-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PySz8BqdRqc+PmE3nGUTYgNCHSyyXTLxgXF0pfLDBHucewCdjk/6rX4p309V7nHY iWouXDOUww18I0RFkD5eDQ== 0001132714-02-000002.txt : 20020413 0001132714-02-000002.hdr.sgml : 20020413 ACCESSION NUMBER: 0001132714-02-000002 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20020115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US PATRIOT INC CENTRAL INDEX KEY: 0001163680 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 571107699 STATE OF INCORPORATION: SC FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-76746 FILM NUMBER: 2509700 BUSINESS ADDRESS: STREET 1: 5401 FOREST DRIVE CITY: COLUMBIA STATE: SC ZIP: 29206 BUSINESS PHONE: 803-790-5294 MAIL ADDRESS: STREET 1: 5401 FOREST DRIVE CITY: COLUMBIA STATE: SC ZIP: 29206 SB-2 1 uspsb2.txt US PATRIOT FORM SB2 Registration No. [_________] SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- US Patriot, Inc. (Name of Small Business Issuer in its Charter) South Carolina 5699 57-1107699 - --------------------------- ---------------------------- ------------------- (State of Other Jurisdiction (Primary Standard Industrial (IRS Employer of Incorporation or Classification Code Number) Identification No.) Organization) 5401 Forest Drive Columbia, SC 29206 (803) 790-5294 (Address and telephone number of principal executive offices and principal place of business) Phillips N. Dee 5401 Forest Drive Columbia, SC 29206 (803) 790-5294 (Name, address and telephone number of agent for service) Copies to: James G. Dodrill II, Esq. James G. Dodrill II, P.A. 3360 NW 53rd Circle Boca Raton, FL 33496 (561) 862-0529 tel (561) 862-0927 fax ---------------------- Approximate date of proposed sale to the public: As soon as practicable after the effective date of this registration statement. ---------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. (X) 1 If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. ( ) If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ( ). If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ( ). CALCULATION OF REGISTRATION FEE PROPOSED PROPOSED TITLE OF EACH MAXIMUM MAXIMUM AMOUNT CLASS OF AMOUNT TO OFFERING AGGREGATE OF SHARES TO BE BE PRICE PER OFFERING REGISTRATION REGISTERED REGISTERED SHARE PRICE FEE - ------------- ------------ ----------- ----------- ------------ Common Stock, 500,000 $0.50 $250,000 $59.75 $.0001 par value to be sold by the company Common Stock, 1,670,000 $0.50 $835,000 $199.56 $.0001 par value to be sold by selling shareholders TOTAL 2,170,000 $1,085,000 $259.31 - ------------------ Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. ------------------------------------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state in which the offer or sale is not permitted. ii 2 PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 16, 2002 2,170,000 Shares of Common Stock US PATRIOT, INC. The Offering: This is our initial public offering. We are registering a total of 2,170,000 shares of our common stock, of which 500,000 are being offered by the company and 1,670,000 are being offered by selling shareholders. All shares are being registered for sale at a price of $0.50 per share There is no established public market for our common stock and we have arbitrarily determined the offering price. Although we hope to be quoted on the OTC Bulletin Board, our common stock is not currently listed or quoted on any quotation service. There can be no assurance that our common stock will ever be quoted on any quotation service or that any market for our stock will ever develop. Proposed Trading Symbol: OTC Bulletin Board - "USPI" _________________________________ Investing in our stock involves risks. You should carefully consider the Risk Factors beginning on page 7 of this prospectus. We have not authorized anyone else to provide you with different information. The common stock is not being offered in any state where the offer is not permitted. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of those documents. ______________________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. _______________________ The information in this prospectus is not complete and may be changed. None of these securities may be sold until a registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The date of this prospectus is January 16, 2002 3 TABLE OF CONTENTS Page ---- Prospectus Summary 3 The Offering 4 Summary Financial Information 6 Risk Factors 7 Use of Proceeds 11 Determination of Offering Price 11 Dividend Policy 11 Dilution 12 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Business 16 Management 24 Principal Shareholders 26 Selling Shareholders 27 Description of Securities 29 Indemnification 31 Plan of Distribution 32 Legal Matters 33 Experts 33 Where You Can Find More Information 34 Index to Financial Statements F-1 As used in this prospectus, the terms "we," "us," "our," "the company," and "US Patriot" mean US Patriot, Inc., a South Carolina corporation. The term "selling shareholders" means our shareholders who are offering to sell their shares of US Patriot common stock that are being registered through this prospectus. The term "common stock" means our common stock, par value $0.0001 per share and the term "Shares" means the 2,170,000 shares of common stock being offered through this prospectus. 2 4 PROSPECTUS SUMMARY Because this is a summary, it does not contain all of the information that may be important to you. You should read the entire prospectus. You should consider the information set forth under "Risk Factors" and our financial statements and accompanying notes that appear elsewhere in this prospectus. US Patriot, Inc. is a company based in Columbia, South Carolina that sells, distributes, tailors and services military and law enforcement clothing, gear and related equipment. The company currently sells through its one existing retail store in Columbia, and plans to expand into law enforcement, correction and security uniforms and soft goods, through the establishment of a new retail store, also located in Columbia, and then subsequently through franchising. The company will serve as the distributor and wholesale supplier to franchisees for these products. We were incorporated in South Carolina in 2000. For the fiscal year ended October 31, 2001, we achieved revenues of approximately $344,000. Our office is located at 5401 Forest Drive, Columbia, South Carolina 29206 and our telephone number is (803) 790-5294. 3 5 The Offering ------------ Securities Offered 2,170,000 shares of common stock, 500,000 of which are being offered by us and 1,670,000 shares of which are being offered by the selling shareholders; See "Description of Securities" Common Stock Outstanding, before offering 5,335,000 Common Stock Outstanding, after offering (1) 6,170,000 Proposed OTC Bulletin Board Symbol USPI Use of Proceeds We will use the proceeds of any sales of our common stock for general corporate purposes. We will not receive any proceeds from the sale of common stock by our selling shareholders. Of the shares being registered, 335,000 may be acquired by the selling shareholders by exercising warrants to purchase such shares from us at a price of $0.40 per share. We will receive proceeds to the extent that any of the warrants are exercised and intend to use the proceeds from the exercise of any of the warrants for general corporate purposes. See "Use of Proceeds." Dividend Policy We do not intend to pay dividends on our common stock. We plan to retain any earnings for use in the operation of our business and to fund future growth. (1) assumes the exercise of all 335,000 warrants and the sale of all 500,000 shares offered by us. 4 6 Risk Factors The securities offered by this prospectus are highly speculative and very risky. We have described the material risks that we face within this prospectus. Before you buy, consider the risk factors described and the rest of this prospectus. This prospectus also contains forward- looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus. Please refer to "Risks Associated with Forward-looking Statements" on page 10. 5 7 Summary Financial Information The following is a summary of our Financial Statements, which are included elsewhere in this prospectus. You should read the following data together with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus as well as with our Financial Statements and the notes therewith. Year ended October 31, 2001 ---------- Statement of Operations Data: Net Sales $ 343,584 ========= Gross Profit $ 134,298 ========= Net Loss $(19,702) ========= As of October 31, 2001 -------- Balance Sheet Data Cash and cash equivalents $ 3,541 Total current assets $ 83,074 Total assets $ 125,809 Total current liabilities $ 55,836 Total stockholders' equity (deficit) $(16,699) Total liabilities and stockholders' equity (deficit) $ 125,809 6 8 RISK FACTORS The securities offered are highly speculative. You should purchase them only if you can afford to lose your entire investment in us. You should carefully consider the following risk factors, as well as all other information in this prospectus. Certain important factors may affect our actual results and could cause those results to differ significantly from any forward-looking statements made in this prospectus or otherwise made by us or on our behalf. For this purpose, any statements contained in this prospectus that are not statements of historical fact should be considered to be forward-looking statements. Words such as "may," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue" or the negatives of those words, identify forward-looking statements. These statements appear in a number of places in this prospectus and include statements as to our intent, belief or expectations. These forward- looking statements are subject to the risks detailed below or elsewhere in this prospectus, or detailed from time to time in our filings with the Securities and Exchange Commission. See "Risks Associated With Forward-Looking Statements" on page 10. Investors should assume that, even if not specifically stated within this document, if any of the following risks actually materialize, our business, financial condition or results of future operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. We have limited historical information. - --------------------------------------- We have limited historical operating and financial data for potential investors to consider in assessing the advisability of an investment in our company or in evaluating us and our prospects. Investors should consider the risks and difficulties frequently encountered by companies like ours that have recently established a new business enterprise. Our prospects must be considered inlight of the risks, expenses and difficulties frequently encountered by new businesses in a competitive industry. Our ability to sell products, and the level of success, if any, we achieve, is difficult to accurately project at this time. Our management has little experience operating a company such as ours. - ---------------------------------------------------------------------- We were founded in October of 2000 and only entered our market in December of 2000. Management has no proven record of success in establishing and/or running a retail store or in franchising a business concept. We need to establish our US Patriot brand. - ------------------------------------------ Currently the majority of our sales are to military and law enforcement personnel. We believe that our chosen name, US Patriot, is an asset that, once established, will contribute to the growth of our business. Our business strategy includes using the US Patriot name nationwide. Implementing this strategy requires the commitment of financial resources that we do not presently have. 7 9 Our officers and directors are not required to continue as shareholders and may not continue to maintain an equity interest in the company. - ------------------------------------------------------------------- We are registering some shares of our common stock that are currently held by our officers and directors. Additionally, there is no requirement that any of our officers and/or directors retain any of their shares of our common stock. Accordingly, there is no assurance that all or any of our officers and/or directors will continue to maintain an equity interest in the company. We face substantial competition. - -------------------------------- We face competition from various companies in each product line we offer. One of these competitors in particular, Galls, is very well established and has substantial capital resources. All of the companies which we know serve our markets are larger and have greater capital resources than we do. Our outstanding warrants may never be exercised. - ------------------------------------------------ We presently have outstanding warrants to purchase 335,000 shares of our common stock at a price of $0.40 per share. If all of these warrants are exercised we will receive proceeds of $134,000. These funds would be used to expedite execution of our business plan. However, there can be no assurance that any of the holders of our warrants will ever choose to exercise any warrants. In that event we would receive no additional funds from these warrants would likely be forced to seek alternative sources of funding. In the event we are unable to secure additional funding we may be unable to execute our business plan at any set timeframe, or at all. There has never been a market for our common stock. - --------------------------------------------------- Prior to this offering, there has been no public trading market for our common stock and there can be no assurances that a public trading market for the common stock will develop or, if developed, will be sustained. Although we hope to be accepted for quotations on the Over the Counter Bulletin Board, there can be no assurance that a regular trading market will develop for the common stock offered through this prospectus, or, if developed, that it will be maintained. There is no assurance of future dividends being paid. - ----------------------------------------------------- At this time we do not anticipate paying dividends in the future, but instead plan to retain any earnings for use in the operation of our business and to fund future growth. We are under no legal or contractual obligation to declare or to pay dividends, and the timing and amount of any future cash dividends and distributions is at the discretion of our Board of Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity, financial condition and general business conditions. We do not intend to pay dividends. - ---------------------------------- We have never paid any dividends and do not intend to pay dividends in the foreseeable future. It is our present policy to retain all earnings, if any, for use in the development and expansion of our business. 8 10 You may not be able to buy or sell our stock at will and may lose your entire investment. - ---------------------------------------------------------------------- We are not listed on any stock exchange at this time. We hope to become a bulletin board traded company. Company's which trade on the bulletin board are often referred to as "penny stocks" and are subject to various regulations involving certain disclosures to be given to you prior to the purchase of any penny stocks. These disclosures require you to acknowledge you understand the risk associated with buying penny stocks and that you can absorb the entire loss of your investment. Penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stock is volatile and you may not be able to buy or sell the stock when you want. We may require additional financing and would be detrimentally impacted if we required such funding and were unable to raise it. - ----------------------------------------------------------------------- At October 31, 2001, we had current assets of $83,074. To assist us in our cash flow requirements we may determine, depending upon the prevailing stock price of our shares, to seek subscriptions from the sale of our securities to private investors, although there can be no assurance that we will be successful in securing any investment from private investors at terms and conditions satisfactory to us, if at all. Based upon our present liquid resources and our present operating expenses, and if we continue generating revenues from operations at their present level, we believe we will be able to maintain our current operations for a minimum of twelve months. If additional funds are required, but cannot be raised, it will have an adverse effect upon our operations. To the extent that additional funds are obtained by the sale of equity securities, our stockholders may sustain significant dilution. Future sales of our common stock may have a depressive effect upon its price. - ---------------------------------------------------------------------- All 5,335,000 of the currently outstanding shares of common stock were issued at prices lower than the price of the shares of common stock in this offering. With the exception of the 1,335,000 shares of common stock being registered in this Registration Statement for our selling shareholders, these shares are "restricted securities" as that term is defined by Rule 144 of the Securities Act, and in the future, may be sold in compliance with Rule 144 or pursuant to an effective registration statement. Rule 144 allows a person, subject to certain requirements, who has beneficially owned restricted securities for a period of one year to, every three months, sell in brokerage transactions an amount that does not exceed the greater of (1) 1% of the outstanding number of shares of a particular class of such securities or (2) the average weekly trading volume in such securities on all national exchanges and/or reported through the automated quotation system of a registered securities association during the four weeks prior to the filing of a notice of sale by a securities holder. In the future, sales of presently restricted securities may have an adverse effect on the market price of our common stock should a public trading market develop for such shares. Our shares are "Penny Stocks" which are subject to certain restrictions that could adversely affect the liquidity of an investment in us. - ------------------------------------------------------------ Our shares are "penny stocks" within the definition of that term contained in Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, which imposes sales practices and disclosure requirements on certain broker-dealers who engage in certain transactions involving penny stocks. These additional sales practices and disclosure requirements could impede the sale of our securities, including securities purchased herein, in the secondary market. In addition, the liquidity for our securities may be adversely affected, with related adverse effects on the price of our securities. 9 11 Under the penny stock regulations, a broker-dealer selling penny stocks to anyone other than an established customer or "accredited investor" (generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. In addition, unless the broker-dealer or the transaction is otherwise exempt, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the Registered Representative and current quotations for the securities. A broker-dealer is additionally required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks. Risks associated with forward looking statements. - ------------------------------------------------- This prospectus contains certain forward-looking statements regarding management's plans and objectives for future operations, including plans and objectives relating to our planned marketing efforts and future economic performance. The forward-looking statements and associated risks set forth in this prospectus include or relate to: (1) our ability to obtain a meaningful degree of consumer acceptance for our products now and in the future, (2) our ability to market our products at competitive prices now and in the future, (3) our ability to maintain brand-name recognition for our products now and in the future, (4) our ability to maintain an effective distributors network, (5) our success in forecasting demand for our services now and in the future, (6) our ability to maintain pricing and thereby maintain adequate profit margins, (7) our ability to achieve adequate intellectual property protection and (8) our ability to obtain and retain sufficient capital for future operations. 10 12 USE OF PROCEEDS We will use any proceeds raised from the sale of securities we are offering for general corporate purposes. We will not receive any proceeds from the sale of securities being offered by our selling shareholders. We will receive proceeds to the extent that any holder of a warrant decides to exercise such warrant and intend to use the proceeds from the exercise of any of the 335,000 warrants for working capital and for general corporate purposes; however, there can be no assurance that all or any portion of these shares will be sold. If all of the 335,000 warrants are exercised at $0.40, we will receive gross proceeds of $134,000. We expect to incur expenses of approximately $60,000 in connection with the registration of the shares. DETERMINATION OF OFFERING PRICE Prior to this offering, there has been no market for our common stock. The offering price of the shares was arbitrarily determined and bears no relationship to assets, book value, net worth, earnings, actual results of operations, or any other established investment criteria. Among the factors considered in determining the price were our historical sales levels, estimates of our prospects, the background and capital contributions of management, the degree of control which the current shareholders desired to retain, current conditions of the securities markets and other information. DIVIDEND POLICY It is our present policy not to pay cash dividends and to retain future earnings for use in the operations of the business and to fund future growth. Any payment of cash dividends in the future will be dependent upon the amount of funds legally available, our earnings, financial condition, capital requirements and other factors that the Board of Directors may think are relevant. 11 13 DILUTION Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the total number of shares of common stock outstanding. Our net tangible book value at October 31, 2001 was $(16,699), or $(0.003) per share of common stock. On November 20, 2001, the Company issued 335,000 shares for $0.02 per share, increasing the net tangible book value by $6,700, or $.001 per share, to $(0.002) per share. Dilution per share represents the difference between the offering price of $0.50 per share and the net tangible book value per share of common stock, as adjusted, subsequent to this offering. After giving effect to the completion of the offering and after deducting offering expenses estimated to be $60,000, our pro forma net tangible book value will be $180,001, or $0.031 per share assuming the sale of all 500,000 shares being offered by the Company. This represents an immediate increase in pro forma net tangible book value of $0.033 per share to existing stockholders and an immediate dilution of $0.467 per share, or approximately 93.4% of the offering price, to investors purchasing shares of common stock in the offering. Public offering Price per share $ 0.50 Net Tangible Book Value per share before offering $(0.002) Increase Per Share attributable to sale of these shares $ 0.033 Pro-Forma Net Tangible Book Value after offering $ 0.031 Dilution per share to Public Investors $ 0.469 The following table summarizes as of December 31, 2001, the number of shares purchased as a percentage of our total outstanding shares, the aggregate amount paid for such shares, the aggregate amount paid figured as a percentage of the total amount paid, and the average amount paid per share for such shares (see "Certain Transactions" for a description of these transactions). For purposes of this table, the sale to the public of these shares, is assumed to have taken place on December 31, 2001.
Shares Purchased Total Consideration Paid Average Price Number Percent Amount Percent per Share ---------- ---------- --------- --------- ------------- Existing Shareholders 5,335,000 91.43% $ 17,700 6.61% $0.0033 New Investors 500,000 8.57% $ 250,000 93.39% $0.50 --------- ------- --------- ------ ------- Total 5,835,000 100.0% $ 267,700 100.0% $0.0459
The following table sets forth the estimated net tangible book value ("NTBV") per share after the offering (less offering expenses of $60,000) and the dilution to persons purchasing shares based upon various levels of sales of the shares being achieved: Shares outstanding prior to offering: 5,335,000
Total shares offered 500,000 500,000 500,000 500,000 Shares sold 125,000 250,000 375,000 500,000 Public offering price $0.50 $0.50 $0.50 $0.50 Per share increase attributable to new investors $ 0.000 $ 0.012 $ 0.022 $ 0.033 NTBV per share prior to offering $ (0.002) $ (0.002) $ (0.002) $ (0.002) ---------- --------- --------- --------- Post offering pro forma NTBV per share $ (0.002) $ 0.010 $ 0.020 $ 0.031 Dilution to new investors $ 0.50 $ 0.49 $ 0.48 $ 0.469 Percent of dilution of the offering price 100.0% 98.0% 96.0% 93.8%
12 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following is a discussion of our results of operations and our liquidity and capital resources. To the extent that our analysis contains statements that are not of a historical nature, these statements are forward-looking statements, which involve risks and uncertainties. See "Risks Associated With Forward Looking Statements". The following should be read in conjunction with our Financial Statements and the related notes included elsewhere in this prospectus. Overview US Patriot was incorporated in the state of South Carolina in 2000. We currently operate one company store, and intend to establish franchises nationwide supported by our management and distribution company. By partnering with our franchisees in a relationship that will maximize everyone's investment, we are committed to providing our franchisees with a quality, competitively priced range of products for their resale. We believe that growth will occur through our company owned stores as well as franchises. Results and Plan of Operations - ------------------------------ For the year ended October 31, 2001 we achieved $343,584 in net sales. This compares to having achieved no net sales during the period from inception (October 2, 2000) through October 31, 2000. During that prior period we were solely in the development stage and had not opened our store. During the year ended October 31, 2001 we incurred $209,286 as our cost of sales, compared to no cost of sales during the period from inception through October 31, 2000. Selling, general and administrative expenses totaled $151,512 during the year ended October 31, 2001 compared to $3,747 during the period from inception through October 31, 2000. This increase of $147,765 was the result of our store opening on December 26, 2000 and having approximately ten months of operations compared to a period of less than one month and no operations. Our net loss for the year ended October 31, 2001 totaled $19,702, compared to a net loss of $2,997 for the period ended October 31, 2000. This increase of $16,705 was primarily a result of having approximately ten months of operations compared to a period of less than one month. Management believes even if we are unsuccessful in selling any of the shares of common stock offered by this prospectus, we will be able to satisfy our cash requirements for at least the next 12 months. Fully executing our business plan beyond the present stage and opening additional stores, however, will increase our cash needs and monthly burn rate and we will not be able to begin such execution until we have raised substantial additional resources or begun generating greater sales through our existing store. We do not anticipate that there will be any significant changes in the number of employees or expenditures from what is discussed in this prospectus. There can be no assurance, however, that conditions will not change forcing us to make changes to any of our plan of operations or business strategies. 13 15 Liquidity and Capital Resources - ------------------------------- While at this time, our current liabilities are mainly comprised of current maturities of long term obligations, there can be no assurance that current liabilities will continue to be less than our current assets. Our business expansion will require significant capital resources that may be funded through the sale of our common stock, the issuance of notes payable or other debt arrangements that may affect our debt and capital structure. As of October 31, 2001 we have spent a total of $151,512 in selling, general and administrative expenses. For the year ended October 31, 2001 our funds have primarily been generated by sales of products. Additionally, between October 2, 2000 and June 1, 2001 our President loaned us $24,482. These advances were formalized in a note agreement with us on June 1, 2001. The note was issued as a 5-year term loan that does not bear interest and requires two payments of principal per year, beginning on December 31, 2002. On November 30, 2000 we entered into a 5-year installment loan agreement with a financial institution to borrow $100,000 for the purpose of purchasing inventory and equipment. The loan bears interest at the institution's prime rate plus 1%, which was 6% at October 31, 2001. The note is payable in 60 monthly principal and interest payments of $2,156. Inventory, accounts receivable, furniture and fixtures, equipment, and stockholder's real property serve as collateral for the loan. On October 15, 2001 we entered into a one-year installment loan of $12,500 with a financial institution to purchase equipment. The note bears interest at the institution's prime rate plus 1%, which was 6% at October 31, 2001. The note is payable in 12 monthly principal and interest payments of $1,092. The equipment serves as collateral for the loan. We also raised $6,700 through a Regulation D private placement in November of 2001. Management believes even if we are unsuccessful in selling any of the shares of common stock offered by this prospectus, we will be able to satisfy our cash requirements for at least the next 12 months. Funds raised through this offering will allow us to expedite our business plan faster. Forward Looking Statements Certain statements in this report are forward-looking statements within the meaning of the federal securities laws. Although the Company believes that the expectations reflected in its forward- looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, competitive pricing pressures at both the wholesale and retail levels, changes in market demand, changing interest rates, adverse weather conditions that reduce sales at distributors, the risk of assembly and manufacturing plant shutdowns due to storms or other factors, and the impact of marketing and cost- management programs. Recent Accounting Pronouncements In 2000, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101 - Revenue Recognition in Financial Statements. This statement addresses the timing of revenue recognition. Management believes that they have appropriately recognized revenue in accordance with the criteria set forth in the statement. 14 16 In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141- Business Combinations. This FASB addresses accounting and reporting for all business combinations and defines the purchase method as the only acceptable method. This statement is effective for all business combinations initiated after June 30, 2001. In June 2001, the FASB issued SFAS No. 142 - Goodwill and Other Intangible Assets. This SFAS addresses how goodwill and other intangible assets should be accounted for at their acquisition (except for those acquired in a business combination) and after they have been initially recognized in the financial statements. The statement is effective for all fiscal years beginning after December 15, 2001. The impact of this SFAS will not be material to the Company's financial statements. In August 2001, the FASB issued SFAS No. 144 - Accounting for the Impairment or Disposal of Long-Lived Assets. This SFAS supercedes prior pronouncements associated with impairment or disposal of long- lived assets. The SFAS establishes methodologies for assessing impairment of long-lived assets, including assets to be disposed of by sale or by other means. This statement is effective for all fiscal years beginning after December 15, 2001. This SFAS is not expected to have a material impact on the Company's financial position. Additional accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. 15 17 BUSINESS GENERAL US Patriot Inc. is an owner and potential franchiser of retail stores that sells, distributes, tailors and services military and law enforcement related clothing, uniforms, gear and associated soft goods. We currently operate one company store, and intend to establish franchises nationwide supported by our management and distribution company. We intend to partner with our franchisees in a relationship that will maximize everyone's investment. We are committed to providing our franchisees with a quality, competitively priced range of products for their resale. A strategy of serving both the private and public sectors will provide stability for all levels of the organization. INDUSTRY OVERVIEW We believe that the market for military and law enforcement related products offers a tremendous opportunity. It encompasses individuals, private companies and organizations, and a large part of the public sector, at all levels of government. Select, targeted marketing of select product lines towards specific segments is a key to our gaining immediate penetration. We also believe that the market is very favorable for franchise opportunities of this type. Market Segmentation ------------------- The military gear market appeals to a wide spectrum of the population, with little geographic boundaries. While sales of military gear are higher in the South and near major military installations, there are veterans and patriotic Americans in every town of our country. In urban markets military gear can be stylish while in the rural areas it is a part of everyday life due to its functionality and durability. There is even some crossover with law enforcement requiring military type clothing and gear in many applications. Individuals use the clothing, cold weather gear and outdoor equipment for camping and other outdoor recreation. Organizations ranging from the Boy Scouts to church groups to high school ROTC units also use the clothing and equipment. Military videos, books and gifts are popular among numerous demographic sub- groups and income brackets, from history buffs to children. Law enforcement uniform and equipment products are geared to soft goods such as clothing, tactical gear and web gear. Officials and personnel of agencies from the local to state level wear uniforms and accessories daily in the execution of their jobs. Local police, sheriff's departments, state agents, paramedics and others in these professions require large quantities of uniforms and accessories as they are an integral part of their job. Private security companies are a growing industry in this country, and they are becoming more professional and sophisticated in their uniforms and equipment. As the need for security grows, and more companies and organizations are sub-contracting this task, numerous private firms have been founded. They are a growing market and represent one of our targets. Miscellaneous uniforms are required for other functions, including restaurant and hospital functions. Depending on a local franchisees market, these lines will be available to them to target these sectors also. Smaller demand uniforms are also available for nationwide organizations such as the Civil Air Patrol, Coast Guard Auxiliary and other official functions. 16 18 Industry Analysis ----------------- The industry for retail and end user sales of both military and law enforcement type equipment is highly fragmented and locally oriented. We are offering what we believe to be a unique franchise concept and also a unique retail concept designed with the local partners' flexibility and effectiveness in consideration. We have the opportunity to build our company through franchisees, or alternatively, particularly in the law enforcement and uniform market, to grow the company owned store division through acquisitions. Select acquisitions could potentially immediately bolster our revenue and allow us to take advantage of economies of scale as a larger organization. By offering the two revenue streams under one roof with the franchises, we give the franchisees a broader base from which to operate with two related but distinct markets. This allows the franchisees to enter smaller markets that would support each revenue stream independently. On the uniform side of the business there is generally one uniform supplier for a particular region and our format would allow the franchisee to compete with the existing outlet and still fall back on the complementing revenue stream for stability. Management believes that they would also be fairly well protected or positioned in the smaller markets, since there would be less opportunity for a third player in small and mid-size markets. In larger markets the two revenue streams could stand independently and may in fact need to in select situations. This will be evaluated in the market studies undertaken for franchisees in these areas. Additionally, some markets would require the establishment of more than one US Patriot location. Franchisees would have a protected radius and market and existing franchisees will have be granted a right of first refusal to open new locations in fragmented markets. In some lucrative trade areas franchisees may be required to open more than one location to ensure complete market coverage and to also limit the markets appeal to local, upstart competitors. COMPANY OVERVIEW We were incorporated in South Carolina in October 2000 and are based in Columbia, South Carolina. We sell, distribute, tailor and service military and law enforcement clothing, gear and related equipment. We currently sell through our one existing retail store in Columbia, and plan to expand into law enforcement, correction and security uniforms and soft goods through the establishment of a new retail store, also located in Columbia, and then subsequently through franchising. We will serve as the distributor and wholesale supplier to franchisees for these products. Our sole currently operating store is located in Columbia, near Fort Jackson, one of the United States Army's largest training posts. This store sells new military equipment, clothing and gear to soldiers, law enforcement, security personnel, Emergency Medical Technicians (EMT), hunters and other civilians. Established in December 2000, this store achieved net sales of $343,584 during the year ended October 31, 2001. In the future, we intend to establish Patriot Uniform Company as a wholly owned subsidiary of ours, providing uniform services to local and state level law enforcement, corrections, fire, security, EMTs, and private organizations. Because of its proximity to Fort Jackson, this location will also carry Army dress and formal uniforms. All required uniforms, boots and soft goods will be stocked and alterations will also be available. Professionals in these fields are provided either a set number of uniforms annually, or are given a 17 19 clothing allowance by their sponsoring organizations. Sales opportunities are through the public bid process and through individual sales. Marketing is easily targeted at these professional fields. Currently one supplier, located in Columbia, dominates the South Carolina market. While they are established and well known, we believe that we are better positioned to provide a higher level of service. Coinciding with the establishment of Patriot Uniform Company will be the beginning of our franchise division. The appearance and success of our current Columbia store has generated numerous inquiries regarding franchise opportunities. Our franchisees will receive a license to operate a store in their respective territories combining our two revenue streams in one location. Their stores will sell new military related clothing and gear and also professional uniforms. The combined venues will provide a related, though distinctly separate and substantial sales base for the success of the franchises. Franchisees will benefit from the market research and sales data generated from the company owned stores. For their initial fee the franchises will receive a turnkey store set-up, including retail point of sales system, market study, site selection, store layout, management procedures and ongoing management support. A key piece of our strategy is to remain on the same team as the franchisees, both working towards maximum profitability together. In this context, the parent company receives no percentage royalty payment or commission from franchisees. The profits they earn are theirs. Our primary source of income as the franchiser is through the wholesale distribution of merchandise to the franchisees. We will warehouse adequate inventory to supply the franchisees their inventory, an inventory that can be held at lower levels for greater cost effectiveness since the parent company will maintain inventory and push it forward to the stores as needed. By warehousing it ourselves we control the distribution for greater efficiency. We also assume the responsibility to supply the franchisees at competitive prices. As we grow we will increase our buying power and lower our product acquisition costs, thus increasing our revenue stream while maintaining competitive pricing for the franchisees. Objectives ---------- Our main objectives are as follows: 1. To develop and create a national chain of franchisees under the name US Patriot, selling military related clothing, gear and gifts in conjunction with law enforcement and other related professional uniforms. 2. To create the systems and foundation of a management and distribution company to support selling franchises in 2002. 3. To establish Patriot Uniform Company in a retail location serving the Columbia, South Carolina region in 2002. 4. To forge strategic alliances to guarantee adequate, quality sources of inventory items. Keys to success --------------- We believe that the keys to success for US Patriot, Inc. are: 18 20 1. Successful development of a franchise sales and support system to maximize returns for all parties involved. 2. Targeted marketing efforts with our franchisees to ensure immediate market penetration. 3. The establishments of strategic public and private sector alliances to expand our product lines ensure product quality and maximize sales. 4. The successful management of the company's two retail stores for product testing and development, cash flow and market research. 5. The establishment of an Internet presence, coordinated with specific targeted catalogs and mailings to solidify the companies market presence and reputation. Products and Services We provide military and law enforcement clothing, gear, equipment and related soft goods for retail sale through our company stores, and intend to provide these in the future through franchises and bid opportunities. Products are acquired and warehoused in Columbia, SC for distribution. Military gear can be tailored for the franchisees in regard to their geographic location and law enforcement related uniforms are selected based on local preferences. By serving a diverse client base our company is able to make a range of products available through corporate or the franchisees. As we grow we will consider producing some items internally, including screen-printing and embroidery. Products and Service Description Through our store in the Columbia, SC market, we sell military and related equipment, clothing and uniforms with a direct focus. Located outside of Fort Jackson, SC, a major Army training post, the inventory is geared to Army needs. Based on local demographics and market characteristics, the franchisees inventory would be customized for their maximum profitability. The inventory falls into two distinct classes as follows: 1. Military Gear: This includes military clothing, boots, gifts and other related products. We plan for our stores to be substitutes for the traditional Army-Navy stores that sold used surplus items. All of our products are new. From military cold weather gear to flashlights, the quality and standard of military gear is tested and known throughout the country. This product line will be one of the two major income streams for the franchisees. 2. Law Enforcement, Corrections, Security and other related professional uniforms: We are introducing this product line in the Columbia, SC market. While this market will sustain these separate, though related, product lines under two roofs the plan is for franchisees to put both lines in one location. We will offer the uniformed professional a single source for a variety of uniforms and accessories, from hats to boots to badges. While a particular geographic area may use a certain type of uniform, the design and production of a corporate catalog would allow us to show them the different uniform options available. 19 21 STRATEGY General ------- Our strategy is to make our new military and law enforcement products available nationally through a network of franchise or company owned outlets. By carrying two separate though related product lines, we and our franchisees will have a broader foundation for sales. We will warehouse and distribute products to the franchisees with product selection based on their unique market situations. We will also own and operate two stores in the Columbia, SC market, one for military clothing and equipment and the other for law enforcement and related uniforms and gear. By supporting our stores and those of the franchisees with product we believe that we will gain volume buying power and national exposure. This will in turn support our planned Internet presence and catalog sales. In time we will seek to gain control of production of certain goods and products. Marketing Strategy ------------------ Our marketing strategy is geared towards establishing regional franchises first then expanding outward from there. While we already have several prospective franchisees in our current region, we will identify specific markets for initial franchise locations then begin our search through shows, business brokers and local advertising. This approach should give us locations that are in closer proximity and better known in order to refine our strategy and establish our logistic support. Product marketing varies on the inventory items and the markets served. Law Enforcement and related professions will be targeted with direct mail, target catalog and specific promotions. Military clothing and gear apply to military, veterans and civilians. Marketing guidance for franchisees will be geared to their markets to include advertising, special promotions and other events. As we find effective advertising for the company stores, this information, as well as other data generated from company stores, will be made available for the franchisees benefit. The other marketing strategy is focused on Internet and target catalog sales. This tool will be used for both retail sales and assisting wholesale accounts with their sale efforts adding another dimension to our efforts to maximize franchisee sales and profits. Pricing Strategy ---------------- Our pricing strategy for the franchisee's fees is dictated by several factors. It is higher than many due to our unique structure where we act as the wholesaler to the franchisees in lieu of royalties from their sales. With a proposed franchise fee of $40,000 we can devote considerable resources to the franchisee's start-up efforts, as well as generate cash flow for the company to support warehousing operations. Pricing of the wholesale inventory items to the franchisees is dependent on market rates for similar products from other manufacturers and wholesalers. This is a major part of our commitment to the franchisees, to supply them their inventory at market pricing. These require us to better source and negotiate supplier agreements to make our profit at the wholesale level. An additional benefit of this is that the cost of goods sold for the company owned stores will be lowered correspondingly. 20 22 Sales Strategy -------------- The sales strategy for franchise development for US Patriot revolves around identifying target markets and seeking franchisees directly through advertisement, shows and other local efforts. Included will be providing information to the various military services retirement and separations offices, which assist exiting personnel with career selection and development. Our personnel plan includes hiring an experienced sales manager to serve as Director of Business Development. This individual will be responsible for closing sales of franchises. Product sales will be through our inside sales department. We will be able to execute wholesale sales through the Internet, fax or telephone for franchisees and others. Other retailers that wish to carry our products can purchase from us if they are located outside the respective trade areas of our franchisees. SUPPLIERS We are dedicated to committing significant resources to thoroughly research and source our products. As a part of our commitment to our franchisees to provide their supplies at competitive, market rates, we must continually search out new suppliers and products that will maintain our reputation for quality, but also for allowing greater wholesale margins. It will be up to us to negotiate deals with major suppliers to ensure adequate supply, quality of workmanship and also favorable pricing to maximize internal wholesale profits. As we grow, we believe that new opportunities for expansion and product development will surface. We will maintain a vigil for these opportunities at the right times to bring production under our control of certain items and products. A prime example here is screen- printing and embroidery. As our need for these types of products increases we believe we will be able to enter this market in a way that also allows us to contract out excess capacity. Our inventory comes from a variety of manufacturers and distributors across the country. We have made a commitment to carry high quality goods and products and a part of this is emphasizing "Made in the USA". While not an absolute, this is a guidance policy for the company. When selling military clothing and gear, we offer two price points for our franchisees and guide them accordingly for their particular market. The first, higher price point is for products carrying the military National Stock Number, made in the USA, and with exceptional quality assurances. The second, lower price point is for similar products produced overseas. In some markets the franchisee may be best served carrying the lower priced goods in their store. We anticipate hiring one full time purchasing agent for the company to work with these vendors within the next twelve months. COMPETITION Our management believes that we offer a unique concept when examined as a total package. In many markets the older Army-Navy surplus stores are folding. Surplus is getting more difficult to acquire and the age and image of the older stores is one of a dark, dusty cavern type store. Our stores bring new military type clothing and gear to these markets, in a bright, modern setting. For the uniform products, one major uniform supplier, usually with minimal competition, generally dominates each region. This has traditionally been a limited market business and has had a high cost of entry. With the growth in professional law enforcement and related fields, this market has experienced rapid growth. Public bid opportunities combined with personal spending in these fields make it a viable product line. With the establishment of a corporate warehouse and inventory, our franchisees would be able to minimize their investment while having the product lines at their easy access. 21 23 We know of no companies currently offering franchise opportunities for these types of products. Neither principle product line nor industry has seen significant consolidation. This opens the door for our franchisees to enter these local markets and succeed. Our company owned stores have limited competition in their market and even though there is limited local competition, our concept, approach and service has distinguished our stores for immediate market penetration. There are two catalog companies with several retail stores with whom we would compete in the mail order business and in the local trade areas in which they have stores. US Cavalry has a tremendous catalog and Internet presence with two retail locations near major Army installations. Additionally, Ranger Joe's of Columbus, GA has two retail stores in Georgia and a catalog geared towards field operations equipment. Their customer service is good and they have a loyal following in the Army community. Both of these entities, have substantially greater revenue, financial and other resources than we do. Additionally, there are several catalog companies geared towards outdoorsmen and hunters with whom we overlap to a certain extent for some of the military related clothing and gear. Additionally there is Gall's, a law enforcement catalog. On the Internet there are literally hundreds of virtual storefronts, though these are not major players and their numbers are decreasing as the Internet retailer shakeout is currently underway. In the wholesale arena there are several companies in the country who sell military and law enforcement related equipment. We would be competing with them as we wholesale to retailers outside of our franchisees' trade areas though our primary focus is to supply our chain of franchisees. LEGAL PROCEEDINGS As of the date of this prospectus, we are not a party to any legal proceedings. 22 24 EMPLOYEES As of the date of this prospectus we have 3 full-time employees, including 2 in sales and 1 in administration. We presently have no labor union contract between us and any union and we do not anticipate unionization of our personnel in the foreseeable future. From time to time, we hire part time employees, ranging from a minimum of 4 to a maximum of 12. DESCRIPTION OF PROPERTY Our principal facility is a 3,500 square foot facility located at 5401 Forest Drive, Columbia South Carolina. We lease this facility through September 30, 2004 at $3,175 per month. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND/FINANCIAL DISCLOSURE. We have had no disagreements with our accountants on accounting and financial disclosure. 23 25 MANAGEMENT Directors and Executive Officers Our directors, executive officers and key employees are as follows: Name: Age Position Director since - ---------------------------------------------------------------------------- Phillips N. Dee 36 President and Chairman 2000 Scott Massey 31 Director 2000 Phil Dee, President and Chairman of the Board of Directors. Mr. Dee has served as our President and Chairman since inception and has spent the past ten years creating new business ventures for others and himself. As the Market Research Analyst for a northern real estate investment group he gained valuable experience in investment strategies. Additionally, he worked as Corporate Marketing Director for Crowder Construction Company of Charlotte, NC, directing the marketing efforts for five divisions in three states. He gained valuable leadership development while serving as an Armor Officer with the United States Army. He has also built several successful small businesses, both retail and manufacturing/distribution. From 1995 through 1998 he served as an Army officer. Upon leaving the active Army, from October 1998 through October 2000, Mr. Dee founded and managed Big Sky Ice Company in Charlotte, NC. In October of 2000 he sold Big Sky Ice and founded US Patriot Inc. He holds a MA in Economic Geography and BA in Geography from University of North Carolina. Scott Massey, Director. Mr. Massey is a key strategist in guiding the growth of the company. From 1992 to 1998 he was an officer with the United States Army, commissioned into the Armor Corps and serving as a combat unit commander in both Europe and the United States. Upon leaving the active Army in 1998 he worked with MITEK, a subsidiary of Johnson & Johnson, as a regional sales representative. After spending October 2000 until October 2001 with Morgan Stanley as a investment banker, he again works with MITEK. He holds a BA in History from The Citadel. Directors' Remuneration Our directors are presently not compensated for serving on the board of directors. Executive Compensation Employment Agreements We have not entered into any employment agreements. 24 26 Summary Compensation Table The following table sets forth the total compensation paid to or accrued for the period from inception through October 31, 2001 to our President. Annual Compensation
Other Restricted Securities All Name and Inception Annual Stock Underlying LTIP Other Principal Position through Salary Bonus Compensation Awards Options Payouts Compensation - ------------------ --------- ------ ----- ------------ ---------- ---------- ------- ------------ Phillips N. Dee, October $23,500 - - - - - - President 31, 2001
Stock Option Grants in the past fiscal year We have not issued any grants of stock options in the past fiscal year. 25 27 PRINCIPAL SHAREHOLDERS The following table sets forth information regarding beneficial ownership of our common stock as of the date of this prospectus and as adjusted to reflect the sale of all 2,170,000 shares which may potentially be sold in connection with this registration statement, by (i) those shareholders known to be the beneficial owners of more than five percent of the voting power of our outstanding capital stock, (ii) each director, and (iii) all executive officers and directors as a group: Number of Percent Percent Name and Address of Shares Before After Beneficial Owner Owned Offering Offering - ---------------- ----- -------- ------------- Phillips N. Dee 2,000,000 37.49% 28.36% C/O US Patriot, Inc. Scott Massey 2,000,000 37.49% 28.36% C/O US Patriot Jim Dodrill 1,000,000 18.74% 8.10% 3360 NW 53rd Circle Boca Raton, FL 33496 2,000,000 All Directors and 4,000,000 74.98% 56.72% Officers as a Group (2 Persons) _____________ * Less than 1% Assumes the exercise of all warrants and the sale of all shares offered hereunder. 26 28 SELLING SHAREHOLDERS The following table sets forth certain information with respect to the ownership of our common stock by selling shareholders as of January 14, 2002. Unless otherwise indicated, none of the selling shareholders has or had a position, office or other material relationship with us within the past three years.
Ownership of Shares Number of Ownership of shares of of Common Stock Prior to Shares Common Stock After Offering Offered Offering -------- ------- -------- selling shareholder Shares Percentage Hereby Shares Percentage ---------- ---------- ------ ------ ---------- Phillips N. Dee 2,000,000 37.49 250,000 1,750,000 28.36% Scott Massey 2,000,000 37.49 250,000 1,750,000 28.36% Jim Dodrill 1,000,000 18.74 500,000 500,000 8.10% William Bauer 50,000 * 50,000 0 * Peggy Bauer 50,000 * 50,000 0 * Greggory Colegrove 50,000 * 50,000 0 * Jeffrey Colegrove 50,000 * 50,000 0 * James Foxworthy 50,000 * 50,000 0 * Melissa Foxworthy 50,000 * 50,000 0 * Judith Cooper 25,000 * 25,000 0 * Larry Higgins 25,000 * 25,000 0 * D.T. Kimble 25,000 * 25,000 0 * Kay Kimble 25,000 * 25,000 0 * Ania Kwalik 25,000 * 25,000 0 * Albert Massey 25,000 * 25,000 0 * Diane Massey 25,000 * 25,000 0 * Richard Weinacker 25,000 * 25,000 0 * Bruce West 15,000 * 15,000 0 * Pamela West 15,000 * 15,000 0 * Pete Baldwin 10,000 * 10,000 0 * Sandra Dee 10,000 * 10,000 0 * Gordon English 10,000 * 10,000 0 * David Gable 10,000 * 10,000 0 * Harry Hunter 10,000 * 10,000 0 * Brenda Jellicorse 10,000 * 10,000 0 * Steve Jellicorse 10,000 * 10,000 0 * Jean Jones 10,000 * 10,000 0 * Mike Jones 10,000 * 10,000 0 * Bert Kemp 10,000 * 10,000 0 * Kristy Massey 10,000 * 10,000 0 * Angela Post 10,000 * 10,000 0 * James Post 10,000 * 10,000 0 * Jim Winders 10,000 * 10,000 0 * Total 5,670,000 1,670,000 4,000,000 _______________________ * Indicates less than 1% Assumes that all warrants are exercised and all shares are sold pursuant to this offering and that no other shares of common stock are acquired or disposed of by the selling shareholders prior to the termination of this offering. Because the selling shareholders may sell all, some or none of their shares or may acquire or dispose of other shares of common stock, no reliable estimate can be made of the aggregate number of shares that will be sold pursuant to this offering or the number or percentage of shares of common stock that each shareholder will own upon completion of this offering. 27 29 Mr. Dee is our President and Chairman of the Board of Directors. Mr. Massey is currently one of our directors. Includes warrants to purchase 25,000 shares of common stock that may be acquired at an exercise price of $0.40 per share commencing 90 days following the date of this prospectus. Includes warrants to purchase 12,500 shares of common stock that may be acquired at an exercise price of $0.40 per share commencing 90 days following the date of this prospectus. Includes warrants to purchase 7,500 shares of common stock that may be acquired at an exercise price of $0.40 per share commencing 90 days following the date of this prospectus. Includes warrants to purchase 5,000 shares of common stock that may be acquired at an exercise price of $0.40 per share commencing 90 days following the date of this prospectus.
28 30 DESCRIPTION OF SECURITIES General Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock, par value $.0001 per share. As of the date of this prospectus, 5,335,000 shares of common stock and no shares of preferred stock were outstanding. We presently act as the transfer agent for our common stock but anticipate that in the future we will use Computershare Trust Company of Denver, CO as our transfer agent. Common Stock We are authorized to issue 100,000,000 shares of our common stock, $0.0001 par value, of which 5,335,000 shares are issued and outstanding as of the date of this prospectus. Except as provided by law or our certificate of incorporation with respect to voting by class or series, holders of common stock are entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Subject to any prior rights to receive dividends to which the holders of shares of any series of the preferred stock may be entitled, the holders of shares of common stock will be entitled to receive dividends, if and when declared payable from time to time by the board of directors, from funds legally available for payment of dividends. Upon our liquidation or dissolution, holders of shares of common stock will be entitled to share proportionally in all assets available for distribution to such holders. Preferred Stock The board of directors has the authority, without further action by our shareholders, to issue up to 20,000,000 shares of preferred stock, par value $.0001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designation of such series. No shares of preferred stock are currently issued and outstanding. The issuance of preferred stock could adversely affect the voting power of holders of common stock and could have the effect of delaying, deferring or preventing a change of our control. Warrants Certain shares of common stock offered by US Patriot on November 20, 2001 had warrants attached. We presently have 335,000 warrants outstanding. Each warrant entitles the holder thereof to purchase one share of common stock at a price per share of $0.40 beginning 90 days following the effectiveness of this registration statement and ending on November 20, 2004. Each unexercised warrant is redeemable by us at a redemption price of $0.001 per warrant at any time, upon 30 days written notice to holders thereof, if (a) our common stock is traded on the Over the Counter Bulletin Board and (b) the Market Price (defined as the average closing bid price for twenty (20) consecutive trading days) equals or exceed 120% of the exercise price. 29 31 Pursuant to applicable federal and state securities laws, in the event a current prospectus is not available, the warrant holders may be precluded from exercising the warrants and we would be precluded from redeeming the warrants. There can be no assurance that we will not be prevented by financial or other considerations from maintaining a current prospectus. Any warrant holder who does not exercise prior to the redemption date, as set forth in our notice of redemption, will forfeit the right to purchase the common stock underlying the warrants, and after the redemption date or upon conclusion of the exercise period, any outstanding warrants will become void and be of no further force or effect, unless extended by our Board of Directors. The number of shares of common stock that may be purchased with the warrants is subject to adjustment upon the occurrence of certain events, including a dividend distribution to our shareholders or a subdivision, combination or reclassification or our outstanding shares of common stock. The warrants do not confer upon holders any voting or any other rights as our shareholders. We may at any time, and from time to time, extend the exercise period of the warrants, provided that written notice of such extension is given to the warrant holders prior to the expiration date then in effect. Also, we may reduce the exercise price of the warrants for limited periods or through the end of the exercise period if deemed appropriate by the Board of Directors. Any extension of the term and/or reduction of the exercise price of the warrants will be subject to compliance with Rule 13e-4 under the Exchange Act including the filing of a Schedule 14E-4. Notice of any extension of the exercise period and/or reduction of the exercise price will be given to the warrant holders. We do not presently contemplate any extension of the exercise period or any reduction in the exercise price of the warrants. The warrants are also subject to price adjustment upon the occurrence of certain events including subdivisions or combinations of our common stock. Market for Common Equity and Related Stockholder Matters There is no established public market for our common stock and we have arbitrarily determined the offering price. Although we hope to be quoted on the OTC Bulletin Board, our common stock is not currently listed or quoted on any quotation service. There can be no assurance that our common stock will ever be quoted on any quotation service or that any market for our stock will ever develop or, if developed, will be sustained. As of January 14, 2002, there were 33 shareholders of record of our common stock and a total of 5,335,000 shares outstanding. 30 32 INDEMNIFICATION Article 11 of our Articles of Incorporation includes certain provisions permitted by the South Caronlina Revised Statutes, which provides for indemnification of directors and officers against certain liabilities. Pursuant to our Articles of Incorporation, our officers and directors are indemnified, to the fullest extent available under South Caronlina Law, against expenses actually and reasonably incurred in connection with threatened, pending or completed proceedings, whether civil, criminal or administrative, to which an officer or director is, was or is threatened to be made a party by reason of the fact that he or she is or was one of our officers, directors, employees or agents. We may advance expenses in connection with defending any such proceeding, provided the indemnitee undertakes to repay any such amounts if it is later determined that he or she was not entitled to be indemnified by us. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable. 31 33 PLAN OF DISTRIBUTION The selling stockholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are then traded or in private transactions at a price of $0.50 per share. The selling stockholders may use any one or more of the following methods when selling shares: * ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; * block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; * purchases by a broker-dealer as principal and resale by the broker-dealer for its account; * an exchange distribution in accordance with the rules of the applicable exchange; * privately negotiated transactions; * a combination of any such methods of sale; and * any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in such state or an exemption from such registration or qualification requirement is available and complied with. The selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. 32 34 We will pay all of the expenses incident to the registration, offering and sale of the shares to the public, but will not pay commissions and discounts, if any, of underwriters, broker-dealers or agents, or counsel fees or other expenses of the selling shareholders. We have also agreed to indemnify the selling shareholders and related persons against specified liabilities, including liabilities under the Securities Act. We have advised the selling shareholders that while they are engaged in a distribution of the shares included in this prospectus they are required to comply with Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the selling shareholders, any affiliated purchasers, and any broker-dealer or other person who participates in such distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the shares offered hereby in this prospectus. LEGAL MATTERS The Law Office of James G. Dodrill II, PA of Boca Raton, Florida will give an opinion for us regarding the validity of the common stock offered in this prospectus. EXPERTS The financial statements as of and for the year ended October 31, 2001 and for the period from inception through October 31, 2000 included in this prospectus have been so included in reliance on the report of Elliott Davis, LLP independent accountants, given on the authority of said firm as certified public accountants. 33 35 WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement under the Securities Act with respect to the securities offered hereby with the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. This prospectus, which is a part of the registration statement, does not contain all of the information contained in the registration statement and the exhibits and schedules thereto, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to Cycle Country Accessories Corp. and the securities offered hereby, reference is made to the registration statement, including all exhibits and schedules thereto, which may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N. W., Room 1024, Washington, D. C. 20549, and at its Regional Offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 at prescribed rates during regular business hours. You may obtain information on the operation of the public reference facilities by calling the Commission at 1-800-SEC-0330. Also, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commssion at http://www.sec.gov. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or document filed as an exhibit to the registration statement, each such statement being qualified in its entirety by such reference. We will provide, without charge upon oral or written request of any person, a copy of any information incorporated by reference herein. Such request should be directed to us at US Patriot, Inc. 5401 Forest Drive, Columbia South Carolina 29206 Attention: Phillips N. Dee, President. Following the effectiveness of this registration statement, we will file reports and other information with the Commission. All of such reports and other information may be inspected and copied at the Commission's public reference facilities described above. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. The address of such site is http://www.sec.gov. In addition, we intend to make available to our shareholders annual reports, including audited financial statements, unaudited quarterly reports and such other reports as we may determine. 34 36 US PATRIOT, INC. REPORT ON FINANCIAL STATEMENTS FOR THE YEAR ENDED OCTOBER 31, 2001 AND THE PERIOD FROM OCTOBER 2, 2000 (INCEPTION) TO OCTOBER 31, 2000 F-1 37 US PATRIOT, INC. COLUMBIA, SOUTH CAROLINA CONTENTS -------- PAGE ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3 FINANCIAL STATEMENTS Balance sheet F-4 Statements of operations F-5 Statements of changes in stockholders' equity (deficit) F-6 Statements of cash flows F-7 NOTES TO FINANCIAL STATEMENTS F-8 - F-12 F-2 38 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Stockholders US Patriot, Inc. Columbia, South Carolina We have audited the accompanying balance sheet of US Patriot, Inc. as of October 31, 2001 and the related statements of operations, changes in stockholders' equity and cash flows for the year ended October 31, 2001 and the period from October 2, 2000 (inception) to October 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in all material respects, the financial position of US Patriot, Inc. as of October 31, 2001 and the results of its operations, changes in stockholders' equity and its cash flows for the year ended October 31, 2001 and the period from October 2, 2000 (inception) to October 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Elliott Davis, LLP November 27, 2001 Columbia, South Carolina F-3 39 US PATRIOT, INC. BALANCE SHEET OCTOBER 31, 2001 ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 3,541 Accounts receivable 930 Deferred tax asset 879 Inventories 77,724 ---------- Total current assets 83,074 ---------- PROPERTY AND EQUIPMENT- Net of accumulated depreciation 33,882 ---------- OTHER ASSETS Accrued interest 334 Deferred tax asset 4,830 Building and utility deposits 3,689 ---------- $ 125,809 ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Current portion of notes payable $ 30,133 Current portion of capital lease obligation 602 Current portion of related party note payable 4,896 Accounts payable 4,599 Accrued expenses 13,312 Sales tax payable 2,294 ---------- Total current liabilities 55,836 ---------- LONG-TERM DEBT Notes payable 66,088 Capital lease obligation 998 Related party note payable 19,586 ---------- Total long-term debt 86,672 ---------- COMMITMENTS AND CONTINGENCIES (NOTE 8) STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock - $.0001 par value; 20,000,000 shares authorized; none issued - Common stock - $.0001 par value; 100,000,000 shares authorized; 5,000,000 shares issued 500 Additional paid-in-capital 10,500 Stock subscription receivable (5,000) Accumulated deficit (22,699) ---------- Total stockholders' equity (deficit) (16,699) ---------- $ 125,809 ========== See notes to financial statements which are an integral part of this statement. F-4 40 US PATRIOT, INC. STATEMENTS OF OPERATIONS October 2, For the 2000 year ended (inception) to October 31, October 31, 2001 2000 ----------- ------------- NET SALES $ 343,584 $ - COST OF SALES 209,286 - ----------- ------------ Gross profit 134,298 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 151,512 3,747 ----------- ------------ Loss from operations (17,214) (3,747) INTEREST EXPENSE (7,447) - ----------- ------------ Net loss before income tax benefit (24,661) (3,747) INCOME TAX BENEFIT 4,959 750 ----------- ------------ Net loss $ (19,702) $ (2,997) =========== ============ LOSS PER COMMON SHARE $ - $ - =========== ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,333,333 1,000,000 =========== ============ See notes to financial statements which are an integral part of this statement. F-5 41 US PATRIOT, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) For the year ended October 31, 2001 and the period from October 2, 2000 (inception) to October 31, 2000 Total stock- Additional Stock Accumu- holder's Preferred stock Common stock paid-in subscriptions lated equity Shares Dollars Shares Dollars capital receivable deficit (deficit) ------ ------- ------ ------- ---------- ------------- -------- --------- ISSUANCE OF COMMON STOCK, OCTOBER 2, 2000 - $- 1,000,000 $100 $ 900 $(1,000) $ - $ - Net loss - - - - - - (2,997) (2,997) ------ ------- ------ ------- ---------- ------------- --------- --------- BALANCE, OCTOBER 31, 2000 - - 1,000,000 100 900 (1,000) (2,997) (2,997) Issuance of common stock, January 2, 2001 - - 4,000,000 400 9,600 (7,500) - 2,500 Stock subscriptions paid, June 1, 2001 - - - - - 3,500 - 3,500 Net loss - - - - - - (19,702) (19,702) ------ ------- --------- ------- ---------- ------------ --------- --------- BALANCE, OCTOBER 31, 2001 - $- 5,000,000 $500 $10,500 $(5,000) $(22,699) $(16,699) ====== ======= ========= ====== =========== =========== ========= =========
See notes to financial statements which are an integral part of this statement. F-6 42 US PATRIOT, INC. STATEMENTS OF CASH FLOWS October 2, For the 2000 year ended (inception) October 31, to October 2001 31, 2000 ----------- ----------- OPERATING ACTIVITIES Net loss $ (19,702) $ (2,997) Adjustments to reconcile net loss to net cash used for operating activities Depreciation 5,332 - Deferred taxes (4,959) (750) Professional fees provided in exchange for stock 2,500 - Changes in deferred and accrued amounts Accounts receivable (930) - Inventories (77,724) - Building and utility deposits 287 (3,976) Accrued interest (334) - Accounts payable 4,599 - Accrued expenses 10,402 2,910 Sales tax payable 2,294 - ---------- ----------- Net cash used for operating activities (78,235) (4,813) ---------- ----------- INVESTING ACTIVITIES Purchase of property and equipment (33,792) (3,822) ---------- ----------- Net cash used for investing activities (33,792) (3,822) ---------- ----------- FINANCING ACTIVITIES Payment of stock subscription 3,500 - Proceeds from related party note payable 15,847 8,635 Proceeds from notes payable 112,500 - Principal payments on notes payable (16,279) - ---------- ----------- Net cash provided by financing activities 115,568 8,635 ---------- ----------- Increase in cash and cash equivalents 3,541 - CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD - - ---------- ----------- END OF PERIOD $3,541 $ - ========== =========== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for: Interest $7,447 $ - ========== =========== NONCASH INVESTING AND FINANCING ACTIVITIES Property and equipment acquired through capital lease $1,600 $ - ========== =========== Stock issued for subscriptions receivable $7,500 $1,000 ========== =========== See notes to financial statements which are an integral part of this statement. F-7 43 US PATRIOT, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- Nature of the operations ------------------------ US Patriot, Inc. (the "Company") was incorporated in the State of South Carolina on October 2, 2000. From inception through December 26, 2000, the Company had not yet commenced operations and no revenue was derived. The Company sells, distributes, tailors, and services military and law enforcement clothing, gear and related equipment from a leased retail facility located in Columbia, South Carolina. Accordingly, the Company was considered a development stage enterprise for the period from October 2, 2000 to October 31, 2000. Basis of accounting ------------------- These financial statements are prepared on the accrual basis of accounting which is in conformity with accounting principles generally accepted in the United States of America. Cash and cash equivalents ------------------------- The Company considers all liquid, non-equity investments with an original maturity of three months or less to be cash equivalents. Inventories ----------- Inventories are valued at the lower of cost (determined on first-in, first-out method) or market (net realizable value). Property and equipment ---------------------- Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated life of each asset. The carrying amount of all property and equipment is evaluated periodically to determine if adjustment to the useful life is warranted. Following are the useful lives by asset class: Computer equipment 3 years Leasehold improvements 3 years Sewing equipment 5 years Furniture and fixtures 7 years Income taxes ------------ The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable (refundable) for the period and the change during the period in deferred tax assets and liabilities. Advertising costs ----------------- The Company expenses advertising costs as they are incurred. Advertising costs for the year ended October 31, 2001 and the period ended October 31, 2000, were $2,765 and $0, respectively. F-8 44 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Estimates --------- The financial statements include estimates and assumptions that affect the Company's financial position and results of operations and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Loss per common share --------------------- Basic loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. Revenue recognition ------------------- Sales are recorded when inventory is shipped or delivered and title transfers. Concentration of credit risk ---------------------------- The Company sells goods and services to military and law enforcement personnel primarily located in Columbia, South Carolina. NOTE 2 - INVENTORIES - -------------------- The Company's inventory consisted of the following at October 31, 2001: Military apparel and accessories $ 80,012 Allowance for excess and slow moving inventory (2,288) --------- $ 77,724 ========= NOTE 3 - PROPERTY AND EQUIPMENT - ------------------------------- Property and equipment consists of the following at October 31, 2001: Computer equipment $ 5,781 Leasehold improvements 6,486 Sewing equipment 17,956 Furniture and fixtures 8,991 -------------- 39,214 Less accumulated depreciation (5,332) -------------- $ 33,882 ============== Included in sewing equipment is an asset acquired under a capital lease for $1,600. The carrying value of this asset was $1,333 at October 31, 2001. F-9 45 NOTE 4 - NOTES PAYABLE On November 30, 2000, the Company entered into a 5-year installment loan agreement with a financial institution to borrow $100,000 for the purpose of purchasing inventory and equipment. The loan bears interest at the institution's prime rate plus 1%, which was 6% at October 31, 2001. The note is payable in 60 monthly principal and interest payments of $2,156. Inventory, accounts receivable, furniture and fixtures, equipment, and stockholder's real property serve as collateral for the loan. On October 15, 2001, the Company entered into a one-year installment loan of $12,500 with a financial institution to purchase equipment. The note bears interest at the institution's prime rate plus 1%, which was 6% as October 31, 2001. The note is payable in 12 monthly principal and interest payments of $1,092. The equipment is collateral for the note. Future maturities on the notes detailed above are as follows for the years ending October 31: 2002 $ 30,133 2003 19,603 2004 21,794 2005 24,229 2006 462 -------------- $ 96,221 ============== NOTE 5 - INCOME TAXES - --------------------- At October 31, 2001, the Company has available for income tax purposes, the following net operating loss carryforwards: Amount Expiration --------- ---------- Federal $ 21,946 2021 State 1,155 2021 Deferred tax assets are as follows at October 31, 2001: Current $ 879 Long-term 4,830 -------- $ 5,709 ======== At October 31, 2001, the deferred tax asset consists primarily of the value of net operating loss carryforwards. Reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows for the year ended October 31, 2001 and period ended October 31, 2000: 2001 2000 ------ ------ U.S. Statutory rate 34.0% 34.0% State income tax benefit, net of federal tax 3.3 3.3 Tax effect of lower brackets (18.0) (18.0) All other, net .8 .7 ------ ------ 20.1% 20.0% ====== ====== F-10 46 NOTE 6 - RELATED PARTY TRANSACTIONS - ----------------------------------- From October 2, 2000 to June 1, 2001, the original stockholder loaned the Company $24,482. This was formalized in a note agreement with the Company on June 1, 2001. The note was issued as a 5-year term loan that does not bear interest and requires two payments of principal per year, beginning on December 31, 2002. Future maturities on the note are as follows for the years ending October 31: 2002 $ 4,896 2003 4,896 2004 4,896 2005 4,896 2006 4,898 ------------- $ 24,482 ============= On March 1, 2001, the Company entered into a 4-year equipment lease with the son of the original stockholder. Ownership of the equipment will transfer to the Company at the expiration of the term, and accordingly, the lease is being accounted for as a capital lease. The equipment and the related liability under the capital lease were recorded at the present value of the future payments due under the leases, as determined with an 8.5% discount rate. The lease is payable in monthly installments of $39 including interest. Payments totaling $312, including principal of $228 and interest of $84, were due but not paid in 2001. The following is a schedule of the future minimum lease payments under the capital lease together with the present value of the net minimum lease payments as of October 31, 2001: 2002 $ 696 2003 468 2004 468 2005 177 ------------ Total minimum lease payments 1,809 Less the amount representing interest (209) ------------ Present value of net minimum lease payments $ 1,600 ============ On August 1, 2001, the Company issued 1,000,000 shares of common stock to an attorney in exchange for present and future legal services for an agreed upon value of $2,500. This amount was expensed as of the issuance date. At October 31, 2001, the Company held a note for stock subscriptions totaling $5,000 from a director of the Company. The note accrues interest annually at 8% and all payments of interest are due upon the maturity of the note on January 2, 2004. This note arose from the stock issued January 2, 2001 and is shown on the balance sheet as a reduction in stockholders' equity (deficit). F-11 47 NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) - --------------------------------------- On August 1, 2001, the Company reduced the par value of its common stock from $.10 per share to $.0001 per share. The effect was treated as a 1,000-for-1 stock split. The Company also authorized 20,000,000 preferred shares at $.0001 per share with attributes to be determined by the Board of Directors. No preferred shares were issued. For the period ended October 31, 2000 and the year ended October 31, 2001, weighted average common shares have been retroactively adjusted for this reduction in par value as if it occurred on October 2, 2000. NOTE 8 - COMMITMENTS AND CONTINGENCIES - -------------------------------------- On October 1, 2001, the Company entered into a 3-year lease agreement for $3,175 per month. The lease required a deposit of $3,375 which is refundable to the Company upon termination of the agreement. Future minimum lease payments are as follows for the years ending October 31: 2002 $ 38,100 2003 38,100 2004 34,925 -------------- $ 111,125 ============== NOTE 9 - SUBSEQUENT EVENTS - -------------------------- On November 15, the Company issued 335,000 shares of common stock for $6,700. Each share issued was accompanied by a stock purchase warrant. Each warrant represents the right to purchase one share of the Company's common stock at a price of $0.40 per share no earlier than 90 days after the effective date of the Company's filing of an SB-2 registration statement with the Securities and Exchange Commission. Each warrant expires on the three year anniversary of the effective date. Each unexercised warrant may be redeemed by the Company at a price of $0.001 per warrant at anytime, upon 30 days written notice to the holders thereof, if the Company's common stock is traded on the Over the Counter Bulletin Board and the market price equals or exceeds 120% of the exercise price. Five thousand of these shares were issued to the wife of the original stockholder. F-12 48 No dealer, salesman or other person is authorized to give any information or to make any representations not contained in this prospectus in connection with the offer made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by US Patriot. This prospectus does not constitute an offer to sell or a solicitation to an offer to buy the securities offered hereby to any person in any state or other jurisdiction in which such offer or solicitation would be unlawful. 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 time subsequent to the date hereof. Until _________ __, 2002 (90 days after the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus . This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. TABLE OF CONTENTS Page ---- Prospectus Summary 3 US Patriot, Inc. The Offering 4 Summary Financial Data 6 Risk Factors 7 Use of Proceeds 11 Determination of Offering Price.. 11 Dividend Policy 11 2,170,000 SHARES Dilution 12 Management's Discussion and Analysis 13 Business 16 Management 24 Principal Shareholders 26 Selling Shareholders 27 Description of Securities 29 Indemnification 31 PROSPECTUS Plan of Distribution 32 Legal Matters 33 Experts 33 Where You Can Find More Information 34 Financial Statements F-1 January 16, 2002 49 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS Article 11 of our Articles of Incorporation includes certain provisions permitted by the South Caronlina Revised Statutes, which provides for indemnification of directors and officers against certain liabilities. Pursuant to our Articles of Incorporation, our officers and directors are indemnified, to the fullest extent available under South Caronlina Law, against expenses actually and reasonably incurred in connection with threatened, pending or completed proceedings, whether civil, criminal or administrative, to which an officer or director is, was or is threatened to be made a party by reason of the fact that he or she is or was one of our officers, directors, employees or agents. We may advance expenses in connection with defending any such proceeding, provided the indemnitee undertakes to repay any such amounts if it is later determined that he or she was not entitled to be indemnified by us. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION We estimate that expenses in connection with this registration statement will be as follows: SEC registration fee $ 260 Legal fees and expenses $ 50,000 Accounting fees and expenses $ 6,000 Miscellaneous $ 3,740 ----------- Total $ 60,000 II-1 50 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES The following information is furnished with regard to all securities sold by US Patriot, Inc within the past three years that were not registered under the Securities Act. The issuances described hereunder were made in reliance upon the exemptions from registration set forth in Section 4(2) and Regulation D of the Securities Act relating to sales by an issuer not involving any public offering. None of the foregoing transactions involved a distribution or public offering. Date Name # of Shares Total Price - ---- ---- ----------- ----------- 11/15/01 William Bauer 25,000 $500 11/15/01 Peggy Bauer 25,000 $500 11/15/01 Gregory Colegrove 25,000 $500 11/15/01 Jeffrey Colegrove 25,000 $500 11/15/01 James Foxworthy 25,000 $500 11/15/01 Melissa Foxworthy 25,000 $500 11/15/01 Judith Cooper 12,500 $250 11/15/01 Larry Higgins 12,500 $250 11/15/01 D.T. Kimble 12,500 $250 11/15/01 Kay Kimble 12,500 $250 11/15/01 Ania Kwalik 12,500 $250 11/15/01 Albert Massey 12,500 $250 11/15/01 Diane Massey 12,500 $250 11/15/01 Richard Weinacker 12,500 $250 11/15/01 Bruce West 7,500 $150 11/15/01 Pamela West 7,500 $150 11/15/01 Pete Baldwin 5,000 $100 11/15/01 Sandra Dee 5,000 $100 11/15/01 Gordon English 5,000 $100 11/15/01 David Gable 5,000 $100 11/15/01 Harry Hunter 5,000 $100 11/15/01 Brenda Jellicorse 5,000 $100 11/15/01 Steve Jellicorse 5,000 $100 11/15/01 Jean Jones 5,000 $100 11/15/01 Mike Jones 5,000 $100 11/15/01 Bert Kemp 5,000 $100 11/15/01 Kristy Massey 5,000 $100 11/15/01 Angela Post 5,000 $100 11/15/01 James Post 5,000 $100 11/15/01 Jim Winders 5,000 $100 II-2 51 ITEM 27. EXHIBITS Exhibit Number Description - -------------- ----------- 3.1 Articles of Incorporation of US Patriot, Inc. 3.2 Bylaws of US Patriot, Inc. 4.1 Specimen certificate of the Common Stock of US Patriot, Inc. 4.2 Specimen certificate of the Warrants of US Patriot, Inc. 5.1 Opinion of Law Office of James G. Dodrill II, P.A. as to legality of securities being registered* 10.1 Lease of Business Property entered into October 1, 2001 between US Patriot, Inc. and Covold Partners. 10.2 Promissory Note Dated November 30, 2000 with SouthTrust Bank 10.3 Promissory Note Dated October 11, 2001 with SouthTrust Bank 23.1 Consent of Elliott Davis LLP 23.2 Consent of James G. Dodrill II (included in Exhibit 5.1) *to be filed by amendment. II-3 52 ITEM 28. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy and as expressed in the Act and is, therefore, unenforceable. The Company hereby undertakes to: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: i. Include any prospectus required by Section 10(a)(3) of the Securities Act; ii. Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. iii. Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (4) For determining any liability under the Securities Act, treat 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 under Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective. (5) For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities. (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised by the Securities and Exchange Commission that 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 us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 53 Signatures In accordance with the requirements of the Securities Act of 193, the registrant certifies that it has reasonable ground to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Columbia state of South Carolina, on January 16, 2002. US PATRIOT, INC. By: /s/ Phillips N. Dee -------------------------------------- Phillips N. Dee Principal Executive Officer, President and Director In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on January 16, 2002. By: /s/ Phillips N. Dee Principal Executive Officer, President -------------------- and Director Phillips N. Dee By: /s/ Scott Massey Director -------------------- Scott Massey II-1 54 EX-1 3 usprestatedarticlesofinc.txt US PATRIOT RESTATED ARTICLES OF INCORPORATION STATE OF SOUTH CAROLINA SECRETARY OF STATE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF US PATRIOT, INC. Pursuant to Section 33-10-107, of the 1976 South Carolina Code of Laws, as amended, US Patriot, Inc., hereby submits the following information: The name of the Corporation has never been changed. The original Articles of Incorporation were filed on October 2, 2000, to form a statutory close corporation. The purpose of filing this Amended and Restated Articles of Incorporation is to terminate the Corporation's status as a statutory close corporation under Section 33-18-310 of the 1976 South Carolina Code of Laws, as amended, and to add additional provisions to the Articles of Incorporation. The Corporation hereby adopts the following Amended and Restated ARTICLES OF INCORPORATION under the laws of the State of South Carolina: ARTICLE 1. Name ---- The name of this Corporation is: US PATRIOT, INC. Page 1 of 1 1 ARTICLE 2. Purpose ------- The purpose for which this Corporation is formed is to conduct any lawful business allowable by the Laws of the State of South Carolina. ARTICLE 3. Registered Office; Registered Agent ----------------------------------- The address of the initial registered office of the Corporation is 5401 Forest Drive, Columbia, South Carolina 29206, and the name of its initial registered agent at such address is Phillips N. Dee. I hereby consent to the appointment as Registered Agent. _________________________________ ARTICLE 4. Principal Office ---------------- The business address of the Corporation's principal office is: US PATRIOT INC. 5401 FOREST DRIVE COLUMBIA, SC 29206 ARTICLE 5. Duration -------- The Corporation is to commence its corporate existence on the date of subscription and acknowledgement of these Articles of Incorporation and shall exist perpetually thereafter until dissolved according to law. ARTICLE 6. Directors --------- 6.1 Number: ------ The number of directors of the Corporation shall be subject to the Corporation's bylaws (the "Bylaws"), provided however, the number of directors of the Corporation may not be fewer than two unless the Corporation has fewer than two stockholders, in which case the number of directors may not be fewer than the number of stockholders. Page 2 of 2 2 6.2 Class of Directors: ------------------ If there shall be more than one director, the directors shall be classified, in respect solely to the time for which they shall severally hold office, by dividing them into three classes (two classes if there are only two directors), each such class to be as nearly as possible equal in number of directors to each other class. If there are three or more directors: (i) the first term of office of directors of the first class shall expire at the first annual meeting after their election, and thereafter such terms shall expire on each three year anniversary of such date; (ii) the term of office of the directors of the second class shall expire on the one year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each three-year anniversary of such one year anniversary; and (iii) the term of office of the directors of the third class shall expire on the two year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each three-year anniversary of such two year anniversary. If there are two directors: (i) the first term of office of directors of the first class shall expire at the first annual meeting after their election, and thereafter such terms shall expire on each two year anniversary of such date; and (ii) the term of office of the directors of the second class shall expire on the one-year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each two year anniversary of such one-year anniversary. If there is one director, the term of office such director shall expire at the first annual meeting after his election. At each succeeding annual meeting, the stockholders of the Corporation shall elect directors for a full term or the remainder thereof, as the case may be, to succeed those whose terms have expired. Each director shall hold office for the term for which elected and until his or her successor shall be elected and shall qualify, or until he or she shall resign or be removed as set forth below. 6.3 Powers of Directors: ------------------- Subject to the limitations contained in the Articles of incorporation and the Corporation law for the State of South Carolina concerning corporate action that must be authorized or approved by the shareholders of the Corporation, all corporate powers shall be exercised by or under the authority of the board of directors, and the business and affairs of the Corporation shall be controlled by the board. 6.4 Removal of Directors: -------------------- Any directors, any class of directors or the entire Board of Directors may be removed from office by stockholder vote at any time, without assigning any cause, but only if the holders of not less than two-thirds (2/3) of the outstanding shares of capital stock of the Corporation entitled to vote upon election of directors, voting Page 3 of 3 3 together as a single class, shall vote in favor of such removal. ARTICLE 7. Incorporators ------------- The names and address of the incorporator is: Name Address ---- ------- Phillips N. Dee 2859 Stratford Road Columbia, SC 29204 ARTICLE 8. Capitalization -------------- 8.1 Authorized Shares: ----------------- The total number of shares of capital stock that the Corporation has the authority to issue is one hundred twenty million (120,000,000). The total number of shares of common stock that the Corporation is authorized to issue is one hundred million (100,000,000) and the par value of each share of such common stock is one-hundredth of one cent ($.0001) for an aggregate par value of ten thousand dollars ($10,000). The total number of shares of preferred stock that the Corporation is authorized to issue is twenty million (20,000,000) and the par value of each share of such preferred stock is one-hundredth of one cent ($.0001) for an aggregate par value of two thousand dollars ($2,000). 8.1 Rights for Preferred Shares: --------------------------- The board of directors is expressly authorized to adopt, from time to time, a resolution or resolutions providing for the issue of preferred stock in one or more series, to fix the number of shares in each such series and to fix the designations and the powers, preferences and relative, participating, optional and other special rights and the qualifications, limitations and restrictions of such shares, of each such series. The authority of the board of directors with respect to each such series shall include a determination of the following, which may vary as between the different series of preferred stock: (a) The number of shares constituting the series and the distinctive designation of the series; Page 4 of 4 4 (b) The dividend rate on the shares of the series, the conditions and dates upon which dividends on such shares shall be payable, the extent, if any, to which dividends on such shares shall be cumulative, and the relative rights of preference, if any, of payment of dividends on such shares; (c) Whether or not the shares of the series are redeemable and, if redeemable, the time or times during which they shall be redeemable and the amount per share payable on redemption of such shares, which amount may, but need not, vary according to the time and circumstances of such redemption; (d) The amount payable in respect of the shares of the series, in the event of any liquidation, dissolution or winding up of this Corporation, which amount may, but need not, vary according to the time or circumstances of such action, and the relative rights of preference, if any, of payment of such amount; (e) Any requirement as to a sinking fund for the shares of the series, or any requirement as to the redemption, purchase or other retirement by this Corporation of the shares of the series; (f) The right, if any, to exchange or convert shares of the series into other securities or property, and the rate or basis, time, manner and condition of exchange or conversion; (g) The voting rights, if any, to which the holders of shares of the series shall be entitled in addition to the voting rights provided by law; and (h) Any other terms, conditions or provisions with respect to the series not inconsistent with the provisions of this ARTICLE or any resolution adopted by the board of directors pursuant to this ARTICLE. The number of authorized shares of preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the stock of this Corporation entitled to vote at a meeting of shareholders. No holder of shares of preferred stock of this Corporation shall, by reason of such holding have any preemptive right to subscribe to any additional issue of any stock of any class or series nor to any security convertible into such stock. Page 5 of 5 5 8.2 Statement of Rights for Common Shares: ------------------------------------- (a) Subject to any prior rights to receive dividends to which the holders of shares of any series of the preferred stock may be entitled, the holders of shares of common stock shall be entitled to receive dividends, if and when declared payable from time to time by the board of directors, from funds legally available for payment of dividends. (b) In the event of any dissolution, liquidation or winding up of this Corporation, whether voluntary or involuntary, after there shall have been paid to the holders of shares of preferred stock the full amounts to which they shall be entitled, the holders of the then outstanding shares of common stock shall be entitled to receive, pro rata, any remaining assets of this Corporation available for distribution to its shareholders. The board of directors may distribute in kind to the holders of the shares of common stock such remaining assets of this Corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other Corporation, trust or entity and receive payment in cash, stock or obligations of such other Corporation, trust or entity or any combination of such cash, stock, or obligations, and may sell all or any part of the consideration so received, and may distribute the consideration so received or any balance or proceeds of it to holders of the shares of common stock. The voluntary sale, conveyance, lease, exchange or transfer of all or substantially all the property or assets of this Corporation (unless in connection with that event the dissolution, liquidation or winding up of this Corporation is specifically approved), or the merger or consolidation of this Corporation into or with any other Corporation, or the merger of any other Corporation into it, or any purchase or redemption of shares of stock of this Corporation of any class, shall not be deemed to be a dissolution, liquidation or winding up of this Corporation for the purpose of this paragraph (b). (c) Except as provided by law or this certificate of incorporation with respect to voting by class or series, each outstanding share of common stock of this Corporation shall entitle the holder of that share to one vote on each matter submitted to a vote at a meeting of shareholders. (d) Such numbers of shares of common stock as may from time to time be required for such purpose shall be reserved for issuance (i) upon conversion of any shares of preferred stock or any obligation of this Page 6 of 6 6 Corporation convertible into shares of common stock and (ii) upon exercise of any options or warrants to purchase shares of common stock. ARTICLE 9. Shareholders ------------ 9.1 Amendment of Bylaws: ------------------- The board of directors has the power to make, repeal, amend and alter the bylaws of the Corporation, to the extent provided in the bylaws. However, the paramount power to repeal, amend and alter the bylaws, or to adopt new bylaws, is vested in the shareholders. This power may be exercised by a vote of a majority of shareholders present at any annual or special meeting of the shareholders. Moreover, the directors have no power to suspend, repeal, amend or otherwise alter any bylaw or portion of any bylaw so enacted by the shareholders, unless the shareholders, in enacting any bylaw or portion of any bylaw, otherwise provide. 9.2 Personal Liability of Shareholders: ---------------------------------- The private property of the shareholders of this Corporation is not subject to the payment of corporate debts, except to the extent of any unpaid balance of subscription for shares. 9.3 Denial of Preemptive Rights: --------------------------- No holder of any shares of the Corporation of any class now or in the future authorized shall have any preemptive right as such holder (other than such right, if any, as the board of directors in its discretion may determine) to purchase or subscribe for any additional issues of shares of the Corporation of any class now or in the future authorized, nor any shares of the Corporation purchased and held as treasury shares, or any part paid receipts or allotment certificates in respect of any such shares, or any securities convertible into or exchangeable for any such shares, or any warrants or other instruments evidencing rights or options to subscribe for, purchase or otherwise acquire any such shares, whether such shares, receipts, certificates, securities, warrants or other instruments be unissued, or issued and subsequently acquired by the Corporation; and any such shares, receipts, certificates, securities, warrants or other instruments, in the discretion of the board of directors, may be offered from time to time to any holder or holders of shares of any class or classes to the exclusion of all other holders of shares of the same or any other class at the time outstanding. 9.4 Voting Rights: ------------- Except as otherwise expressly provided by the law of the State of South Carolina or this certificate of incorporation or the resolution of the board of directors providing for the issue of a series of preferred stock, the holders of the common stock shall Page 7 of 7 7 possess exclusive voting power for the election of directors and for all other purposes. Every holder of record of common stock entitled to vote and, except as otherwise expressly provided in the resolution or resolutions of the board of directors providing for the issue of a series of preferred stock, every holder of record of any series of preferred stock at the time entitled to vote, shall be entitled to one vote for each share held. 9.5 Actions By Written Consent: -------------------------- Whenever the vote of shareholders at a meeting of shareholders is required or permitted to be taken for or in connection with any corporate action by any provision of the Corporation law of the State of South Carolina, or of this certificate of incorporation or of the bylaws authorized or permitted by that law, the meeting and vote of shareholders may be dispensed with if the proposed corporate action is taken with the written consent of the holders of stock having a majority of the total number of votes which might have been cast for or in connection with that action if a meeting were held; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for that action, and provided that prompt notice is given to all shareholders of the taking of corporate action without a meeting and by less than unanimous written consent. ARTICLE 10. Amendments ---------- The Corporation shall be deemed, for all purposes, to have reserved the right to amend, alter, change or repeal any provision contained in its articles of incorporation, as amended, to the extent and in the manner now or in the future permitted or prescribed by statute, and all rights conferred in these Articles upon shareholders are granted subject to that reservation. ARTICLE 11. Regulation of Business and Affairs of Corporation ------------------------------------------------- 11.1 Powers of Board of Directors ---------------------------- (a) In furtherance and not in limitation of the powers conferred upon the board of directors by statute, the board of directors is expressly authorized, without any vote or other action by shareholders other than such as at the time shall be expressly required by statute or by the provisions of these Articles of incorporation, as amended, or of the bylaw, to exercise all of the powers, rights and privileges Page 8 of 8 8 of the Corporation (whether expressed or implied in these Articles or conferred by statute) and to do all acts and things which may be done by the Corporation, including, without limiting the generality of the above, the right to: (i) Pursuant to a provision of the bylaw, by resolution adopted by a majority of the actual number of directors elected and qualified, to designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in that resolution or in the bylaw, shall have and exercise all the authority of the board of directors except as otherwise provided by law; (ii) To make, alter, amend or repeal bylaw for the Corporation; (iii) To authorize the issuance from time to time of all or any shares of the Corporation, now or in the future authorized, part paid receipts or allotment certificates in respect of any such shares, and any securities convertible into or exchangeable for any such shares (regardless of whether those shares, receipts, certificates or securities be unissued or issued and subsequently acquired by the Corporation), in each case to such Corporations, associations, partnerships, firms, individuals or others (without offering those shares or any part of them to the holders of any shares of the Corporation of any class now or in the future authorized), and for such consideration (regardless of whether more or less than the par value of the shares), and on such terms as the board of directors from time to time in its discretion lawfully may determine; (iv) From time to time to create and issue rights or options to subscribe for, purchase or otherwise acquire any shares of stock of the Corporation of any class now or in the future authorized or any bonds or other obligations or securities of the Corporation (without offering the same or any part of them to the holders of any shares of the Corporation of any class now or in the future authorized); (v) In furtherance and not in limitation of the provisions of the above subdivisions (iii) and (iv), from time to time to establish and amend plans for the distribution among or sale to any one or more of the officers or employees of the Corporation, or any subsidiary of the Corporation, of any shares of stock or other securities of the Corporation of any class, or for the grant to any of such officers or employees of rights or options to subscribe for, purchase or otherwise Page 9 of 9 9 acquire any such shares or other securities, without in any case offering those shares or any part of them to the holders of any shares of the Corporation of any class now or in the future authorized; such distribution, sale or grant may be in addition to or partly in lieu of the compensation of any such officer or employee and may be made in consideration for or in recognition of services rendered by the officer or employee, or to provide him/her with an incentive to serve or to agree to serve the Corporation or any subsidiary of the Corporation, or otherwise as the board of directors may determine; and (vi) To sell, lease, exchange, mortgage, pledge, or otherwise dispose of or encumber all or any part of the assets of the Corporation unless and except to the extent otherwise expressly required by statute. (b) The board of directors, in its discretion, may from time to time: (i) Declare and pay dividends upon the authorized shares of stock of the Corporation out of any assets of the Corporation available for dividends, but dividends may be declared and paid upon shares issued as partly paid only upon the basis of the percentage of the consideration actually paid on those shares at the time of the declaration and payment; (ii) Use and apply any of its assets available for dividends, subject to the provisions of these Articles, in purchasing or acquiring any of the shares of stock of the Corporation; and (iii) Set apart out of its assets available for dividends such sum or sums as the board of directors may deem proper, as a reserve or reserves to meet contingencies, or for equalizing dividends, or for maintaining or increasing the property or business of the Corporation, or for any other purpose it may deem conducive to the best interests of the Corporation. The board of directors in its discretion at any time may increase, diminish or abolish any such reserve in the manner in which it was created. 11.2 Approval of Interested Director or Officer Transactions: ------------------------------------------------------- No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other Corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the Page 10 of 10 10 meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his/her or their votes are counted for such purpose, if: 1. The material facts as to his/her interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or 2. The material facts as to his/her interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or 3. The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the shareholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee that authorizes the contract or transaction. 11.3 Indemnification: --------------- (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he/she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fee), judgments, fines and amounts paid in settlement actually and reasonably incurred by him/her in connection with such action, suit or proceeding if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his/her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo Page 11 of 11 11 contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his/her conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he/she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him/her in connection with the defense or settlement of such action or suit if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his/her duty to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such other court shall deem proper. (c) To the extent that any person referred to in paragraphs (a) and (b) of this Article has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he/she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him/her in connection therewith. (d) Any indemnification under paragraphs (a) and (b) of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he/she has met the applicable standard of conduct set forth in paragraphs (a) and (b) of this Article. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such Page 12 of 12 12 action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he/she is entitled to be indemnified by the Corporation as provided in this Article. (f) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his/her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him/her and incurred by him/her in any such capacity, or arising out of his/her status as such, whether or not the Corporation would have the power to indemnify him/her against such liability under the provisions of this Article 11. (h) For the purposes of this Article, references to "the Corporation" include all constituent Corporations absorbed in a consolidation or merger as well as the resulting or surviving Corporation so that any person who is or was a director, officer, employee or agent of such a constituent Corporation or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this section with respect to the resulting or Page 13 of 13 13 surviving Corporation as he/she would if he/she had served the resulting or surviving Corporation in the same capacity. CERTIFICATE Accompanying the Restated ------------------------------------- Articles of Incorporation ------------------------- Check either A or B, whichever is applicable; and if B applies, complete the additional information requested: A. [ ] The attached restated articles of incorporation do not contain any amendments to the corporation's articles of incorporation and have been duly approved by the corporation's board of directors as authorized by Section 33-10-107(a) of the 1976 South Carolina Code of Laws, as amended. B. [Y] The attached restated articles of incorporation contain one or more amendments to the corporation's articles of incorporation. Pursuant to Section 33-10-107 (d) (2) also, the following information concerning the amendment(s) is hereby submitted: 1. On October 25, 2001, the corporation adopted the following amendment(s) to its articles of incorporation: Resolved, that the Articles of Incorporation be amended and restated as set above 2. The manner, if not set forth in the Amendment(s), in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be affected, is as follows: (if not applicable, insert "not applicable" or "NA"). Not Applicable 3. Complete either a or b, whichever is applicable. a. [Y] Amendment(s) adopted by shareholder action. At the date of adoption of the Amendment(s), the number of outstanding shares of each voting group entitled to vote separately on the Amendment(s), and vote of such shares was: Page 14 of 14 14 Number of
Number of Votes Undisputed Shares Number of Number of Votes Represented at the Voted Voting Group Outstanding Shares Entitled to be Cast Meeting For or Against - ------------ ------------------ ------------------ ------------------ ----------------- Common 1,000 1,000 1,000 1,000
Note: Pursuant to Section 33-10-106(6)(1), the corporation can alternatively state the total number of undisputed shares cast for the amendment by each voting group together with a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group. b. [ ] Amendment(s) was duly adopted by unanimous action or board of directors with shareholders approval pursuant to sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code of Laws, as amended and shareholder action was not required. Date October 25, 2001 US Patriot, Inc. ________________ ___________________ Name of Corporation ____________________ Signature Phillips N. Dee, President ___________________________ Type or Print Name and Office Page 15 of 15 15 EX-2 4 uspbylaws.txt US PATRIOT BYLAWS BYLAWS ------ OF -- US PATRIOT INC -------------- 1. OFFICES ------- 1.1. Registered Office ----------------- The initial registered office of the Corporation shall be in Columbia, SC, and the initial registered agent in charge thereof shall be Phillips N. Dee. 1.2. Other Offices ------------- The Corporation may also have offices at such other places, both within and without the State of South Carolina, as the Board of Directors may from time to time determine or as may be necessary or useful in connection with the business of the Corporation. 2. MEETINGS OF STOCKHOLDERS ------------------------ 2.1. Place of Meetings ----------------- All meetings of the stockholders shall be held at such place as may be fixed from time to time by the Board of Directors, the Chairperson or the President. Notwithstanding the foregoing, the Board of Directors may determine that the meeting shall not be held at any place, but may instead be held by means of remote communication. 2.2. Annual Meetings --------------- Unless directors are elected by written consent in lieu of an annual meeting, the Corporation shall hold annual meetings of stockholders, commencing with the year 2000, on such date and at such time as shall be designated from time to time by the Board of Directors, the Chairperson or the President, at which stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. If a written consent electing directors is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action. 1 2.3. Special Meetings ---------------- Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Board of Directors, the Chairperson or the President. 2.4. Notice of Meetings ------------------ Notice of any meeting of stockholders, stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and (if it is a special meeting) the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting (except to the extent that such notice is waived or is not required as provided in the State of South Carolina or these Bylaws). Such notice shall be given in accordance with, and shall be deemed effective as set forth in Section 33-7-105 (or any successor section or sections) of the 1976 Code of Laws of South Carolina. 2.5. Waivers of Notice ----------------- Whenever the giving of any notice is required by statute, the Certificate of Incorporation or these Bylaws, a written waiver thereof signed by the person or persons entitled to said notice, or a waiver thereof by electronic transmission by the person entitled to said notice, delivered to the Corporation, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice (1) of such meeting, except when the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (2) (if it is a special meeting) of consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter at the beginning of the meeting. 2.6. Business at Special Meetings ---------------------------- Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice (except to the extent that such notice is waived or is not required as provided in the Statutes of the State of South Carolina or these Bylaws). 2.7. List of Stockholders -------------------- After the record date for a meeting of stockholders has been fixed, at least ten days before such meeting, the officer who has charge of the stock ledger of the Corporation shall make a list of all stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder (but not the electronic mail address or other electronic contact information, 2 2 unless the Board of Directors so directs) and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (1) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (2) during ordinary business hours, at the principle place of business of the Corporation. If the meeting is to be held at a place, then such list shall also, for the duration of the meeting, be produced and kept open to the examination of any stockholder who is present at the time and place of the meeting. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. 2.8. Quorum at Meetings ------------------ Stockholders may take action on a matter at a meeting only if a quorum exists with respect to that matter. Except as otherwise provided by statute or by the Certificate of Incorporation, the holders of a majority of the shares entitled to vote at the meeting, and who are present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. Once a share is represented for any purpose at a meeting (other than solely to object (1) to holding the meeting or transacting business at the meeting, or (2) (if it is a special meeting) to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice), 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 the adjourned meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time. 2.9. Voting and Proxies ------------------ Unless otherwise provided in the Statutes of the State of South Carolina or in the Corporation's Certificate of Incorporation, and subject to the other provisions of these Bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the Corporation's capital stock that has voting power and that is held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed appointment of proxy shall be irrevocable if the appointment form states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. If authorized by the Board of Directors, and subject to such guidelines as the Board of Directors may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of 3 3 remote communication, participate in a meeting of stockholders and be deemed present in person and vote at such meeting whether such meeting is held at a designated place or solely by means of remote communication, provided that (1) the Corporation implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (2) the Corporation implements reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (3) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action is maintained by the Corporation. 2.10. Required Vote ------------- When a quorum is present at any meeting of stockholders, all matters shall be determined, adopted and approved by the affirmative vote (which need not be by ballot) of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote with respect to the matter, unless the proposed action is one upon which, by express provision of statutes or of the Certificate of Incorporation, a different vote is specified and required, in which case such express provision shall govern and control with respect to that vote on that matter. Where a separate vote by a class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. Notwithstanding the foregoing, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. 2.11. Action Without a Meeting ------------------------ Any action required or permitted to be taken at a stockholders' meeting may be taken without a meeting, without prior notice and without a vote, if the action is taken by persons who would be entitled to vote at a meeting and who hold shares having voting power equal to not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by the stockholders entitled to take action without a meeting, and delivered to the Corporation in the manner prescribed by the this Section 2.11 for inclusion in the minute book. No consent shall be effective to take the corporate action specified unless the number of consents required to take such action are delivered to the Corporation within sixty days of the delivery of the earliest-dated consent. A telegram, cablegram or other electronic transmission consenting to such action and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for the purposes of this Section 2.11, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the 4 4 stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (2) the date on which such stockholder or proxy holder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. Written notice of the action taken shall be given in accordance with Section 33-7-104 of the 1976 Code of Laws of South Carolina to all stockholders who do not participate in taking the action who would have been entitled to notice if such action had been taken at a meeting having a record date on the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. 3. DIRECTORS --------- 3.1. Powers ------ The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things, subject to any limitation set forth in the Certificate of Incorporation or as otherwise may be provided in the By-laws. 3.2. Number and Election ------------------- The number of directors which shall constitute the whole board shall not be fewer than two (2) nor more than five (5) unless there are fewer than two (2) shareholders, in which case the number of directors may not be fewer than the number of shareholders. The first board shall consist of two directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the Board of Directors. 3.3. Nomination of Directors ----------------------- The Board of Directors shall nominate candidates to stand for election as directors; and other candidates also may be nominated by any Corporation stockholder, provided that such other nomination(s) are submitted in writing to the Secretary of the Corporation no later than 90 days prior to the meeting of stockholders at which such directors are to be elected, together with the identity of the nominator and the number of shares of the Corporation's stock owned, directly or indirectly, by the nominator. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.4 hereof, and each director elected shall hold office until such director's successor is elected and qualified or until the director's earlier death, resignation or removal. Directors need not be stockholders. 5 5 3.4. Vacancies --------- Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by the affirmative vote of a majority of the directors then in office, although fewer than a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by the affirmative vote of a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Each director so chosen shall hold office until the next election of directors and until such director's successor is elected and qualified, or until the director's earlier death, resignation or removal. In the event that one or more directors resign from the Board, effective at a future date, a majority of the directors then in office who were elected by holders of the same class of stock as the director(s) so resigning, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election of directors, and until such director's successor is elected and qualified, or until the director's earlier death, resignation or removal. 3.5. Meetings -------- 3.5.1. Regular Meetings ---------------- Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. 3.5.2. Special Meetings ---------------- Special meetings of the Board may be called by the Chairperson or President on one day's notice to each director, either personally or by telephone, express delivery service (so that the scheduled delivery date of the notice is at least one day in advance of the meeting), telegram or facsimile transmission, and on five days' notice by mail (effective upon deposit of such notice in the mail). The notice need not describe the purpose of a special meeting. 3.5.3. Telephone Meetings ------------------ Members of the Board of Directors may participate in a meeting of the board by any communication by means of which all participating directors can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. 6 6 3.5.4. Action Without Meeting ---------------------- Any action required or permitted to be taken at any 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 consents in writing or by electronic transmission describing the action taken, signed by each director, and delivered to the Corporation for inclusion in the minute book. 3.5.5. Waiver of Notice of Meeting --------------------------- A director may waive any notice required by statute, the Certificate of Incorporation or these Bylaws before or after the date and time stated in the notice. Except as set forth below, the waiver must be in writing, signed by the director entitled to the notice, or made by electronic transmission by the director entitled to the notice, and delivered to the Corporation for inclusion in the minute book. Notwithstanding the foregoing, a director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 3.6. Quorum and Vote at Meetings --------------------------- At all meetings of the board, a quorum of the Board of Directors consists of at least three (3) directors, or a majority of the total number of directors prescribed pursuant to Section 3.2 of these Bylaws if such number of directors is greater than three (3). The vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these Bylaws. 3.7. Committees of Directors ----------------------- The Board of Directors may designate one or more committees, each committee to consist of one or more directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by unanimous vote, appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to approving or adopting, or recommending to the stockholders, any action or matter expressly required by the Statutes of the State of South Carolina to be submitted to stockholders for approval or adopting, amending or 7 7 repealing any bylaw of the Corporation; and unless the resolution designating the committee, these bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors, when required. Unless otherwise specified in the Board resolution appointing the Committee, all provisions these Bylaws relating to meetings, action without meetings, notice (and waiver thereof), and quorum and voting requirements of the Board of Directors apply, as well, to such committees and their members. 3.8. Compensation of Directors ------------------------- The Board of Directors shall have the authority to fix the compensation of directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 4. OFFICERS -------- 4.1. Positions --------- The officers of the Corporation shall be a Chairperson, a President, a Secretary and a Treasurer, and such other officers as the Board of Directors (or an officer authorized by the Board of Directors) from time to time may appoint, including one or more Vice Chairmen, Executive Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant Treasurers. Each such officer shall exercise such powers and perform such duties as shall be set forth below and such other powers and duties as from time to time may be specified by the Board of Directors or by any officer(s) authorized by the Board of Directors to prescribe the duties of such other officers. Any number of offices may be held by the same person. As set forth below, each of the Chairperson, President, and/or any Vice President may execute bonds, mortgages and other contracts under the seal of the Corporation, if required, except where required or permitted by law to be otherwise executed and except where the execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 4.2. Chairperson ----------- The Chairperson shall be the presiding officer of the Corporation, shall (when present) preside at all meetings of the Board of Directors and stockholders. 8 8 4.3. President --------- The President shall be the chief executive officer of the Corporation and shall have full responsibility and authority for general and active management and supervision of the operations of the Corporation for ensuring that all order and resolutions of the Board of Directors are carried into effect, and for performing all other duties which are incidental to the office of President. The President may execute bonds, mortgages and other contracts, under the seal of the Corporation, if required, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 4.4. Vice President -------------- In the absence of the President or in the event of the President's inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) 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. 4.5. Secretary --------- The Secretary shall have responsibility for preparation of minutes of meetings of the Board of Directors and of the stockholders and for authenticating records of the Corporation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors. The Secretary or an Assistant Secretary may also attest all instruments signed by any other officer of the Corporation. 4.6. Assistant Secretary ------------------- The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary. 4.7. Treasurer --------- The Treasurer shall have responsibility for the custody of the corporate funds and securities and shall see to it that full and accurate accounts of receipts and disbursements are kept in books belonging to the Corporation. The Treasurer shall render to the Chairperson, the President, and the Board of Directors, upon request, an account of all financial transactions and of the financial condition of the Corporation. 9 9 4.8. Assistant Treasurer ------------------- The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer. 4.9. Term of Office -------------- The officers of the Corporation shall hold office until their successors are chosen and qualify or until their earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors. 4.10. Compensation ------------ The compensation of officers of the Corporation shall be fixed by the Board of Directors, or any committee established by the Board of Directors. 4.11. Fidelity Bonds -------------- The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 5. CAPITAL STOCK ------------- 5.1. Certificates of Stock; Uncertificated Shares -------------------------------------------- The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate (representing the number of shares registered in certificate form) signed in the name of the Corporation by the Chairperson, President or any Vice President, and by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the 10 10 same effect as if such person were such officer, transfer agent or registrar at the date of issue. 5.2. Lost Certificates ----------------- The Board of Directors, Chairperson, President or Secretary may direct a new certificate of stock to be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming that the certificate of stock has been lost, stolen or destroyed. When authorizing such issuance of a new certificate, the board or any such officer may, as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner's legal representative, to advertise the same in such manner as the board or such officer shall require and/or to give the Corporation a bond or indemnity, in such sum or on such terms and conditions as the board or such officer may direct, as indemnity against any claim that may be made against the Corporation on account of the certificate alleged to have been lost, stolen or destroyed or on account of the issuance of such new certificate or uncertificated shares. 5.3. Record Date ----------- 5.3.1. Actions by Stockholders ----------------------- In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Bylaws, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by Section 33-7-104 of the 1976 Code of Laws of the State 11 11 of South Carolina. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Bylaws, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. 5.3.2. Payments -------- In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 5.4. Stockholders of Record ---------------------- The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner, and to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise may be provided by the laws of South Carolina. 6. GENERAL PROVISIONS ------------------ 6.1. Inspection of Books and Records ------------------------------- Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's records as provided by Section 33-16- 102 of the 1976 Code of Laws of the State of South Carolina, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office or at its principal place of business. 12 12 6.2. Dividends --------- The Board of Directors may declare dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and the laws of the State of Florida. 6.3. Reserves -------- The directors of the Corporation may set apart, out of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve. 6.4. Execution of Instruments ------------------------ All checks, drafts or other orders for the payment of money, and promissory notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. 6.5. Fiscal Year ----------- The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 6.6. Seal ---- The corporate seal shall be in such form as the Board of Directors shall approve. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. * * * * * The foregoing Bylaws were adopted by the Board of Directors on ________ __, 2001. _______________________________ Secretary 13 13 TABLE OF CONTENTS ----------------- Page ---- 1. OFFICES.......................................................... 1 1.1. Registered Office....................................... 1 1.2. Other Offices........................................... 1 2. MEETINGS OF STOCKHOLDERS......................................... 1 2.1. Place of Meetings....................................... 1 2.2. Annual Meetings......................................... 1 2.3. Special Meetings........................................ 2 2.4. Notice of Meetings...................................... 2 2.5. Waivers of Notice....................................... 2 2.6. Business at Special Meetings............................ 2 2.7. List of Stockholders.................................... 2 2.8. Quorum at Meetings...................................... 3 2.9. Voting and Proxies...................................... 3 2.10. Required Vote........................................... 4 2.11. Action Without a Meeting................................ 4 3. DIRECTORS........................................................ 5 3.1. Powers.................................................. 5 3.2. Number and Election..................................... 5 3.3. Nomination of Directors................................. 5 3.4. Vacancies............................................... 6 3.5. Meetings................................................ 6 3.5.1. Regular Meetings.............................. 6 3.5.2. Special Meetings.............................. 6 3.5.3. Telephone Meetings............................ 6 3.5.4. Action Without Meeting........................ 7 3.5.5. Waiver of Notice of Meeting................... 7 3.6. Quorum and Vote at Meetings............................. 7 3.7. Committees of Directors................................. 7 3.8. Compensation of Directors............................... 8 4. OFFICERS......................................................... 8 4.1. Positions............................................... 8 4.2. Chairperson............................................. 8 4.3. President............................................... 9 4.4. Vice President.......................................... 9 4.5. Secretary............................................... 9 4.6. Assistant Secretary..................................... 9 4.7. Treasurer............................................... 9 4.8. Assistant Treasurer..................................... 10 4.9. Term of Office.......................................... 10 14 4.10. Compensation............................................ 10 4.11. Fidelity Bonds.......................................... 10 5. CAPITAL STOCK.................................................... 10 5.1. Certificates of Stock; Uncertificated Shares............ 10 5.2. Lost Certificates....................................... 11 5.3. Record Date............................................. 11 5.3.1. Actions by Stockholders....................... 11 5.3.2. Payments...................................... 12 5.4. Stockholders of Record.................................. 12 6. GENERAL PROVISIONS............................................... 12 6.1. Inspection of Books and Records......................... 12 6.2. Dividends............................................... 13 6.3. Reserves................................................ 13 6.4. Execution of Instruments................................ 13 6.5. Fiscal Year............................................. 13 6.6. Seal.................................................... 13 15 US PATRIOT, INC. ---------------- BYLAWS ------ Adopted as of 01 OCTOBER 2001 16 EX-3 5 uspstkcert.txt US PATRIOT FORM OF COMMON STOCK CERTIFICATE ====================================================================== NUMBER SHARES - ---------------- ------------ US PATRIOT, INC. - ---------------- ------------ COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP ______________ INCORPORATED UNDER THE LAWS OF THE STATE OF SOUTH CAROLINA - ------------------------------------------------------------------------------ THIS IS TO CERTIFY THAT is the owner of - ------------------------------------------------------------------------------ fully paid and non-assessable shares of Common Stock, $.0001 par value, of US PATRIOT, INC. transferable only on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued under and subject to the laws of the State of South Carolina and to the Certificate of Incorporation and Bylaws of the Corporation, all as in effect from time to time. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: Treasurer President US PATRIOT, INC. SOUTH CAROLINA [Corporate Seal] COUNTERSIGNED AND REGISTERED: ------------------------------- TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE 1 ============================================================================== US PATRIOT, INC. The Corporation shall furnish without charge to each stockholder who so requests a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such requests shall be made to the Corporation's Secretary at the principal office of the Corporation. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- Custodian ------------------------ (Cust) (Minor) under Uniform Gifts to Minors Act --------------------------------- (State) Additional abbreviations may also be used though not in the above list. For value received, _______________ hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE -------------------------------------- -------------------------------------- - ------------------------------------------------------------------------------ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ______________________________________________________________________________ ______________________________________________________________________________ ________________________________________________________________________ shares of the capital stock represented by the within Certificate, and do(es) hereby irrevocably constitute and appoint _____________________________________________________________________________ ______________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated _____________________ ---------------------------------------- - ---------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. ------------------------------------------------ Signature Guaranteed: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE l7Ad-15. 2 EX-4 6 uspwarrant.txt US PATRIOT FORM OF WARRANT NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. Eastern Standard Time, on ______, ____ WARRANT TO PURCHASE COMMON STOCK OF US PATRIOT, INC. FOR VALUE RECEIVED,US Patriot, Inc. a South Carolina corporation (the "Company"), hereby certifies that ______________, or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing on the date that is 90 days after the Securities and Exchange Commission declares effective (the "Effective Date") a registration statement registering the Warrant Shares (as defined below), a total of __________________ fully paid and nonassessable shares of the Common Stock, par value $.0001 per share, of the Company for an aggregate purchase price of $0.40 per share. (Hereinafter, (i) said Common Stock together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock", (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares", (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares is referred to as the "Exercise Price", (v) this Warrant, and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is referred to as the "Holder".) The Exercise Price is subject to adjustment as hereinafter provided. 1. Exercise of Warrant. ------------------- (a) Exercise. This Warrant may be exercised, in whole at any time or in part from time to time, commencing on the date that is 90 days after the Securities and Exchange Commission declares effective a registration statement registering the Warrant Shares and prior to 5:00 P.M., Eastern Standard Time on the date that is the three year anniversary of the Effective Date (the "Warrant Termination Date") by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set 1 forth in Subsection 10(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by certified or official bank check payable to the order of the Company. If this Warrant is exercised in part, the Holder is entitled to receive a new Warrant covering the number of Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will (a) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled if this Warrant is exercised in whole and (b) deliver the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of the Warrant. In lieu of any fractional share of the Common Stock which would otherwise be issuable in respect to the exercise of the Warrant, the Company at its option (a) may pay in cash an amount equal to the product of (i) the daily mean average of the Closing Price of a share of Common Stock on the ten consecutive trading days before the Conversion Date and (ii) such fraction of a share or (b) may issue an additional share of Common Stock. Upon exercise of the Warrant, the Company shall issue and deliver to the Holder certificates for the Common Stock issuable upon such exercise within ten business days after such exercise and the person exercising shall be deemed to be the holder of record of the Common Stock issuable upon such exercise. No warrant granted herein shall be exercisable after 5:00 p.m. Eastern Standard Time on the Warrant Termination Date. (b) Net Issuance. Notwithstanding anything to the contrary contained in Subsection 1(a) hereof, in the case of any exercise on or prior to the Warrant Termination Date the Holder may elect to exercise this Warrant in whole or in part by receiving shares of Common Stock equal to the net issuance value (as determined below) of this Warrant, or any part hereof, upon surrender of this Warrant at the principal office of the Company together with notice of such election (with the form at the end hereof duly executed), in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula: X= Y (A-B) ------- A Where: X = the number of shares of Common Stock to be issued to the Holder Y = the number of shares of Common Stock as to which this Warrant is to be exercised A = the current fair market value of one share of Common Stock calculated as of the last trading day immediately preceding the exercise of this warrant B = the Exercise Price 2 2 (c) Certain Adjustments ------------------- The Exercise Price and the number of Warrant Shares shall be equitable adjusted from time to time to account for stock splits, stock dividends, combinations, recapitalizations, reclassifications and similar events. As used herein, current fair market value of the Common Stock as of a specified date shall mean with respect to each share of Common Stock the average of the closing bid prices of the Common Stock on the principal securities market on which the Common Stock may at the time be traded over a period of five business days consisting of the day as of which the current fair market value of a share of Common Stock is being determined (or if such day is not a business day, the business day next preceding such day) and the four consecutive business days prior to such day. If on the date for which current fair market value is to be determined the Common Stock is not eligible for trading on any securities market, the current fair market value of Common Stock shall be the highest price per share which the Company could then obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors of the Company, which determination shall be conclusive, unless prior to such date the Company has become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the current fair market value of the Common Stock shall be deemed to be the value received by the holders of the Company's Common Stock for each share thereof pursuant to the Company's acquisition. 2. Redemption. This Warrant may be redeemed at the option of the Company, at a redemption price of $0.01 per Warrant Share at any time, upon 30 days prior written notice to the Holder, if, for a period of ten consecutive trading days, the average closing bid price of our Common Stock equals or exceeds $0.60. On and after the date fixed for redemption, the Holder shall have no rights with respect to this Warrant except to receive the $0.01 per Warrant share upon surrender of this Certificate. 3. Reservation of Warrant Shares. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and reserved, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the number of shares of the Common Stock as from time to time shall be receivable upon the exercise of this Warrant. 4. Fully Paid Stock: Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Exercise Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original 3 3 issue or similar taxes that may be payable in respect of the issue of any Warrant Share or certificate therefor. 5. Transfer. -------- (a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon the exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws and unless so registered may not be transferred, sold, pledged, hypothecated or otherwise disposed of unless an exemption from such registration is available. In the event Holder desires to transfer this Warrant or any of the Warrant Shares issued, the Holder must give the Company prior written notice of such proposed transfer including the name and address of the proposed transferee. Such transfer may be made only either (i) upon publication by the Securities and Exchange Commission (the "Commission") of a ruling, interpretation, opinion or "no action letter" based upon facts presented to said Commission, or (ii) upon receipt by the Company of an opinion of counsel to the Company in either case to the effect that the proposed transfer will not violate the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and regulations promulgated under either such act, or in the case of clause (ii) above, to the effect that the Warrant or Warrant Shares to be sold or transferred has been registered under the Securities Act and that there is in effect a registration statement in which is included a prospectus meeting the requirements of Subsection 10 (a) of the Securities Act, which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of the certificates evidencing the Warrant or Warrant Stock to be sold or transferred. (b) Conditions to Transfer. Prior to any such proposed transfer, and as a condition thereto, if such transfer is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if requested by the Company, deliver to the Company (i) an investment covenant signed by the proposed transferee, (ii) an agreement by such transferee to the impression of the restrictive investment legend set forth herein on the certificate or certificates representing the securities acquired by such transferee, (iii) an agreement by such transferee that the Company may place a "stop transfer order" with its transfer agent or registrar, and (iv) an agreement by the transferee to indemnify the Company to the same extent as set forth in the next succeeding paragraph. (c) Indemnity. The Holder acknowledges that the Holder understands the meaning and legal consequences of this Section 5, and the Holder hereby agrees to indemnify and hold harmless the Company, its representatives and each officer and director thereof from and against any and all loss, damage or liability (including all attorneys' fees and costs incurred in enforcing this indemnity provision) due to or arising out of (a) the inaccuracy of any representation or the breach of any warranty of the Holder contained in, or any other breach of, this warrant, (b) any transfer of the Warrant or any of the Warrant Shares in violation of the Securities Act, the Exchange Act or the rules and regulations promulgated under either of such acts, (c) any transfer of the Warrant or any of the Warrant Shares not in accordance with this Warrant or (d) any untrue statement or omission to state any material fact in connection with the investment representations or with respect to the facts and representations supplied by the Holder to counsel to the Company upon 4 4 which its opinion as to a proposed transfer shall have been based. (d) Transfer. Except as restricted hereby, this Warrant and the Warrant Shares issued may be transferred by the Holder in whole or in part at any time or from time to time. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with assignment documentation duly executed and funds sufficient to pay any transfer tax, and upon compliance with the foregoing provisions, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall promptly be canceled. Any assignment, transfer, pledge, hypothecation or other disposition of this Warrant attempted contrary to the provisions of this Warrant, or any levy of execution, attachment or other process attempted upon the Warrant, shall be null and void and without effect. (e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been registered under the Securities Act, upon exercise of any part of the Warrant and the issuance of any of the Warrant Shares, the Company shall instruct its transfer agent to enter stop transfer orders with respect to such shares, and all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend, insofar as is consistent with Massachusetts law: "The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, offered for sale, assigned, transferred or otherwise disposed of unless registered pursuant to the provisions of that Act or an opinion of counsel to the Company is obtained stating that such disposition is in compliance with an available exemption from such registration." 6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of an unsecured indemnity from the Holder reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of the Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 7. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 8. Communication. No notice or other communication under this Warrant shall be effective unless the same is in writing and is mailed by certified mail, return receipt requested, addressed to: 5 5 (a) the Company at 5401 Forest Drive, Columbia, South Carolina 29206 or such other address as the Company has designated in writing to the Holder, with a copy to James G. Dodrill II, PA 3360 NW 53rd Circle, Boca Raton, Florida 33496 or (b) the Holder at ____________________________________, or such other address as the Holder has designated in writing to the Company. Any notice given hereunder shall be effective upon the earlier of (i) receipt, or (ii) a date three days from the date of posting. 9. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 10. Applicable Law. This Warrant shall be governed by and construed in accordance with the law of the State of South Carolina without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, US PATRIOT, INC. has caused this Warrant to be signed by its President this __ day of _________, 2001 US PATRIOT, INC. By:_____________________________ 6 6 SUBSCRIPTION The undersigned, _______________________________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for the purchase of ________ shares of the Common Stock of US Patriot, Inc. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:____________________________ Signature:______________________________ Address:__________________________ __________________________________ __________________________________ ASSIGNMENT FOR VALUE RECEIVED ___________________________ hereby sells, assigns and transfers unto ______________________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of US Patriot, Inc. Dated:____________________________ Signature:_______________________________ Address:__________________________ __________________________________ __________________________________ 7 7 PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers unto ___________________________ the right to purchase _________ shares of the Common Stock of US Patriot, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint ___________________________________, attorney, to transfer that part of said Warrant on the books of US Patriot, Inc. Dated:____________________________ Signature:_______________________________ Address:__________________________ __________________________________ __________________________________ NET ISSUANCE ELECTION The undersigned, _______________________________, pursuant to the provisions of the foregoing Warrant, hereby tenders the right to purchase _____ shares of the Common Stock of US Patriot, Inc. and a proportionate part of said Warrant and the rights evidenced thereby, in exchange for a number of shares of said Common Stock to be computed in accordance with the provisions of Section 1 (b) of said Warrant. Dated:____________________________ Signature:______________________________ Address:__________________________ __________________________________ __________________________________ 8 8 EX-5 7 uspcommlease.txt US PATRIOT COMMERCIAL LEASE COMMERCIAL LEASE THIS LEASE made and entered into this 1st date of October 2001, between Covold Partners hereinafter called "Landlord" and US Patriot Inc hereinafter called "Tenant". WITNESSETH In consideration of the covenants and agreements of the respective parties herein contained, the parties hereto do hereby agree as follows: A. DEMISED PREMISES ---------------- Landlord by these present does hereby demise and let unto Tenant, and Tenant leases and hires from Landlord all these certain premised hereinafter more fully described, together with and the buildings and other improvements now and hereafter erected thereon for the term and upon the rental and the covenants and agreements of the respective parties herein set forth. Said premises consist of a parcel of ground located in the State of South Carolina, County of Richland, City of Columbia, address is 5401 Forest Drive. B. TERMS ----- The term of this lease shall be for three (3) years commencing October 1, 2001 and terminating September 30, 2004. C. COVENANTS AND CONDITION OF LEASE: -------------------------------- This lease is made on the following covenants and conditions which are expressly agreed to by the Landlord and the Tenant: 1. RENT: Tenant agrees to pay as rental to Landlord the annual sum of Thirty Eight Thousand One Hundred ($38,100.00) Dollars, payable in equal monthly installments of Three Thousand One Hundred Seventy Five ($3175.00) Dollars per month to Covold Partners, Calendar Court, Suite 4, Columbia, SC 29206. Rent is due on the last cay of the month and shall not be withheld for any reason whatsoever. In the event Tenant shall fail to pay each rental on the due date or within ten (10) days thereafter, a late charge of (2%) percent of the monthly rental shall be added to the rental and paid to the Landlord for each late payment, and the same shall be treated as additional rent. 2. CONDITION OF PREMISES: Tenant has inspected and accepted leased premises in the same condition they are in at the time of commencement of the term of this Lease. Tenant agrees if, during said term, Tenant shall change the 1 usual method of conducting Tenant's business on leased premises, or should Tenant install thereon or therein any new facilities, Tenant will at the cost and expense of Tenant, make alterations or improvements in or to the demised which may be required of Federal or State law, or by any municipal ordinance, or regulation applicable thereto. 3. REPAIR AND CARE OF BUILDING BY TENANT: Tenant shall, throughout the initial term of this Lease and any renewals thereof, as its own expense, maintain in food order and repair the leased premises, including the building and other improvements located thereon. Such repairs by Tenant shall include as applicable but not limited to, repairs to electrical and plumbing systems and fixtures, air- conditioning and heating systems, loading doors, paved parking areas and drives, mowing of grass and care of shrubs. Tenant shall at its expense contract with a reputable firm for periodic servicing of the heating, air- conditioning and ventilation systems as recommended by the manufacturer of such equipment and shall keep on file with Landlord or its agent a copy of said contract or other substantial proof of such servicing. Tenant shall be responsible for all repairs to heating and air conditioning equipment including parts and labor. Tenant shall also maintain pest control (including termite) inspection and treatment of the premises as required. Tenant agrees to return said premises to Landlord at the expiration or prior termination of this lease in as good condition and repair as when received, natural wear and tear, damage by storm, fire lightening, or other natural casualty excepted. 5. ALTERATION OF BUILDING AND INSTALLATION OF FIXTURES AND OTHER APPURTENANCES: Tenant may, with prior written consent of Landlord, but at its own cost and expense in a good, workmanlike manner, make such alterations and repairs in the building as Tenant may require for the conduct of its business without, however, materially altering the basic character of the building or improvements, or weakening any structure on the demised premises. Tenant shall have the right without the permission of the Landlord to erect at Tenants sole cost and expense, such temporary partitions, including office partitions, as mat be necessary to facilitate the handling of Tenant's business and to install electrical fixtures, additional lights and wiring and other trade appliances. Any alterations and improvements to the leased premises, including but not limited to partitions, all electrical fixtures, lights and wiring, shall at the option of Landlord, become the property of Landlord, at the expiration or sooner termination of this lease. Should Landlord request Tenant to remove all or any part of the above mentioned items, Tenant shall do so prior to the expiration of this lease, or any extension thereof, Tenant shall remove said shelves, bins and machinery, and repair, in good and workmanlike manner, all damage done 2 2 to the lease premises by such removal. Tenant shall not exercise the right and privilege granted by this Article 5 in such manner as to damage or affect the structural qualities of the building. Before any work is begun, tenant agrees to furnish Landlord with hold harmless agreements from all contractors protecting against mechanics liens. 6. SUBORDINATION OF LEASE: Tenants rights under this lease shall remain subordinate to any bona fide mortgage or deed to secure debt, which is now, or may hereafter be placed upon the premises by Landlord. 7. CONDEMNATION: In the event any part of the premises shall be taken or condemned at any time during the term hereof through the exercise of power of eminent domain, with or without litigation, and Tenant shall determine that the remaining portion of premises are not reasonably suitable for it's use and occupation of premises are giving written notice to Landlord within ninety (90) days after the date of such taking, terminate this lease and Landlord shall refund any unearned rent paid in advance by Tenant. If Tenant does not terminate this lease as provided above, this lease shall continue in force as to the remaining portion of the demised premises and in such event the monthly rental thereafter payable by Tenant hereunder shall be adjusted and prorated in the exact ratio which the value or the premises remaining after such condemnation bears to the value of the premises immediately preceding the condemnation, and Landlord shall, at its own expense, make any repairs or alterations to said premises which may be necessary to restore the premises, in so far as possible, to their condition prior to condemnation. In the event of the taking of all or any portion of the premises if the Tenant terminates the lease as provided above, Landlord and Tenant shall together pursue the claim against the condemning or taking authority for the value of the property taken and tenant shall receive from the condemnation award the value of his improvements, of any, so taken; Tenant shall receive no other part of the condemnation award. If the lease is not terminated, Landlord shall receive the entire award in the condemnation proceeding. 8. ERECTION AND REMOVAL OF SIGNS: Tenant shall place suitable signs on the leased premises for the purpose of the indicating the nature of the business carried on by the Tenant in said premises; provided, they shall not damage the leased premises in any manner. At the termination of this, Landlord may require that the Tenant remove his sign and any damage to the premises caused by the removal shall be promptly repaired by the Tenant. Tenant shall be responsible for applying for and paying for any and all licenses or fees which may be required by any governmental authority as it pertains to signage. And further, Tenant shall adhere to all local sign ordinances as it pertains to the erection of the signs on the premises. 3 3 9. GLASS BREAKAGE AND VANDALISM: Tenant agrees to immediately replace all broken or damaged glass with glass of a comparable quality and characteristics which meets appropriate agence building code requirements, excepting breakage covered under Landlord's normal fire and extended coverage insurance policy. Tenant shall make any repairs or replacements caused by vandalism to the premises or any part thereof, if said damage is not covered by Landlord's insurance. 10. RIGHT OF ENTRY OF LANDLORD: Tenant at any time during this lease term shall permit inspection of the demised premises during reasonable business hours by Landlord or Landlord's agents or representatives for the purpose of ascertaining the condition of the demised premises and in order that the Landlord may make such repairs as may be required to be made by the Landlord under the terms of this lease. Sixty (60) days prior to the expiration of this lease, Landlord may post suitable notice on the demised premises that the same are "For Rent" and may show the premises to prospective tenants at reasonable times. Landlord may not, however, thereby unnecessarily interfere with the use of demised premises by Tenant. 11. PAYMENT OF UTILITIES: Tenant shall contract for and pay all charges for sewage, water, gas, electricity and other public utilities used on the leased premises, including all replacements of light bulbs, tubes, ballasts and starters. Landlord may pay any delinquent bills incurred by the Tenant during the lease term which bills may create a lien on the demised premises and shall upon demand be immediately reimbursed by Tenant. Said payments shall be treated as additional rental even though the lease term may have expired. 12. ASSINGNMENT AND SUBLETTING: Neither this lease nor any interest herein may be assigned by the Tenant voluntarily or involuntarily, by operation of law, and neither all not any part of the leased premises shall be sublet by Tenant without the written consent of Landlord first had and obtained; however, Landlord agrees not to withhold it's consent unreasonably for Tenant to sublet the demised premises. 13. DAMAGE OR DESTRUCTION: If the demised premises or any part thereof shall be damaged or destroyed by fire or other casualty, Landlord shall promptly repair all such damage and restore the demised premises without expense to Tenant, subject to delays due to adjustment of insurance claims, strikes and other causes beyond Landlord's control. If such damage or destruction shall render the premises untenantable in whole or in part, the rent shall be abated wholly or proportionately as the case may be until the damage shall be repaired and the premises restored. If the damage or destruction shall be so extensive as to require the substantial rebuilding (i.e., expenditure of fifty (50%) percent or more of replacement costs) of the building or buildings on the demised premises, Landlord or Tenant may elect to 4 4 terminate this lease by written notice to the other given thirty (30) days after the occurrence of such damage or destruction. Landlord and Tenant hereby release each other from liability for loss or damage occurring on or to the leased premises or the premises of which they are a part or to the contents of either thereof, caused by fire or other hazards ordinarily covered by fire and extended coverage insurance policies and each waives all rights of recovery against the other for such loss or damage. Willful misconduct lawfully attributable to either part, whether in whole or in part a contributing cause of the casualty giving rise to the loss or damage, shall not be excused under the foregoing release and waiver. 14. INJURIES AND PROPERTY DAMAGE: Tenant agrees to indemnify and hold Landlord harmless of and from any and all claims of any kind or nature arising from Tenant's use of the demised premises during the term hereof, and tenant hereby waives all claims against Landlord for damage to goods, wares, or merchandise of for injury to persons in and upon the premises from any cause whatsoever, except such as might result from the negligence of Landlord or Landlord's representatives or from failure of Landlord to perform it's obligation herunder within a reasonable within a reasonable time after notice in writing by Tenant requiring such performance by Landlord. Tenant shall at all times during the term hereof keep in effect in responsible companies liability insurance in the names of and for the benefit of Tenant and Landlord with limits as follows: Bodily Injury .$ 100,000 each person $ 300,000 each accident Property Damage . $ 100,000 Such insurance may, at Tenant's election, be carried under any general blanket coverage of Tenant. A renewal policy shall be procured not less than ten (10) days prior to the expiration of any policy. Each original policy or a certified copy thereof, or a satisfactory certificate of the insurer evidencing insurance carried with proof of payment of the premium shall be deposited with Landlord. Tenant shall have the right to settle and adjust all liability claims and all claims against the insuring companies, but without subjecting Landlord to any liability or obligation. 15. SURRENDER OF PREMISES: Tenant agrees to deliver all keys and to surrender the leased premises at the expiration, or sooner termination, of this lease, or any extension thereof, broom-clean in the same condition as said when premises were delivered to Tenant, or as altered, pursuant to the provisions of this lease, ordinary wear, tear and damage by the elements excepted, and Tenant shall remove all of it's property. Tenant agrees to pay a reasonable cleaning charge should it be necessary for Landlord to restore or cause to the restored the premises to the same condition as when said premises were delivered to Tenant. 5 5 16. QUIET ENJOYMENT: If and so long as Tenant pays the rents reserved by this lease and performs and observes all the covenants and provisions hereof, Tenant shall quietly enjoy the demised premises, subject, however, to the terms of this lease, and the Landlord will warrant and defend Tenant in the enjoyment and peaceful possession of the demised premises throughout the term of the lease. 17. WAIVER OF COVENANTS: It is agreed that the waiving of any of the covenants of this lease agreement by either party shall be limited to the particular instance and shall not be deemed to waive any other breaches of such covenant or any provision herein contained. 18. DEFAULT: If Tenant shall make default in the fulfillment of any of the covenants and conditions hereof except default in payment of rent, Landlord may, at it's option, after fifteen (15) days prior to notice to Tenant, make performance for Tenant and for the purpose advance such amounts as may be necessary. Any amounts so advanced or any reasonable expence incurred or sum of money paid by Landlord by reason of the failure of Tenant to comply with any covenant, agreement, obligation, or provision of this lease shall be deemed to be additional rent for the leased premises and shall be dire and payable to Landlord on demand. The acceptance by Landlord or any installment of fixed rent or of any additional rent hereunder shall not be a waiver of any other rent than due. If Tenant shall make default in fulfillment of any of the covenants or conditions of this lease (other then the covenants for the payment of rent or other amounts) and any such default shall continue for a period of thirty (30) days after notice, then Landlord may, at it's option, terminate this lease by giving Tenant notice of such termination and, thereupon, this lease shall expire as fully and completely as if that day were the date definitely fixed for the expiration of the term of this lease and Tenant shall then quit and surrender the leased premises. 19. DEFAULT IN RENT, INSOLVENCY OF TENANT: If Tenant shall make default in the payment of the rent reserved hereunder, or any part thereof, or making nay other payment herein provided for , and any such default shall continure for a period of fifteen (15) days, after written notice to Tenant, or if the leased premises or any part thereof shall be abandoned or vacated or if the Tenant shall be dismissed therefrom by or under any authority other than Landlord, or if Tenant shall file a voluntary petition in bankruptcy or if Tenant shall file any petition or institute any proceedings under any Insolvency or Bankruptcy Act or any amendment therto hereafter made, made seeking to effect it's reorganization or a composition with it's creditors or if, in any proceedings based on the insolvency of the Tenants or relation to bankruptcy proceedings, a receiver or trustee shall be appointed for Tenant or the leased premises or if any proceedings shall be commenved for the reorganization of Tenant or if the leasehold estate created hereby shall admit in writing it's inability to pay it's obligations generally as they become due, then 6 6 Landlord may, at it's option, terminate this lease, without notice, and Landlord or Landlord's agents and servants may immediately, or at any time thereafter, re- enter said premises by force, summary proceedings or otherwise, and remove all persons and property therein, without being liable to indictment, prosecution or damage therefore, and Tenant herby expressly waives the service of any notice in writing of intention to re-enter said premises. Landlord may in addition to any other remedy provided by law or permitted herein, at it's option re-let said premises on behalf of Tenant, applying any moneys collected first to the payment of expenses of resuming or obtaining permission, and second to the payment of costs of placing the leased premises in rentable condition, including leasing commission, and third to the payment of rent due hereunder, and any other charges due to the Landlord. Any surplus remaining thereafter shall be paid to Tenant and Tenant shall remain liable for any deficiency in rental which shall be paid upon demand therefore to Landlord. 20. ENFORCEMENT: In the even either party shall enforce the terms of this lese by suit or otherwise, the party at fault shall pay the costs and expenses incident thereto, including a reasonable attorneys fee. 21. FAILURE TO PERFORM COVENANT: Any failure on the part of either party to theis lease to perform any obligation hereunder, and any delay in doing any act required hereby shall be excused if such failure or delay is caused by any other similar caused by any strike, lockout, governmental restriction or any other similar cause beyond the control of the party so failing to perform, to the extent and for the period that such continues, save and except that the provisions of this paragraph shall not excuse a non-payment fo rent or other sums due hereunder on it's due day. 22. RIGHTS TO SUCCESSORS AND ASSIGNS: The covenants and agreements contained in the within lease shall apply to, inure to the benefit of, and be binding upon the parties hereto, their heirs, distributes, executors, administrators, legal representatives, assigns and upon their respective successors in interest, except as expressly otherwise hereinbefore provided. 23. LIENS: Tenant agrees not to permit any lien for moneys owing by Tenant to remain against the leased premises for a period of more then thirty (30) days following discovery of the same by Tenant; provided, however, that nothing herin contained shall prevent Tenant, in good faith and for good cause, from contesting in the courts the claim or claims of any person, firm or corporation growing out of Tenants operation of the demised premises or costs of improvements by Tenant on the said premises, and the postponement of payment of such claim or claims, until such contest shall finally be decided by the courts shall not be a violation of this agreement or any covenant thereof. Should any such lien be filed and not released or discharged or action not commenced to declare 7 7 the same by Tenant, Landlord may at Landlord's option (but without any obligation so to do) pay and discharge such lien and may likewise pay and discharge any taxes, assessments or other charges against the leased premises which Tenant is obligated hereunder to pay and which may or might become a lien on said premises. Tenant agrees to repay any sums so paid by Landlord upon demand therefore, together with interest at the rate of ten (10%) percent per annum for the date any such payment is made. 24. CONSTRUCTION OF LEASE: The word " Landlord" as used herein shall refer to the individual, individuals, partnership, or corporation called "Tenant". Word of any gender used in this lease shall be held to include any other gender, and words in a singular number shall be held to include plural when the sense requires. 25. NOTICES: It is agreed that the legal address of the parties for all notices required or permitted to give hereunder, or for all purposes of billing, process, correspondence, and any other legal purposes whatsoever, shall be deemed sufficient, if given by communication in writing by United States mail, postage prepaid and certified, and address as follows: To the Landlord at the following address: Covold Partners, 17 Calender Ct Suite 4 Columbia, SC 29206. To the Tenant at the following address: U.S. Patriot, 5401 Forest Drive, Columbia, SC 29206. 26. ADDITIONAL PROVISIONS: Insofar as the following provisions conflict with other provisions of the lease, the following shall control. A. INSURANCE: Tenant shall maintain suitable fire and extended coverage insurance upon the building during the term of this lease and any renewals thereof, and agrees to name the Mortgage as additional named on the policy. Such insurance will be to the full extent of the insurable replacement value of the building improvements. Tenant agrees to provide the Landlord with written proof of such insurance protection. It is further understood that Tenant shall be responsible for maintaining it's own fire and extended coverage insurance on it's contents. Such insurance may be carried under a blanket policy by Tenant. B. REAL ESTATE TAXES: To be paid by Landlord. 27. SECURITY DEPOSIT: Security deposit of Three thousand three hundred seventy five Dollars ( $3375) WITNESS: LANDLORD: Covold Partners ____________________ By:______________________ Mike Arnold ____________________ By:______________________ Tenant U.S. Patriot ____________________ By:____________________ 8 8 EX-6 8 usppromnotenov2000.txt US PATRIOT PROMISSORY NOTE DATED NOVEMBER 2000 PROMISSORY NOTE Principle Loan Date Maturity Loan No. Account Officer Initials $100,000.00 11-30-00 11-30-05 1024579987 - ------------------------------------------------------------------------------ References in the shaded area are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing has been omitted due to text length limitations. Borrower : U.S. Patriot, Inc. (TIN: 57-1107699) Lender: SouthTrust Bank P.O. Box 6125 Forest Acres Office Columbia, SC 29206 5490 Forest Drive Columbia, SC 29206 (803) 787-0698 ______________________________________________________________________________ Principle Amount: $100,000.00 Initial Rate: 10.500% Date of Note: 30 NOV 00 PROMISE TO PAY. U.S. Patriot , Inc. (Borrower) promises to pay to SouthTrust Bank (Lender) , or order, In lawful money of the United States of America, the principal amount of One Hundred Thousand & 00/100 Dollars ($100,000.00), together with interest on the unpaid principal balance from October 11,2001, until paid in full. PAYMENT-Subject to any payment changes resulting form changes in the index. Borrower will pay this loan in 59 payments of $2,156.77 each payment and an irregular last payment estimated at $1,091.96. Borrower's first payment will be due on December 30, 2000, and all subsequent payments are due on the same day of each month after that. Borrower's final payment will be due on November 30, 2005, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and any late charges, then to any unpaid interest, and any remaining amount to principal. The annual interest rate for this Note is computed on a 365/360 basis: that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay lender at Lenders address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The Interest rate on this Note is subject to change from time to time based on changes in an index which is the "base rate". The term "base rate" means the rate o Interest designated by the Lender periodically as it's Base rate( the Index). The Index is not necessarily the lowest rate charged by Lender on it's loans and is set by Lender in it's sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current index rate upon Borrower's request. The interest rate change will not occur more often than each day the Index Rate charges. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 9.500% per annum. The Interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 1.000 percentage point over the Index, resulting in the initial rate of 10.500% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at it's option may do one or more of the following: A Increase Borrower's payments to ensure Borrower's loan will pay off by it's original final maturity date. B) Increase Borrower's payments to cover accruing interest. (C) Increase the number of Borrower's payments, and (D) continue Borrower 's payments at the same amount and increase Borrower's final payments. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earliest than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any 1 check or other payment Instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: SouthTrust Bank, Forest Acres Office, 5490 Forest Acre Drive, Columbia, SC 29205. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $0.50, whichever is greater. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, at Lender's option, and if permitted by applicable law, Lender may add any unpaid accrued Interest to principal and such sum will bear interest therefrom until paid at the rate provided in the Note. Upon default the total sum due under this Note will bear Interest from the date of acceleration or maturity. At the variable interest rate on this Note. The Interest rate will not exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note. Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a gin business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or Insolvency laws or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosures or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the calm which is the basic of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding. In the amount determined by Lender, in it's sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of death, Lender, at it's option, may, but shall not be required to permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership at twenty-five percent (25%) or more of the common stock of Borrower. Address Change. A material adverse change occurs in Borrowers financial condition, or Lender believes the prospect of payment performance of this Note is impaired. 2 2 Insecurity. Lender in good faith believes itself insecure. Cure Provisions, If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured and (no event of default will have occurred) if Borrower , after receiving written notice from Lender demanding cure of such default: 1) cures the default within (15) days or 20 if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHT'S. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes Lenders reasonable attorney's fees in an amount not less than fifteen percent (15%) of the amount owing on this Note and Lender's legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings including efforts to modify or vacate any automatic stay or injunction and appeal. If not prohibited by applicable law, Borrower also will pay any court costs. In addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. Initial Here_______ GOVERNING LAW. This Note will be governed by construed and enforced in accordance with federal law and the laws of the State of South Carolina. This note has been accepted by Lender in the State of South Carolina. RIGHT OF SETOFF. To the extent permitted by applicable law. Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other accounts). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower any open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable la, to charge or setoff all sums owing on the indebtedness against any and all accounts , and at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff right's provided in this paragraph. COLLATERAL. Borrower acknowledges this Note is secured by Any and All Commercial Security Agreements describing One (1) Embroidery Machine EMT1/ EDSIV with Embroidery Software.: Guaranty of Payment executed by Phil Dee. FINANCIAL STATEMENTS. Until this loan is paid in full. Borrower will furnish to Lender, as soon as available but in any event within 120 days after the end of each fiscal year. Borrower's balance sheet and statements of income, cash flows and changes in capital for the fiscal year just ended. Setting forth in comparative form the corresponding figures for the prior year, together with accompanying schedule and footnotes. If the financial statements were complied or certified by a public accountant, Borrower will also furnish Lender the accountants letter accompanying the financial statements. Borrower will furnish to Lender, as soon as available, but in any event within 30 days after the end of the first three quarters of Borrower's fiscal year. Borrower's balance sheet and profit and loss statement for the quarter just ended,. All financial reports provided to Lender will be certified in writing by the chief executive officer, managing partner or comparable financial officer of Borrower to be true and complete to the heat of his or her knowledge and belief and to have been prepared in accordance with generally accepted accounting principles applied on a basic consistent with the financial statements previously furnished to Lender or, if not so prepared, setting forth the manner in which the financial statements depart therefrom. Borrower will cause each guarantor or endorser of this loan to furnish to Lender, within 90 3 days after Lender's request therefor, a current financial statement of such guarantor or endorser in form acceptable to Lender and a copy of the federal income tax return most recently filed by such guarantor or endorser. CHANGE IN OWNERSHIP. Any aggregate change of twenty -five (25%) or more in the ownership of the common stock or other ownership interest in Borrower in any period of 12 consecutive months shall constitute a default under this loan. OBLIGATION TO DEVELOP BUSINESS PLAN. Before approving this loan, Lender required Borrower to furnish Lender with financial statements and other information concerning the financial history and future prospects of Borrower's business. Lender requested and reviewed that information solely to enable it to make a decision whether to extend credit. Borrower understands that Lender has not necessarily approved Borrower's business plan and has not undertaken any duty or obligation to advise Borrower on business matters now or in the future. Lender is not a financial or business advisor, and borrower will not look to Lender for business advise. Lender's role is solely hat of a Lender and Borrower's relationship with Lender is that of debtor and creditor. Lender expressly disclaims any fiduciary or other duties or obligations to Borrower except those expressly provided in the written loan documents signed by Lender. NO ORAL AGREEMENTS. Lender's agreements to lend, Borrower's obligation to repay the loan, and all other agreements between Lender and Borrower have been reduced to writing. This instrument and the other documents signed concurrently with it contain the entire agreement between Lender and Borrower. Any prior conversations and discussions that Lender or Borrower may have had concerning the transaction are not binding unless reflected in the written loan documents. Borrower acknowledges that the loan documents reflects everything the Lender has agreed to do or not to do in connection with the transaction. SUCCESSOR INTERETS. The terms of this Note shall be binding upon Borrower , and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit to Lender and it's successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: SouthTrust Bank P.O. Box 2554 Birmingham, AL35290 GENERAL PROVISIONS. Lender may delay or forge enforcing any of it's rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, t the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing , no party who sighs this Note, whether as maker, guarantor, accommodation make or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral, or impair, fail to realize upon or perfect Lender's security interest in the collateral: and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that lender may modify this loan without the consent or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEGES RECEIPT OF A COMPLETEDD COPY OF THIS PROMISSARY NOTE. BORROWER: U.S. PATRIOT, INC. By:___________________________ Phil Dee, President/ Secretary of U.S. Patriot, Inc. 4 4 EX-7 9 usppromnoteoct2001.txt US PATRIOT PROMISSORY NOTE DATED OCTOBER 2001 PROMISSORY NOTE Principle Loan Date Maturity Loan No. Account Officer Initials $12,638.00 10-11-01 10-15-02 521592389888 - ------------------------------------------------------------------------------ References in the shaded area are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing has been omitted due to text length limitations. Borrower : U.S. Patriot, Inc. (TIN: 57-1107699) Lender: SouthTrust Bank P.O. Box 6125 Forest Acres Office Columbia, SC 29206 5490 Forest Dr. Columbia, SC 29206 (803) 787-0698 ______________________________________________________________________________ Principle Amount: $12638.00 Initial Rate: 6.500% Date of Note: 11 OCT 01 PROMISE TO PAY. U.S. Patriot , Inc. (Borrower) promises to pay to SouthTrust Bank (Lender) , or order, In lawful money of the United States of America, the principal amount of Twelve Thousand Six Hundred Thirty-eight & 00/100 Dollars ( $12,638.00), together with interest on the unpaid principal balance from October 11,2001, until paid in full. PAYMENT-Subject to any payment changes resulting form changes in the index. Borrower will pay this loan in 11 payments of $1,091.91 each payment and an irregular last payment estimated at $1,091.96. Borrower's first payment will be due on November 15, 2001, and all subsequent payments are due on the same day of each month after that. Borrower's final payment will be due on October 15, 2001, and will be for all principal and all accrued interest not yet paid. Pay include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and any late charges, then to any unpaid interest, and any remaining amount to principal. The annual interest rate for this Note is computed on a 365/360 basis: that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay lender at Lenders address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The Interest rate on this Note is subject to change from time to time based on changes in an index which is the "base rate". The term "base rate" means the rate o Interest designated by the Lender periodically as it's Base rate( the Index). The Index is not necessarily the lowest rate charged by Lender on it's loans and is set by Lender in it's sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current index rate upon Borrower's request. The interest rate change will not occur more often than each day the Index Rate charges. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 6.600% per annum. The Interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 1.000 percentage point over the Index, resulting in the initial rate of 6.600% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at it's option may do one or more of the following: A Increase Borrower's payments to ensure Borrower's loan will pay off by it's original final maturity date. B) Increase Borrower's payments to cover accruing interest. (C) Increase the number of Borrower's payments, and (D) continue Borrower 's payments at the same amount and increase Borrower's final payments. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earliest than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any 1 check or other payment Instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: SouthTrust Bank, Forest Acres Office, 5490 Forest Acre Drive, Columbia, SC 29205. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $0.50, whichever is greater. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, at Lender's option, and if permitted by applicable law, Lender may add any unpaid accrued Interest to principal and such sum will bear interest therefrom until paid at the rate provided in the Note. Upon default the total sum due under this Note will bear Interest from the date of acceleration or maturity. At the variable interest rate on this Note. The Interest rate will not exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note. Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a gin business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or Insolvency laws or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosures or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the calm which is the basic of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding. In the amount determined by Lender, in it's sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of death, Lender, at it's option, may, but shall not be required to permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership at twenty-five percent (25%) or more of the common stock of Borrower. Address Change. A material adverse change occurs in Borrowers financial condition, or Lender believes the prospect of payment performance of this Note is impaired. 2 2 Insecurity. Lender in good faith believes itself insecure. Cure Provisions, If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured and (no event of default will have occurred) if Borrower , after receiving written notice from Lender demanding cure of such default: 1) cures the default within (15) days or 20 if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHT'S. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes Lenders reasonable attorney's fees in an amount not less than fifteen percent (15%) of the amount owing on this Note and Lender's legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings including efforts to modify or vacate any automatic stay or injunction and appeal. If not prohibited by applicable law, Borrower also will pay any court costs. In addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. Initial Here_______ GOVERNING LAW. This Note will be governed by construed and enforced in accordance with federal law and the laws of the State of South Carolina. This note has been accepted by Lender in the State of South Carolina. RIGHT OF SETOFF. To the extent permitted by applicable law. Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other accounts). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower any open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable la, to charge or setoff all sums owing on the indebtedness against any and all accounts , and at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff right's provided in this paragraph. COLLATERAL. Borrower acknowledges this Note is secured by Any and All Commercial Security Agreements describing One (1) Embroidery Machine EMT1/ EDSIV with Embroidery Software.: Guaranty of Payment executed by Phil Dee. FINANCIAL STATEMENTS. Until this loan is paid in full. Borrower will furnish to Lender, as soon as available but in any event within 120 days after the end of each fiscal year. Borrower's balance sheet and statements of income, cash flows and changes in capital for the fiscal year just ended. Setting forth in comparative form the corresponding figures for the prior year, together with accompanying schedule and footnotes. If the financial statements were complied or certified by a public accountant, Borrower will also furnish Lender the accountants letter accompanying the financial statements. Borrower will furnish to Lender, as soon as available, but in any event within 30 days after the end of the first three quarters of Borrower's fiscal year. Borrower's balance sheet and profit and loss statement for the quarter just ended,. All financial reports provided to Lender will be certified in writing by the chief executive officer, managing partner or comparable financial officer of Borrower to be true and complete to the heat of his or her knowledge and belief and to have been prepared in accordance with generally accepted accounting principles applied on a basic 4 4 consistent with the financial statements previously furnished to Lender or, if not so prepared, setting forth the manner in which the financial statements depart therefrom. Borrower will cause each guarantor or endorser of this loan to furnish to Lender, within 90 days after Lender's request therefor, a current financial statement of such guarantor or endorser in form acceptable to Lender and a copy of the federal income tax return most recently filed by such guarantor or endorser. CHANGE IN OWNERSHIP. Any aggregate change of twenty -five (25%) or more in the ownership of the common stock or other ownership interest in Borrower in any period of 12 consecutive months shall constitute a default under this loan. OBLIGATION TO DEVELOP BUSINESS PLAN. Before approving this loan, Lender required Borrower to furnish Lender with financial statements and other information concerning the financial history and future prospects of Borrower's business. Lender requested and reviewed that information solely to enable it to make a decision whether to extend credit. Borrower understands that Lender has not necessarily approved Borrower's business plan and has not undertaken any duty or obligation to advise Borrower on business matters now or in the future. Lender is not a financial or business advisor, and borrower will not look to Lender for business advise. Lender's role is solely hat of a Lender and Borrower's relationship with Lender is that of debtor and creditor. Lender expressly disclaims any fiduciary or other duties or obligations to Borrower except those expressly provided in the written loan documents signed by Lender. NO ORAL AGREEMENTS. Lender's agreements to lend, Borrower's obligation to repay the loan, and all other agreements between Lender and Borrower have been reduced to writing. This instrument and the other documents signed concurrently with it contain the entire agreement between Lender and Borrower. Any prior conversations and discussions that Lender or Borrower may have had concerning the transaction are not binding unless reflected in the written loan documents. Borrower acknowledges that the loan documents reflects everything the Lender has agreed to do or not to do in connection with the transaction. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower , and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit to Lender and it's successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: SouthTrust Bank P.O. Box 2554 Birmingham, AL35290 GENERAL PROVISIONS. Lender may delay or forge enforcing any of it's rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, t the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing , no party who sighs this Note, whether as maker, guarantor, accommodation make or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral, or impair, fail to realize upon or perfect Lender's security interest in the collateral: and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that lender may modify this loan without the consent or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEGES RECEIPT OF A COMPLETEDD COPY OF THIS PROMISSARY NOTE. 4 4 BORROWER: U.S. PATRIOT, INC. By:___________________________ Phil Dee, President/ Secretary of U.S. Patriot, Inc. EX-8 10 uspaudconsent.txt US PATRIOT, CONSENT OF AUDITORS ElliottDavis Elliot Davis, LLP Advisors-CPAs-Consultants 1901 Main Street, Suite 1650 P.O. Box 2227 Columbia, SC 29202-2227 Phone 803.256.0002 Fax 803.254.4724 INDEPENDENT AUDITOR'S CONSENT We consent to the use in this Registration Statement of US Patriot, Inc. on Form SB-2 of our report, dated November 27, 2001, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the caption "Experts" in such Prospectus. /s/ Elliott Davis, LLP Elliott Davis, LLP Columbia, South Carolina January 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----