UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
DAC Technologies Group International, Inc.
(Name of Small Business Issuer in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
65-0847852
(I.R.S. Employer Identification No.)
3200 N. Ocean Blvd, Suite 1006
Ft. Lauderdale, FL 33308
(Address of principal executive offices)
(954) 375-0119
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001
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TABLE OF CONTENTS
PART I.................................................................... -1-
ITEM 1. DESCRIPTION OF BUSINESS................................. -1-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION............................................... -10-
ITEM 3. DESCRIPTION OF PROPERTY................................. -13-
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................. -14-
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS........................ -15-
ITEM 6. EXECUTIVE COMPENSATION.................................. -16-
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... -17-
ITEM 8. DESCRIPTION OF SECURITIES............................... -19-
PART II................................................................... -20-
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........... -20-
ITEM 2. LEGAL PROCEEDINGS....................................... -20-
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS........... -20-
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES................. -21-
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS............... -21-
PART F/S.................................................................. -23-
PART III.................................................................. -24-
Index and Description of Exhibits................................ -24-
SIGNATURES................................................................ -25-
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PART I
This discussion in this Registration Statement regarding our company
and its business and operations contain "forward-looking statements." Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof or
other variations thereon or comparable terminology. The reader is cautioned that
all forward-looking statements are necessarily speculative and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward looking statements. We do not
have a policy of updating or revising forward-looking statements and thus it
should not be assumed that silence by its management over time means that actual
events are bearing out as estimated in such forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
(a) History and Business Development.
We were incorporated as a Florida corporation in July, 1998, under the
name DAC Technologies of America, Inc. for the purpose of succeeding to the
interest of DAC Technologies of America, Inc., an Arkansas corporation ("DAC
Arkansas"). In September, 1998, we purchased substantially all of the assets of
DAC Arkansas. DAC Arkansas, formed as an Arkansas corporation in 1993, may be
deemed to be a predecessor of our company. DAC Arkansas commenced operations
with the manufacture of various safety products, which were eventually acquired
by us. Our principal owners and management held similar positions with DAC
Arkansas. We have continued the operations of DAC Arkansas without any
significant changes. In July,1999, we changed our name to DAC Technologies Group
International, Inc.
Between July 1998 and April 1999, we sold an aggregate of 5,024,500
shares of our Common Stock to approximately 30 accredited or otherwise
sophisticated investors with whom we had pre-existing relationships and who had
access to relevant information concerning the Company in a series of
transactions exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). We received gross proceeds of approximately
$243,530 from these transactions. The funds have been used to fund our business
plan and we anticipate needing additional capital to complete the plan.
We have not been involved in any bankruptcy, receivership or similar
proceeding. Except as set forth herein, we have not been involved in any
material reclassification, merger, consolidation, or purchase or sale of a
significant amount of assets not in the ordinary course of business.
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(b) Business Plan
We are in the business of developing, marketing and manufacturing
various consumer products, patented and unpatented, designed to enhance and
provide security for the consumer and for his property. We have placed
particular emphasis on gun safety because it has become a prominent national
issue due to the recent rash of school and workplace violence. We believe that
there will be a continual public mandate for our federal, state and local
governments to pass gun safety legislation on all guns manufactured. With over
220 million firearms in the U.S. alone, we believe we will be a major presence
in the gun lock market.
In addition, we have developed a wide range of security and
non-security products for the home, automobile and person including various
plastic injection and leather products. We primarily sell to mass market
retailers such as Wal-Mart and K-Mart. The majority of our products are
manufactured and imported from mainland China and shipped to a central location
for distribution in Little Rock, Arkansas.
In order to build a database from which we might select products to
market and distribute, we presently anticipate that we will solicit proposals
from inventors who have substantially completed their product development but
lack the expertise or capital to market or distribute it. We expect that we will
utilize advertisements in trade and other publications, networking, referrals
from persons with whom we may have pre-existing relationships and our Web site
as methods of soliciting these proposals. We may also acquire existing
businesses with complimentary operations as a method of expanding our business
and operations.
(c) Products
(1) Security Products
We manufacture and distribute products in three main categories (a)
home, auto and personal security, (b) gun safety locks, and (c) non-security
devices. In developing these products, we focus on developing features,
establishing patents, and formulating pricing to obtain a competitive edge. We
currently design and engineer our safety products with the assistance of our
Chinese and domestic manufacturers, who are also responsible for the tooling,
manufacture and packaging of the products.
(A) Gun Safety. We currently market three gun safety products:
o "Trigger Lock Value Pack," a patented product, which
contains three ABS plastic trigger locks with metal locking
device and keys. This lock fits virtually all handguns and
prevents unwanted or accidental discharge of the firearm.
o "Lever Hammer Lock," constructed of ABS plastic with a metal
locking device and key, is designed to prevent cocking of
lever action rifles.
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o "Gun Lock", a steel lock with keyed locking device, that
fits over the entire trigger guard of virtually all
handguns.
o "Metal Trigger Lock," the development of which has been
recently completed and production has begun. This lock is
similar to our Trigger Lock Value Pack, but is made of metal
instead of plastic with a more secure locking system. The
lock will be available at the retail level in a three-piece
value pack and as a single unit. It will also be available
in bulk without retail packaging for gun manufacturers. We
have a patent pending on this product.
(B) Personal Security. We carry a wide range of electronic alarms
designed to protect the consumer and personal property.
o "Body Alarm," a 130-decibel alarm, is designed to be carried
or worn whenever the user faces the possibility of attack.
An original product of DAC Arkansas, it has been redesigned
to include a built-in flashlight and accessories so it can
be used as a door or window alarm.
o "Key Alert," a patented product, is a small, 120 decibel
alarm with key chain and built-in flashlight. This unit,
easily activated by a push button, will enhance protection
any time its user feels threatened.
o "Pepper Spray," packaged in an attractive leather holster
with key ring, this canister contains 14 grams of 5%
oleoresin capsicum red pepper, and will debilitate an
attacker on contact with his eyes.
o "Protect All," a vibration activated, 130 decibel alarm,
this unit can be attached to virtually anything, i.e.
television, stereo, microwave. Not much larger than a
beeper, this alarm can protect personal property at home,
office or virtually any location.
o "Patient Alert," designed specifically for the health care
industry, this alarm is similar to our Body Alarm, but with
attachments to mount the unit onto a bed or wheelchair and
the pull strap to the patient. Decibel level of this alarm
is only 100-105, as its intended use is not to scare off an
attacker but to alert nursing staff when a patient attempts
to get out of bed or wheelchair.
(C) Automotive Safety. We currently manufacture the following car
alarms:
o "SWAT Steering Wheel Alarm," a patented product, is a
130-decibel alarm which mounts to virtually any vehicle
steering wheel. Locking the alarm to the steering wheel arms
the alarm, and a delay timer allows the driver 15 seconds to
exit the vehicle without activating the alarm. Vibration
activated, this alarm has an automatic reset, sensitivity
settings, and a blinding strobe light. Selling for $25-$30
at the retail level, this alarm is perfect for
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consumers who do not want to invest in more expensive
vehicle alarms. The SWAT Steering Wheel Alarm is also
manufactured with remote control for arming and disarming.
o "SWAT II Talking Car Alarm," a more traditional, under the
hood car alarm, can easily be installed by the consumer. The
alarm can be mounted under the hood by screws, tape, or
simply strapped to the car battery, all provided. Alligator
clips allow for easy attachment to battery for power. Two
remote controls come with the unit, which are used to arm
and disarm the alarm, as well as set sensitivity levels and
spoken warnings in both English and Spanish. Alarm has nine
voice commands programmed, car finder, and a panic button.
Retailing in the $80-$100 range, this alarm is less
expensive than most competitors models, and does not require
professional installation.
o "Warning Module," is a simple battery operated device that
mounts on the dashboard, with two red LED lights that flash
when activated. Sold separately, it is also included in the
packaging with the SWAT II Talking Car Alarm.
(D) Home Safety. We carry a full line of home security alarms,
packaged both as a complete unit, and with individual pieces to
add on.
o "Strobe Alarm Security System," is a complete, wireless,
motion detection home security package. Wall mounted motion
detector with 120(degree) radius, emits a 120 decibel alarm
and sends RF signal to an outside alarm as well. Two remote
controls included.
Companion pieces include:
o The Glass/Window Alert
o Mini-Magnetic Door/Window alarm
o Glass Breakage Commander
o Magnetic Sensor Commander
o Additional Remote Controls
(2) Non Security Products.
We manufacture and market the following non-security consumer
products:
o "Clampit Cupholder", a licensed product, designed as a
plastic, adjustable cupholder, with a unique clamping arm
that allows the user to attach to virtually anything.
Perfect for lawn chairs. The cupholder clamp can be adjusted
so that the holder is always upright.
o "Clampit Plateholder", a licensed product, designed as a
plastic holder for paper or plastic plates, has the same
patented clamp as the Cupholder, allowing user to attach to
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almost anything and at any angle. Perfect for lawn chairs so
you no longer have to hold your plate in your lap.
o We are currently preparing for market the:
o "Horizontal Phone Case", developed and patent pending, but
not yet marketed, is a uniquely designed, leather cell phone
case that attaches to a user's belt horizontally. User no
longer has to worry about getting jabbed in the side by cell
phone when sitting down. Available in three sizes.
(d) Manufacturing and Distribution.
We, through our foreign and domestic manufacturing agents, manufacture,
design and build our tooling, molds and products. Our administrative offices are
located in Little Rock, Arkansas and Ft. Lauderdale, Florida. Additionally, we
have a distribution facility in Hong Kong, provided to us as an accomodation by
one of our suppliers. We sub-contract our manufacturing for tooling and
production in Shenchen, China and Sandwich, Illinois. We distribute all of the
domestic and certain of our international business out of our Little Rock
facility, most international business is shipped directly to the customer from
our Hong Kong location. We believe we can provide low-cost quality products
because labor-intensive products are manufactured in China, where labor costs
are lower. Our plastic injection products can be manufactured competitively in
the U.S. due to automation. Our central warehouse facility is in Little Rock
where following manufacture, with the exception of our international business as
previously noted, products are delivered complete and ready for delivery to our
customers.
Our distribution strategy includes direct selling and marketing,
utilizing commissioned independent sales representatives. We anticipate that we
will develop sales promotion and sales development activities which will be
directed towards giving selling assistance to the independent sales
representatives through aids such as brochures, product samples and
demonstration products. We will establish a Web site which will serve both as an
additional marketing tool, and will provide a platform from which we will be
able to provide various support services to our independent sales
representatives. We also anticipate that we will seek to motivate our
independent sales representatives through the use of special incentive programs
that reward superior sales performance. We also anticipate utilizing trade
shows, both on a local and national level to promote our products and to attract
qualified sales representatives.
Our management will attempt to maintain sufficient inventory levels to
meet customer's demands but there can be no assurance that we will be successful
in doing so. Turnaround time from the date an order is placed until received in
our distribution center normally is between four to six weeks. This quick
turnaround time allows us to maintain minimum inventory levels. However since we
out source our manufacturing, a good portion of which is done in China, it is
difficult to predict the efficiency of our vendors.
(e) Competition.
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We will be operating in a very competitive industry, dominated by
national and international companies with well-established brands all of whom
are better capitalized, have more experience in our industry and have
established varying degrees of consumer loyalty. There are no assurances we will
ever be successful in establishing our brands or penetrating our target markets.
Some of our competitors in the business sectors which we will be operating in
are:
o Gun safety competitors include: Master Lock (which presently
controls 60-70% of the market), Noble Security and Shot Lock.
o Automotive security competitors include: Bulldog, Rally and Code
Alarm
o Personal security competitors are varied and mostly smaller
vendors.
o Non-security product competitors include: various small and large
vendors participate in this field
We are subject to competition that is expected to intensify in the
future because we believe that the number of competitors is increasing. There
are no significant barriers to entry into our markets. We feel our greatest
difficulties in competing come in areas such as gun safety where are competitors
are bigger, better known, and have greater resources including capital and
personnel. We realize it is important to achieve brand name recognition in
establishing market share, which, in turn generates additional market share
giving consumers preferences for brand names. We believe that while brand names
operate effectively in mainstream product distribution, there is significant
opportunity for lesser known names with specific products and solutions that
appeal to consumers.
It is critical for us to be selective in the products we select to
bring to market, and management has been effective in developing products that
can be priced advantageously and obtain consumer acceptance as well as approval
from the mass merchandisers whose relationships we have, over the years,
cultivated. In addition, we believe that impulse buying is more prominent when
products are sold below the $20 threshold. We believe that consumers have
responded favorably to our lower priced products. Accordingly, the keys to our
maintaining a competitive position are product design, pricing quality of
product and the maintenance of favorable relationships with various mass
merchandisers.
(f) Principal Suppliers.
Our principal suppliers and manufacturers are:
o Uni Skit Technologies, Inc., a Chinese company which manufactures
the our auto and body alarm systems.
o Uni Tat International, Inc., a Chinese company which manufactures
the gun locks and auto alarm systems.
o Security Limited, a Little Rock, Arkansas company, manufactures
the Pepper Spray.
o Taico Designs, a company located in Chicago, Ill. manufactures
the cup and plateholder
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o Emsal Tekin a company located in Istanbul, Turkey, manufactures
the horizontal phone case
With the exception of Uni Skit Technologies, Inc., we have no
contractual relationship with our manufacturers. For the past two years Uni Skit
and Uni Tat have supplied approximately 80% of our products. We are dependent
upon these suppliers for the near term. We believe our relationships with our
suppliers and manufacturers is satisfactory, however should any of them cease
providing for us, we believe they can be replaced without difficulty and at
competitive cost.
In 1997, we contracted with Uni Skit to share ownership rights,
research and development costs with respect to all products developed on a joint
basis. Uni Skit also has the exclusive right of manufacturing certain products
providing it can handle our requirements. The contract also gives us the
exclusive right to market and sell our joint products in North and South
America, and gives Uni Skit the same exclusive rights in the Pacific Rim. The
parties have non-exclusive rights to market and sell in other parts of the
world.
(g) Customers.
Although we have numerous customers, we sell on the basis of purchaser
orders, primarily to national retail chains such as Wal-Mart, K-Mart, Walgreens,
Pep Boys, Discount Auto, Advance Auto Sales and Radio Shack. In 1998 Wal-Mart
accounted for 14% of our gross revenues and 28% in 1999. In 1999, K-Mart
accounted for 17% of our gross revenues.
We have entered into a "Blanket Purchase Order" with Savage
Arms(Canada) Inc., a significant national gun manufacturer which provides for
the following:
o the contract runs for a period of one year but may be terminated
on three months notice.
o we are required to maintain an inventory equal to three weeks of
requirements relative to the most recent scheduled release.
o the contract provides for 90,000 pieces of the trigger lock
mechanism
In addition, our customer base also includes numerous regional and
national distributors and smaller retailers. We also sell to distributors in
Europe, Asia, South and Central America and the Far East, including the
following:
o Germany - SWAT II Talking Car Alarm (speaks German), SWAT
Steering Wheel Alarm w/remote, Warning Module and Key Alert.
o England - SWAT II Talking Car Alarm, both SWAT Steering Wheel
Alarms.
o Japan - SWAT Steering Wheel Alarm, Glass/Window Alarm.
(h) Intellectual Property.
We believes that protection of proprietary rights to our products is
extremely important.
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To this end, we have obtained U.S. patents on certain of our products as
follows:
<TABLE>
<CAPTION>
Model Patent No. Expiration
----- ---------- ----------
<S> <C> <C> <C>
TVP 095 Trigger Lock Value Pack Des. 375,342 2009
SWA 03 SWAT Steering Wheel Alarm Des. 365,774 2009
KAL 201 Personal Safety Alarm Des. 355,863 2008
Key Chain Alarm 5,475,368 2008
GWA 001 Glass/Window Alarm Des. 371,086 2009
Defense Spray and Flashlight Des. 375,994 2009
</TABLE>
In addition, we have patents pending on our steel trigger and
horizontal phone case products .We have entered into a licensing agreement
giving us the exclusive right to sell the patented Clampit Cup and Plate Holder
in the U.S., with certain minor exceptions.
We intend to register our product names, although we may not be
successful in doing so particularly because of their generic character. As we
develop trademarks, trade names, copyrights or other intellectual property
rights, we may seek to protect these, as well as those related to the products
listed above, by registration in the United States and other countries where
these products may be marketed.
Depending upon the development of our business, we may also wish to
develop and market products which incorporate patented or patent-pending
formulations, as well as products covered by design patents or other patent
applications.
While we may seek to protect our intellectual property, in general,
there can be no assurance that our efforts to protect our intellectual property
rights through copyright, trademark and trade secret laws will be effective to
prevent misappropriation of our products. Our failure or inability to protect
our proprietary rights could materially adversely affect our business, financial
condition and results of operations. Moreover, inasmuch as we will often seek to
manufacture products which are similar to those being manufactured by others, it
is also critical for us to insure that our manufactured products do not infringe
upon existing patents of others.
(i) Governmental Regulations.
We have obtained the required approval from the Federal Communications
Commission for the Rf signals emitted by our remote control units. We are not
aware of any other required governmental approvals on any of our products.
While not directly affecting our business, there is a likelihood of
governmental regulations requiring trigger locks on guns. If such regulations
are passed, they presumably will serve to increase the demand for our products
and sales in the gun safety area. Government regulations may, however, be
promulgated to regulate these devices.
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(j) Research and Development.
We do not incur any true research and development costs. We develop our
products internally, utilizing the expertise of our manufacturers, and input
from our customers. Because of our close relationships with our customers, we
are able to determine the level of interest in a particular product before
investing significant time or capital in its development. Once a potential new
product is identified, we utilize the services of a patent attorney to assure
that we do not infringe upon anyone's patent rights. We also design our own
packaging internally.
Working closely with our manufacturers' engineers, a final design for a
product and cost estimations are completed. If management determines that a
product can be produced at competitive prices, and the interest level justifies
production, we proceed with having a mold made. We own the molds for all of our
products. After pre-production samples are made and approved, full production
begins.
(k) Environmental Laws.
We are not subject to any environmental laws or regulations.
(l) Employees.
We currently employ five employees, all of whom are full-time:
President & Chief Executive Officer, Chief Financial Officer, salesman,
receptionist, & shipping clerk. There are no collective bargaining agreements or
contracts.
(m) Reports to Security Holders
We are not, until the effectiveness of this registration statement ,
subject to the reporting requirements of the Securities & Exchange Act of 1934
and the rules and regulations promulgated thereunder, and, therefore, do not
file reports, proxy statements or other information with the Securities &
Exchange Commission. Copies of the registration statement, including the
exhibits to the Registration Statement and other material that is not included
herein, may be inspected, without charge, at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549, and may be available at the following Regional Offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10048. Copies of
such materials may be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Information on the operation of the Public Reference Room
may be obtained by calling the Commission at 1-800-SEC-0330. In addition, the
Commission maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following Management Discussion and Analysis of Financial Condition
is qualified by reference to and should be read in conjunction with, our
Financial Statements and the Notes thereto as set forth at the end of this
document. We include the following cautionary statement in this Form 10SB for
any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, future events or performances and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements. The Company's expectations, beliefs and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without limitations, management's examination of historical operating trends,
data contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations, beliefs
or projections will result or be achieved or accomplished.
(a) Background
DAC Arkansas was formed in 1993, and began selling its Body Alarm, a
small, beeper sized, 130 decibel, electronic personal security alarm, which
retails for under $10. In 1994, we brought to market our patented Key Alert, a
110 decibel hand held alarm with key chain and built-in flashlight. Other
products followed over the next few years, including the patented SWAT Steering
Wheel Alarm, SWAT II Talking Car Alarm, and the patented Clampit Cupholder and
Plateholder.
In 1996, we developed our patented Trigger Lock, an inexpensive,
plastic trigger lock for handguns. Recognizing the public's and government's
concern for gun safety, we have developed a new Metal Trigger Lock, a steel Gun
Lock, and a Lever Hammer Lock for lever action rifles. All of these gun safety
devices are currently carried by Wal Mart and K Mart. We have devoted a
significant amount of time and effort the past year in establishing ourselves in
the area of gun safety.
o Develop a National Sales Force
We have in the past utilized national and regional manufacturing sales
representatives, with varied success. We believe use of such sales
representatives is a cost-effective method of reaching mid-sized and regional
retail outlets as well as national distributors. To properly monitor and
motivate these sales representatives, we intend to hire a national sales
manager.
o Develop New Products.
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Our success has been due, in part, to our ability to continue
developing new consumer products. We currently offer over thirty products in
personal, home and automotive security, gun safety, and non-security products
such as our patented Clampit Cupholder and Plateholder. In addition to the Metal
Trigger Lock, we have also recently completed development of a leather
horizontal cell phone case. This new product will be available early in 2000.
We believe that with our relationships with major retailers such as Wal Mart,
K Mart, and Walgreens, and the capabilities of our manufacturers, we can
continue to identify consumer products that we can produce that are of high
quality and competitively priced.
o Internet
We have not yet ventured into what we see as the ever-expanding
opportunities available through the Internet. There are some distributors and
retail chains that offer our products through their own Web sites. In
anticipation of making use of the Internet to market our products, we have
acquired the rights to several Internet domain names such as "trigger-lock.com"
and "gun-lock.net". We intend to pursue the Internet potential early in 2000.
o Direct Mailings
We have had success in identifying specific target groups and utilizing
mass mailings and faxing. Sales of our Patient Alert, used by nursing homes and
hospitals to alert staff when confined patients attempt to get out of their bed
or wheelchair, has been developed and continues to increase as a result of this
type of advertisement. We have begun similar efforts to leading gun
manufacturers and distributors with regards to our gun safety locks. We intend
to continue to use direct mailings whenever specific target groups can be
identified as potential purchasers of any of our products.
o Expansion/Upgrade of Accounting and Management Systems.
Current accounting and management systems have been satisfactory in
maintaining accurate accounting data and in aiding management decisions. With
anticipated growth in sales and products, it will be necessary to upgrade these
systems to insure accurate data and to properly control costs, manage inventory,
track cash flows, as well as provide timely information required for quarterly
SEC filings.
(b) Financial Condition and Results of Operations.
o Overview
As discussed in the Notes to Financial Statements, the Company
acquired certain assets and assumed certain liabilities of a related company
effective September 30, 1998. The following discussion and analysis of operating
results for the twelve months ended December 31, 1998,
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include the nine months ended September 30, 1998 for this predecessor company
and the three months of October 1, 1998 through December 31, 1998 for the
Company.
o Year Ended December 31, 1998 compared to the year ended December
31, 1997.
Sales revenues for the year ended December 31, 1998 were $2,044,634
compared to $2,501,368 for the year ended December 31, 1997. The decrease of
$456,734 can be attributed to a variety of factors. The most significant factor
was management's decision to concentrate the Company's efforts to developing,
designing and marketing the Company's line of gun safety products. These
efforts, while establishing the Company as a leader in area of gun safety,
significantly affected sales efforts of the Company's other products. The
benefits to be realized in future sales will not realized until the year 2000.
Operating expenses for the year ended December 31, 1998 were $777,913
compared to $730,376 for the year ended December 31, 1997. This increase of
$47,537 was due primarily to one time charges totaling $81,369 to write-down the
carrying values of certain inventory and fixed asset items and receivables from
former employees and other related parties. The effect of these one-time
expenses were offset by decreases in other normal operating expenses of $33,832.
The net loss of $57,659 for the year ended December 31, 1998 as
compared to net income of $190,245 for the year ended December 31, 1997, was due
mainly to the decrease in sales revenues as discussed above.
At December 31, 1998, the Company had working capital of $58,931 as
compared to a working capital deficit of $90,763 at December 31, 1997. The
increase in working capital of $149,694 can be attributed to the cash infusion
of $200,000 from the private sale of 1,000,000 shares of the Company's common
stock in December, 1998.
o Nine months ended September 30, 1999 compared to nine months
ended September 30, 1998.
Income from operations for the nine months ended September 30, 1999 was
$176,163, an increase of $75,271 from the nine months ended September 30, 1998.
This increase is due to management's efforts to control and reduce selling,
general and administrative expenses, which decreased $74,011.
Net income for the nine months ended September 30, 1999 was $114,620 as
compared to $151,463 for the nine months ended September 30, 1998, which
included the recognition of $165,000 gain from the transfer of assets from DAC
Arkansas to DAC Fla. In addition, in 1999, the Company decreased its selling,
general and administrative expenses by $74,011, and decreased its interest
expense by $53,519, all of which resulted in a $36,843 decrease in net income.
The decrease in interest expense is due to the contribution to capital of
certain notes payable by minority shareholders on September 30, 1998.
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o Liquidity and Capital Resources
Our primary source of cash is funds from our operations. We believe
that external sources of liquidity could easily be obtained in the form of bank
loans, letters of credit etc. We maintain an account receivable factoring
arrangement in order to insure an immediate cash flow. The factor may also, at
its discretion, advance funds prior to the collection of our accounts. Advances
are payable to the factor on demand. Should our sales revenues significantly
decline, it could effect our short term liquidity. For the period ending
September 30, 1999, we owed our factor approximately $294,000. In 1994, DAC
Arkansas' shareholders and the Company obtained a $500,000 line of credit. The
notes reflecting the advances were consolidated and commencing March 1999, we
are required to pay $10,000 for 11 months, with a balloon payment of $137,301,
plus accrued interest due on February 14, 2000. The interest rate is 9.5% and
the loan is collateralized by our inventories and personal guarantees of our
founding stockholders. We believe our revenues will be sufficient to pay these
obligations. If not, we will seek to refinance them or request our shareholders
to pay their guarantees.
o Trends
The recent flurry of publicity involving firearms has caused gun safety
to become a prominent issue nationally. Gun violence, especially in schools has
prompted the President, as well as national and state legislators, to debate
legislation requiring gun safety locks on all firearms. Threatened litigation
against gun manufacturers has caused them to seriously consider placing gun
safety locks on the guns they manufacture. We believe sales revenues in this
area will grow significantly. Sales of our gun locks products for the nine
months ending September 30, 1999, totalled $661,842 as compared to $218,788 for
the nine months ending September 30,1998. Sales for the fourth quarter of 1999
were $271,514.
ITEM 3. DESCRIPTION OF PROPERTY
Our corporate headquarters are located at 3200 N. Ocean Blvd, Suite
1002, Ft. Lauderdale, FL 33308 consisting of 500 square feet, with telephone
number (954) 375-0119. The lease term is month to month at a $1,400 per month
rent.
We have a 5,000 square foot office/warehouse at 1601 Westpark Dr.,
Suite 4C, Little Rock, AR 72204. Approximately 1,500 square feet is office and
3,500 square feet is warehouse. All of the accounting and shipping functions are
performed out of this location, as well as some sales. This space is leased for
two years, expiring February 1, 2001, with monthly rent of $2,325. There are no
renewal options. We believe there are adequate alternative facilities at
reasonably competitive prices in the event these leases terminate.
-13-
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of December 31, 1999 by (a) each
person known by us to be the beneficial owner of five percent or more of the
outstanding common stock and (b) all executive officers and directors both
individually and as a group. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable, we believe that
each of the shareholders named in this table has sole or shared voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based upon 5,024,500 shares of common stock
outstanding.
(a) Security Ownership of Certain Beneficial Owners.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percent
Title of Class Beneficial Owner Beneficially Owned of Class
- -------------- ---------------- ------------------ --------
<S> <C> <C> <C> <C>
Common Stock Larry Legel 1,498,250(1)(2) 30%
1425 NE 57th Place
Ft. Lauderdale, FL 33334
Common Stock Gerald E. Hannahs, Jr. 1,157,500(3)(5) 23%
17710 Leatha Lane
Little Rock, AR 72211
Common Stock Dan R. Lasater 1,224,000(4)(5) 24.4%
Hinson Rd.
Little Rock, AR
Common Stock David A. Collins(4) 316,750 6.3%
3200 N. Ocean Blvd #1006
Ft. Lauderdale, FL 33308
Common Stock Ralph Coppess 316,500(6) 6.3%
1004 Commerce St.
Little Rock, AR
</TABLE>
-14-
<PAGE>
- ------------------------------------
(1) Includes 181,500 shares of Common Stock held jointly with wife, 500,000
shares owned by the Collins Children's Trust and 816,750 owned by the Collins
Family Trust, both of which Mr. Legel is the Trustee with full voting power.
(2) David Collins claims neither beneficial ownership nor control of the shares
held by Larry Legal as trustee.
(3) 250,000 of these shares are held by Diamond Capital Partners for the benefit
of Gerald Hannahs.
(4) 250,000 of these shares are held by Caribou Marketing, a company controlled
by Dan Lasater
(5) 88,390 and 205,640 shares are held respectively by H & L Holdings and
Phoenix Mortgage, companies jointly controlled by Gerald Hannahs, Jr. and Dan
Lasater, each has been allocated 1/2 the combined shares or 197,525 shares.
(6) These shares are held by Jasper Marketing, a corporation controlled by Ralph
Coppess
(b) Security Ownership of Management
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percent
Title of Class Beneficial Owner Beneficially Owned of Class
- -------------- ---------------- ------------------ --------
<S> <C> <C> <C>
Common Stock Larry Legel 1,498,250(1)(2) 26.2%
1425 NE 57th Place
Ft. Lauderdale, FL 33334
Common Stock David A. Collins 316,750 6.3%
3200 N. Ocean Blvd #1006
Ft. Lauderdale, FL 33308
Common Stock Total Officers & Directors 1,631,750 32.5%
</TABLE>
- ---------------------------------
(1) Includes 181,500 shares of Common Stock held jointly with wife, 500,000
shares owned by the Collins Children Trust and 816,750 owned by the Collins
Family Trust, both of which Mr. Legel is the Trustee with full voting power.
(2) David Collins claims neither beneficial ownership nor control of the shares
held by Larry Legal.
There are no arrangements which may result in a change in control of
the Company.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of our executive officers
and directors. Directors are elected annually at our annual meeting of
stockholders, and serve for the one year term for which they are elected and
until their successors are duly elected and qualified. Our officers are
appointed by the board of directors and serve at the board's discretion.
<TABLE>
<CAPTION>
Name Age Position Term
- ---- ---- -------- ----
<S> <C> <C> <C> <C>
David A. Collins 54 President, CEO/Director 2000-2001
Robert C. Goodwin 43 CFO/Director 2000-2001
Larry Legel 53 Secretary/Director 2000-2001
John C. Collins 33 Vice President-Sales 2000-2001
</TABLE>
-15-
<PAGE>
David A. Collins has served as the Company's President and CEO since
its inception. From 1992 until September 1998, Mr. Collins was President and CEO
of DAC Arkansas. Mr. Collins also served as President of Global Enterprises, a
marketing and sales organization serving the convenience store industry. Mr.
Collins attended Little Rock University, lacking 10 hours for his degree.
Larry Legel has been a Director of the Company since its inception, as
well as a Director of DAC Arkansas. Mr. Legel is an independent CPA, and has
owned and managed a CPA firm for over 25 years. Mr. Legel has served as a
Director, CEO, and CFO of a number of corporations. Mr. Legel received his BS
degree from Wayne State University, Detroit, MI.
Robert C. Goodwin has served as the Company's CFO since its inception,
as well as DAC Arkansas since 1993. Mr. Goodwin has served as CFO of companies
in a variety of industries for twenty years. Mr. Goodwin received a BA degree
from Hendrix College, Conway, Arkansas in 1978. Mr. Goodwin has been a CPA in
Arkansas since 1982.
John C. Collins is the son of David A. Collins and has served as a
regional sales manager of the Company and DAC Arkansas since 1994. Mr. Collins
has sales experience in a number of industries. He has been instrumental in
developing the Company's international customer base as well as being involved
in product development and merchandising.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation received for services rendered to us during the fiscal year ended
December 31, 1998. Other annual compensation consists of health insurance
premiums paid for by us on behalf of the named officers, and in some cases, the
spouse and dependents of the named officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
----------------------------- --------------------------------------------------
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted Securities All Other
and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)
- -------- ---- --------- --------- -------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David A.
Collins, CEO 1998 52,000 5,000 61,500[1]
Robert C.
Goodwin, CFO 1998 54,000 4,000
John C.
Collins,
VP Sales 1998 36,000 18,000 4,000
</TABLE>
- --------------------------------
[1] These funds were paid to Telephone Connections Network, Inc., a company
owned by the Collins Family Trust, as consulting fees.
-16-
<PAGE>
Board Compensation
Our directors do not receive cash compensation for their services as
Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Acquisition of Our Predecessor's Assets and Liabilities
On September 27, 1999, we entered into an Asset Purchase Agreement,
effective September 30, 1998, wherein we acquired assets of DAC Arkansas,
totaling $939,150, and assumed liabilities totaling $1,104,783. Not included in
this transaction was a receivable from David Collins, certain bridge loans,
stockholder advances, an automobile, certain accounts payable, accrued
commissions and accrued payroll. The difference resulted in a gain to the DAC
Arkansas of $165,633, and a loss in the same amount to us.
(b) DAC Arkansas
In previous periods, the DAC Arkansas had significant related party
transactions, including loans to and from stockholders. Prior to September 23,
1998, DAC Arkansas had loaned a principal shareholder, the Collins Family Trust
and Telephone Connections Network, Inc., a company wholly-owned by the Collins
Family Trust, approximately $340,000 and David Collins, the company president,
approximately $143,000. During the same period, Gerald Hannahs and Dan Lasater,
principal shareholders of the Company, loaned DAC Arkansas approximately
$464,000.
On September 23, 1998, Gerald Hannahs and Dan Lasater, purchased, from
DAC Arkansas, $174,603 of notes and accrued interest receivable owed by David
Collins to DAC Arkansas. The consideration was an equal amount of notes payable
to these stockholders.
On September 30, 1998, Gerald Hannahs and Dan Lasater, contributed
$348,867 of notes payable and accrued interest to the capital of the DAC
Arkansas. Consulting fees of $10,500, $51,000 and $120,000 for the three months
ended December 31, 1998, for the nine months ended the September 30, 1998 and
for the year ended December 31, 1997, respectively, are payments to Telephone
Connections Network, Inc., a Company consultant.
(c) Related Party Transactions
-17-
<PAGE>
We and our predecessor have two major suppliers in China-Uni Skit
Technologies, Inc. and Uni Tat International, Inc.- from whom we purchase, on
average more than 90% of our products. On December 23, 1998, Uni Skit, one of
our major suppliers, agreed to convert $251,936 of its debt to 165,000 of our
common shares. The transaction was made in reliance on Section 4(2) of the
Securities Act, as the purchaser was sophisticated, has full access to all
material information and took the shares for investment purposes. As of
September 30, 1999, we owe this supplier $26,026. In 1997, we contracted with
Uni Skit to share ownership rights, research and development costs with respect
to all products developed on a joint basis. Uni Skit also has the exclusive
right of manufacturing certain products providing it can handle our
requirements. The contract also gives us the exclusive right to market and sell
our joint products in North and South America, and gives Uni Skit the same
exclusive rights in the Pacific Rim. The parties have non-exclusive rights to
market and sell in other parts of the world.
On March 1, 1995, DAC Arkansas entered into a consulting agreement with
Telephone Connections Network Inc., a company controlled by the Collins Family
Trust, to provide sales and marketing advice to the Company. The Collins Family
Trust was created for the benefit of members of the family of David Collins, the
Company's president. Mr. Collins disclaims any beneficial interest in the trust.
The trustee of the Trust is Larry Legal, the Company's Secretary and a director.
The fees paid under the consulting agreement are subject to agreement between
the parties. To date they have averaged approximately $6,000 per month. The
agreement expires on March 1, 2000, but can be terminated on 30 days notice.
(d) Promoters and Founders
On July 31, 1998 we issued 3,630,000 shares of our common stock to
principally the same shareholders of our predecessor, DAC Arkansas, i.e. Collins
Family Trust, Dan Lasater and Gerald Hannahs, for par value, in the same ratio
of ownership in the latter, in reliance on section 4(2) of the Securities Act.
(e) Factoring Agreement
On April 10, 1995, DAC Arkansas entered into a factoring agreement that
is renewable annually. By agreement with the factor, CIT Group/Commercial
Services, Inc., we assumed this agreement on October 1, 1998. The factoring fees
range from .65% to 1.8% monthly depending on the creditworthiness and location
of an account, i.e. domestic or foreign. An additional fee of .25% is charged
for each 30 day period, or part thereof, when the terms of sale exceed 30 days.
Fees are calculated on the gross face value of each invoice. In addition to the
factoring fees interest is charged on the outstanding funds in use at the
greater of 7% or 1.25% above prime. The amounts borrowed are secured by our
accounts receivable. For the period ending September 30, 1999, we owed our
factor approximately $294,000.
-18-
<PAGE>
(f) Line of Credit/Loans
On April 15, 1994, DAC Arkansas' stockholders entered into note
agreements with the Mercantile Bank in Little Rock, Arkansas for a line of
credit totaling $500,000. On February 12, 1999, several principal shareholders
and the Company jointly borrowed, for the benefit of the Company, $230,722
evidenced by a promissory note whose terms require 11 monthly payments of
$10,000, beginning March 12, 1999, with a balloon payment of $137,301 plus
accrued interest, due on February 14, 2000. The interest rate is 9.5%. The loans
are collateralized by our inventories.
ITEM 8. DESCRIPTION OF SECURITIES
(a) Common Stock.
We are authorized to issue 10,000,000 shares of common stock, par value
$0.001 per share, of which 5,024,500 shares were issued and outstanding as of
January, 2000. All of the issued and outstanding common stock is fully paid and
non-assessable.
Each share of common stock entitles the holder thereof to one vote in
the election of directors and all other matters upon which stockholders are
entitled to vote. There are no cumulative voting rights, which means that the
holders of more than 50% of the outstanding shares voting for the election of
directors can elect all of the directors to be elected, if they so choose. In
such event, the holders of the remaining shares will not be able to elect any of
our directors.
Each share of common stock entitles the holder thereof to receive cash
dividends as the Board of Directors may declare from funds legally available
therefore. However, we do not intend to declare any dividend on our common stock
in the foreseeable future.
There are no preemptive rights with respect to our common stock. Upon
liquidation, dissolution or winding up of the affairs of the Company, and after
payment of creditors, the assets legally available for distribution will be
divided ratably on a share-for-share basis among the holders of the outstanding
shares of common stock.
The transfer agent and registrar for our common stock will be Florida
Atlantic Stock Transfer, Tamarac, FL.
-19-
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no public trading market for our common stock. We have no
outstanding options, warrants or other securities that could be converted into
common stock. As of January 26, 2000, there were approximately 29 holders of
record of our 5,024,500 shares of common stock outstanding.
We have not paid a cash dividend on the common stock since inception.
The payment of dividends may be made at the discretion of our Board of Directors
and will depend upon, among other things, our operations, our capital
requirements and our overall financial condition. Although there is no
restriction to pay dividends, as of the date of this registration statement, we
have no intention to declare dividends.
ITEM 2. LEGAL PROCEEDINGS
We are currently unaware of any pending legal proceeding or any
proceeding contemplated by a governmental authority in which we may be involved.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
As of the date of this Registration Statement, Sweeney, Gates & Co.,
located at 2691 East Oakland Park Boulevard, Suite 302, Fort Lauderdale, Florida
33306, served as our independent accountants and have prepared the audited
statements included as Exhibits hereto. Sweeney, Gates & Co. have advised us on
January 6, 2000, that it will decline reappointment for the upcoming fiscal
year. Sweeney, Gates & Co. report on our financial statements for the past two
(2) years has not contained an adverse opinion or disclaimer of opinion or was
qualified or modified, as to uncertainty, audit, scope, or accounting
principals. The decision to change accountants was not recommended or approved
by any audit committee or similar committee of the Board of Directors or by the
Board of Directors. During the two most recent fiscal years and during any
subsequent interim period preceding the declination, there were no disagreements
with Sweeney, Gates & Co. on any manner of accounting principals or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Sweeney, Gates & Co.,
would have caused it to make a reference to the subject matter of the
disagreements in connection with its report. The reason for the declination is
that the bulk of our business and administration is located in Little Rock,
Arkansas, as opposed to Fort Lauderdale, Florida, and as such we have engaged
the CPA firm of Moore, Stephens & Frost, LLP to serve as our independent
accountants and prepare our audited statements for the upcoming fiscal year.
-20-
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On July 31, 1998, we issued 3,630,000 founders' shares of common stock
to principally the same stockholders, and in the same ratio as the ownership
ratio of the DAC Arkansas. Because these persons had a preexisting relationship
with us and access to relevant information concerning us, the issuance of such
securities was exempt from the registration requirements of the Securities Act
pursuant to the exemption set forth in Section 4(2) of the Securities Act.
These shares were issued for our par value, $0.001. These shares may only be
sold in compliance with Rule 144. Of these 5,024,500 shares, 3,825,000 shares
are restricted securities within the meaning of Rule 144(a)(3) promulgated under
the Securities Act of 1933, as amended, because such shares were issued and sold
by the Company in private transactions not involving a public offering.
On December 31, 1998, pursuant to an offering, we sold 1,000,000 shares
of its common stock for $200,000 or $0.20 per share to 15 investors who were
either accredited or otherwise sophisticated investors with whom we had
pre-existing relationships and access to relevant information concerning the
Company in a private placement exempt from registration under the Securities Act
in reliance on Section 3(b) and Rule 504 of Regulation D of the Securities Act.
Approximately 500,000 shares of the offering were made to affiliates of the
Company. At the same time, we issued 30,000 shares of common stock for legal
services to our former securities counsel, Atlas, Pearlman, Trop and Borkson,
P.A.
On December 23, 1998, Uni Skit, one of our major suppliers, agreed to
convert $251,936 of its debt to 165,000 of our common shares. The transaction
was made in reliance on Section 4(2) of the Securities Act, as the purchaser was
sophisticated, has full access to all material information and took the shares
for investment purposes.
In April 1999, pursuant to a private placement, we sold 199,500 shares
of our common stock for $39,900 or $0.20 per share to 3 investors who were
either accredited or otherwise sophisticated and with whom we had a pre-existing
relationship and who had access to all material information. The transaction was
exempt under Section 3(b) and Rule 504 of Regulation D of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS .
Our bylaws and articles of incorporation provide that no officer or
director of the Company shall be personally liable to the Company or its
shareholders for damages for breach of duty owed to the Company or its
shareholders to the fullest extent permitted by law. In addition, the Company
shall have the power to undertake to indemnify the officers and directors of the
company against any contingency or peril as may be determined to be in the best
interest of the Company.
Florida Business Corporation Act. Section 607.0850(1) of the Florida
Business Corporation Act (the "FBCA") provides that a Florida corporation, such
as the Company, shall have the power to indemnify any person who was or is a
party to any proceeding (other than an action by, or in the
-21-
<PAGE>
right of, the corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against liability incurred in connection
with such proceeding, including any appeal thereof, 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 corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida corporation
shall have the power to indemnify any person, who was or is a party to any
proceeding by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 607.850 of the FBCA further provides that: (I) to the extent
that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any proceeding referred to in
subsection (1) or subsection (2), or in defense of any proceeding referred to in
subsection (1) or subsection (2), or in defense of any claim, issue, or matter
therein, he shall be indemnified against expense actually and reasonably
incurred by him in connection therewith; (ii) indemnification provided pursuant
to Section 607.0850 is not exclusive; and (iii) the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA provides
that indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute: (i) a violation of the
criminal law, unless the director, officer, employee or agent had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful; (ii) a transaction from which the director,
-22-
<PAGE>
officer, employee or agent derived an improper personal benefit; (iii) in the
case of a director, a circumstance under which the liability provisions
regarding unlawful distributions are applicable; or (iv) willful misconduct or a
conscious disregard for the best interests of the corporation in a proceeding by
or in the right of the corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a Florida
corporation is not personally liable for monetary damages to the corporation or
any other person for any statement, vote, decision, or failure to act, regarding
corporate management or policy, by a director, unless: (i) the director breached
or failed to perform his duties as a director; and (ii) the director's breach
of, or failure to perform, those duties constitutes: (A) a violation of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful; (B) a
transaction from which the director derived an improper personal benefit, either
directly or indirectly; (C) a circumstance under which the liability provisions
regarding unlawful distributions are applicable; (D) in a proceeding by or in
the right of the corporation to procure a judgment in its favor or by or in the
right of a shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct; or (E) in a proceeding by or in the right of
someone other than the corporation or a shareholder, recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety, or
property.
PART F/S
-23-
<PAGE>
PART III. Index and Description of Exhibits
Exhibit Description Page
2 Asset Purchase Agreement
3.1 Articles of Incorporation
3.2 By-laws
10.1 Consulting Agreement
10.2 Lease Agreement
10.3 Factoring Agreement
10.4 Uni-Skit Agreement
16 Declination Letter of Sweeney, Gates & Co
23 Consent Of Independent Certified Public Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Dated:______________
By: /s/ David A. Collins
-------------------------------
David A. Collins, President and CEO
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND
DAC TECHNOLOGIES OF ARKANSAS, INC. (PREDECESSOR)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants F-1
Balance Sheet F-2
Statements of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
DAC Technologies Group International, Inc.
We have audited the accompanying balance sheet of DAC Technologies Group
International, Inc., as of December 31, 1998 and the related statements of
operations, stockholders' equity and cash flows for the three months ended
December 31, 1998, and the statements of operations and cash flows of DAC
Technologies of Arkansas, Inc. (Predecessor) for the nine months ended September
30, 1998 and the year ended December 31, 1997. These financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements of DAC Technologies Group
International, Inc., referred to above present fairly, in all material respects,
the financial position as of December 31, 1998 and the results of its operations
and cash flows for the three months ended December 31, 1998, and the results of
the operations and cash flows of DAC Technologies of Arkansas, Inc.
(Predecessor) for the nine months ended September 30, 1998 and the year ended
December 30, 1997, in conformity with generally accepted accounting principles.
SWEENEY, GATES & CO.
Fort Lauderdale, Florida
September 30, 1999
F-1
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 68,042
Accounts receivable 204,805
Inventories 305,924
Other current assets 6,360
---------
Total current assets 585,131
Property and equipment 324,695
Patents 27,469
---------
$ 937,295
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to factor $ 152,147
Current portion of long-term debt 88,191
Accounts payable and accrued expenses 285,862
---------
Total current liabilities 526,200
---------
Long-term debt, less current portion 173,781
---------
Stockholders' equity:
Common stock, $.001 par value; 10,000,000 shares authorized,
4,825,000 issued and outstanding 4,825
Additional paid-in capital 445,241
Stock subscriptions receivable (3,630)
Accumulated deficit (209,122)
---------
Total stockholders' equity 237,314
---------
$ 937,295
=========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Predecessor Company
------------------------------------ ---------------
January 1, 1998 October 1, 1998
Year ended through through
December 31, September 30, December 31,
1997 1998 1998
----------- -------------- ---------------
<S> <C> <C> <C>
Sales, net of returns and allowances $ 2,501,368 $ 1,683,948 $ 360,686
Cost of sales 1,445,395 974,632 212,143
----------- ----------- -----------
Gross profit 1,055,973 709,316 148,543
----------- ----------- -----------
Selling, general and administrative expenses 730,376 608,424 169,489
----------- ----------- -----------
Income from operations 325,597 100,892 (20,946)
----------- ----------- -----------
Other income (expense):
Interest (135,352) (115,062) (22,543)
Gain (loss) on transfer of assets - 165,633 (165,633)
----------- ----------- ----------
Other income (expense) (135,352) 50,571 (188,176)
----------- ----------- ----------
Net income (loss): $ 190,245 $ 151,463 $ 209,122)
=========== =========== ==========
Pro forma information (unaudited):
Net income (historical)
before income taxes $ 190,245 $ 151,463 $ (209,122)
Income taxes (73,000) (58,000) --
----------- ----------- ----------
Net income (loss) $ 117,245 $ 93,463 $ (209,122)
=========== =========== ==========
Net loss per share - basic and diluted $ (0.06)
==========
Weighted average shares outstanding 3,644,348
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Additional Stock
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit Total
--------- ------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
July 2, 1998:
Issuance of founders' shares 3,630,000 $ 3,630 $ - $(3,630) $ - $ -
--------- ------- --------- ------- --------- ---------
Balance, October 1, 1999 3,630,000 3,630 - (3,630) - -
Conversion of debt to equity 165,000 165 251,771 - - 251,936
Issuance of stock for cash 1,000,000 1,000 187,500 - - 188,500
Issuance of stock for services 30,000 30 5,970 - - 6,000
Net loss - - - - (209,122) (209,122)
--------- ------- --------- ------- --------- ---------
Balance, December 31, 1998 4,825,000 $ 4,825 $ 445,241 $(3,630) $(209,122) $ 237,314
========= ======= ========= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------- ----------------
Year January 1, 1998 October 1, 1998
ended through through
December 31, September 30, December 31,
1997 1998 1998
----------- -------------- --------------
<S> <C> <C> <C>
Cash flows provided (used) by operating activities:
Net Income (loss) $ 190,245 $ 151,463 $ (209,122)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
(Gain) loss on transfer of assets - (165,633) 165,633
Depreciation and amortization 41,763 35,501 11,730
Allowance for doubtful accounts and returned
merchandise 97,879 29,940 2,364
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 85,698 (123,427) 101,314
Inventories 283,948 13,113 (12,648)
Other current assets 48,013 29,813 841
Increase (decrease) in:
Accounts payable and accrued expenses (377,724) (172,876) (44,784)
--------- --------- ----------
Net cash provided (used) by operating activities 369,822 (202,106) 15,328
--------- --------- ----------
Cash flows used for investing activities:
Purchase of property and equipment (32,087) (46,302) (46,481)
Patents (10,000) - -
Increase in notes receivable-related parties (86,650) (17,400) -
Increase in employee advances (17,164) (32,529) -
--------- --------- ----------
Net cash used by investing activities (145,901) (96,231) (46,481)
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------- ---------------
Year January 1, 1998 October 1, 1998
ended through through
December 31, September 30, December 31,
1997 1998 1998
------------ --------------- ---------------
<S> <C> <C> <C>
Cash flows from financing activities:
Increases (decreases) due to factor (59,978) 71,509 (140,511)
Proceeds (payments) on notes payable, related parties (82,179) 121,073 -
Proceeds (payments) on notes payable, bank (84,256) 21,403 23,284
Proceeds from bridge loans - 100,000 -
Proceeds from sale of common stock - - 200,000
Deferred offering costs - (5,500) -
--------- --------- ---------
Net cash provided (used) by financing activities (226,413) 308,485 82,773
--------- --------- ---------
Net increase (decrease) in cash (2,492) 10,148 51,620
Cash at the beginning of the period 8,766 6,274 16,422
--------- --------- ---------
Cash at the end of the period $ 6,274 $ 16,422 $ 68,042
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ 161,602 $ 43,067 $ 8,328
========= ========= =========
Cash paid for income taxes during the period $ -
=========
Supplemental disclosure of non-cash
Investing and financing activities:
Contribution of capital by related party notes $ 348,867
=========
Purchase of majority stockholder notes receivable
by minority stockholders $ 174,603
=========
Contribution of capital by supplier $ 251,936
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and basis of presentation - DAC Technologies of America Inc. ("the
Company"), a Florida corporation, was incorporated on July 2, 1998. The Company
changed it's name in July 1999 to DAC Technologies Group International, Inc.
Effective September 30, 1998, the Company acquired certain assets from, and
assumed certain liabilities of, a related company, DAC Technologies of Arkansas,
Inc., ("Predecessor"), formerly known as DAC Technologies of America, Inc., an
Arkansas corporation. On September 17, 1999, the Predecessor changed its name to
DAC Technologies of Arkansas, Inc. Since this was a related party transaction,
the basis of the assets and liabilities assumed were carried forward at
predecessor values and the resulting gain or loss was recognized on the
respective company's statement of operations.
The financial statements for the period October 1, 1998 to December 31, 1998
include the accounts of the Company. The financial statements for the nine
months ended September 30, 1998 and for the year ended December 31, 1997 include
the accounts of the Predecessor.
Inventories - Inventories are stated at the lower of average cost or market.
Costs include freight and applicable custom fees.
Property and equipment - Property and equipment are recorded at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets.
Patents - Costs incurred in connection with the acquisition of patents are
capitalized and amortized over their remaining lives. Patents have been issued
to the Company for its SWAT Steering Wheel Alarm, Gun Trigger Lock, Key Alert
and Glass/Window Alert products.
Impairment of long-lived assets - The Company evaluates the recoverability of
its long-lived assets in accordance with Statement of Financial Accounting
Standards No.121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires recognition
of impairment of long-lived assets in the event the net book value of such
assets exceeds the estimated future undiscounted cash flows attributable to such
assets or the business to which such intangible assets relate. The Predecessor
recorded an expense, of $30,403, for the cost of molds utilized to manufacture
pepper spray, since it is no longer being sold. This expense was included in
selling, general and administrative expenses.
Income taxes - Income tax assets and liabilities are computed for temporary
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future,
based upon enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period, plus or minus the change during the period in deferred tax assets and
liabilities.
The Predecessor, with the consent of its stockholders, had elected to be an "S"
Corporation under the Internal Revenue Code. All taxable income or loss flowed
through to the stockholders. Accordingly, no income tax expense or liability was
recorded in the accompanying financial statements of the Predecessor.
F-7
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income (loss) per share - The Company accounts for earnings per share according
to Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128").
FAS 128 requires presentation of basic and diluted earnings or loss per share.
Since the Company has no dilutive shares or options outstanding only basic
earnings per shares are presented. Earnings or loss per share is computed by
dividing net income or loss by the weighted average number of shares outstanding
during the period.
Fair value of financial instruments - The fair value of the Company's financial
instruments, consisting of account receivables, accounts payable, and notes
payable, approximate their carrying value.
Advertising costs - Advertising costs are charged to operations as incurred and
were none, $12,725 and $24,712 for the three months ended December 31, 1998,
nine months ended September 30, 1998 and year ended December 31, 1997,
respectively.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenue and expenses during the reporting
period. Actual results could differ from those estimated.
Recent applicable accounting pronouncement - In April 1998, the Accounting
Standards Executive Committee of the AICPA issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires
that start-up costs, including organizational costs, be expensed as incurred.
The effect of adoption of this pronouncement was immaterial.
2. NATURE OF BUSINESS AND RISKS
The Company imports security alarms, gun locks and similar merchandise from
mainland China, which, along with other items manufactured in the United States,
are sold to major retail chains in the United States and Germany.
The Company provides credit in the normal course of business to its customers
and performs ongoing credit evaluations of its customers. It maintains
allowances for doubtful accounts and provisions for returns and credits, based
on factors surrounding the specific customers and circumstances. Credit losses,
when realized, have been within the range of the Company's expectations and
historically, have not been significant. The majority of the allowance is for
returned merchandise.
The Predecessor and the Company have one major supplier, a related party, from
whom it purchased 93% of its products in the three months ended December 31,
1998, 76% in the nine months ended September 30, 1998 and 100% in 1997. The
Company is dependent upon the supplier continuing in business and its ability to
ship to the United States, but believes that it could replace the supplier, if
it were required to, at similar quality and terms.
F-8
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. NATURE OF BUSINESS AND RISKS (continued)
On December 23, 1998, the supplier agreed to convert $251,936 of its debt to
equity in the Company in exchange for 165,000 shares of common stock, thereby
making it a related party. At December 31, 1998, the Company owed this supplier
$98,186.
One customer accounted for 14% of the Company's sales in the three months ended
December 31, 1998. This customer's sales were not significant for the nine
months ended September 30, 1998. The same customer accounted for 15% of the
Predecessor's sales in the year ended December 31, 1997. A German customer
accounted for 16.5% of the Company's sales in the nine months ended September
30, 1998. Sales to Germany were not significant for the three months ended
December 31, 1998 and for the year ended December 31, 1997.
3. RELATED PARTY TRANSACTIONS
On September 27, 1999, the Company entered into an asset purchase agreement,
effective September 30, 1998, wherein it acquired assets of the Predecessor,
totaling $939,150, and assumed liabilities totaling $1,104,783. Not included in
this transaction were a receivable from the majority stockholder, certain bridge
loans, stockholder advances, an automobile, certain accounts payable, accrued
commissions and accrued payroll. The difference resulted in a gain to the
Predecessor, of $165,633, and a loss in the same amount to the Company.
Predecessor
In previous periods, the Predecessor had significant related party transactions,
including loans to and from the President and stockholders. Prior to September
23, 1998, the Predecessor had loaned the majority stockholder (The Collins
Family Trust, "CFT") and Telephone Connections Network, Inc. ("TCN"), wholly
owned by CFT approximately $340,000. The Predecessor had loaned the President
approximately $143,000. During the same period, the minority stockholders loaned
the Predecessor approximately $464,000.
On September 23, 1998, the minority stockholders purchased, from the
Predecessor, $174,603 of notes and accrued interest receivable owed by the
President and the majority stockholder (CFT) to the Predecessor. The
consideration was an equal amount of notes payable to these stockholders.
On September 30, 1998, the minority stockholders contributed $348,867 of notes
payable and accrued interest to the capital of the Predecessor.
Consulting fees were paid to TCN of $10,500, $51,000 and $120,000 for the three
months ended December 31, 1998, for the nine months ended the September 30, 1998
and for the year ended December 31, 1997, respectively.
F-9
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (continued)
Contingency
In connection with the initial transaction, if Predecessor's creditors were to
institute litigation, the Company could be liable to certain Predecessor's
unsecured creditors for up to approximately $119,000, representing the remaining
outstanding liabilities of the Predecessor as of September 30, 1998. No accrual
has been made for this contingency.
The Company
On July 31, 1998, the Company issued 3,630,000 founders' shares of common stock
to principally the same stockholders, in the same ratio as the ownership ratio
of the Predecessor. The shares were not paid for as of December 31, 1998 and
$3,630 has been recorded as stock subscriptions receivable. Prior to September
30, 1999, $999 was paid.
On December 31, 1998, pursuant to a private placement offering, the Company
raised $200,000 and issued 1,000,000 shares of common stock, of which 500,000
shares were to companies affiliated with existing stockholders. At the same
time, the Company issued 30,000 shares of common stock for legal services valued
at $6,000 and charged the $6,000 and an additional $5,500 of other expenses
against the proceeds of the offering.
4. PRO FORMA INFORMATION
Pro forma income tax - The objective of the unaudited pro forma income statement
information is to show what the significant effects on the historical financial
information might have been had the Predecessor not been taxed as an S
corporation for income tax purposes through September 30, 1998. The pro forma
adjustments reflect provisions for income taxes computed based upon statutory
tax rates as if the Predecessor had been subject to federal and state taxation
during 1998 and 1997.
5. INVENTORIES
Inventories as of December 31, 1998, consisted of the following:
Finished goods $222,277
Inventory in transit 59,348
Parts 24,299
--------
Total $305,924
========
F-10
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 1998:
Lives
-----
Molds, dies and artwork $243,413 10 years
Furniture and fixtures 60,214 11 years
Vehicles 32,209 5 years
--------
335,836
Less: accumulated depreciation (11,141)
--------
$324,695
========
Depreciation expense charged to income was $11,141, $33,794 and $40,122, for the
three months ended December 31, 1998, nine months ended September 30, 1998 and
year ended December 31, 1997, respectively.
7. FACTORING AGREEMENT
On April 10, 1995, the Predecessor entered into a factoring agreement that is
renewable annually. By agreement with the factor, the Company assumed this
agreement on October 1, 1998. Factoring fees range from .65% to 1.8% monthly
depending on the creditworthiness and location of an account (domestic or
foreign). An additional fee of 1/4 of 1.0% is charged for each 30-day period, or
part thereof, when the terms of sale exceed 90 days. Fees are calculated on the
gross face value of each invoice. In addition to factoring fees, interest is
also charged on the outstanding funds in use. The interest rate is the greater
of 7% or 1.25% above prime. The amounts borrowed are collateralized by the
accounts receivable.
8. LONG TERM DEBT
On April 15, 1994, the Predecessor's stockholders entered into note agreements
with a bank for a line of credit totaling $500,000. The Company assumed these
notes on October 1, 1998. Subsequently, on February 12, 1999, the notes were
consolidated into one. The terms are 11 monthly payments of $10,000, beginning
March 12, 1999, with a balloon payment of $137,301, plus accrued interest due
on February 14, 2000. The interest rate is 9.5%. The loans are collateralized by
the inventories and by personal guarantees of the Company's stockholders.
F-11
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. LONG TERM DEBT (continued)
On October 22, 1996, the Predecessor entered into a loan agreement with a bank
for $48,952 to finance a vehicle. Monthly payments were $1,241, inclusive of
interest at ten percent, and expired on October 21, 2000. As of September 30,
1998, the principal balance of the loan was $31,362. In October of 1999, the
predecessor sold the vehicle and paid the loan.
On October 23, 1998, the Company purchased a vehicle for $32,209, which it
fully financed. The terms of the loan are 35 payments of $524 and a balloon
payment of $21,804, with an interest rate of 9.755%.
The following is a summary of remaining principal maturities of long-term debt:
1999 $ 88,191
2000 149,140
2001 24,641
--------
$261,972
========
9. INCOME TAXES
At December 31, 1998, the Company had available a net operating loss
carry-forward for federal and state tax purposes of approximately $48,000, which
could be applied against taxable income in subsequent years through 2018. The
Company also has a deferred tax asset, of approximately $163,000, for the
difference between the tax and financial basis of intangible assets. The tax
effect of these deferrals is approximately $81,000 and a full valuation
allowance has been recorded since the deferred tax asset realization is
uncertain.
10. COMMITMENTS
The Predecessor leased its office and warehouse under a lease expiring November
30, 1997 and which continued on a month-to-month basis until December 31, 1998.
Rental expense per month was $2,340. Rental expense for the facilities was
$28,080 for the year ended December 31, 1998, and this entire amount was
recorded as a liability for the Predecessor. The Predecessor did not pay and the
liability was not sold to the Company. Rental expense for the year ended
December 31, 1997 was $33,815.
The Company currently leases office and warehouse space under a lease that
expires on February 1, 2001. Minimum future rental payments under the
non-cancellable lease as of December 31, 1998 are as follows:
1999 $25,600
2000 27,900
2001 2,300
F-12
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
(unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 9,129
Accounts receivable 427,475
Inventories 279,840
Other current assets 44,521
----------
Total current assets 760,965
----------
Property and equipment 299,153
----------
Other assets:
Patents 27,618
Deferred income taxes 12,507
Deposits 3,005
----------
Total other assets 43,130
----------
$1,103,248
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to factor $ 294,293
Current portion of long-term debt 203,762
Accounts payable and accrued expenses 173,653
Income taxes payable 12,507
----------
Total current liabilities 684,215
----------
Long-term debt, less current portion 26,200
----------
Stockholders' equity:
Common stock, $.001 par value; 10,000,000 shares authorized
5,024,500 issued and outstanding 5,024
Additional paid-in capital 484,942
Stock subscriptions receivable (2,631)
Accumulated deficit (94,502)
----------
Total stockholders' equity 392,833
----------
$1,103,248
==========
</TABLE>
F-13
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
Predecessor Company
------------- -------------
September 30, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Sales, net of returns and allowances $1,683,948 $1,655,445
Cost of sales 974,632 944,869
---------- ----------
Gross profit 709,316 710,576
---------- ----------
Selling, general and administrative expenses 608,424 534,413
---------- ----------
Income from operations 100,892 176,163
---------- ----------
Other income (expense):
Interest (115,062) (61,543)
Gain on transfer of assets 165,633 0
---------- ----------
Other income (expense) 50,571 (61,543)
---------- ----------
Net income (historical)
before income taxes $ 151,463 114,620
==========
Income taxes-current (12,507)
Income taxes-deferred 12,507
----------
Net income $ 114,620
==========
Pro forma information (unaudited):
Net income (historical)
before income taxes $ 151,463
Income taxes (58,000)
----------
Net income $ 93,463
==========
Net loss per share - basic and diluted $ 0.02
==========
Weighted average shares outstanding 4,954,346
==========
</TABLE>
F-14
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Stock
------------------------ Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit Total
--------- ------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 4,825,000 $ 4,825 $ 445,241 $ (3,630) $(209,122) $ 237,314
Issuance of stock for cash 199,500 199 39,701 - - 39,900
Cash received for stock subscriptions - - - 999 - 999
Net income - - - 114,620 114,620
--------- ------- --------- -------- --------- ---------
Balance, September 30, 1999 5,024,500 $ 5,024 $ 484,942 $ (2,631) $ (94,502) $ 392,833
========= ======= ========= ======== ========= =========
</TABLE>
F-15
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
Predecessor Company
------------- -------------
September 30, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income $ 151,463 $ 114,620
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
(Gain) on transfer of assets (165,633) --
Depreciation and amortization 35,501 32,000
Allowance for doubtful accounts and returned merchandise 29,940 10,884
Changes in assets and liabilities
Decrease (increase) in:
Accounts receivable (123,427) (233,554)
Inventories 13,113 26,084
Other current assets 29,813 (27,831)
Other assets - (5,154)
(Decrease) in accounts payable and accrued expenses (172,876) (112,209)
--------- ---------
Net cash (used) by operating activities (202,106) (195,160)
--------- ---------
Cash flows used by investing activities:
Purchase of property and equipment (46,302) (4,458)
Increase in notes receivable-related parties (17,400) (1,050)
Increase in employee advances (32,529) (9,280)
--------- ---------
Net cash used by investing activities (96,231) (14,788)
--------- ---------
Cash flows from financing activities:
Increase due to factor 71,509 142,146
Proceeds from notes payable, related parties 121,073 3,000
Proceeds (payments) from notes payable, banks 21,403 (51,343)
Proceeds from bridge loans 100,000 16,333
Payment of stock subscriptions receivable -- 999
Proceeds from sale of common stock -- 39,900
Deferred offering costs (5,500) --
--------- ---------
Net cash provided by financing activities 308,485 151,035
--------- ---------
Net increase (decrease) in cash 10,148 (58,913)
</TABLE>
F-16
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
Predecessor Company
------------- -------------
September 30, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Cash at the beginning of the period $ 6,274 $68,042
-------- -------
Cash at the end of the period $ 16,422 $ 9,129
======== =======
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ 43,067 $77,739
======== =======
Cash paid for income taxes during the period $ -
=======
Supplemental disclosurer of non-cash
investing and financing activities:
Contribution of capital by related party notes $348,867
========
Purchase of majority stockholder notes receivable
by minority stockholders $174,603
========
</TABLE>
F-17
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and basis of presentation - DAC Technologies of America, Inc.
("the Company"), a Florida corporation, was incorporated on July 2, 1998. The
Company changed its name in July 1999 to DAC Technologies Group International,
Inc. Effective September 30, 1998, the Company purchased certain assets and
liabilities from a related company, DAC Technologies of Arkansas, Inc.,
("Precedessor"), formerly known as DAC Technologies of America, Inc., an
Arkansas corporation, incorporated on July 13, 1993. On September 17, 1999, the
Predecessor changed its name to Dac Technologies of Arkansas, Inc. Since it was
a related party transaction, the basis of the assets and liabilities assumed
were carried forward at predecessor values and the resulting gain or loss was
recognized on the respective company's statement of operations.
The financial statements for the period January 1, 1999 to September 30, 1999
include the accounts for the Company. The financial statements for the period
from January 1, 1998 to September 30, 1998 include the accounts of the
Predecessor.
Unaudited interim financial statements - The accompanying financial statements
of the Company for the nine months ended September 30, 1999 and 1998 are
unaudited, but, in the opinion of management, reflect the adjustments, all of
which are of a normal recurring nature, necessary for a fair presentation of
such financial statements in accordance with generally accepted accounting
principles. The results of operations for an interim period are not necessarily
indicative of the results for a full year.
2. EQUITY TRANSACTIONS
On July 31, 1998, the Company issued 3,630,000 founders' shares of common stock
to principally the same stockholders as the stockholders of Predecessor. The
shares were issued in the same ratio as the ownership ratio in the Predecessor.
The shares were not paid for as of December 31, 1998 and $3,630 has been
recorded as a stock subscription receivable. In August of 1999, $999 of the
stock subscriptions was paid, leaving a balance at September 30, 1999 of $2,631.
On December 23, 1998, a supplier agreed to convert $251,936 of its debt to
equity in the Company in exchange for 165,000 shares of common stock.
On December 31, 1998, pursuant to a private placement offering, the Company
raised $200,000 and issued 1,000,000 shares of common stock of which 500,000
shares were sold to companies affiliated with existing stockholders. At the same
time, the Company issued 30,000 shares of common stock for legal services.
On April 6, 1999, pursuant to the above private placement, the Company raised an
additional $39,900 and issued 199,500 shares of common stock. These shares were
sold to existing stockholders.
F-18
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
3. PRO FORMA INFORMATION
Pro forma income tax - The objective of the unaudited pro forma income statement
information is to show what the significant effects on the historical financial
information might have been had the Predecessor not been taxed as an S
corporation for income tax purposes through September 30, 1998. The pro forma
adjustments reflect provisions for income taxes computed based upon statutory
tax rates as if the Predecessor had been subject to federal taxation during
1998.
4. INCOME TAXES
During the period, The Company utilized its net operating loss carry-forwards
for federal and state tax purposes. The Company has a deferred tax asset of
approximately $155,000 for the difference between the tax basis and financial
lives of intangible assets. The tax effect of this deferral is approximately
$58,000 of which $12,507 has been recorded since the Company owes that amount
for the period ended September 30, 1999, and a valuation allowance for the
balance of approximately $45,000 has been recorded since the remaining deferred
tax asset realization is uncertain.
F-19
ASSET PURCHASE AGREEMENT
_______________________________
THIS AGREEMENT (the "Agreement") made and entered on the date indicated
below as the execution date by the last of the parties hereto to execute same,
by and between Dac Technologies of America, Inc., an Arkansas corporation
(referred to herein as the "Seller"), and Dac Technologies of America, Inc., a
Florida corporation (referred to herein as the "Purchaser").
WITNESSETH:
WHEREAS, the Seller is the owner of all the assets, including
inventory, equipment and furniture of a business currently located at 3905 W.
81st Street, Suite D, Little Rock, Arkansas 72209 (the "Premises") in the
business of manufacturing (the "Business"), and
WHEREAS, subject to the terms and conditions set forth herein, the
Seller desires to sell to Purchaser, and Purchaser desires to buy from the
Seller, all right, title and interest in and to certain assets of the Seller
described in Section 1.1 hereof, with quiet enjoyment of the assets purchased
free of adverse claims from third parties.
NOW THEREFORE, in consideration of the promises hereinafter contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS AND PAYMENT PROVISIONS
1.1 Sale and Transfer of Assets. Pursuant to the terms of this
Agreement, the Seller will, at the Closing, sell, assign, convey and transfer to
Purchaser free and clear of all liabilities, obligations, liens, charges and
encumbrances of whatsoever nature (except those expressly assumed by Purchaser
pursuant to this Agreement), all of the following assets of Seller used in
conducting the Business (collectively, the "Purchased Assets"):
(a) Personal Property. All the Seller's inventory, machinery, tools,
supplies, molds, and equipment used in the operation of the Business, including,
but not limited to, the personal property described on Exhibit "A", affixed
hereto and by this reference made a part hereof (hereinafter collectively
referred to as the "Personal Property").
(b) Accounts Receivable. All Sellers' accounts receivable, excluding
any receivables from any of the shareholders, but including the accounts
receivable which are listed on Exhibit "B", affixed hereto and by this reference
made a part hereof (the "Receivables").
<PAGE>
(c) Miscellaneous Assets. All Seller's rights to certain advances to
its employees, as listed in the attached Exhibit "C", as well as its benefits
from certain prepaid expenses as listed in Exhibit "C" ("Miscellaneous Assets").
Purchaser acknowledges that it has and will receive an economic benefit from
these assets.
(d) All Cash, Bank Accounts and Deposits. All Seller's bank and saving
accounts, all cash on hand, petty cash and deposits (the "Cash"), excluding the
purchase price as set forth in Article II.
(e) Contracts. All Seller's contracts which are listed on Exhibit "D",
affixed hereto and by this reference made a part hereof (the "Contracts"). No
contracts or leases, unless expressly made a part of Exhibit "D", or referenced
elsewhere in this Agreement are part of this Agreement.
(f) Business Records. All lists and records, names and addresses of all
clients, and all other business records of Seller necessary and essential for
the continued operation of the Business (the "Business Records"), provided,
Seller may maintain its accounting records for purposes of preparing its tax
returns, but agrees to deliver copies of such accounting records to Purchaser
upon request. Purchaser shall maintain any such Business Records delivered to
Purchaser and shall allow Seller reasonable access thereto for any reasonable
business purpose, and prior to destroying or discarding any such Business
Records, Purchaser shall notify Seller and either obtain its written consent, or
if requested by Seller, shall return such records to Seller prior to
destruction; and
(g) Intangible Rights. All trademarks, trade names and trade secrets of
Seller, if any, and logos, including all of Sellers right to the name "Dac
Technologies of America, Inc." (the Intangible Rights"), to the extent it may be
assigned.
The Personal Property shall be purchased in its AS-IS condition
and state of repair, and Seller disclaims any and all representations and
warranties, regarding the condition or state of repair thereof, including
any implied warranties or merchantability or fitness for any particular
purpose. Seller makes no warranty or representation regarding the
collectibility of the Accounts Receivable. Seller notes that the name "Dac
Technologies of America, Inc." has not been trademarked by Seller and
Seller makes no warranty or representation regarding rights to the name
"Dac Technologies of America, Inc." or other Intangible rights, if any,
other than noting that Seller has used the name "Dac Technologies of
America, Inc." as its corporate and business name since its inception and
has not received any notice of infringement from any third party with
respect to the use of such name.
1.2 No Liabilities Assumed. Except as specifically set forth in this
Agreement, Purchaser shall not assume any obligations or liabilities of any
nature of Seller, and the
<PAGE>
parties acknowledge their intent that Purchaser shall not be deemed a "successor
corporation" to the Seller for any purpose.
ARTICLE II
PURCHASE PRICE
2.1 Consideration for Purchased Assets. As consideration for the conveyance
of the Purchased Assets, and representations, warranties, covenants and
agreements set forth in this Agreement by Seller, Purchaser shall pay and
deliver to Seller, or otherwise pay or agree to pay the following as the
purchase price of the Purchased Assets ("Purchase Price"), payable as follows:
(a) Cash at Closing. No cash will be required to be paid by Purchaser at
closing.
(b) Assumption of the Mercantile Notes. The Purchaser shall assume or pay
the balance (principal and accrued interest) of those promissory notes dated May
27, 1998 of the Seller due Mercantile Bank of Arkansas (the "Mercantile Notes")
at Closing. Seller warrants that the sum of the outstanding balance due on the
Mercantile Notes at Closing shall not be greater than $238,688.10, plus accrued
interest of $3,991.20.
(c) Assumption of CIT Group/Commercial Services, Inc. ("CIT") Factoring
Agreement. The Purchaser shall assume all obligations of the Seller under the
Seller's CIT Factoring Agreement dated April 10, 1995, including any amendments
thereto. This assumption also includes the outstanding loan balance due to CIT,
that Seller warrants that the sum shall not exceed $292,657.76 at Closing.
(d) Assumption of Accounts Payable, Tax Payables and Payroll Tax Payables.
The Purchaser shall assume or pay the balance, at Closing, of the accounts
payable, personal property taxes and payroll tax payables which are currently
due and have been incurred in the normal course of business of the Seller
(collectively, the "Accounts Payable"), including, without limitation, the
payables listed on Exhibit "E" attached hereto and incorporated herein by
reference.
ARTICLE III
ADDITIONAL COVENANTS OF PARTIES
3.1 Use of Corporate Name. The Seller hereby agrees to discontinue use of
the name "Dac Technologies of America, Inc." in the operation of its business.
Seller shall operate under some "doing business as" name that is not any
derivative of same. Seller agrees to change its corporate name or otherwise
provide whatever assistance is necessary
<PAGE>
for the Purchaser to operate in the State of Arkansas as "Dac Technologies of
America, Inc.".
3.2 Indemnity For Assumed Liabilities. Purchaser agrees to fully, timely
and properly pay all of the Assumed Liabilities and to indemnify and hold Seller
harmless from and against any and all claims in respect hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Purchaser as follows:
(a) Organization and Existence. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arkansas
and has all requisite corporate power to carry on its business as now conducted.
Neither the character or location of the assets owned by the Seller, nor the
nature of the business transacted by it requires it to be qualified to do
business as a foreign corporation in any other jurisdiction.
(b) Subsidiary. No assets reflected in Seller's books and records as being
owned by Seller and used by Seller in its trade or business are owned by a
subsidiary or affiliated party.
(c) Title to Personal Properties. Except as otherwise noted on Exhibit "A",
the Seller is in actual or constructive possession of all of the personal
property which in the exercise of its reasonable business judgment it deems
necessary for the operation of its business as presently conducted. Seller has
good and marketable title to all of the personal property purported to be owned
by it, including without limitation, all personal property reflected on the
attached Exhibit "A", free and clear of all liens, encumbrances and
restrictions, including any conditional sale or other title retention agreement,
save and except any lien securing the Mercantile Notes and any rights, lien and
security interest in favor of CIT.
(d) Tax Matters. The parties acknowledge that Purchaser is assuming
currently due employment taxes and personal property taxes that are delinquent.
The Seller has, to the best of its knowledge, filed all tax returns and reports
required to be filed by it with the appropriate authorities. With the exception
of current year ad valorem taxes, there are no liens with respect to any tax
liability, including liens for which notice has not been filed.
(e) Other Agreements. Other than the Mercantile Notes, to the knowledge of
the Seller, there are no material agreements, notes, mortgages, leases, permits,
orders, judgments, or decrees to which the Seller is a party or by which it is
bound, which contain any provision which would be violated or contravened by, or
which would cause acceleration of any material obligation of the Seller as a
result of, or which would cause or
<PAGE>
permit the forfeiture of any material right or benefit of the Seller by reason
of, the execution or performance of this Agreement by the Seller.
(f) Litigation. Except as otherwise noted on the Schedule of Litigation
attached hereto as Exhibit "F", to the knowledge of Seller, there are no claims,
actions, suits, proceedings or investigations pending against or affecting the
Seller, or its assets or properties, at law or in equity or before or by any
court or federal, state, municipal or other governmental department, commission,
board, agency or instrumentality. To the knowledge of Seller, the Seller is not
subject to any adverse continuing court or administrative order, writ,
injunction or decree applicable to it or to any of its assets, business or
property.
(g) Investigations. The Seller is currently undergoing an Internal Revenue
Service audit of its 1996 federal income tax return. In so much as the Seller is
an S-Corp for federal income tax purposes, the outcome of said audit will not
affect the assets, business or property of the Seller. To the knowledge of
Seller, there are no other investigations, audits, or other proceedings
threatened.
(h) No Broker. The Seller is not a party to or in any way obligated under
any contract or other agreement with any broker or finder with respect to, and
there are no outstanding claims against Seller for, the payment of any broker's
or finder's fee in connection with the origin, negotiation, execution or
performance of this Agreement.
(i) Authority of the Seller. The execution, delivery and performance by the
Seller of this Agreement and all other agreements contemplated herein to which
the Seller will be a party, have been or will by the Closing be, duly authorized
and approved by all requisite corporate action, including shareholder approval.
The Seller shall, at or prior to Closing, deliver to Buyer copies of the written
consents without a meeting of the Board of Directors and shareholders of Seller
authorizing and approving the transactions contemplated herein, such copies to
be certified by the Seller's Secretary as true and Correct. This Agreement and
such other agreements are the valid and binding obligations of Seller and
enforceable against it in accordance with their respective terms.
ARTICLE V
THE CLOSING
5.1 Closing and Effective Date. Closing of this Agreement (the "Closing")
shall be effective as of September 30, 1998 and shall occur at 2:00 pm on
December 28, 1998, or at such other time and date as may be mutually agreed
upon, in writing, by the parties hereto (the "Closing Date").
5.2 Place of Closing. Closing shall occur at the offices of Treece Phillips
LLP, 410 West Third, Suite D, Little Rock, Arkansas 72201, or at such other
location as is agreeable to the parties hereto.
<PAGE>
5.3 Deliveries by Seller to Purchaser at Closing. At the Closing, in
addition to those instruments described in Article I hereof, if any, Seller
shall deliver or cause to be delivered to Purchaser the following executed
instruments:
(a) Bill of Sale and Warranty. A Bill of Sale in customary form reasonably
acceptable to Purchaser's counsel to transfer to and perfect the title of
Purchaser in and to all Personal Property, Receivables, Intangible Rights and
Business Records.
(b) Additional Documents. All such further customary instruments and
documents as Purchaser may reasonably request to properly effect the conveyance,
assignment or transfer to Purchaser of any Purchased Assets.
5.4 Deliveries by Purchaser to Seller at Closing. At the Closing, Purchaser
will deliver to Seller:
(a) Purchase Price. The Purchase Price for the Purchased Assets; and
(b) Additional Documents. All such further customary instruments and
documents as Seller may reasonably request to properly effect this
transaction and the payment of the Purchase Price.
ARTICLE VI
BREACH AND DAMAGES
6.1 Breach. Each of the covenants, representations and warranties set forth
in this Agreement shall be continuous and shall survive the Closing and delivery
of the Purchased Assets, provided the representations and warranties of the
Seller set forth herein shall survive only for a period of twelve (12) months
following the Closing Date, and shall expire except to the extent written notice
of the claim is provided to Seller within twelve (12) months after the Closing
Date. Except for a willful or intentional breach, Seller's maximum aggregate
liability for breach of representation or warranty shall not exceed the Purchase
Price.
ARTICLE VII
MISCELLANEOUS
7.1 Binding Agreement; Assignment. This Agreement and the right of the
parities hereunder shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
7.2 Sales or Transfer Taxes. Purchaser shall pay all sales and use taxes,
if any, assessed in connection with the transactions contemplated herein and all
transfer,
<PAGE>
recording or other such taxes or charges assessable on account of the
transactions contemplated herein.
7.3 Construction. Within this Agreement, the singular shall include the
plural and plural shall include the singular, and any gender shall include the
other gender, all as the meaning in the context of this Agreement shall require.
7.4 Waiver of Compliance. The failure of the parties hereto to comply with
any covenant or agreement herein or in any agreement attached hereto or referred
to herein may be expressly waived in writing, but such waiver or failure to
insist upon strict compliance with any obligation, covenant or agreement shall
not operate as a waiver of, or estoppel with respect to any subsequent or other
failure.
7.5 Entire Agreement. This Agreement, including the documents attached
hereto or referred to herein contains the entire understanding of the parties
with respect to the subject matter contained herein. There are no restrictions,
promises, warranties, representations, covenants or undertakings other than as
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such matters.
7.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas.
7.7 Modification. No provisions of this Agreement or any agreement attached
hereto or referred to herein may be waived, changes or modified or discharges,
except by an agreement in writing signed by the party or parties against whom
enforcement of such waiver, change or modification, by whom discharge, is
sought.
7.8 Headings. The headings of the sections and articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
7.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one agreement.
7.10 Notices. Any notice, request, instruction or other document to be
given hereunder to any party shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, return receipt requested.
IF TO SELLER: c/o Bob Goodwin
3905 W. 81st Street, Suite D
Little Rock, AR 72209
IF TO PURCHASER: c/o Larry Legel
5100 N. Federal Highway, Suite 409
Fort Lauderdale, FL 33308
<PAGE>
7.11 Authority. Each of the undersigned personally warrant and represent
their individual authority to sign this Agreement in such capacity as such
signature is affixed hereto.
7.12 Expenses. Seller and Purchaser shall each pay their, its or his own
expenses, including, without limitation, counsel, accounting fees and expenses,
incident to the preparation and carrying out of this Agreement and the
consummation of the transactions contemplated herein and the exhibits hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Little Rock, Pulaski County, Arkansas, on the dates indicated below,
effective as of September 30, 1998.
SELLER:
DAC TECHNOLOGIES OF AMERICA, INC.
BY:________________________________
TITLE:_____________________________
DATE OF EXECUTION:_________________
PURCHASER:
DAC TECHNOLOGIES OF AMERICA, INC.
BY:________________________________
TITLE:_____________________________
DATE OF EXECUTION:_________________
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT "A" - Personal Property
FINISHED GOODS INVENTORY PARTS INVENTORY
Unit Extended Extended
Model# Cost #Units Cost Model #/Desc Unit Cost #Units Cost
<S> <C> <C> <C> <C> <C> <C> <C>
ALR 111 2.38 5,472 13,023.36 German voice IC's 1.70 10,432.00 17,734.40
ALR 112A 2.56 3,082 7,889.92
BA 755 3.60 396 1,425.60 MAK795 keypad 1.25 7,324.00 9,155.00
CHR792 0.40 2,968 1,187.20
DAB 196 2.88 1,632 4,700.16 SWA03 camlocks 1.00 1,414.00 1,414.00
---------
GBC 048 3.79 153 579.87 28,303.40
---------
GUN 025 4.00 4,073 16,292.00
GWA 001 2.97 19,475 57,840.75
GWA 001 3.78 5,582 21,099.96
HCA 001 2.35 1,112 2,613.20
KAL 201 2.40 1,788 4,291.20
LHL 096 1.15 1,266 1,455.90
NBF 21B 2.82 2,750 7,755.00
NBF 21Y 2.82 428 1,206.96
PS 002 1.47 86 126.42
MA 795 11.58 298 3,450.84
MMA 068 2.85 1,430 4,075.50
MSC 038 5.07 609 3,087.63
PHR 793 0.69 3,876 2,674.44
PRO 015 3.00 1,222 3,666.00
RFA 028 7.26 348 2,526.48
RFC 018 3.41 281 958.21
RMC 795 3.09 192 593.28
RMC 03R 3.00 282 846.00
RVC 002 2.92 10 29.20
SAS 200 32.91 180 5,923.80
SWA 03 6.41 420 2,692.20
SWA03R 11.00 36 396.00
SBA 101 2.57 34,155 87,778.35
SBT 102 5.01 2,626 13,156,26
TEM 496 9.37 3 28.11
TCA 396 23.80 102 2,427.60
TCA 396N 17.60 29 510.40
TVP 095 1.10 0 0.00
WWM 296 1.40 9,444 13,221.60
CTP 101 1.09 270 294.30
CTP 106 0.76 255 193.80
FSZ 101 2.43 680 1,652.40
KAD 212 1.19 140 166.60
KAS 101 6.10 180 1,098.00
SWD 112 1.09 990 1,079.10
SWD 106 0.76 90 68.40
Seat Belt 2.43 87 211.41
SWS 101 2.43 40 97.20
AAD 6.06 140 848.40
TVP 6 ct coui 0.76 810 615.60
NBF 6 ct cou 0.76 835 634.60
Generic 6 ct 0.76 910 691.60
30 ct Pepper 3.00 385 1,155.00
Reserve for obsolesence (33,363.70)
-------------
(264,972.11)
</TABLE>
<PAGE>
EXHIBIT "A" - Personal Property
<TABLE>
<CAPTION>
Furniture & Fixtures
Cost Accum Depr NBV
<S> <C> <C> <C>
7/1/93 Furniture 4,483 2,352 2,131
-----
1/1/94 Conference table & chairs 1,580
1/1/94 Computer 2,598
2/1/94 Desk/chairs 3,589
4/1/94 Fax machine 496
7/1/94 (2) warehouse fans 1,129
7/1/94 Trade Show display 6,848
7/1/94 Trade Show display 33,409
10/1/94 Laser printer 635
11/1/94 Office chairs 625
------
1994 additions 50,909 21,636 29,273
------
7/1/95 Computer & equipment 969
7/1/95 Trade Show Display 12,539
7/1/95 Furniture 19,733
------
1995 additions 33,241 10,803 22,438
------
1/31/96 Trade Show Display 2,065
4/3/96 Horizon phone system 1,250
5/24/96 Computer 800
11/1/96 Trade Show Display 2,709
------
1996 additions 6,824 1,535 5,289
------
3/6/97 Computer 450
3/6/97 Office furn/desk 737
------
1997 additions 1,187 103 1,084
------ ------
9/30/98 96,644 36,429 60,215
------ ------
Molds
3/18/94 Key Alet 3,000
3/18/94 Silicone rubber keypad 1,818
5/4/94 12 keyboard alarm 4,700
5/13/94 4 cavity mold 8,000
8/29/94 New Key Alert 7,885
8/29/94 Modigy old Key Alert 1,282
10/24/94 Bike Alert 9,060
10/24/94 GWA 001 5,345
Other 3,669
------
1994 additions 44,759 19,023 25,736
------
3/27/95 NBF 9,000
4/25/95 SWAT 22,100
4/25/95 TVP 095 1,900
4/25/95 GUN 025 11,975
6/9/95 AAD 10,600
8/21/95 Strobe mockups 4,455
8/21/95 PRO 015 4,880
11/10/95 Motion alarm 16,400
11/24/95 Strobe alarms 3,955
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cost Accum Depr NBV
<S> <C> <C> <C>
11/24/95 MMA 068 1,283
11/28/95 SGA028 3,335
11/28/95 MMA 068 4,525
12/22/95 TCA 13,638
------
1995 additions 108,046 35,115 72,931
1/29/96 WWM 296 2,225
2/26/96 RFC 3,750
DAB 196 1,425
4/22/96 TCA 14,350
4/24/96 GBC 038 2,475
5/23/96 MSC 038 4,400
------
1996 additions 28,625 6,441 22,184
1/17/97 CHR792 5,500
3/11/96 TEM496 3,900
4/17/97 RFA028 6,750
5/5/97 CHR792 3,300
5/16/97 LHL096 3,510
5/22/97 CHR792 2,200
6/23/97 LHL 096 2,340
------
1997 additions 27,500 3,438 24,062
------
SWA03R 9,000
New KAL 201 8,125
CHR792 12,014
PHR793 3,448
GL001 13,075
------
1998 additions 45,662 1,221 44,441
------ ------ -------
9/30/98 254,592 65,238 189,354
------ ------ -------
Display dies, artwork
7/1/94 1994 additions 16,212 6,890 9,322
------
7/1/95 1995 additions 12,684 4,121 8,563
------
1/3/97 865
1/30/97 2,535
------
1997 additions 3,400 425 2,975
------
Sterling Container 14,159
Diversified Graphics 4,585
------
1998 additions 18,744 703 18,041
------ ------ ------
9/30/98 51,040 12,139 38,901
------ ------ ------
</TABLE>
<PAGE>
EXHIBIT B - Receivables
<TABLE>
<CAPTION>
Cust Customer Name Current 31 to 60 61 to 90 Over 90 Total
No. Days Days Days
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
30050 CSK Auto, Inc. 16,072.49- 16,072.49-
30055 Spy Headquarters 1,014.87 1,014.87
- ------------------------------------------------------------------------------------------------------------------------
40001 Wal Mart Stores 91,869.51 23,459.10 16,485.60 1,145.11 132,959.99
40005 Samples 41.75 117.11 158.86
50037 Fry's Electronics, Inc. V#12012 5,068.62 2,843.16 54.72 143.04 8,109.54
- ------------------------------------------------------------------------------------------------------------------------
50485 Trader Sports 63.00- 63.00-
60100 Phoenix Systems, Inc. 797.55 797.55
90315 Airpress USA, Inc. 7,084.35 12,035.60 19,119.95
- ------------------------------------------------------------------------------------------------------------------------
90600 Jair Electronics Corp. 1,638.72 1,638.72
90645 Discount Auto Parts 6,674.58 7,323.84 4,401.54 18,399.96
90685 RES Marketing, Inc. 179.65 179.65
- ------------------------------------------------------------------------------------------------------------------------
90690 Home Shopping Network 8,820.00 8,820.00
100090 Bud K Worldwide, Inc. 4.34- 4.34-
100125 GLOBALEX International, Inc. 588.25 588.25
- ------------------------------------------------------------------------------------------------------------------------
110030 USC International 182.28 182.28
120035 CPC 418.75 185.40 604.15
130080 Walgreen Co. V#102061 6,229.88 2,721.60 1,094.40 10,045.88
- ------------------------------------------------------------------------------------------------------------------------
130205 Faber Brothers 2,701.44 2,701.44
130290 Regent Products Corp. 2,900.68 2,900.68
160015 Payless Cashways, Inc. 2,590.44- 2,590.44-
- ------------------------------------------------------------------------------------------------------------------------
160025 WestWood Animal Hospital 107.11 107.11-
160045 Peavey Performance Systems 287.00 287.00
170045 Jefferson Place 318.54 318.54
- ------------------------------------------------------------------------------------------------------------------------
170050 Faughteroy Supply, Inc. 224.54 224.54
170055 National Supply Co. 1,069.20 396.00 1,108.80 2,574.00
200065 Live Safe America 159.73 396.80- 237.07-
- ------------------------------------------------------------------------------------------------------------------------
200100 Sinai Hospital of Baltimore 1,148.16 806.16 288.00
210007 Serv-U Stores, Inc. 147.73 147.73
210140 JCNL Marketing 1,434.24 1,434.24
- ------------------------------------------------------------------------------------------------------------------------
220001 Kmart Corporation 6,588.00 4,617.00 11,205.00
220280 APAC Paper & Packaging Corp 1,043.00 1,415.00 596.00 1,490.55 1,563.95
220290 S. Abraham & Sons, Inc. 67.89 67.89
- ------------------------------------------------------------------------------------------------------------------------
230001 Personal Security Products, Inc. 841.12 841.12
230007 Target V# 184940601 3,114.99 618.72 694.87 59.64 4,511.22
230140 Damark International, Inc. 1,845.04 41.64 234.32 2,121.00
- ------------------------------------------------------------------------------------------------------------------------
250013 Western Auto Supply Co. 8,718.48 9,291.60 3,967.02 8,749.78 30,726.88
290001 National Safety Equip Outlet 288.00- 288.00-
320355 B & F Johnstone Supply 478.08 478.08
- ------------------------------------------------------------------------------------------------------------------------
320365 Electronic Distributions, Inc. 972.12 1,244.16 2,216.28
330043 Lowe's Companies, Inc. 744.08 744.08
350140 The Calder Corp. DIP #95B44080 2,541.85 378.96 0.02- 2,920.79
380007 Jade Distributions 618.22 618.22
380110 Electronic & More 800.98- 800.98-
</TABLE>
<PAGE>
EXHIBIT B - Receivables
<TABLE>
<CAPTION>
Cust Customer Name Current 31 to 60 61 to 90 Over 90 Total
No. Days Days Days
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
380165 Pep Boys 7,772.52 7,114.56 7,128.60 6,224.52 28,240.20
- ----------------------------------------------------------------------------------------------------------------------
380290 Manor Care Health Kingston Ct 129.76 129.76
420065 Pilot Corporation 1,224.64- 1,244.67-
420115 Orqill Brothers & Co. 1,334.92 1,334.92
- ----------------------------------------------------------------------------------------------------------------------
430139 Army/Air Force Exc V#15804110 239.04- 239.04-
430405 Centex Life Solutions, Inc. 217.50 217.50
460050 Hechinger/HQ Warehouse 15,783.44 317.16 16,100.60
- ----------------------------------------------------------------------------------------------------------------------
530065 Entreprix Import/Export 12,791.16 6,655.68 19,446.84
530185 Sumex, S.A. 252.91- 252.91-
430205 L "EXEMPLAIRE 318.40 318.40
- -----------------------------------------------------------------------------------------------------------------------
__________ ___________ ___________ __________ __________
Account Set (111111) 181,238.04 97,759.56 35,721.53 2,045.07- 312,674.06
- ----------------------------------------------------------------------------------------------------------------------
40003 Nursing Homes (Non-recurring) 1,297.91 515.94 153.88 123.85 2,091.58
40004 Retail 158.77 281.72 440.49
50850 Uninet, Inc. 808.20 808.20
- ----------------------------------------------------------------------------------------------------------------------
90675 Int'l Electronics & Gifts, Inc. 322.24 322.24
160070 Nema Schneider 430.08 430.08-
220250 Department of Correction 1,844.00 1,844.00
- ----------------------------------------------------------------------------------------------------------------------
320025 New York Police Supply 956.16 1,052.94 2,009.10
380210 Manor Care North 123.97 123.97 247.94
380310 Help Fight Crime America 652.32 652.32 1,388.85 2,693.49
- ----------------------------------------------------------------------------------------------------------------------
430310 A & A International Inc. 12,331.20 0.32 12,331.52
490095 Beverly Health & Rhab 77.97- 77.97-
540075 PTA 154.00- 154.00-
- ----------------------------------------------------------------------------------------------------------------------
___________ ____________ _____________ _______ _____________
Account Set (111112) 16,408.17 2,248.71 2,877.39 592.24 22,126.51
- ----------------------------------------------------------------------------------------------------------------------
___________ ____________ _____________ ___________ ___________
Report Total 197,646.21 100,008.27 38,598.92 1,452.83- 334,800.57
=========== ============ ============== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------
59.03% 29.87% 11.53% 0.42-%
c: indicates over credit limit.
- ----------------------------------------------------------------------------------------------------------------------
2 accounts sets
65 customers printed
</TABLE>
<PAGE>
EXHIBIT "C" - Miscellaneous Assets
Employee Advances
John Collins 1,077.88
Deborah Grizzell 300.00
________
1,377.88
________
Prepaid Expenses
Union Standard Insurance 2,521.75
Electronic Art 1,669.99
Dailey Planet 1,380.83
Postage 250.00
________
5,822.57
________
Patents & Trademarks
Patent No. Des. 375,342
Patent No. Des. 365,774
Patent No. Des. 355,863
Patent No. 5,475,368
Patent No. 371,086 __________
Total Cost 32,970.00
Accumulated amortization (4,912.94)
__________
Net Book Value 28,057.06
__________
Trade Accounts receivable-Reverse for bad debts
(26,315.32)
___________
<PAGE>
EXHIBIT D - CONTRACTS
(1) CIT Agreement
(2) All vendor agreements/contracts with existing customers, such as, but not
limited Wal Mart, Kmart, Walgreens, etc.
(3) All contracts/agreements with manufacturing sales representatives.
(4) Contracts with Seller's manufacturers, Uni-skit Technologies, Inc., Uni-Tat
International, Inc., Taico Design Products, Inc.
<PAGE>
EXHIBIT "E" - Accounts Payable
Trade Accounts Payable
Vendor Amount
- -------------------------- -----------
ADT Security 133.17
AP&L 426.40
American Express 23,011.58
Arkansas Packaging 125.29
All Type Printing 659.86
Arkansas Toner 95.51
Business World 808.38
BFI 77.37
Diversified Graphics 313.68
Enviro Pac 1,000.00
Bob Goodwin VISA 1,695.25
Harbinger 660.00
Edward McNutt 2,357.82
Pulaski Cty Tax Coll 2,719.52
Quick Response 411.75
RPS 3,099.54
SW Bell 803.87
Sino Container 1,129.51
Telco Communications 2,068.76
Taico Designs 45,947.02
Watkins Motor Lines 4,386.04
SKIT 279,450.30
SKIT 88,917.03
Uni-Tat 14,710.00
____________
475,007.65
------------
Accured Interest Payable
Mercantile Bank 3,991.20
Internal Revenue Service 14,113.72
State of Arkansas 9,207.67
___________
27,312.59
-----------
Property Taxes
Pulaski County Arkansas 3,500.00
-----------
Payroll Tax Payables
IRS 941 Taxes 43,971.01
State of Arkansas 17,538.28
Unemployment Taxes 6,108.41
___________
67,617.70
-----------
<PAGE>
EXHIBIT F - Litigation
NONE
<PAGE>
ARTICLES OF INCORPORATION
OF
DAC TECHNOLOGIES OF AMERICA, INC.
The undersigned subscriber to these Articles of Incorporation, a
natural person competent to make contracts, does hereby form a corporation under
the laws of the State of Florida.
ARTICLE I
---------
The name of this Corporation is DAC TECHNOLOGIES OF AMERICA, INC.
ARTICLE II
----------
This Corporation is formed for the purpose of engaging in any lawful
activity or business permitted under the laws of the United States of America,
the State of Florida, or any other state or country, more specifically to engage
in the business of manufacturing and marketing plastic products.
ARTICLE III
-----------
The aggregate number of shares which this Corporation shall have the
authority to issue shall be 5,000,000 shares of $.01 par value. The
consideration to be paid for each share shall be fixed by this Corporation..
ARTICLE IV
----------
The amount of capital with which this Corporation will begin business
is Ten Thousand Dollars ($10,000).
ARTICLE V
---------
This Corporation is to exist perpetually.
<PAGE>
ARTICLE VI
----------
No officers, directors or shareholders shall be personally liable for
any debts of this Corporation.
ARTICLE VII
-----------
The street address of the initial principal office is: 5100 N. FEDERAL
HIGHWAY, SUITE 409, FT. LAUDERDALE, FL 33308 and the name of its initial
registered agent is LARRY LEGEL.
ARTICLE VIII
------------
The number of directors constituting the initial Board of Directors of
this Corporation is one (1). The name and street address of the initial director
of this Corporation is:
(1) LARRY LEGEL 5100 N. Federal Hwy., Suite 409
Ft. Lauderdale, Fl 33308
The initial director may serve from time to time and may, by
resolution, fix the number constituting the Board of Directors and may also name
persons to fill vacancies on the Board of Directors created by an increase in
the number of directors which occurs between annual meetings. The number of
directors of this Corporation shall be not less than one (1).
ARTICLE IX
----------
The name and street address of the subscriber to these Articles of
Incorporation, together with the number of shares of stock and value of
consideration therefore are as follows:
SHARES CONTRIBUTION
(1) LARRY LEGEL, TRUSTEE 1000 1000
5100 N. FEDERAL HIGHWAY
SUITE 409
FT. LAUDERDALE, FL 33308
ARTICLE X
---------
The date when corporate existence shall commence shall be upon the
filing of these Articles of Incorporation by the Department of State, State of
Florida.
ARTICLE XI
----------
<PAGE>
This Corporation, and the parties hereto, shall take whatever action
necessary to cause the shares of this Corporation to qualify as "Section 1244
Stock", as such term is used and defined in the Internal Revenue Code of 1986
and the Regulations issued thereunder.
ARTICLE XII
-----------
Anything to the contrary contained in these Articles of Incorporation
notwithstanding, if the shareholders of this Corporation shall so elect, they
may exercise all powers and conduct the business and affairs of this Corporation
in lieu of the Board of Directors.
ARTICLE XIII
------------
The directors of this Corporation need not be residents of the State of
Florida, unless otherwise provided in the Articles or Bylaws of the Corporation.
The shareholders of this Corporation shall have exclusive authority to
fix the compensation of the directors of this Corporation, unless otherwise
provided in the Articles or Bylaws.
ARTICLE XIV
-----------
These Articles of Incorporation may be amended in the manner provided
in the Bylaws and may be amended at any regular or special shareholders meeting
called for such purpose upon a majority affirmative vote of all the shareholders
entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned does hereby affix his hand the
purpose of forming this Corporation this 30th day of June, 1998.
/s/ Larry Legel
------------------------
STATE OF FLORIDA
COUNTY OF BROWARD
BEFORE ME, a notary public authorized to take acknowledgments in the
State and County set forth above, personally appeared LARRY LEGEL , personally
known to me and known by me to be the person who executed the foregoing Articles
of Incorporation, and he acknowledged
<PAGE>
before me that he executed those Articles of Incorporation, and he proved his
identity by driver's license.
IN WITNESS WHEREOF, I have hereto set my hand and affixed my official
seal, in the State and County aforesaid, this 30th day of June, 1998.
/s/ Mary Nicolle
------------------
NOTARY PUBLIC
State of Florida at Large
My Commission Expires: MARY NICOLLE
MY COMMISSION # CC 708735
EXPIRES: April 9, 2002
1-800-3-NOTARY Fla. Notary Service & Bonding Co.
<PAGE>
CERTIFICATE DESIGNATING PLACE OF BUSINESS OF DOMICLE
FOR THE SERVICE OF PROCESS WITHIN FLORIDA
NAMING AGENT UPON WHOM PROCESS MAY BE SERVED
In compliance with Section 48.091, Florida Statutes, the following is
submitted: First - That DAC TECHNOLOGIES OF AMERICA, INC. desiring to organize
or qualify under the laws
of the State of Florida with its principal place of business at Ft. Lauderdale,
State of Florida, has named Larry Legel, located at:
5100 N. Federal Highway, Suite 409
Ft. Lauderdale, FL 33308
as its agent to accept service of process within Florida.
Signature /s/ Larry Legel, Trustee
--------------------------------------
Title TRUSTEE
Date /s/ 6/30/98
--------------------------------------
Having been named to accept service of process for the above stated
corporation, at the place designated in this certificate, I hereby agree to act
in this capacity, and I further agree to comply with the provisions of all
statutes relative to the proper and complete performance of my duties.
Signature /s/ Larry Legel
--------------------------------------
LL, Registered Agent
Date /s/ 6/30/98
--------------------------------------
BYLAWS
of
DAC TECHNOLOGIES OF AMERICA, INC.
ARTICLE I - OFFICES
-------------------
SECTION 1. PRINCIPAL PLACE OF BUSINESS
The initial location of the principal place of business of the
corporation shall be as specified in the articles of incorporation and may be
changed from time to time by resolution of the Board of Directors. It may be
located at any place within or outside the State of Florida. {BCA Sec.
607.0202(b)}
The principal place of business of the corporation shall also be known
as the principal office of the corporation.
SECTION 2. OTHER OFFICES
The corporation may also have offices at such other places as the Board
of Directors may from time to time designate, or as the business of the
corporation may require.
ARTICLE II - SHAREHOLDERS
-------------------------
SECTION 1. PLACE OF MEETINGS
All meetings of the shareholders shall be held at the principal place
of business of the corporation or at such other place, within or outside the
State of Florida, as may be determined by the Board of Directors. {BCA Secs.
607.0701(2) & 607.0702(2)}
SECTION 2. ANNUAL MEETINGS
The annual meeting of the shareholders shall be held on the ___ of the
month of_______ in each year, at ____o'clock .M., at which time the shareholders
shall elect a Board of Directors and transact any other proper business. If this
date falls on a legal holiday, then the meeting shall be held on the following
business day at the same hour. {BCA Sec. 607.0701(1)}
SECTION 3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the Board of
Directors or by the shareholders. In order for a special meeting to be called by
the shareholders, 10 percent or more of all the votes entitled to be cast on any
issue proposed to be considered
Bylaws 1
<PAGE>
Considered at the proposed special meeting shall sign, date and deliver to the
secretary one or more written demands for the meeting describing the purpose or
purposes for which it is to be held. (BCA Sec. 607.0702)
The secretary shall issue the call for special meetings unless the
president, the board of directors, or the shareholders designate another person
to make the call.
SECTION 4. NOTICE OF MEETINGS
Notice of all shareholders' meetings, whether annual or special, shall
be given to each shareholder of record entitled to vote at such meeting no fewer
than 10 or more than 60 days before the meeting date. The notice shall include
the date, time and place of the meeting and in the case of a special meeting the
purpose or purposes for which the meeting is called. Only the business within
the purpose or purposes included in the notice of special meeting may be
conducted at a special shareholders' meeting.
Notice of shareholders' meetings may be given orally or in writing, by
or at the direction of the president, the secretary or the officer or persons
calling the meeting. Notice of meetings may be communicated in person; by
telephone, telegraph, teletype, facsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at the
shareholder's address as it appears on the stock transfer books of the
corporation, with postage prepaid.
When a meeting is adjourned to a different date, time or place, it
shall not be necessary to give any notice of the adjourned meeting if the new
date, time or place is announced at the meeting at which the adjournment is
taken, and any business may be transacted at the adjourned meeting that might
have been transacted on the original date of the meeting. If, however, after the
adjournment, the board fixes a new record date for the adjourned meeting, notice
of the adjourned meeting in accordance with the preceding paragraph of this
bylaw shall be given to each person who is a shareholder as of the new record
date and is entitled to vote at such meeting. [BCA Secs. 607.0141 & 607.0705]
SECTION 5. WAIVER OF NOTICE
A shareholder may waive any notice required by the Business Corporation
Act, the articles of incorporation or these bylaws before or after the date and
time stated in the notice. The waiver must be in writing, be signed by the
shareholder entitled to the notice, and be delivered to the corporation for
inclusion in the minutes or filing with the corporate records. Neither the
business to be transacted at nor the purposes of any annual or special
Bylaws 2
<PAGE>
meeting of the shareholders need be specified in any written waiver of notice.
[BCA Sec. 607.0706(l)]
SECTION 6. ACTION WITHOUT MEETING
Any action which is required by law to be taken at an annual or special
meeting of shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote if one or more written consents, setting forth the
action so taken, shall be dated and signed by the holders of outstanding shares
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. Written consents shall not be effective to take
corporate action unless, within 60 days of the date of the earliest written
consent relating to the action, the signed written consents of the number of
holders required to take the action are delivered to the corporation.
Within 10 days after obtaining any such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action. [BCA Sec. 607.0704]
SECTION 7. QUORUM AND SHAREHOLDER ACTION
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. Unless otherwise
provided under law, the articles of incorporation or these bylaws, if a quorum
is present, action on a matter, other than the election of directors, shall be
approved if the votes cast by the holders of the shares represented at the
meeting and entitled to vote favoring the action exceed the votes cast opposing
the action. Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof. [BCA Secs. 607.0727 & 607.0728]
SECTION 8. VOTING OF SHARES
Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, except as may be provided
under law or the articles of incorporation. A shareholder may vote either in
person or by proxy executed in
Bylaws 3
<PAGE>
writing by the shareholder or the shareholder's duly authorized
attorney-in-fact.
At each election of directors, each shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder, for as many persons as there are directors to
be elected at that time and for whose election the shareholder has a right to
vote. (BCA Secs. 607.0721 & 607.0728]
SECTION 9. PROXIES
A shareholder, or the shareholder's attorney in fact, may appoint a
proxy to vote or otherwise act for the shareholder. An executed telegram or
cablegram appearing to have been transmitted by such person, or a photographic,
photostatic, or equivalent reproduction of an appointment form, shall be a
sufficient appointment form.
An appointment of a proxy is effective when received by the secretary
or other officer or agent authorized to tabulate votes. An appointment is valid
for up to 11 months unless a longer period is specified in the appointment form.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is revocable and the appointment
is coupled with an interest as provided in Section 607.0722(5) of the Business
Corporation Act. [BCA Sec. 607.0722]
SECTION 10. RECORD DATE FOR DETERMINING SHAREHOLDERS
The board of directors may fix in advance a date as the record date f
or the purpose of determining shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote, or to take any other action. In
no event may a record date fixed by the board of directors be a date preceding
the date upon which the resolution f ixing the record date is adopted. A record
date may not be specified to be more than 70 days before the meeting or action.
Unless otherwise specif ied by resolution of the board directors, the
following record dates shall be operative:
1. The record date f or determining shareholders entitled to demand a
special meeting is the date the first shareholder delivers the shareholder's
demand to the corporation.
2. If no prior action is required by the board of directors pursuant to
the Business Corporation Act, the record date f or determining shareholders
entitled to take action without a meeting
Bylaws 4
<PAGE>
is the date the f irst signed written consent relating to proposed action is
delivered to the corporation.
3. if prior action is required by the board of directors pursuant to
the Business Corporation Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the board of directors adopts the resolution taking such prior action.
4. The record date f or determining shareholders entitled to notice of
and to vote at a meeting of shareholders is at the close of business on the day
before the first notice is delivered to the shareholders. [BCA Sec. 607.0707)
SECTION 11. SHAREHOLDERS' LIST
After a record date is fixed or determined in accordance with these
bylaws, the secretary shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
shall show the addresses of, and the number and class and series, if any, of
shares held by, each person.
The shareholders' list shall be available for inspection by any
shareholder for a period of 10 days prior to the meeting, or such shorter time
as exists between the record date and the meeting, and continuing through the
meeting, at the corporation's principal place of business. [BCA Sec. 607.0720]
ARTICLE III - DIRECTORS
-----------------------
SECTION 1. POWERS
Except as may be otherwise provided by law or the articles of
incorporation, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors. [BCA Sec. 607.0801(2)]
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless:
1. The director votes against or abstains f rom the action taken; or
2. The director objects at the beginning of the meeting, or promptly
upon the director's arrival, to holding the meeting or
Bylaws 5
<PAGE>
transacting specified business at the meeting. [BCA Sec. 607.0824(4)]
The board of directors shall have the authority to f ix the
compensation of directors. [BCA Sec. 607.08101]
SECTION 2. QUALIFICATION AND NUMBER
Directors shall be individuals who are 13 years of age or older but
need not be residents of Florida or shareholders of this corporation. [BCA Sec.
607.0802]
The authorized number of directors shall be . This number may be
increased or decreased from time to time by amendment to these bylaws, but no
decrease shall have the effect of shortening the term of any incumbent director.
[BCA Secs. 607.0803 & 607.0805(3)]
SECTION 3. ELECTION AND TENURE OF OFFICE
The directors shall be elected at each annual meeting of the
shareholders and each director shall hold off ice until the next annual meeting
of shareholders and until the director's successor has been elected and
qualified, or until the director's earlier resignation or removal from office.
[BCA Secs. 607.0803(3) & BCA Sec. 607.0805]
SECTION 4. VACANCIES
Unless otherwise provided in the articles of incorporation, any vacancy
occurring in the board of directors, including any vacancy created by reason of
an increase in the number of directors, may be filled by the affirmative vote of
a majority of the remaining directors, though less than a quorum of the board of
directors, or by the shareholders. [BCA Sec. 607.0809(l)]
A director elected to fill a vacancy shall hold office only until the
next shareholders' meeting at which directors are elected. [BCA Secs.
607.0805(4)]
SECTION 5. REMOVAL
Unless the articles of incorporation provide that a director may only
be removed for cause, at a meeting of shareholders called expressly for that
purpose, one or more directors may be removed, with or without cause, if the
number of votes cast to remove the director exceeds the number of votes cast not
to remove the director. CBCA Sec. 607.0808]
SECTION 6. PLACE OF MEETINGS
Meetings of the board of directors shall be held at any place,
Bylaws 6
<PAGE>
within or without the State of Florida, which has been designated in the notice
of the meeting or, if not stated in the notice or if there is no notice, at the
principal place of business of the corporation or as may be designated from time
to time by resolution of the board of directors.
The board of directors may permit any or all directors to participate
in meetings by, or conduct the meeting through the use of, any means of
communication by which all directors participating can simultaneously hear each
other during the meeting. [BCA Sec. 607.0820]
SECTION 7. ANNUAL AND REGULAR MEETINGS
An annual meeting of the board of directors shall be held without call
or notice immediately after and at the same place as the annual meeting of the
shareholders.
Other regular meetings of the board of directors shall be held at such
times and places as may be fixed from time to time by the board of directors.
Call and notice of these regular meetings shall not be required. [BCA Secs.
607.0820(l) & 607.0822(l)]
SECTION 8. SPECIAL MEETINGS AND NOTICE REQUIREMENTS
Special meetings of the board of directors may be called by the
chairman of the board or by the president and shall be preceded by at least 2
days' notice of the date, time, and place of the meeting. Unless otherwise
required by law, the articles of incorporation or these bylaws, the notice need
not specify the purpose of the special meeting. [BCA Sec. 607.0822(2)]
Notice of directors' meetings may be given orally or in writing, by or
at the direction of the president, the secretary or the officer or persons
calling the meeting. Notice of meetings may be communicated in person; by
telephone, telegraph, teletype, f acsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the director at the
director's current address orT file with the corporation, with postage prepaid.
CBCA Sec. 607.0141]
If any meeting of directors is adjourned to another time or place,
notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors. [BCA Secs. 607.0820(2)]
SECTION 9. QUORUM
A majority of the authorized number of directors shall
Bylaws 7
<PAGE>
constitute a quorum for all meetings of the board of directors. [BCA Sec.
607.0824]
SECTION 10. VOTING
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present at the meeting shall be the act of the board of
directors.
A director of the corporation who is present at a meeting of the board
of directors when corporate action is taken shall be deemed to have assented to
the action taken unless:
1. The director objects at the beginning of the meeting, or promptly
upon arriving, to holding the meeting or transacting specified business at the
meeting; or
2. The director votes against or abstains from the action taken. [BCA
Sec. 607.0824]
SECTION 11. WAIVER OF NOTICE
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
or the manner in which it has been called or convened, except when a director
states, at the beginning of the meeting or promptly upon arrival at the meeting,
any objection to the transaction of business because the meeting is not lawfully
called or convened. [BCA Sec. 607.0823]
SECTION 12. ACTION WITHOUT MEETING
Any action required or permitted to be taken at a board of directors,
meeting or committee meeting may be taken without a meeting if the action is
taken by all members of the board of directors or of the committee. The action
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member. [BCA Sec. 607.0821)
ARTICLE IV - OFFICERS
---------------------
SECTION 1. OFFICERS
The officers of the corporation shall consist of a president, a
secretary, a treasurer, and such other officers as the board of directors may
appoint. A duly appointed officer may appoint one or more officers or assistant
officers if authorized by the board of directors.
Bylaws 8
<PAGE>
The same individual may simultaneously hold more office in the than one
corporation.
Each officer shall have the authority and shall perform the duties set
f orth in these bylaws and, to the extent consistent with these bylaws, shall
have such other duties and powers as may be determined by the board of directors
or by direction of any officer authorized by the board of directors to prescribe
the duties of other officers. [BCA Secs. 607.08401 & 607.08411
SECTION 2. ELECTION
All officers of the corporation shall be elected or appointed by, and
serve at the pleasure of, the board of directors.
The election or appointment of an off icer shall not itself create
contract rights. CBCA Secs. 607.08401 & 607.08431
SECTION 3. REMOVAL, RESIGNATION AND VACANCIES
An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the ef f ective date if the board
provides that the successor does not take office until the effective date.
The board of directors may remove any officer at any time with or
without cause. Any of f icer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
An officer's removal shall not affect the officer's contract rights, if
any, with the corporation. An officer's resignation shall not affect the
corporation's contract rights, if any, with the officer. [BCA Secs. 607.0842 &
607.0843]
Any vacancy occurring in any office may be filled by the board of
directors.
SECTION 4. PRESIDENT
The president shall be the chief executive officer and general manager
of the corporation and shall, subject to the direction and control of the board
of directors, have general supervision, direction, and control of the business
and affairs of the corporation. He shall preside at all meetings of the
shareholders if present thereat and be an ex-officio member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation.
Bylaws 9
<PAGE>
In the absence or disability of the president, the vice president, if
any, shall perform all the duties of the president and, when so acting, shall
have all the powers of, and be subject to all the restrictions imposed upon, the
president.
SECTION 5. SECRETARY
(a) The secretary shall be responsible f or preparing, or causing to be
prepared, minutes of all meetings of directors and shareholders and f or
authenticating records of the corporation. CBCA Sec. 607.08401(3)].
(b) The secretary shall keep, or cause to be kept, at the principal
place of business of the corporation, minutes of all meetings of the
shareholders or the board of directors; a record of all actions taken by the
shareholders or the board of directors without a meeting f or the past three
years; and a record of all actions taken by a committee of the board of
directors in place of the board of directors on behalf of the corporation. [BCA
Sec. 607.1601(l)]
(c) Minutes of meetings shall state the date, time and place of the
meeting; whether regular or special; how called or authorized; the notice
thereof given or the waivers of notice received; the names of those present at
directors' meetings; the number of shares present or represented at
shareholders' meetings; and an account of the proceedings thereof.
(d) The secretary shall maintain, at the principal place of business of
the corporation, a record of its shareholders, showing the names of the
shareholders and their addresses, the number, class, and series, if any, held by
each, the number and date of certificates issued for shares, and the number and
date of cancellation of every certificate surrendered for cancellation. [BCA
Sec. 607.1601(3)]
(e) The secretary shall make sure that the following papers and reports
are included in the secretary's records kept at the principal place of business
of the corporation:
1. The articles or restated articles of incorporation and all
amendments to them currently in effect;
2. The bylaws or restated bylaws and all amendments to them
currently in effect;
3. Resolutions adopted by the board of directors creating one
or more classes or series of shares and fixing their relative rights,
preferences, and limitations, if shares issued pursuant to those resolutions are
outstanding;
Bylaws 10
<PAGE>
4. Minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past 3 years;
5. Written communications to all shareholders generally or all
shareholders of a class or series within the past 3 years, including the
financial statements furnished for the past 3 years under Article VI, Section 2
of these bylaws and any reports furnished during the last 3 years under Article
VI, Section 3 of these bylaws;
6. A list of the names and business street addresses of current
directors and officers; and
7. The corporation's most recent annual report delivered to the
Department of State under Article VI, Section 4 of these bylaws. [BCA Sec.
607.1601(5)]
The secretary shall give, or cause to be given, notice of all meetings
of shareholders and directors required to be given by law or by the provisions
of these bylaws.
The secretary corporation shall have charge of the seal of the
Corporation.
In the absence or disability of the secretary, the assistant secretary,
or, if there is none or more than one, the assistant secretary designated by the
board of directors, shall have all the powers of, and be subject to all the
restrictions imposed upon, the secretary.
SECTION 6. TREASURER
The treasurer shall have custody of the funds and securities of the
corporation and shall keep and maintain, or cause to be kept and maintained, at
the principal business office of the corporation, adequate and correct books and
records of accounts of the income, expenses, assets, liabilities, properties and
business transactions of the corporation. [BCA Sec. 607.1601(2)]
The treasurer shall prepare, or cause to be prepared, and shall furnish
to shareholders, the annual financial statements and other reports required
pursuant to Article VI, Sections 2 and 3 of these bylaws.
The treasurer shall deposit monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the board of directors. The treasurer shall disburse the funds of the
corporation in payment of the just demands against the corporation as authorized
by the board of directors and shall render to the president and directors,
whenever
Bylaws 11
<PAGE>
requested, an account of all his or her transactions as treasurer and of the
financial condition of the corporation.
In the absence or disability of the treasurer, the assistant treasurer,
if any, shall perform all the duties of the treasurer and, when so acting, shall
have all the powers of and be subject to all the restrictions imposed upon the
treasurer.
SECTION 7. COMPENSATION
The officers of this corporation shall receive such compensation for
their services as may be fixed by resolution of the board of directors.
ARTICLE V - EXECUTIVE AND OTHER COMMITTEES
------------------------------------------
SECTION 1. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate from its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution, the articles of incorporation or these bylaws, shall have
and may exercise the authority of the board of directors, except that no such
committee shall have the authority to:
1. Approve or recommend to shareholders actions or proposals required
by law to be approved by shareholders.
2. Fill vacancies on the board of directors or any committee thereof.
3. Adopt, amend, or repeal the bylaws
4. Authorize or approve the reacquisition of shares unless pursuant to
a general formula or method specified by the board of directors.
5. Authorize or approve the issuance or sale or contract for the sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the board gf directors may authorize a
committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the board of directors.
Each such committee shall have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
directors as alternate members of any such committee who may act in the place
and stead of any absent member or members at any meeting of such committee.
Bylaws 12
<PAGE>
The provisions of law, the articles of incorporation and these bylaws
which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the board of directors shall apply to such committees of the
board and their members as well.
Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority shall
alone constitute compliance- by any member of the board of directors not a
member of the committee in question with the director's responsibility to act in
good faith, in a manner the director reasonably believes to be in the best
interests of the corporation, and with such care as an ordinarily prudent person
in like position would use under similar circumstances. [BCA Sec. 607.0825]
ARTICLE VI - CORPORATE BOOKS, RECORDS AND REPORTS
-------------------------------------------------
SECTION 1. BOOKS, RECORDS AND REPORTS
The corporation shall keep correct and complete books and records of
account; minutes of the proceedings of its shareholders, board of directors, and
committees of directors; a record of its shareholders; and such other records
and reports as are further described in Article IV, Sections 5 and 6 of these
bylaws, at the principal place of business of the corporation.
Any books, records, and minutes may be in written form or in another
form capable of being converted into written form within a reasonable time. [BCA
Sec. 607.1601(4)]
SECTION 2. ANNUAL FINANCIAL STATEMENTS FOR SHAREHOLDERS
Unless modified by resolution of the shareholders within 120 days of
the close of each f iscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the f iscal year, an income statement
for that year, and a statement of cash flow for that year. If financial
statements are prepared on the basis of generally accepted accounting
principles, the annual f inancial statements must also be prepared on that
basis.
If the annual f inancial statements are reported upon by a public
accountant, the accountant's report must accompany them. If not, the statements
must be accompanied by a statement of the president or the person responsible
for the corporation's accounting records:
1. Stating the person's reasonable belief whether statements were
prepared on the basis of generally accepted
Bylaws 13
<PAGE>
accounting principles preparation, and, if not, describing the basis of
preparation, and
2. Describing any respects in which the statements were not prepared on
a basis of accounting consistent with the statements prepared for the preceding
year.
The corporation shall mail the annual f inancial statements to each
shareholder within 120 days after the close of each f iscal year or within such
additional time thereaf ter as is reasonably necessary to enable the corporation
to prepare its financial statements if, for reasons beyond the corporation's
control, it is unable to prepare its f inancial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the corporation shall mail the shareholder the latest financial
statements. [BCA Sec. 607.1620]
Copies of the annual financial statements shall be kept at the
principal place of business of the corporation f or at least 5 years, and shall
be subject to inspection during business hours by any shareholder or holder of
voting trust certificates, in person or by agent.
SECTION 3. OTHER REPORTS TO SHAREHOLDERS
If the corporation indemnif ies or advances expenses to any director,
officer, employee, or agent, other than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
corporation, the corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time that such meeting is held. The
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation. [BCA Sec. 607.1621(l)]
If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting. [BCA Sec. 607.1621(2)]
SECTION 4. ANNUAL REPORT TO DEPARTMENT OF STATE
The corporation shall prepare and deliver an annual report form to the
Department of State each year within the time limits imposed, and containing the
information required, by section 607.1622 of the Business Corporation Act.
Bylaws 14
<PAGE>
SECTION 5. INSPECTION BY SHAREHOLDERS
(a) A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, the records
of the corporation described in Article IV, Section 5(e) of these bylaws if the
shareholder gives the secretary written notice of the shareholder's demand at
least 5 business days before the date on which the shareholder wishes to inspect
and copy.
(b) A shareholder of this corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation if the shareholder
meets the requirements of subsection (c) below and gives the corporation written
notice of the shareholder's demand at least 5 business days before the date on
which the shareholder wishes to inspect and copy:
1. Excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders, and records of action taken by the
shareholders or board of directors without a meeting, to the extent not subject
to inspection under subsection (a) above;
2. Accounting records of the corporation;
3. The record of shareholders; and
4. Any other books and records of the corporation.
(c) A shareholder may inspect and copy the records described in
subsection (b) above only if:
1. The shareholder I s demand is made in good f aith and f or
a purpose reasonably related to the shareholder's interest as a shareholder;
2. The demand describes with reasonable particularity the
shareholder's purpose and the records the shareholder desires to inspect; and
3. The records requested are directly connected with the
shareholder's purpose.
(d) This section of the bylaws does not affect:
1. The right of a shareholder to inspect and copy records
under Article II, Section 11 of these bylaws;
Bylaws 15
<PAGE>
2. The power of a court, independently of the Business
Corporation Act, to compel the production of corporate records for examination.
CBCA Sec. 607.1602]
SECTION 6. INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind of the
corporation and to inspect the physical properties of the corporation. Such
inspection by a director may be made in person or by agent or attorney. The
right of inspection includes the right to copy and make extracts.
ARTICLE VII - INDEMNIFICATION AND INSURANCE
-------------------------------------------
SECTION 1. INDEMNIFICATION UNDER BCA SECTION 607.0850
The corporation shall have the power to indemnify any director,
officer, employee, or agent of the corporation as provided in Section 607.0850
of the Business Corporation Act.
SECTION 2. ADDITIONAL INDEMNIFICATION
The corporation may make any other or further indemnification or
advancement of expenses of any of its directors, of f icers, employees, or
agents, under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in the person's official capacity and
as to action in another capacity while holding such office. However, such
further indemnification or advancement of expenses shall not be made in those
instances specified in Section 607.0850 (7) (a-d) of the Business Corporation
Act.
SECTION 3. COURT ORDERED INDEMNIFICATION
Unless otherwise provided by the articles of incorporation,
notwithstanding the failure of the corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction in accordance with Section
607.0850(9) of the Business Corporation Act.
SECTION 4. INSURANCE
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director,
Bylaws 16
<PAGE>
officer, employee, or agent of the corporation against any liability asserted
against the person and incurred by the person in any such capacity or arising
out of the person's status as such, whether or not the corporation would have
the power to indemnify the person against such liability under provisions of
law. [BCA Sec. 607.0850(12))
ARTICLE VIII - SHARES
---------------------
SECTION 1. ISSUANCE OF SHARES
The board of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed, promises
to perform services evidenced by a written contract, or other securities of the
corporation.
Before the corporation issues shares, the board of directors shall
determine that the consideration received or to be received f or shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration f or the issuance of shares relates to
whether the shares are validly issued, fully paid, and nonassessable.
When the corporation receives the consideration f or which the board of
directors authorized the issuance of shares, the shares issued therefor are
fully paid and nonassessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
The corporation may place in escrow shares issued for a contract for
future services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may credit distributions in respect of
the shares against their purchase price, until the services are performed, the
note is paid, or the benefits received. If the services are not performed, the
shares escrowed or restricted and the distributions credited may be canceled in
whole or part. (BCA Sec. 607.0621)
SECTION 2. CERTIFICATES
After shares in the corporation have been fully paid, the holder of the
shares shall be given a certificate representing the shares. At a minimum, each
share certif icate shall state on its face the following information:
1. the name of the corporation and that the corporation is organized
under the laws of Florida;
Bylaws 17
<PAGE>
2. the name of the person to whom issued;
3. the number and class of shares and the designation of the series, if
any, the certificate represents.
Each certificate shall be signed, either manually or in facsimile, by
the president or a vice president and by the secretary or an assistant secretary
of the corporation and may bear the seal of the corporation. [BCA Sec. 607.0625]
ARTICLE IX - DIVIDENDS
----------------------
SECTION 1. PAYMENT OF DIVIDENDS
The board of directors may authorize, and the corporation may make,
dividends on its shares in cash, property, or its own shares and other
distributions to its shareholders, subject to any restrictions contained in the
articles of incorporation, to the requirements of Sections 607.0623 and
607.06401 of the Business Corporation Act, and to all applicable provisions of
law. [BCA Secs. 607.01401(15), 607.0623(2) & 607.06401(3)]
ARTICLE X - AMENDMENT OF ARTICLES AND BYLAWS
--------------------------------------------
SECTION 1. AMENDMENT OF ARTICLES OF INCORPORATION
The board of directors may propose one or more amendments to the
articles of incorporation for submission to the shareholders. For the amendment
to be effective:
1. The board of directors must recommend the amendment to the
shareholders, unless the board of directors determines that because of conflict
of interest or other special circumstances it should make no recommendation and
communicates the basis for its determination to the shareholders with the
amendment; and
2. The shareholders entitled to vote on the amendment must approve the
amendment as provided below.
The board of directors may condition its submission of the proposed
amendment to the shareholders on any basis. The shareholders shall approve
amendments to the articles of incorporation by the vote of a majority of the
votes entitled to be cast on the amendment, except as may otherwise be provided
by the articles of incorporation, Sections 607.1003 and 607.1004 of the Business
Corporation Act and other applicable provisions of law, and these bylaws.
The corporation shall notify each shareholder, whether or not entitled
to vote, of the proposed shareholders' meeting to amend
Bylaws 18
<PAGE>
the articles of incorporation in accordance with Article II, Section 4 of these
bylaws. The notice of meeting must state that the purpose, or one of the
purposes, of the meeting is to consider the proposed amendment and contain or be
accompanied by a copy or summary of the amendment.
Notwithstanding the above provisions of this section and unless
otherwise provided in the articles of incorporation, if this corporation has 35
or fewer shareholders then, pursuant to Section 607.1002(6) of the Business
Corporation Act, the shareholders may amend the articles of incorporation
without an act of the directors at a meeting of the shareholders for which the
notice of the changes to be made is given. [BCA Secs. 607.1002 - 607.1005]
SECTION 2. AMENDMENT OF BYLAWS
The board of directors may amend or repeal these bylaws unless:
1. The articles of incorporation or the Business Corporation Act
reserves the power to amend the bylaws generally or a particular bylaw provision
exclusively to the shareholders; or
2. The shareholders, in amending or repealing the bylaws generally or a
particular bylaw provision, provide expressly that the board of directors may
not amend or repeal the bylaws or that bylaw provision.
The shareholders may amend or repeal these bylaws even though the
bylaws may also be amended or repealed by the board of directors. [BCA Sec.
607.1020]
CERTIFICATE
This is to certify that the foregoing is a true and correct copy of the
Bylaws of the corporation named in the title thereto and that such Bylaws were
duly adopted by the board of directors of the corporation on the date set forth
below.
Dated: July 15, 1998
/s/ Larry Legel Secretary
-------------------------
Bylaws 19
MARKETING CONSULTING AGREEMENT
1. Telephone Connections Network (TCN) agrees to provide certain
consulting service to DAC Technologies of America, Inc. ("DAC") .
Inasmuch as TNC possesses certain knowledge and expertise as a
marketing consultant and management consultant and sales consultant and
is willing to share said knowledge and expertise with DAC and DAC is in
need of said consulting services and is willing to pay TNC for
providing said services, TNC and DAC hereby enter into this marketing
consulting agreement.
2. The effective date of this agreement is March 1, 1995 and will continue
in effect for five years.
3. The address of TNC for purposes of this Agreement is:
5100 N. Federal Highway, Suite 409
Fort Lauderdale, FL 33308
4. The address of DAC for purpose of this Agreement is:
3905 W. 81 Street, Suite D
Little Rock, AR 72209
5. TNC shall provide specific consulting services as DAC and TNC shall
from time to time determine.
6. TNC shall bill DAC for its services at a fee as from time to time may
be agreed upon by DAC and all fees shall be payable by the 15th of each
month following the month in which the services were rendered. The
monthly fee is estimated to be $10,000.
7. This agreement may be cancelled by either party subject to a 30 day
written notice.
8. Both parties agree that in the event of a dispute, the laws of the
State of Florida shall be binding.
9. In the event of a dispute, both parties agree to submit to binding
arbitration.
/s/ D. Collins March 1, 1995
- ----------------------------------
DAC Technologies of America, Inc. Date
/s/ Larry Legel March 1, 1995
- ----------------------------------
Telephone Connections Network, Inc. Date
by Larry Legel
INIT1ALS: [ILLEGIBLE]
AGREEMENT OF LEASE
THIS AGREEMENT IS ENTERED INTO THIS 14th DAY OF Jan 1999, BY AND BETWEEN R. F.
TOLL, LESSOR AND D.A.C. TECHNOLOGIES, LESSEE.
WITNESSETH:
-----------
LESSOR LEASES TO LESSEE THE FOLLOWING DESCRIBED PREMISES IN THE CITY OF LITTLE
ROCK, COUNTY OF PULASKI, STATE OF ARKANSAS, TO-WIT: SUITE # 4C, WESTPARK
BUSINESS CENTER, LITTLE ROCK, AR, 72204
THE TERM OF THIS LEASE IS 2 YEARS, COMMENCING ON THE 1ST DAY OF FEBRUARY, 1999
AND ENDING ON THE 1ST DAY OF FEBRUARY, 2001. LESSEE AGREES TO PAY THE LESSOR THE
FOLLOWING RENTAL TO-WIT: $2,325 PER MONTH.
PAYMENTS WILL BE MADE MONTHLY IN ADVANCE ON THE 1ST. DAY OF EACH MONTH TO LESSOR
AT THE FOLLOWING ADDRESS: P0 BOX 21640, LITTLE ROCK ARK., 72221, OR TO SUCH
OTHER PERSON AND AT SUCH OTHER PLACE AS THE LESSOR MAY DESIGNATE. ANY
INSTALLMENT OF RENT WHICH IS NOT PAID WHEN DUE SHALL, AFTER A 10 DAY GRACE
PERIOD, BEAR A LATE CHARGE OF $25, PLUS $5 PER DAY FOR EACH ADDITIONAL DAY,
UNTIL PAYMENT IS RECEIVED.
SPECIAL TERMS AND/OR CONDITIONS
- -------------------------------
1. LESSOR AT HIS EXPENSE WILL PARTITION OFF SOUTH EAST CORNER ~F EXISTING
OFFICE TO PROVIDE 3 PRIVATE OFFICES. 2. LESSOR AT HIS EXPENSE WILL PROVIDE STAND
UP TYPE OFFiCE SEPARATOR WALLS FOR LARGE OFFICE AT NORTH EAST CORNER OF EXISTING
OFFICES.
PAGE# 1 OF 7
<PAGE>
INITIALS:
THE PARTIES HERETO COVENANT AS FOLLOWS:
1. LESSEE WiLL PROMPTLY PAY THE STIPULATED RENTAL AT THE PLACE DESIGNATED.
2. THE LEASED PREMISES WILL BE USED BY THE LESSEE ONLY FOR THE FOLLOWING
PURPOSE, TO WIT: OFFICE/WAREHOUSE USE
3. THE LESSEE WILL NOT DO, OR PERMIT ANYTHING TO BE DONE, UPON OR ABOUT THE
LEASED PREMISES THAT INCREASES THE FIRE HAZARD BEYOND THAT WHICH EXISTS BY
REASON OF THE ORDINARY USE OR OCCUPANCY OF ThE PREMISES FOR THE PURPOSE
SPECIFIED IN PARAGRAPH 2 HEREOF. LESSEE AGREES TO PAY TO THE LESSOR, ON DEMAND,
ANY INCREASE IN FIRE AND OR LIABILITY INSURANCE PREMIUMS ON THE BUILDING AND
IMPROVEMENTS, WHICH LESSOR MAY HAVE TO PAY BECAUSE OF LESSEE'S USE OR OCCUPANCY
OF THE PREMISES. LESSEE WILL NOT DO OR PERMIT TO BE DONE ANYTHING WHICH WILL
MAKE UNINSURABLE THE LEASED PREMISES, OR ANY PART THEREOF. LESSOR TO PROVIDE
LESSEE WITH A COPY OF EXISTING INSURANCE POLICY.
4. LESSEE WILL NOT DO OR PERMIT TO BE DONE ANYTHING IN, ABOUT, OR UPON THE
LEASED PREMISES THAT INTERFERES WITH THE RIGHTS OF, OR TENDS TO ANNOY, OTHER
TENANTS OF THE LESSOR; THAT CONFLICTS WITH STATE OR MUNICIPAL LAWS, OR THE
REGULATIONS OF THE FIRE DEPARTMENT OR THE STATE BOARD OF HEALTH; THAT CREATES A
NUISANCE OR THAT IS DANGEROUS TO PERSONS OR PROPERTY. LESSEE WILL CAUSE HIS
EMPLOYEES TO COMPLY WITH ALL RULES SET FORTH BY LESSOR FOR THE COMMON BEST
INTEREST OF ALL TENANTS OF THE BUILDING, PERTAINING TO THE USE OF THE BU1LDING
AND PREMISES.
5. THIS LEASE SHALL NOT BE ASSIGNED OR ANY PART OF THE LEASED PREMISES SUBLET
WITHOUT THE WRITTEN CONSENT OF THE LESSOR FIRST ENDORSED HEREON. IF LESSOR
CONSENTS TO AN ASSIGNMENT OR SUBLETTING, THE LESSEE SHALL REMAIN LIABLE FOR
PAYMENT OF THE SPECIFIED RENTAL AND THE DUE PERFORMANCE OF ALL THE AGREEMENTS
AND CONDITIONS HEREIN. APPROVAL BY LESSOR SHALL NOT BE UNREASONABLY WITHHELD.
6. LESSOR'S INTEREST IN THIS LEASE SHALL PASS TO AND VEST IN THE LESSOR'S HEIRS,
DEVISES, SUCCESSORS AND ASSIGNS.
7.LESSEE WILL NOT MAKE ANY ALTERATIONS, CHANGES OR IMPROVEMENTS WITHOUT LESSOR'S
PRIOR WRITTEN CONSENT. IF CONSENT iS GIVEN, THEN THE COST OF SUCH ALTERATIONS,
ADDITIONS, OR IMPROVEMENTS SHALL BE PAID BY THE LESSEE. UPON THE TERMINATION OF
THIS LEASE, LESSOR SHALL HAVE THE RIGHT TO RETAIN THE PREMISES AS ALTERED,
CHANGED OR IMPROVED BY LESSEE; OR LESSOR, AT HIS OPTION MAY REQUIRE THE LESSEE
TO RESTORE THE PREMISES TO THE CONDITIONS EXISTING AS OF THE DATE LESSEE WENT
INTO POSSESSION OF
PAGE# 2 OF 7
<PAGE>
INITIALS: ______
THE LEASED PREMISES UNDER THE TERMS OF THIS LEASE. ANY ITEM OR ITEMS THAT ARE
ATTACHED TO THE BUILDING WALLS, CEILING, OR FLOORS BY LESSEE BECOME A PART OF
THE BUILDING AND PROPERTY OF THE LESSOR UPON TERMINATION OF TH1S LEASE. THIS
DOES NOT INCLUDE PICTURES OR ITEMS OF THIS NATURE.
8. LESSOR, WILL PAY THE CURRENT TAXES ASSESSED AGAINST THE REAL PROPERTY AND THE
IMPROVEMENTS THEREON. IN THE EVENT THAT TAXES ARE RAISED DURING THE TERM OF THE
LEASE, LESSEE WILL PAY TO LESSOR A PRO RATA SHARE OF THE INCREASE BASED UPON
LESSOR'S SQUARE FEET OF SPACE AS COMPARED TO THE TOTAL SQUARE FEET IN THE
BUiLDING.
9. LESSOR WILL KEEP THE OUTSIDE WALLS AND ROOF IN GOOD REPAIR; PROVIDED HOWEVER,
THAT THE LESSOR WILL NOT BE HELD LIABLE FOR ANY DAMAGES CAUSED BY ANY ROOF OR
WALL LEAK, PROVIDED THAT LESSOR MAKES THE NECESSARY REPAIRS TO WALLS AND ROQF
WITHIN A REASONABLE PERIOD OF TIME. LESSOR IS TO HAVE EXCLUSIVE USE OF THE ROOF.
LESSOR IS RESPONSIBLE TO MAINTAIN ThE OUTSIDE UNDERGROUND SEWER LINE RUNNING
FROM ThE BUILDING TO THE CITY SEWER MA1N.
10. LESSEE WILL KEEP THE LEASED PREMISES IN GOOD REPAIR INCLUDING, BUT NOT
LiMITED TO: PLUMBING SYSTEM AND PLUMBING FIXTURES, HEATING AND AIR CONDITIONING
SYSTEM INCLUDING FILTER REPLACEMENT, ELECTRIC DEVISES AND LIGHT FIXTURES. LESSOR
RESPONSIBLE FOR ONLY AIR CONDITIONER COMPRESSOR REPLACEMENT AND THE REPLACING OF
DEFECTiVE FLORESCENT FIXTURE BALLASTS ( NOT INCLUDING TUBES). LESSEE SHALL ALSO
KEEP iN GOOD REPAIR THE FLOORS, CARPETS, WALLS, ALL DOORS INCLUDING OVERHEAD
DOORS IF ANY, PLATE GLASS AND OTHER GLASS, AND WILL DO ALL NECESSARY PAINTINGS
THROUGH OUT THE TERM OF THIS LEASE. UPON THE EXPIRATION OF THIS LEASE, IN COURSE
OR BY BREACH OF ANY OF ITS PROVISIONS, THE LESSEE WILL RETURN THE LEASED
PREMISES TO LESSOR IN AS GOOD A CONDITION AS WHEN POSSESSION WAS TAKEN BY
LESSEE, ORDINARY WEAR AND TEAR EXCEPTED.
11. BUILDING AND GROUNDS MAiNTENANCE AND SERVICES SHALL BE PROViDED BY AND PAID
BY THE PARTIES AS FOLLOWS:
SERVICE N/A LESSOR LESSEE
GAS X
ELECTRICITY X
WATER!SEWER X
OUTSIDE GROUNDS MAINT. X
WASTE DISPOSAL X
JANITORIAL SERVICES!SUPPLIES X
PAGE# 3 OF 7
<PAGE>
INITIALS _______
12. NO SiGN, PICTURE, ADVERTISEMENT, OR NOTICE, EXCEPT ON THE GLASS OF THE DOORS
OR WINDOWS SHALL BE DISPLAYED ON ANY PART OF THE OUTSIDE OF SAID BUILDING OR ON
OR ABOUT THE PREMISES HEREBY DEMISED WITHOUT THE PREVIOUS CONSENT OF LESSOR IN
WRITING. SIGNAGE REQUIRED BY LESSEE SHALL BE FURNISHED AND INSTALLED BY LESSEE
AT LESSEE'S EXPENSE. SUCH SIGN(S) SHALL BE APPROVED BY AND A PERMIT SHALL BE
OBTAINED FROM THE CITY AUTHORITIES PRIOR TO ITS INSTALLATION. UPON TERMINATION
OF THIS LEASE, LESSEE WILL REMOVE ANY SIGNS, ADVERTISEMENTS OR NOTICES PAINTED
ON OR AFFIXED TO THE LEASED PREMISES AND RESTORE THE AREA IT OCCUPIES TO THE
ORIGiNAL CONDITION AS EXISTED BEFORE ITS INSTALLATiON.
13. LESSOR SHALL CARRY INSURANCE ON THEBUILDING STRUCTURE ONLY, NOT THE
CONTENTS. LESSEE SHALL PROVIDE AT HIS EXPENSE ANY DESIRED FIRE AND CASUALTY
INSURANCE FOR HIS PROPERTY CONTAINED WITHIN HIS LEASED PREMISES. LESSEE ASSUMES
ALL RISK OF AND LIABILITY FOR DAMAGES TO PERSONS OR PROPERTY ARISING FROM HIS
USE OF HiS LEASED PREMISES DURING THE TERM OF THiS LEASE. LESSEE SHALL PROVIDE
AT HIS COST LIABILITY INSURANCE IN THE AMOUNT OF $200,000 FOR PROTECTION OF
LESSOR DURING THE TERM OF ThIS LEASE OR ANY EXTENSION THEREOF. LESSEE AND LESSOR
AGREE TO WAIVE ANY RIGHT OF SUBROGATION THAT THEIR RESPECTIVE INSURANCE CARRIERS
MIGHT HAVE AGAINST EITHER OF THE PARTIES.
14. IN THE EVENT OF PARTIAL DESTRUCTiON OF THE LEASED PREMISES BY FIRE, TORNADO,
OR ACT OF GOD, LESSOR WILL PROCEED WITH ALL REASONABLE DILIGENCE, DELAY DUE TO
UNAVOIDABLE CIRCUMSTANCES EXCEPTED, TO RESTORE THE LEASED PREMISES TO THE
ORIGINAL CONDITION. DURING THE RESTORATION PERIOD, IF THE DAMAGE 1S CAUSED BY
LESSEE'S NEGLIGENCE, THIS LEASE SHALL CONTiNUE IN FULL FORCE AND EFFECT AND
LESSEE SHALL CONTINUE TO MAKE THE MONTHLY RENT PAYMENTS. IF THE DAMAGE IS NOT
DUE TO LESSEE'S NEGLIGENCE, THERE SHALL BE A PROPORTIONATE ABATEMENT OF THE RENT
PAYABLE BY THE LESSEE DURING THE TIME SAID PREMISES ARE UNTENABLE OR IN PART
UNTENABLE.
IN THE EVENT OF SUBSTANTIAL DESTRUCTION THIS LEASE MAY BE TERMINATED ON WRITTEN
NOTICE WITHIN TEN (10) DAYS OF SUCH DESTRUCTION BY EITHER PARTY TO THE OTHER.
(SUBSTANTIAL DESTRUCTION AS HEREIN USED MEANS DESTRUCTION WHICH WILL COST 25% OR
MORE OF THE VALUE OF IMPROVEMENTS TO THE LEASED PREMISES PRIOR TO SAID
DESTRUCTION, TO RESTORE SUCH IMPROVEMENTS.). IF NO NOTICE IS GIVEN BY EITHER
PARTY, LESSOR SHALL THEN PROCEED WITH ALL REASONABLE DILIGENCE, DELAY DUE TO
UNAVOIDABLE CIRCUMSTANCES EXCEPTED, TO RESTORE THE LEASED PREMISES TO THE
ORIGINAL
PAGE# 4 OF 7
<PAGE>
INITIALS:______
CONDITION. THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT EXCEPT THAT THERE
SHALL BE A PROPORTIONATE ABATEMENT OF THE RENT PAYABLE BY
THE LESSEE DURING THE TIME SAID PREMISES ARE UNTENABLE OR IN PART UNTENABLE.
15. THIS LEASE SHALL NOT BE RENEWABLE EXCEPT BY WRITTEN AGREEMENT BETWEEN LESSOR
AND LESSEE. SHOULD LESSEE BE ALLOWED TO REMAIN IN POSSESSION AFTER TERMINATION
OF THE LEASE, EITHER IN COURSE OR BY REASON OF THE BREACH OF ANY OF ITS
PROVISiONS BY THE LESSEE, OR SHOULD LESSOR ACCEPT ANY RENT AFTER SUCH
TERMINATION, THE STATUS OF THE LESSEE SHALL BE DEEMED "MONTH-TO -MONTH" TENANCY
AND THE LESSEE WILL WITHIN 30 DAYS AFTER RECEIPT OF LESSOR NOTICE VACATE THE
PREMISES UPON BEiNG NOTIFIED TO DO SO BY THE LESSOR.
16. LESSEE WILL NOT PERMIT THE LEASED PREMISES TO REMAIN VACANT OR UNUSED FOR
THE PURPOSES FOR WHICH LEASED FOR MORE THAN THIRTY (30) CONSECUTIVE DAYS WITHOUT
THE WRITTEN CONSENT OF THE LESSOR.
17. THE LESSEE HEREBY SUBORDINATES THIS LEASE TO ANY MORTGAGE, DEED OF TRUST, OR
ENCUMBRANCE WHICH THE LESSOR MAY HAVE PLACED, OR MAY HEREAFTER PLACE ON THE
PREMISES. LESSEE AGREES TO EXECUTE, ON DEMAND, ANY INSTRUMENT WHICH MAY BE
DEEMED NECESSARY OR DESIRABLE TO RENDER SUCH MORTGAGE, DEED OF TRUST, OR
ENCUMBRANCE, WHENEVER MADE, SUPERIOR AND PRIOR TO THIS LEASE.
18. IN THE EVENT OF A BREACH OF ANY OF THE TERMS OR CONDITIONS HEREOF BY LESSEE,
LESSOR MAY: (A) TAKE POSSESSION OF THE LEASED PREMISES AND LEASE THE SAME FOR
THE ACCOUNT QF THE LESSEE UPON SUCH TERMS AS MAY BE ACCEPTABLE TO LESSOR, AND
APPLY THE PROCEEDS RECEIVED FROM SUCH LEASING, AFTER PAYING THE EXPENSES
THEREOF, TOWARD THE PAYMENT OF THE RENT WHICH THE LESSEE HEREIN IS OBLIGATED TO
PAY, AND COLLECT THE BALANCE THEREOF FROM THE LESSEE; OR (B) TAKE POSSESSION OF
THE LEASED PREMISES AND COLLECT FROM THE LESSEE ALL DAMAGES SUSTAINED BY REASON
OF BREACH; OR (C) PURSUE ANY REMEDY OR REMEDIES WHICH MAY BE AVAILABLE AT LAW OR
IN EQUITY. THE LESSEE WILL BE RESPONSIBLE FOR PAYING REASONABLE ATTORNEY'S FEES
1NCURRED BY THE LESSOR (PROVIDED THAT LESSOR PREVAILS IN THE LITIGATION) IN ANY
BREACH OF CONTRACT LITIGATiON THAT MIGHT ARISE AS A RESULT OF ANY MATERIAL
BREACH OF THIS CONTRACT BY LESSEE. ANY LITIGATION ARiSING BETWEEN THE PART1ES
SHALL BE GOVERNED BY THE STATE OF ARKANSAS. ANY COURT PRECEDING SHALL BE FILED
AND TRIED iN THE COURTS OF PULASKI COUNTY, ARKANSAS. o
19. SHOULD BANKRUPTCY, INSOLVENCY OR RECEIVERSHIP PROCEEDINGS OF ANY
PAGE# 5 OF 7
<PAGE>
INITIALS: _______
KIND BE INSTITUTED AGAINST LESSEE OR ANY ONE OF THE LESSEES, IF MORE THAN ONE BE
INCLUDED IN DESIGNATiON "LESSEE" HEREIN, OR SHOULD LESSEE'S iNTEREST IN THIS
LEASE OR IN THE INTEREST OF ANY ONE OF THE LESSEES, IF MORE THAN ONE IS INCLUDED
UNDER THE DESIGNATION "LESSEE" HEREIN, DEVOLVE OR PASS BY OPERATION OF LAW TO
ANY OTHER PERSON OR CORPORATION, ThEN THAT SHALL BE CONSIDERED A BREACH OF THE
TERMS AND CONDITIONS OF THIS LEASE, AND LESSOR MAY PURSUE THE REMEDIES PROVIDED
FOR IN PARAGRAPH 18 HEREOF.
20. ON TERMINATION OF THIS LEASE IN COURSE LESSEE AGREES TO SURRENDER POSSESSION
OF THE LEASED PREMISES WiTHOUT DEMAND. FAILING TO DO SO LESSEE WILL, IN ADDITiON
TO THE REASONABLE DAMAGES GENERALLY RECOVERABLE, BE LIABLE TO LESSOR FOR ALL
DAMAGES LESSOR MAY SUSTAIN INCLUDING CLAIMS MADE BY ANY SUCCEEDING TENANT
AGAiNST LESSOR WHICH ARE FOUNDED UPON DELAY OR A FAILURE IN DELIVERING
POSSESSION OF THE LEASED PREMISES TO THE SUCCEEDING TENANT.
21. AS SECURITY FOR THE RENT HEREIN PROVIDED FOR, AND AS SECURITY FOR THE
PAYMENT OF ALL DAMAGES WHICH MAY BE SUSTAINED BY THE LESSOR IN THE EVENT THAT
THERE ISA BREACH OF ANY OFTHETERMS HEREOF BY LESSEE, THE LESSOR SHALL HAVE A
LIEN ON ALL OF THE FURNITURE, FIXTURES, AND OTHER PROPERTY, EXCEPTING
MERCHANDISE CARRIED IN STOCK FOR SALE, WHICH MAY BE BROUGHT INTO OR UPON THE
LEASED PREMISES. THE LESSOR SHALL HAVE THE POWER TO SELL SUCH FURNITURE,
FIXTURES, AND OTHER PROPERTY AT PUBLIC SALE AND TO APPLY ALL AMOUNTS REALIZED
THEREFROM TO THE PAYMENT OF THE ACCRUED RENTALS OR TO THE CLAIM OR CLAIMS OF
LESSOR FOR DAMAGES. BEFORE MAKING SUCH SALE, LESSOR SHALL PUBLISH A FIVE (5) DAY
NOTICE THEREOF BY ONE INSERTION IN A DAILY NEWSPAPER PUBLISHED IN THE CITY OF
LITTLE ROCK; SUCH SALE IS TO BE FOR CASH, AND LESSOR MAY BID THEREAT AS ANY
THIRD PERSON MIGHT DO. LESSEE HEREBY WAIVES ANY AND ALL RIGHTS AND REDEMPTION
GRANTED BY THE LAWS QF ARKANSAS.
22. TIME IS OF THE ESSENCE IN EACH OF THE AGREEMENTS AND CONDITIONS HEREIN TO BE
PERFORMED BY EITHER PARTY. THE FAILURE OF EITHER PARTY TO INSIST UPON
PERFORMANCE OF ANY OF ThE AGREEMENTS AND CONDITIONS HEREiN iN ANY ONE OR MORE
INSTANCES SHALL Not BE A WAiVER OF THE RIGHT THEREAFTER TO INSIST UPON FULL AND
COMPLETE PERFORMANCE OF SUCH AGREEMENTS AND CONDITIONS. RECEIPT BY THE LESSOR OF
RENT WITH KNOWLEDGE OF ThE BREACH OF ANY OF ThE AGREEMENTS AND CONDrnONS:HEREOF
SHALL NOT BE DEEMED A WAIVER OF SUCH BREACH.
23. ANY NOTICE PROVIDED FOR HEREIN WILL BE DEEMED TO HAVE BEEN GIVEN
PAGE# 6 OF 7
<PAGE>
INITIALS_______; ______
LESSEE WHEN RECEIVED BY A RECOGNIZED OVER-NiGHT EXPRESS SERVICE OR REGISTERED
MAIL ADDRESSED TO LESSEE, OR ANY LESSEE IF MORE THAN ONE ARE INCLUDED UNDER THE
DESIGNATION "LESSEE" HEREIN, AT: SUITE # 4C, 1601 WESTPARK DRIVE, LITLE ROCK,
AR, 72204.
24. UPON TERMINATiON OF THE LEASE IN COURSE OR FOR BREACH OF ANY OF ITS TERMS OR
CONDITiONS LESSEE AGREES TO RESTORE ThE LEASED PREMISES TO LESSOR IN AS GOOD A
CONDITION AS WHEN POSSESSION IS DELIVERED TO LESSEE, ORDINARY WEAR AND TEAR
EXCEPTED.
25. LESSOR MAY PLACE A "FOR RENT" SIGN OR SIGNS ON THE LEASED PREMISES DURING
THE LAST THIRTY (30) DAYS THIS LEASE IS IN FORCE.
26. LESSEE IS RESPONSIBLE FOR ANY ENVIRONMENTAL DAMAGED CAUSED BY HIS USE OF THE
BUILDING AND OUTSIDE GROUNDS. UPON EXPIRATION OF THIS LEASE AND ANY EXTENSIONS
THEREOF, LESSOR MAY ELECT TO HAVE AN ENVIRONMENT INSPECTION DONE TO DETERMINE IF
ANY DAMAGE HAS OCCURRED. IF NONE EXISTS, THE INSPECTION COSTS SHALL BE PAID FOR
BY THE LESSOR. IF DAMAGE IS DISCOVERED, THEN LESSEE SHALL PAY FOR THE INSPECTION
PLUS ALL CLEAN-UP COSTS INCLUDING A FINAL INSPECTION TO DETERMINE THAT ALL
DAMAGE HAS BEEN CORRECTED.
30. LESSEE AGREES ThAT NO REPRESENTATION OF WARRANTY OR AGREEMENT HAS BEEN MADE
BY THE LESSOR OR ANY AGENT OF THE LESSOR WHICH IS NOT HEREIN EXPRESSED.
TOLL CORPORATION, LESSOR:
SIGNED DATE
- ----------------------------- -----------------------------
LESSEE: /s/ David Collins
----------------------------------------------------------
1/14/99
- ----------------------------- -----------------------------
SIGNED DATE
PAGE# 7 OF 7
The CIT Group/BCC, Inc.
Suite 250-LB27
15303 Dallas Parkway
Dallas, TX 75248
Tel: 214 661 1251
Fax: 214 78~0847
April 10, 1995
DAC Technologies of America, Ina.
3905 81st Street
Little Rock, AR 72209
NOTIFICATION FACTORING AGREEMENT
--------------------------------
Ladies and Gentlemen:
We are pleased to confirm the terms and conditions that shall govern our
collected funds accounting factoring arrangement with you.
1. SALE OF ACCOUNTS
1. You hereby sell, assign and transfer to us, and we hereby purchase as
absolute owner, all of your accounts receivable created by or arising from the
sale of goods or rendition of services by you (referred to herein collectively
as the "Accounts", individually as an "Account"). This includes, without
limitation, all sales made and services rendered under any of your trade names
or styles or through any of your divisions.
2. CREDIT APPROVAL
2.1 Credit approval of all orders shall be requested from our Credit
Department via computer, in accordance with procedures more particularly
described in the Client Service Guide which we have provided to you, and any
modifications or revisions thereof or supplements thereto which we may hereafter
provide to you (herein the "Guide"). Orders may be submitted by either: (i)
On-Line Terminal Access, in accordance with the procedures more particularly
described in the appropriately marked section of the guide, or (ii) Electronic
Batch Transmission, in accordance with the procedures more particularly
described in the supplement to the Guide referred to as the guide to Batch Data
Communications. We shall assume the Credit Risk (the customers failure to pay an
invoice representing an Account in full when due at its longest maturity because
of its financial inability to do so) on each Account with respect to which
Not. CF Adv.
2/7/95
A company of
Dai- Ichi Tango Bank and
Chemical Banking Corporation
<PAGE>
the shipment of goods or rendition of services represented thereby has been
credit approved by our Credit Department in writing, and with respect to which
the customer actually receives and finally accepts delivery of the goods or
services. Without our prior written consent, you shall not change the amount,
terms, shipping or delivery dates with respect to any shipment of goods or
rendition of services, or any invoice relating thereto, whether or not approved
by us as to credit, or grant any other indulgence with respect thereto (other
than accepting returns and granting allowances as provided in paragraph 8.1
hereof). Credit approval of any shipment of goods or rendition of services may
be withdrawn by us any time before, but not after, delivery is made. Credit
approvals shall be effective only if shipment is made or services are rendered
within thirty (30) days from the completion date specified in the approval.
Notwithstanding anything to the contrary contained herein, we shall not assume
the Credit Risk on any Account or portion thereof arising from freight charges,
sales of sample merchandise, sales of merchandise not regularly sold by you,
sales of merchandise which is not in the form or quantity of merchandise
normally sold by you, or on any Account represented by an invoice, although all
such Accounts shall be purchased by and assigned to us as provided herein. We
shall have no liability whatsoever to you or to any person, firm or entity for
not credit approving, or for withholding or withdrawing credit approval of, any
order. In the event that we decline to credit approve an order from a customer
and, in connection therewith, furnish any information to you regarding the
credit standing of the customer in explanation of our decision, such information
shall be privileged and confidential and shall not be given by you to the
customer, your salesperson or any third party; however, you may advise such
party that any questions relating thereto may be directed to us.
2.2 To indicate credit decisions by our Credit Department each day, we
shall send to you a computer generated Credit Decisions Report. The Credit
Decisions Report shall constitute the official record of our written credit
approvals. All information and exhibits contained in the Guide or on any screen
accessed by you, or any print-outs, reports, statements or notices received by
you are, and shall remain, our exclusive property and shall not be disclosed to
or used by anyone other than you, in whole or part, except after obtaining the
express written permission of an authorized officer of the undersigned.
2.3 Accounts and portions of Accounts on which we bear the Credit Risk
shall be referred to herein collectively as "Factor Risk Accounts", individually
as a "Factor Risk Account". Accounts and portions of Accounts on which you bear
the risk as to credit shall be referred to herein collectively as "Client Risk
Accounts", individually as a "Client Risk Account".
Not. OF Adv.
2/7/95
<PAGE>
3. INVOICING
3. Each of your invoices shall bear a notice (in form and content approved
by us) that the Account represented thereby has been sold, assigned and
transferred to us, and is owned by and payable only to us. All invoices shall be
mailed by you to your customers at your expense. You shall provide us with
copies of all invoices, and with such confirmation of the transfer of Accounts
to us and such proof of order, shipment or delivery as we may require. Your
printed name or rubber stamp signature on invoices and confirmatory assignment
schedules shall have the same legal effect as a manual signature by one of your
authorized officers or agents. Should you for any reason defer shipment of goods
which you have sold and invoiced to a customer (such sales are also known as
bill and hold sales) you shall: so advise us promptly, submit all relevant
details to us, and comply with such conditions as we deem necessary as a
prerequisite to our handling the Accounts arising therefrom on our books.
4. REPRESENTATIONS AND WARRANTIES
4.1 You hereby represent and warrant that: each Account is based upon an
actual and bona fide sale and delivery of goods or rendition of services to
customers, made by you in the ordinary course of your business; the goods and
inventory being sold and the Accounts created are your exclusive property and
are not and shall not be subject to any lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever, other than in
our favor; your customers have accepted the goods or services, owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without dispute, claim, offset, defense, deduction, recoupment,
counterclaim or contra account (any of the foregoing being referred to herein as
a "Customer Claim"); all amounts are due in United States Dollars; all original
invoices bear notice of the assignment and transfer to us; any taxes or fees
relating to your Accounts or goods are solely your responsibility; and none of
the Accounts factored with us hereunder represent sales to any subsidiary,
parent or affiliated company of yours.
4.2 You also warrant and represent that: you are a duly organized and
validly existing corporation, qualified to do business in all states where
required; there are no actions, suits or legal proceedings of any kind or nature
pending against you; and the most recent financial statements provided to us by
you accurately state your financial condition and there has been no material
adverse change in your financial condition since the date of said financial
statements. You shall maintain such books and records concerning the Accounts as
we may require and agree that they will reflect our ownership of the Accounts.
You shall furnish us with such information concerning your business affairs and
financial condition as we may request from time to time, and shall promptly
notify us of any change in your name, chief executive
Not. CF Adv.
2/7/95
<PAGE>
5. PURCHASE OF ACCOUNTS
5. We shall purchase the Accounts for the gross amount of the respective
invoices, less factoring fees or commissions relating thereto, trade and cash
discounts allowable to your customers and credits and allowances (the "Purchase
Price of Accounts"). Our purchase of the Accounts shall be reflected on the
Statements of Account which we shall render to you, and such statements shall
also reflect all credits and discounts made available to your customers (whether
or not taken) and anticipation earned by your customers. A more detailed
description of these and all other accounting procedures used hereunder is
contained in the Guide.
6. ADVANCES
6. At your request, we may in our sole discretion, make advances to you
prior to the collection of Accounts, subject to our right to hold any reserves
we deem necessary as security for the payment and performance of any and all of
your Obligations, as defined herein. All amounts owing to us by you, including,
without limitation, any advances which may be made to you prior to shipment and
any debit balance in your Client Position Account (as defined below), shall be
payable to us on demand. We may send to you at any time any credit balance in
your Funds-In-Use Account (as defined below), without prior notice to you.
7. PAYMENT OF ACCOUNTS
7.1 Checks and other proceeds received by us in payment of Accounts will be
applied to your account with us after crediting your customer's account;
however, we shall debit your account monthly with the cost of three (3)
additional business days on all such amounts. The foregoing shall be computed at
the rate charged by us on debit balances, as set forth in paragraph 14.1 hereof.
No checks, drafts or other instruments received by us shall constitute final
payment of an Account unless and until such instruments have actually been
collected.
7.2 With respect to any Factor Risk Account which remains unpaid, the
Purchase Price of Accounts relating thereto shall be credited to your account as
follows:
(a) if the customer in question makes an assignment for the benefit
of creditors, calls a meeting of its creditors, institutes any
proceeding to compromise or adjust its debts, or if any
proceeding or petition is filed or instituted by or against such
customer for relief under any State or Federal bankruptcy or
insolvency law, or if a receiver or trustee is appointed for the
customer, then, when the later of the following occurs: the
longest due date of the
Not. CF Adv.
2/7/95
<PAGE>
Account, or at such time as we become aware that one of the
events specified above has occurred; or
(b) if none of the events specified in (a) above has occurred, then,
when the later of the following occurs: the longest due date of
the Account, or at such time as we become aware that the customer
has become financially unable to pay.
Should it subsequently be determined that any Factor Risk Account credited to
your account with us was not paid for any reason other than the customer's
financial inability to do so, we shall reverse the credit and debit your account
accordingly.
8. CUSTOMER CLAIMS AND CHARGEBACKS
8. You shall notify us promptly of any matter affecting the value,
enforceability or collectability of any Account and of all Customer Claims,
returns and rejections. You shall issue credit memoranda promptly upon accepting
returns or granting allowances, (and upon our request, send duplicates and/or
confirm the assignment of such credit memoranda to us), and may continue to do
so until we have notified you that such credits or allowances are to be made
only after our prior written approval. We shall have the right to adjust
Customer Claims directly with customers, upon such terms as we in our sole
discretion may deem advisable, but shall not be required to do so. We shall
cooperate in the adjustment of Customer Claims, but may at any time debit or
charge back to your account the amount of: (a) any Factor Risk Account which is
not paid in full when due for any reason other than the customer's financial
inability to do so (including, but not limited to, non-payment due to acts of
God, civil strife, war and the like), or any anticipation taken or Customer
Claim asserted with respect to any Factor Risk Account; (b) any Client Risk
Account which is not paid in full on its due date; and (c) any Account with
respect to which we determine that there has been a breach of any representation
or warranty hereunder. Such debit or chargeback shall not constitute a
reassignment to you of the Account involved. Any deduction taken by a customer
shall be charged back to your account immediately, and we may at any time debit
or charge back to your account the amount of: (i) payments we receive on Client
Risk Accounts which we are required thereafter to turnover or return; (ii) any
and all expenses and attorneys' fees incurred by us in collecting or attempting
to collect any Account charged back to you or any Obligation hereunder; and
(iii) any expenses incurred by us as a result of remittances made by customers
on Client Risk Accounts that are not finally paid, for whatever reason. Further,
we shall be entitled to charge you a reasonable fee for each Client Risk Account
which we may place with a collection agency or attorney for collection, which
fee shall be charged to your account in addition to any fees or expenses of such
collection agency or attorney.
<PAGE>
9. HANDLING AND COLLECTION OF ACCOUNTS AND RETURNED GOODS
9.1 As owners and assignees of the Accounts, we shall have the right to
bring suit or otherwise enforce collection, in your name or ours, and generally
shall have all other rights respecting said Accounts, including, without
limitation, the right to: accelerate or extend the time of payment, modify the
terms of payment, settle, compromise, release in whole or in part any amounts
owing, and issue credits in your name or ours. To the extent applicable, you
hereby waive any and all claims and defenses based on suretyship. If monies are
due and owing from a customer for both Factor Risk Accounts and Client Risk
Accounts, you agree that any payments received in respect of any such Accounts
may be applied first to the Factor Risk Accounts, regardless of any notation to
the contrary on payment items, and regardless of the due dates of such Accounts.
Once you have granted or issued a discount, credit or allowance, you shall have
no further interest therein. Any checks, cash, notes or other instruments,
proceeds or property received by you with respect to any Accounts shall be held
by you in trust for us, separate from your own property and funds, and
immediately turned over to us with proper assignments or endorsements. We may
endorse or sign your name or ours on any checks or other instruments or
documents with respect to Accounts or the goods covered thereby.
9.2 At any time that we so request, and immediately upon the occurrence of
an Event of Default (as defined below) or upon termination of this Agreement,
any and all returned, reclaimed or repossessed inventory and goods shall be set
aside by you, marked with our name and held by you in trust for us as owner, and
for our account. Further, upon the occurrence of any of the foregoing, you shall
promptly notify us of all such inventory and goods and deliver the same to us,
pay us the invoice price thereof, or sell the same for our account and remit the
full proceeds to us.
10. STATEMENTS OF ACCOUNT
10. After the end of each month, we shall send to you one or more reports
showing the accounting for sales, charges, advances and other transactions
between us during that month (herein the "Reports"). The Reports sent to you
each month will include, among other things, a Statement of Account which will
reflect transactions in three accounts: an accounts receivable account (the
"Accounts Receivable Account"), a client position account (the "Client Position
Account") and a funds-in-use account (the "Funds-In-Use Account"). All financial
transactions between us will be reflected on these monthly Reports. The monthly
Reports shall be deemed correct and binding upon you and shall constitute an
account stated between us,. unless we receive a written statement of your
exceptions within thirty (30) days after the date the same are mailed to you.
Not. CF Adv.
2/7/95
<PAGE>
11. GRANT OF SECURITY INTEREST
11.1 In addition to the sale of Accounts hereunder, and without the
necessity of any further formality, writing or evidence, you hereby transfer and
assign to us and grant us a security interest in all of your right, title and
interest in and to all of your now existing and future: (a) accounts receivable
(whether or not the same constitute Accounts purchased by us hereunder),
instruments, documents, chattel paper, general intangibles (including, without
limitation, all federal, state and local income tax refunds), and any and all
other forms of obligations owing to you; (b) unpaid seller's rights (including
rescission, repossession, replevin, reclamation and stoppage in transit)
relating to any of the foregoing or arising therefrom; (c) rights to any goods
represented by any of the foregoing, including returned or repossessed goods;
(d) reserves and credit balances arising hereunder; (e) guarantees or collateral
for any of the foregoing (including, without limitation, rights under any
letters of credit or other credit enhancements in your favor); (f) insurance
policies or rights relating to any of the foregoing; (g) bank deposits and
accounts; (h) cash and non-cash proceeds of any and all of the foregoing; and
(i) Books and Records (as defined below in paragraph 13) evidencing or
pertaining to any of the foregoing. (It is understood that we shall have no
obligation to perform in any respect, any contracts relating to any Accounts).
You shall comply with the requirements of all applicable laws to perfect our
security interest in collateral granted to us hereunder, and execute such
financing statements and other documents as we may require to effectuate the
foregoing and implement this Agreement. To the extent permitted by applicable
law, you hereby authorize us to sign your name on your behalf on financing
statements covering the collateral and to file financing statements without your
signature in order to perfect or maintain our security interest in the
collateral.
12. OBLIGATIONS SECURED
12. The security interest granted hereunder, and any lien or security
interest that we may have in any of your other assets or property, shall secure
the payment and performance of all of your now existing and future indebtedness
and obligations to us, whether absolute or contingent, and whether arising
hereunder or under any other agreement or arrangement between us, or by
operation of law or otherwise, including, without limitation, indebtedness for
goods and services purchased by you from any party whose accounts receivable are
factored or financed by us, and indebtedness arising under any guaranty, credit
enhancement or other credit support executed by in our favor (herein
"Obligations"). Any reserves or balances to your credit and any other property
or assets of yours in possession shall constitute security for any and all
Obligations. We may, in our discretion, debit your account at any time with the
amount of any and all Obligations.
<PAGE>
13. BOOKS AND RECORDS AND EXAMINATIONS
13. You agree: to make your records, files and books of account (including,
without limitation, paper records, computer-based data, records or media,
electronic records, tapes, discs, etc., and all programs and procedure manuals
relating thereto) (all of the foregoing referred to herein as "Books and
Records") available to us on request; to permit us to visit your premises during
business hours to examine the same and to make copies or extracts thereof; and
to conduct such examinations as we deem necessary. In order to cover costs and
expenses we may incur in connection with any such examinations, we shall be
entitled to charge you a fee for each day or part thereof during which such
examination is conducted, which fee shall be charged to your account, in
addition to any out-of-pocket costs and expenses we incur as a result of
conducting said examinations.
14. INTEREST, FACTORING FEES OR COMMISSIONS AND OTHER CHARGES
14.1 Interest shall be charged as of the last day of each month on the
debit balance in your Funds-In-Use Account each day during that month. The
amount that appears in your Funds-In-Use Account is the difference between the
balance in your Accounts Receivable Account and the balance in your Client
Position Account. Interest shall be calculated at the greater of seven percent
(7%) per annum or a rate of one and one-quarter percent (1/4) per annum above
the "Chemical Rate", based on the nine percent (9%) per annum "Chemical Rate" as
of March 1, 1995. The Chemical Rate is the per annum rate of interest publicly
announced by Chemical Bank in New York, New York from time to time as its prime
rate. (The prime rate is not intended to be the lowest rate of interest charged
by Chemical Bank to its borrowers.) Any change in the rate of interest hereunder
due to a change in the Chemical Rate shall take effect as of the first of the
month following such change in the Chemical Rate. Interest shall be calculated
based on a 360 day year. Interest shall be credited as of the last day of each
month on any credit balance in your Funds-In-Use Account each day during that
month, at a rate three percent (3~) per annum below the Chemical Rate being used
to calculate interest hereunder for the period. In no event, shall the rate
charged hereunder exceed the highest rate permitted under applicable law. In the
event, however, that we do receive interest hereunder in excess of the highest
rate permissible, you agree that your sole remedy shall be to seek repayment of
such excess, and you hereby waive any and all other rights and remedies which
may be available to you under law or in equity.
14.2 For our services hereunder, we shall be entitled to a factoring fee or
commission as follows: (a) sixty-five hundredths of one percent (.65~) on the
gross face amount of all Accounts arising from sales to Customers listed on
Exhibit A (attached hereto) and (b) eight tenths of one percent (.8~) on the
gross face amount of all Accounts arising from all other sales factored with us,
plus one-quarter of one percent (1/4 of 1 %) of the gross face amount of each
Account for each thirty-day period or part thereof by which the
Not. OF Adv.
2/7/95
<PAGE>
longest terms of sale applicable to such Account exceed ninety (90) days
(whether as originally stated or as a result of a change of terms requested by
you or the customer). In addition, with respect to Accounts arising from sales
to customers located in United States territorial possessions, we shall be
entitled to an additional factoring fee or commission of one percent (1~) on the
gross face amount of such Accounts.
14.3 In addition to the foregoing, you shall pay all costs and expenses
incurred by us in connection with the preparation, execution, administration and
enforcement of this Agreement, including, without limitation, all reasonable
fees and expenses attributable to the services of our attorneys (whether
in-house or outside), all search fees and the cost of all public record filings.
Furthermore, you shall pay to us a reasonable fee for: (i) all special reports
prepared by us at your request; (ii) all wire transfers; (iii) handling all
change of terms requests relating to Accounts; and (iv) the usage by you of our
on-line computer services. All such fees shall be charged to your account and
may be changed by us from time to time upon notice to you.
14.4 If any tax by any governmental authority (other than income and
franchise taxes imposed on us which are not related to any transaction between
us) is or may be imposed on, or arises as a result of, any transactions between
us, any sales made by you, or any inventory or goods relating to such sales, and
we are or may be required to withhold or pay such tax and any interest or
penalties related thereto, you shall indemnify and hold us harmless in respect
thereof and pay to us the amount of any such tax, interest or penalties.
15. TERMINATION
15. You may terminate this Agreement for any reason whatsoever, but only as
of an Anniversary Date, as defined herein, and then only by giving us at least
sixty (60) days prior written notice of termination. We may terminate this
Agreement for any reason whatsoever at any time by giving you written notice
stating a termination date not less than sixty (60) days from the date such
notice is given, or immediately at any time without prior notice to you upon and
after the occurrence of an Event of Default (as defined below). This Agreement
continues uninterrupted unless terminated as herein provided. As used herein,
the term "Anniversary Date" shall mean the last day of the month occurring one
year from the date hereof or the same date in any year thereafter. Unless sooner
demanded, all Obligations shall become due and payable upon termination of this
Agreement and, pending a final accounting, we may withhold any balances in your
account unless supplied with an indemnity satisfactory to us to cover all
Obligations. All our rights, liens and security interests hereunder shall
continue and remain in effect after termination of this Agreement, whether said
termination is upon notice or as a result of the occurrence of an Event of
Default, and you shall continue to assign accounts receivable to us and to remit
to us all collections on accounts
<PAGE>
receivable, until all Obligations have been paid in full or we have been
supplied with an indemnity satisfactory to us to cover all Obligations.
16. EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT
16.1 An "Event of Default" shall be deemed to have occurred under this
Agreement upon: (a) the cessation of your business or the calling of a meeting
of your creditors; (b) your failure to meet your debts as they mature; (c) the
commencement by or against you of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law; (d) breach by you of any representation, warranty or covenant contained
herein; or (e) your failure to pay any Obligation when due.
16.2 Upon and after the occurrence of an Event of Default, this
Agreement may be terminated by us immediately at any time, without notice to
you, and all Obligations shall, at our option and without notice or demand of
any kind (all of which you hereby expressly waive), become due and payable
immediately. Further, we may remove, from any premises where the same may be
located, any and all documents, instruments, Books and Records (and any
receptacles or cabinets containing the same) pertaining to the Accounts or other
collateral hereunder and/or we may use (at your expense) such of your personnel,
supplies and space at your place of business or elsewhere, as may be necessary
to properly administer and enforce our rights in the Accounts and any other
collateral hereunder, and to facilitate the collection thereof and realization
thereon. We may sell, assign or otherwise dispose of the Accounts and any
returned, reclaimed or repossessed inventory, goods or other property relating
thereto, whether held by you or by us, at public or private sale, for cash, on
credit or otherwise, at such price and on such terms as we in our sole option
and discretion may determine, and we may bid or become purchasers at any such
sale, or acquire an interest in or dispose of said property. You hereby
acknowledge that you have no right to notice, or to an accounting or right of
redemption with respect to any such sale or other disposition of the aforesaid
Accounts or aforesaid goods. With respect to any other property or collateral in
which we have a security interest, we shall have all of the rights and remedies
of a secured party under Article 9 of the Uniform Commercial Code. If notice of
intended disposition of any of said property or collateral is required by law,
it is agreed that five (5) days notice shall constitute reasonable notice. The
net cash proceeds resulting from the exercise of any of the foregoing rights,
after deducting all charges, costs and expenses (including reasonable attorneys'
fees) shall be applied by us to the payment or satisfaction of the Obligations,
whether due or to become due, in such order as we may elect, and you shall
remain liable to us for any deficiencies. Upon and after the occurrence of an
Event of Default, or in the event of a termination of this Agreement by us, we
are hereby authorized by you to notify postal authorities at any time to change
the address for delivery of mail to you to such address as we may designate, and
to receive and open mail addressed to you to enable us to carry out our rights
under this Agreement.
Not. OF Adv.
2/7/95
<PAGE>
17. MISCELLANEOUS PROVISIONS
17.1 This Agreement, and all attendant documentation, as the same may be
amended from time to time, constitutes the entire agreement between us with
regard to the subject matter hereof, and supersedes any prior agreements or
understandings. Furthermore, unless specifically provided otherwise herein, this
Agreement can be changed only by a writing signed by both of us, and shall bind
and benefit each of us and our respective successors and assigns, provided,
however, that you may not assign this Agreement or your rights hereunder without
our prior written consent. Our failure or delay in exercising any right
hereunder shall not constitute a waiver thereof or bar us from exercising any of
our rights at any time. The validity, interpretation and enforcement of this
Agreement shall be governed by the laws of the State of New York.
17.2 If any provision of this Agreement (including, without limitation, any
provision relating to charges constituting interest payable by you) is contrary
to, prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
17.3 Paragraph headings are for convenience only and shall not be deemed to
be a controlling part of this Agreement.
18. JURY TRIAL WAIVER
18. To the extent permitted by applicable law, you and we each hereby waive
any right to a trial by jury in any action or proceeding arising directly or
indirectly out of this Agreement, or any other agreement or transaction between
us or to which we are both parties.
If the foregoing is in accordance with, and accurately reflects, your
understanding, please so indicate by signing and returning to us the original
and one copy of this Agreement. This Agreement shall take effect as of the date
set forth above, but only after being accepted below by one of our officers in
New York, after which, we shall forward your fully executed copy to you for your
files.
Very truly yours,
<PAGE>
THE CIT GROUP.COMMERCIAL SERVICES, INC.
By: /s/ Barry Schwartz
----------------------
Name: Barry Schwartz
Title: S.V.P.
Read and Agreed to:
DAC TECHNOLOGIES OF AMERICA, INC.
By: /s/ David A. Collins
----------------------
Name: David A. Collins
Title: President
Accepted at: New York, New York
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/ John F. Daly
------------------------------------
Name: John F. Daly
Title: Executive Vice President
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Target Stores McLane Company, Inc.
Minneapolis, MN Subsidiary of Wal-Mart Stores, Inc.
Bentonville, AR
Wal-Mart Stores, Inc. General Motors Corporation
Bentonville, AR Detroit, MI
Walgreen Company Sears, Roebuck and Company
Danville, IL Hoffman Estates, IL
Army and Air Force Exchange Montgomery Ward Co.
Dallas, TX Chicago, IL
Fred Meyer Incorporated Dillard Department Stores, Inc.
Portland, OR Little Rock, AR
K Mart Corporation J. C. Penney Co., Inc.
Troy, MI Plano, TX
Lowes Companies, Inc. The Pep Boys-Manny, Moe & Jack (Inc.)
North Wilkesboro, NC Philadelphia, PA
Mercantile Stores
Fairfield, OH
American Drug Stores
(OSCO Drug)
Franklin Park, IL
Longs Drug Stores, Inc.
Antioch, CA
Builders Square Division of K Mart
Corporation San Antonio, TX
</TABLE>
THE CIT GROUP/COMMERCIAL SERVICES /s/ [ILLEGIBLE]
DAC TECHNOLOGIES OF AMERICA, INC. /s/ [ILLEGIBLE]
<PAGE>
Suite 250-LB27
15303 Dallas Parkway
Dallas, TX 75248
Tel: 214 661 1251
Fax: 214 786-0a47
The CIT Group/BCC, Inc. April 10, 1995
DAC Technologies of America, Inc.
3905 81st Street
Little Rock, AR 72209
Re: Customer Surcharge Letter Agreement
-----------------------------------
Ladies and Gentlemen:
We refer to the Factoring Agreement between us, as supplemented and amended
(herein the "Agreement").
This shall confirm our mutual understanding and agreement that, notwithstanding
anything to the contrary contained in the Agreement, all of your accounts
receivable arising from sales to the customers listed on the attached Schedule
and their respective divisions, trade names, affiliates and subsidiaries,
including but not limited to those listed on the Schedule (herein "Customers",
all such accounts being referred to herein as "Customer Accounts") shall be
subject to the following terms and conditions:
a. Only those sales to the Customers that are made by you on terms of sale not
exceeding thirty (30) days, will be eligible for credit approval under the
Agreement.
b. We shall charge your account with a Surcharge based on the gross face
amount of each Customer Account approved by us as to credit whose terms of
sale do not exceed 30 days, at the surcharge rate applicable to the
Customer involved, as set forth on the attached Schedule. The Surcharge
shall be in addition to any other fees or commissions we are entitled to
charge you under the Agreement, and shall be due and charged to your
account in the same manner as commissions are charged thereunder.
c. You shall continue to request credit approval from our Credit Department on
all orders from each Customer, as per the Agreement. Any Customer Account
whose terms of sale exceed thirty (30) days or which has not been approved
by us as to credit as per the Agreement, shall be at your sole Credit Risk.
d. All payments that we receive from any Customer prior to the commencement of
any liquidation of all or substantially all of its assets, or prior to the
commencement by or against it of any
<PAGE>
case under Chapter 7 or Chapter 11 (as applicable) of the Bankruptcy Code
(herein a "Liquidation"), shall be applied by us in accordance with our
normal procedures. If at the commencement of a Liquidation with respect to
any Customer, there are any Customer Accounts on our books at your Credit
Risk, as well as Customer Accounts on our books at our Credit Risk, then
any dividends or other payments that we receive relating to any such
Customer Accounts shall be applied in reduction of the outstanding amounts
of all such Customer Accounts at your and our Credit Risk, in proportion to
the percentage of your and our Credit Risk on such Customer Accounts.
Except as herein specifically provided, the Agreement remains in full force and
effect in accordance with its terms. If you are in agreement with the foregoing,
please so indicate by signing and returning to us the enclosed copy of this
letter.
Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By /s/ [ILLEGIBLE]
----------------------------
Name:
Title: S.V.P.
Read and Agreed to:
DAN TECHNOLOGIES OF AMERICA, INC.
By /s/ David A. Collins
-------------------------------
Name: David A. Collins
Title: President
<PAGE>
Schedule
--------
To Customer Surcharge Letter Agreement
Customer
(And Divisions, Tradenames, Affiliates and Surcharge Rate
Subsidiaries)
B. Boman and Co., Inc. - D.I.P. 1%
Bolton's - D.I.P.
CFTC Group, Inc. - D.I.P. 1%
Canadian Fur Trappers Corporation, Inc. D.I.P.
McCrory Corporation - D.I.P. 1%
McCrory Stores Division - D.I.P.
Masters, Inc. - D.I.P. 3%
Lady Rose - D.I.P.
Lord Bibb - D.I.P.
Central Textile - D.I.P.
The Leslie Fay Companies, Inc. - D.I.P. 3%
Albert Nipon Division - D.I.P.
Andrea Gayle Division - D.I.P.
Breckenridge Division - D. I. P.
Castleberry Knit. Division - D.I.P.
Joan Leslie Division - D.I.P.
Leslie Fay Dress Division - D.I.P.
L. Fay Evenings Division - D.I.P.
Leslie Fay Intimates Division - D.I.P.
Leslie Fay Sportswear Division - D.I.P.
Outlander Division - D.I.P.
Sassco Fashions - D.I.P.
Theo Miles Division - D.I.P.
Spitalnick Corp., a subsidiary of The Leslie Fay 3%
Companies,
Inc., - D.I.P.
HUE, Inc., a subsidiary of The Leslie Fay 3%
Companies,
Inc., - D.I.P.
Piece Goods Shops - D.I.P. 3%
Bill's Dollar Stores, Inc., - D.I.P. 3%
<PAGE>
Roses Stores, Inc. - D.I.P 3%
d/b/a Roses
Brendles Stores, Inc. - D.I.P. 3%
Carlisle Retailers Inc. - D.I.P. 3%
d/b/a Carlisle-And-First, Carlisle's, Carlisle
Clothing and The Alley
Gantos Inc. - D.I.P. 3%
d/b/a Gantos Stores, Inc. - D.I.P.
Craig's Stores of Texas Inc. - D.I.P. 3%
d/b/a Craig's ang Everitt Buelow
Broadway Stores, Inc. 1%
d/b/a The Broadway, Broadway Southwest, Emporium
Capwell and Weinstock's
Merry-Go-Round Enterprises, Inc - D.I.P. 3%
d/b/a MGR Distribution Corp. - D.I.P, and MGRR,
Inc. - D.I.P.
Woodward & Lothrop, Incorporated - D.I.P. 3%
John Wanamaker, Philadelphia - D.I.P.
Crystal Brands, Inc. - D.I.P. 3%
Crystal Brands, Inc - D.I.P./Retail Div.
Ormond Shops Inc. - D.I.P. d/b/a Amancio 3%
Maurice L. Rothschild & Co. - D.I.P. 3%
d/b/a LLoyd's
Jim's Deep Discount (Mr. Jim's)
Joseph Spiess & Co.
Blakes Gilbert's Menswear (Big & Tall Dept.)
Park Menswear (Big & Tall Dept.)
Kositchek's (Big & Tall Dept.)
Higgins & Holmes
Raleigh's
Eagle Clothes
<PAGE>
Middishade
Stallones
Justers
Racusin's
Looies
Gallagher Clothier
Broadstreets
Rothchild Big & Tall Men'
Chelsea
Willow Tree
Willow Tree Plus
Clothing Clearance Center
April-Marcus
Baskin Outlet
Jefferys
Ames Department Stores, Inc. 3%
Jay Jacobs, Inc. - D.I.P. 3%
Jay Jacobs of California, Inc. - D.I.P.
Fine's Men's Shop, Inc. - D.I.P. 3%
AGREEMENT
THIS AGREEMENT is made and entered into by and between SJI
INTERNATIONAL, LTD., and UNI-SKIT TECHNOLOGIES, [NC., hereinafter referred to as
"Manufacturers", and DAC TECHNOLOGIES OF AMERICA, INC., hereinafter referred to
as
WHEREAS, the parties are currently engaged in a manufacturing
agreement to manufacture, design and develop security related products,
including but not limited to the body alarm, key alert, SWAT auto alarm, gun
alert, briefcase luggage alert, protect-all computer alert, glass window alert,
camper-RV alert, bike alert, pepper spray and door alert; and
WHEREAS, the parties have agreed to research, design and develop
additional products.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. The parties agree to equally share ownership rights and
research and development costs, tooling charges, tooling
maintenance/modification, injection molds and related project
costs with respect to all products and items developed by the
parties on a joint basis. With respect to future products,
Manufacturers agree to obtain the approval of all such costs
from DAC prior to commencing such projects.
2. DAC agrees to give Manufacturers the sole and exclusive right
to manufacture its products, provided that Manufacturers can
manufacture for DAC sufficient quantities of such products at
competitive pricing upon reasonable notice. Competitive
pricing shall mean the direct cost of all parts, material and
labor, plus up to twenty-five percent (25%) profit to
Manufacturers, and will be competitive with prices available
from other manufacturers for similar products. DAC shall have
the right upon reasonable notice to review documents
reasonably necessary to verify the competitive pricing as
defined herein.
3. DAC shall have the sole and exclusive right to market, sell
and receive profits from all the products developed andlor
manufactured for DAC in the North and South Americas.
4. Manufacturers shall have the sole and exclusive right to
market, sell and receive all profits from the products
manufactured by the parties in Asia and the Pacific Rim
region, including Japan and Everglow Group Pty. With an
exception in Japan, DAC shall keep its current customers and
profits in Japan and Manufacturers will not deal with DAC's
customers in Japan. Both Manufacturers and DAC have the same
right and selling price as agreed to market and sell
<PAGE>
products developed by both parties to Japan.
5. It is agreed that both parties shall be entitled to solicit
business in all global areas not specified in Paragraphs 3 and
4. Both parties agree to sell products at an agreed upon
pricing agreement, as specified in Exhibit "A" attached
hereto. Said pricing schedule may be amended upon mutual
written consent by both parties. Manufacturers also agree to
honor existing exclusive contracts in Germany and England. It
is understood that Germany and England shall maintain a normal
rate of growth in their business. DAC agrees not to enter into
any further exclusive contracts outside its territory without
the consent of Manufacturers. Both parties agree not to sell
to or solicit sales from each other's customers or to sell to
any customer whose intent is to deliver the products into the
other party's exclusive territory.
6. Both parties agree to pay a commission for any customers
referred to each other which exists within the other party's
exclusive region or territory. Commission percentage will be
negotiated, but in no event will exceed ten (10%) percent.
7. The parties agree that ownership of any and all intellectual
property rights, including patents that are granted in
connection with products that have been developed jointly by
the parties, or are in the process of development jointly by
the parties shall be owned equally between Manufacturers and
DAC. Parties agree to share equally in the cost, both direct
and indirect, of securing such Intellectual property rights
and patents.
8. The parties agree to share equally in the costs of obtaining
approval from any government or agency thereof, which requires
such approval before a product may be sold in a particular
country of geographical region. Such cost sharing will only
apply to those areas where both parties are permitted to sell
product.
9. This contract constitutes the sole and only agreement between
Manufacturers and DAC respecting the development and
manufacturing of products described in this contract and
correctly sets forth the obligations of Manufacturers and DAC
to each other. Any agreements or representations not expressly
set forth in this contract are null and void.
10. Should any litigation be commenced between the parties to this
agreement, the party prevailing in such litigation or
arbitration shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum as and for its
attorneys' fees in such litigation or arbitration as shall be
determined by the court or arbitrator in such litigation or in
a separate action brought for that purpose,
11. Neither this contract nor any interest therein shall be
assigned by Manufacturers or DAC without the written consent
of the other.
<PAGE>
12. This agreement shall be binding upon and shall inure to the
benefit of the parties hereto, to their respective heirs,
successors and/or assigns.
13. Time is of the essence in this agreement.
14. This contract shall be governed and interpreted according to
the laws of the State of Arkansas.
THIS AGREEMENT is entered into this l2Uh1 day of May, 1997.
MANUFACTURERS DAC
SKIT INTERNATIONAL, LTD. & DAC TECHNOLOGIES OF
UNI-SKIT TECHNOLOGIES, INC. AMERICA, INC.
By: /s/ Arthur Yung By: /s/ David Collins, Pres
------------------- ---------------------------
Arthur Yung David Collins, President
By: /s/ Victor Lee
-------------------
Victor Lee
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
-----------------------------------
PRICES/QUANTITY
- -------------------------------------------------------------------------------------------------------------------
Model # Description 1-1999 2000-5000 10000+
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BA 755 Bike Alert 5.33 5.13
- -------------------------------------------------------------------------------------------------------------------
DAB 196 Driver Alert 4.52 4.22
- -------------------------------------------------------------------------------------------------------------------
GBC 048 RF Glass Breakage Sensor Commander 5.16 4.69
- -------------------------------------------------------------------------------------------------------------------
GUN 025 Gun Alert 5.46 4.97
- -------------------------------------------------------------------------------------------------------------------
GWA 001 Glass Window Alert 4.52 3.97
- -------------------------------------------------------------------------------------------------------------------
KAL 201 Key Alert 3.78 3.48
- -------------------------------------------------------------------------------------------------------------------
MA 795 Strobe Alarm (Remote Control Model) 16.10 14.64
- -------------------------------------------------------------------------------------------------------------------
MAK 795 Strobe Alarm (Keypad Model) 13.01 12.15
- -------------------------------------------------------------------------------------------------------------------
MMA 068 Strobe Alarm (Mini D/W Modules) 3.98 3.62
- -------------------------------------------------------------------------------------------------------------------
MSC 038 RF Magnetic D/W Sensor Commander 6.92 6.49
- -------------------------------------------------------------------------------------------------------------------
NBF 21B Body Alarm w/ Flashlight (Black) 3.90 3.55
- -------------------------------------------------------------------------------------------------------------------
NBF 21Y Body Alarm w/ Flashlight (Yellow) 3.90 3.55
- -------------------------------------------------------------------------------------------------------------------
PRO 015 Protect All 4.57 3.87
- -------------------------------------------------------------------------------------------------------------------
RFA 028 Strobe Alarm (Outdoor Module) 9.98 9.27
- -------------------------------------------------------------------------------------------------------------------
RFC 018 Strobe Alarm (RF Transmitter) 4.65 4.23
- -------------------------------------------------------------------------------------------------------------------
RMC 795 Strobe Alarm Remote Control 4.27 3.88
- -------------------------------------------------------------------------------------------------------------------
RVC 002 RV/Camper/Van Alert 4.52 3.97
- -------------------------------------------------------------------------------------------------------------------
SAS 200 Strobe Alarm System 45.08 42.98
- -------------------------------------------------------------------------------------------------------------------
SBA 101 Seat Belt Alert 4.48 3.97
- -------------------------------------------------------------------------------------------------------------------
SBT 102 Seat Belt Alert (Twin Pack) 8.32 7.82
- -------------------------------------------------------------------------------------------------------------------
SGA 095 Sporting Gear Alarm 5.08 4.62
- -------------------------------------------------------------------------------------------------------------------
SWA 03 SWAT Auto Alarm 10.39 9.65
- -------------------------------------------------------------------------------------------------------------------
TCA 396 SWAT II Talking Car Alarm 32.51 29.56
- -------------------------------------------------------------------------------------------------------------------
TCA 396N SWAT II Non-Talking Car alarm 24.06 21.87
- -------------------------------------------------------------------------------------------------------------------
TVP 095 Trigger Lock Value Pack 2.28 1.82
- -------------------------------------------------------------------------------------------------------------------
WWM 296 Warning Module 1.96 1.84
- -------------------------------------------------------------------------------------------------------------------
CHR 792 Cup Holder 0.90
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Agree to this 12th day of May, 1997:
/s/ Victor Lee /s/ David Collins
- ---------------------- ------------------
Victor Lee David Collins
/s/ Arthur Yung
- ----------------------
Arthur Yung
[LETTERHEAD]
January 26, 2000
Securities and Exchange Commission
450 Fifth Avenue, N.W.
Washington, DC 20549
RE: DAC Technologies Group International, Inc. (the "Company")
Ladies and Gentlemen:
This firm has been provided with a copy of the disclosure to be made by the
company in a Report on form 10-SB, Item 3 regarding the change of the Company's
certifying acountants from Sweeney, Gates & Co. to Moore, Stephens & Foster,
LLP. After review of such disclosure, this firm agrees with the statements made
by the Company therein as it relates to this firm.
Sincerely,
/s/ Sweeney, Gates & Co.
- ------------------------
Sweeney, Gates & Co.
PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
DAC Technologies Group International, Inc.
We hereby consent to the use in the Form 10-SB dated January 25, 2000 of our
report dated September 30, 1999 related to the financial statements of DAC
Technologies Group International, Inc. for the three months ended December 31,
1998 and DAC Technologies of Arkansas, Inc. (predecessor) for the nine months
ended September 30, 1998 and for the year ended December 31, 1997.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
January 25, 2000
