As filed with the Securities and Exchange Commission on September 5, 1996
Registration No.333-5268
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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
(State or Jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
56-1921093
(I.R.S. Employer Identification Number)
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. VanEtten
President & CEO
2626 Glenwood Avenue
Suite 200
Raleigh, North Carolina 27608
(919) 571-4646
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Georgina Marie Mollick, Esq. Richard S. Heller, Esq.
Wood & Francis, PLLC Shustak Jalil Sanders & Heller
P.O. Box 164 545 Madison Avenue
Raleigh, North Carolina 27602 New York, New York 1002
(919) 828-0801 (212) 688-5900
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
CALCULATION OF REGISTRATION FEE
Title of each class of securities Amount to be registered
to be registered
Common Stock, $0.001
par value ........... 2,500,000 shares
proposed maximum Proposed minimum
offering price per aggregate offering
share price
$10.00(1) $5,000,000.00
Proposed maximum Amount of registration fee
aggregate offering
price
$25,000,000.00 $8,620.00
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a)
The Registrant amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to such Section 8(a), may determine.
INTERNATIONAL HERITAGE, INC.
Cross-Reference Sheet Showing Location in Prospectus of Information
Required by Items of Form S-1
Form S-1 Registration
Statement Item and Heading Location in Prospectus
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . Inside Front Cover Page;
. . . . . . . . . . . . Outside Back Cover Page
3. Summary Information, Risk Factors. . . . . . . . Prospectus Summary;
Risk Factors
4. Use of Proceeds. . . . . . . . . . . . . . . . . Prospectus Summary;
Use of Proceeds
5. Determination of Offering Price. . . . . . . . . Outside Front Cover Page
6. Dilution . . . . . . . . . . . . . . . . . . . . Dilution
7. Plan of Distribution . . . . . . . . . . . . . . Front Cover Page;
Plan of Distribution
8. Description of Securities to be Registered . . . Prospectus Summary;
. . . . . . . . . . . Capitalization;
Description of
Capital Stock
9. Interests of Named Experts and Counsel . . . . . Experts
10. Information with Respect to the Registrant . . . Front Cover Page;
Prospectus
SUBJECT TO COMPLETION, DATED_____________, 1996 PROSPECTUS
2,500,000 SHARES
MINIMUM SIZE OF OFFERING REQUIRED TO CLOSE: $5,000,000 (500,000 SHARES)
MINIMUM INVESTMENT AMOUNT: $500 (50 SHARES)
INTERNATIONAL HERITAGE, INC.
Common Stock
$0.001 Par Value
INTERNATIONAL HERITAGE, INC., a North Carolina corporation (the
"Company"), hereby offers on the terms set forth herein (See
"Terms of Offering") up to 2,500,000 shares (the "Shares") of the
Company's Common Stock, $.001 par value (the "Common Stock") at a
per share price of $10.00, with a minimum of $5,000,000 (500,000
shares) required to close to be held by the Escrow Agent
Continental Stock Transfer & Trust Company. The Company has
applied for listing on the NASDAQ National Market System.
The Company was incorporated on April 28, 1995 to sell high
quality jewelry and fine collectibles through a network marketing
system of distribution. The Company has just completed its first full
year of operations. The Company is principally engaged in the direct
sale of fine gold and precious stone jewelry and fine collectibles
from manufacturers located around the world. 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"), independent
contractors who purchase products from the Company and resell them to
the public or consume them themselves. In addition, IRSRs may
supervise or manage one or more additional sales representatives who
purchase products from the Company for personal consumption or resale
to the public. The Company currently has over 25,000 Independent
Retail Sales Representatives in 48 states and the provinces of
Alberta, British Columbia and Ontario, Canada.
The Common Stock offered hereby involves a high degree of risk. See
"Risk Factors".
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.
Price to Public Underwritten Discounts Proceeds to Company
Per Share $10.00 $.90 $9.10
Total Minimum(1) $5,000,000 $450,000 $4,550,000(2)
Total Maxmimum $25,000,000 $2,250,000 $22,750,000(2)
(1) Until at least 500,000 shares of Common Stock are sold the
proceeds of the offering will be held in escrow by Continental Stock
Transfer & Trust Company. If at least 500,000 shares of Common Stock
are not sold within 90 days from the date of this Prospectus, such
proceeds will be returned to subscribers, without interest or
deductions.
(2) Before deducting offering expenses payable by the Company of
approximately $135,509 in the case of the minimum and $157,405 in the
case of the maximum.
The Common Stock is offered on behalf of the Issuer by the
Underwriter WIN Capital Corporation on a "best efforts" basis, subject
to prior sale, when, as and if delivered to and accepted by the
Underwriter, and subject to their right to reject any order, in whole
or in part and certain other conditions.
WIN Capital Corporation
The date of this Prospectus is _________, 1996
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere
in this Prospectus.
THE COMPANY
The Company was incorporated on April 28, 1995 and has just completed
its first full year of operations. The Company 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 most prestigious
manufacturers around the world. 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) and Reed & Barton (silver &
flatware). Some of these products are premium 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"), independent contractors who purchase products
from the Company and resell them to the public or consume them themselves.
In addition, IRSRs may supervise or manage one or more additional sales
representatives who purchase products from the Company for personal
consumption or resale to the public. The Company currently has over 25,000
Independent Retail Sales Representatives in 48 states, the U.S. territories
and the provinces of Alberta, British Columbia and Ontario, Canada.
The Company's wholly owned subsidiary, International Heritage of
Canada, Inc., engages in similar direct retail sales of jewelry and fine
collectibles in the Canadian provinces of Alberta, British Columbia and
Ontario. See Management's Discussion and Analysis of Financial Condition
and Results of Operations and Business.
The Company's principal executive offices are located at 2626 Glenwood
Avenue, Suite 200, Raleigh, North Carolina 27608, its telephone number is
(919) 571-4646, and its fax number is (919) 571-4620.
The Company's Canadian 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.
Prospective purchasers should carefully consider the factors discussed
under Risk Factors.
The Offering
Common Stock offered:
By the Company . . . . . . . . . . . . . 500,000 shares minimum
. . . . . . . . . . . . . . . . . . 2,500,000 shares maximum
Common Stock to be outstanding
after the offering . . . . . . . . 10,993,540 shares if the minimum
number of shares offered hereby
are sold
. . . . . . . . . . . . . . . . . .12,993,540 shares if the maximum
number of shares offered hereby
are sold
Use of Proceeds. . . . . . . The net proceeds from the offering
of the Common Stock, after deducting
estimated offering expenses of
$135,509,and commissions of $450,000
are estimated to be $4,414,491 if the
minimum number of shares offered hereby
are sold; and after deducting estimated
offering expenses of $157,405 and
commissions of $2,250,000 are estimated
to be $22,592,595 if the maximum number
of shares offered hereby are sold. If
the minimum number of shares offered
hereby are sold the Company plans to use
the funds for working capital. If the
maximum number of shares offered hereby
are sold the Company plans to use the
funds for working capital purposes and
additionally, shall use funds to: fund
further international expansion into
other provinces of Canada and Mexico and
to develop its own product fulfillment
center. In addition, the Company is
registering shares for future employee
compensation. Pending such uses, the
Company intends to invest the net
proceeds from this offering in
short-term interest bearing securities.
Summary Financial and Operating Information
The following table presents summary selected consolidated financial
data derived from the audited consolidated financial statements for the
period from April 28, 1995 (inception) to the year ended December 31, 1995
and the audited consolidated financial statements of the Company for the
seven months ended July 31, 1996, included elsewhere in the prospectus.
All financial statements have been prepared according to generally accepted
accounting principals.
April 28, 1995 Seven Months
(Inception) to Ended
December 31, 1995 July 31, 1996
Consolidated Statements of Operations:
Revenue $4,852,242 $19,079,496
Gross Income (Loss) ($66,095) $3,121,961
Selling and Administrative Expenses
$1,863,728 $3,712,754
Net Income (Loss) ($1,929,823) ($590,793)
Weighted Average Number of Common
Shares Outstanding 877,446 7,495,387
Net Loss Per Shares at Period Ended
($2.20) ($0.08)
Consolidated Balance Sheets:
Cash $454,671 $274,797
Current Assets $1,033,481 $1,760,286
Current Liabilities $2,951,210 $3,806,017
Total Assets $2,278,993 $3,207,500
Long-Term Debt,
less current Maturities
$0 $12,447
Stockholders' Deficit
($672,217) ($610,964)
RISK FACTORS
An investment in the shares being offered by this Prospectus involves
a high degree of risk. In addition to the other information contained in
this Prospectus, prospective investors should carefully consider the
following risk factors before purchasing shares offered by this Prospectus.
Lack of Prior Management Experience
The Company's officers and managers 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 working capital, information systems,
and management, operational, and other financial resources. The continued
growth of the Company will depend on various factors, including, among
others, compensation to Representatives, the capacity of the Company's
computer systems to handle the growing number of Representatives and the
increasing sales, the ability of the Company's suppliers to fulfill orders,
the ability of the Company to provide adequate Representative 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 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 and implementing business policies and
administrative activities. During this development stage, the Company
incurred losses of approximately $225,000. From the date of inception
through July 31, 1996, the Company had accumulated losses of $2,520,616.
In addition, the Company had a stockholders' deficit of $610,964 as of July
31, 1996, and its current liabilities exceed its current assets by
$2,045,731 (as of July 31, 1996). This situation has been caused by the
nature of the Company's business (deferred revenue and commissions are the
highest at the opening and subsequent building of the business) and the
fact that it has taken more capital to establish an international direct
sales company than was originally anticipated. The Company's ability to
continue as a going concern is dependent on its ability to maintain future
profitability through cutting corporate expenses and successfully obtaining
additional working capital and realizing the effectiveness of the Company's
changes in cash-out policy.
On June 15, 1996, the Company ceased making exceptions to its existing
cash-out policy limiting the time an IRSR has to cash-out to sixty (60)
days. Adherence to the policy is effective immediately. Effective July 1,
1996, the Board of Directors of the Company approved a change in policy
such that those IRSRs who enter the business of the Company by opening and
certifying more than one (1) Retail Business Center will not be eligible to
cash-out. Prior to July 1, 1996, all IRSRs could cash-out for sixty (60)
days. This change will be implemented prospectively and all current IRSRs
who have more than one (1) Retail Business Center will be able to cash-out
through July 10, 1996. However, the Company still maintains a one hundred
percent (100%) money back guarantee for all Retail Business Career Kit and
product purchases. In addition, any IRSR may seek a refund or cash-out
from a Retail Business Agreement if they open and certify only one (1)
Retail Business Center. This policy is consistent with the industry and
conforms with regulations in the states in which the Company conducts
business.(1) This new policy is designed to encourage potential IRSRs to
weigh their options carefully prior to entering the business. The Company
believes that these changes will substantially reduce the current level of
cash-outs, thereby improving future cash flow and results of operations.
In addition, with this change in policy, the Company is attempting to
discourage Representatives from opening multiple Retail Business Centers.
(1) There are some states which, by statute, require longer periods for
refunds, returns or "cash-out." For those states, the Company has made
the necessary addendums to its policy.
As of July 31, 1996 and December 31, 1995, net income, retained
earnings and cash would have been increased by approximately $3,023,000 and
$492,000 respectively if all IRSRs who joined the Company with three (3) or
seven (7) Retail Business Centers were ineligible for cash-out. See
Financial Statements.
On June 20, 1996, the Board of Directors of the Company authorized a
special meeting of shareholders to vote on increasing the authorized shares
of common stock to 25,000,000 shares, and upon passage of the same, the
effectuation of a ten for one (10:1) stock split. The shareholders
approved the measure to increase the authorized shares. The Amended
Articles of Incorporation were filed July 2, 1996, and thereafter the ten
for one (10:1) stock split was made effective.
The consolidated financial statements contained herein do not include
any adjustments that might be necessary should the Company be unable to
continue as a going concern. See Management's Discussion and Analysis of
Financial Condition and Results of Operations and Financial Statements.
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 Independent Retail Sales
Representatives ("IRSRs") who, in turn, recruit other IRSRs all of whom
solicit purchasers for the Company's products. Significant turnover among
IRSRs, which the Company believes is typical of direct selling, requires
the sponsoring of new IRSRs by existing IRSRs in order to maintain or
increase the overall Representative sales force. For the year ended
December 31, 1995, the Company experienced an attrition rate of
approximately 9.3% for IRSRs (which, using the method of measuring
attrition used by the Direct Selling Association, is calculated by dividing
the number of IRSRs who leave the Company during the year by the sum of the
IRSRs at the beginning of the year plus the new IRSRs who sign up during
the year). Activities of the IRSRs in obtaining new IRSRs are particularly
impacted by changes in the level of motivation, which in turn can be
positively or negatively affected by general economic conditions,
modifications to the pay-out under the IHI Bi-Lateral Compensation Plan,
the availability of training and leadership conferences and a number of
intangible factors. The Company's ability to attract IRSRs could be
negatively affected by adverse publicity relating to the network marketing
industry, the Company or its products or its operations, as well as
competition with other network marketing companies who may recruit the
Company's IRSRs to become salesmen for their own networks. 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
IRSRs 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 an
independent direct selling business opportunity. There can be no assurance
that the number or productivity of IRSRs will be sustained at current
levels or will increase in the future.
The Company's products are marketed exclusively through a network of
IRSRs. The Company encourages IRSRs to offer the IHI business opportunity
to purchasers with whom the IRSRs have an ongoing relationship as a result
of being a family member, friend, business associate, neighbor, or
otherwise. This network marketing system has been selected by the Company
because the Company believes it reduces net marketing costs, purchaser
acquisition costs, and purchaser attrition. The Company believes that
purchasers will be more likely to remain with the Company because they have
been enrolled with the Company by someone with whom they have an ongoing
relationship, and that this relationship will foster training and
leadership development by IRSRs who sponsor other IRSRs. The Company also
believes that its network marketing system will continue to build a base of
potential purchasers for additional products. The Company's network
marketing system is particularly attractive to potential IRSRs because of
the potential for supplemental income and because the IRSRs are not
required to purchase any inventory, have no monthly sales quotas or account
collection issues, have minimal paperwork, have a flexible work schedule
and can get started in the business for a minimal cost of $75.00 (the
actual cost of the Retail Business Career Kit which contains all the
information necessary for a potential representative to start his or her
business with the Company).
Future Capital Needs
Although the Company has reduced its loss since December 1995, and the
proceeds of this offering are anticipated to fund continued growth, there
may be some unforeseen event which will 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 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. 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.
Dilution
The offering price is substantially higher than the book value per
share of the Common Stock. Therefore, investors purchasing Shares will
incur immediate, substantial book value dilution of 97% or $9.65 per share
if the minimum number of shares offered hereby are sold and 83% or $8.30
per share if the maximum number of shares offered hereby are sold. See
Dilution.
Absence of Dividends
The Company has not paid any cash dividends in the past and does not
anticipate paying any in the foreseeable future. See Dividend Policy.
Arbitrary Determination of Offering Price
The offering price for the Shares has been determined arbitrarily by
the Company and does not necessarily indicate the current value of the
Shares and should not be regarded as an indication of any future market
price of the Company's Common Stock.
Control by Current Shareholders
Upon consummation of this offering, Stanley H. Van Etten, the Company's
President and CEO, together with John D. Brothers, the Company's Secretary,
and the directors of the Company will beneficially own an aggregate of
approximately 39.48% of the Company's Common Stock. The aforementioned
officers and directors, along with Derrick L. Rodgers, a principal
shareholder, own an aggregate of approximately 44.98% of the Company's
Common Stock. The officers, directors and others who may be deemed control
parties of the Company will own 42.93% of the Company's issued and
outstanding stock if the minimum number of shares offered hereby are sold
and 36.32% of the Company's issued and outstanding stock if the maximum
number of shares offered hereby are sold. In addition, options convertible
into more than 3,100,000 shares of Common Stock are held by officers,
directors and others who may be deemed control persons of the Company.
(The exact number of shares cannot be determined since options granted to
the original Board of Directors are for 5% of the issued and outstanding
shares at the date of exercise). If exercised, this group would own
approximately 55.73% of the Company's issued and outstanding stock if the
minimum number of shares offered hereby are sold and 48.83% of the
Company's issued and outstanding stock if the maximum number of shares
offered hereby are sold. (These percentages include stock and stock
granted upon exercise of all outstanding options readily convertible into a
known number of shares). As a result, this group may be able to control
the Company, elect all of the Company's directors, cause an increase in the
authorized capital stock or the dissolution, merger or sale of the assets
of the Company and generally, to direct the affairs of the Company.
Accordingly, it is likely that investors in this offering will have little
or no effective voice in the direction of the Company's operation. See
Security Ownership of Certain Beneficial Owners and Management.
Experience of Management; Dependence Upon Key Personnel
The Company is dependent upon key personnel, including its President
and CEO, Stanley H. Van Etten, and upon recruiting and retaining skilled
IRSRs. In addition, the Company's other 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 could have a material adverse effect upon the Company.
See Business.
Competition
The Company operates in a highly competitive business. The Company
competes with a number of established network marketing companies,
including some that also sell jewelry. In addition, the Company competes
with other 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 and reliability, and
marketing. See Business.
Prior Transactions With Affiliates
The Company has in the past entered into and may in the future enter
into transactions and agreements with its shareholders and certain
partnerships and/or corporations and/or other entities controlled by its
shareholders. 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. See Related Party Transactions.
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, it is
the Company's policy that all material affiliated transactions and loans,
and any forgiveness of loans, should be approved by a majority of the
Company's Board of Directors who do not have an interest in the particular
transaction(s).
Network Marketing Industry and Government Regulation
Regulations regarding network marketing companies are a complexity of
overlapping laws which vary from jurisdiction to jurisdiction. Network
sales programs are affected by combinations of business opportunity
statutes, franchise and securities statutes, anti-pyramid statutes, network
distribution statutes, and state lottery statutes, as well as, U.S. Post
Office lottery and Federal Trade Commission fraud regulations, among
others. In addition, some regulatory officials seem to have a negative
bias toward the legality of network marketing as a means of merchandising.
Many network marketing programs have been targeted for prosecution and
litigation under a variety of laws, though enforcement of these statutes
and regulations has often appeared selective. Failure to comply with the
laws of any jurisdiction can result in the loss of the Company's ability to
operate therein for indefinite periods of time, and could possibly affect
its ability to operate in other jurisdictions as well. From time to time,
the Company has, in the past, received inquiries from various state
regulators regarding various aspects of the Company's business. The
Company's practice is to promptly respond to all such inquiries, and to
provide whatever information is requested. The Company is aware of no
currently outstanding inquiries to which it has not responded, or other
actions by any state or federal regulatory authority. However, no
assurances can be given that such responses will be deemed dispositive of
any particular matter. From its inception, the Company has invested a
substantial amount of money to seek the advice of legal counsel in the
areas of corporate, network marketing and securities law in order to
structure itself in accordance with the multiplicity of laws that govern
its operations. Though it can give no assurances, the Company believes it
has taken reasonable steps to comply with the various laws that would apply
to it in the jurisdictions in which it currently operates. In addition,
the Company has adopted certain policies and procedures designed to assure
compliance with the various laws that govern its business, and it devotes
significant efforts to policing its operations and sales force. See
Business.
Key-Man Life Insurance; Management Contracts
The Company maintains a $1,500,000 key-man life insurance policy on its
President and CEO, Stanley H. Van Etten. The Company currently carries no
key-man life insurance on any other members of its management. All members
of management have entered into confidentiality and non-competition
agreements with the Company. The Company has entered into a long-term
employment contract with its President. The loss of any members of
management, especially the current President, could significantly adversely
affect the Company's ability to maintain operations.
Primary Dependence on One Supplier
The Company currently uses a single primary supplier to provide the
jewelry products that it markets (A&A Jewelers, Inc.-Canada/E.B. Harvey,
Inc.-USA (collectively "E.B Harvey")). In addition, 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. Any interruption of the
supply of products from E.B. Harvey could adversely affect the Company's
ability to fill customer's orders. Such an interruption could lead to the
loss of retail customers and to the loss of IRSRs. The Company is pursuing
relationships with other vendors of similar products in order to reduce its
sole supplier dependence. The Company believes there are several suppliers
who could provide the same products to the Company if necessary. See
Operations.
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, thereby adversely affecting the Company's growth, net
sales and profitability.
Management Has Broad Discretion to Allocate Proceeds
Management shall have broad discretion to allocate the proceeds of this
offering in the event the minimum or maximum number of shares offered
hereby are sold. A significant portion of the proceeds are to be used to
fund working capital. See Use of Proceeds.
Absence of Public Market; Possible Volatility of Stock Price
Prior to the Offering, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will
develop or be sustained after the offering. Further, there can be no
assurance that the underwriter, or members of the proposed selling group,
if any, will make a market in the Company's securities or that the
underwriter, or members of the proposed selling group, if any, will be able
to establish an active trading market in the Company's securities.
The Company has applied for a listing of the Common Stock on the NASDAQ
National Market. There can be no assurance that the Common Stock will be
approved for listing. After completion of the Offering, the market price
of the Common Stock could be subject to significant fluctuations in
response to various factors and events, including the liquidity of the
market for the shares of Common Stock, variations in the Company's
operating results, new statutes or regulations or changes in the
interpretation of existing statutes or regulations affecting the network
marketing industry. In addition, the stock market in recent years has
experienced broad price and volume fluctuations that often have been
unrelated to the operating performance of particular companies. These
market fluctuations also may adversely affect the market price of the share
of Common Stock. See Plan of Distribution.
Litigation of Certain Insiders
Although the Company is not involved in any material legal proceedings,
the Company's officers, Stanley H. Van Etten and John D. Brothers are
involved in proceedings either individually or through other corporate
interests; however, none of these matters involve the Company or are
related to any of the Company's activities. Management believes that none
of these matters will have a significant adverse impact on the Company.
See Litigation.
Subsequent Registration of Privately Held Shares
At present the Company plans to file a subsequent registration
statement in the fourth quarter of fiscal 1996 to register additional
shares (privately held shares). There can be no assurance that the Company
will be able to achieve the registration of these privately held shares.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered hereby are estimated to be approximately $4,414,491, if the
minimum number of shares offered hereby are sold and approximately
$22,592,595, if the maximum number of shares offered hereby are sold, after
deducting the commissions to the underwriter and estimated offering
expenses payable by the Company. If the minimum number of shares offered
hereby are sold, the Company plans to use the funds for working capital
purposes. If the maximum number of shares offered hereby are sold, the
Company plans to use the funds for working capital purposes and
additionally, shall use proceeds of the offering to: fund further
international expansion into other provinces of Canada and Mexico and to
develop its own product fulfillment center. In addition, the Company is
registering shares for future employee compensation. Pending such uses,
the Company intends to invest the net proceeds from this offering in
short-term interest bearing securities.
Minimum Offering Maximum Offering
Amount Percent Amount Percent
Working Capital $4,414,491 100% $16,217,595 71.79%
Fund Expansion Into New Areas $3,550,000 15.71%
Develop Fulfillment Center $2,825,000 12.50%
Total $4,414,491 100% $22,592,595 100%
DIVIDEND POLICY
The Company does not currently pay dividends on its Common Stock and
does not anticipate paying dividends. It is the present policy of the
Company's Board of Directors to retain earnings, if any, to finance the
expansion of the Company's business. The payment of dividends in the
future will depend on the results of operations, financial condition,
capital expenditure plans and other cash obligations of the Company and
will be at the sole discretion of the Board of Directors.
DILUTION
The difference between the public offering price per share and the net
tangible book value per share after this offering constitutes the dilution
to investors in this offering. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liability) by the number of shares of Common
Stock actually outstanding.
As of July 31, 1996, the fully diluted net book value of the Company
was ($0.06) per share. Assuming the sale of the minimum number of shares
offered hereby (500,000 shares) and the receipt of the proceeds therefrom
(based upon the assumed initial offering price of $10.00 per share and
after deducting estimated cash offering expenses payable by the Company in
connection with this offering), the fully diluted pro forma net book value
of the Company on July 31, 1996 would have been $0.35 per share. This
represents an immediate increase in net book value of $0.41 per share to
the existing shareholders and an immediate dilution of $9.65 per share to
new investors. Assuming full subscription of the offering ($25,000,000 or
2,500,000 shares), and the receipt of the proceeds therefrom (based upon
the assumed initial offering price of $10.00 per share and after deducting
the estimated cash offering expenses payable by the Company in connection
with this offering), the fully diluted pro forma net book value of the
Company on July 31, 1996 would have been $1.70 per share. This represents
an immediate increase in net book value of $1.76 per share to the existing
shareholders and an immediate dilution of $8.30 per share to new investors.
This table illustrates this per share dilution:
Minimum Offering Maximum Offering
Initial public offering price per share $10.00 $10.00
Net tangible book value per share
before pro forma adjustments ($0.06) ($0.06)
Increase attributable to investors
in this offering $0.41 $1.76
Adjusted net tangible book
value after offering $0.35 $1.70
Dilution to investors in this offering $9.65 $8.30
The following table summarizes, as of July 31, 1996, with respect to
existing shareholders and investors in the offering, a comparison of the
number of shares of Common Stock acquired from the Company, the percentage
ownership of such shares, the total consideration paid, the percentage of
total consideration paid and the average price per share.
Minimum Offering
Shares of Common Stock Purchased Total Consideration Paid Avg. Price
Number Percent Amount Percent Per Share
Existing
Shareholders 10,493,540 95.45% $1,607,060 24.32% $0.15
Investors in
Offering 500,000 4.55% $5,000,000 75.68% $10.00
TOTAL 10,993,540 100% $6,607,060 100%
Maximum Offering
Shares of Common Stock Purchased Total Consideration Paid Avg. Price
Number Percent Amount Percent Per Share
Existing
Shareholders 10,493,540 80.76% $1,607,060 6.04% $0.15
Investors in
Offering 2,500,000 19.24% $25,000,000 93.96% $10.00
TOTAL 12,993,540 100% $26,607,060 100%
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
July 31, 1996 and as adjusted to give pro forma effect to the issuance and
sale of the minimum number of shares offered hereby and the issuance and
sale of the maximum number of shares offered hereby and the application of
the estimated net proceeds of the offering ($4,414,491 in the event of the
minimum and $22,592,595 in the event of the maximum). The table should be
read in conjunction with the Selected Financial Information, Management's
Discussion and Analysis of Results of Operations and Financial Condition,
and the Financial Statements of the Company and notes thereto appearing
elsewhere in this Prospectus.
Actual Actual As Adjusted
December 31, 1996 July 31, 1996 Minimum Maximum
Long-term debt (including current portion)
$0 $19,544 $19,544 $19,544
Stockholders' deficit:
Common stock, $0.001 par value: 25,000,000
authorized 10,493,540 issued and outstanding(2)(3)(4),
respectively: $9,987 $10,494 $10,994 $12,994
Additional paid-in capital
$1,247,463 $1,596,565 $6,596,066 $26,594,066
Adjustment for foreign currency translation
$156 $2,592 $2,592 $2,592
Accumulated deficit
($1,929,823) ($2,220,616)($2,220,616)($2,220,616)
(2) Does not include conditional share gifts to employees to be awarded January,
1997, totaling 142,000 shares; conditional share gifts to top salesman to be
awarded January, 1997, totaling 120,000 shares; and conditional shares to others
to be awarded January, 1997, totaling 200,000 shares.
(3) Does not include unexercised outstanding options for up to 3,175,000 shares
set forth in Option Grants.
(4) Pursuant to the terms of his employment contract, the President is entitled
to stock incentives as follows: (i) 2% of the issued and outstanding shares
as of December 31, 1996 if the Company has achieved gross revenue in excess of
$25,000,000; (ii) 3% of the issued and outstanding shares as of December 31,
1997 if the Company has achieved gross revenue in excess of $75,000,000; (iii)
3% of the issued and outstanding shares as of December 31, 1998 if the Company
has achieved gross revenue in excess of $125,000,000; (iv) 3% of the issued and
outstanding shares as of December 31, 1999 if the Company has achieved gross
revenue in excess of $200,000,000; and (v) 3% of the issued and outstanding
shares as of December 31, 2000 if the Company has achieved gross revenue of
$275,000,000.
SELECTED FINANCIAL INFORMATION
The selected financial information presented in the following table
for the period from April 28, 1995 (inception) to December 31, 1995 and for
the seven months ended July 31, 1996 have been derived from the Company's
audited consolidated financial statements. All information in the
following table should be read in conjunction with Management's Discussion
and Analysis of Results of Operations and Financial Condition and with the
Financial Statements of the Company and related notes thereto appearing
elsewhere in this Prospectus.
April 28, 1995
(Inception) to Seven Months
December 31, 1995 Ended July 31,
1996
Consolidated Statements of Operations:
Revenue $4,852,242 $19,079,496
Gross Income (Loss) ($66,095) $3,121,961
Selling and Administrative Expenses
$1,863,728 $3,412,754
Net Income (Loss) ($1,929,823) ($590,793)
Weighted Average Number of Common
Shares Outstanding 877,446 7,495,387
Net Loss Per Shares at Period Ended
($2.20) ($0.08)
Consolidated Balance Sheets:
Cash $454,671 $274,797
Current Assets $1,033,481 $1,760,286
Current Liabilities $2,951,210 $3,806,017
Total Assets $2,278,993 $3,207,500
Long-Term Debt,
less current maturities $0 $12,447
Stockholders' Deficit ($672,217) ($610,964)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company
The Company was incorporated in North Carolina on April 28, 1995, and
has a wholly owned Canadian subsidiary, International Heritage of Canada,
Inc. The Company is a network marketing company, owned by some of its
Independent Retail Sales Representatives ("IRSRs") and its professional
management team. The Company distributes a variety of fine jewelry and
collectible products through IRSRs throughout the United States and 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. The Company's product categories are: fine
14K, 18K and 24K gold and precious stone jewelry and fine collectibles from
manufacturers around the world. The fine collectible products are from the
following manufacturers: 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) and Reed & Barton (silver and
flatware). Some Company products mentioned above are not available for
sale, but rather are available only as awards to IRSRs through the earn-out
program of the Company's Bi-Lateral Compensation Plan. 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.
The Company works like a "partner" with its IRSRs. By distributing and
supporting world class products for distributors, the Company addresses the
problems with which most distributors have been faced. The confidence
shown in the Company by its customers and distributors is its most valued
possession and the Company acknowledges and accepts those responsibilities
as their "partner."
Start-Up Objectives
On April 28, 1995 three entrepreneurs: Claude W. Savage, Larry G.
Smith and Stanley H. Van Etten were drawn together by a vision to build and
develop a network marketing company that would have all of the strengths of
corporate America and all of the benefits of network marketing. This
vision would become International Heritage, Inc. ("IHI").
During May and June, 1995, the entrepreneurial vision was shared with
57 other individuals who further refined the vision and invested in
International Heritage, Inc. Together, the founding shareholders assembled
a team of professionals to assist, plan and advise the Company in every
regard. These professional parties were instrumental in developing the
Company, and included: securities attorneys, network marketing attorneys,
certified public accountants, computer and technical advisors, management
consultants and investment bankers. The founding shareholders invested and
loaned the Company over $700,000 to form and implement the IHI concept.
On June 21, 1995, IHI opened its doors for business, signed its first
IRSR, and sold its first product. The Company started by making its
products available to a small number of highly motivated professional
people in key sales regions. These IRSRs earn sales commissions by
building their own retail sales organizations, or networks. IRSRs who join
the Company are given the same opportunities as the initial distributors,
and, as the process repeats itself, the Company's distribution system
expands, spreading from person to person, from state to state, and
eventually, from country to country. Currently the Company has more than
25,000 Representatives in 48 states (except North Dakota and South Dakota),
the U.S. territories and the provinces of Alberta, British Columbia and
Ontario, Canada. The Company carries the costs of developing supporting
materials used by the distribution network, to include, but not limited to:
sales brochures; audio and video tapes; training manuals; sales kits;
business forms; and warehousing and transporting products; all in an effort
to support the IRSR at a lower cost than that of standard retailing
channels. The Company sells its sales aids and audio/visual materials to
its Representatives for a marginal profit. By providing materials and
support to Representatives at reduced start-up costs, the Company hopes to
benefit 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 affordably start
his or her own business with minimal start-up costs and operating
expenditures, a reasonable expectation of profits and individual business
profitability. Further, the IRSR should benefit from the following as
well: 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.
Throughout 1995 the Company continued to grow its network of IRSRs
and, as a result, the need for capital continued to grow. The Company
offered additional stock to Representatives through December, 1995. In
December 1995 the Company offered each of its shareholders the opportunity
to rescind their investment. The Company made rescission offers to
approximately 190 persons who had invested money in the Company prior to
the Company's securities being registered for sale or exempted from
registration under applicable securities laws. While these rescission
offers should absolve the Company of any civil liability to the individual
investors, the Company may still be liable for administrative penalties and
sanctions as a result of these transactions. Such administrative sanctions
can be severe, and can include, among other things, significant monetary
penalties and injunctive actions. While the Company can give no assurances
that it will not be sanctioned for these transactions in the future, the
Company knows of no administrative proceedings or regulatory investigations
related to these rescission offers or the facts underlying same, that are
currently pending or proposed. The Company intends to make an appropriate
filing to register the shares of all shareholders who previously rejected
the Company's offer of rescission. Four (4) shareholders accepted the
Company's offer of rescission.
The Company's philosophy is similar to that of traditional corporate
America, that is to let as many people as possible benefit from owning a
small stake in the Company. The Company's existing shareholders consist of
IRSRs, management and eventually, employees. A benefit of this broad basis
of stock ownership, especially ownership by Representatives, is the
creation of a national "training force" of sorts to enforce compliance with
the Company's policies and procedures.
Network Development and Training
The Company has recently implemented the IHI Training, Leadership
Development and Support System (the "System") which is a comprehensive
system 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 which extends the Company's
philosophy and vision throughout its network of Representatives; and to
create and promote a working partnership between the Company and its
network of Representatives. The System is supported by a series of events,
recognition (sales production and other) and tools. The events include:
local weekly business opportunity meetings, area events, regional events,
national events and conventions, international conference calls with the
Company's President and various guest speakers, corporate leadership
courses, leadership retreats and special meetings and contest/incentive
trips. The recognition system is designed to increase sales momentum,
sales volume, Representative income and retention. The tools include: a
series of audio and video tapes on the Company, building a retail sales
organization, Quickstart Training, retailing products, the IHI Bi-Lateral
Compensation Plan and how to fill out Company forms along with commonly
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; various sales and marketing
publications (Gettin' the Business; A Sales Professional's Handbook is
included in the Company's Retail Business Career Kit); and the
International Data and Communications Center, which is an automated,
comprehensive, multi-functional communication and support service linking
the Representative, via telephone to the Company's computer system in order
to access all types of information relevant to the Representatives'
business.
Results of Operations
At year end 1995, only six months after the start of business, the
Company's total assets were in excess of $2,000,000 and total revenue for
the year was a little over $5,000,000 ($4,852,242 in sales and $408,375 in
deferred sales). In addition, the Company reached profitability one month
ahead of management's financial projections, by showing a $175,878 profit
for the month of December. However, at year end 1995, the Company had lost
in excess of $1,900,000.
While the Company lost approximately $1,900,000 from its inception to
December 31, 1995, it experienced a dramatic turn-around in cash flow and
operating profitability. For the month end December 1995, the Company had
net cash provided from operating activities of $537,171. For the seven
month period ended July 31, 1996, the Company had a net loss of $590,793,
based on total revenue of $19,079,496. For the seven month period ended
July 31, 1996, the Company had net cash provided by operating activities of
$775,974. This increase in positive cash flow is a direct result of
management's ongoing efforts to cut costs and improve operating
efficiencies. However, management fully expected the losses incurred to
date and attributes the one-time losses directly to the high cost of
start-up, the need for professional parties and their planning expertise,
the development of an IRSR network from scratch, the high cost of computer
hardware and software development, and numerous other technical and
specialized issues. However, the Company does not anticipate the
continuation of these losses since most of the relevant costs were isolated
in nature. The Company's gross operating profit margin is in excess of 16%
before overhead expenses. However, there can be no assurance that the
profit margin can be sustained. See Financial Statements. In addition,
the Company's initial capitalization and the additional capitalization from
the proceeds of this offering should be sufficient to operate the Company
into profitability. However, there can be no assurances of profitability
and no reliance should be made therein. See Financial Statements.
Although the Company has reduced its loss since December 1995, and the
proceeds of this offering are anticipated to fund continued growth, there
may be some unforeseen event which will 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 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. 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.
BUSINESS
General
The Company was incorporated in North Carolina on April 28, 1995. The
Company is engaged principally in the direct sale of fine jewelry and fine
collectibles. The Company utilizes a network marketing distribution system
to market its products through catalogue sales. Compensation to the
Company and to its network of IRSRs is based on the volume and price of
Company products sold.
The Company's wholly owned subsidiary, International Heritage of
Canada, Inc., incorporated on July 25, 1995, engages in similar direct
sales of fine jewelry and fine collectibles in three Canadian provinces
(Alberta, British Columbia and Ontario).
Primary Markets
The Company currently has IRSRs operating in forty-eight (48) states
(except North Dakota and South Dakota), all of the U.S. territories and the
Canadian provinces of Alberta, British Columbia and Ontario through its
wholly-owned subsidiary International Heritage of Canada, Inc. While there
can be no assurances that such will come to fruition, the Company
anticipates expanding into additional provinces of Canada, as well as
Mexico and certain overseas markets in the next twelve (12) 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 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.
Operations
The Company's operations provide for the sale of fine gold jewelry and
collectibles. The Company markets and sells its products through a network
of IRSRs, independent contractors who purchase products from the Company
and resell them to the public or consume them personally. While these
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 to these IRSRs
is based on the Company's proprietary Bi-Lateral Compensation Plan. See
Bi-Lateral Compensation Plan.
The Company negotiates for and secures the rights to market and sell
the various products available to the IRSRs. The Company has secured the
rights to market various items of fine jewelry from E.B. Harvey. The items
of jewelry currently available to the Company from E.B. Harvey include gold
(14K, 18K and 24K) and precious stone jewelry in the form of rings,
bracelets, earrings, necklaces and watches, among others. In addition, the
Company's current access to the fine collectible products it offers to the
public is maintained through E. B. Harvey and the agreements that this
supplier has with the individual collectibles suppliers. The Company is
constantly reviewing and evaluating the possibility of adding additional
product lines, as well as, additional product suppliers.
The Company has recently made an arrangement with Jewels By Evonne to
provide jewelry products which are being tested for sales receptiveness
through a new Value Series Brochure (a marketing program which makes an
introduction of new Company products or introduces a new supplier on a
quarterly basis). If these products are well received, Jewels By Evonne
shall serve as a new supplier to the Company and its products shall be
added to the Company's primary catalog.
The Company is currently in discussions with a major US
telecommunications carrier to provide a value-added line of
telecommunications products to IRSRs to include: personal communications
systems, long-distance pre-paid calling cards and conference calling. The
Company is also exploring several affinity programs for its IRSRs not
limited to its own Visa/MasterCard and a travel program.
The Company displays the various products for sale in color catalogues
which are made available for use by the IRSRs. In addition, the Company
assists its IRSRs in ordering the products, tracking delivery, and
recording and paying compensation associated with the sale of products.
As of July 31, 1996 the Company had over 25,000 IRSRs throughout most
of the United States and parts of Canada, the vast majority of whom 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 in June 1995, to approximately $1,135,000 for the
week ended August 23, 1996.
As of August 31, 1996 the Company had already achieved a significant
increase in sales and operating profitability. For the one month period
ending August 31, 1996 (unaudited) the Company had gross revenues of
$5,650,242.15, with operating income of $678,029.04. In addition, the
Company achieved its first $1,000,000 sales day on August 30, 1996 and for
the one week sale period ending August 31, 1996 the Company had gross
revenues in excess of $2,000,000. In management's opinion, the Company is
experiencing significant sales growth and operating profitability and
expects the Company to continue with this trend of operations and sales.
Bi-Lateral Compensation Plan
IRSRs are compensated for sales of the Company's products in
accordance with the Company's proprietary Bi-Lateral Compensation Plan,
(the "Plan"). Representatives earn compensation under in the Plan in any
of several ways. First, Representatives may purchase products at wholesale
cost from the Company and sell them at a marked-up retail price to
consumers, thereby earning a retail profit.
Second, Representatives may undertake to build a Retail Sales
Organization, and earn override commissions and bonuses on the sales made
by the other Representatives in the Retail Sales Organization. Attendant
with this opportunity to earn override commissions and bonuses, the Company
places an obligation on the sponsoring Representative to supervise, manage
and otherwise support and aid the down line Representatives in their sales
efforts. To qualify for such override commissions and bonuses, a
Representative must (1) "open" a Retail Business Center with the Company;
(2) "create" Retail Sales Business Volume through retail sales, retail
purchases and/or the use of Retail Business Agreements; (3) "certify" the
Retail Business Center by amassing at least 200 in Retail Sales Business
Volume Credit; and (4) "duplicate" the Retail Business Center by sponsoring
two additional IRSRs who also create sales organizations of their own.
Override commissions and bonuses are tracked and calculated by the Company
and paid out weekly to qualifying representatives. To maintain their
qualification to receive override commissions and bonuses, all
Representatives are required to meet certain retail sales quotas themselves
by selling products to buyers outside the Company. The Company only pays
commissions on product sales. No commissions are paid when Representative
or prospective Representative is sponsored. Representatives are personally
responsible for all taxes due on their earnings.
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) and Quorum (an electronics 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 selling Representatives than its competitors.
In addition, the Company also competes with more traditional retail
sellers of fine jewelry and fine collectibles. These competitors are
typically located in malls or other retail shopping areas. The Company
believes its marketing approach is more efficient and effective than these
traditional store-front retailers, and that it can provide its products at
a more attractive price because of the absence of traditional retail
overhead costs.
Network Marketing Industry and Government Regulation
Regulations regarding network marketing companies are a complexity of
overlapping laws which vary from jurisdiction to jurisdiction. Network
sales programs are affected by combinations of business opportunity
statutes, franchise and securities statutes, anti-pyramid statutes, network
distribution statutes, and state lottery statutes, as well as, U.S. Post
Office lottery and Federal Trade Commission fraud regulations, among
others. In addition, some regulatory officials seem to have a negative
bias toward the legality of network marketing as a means of merchandising.
Many network marketing programs have been targeted for prosecution and
litigation under a variety of laws, though enforcement of these statutes
and regulations has often appeared selective. Failure to comply with the
laws of any jurisdiction can result in the loss of the Company's ability to
operate therein for indefinite periods of time, and could possibly affect
its ability to operate in other jurisdictions as well. From time to time,
the Company has, in the past, received inquiries from various state
regulators regarding various aspects of the Company's business. The
Company's practice is to promptly respond to all such inquiries, and to
provide whatever information is requested. The Company is aware of no
currently outstanding inquiries to which it has not responded, or other
actions by any state or federal regulatory authority. However, no
assurances can be given that such responses will be deemed dispositive of
any particular matter. From its inception, the Company has invested a
substantial amount of money to seek the advice of legal counsel in the
areas of corporate, network marketing and securities law in order to
structure itself in accordance with the multiplicity of laws that govern
its operations. Though it can give no assurances, the Company believes it
has taken reasonable steps to comply with the various laws that would apply
to it in the jurisdictions in which it currently operates. In addition,
the Company has adopted certain policies and procedures designed to assure
compliance with the various laws that govern its business, and it devotes
significant efforts to policing its operations and sales force.
Physical Properties and Equipment
The following table provides a description of the Company's principal
physical properties and equipment including the original cost, and the
accumulated depreciation and net book value as of July 31, 1996. All of
the physical properties and equipment are located at the Company's Raleigh,
North Carolina headquarters. Although the Company has not retained an
independent appraisal for such purposes, the Company estimates the total
replacement cost associated with the physical properties and equipment is
approximately $575,000.
Property and equipment - at cost:
Construction In Process $18,876
Computer Software 108,081
Computer Hardware 260,121
Office Furniture and Equipment 132,511
Vehicle 32,775
Leasehold Improvement 4,547
Total Cost 556,911
Accumulated Depreciation 114,701
Book Value $442,210
Employees
As of July 31, 1996, the Company had forty-four (44) employees, of
whom eleven (11) performed management and supervisory functions and
thirty-three (33) performed technical, administrative and support functions
related to the Company's sales and network marketing operations. As of
July 31, 1996, forty-three (43) of the Company's employees were full-time
employees and one (1) Company employee was part-time. As of July 31, 1996,
the Company had employment contracts with its President and managers only.
The management contracts are for one (1) year terms and address
confidentiality and non-competition concerns.
As of July 31, 1996, International Heritage of Canada, Inc. had two
(2) employees both of whom were full-time employees. These employees are
involved primarily in conducting the same business as the Company; however,
their duties are related solely to business conducted in the three Canadian
provinces where authorization to do business has been secured.
The Company is not a party to any collective bargaining agreements.
The Company considers relations with its employees to be excellent.
PRIOR SALES OF SECURITIES
Prior to this Offering, the Company sold and issued a total of
10,493,540 Shares of Common Stock for a total consideration of $1,607,060(5).
The Company received cash consideration of $732,660. The balance of the
consideration was for services rendered, sales awards and incentives, and
management awards, having a value of $874,400.
(5) As of July 31, 1996. See Financial Statements.
Between May 1995 and December 1995, the Company sold 998,675 shares of
its Common Stock to approximately 192 persons for an aggregate of
$1,257,450 in cash and services. The Company relied upon the Regulation D,
Rule 504 exemption from the registration requirements of the Securities Act
of 1933 for these sales. The Company made rescission offers to each of
these investors in December 1995. All investors who accepted the offer of
rescission were repaid the amount of their investment plus interest at the
legal rate. Four (4) investors accepted the offer of rescission.
In January 1996, the Company issued rights to shares of Common Stock
(totaling 50,000 post-split shares) to four (4) existing shareholders and
IRSRs as merit awards for their previous provision of gratis services to
the Company. Two (2) of these individuals are current directors of the
Company. The issuance of shares pursuant to these rights is contingent
upon each remaining an IRSR of the Company through December 31, 1996. The
Company relied upon the Section 4(2) exemption from the registration
requirements of the Securities Act of 1933 for issuance of these
securities.
In January 1996, the Company issued rights to shares of Common Stock
(totaling 70,000 post-split shares) to eight (8) existing IRSRs as sales
awards and compensation for their product sales efforts. Three (3) of
these IRSRs are past or present directors of the Company or are affiliated
with present directors of the Company. The issuance of shares pursuant to
these rights is contingent upon each IRSR remaining in good standing with
the Company through December 31, 1996. The Company relied upon the Section
4(2) exemption from the registration requirements of the Securities Act of
1933 for issuance of these securities.
In January 1996, the Company issued rights to shares of Common Stock
(totaling 152,000 post-split shares) to twenty (20) existing employees as
compensation for their various services to the Company. One (1) of these
employees is a current director of the Company. The issuance of shares
pursuant to these rights is contingent upon each remaining an employee in
good standing through December 31, 1996. The Company relied upon the
Section 4(2) exemption from the registration requirements of the Securities
Act of 1933 for issuance of these securities. As of July 31, 1996 four (4)
of the employees were no longer employed but an additional employee was
granted such rights to shares for a total of 142,000 shares subject to this
conditional gift.
In February 1996, the Company issued 10,087 shares (100,870 post-split
shares) of its Common Stock to the Company's President, Stanley H. Van
Etten, pursuant to an employment contract between the Company and Mr. Van
Etten whereby he was entitled to receive as compensation for his services a
bonus of one percent (1%) of the shares of the Company's Common stock
outstanding at December 31, 1995, as a result of the Company meeting
certain financial goals during 1995. The Company relied upon the Section
4(2) exemption from the registration requirements of the Securities Act of
1933 for the issuance of these shares. Mr. Van Etten assigned these shares
to Mayflower Holdings, Inc., who in turn gifted the shares to various
individuals.
In March 1996, the Company issued 25,000 shares (250,000 post-split
shares) of its Common Stock to Mayflower Holdings, Inc., a principal
shareholder of the Company, of which the Company's President, Stanley H.
Van Etten, is also president. The Company granted said shares as
prepayment for services in connection with a corporate capitalization plan.
The Company relied upon the Section 4(6) exemption from the registration
requirements of the Securities Act of 1933 for the issuance of these
shares.
During the March 1996 meeting of the Board of Directors, Johnny Daniel
was granted 20,000 (200,000 post-split shares) conditional shares for
assisting the Company in establishing IRSRs in the State of Montana. The
award of these shares is contingent upon Mr. Daniel remaining a
Representative in good standing with the Company through January 1, 1997.
RELATED PARTY TRANSACTIONS
It is the Company's policy that any person that is a member of
management or an employee of either the Company or International Heritage
of Canada, Inc., may not build a sales organization and receive override
commissions and bonuses therefrom under the Bi-Lateral Compensation 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.
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.
Mayflower Holdings, Inc., ("Mayflower") a principal shareholder of whom
Stanley H. Van Etten is President, provided substantial professional
services, employees, operating capital, corporate office space, loans,
general administrative supplies and support to the Company during the
period March through May 1995. As a result, the Company owed $131,812 to
the President and to Mayflower. These notes have been repaid as of July
31, 1996. Mayflower advanced $178,500 to the Company in August 1996. The
note requires 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 (12%). This loan is
secured by the assets of the Company.
In addition, as of July 31, 1996, the Company has shareholder loans in
the amount of $10,000 outstanding. The notes bear interest at a rate of
twelve percent (12%) and mature in less than one year. In order to provide
the note holders with a rate of return commensurate with the risk of their
investments, the notes were discounted ten percent (10%) and the discount
is being amortized over the twelve (12) month period. The notes shall be
repaid with proceeds from the offering.
The Company received services related to the start-up and organization
of the Company's Canadian subsidiary totaling $450,000 in exchange for
stock of the Company from shareholders.
The Company entered into an agreement with the Company's President,
Stanley H. Van Etten, and a relative to create a sales training handbook
for the Company's IRSRs. The agreement calls for a lump sum payment of
$10,000 to the authors as well as a $4.00 per book royalty.
The Company has entered into an agreement with Premium Concepts, Inc.,
the president of which is a shareholder of the Company, to provide the
Company with a line of clothing, and other accessories. The Company shall
not bear any of the costs associated with production and manufacture of the
clothing and other accessories, but shall receive a royalty for granting
the license to use the Company logo(s).
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company, their ages
as of July 31, 1996, and their respective positions are as follows:
Name Age Position
Stanley H. Van Etten 34 President, CEO and Chairman
Barry A. Ackel 54 Director
John D. Brothers 30 Secretary and Director
Jimmie D. Knowles 50 Director
Claude W. Savage 58 Director
Larry G. Smith 51 Director
Sabrina L. H. Wei 27 Director
Directors are elected by the shareholders to serve until their successors
are duly elected and qualified. There are no family relationships between
any of the directors and executive officers of the Company.
STANLEY H. VAN ETTEN has served as President, CEO and Chairman of the
Company since May 4, 1995. Mr. Van Etten was the incorporator and a
founding party of the Company. Mr. Van Etten also is the President of
Mayflower Holdings, Inc., and has held this position since 1992. Mayflower
Holdings 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 Holdings Mr. Van
Etten is a principal shareholder and also is the Managing Director of
Mayflower Capital LLC, a pending 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 Unites States. From 1988 to 1993, Mr. Van Etten was
Regional Vice President for F.N. Wolf & Co., Inc., a national investment
banking firm. Mr. Van Etten holds a Bachelor of Arts degree from Florida
State University. Mr. Van Etten attended the Duke University, Fuqua School
of Business Executive MBA program in 1991 and 1992 but did not complete all
of the course work for graduation. He holds Series 24, 7, and 63 licenses
with the NASD as well. In addition, Mr. Van Etten owns small percentages
of numerous companies and from time to time serves as director or
consultant.
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. Prior to his association with the Company, Mr. Ackel was an
independent distributor with various network marketing companies. In
addition, Mr. Ackel has been the owner or co-owner of several businesses
dating back to 1967.
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
Compliance Director, 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. in Raleigh, and from February 1993 to September
1994, he was Vice President of Mayflower Holdings, Inc. In addition, from
1989 to 1993, he held several positions with F.N. Wolf & Co., Inc.
including the position of Branch Manager. Mr. Brothers holds a Bachelors
degree from Elon College with a major in Finance. In addition, he holds
Series 24, 7, 63 and 28 licenses with the NASD.
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 salesmen licenses.
CLAUDE W. SAVAGE has served as a Director of the Company since May
1995. He also is a principal shareholder of the Company. See Principal
Shareholders. Mr. Savage has been involved with network marketing since
1990. He is the former National Marketing Director with National Safety
Associates. Mr. Savage also is a former teacher and coach in various
public school systems in North Carolina, and since 1975, he has been the
owner of fourteen (14) restaurants. He is currently the owner of the Fish
Farm Seafood Restaurant in Matthews, North Carolina. Prior to his
association with the Company, Mr. Savage was an independent distributor
with various network marketing companies. 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 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
lies in the health care field. For eighteen (18) years he worked with
Smith Kline Beckman and Johnson & Johnson. The highest position held was
Vice President of Sales and Marketing. Prior to his association with the
Company, Mr. Smith was an independent distributor with various network
marketing companies. 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, Ms. Wei was involved with
network marketing with Nu Skin International and was Regional Vice
President for Images & Attitudes International (New Ways). Prior to that
she established Trans Global Development and Investment Company, Ltd., a
Hong Kong-based investment consulting firm. In addition, from 1986 to 1990
she was a Senior Auditor specializing in finance and investment with Touche
Ross, Chartered Accountants. Ms. Wei holds a Bachelors degree from Simon
Fraser University.
Executive Compensation
The following table sets forth the compensation paid by the Company as
of July 31, 1996 to each of the individuals who served as officers or
directors of the Company, and to all officers and directors as a group.
Name Position Compensation
Stanley H. Van Etten President/CEO/Director $842,499(1)(3)
Barry A. Ackel Director -0-(1)(2)
John D. Brothers Secretary/Director $60,963(1)(2)
Jimmie D. Knowles Director -0-(1)(2)
Claude W. Savage Director -0-(1)(2)
Larry G. Smith Director -0-(1)(2)
Sabrina L.H. Wei Director -0-(1)(2)
All officers and directors
as a group (7 persons) $903,462
(1) Does not include payments to each director of $100 per
meeting plus reimbursement of expenses incurred in
attending meetings.
(2) Does not include compensation received from the Company for
sales of products or bonuses or override commissions
on sales by down line sales organizations.
(3) 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 10,087 pre-split
shares) of the Company's Common Stock as of December
31, 1995 on February 16, 1996.
OPTIONS GRANTS
The Company has granted various options and conditional shares as
incentives to various parities associated with the Company and its
business. Currently all shareholders, optionees and prospective
(conditional) shareholders are either IRSRs or employees of the Company.
The only exception to this is: Patrick Kolenick, Bridge Ventures, Inc.,
Mayflower Holdings, Inc., Justo Nunez, Georgina Marie Mollick, Wood &
Francis, PLLC, Richard S. Heller, Jeffrey Babener and Wyrick, Robbins,
Yates & Ponton, PLLP, all of whom are professional parties working on
behalf of the Company. All outstanding options (other than those issued to
managers, employees and professional parties) have been issued to "key"
IRSRs who work on a full-time basis selling Company products. Since all of
these IRSRs are independent contractors, the Company believes these options
are a necessary incentive in order to keep these IRSRs associated with the
Company as opposed to loosing these key IRSRs to competing network
marketing companies.
The following table sets forth all outstanding options as of July 31,
1996:
Options Granted Expiration
Name Number of Shares Exercise Price Grant Date Date
Claude Savage(1) 5% of the issued and $0.0002 May 4, 1995 May 4, 1998
outstanding shares
Omega Leasing Services(1)
5% of the issued and $0.0002 May 4, 1995 May 4, 1998
outstanding shares
Mayflower Holdings, Inc.(1)
5% of the issued and $0.0002 May 4, 1995 May 4, 1998
outstanding shares
Barry Ackel(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Claude Savage(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Larry G. Smith(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Stanley H. Van Etten(2)
100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Sabrina L. H. Wei(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Derrick L. Rodgers(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
John D. Brothers(2) 100,000 $0.20 Jan 8, 1996 Jan 1, 1999
Jimmie Knowles(2) 100,000 $0.20 Apr 1, 1996 Jan 1, 1999
John D. Brothers(3) 100,000 $0.20 Mar 4, 1996 Jan 1, 1999
Dawn McIntyre(3) 50,000 $0.20 Mar 4, 1996 Jan 1, 1999
Dawn McIntyre(3) 50,000 $0.20 Jun 30, 1996 Jan 1, 1999
Mary Breen(3) 50,000 $0.20 Mar 4, 1996 Jan 1, 1999
Dwight Hallman(3) 50,000 $0.20 Mar 4, 1996 Jan 1, 1999
Dwight Hallman(3) 50,000 $0.20 Jun 30, 1996 Jan 1, 1999
Clark Jones(3) 50,000 $0.20 Mar 4, 1996 Jan 1, 1999
Jeffrey L. Hooks(3) 50,000 $0.20 Jun 30, 1996 Jan 1, 1999
Stephanie Harris(3) 50,000 $0.20 Jun 30, 1996 Jan 1, 1999
Gary Bisby(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Johnny Daniell(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Rodger Gadd(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
B. Smith III(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
DeAnne Elrod(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Martin Runion(4) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Maureen Uphill(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Dave Martin(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Greg Bright(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Robert L. Chalmers(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Tricia Martin(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Rhyon Caldwell(5) 50,000 $1.00 Jun 30, 1996 Jan 1, 1999
Patrick Kolenik(6) 400,000 $1.50 Jul 3, 1996(10) Jan 1, 1999
Bridge Ventures, Inc.(6)
100,000 $1.50 Jul 3, 1996(10) Jan 1, 1999
Mayflower Holdings, Inc.(6)
200,000 $1.50 Jul 3, 1996(10) Jan 1, 1999
O. Kenneth Rudd III(7) 100,000 $0.20 Jun 30, 1996 Jan 1, 1999
Evonne Eckenroth(7) 50,000 $0.20 Jun 30, 1996 Jan 1, 1999
Justo Nunez(8) 100,000 $0.20 Jun 30, 1996 Jan 1, 1999
Georgina Marie Mollick(9)
150,000 $0.20 Jun 30, 1996 Jun 30, 1999
Wood & Francis, PLLC(9) 50,000 $1.00 Jun 30, 1996 Jun 30, 1999
Richard S. Heller(9)(11) 25,000 $1.00 Jun 30, 1996 Jun 30, 1999
Jeffrey Babener(9) 50,000 $1.00 Jun 30, 1996 Jun 30, 1999
Wyrick, Robbins,
Yates & Ponton (9) 50,000 $1.00 Jun 30, 1996 Jun 30, 1999
(1) 1995 Board of Directors option.
(2) 1996 Board of Directors option.
(3) 1996 Management option.
(4) U.S. Advisory Board option.
(5) Canadian Advisory Board option.
(6) Option of consultants.
(7) Retail Sales Training System Development and Implementation
Team Member Option.
(8) Merit Award for marketing services to Company since inception.
(9) Option to legal service providers.
(10) Option granted after the ten for one (10:1) stock split
(11) Will be restricted for 12 months from the date of SEC effectiveness.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
At July 31, 1996, the directors, executive officers and persons
holding five percent (5%) or more of the outstanding Shares were as
follows:
Percentage
Shares
Benefi- Prior After After
cially to $5,000,000 $25,000,000
Shareholder Owned Offering Offering Offering
Acme Holdings 522,500 4.98% 4.75% 4.02%
Barry Ackel, Director
1239 Heyman Lane
Alexandria, LA 71303
Omega Leasing Services 915,000 8.72% 8.32% 7.04%
Larry G. Smith, Director
2435 E. North Street
Suite 292
Greenville, SC 29615
Jimmie & Portia Knowles, Director 663,900 6.33% 6.04% 5.11%
105 Beechtree Court
Apex, NC 27502
Mayflower Holdings 885,280(6) 8.43% 8.05% 6.81%
Stanley H. Van Etten, President & CEO
2626 Glenwood Avenue
Suite 300
Raleigh, NC 27608
Paradise Investments, Ltd. 250,000 2.38% 2.27% 1.92%
Sabrina L. H. Wei, Director
1370-885 W. Georgia
Vancouver, BC V6C 3E8
Canada
Derrick L. Rodgers 577,000 5.50% 5.25% 4.44%
409 Jackson Park Road
Kannapolis, NC 28083
Claude Savage, Director 797,000 7.59% 7.25% 6.13%
106 Benbow Lane
Charlotte, NC 28214
To the Top We Go, Inc. 110,000(7) 1.05% 1.00% 0.85%
John D. Brothers, Director
2626 Glenwood Ave.,
Ste. 200
Raleigh, NC 27608
All directors and 4,143,680 39.48% 37.68% 31.88%
executive officers
as a group (7 persons)
(6) Does not include stock bonus of 10,087 shares (pre-split) earned pursuant to
the president's employment contract with the Company or the 25,000 shares
(pre-split) awarded to Mayflower Holdings, Inc., as prepayment for services
in connection with as corporate capitalization plan. All shares were gifted to
other parties, no shares were retained by Mr. Van Etten or Mayflower Holdings,
Inc.
(7) Does not include 25,000 conditional shares to be granted January 1, 1997 so
long as Mr. Brothers remains continuously employed by the Company through Dec-
ember 31, 1996.
LITIGATION
The Company is not involved currently in any material legal proceedings.
The Company's directors and officers are not involved currently in any
legal proceedings, except as listed below regarding Stanley H. Van Etten
and John D. Brothers.
1. Jerry W. Kapp, et al. v. F.N. Wolf & Co., Inc., et al., 93 CVS 02170,
Wake County Superior Court; 93-207-CIV-5-BO, United States District
Court for the Eastern District of North Carolina, Raleigh Division.
This action was initiated on February 26, 1993, in Wake County Superior
Court. The Complaint was filed by Jerry W. Kapp against F.N. Wolf &
Co., Inc. ("Wolf"), and Stanley H. Van Etten. The Plaintiff alleged
that he had been damaged through the Defendants' sale of unregistered
securities, market manipulation, and fraud in connection with the sale
of securities in violation of the North Carolina Securities Act, as
well as, through common law fraud, negligent misrepresentation, and
breach of an implied contract duty of good faith and fair dealing. Mr.
Van Etten denied the allegations. The Complaint also sought to
certify, as a class, all North Carolina investors who purchased shares
of Treats International Enterprises, Inc. from Wolf. On August 24,
1994, Wolf filed for Chapter 11 bankruptcy protection in the United
States District court for the Southern District of New York.
Subsequently, the Plaintiffs were enjoined temporarily from prosecuting
their action provided that a disclosure statement was approved by the
Bankruptcy Court and provided that a Plan of Reorganization was
confirmed. Wolf seeks a permanent injunction as part of the Plan of
Reorganization which would presumably settle all claims against Mr. Van
Etten. Mr. Van Etten has entered into settlement discussions and
management believes that the claims against Mr. Van Etten will be so
settled, and that this matter will have no material effect on the
Company.
2. In addition, Mr. Van Etten and/or Mayflower Holdings, Inc., a principal
shareholder of the Company, and a company in which Mr. Van Etten is a
principal, and/or Carpediem Venture Capital Group, Inc., a company in
which Mr. Van Etten is a shareholder, also are involved in certain
litigation stemming from various venture capital financing
transactions. First, on March 2, 1995, Mayflower Holdings, Inc. filed
suit against Denise Fordin in Superior Court in Wake County, North
Carolina alleging that Ms. Fordin had failed to repay a loan made to a
company of which Ms. Fordin was a principal and for which Ms. Fordin
had personally guaranteed the loan. Mayflower Holdings, Inc. secured a
judgment in the matter and has enforced the same. Second, Mr. Van
Etten is a shareholder in Carpediem Venture Capital Group, Inc., which
filed a complaint against various defendants in Superior Court in
Forsyth County, North Carolina in March 1995, alleging common law fraud
and securities law violations, stemming from a transaction to provide
investment capital to the defendants and their business venture.
Answers have been filed by the Defendants and a Motion for Summary
Judgment is currently pending. Third, Parissa Haibodi Jones has filed
suit against Mr. Van Etten individually in September 1995, in District
Court, Wake County, North Carolina, alleging that Mr. Van Etten was
liable for loans that Jones had made to Sunshine Jr. Acquisition, Inc.
Mr. Van Etten has prepared an Answer to this Complaint denying the
allegations. Mr. Van Etten intends to vigorously prosecute or defend
his interests in each of these suits. In addition, management believes
that none of these matters will have a significant adverse impact on
the Company, and has included disclosure of these matters in the
interest of full disclosure.
3. On January 20, 1995, Mr. Brothers filed a petition for adjustment of
debts under Chapter 13, Title 11, United States Code in the United
States Bankruptcy Court for the Eastern District of North Carolina
(Case No. 95-00061-5-ATS). The Court ordered a schedule for repayment
of debts.
DESCRIPTION OF COMMON STOCK
Upon the closing of the offering, the authorized capital stock of the
Company will consist of 25,000,000 shares of Common Stock, par value $0.001
per share.
As of July 31, 1996, there were 10,493,540 shares of Common Stock
outstanding held by the Shareholders. In addition, pursuant to its
employment agreement with its President, Stanley H. Van Etten, the Company
awarded Mr. Van Etten a bonus of 10,087 pre-split shares (1% of the issued
and outstanding shares of December 31, 1995) based on the Company's
financial performance in 1995. These shares were issued on February 16,
1996. March 4, 1996, the Company's Board of Directors awarded an
additional 25,000 pre-split shares of Common Stock to Mayflower Holdings,
Inc. as prepayment for services provided by a related party in an
anticipated capitalization plan. Mr. Van Etten assigned all rights and
ownership to these shares to Mayflower Holdings, Inc., who in turn gifted
the shares to various individuals.
During the January 1996 annual meeting of the Board of Directors, certain
conditional share awards were approved. These awards included: (i) rights
to shares of common stock totaling 50,000 shares to be awarded in January
1997 to four (4) existing shareholders and Representatives as merit awards
for their previous provision of gratis services to the Company; (ii) rights
to shares of common stock totaling 70,000 shares to be awarded in January
1997 to nine (9) existing sales Representatives as sales awards for their
product sales efforts (three (3) of these Representatives are past or
present directors of the Company); and (iii) rights to shares of common
stock totaling 152,000 shares to be awarded January 1997 to twenty (20)
employees as compensation for their various services to the Company (some
of these employees have failed to meet the condition of continued
employment through December 31, 1996, and therefore there are 142,000
shares which are subject to the terms of this provision).
During the January 1996 annual meeting of the Board of Directors, options
to the members of the Board of Directors were approved. These options were
for 10,000 (pre-split) shares each at an exercise price of $2.00 per share,
the term of the option is between January 1, 1997 and January 1, 1999 to be
exercised in whole. These options were conditioned on the optionee being
associated in good standing with the Company and remaining a member of the
Board of Directors from January 8, 1996 through December 31, 1996.
During the March 1996 meeting of the Board of Directors, as part of their
overall compensation, the Company's managers were awarded a stock option
for $2.00 per share exercisable between January 1, 1997 and January 1,
1999. The options were granted as follows: Mary Breen, 5,000 shares; Dawn
McIntyre, 5,000 shares; Clark Jones, 5,000 shares; Dwight Hallman, 5,000
shares; and John Brothers, 10,000 shares. (All options reflect pre-split
numbers).
During the March 1996 meeting of the Board of Directors, Johnny Daniel was
granted 20,000 (pre-split) conditional shares for assisting the Company in
establishing IRSRs in the State of Montana. The award of these shares is
contingent upon Mr. Daniel remaining a representative in good standing with
the Company through January 1, 1997.
June 30, 1996, the Board of Directors granted options to the members of the
Canadian Advisory Board and the U.S. Advisory Board. Each member of the
advisory boards were entitled to 5,000 shares at an exercise price of
$10.00 per share on or before January 1, 1999. The shares of common stock
subject to this option total 65,000 (pre-split) shares. June 30, 1996 the
Board also granted options to its Retail Sales Training System Development
and Implementation Team, O. Kenneth Rudd, III and Evonne Eckenroth. These
options are for 10,000 and 5,000 pre-split shares, respectively,
exercisable at a price of $2.00 per share on or before January 1, 1999.
On June 30, 1996, the Board of Directors also awarded options to various
service providers as follows: (1) Justo Nunez of Nunez Communications
10,000 shares exercisable at a price of $2.00 per share in whole or in part
before January 1, 1999 for work with the Company in developing its
marketing materials since inception; (2) Georgina Marie Mollick, 15,000
shares exercisable at a price of $2.00 per share in whole or in part on
demand on or before June 30, 1999 for the rendering of legal services from
inception to date; (3) Wood & Francis, PLLC, 5,000 shares at $10.00 per
share exercisable in whole on or before January 1, 1999 for services as
general counsel to the Company; (4) Richard S. Heller, 2,500 shares at
$10.00 per share exercisable on or before January 1, 1999 for legal
services related to this offering. Mr. Heller's shares will be restricted
for 12 months from the date of SEC effectiveness; (5) Jeffrey Babener,
5,000 shares at $10.00 per share exercisable on or before January 1, 1999
for network marketing legal services; and (6) Wyrick, Robbins, Yates &
Ponton, LLP, 5,000 shares at $10.00 per share on or before January 1, 1999
for legal services. (All options reflect pre-split numbers).
On June 30, 1996, the Board of Directors also awarded options to new
managers Jeffrey L. Hooks and Stephanie Harris pursuant to the same terms
as the options granted to the Company's managers in March 1996.
Additionally, the Board awarded an additional option of 5,000 shares each
to Dawn McIntyre and Dwight Hallman (pursuant to the same terms as the
prior option grant).
The Company has granted the afore-mentioned various options and conditional
shares as incentives to parities associated with the Company and its
business. Currently all shareholders, optionees and prospective
(conditional) shareholders are either IRSRs or employees of the Company.
The only exception to this is: Patrick Kolenick, Bridge Ventures, Inc.,
Mayflower Holdings, Inc., Justo Nunez, Georgina Marie Mollick, Wood &
Francis, PLLC, Richard S. Heller, Jeffrey Babener and Wyrick, Robbins,
Yates & Ponton, PLLP, all of whom are professional parties working on
behalf of the Company. All outstanding options (other than those issued to
managers, employees and professional parties) have been issued to "key"
IRSRs who work on a full-time basis selling Company products. Since all of
these IRSRs are independent contractors, the Company believes these options
are a necessary incentive in order to keep these IRSRs associated with the
Company as opposed to loosing these key IRSRs to competing network
marketing companies.
Holders of shares of Common Stock are entitled to receive dividends in
cash, property or shares when and if dividends are declared by the Board of
Directors out of funds legally available therefor. There are no
limitations on the payment of dividends. A quorum for any meeting of
shareholders is fifty percent (50%) of the outstanding shares entitled to
be voted at the meeting. Holders of Shares are entitled to one (1) vote
per share. Upon any liquidation, dissolution or winding up of the business
of the Company, any assets will be distributed to the holders of shares
after payment or provision for payment of all debts, obligations or
liabilities of the Company. There are no preemptive rights, subscription
rights, conversion rights and redemption provisions relating to the shares
and none of the shares carry any liability for further calls.
The rights of holders of shares of Common Stock may not be modified other
than by vote of two-thirds (2/3) of the shares voting on such modification.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for securities of
the Company. No prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of share of
Common Stock for sale will have on the market price prevailing from time to
time. Nevertheless, sales of substantial amount of Common Stock of the
Company in the public market after the lapse of the restrictions through
the registration of the underlying shares, could adversely affect the
prevailing market price of the Common Stock.
Upon completion of the Minimum Offering, the Company will have outstanding
10,993,540 shares of Common Stock. Upon completion of the Maximum
Offering, the Company will have outstanding 12,993,540 shares of Common
Stock. Of these shares, 500,000 shares of Common Stock, representing all
of the shares sold in the Minimum Offering, or 2,500,000 shares of Common
Stock, representing all of the shares sold in the Maximum Offering, as the
case may be, will be freely tradable without restriction or limitation
under the Securities Act, except for shares, if any, purchased by an
"affiliate" of the Company (as defined in the rules and regulations of the
Commission under the Securities Act) which shares will be subject to the
resale limitations of Rule 144 under the Securities Act. The remaining
outstanding shares are "restricted" shares within the meaning of the
Securities Act (the "Restricted Shares"). The Restricted Shares
outstanding on the date hereof were issued and sold by the Company in
private transaction in reliance upon exemptions from registration under the
Securities Act and may be sold only if they are registered under the
Securities Act or unless any exemption from registration is available. See
Prior Sales of Securities and Subsequent Registration of Privately Held
Shares.
PLAN OF DISTRIBUTION
The securities offered hereby are being offered on a "best efforts" basis
by WIN Capital Corporation. Subject to the terms and conditions of the
Underwriting Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, WIN Capital
Corporation has agreed to act as representative of the several underwriters
who will form the proposed selling group. See Revised Underwriting
Agreement.
The Company will bear all costs and expenses incident to the issuance,
offer, sale and delivery of the Common Stock. The Issuer has agreed to
reimburse WIN Capital Corporation's counsel, Shustak, Jalil, Sanders &
Heller, its legal fees estimated to be $35,000. Richard S. Heller, a
member of the firm, has had options conferred on him by the Issuer for
25,000 common shares as an exercise price of $0.20 per share (post-split).
(These options are restricted for 12 months from the date of SEC
effectiveness). The members of the selling group, if any, have agreed to
pay all fees and expenses of any legal counsel who it may employ to
represent it separately in connection with or on account of the proposed
offering by the Company, mailing, telephone, travel and clerical costs and
all other office costs incurred or to be incurred by the Underwriters or by
their representatives in connection with this offering.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the 1933 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 intends to sell the shares of Common Stock in this offering
only in the states in which the offering is qualified. An offer to
purchase may only be made and consummated in such states. The Subscription
Agreement for the shares of Common Stock must be executed, and the shares
of Common Stock may only be delivered only in such states. Resales or
transfer of the shares of Common Stock may be restricted under state law.
If the Company does not terminate the offering earlier, the offering of
shares of Common Stock will continue beyond the minimum amount of
$5,000,000 until the Company raises an aggregate of $25,000,000, provided
that the offering period for all of the shares of Common Stock of the
Company will not exceed 120 days from the effective date of this
Prospectus.
The participating members of the selling group have agreed in accordance
with the provisions of Rule 15c2-4 promulgated by the Securities and
Exchange Act of 1934, as amended, to cause all funds received upon
subscription for shares of Common Stock to be forwarded to the Escrow Agent
upon the receipt of the executed Subscription Agreement and related funds
by the member of the selling group by or before noon of the next business
day following the subscription for said shares of Common Stock.
Any and all proceeds received by the Underwriter from the sale of the Stock
shall be deposited in an escrow account with Continental Trust & Transfer
Company (the "Escrow Agent") pursuant to the terms and conditions of the
Escrow Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Company
shall pay the fee for establishing and maintaining the escrow account.
Subscribers' checks shall be made payable to the Escrow Agent and the
Underwriter will transmit such checks directly to the Escrow Agent by noon
the next business day after receipt. The Escrow Agent promptly shall
release to the Company the net proceeds (proceeds less commissions) from
the sales of the Stock as and when requested by the Company but in any
event, no earlier than the closing of the offering beginning with the first
closing upon receipt of the Minimum Offering amount of $5,000,000 and the
Maximum Offering amount of $25,000,000 or until the termination of the
offering. The commission relating to a particular sale shall be released
by the Escrow Agent to the Underwriter when the net proceeds of that sale
are released to the Company.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price has been unilaterally determined
by the Company without being negotiated with an underwriter or other third
party. Among factors considered by the Company in determining the price
were the history of, and the prospects for, the Company and the industry in
which it competes, its past and present operations, its past and present
earnings and the trend of such earnings, the prospects for future earnings,
the present state of the Company's development, the general condition of
the securities markets at the time of this offering, and the recent market
prices of publicly traded common stocks of comparable companies.
LEGAL MATTERS
The legality of the Securities offered hereby has been passed upon for the
Company by Wood & Francis, PLLC, Raleigh, North Carolina. The Underwriter
will be represented by Shustak Jalil Sanders & Heller, New York, New York.
EXPERTS
The balance sheets of the Company as of July 31, 1996 (historical and pro
forma) and December 31, 1995, and the statements of loss, changes in
stockholders' deficit, cash flow and the consolidated financial statement
schedules for the period from April 28, 1995 (inception) to December 31,
1995, and the seven months ended July 31, 1996 appearing in this Prospectus
and Registration Statement, have been included herein in reliance on the
reports of Eilers, Jones, Brown & McLeod, CPAs, PA, independent
accountants, given on the authority of that firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission ("SEC"), all of
which may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, the Company intends to provide its shareholders with annual
reports, including audited financial statements, and such other reports as
the Company may determine.
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth
in the Registration Statement and exhibits thereto. For further
information with respect to the Company and the securities offered hereby,
or with respect to any contract or other document referred to, reference is
made to such Registration Statement and exhibits, including the copy of
such contract or other documents as it is filed as an exhibit to the
Registration Statement. Copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the SEC,
Washington, D.C. 20549 upon the payment of the fees prescribed by the SEC.
INTERNATIONAL HERITAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL
INFORMATION
Periods Ended July 31, 1996 and December 31, 1995
PAGE(S)
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3 & F-4
Consolidated Statements of Loss F-5
Consolidated Statements of Stockholders' Deficit F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 to F-16
SUPPLEMENTAL INFORMATION:
Schedules of Consolidated Selling and Administrative Expenses F-17
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
International Heritage, Inc.
Raleigh, North Carolina
We have audited the accompanying consolidated balance
sheets of International Heritage, Inc. as of July 31, 1996
and December 31, 1995, and the related consolidated
statements of loss, stockholders' deficit and cash flows
for the periods January 1, 1996 to July 31, 1996 and 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 July 31, 1996 and December 31, 1995, and the results of
its operations and its cash flows for the periods 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-
17 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
August 24, 1996
Raleigh, North Carolina
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEETS
July 31, 1996 and December 31, 1995
ASSETS
1996 1995
CURRENT ASSETS
Cash $ 274,797 $ 454,671
Certificates of deposit 70,265 10,000
Inventory 423,193 283,371
Employee and stockholder advances 54,093 39,556
Due from representatives, less allowance for
doubtful accounts of $11,595 in 1996 347,177 142,028
Sales tax refunds due 44,214 -
Other receivables 45,457 22,998
Deposits 122,179 79,419
Prepaid expenses 378,911 1,438
Total Current Assets 1,760,286 1,033,481
PROPERTY AND EQUIPMENT - AT COST
Construction in process 18,876 -
Computer software 108,081 81,102
Computer hardware 260,121 101,114
Office furniture and equipment 132,511 88,137
Vehicle 32,775 -
Leasehold improvements 4,547 -
556,911 270,353
Less accumulated depreciation and amortization 114,701 36,411
Net Property and Equipment 442,210 233,942
ORGANIZATIONAL AND START-UP COSTS, NET 804,630 864,861
DOWNLINE DEVELOPMENT COSTS, NET 200,374 146,709
$3,207,500 $2,278,993
The accompanying notes are an integral part of these consolidated
financial statements.
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEETS
July 31, 1996 and December 31, 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
1996 1995
CURRENT LIABILITIES
Trade accounts payable $ 909,877 $ 594,566
Payable to representatives 148,399 103,331
Cash overdrafts - 242,606
Deferred revenue 464,914 408,375
Sales tax payable 41,703 135,913
Accrued payroll and payroll taxes 218,640 13,215
Accrued commissions 1,542,132 915,421
Accrued earn-out product 413,255 253,913
Accrued award trip 50,000 -
Accrued interest payable - 2,675
Notes payable from stockholders 10,000 33,733
Notes payable - other - 131,812
Current maturities of long-term debt 7,097 -
Potential investor deposits - 115,650
Total Current Liabilities 3,806,017 2,951,210
LONG-TERM DEBT, less current maturities 12,447 -
STOCKHOLDERS' DEFICIT
Common stock 10,494 9,987
Additional paid-in capital 1,596,566 1,247,463
Equity adjustment for foreign currency translation
2,592 156
Paid-in capital -- stock options 1,566,000 -
Accumulated deficit (2,520,616)(1,929,823)
655,036 (672,217)
Deferred compensation expense (1,266,000) -
Total Stockholders' Deficit (610,964) (672,217)
$3,207,500 $2,278,993
The accompanying notes are an integral part of these consolidated
financial statements.
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF LOSS
Periods Ended July 31, 1996 and December 31, 1995
1996 1995
REVENUE
Sales - product $17,099,074 $4,254,278
Sales - business kits 1,321,925 312,110
Sales - administrative fees 658,497 285,854
Total Revenue 19,079,496 4,852,242
COST OF SALES
Commissions 8,372,285 2,580,177
Product 5,624,063 1,912,157
Business kits 1,249,711 358,549
Other 711,476 67,454
Total Cost of Sales 15,957,535 4,918,337
GROSS INCOME (LOSS) 3,121,961 (66,095)
SELLING AND ADMINISTRATIVE EXPENSES 3,712,754 1,863,728
NET LOSS $ (590,793) $(1,929,823)
NET LOSS PER SHARE $ (0.08) $ (2.20)
Weighted average number of common shares outstanding
7,495,387 877,446
The accompanying notes are an integral part of these consolidated
financial statements.
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Periods Ended July 31, 1996 and December 31, 1995
Common Stock; $.001 par value, 25,000,000 shares authorized
Adjustment for
Additional Paid Foreign Currency
Shares Amount in Capital Translation
Initial issuance of common stock
1,615 $ 16 $ 111,475 $ -
Stock split (500 for 1)
805,885 8,059 (8,059) -
Issuance of common stock
114,475 1,145 803,320 -
Conversion of notes payable to
common stock
76,700 767 340,727 -
Adjustment for foreign currency tran
- - - 156
Net Loss
- - - -
Balance as of December 31, 1995
998,675 9,987 1,247,463 156
Issuance of common stock
50,679 507 349,103 -
Issuance of common stock options
- - - -
Stock split (10 for 1)
9,444,186 - - -
Adjustment for foreign currency tran-
slation - - - 2,436
Net Loss
- - - -
Balance as of July 31, 1996
10,493,540 $ 10,949 $ 1,596,566 $ 2,592
Paid-in Deferred Total
Capital Accumulated Compensation Stockholders'
Stock Options Deficit Expensed Deficit
Initial issuance of common stock
$ $ $ $ 111,491
Stock split (500 for 1)
- - - -
Issuance of common stock
- - - 804,465
Conversion of notes payable to
common stock
- - - 341,494
Adjustment for foreign currency tran
- - - 156
Net Loss
- (1,929,823) (1,929,823)
Balance as of Decemer 31, 1995
- (1,929,823) ($672,217)
Issuance of common stock
- - - 349,610
Issuance of common stock options
1,566,000 - (1,266,000) 300,000
Stock split (10 for 1)
- - - -
Adjustment for foreign currency tran-
slation - - - 2,436
Net Loss
- (590,793) - (590,793)
Balance as of July 31, 1996
$ 1,566,000 $ (2,520,616) $(1,266,000) $ (610,694)
The accompanying notes are an integral part of these consolidated financial
statements.
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods Ended July 31, 1996 and December 31, 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(590,793) $(1,929,823)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 78,290 36,411
Amortization 121,334 54,252
Adjustments for foreign currency translation 2,436 156
Issuance of stock bonus 100,870 -
Other (1,260) -
Common stock options 300,000 -
Changes in Assets and Liabilities:
Inventory (139,822) (283,371)
Receivables (286,359) (204,582)
Deposits and prepaid expenses (170,233) (80,857)
Payables 360,379 697,897
Deferred revenue 56,539 408,375
Accrued expenses 944,593 1,321,137
NET CASH PROVIDED BY OPERATING ACTIVITIES 775,974 19,595
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (286,558) (270,353)
Purchases of certificates of deposit (60,265) (10,000)
NET CASH USED IN INVESTING ACTIVITIES (346,823) (280,353)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of stock and conversion of notes payable
- 1,257,450
Proceeds from notes payable and long term debt 22,775 170,045
Payments on notes payable and long term debt (158,776) (4,500)
Deposits from potential investors - 115,650
Refunds to investors (115,650) -
Payments for organization and start-up costs (36,446) (905,776)
Payments for downline development costs (78,322) (160,046)
Cash overdraft (242,606) 242,606
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(609,025) 715,429
NET INCREASE (DECREASE) IN CASH AT END OF PERIOD (179,874) 454,671
Cash at Beginning of Period 454,671 -
CASH AT END OF PERIOD $ 274,797 $ 454,671
The accompanying notes are an integral part of these consolidated financial
statements.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 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 direct sales in forty-eight states.
The Company is dedicated to helping Independent Retail Sales
Representatives ("IRSR") build retail sales organizations to
sell jewelry and collectibles.
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 - Certain 1995 amounts have been
reclassified to conform to current year presentation. None
of these reclassifications effected the net loss or
stockholders' deficit.
CERTIFICATES OF DEPOSIT - The Company was required to deposit
$70,000 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 1996 and 1997.
INVENTORY - Inventory, consisting primarily of retail
business center kits, is stated at the lower of cost or
market, with cost determined under the first-in first-out
(FIFO) method.
PROPERTY AND EQUIPMENT - Depreciation expense is calculated
on the declining balance methods over useful lives as
follows:
Estimated Useful Life
Computer software 5 years
Computer hardware 5 years
Office furniture and equipment 7 years
Vehicle 5 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.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 1 -THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ORGANIZATION AND START-UP COSTS - The organization costs are
being amortized on a straight-line basis over 5
years (accumulated amortization was $120,914 as of July 31, 1996
and $33,898 as of December 31,1995). The start-up costs are
being amortized on a straight-line basis over 15 years
(accumulated amortization was $16,679 as of July 31, 1996
and $7,017 as of December 31, 1995).
DOWNLINE DEVELOPMENT COSTS - In order to facilitate a larger
retail sales organization in a short time period, the Company
allowed certain representatives to develop retail sales
organizations with products paid for by the Company, not the
representative. Accordingly, the costs associated with this
downline development have been capitalized and are being
amortized on a straight-line basis over 5 years (accumulated
amortization was $37,994 as of July 31, 1996 and $13,337 as
of December 31, 1995).
REVENUE RECOGNITION AND DEFERRED REVENUE - The Independent
Retail Sales Representative may join the Company at no cost,
but must purchase a $75 professional retail business career
kit (at cost), which then allows them to sell the Company's
products. When the IRSR sells a product under a direct
product purchase, the sale is recognized when the product is
shipped. When the IRSR makes a down payment of $250 towards
the purchase of product and signs a representative
application and retailed business agreement with the
Company, they can directly market the Company's products and
build a retail sales organization. This agreement allows the
buyer to cancel the agreement without penalty or obligation
within 60 days and receive a complete refund ("cash-out").
The Company defers a portion of all other revenue at the time
of receipt and after the 60 day time period has elapsed, the
remaining revenue is recognized. Effective July 1996, those
representatives who enter with more than one business center
are not eligible to cash-out. The Company provides a 100%
satisfaction guarantee on all products and sales aids
purchased by representatives. The Company recognizes revenue
based on a $25 administrative fee and the out-of-pocket cost
when a representative first joins the company and every year
thereafter. Commissions are earned by the representatives
based on sales volume levels. The Company does not pay
commissions on representative sponsorships, it only pays
commissions on product sales. The Company does not accrue for
commissions on an incremental basis between sales volume
levels.
ADVERTISING COSTS - Advertising costs are expensed the first
time the advertising takes place.
PER SHARE AMOUNTS - Per share amounts are calculated based on
the weighted average number of common shares outstanding.
Common stock options and contingent shares are excluded from
the calculation due to their anti-dilutive nature.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVESTOR DEPOSITS - Subsequent to the initial issuance of
common stock, the Company received $804,465 of funds from
potential investors. These securities may have been offered
and sold without having been registered or exempted from
registration under applicable federal and state securities
laws. Thus, the Company offered to rescind such prior sales
to all investors who deposited monies during the period from
August to December 1995 by refunding the price paid for the
securities plus interest. The Company has recorded deposits
made by investors who rejected the Rescission Offer as
equity. Three investors, for a total of $15,000, accepted
the Rescission Offer and received a refund. 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 one pre-split share for each
$10 investment.
EMPLOYEE STOCK OPTIONS - The Company recognizes compensation
cost for nonvariable employee stock options at the
differences between what the stock has sold for to outside
investors ($1.00 per share post-split) less the amount, if
any, the employee is required to pay. The method used here
is the intrinsic value based method (which approximates the
fair value based method) and is expensed over the estimated
period of service (estimated to be three years).
STATEMENT OF CASH FLOWS - For purposes of reporting cash
flows, cash includes cash on hand and amounts due from banks.
Cash paid for interest was $20,872 for the period ended July
31, 1996 and $2,833 for the period ended December 31, 1995.
Cash received for interest was $266 for the period ended July
31, 1996. Noncash financing activities in 1996 include the
exchange of approximately $250,000 of common stock as
prepayment for services to be provided by a related party in
connection with a planned stock offering, and $100,870 of
common stock for services provided by the President of the
Company. Noncash financing activities in 1995 included the
exchange of approximately $522,485 of common stock for
services provided by individuals who assisted in the
organization of the Company. As of July 31, 1996, the
Company had U.S. bank balances of $746,745 of which $546,745
was in excess of the insured limits prescribed by the Federal
Deposit Insurance Corporation.
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.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 3 - OPERATING STATUS
As noted in the accompanying financial statements, the Company
incurred a net loss of $2,520,616 for the period April 28, 1995 (date
of inception) to July 31, 1996. In addition, the Company has a
stockholders' deficit of $610,964 as of July 31, 1996, and its current
liabilities exceed its current assets by $2,045,731 as of July 31,
1996. This situation has been caused by the nature of the Company's
business (deferred revenue and commissions are the highest at the
start of a business center) and the fact that it has taken more
capital to establish an international direct sales Company than was
originally anticipated. The Company is currently completing the
required filings that will allow them to issue common stock in the
Company to raise additional capital. The Company's ability to
continue as a going concern is dependent on its ability to maintain
future profitability through cutting corporate expenses, to
successfully obtain the above mentioned capital and the change in the
cash-out policy (see Note 1). The financial statements do not include
any adjustments that might be necessary should the Company be unable
to continue as a going concern.
NOTE 4 - ORGANIZATION AND START-UP COSTS
The Company was incorporated April 28, 1995 and accordingly,
significant organization and start-up expenses were incurred. A
portion of these costs were paid to or exchanged for services from
various parties. The components of organization and start-up costs
are detailed below:
1996 1995
Consulting services and expense
reimbursements charged by Mayflower
Holdings, Inc. (a stockholder) $104,065 $104,065
Exchange of common stock for services
provided 434,985 434,985
Legal and accounting fees 277,595 242,668
Consulting fees 50,806 50,806
Exchange of common stock for services
provided Mayflower Holdings, Inc. and
Eagle Harbor Holdings (a stockholder) 38,500 38,500
Video production 32,412 32,412
Trademarks 3,860 2,340
_______ _______
942,223 905,776
Less accumulated amortization 137,593 40,915
$804,630 $864,861
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 5 -NOTES PAYABLE AND LETTERS OF CREDIT
The Company has loans of $10,000 outstanding to two stockholders.
These notes have interest rates of 12% and mature in one year. In
order to provide the note holders with a rate of return commensurate
with risk of their investment, the notes were discounted 10% and the
discount is being amortized over the 12 month period.
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 (10,000 Canadian dollars) 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 July 31, 1996) and
matures on September 17, 1996. The note is secured by a certificate
of deposit with the bank. No amounts are outstanding under either
letter as of July 31, 1996.
NOTE 6 -LONG-TERM DEBT
At July 31, 1996, the Company was indebted on long-term debt as
follows:
$22,775 note payable to Ford Motor Credit Company,
bearing interest at 12.5%. Principle and interest are
payable in monthly installments of $762. The note is
secured by a vehicle and matures January 4, 1999. $19,544
Less current maturities 7,097
$12,447
Interest expense was $1,544 in 1996.
NOTE 7 - PROVISION FOR INCOME TAXES
The Company has a Federal income tax net operating loss of
approximately $590,000 in 1996 and $1,930,000 in 1995. As a result,
no provision for income taxes has been recorded. As of July 31, 1996,
The Company has a net operating loss carryforward for Federal income
tax purposes of approximately $2,520,000. The net operating loss
carryforward is available to offset against future Federal taxable
income and expires in 2010 and 2011.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 8 -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
amendment, the par value of common stock changed from $0.01
to $0.001 per share. The Company has granted the following
stock options, all of which remain exercisable as of July 31,
1996:
Optioned Exercise Expiration
Optionee Shares Price Date
1995 Board of Directors 5% of issued
and outstanding
shares $ 0.002 May 4, 1998
1996 Board of Directors 800,000 $ 0.20 January 1, 1999
1996 Management 500,000 $ 0.20 January 1, 1999
Advisory Board 600,000 $ 1.00 January 1, 1999
Consultants 700,000 $ 1.50 January 1, 1999
Legal Service Providers 325,000 $ 1.00 June 30, 1999
Others 250,000 $ 0.20 January 1, 1999
The Company has promised 462,000 shares of stock as employee
stock bonuses and salesman incentives. The share issuance is
contingent on the employee or salesman remaining employed by
or in good standing with the Company through December 31,
1996 with an award date of January 1, 1997.
Under an 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 2% of issued and outstanding shares as of December 31,
1996 and 3% as of each year ended December 31, 1997 through
2000.
NOTE 9 - 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 expiring on August 31,
1996. The lease 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:
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 9 - LEASE COMMITMENTS (CONTINUED)
Year Ending July 31, Amount
1997 $ 23,867
1998 20,087
1999 19,034
2000 11,492
2001 11,094
Thereafter 177,501
$ 263,075
Rent expense was $90,679 in 1996 and $94,197 in 1995.
NOTE 10 - ECONOMIC DEPENDENCY
A material amount of the Company's jewelry and collectibles
products are acquired from one supplier, the loss of which
may have an adverse effect on the Company. The supplier
accounted for approximately 100% of the jewelry products
purchased as of July 31, 1996. The Company has recently made
an arrangement with a stockholder to provide jewelry products
which are being tested for future sales by the Company's
representatives.
A material amount of the Company's inventory is acquired from
three principal suppliers, the loss of which may also have an
adverse effect on the Company. These suppliers accounted for
approximately 100% of the inventory on hand at July 31, 1996.
NOTE 11 - SEGMENT REPORTING OF FOREIGN OPERATIONS
United
States Canada Consolidated
Period ended December 31, 1995:
Total revenue $4,808,711 $43,531 $4,852,242
Operating loss $(1,822,500) $(80,715)$(1,903,215)
General corporate expenses (18,546)
Interest expense (8,062)
Net loss $(1,929,823)
Identifiable assets $1,459,098 $ 506,481 $1,965,579
Corporate assets $ 313,414
Total assets as of
December 31, 1995 $2,278,993
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 11 - SEGMENT REPORTING OF FOREIGN OPERATIONS (CONTINUED)
United
States Canada Consolidated
Period ended July 31, 1996:
Total revenue $19,003,642 $75,854 $19,079,496
Operating loss $ (184,881) $(169,901) $ (354,782)
General corporate expenses (216,348)
Interest expense (19,663)
Net loss $ (590,793)
Identifiable assets $2,599,814 $ 431,131 $3,030,945
Corporate assets 176,555
Total assets as of
July 31, 1996 $3,207,500
Operating loss is total revenue less operating expenses. In
computing operating loss, none of the following items has
been added or deducted: general corporate expenses, interest
expense and income tax expense. Identifiable assets are
those assets of the Company that are identified with the
operations in each geographic area. Corporate assets are
principally certain cash accounts and certificates of
deposit.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Company paid for or received services and expense
reimbursements (excluding those costs capitalized as
described in Note 4) totaling approximately $12,530 in 1996
and $258,000 in 1995 from Mayflower Holdings, Inc., a
stockholder which is owned by the President of the Company,
for services related to the start-up and other operating
expenses of the Company. As of July 31, 1996, the amount due
from Mayflower Holdings, Inc. was $25,000.
The Company subleases office space to Mayflower Holdings,
Inc. on a month-to-month basis. Rental income is $3,500 in
1996.
In 1996, the Company issued Mayflower Holdings, Inc. 25,000
shares of common stock ($10 a share pre-split) in exchange
for prepaid consulting services.
In 1996, the President of the Company received 10,087 shares
of common stock ($10 a share pre-split) for having attained
certain corporate revenue goals pursuant to his employment
contract.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and December 31, 1995
NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED)
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. $52,000 was paid to these
individuals in 1996 and $30,600 was paid in 1995. No amounts
were due at July 31, 1996.
The Company has an agreement with a stockholder to provide
the Company with a promotional line of merchandise.
As of July 31, 1996, two stockholders owe the Company $25,537
and $17,100, respectively, for employee advances.
The Company owed $131,812 outstanding to the President and to
Mayflower Holdings, Inc. as of December 31, 1995. The notes
were paid off in February 1996.
In 1995, the Company received services totaling 45,000 shares
of common stock ($10 a share pre-split) in exchange for
services related to the start-up and organization of the
Canadian subsidiary.
NOTE 13 - SUBSEQUENT EVENT
In August 1996, Mayflower Holdings, Inc. loaned the Company
$178,500, 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.
INTERNATIONAL HERITAGE, INC.
SCHEDULES OF CONSOLIDATED SELLING AND ADMINISTRATIVE EXPENSES
Periods Ended July 31, 1996 and December 31, 1995
1996 1995
Salaries and employee benefits $1,923,308 $ 526,613
Rent 90,679 94,197
Seminars and meeting room 18,623 3,893
Telephone 114,067 94,919
Insurance 29,526 12,280
Office supplies 60,651 24,035
Postage and shipping 205,824 107,367
Repair and maintenance 1,051 3,705
Dues and subscriptions 1,258 1,041
Fulfillment fees 56,887 53,297
Taxes and licenses 8,362 1,343
Advertising 15,702 17,444
Sales presentations and promotions 114,486 248,815
Printing and binders 51,580 120,700
Royalties 52,000 17,500
Meals and entertainment 52,024 2,968
Travel 191,068 113,046
Professional and consulting fees 177,113 128,145
Directors fees 4,000 -
Computer services 48,174 20,661
Temporary and contract help 98,476 18,716
Depreciation 78,290 36,411
Amortization 121,334 54,252
Product development 20,000 -
Conference calls 16,760 -
Bank fees and charges 18,303 25,656
Recruiting and training 2,229 4,950
Business development 59,456 96,182
Bad debt 11,595 -
Fax and mobile communications 33,329 23,929
Interest 19,663 8,062
Charitable contributions 11,000 -
Exchange loss 2,745 737
Other 3,191 2,864
$3,712,754 $ 1,863,728
INTERNATIONAL HERITAGE, INC.
INDEX TO CONSOLIDATED BALANCE SHEET AND PRO FORMA INFORMATION
July 31, 1996
PAGE(S)
INDEPENDENT AUDITORS' REPORT F-19
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet F-20 & F-21
Notes to Consolidated Balance Sheet F-22 & F-29
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
International Heritage, Inc.
Raleigh, North Carolina
We have audited the accompanying historical consolidated
balance sheet of International Heritage, Inc. as of July
31, 1996. The consolidated balance sheet is the
responsibility of the management of International
Heritage, Inc. Our responsibility is to express an opinion
on the consolidated balance sheet on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the consolidated balance sheet is
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the statement of financial condition.
An audit also includes assessing the accounting principles
used and significant estimates made by management, as well
as evaluating the overall statement of financial condition
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the historical consolidated balance sheet
referred to above presents fairly, in all material
respects, the financial position of International Heritage,
Inc. as of July 31, 1996 in conformity with generally
accepted accounting principles.
We have also audited the pro forma adjustments reflecting
the transactions described in Note 13 and the application
of those adjustments to the historical amounts in the
accompanying July 31, 1996, consolidated balance sheet.
Our audit was made in accordance with standards established
by the American Institute of Certified Public Accountants
and, accordingly, included such procedures as we considered
necessary in the circumstances. The objective of this pro
forma consolidated balance sheet is to show what the
significant effects on the historical financial information
might have been had the transactions described in Note 13
been consummated as of July 31, 1996.
In our opinion, the July 31, 1996 pro forma amounts reflect
the proper application of the pro forma adjustments to the
historical consolidated balance sheet amounts in the
aforementioned pro forma consolidated balance sheet.
/s/ EILERS, JONES, BROWN & McLEOD, CPAs, PA
August 24, 1996
Raleigh, North Carolina
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEET
July 31, 1996
ASSETS
Pro Forma
Adjustment
1996 (See Note 13) Pro Forma
CURRENT ASSETS
Cash $ 274,797 $3,514,842 $3,789,639
Certificates of deposit 70,265 - 70,265
Inventory 423,193 - 423,193
Employee and stockholder advances 54,093 - 54,093
Due from representatives, less allowance
for doubtful accounts of $11,595 347,177 - 347,177
Sales tax refunds due 44,214 - 44,214
Other receivables 45,457 - 45,457
Deposits 122,179 - 122,179
Prepaid expenses 378,911 - 378,911
Total Current Assets 1,760,286 3,514,842 5,275,128
PROPERTY AND EQUIPMENT - AT COST
Construction in process 18,876 - 18,876
Computer software 108,081 - 108,081
Computer hardware 260,121 - 260,121
Office furniture and equipment 132,511 - 132,511
Vehicle 32,775 - 32,775
Leasehold improvements 4,547 - 4,547
556,911 - 556,911
Less accumulated depreciation and amortization
114,701 - 114,701
Net Property and Equipment 442,210 - 442,210
ORGANIZATIONAL AND START-UP COSTS, NET 804,630 - 804,630
DOWNLINE DEVELOPMENT COSTS, NET 200,374 - 200,374
$3,207,500 $3,514,842 $6,722,342
The accompanying notes are an integral part of these consolidated
balance sheet.
INTERNATIONAL HERITAGE, INC.
CONSOLIDATED BALANCE SHEET
July 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Pro Forma
Adjustments
1996 (See Note 13) Pro Forma
CURRENT LIABILITIES
Trade accounts payable $ 909,877 $ - $ 909,877
Payable to representatives 148,399 - 148,399
Deferred revenue 464,914 (327,000) 137,914
Sales tax payable 41,703 - 41,703
Accrued payroll and payroll taxes 218,640 - 218,640
Accrued commissions 1,542,132 - 1,542,132
Accrued earned-out product 413,255 - 413,255
Accrued award trip 50,000 - 50,000
Notes payable from stockholders 10,000 - 10,000
Current maturities of long-term debt 7,097 - 7,097
Total Current Liabilities 3,806,017 (327,000) 3,479,017
LONG-TERM DEBT, less current maturities
12,447 - 12,447
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 10,494 - 10,494
Additional paid-in capital 1,596,566 - 1,596,566
Equity adjustment for foreign currency translation
2,592 - 2,592
Paid-in capital--stock options 1,566,000 - 1,566,000
Retained earnings (deficit) (2,520,616) 3,841,842 1,321,226
655,036 3,841,842 4,496,878
Deferred compensation expense (1,266,000) - (1,266,000)
Total Stockholders' Equity (Deficit)
(610,964) 3,841,842 3,230,878
$3,207,500 $3,514,842 $6,722,342
The accompanying notes are an integral part of these consolidated
balance sheet.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
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 direct sales in forty-eight states.
The Company is dedicated to helping Independent Retail Sales
Representatives ("IRSR") build retail sales organizations to
sell jewelry and collectibles.
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.
CERTIFICATES OF DEPOSIT - The Company was required to deposit
$70,000 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 1996 and 1997.
INVENTORY - Inventory, consisting primarily of retail
business center kits, is stated at the lower of cost or
market, with cost determined under the first-in first-out
(FIFO) method.
PROPERTY AND EQUIPMENT - Depreciation expense is calculated
on the declining balance methods over useful lives as
follows:
Estimated Useful Life
Computer software 5 years
Computer hardware 5 years
Office furniture and equipment 7 years
Vehicle 5 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 - The organization costs are
being amortized on a straight-line basis over 5 years
(accumulated amortization was $120,914 as of July 31, 1996).
The start-up costs are being amortized on a straight-line
basis over 15 years (accumulated amortization was $16,679 as
of July 31, 1996).
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 1 -THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DOWNLINE DEVELOPMENT COSTS - In order to facilitate a larger
retail sales organization in a short time period, the Company
allowed certain representatives to develop retail sales
organizations with product paid for by the Company, not the
representative. Accordingly, the costs associated with this
downline development have been capitalized and are being
amortized on a straight-line basis over 5 years (accumulated
amortization was $37,994 as of July 31, 1996).
REVENUE RECOGNITION AND DEFERRED REVENUE - The Independent
Retail Sales Representative may join the Company at no cost,
but must purchase a $75 professional retail business career
kit (at cost), which then allows them to sell the Company's
products. When the IRSR sells a product under a direct
product purchase, the sale is recognized when the product is
shipped. When the IRSR makes a down payment of $250 towards
the purchase of product and signs an agreement with the
Company, they can directly market the Company's products and
build a retail sales organization. This agreement allows the
buyer to cancel the agreement without penalty or obligation
within 60 days and receive a complete refund ("cash-out").
The Company defers a portion of all other revenue at the time
of receipt and after the 60 day time period has elapsed, the
remaining revenue is recognized. Effective July 1996, those
representatives who enter with more than one business center
are not eligible to cash-out. The Company provides a 100%
satisfaction guarantee on all products and sales aids
purchased by representatiaves. The Company recognizes
revenue based on a $25 administrative fee and the out-of-
pocket cost when a representative first joins the Company and
every year thereafter. Commissions are earned by the
representatives based on sales volume levels. The Company
does not accrue for commissions on an incremental basis
between sales volume levels. The Company does not pay
commissions on representatiave sponsorships, it only pays
commissions on product sales.
INVESTOR DEPOSITS - Subsequent to the initial issuance of
common stock, the Company received $804,465 of funds from
potential investors. These securities may have been offered
and sold without having been registered or exempted from
registration under applicable federal and state securities
laws. Thus, the Company offered to rescind such prior sales
to all investors who deposited monies during the period from
August to December 1995 by refunding the price paid for the
securities plus interest. The Company has recorded deposits
made by investors who rejected the Rescission Offer as
equity. Three investors, for a total of $15,000, accepted
the Rescission Offer and received a refund. 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 one pre-split share for each
$10 investment.
EMPLOYEE STOCK OPTIONS - The Company recognizes compensation
cost for nonvariable employee stock options at the
differences between what the stock has sold for to outside
investors ($1.00 per share post-split) less the amount, if
any, the employee is required to pay. The method used here
is the intrinsic value based method (which
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 1 -THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
approximates the fair value based method) and is expensed over
the estimated period of service (estimated to be three years).
NOTE 2 - OPERATING STATUS
As noted in the accompanying historical balance sheet, the
Company incurred a net loss of $2,520,616 for the period
April 28, 1995 (date of inception) to July 31, 1996. In
addition, the Company has a stockholders' deficit of $610,964
as of July 31, 1996, and its current liabilities exceed its
current assets by $2,045,731 as of July 31, 1996. This
situation has been caused by the nature of the Company's
business (deferred revenue and commissions are the highest at
the start of a business center) and the fact that it has
taken more capital to establish an international direct sales
Company than was originally anticipated. The Company is
currently completing the required filings that will allow
them to issue common stock in the Company to raise additional
capital. The Company's ability to continue as a going
concern is dependent on its ability to maintain future
profitability through cutting corporate expenses, to
successfully obtain the above mentioned capital and the
change in the cash-out policy (see Note 1). The financial
statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going
concern.
NOTE 3 - ORGANIZATION AND START-UP COSTS
The Company was incorporated April 28, 1995 and accordingly,
significant organization and start-up expenses were incurred.
A portion of these costs were paid to or exchanged for
services from various parties. The components of
organization and start-up costs are detailed below:
Consulting services and expense reimbursements
charged by Mayflower Holdings, Inc. (a stockholder) $104,065
Exchange of common stock for services provided 434,985
Legal and accounting fees 277,595
Consulting fees 50,806
Exchange of common stock for services provided Mayflower
Holdings, Inc. and Eagle Harbor Holdings (a stockholder)
38,500
Video production 32,412
Trademarks 3,860
942,223
Less accumulated amortization 137,593
$ 804,630
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 4 - NOTES PAYABLE AND LETTERS OF CREDIT
The Company has loans of $10,000 outstanding to two
stockholders. These notes have interest rates of 12% and
mature in one year. In order to provide the note holders
with a rate of return commensurate with risk of their
investment, the notes were discounted 10% and the discount is
being amortized over the 12 month period.
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
(Canadian dollars) 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 July
31, 1996) and matures on September 17, 1996. The note is
secured by a certificate of deposit with the bank. No
amounts are outstanding as of July 31, 1996.
NOTE 5 - LONG-TERM DEBT
At July 31, 1996, the Company was indebted on long-term debt
as follows:
$22,775 note payable to Ford Motor Credit Company,
bearing interest at 12.5%. Principle and interest are
payable in monthly installments of $762. The note is
secured by a vehicle and matures January 4,1999.
$ 19,544
Less current maturities 7,097
$ 12,447
NOTE 6 - 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
amendment, the par value of common stock changed from $0.01
to $0.001 per share. The Company has granted the following
stock options, all of which remain exercisable as of July 31,
1996:
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 6 - COMMON STOCK AND STOCK OPTIONS (CONTINUED)
Optioned Exercise Expiration
Optionee Shares Price Date
1995 Board of Directors 5% of issued
and outstanding
shares $ 0.002 May 4, 1998
1996 Board of Directors 800,000 $ 0.20 January 1, 1999
1996 Management 500,000 $ 0.20 January 1, 1999
Advisory Board 600,000 $ 1.00 January 1, 1999
Consultants 700,000 $ 1.50 January 1, 1999
Legal Service Providers 325,000 $ 1.00 June 30, 1999
Others 250,000 $ 0.20 January 1, 1999
The Company has promised 462,000 shares of stock as employee
stock bonuses and salesman incentives. The share issuance is
contingent on the employee or salesman remaining employed by
or in good standing with the Company through December 31,
1996 with an award date of January 1, 1997.
Under an 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 2% of issued and outstanding shares as of December 31,
1996 and 3% as of each year ended December 31, 1997 through
2000.
NOTE 7 - PROVISION FOR INCOME TAXES
The Company has a Federal income tax net operating loss of
approximately $590,000 in 1996. As a result, no provision
for income taxes has been recorded. As of July 31, 1996, the
Company has a net operating loss carryforward for Federal
income tax purposes of approximately $2,520,000. The net
operating loss carryforward is available to offset against
future Federal taxable income and expires in 2010 and 2011.
NOTE 8 - 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 expiring on August 31,
1996. The lease 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:
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 8 - LEASE COMMITMENTS (CONTINUED)
Year Ending July 31 Amount
1997 $ 23,867
1998 20,087
1999 19,034
2000 11,492
2001 11,094
Thereafter 177,501
$ 263,075
NOTE 9 - ECONOMIC DEPENDENCY
A material amount of the Company's jewelry and collectibles
products are acquired from one supplier, the loss of which
may have an adverse effect on the Company. The supplier
accounted for approximately 100% of the jewelry products
purchased as of July 31, 1996. The Company has recently made
an arrangement with a stockholder to provide jewelry products
which are being tested for future sales by the Company's
representatives.
A material amount of the Company's inventory is acquired from
three principal suppliers, the loss of which may also have an
adverse effect on the Company. These suppliers accounted for
approximately 100% of the inventory on hand at July 31, 1996.
NOTE 10 - SEGMENT REPORTING OF FOREIGN OPERATIONS
Segment information by geographic area as of July 31, 1996 is
as follows:
United
States Canada Consolidated
Identifiable assets $2,599,814 $431,131 $3,030,945
Corporate assets 176,555
Total Assets $3,207,500
Identifiable assets are those assets of the Company that are
identified with the operations in each geographic area.
Corporate assets are principally certain cash accounts and
certificates of deposit.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company paid for or received services and expense
reimbursements (excluding those costs capitalized as
described in Note 4) totaling approximately $12,530 in 1996
and $258,000 in 1995 from Mayflower Holdings, Inc., a
stockholder which is owned by the
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
President of the Company, for services related to the start-up and other
operating expenses of the Company. As of July 31, 1996, the amount
due from Mayflower Holdings, Inc. was $25,000.
The Company subleases office space to Mayflower Holdings, Inc. on a month-
to-month basis. Rental income is $3,500 in 1996.
In 1996, the Company issued Mayflower Holdings, Inc. 25,000 shares of
common stock ($10 a share pre-split) in exchange for prepaid consulting
services.
In 1996, the President of the Company received 10,087 shares of common
stock ($10 a share pre-split) for having attained certain corporate
revenue goals pursuant to his employment contract.
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. $52,000 was
paid to these individuals in 1996. No amounts were due at July 31, 1996.
The Company has an agreement with a stockholder to provide the Company
with a promotional line of merchandise.
As of July 31, 1996, two stockholders owe the Company $25,537 and $17,100,
respectively, for employee advances.
The Company owed $131,812 outstanding to the President and to
Mayflower Holdings, Inc. as of December 31, 1995. The notes were
paid off in February 1996.
In 1995, the Company received services totaling 45,000 shares of common
stock ($10 a share pre-split) in exchange for services related to the
start-up and organization of the Canadian subsidiary.
NOTE 12 - SUBSEQUENT EVENT
In August 1996, Mayflower Holdings, Inc. loaned the Company $178,500, 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.
INTERNATIONAL HERITAGE, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
July 31, 1996
NOTE 13 - PRO FORMA ADJUSTMENT
Effective July 1, 1996, the Board of Directors of the Company approved a
change in policy such that those representatives who enter with more than
one business center will not be eligible to cash-out. This change has
been implemented prospectively and is designed to encourage potential
representatives to weigh their options carefully prior to entering the
business. If this adjustment had been effective since the Company's
inception (April 28, 1995) through July 31, 1996, it would have provided
$3,841,842 in additional income, $3,514,842 in additional cash, $327,000
reduction in deferred revenue and would have changed the retained earnings
to a positive $1,321,226. The attached pro forma balance sheet has been
adjusted for this change as if it was made on April 28, 1995.
No person has been authorized in connection with the offering made hereby
to give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any of the securities offered hereby to any person or by
anyone in any jurisdiction in which it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any date subsequent to the
date hereof.
Table of Contents
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . .2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 11
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . 11
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 13
Selected Financial Information . . . . . . . . . . . . . . . . 13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Prior Sales of Securities. . . . . . . . . . . . . . . . . . . 21
Related Party Transactions . . . . . . . . . . . . . . . . . . 22
Management . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Options Grants . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . 28
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of Common Stock. . . . . . . . . . . . . . . . . . 30
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . 32
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 32
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . 34
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Aditional Information. . . . . . . . . . . . . . . . . . . . . 34
Financial Statements . . . . . . . . . . . . . . . . . . . . .F-1
Until September 30, 1996 (25 days after the date of this Prospectus),
all dealers effecting transactions in the Common Stock offered hereby,
whether or not participating in this distribution, may be required to
deliver a Prospectus.
2,500,000 Shares
International Heritage, Inc
Common Stock
$.001 Par Value
PROSPECTUS
SEPTEMBER 5, 1996
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.
Minimum Maximum
SEC registration fee $1,724* $8,620*
Printing and engraving 25,000* 35,000*
Legal Fees and expenses 50,000* 50,000*
Accounting fees and expenses 35,000* 35,000*
Blue Sky fees and expenses 13,785* 13,785*
Transfer Agent and Registrar fees 5,000* 5,000*
Miscellaneous 5,000* 10,000*
Total $135,509* $157,405*
*Estimated cost
Item 14. Indemnification of Directors and Officers
The Registrant's Amended Articles of Incorporation and Bylaws include
provisions to (i) 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 and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by Sections 55-8-50
thorough 55-8-58 of the North Carolina Business Corporation Act. Pursuant
to Section 55-8-51 and 55-8-57 of the North Carolina Business Corporation
Act, 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 conduct was
unlawful. The Registrant believes that these provisions are necessary to
attract and retain qualified persons as directors and officers. 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 North Carolina
Business Corporation Act. 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 inattention 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,
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 caused to
believe his or her conduct was unlawful.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification in being
sought nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
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 of
1933, as amended (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:
Generally
Fred B. Smith & Associates purchased on April 31, 1995, 50 shares of
common stock and a convertible note in the amount of $12,600, which was
converted to 2,520 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 275,200
shares.
Eagle Harbor Holdings purchased on May 4, 1995, 175 shares of common
stock and a convertible note in the amount of $20,000, which was converted
to 4,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 915,000 shares.
Eagle Harbor Holdings assigned all right, title and interest in these
shares to Omega Leasing Services on April 4,1996.
Mayflower Holdings, Inc. purchased on May 4, 1995, 175 shares of common
stock and a convertible note in the amount of $20,000, which was converted
to 4,000 shares on August 15, 1995, including interest. These shares were
split 500:1 for a total of 91,500 shares. February 16, 1996, Stanley H.
Van Etten, President, received 10,087 shares pursuant to the terms of his
employment contract with the Company and assigned these shares to Mayflower
Holdings, Inc. who gifted these shares to several individuals. March 11,
1996, the Board of Directors gave Stanley H. Van Etten a bonus of 25,000
shares as prepayment for services in connection with a corporate
capitalization plan. Mr. Van Etten assigned these shares to Mayflower
Holdings, Inc., who in turn gifted the shares to several individuals.
Subsequent to the gifting of several shares and the 10:1 stock split,
Mayflower Holdings, Inc. owns a total of 885,280 shares.
Claude W. Savage purchased on May 4, 1995, 175 shares of common stock
and a convertible note in the amount of $20,000, of which $10,000 was
converted to 2,000 shares on August 15, 1995, including interest and the
remaining $10,000 was repaid June 4, 1995. The non-converted shares were
split 500:1 for a total of 89,500 shares. Mr. Savage gifted certain shares
to his children. Subsequent to the gifting of shares and the 10:1 stock
split, Mr. Savage owns a total of 797,000 shares.
Wendell and Jodie C. Elliott purchased on May 9, 1995, 20 shares of
common stock and a convertible note in the amount of $10,000, which was
converted to 2,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 for a total of 12,000 shares. The
Elliotts purchased an additional 1,650 shares. Subsequent to the 10:1
stock split, the Elliotts own a total of 136,500 shares.
Dean Elliott purchased on May 10, 1995, 5 shares of common stock and a
convertible note in the amount of $2,500, which was converted to 500 shares
on August 15, 1995, including interest. The non-converted shares were
split 500:1 for a total of 3,000 shares. Mr. Elliott purchased and
additional 400 shares on August 18, 1995 for $4,000. Mr. Elliott purchased
an additional 350 shares. Subsequent to the 10:1 stock split, Mr. Elliott
owns a total of 37,500 shares.
Larry Ellis purchased on May 10, 1995, 20 shares of common stock and a
convertible note in the amount of $12,500, which was converted to 2,500
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 for a total of 12,500 shares. Mr. Ellis purchased on June
8, 1995, an additional 5,000 shares for $5,000. Mr. Ellis purchased on
July 21, 1995, an additional 7,500 shares for $7,500. Subsequent to the
10:1 stock split, Mr. Ellis owns 250,000 shares.
Calvin Michael Ward purchased on May 22, 1995, 25 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 135,000 shares.
Geni and Michael D. Batchelor purchased on May 22, 1995, 10 shares of
common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
John Buhrman purchased on May 23, 1995, 10 shares of common stock and a
convertible note in the amount of $5,000, which was converted to 1,000
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 60,000 shares.
Jimmie and Portia Knowles purchased on May 24, 1995, 45 shares of
common stock and a convertible note in the amount of $19,450, which was
converted to 3,890 shares on August 15, 1995, including interest. Mr. and
Mrs. Knowles purchased an additional 80 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. The non-converted shares were split 500:1 and
again 10:1 for a total of 663,900 shares.
To The Top We Go, Inc. received on May 24, 1995, 25 shares in exchange
for services rendered to the Company. These shares were split 500:1 for a
total of 12,500 shares. To The Top We Go, Inc. Gifted some of its shares
to others. Subsequent to the gifts and the 10:1 stock split, To The Top We
Go, Inc. owns 110,000 shares.
Jeffrey L. Hooks received on May 24, 1995, 25 shares in exchange for
services rendered to the Company. These shares were split 500:1 and again
10:1 for a total of 125,000 shares.
Dr. Martin R. and Nina R. Runion purchased on May 24, 1995, 45 shares
of common stock and a convertible note in the amount of $20,000, which was
converted to 4,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 265,000
shares.
Harold W. and Linda W. Queen purchased on May 26, 1995, 10 shares of
common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Steven E. and Nanette N. Taitt purchased on May 28, 1995, 5 shares of
common stock and a convertible note in the amount of $2,500, which was
converted to 500 shares on August 15, 1995, including interest. The
non-convertible shares were split 500:1 and again 10:1 for a total of
30,000 shares.
George B. Bain purchased on May 30, 1995, 10 shares of common stock and
a convertible note in the amount of $5,000, which was converted to 1,000
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 60,000 shares.
Bobby W. and Shirley E. Bristow purchased on May 30, 1995, 10 shares of
common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Joseph F. Spoon purchased on May 30, 1995, 5 shares of common stock and
a convertible note in the amount of $2,500, which was converted to 500
shares on August 15, 1995, including interest. The non-convertible shares
were split 500:1 and again 10:1 for a total of 30,000 shares.
Ronald W. Cassese purchased on May 31, 1995, 25 shares of common stock
and a convertible note in the amount of $5,000, which was converted to
1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 135,000 shares.
Nick Collias purchased on May 31, 1995, 30 shares of common stock and a
convertible note in the amount of $15,000, which was converted to 3,000
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 180,000 shares.
Barry Ackel purchased on June 1, 1995, 100 shares of common stock and a
convertible note in the amount of $12,500, which was converted to 2,520
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 525,200 shares.
Jack F. Weatherly purchased on June 2, 1995, 10 shares of common stock
and a convertible note in the amount of $5,000, which was converted to
1,000 shares on August 15, 1995, including interest. The shares were split
500:1 and again 10:1 for a total of 60,000 shares.
Leisure Time Rentals & Management purchased on June 3, 1995, 10 shares
of common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Dennis E. And Linda C. Brackett purchased on June 5, 1995, 10 shares of
common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Braxton Merritt purchased on June 5, 1995, 40 shares of common stock
and a convertible note in the amount of $20,000, which was converted to
4,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 240,000 shares.
Dwight and Jennifer Hallman received on June 6, 1995, 25 shares of
common stock in exchange for Mr. Hallman's services to the Company in
establishing their computer system for the tracking of sales and
computation of compensation to Independent Retail Sales Representatives and
other services in the start-up of the Company. These shares were split
500:1 and again 10:1 for a total of 125,000 shares.
William A. Blackman purchased on June 7, 1995, 5 shares of common stock
and a convertible note in the amount of $2,500. On July 20, 1995, Mr.
Blackman purchased an additional 5 shares of common stock and a convertible
note in the amount of $3,750. Both notes were converted to 1,250 shares on
August 15, 1995, including interest. The non-converted shares were split
500:1 and again 10:1 for a total of 62,500 shares.
Diane B. James purchased on June 7, 1995, 10 shares of common stock and
a convertible note in the amount of $5,000, which will be repaid from
offering proceeds. These share were split 500:1 and again 10:1 for a total
of 50,000 shares.
Harold Scott Jr. purchased on June 7, 1995, 10 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 September 29, 1995.
Paul Hoyle purchased on June 8, 1995, 10 shares of common stock and a
convertible note in the amount of $5,000, which was converted to 1,000
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 60,000 shares.
Jimmy Aymond purchased on June 8, 1995, 50 shares of common stock and a
convertible note in the amount of $12,600, which was converted to 2,520
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 275,200 shares.
Faiger M. Blackwell purchased on June 9, 1995, 5 shares of common stock
and a convertible note in the amount of $2,500, which was converted to 500
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 30,000 shares.
Clotilda Rodgers purchased on June 9, 1995, 10 shares of common stock
and a convertible note in the amount of $5,000, which was converted to
1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000 shares.
Michael Francis Canning, Jr. purchased on June 12, 1995, 5 shares of
common stock and a convertible note in the amount of $2,500, which was
converted to 500 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 for a total of 3,000 shares. Mr.
Canning purchased on August 10, 1995, an additional 800 shares for $8,000.
The shares were split 10:1 for a total of 38,000 shares.
Neva Marie Canning purchased on June 12, 1995, 10 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000 shares.
Kenneth W. and Helen W. Wilkinson purchased on June 12, 1995, 10 shares
of common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Kay Wood Disman purchased on June 13, 1995, 20 shares of common stock
and a convertible note in the amount of $10,000, which was converted to
2,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 120,000 shares.
Rodger Dale Gadd received on June 13, 1995, 10 shares of common stock
in exchange for downline development services. These shares were split
500:1 and again 10:1 for a total of 50,000 shares.
John F. and Margaret H. Hudson purchased on June 13, 1995, 5 shares of
common stock and a convertible note in the amount of $2,500, which was
converted to 500 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 30,000
shares.
Edgar Collins purchased on June 14, 1995, 15 shares of common stock and
a convertible note in the amount of $7,500, which was converted to 1,500
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 for a total of 9,000 shares. Mr. Collins gifted 3,000
shares to others. Subsequent to the gift and a 10:1 stock split, Mr.
Collins owns a total of 60,000 shares.
Clinton S. (Jr.) and Lavada P. Forbis received on June 14, 1995, 5
shares of common stock in exchange for downline development services
rendered. These shares were split 500:1 and again 10:1 for a total of
25,000 shares.
Conda McCall purchased on June 14, 1995, 10 shares of common stock and
a convertible note in the amount of $5,000, which was converted to 1,000
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 60,000 shares.
Derrick L. Rodgers purchased on June 14, 1995, 100 shares of common
stock and a convertible note in the amount of $47,500, which was converted
to 9,500 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 for a total of 59,500 shares. Mr. Rogers gifted
2,200 shares to others. Subsequent to the gift and a 10:1 stock split, Mr.
Rodgers owns 577,000 shares.
James Ronnie and Sylvia M. Sherrill purchased on June 14, 1995, 5
shares of common stock and a convertible note in the amount of $2,500,
which was converted to 500 shares on August 15, 1995, including interest.
The non-converted shares were split 500:1 and again 10:1 for a total of
30,000 shares.
Christopher S. Brackett purchased on June 15, 1995, 10 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000 shares.
Stephen E. Brackett purchased on June 15, 1995, 10 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000 shares.
James Pinkney and Nina Lou Blackwelder purchased on June 15, 1995, 5
shares of common stock and a convertible note in the amount of $2,500,
which was converted to 500 shares on August 15, 1995, including interest.
The non-converted shares were split 500:1 for a total of 3,000 shares. On
November 17, 1995, the Blackwelders purchased an additional 3,150 shares of
common stock for $1,500. These shares were split 10:1 for a total of
61,500 shares.
Gold Raven, Inc. received on June 16, 1995, 10 shares of common stock
in exchange for downline development services. These shares were split
500:1 and again 10:1 for a total of 50,000 shares.
Eddie L. Mattox Irrevocable Trust purchased on June 16, 1995, 10 shares
of common stock and a convertible note in the amount of $5,000, which was
converted to 1,000 shares on August 15, 1995, including interest. The
non-converted shares were split 500:1 and again 10:1 for a total of 60,000
shares.
Sunrise Pro Glass purchased on June 16, 1995, 5 shares of common stock
and a convertible note in the amount of $2,500, which was converted to 500
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 for a total of 3,000 shares. The shares were issued to
the individual shareholders who invested through Sunrise Pro Glass to
include: David Andrew and Kathy June Holt, Gary Lee and Valerie Bisby,
Darin and Jennifer Brewer, Donald and Patricia Snyder, and Brian D. and
Debra Jean Waite, who subsequent to the 10:1 stock split, own 6,000 shares,
respectively.
Robert L. Chalmers purchased on June 20, 1995, 10 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000 shares.
Kathleen Illian received on June 20, 1995, 5,000 shares of common stock
in exchange for establishing a group health insurance program for Company
IRSRs. These shares were split 10:1 for a total of 50,000 shares.
Samuel W. (III) and Carolyn Johnston purchased on June 21, 1995, 10
shares of common stock and a convertible note in the amount of $5,000,
which was converted to 1,000 shares on August 15, 1995, including interest.
The non-converted shares were split 500:1 and again 10:1 for a total of
60,000 shares.
Egbert Louis Ming purchased on June 22, 1995, 10 shares of common stock
and a convertible note in the amount of $5,000, which was converted to
1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 for a total of 6,000. Mr. Ming purchased on August
22, 1995, an additional 1,000 shares for $10,000. Mr. Ming purchased on
October 5, 1995, and additional 1,500 shares for $15,000. These shares
were split 10:1 for a total of 85,000 shares.
Joanne and Ray Norville purchased on June 22, 1995, 5 shares of common
stock and a convertible note in the amount of $2,500, which was converted
to 500 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 30,000 shares.
Larry J. Rickard purchased on June 22, 1995, 5 shares of common stock
and a convertible note in the amount of $2,500, which was converted to 500
shares on August 15, 1995, including interest. The non-converted shares
were split 500:1 and again 10:1 for a total of 30,000 shares.
Evonne B. Eckenroth purchased on July 3, 1995, 60 shares of the common
stock and a convertible note in the amount of $12,600, which was paid July
23, 1996. These shares were split 500:1 for a total of 30,000 shares. On
August 18, 1995, Ms. Eckenroth purchased an addition 5,000 shares for
$1,300. These shares were split 10:1 for a total of 300,000 shares.
Richard C. Hungate purchased on August 10, 1995, 18,750 shares of
common stock and a convertible note in an amount of $12,600, which was
repaid March 27, 1996. These shares were split 10:1 for a total of 187,500
shares.
Kathryn C. Crist received on August 10, 1995, 1,250 shares of common
stock as a gift of shares from Richard C. Hungate. These shares were split
10:1 for a total of 12,500 shares.
John Bell Neil purchased on August 10, 1995, 300 shares of common stock
for $3,000. These share were split 10:1 for a total of 3,000 shares.
Richard Blaine Smith purchased on August 11, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
David Lane Tillman purchased on August 11, 1995, 100 shares of common
stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Terry D. Phillips purchased on August 14, 1995, 10 shares of common
stock and a convertible note in the amount of $5,000, which was converted
to 1,000 shares on August 15, 1995, including interest. The non-converted
shares were split 500:1 and again 10:1 for a total of 60,000.
Kathi Jean Jones purchased on August 15, 1995, 70 shares of common
stock for $700. These shares were split 10:1 for a total of 700 shares.
Bobby Wren Bristow purchased on August 18, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
James R. Reynolds received on August 18, 1995, 4,000 shares of common
stock as a gift from Evonne Eckenroth. These shares were split 10:1 for a
total of 40,000 shares.
Thomas Suber (Jr.) and Betty Jean Cromer purchased on August 21, 1995,
200 shares of common stock for $2,000. These shares were split 10:1 for a
total of 2,000 shares.
Claude W. Savage, Jr. purchased on August 22, 1995, 5,000 shares of
common stock for $5,000. These shares were split 10:1 for a total of
50,000 shares.
Frank S. Hart purchased on August 24, 1995, 200 shares of common stock
for $2,000. Mr. Hart purchased on November 9, 1995, 300 shares of common
stock for $3,000. These shares were split 10:1 for a total of 5,000
shares.
Frank Wesley Alexander purchased on August 28, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
John H. Giles purchased on August 28, 1995, 100 shares of common stock
for $1,000. These shares were split 10:1 for a total of 1,000 shares.
Edmund Eugene and Rosemarie Jaqueline Dreyer purchased on August 31,
1995, 500 shares of common stock for $5,000. These shares were split 10:1
for a total of 5,000 shares.
Russell Hugh Caston purchased on September 5, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Charles Campbell Edmondson, Jr. purchased on September 7, 1995, 1,000
shares of common stock for $10,000. These shares were split 10:1 for a
total of 10,000 shares.
Paul Bourque purchased on September 20, 1995, 600 shares of common
stock for $6,000. These shares were split 10:1 for a total of 6,000
shares.
Rhyon Caldwell received on September 20, 1995, 5,000 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 split 10:1 for a total of 50,000 shares.
James Law received on September 20, 1995, 5,000 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 split 10:1 for a total of 50,000 shares.
Felix Li received on September 20, 1995, 5,000 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 split 10:1 for a total of 50,000 shares.
Paradise Investments, Ltd. received on September 20, 1995, 25,000
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 split 10:1 for a total of
250,000 shares.
Lawrence A. Canning purchased on September 20, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Neva Marie Canning and Freeland R. Goldammer purchased on September 20,
1995, 500 shares of common stock for $5,000. These shares were split 10:1
for a total of 5,000 shares.
Kathleen Canning Leone purchased on September 20, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Frederick Michael Kennel purchased on September 22, 1995, 300 shares of
common stock for $3,000. Mr. Kennel purchased an additional 400 shares of
stock for $4,000. These shares were split 10:1 for a total of 7,000
shares.
Hans Fiedrich Kennel purchased on September 22, 1995, 300 shares of
common stock for $3,000. Mr. Kennel purchased an additional 400 shares for
$4,000. These shares were split 10:1 for a total of 7,000 shares.
Aubry L. and Brenda Sue Vincent purchased on September 25, 1995, 500
shares of common stock for $5,000. These shares were split 10:1 for a
total of 5,000 shares.
Ray Paul Boudreaux purchased on September 27, 1995, 50 shares of common
stock for $500. These shares were split 10:1 for a total of 500 shares.
The Dujay Living Trust of 1994 purchased on September 28, 1995, 500
shares of common stock for $5,000. These shares were split 10:1 for a
total of 5,000 shares.
McCleldon Van and Judith Ann Evans purchased on September 28, 1995, 300
shares of common stock for $3,000. These shares were split 10:1 for a
total of 3,000 shares.
Charles C. Geoffroy purchased on September 28, 1995, 250 shares of
common stock for $2,500. These shares were split 10:1 for a total of 2,500
shares.
Eric J. Geoffroy purchased on September 28, 1995, 250 shares of common
stock for $2,500. Mr. Geoffroy purchased an additional 200 shares of
common stock for $2,000. These shares were split 10:1 for a total of 4,500
shares.
Lloyd Geoffroy, Jr. purchased on September 28, 1995, 300 shares of
common stock for $3,000. Mr. Geoffroy purchased an additional 300 shares
of common stock for $3,000. These shares were split 10:1 for a total of
6,000 shares.
Robin K. Savage McDaniel purchased on September 28, 1995, 100 shares of
common stock for $1,000. Ms. McDaniel received 4,900 shares of common
stock as a gift from Claude W. Savage. These shares were split 10:1 for a
total of 50,000 shares.
Tracy E. Sabates purchased on September 28, 1995, 100 shares of common
stock for $1,000. Ms. Sabates received 4,900 shares of common stock as a
gift from Claude W. Savage. These shares were split 10:1 for a total of
50,000 shares.
Charles Edward and Patricia Joanne White purchased on September 28,
1995, 500 shares of common stock for $5,000. These shares were split 10:1
for a total of 5,000 shares.
Kathleen Helen Caldwell purchased on September 29, 1995, 200 shares of
common stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Melissa Aine Caldwell purchased on September 29, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Muriel Kathleen Caldwell purchased on September 29, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Charles Barron Elrod purchased on September 29, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Bruce W. Jones purchased on September 29, 1995, 500 shares of common
stock for $5,000. These shares were split 10:1 for a total of 5,000
shares.
Melvola J. Mitchell purchased on September 29, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
David Matthew Canning purchased on October 2, 1995, 500 shares of
common stock for $5,000. These shares were split 10:1 for a total of 5,000
shares.
Douglas L. Simms purchased on October 2, 1995, 200 shares of common
stock for $2,000. Mr. Simms purchased an additional 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 4,000
shares.
Rhett M. Starnes purchased on October 2, 1995, 150 shares of common
stock for $1,500. These shares were split 10:1 for a total of 1,500
shares.
Darrell Murray Olinger purchased on October 3, 1995, 1,000, shares of
common stock for $10,000. These shares were split 10:1 for a total of
10,000 shares.
Norbert Louis Ming purchased on October 5, 1995, 500 shares of common
stock for $5,000. Mr. Ming purchased an additional 2,000 shares for
$20,000. These shares were split 10:1 for a total of 25,000 shares.
Douglas Rene Schexnayder purchased on October 5, 1995, 320 shares of common
stock for $3,200. These shares were split 10:1 for a total of 3,200
shares.
Harold Walter Queen purchased on October 6, 1995, 110 shares of common
stock for $1,100. These shares were split 10:1 for a total of 1,110
shares.
Rebecca G. Rushing purchased on October 6, 1995, 50 shares of common
stock for $500. These shares were split 10:1 for a total of 500 shares.
Patricia S. Schnell purchased on October 9, 1995, 500 shares of common
stock for $5,000. These shares were split 10:1 for a total of 5,000
shares.
Joyce M. Hatley received on October 10, 1995, 400 shares of common
stock as a gift from Derrick L. Rodgers. These shares were split 10:1 for
a total of 4,000 shares.
William A. Myers, III received on October 10, 1995, 100 shares of
common stock as a gift from Derrick L. Rodgers. These shares were split
10:1 for a total of 1,000 shares.
Ann M. Smoak received on October 10, 1995, 400 shares of common stock
as a gift from Derrick L. Rodgers. These shares were split 10:1 for a
total of 4,000 shares.
Betty Jean H. Taylor purchased on October 10, 1995, 200 shares of
common stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Elizabeth M. Oakley purchased on October 11, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Enrico Victor Cannella purchased on October 16, 1995, 1,000 shares of
common stock for $10,000. These shares were split 10:1 for a total of
10,000 shares.
Dorothy Grant Eaddy purchased on October 16, 1995, 300 shares of common
stock for $3,000. These shares were split 10:1 for a total of 3,000
shares.
Patricia A. Gore purchased on October 18, 1995, 30 shares of common
stock for $300. These shares were split 10:1 for a total of 300 shares.
Marc Homer Mitchell purchased on October 18, 1995, 270 shares of common
stock for $2,700. These shares were split 10:1 for a total of 2,700
shares.
Luke J. Carline purchased on October 19, 1995, 60 shares of common
stock for $600. These shares were split 10:1 for a total of 600 shares.
Daivd R. Fanning purchased on October 23, 1995, 200 shares of common
stock for $2,000. Mr. Fanning purchased an additional 300 shares of common
stock for $3,000. These shares were split 10:1 for a total of 5,000
shares.
Carl Richard Fears purchased on October 23, 1995, 500 shares of common
stock for $5,000. Mr. Fears purchased an additional 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 7,000
shares.
John Vales purchased on October 23, 1995, 20 shares of common stock for
$200. These shares were split 10:1 for a total of 200 shares.
The Vales Revocable Living Trust purchased on October 23, 1995, 2,500
shares of common stock for $25,000. These shares were split 10:1 for a
total of 25,000 shares.
Bobbie Lee Baer purchased on October 24, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Rachel H. Clark purchased on October 24, 1995, 200 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 on January 30, 1996.
Caroll Joseph Boutte, III purchased on October 25, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Joe Oscar Matthews purchased on October 25, 1995, 100 shares of common
stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Byron Keith and Elizabeth McKellips purchased on October 25, 1995, 300
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 on January 30,
1996.
Barbara M. Romero purchased on October 25, 1995, 100 shares of common
stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Helen G. Rourk purchased on October 25, 1995, 400 shares of common
stock for $4,000. These shares were split 10:1 for a total of 4,000
shares.
Philip Andre Martin purchased on October 26, 1995, 500 shares of common
stock for $5,000. Mr. Martin purchased an additional 500 shares for
$5,000. These shares were split 10:1 for a total of 10,000 shares.
Terry Lane Neustrom purchased on October 26, 1995, 1,000 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 on January 30, 1996.
Sherry T. Macklin purchased on October 27, 1995, 115 shares of common
stock for $1,150. These shares were split 10:1 for a total of 1,150
shares.
Lawrence L. and Dorothy Smith purchased on October 27, 1995, 500 shares
of common stock for $5,000. These shares were split 10:1 for a total of
5,000 shares.
William Larry Duncan purchased on October 30, 1995, 50 shares of common
stock for $500. These shares were split 10:1 for a total of 500 shares.
Fannie Lenora Ross purchased on October 30, 1995, 800 shares of common
stock for $8,000. These shares were split 10:1 for a total of 8,000
shares.
Karen Elaine Sardinas purchased on October 30, 1995, 200 shares of
common stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Henry C. and Winifred E. Turner purchased on October 30, 1995, 400
shares of common stock for $4,000. These shares were split 10:1 for a
total of 4,000 shares.
Mollie M. Stewart purchased on November 2, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Mollie M. Stewart and Pharoh H. Smith purchased on November 2, 1995,
100 shares of common stock for $1,000. These shares were split 10:1 for a
total of 1,000 shares.
Bradley Reed Thomas, Jr. received on November 8, 1995, 100 shares of
common stock in exchange for pulling cable and wire network for computer in
home office. These shares were split 10:1 for a total of 1,000 shares.
Joel Daniel Thomas received on November 8, 1995, 100 shares of common
stock in exchange for pulling cable and wire network for computer in home
office. These shares were split 10:1 for a total of 1,000 shares.
Scot Rolland Thomas received on November 8, 1995, 100 shares of common
stock in exchange for pulling cable and wire network for computer in home
office. These shares were split 10:1 for a total of 1,000 shares.
Ronald Franklin Hopson purchased on November 10, 1995, 100 shares of
common stock for $1,000. Mr. Hopson purchased an additional 100 shares for
$1,000. These shares were split 10:1 for a total of 2,000 shares.
David P. Accurso purchased on November 13, 1995, 250 shares of common
stock for $2,500. Mr. Accurso purchased an additional 750 shares for
$7,500. These shares were split 10:1 for a total of 10,000 shares.
Jerome Victor and Sandra Yvonne Leventhal purchased on November 13,
1995, 500 shares of common stock for $5,000. These shares were split 10:1
for a total of 5,000 shares.
James LeRoyal Lucas purchased on November 13, 1995, 100 shares of
common stock for $1,000. Mr. Lucas purchased an additional 50 shares for
$500.00. These shares were split 10:1 for a total of 1,500 shares.
McDaniel Air Conditioning and Heating, Inc. purchased on November 13,
1995, 2,500 shares of common stock for $25,000. These shares were split
10:1 for a total of 25,000 shares.
David and Leslie Newman Family Trust purchased on November 13, 1995,
500 shares of common stock for $5,000. These shares were split 10:1 for a
total of 5,000 shares.
Kenneth R. Hines purchased on November 14, 1995, 200 shares of common
stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Houston Allen Little purchased on November 17, 1995, 100 shares of
common stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Charles T. and Rachel E. Moore purchased on November 17, 1995, 100
shares of common stock for $1,000. These shares were split 10:1 for a
total of 1,000 shares.
Charles Otto and Deborah Ann Reynolds purchased on November 17, 1995,
50 shares of common stock for $500. These shares were split 10:1 for a
total of 500 shares.
Eric O. and Trina C. Skidmore purchased on November 17, 1995, 400
shares of common stock for $4,000. These shares were split 10:1 for a
total of 4,000 shares.
Jerry Dean and Dorthea P. Staley purchased on November 17, 1995, 500
shares of common stock for $5,000. These shares were split 10:1 for a
total of 5,000 shares.
Homer R. and Ruth J. Fears purchased on November 23, 1995, 200 shares
of common stock for $2,000. These shares were split 10:1 for a total of
2,000 shares.
Bobby Dean Sidden purchased on November 27, 1995, 1,000 shares of
common stock for $10,000. These shares were split 10:1 for a total of
10,000 shares.
Helen W. Kennedy purchased on December 1, 1995, 100 shares of common
stock for $1,000. These shares were split 10:1 for a total of 1,000
shares.
Johnny R. Kennedy, Sr. purchased on December 1, 1995, 200 shares of
common stock for $2,000. These shares were split 10:1 for a total of 2,000
shares.
Reine R. and David Hemelright purchased on December 6, 1995, 200 shares
of common stock for $2,000. These shares were split 10:1 for a total of
2,000 shares.
Washington State
Similar to the shares issued above, securities were sold to several
investors in Washington. 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 a registration with the State. The transactions
were as follows:
David Andrew and Kathy June Holt purchased on August 8, 1995, 500
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, 500 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, 50 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, 100 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, 150 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, 500 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.
Mildred Gerard purchased on August 11, 1995, 50 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, 100 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, 100 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, 300 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, 150 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, 100 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, 350 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, 50 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, 500 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, 50 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, 300 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, 125 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, 60, 130, and 250 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, 100 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, 50 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, 200 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, 200 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.
Barbara J. Dickson purchased on August 15, 1995, 50 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 Bisby purchased on August 16, 1995, 500 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 Bisby purchased on August 16, 1995, 50 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, 150 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, 500 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, 500 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, 200 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, 500 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, 50 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, 100 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, 200 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,
500 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, 50 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, 500 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, 50 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, 500 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, 500 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.
Robert L. Undsderfer purchased on October 24, 1995, 200 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, 100 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, 50 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 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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description
1.1 Underwriting Agreement
3.1 Certificate of Incorporation of the Company, with
Certificate of Amendment
3.2 Bylaws of the Company
4.1 Specimen Common Stock Certificate
5.1 Opinion and Consent of Wood & Francis, PLLC
10.1 Employment Agreement - Stanley H. Van Etten
10.2 Confidentiality/Non-Competition Agreement - John D. Brothers
10.3 Confidentiality/Non-Competition Agreement - Mary E. Breen
10.4 Confidentiality/Non-Competition Agreement - Dwight Hallman
10.5 Confidentiality/Non-Competition Agreement - Clark A. Jones
10.6 Confidentiality/Non-Competition Agreement - Dawn E. McIntyre
10.7 Confidentiality/Non-Competition Agreement - Stephanie Harris
21.1 Certificate of Incorporation International Heritage of
Canada, Inc.
21.2 Bylaws of International Heritage of Canada, Inc.
23.1 Consent of Eilers, Jones, Brown & McLeod, CPAs, PA
25.1 Powers of Attorney (included on Signature Page)
Item 17. Undertaking
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the North Carolina Business Corporation Act, the Amended
Articles of Incorporation or the Bylaws of the Company, Indemnification
Agreements entered into between the Company and its officers and directors,
the Underwriting Agreement, or otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer, or controlling person of the
Company in the successful defense of any action, suite or proceeding)
asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Company pursuant ro Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Raleigh, North
Carolina on this 30th day of August, 1996.
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 August 30, 1996
Stanley H. Van Etten And Chairman of the Board
/s/ JOHN D. BROTHERS Secretary and Director August 30, 1996
John D. Brothers
/s/ LARRY G. SMITH Director August 30, 1996
Larry G. Smith
/s/ CLAUDE W. SAVAGE Director August 30, 1996
Claude W. Savage
/s/ BARRY ACKEL Director August 30, 1996
Barry Ackel
/s/ JIMMIE D. KNOWLES Director August 30, 1996
Jimmie D. Knowles
/s/ SABRINA L .H. WEI Director August 30, 1996
Sabrina L.H. Wei
/s/ STANLEY H. VAN ETTEN Attorney-in-fact August 30, 1996
Stanley H. Van Etten
Attorney-in-fact
EXHIBITS
INDEX OF EXHIBITS
Description Number
Revised Underwriting Agreement . . . . . . . . . . . . . . . .1.1
Certificate of Incorporation of the Company, with Certificate of
Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . .3.1
Bylaws of the Company. . . . . . . . . . . . . . . . . . . . .3.2
Specimen Common Stock Certificate. . . . . . . . . . . . . . .4.1
Opinion and Consent of Wood & Francis, PLLC . . . . . . . . .5.1
Employment Agreement - Stanley H. Van Etten. . . . . . . . . 10.1
Confidentiality/Non-Competition Agreement - John D. Brothers 10.2
Confidentiality/Non-Competition Agreement - Mary E. Breen. . 10.3
Confidentiality/Non-Competition Agreement - Dwight Hallman . 10.4
Confidentiality/Non-Competition Agreement - Clark A. Jones .10.5
Confidentiality/Non-Competition Agreement - Dawn E. McIntyre 10.6
Confidentiality/Non-Competition Agreement - Stephanie Harris 10.7
Certificate of Incorporation International Heritage of Canada, Inc.21.1
Bylaws of International Heritage of Canada, Inc. . . . . . . 21.2
Consent of Eilers, Jones, Brown & McLeod, CPAs, PA . . . 23.1
REVISED
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT (the "Agreement") is made and
entered into this 30th day of August 1996, by and between
International Heritage, Inc., a North Carolina corporation,
the address of which is 2626 Glenwood Avenue, Raleigh, North
Carolina 27608 (the "Issuer"), and WIN Capital Corporation, a
New York corporation, the address of which is 26 Ludlam
Avenue, Bayville, New York 11709 (the "Agent").
Recitals:
A. The Issuer desires to offer and sell up to 2,500,000
shares of its Common Stock, $0.001 par value (the "Stock"), at
a price of Ten Dollars ($10.00) per share in cash to outside
investors in a public offering in the States of Alabama,
California, Florida, Georgia, Kansas, Louisiana, Maryland, New
York, North Carolina, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas and Virginia (the "Jurisdictions"),
among other places (the "Offering").
B. The Offering will be made pursuant to a Registration
Statement on Form S-1 under the Securities Act of 1933, as
amended (the "Securities Act"), which was originally filed with
the U.S. Securities and Exchange Commission (the "SEC") on, or
about, July 16, 1996, (the "Offering Statement") and pursuant
to registrations and/or exemptions therefrom in each of the
above Jurisdictions.
C. The Issuer desires to obtain the services of an Agent
to assist it in the offering and sale of the Stock in the
Jurisdictions.
D. The Agent is a member of the National Association of
Securities Dealers, Inc. (the "NASD") and is willing, as an
Agent, to assist the Issuer in the offering and sale of the
Stock in the Jurisdictions on the terms and conditions set
forth herein.
Agreement:
NOW, THEREFORE, for and in consideration of the foregoing,
and of the mutual covenants, agreements undertakings,
representations and warranties contained herein, the parties
hereto agree as follows:
1. Appointment of Agent. The Issuer hereby appoints the
Aqent as its Agent in the Jurisdictions for the Offering.
The Issuer further appoints the Agent to act in its
behalf to form and menage a selling group to sell the Offering.
The Issuer maintains the right in its sole discretion to approve or
disapprove any potential member of the selling group.
2. Acceptance of Appointment; Best Efforts. The Agent hereby
accepts the appointment described in Section 1 above and agrees, as
Agent for the Issuer, to use its best efforts to find purchasers for
the Stock in the Jurisdictions. The Agent makes no commitment to
purchase all or any of the shares of the Stock.
3. Other Jurisdictions. The Issuer retains the right to employ
other agents in jurisdictions other than the Jurisdictions for and in
connection with the sale of the Stock. However, the Issuer. in its
sole discretion, may accept or reject those agents.
4. Termination of Offering. The Offering shall terminate upon the
happening of the earlier of (i) the sale of all of the Stock, (ii)
December 31, 1996 (or such later date if the Offering is extended by the
Issuer for an additional period, not to extend beyond January 3, 1997), or
(iii) the withdrawal or cancellation of the Offering by the Issuer in
its sole and absolute discretion (the earlier of (i), (ii) and (iii)
being sometimes referred to herein as the "Termination Date"). Upon
the Agent's receipt of written notice from the Issuer of the
termination of the Offering, the Agent immediately shall cease making
offers of the Stock and shall terminate all then pending offers.
5. Proceeds to Issuer. The net proceeds that shall be paid to
the Issuer on the sale of Stock by the Agent are Nine Dollars and Ten
Cents ($9.10) per share.
6. Agent Compensation. As compensation for its activities
hereunder and pursuant hereto, the Agent shall be paid a commission
equal to Ninety Cents ($0.90) per share of the Stock (whose
subscription is accepted by the Issuer) sold by the Agent or other
broker-dealers joining the syndicate with the Agent. A sales
commission of Cents ($ . ) per share of Stock sold in the Offering
shall be paid to members of the selling syndicate.
In the event the offering is terminated prior to closing,
the Agent will be reimbursed only for its actual, accountable out of
pocket expenses.
Options or Warrants to be granted to the Agent and to the
Agent's counsel, Richard Heller of Shustak Jalil Sanders & Heller will
be restricted from sale, transfer, assignment or hypothecation for a
period of one year from the effective date of the offering.
7. Escrow and Release of Proceeds. Any and all proceeds received
by the Agent from the sale of the Stock shall be deposited in an
escrow account with Continental Trust & Transfer Company (the "Escrow
Agent") pursuant to that certain Escrow Agreement attached hereto as
Exhibit A (the "Escrow Agreement"). The Issuer shall pay
the fee for establishing and maintaining the Escrow Account.
Subscribers' checks shall be made payable to the Escrow Agent and the
Agent will transmit such checks directly to the Escrow Agent by noon
the next business day after receipt. The Escrow Agent promptly shall
release to the Issuer the net proceeds (proceeds less commissions)
from the sales of the Stock as and when requested by the Issuer but in
any event, no earlier than the closing of the offering beginning with
the first closing upon receipt of the minimum offering amount of
$5,000,000 and the maximum offering amount of $25,000,000 or until the
termination of the offering. The commission relating to a particular
sale shall be released by the Escrow Agent to the Agent when the net
proceeds of that sale are released to the Issuer.
8. Agent Expenses. The Agent shall be responsible for payment of
all of its, travel, printing and other expenses, whether or not there
is a closing under the Offering.
The Issuer shall, however, reimburse the Agent for its
reasonable legal fees and disbursements related to the offering.
9. Subscriptions. Each subscriber purchasing Stock through the
Agent shall subscribe for the Stock by completing and executing a
subscription agreement in the form attached hereto as Exhibit B
("Subscription Agreement") and delivering the completed and executed
Subscription Agreement along with payment to the Agent. The Agent will
transmit such Subscription Agreements directly to the Issuer by noon
the next business day after receipt.
10. Acceptance or Rejection of Subscriptions. The Issuer has the
right to accept or reject any subscription. Only upon the acceptance
of a subscription by the Issuer is a sale made. Upon the acceptance of
a subscription, the Issuer shall execute the acceptance on the
Subscription Agreement, and shall forward a duplicate of the accepted
Subscription Agreement to the subscriber with a copy to the Agent.
11. Representations and Warranties of the Issuer. The Issuer
represents and warrants to, and agrees with the Agent that:
(a) The Issuer is a corporation duly organized, validly existing
and in good standing under the laws of the State of North
Carolina with power and authority to own its properties and to
conduct its business as described in the Offering Statement;
(b) The Issuer has a duly authorized and outstanding
capitalization as set forth in the Offering Statement, its
capital stock conforms to the description contained in the
Offering Statement and the Stock conforms to the description
contained in the Offering Statement and the Stock, when issued
and delivered pursuant to Subscription Agreements, shall be
duly and validly issued, fully paid and non-assessable;
(c) The Issuer shall prepare and file the Offering Statement
with the SEC, the NASD and, to the extent required by law, the
Jurisdictions, and shall use its best efforts to cause the
registration or exemption with each such regulatory agency to
become effective, as well as those of any other jurisdiction in
which the Stock is to be offered and sold;
(d) The Offering Statement does not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated or necessary to make the statements in the Offering
Statement, in light of the circumstances under which they are
made, not misleading;
(e) The consolidated financial statements and schedules filed
with, and as part of, the Offering Statement present fairly the
cost of the assets, the liabilities and the capital stock of the
Issuer as of the dates of the statements and schedules, all in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the entire periods
involved, except that those of such financial statements and
schedules that are unaudited do not contain the notes normally
required by GAAP and are subject to audit adjustments, and since
the respective dates of the financial statements and schedules
there has been no material adverse change in the condition or
general affairs of the Issuer, financial or otherwise, other than
as referred to in, or contemplated by, the Offering Statement;
(f) The execution and delivery of this Agreement, the
consummation of the transactions contemplated in this Agreement
and compliance with the terms and provision of this Agreement
shall not conflict with, or result in a breach of, any of the
terms or provisions of, or constitute a default under, the
Articles of Incorporation, as amended, or the Bylaws of the
Issuer or any of its subsidiaries, or any indenture, mortgage or
other agreement or instrument to which the Issuer or any of its
subsidiaries is a party or by which any of their respective
assets or properties are bound, or any applicable law, rule,
regulation, judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign,
having jurisdiction over the Issuer or any of its subsidiaries or
any of their respective assets or properties, except for
instances where not material to the Issuer:
(g) This Agreement has been duly authorized, executed and
delivered on behalf of the Issuer, and is the valid, binding and
enforceable obligation of the Issuer; and
(h) No authorization, approval, consent or license of any
regulatory body or authority is required for the valid
authorization, issuance, sale and delivery of the Stock, or, if
so required, all authorizations, approvals, consents and licenses
have been obtained and are in full force and effect, except for
instances where not material to the Issuer.
12. Covenants of the Issuer. The Issuer covenants that:
(a) The Issuer shall not at any time make or file any amendment
or supplement to the Offering Statement of which the Agent
previously has not been advised and furnished a copy, or to
which the Agent reasonably may object in writing. The Issuer
shall prepare and file any amendments or supplements to the
Offering Statement that in the reasonable opinion of counsel for
the Agent may be necessary in connection with the offering and
sale of the Stock by the Agent, and shall use its best efforts
to cause each such amendment or supplement to become effective
as promptly as possible.
(b) The Issuer shall deliver to the Agent a confidential listing
of potential investors for the Offering, including contact
information for each such potential investor (the "Confidential
Investor List"). The Issuer shall also deliver to the Agent,
without charge, from time to time during the term of this
Agreement as many copies of the Offering Statement, the Offering
Circular included therein (as amended from time to time, the
"Circular") and any other documents as the Aqent reasonably may
request.
(c) The Issuer shall use its best efforts to comply with, and to
continue to comply with, all applicable state and federal
securities and other laws so as to permit the continuation of
the offering and sale of the Stock.
(d) The Issuer promptly shall notify the Agent in the event of
(i) the issuance by any federal or state securities commission or
authority of any stop order suspending the effectiveness of the
Offering Statement, or (ii) the institution or notice of the
intended institution of any action or proceeding for that
purpose. The Issuer shall make every reasonable effort to prevent
the issuance of such a stop order, and, if such a stop order is
issued at any time, to obtain the withdrawal of the order at the
earliest possible time.
(e) The Issuer will cooperate with the Agent in connection with,
and shall make available to the Agent such documents and other
information as the Agent shall reasonably require to satisfy, its
reasonable due diligence requirements.
13. Representations and Warranties of the Agent. The Agent
represents and warrants to, and agrees with the Issuer that:
(a) The Agent is a member in good standing of the NASD and is
currently licensed in the jurisdictions in which the offering
will be sold;
(b) The Agent and all persons employed by it or who work for it
as agents have all necessary permits, licenses and permissions
to enable it and them to act as agent for the Issuer in the
offering and sale of the Stock as required by applicable state
and federal securities and other laws; and
(c) Neither the Agent nor any partner, director or officer of
the Agent is disqualified under Rule 262 promulgated under the
Securities Act or any applicable disqualification provision of
any Jurisdiction's law.
14. Covenants of the Agent. The Agent covenants that:
(a) The Agent shall not sell the stock offered pursuant to the
Offering Statement in any manner that violates the conditions
imposed by applicable state or federal securities laws in
connection with an offer and sale of securities pursuant to
registrations pertaining to the Offering and under the
Securities Act and the registrations and/or exemptions therefrom
in each of the Jurisdictions.
(b) The Agent shall use its best efforts to contact all of the
potential investors listed in the Confidential Investor List to
be provided by the Issuer for purposes of Offering and selling
the Stock in the Offering. However, the Agent shall not be
limited to offering the Stock solely to the potential investors
listed in the Confidential Investor List, and the Agent shall
not be required to contact any additional potential investors
listed in the Confidential Investor List not already contacted
by the Agent, after the Issuer has accepted Subscription
Agreements from investors for the total amount of stock in the
Offering.
15. Termination of Aqreement. This Agreement may, subject to the
other Provisions hereof, be terminated as follows:
(a) At any time prior to the commencement of the Offering, the
Issuer may, by notice to the Agent, terminate this Agreement; and
at any time prior to the commencement of the Offering, the Agent
may, by notice to the Issuer, terminate this Aqreement;
(b) By the Agent at any time by notice to the Issuer because of
any failure on the part of the Issuer to comply with any of the
terms and provisions, or to fulfill any of the conditions
hereof, or if for any reason the Issuer is unable to perform its
obligations hereunder;
(c) By the Issuer at any time by notice to the Agent because of
any failure on the part of the Agent to comply with any of the
terms and provisions, or to fulfill any of the conditions
hereof, or if for any reason the Agent is unable to perform its
obligations hereunder;
(d) By the Issuer at any time by notice to the Agent because of
disapproval of the terms of this Agreement by the NASD, SEC, or
any state securities regulatory authority charged with approving
such agreements or the registration of the Offering or any
exemption therefrom. However, without first terminating this
Agreement, the Issuer and the Agent, by mutual written consent,
may amend this Agreement, by adding, deleting, or modifying any
of the provisions hereof if necessary to obtain approval of this
Agreement or of the offering by the NASD, SEC, or any state
securities regulatory authority.
(e) Upon the occurrence and satisfactory completion of the
offering and sale of all of the Stock and the distribution of
the proceeds to the Agent.
16. Indemnification. The Issuer shall indemnify and hold
harmless the Agent and each person, if any, who controls the Agent
within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses or liabilities,
joint or several, to which they or any of them may become subject
under the Securities Act or under any other statute or at common law
or otherwise, and, except as provided below, shall reimburse the Agent
and each controlling person, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as the losses, claims, damages, expenses,
liabilities actions or expenses (collectively, "Losses") arising out
of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Offering Statement, or arising out
of or based upon the omission or alleged omission to state a material
fact contained in the Offering Statement, or arising out of or based
upon the omission or alleged omission to state a material fact
required to be stated in the Offering Statement necessary in order to
make the statements in the Offering Statement not misleading, unless
the untrue statement or omission was made in the Offering Statement in
reliance upon and in conformity with information furnished in writing
to the Issuer by the Agent directly or through counsel expressly for
the purpose of inclusion therein. However, this indemnification
provision shall not benefit the Agent or any person controlling the
Agent if the Agent failed to send or give a copy of the Offering
Statement to a person at or prior to the time an offer of Stock was
made to that person, or acted in violation of any covenants made by it
herein.
Promptly after receipt by the Agent or any person controlling
the Agent of notice of the commencement of any action with respect to
which indemnification may be sought from the Issuer under this
Section, the Agent shall notify the Issuer in writing of the
commencement, and, subject to the provisions stated below, the Issuer
shall assume the defense of the action (including the employment of
counsel and the payment of expenses) in so far as the action relates
to any alleged Losses with respect to which indemnification may be
sought from the Issuer. The Agent or any person controlling the Agent
shall have the right to employ separate counsel in any action and to
participate in the defense of the action, but the fees and expenses
of such counsel must be specifically authorized in writing by the
Issuer before being incurred. The Issuer shall not be liable, and
shall not be required, to indemnify any person in connection with any
settlement of any action effected without the Issuer's consent in
writing.
The Agent shall indemnify and hold harmless the Issuer, each of
its directors, each of its officers, and each person, if any, who
controls the Issuer within the meaning of Section 15 of the Securities
Act from and against any and all Losses to which they or any of them
may become subject under the Securities Act or under any other statute
or at common law or otherwise, and, except as provided below, shall
reimburse the Issuer and each director, officer or controlling person,
if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions
whether or not resulting in any liability, (i) insofar as the Losses
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained the Offering Statement, or
arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated in the Offering Statement
or necessary in order to make the statements in the Offering Statement
not misleading, but only in so far as the untrue statement or omission
was made in the Offering Statement in reliance upon and in conformity
with information furnished in writing to the Issuer by the Agent
directly or through counsel expressly for the purpose of inclusion
therein, or (ii) in so far as the Losses arise out of or are based
upon any statements made or action taken in connection with an offer
or sale in connection with the offering and under the Securities Act
and the registrations and/or exemptions therefrom in each of the
Jurisdictions.
Promptly after receipt of notice of the commencement of any
action with respect to which indemnification may be sought from the
Agent under this Section, the Issuer shall notify the Agent in writing
of the commencement, and, subject to the provisions stated below, the
Agent shall assume the defense of the action (including the employment
of counsel and the payment of expenses) in so far as
the action relates to any alleged Losses with respect to which
indemnification may be sought from the Agent. The Issuer and
each director, officer or controlling person shall have the
right to employ separate counsel in any action and to
participate in the defense of the action, but the fees and
expenses of the counsel shall not be the expense of the Agent
unless the employment of the counsel has been specifically
authorized in writing by the Agent. The Agent shall not be
liable, and shall not be required, to indemnify any person in
connection with any settlement of any action effected without
the Agent's consent in writing.
17. Contribution. If the indemnity referred to in Section
17 should be, for any reason whatsoever, unenforceable,
unavailable or otherwise insufficient to hold each indemnified
person harmless, the indemnified person shall pay to or on
behalf of each indemnified person contributions for Losses so
that each indemnified person ultimately bears only a portion of
such Losses as is appropriate (i) to reflect the relative
benefits received by each such indemnified person,
respectively, on the one hand and the indemnifying person on
the other hand in connection with the transaction, or (ii) if
the allocation of that basis is not permitted by applicable
law, to reflect not only the relative fault of each such
indemnified person, respectively, and the indemnifying person
as well as any other relevant equitable considerations. The
respective relative benefits received by the Agent and the
Issuer shall be deemed to be in the same proportion as the
aggregate commission paid to the Agent bears to the total gross
proceeds of the Offering. The relative fault of each
indemnifying person shall be determined by reference to, among
other things, whether the actions or omissions to act were by
such indemnifying person and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action or omission to act.
18. Provisions to Survive Delivery. The representations,
warranties, covenants, indemnities, understandings, agreements,
and other statements of the Issuer and the Agent contemplated
by, set forth in, or made pursuant to, this Agreement and the
indemnification agreements of the Issuer and the Agent shall
survive delivery of, and payment for, the Stock.
19. Arbitration. Any dispute arising out this Agreement or
breach hereof shall, at the election of a party hereto, by
written notice to the other (the "Non-electing Party"), be
referred to the American Arbitration Association (the "AAA") to
be settled by arbitration in the city and state where the
Non-electing Party, or its principal executive office, is
located under the then existing Commercial Arbitration Rules of
the AAA. Any arbitration conducted pursuant hereto shall be
conducted by a recognized independent and impartial arbitrator
mutually agreed to by the Issuer and the Agent involved in such
dispute, or, if they cannot agree, by three (3) arbitrators, one
chosen by the Issuer, one chosen by the Agent and the third
(who shall be a recognized independent and impartial
arbitrator and who shall act as chairperson of the arbitrators)
selected by the first two arbitrators; provided, however, that if
either party fails to appoint an arbitrator within fifteen (15)
calendar days of its receipt of written notice by the other that the
other has appointed an arbitrator, the arbitration shall be conducted
by an arbitrator selected by the AAA. If the arbitrators selected by
the issuer and the Agent fail to agree on a third arbitrator, the
third arbitrator shall be appointed by the AAA. All costs of each
arbitration pursuant to this Section (including, without limitation,
all fees of the arbitrator(s) and attorneys' fees) shall be borne by
the party whose last written offer of settlement (or claim if no offer
of settlement was made by such party) differed by a greater amount
from the award made by the arbitrator(s), or in the case of an
arbitration to determine a matter other than a dollar amount or
percentage, by the party against whom the decision of the
arbitration(s) shall be rendered, as such issue is determined by the
arbitrator(s); provided, however, that no offer of settlement shall be
disclosed by a party to the arbitrator(s) until after the
arbitrator(s) has (have) rendered an award or decision on the merits.
Any award granted or decision reached pursuant to arbitration
hereunder shall be final and binding upon the parties and payment
shall be made as so determined within seven calendar days of the date
of the award or decision. Judgment upon the arbitration award or
decision may be entered in any court having competent jurisdiction.
20. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of North Carolina without
regard to conflict of law principles.
21. Assignment. Neither this Agreement nor any interest of any
party herein may be assigned, pledged or transferred without the
prior written consent of the parties hereto.
22. Binding Effect. This Agreement inures to the benefit of, and
is binding upon, the parties hereto, and their respective heirs,
representatives, successors, assigns and controlling person, but
nothing herein shall be construed as an authorization or right of any
party to assign its rights and obligations hereunder. A successor or
an assign does not include a purchaser of Stock of the Issuer solely
by reason of that purchase.
23. Waiver. No waiver of any provision hereof is valid unless it
is in writing and signed by the person against whom it is charged.
24. Notice. Any notice required or permitted to be given
pursuant hereto must be in writing addressed to the person at the
address specified herein, or at an address changed in this manner.
25. Entire Agreement. This Agreement, including all exhibits,
constitutes the entire agreement among parties with respect to
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day, month and year first written above.
The ISSUER: International Heritage, Inc
By /s/ Stanley Van Etten
Its President and CEO
WIN Capital Corporation
THE AGENT:
By /s/ Barry Hawk
Its President
ESCROW AGREEMENT
PUBLIC OFFERING
AGREEMENT made 28th day of August, 1996 by and among the Issuer
and the Underwriter whose names and addresses appear on the
Information Sheet (as defined herein) attached to this Agreement
and Continental Stock Transfer & Trust Company (the "Escrow
Agent") with a principal place of business located at: 2
Broadway, New York, New York 10004.
W I T N E S S E T H
WHEREAS, the Issuer has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the
"Registration Statement") covering a proposed public offering of
its securities as described on the Information Sheet;
WHEREAS, the Underwriter proposed to offer the Securities, as
agent for the Issuer, for sale to the public on a "best
efforts," minimum/maximum basis with respect to the Minimum
Securities Amount and Minimum Dollar Amount and at the price per
share or other unit all as set forth on the Information Sheet;
WHEREAS, the Issuer and the Underwriter propose to establish an
escrow account (the "Escrow Account"), to which subscription
monies which are received by the Escrow Agent from the
Underwriter in connection with such public offering are to be
credited, and the Escrow Agent is willing to establish the
Escrow Account on the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, the Escrow Agent has an agreement with Chase Bank to
establish a special bank account (the "Bank Account") into which
the subscription monies, which are received by the Escrow Agent
from the Underwriter and credited to the Escrow Account, are to
be deposited; NOW,
THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Information Sheet. Each capitalized term not otherwise
defined in this Agreement shall have the meaning set forth for
such term on the information sheet which is attached to this
Agreement and is incorporated by reference herein and made a
part hereof (the "Information Sheet").
2. Establishment of the Bank Account.
2.1 The Escrow Agent shall establish a non-interest-bearing
bank account at the branch of Chase Bank selected by the Escrow
Agent, and bearing the designation set forth on the Information
Sheet (heretofore defined as the "Bank Account"). The purpose
of the Bank Account is for (a) the deposit of all subscription
monies (checks, cash or wire transfers) which are received by
Issuer from the Underwriter from prospective purchasers of the
Securities and are delivered by the Underwriter to the Escrow
Agent, (b) the holding of amounts of subscription monies which
are collected through the banking system, and (c) the
disbursement of collected funds, all as described herein.
2.2 On or before the date of the initial deposit in the Bank
Account pursuant to this Agreement, the Underwriter shall notify
the Escrow Agent in writing of the effective date of the
Registration Statement (the "Effective Date"), and the Escrow
Agent shall not be required to accept any amounts for credit to
the Escrow Account or for deposit in the Bank Account prior to
its receipt of such notification.
2.3 The Offering Period, which shall be deemed to commence
on the Effective Date, shall consist of the number of calendar
days or business days set forth on the Information Sheet. The
Offering Period shall be extended by an Extension Period only
if the Escrow Agent shall have received written notice thereof
at least five (5) business days prior to the expiration of the
Offering Period. The Extension Period, which shall be deemed
to commence on the next calendar day following the expiration
of the Offering Period, shall consist of the number of calendar
days or business days set forth on the Information Sheet. The
last day of the Offering Period, or the last day of the Exten-
sion Period (if the Escrow Agent has received written notice
thereof as hereinabove provided), is referred to herein as the
"Termination Date." Except as provided in Section 4.3 hereof,
after the Termination Date the Underwriter shall not deposit,
and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.
3. Deposits to the Bank Account.
3.1 The Underwriter shall promptly deliver to the Escrow Agent all
monies which it receives from prospective purchasers of the
Securities, which monies shall be in the form of checks,
cash, or wire transfers. Upon the Escrow Agent's receipt of
such monies, they shall be credited to the Escrow Account.
All checks delivered to the Escrow Agent shall be made
payable to "Continental Stock Transfer & Trust Company, as
Escrow Agent for the offering by International Heritage,
Inc." Any check payable other than to the Escrow Agent as
required hereby shall be returned to the prospective
purchaser, or if the Escrow Agent has insufficient
information to do so, then to the Underwriter (together with
any Subscription Information, as defined below or other
documents delivered therewith) by noon of the next business
day following receipt of such check by the Escrow Agent, and
such check shall be deemed not to have been delivered to the
Escrow Agent pursuant to the terms of this Agreement.
3.2 Promptly after receiving subscription monies as described in
Section 3.1 the Escrow Agent shall deposit the same into the
Bank Account. Amounts of monies so deposited are hereinafter
referred to as "Escrow Amounts." The Escrow Agent shall cause
Chase Bank to process all Escrow Amounts for collection through
the banking system. Simultaneously with each deposit to the
Escrow Account, the Underwriter (or the Issuer, if such deposit
is made by the Issuer) shall inform the Escrow Agent in writing
of the name and address of the prospective purchaser, the amount
of Securities subscribed for by such purchaser, and the
aggregate dollar amount of such subscription (collectively, the
"Subscription Information").
3.3 The Escrow Agent shall not be required to accept for
credit to the Escrow Account or for deposit into the Bank Account
checks which are not accompanied by the appropriate Subscription
Information. Wire transfers and cash representing payments by
prospective purchasers shall not be deemed deposited in the
Escrow Account until the Escrow Agent has received in writing
the Subscription Information required with respect to such
payments.
3.4 The Escrow Agent shall not be required to accept in the
Escrow Account any amounts representing payments by prospective
purchasers, whether by check, cash or wire, except during the
Escrow Agent's regular business hours
3.5 Only those Escrow Amounts, which have been deposited in
the Bank Account and which have cleared the banking system and
have been collected by the Escrow Agent, are herein referred to
as the "Fund "
3.6 If the proposed offering is terminated before the
Termination Date, the Escrow Agent shall refund any portion of
the Fund prior to disbursement of the Fund in accordance with
Article 4 hereof upon instructions in writing signed by both the
Issuer and the Underwriter.
4. Disbursement from the Bank Account.
4.1 Subject to Section 4.3 below, if by the close of regular
banking hours on the Termination Date the Escrow Agent
determines that the amount in the Fund is less than the Minimum
Dollar Amount or the Minimum Securities Amount, as indicated by
the Subscription Information submitted to the Escrow Agent, then
in either case, the Escrow Agent shall promptly refund to each
prospective purchaser the amount of payment received from such
purchaser which is then held in the Fund or which thereafter
clears the banking system, without interest thereon or deduction
therefrom, by drawing checks on the Bank Account for the amounts
of such payments and transmitting them to the purchasers. In
such event, the Escrow Agent shall promptly notify the Issuer
and the Underwriter of its distribution of the Fund.
4.2 Subject to Section 4.3 below, if at any time up to the
close of regular banking hours on the Termination Date, the
Escrow Agent determines that the amount in the Fund is at least
equal to the Minimum Dollar Amount and represents the sale of
not less than the Minimum Securities Amount, the Escrow Agent
shall promptly notify the Issuer and the Underwriter of such
fact in writing. The Escrow Agent shall promptly disburse the
Fund, by drawing checks on the Bank Account in accordance with
instructions in writing signed by both the Issuer and the
Underwriter as to the disbursement of the Fund, promptly after
it receives such instructions.
4.3 [This provision applies only if a Collection Period has
been provided for by the appropriate indication on the
Information Sheet.] If the Escrow Agent or the Underwriter has
on hand at the close of business on the Termination Date any
uncollected amounts which then added to the Fund would raise the
amount in the Fund to the Minimum Dollar Amount, and result in
the Fund representing the sale of the Minimum Securities Amount,
the Collection Period (consisting of the number of business days
set forth on the Information Sheet) shall be utilized to allow
such uncollected amounts to clear the banking system. During
the Collection Period, the Underwriter (and the Issuer) shall
not deposit, and the Escrow Agent shall not accept, any
additional amounts; provided, however, that such amounts as were
received by the Underwriter (or the Issuer) by the close of
business on the Termination Date may be deposited with the
Escrow Agent by noon of the next business day following the
Termination Date. If at the close of business on the last day
of the Collection Period an amount sufficient to raise the
amount in the Fund to the Minimum Dollar Amount and which would
result in the Fund representing the sale of the Minimum
Securities Amount shall not have cleared the banking system, the
Escrow Agent shall promptly notify the Issuer and the
Underwriter in writing of such fact and shall promptly return
all amounts then in the Fund, and any amounts which thereafter
clear the banking system, to the prospective purchasers as
provided in Section 4.2 hereof.
4.4 Upon disbursement of the Fund pursuant to the terms of
this Article 4, the Escrow Agent shall be relieved of all
further obligations and released from all liability under this
Agreement. It is expressly agreed and understood that in no
event shall the aggregate amount of payments made by the Escrow
Agent exceed the amount of the Fund.
5. Rights, Duties and Responsibilities of Escrow Agent. It is
understood and agreed that the duties of the Escrow Agent are
purely ministerial in nature, and that:
5.1 The Escrow Agent shall notify the Underwriter, on a
daily basis, of the Escrow Amounts which have been deposited in
the Bank Account and of the amounts, constituting the Fund,
which have cleared the banking system and have been collected by
the Escrow Agent.
5.2 The Escrow Agent shall not be responsible for or be
required to enforce any of the terms or conditions of the
Underwriting Agreement or any other agreement between the
Underwriter and the Issuer nor shall the Escrow Agent be
responsible for the performance by the Underwriter or the Issuer
of their respective obligations under this Agreement.
5.3 The Escrow Agent shall not be required to accept from the
Underwriter (or the Issuer) any Subscription Information
pertaining to prospective purchasers unless such Subscription
Information is accompanied by checks, cash, or wire transfers
meeting the requirements of Section 3.1, nor shall the Escrow
Agent be required to keep records of any information with
respect to payments deposited by the Underwriter (or the Issuer)
except as to the amount of such payments; however, the Escrow
Agent shall notify the Underwriter within a reasonable time of
any discrepancy between the amount set forth in any Subscription
Information and the amount delivered to the Escrow Agent
therewith. Such amount need not be accepted for deposit in the
Escrow Account until such discrepancy has been resolved.
5.4 The Escrow Agent shall be under no duty or
responsibility to enforce collection of any check delivered to
it hereunder. The Escrow Agent, within a reasonable time, shall
return to the Underwriter any check received which is
dishonored, together with the Subscription Information, if any
which accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the accu-
racy, act in reliance upon the contents, and assume the genuineness of
any notice, instruction, certificate, signature, instrument or other
document which is given to the Escrow Agent pursuant to this
Agreement without the necessity of the Escrow Agent verifying the
truth or accuracy thereof. The Escrow Agent shall not be obligated
to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or
instructions or to execute any such certificate, instrument or other
document.
5.6 If the Escrow Agent is uncertain as to its duties or
rights hereunder or shall receive instructions with respect to
the Bank Account, the Escrow Amounts or the Fund which, in its
sole determination, are in conflict either with other
instructions received by it or with any provision of this
Agreement, it shall be entitled to hold the Escrow Amounts, the
Fund, or a portion thereof, in the Bank Account pending the
resolution of such uncertainty to the Escrow Agent's sole
satisfaction, by final judgment of a court or courts of
competent jurisdiction or otherwise; or the Escrow Agent, at its
sole option, may deposit the Fund (and any other Escrow Amounts
that thereafter become part of the Fund) with the Clerk of a
court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow
Agent of the Fund with the Clerk of any court, the Escrow Agent
shall be relieved of all further obligations and released from
all liability hereunder unless due to the Escrow Agent's willful
misconduct or gross negligence.
5.7 The Escrow Agent shall not be liable for any action
taken or omitted hereunder, or for the misconduct of any
employee, agent or attorney appointed by it, except in the case
of willful misconduct or gross negligence. The Escrow Agent
shall be entitled to consult with counsel of its own choosing
and shall not be liable for any action taken, suffered or
omitted by it in accordance with the advice of such counsel.
5.8 The Escrow Agent shall have no responsibility at any time
to ascertain whether or not any security interest exists in the
Escrow Amounts, the Fund or any part thereof or to file any
financing statement under the Uniform Commercial Code with
respect to the Fund or any part thereof.
6. Amendment. This Agreement may be altered or amended only
with the written consent of the Issuer, the Underwriter and the
Escrow Agent.
7. Representations and Warranties. The Issuer and the
Underwriter hereby jointly and severally represent and warrant
to the Escrow Agent that:
7.1 No party other than the parties hereto and the
prospective purchasers have, or shall have, any lien, claim or
security interest the Escrow Amounts or the Fund or any part
thereof.
7.2 No financing statement under the Uniform Commercial Code
is on file in any jurisdiction claiming a security interest in
or describing (whether specifically or generally) the Escrow
Amounts or the Fund or any part thereof.
7.3 The Subscription Information submitted with each deposit
shall, at the time of submission and at the time of the
disbursement of the Fund, be deemed a representation and
warranty that such deposit represents a bona fide payment by the
purchaser described therein for the amount of Securities set
forth in such Subscription Information.
7.4 All of the information contained in the Information
Sheet is, as of the date hereof, and will be, at any time of any
disbursement of the Fund, true and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled
to the Escrow Agent Fees set forth on the Information Sheet,
payable as and when stated therein. In addition, the Issuer and
the Underwriter jointly and severally agree to reimburse the
Escrow Agent for any reasonable expenses incurred in connection
with this Agreement, including, but not limited to, reasonable
counsel fees. Upon receipt of the Minimum Dollar Amount, the
Escrow Agent shall have a lien upon the Fund to the extent of
its fees for services as Escrow Agent.
9. Indemnification and Contribution.
9.1 The Issuer and the Underwriter (collectively referred to
as the "Indemnitors") jointly and severally agree to indemnify
the Escrow Agent and its officers, directors, employees, agents
and shareholders (collectively referred to as the "Indemnitees")
against, and hold them harmless of and from, any and all loss,
liability cost, damage and expense, including without
limitation, reasonable counsel fees, which the Indemnitees may
suffer or incur by reason of any action, claim or proceeding
brought against the Indemnitees by a third party arising out of
or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or
proceeding is the result of the willful misconduct or gross
negligence of the Indemnitees.
9.2 If the indemnification provided for in Section 9.1 is
applicable, but for any reason is held to be unavailable, the
Indemnitors shall contribute such amounts as are just and
equitable to pay, or to reimburse the Indemnitees for, the
aggregate of any and all losses, liabilities, costs, damages and
expenses, including counsel fees, actually incurred by the
Indemnitees as a result of or in connection with, and any amount
paid in settlement of, any action, claim or proceeding arising
out of or relating in any way to act actions or omissions of the
Indemnitors.
9.3 The provisions of this Article 9 shall survive any
termination of this Agreement, whether by disbursement of the
Fund, resignation of the Escrow Agent or otherwise.
10. Governing Law and Assignment. This Agreement shall be
construed in accordance with and governed by the laws of the
State of New York and shall be binding upon the parties hereto
and their respective successors and assigns; provided, however,
that any assignment or transfer by any party of its rights under
this Agreement or with respect to the Escrow Amounts or the Fund
shall be valid upon the written consent of the parties hereto.
11. Notices. All notices required to be given in
connection with this Agreement shall be sent by registered or
certified mail, return receipt requested, or by hand delivery
with receipt acknowledged, or by the Express Mail service
offered by the United States Post Office, and addressed, if to
the Issuer or the Underwriter, at their respective addresses set
forth on the Information Sheet, and if to the Escrow Agent, at
its address set forth above, to the attention of the Trust
Department.
12. Severability. If any provision of this Agreement or
the application thereof to any person or circumstances shall be
determined to be invalid or unenforceable, the remaining
provisions of this Agreement or the application of such
provision to persons or circumstances other than those to which
it is held invalid or unenforceable shall not be affected
thereby and shall be valid and enforceable to the fullest extent
permitted by law.
13. Execution in Several Counterparts. This Agreement may
be executed in several counterparts or by separate instruments,
and all of such counterparts and instruments shall constitute
one agreement, binding on all of the parties hereto.
14. Entire Agreement. This agreement constitutes the
entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and
understandings (written or oral) of the parties in connection
therewith.
IN WITNESS WHEREOF, the undersigned have executed
this Agreement as of the day and year first above written.
THE ISSUER: International Heritage, INC. CONTINENTAL STOCK
TRANSFER & TRUST COMPANY
By: /s/ Stanley Van Etten
THE UNDERWRITER: WIN CAPITAL CORPORATION
By: /s/Barry Hawk
ESCROW AGREEMENT INFORMATION SHEET
1. The Issuer
Name: International Heritage, Inc.
Address: 2626 Glenwood Avenue, Suite 200, Raleigh, North
Carolina 27608 State of incorporation or organization:
North Carolina
2. The Underwriter
Name: WIN Capital Corporation Address: 26 Ludlam Avenue,
Bayville, New York 11709 State of incorporation or
organization: New York
3. The Securities
Description of the Securities to be offered (e.g., shares
of or warrants for common stock, debentures, units
consisting shares and warrants, etc.): 2,500,000 shares
of common stock Par value, if any: $0.001 Offering price
per share/unit/other: $10.00
4. Minimum Amounts Required for Disbursement of the Escrow Account
Aggregate dollar amount which must be collected before the
Escrow Account may be disbursed to the Issuer ("Minimum
Dollar Amount"): $5,000,000 Total amount of securities
which must be subscribed for before the Escrow Account
may be disbursed to the Issuer ("Minimum Securities
Amount"): 500,000 shares
5. Plan of Distribution of the Securities
Offering Period: 120 calendar days
Extension Period, if any: none
Collection Period if any:
calendar/business days
6. Title of Escrow Account: "Continental Stock Transfer & Trust
Company, Escrow Agent for the offering by International
Heritage, Inc."
7. Escrow Agent Fees
Amount due on execution of the Escrow Agreement: $1,000.00 and
$1,000.00 upon completion of the escrow. Fee for each check
disbursed pursuant to the terms of the Escrow Agreement $ Fee
for each cheek returned pursuant to the terms of the Escrow
Agreement $
STOCK SUBSCRIPTION AGREEMENT
INTERNATIONAL HERITAGE, INC.
ARTICLE I
SUBSCRIPTION
The undersigned SUBSCRIBER, (the "SUBSCRIBER") hereby applies to
subscribe to shares of Common Stock, (the "SHARES") of
International Heritage, Inc., a North Carolina corporation (the
"CORPORATION"), in consideration for Ten and 00/100 Dollars
($10.00) per share. Enclosed with this application is a check
payable to International Heritage, Inc., as a tender of the
total purchase price of the shares subscribed for in the total
sum of DOLLARS ($ ), in accordance with the terms and conditions
of the Prospectus ( ) dated , 1996 (the "PROSPECTUS").
THE SUBSCRIBER ACKNOWLEDGES THAT THE SHARES BEING SUBSCRIBED FOR
HEREUNDER ARE OFFERED SUBJECT TO ALL OF THE TERMS AND CONDITIONS
SET FORTH IN THE PROSPECTUS, A COPY OF WHICH THE SUBSCRIBER HAS
BEEN FURNISHED. THE SUBSCRIBER ALSO ACKNOWLEDGES THAT THIS
SUBSCRIPTION AGREEMENT IS SUBJECT TO THE UNCONDITIONAL RIGHT OF
THE CORPORATION TO ACCEPT OR REJECT THE SAME IN WHOLE OR PART.
ACCEPTANCE SHALL BE EFFECTIVE UPON CORPORATION'S TRANSMITTAL OF
NOTICE TO SUBSCRIBER AT THE ADDRESS SPECIFIED HEREIN.
ARTICLE II
REPRESENTATIONS BY SUBSCRIBER
A. The SUBSCRIBER has received and read the PROSPECTUS relating
to this offering (the "OFFERING") of the SHARES, and has relied
only on the information contained therein.
B. The SUBSCRIBER understands that the PROSPECTUS is part of a
Registration Statement filed with the Securities and Exchange
Commission and the respective state regulatory divisions that
regulate the sale of securities in Alabama, Florida, Georgia,
Kansas, Louisiana, Maryland, North Carolina, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia
(the "DIVISION(s)") and that such registration does not
constitute approval of the merits of this OFFERING by the
respective Division nor does it indicate the offering is
complete or accurate.
C. The SUBSCRIBER (and the SUBSCRIBER's representative(s), (if
any), has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of this investment which represents A SUBSTANTIAL RISK OF
LOSS. The SUBSCRIBER represents and warrants that:
(1) the SUBSCRIBER has adequate means of providing for the
SUBSCRIBER's current needs and possible personal contingencies:
(2) the SUBSCRIBER has no need for liquidity with respect to
this investment:
(3) the SUBSCRIBER has no reason to anticipate any change in the
SUBSCRIBER's personal circumstances, financial or otherwise,
which may cause or require any sale or distribution of the
SUBSCRIBER's SHARES; and
(4) the SUBSCRIBER is able to bear the economic risk of this
investment--specifically, the SUBSCRIBER is able to bear the
COMPLETE LOSS OF THIS INVESTMENT (i.e., the full purchase price
of the SUBSCRIBER's SHARES and any additional capital
contributions, if applicable).
D. The SUBSCRIBER (and the SUBSCRIBER's representative, if any),
has been given: (1) a copy of the PROSPECTUS, (2) any additional
information requested, and (3) the opportunity to communicate
directly with the officers and directors of the CORPORATION, in
order to verify the accuracy of, or amplify upon, the
information in the PROSPECTUS.
E. SUBSCRIBER understands that SUBSCRIBER's payment will be
deposited with Continental Stock Transfer & Trust Company as
CORPORATION's escrow agent (the "BANK") in connection with the
CORPORATION'S best efforts offering and will not be released to
CORPORATION until a minimum of $5,000,000 has been received by
the BANK. (A copy of the entire agreement will be provided to
the Subscriber upon request.) Once a minimum of $5,000,000 has
been sold, the proceeds will be released to the CORPORATION by
the BANK. THEREAFTER, UPON THE COMPLETION OF THE OFFERING, ANY
AND ALL AMOUNTS RECEIVED BY THE BANK IN EXCESS OF THE $5,000,000
REFERRED TO ABOVE WILL BE RELEASED TO THE CORPORATION BY THE
BANK. IF THE MINIMUM OFFERING OF $5,000,000 IS NOT SOLD, THE
BANK WILL RETURN TO EACH INVESTOR THE AMOUNT THAT INVESTOR
INVESTED WITHOUT INTEREST.
F. As a condition of the right to subscribe for the SHARES, the
SUBSCRIBER acknowledges that the SHARES are offered solely by
the PROSPECTUS, dated , 1996, and on the terms and conditions
described herein. IF ANY REPRESENTATIONS HAVE BEEN MADE OTHER
THAN THOSE MADE IN THE PROSPECTUS, SUCH REPRESENTATIONS MUST NOT
BE RELIED ON AS HAVING
BEEN AUTHORIZED BY THE CORPORATION.
(initial)
G. I will hold title to my SHARES as follows:
_____Community Property with___________
_____Tenants in Common with ___________
Joint Tenants, with Right of Survivorship, with _
.
Separate Property
Other (corporation, partnership, trust, etc
(please indicate)
(initial)
Section 14 of the Securities Act of 1933, as amended, (the
"Act") provides that any condition, stipulation, or provision
binding any person acquiring any security to waive compliance
with any provision of the Act or of the rules and regulations of
the Securities and Exchange Commission shall be void.
Signatory Page
(Corporation or Partnership)
The undersigned, _________________________________________
(herein "SUBSCRIBER") hereby certifies that the foregoing
information is true and correct to the best of his/her knowledge
and that he/she has read the entire Stock Subscription Agreement
and has full authority to execute this document.
DATED: 19 . TIME:
NAME OF CORPORATION
OR PARTNERSHIP
Signature: BY:
Printed Name:
Title:
Address to which correspondence
should be directed:
Street:
City: State: Zip:
Telephone:
Tax Identification:
WHEN COMPLETED AND SIGNED THIS SUBSCRIPTION AGREEMENT AND THE
SUBSCRIBER'S CHECK SHOULD BE DELIVERED TO:
International Heritage, Inc.
2626 Glenwood Avenue: Suite 200
Raleigh. North Carolina 27608
MAKE CHECK PAYABLE TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
N.A., Escrow Account
Section 14 of the Securities Act of 1933, as amended, (the
"Act") provides that any condition, stipulation, or provision binding
any person acquiring any security to waive compliance with any
provision of the Act or of the rules and regulations of the
Securities and Exchange Commission shall be void.
Signatory Page
(Individual)
The undersigned, _________________________________________
(herein "SUBSCRIBER") hereby certifies that the foregoing information
is true and correct to the best of his/her knowledge and that he/she
has read the entire Stock Subscription Agreement and has full
authority to execute this document.
DATED: 19 . TIME:
Signature: BY:
Printed Name:
Title:
Address to which correspondence
should be directed:
Street:
City: State: Zip:
Telephone:
Tax Identification:
Social Security Number:
WHEN COMPLETED AND SIGNED THIS SUBSCRIPTION AGREEMENT AND THE
SUBSCRIBER'S CHECK SHOULD BE DELIVERED TO:
International Heritage, Inc.
2626 Glenwood Avenue: Suite 200
Raleigh. North Carolina 27608
MAKE CHECK PAYABLE TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
N.A., Escrow Account
ACCEPTANCE BY CORPORATION
International Heritage, Inc., a North Carolina
corporation, having offered SHARES of its Common Stock (par
value $.001 per share) and being authorized to issue the same
to the SUBSCRIBER mentioned in the foregoing Stock
Subscription Agreement (the "SUBSCRIPTION") in the amount
therein set forth, and based upon the representations and
warranties made by the SUBSCRIBER in that SUBSCRIPTION, hereby
acknowledges receipt of contributions in the amount of $10.00
per share for value, accepts the SUBSCRIPTION, and agrees to
issue said SHARES to SUBSCRIBER.
DATED this _____ day of ______ , 19____.
Attest: INTERNATIONAL HERITAGE, INC.
Stanley H. VanEtten, President
THE ESCROW AGENT FOR THE OFFERING IS:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
ALL CHECKS ARE TO BE MADE PAYABLE TO:
CONTINENTAL STOCR TRANSFER & TRUST COMPANY, AS ESCROW AGENT FOR
THE OFFERING BY INTERNATIONAL HERITAGE, INC.
THE UNDERSIGNED ACKNOWLEDGES THAT CONTINENTAL STOCK
TRANSFER AND TRUST COMPANY IS ACTING ONLY AS AN ESCROW AGENT
IN CONNECTION WITH THE OFFERING OF THE SECURITIES DESCRIBED
HERE AND HAS NOT ENDORSED, RECOMMENDED OR GUARANTEED THE
PURCHASE, VALUE OR REPAYMENT OF SUCH SECURITIES.
____________________________________
SUBSCRIBER(S)
Exhibit 1.1
WOOD & FRANCIS, PLLC
ATTORNEYS & COUNSELORS AT LAW
BRENT E. WOOD TWO HANNOVER SQUARE MAILING ADDRESS:
CHARLES T. FRANCIS 434 FAYETVILLLE STREET MALL Post Office Box 164
LORI G. CHRISTIAN SUITE 2300 Raleigh, NC 27602
VICTOR S. LEE RALEIGH, NORTH CAROLINA 27601
TELEPHONE (919) 828-0801
TELECOPY (919) 828-0804
September 3, 1996
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
By: /s/ Charles T. Francis
Charles T. Francis
Exhibit 5.1
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 original 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
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
to, 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
choses in action; to make, draw, accept, endorse, execute, and
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
indebtedness, 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, 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 owns or
in which this Corporation has an interest; to secure contracts,
obligations, 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 property 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 Corporations 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 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 Organize 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.
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 powers and purposes; and
the enumeration of specific powers and purposes shall not be
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 to exclude
another not expressed, although it be of like nature. This
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 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 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 VllI: 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 IX: 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 X: 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 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 XI: 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 XII: 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 XIII: 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
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 original 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
Secretary of State
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)
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
Exhibit 3.1
BYLAWS
OF
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
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.
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.
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.
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 provided in Section 6 of
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. Term of directors. Each initial director shall
hold office until the first shareholders' meeting at which
directors are elected, or until such director's death,
resignation, or removal. The term of every other director
shall expire at the next annual shareholders' meeting
following the director's election or upon such director's
death, resignation, or removal. The term of a director
elected to fill a vacancy expires at the next shareholders'
meeting at which directors are 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 serve until a successor shall be
elected and qualifies or until there is a decrease in the
number of directors.
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 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 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.
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 Directors 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 in one (1) or more books
provided for that purpose; (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 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 the 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 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 shares, 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.
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 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 (including
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.
No bylaw adopted, amended, or repealed by the shareholders shall
be readopted, amended, or repealed by the Board of Directors, un-
less the articles of incorporation or a bylaw adopted by the share-
holders 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 defind therein.
These Bylaws were duly adopted by the Board of Directors, and
are effective this 4th day of May, 1995.
CONSENTED AND ACCEPTED:
BY /s/ Stanley H. Van Etten
Stanley H. Van Etten, Director
BY: /s/ Claude W. Savage
Claude W. Savage, Director
BY: /s/ Larry Smith
Larry Smith, Director
Exhibit 3.2
Number International Heritage Incorporated Shares
Common Stock
This certifies that_____________is the owner of_________
fully paid
and non-assessable. Of par, shares of the Capital Stock of
International Heritage, Inc. a North Carolina corporation,
transferable only on the books of Corporation by the holder hereof
in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed. The Witness Whereof, the said
Corporation has caused this Certificate to be signed by its duly
authorized officers and its Corporate Seal to be herunto affixed
this______day of_____A.D. 19__
Secretary/Treasurer President
EXPLANATION OF ABBREVIATIONS
The following abbreviations, when used in the inscription of
ownership on the face of this certificate, shall be construed as if
they were written in full according to applicable laws or
regulations. Abbreviations, in addition to those appearing below,
may be used.
JT TEN As joint tenants with right of survivorship
and not as tenants in common
TET ENT As tenants by the entireties
UNIT GIF MIN ACT Uniform Gifts to Minors Act
TEN COM As tenants in common
CUST Custodian for
For Value Received_________________hereby sell, asign and transfer
unto _________________shares represented by the within Certificate
and do hereby irrevocably constitute and
appoint_______________Attorney to transfer the said shares on the
books of within named Corporation with full power of substitution in
the premises. Dated______19__
In presence of_____________________
Exhibit 4.1
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 statuts 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 or R.R. Number & Multi-office bulding give Room No.)
(Rue et numero ou numero de la R.R. et,
s'll s'agit d'un edifice a bureaux, numero du bureau)
Toronto M5J2N7
(Name of Municipality or Post Office) (Postal Code/Code Postal
(Nom de la municipalite ou du bureau de poste)
Toronto
(Name of Municipality, Geographical Township)
(Nom de la municipalite du canton)
in the Metropolitan Toronto
(dans lefla) (County, District, Regional Municipality)
(Comte, district, municipalite, regionale)
3. Number (or minimum and maximum number) of
directors is:
Nombre (ou nombres minimal et maximal)
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
Prenom, initiales et nom de famille street & no. or RR.
Municipality and postal code
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
Resident Canadian State Yes or No
Resident Canadian Oui/Non
Robert Stikeman
15 McGlashan Court
North York, Ontario, M5M 4M6
Yes
5. Restrictions, if any, on business the corporation may
aux activites
carry on or on powers the corporation may exercise.
Limites, s'll y a lieu, inposees aux activites commerciales
ou auz pouvoirs de la compagnie.
None
6. The classes and any maximum number of shares that
sll y a lieu,
the corporation is authorized to issue:
Categories et nombre maximal, s'll y a lieu, d'actions
que la compagnie est autorisee a emettre:
The corporation is authorized to issue an unlimited number of
shares of one 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 of shares which
may no issued in series:
Droits, privileges, restrictions et conditions, s'll y a lieu,
rattaches a chaque categorie d'actions et pouvoirs
des administrateurs relatifs a chaque categorie
d'actions qui peut etre emise en serie:
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
50,000 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" preference
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 (if any) are as follows:
L'emission, le transfert ou la propriete d'actions est/n'est
pas restrainte. Le restrictions, s'll y a lieu, sont les
suivantes:
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:
Autres dispostions, s'll y a lieu:
9.01 that the board of directors may from time to time,
in such amounts and on such terms as it deems expedient:
9.01.1 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:
Nom et adrese des fondateurs:
First name, Initials and surname or corporate name
Prenom, initiale et nom de famille ou denomination sociale
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
Adresse personelle au complet, adresse du siege
social ou adresse de l'etablissement principal,
y compris la rue et la numera, la numera de la
R.R., le nom de la municipalite et la code postal
Robert Stikeman 15 McGlashan Court
North York, Ontario
M5M 4M6
These articles are signed in duplicate.
Le presents statuts sont signees en double exemplaire.
Signatures of Incorporators
(Signatures des fondateurs)
/s/ Robert Stikeman
Exhibit 21.1
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 137O, 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.
2. 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
1. 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
to the 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.(1)
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.
(1) As of October 31, 1995, Employee has
received compensation in the amount of $77,905.71
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.
3. In addition to the compensation referenced hereinabove,
and in partial 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
$5,000,000.00; 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 the 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 the 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
Exhibit 10.2
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 25 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, 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
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 throughs
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: /s/ John D. Brothers
Secretary
EMPLOYEE
CORPORATE SEAL /s/ John D. Brothers
/s/ Stanley Van Etten
President and CEO
Exhibit 10.3
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 25 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the "Company"), and Mary Breen (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 con-
tained 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 Represen-
tative Services and Data Processing 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 written consent of the Company's
President or a majority of the Board of Directors.
4. Confidentiality. Employee agrees to treat all matters and infor-
mation 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 Representatives' 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 Companyl 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:
By: /s/ John Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
/s/ Stanley H. Van Etten
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Mary Breen
Exhibit 10.4
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 25 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 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:
By:/s/John Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/ Dwight Hallman
Exhibit 10.5
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 25 day of March, 1996, by and between
International Inc., a North Carolina corporation, (the
"Company"), and Clark Jones (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 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 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:
By:/s/John Brothers
Secretary
INTERNATIONAL HERITAGE INC.
/s/ Stanley H. Van Ellen
President and CEO
EMPLOYEE
/s/ Clark Jones
CORPORATE SEAL
Exhibit 10.6
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTLALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 25 day of March, 1996, by and between
International Heritage, Inc., a North Carolina corporation,
(the"Company"), and Dawn McIntyre (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
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
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 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:
By./s/ John Brothers
Secretary
INTERNATIONAL HERITAGE, INC.
By /s/ Stanley H. Van Etten
President and CEO
CORPORATE SEAL
EMPLOYEE
/s/Dawn McIntyre
Exhibit 10.7
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, is made
and entered into this 29 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 (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 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.
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:
By:/s/John D. Brothers
Secretary
CORPORATE SEAL
INTERNATIONAL HERITAGE, INC.
By: /s/ Stanley H. Van Etten
President and CEO
EMPLOYEE
/s/Stephanie Harris
Exhibit 10.8
BY-LAW NO. 1
A by-law relating generally to the conduct of the business and
affairs of INTERNATIONAL HERITAGE OF CANADA, INC.
(herein called the "Corporation").
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 address" 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;
1.11 "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 re-election. 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
3.01 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, directors may transact business at a meeting 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 been 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, to elect its chairman and to
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, be known as the secretary-treasurer.
5.02 Term, Remuneration and Removal
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 President shall be the chief executive officer of the Corporation.
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 Present
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:
6.08.1 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 be 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 not be shareholders of the Corporation.
6.16 Votes to Govern
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.
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 Corporation.
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 or on behalf of
such registrar and/or transfer agent. The corporate seal of the
Corporation and the signature of one of the signing officers or,
in the case of share certificates which are not valid unless
countersigned by or 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, Inc.
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.
1. 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.
3. 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
Exhibit 21.2
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'
reports dated August 24, 1996, on our audits of the consolidated
financial statements and consolidated balance sheet and pro
forma information of International Heritage, Inc. and Subsidary.
We also consent to the reference to our Firm under the heading
"Experts".
/s/ Eilers, Jones, Brown, & McLeod, CPA, PA
August 5, 1996
Exhibit 23.1