-----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, TDCb7Ol+EsQeP5cxUCkwJTMVzY5L0+A9UsDXq8z4uKGUUwUKs+Hendg1HHIZj6+a ao71E9FC9aA0tJHA5lVl2g== 0001015402-00-000967.txt : 20000414 0001015402-00-000967.hdr.sgml : 20000414 ACCESSION NUMBER: 0001015402-00-000967 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERENS INDUSTRIES INC CENTRAL INDEX KEY: 0000768216 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870565948 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-22711 FILM NUMBER: 600279 BUSINESS ADDRESS: STREET 1: 701 NORTH POST OAK ROAD STREET 2: SUITE 350 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7136827400 MAIL ADDRESS: STREET 1: 5525 S 900 EAST STREET 2: SUITE #10 CITY: SALT LAKE CITY STATE: UT ZIP: 84117 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL AIR CORP DATE OF NAME CHANGE: 19970521 10KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB _______________________________________________________________________________ [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 BERENS INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Commission file number: 000-22711 Nevada 87-05065948 ------ ----------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 701 N. Post Oak Road, Houston, Texas 77024 ------------------------------------ ----- (Address of Principal Executive Office) (Zip Code) 713-682-7400 ------------ (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Exchange Act: None Securities registered pursuant to Section 12(g)of the Exchange Act: Common Stock Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] Issuer's revenues for the 12 months ended December 31, 1999 were $2,543. The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the average bid and ask price on the OTC Electronic Bulletin Board on March 24, 2000 was $9,216,188. As of March 24, 2000, registrant had 18,690,500 shares of Common Stock outstanding. The registrant is incorporating by reference into Part III of this Form 10-KSB, certain information contained in the registrant's proxy statement for its 2000 annual meeting of stockholders. PART I This annual report contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward- looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of the forward- looking statements after the date of this report to conform our prior statements to actual results. ITEM 1. DESCRIPTION OF BUSINESS BUSINESS CONCEPT Berens Industries, Inc., through its wholly owned subsidiary, Artmovement.com, Inc., is a development-staged company focused on delivering one of the Internet's first private-label auction network for the art and antique world-Streaming Auctions (tm). Artmovement intends to combine this with development of one of the first Internet art and entertainment portals with public access-Artmovement.com. We believe the two are unique in their fundamental ability to empower clients with custom ready-made network solutions that help them explore the commercial and creative limits of the Internet medium. Using ready-made solutions, we will allow clients to instantly stream custom-branded Internet solutions to their own websites with zero investment in installation, hardware, or bandwidth concerns. By aggregating all clients and registered patrons onto a centralized infrastructure, we intend to create a global affiliate network of consumers and viewership for both merchandising and entertainment events. Our primary sources of revenue will consist of Business-to-Consumer ("B2C") products and services that generate product-related subscriptions fees, service fees, transaction-related fees and advertising. Our primary approach to market penetration is two-fold: (1) attract business clients who have a long-standing reputation with art and antique patrons, and (2) develop a portal to become a conduit for Webcast events and Internet art performances that will attract more patrons. We believe these two strategies in the Art and Antique market, makes Artmovement one of the first Internet company to network buyers and sellers through branded B2C solutions, while also developing patronage for its clients through portal development. Our goal is to become the leading provider of outsourced, networked e-commerce services. Key elements of our strategy include: - - expanding the reach and scope of the Artmovement Network; - - increasing traffic and transactions across the Artmovement Network; - - continuing to provide new service offerings; - - expanding into additional international markets; and - - leveraging our expertise to further penetrate the business-to-business market. CORPORATE HISTORY We were incorporated in January 1985 as a Nevada corporation under the name National Air Corporation. From 1985 until 1992, we engaged in the business of leasing and chartering aircraft to provide air transportation services. These operations were unsuccessful, and we ceased all activities in 1992. In June 1999, we acquired all of the issued and outstanding shares of capital stock of Berensgallery.com, Inc., a Nevada corporation in exchange for 2,893,250 shares of common stock to the shareholders of Berensgallery.com. Subsequent to this transaction, we changed our name to Berens Industries, Inc. In December 1999, we acquired all of the issued and outstanding shares of capital stock of Artmovement.com, Inc., a Nevada corporation in exchange for 12,960,000 shares of common stock to the shareholders of Artmovement.com. Berensgallery.com does not conduct any significant business operations. MARKET OPPORTUNITY INDUSTRY OVERVIEW: TRADITIONAL ART MARKET The art and antique market has historically been characterized by "brick and mortar" gallery and auction businesses organized as single galleries or small art store chains, each representing different artists and products. Individual art retailers must attract customers: (a) by offering products with consumer appeal and name brand recognition of artists, (b) through price competitiveness, and (c) by offering high quality. In addition, the traditional business channels of art retailers have historically been challenged with: - - INVENTORY COSTS: The unpredictable appeal and high cost of acquiring art inventory can create slow inventory cycles. - - LIMITED SELECTIONS: Selection is often limited due to scarcity of original and limited edition art and physical retail space constraints. - - HIGH OPERATING COST STRUCTURES: Traditional brick and mortar galleries typically have a high cost of operations as most leading galleries are located in either expensive shopping locales or in high-cost retail outlets and malls. - - HIGH COST OF CUSTOMER SERVICE: Luxury goods buyers often demand personalized customer service and sales people must be well trained and highly educated. Sales people must devote considerable time to each customer. We believe these factors combine to create a high cost in time and resources to maintain an effective gallery sales force. The challenges for rolling out an online presence and generating traffic are even more imposing: - - HIGH BARRIERS TO ENTRY: Traditional brick and mortar galleries often achieve high profit margins, but they hav e spent little on computer infrastructure in the past. We estimate that to start a reputable online auction, they will need to invest heavily in software, hardware and bandwidth alone. - - HIGH COST TO MARKET WEBSITES: eCommerce companies in every market are sometimes spending three times more capital on marketing their online brand than they are on development costs. - - MUST HIRE OUTSIDE THEIR CORE BUSINESS: To maintain and manage a successful online presence, art and antique companies will have to hire IT staff, web designers, and programmers with which they traditionally have no experience managing. 2 Consumers tend to purchase art, antiques, decorative accessories and collectibles from galleries and specialty stores. We believe that the increased demand for art and collectible products through specialty retail stores presents a significant business opportunity for us. We believe our Private-Label "Click & Brick" solution successfully meets the challenges posed to the traditional art retailing market. We believe these markets are largely untapped and provide the greatest opportunity for focused and quick-maneuvering companies to carve-out market share rapidly. We believe the pacesetters will be companies who provide: - - COMPLETE TECHNOLOGY SOLUTIONS: We believe this market is not computer savvy and requires one-stop shopping for applications, hardware and hosting. - - PRIVATE-LABEL SOLUTIONS: We believe this market considers reputation a key to success. We believe they have yet to embrace generic outlets like eBay, Amazon or FairMarket.com or Co-Label upstarts like iCollector or Artnet.com. - - SIMPLE SOLUTIONS AT A LOW COST: Few "Brick and Mortar" companies have computer expertise in-house, nor do they consider managing teams of consultants a viable option. They want simple solutions to solve specific needs. In addition, we expect that they will show little interest in trying a solution that requires large capital expenditures on technology ownership. - - A FOCUS ON ART AND ANTIQUES: This market tends to be educated and refined in their business and ways of doing business and they expect vendors to be as educated and refined as them in doing business in this unique marketplace. INDUSTRY OVERVIEW: INTERNET ART MARKET The widespread consumer acceptance of e-commerce presents an enormous opportunity for art retailers and artists to conduct business over the Internet. In addition, we believe demographic trends, a strong economy, and the increase in home ownership have all contributed to greater spending on private collections of art, antiques, collectibles and home decorations. The expansion into the Internet by art retailers and auctioneers has greatly expanded the typical consumer's access to high quality art and to information about art, including history and pricing. The Internet has provided art retailers with the opportunity to develop one-to-one relationships with customers worldwide from a central location without making the significant investments required to build a number of local retail points of presence. It has also reduced the printing and mailing requirements associated with traditional worldwide marketing activities. We believe art and related items are well suited for e-commerce because of the wide range of unique items available, the dispersed locations of potential customers, and the relatively low operating costs. There are now a number of on-line art galleries and collectibles retailers. These can be categorized broadly as: - - UPSCALE AUCTION HOUSES which are attempting to extend their reach and margins by offering items for auction on-line and by encouraging smaller dealers to affiliate with them; - - ON-LINE COMPANIES which focus exclusively on Internet sales of art and art-related items, ranging from high quality original work to collectibles and posters; and - - "BRICK AND MORTAR" COMPANIES which are seeking either to supplement store sales with Website business or to shift to a full Internet model. 3 THE CURRENT LANDSCAPE FOR ONLINE DYNAMIC PRICING FORMATS The dominant format for traditional commercial transactions today is fixed pricing, in which sellers dictate prices to buyers. This often results from the fact that sellers traditionally have been unable to adjust prices in a timely manner to reflect the demands of buyers because they have lacked access to real-time aggregated demand information. Aside from our outsourced, networked solution, there are a number of other ways businesses and community web sites can participate in the online auction market, but we believe each of them has significant disadvantages.
OPTIONS DISADVANTAGES - Surrender of online branding; - surrender of control of users' auction experience; and List goods on a general third-party - limited access to auction-generated pricing and Auction web site marketing data - significant initial and ongoing investments in License and install third-party technology, personnel, and resources; and Auction software - minimal initial traffic and bidding activity. - significant initial and ongoing investments in technology, personnel, and resources; and Develop auction software in-house - minimal initial traffic and bidding activity;.
THE CURRENT LANDSCAPE FOR ONLINE DYNAMIC PRICING FORMATS The dominant format for traditional commercial transactions today is fixed pricing, in which sellers dictate prices to buyers. This often results from the fact that sellers traditionally have been unable to adjust prices in a timely manner to reflect the demands of buyers because they have lacked access to real-time aggregated demand information. Aside from our outsourced, networked solution, there are a number of other ways businesses and community web sites can participate in the online auction market, but we believe each of them has significant disadvantages. THE CURRENT LANDSCAPE FOR INTERNET ART MOVEMENTS Since the summer of 1999, eBay and Amazon have partnered with two leading auctioneers, Butterfield & Butterfield and Sotheby's, respectively. The eBay/Butterfield partnership resulted in eBay rolling-out their "Great Collections" primary category in the Fall of 1999. The Amazon/Sotheby's partnership resulted in a co-label auction hall hosted at sothebys.amazon.com. Both Sotheby's and Butterfield will, or already have, opened Private Label efforts of their own at their own websites. Artmovement is convinced the reason large auctioneers cannot get other dealers to upload inventory stems from a fundamental characteristic of this market fragmentation. Fragmented markets may have a small number of large brand names, but a significant portion of the market is divided regionally and locally among small-to-medium sized enterprises (SMEs). They each have invested significant marketing capital in generating regional name recognition and reputation, and generally show a strong unwillingness to co-mingle inventory under another brand. In such fragmented market environments, we expect that mature and profitable art and antique dealers will show limited interest in listing inventory with Sotheby's and Butterfield & Butterfield at Amazon and eBay, respectively. We believe that SMEs require Private Label solutions, not Co-Labeling. Until the SMEs move to the Internet under their own label, we believe they will remain "Brick and Mortar" companies, only. 4 THE ARTMOVEMENT SOLUTION The Artmovement strategy is to provide a complete solution for all sectors of the art and antique market: large to small auctioneers; Primary and Secondary art sales; wholesalers, retailers and artist direct sales; as well as to provide services and amenities for patrons, curators, critiques, appraisers, and private sellers. In other words, the Artmovement solution is to focus exclusively and entirely on the full spectrum of the art and antique vertical market, by providing low-cost, Private-Label Internet applications and an affinity community portal, namely artmovement.com. The complete solution for clients will meet the following requirements of operating their own online presence: - - COMPLETE E-COMMERCE SOLUTION: Clients receive Internet applications plus bundled hosting services from a leader in the Application Service Provider market, Interliant, Inc., that includes scalable server(s), managed hosting and unlimited bandwidth; - - LOW COST: All Artmovement products and services are rented on a monthly basis; thus clients' never have to invest in ownership of technology; - - EXPANDING PATRON MEMBERSHIP: All Artmovement products are centrally networked to expose client inventory to patrons throughout the Artmovement Network. Clients may choose to open their inventories to the entire network (thus accepting inventory listings from other's as well), or they many keep their inventory closed to other client sites, thus only benefiting from patron referrals coming through promotion at artmovement.com; see below under Advantages of Dynamic Pricing and Revenue Sharing Incentives; - - REVENUE SHARING: As an incentive to open inventory to the entire Artmovement Network, Artmovement will share its transaction fees - - PROMOTION OF CUSTOMER BRAND: Artmovement products "plug" into a clients current website so that clients can continue to market their online presence under their own brand; - - AFFINITY MARKETING: Each client company receives Affiliate membership into the Artmovement Network, which includes Preferred Presence Partner privileges at artmovement.com. Artmovement will use the portal location to attract more patronage to the benefit of its Affiliates. All registered users at artmovement.com will receive Patron Membership Reciprocity throughout our client locations, meaning they are treated as fully-registered members throughout the Artmovement Network; - - MARKET INFORMATION: Artmovement, through its parent company, has exclusive rights to bundle the prestigious Mayer International Auction Records Index (a.k.a. The Blue Book). We believe Mayer is the definitive resource for fine art dealers, appraisers, museums and galleries for works of art that have sold at auction in the past twelve years. The 1987-1999 database contains more than 1,200,000 auction records through December 31, 1998. More than 800 auction houses in 40 countries contribute information to Mayer. An Internet version of the book is provided by Digital Media Resources, Inc. through its www.artlibrary.com website, where it has attracted over 15,000 registered users since its debut in 1996. Artmovement's flagship product is Streaming Auctions. Currently scheduled for release in the second quarter of 2000, Streaming Auctions represents one of the first ASP-hosted products to deliver networked auctions exclusively for the Art and Antique market. Streaming Auctions is a flexible, ready-made solution providing branded B2C auctions at one low monthly subscription rate. As a networked auction solution, it leverages the buying and selling power of the whole networked community by aggregating the inventory of all clients auctions so buyers can bid on them from any client auction site. We call this Patron Membership Reciprocity. 5 REVENUE SHARING INCENTIVES While Artmovement does not require its Streaming Auctions licensees to make their inventory visible to the other client sites in the Artmovement Network, there are strong incentives to contribute Artmovement's Patron Membership Reciprocity campaign. Licensees of Streaming Auctions may take advantage of dynamic pricing throughout the Artmovement Network using three progressively more expansive means to gain exposure to more buyers. The various levels are meant to cater to both prestigious galleries with no interest in co-mingling inventories: - - ARTMOVEMENT.COM REFERRALS: This is the most protective of client reputation. Client inventory is accessed through links to their website prominently displayed in the artmovement.com auction area. No inventory is actually listed in the Artmovement Network. These clients gain traffic to their websites via click-throughs; - - ARTMOVEMENT.COM AUCTIONS: These clients allow inventory to be listed at artmovement.com for bidding. These clients gain traffic via click-throughs and expose their inventory to artmovement.com registered users; - - FULL PARTICIPATION IN THE ARTMOVEMENT NETWORK: These clients open their inventory to all other licensees, and in turn, inventory from other licensees shows up at their site. As an incentive to do this, Artmovement shares its transaction fee revenue with the client who produced the highest bidder (who will tend to be the client with the most active buyers and branding campaign). - - CLASSIFIED ADS: Available separately, is the option to turn on a Classified Ads area in Streaming Auctions, a Person-to-Person (P2P) auction area. All Classified Ads are show up at any client site that has activated the Classified Ads option. Since these auctions are not inventory belonging to the licensee, the Artmovement transaction fee is shared with both the site where the seller started the auction and the site producing the highest bidder. ADVANTAGES OF DYNAMIC PRICING The Internet is transforming traditional commerce by allowing market information to be disseminated more quickly and efficiently, in greater quantity and to a wider audience than was historically possible. These factors have reduced the need for sellers to adhere to fixed pricing and given rise to increased use of dynamic pricing in e-commerce transactions. In a dynamic pricing format, buyers and sellers determine the prices of goods on a transaction-by-transaction basis through negotiation or bidding. Dynamic pricing in the e-commerce environment allows large numbers of buyers to simultaneously indicate the prices they would be willing to pay for an item. This liquid market enables sellers to rapidly and efficiently sell their products, reducing merchandizing, holding and liquidation costs. 6 BRANDING CONTROL Artmovement's Internet applications will enhance existing websites with no intrusion onto the client's current web servers. These applications do not require the client to promote Artmovement or otherwise make use of artmovement.com or any other branded services of Artmovement. The role of Artmovement is to empower the client with Internet solutions that add a full-function "Click and Brick" department to their existing "Brick and Mortar" enterprise. By added solutions under our client's brand name, we intend to create a first low-cost solution for galleries, museums, and dealers who insist on advancing their own name recognition while protecting their reputation. We believe this is the winning strategy in a race to market share in this mature, yet fragmented market. We expect the Artmovement solution is to give the dealers and galleries: (a) branding control, by launching from their website, (b) low price points, by aggregating merchants on remotely-hosted servers, and (c) affinity sales and marketing, by exposing inventory to buyers throughout the community. Artmovement solutions enhance a client site "stickiness" as well by provided information services and other amenities. The Mayer Book database is piped into Streaming Auctions via a data stream agreement with Digital Media Resources, the owners of ArtLirary.com and the Mayer Book database. Other amenities include messaging, calendaring, discussion groups, and event advertising. BUNDLED ASP HOSTING All Artmovement products will be hosted by an ASP. As business partners of Interliant, we are allowed to market and resell Interliant's entire line of ASP products. While Streaming Auctions provides many of the benefits of popular ASP products, such as eCommerce, Enterprise Messaging, GroupWare, there are limitations imposed by Internet browsers (which is Streaming Auctions delivery platform). Clients who wish to exceed the limits imposed by browsers and unlock all the possibilities of ASP products and services can be upsold to several existing solutions without losing any of the simplicity of Artmovement products. Streaming Auctions will be jointly marketed for sale at artmovement.interliant.com. We are also seeking other premier online application distributors who specialize in Internet application. PRICING STRATEGY We expect affinity pricing to be achieved through partnerships with key ASPs who are aggressively building their commercial rent-based application offerings. Streaming Auctions is currently in review by Interliant to qualify as an "Instant" application available at www.appsonline.com and co-branded at artmovement.interliant.com. Such a partnership will involve negotiating long-term pricing and revenue sharing. Also key to pricing is the stratified user-privilege levels and security built into the system architecture. We believe stratifying users to mirror real-world, vertical markets provides a means to capture several peripheral revenue streams. Such upselling requires easy application registration and activation via a secure database and sophisticated user access privileges to stratify user revenue streams using computer logic. The stratified users access privileges and security is the low-level architecture built into Streaming Auctions for the purpose of flexibly supporting a wide-range of add-ons in future upgrades. Also, the user-access architecture is developed with native support for Lotus Domino IDAP services and also fully supports other major IBM platforms, specifically Websphere, IBM's entry into the high volume, eCommerce transaction market. This allows future Artmovement products and upgrades to flexibly support other IBM platforms that can expand the Companies reach into complimentary revenue streams throughout the vertical market. Our primary sales strategy is to develop both licensing distribution through Strategic Marketing Alliances (SMAs) and registered users through promotional giveaways. Under distribution and channel development, we target alliances with ASP hosting partners and dealer/inventory partners. We can offer combinations of licensing revenue, transaction fee sharing and equity. Portal Marketing Using www.ArtMovement.com Artmovement.com is in the early stages of development. We expect Artmovement.com to become one of the first Internet art and entertainment portals to have public access, which means that only the front page and site maintenance is managed by Artmovement staff; the rest is created and maintain by registered users. To achieve this, Artmovement will design sophisticated security layers of user access rights and privileges. The resulting portal will be similar to a large corporate Intranet portal consisting of editors, contributors, curators, repositories, and other such access control strategies conducive to empowering employees to build and use their enterprise-wide portal. We predict that Artmovement.com will be an ideal Vertical Portal, since it will already have affinity. Art and entertainment is an established market with a mature demographic. We believe art and entertainment is also an attraction to many successful Internet information sites. However, these portals oftentimes do not allow galleries and museums to maintain their own listings, event calendars, and discussion groups, much less load-intensive Webcasting events. 7 Our primary marketing effort will consist of promotional give-aways to foster a global "virus marketing" effort or word-of-mouth marketing. We believe the accompanying "virus marketing" resulting from self-promotion by affiliates, artists and the art community will exceed viewer impressions achieved through advertising vehicles embraced by other eCommerce markets. We also intend to launch promotional giveaway campaigns to attract Artmovement.com museum partners. Our target threshold is twenty museum partners delivering 400,000 patrons. Once in place, we believe these museum partners will not only contribute marketing, patrons, and content for Artmovement.com, but will also provide sales development channels in their region. Our ability to implement any of the above marketing efforts is dependent on receiving additional financing. We can provide no assurance that we will be able to raise additional funds to implement our business strategy, and if we are unable to do so our business and financial condition will suffer. EMPLOYEES We currently employ nine full-time employees and six part-time employees. No employees are covered by a collective bargaining agreement. We consider relations with are employees to be satisfactory. INTELLECTUAL PROPERTY We rely heavily on various types of intellectual property for our success and competitive positioning. We use trademarks, copyrights, trade secrets and the laws pertaining to them as well as contractual provisions to protect our intellectual property. Currently, our most important proprietary rights are those embodied in our auction service offerings. We also license software from Microsoft for use in our development and production systems. Because our technology is located on our operating systems and we do not license our software to any customer or other third party, we believe that the risk of unauthorized use of our technology is small. However, no combination of intellectual property protections can guarantee the continued security and availability of our intellectual property. Creation and implementation of our technology, business model, marketing research and plans, lead generation activities, customer lists, strategic plans, and similar proprietary assets are all protected at their inception and throughout their economic lifetimes by confidentiality and proprietary rights agreements which each of our employees is required to execute upon entering into employment with us. We also rely on confidentiality agreements entered into with contractors and vendors. In addition, we intend to file trademark applications on the service marks Streaming Auctions and Artmovement.com. We will rely on our marks to protect our domain and brand names. While we continue to evaluate the importance of patents to our business, we do not believe that our ability to obtain patents is material to the success of our business and results of operations. COMPETITION Competition in the Internet auction market is intense. We see potential competitors from several fronts: major brand outlets, Co-Label outlets, Private Label aggregators, and software consultants or do-it-yourself solutions. Major outlets like eBay and Amazon have budgets to compete through both new development and merger/acquisition. We believe they have shown little interest in Private Labeling offerings for SMBs, and, only a small Co-Label effort. Co-Label outlets such as iCollector and Artnet are Internet specialists for art and antique auctions and have proven to attract some SMBs, but, at this time, we believe they have no offering for Private Label needs. While we expect Private Label aggregators to become a hot new venture, we have found only one to date: Fairmarket.com. Fairmarket is doing a large-scale, generic, P2P version of Streaming Auctions. Currently, they are strictly a technology company, offering no affinity marketing or news/entertainment services. Their clients must provide their own peripheral services. It should be expected that in the future additional direct competitors would form to compete in our target market. Many of these competitors will have greater financial and other resources than we have, and there is no assurance that we will be able to successfully compete in this market. 8 RISK FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business could be harmed. BECAUSE WE HAVE A LIMITED OPERATING HISTORY, OUR FUTURE SUCCESS IS UNCERTAIN. We have a limited operating history for you to analyze or to aid you in making an informed judgment concerning the merits of an investment in our securities. Although we have begun to implement our business strategy, we have to date conducted no revenue generating operations. Therefore, we can provide no assurance that we will be able to generate revenue from our proposed operations in the future. In addition, our business strategy requires significant capital, which we do not currently have. Although we are actively seeking additional funding, we have no commitments for such funding at this time, and there is no assurance that we will be able to raise additional funding in the future. If are able to raise additional capital, there is no assurance that we will be able to raise such capital on favorable terms. WE EXPECT TO CONTINUE TO HAVE LOSSES AND WE MAY NEVER BECOME PROFITABLE. We cannot assure you that we will ever achieve profitability or, if we ever achieve profitability, that it will be sustainable. Since inception, we have experienced an accumulated net loss of $3,015,980. We anticipate increased expenses as we continue to: - - expand and improve our infrastructure; - - expand our sales and marketing efforts; and - - pursue additional industry relationships. As an early-stage company, we do not have the operating experience to estimate what the extent of these expenditures will be at this time, but they will increase as we expand. WE DEPEND ON KEY PERSONNEL IN AN INDUSTRY THAT HAS A SHORTAGE OF QUALIFIED PERSONNEL. Our success is substantially dependent on the continued service and performance of our senior management and key personnel. The loss of the services of any of our key management could have a negative effect on our business. If we do lose any of these people, we will be required to hire new employees, which is time consuming and may not be possible due to the shortage of qualified personnel in our industry. We maintain life insurance policies for Marc I. Berens and Yolana Berens. Our future success also depends on our ability to attract, hire, and retain other highly skilled personnel. Competition for personnel in our industry is intense, and we may not be able to successfully attract, assimilate, or retain qualified personnel. 9 OUR HARDWARE MAY BE DAMAGED, EITHER PHYSICALLY OR THROUGH COMPUTER VIRUSES. Our success largely depends on the efficient and uninterrupted operation of our computer and communications hardware systems. Our hardware, located in a leased facility in Houston, Texas, is vulnerable to: - - computer viruses; - - electronic break-ins; and - - physical vulnerability to damage or interruption from fire, long-term power loss, and telecommunications failures. These events could lead to delays, loss of data, or interruptions in service, which could subject us to liability and harm our reputation. WE ARE EXPANDING OUR BUSINESS, WHICH WILL PLACE A SEVERE STRAIN ON OUR LIMITED RESOURCES. We expect to expand our operations, and anticipate that further significant expansion will be required to address potential growth in our customer base and market opportunities. This expansion may place a significant strain on our limited resources. We expect to hire new employees and increase our infrastructure. IF THE MARKET FOR DYNAMIC COMMERCE DOES NOT CONTINUE TO GROW, OUR BUSINESS MAY SUFFER. Our success is highly dependent upon the widespread acceptance and use of the Internet for dynamic commerce. In particular, the continued adoption by buyers and sellers of online auctions and other dynamic pricing models on the Internet is critical to our continued growth. Use of the Internet for auctions and other forms of dynamic commerce is still at an early stage of development. We cannot be certain that acceptance of online auctions and other forms of dynamic commerce will continue to develop. Any material reduction in the growth of acceptance and use of dynamic commerce could have a material adverse effect on our business. The continued growth of online dynamic commerce is dependent upon a number of factors, including the following: - - continued growth in the number of buyers and sellers who use electronic commerce services; - - continued market demand for dynamic pricing by buyers and sellers; and - - continued growth in the number of businesses who desire online auction capabilities. OUR BUSINESS MAY BE HARMED BY THE LISTING OR SALE BY OUR USERS OF PIRATED ITEMS. We may receive communications alleging that certain items listed or sold through our service by our users infringe third-party copyrights, trademarks and trade names or other intellectual property rights. An allegation of infringement of third-party intellectual property rights may result in litigation against us. Any such litigation could be costly for us, could result in increased costs of doing business through adverse judgment or settlement, could require us to change our business practices in expensive ways, or could otherwise harm our business. 10 OUR MARKET IS INTENSELY COMPETITIVE. The market for person-to-person trading over the Internet is new, rapidly evolving and intensely competitive, and we expect competition to intensify in the future. Barriers to entry are relatively low, and current and new competitors can launch new sites at a relatively low cost using commercially available software. We currently or potentially compete with a number of other companies. We potentially face competition from a number of large online communities and services that have expertise in developing online commerce and in facilitating online person-to-person interaction. The principal competitive factors in our market include the following: - - volume of transactions and selection of goods; - - community cohesion and interaction; - - system reliability; - - customer service; - - reliability of delivery and payment by users; - - brand recognition; - - website convenience and accessibility; and - - level of service fees. Current and potential competitors have longer company operating histories, larger customer bases and greater brand recognition in other business and Internet markets than we do. Some of these competitors also have significantly greater financial, marketing, technical and other resources. Other online trading services may be acquired by, receive investments from or enter into other commercial relationships with larger, well established and well financed companies. As a result, some of our competitors with other revenue sources may be able to devote more resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to website and systems development than we are able to. Increased competition may result in reduced operating margins, loss of market share and diminished value of our brand. We may be unable to compete successfully against current and future competitors. OUR BUSINESS IS DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF THE INTERNET INFRASTRUCTURE. The success of our service will depend largely on the development and maintenance of the Internet infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well timely development of complementary products such as high speed modems, for providing reliable Web access and services. Because global commerce and the online exchange of information is new and evolving, we cannot predict whether the Web will prove to be a viable commercial marketplace in the long term. The Web has experienced, and is likely to continue to experience, significant growth in the numbers of users and amount of traffic. If the Web continues to experience increased numbers of users, increased frequency of use or increased bandwidth requirements, the Web infrastructure may be unable to support the demands placed on it. In addition, the performance of the Web may be harmed by increased users or bandwidth requirements. The Web has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of Web usage as well as the level of traffic and the processing of auctions on our service. In addition, the Web could lose its viability due to delays in the development or adoption of new standards and protocols to handle increased levels of activity or due to increased governmental regulation. The infrastructure and complementary products or services necessary to make the Web a viable commercial marketplace for the long term may not be developed successfully or in a timely manner. Even if these products or services are developed, the Web may not become a viable commercial marketplace for services such as those that we offer. OUR BUSINESS IS SUBJECT TO ONLINE COMMERCE SECURITY RISKS. A significant barrier to online commerce and communications is the secure transmission of confidential information over public networks. Our security measures may not prevent security breaches. Our failure to prevent security breaches could harm our business. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication technology to effect secure transmission of confidential information, including customer credit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography, or other developments may result in a compromise or breach of the technology used by us to protect customer transaction data. Any such compromise of our security could harm our reputation and, therefore, our business. In addition, a party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. 11 WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE. The market in which we compete is characterized by rapidly changing technology, evolving industry standards, frequent new service and product introductions and enhancements and changing customer demands. These market characteristics are worsened by the emerging nature of the Internet and the apparent need of companies from a multitude of industries to offer Web-based products and services. Our future success therefore will depend on our ability to adapt to rapidly changing technologies, to adapt our services to evolving industry standards and to continually improve the performance, features and reliability of our service. Our failure to adapt to such changes would harm our business. OUR STOCK PRICE IS VOLATILE. The market for our securities is highly volatile. The closing price of our common stock has fluctuated widely. The stock markets have in general, and technology companies in particular, experienced extreme stock price volatility. It is likely that the price of our common stock will continue to fluctuate widely in the future. ITEM 2. DESCRIPTION OF PROPERTY Our headquarters are located in Houston, Texas at a leased facility that is approximately 2950 square feet. We do not directly lease this facility, but rather it is leased through an affiliated party. We pay $2,650 per month to such party for the leased space. At the present time, we consider this space to be adequate to meet our needs. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 12 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our common stock trades under the symbol "BEII" on the OTC Electronic Bulletin Board. The market for our common stock on the OTC Electronic Bulletin Board is limited, sporadic, and highly volatile. The following table sets forth the high and low bid prices per share of our common stock since August 27, 1999, the date a market for the common stock developed, as reported by the OTC Electronic Bulletin Board. Prior to this date, no public market for our common stock existed. These prices reflect inter-dealer prices, without retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions. HIGH LOW FISCAL 1999 ------------ Third Quarter $2.875 $1.50 Fourth Quarter $2.625 $0.9 On March 24, 2000, the last bid price of our common stock as reported by the OTC Electronic Bulletin Board was $2.375. We believe that as of March 24, 2000, there were approximately 181 record owners of our common stock. It is our present policy not to pay cash dividends and to retain future earnings to support our 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 we may deem relevant. We have not paid any dividends during the last two fiscal years and we do not anticipate paying any cash dividends in the foreseeable future. RECENT SALES OF UNREGISTERED SECURITIES In June 1999, we issued an aggregate of 3,755,745 shares of common stock to 73 accredited investors in connection with our purchase of Berensgallery.com, Inc. and for consulting services rendered. In December 1999, we issued an aggregate of 12,960,000 shares of common stock to 15 accredited investors in connection with our purchase of Artmovement.com, Inc. In December 1999, we issued an 200,000 shares of common stock to an accredited investor and to a sophisticated investor for investor relations services. We believe the above transactions were exempt from registration pursuant to Section 4(2) of the Securities Act, as the issuances were to accredited investors and sophisticated investors and, and since the transactions were non-recurring and privately negotiated. The sophisticated investor had specific knowledge of the company and had general expertise in financial and business matters that it was able to evaluate the merits and risks of an investment in the company. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS For a complete understanding , this "Management's Discussion and Analysis" should be read in conjunction with "Item 1. Description of Business" and "Item 7. Financial Statements" of this Form 10-KSB. GENERAL We are a Nevada corporation involved in the development of an online auction site for exclusive paintings, other art works, and antiques. We are considered a development stage enterprise because we have not yet generated significant revenue from our primary business operations. Since inception, we have devoted substantially all of our efforts to website development activities and to the search for sources of capital to fund our efforts. On June 15, 1999, we were acquired by National Air Corporation in a recapitalization transaction accounted for similar to a reverse acquisition, except that no goodwill was recorded. National Air Corporation was the "acquired" company in the transaction, but remains the surviving legal entity. Prior to the acquisition, National Air Corporation was a non-operating public shell corporation with no significant assets. Accordingly, the transaction was treated as an issuance of stock by us for National Air Corporation's net monetary assets, accompanied by a recapitalization. In connection with this transaction, we issued 3,755,745 shares of common stock in exchange for all outstanding shares of National Air Corporation. Since this transaction was in substance, a recapitalization of and not a business combination, proforma information is not presented and a valuation of our company was not performed. 13 During the period from inception, February 26, 1999 to December 31, 1999, we have not generated significant revenue from our website operations and may not generate significant revenue during 2000 because we plan to use substantially all our resources for further development of our markets and for further improvements to our website operations. We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets such as online commerce. We will encounter various risks in implementing and executing our business strategy. We can provide no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business. PLAN OF OPERATIONS As of December 31, 1999, we had an accumulated deficit of $6,421,988 incurred entirely in 1999 and funded by paid-in capital, debt, and use of our common stock in acquisitions. Additionally, as of December 31, 1999, we had cash and cash equivalents of $13,316 and negative working capital of $101,283. We do not expect to make any major capital expenditures in the foreseeable future, but we do expect that operating losses will continue until such time as website operations generate sufficient revenues to fund our continuing operations, and we cannot be sure when or if that will occur. We have financed our operations mainly through the sale of our common stock and we have been entirely dependent on outside sources of financing for continuation of our operations. Our acquisition of Artmovement.com for $8,263,157 on December 31, 1999 was designed to give us a platform for better market penetration and access to additional capital. As part of our acquisition of Artmovement, we obtained a $3,000,000 receivable owed to Artmovement, of which $100,000 was received in 1999 and $200,000 in the first quarter of 2000. The remaining portion of the receivable is due June 30, 2000 with penalties for late payment; however, the obligation may be terminated by the debtor on September 1, 2000 without recourse. Accordingly, there is no assurance that we will be able to collect this receivable. If collected, it is our belief that the remaining $2,700,000 due under this receivable will be sufficient to fund our operations for at least two years. Based on our current plan of operation we anticipate that our monthly operating expenditures will increase and will average approximately $63,000 per month for the next twelve months. Operating expenditures include administrative expenses, web site development, and professional fees. These amounts are merely estimates, and we can provide no assurance that unexpected expenses will not shorten the period of time within which our funds may be utilized. If we do not receive the remaining $2,700,000 due under the receivable acquired with Artmovement, we may have to limit our operations to an extent that we cannot presently determine. The effect on our business may include the sale of our assets or the curtailment of business operations. Currently, we do not generate significant revenues from the services that we provide and do not expect to generate significant revenues for the foreseeable future. Although we have no commitments for capital, we may raise additional funds through: - - public offerings of equity, securities convertible into equity or debt, - - private offerings of securities or debt, or - - other sources. 14 Stockholders should assume that any additional funding will cause substantial dilution to current stockholders. In addition, we may not be able to raise additional funds on favorable terms, if at all. Our capital requirements will depend on numerous factors, including the progress of our website development and marketing efforts and the economic impact of competing websites. We believe that our current assets and potential committed contributions will be sufficient to meet our operating expenses and capital expenditures to the successful commercialization of our website. However, there is no way we can predict when and if any additional contributions may be needed beyond those currently committed. Consequently, at the expiration of current commitments, we may need to seek one or more substantial new investors. Our ability to achieve profitability will depend on our ability to successfully make the transformation from a development stage enterprise to a commercially viable internet business. We can make no assurance that we will be able to successfully make that transition. The report from the Company's independent accountants includes an explanatory paragraph which describes substantial doubt concerning the ability of the Company to continue as a going concern, without continuing additional contributions to capital. The Company may incur losses for the foreseeable future due to the significant costs associated with website development and marketing activities which will be necessary for successful commercialization of Artmovement.com. See "Financial Statements - Report of Independent Accountants." ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS Our financial statements, commencing on page F-1, have been audited by Ham, Langston & Brezina, independent certified public accountants, to the extent and for the periods set forth in their reports appearing elsewhere herein and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This information was "previously reported," as defined in Rule 12b-2 of the Securities Exchange Act of 1934, in our Form 8-K dated June 30, 1999. 15 PART III ITEMS 9 TO 12 INCLUSIVE. These items have been omitted in accordance with the general instructions to Form 10-KSB. Prior to April 29, 2000, we will file a definitive proxy statement or information statement that will involve the election of directors. The information required by these items will be included in such proxy statement or information statement and are incorporated by reference in this annual report. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are to be filed as part of the annual report: EXHIBIT NO. IDENTIFICATION OF EXHIBIT Exhibit 2.1(1) Reorganization Agreement between National Air Corporation and Berensgallery.com, Inc. Exhibit 3.1(2) Amended and Restated Articles of Incorporation of Berens Industries, Inc. Exhibit 3.2 Amended and Restated Bylaws of Berens Industries, Inc. Exhibit 4.1(3) Common Stock Certificate of Berens Industries, Inc. Exhibit 10.1 Employment Agreement between Marc I. Berens and Berensgallery.com, Inc. Exhibit 10.2 Employment Agreement between Kevin Willcutts and Berens Industries, Inc. Exhibit 10.3* Digital Media Resources, Ltd. Database Access Agreement Exhibit 21.1 List of Subsidiaries Exhibit 23.1 Consent of Ham, Langston & Brezina Exhibit 27.1 Financial Data Schedule ____________________ (1) Filed previously on Form 8-K SEC File No.0-22711 (2) Filed previously as Appendix A to our preliminary proxy statement. (3) Filed previously on registration statement Form 10-SB SEC File No.0-22711. * We have omitted some portions of these exhibits and submitted them separately in a confidential treatment request filed with the SEC. (b) There were no reports filed on Form 8-K during the last quarter of the fiscal year ended December 31, 1999. SIGNATURES ---------- In accordance with the Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Berens Industries, Inc. By: /s/ Marc I. Berens --------------------- Marc I. Berens, President ___________________________ In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Marc I. Berens Chief Executive Officer April 11, 2000 - --------------------- and Director MARC I. BERENS /s/ Yolana Berens Director April 11, 2000 - ------------------- YOLANA BERENS /s/ William Ranshaw Director April 11, 2000 - --------------------- WILLIAM RANSHAW BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) __________ CONSOLIDATED FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT ACCOUNTANTS FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999, TO DECEMBER 31, 1999 BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) TABLE OF CONTENTS __________ PAGE ---- Report of Independent Accountants 1 Consolidated Financial Statements: Consolidated Balance Sheet as of December 31, 1999 2 Consolidated Statement of Operations for the period from inception, February 26, 1999, to December 31, 1999 3 Consolidated Statement of Stockholders' Deficit for the period from inception, February 26, 1999, to December 31, 1999 4 Consolidated Statement of Cash Flows for the period from inception, February 26, 1999, to December 31, 1999 5 Notes to Consolidated Financial Statements 6-14 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Stockholders and Directors Berens Industries, Inc. We have audited the accompanying consolidated balance sheet of Berens Industries, Inc. (a corporation in the development stage) as of December 31, 1999, and the related consolidated statements of operations, stockholders' deficit and cash flows for the period from inception, February 26, 1999, to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Berens Industries, Inc. as of December 31, 1999, and the consolidated results of their operations and their cash flows for the period from inception, February 26, 1999, to December 31, 1999, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements and discussed in Note 3, the Company has incurred a significant loss from operations since inception and is dependent on outside sources of financing for continuation of its operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to this matter are also discussed in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Ham, Langston & Brezina, L.L.P. March 13, 2000 Houston, Texas -1-
BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 __________ ASSETS - ------------------------------------------- Current assets: Cash and cash equivalents $ 13,316 Accounts receivable, trade 1,989 Prepaid license fees 69,300 ------------ Total current assets 84,605 Office equipment, net of accumulated depreciation of $1,618 6,022 Other assets 1,259 ------------ Total assets $ 91,886 ============ LIABILITIES AND STOCKHOLDERS' DEFICIT - ------------------------------------------- Current liabilities: Note payable to bank $ 150,000 Accounts payable 18,025 Accrued liabilities 17,863 ------------ Total current liabilities 185,888 ------------ Commitment and contingencies Stockholders' deficit: Common stock, $.001 par value, 50,000,000 shares authorized, 18,108,500 shares issued and outstanding 18,108 Additional paid-in capital 9,258,653 Receivables from stockholders (2,948,775) Losses accumulated during the development stage (6,421,988) ------------ Total stockholders' deficit (94,002) ------------ Total liabilities and stockholders' deficit $ 91,886 ============
See notes to consolidated financial statements. -2-
BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999, TO DECEMBER 31, 1999 __________ Service revenue $ 2,543 ------------ Operating expenses: Common stock and stock option compensation 806,011 Website development costs 5,263,157 Salaries and wages 127,714 Legal and consulting fees 64,425 License fees 49,500 Other 116,676 ------------ Total operating expenses 6,427,483 ------------ Net loss $(6,421,988) ============ Basic and diluted net loss per common share $ (1.39) ========= Weighted average shares outstanding 4,632,881 ============
See notes to consolidated financial statements. -3-
BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999, TO DECEMBER 31, 1999 __________ LOSSES ACCUMULATED COMMON STOCK ADDITIONAL RECEIVABLE DURING THE ----------------------- PAID-IN FROM DEVELOPMENT SHARES AMOUNT CAPITAL STOCKHOLDERS STAGE TOTAL ----------- ---------- ----------- -------------- ------------ ------------ Balance at inception, February 26, 1999 - $ - $ - $ - $ - $ - Net proceeds from an initial capitalization 2,893,250 2,893 198,107 - - 201,000 Recapitalization effective June 15, 1999 737,505 738 (738) - - Common stock issued as compensation to consultants 858,495 858 59,142 - - 60,000 Stock options issued as employee compensation and for payment of legal fees - - 746,011 - - 746,011 Issuance of common stock upon ex- ercise of stock options 659,250 659 5,934 - - 6,593 Issuance of common stock for ac- quisition of Artmovement.com 12,960,000 12,960 8,250,197 (3,000,000) - 5,263,157 Receipt of cash from stockholders under loan commitment - - - 100,000 - 100,000 Loan to stockholder - - - (48,775) - (48,775) Net loss - - - - (6,421,988) (6,421,988) ---------- ----------- -------------- ------------ ------------ ------------ Balance at December 31, 1999 18,108,500 $ 18,108 $ 9,258,653 $(2,948,775) $(6,421,988) $ (94,002) ========== =========== ============== ============ ============ ============
See notes to consolidated financial statements. -4-
BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999, TO DECEMBER 31, 1999 __________ Cash flows from operating activities: Net loss $(6,421,988) Depreciation expense 1,618 Website development cost 5,263,157 Stock and stock option compensation expense 806,011 Adjustments to reconcile net loss to net cash used in operating activities: Changes in operating assets and liabilities: Increase in accounts receivable, trade (1,989) Increase in prepaid license fees (69,300) Increase in other assets (1,259) Increase in accounts payable 18,025 Increase in accrued liabilities 17,863 ------------ Net cash used in operating activities (387,862) ---------- Cash flows from investing activities: Purchase of property and equipment (7,640) Loan to stockholder (48,775) ------------ Net cash used in investing activities (56,415) ---------- Cash flows from financing activities: Proceeds from note payable to bank 150,000 Proceeds from sale of common stock 207,593 Proceeds from receivable from stockholder 100,000 ---------- Net cash provided by financing activities 457,593 ------------ Net increase in cash and cash equivalents 13,316 Cash and cash equivalents at beginning of period - ------------ Cash and cash equivalents at end of period $ 13,316 ============ Supplemental disclosure of cash flow information: Cash paid for interest expense $ - ============
See notes to consolidated financial statements. -5- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS __________ 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ----------------------------------------------------------------- Berens Industries, Inc. (the "Company") through its wholly-owned subsidiary, Artmovement.com, Inc. ("Artmovement), is involved in the development of an online auction site for sale of exclusive paintings, antiques and other art works. The Company is a development stage enterprise because since its inception substantially all its efforts have been devoted to Website development and fund raising activities. Following is a description of its significant accounting policies: SIGNIFICANT ESTIMATES ---------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from estimates making it reasonably possible that a change in the estimates could occur in the near term. PRINCIPLES OF CONSOLIDATION ----------------------------- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Artmovement, after elimination of all significant intercompany accounts and transactions. CASH AND CASH EQUIVALENTS ---------------------------- The Company considers all highly liquid short-term investments with an original maturity of three months or less when purchased, to be cash equivalents. OFFICE EQUIPMENT ----------------- Office equipment is recorded at cost and depreciated for financial statement purposes using the straight-line method over an estimated useful life of three years. Gains or losses on dispositions are included in the statement of operations in the period incurred. Maintenance and repairs are charged to expense as incurred. Continued -6- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED ------------------------------------------------------------------------- IMPAIRMENT OF LONG-LIVED ASSETS ---------------------------------- Periodically, the Company evaluates the carrying value of its office equipment and long-lived assets by comparing the anticipated future net cash flows associated with those assets to the related net book value. If an impairment is indicated as a result of such reviews, the Company would remove the impairment based on the fair market value of the assets, using techniques such as projected future discounted cash flows or third party valuations. INCOME TAXES ------------- The Company uses the liability method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their financial amounts at year-end. The Company provides a valuation allowance to reduce deferred tax assets to their net realizable value. FAIR VALUE OF FINANCIAL INSTRUMENTS --------------------------------------- The Company includes fair value information in the notes to financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made. CONCENTRATIONS OF CREDIT RISK -------------------------------- Cash and accounts receivables are the primary financial instruments that subject the Company to concentrations of credit risk. The Company maintains its cash in banks selected based upon management's assessment of the bank's financial stability. Cash balances periodically exceed the $100,000 federal depository insurance limit. Accounts receivable arise primarily from transactions with customers in the United States. The Company provides a reserve for accounts where collectibility is uncertain. Collateral is generally not required for credit granted. REVENUE RECOGNITION -------------------- Revenues from website service are recognized upon performance of the services. Continued -7- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED ------------------------------------------------------------------------- NET LOSS PER COMMON SHARE ----------------------------- Basic and dilutive net loss per common share for the period ended December 31, 1999 have been computed by dividing net loss by the weighted average number of shares of common stock outstanding during these periods. All common stock equivalents were antidilutive in both periods. COMPREHENSIVE INCOME --------------------- The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which requires a company to display an amount representing comprehensive income as part of the Company's basic financial statements. Comprehensive income includes such items as unrealized gains or losses on certain investment securities and certain foreign currency translation adjustments. The Company's financial statements include none of the additional elements that affect comprehensive income. Accordingly, comprehensive income and net income are identical. SEGMENT INFORMATION -------------------- The Company has adopted SFAS 131, "Disclosures About Segments of an Enterprise and Related Information". SFAS 131 requires a company to disclose financial and other information, as defined by the statement, about its business segments, their products and services, geographic areas, major customers, revenues, profits, assets and other information. The Company believes that it operates in only one business segment and does not have geographically diversified business operations. Accordingly, the adoption of SFAS 131 did not have a significant impact on the Company. RECENT PRONOUNCEMENTS ---------------------- IN JUNE 1998, THE FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) ISSUED SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES", WHICH ESTABLISHES ACCOUNTING AND REPORTING STANDARDS FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. IT REQUIRES THAT AN ENTITY RECOGNIZE ALL DERIVATIVES AS EITHER ASSETS OR LIABILITIES IN THE BALANCE SHEET AND MEASURE THOSE INSTRUMENTS AT FAIR VALUE. MANAGEMENT DOES NOT BELIEVE THIS PRONOUNCEMENT WILL HAVE AN IMPACT ON THE COMPANY'S OPERATIONS OR FINANCIAL REPORTING. IMPLEMENTATION OF THIS STANDARD HAS RECENTLY BEEN DELAYED BY THE FASB FOR A 12-MONTH PERIOD AND, ACCORDINGLY, THE COMPANY WILL ADOPT SFAS 133 IN 2001. Continued -8- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 2. GOING CONCERN CONSIDERATIONS ------------------------------ Since its inception, as a development stage enterprise, the Company has not generated significant revenue and has been dependent on debt and equity raised from individual investors to support its operations. During the period from inception, February 26, 1999, to December 31, 1999, the Company incurred a net loss of $6,421,988 and negative cash flows from operations of $387,862. These factors raise substantial doubt about the Company's ability to continue as a going concern. In order to address its financial situation, management undertook private placements of its common stock, recapitalized its operations, and acquired Artmovement.com, Inc. (See Notes 3 and 4). There can be no assurances that the Company's current cash reserves will be adequate to sustain its operations nor that the Company can raise adequate debt or equity to successfully commercialize its website activities. The Company's long-term viability as a going concern is dependent upon three key factors, as follows: - - The Company's ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations. - - The ability of the Company to successfully make the transformation from a development stage company to a commercially viable internet business. - - The ability of the Company to ultimately achieve adequate profitability and cash flows from operations to sustain its operations. 3. RECAPITALIZATION ---------------- Effective June 15, 1999 National Air Corporation was acquired by Berensgallery.com, Inc. in a recapitalization transaction accounted for similar to a reverse acquisition, except that no goodwill was recorded. National Air Corporation was the "acquired" company in the transaction, but remains the surviving legal entity. Prior to the acquisition National Air Corporation was a non-operating public shell corporation with no significant assets. Accordingly, the transaction was treated as an issuance of stock by Berensgallery.com, Inc. for National Air Corporation's net monetary assets, accompanied by a recapitalization. Since this transaction is in substance, a recapitalization of Berensgallery.com, Inc. and not a business combination, proforma information is not presented. Continued -9- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 3. RECAPITALIZATION, CONTINUED ---------------------------- Subsequent to the recapitalization, the Company's stockholders approved: 1) changes in the Company's name from National Air Corporation to Berensgallery.com, Inc. and subsequently to Berens Industries, Inc.; 2) a change in the number of authorized shares of the Company's common stock from 20,000,000 to 50,000,000 shares; and 3) a change in the number of authorized shares of the Company's preferred stock from 2,000,000 shares with par values of $0.10 to $0.25 to 10,000,000 shares with a par value of $0.001. 4. ACQUISITION OF ARTMOVEMENT.COM, INC. --------------------------------------- Effective December 31, 1999, the Company acquired 100% of the common stock of Artmovement from a company under common control with the Company. The purchase price of Artmovement was approximately $8,263,157 and was satisfied entirely through the issuance of 12,960,000 shares of the Company's common stock. The primary assets of Artmovement acquired in the transaction were as follows: Notes receivable from stockholders $3,000,000 Website 5,263,157 ---------- $8,263,157 ========== Artmovement was formed in November 1999 and had no significant operating history. The Company exchanged 12,960,000 newly issued shares for all of the outstanding shares of Artmovement. Upon acquisition of Artmovement, the Website was written down to zero because the net realizable value of the website could not be demonstrated at the date of acquisition (See Note 10). 5. NOTE PAYABLE TO A BANK -------------------------- The note payable to a bank consists of amounts due under a $150,000 revolving line of credit bearing interest at the bank's prime rate (8.5% at December 31, 1999) plus 2.0% per year and maturing in June 2000. This note is collateralized by the guarantees of certain primary stockholders/officers of the Company. Continued -10- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 6. INCOME TAXES ------------- The composition of deferred tax assets and the related tax effects at December 31, 1999 were as follows: Asset ----- Benefit from carryforward of net operating loss $ 119,959 Less valuation allowance (119,959) ----------- Net deferred tax asset $ - =========== The difference between the income tax benefit in the accompanying statement of operations and the amount that would result if the U.S. Federal statutory rate of 34% were applied to pre-tax loss is as follows: AMOUNT PERCENT ----------- -------- Benefit for income tax at federal statutory rate $2,183,476 34.0% Non-deductible compensation expense (2,063,517) (32.1) Increase in valuation allowance (119,959) (1.9) ----------- -------- Total $ - $ - % =========== ======== At December 31, 1999, for federal income tax and alternative minimum tax reporting purposes, the Company has approximately $353,000 of unused net operating losses available for carryforward to future years. The benefit from carryforward of such net operating losses will expire in 2019. The benefit from utilization of such net operating loss carryforwards incurred prior to December 31, 1999 was significantly limited in connection with the Company's merger with National Air Corporation, Inc. (See Note 3). The benefit could be subject to further limitations if significant future ownership changes occur in the Company. Continued -11- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 7. STOCKHOLDERS' EQUITY --------------------- STOCK OPTIONS -------------- The Company periodically issues incentive stock options to key employees, officers, and directors to provide additional incentives to promote the success of the Company's business and to enhance the ability to attract and retain the services of qualified persons. The issuance of such options are approved by the Board of Directors. The exercise price of an option granted is determined by the fair market value of the stock on the date of grant. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options is greater than or equals the market price of the underlying stock on the date of grant, no compensation expense has been recognized. Proforma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the period ended December 31, 1999: risk-free interest rate of 6%; no dividend yield; weighted average volatility factor of the expected market price of the Company's common stock of 70%; and a weighted-average expected life of the options of 3 years. The Black-Scholes option valuation model was developed for use in estimating fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Continued -12- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 7. STOCKHOLDERS' EQUITY, CONTINUED --------------------------------- For purposes of proforma disclosures, the estimated fair value of the options is included in expense over the option's vesting period or expected life. The Company's proforma information for the period ended December 31, 1999 follows: Net loss as reported $(6,421,988) Proforma net loss $(6,433,854) Proforma basic and dilutive loss per share $ (1.39) A summary of the Company's stock option activity and related information for the period ended December 31, 1999 follows: NUMBER OF WEIGHTED- SHARES AVERAGE UNDER EXERCISE OPTIONS PRICE --------- ---------- Outstanding - at inception, February 26, 1999 - $ - Granted 709,250 0.08 Exercised (659,250) 0.01 Forfeited - - --------- Outstanding - December 31, 1999 50,000 1.00 ========= The weighted-average fair value of options granted during the period ended December 31, 1999 was $1.05 and all of the options granted expire in 2004. 8. RECEIVABLES FROM STOCKHOLDERS ------------------------------- Receivables from stockholders at December 31, 1999 represent amounts due from stockholders of Mercosur Industries, Inc. ("Mercosur"), a company under common control with the Company. The receivables were acquired in connection with the Company's acquisition of Artmovement (See Note 4). Receivables from stockholders are non-interest bearing, have no formal repayment schedule and arose from sale of Mercosur's common stock (See Note 10). Subsequent to the acquisition of Artmovement, the Company collected $100,000 of the receivables from stockholders and made a loan to Mercosur of $48,775. Continued -13- BERENS INDUSTRIES, INC. (A CORPORATION IN THE DEVELOPMENT STAGE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED __________ 9. DATABASE ACCESS AGREEMENT --------------------------- In August 1999, the Company entered into a database access agreement with a foreign corporation. The agreement has a 36 month term and requires monthly payments through August 2002. At December 31, 1999, the Company had prepaid $69,300 under this database access agreement. 10. RELATED PARTY TRANSACTIONS ---------------------------- As described in Note 4 to the financial statements, in December 1999 the Company acquired Artmovement. Artmovement's primary asset is a website that provides an auction network for buyers and sellers of art and antiques. Artmovement had previously been spun-off from Mercosur Industries, Inc. ("Mercosur"), a company that is under common control and has common management with the Company. Prior to the spin-off of Artmovement, Mercosur received a $3,000,000 investment commitment from certain foreign investors. In connection with the spin-off of Artmovement, Mercosur entered into an agreement with Artmovement under which it assigned the $3,000,000 subscription receivable from such foreign investors to Artmovement. 11. NON-CASH INVESTING AND FINANCING ACTIVITIES ----------------------------------------------- During the period from inception, February 26, 1999, to December 31, 1999, the Company engaged in non-cash investing and financing transactions as follows: Common stock issued to acquire Artmovement.com, Inc. $ 8,263,157 -14- EX-3.2 2 Exhibit 3.2 AMENDED AND RESTATED BYLAWS OF BERENS INDUSTRIES, INC. A NEVADA CORPORATION ARTICLE 1. DEFINITIONS 1.1 Definitions. Unless the context clearly requires otherwise, in ----------- these Bylaws: (a) "Board" means the board of directors of the Com-pany. (b) "Bylaws" means these bylaws as adopted by the Board and includes amendments subsequently adopted by the Board or by the Stockholders. (c) "Certificate of Incorporation" means the Certificate of Incorporation of Berens Industries, Inc. as filed with the Secretary of State of the State of Nevada and in-cludes all amendments thereto and restatements thereof subsequently filed. (d) "Company" means Berens Industries, Inc., a Nevada corporation. (e) "Section" refers to sections of these Bylaws. (f) "Stockholder" means stockholders of record of the Company. 1.2 Offices. The title of an office refers to the per-son or persons ------- who at any given time perform the duties of that particular office for the Company. ARTICLE 2. OFFICES 2.1 Principal Office. The Company may locate its principal office ----------------- within or without the state of incorporation as the Board may determine. 2.2 Registered Office. The registered office of the Company required ------------------ by law to be maintained in the state of incorporation may be, but need not be, the same as the prin-cipal place of business of the Company. The Board may change the address of the registered office from time to time. 2.3 Other Offices. The Company may have offices at such other places, -------------- either within or without the state of incor-poration, as the Board may designate or as the business of the Company may require from time to time. 1 ARTICLE 3. MEETINGS OF STOCKHOLDERS 3.1 Annual Meetings. The Stockholders of the Company- shall hold their --------------- annual meetings for the purpose of elect-ing directors and for the transaction of such other proper bus-iness as may come before such meetings at such time, date and place as the Board shall determine by resolution. 3.2 Special Meetings. Only the Board, the Chairman of the Board, the ----------------- President, a committee of the Board duly designated and whose powers and authority include the power to call meetings, and holders of at least fifty percent (50%) of all the shares entitled to vote at the proposed meeting, may call special meetings of the Stockholders of the Company at any time for any purpose or purposes. 3.3 Place of Meetings. The Stockholders shall hold all meetings at ------------------- such places, within or without the State of Nevada, as the Board or a committee of the Board shall specify in the notice or waiver of notice for such meetings. 3.4 Notice of Meetings. Except as otherwise required by law, the Board ------------------ or a committee of the Board shall give notice of each meeting of Stockholders, whether annual or special, not less than 10 nor more than 60 days before the date of the meet-ing. The Board or a committee of the Board shall deliver a notice to each Stockholder entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his address as it appears on the records of the Company, or by transmitting a notice thereof to him at such address by tele-graph, telecopy, cable or wireless. If mailed, notice is given on the date deposited in the United States mail, postage pre-paid, directed to the Stockholder at his address as it appears on the records of the Company. An affidavit of the Secre-tary or an Assistant Secretary or of the Transfer Agent of the Company that he has given notice shall constitute, in the absence of fraud, prima facie evidence of the facts stated therein. Every notice of a meeting of the Stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, also shall state the purpose or purposes of the meeting. Furthermore, if the Company will maintain the list at a place other than where the meeting will take place, every notice of a meeting of the Stockholders shall specify where the Company will maintain the list of Stockholders entitled to vote at the meeting. 2 3.5 Stockholder Notice. Subject to the Certificate of Incorporation, ------------------- the Stockholders who intend to nominate persons to the Board of Directors or propose any other action at an annual meeting of Stockholders must timely notify the Secretary of the Company of such intent. To be timely, a Stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 60 days nor more than 90 days prior to the date of such meeting; provided, however, that in the event that less than 75 days' notice of the date of the meeting is given or made to Stockholders, notice by the Stockholder to be timely must be received not later than the close of business on the 15th day following the date on which such notice of the date of the annual meeting was mailed. Such notice must be in writing and must include a (i) a brief description of the business desired to the brought before the annual meeting and the reasons for conducting such business at the meeting; (ii) the name and record address of the Stockholder proposing such business; (iii) the class, series and number of shares of capital stock of the Company which are beneficially owned by the Stockholder; and (iv) any material interest of the Stockholder in such business. The Board of Directors reserves the right to refuse to submit any such proposal to stockholders at an annual meeting if, in its judgment, the information provided in the notice is inaccurate or incomplete. 3.6 Waiver of Notice. Whenever these Bylaws require written notice, a ----------------- written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall constitute the equivalent of notice. Attendance of a person at any meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meet-ing, to the transaction of any business because the meeting is not lawfully called or convened. No written waiver of notice need specify either the business to be transacted at, or the purpose or purposes of any regular or special meeting of the Stockholders, directors or members of a committee of the Board. 3.7 Adjournment of Meeting. When the Stockholders adjourn a meeting to ---------------------- another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Stockholders may transact any business which they may have transacted at the original meet-ing. If the adjournment is for more than 30 days or, if after the adjournment, the Board or a committee of the Board fixes a new record date for the adjourned meeting, the Board or a com-mittee of the Board shall give notice of the adjourned meeting to each Stockholder of record entitled to vote at the meeting. 3 3.8 Quorum. Except as otherwise required by law, the holders of a ------ majority of all of the shares of the stock enti-tled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes at any meeting of the Stockholders. In the absence of a quorum at any meeting or any adjournment thereof, the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, or, in the absence therefrom of all the Stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting to another place, date or time. If the chairman of the meeting gives notice of any adjourn-ed special meeting of Stockholders to all Stockholders entitled to vote thereat, stating that the minimum percentage of stock-holders for a quorum as provided by Nevada law shall consti-tute a quorum, then, except as otherwise required by law, that percentage at such adjourned meeting shall constitute a quorum and a majority of the votes cast at such meeting shall deter-mine all matters. 3.9 Organization. Such person as the Board may have designated or, in ------------ the absence of such a person, the highest ranking officer of the Company who is present shall call to order any meeting of the Stockholders, determine the presence of a quorum, and act as chairman of the meeting. In the absence of the Secretary or an Assistant Secretary of the Company, the chairman shall appoint someone to act as the secretary of the meet-ing. 3.10 Conduct of Business. The chairman of any meeting of Stockholders -------------------- shall determine the order of business and the pro-cedure at the meeting, including such regulations of the manner of voting and the conduct of discussion as he deems in order. 3.11 List of Stockholders. At least 10 days before every meeting of ---------------------- Stockholders, the Secretary shall prepare a list of the Stockholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. The Company shall make the list available for examination by any Stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting will take place or at the place desig-nated in the notice of the meeting. 4 The Secretary shall produce and keep the list at the time and place of the meet-ing during the entire duration of the meeting, and any Stock-holder who is present may inspect the list at the meeting. The list shall constitute presumptive proof of the identity of the Stockholders entitled to vote at the meeting and the number of shares each Stockholder holds. A determination of Stockholders entitled to vote at any meeting of Stockholders pursuant to this Section shall apply to any adjournment thereof. 3.12 Fixing of Record Date. For the purpose of determining ------------------------ Stockholders entitled to notice of or to vote at any meet-ing of Stockholders or any adjournment thereof, or Stockholders entitled to receive payment of any dividend, or in order to make a determination of Stockholders for any other proper pur-pose, the Board or a committee of the Board may fix in advance a date as the record date for any such determination of Stockholders. However, the Board shall not fix such date, in any case, more than 60 days nor less than 10 days prior to the date of the particular action. If the Board or a committee of the Board does not fix a record date for the determination of Stockholders entitled to notice of or to vote at a meeting of Stockholders, the record date shall be at the close of business on the day next preced-ing 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 or the date on which the Board adopts the resolution declaring a dividend. 3.13 Voting of Shares. Each Stockholder shall have one vote for every ----------------- share of stock having voting rights registered in his name on the record date for the meeting. The Company- shall not have the right to vote treasury stock of the Company, nor shall another corporation have the right to vote its stock of the Company if the Company holds, directly or indirectly, a majority of the shares entitled to vote in the election of directors of such other corporation. Persons holding stock of the Company in a fiduciary capaci-ty shall have the right to vote such stock. Persons who have pledged their stock of the Company shall have the right to vote such stock unless in the transfer on the books of the Com-pany the pledgor expressly empowered the pledgee to vote such stock. In that event, only the pledgee, or his proxy, may represent such stock and vote thereon. A plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote shall determine all elections and, except when the law or Certificate of Incorporation requires otherwise, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall determine all other matters. 5 Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. The Stockholders may vote by voice vote on all matters. Upon demand by a Stockholder entitled to vote, or his proxy, the Stockholders shall vote by ballot. In that event, each ballot shall state the name of the Stockholder or proxy voting, the number of shares voted and such other information as the Company may require under the procedure established for the meeting. 3.14 Inspectors. At any meeting in which the Stockholders vote by ---------- ballot, the chairman may appoint one or more inspectors. Each inspector shall take and sign an oath to execute the duties of inspector at such meeting faithfully, with strict impartiality, and according to the best of his ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each; determine the shares represented at a meeting and the validity of proxies and ballots; count all votes and ballots; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The certification required herein shall take the form of a subscribed, written report prepared by the inspectors and delivered to the Secretary of the Company. An inspector need not be a Stockholder of the Com-pany, and any officer of the Company may be an inspector on any question other than a vote for or against a proposal in which he has a material interest. 3.15 Proxies. A Stockholder may exercise any voting rights in person ------- or by his proxy appointed by an instrument in writing, which he or his authorized attorney-in-fact has sub-scribed and which the proxy has delivered to the secretary of the meeting pursuant to the manner prescribed by law. 6 A proxy is not valid after the expiration of 13 months after the date of its execution, unless the person executing it specifies thereon the length of time for which it is to contin-ue in force (which length may exceed 12 months) or limits its use to a particular meeting. Each proxy is irrevocable if it expressly 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. The attendance at any meeting of a Stockholder who pre-viously has given a proxy shall not have the effect of revoking the same unless he notifies the Secretary in writing prior to the voting of the proxy. 3.16 Action by Consent. Any action required to be taken at any annual ------------------ or special meeting of stockholders of the Company or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Company by delivery to its registered office, its principal place of business, or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Company's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this section to the Company, written consents signed by a sufficient number of holders to take action are delivered to the Company by delivery to its registered office, its principal place of business or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Company's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 7 ARTICLE 4. BOARD OF DIRECTORS 4.1 General Powers. The Board shall manage the property, business and --------------- affairs of the Company. 4.2 Number. The number of directors who shall constitute the Board ------ shall equal not less than one nor more than 10, as the Board may determine by resolution from time to time. 4.3 Election of Directors and Term of Office. The Stockholders of the ----------------------------------------- Company shall elect the directors at the annual or adjourned annual meeting (except as otherwise provided herein for the filling of vacancies). Each director shall hold office until his death, resignation, retirement, removal, or disqualification, or until his successor shall have been elected and qualified. 4.4 Resignations. Any director of the Company may resign at any time by ------------ giving written notice to the Board or to the Secretary of the Company. Any resignation shall take effect upon receipt or at the time specified in the notice. Unless the notice specifies otherwise, the effectiveness of the resignation shall not depend upon its acceptance. 4.5 Removal. Stockholders holding a majority of the outstanding shares ------- entitled to vote at an election of directors may remove any director or the entire Board of Directors at any time, with or without cause. 4.6 Vacancies. A majority of the remaining directors, although less --------- than a quorum, or a sole remaining director may fill any vacancy on the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause. Any director elected to fill a vacancy shall hold office until his death, resigna-tion, retirement, removal, or disqualification, or until his successor shall have been elected and qualified. 4.7 Chairman of the Board. At the initial and annual meeting of the ------------------------ Board, the directors may elect from their number a Chairman of the Board of Directors. The Chairman shall preside at all meetings of the Board and shall perform such other duties as the Board may direct. The Board also may elect a Vice Chairman and other officers of the Board, with such powers and duties as the Board may designate from time to time. 4.8 Compensation. The Board may compensate directors for their services ------------ and may provide for the payment of all ex-penses the directors incur by attending meetings of the Board or otherwise. 8 ARTICLE 5. MEETINGS OF DIRECTORS 5.1 Regular Meetings. The Board may hold regular meet-ings at such ----------------- places, dates and times as the Board shall estab-lish by resolution. If any day fixed for a meeting falls on a legal holiday, the Board shall hold the meeting at the same place and time on the next succeeding business day. The Board need not give notice of regular meetings. 5.2 Place of Meetings. The Board may hold any of its meetings in or ------------------- out of the State of Nevada, at such places as the Board may designate, at such places as the notice or waiver of notice of any such meeting may designate, or at such places as the persons calling the meeting may designate. 5.3 Meetings by Telecommunications. The Board or any committee of the ------------------------------- Board may hold meetings by means of conference telephone or similar telecommunications equipment that enable all persons participating in the meeting to hear each other. Such participation shall constitute presence in person at such meeting. 5.4 Special Meetings. The Chairman of the Board, the President, or ----------------- one-half of the directors then in office may call a special meeting of the Board. The person or persons author-ized to call special meetings of the Board may fix any place, either in or out of the State of Nevada as the place for the meeting. 5.5 Notice of Special Meetings. The person or persons calling a special -------------------------- meeting of the Board shall give written notice to each director of the time, place, date and purpose of the meeting of not less than three business days if by mail and not less than 24 hours if by telegraph or in person before the date of the meeting. If mailed, notice is given on the date deposited in the United States mail, postage prepaid, to such director. A director may waive notice of any special meeting, and any meeting shall constitute a legal meeting without notice if all the directors are present or if those not present sign either before or after the meeting a written waiver of notice, a consent to such meet-ing, or an approval of the minutes of the meeting. A notice or waiver of notice need not specify the purposes of the meeting or the business which the Board will transact at the meeting. 5.6 Waiver by Presence. Except when expressly for the purpose of -------------------- objecting to the legality of a meeting, a director's presence at a meeting shall constitute a waiver of notice of such meeting. 5.7 Quorum. A majority of the directors then in office shall ------ constitute a quorum for all purposes at any meeting of the Board. In the absence of a quorum, a majority of directors present at any meeting may adjourn the meeting to another place, date or time without further notice. No proxies shall be given by directors to any person for purposes of voting or establish-ing a quorum at a directors meetings. 9 5.8 Conduct of Business. The Board shall transact busi-ness in such --------------------- order and manner as the Board may determine. Except as the law requires otherwise, the Board shall determine all matters by the vote of a majority of the directors present at a meeting at which a quorum is present. The directors shall act as a Board, and the individual direc-tors shall have no power as such. 5.9 Action by Consent. The Board or a committee of the Board may take ------------------ any required or permitted action without a meet-ing if all members of the Board or committee consent thereto in writing and file such consent with the minutes of the proceed-ings of the Board or committee. ARTICLE 6. COMMITTEES 6.1 Committees of the Board. The Board may designate, by a vote of a ------------------------- majority of the directors then in office, com-mittees of the Board. The committees shall serve at the plea-sure of the Board and shall possess such lawfully delegable powers and duties as the Board may confer. 6.2 Selection of Committee Members. The Board shall elect by a vote of ------------------------------ a majority of the directors then in office a director or directors to serve as the member or members of a committee. By the same vote, the Board may designate other directors as alternate members who may replace any absent or disqualified member at any meeting of a committee. In the absence or disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or they constitute a quorum, may appoint by unanimous vote another member of the Board to act at the meeting in the place of the absent or disqualified member. 6.3 Conduct of Business. Each committee may determine the procedural --------------------- rules for meeting and conducting its business and shall act in accordance therewith, except as the law or these Bylaws require otherwise. Each committee shall make ade-quate provision for notice of all meetings to members. A majority of the members of the committee shall constitute a quorum, unless the committee consists of one or two members. In that event, one member shall constitute a quorum. A majority vote of the mem-bers present shall determine all matters. A committee may take action without a meeting if all the members of the committee consent in writing and file the consent or consents with the minutes of the proceedings of the committee. 10 6.4 Authority. Any committee, to the extent the Board provides, shall --------- have and may exercise all the powers and auth-ority of the Board in the management of the business and affairs of the Company, and may authorize the affixation of the Company's seal to all instruments which may require or per-mit it. However, no committee shall have any power or authori-ty with regard to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the Stockholders the sale, lease or exchange of all or sub-stantially all of the Company's property and assets, recommending to the Stockholders a dissolution of the Company or a revoca-tion of a dissolution of the Company, or amending these Bylaws of the Company. Unless a resolution of the Board expressly provides, no committee shall have the power or auth-ority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger. 6.5 Minutes. Each committee shall keep regular minutes of its ------- proceedings and report the same to the Board when required. ARTICLE 7. OFFICERS 7.1 Officers of the Company. The officers of the Company shall consist ----------------------- of a President, a Secretary and such Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other officers as the Board may designate and elect from time to time. The same person may hold at the same time any two or more offices, except the offices of President and Sec-retary. 7.2 Election and Term. The Board shall elect the offi-cers of the ------------------- Company. Each officer shall hold office until his death, resignation, retirement, removal or disqualification, or until his successor shall have been elected and qualified. 7.3 Compensation of Officers. The Board shall fix the compensation of ------------------------- all officers of the Company. No officer shall serve the Company in any other capacity and receive compensation, unless the Board authorizes the additional com-pensation. 11 7.4 Removal of Officers and Agents. The Board may remove any officer -------------------------------- or agent it has elected or appointed at any time, with or without cause. 7.5 Resignation of Officers and Agents. Any officer or agent the Board ---------------------------------- has elected or appointed may resign at any time by giving written notice to the Board, the Chairman of the Board, the President, or the Secretary of the Company. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified. Unless other-wise specified in the notice, the Board need not accept the resignation to make it effective. 7.6 Bond. The Board may require by resolution any offi-cer, agent, or ---- employee of the Company to give bond to the Company, with sufficient sureties conditioned on the faith-ful performance of the duties of his respective office or agen-cy. The Board also may require by resolution any officer, agent or employee to comply with such other conditions as the Board may require from time to time. 7.7 President. The President shall be the chief operating officer of --------- the Company and, subject to the Board's control, shall supervise and direct all of the business and affairs of the Company. When present, he shall sign (with or without the Secretary, an Assistant Secretary, or any other officer or agent of the Company which the Board has author-ized) deeds, mortgages, bonds, contracts or other instruments which the Board has authorized an officer or agent of the Com-pany to execute. However, the President shall not sign any instrument which the law, these Bylaws, or the Board expressly require some other officer or agent of the Company to sign and execute. In general, the President shall perform all duties incident to the office of President and such other duties as the Board may prescribe from time to time. 7.8 Vice Presidents. In the absence of the President or in the event ---------------- of his death, inability or refusal to act, the Vice Presidents in the order of their length of service as Vice Presidents, unless the Board determines otherwise, shall perform the duties of the President. When acting as the President, a Vice President shall have all the powers and restrictions of the Presidency. A Vice President shall perform such other dut-ies as the President or the Board may assign to him from time to time. 7.9 Secretary. The Secretary shall (a) keep the minutes of the --------- meetings of the Stockholders and of the Board in one or more books for that purpose, (b) give all notices which these Bylaws or the law requires, (c) serve as custodian of the records and seal of the Company, (d) affix the seal of the corporation to all documents which the Board has authorized execution on behalf of the Company under seal, (e) maintain a register of the address of each Stockholder of the Company-, (f) sign, with the President, a Vice President, or any other officer or agent of the Company which the Board has authorized, certificates for shares of the Company, (g) have charge of the stock transfer books of the Company, and (h) perform all duties which the President or the Board may assign to him from time to time. 12 7.10 Assistant Secretaries. In the absence of the Secre-tary or in the --------------------- event of his death, inability or refusal to act, the Assistant Secretaries in the order of their length of service as Assistant Secretary, unless the Board determines other-wise, shall perform the duties of the Secretary. When acting as the Secretary, an Assistant Secretary shall have the powers and restrictions of the Secretary. An Assistant Secretary shall perform such other duties as the President, Secretary or Board may assign from time to time. 7.11 Treasurer. The Treasurer shall (a) have responsi-bility for all --------- funds and securities of the Company, (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, (c) deposit all moneys in the name of the Company in depositories which the Board selects, and (d) perform all of the duties which the President or the Board may assign to him from time to time. 7.12 Assistant Treasurers. In the absence of the Treas-urer or in the --------------------- event of his death, inability or refusal to act, the Assistant Treasurers in the order of their length of ser-vice as Assistant Treasurer, unless the Board determines other-wise, shall perform the duties of the Treasurer. When acting as the Treasurer, an Assistant Treasurer shall have the powers and restrictions of the Treasurer. An Assistant Treasurer shall perform such other duties as the Treasurer, the Presi-dent, or the Board may assign to him from time to time. 7.13 Delegation of Authority. Notwithstanding any provi-sion of these ------------------------- Bylaws to the contrary, the Board may delegate the powers or duties of any officer to any other officer or agent. 7.14 Action with Respect to Securities of Other Corporations. Unless --------------------------------------------------------- the Board directs otherwise, the President shall have the power to vote and otherwise act on behalf of the Company, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which the Company holds securities. Furthermore, unless the Board directs otherwise, the President shall exercise any and all rights and powers which the Company- possesses by reason of its ownership of securities in another corporation. 7.15 Vacancies. The Board may fill any vacancy in any office because --------- of death, resignation, removal, disqualification or any other cause in the manner which these Bylaws prescribe for the regular appointment to such office. 13 ARTICLE 8. CONTRACTS, LOANS, DRAFTS, DEPOSITS AND ACCOUNTS 8.1 Contracts. The Board may authorize any officer or officers, agent --------- or agents, to enter into any contract or exe-cute and deliver any instrument in the name and on behalf of the Company. The Board may make such authorization general or special. 8.2 Loans. Unless the Board has authorized such action, no officer or ----- agent of the Company shall contract for a loan on behalf of the Company or issue any evidence of indebtedness in the Company's name. 8.3 Drafts. The President, any Vice President, the Treasurer, any ------ Assistant Treasurer, and such other persons as the Board shall determine shall issue all checks, drafts and other orders for the payment of money, notes and other eviden-ces of indebtedness issued in the name of or payable by the Company. 8.4 Deposits. The Treasurer shall deposit all funds of the Company not -------- otherwise employed in such banks, trust companies, or other depositories as the Board may select or as any officer, assistant, agent or attorney of the Company to whom the Board has delegated such power may select. For the purpose of deposit and collection for the account of the Com-pany, the President or the Treasurer (or any other officer, assistant, agent or attorney of the Company whom the Board has authorized) may endorse, assign and deliver checks, drafts and other orders for the payment of money payable to the order of the Company. 8.5 General and Special Bank Accounts. The Board may authorize the ------------------------------------- opening and keeping of general and special bank accounts with such banks, trust companies, or other depositor-ies as the Board may select or as any officer, assistant, agent or attorney of the Company to whom the Board has delegated such power may select. The Board may make such special rules and regulations with respect to such bank accounts, not incon-sistent with the provisions of these Bylaws, as it may deem expedient. 14 ARTICLE 9. CERTIFICATES FOR SHARES AND THEIR TRANSFER 9.1 Certificates for Shares. Every owner of stock of the Company shall ----------------------- have the right to receive a certificate or certificates, certifying to the number and class of shares of the stock of the Company which he owns. The Board shall determine the form of the certificates for the shares of stock of the Company. The Secretary, transfer agent, or regis-trar of the Company shall number the certificates representing shares of the stock of the Company in the order in which the Company issues them. The President or any Vice President and the Secretary or any Assistant Secretary shall sign the certificates in the name of the Company. Any or all certificates may contain facsimile signatures. In case any officer, transfer agent, or registrar who has signed a certifi-cate, or whose facsimile signature appears on a certificate, ceases to serve as such officer, transfer agent, or registrar before the Company issues the certificate, the Company may issue the certificate with the same effect as though the person who signed such certificate, or whose facsimile signa-ture appears on the certificate, was such officer, transfer agent, or registrar at the date of issue. The Secretary, trans-fer agent, or registrar of the Company shall keep a record in the stock transfer books of the Company of the names of the persons, firms or corporations owning the stock represented by the certificates, the number and class of shares represented by the certificates and the dates thereof and, in the case of cancellation, the dates of cancellation. The Secretary, trans-fer agent, or registrar of the Company shall cancel every certificate surrendered to the Company for exchange or transfer. Except in the case of a lost, destroyed, stolen or mutilated certificate, the Secretary, transfer agent, or regis-trar of the Company shall not issue a new certificate in exchange for an existing certificate until he has cancelled the existing certificate. 9.2 Transfer of Shares. A holder of record of shares of the Company's ------------------- stock, or his attorney-in-fact authorized by power of attorney duly executed and filed with the Secre-tary, transfer agent or registrar of the Company, may transfer his shares only on the stock transfer books of the Company. Such person shall furnish to the Secretary, transfer agent, or registrar of the Company proper evidence of his authority to make the transfer and shall properly en-dorse and surrender for cancellation his existing certificate or certificates for such shares. Whenever a holder of record of shares of the Company's stock makes a transfer of shares for collateral security, the Secretary, transfer agent, or registrar of the Company shall state such fact in the entry of transfer if the transferor and the transferee request. 15 9.3 Lost Certificates. The Board may direct the Secretary, transfer ------------------ agent, or regis-trar of the Company to issue a new certificate to any hol-der of record of shares of the Company's stock claiming that he has lost such certificate, or that someone has stolen, destroyed or mutilated such certificate, upon the receipt of an affidavit from such holder to such fact. When authorizing the issue of a new certificate, the Board, in its discretion may require as a condition precedent to the issuance that the owner of such certificate give the Company a bond of indemnity in such form and amount as the Board may direct. 9.4 Regulations. The Board may make such rules and regulations, not ----------- inconsistent with these Bylaws, as it deems expedient concerning the issue, transfer and registration of certificates for shares of the stock of the corporation. The Board may appoint or authorize any officer or officers to appoint one or more transfer agents, or one or more registrars, and may require all certificates for stock to bear the signa-ture or signatures of any of them. 9.5 Holder of Record. The Company may treat as absolute owners of ------------------ shares the person in whose name the shares stand of record as if that person had full competency, capacity and authority to exercise all rights of ownership, despite any knowledge or notice to the contrary or any description indicat-ing a representative, pledge or other fiduciary relation, or any reference to any other instrument or to the rights of any other person appearing upon its record or upon the share certificate. However, the Company may treat any person furnish-ing proof of his appointment as a fiduciary as if he were the holder of record of the shares. 9.6 Treasury Shares. Treasury shares of the Company shall consist of ---------------- shares which the Company has issued and thereafter acquired but not canceled. Treasury shares shall not carry voting or dividend rights. 16 ARTICLE 10. INDEMNIFICATION 10.1 The Company 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 Company) by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner in which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 10.2 The Company 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 Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company 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 to the Company unless and only to the extent that the Court of Chancery or 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 the Court of Chancery or such other court shall deem proper. 17 10.3 To the extent that a director, officer, employee or agent of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 10.1 and 10.2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 10.4 Any indemnification under subsections 10.1 and 10.2 of this Article (unless ordered by a court) shall be made by the Company 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 has met the applicable standard of conduct set forth in subsections 10.1 and 10.2 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 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 stockholders. 10.5 Expenses (including attorneys' fees) incurred by an officer or director in defending in a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized by this Article. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. 10.6 The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. 10.7 The Company shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under this Article. 18 10.8 For purposes of this section references to "the Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such 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 this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 10.9 The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, 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. 10.10 Nothing contained in this Article 10, or elsewhere in these Bylaws, shall operate to indemnify any director or officer is such indemnification is contrary to law, either as a matter of public policy, or under the provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable state or Federal law. ARTICLE 11. TAKEOVER OFFERS In the event the Company receives a takeover offer, the Board of Directors shall consider all relevant factors in evaluating such offer, including, but not limited to, the terms of the offer, and the potential economic and social impact of such offer on the Company's stockholders, employees, customers, creditors and community in which it operates. 19 ARTICLE 12. NOTICES 12.1 General. Whenever these Bylaws require notice to any Stockholder, ------- director, officer or agent, such notice does not mean personal notice. A person may give effective notice under these Bylaws in every case by depositing a writing in a post office or letter box in a postpaid, sealed wrapper, or by dispatching a prepaid telegram addressed to such Stockholder, director, officer or agent at his address on the books of the Company. Unless these Bylaws expressly provide to the con-trary, the time when the person sends notice shall constitute the time of the giving of notice. 12.2 Waiver of Notice. Whenever the law or these Bylaws require notice, ---------------- the person entitled to said notice may waive such notice in writing, either before or after the time stated therein. ARTICLE 13. MISCELLANEOUS 13.1 Facsimile Signatures. In addition to the use of facsimile --------------------- signatures which these Bylaws specifically authorize, the Company may use such facsimile signatures of any offi-cer or officers, agents or agent, of the Company as the Board or a committee of the Board may authorize. 13.2 Corporate Seal. The Board may provide for a suitable seal --------------- containing the name of the Company, of which the Secretary shall be in charge. The Treasurer, any Assistant Secretary, or any Assistant Treasurer may keep and use the seal or duplicates of the seal if and when the Board or a committee of the Board so directs. 13.3 Fiscal Year. The Board shall have the authority to fix and change ----------- the fiscal year of the Company. ARTICLE 14. AMENDMENTS Subject to the provisions of the Certificate of Incorporation, the Stockholders or the Board may amend or repeal these Bylaws at any meeting. The undersigned hereby certifies that the foregoing constitutes a true and correct copy of the Bylaws of the Company as adopted by the Directors on the 27th day of March, 2000. Executed as of this 27th day of March, 2000. ____________________________________________ Marc I. Berens, President EX-10.1 3 Exhibit 10.1 NOTICE TO PROSPECTIVE EMPLOYEES ------------------------------- YOU SHOULD CAREFULLY READ THE FOLLOWING DOCUMENT PRIOR TO SIGNING. IT CONTAINS A NUMBER OF RULES AND REQUIREMENTS GOVERNING YOUR EMPLOYMENT, CONDUCT AND ACTIONS. AS THE TERMS ARE USED IN THIS AGREEMENT YOU ARE THE EMPLOYEE, AND THE COMPANY IS EMPLOYER. - --- -------- ------- -------- IF YOU HAVE QUESTIONS CONSULT A LAWYER BEFORE SIGNING. EMPLOYMENT AND CONFIDENTIALITY AGREEMENT THIS AGREEMENT made between Berensgallery.com, a Nevada Corporation, maintaining offices at 701 North Post Oak Road, Suite 350, Houston, Texas 77024, (hereinafter "Employer" or "Company"), and Marc Ivan Berens, (hereinafter "Employee"), an individual currently residing at 3525 Sage Road, #613, Houston, Texas 77056 IN CONSIDERATION of the employment or continued employment of the Employee by Employer and the mutual covenants contained herein, it is agreed at follows: 1. EMPLOYMENT. ---------- Employer hereby employs or continues the employment of the Employee and the Employee hereby accepts employment upon the terms and conditions contained herein. 2. COMPENSATION. ------------ Compensation shall consist of salary, benefits, vacation, and holidays, as follows: (a.) SALARY. First Year - For the services rendered by the Employee to Employer, Employer shall pay the Employee a salary at the rate of $7,500 per month, or as otherwise shall be agreed upon from time to time by the parties hereto. Any raises in salary to which Employee shall become entitled, shall be evidenced by a written memorandum awarding such raise to the Employee, and signed by Employer. Second Year - For the services rendered by the Employee to Employer, Employer shall pay the Employee a salary at the rate of $10,000 per month, or as otherwise shall be agreed upon from time to time by the parties hereto. Any raises in salary to which Employee shall become entitled, shall be evidenced by a written memorandum awarding such raise to the Employee, and signed by Employer. Third Year - For the services rendered by the Employee to Employer, Employer shall pay the Employee a salary at the rate of $12,500 per month, or as otherwise shall be agreed upon from time to time by the parties hereto. Any raises in salary to which Employee shall become entitled, shall be evidenced by a written memorandum awarding such raise to the Employee, and signed by Employer. 1 (b.) COMMISSIONS. In addition to salary, Employee shall receive a commission, payable monthly in arrears, based upon the gross fees/income earned by Employer based on Employees work product, according to the following scale: First Year - 5% of Pretax Operating Profits of The Company. Second Year - 5% of Pretax Operating Profits of The Company. Third Year - 5% of Pretax Operating Profits of The Company. (c.) BENEFITS. Benefits shall be paid to Employee by Employer in accordance with the standard practice of Employer, as defined by it from time to time. Benefits presently anticipated include fully paid, standard Employer provided health insurance for the Employee, and a fifty percent (50%) copayment of health insurance premiums under the standard Employer provided policy for dependent members of Employee's family. No other benefits are offered at the time of entering into this contract. Employer may chose to offer other benefits to Employee from time to time. (d.) VACATIONS AND HOLIDAYS. Employee shall be entitled to paid vacation of ten (l0) work days, and in addition shall be entitled to take off from work during all designated federal holidays with pay. (e.) EXPENSE ACCOUNT. Employee shall be entitled to reimbursement for documented business and travel expenses, of the following nature: air fare, hotel, meals, taxi, and entertainment where such expenses entitle the Employer to a tax deduction upon reimbursement. Employee shall be required to submit a monthly statement of reimbursable expenses for approval by such person or group as determined by the Board of Directors of Employer. Such statement shall include a copy of the expense receipt, a statement of business purpose, and amount reimbursable under this Agreement. 3. TERM. ---- This Agreement shall provide for a term of Three Years, terminable at any time by either the Employer or the Employee. This Agreement shall be interpreted to provide a defined contract of employment for a specific or of any specific term. Should the Employee be dismissed "for cause" under this Agreement, all payments due and accruing to Employee shall be payable. Nonetheless, the provisions of Articles 5 and 6 related to Proprietary Information and Non-circumvention shall survive termination of this agreement and continue for such terms as provided therein. 2 4. DUTIES AND EXTENT OF SERVICES. --------------------------------- The Employee is engaged to perform work as President and Chief Operating Officer of Employer. Employee shall report to the Board of Directors of Employer. (a.) GENERAL DUTIES. The precise duties or services to be performed by Employee are as set forth in the Corporate Bylaws of Employer, and as may be extended or curtailed, from time to time, at the direction of the President of the Employer. The Employee shall devote the majority of Employee's workday, attention and energies to the business of Employer, and shall assume and perform such further reasonable responsibilities and duties as may be assigned to him from time to time by Employer. Employee is management, and shall have no set working hours. Employee will endeavor to be available at such times as required by Employer for consultations, demonstrations, etc. (b.) CONFLICTING EMPLOYMENT. Employee shall be able to perform additional employment duties during the term of this Agreement. For purposes of this covenant, "employment" shall mean provision of services similar in any manner to those provided by Employee to Employer, to any other person or entity, whether or not for compensation. Such outside work shall include the use of or relate to Proprietary Information provided by Employer to Employee. (c.) REPORTING. Employee shall prepare weekly reports directed to such person as Employer shall specify, which define the work performed by Employee during each preceding week. It is not intended that these reports be a timesheet, but shall specify actual accomplishments of Employee. Such reports shall specify progress, directions undertaken, financial transactions reviewed or created, new contacts, and any other significant developments in the work of Employee. Employer may specify a different reporting interval other than weekly for such reports. 5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. --------------------------------------------- The Employee agrees, during the term of employment and forever thereafter, except as provided in Article 7 of this Agreement, to keep confidential all information provided by Employer or learned as a result of this employment (hereinafter collectively referred to as "Proprietary Information"), AND not to release, use, or disclose it except with the prior written permission of Employer, specifically as follows: 3 "Proprietary Information" includes, inter alia, data and material relating to any customer, vendor, licenser, licensee, or other parties transacting business with Employer, information on deal structure, accounting, scientific or technical data, information related to regulatory clearances of products or securities, analyst compilations, forecasts, studies and other documents, including those prepared by Employee or any other employees, independent contractors, agents and representatives, or any other person or entity, which contain or otherwise reflect such "Proprietary Information". (a.) The Proprietary Information will be kept confidential and shall not be disclosed, except as required by law without the prior written consent of the Company. Disclosure includes the information being made available to a non-party to this Agreement by Employee in any matter whatsoever, in whole or in part, and such Proprietary Information shall not be used by Employee other than in connection with the Employment. (b.) Proprietary Information shall not include any information which: (i) was already of written record in Employee's files on a non-confidential basis prior to disclosure to Employee by Company or anyone in privity with Company; (If Employee intends to rely upon this exemption, he shall within 24 hours of any disclosure of Proprietary Information by Employer to him, provide Employer copies of such written record in his personal files, including the date obtained.) or (ii) at the time of disclosure to Employee, was generally available to the public without the performance of work necessary to extract such information from the unlimited environment of public information from which it may be obtained; or (iii) becomes available to Employee, after termination of Employment, in writing on a non-confidential basis from a third party, provided that such third party is not breaching any legal, contractual or fiduciary obligation to the Company or any other entity. In the event that such Proprietary Information was provided to Employee by such third party breaching a duty to Company as provided herein, Employee agrees not to further use or disclose such Proprietary Information, but Employee will have no other liability with respect to USE of such Proprietary Information. (c.) Proprietary Information is being provided to Employee solely for the purpose of his performance under this Agreement. (d.) In addition to requirements of nondisclosure of Proprietary Information, without Company's prior written consent, (except as required by law - - as discussed in Subpart f, hereinbelow), Employee will not disclose to any Person (whether an individual, corporation, government body or agency, or any other entity) the fact that (i.) Proprietary Information has been made available; (ii.) that discussions or negotiations are taking place concerning any business of the Company, including the terms and conditions, or other facts with respect to any Transaction; (iii.) that any Proprietary Information has been developed by Employee or any other person or entity for Company; or (iv.) that Employee and the Company have entered into this Agreement. 4 (e.) Company will keep a written record of the Proprietary Information furnished to Employee by the Company and all Proprietary Information developed by Employee. Employee may verify this record at any time. Upon Termination of Employment, all Proprietary Information, together will all copies thereof, including any working models, research notes, case histories, books, business records, scientific instruments, and other items containing or embodying Confidential Proprietary Information will be returned immediately to the Company. Employee shall certify in writing, in the form of an affidavit made under oath, to such return of the Proprietary Information in a form acceptable to Company. In addition, whenever Employee obtains permission to disclose Proprietary Information to anyone, such permission and disclosure shall be recorded in Employee's written record maintained by Employer. Employer and Employee shall jointly insure that all transactions are accurately recorded. (f.) In the event that Employee is requested or legally compelled to disclose any Proprietary Information, Employee (whether or not the Employer-Employee relationship has been terminated) will provide the Company written notice as soon as possible, and in no event more than ten (l0) days of such event, so that the Company may seek an appropriate remedy and/or waive, in writing, compliance with the provisions of this Agreement. In the event that Company does not waive compliance with this Agreement, Employee shall be legally bound not to disclose such information, pending the Company seeking a remedy to forestall disclosure. The Company will promptly advise Employee of any action it intends to take. In the event that such remedy, as is desired by the Company, is not obtained or that the Company waives compliance with the provisions of this Agreement, Employee will furnish only that portion of the Proprietary Information which "upon the written opinion of appropriate legal counsel" is legally required to be produced, and will exercise best efforts to obtain reliable assurance that confidential treatment will be accorded the Proprietary Information provided. (g.) Employee shall promptly advise Company in writing if Employee learns of any unauthorized use or disclosure of Proprietary Information by any person or entity. (h.) Employee shall have no proprietary interest in the work product developed by Employee or any other employee, independent contractor, or agent of Employer during the course, and as a result of this Agreement and Employee expressly agrees to assign all rights, title and interest to any trade secrets or other proprietary rights (including patents, or other intellectual property rights) developed as a result of this Agreement to Company. Employee agrees to execute appropriate assignments upon request of Company. (i.) Transmittal of Proprietary Information by Employer to Employee may be made in oral or written form. If in writing, such transmittal shall bear the word "Confidential". Any copies or reproductions shall bear the proprietary notices contained in the original. (j.) Proprietary Information shall remain confidential for an indefinite term as provided in Article 7. 5 6. NON-CIRCUMVENTION. ----------------- If this Employment Agreement terminates for any reason, Employee agrees for such times as are specified herein not to have any business dealings whatsoever, either directly or indirectly or through associates with any customer, source, technical consultant, agent, associate, or client of the Company or its subsidiaries or any person or firm with whom Employee has made contact in connection with his activities for the Company (hereinafter "Introduced Entities"). With respect to such Introduced Entities which Employee may have knowledge as a result of the Employee-Employer relationship made possible by this Agreement, and in addition to the requirements of Article 5, the Employee: (a.) will keep in strictest confidence, both during the term of this Agreement and subsequent to termination of this Agreement, and will not during the term of this Agreement or thereafter disclose or divulge to any person, firm or corporation, or use directly or indirectly, for his own benefit or the benefit of others, any information which in good faith and good conscience ought to be treated as confidential information including, without limitation, information relating to the technical or business aspects developed by the Company, including, inter alia, information as to sources of, and arrangements for, goods and services supplied to customers or clients of the Company, submission and proposal procedures of the Company, customer or contact lists or any other confidential information or trade secrets respecting the business or affairs of the Company which Employee may acquire or develop in connection with or as a result of the performance of his services hereunder. (b.) agrees to the following additional restrictions upon Employee's transaction of any, other, present and future, related or non-related business with Introduced Entities. The nature of the information provided by Company to him, requires Employee to work, in many cases, directly with the Introduced Entities, including those named or disclosed in Proprietary Information. Employer and Employee jointly agree that work performed by Employee for Employer is such that Employee would not have otherwise known about such Introduced Entities", which he has met as a result of the Employment relationships. This does not include persons or entities of which Employee already had knowledge. It is jointly agreed that such relationships are Proprietary Information, and not subject to utilization by Employee during the course of this Agreement and for a reasonable term as provided herein thereafter, as follows: (i.) Employee agrees not to enter into any relationship with an Introduced Entity. Employee irrevocably and unconditionally agrees that all such relationships (including deals, agreements, employment, or any other relationship) involving Proprietary Information or with any Introduced Entities which result from any Proprietary Information provided under this Agreement or performance by Employee under this Agreement, are barred. Employee shall not circumvent Company by entering into or reaching any agreement between himself (or any related entity) and any Introduced Entity, except as permitted by this Agreement. 6 (ii.) Such restrictions upon non-circumvention shall continue for Two (2) years from the date hereof if the relationship with the Introduced Entity does not involve any Proprietary Information. If such relationship involves Proprietary Information, including the introduction having been made as a result of disclosure of the Introduced Entity as part of the content of Proprietary Information, the restrictions shall continue for an indefinite term as provided in Article 7. (iii.) Employee specifically represents that he possesses sufficient knowledge and ability so that compliance with the provisions of this article will not effectively prohibit him from obtaining other employment should this Agreement terminate. In the event of an actual or threatened breach by Employee of the provisions of this Article, Employer shall be entitled to injunctive relief restraining the Employee from the breach or threatened breach, however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages from Employee. 7. TERM FOR NONDISCLOSURE. ------------------------ This Article shall survive Termination of this Agreement. Employer and Employee agree that Proprietary Information is a valuable resource owned by Employer. The confidentiality of such resource must be protected beyond the term of Employment of Employee. It is agreed that Employee shall be obligated to keep Proprietary Information confidential as provided in Articles 5 and 6 herein, until one of the following occurs: (a.) Employer notifies Employee in writing that such Proprietary Information is no longer confidential. (b.) Such Proprietary Information is disclosed in writing in a public, non-confidential disclosure, and then only to the extent of the disclosure made, and to the extent that such disclosure is not made as a breach of any agreement or obligation with Employer. If such public disclosure relates to a requirement of non-circumvention as provided in Article 6 of this Agreement, it shall NOT be sufficient for the term to run under this Article, that the public disclosure details business between Company and such Introduced Entity. 8. WARRANTY. -------- Employee acknowledges and agrees that any and all Proprietary Information is provided without any representation or warranty, expressed or implied, as to the accuracy or completeness and that the Company expressly disclaims any and all liability that may be based on the information or any errors therein or omissions therefrom. Employee agrees that only those representations and warranties made to Employee in writing by the Company in any executed definitive agreement shall have any legal effect. 7 9. CONSIDERATION. ------------- Employee acknowledges receipt of good and sufficient consideration to make this a binding agreement, which consideration is as follows: (i.) Payment of Ten Dollars ($l0.00) in cash, receipt of which is hereby acknowledged, and (ii.) The payment from time to time of wages and such benefits (as provided in Article 2) which at the discretion of the Employer may be provided (however, failure to pay wages and fail-ure to provide benefits shall not be considered to be a failure of consideration or inadequate consideration, provided at least one pay period of wages is paid by Employer to Employee), and (iii.) The covenants of Employer, including the contractual requirement of indemnification, made herein to Employee. By signing this Agreement, Employee submits that the agreed consideration is good, sufficient and binding upon Employee for this to be a good and valid agreement. 10. INDEMNIFICATION. --------------- Employer, at its own expense, shall defend, indemnify and hold Employee harmless from any claim, demand, cause of action, debt or liability (including attorneys' fees) to the extent it is based on a claim that Employee in the course of this Agreement, infringed or violated the patent of a third party, provided Company is notified promptly of such claim and provided that such claim is based upon the Proprietary Information provided by Company. Company shall have the right to control the defense in any such action and to enter into a stipulation of discontinuance and settlement of such claim in its discretion. 11. STANDARD OF CONDUCT. --------------------- Any work performed by Employee under this Agreement is as an Employee of the Company. Employee is authorized to negotiate for Company as directed by the Board of Directors of Company. Employee may sign agreements for Company as directed by its Board of Directors. It is the intention of the parties to at all times conduct themselves, both with respect to activities under this Agreement, and their respective business activities generally, in compliance with all applicable federal and state laws. The mutual interests of both parties to this Agreement require that both parties act in good faith to fulfill the intent and purpose of this Agreement. 12. INJUNCTIVE RELIEF. ------------------ Employee acknowledges that the use or disclosure of the Proprietary Information in a manner inconsistent with this Agreement will cause Company irreparable damage for which the remedies available at law would be inadequate to protect the Company. As such the Company shall have the right to equitable and injunctive relief to prevent the unauthorized use or disclosure, and (in addition to such equity relief) to such damages as are occasioned by such unauthorized use or disclosure. Employee agrees in advance NOT to object to the granting of equitable relief (including injunctions and specific performance) in the Company's, favor WITHOUT any proof by Company of actual damages and WITHOUT the posting of any bond. The aforementioned remedies are in addition to all other remedies available to the Company. 8 Employee hereby irrevocably and unconditionally consents and submits to the exclusive jurisdiction of the courts of the State of Texas located in the City of Houston, Texas for any actions, suits or proceedings arising out of or relating to this Agreement or any Transaction contemplated hereby, and Em-ployee agrees NOT to commence any action, suit or proceeding relating thereto except in such a court. Employee agrees that service of any process, summons, notice or document by U.S. certified mail, postage prepaid, to your address set forth hereinbelow shall be effective service of process for commencement or maintenance of any proceeding brought against Employee in any such court. 13. GENERAL PROVISIONS. -------------------- 13.1 NO WAIVER. Employee's obligation(s) as set forth in this Agreement may be waived, in whole or in part, by Employer. To be effective, a waiver by the Company must be in writing, shall specifically refer to this Agreement and the obligation being waived, and must be executed by an executive officer of the Company, A waiver on one occasion will not be deemed a waiver of the same or any other occasions or on any future occasion. It is further understood and agreed that no failure or delay by Employer in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise preclude any other or further exercise of any right, power or privilege hereunder. 13.2 NOTICES. Any notice hereby required or permitted to be given shall be sufficient if in writing and mailed by registered or certified mail, postage prepaid, to either party at the address of such party set forth below or at such other address as shall have been designated by written notice by such party to the other party. Initially such notices shall be sent as follows: If by Employer to: Mr. Marc Ivan Berens 3625 Sage Road, Suite 613 Houston, Texas 77056 If by Employee to: Mrs. Yolana Berens, Chairperson Berensgallery.com 701 N Post Oak Rd, Suite 350 Houston, Texas 77024 9 13.3 ENTIRE CONTRACT. This Agreement shall constitute the entire contract between the parties and supersedes all existing agreements between them, whether oral or written, with respect to the subject matter hereof. No change, modification or amendment of this Agreement, which is to be binding upon Employer, shall be of any effect unless in writing signed by the Employee and by the Authorized Officer of Employer. 13.4 GOVERNING LAW. This agreement shall be governed by the laws of the State of Texas, and without regard to any principles of conflicts of laws, the state (not federal) courts of the State of Texas shall have jurisdiction and venue over controversies concerning interpretation of this Agreement. Each party agrees to be solely responsible for any legal fees incurred by it in connection with negotiation and execution of this Agreement, and represents that it owes no commission or other fee, including any employment agency fee, to any other entity for bringing about or introduction of parties to this Agreement. 13.5 SEVERABILITY. Should any provision of this Agreement not be enforceable in any jurisdiction, the remainder of the Agreement shall not be affected thereby, and this Agreement shall be interpreted as though the non-enforceable part was not contained herein. 13.6 ASSIGNMENT. This Agreement is not assignable by Employee, because Employer is contracting for the personal work of the Employee. Employer may assign this Agreement to another entity. Upon assignment, Employer shall notify Employee in writing. Signed in Duplicate by the Parties hereto. EMPLOYEE: Marc Ivan Berens 6/1/99 /s/Marc Berens DATED: ----------- By:----------------------------- Individually EMPLOYER: Berensgallery.com 6/1/99 /s/Yolanda Berens DATED:____________ By:____________________________ Yolana Berens, Chairperson 10 EX-10.2 4 1 Exhibit 10.2 NOTICE TO PROSPECTIVE EMPLOYEES ------------------------------- YOU SHOULD CAREFULLY READ THE FOLLOWING DOCUMENT PRIOR TO SIGNING. IT CONTAINS A NUMBER OF RULES AND REQUIREMENTS GOVERNING YOUR EMPLOYMENT, CONDUCT AND ACTIONS. AS THE TERMS ARE USED IN THIS AGREEMENT YOU ARE THE EMPLOYEE, AND THE COMPANY IS EMPLOYER. --- -------- ------- -------- IF YOU HAVE QUESTIONS CONSULT A LAWYER BEFORE SIGNING. EMPLOYMENT AND CONFIDENTIALITY AGREEMENT THIS AGREEMENT made between Berens Industries, Inc., a Nevada Corporation, maintaining offices at 701 North Post Oak Road, Suite 350, Houston, Texas 77024, (hereinafter "Employer" or "Company"), and Kevin Willcutts, (hereinafter "Employee"), an individual currently residing at 1927 Hawthorne Street, Houston, Texas 77098. IN CONSIDERATION of the employment or continued employment of the Employee by Employer and the mutual covenants contained herein, it is agreed at follows: 1. EMPLOYMENT. ---------- Employer hereby employs or continues the employment of the Employee and the Employee hereby accepts employment upon the terms and conditions contained herein. 2. COMPENSATION. ------------ Compensation shall consist of salary, benefits, vacation, and holidays, as follows: 1 (A.) SALARY. For the services rendered by the Employee to Employer, Employer shall pay the Employee a salary at the rate of $5,000 per month, or as otherwise shall be agreed upon from time to time by the parties hereto. Any raises in salary to which Employee shall become entitled, shall be evidenced by a written memorandum awarding such raise to the Employee, and signed by Employer. (b.) STOCK OPTIONS, BONUSES AND INCENTIVES. In addition to salary, Employee shall receive stock options, bonuses and incentives. Stock Options, Bonuses and Incentives shall vest to Employee after six (6) months of employment. If Employee is terminated for Cause, all Stock Options, Bonuses and Incentives earned after the date of termination shall become null and void. Employees Stock Option, Bonus and Incentives shall be granted according to the following formula: 2 STOCK OPTIONS: Employee will be granted options to acquire 50,000 restricted shares of common stock of Employer pursuant to Employers 1999 Stock Incentive Plan, at a price of $1.00 per share upon transfer of the domain name artmovement.com to Employer. OTHER:
1. Employee will be granted piggy-back registration rights for any fully vested restricted common shares Employee exercises. 2. Any options not exercised within Two (2) Year's of the date of this Agreement shall become null and void and Employer shall have no further obligation to Employee and Employee shall have no further claim on stock options of Employer. 3. Employer retains sole discretion to grant additional Stock Options and Incentives to Employee during employment. 4. Employee will receive 1,000,000 restricted common shares of Mercosur Industries, Inc. 5. Employee will receive a commission in stock or cash to be mutually determined by Employer and Employee for raising equity capital for Employer.
(c) BENEFITS. Benefits shall be paid to Employee by Employer in accordance with the standard practice of Employer when offered to all Employees. Benefits presently anticipated include fully paid, standard Employer provided health insurance for the Employee, and a fifty percent (50%) copayment of health insurance premiums under the standard Employer provided policy for dependent members of Employee's family. No other benefits are offered at the time of entering into this contract. Employer may chose to offer other benefits to Employee from time to time. (d) VACATIONS AND HOLIDAYS. Employee shall be entitled to three (3) weeks paid vacation after one (1) year of Employment, based on a five day work week. Vacation days will begin to accrue to Employee after ninety (90) days of Employment. In addition, Employee shall be entitled to take off from work during all designated Employer and Federal holidays with pay. (e) SICK AND PERSONAL DAYS: Employee shall be entitled to a total of ten (10) days paid Sick and/or Personal days beginning ninety (90) days after Employment. No sick days or personal days can be taken (paid) one week prior to or immediately after any Vacation days. Sick and/or Personal days not used during the term of employment will not be carried forward to the next employment year. (f) EXPENSE ACCOUNT. Employee shall be entitled to reimbursement for documented and approved business and travel expenses. Such charges shall include; coach air fare, hotel, meals, taxi, and business entertainment. All travel and hotel charges must be pre-approved by Employer. Employee shall be required to submit a monthly statement of reimbursable expenses for approval by such person or group as determined by the Board of Directors of Employer. Such statement shall include a copy of the expense receipt, a statement of business purpose, and name of client for whom the expense was incurred. 3. TERM. ---- This Agreement shall provide for a term of six (6) months, terminable at any time by either the Employer or the Employee for Cause. This Agreement will automatically renew for an additional six (6) months with all terms and conditions extended in their entirety. This Agreement shall be interpreted to provide a defined contract of employment for a specific term. Should the Employee be dismissed "for cause" under this Agreement, all payments and other stock options or incentives due and accruing to Employee up until the time of termination shall be payable. 3 Nonetheless, the provisions of Articles 5 and 6 related to Proprietary Information and Non-circumvention shall survive termination of this agreement and continue for such terms as provided therein. 4. DUTIES AND EXTENT OF SERVICES. --------------------------------- The Employee is engaged to perform work as Vice President of Marketing and Business Development of Employer. Employee shall report to the Chief Executive Officer of Employer. (a.) GENERAL DUTIES. The precise duties or services to be performed by Employee are as set forth in the Corporate Bylaws of Employer, and as may be extended or curtailed, from time to time, at the direction of the President of the Employer. The Employee shall devote the majority of Employee's workday, attention and energies to the business of Employer, and shall assume and perform such further reasonable responsibilities and duties as may be assigned to him from time to time by Employer. Employee is management, and shall have no set working hours. Employee will endeavor to be available at such times as required by Employer for consultations, demonstrations, etc. (b.) CONFLICTING EMPLOYMENT. Employee shall NOT be able to perform additional employment duties during the term of this Agreement. For purposes of this covenant, "employment" shall mean provision of services similar in any manner to those provided by Employee to Employer, to any other person or entity, whether or not for compensation. Such outside work shall include the use of or relate to Proprietary Information provided by Employer to Employee. (c.) REPORTING. Employee shall prepare reports directed to such person as Employer shall specify, which define the work performed by Employee. It is not intended that these reports be a timesheet, but shall specify actual accomplishments of Employee. Such reports shall specify progress, directions undertaken, financial transactions reviewed or created, new contacts, and any other significant developments in the work of Employee. 5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. --------------------------------------------- The Employee agrees, during the term of employment and forever thereafter, except as provided in Article 7 of this Agreement, to keep confidential all information provided by Employer or learned as a result of this employment (hereinafter collectively referred to as "Proprietary Information"), AND not to release, use, or disclose it except with the prior written permission of Employer, specifically as follows: 4 "Proprietary Information" includes, inter alia, data and material relating to any customer, vendor, licenser, licensee, or other parties transacting business with Employer, information on deal structure, accounting, scientific or technical data, information related to regulatory clearances of products or securities, analyst compilations, forecasts, studies and other documents, including those prepared by Employee or any other employees, independent contractors, agents and representatives, or any other person or entity, which contain or otherwise reflect such "Proprietary Information". (a.) The Proprietary Information will be kept confidential and shall not be disclosed, except as required by law without the prior written consent of the Company. Disclosure includes the information being made available to a non-party to this Agreement by Employee in any matter whatsoever, in whole or in part, and such Proprietary Information shall not be used by Employee other than in connection with the Employment. (b.) Proprietary Information shall not include any information which: (i) was already of written record in Employee's files on a non-confidential basis prior to disclosure to Employee by Company or anyone in privity with Company; (If Employee intends to rely upon this exemption, he shall within 24 hours of any disclosure of Proprietary Information by Employer to him, provide Employer copies of such written record in his personal files, including the date obtained.) or (ii) at the time of disclosure to Employee, was generally available to the public without the performance of work necessary to extract such information from the unlimited environment of public information from which it may be obtained; or (iii) becomes available to Employee, after termination of Employment, in writing on a non-confidential basis from a third party, provided that such third party is not breaching any legal, contractual or fiduciary obligation to the Company or any other entity. In the event that such Proprietary Information was provided to Employee by such third party breaching a duty to Company as provided herein, Employee agrees not to further use or disclose such Proprietary Information, but Employee will have no other liability with respect to USE of such Proprietary Information. (c.) Proprietary Information is being provided to Employee solely for the purpose of his performance under this Agreement. (d.) In addition to requirements of nondisclosure of Proprietary Information, without Company's prior written consent, (except as required by law - - as discussed in Subpart f, hereinbelow), Employee will not disclose to any Person (whether an individual, corporation, government body or agency, or any other entity) the fact that (i.) Proprietary Information has been made available; (ii.) that discussions or negotiations are taking place concerning any business of the Company, including the terms and conditions, or other facts with respect to any Transaction; (iii.) that any Proprietary Information has been developed by Employee or any other person or entity for Company; or (iv.) that Employee and the Company have entered into this Agreement. 5 (e.) Company will keep a written record of the Proprietary Information furnished to Employee by the Company and all Proprietary Information developed by Employee. Employee may verify this record at any time. Upon Termination of Employment, all Proprietary Information, together will all copies thereof, including any working models, research notes, case histories, books, business records, scientific instruments, and other items containing or embodying Confidential Proprietary Information will be returned immediately to the Company. Employee shall certify in writing, in the form of an affidavit made under oath, to such return of the Proprietary Information in a form acceptable to Company. In addition, whenever Employee obtains permission to disclose Proprietary Information to anyone, such permission and disclosure shall be recorded in Employee's written record maintained by Employer. Employer and Employee shall jointly insure that all transactions are accurately recorded. (f.) In the event that Employee is requested or legally compelled to disclose any Proprietary Information, Employee (whether or not the Employer-Employee relationship has been terminated) will provide the Company written notice as soon as possible, and in no event more than ten (l0) days of such event, so that the Company may seek an appropriate remedy and/or waive, in writing, compliance with the provisions of this Agreement. In the event that Company does not waive compliance with this Agreement, Employee shall be legally bound not to disclose such information, pending the Company seeking a remedy to forestall disclosure. The Company will promptly advise Employee of any action it intends to take. In the event that such remedy, as is desired by the Company, is not obtained or that the Company waives compliance with the provisions of this Agreement, Employee will furnish only that portion of the Proprietary Information which "upon the written opinion of appropriate legal counsel" is legally required to be produced, and will exercise best efforts to obtain reliable assurance that confidential treatment will be accorded the Proprietary Information provided. (g.) Employee shall promptly advise Company in writing if Employee learns of any unauthorized use or disclosure of Proprietary Information by any person or entity. (h.) Employee shall have no proprietary interest in the work product developed by Employee or any other employee, independent contractor, or agent of Employer during the course, and as a result of this Agreement and Employee expressly agrees to assign all rights, title and interest to any trade secrets or other proprietary rights (including patents, or other intellectual property rights) developed as a result of this Agreement to Company. Employee agrees to execute appropriate assignments upon request of Company. (i.) Transmittal of Proprietary Information by Employer to Employee may be made in oral or written form. If in writing, such transmittal shall bear the word "Confidential". Any copies or reproductions shall bear the proprietary notices contained in the original. (j.) Proprietary Information shall remain confidential for an indefinite term as provided in Article 7. 6 6. NON-CIRCUMVENTION. ----------------- If this Employment Agreement terminates for any reason, Employee agrees for such times as are specified herein not to have any business dealings whatsoever, either directly or indirectly or through associates with any customer, source, technical consultant, agent, associate, or client of the Company or its subsidiaries or any person or firm with whom Employee has made contact in connection with his activities for the Company (hereinafter "Introduced Entities"). With respect to such Introduced Entities which Employee may have knowledge as a result of the Employee-Employer relationship made possible by this Agreement, and in addition to the requirements of Article 5, the Employee: (a.) will keep in strictest confidence, both during the term of this Agreement and subsequent to termination of this Agreement, and will not during the term of this Agreement or thereafter disclose or divulge to any person, firm or corporation, or use directly or indirectly, for his own benefit or the benefit of others, any information which in good faith and good conscience ought to be treated as confidential information including, without limitation, information relating to the technical or business aspects developed by the Company, including, inter alia, information as to sources of, and arrangements for, goods and services supplied to customers or clients of the Company, submission and proposal procedures of the Company, customer or contact lists or any other confidential information or trade secrets respecting the business or affairs of the Company which Employee may acquire or develop in connection with or as a result of the performance of his services hereunder. (b.) agrees to the following additional restrictions upon Employee's transaction of any, other, present and future, related or non-related business with Introduced Entities. The nature of the information provided by Company to him, requires Employee to work, in many cases, directly with the Introduced Entities, including those named or disclosed in Proprietary Information. Employer and Employee jointly agree that work performed by Employee for Employer is such that Employee would not have otherwise known about such Introduced Entities", which he has met as a result of the Employment relationships. This does not include persons or entities of which Employee already had knowledge. It is jointly agreed that such relationships are Proprietary Information, and not subject to utilization by Employee during the course of this Agreement and for a reasonable term as provided herein thereafter, as follows: (i.) Employee agrees not to enter into any relationship with an Introduced Entity. Employee irrevocably and unconditionally agrees that all such relationships (including deals, agreements, employment, or any other relationship) involving Proprietary Information or with any Introduced Entities which result from any Proprietary Information provided under this Agreement or performance by Employee under this Agreement, are barred. Employee shall not circumvent Company by entering into or reaching any agreement between himself (or any related entity) and any Introduced Entity, except as permitted by this Agreement. 7 (ii.) Such restrictions upon non-circumvention shall continue for Two (2) years from the date hereof if the relationship with the Introduced Entity does not involve any Proprietary Information. If such relationship involves Proprietary Information, including the introduction having been made as a result of disclosure of the Introduced Entity as part of the content of Proprietary Information, the restrictions shall continue for an indefinite term as provided in Article 7. (iii.) Employee specifically represents that he possesses sufficient knowledge and ability so that compliance with the provisions of this article will not effectively prohibit him from obtaining other employment should this Agreement terminate. In the event of an actual or threatened breach by Employee of the provisions of this Article, Employer shall be entitled to injunctive relief restraining the Employee from the breach or threatened breach, however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages from Employee. 7. TERM FOR NONDISCLOSURE. ------------------------ This Article shall survive Termination of this Agreement. Employer and Employee agree that Proprietary Information is a valuable resource owned by Employer. The confidentiality of such resource must be protected beyond the term of Employment of Employee. It is agreed that Employee shall be obligated to keep Proprietary Information confidential as provided in Articles 5 and 6 herein, until one of the following occurs: (a.) Employer notifies Employee in writing that such Proprietary Information is no longer confidential. (b.) Such Proprietary Information is disclosed in writing in a public, non-confidential disclosure, and then only to the extent of the disclosure made, and to the extent that such disclosure is not made as a breach of any agreement or obligation with Employer. If such public disclosure relates to a requirement of non-circumvention as provided in Article 6 of this Agreement, it shall NOT be sufficient for the term to run under this Article, that the public disclosure details business between Company and such Introduced Entity. 8. WARRANTY. -------- Employee acknowledges and agrees that any and all Proprietary Information is provided without any representation or warranty, expressed or implied, as to the accuracy or completeness and that the Company expressly disclaims any and all liability that may be based on the information or any errors therein or omissions therefrom. Employee agrees that only those representations and warranties made to Employee in writing by the Company in any executed definitive agreement shall have any legal effect. 8 9. CONSIDERATION. ------------- Employee acknowledges receipt of good and sufficient consideration to make this a binding agreement, which consideration is as follows: (i.) Payment of Ten Dollars ($l0.00) in cash, receipt of which is hereby acknowledged, and (ii.) The payment from time to time of wages and such benefits (as provided in Article 2) which at the discretion of the Employer may be provided (however, failure to pay wages and fail-ure to provide benefits shall not be considered to be a failure of consideration or inadequate consideration, provided at least one pay period of wages is paid by Employer to Employee), and (iii.) The covenants of Employer, including the contractual requirement of indemnification, made herein to Employee. By signing this Agreement, Employee submits that the agreed consideration is good, sufficient and binding upon Employee for this to be a good and valid agreement. 10. INDEMNIFICATION. --------------- Employer, at its own expense, shall defend, indemnify and hold Employee harmless from any claim, demand, cause of action, debt or liability (including attorneys' fees) to the extent it is based on a claim that Employee in the course of this Agreement, infringed or violated the patent of a third party, provided Company is notified promptly of such claim and provided that such claim is based upon the Proprietary Information provided by Company. Company shall have the right to control the defense in any such action and to enter into a stipulation of discontinuance and settlement of such claim in its discretion. 11. STANDARD OF CONDUCT. --------------------- Any work performed by Employee under this Agreement is as an Employee of the Company. Employee is authorized to negotiate for Company as directed by the Board of Directors of Company. Employee may sign agreements for Company as directed by its Board of Directors. It is the intention of the parties to at all times conduct themselves, both with respect to activities under this Agreement, and their respective business activities generally, in compliance with all applicable federal and state laws. The mutual interests of both parties to this Agreement require that both parties act in good faith to fulfill the intent and purpose of this Agreement. 12. INJUNCTIVE RELIEF. ------------------ Employee acknowledges that the use or disclosure of the Proprietary Information in a manner inconsistent with this Agreement will cause Company irreparable damage for which the remedies available at law would be inadequate to protect the Company. As such the Company shall have the right to equitable and injunctive relief to prevent the unauthorized use or disclosure, and (in addition to such equity relief) to such damages as are occasioned by such unauthorized use or disclosure. Employee agrees in advance NOT to object to the granting of equitable relief (including injunctions and specific performance) in the Company's, favor WITHOUT any proof by Company of actual damages and WITHOUT the posting of any bond. The aforementioned remedies are in addition to all other remedies available to the Company. 9 Employee hereby irrevocably and unconditionally consents and submits to the exclusive jurisdiction of the courts of the State of Texas located in the City of Houston, Texas for any actions, suits or proceedings arising out of or relating to this Agreement or any Transaction contemplated hereby, and Em-ployee agrees NOT to commence any action, suit or proceeding relating thereto except in such a court. Employee agrees that service of any process, summons, notice or document by U.S. certified mail, postage prepaid, to your address set forth hereinbelow shall be effective service of process for commencement or maintenance of any proceeding brought against Employee in any such court. 13. SEVERANCE ------------- Should Employee leave the Employment of Employer for any reason other than Cause after the initial term of Employment, Employer will pay to Employee two (2) months severance pay. 14. GENERAL PROVISIONS. ------------------- 14.1 NO WAIVER. Employee's obligation(s) as set forth in this Agreement may be waived, in whole or in part, by Employer. To be effective, a waiver by the Company must be in writing, shall specifically refer to this Agreement and the obligation being waived, and must be executed by an executive officer of the Company, A waiver on one occasion will not be deemed a waiver of the same or any other occasions or on any future occasion. It is further understood and agreed that no failure or delay by Employer in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise preclude any other or further exercise of any right, power or privilege hereunder. 14.2 NOTICES. Any notice hereby required or permitted to be given shall be sufficient if in writing and mailed by registered or certified mail, postage prepaid, to either party at the address of such party set forth below or at such other address as shall have been designated by written notice by such party to the other party. Initially such notices shall be sent as follows: If by Employer to: Mr. Kevin Willcutts 1927 Hawthorne Street Houston, Texas 77098 If by Employee to: Mr. Marc Ivan Berens, President Berens Industries, Inc. 701 North Post Oak Road, Suite 350 Houston, Texas 77024 10 14.3 ENTIRE CONTRACT. This Agreement shall constitute the entire contract between the parties and supersedes all existing agreements between them, whether oral or written, with respect to the subject matter hereof. No change, modification or amendment of this Agreement, which is to be binding upon Employer, shall be of any effect unless in writing signed by the Employee and by the Authorized Officer of Employer. 14.4 GOVERNING LAW. This agreement shall be governed by the laws of the State of Texas, and without regard to any principles of conflicts of laws, the state (not federal) courts of the State of Texas shall have jurisdiction and venue over controversies concerning interpretation of this Agreement. Each party agrees to be solely responsible for any legal fees incurred by it in connection with negotiation and execution of this Agreement, and represents that it owes no commission or other fee, including any employment agency fee, to any other entity for bringing about or introduction of parties to this Agreement. 14.5 SEVERABILITY. Should any provision of this Agreement not be enforceable in any jurisdiction, the remainder of the Agreement shall not be affected thereby, and this Agreement shall be interpreted as though the non-enforceable part was not contained herein. 14.6 ASSIGNMENT. This Agreement is not assignable by Employee, because Employer is contracting for the personal work of the Employee. Employer may assign this Agreement to another entity. Upon assignment, Employer shall notify Employee in writing. Signed in Duplicate by the Parties hereto. EMPLOYEE: Kevin Willcutts 6/1/99 /s/Kevin Willcutts DATED: ----------- By:----------------------------- EMPLOYER: Berens Industries, Inc. 6/1/99 /s/Marc Berens DATED: ----------- By:----------------------------- EX-10.3 5 ** Indicates information which has been omitted and filed separately with the SEC pursuant to a confidential treatment request. Asterisks appear on page 2 and 3 of this agreement. DATABASE ACCESS AGREEMENT This is a Database access Agreement between Digital Media Resources, Ltd., with a principal office located at Gounodstraat 1 2018 Antwerpen Belgium, referred to in this Agreement as ``Vendor,'' and Berens Industries, Inc., of 701 North Post Oak Road, Suite 350, Houston, Texas 77024, USA, referred to in this Agreement as ``Customer.'' RECITALS Vendor represents that it is the exclusive publishing agent for the Mayer Book of Switzerland and has established a database or other digitally based medium (collectively referred to as "Database") that is available for access by its customers pursuant to the terms and conditions of this Agreement. Customer desires to obtain access to Vendor's Database known as Art Library Auction Index, which uses the contents of the most recently published Mayer Book of Switzerland as its principal information source. Therefore, in consideration of the promises made in this Agreement, Vendor and Customer agree as follows: ACCESS TO DATABASE 1. When Vendor accepts and the parties execute this Agreement, during the term of this Agreement Customer shall be entitled to access Vendor's Database as specified in this Agreement continuously, twenty-four (24) hours per day, throughout the term of this Agreement, subject to the other terms and conditions stated in this Agreement. Vendor agrees to always provide access in accordance with the then current minimum industry standards and Vendor acknowledges that such minimums will likely change with new technology. Specifically and currently, Vendor agrees to provide a minimum access capacity on its artlibrary.com site of two hundred and fifty six kilobytes per second (256kb/s). In the event that the volume of traffic renders this 256kb/s level of bandwidth insufficient, Vendor agrees to increase the bandwidth and/or server capacity in line with the increase in server usage at Vendor's sole expense. TERM 2. This Agreement shall take effect on the date of its acceptance by Vendor and shall continue in effect for thirty-six (36) months, except as otherwise provided in this Agreement. This Agreement shall be automatically renewed on a month to month basis at the end of the thirty-six (36) month period unless it is terminated in writing by either party giving ninety (90) days written notice. 1 CONTENTS OF DATABASE 3. (a) Customer shall have access to Vendor's Database known as Art Library Auction Index which contains auction records from more than 800 auction houses in 40 countries through its site artlibrary.com, and uses the contents of the most recently published Mayer Book of Switzerland as its principal information source. (b) Vendor agrees to deliver custom designed interfaces that links Customer's sites to the Database stored on Vendor's server. Vendor further agrees to allow the Customer to improve the custom interfaces to take advantages of any technological advancements that may occur during the term of this Agreement. (c) Vendor shall maintain and update the Database with the same care and frequency as in the twelve (12) months proceeding the date of this Agreement. Vendor shall update the Database with respect to future auction records within the following time limits: (i) 1998 data by September 1, 1999; (ii) 1999 data by September 1, 2000; and (iii) 2000 data by September 1, 2001. Vendor acknowledges that time is of the essence in relation to these time limits. SECURITY AND INTELLECTUAL PROPERTY 4. (a) Customer acknowledges the title of Vendor to all intellectual property rights now or in the future asserted by Vendor in relation to materials contained on Vendor's artlibrary.com site. Customer agrees not to challenge Vendor's said rights. (b) Customer shall protect the security in regard with access to the data on the Database, using no less care than it does to protect its own data. (c) Vendor acknowledges the title of Customer to all intellectual property rights now or in the future asserted by Customer in relation to materials contained on Customer's site, other than the pages licensed to Vendor. Vendor agrees not to challenge Customer's said rights. CHARGES 5. (a) Customer shall pay a monthly fee of **. Payments shall be made quarterly upon execution of this Agreement. Customer may at Customer's sole discretion make lump sums payments during the term of this Agreement for a discount fee as follows: (i) ** lump sum payment for 24 months; or (ii) ** lump sum payment for 36 months. Customer will pay a lump sum payment for the first 12 months as follows: - ** upon execution of this agreement. - ** on or before 15 November 1999 as the balance of the annual lump sum, less discounts and payments made ** Customer is in no way obligated to make other said lump sum payments after the First twelve months. 2 TERMINATION 6. (a) Vendor may cancel this Agreement if Customer fails to pay the agreed fee as stated in Paragraph 5 herein after thirty (30) days written notice. Customer may terminate this Agreement on ten (10) days written notice to Vendor if Vendor: (i) fails to maintain and enhance the Database on a regular basis; (ii) fails to provide the agreed bandwidth and/or server capacity as specified in Paragraph 1 herein.; or (iii) sells, assigns, reassigns, or in any way compromises its contract as the exclusive publishing agent for the Mayer Book of Switzerland which is essential to Customer. EXCLUSIVITY 7. (a) Vendor shall not grant access to it Database to any sites that are operated in the English language other than access previously granted to Interactive Collector Limited ("IC"), London, UK, and to Vendor itself. Vendor agrees to grant Customer a right of second refusal, after IC, to meet any offers Vendor receives for its Database and related content during the term of this Agreement, and for a period of three (3) months following the termination of this agreement. (b) ** (c) Vendor shall vigorously prevent IC from reselling, reassigning, or redistributing the contents of, or the access rights to, the Database records. Other than Customer, IC, their wholly-owned subsidiaries and those parties covered under 7(b) of this Agreement, no other party (included, but not limited to, clients, partners and affiliates of IC) may offer any products or the internet as a distribution medium. ** ASSIGNMENT 8. Customer and Vendor agrees that this Agreement shall not be assigned or transferred and that any attempt on either part to assign or transfer this Agreement or any of its rights or obligations under this Agreement shall be null and void. Customer further agrees that Vendor may assign payments due under this Agreement with prior permission or approval of Customer. GOVERNING LAW 9. This Agreement shall be construed under and be governed by the laws of the State of Texas in the United States of America. ENTIRE AGREEMENT 10. This Agreement, including all attachments, constitutes the entire Agreement of the parties. 3 NOTICES 11. Notices required or provided for under this Agreement may be given by Vendor to Customer in writing or electronically over its computer service. Notices required or provided for under this Agreement may be given by Customer to Vendor in writing or electronically over Vendor's computer service. No public statements in regard to the nature of this agreement may be made before the option fee of US$ 33,000 is received by Vendor. NONWAIVER OF RIGHTS 12. Customer and Vendor agree that no failure or delay to exercise any right, power, or privilege on the part of either party shall operate as a waiver of any right, power, or privilege under this Agreement. Customer and Vendor also agree that no single or partial exercise of any right under this Agreement shall preclude further exercise of the right. SEVERABILITY 13. If any court determines that any provision in this Agreement is invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force and effect. ATTORNEY'S FEES 14. If any legal action is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire Agreement. August 13 Executed at Houston, Texas on -----------------------, 1999. DIGITAL MEDIA RESOURCES LTD. /s/David Dehaeck By:------------------------------ David Dehaeck Managing Director BERENS INDUSTRIES, INC. ./s/Marc Berens By: ----------------------------- Marc Berens Chief Executive Officer EX-21.1 6 EXHIBIT 21.1 List of Subsidiaries - ---------------------- 1. Berensgallery.com, Inc., a Nevada corporation 2. Artmovement.com, Inc., a Nevada corporation EX-23.1 7 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ------------------------------------- We consent to the inclusion by reference in this registration statement on Form S-8 of our report dated March 13, 2000, on our audits of the consolidated financial statements of Berens Industries, Inc. for the period from inception, February 26, 1999, to December 31, 1999. We also consent to the reference to our firm under the caption "Experts". /s/ Ham, Langston & Brezina, L.L.P. Houston, Texas April 12, 2000 EX-27 8
5 1 YEAR DEC-31-1999 JAN-01-2000 DEC-31-1999 13316 0 1989 0 0 84605 7640 1618 91886 185888 0 0 0 17460 (111462) 91886 2543 2543 0 6427483 0 0 0 (6427483) 0 (6427483) 0 0 0 (6421988) (1.39) (1.39)
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