SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-24736
BioProgress Technology International, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0361701
(State or other jurisdiction) (I.R.S. employer)
of incorporation or organization identification number
9055 Huntcliff Trace, Atlanta, Georgia 30350-1735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 641-0264
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing: On
April 6, 1998, the closing inside bid and asked prices for the shares of common
stock of registrant, which is the sole voting stock outstanding of registrant,
were $.93 and $1.03, respectively. On that date, there were 4,999,753 shares of
common stock outstanding. Affiliates held 4,000,000 shares of this stock; thus,
the aggregate market value of the voting stock held by non-affiliates
approximated $979,758.
Registrant had no revenues during fiscal 1997.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: As of April 6, 1998, there were
approximately 4,999,753 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1
<PAGE>
List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.
PART I.
Item 1. Description of Business:
History: Famous Sam's Group, Inc., formerly known as U.S. Flywheel Systems, Inc.
(the "Company"), was incorporated in California on March 5, 1990, as a
subsidiary of Sunbird Technologies, Inc., a Utah corporation ("Sunbird
Technologies"). In June, 1991, the Company acquired three patents and a license
relating to flywheel technology from Sunbird Technologies and its affiliates in
exchange for common shares of the Company ("Common Stock"). These shares of
Common Stock were subsequently distributed to the shareholders of Sunbird
Technologies after registration with the U.S. Securities and Exchange Commission
("Commission"). The Company subsequently transferred its flywheel technology to
a partnership (the "Partnership") in exchange for a minority interest in the
Partnership. The Partnership interest of the Company was subsequently sold,
after which the Company began its search for a business in which to engage.
Acquisition of BioProgress Technology, Inc.: On October 30, 1997, the Company
entered into a letter of intent with BioProgress Technology, Inc., a Colorado
corporation ("BioProgress Technology"), which was followed on November 17, 1997,
by a formal agreement (the "Reorganization Agreement"). Pursuant to the
Reorganization Agreement, the Company agreed to acquire all of the outstanding
capital stock of BioProgress Technology in exchange for 4,000,000 post- split
shares of Common Stock. Immediately prior to closing the Company had reverse
split its outstanding capitalization on a one for five (1:5) basis.
In conjunction with the execution and delivery of the Reorganization Agreement,
the Company entered into an agreement with the shareholders of the Distributor
which gives the Company the option of acquiring all or any part, on a pro rata
basis, of the issued and outstanding proprietary interest of the Distributor on
or before June 30, 1998. The Company, if an election is made, would be required
to issue one and 1/2 shares of Common Stock for each share outstanding of the
Distributor, which has 10,100,000 shares outstanding; thus, if the option were
exercised in full, the Company would issue 15,150,000 shares of Common Stock. On
exercise of this election, the Distributor may have no more than 10,100,000
shares outstanding, and the Company may have no more than 5,000,000 shares of
Common Stock issued and outstanding and must have completed or be in a position
to complete the sale of such number of shares of Common Stock at a price of no
less than $5.00 per share so as to generate no less than $4,000,000 net of all
costs.
Business of BioProgress Technology: BioProgress Technology has entered into an
"Exclusive Distributor Agreement" with BioProgress Technology, Limited, an
entity incorporated in the United Kingdom (the "Distributor"). The Distributor
is engaged in the development, manufacture, sale and distribution of materials
and processes used to replace gelatin in the manufacture of soft capsules, as
discussed in more detail below. BioProgress Technology, under this agreement,
has been granted the right to serve as the "Exclusive Distributor" of the
foregoing products in the United States and Canada, and has agreed to purchase
34,500,000 products over a twelve month period beginning in January of next year
at a price per thousand of $66.00. The volume purchased will increase by 20% per
annum after the first year of the agreement through the fifth year, by 15% per
annum in years six through ten, 10% per annum in years eleven through 15, and 5%
per annum in years 16 through 20. If this purchase schedule is not met,
BioProgress Technology will lose the exclusive right to distribute these
products, but may not lose its distribution rights altogether, i.e., it may
remain as a non-exclusive distributor; however, the Distributor will then have
the right to find another exclusive distributor in the United States and Canada
for the products. The Distributor remains the sole owner of the technical
know-how and intellectual property rights associated with the products.
The Gelatin Capsule Industry and the Opportunity: BioProgress Technology, as a
result of the Exclusive Distributor Agreement, aims to take commercial advantage
of certain external factors adversely affecting the gelatin industry,
particularly soft gelatin encapsulation, by providing the industry with a cost
effective commercial substitute and flexible manufacturing process for the
gelatin capsules. Gelatin capsules are currently used to encapsulate a wide
range of consumer products, including cosmetics and dietary supplements. This
represents an extremely large and lucrative market which is urgently seeking a
replacement for gelatin, a product under attack on various fronts.
2
<PAGE>
Gelatin is a protein derived from animal renderings, which is used to
encapsulate dietary supplements, oils, cosmetic preparations and, in some cases,
drug delivery systems. The global annual consumption of gelatin by weight
exceeds 210,000 tonnes, of which 21,000 tonnes are used to produce around 50
billion soft capsule products annually. Expansion of the encapsulation market
into those groups with religious and ethical concerns about the use of animal
derived materials would open up such markets as the Muslim population which now
stands globally at approximately 935 million, and vegetarians, of which there
are an estimated 29 million in the USA alone. Currently, these groups are
supplied either with hard cellulose capsules or, in the case of Muslims, with
gelatin derived solely from bones. In addition, the fear of contraction of
Bovine Spongiform Encephalopathy ("Mad Cow Disease") from the ingestion of
gelatin based capsules has opened up further opportunities.
Management of the Distributor and BioProgress Technology have identified
weaknesses in the processing requirements and in-use performance of gelatin, and
the Distributor has filed a patent application in respect of a new process using
a replacement material ("X-GelTM"). In addition, trials of this new process have
been concluded and have proved the principle and commercial viability of the
technology.
BioProgress Technology has landed the contractual right to exploit the
formulation and engineering necessary to perfect an encapsulation system which
does not require the unique properties of gelatin. Trial manufacturing processes
have concluded and management believes that the bath oil capsule range is now
ready for commercial use, which, under the means proposed, does not require
governmental approval.
Famous Sam's Acquisition: The Company acquired Famous Sam's Franchise
Corporation ("Famous Sam's") as a wholly-owned subsidiary on July 23, 1996.
Subsequently, on March 11, 1997, the Company and Famous Sam's entered into a
recision agreement between themselves and the former shareholders of Famous
Sam's (the "Shareholders") whereby the Company returned to the Shareholders all
of the outstanding proprietary interest of Famous Sam's in exchange for (i) a
release of any and all liabilities between the Company, Famous Sam's and the
Shareholders, (ii) a representation from the Shareholders and Famous Sam's that
the Company had no outstanding liabilities which had not been satisfied, other
than amounts due the attorney for the Company, Mr. Mark S. Pierce, (iii) the
return to treasury of the shares of Common Stock issued to the Shareholders
under the Reorganization Agreement, (iv) the resignation of the then board and
officers of the Company and (v) the appointment of a new board member. The
premise for the recision was what the Company, Famous Sam's and the Shareholders
felt to be certain material misrepresentations made by an independent contractor
of the Company in obtaining the acquiescence of Famous Sam's to the
Reorganization Agreement. After discussions between the Company and the
independent contractor and subsequent factual inquiries by management, it
appeared that it was in the best interests of the Company to expeditiously and
economically resolve all differences between the Company and the independent
contractor. For this reason, all matters between the Company and the independent
contractor were resolved on April 15, 1997, through the execution and delivery
of a mutual release and settlement agreement. No party to this agreement
admitted or denied any wrongdoing. The recision of the Reorganization Agreement
and the settlement with the independent contractor were entered into by the
Company in order to avoid what it considered to be otherwise unnecessary
litigation if the disputes which had arisen had not been resolved, which the
Company could not have afforded. The recision and settlement placed the parties
in roughly the same position as if the acquisition of Famous Sam's had never
taken place.
Item 2. Description of Property: The Company, as of the date of this report,
owned no real or personal property, tangible or intangible, other than the
shares of its wholly-owned subsidiary, BioProgess. The executive offices of the
Company are being provided by The Jade Partnership, the majority shareholder of
the Company, free of charge on a month-to-month basis. These offices are located
at 9055 Huntcliff Trace, Atlanta, Georgia, 30350-1735. The telephone number at
this address is (770) 641-0264.
Item 3. Legal Proceedings: No material legal proceedings to which the Company
(or any officer or director of the Company, or any affiliate or owner of record
or beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending, and no such material proceeding is known by management of the Company
to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report.
3
<PAGE>
Item 5. Market for Common Equity and Related Shareholder Matters: On May 31,
1996, the Company effected a reverse one for one thousand (1:1000) capital share
split. On November 6, 1997, the Company effected a reverse one for five (1:5)
capital share split. Concurrently, the authorized capitalization of the Company
was increased to 10,000,000 common shares, $.001 par value per share, and
1,000,000 preferred shares, $.01 par value per share. As of April 6, 1998, there
were approximately 4,999,753 shares of Common Stock issued and outstanding,
which were held of record by approximately 2,197 shareholders.
The Common Stock is currently quoted on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc., under the symbol "BPRG." There
was no trading in the Common Stock prior to August, 1996. The following table
sets forth the range of high, low and closing bid and asked prices per share of
the Common Stock as reported by National Quotation Bureau, Inc. for the period
indicated.
<TABLE>
<CAPTION>
Calendar Quarter High Bid Low Bid Closing Bid High Ask Low Ask Closing Ask
- ------------------ -------- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1996 $ 4.50 $ 1.00 $ 4.375 $ 5.50 $ 2.00 $ 5.375
December 31, 1996 1.875 .75 1.75 2.25 1.25 2.25
March 31, 1997 .75 .75 .75 1.25 1.25 1.25
June 30, 1997
September 30, 1997
December 31, 1997
</TABLE>
The above prices represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
Further, the above prices have been adjusted to reflect the two reverse share
splits discussed above in this item. On April 6, 1998, the closing inside bid
and asked prices for the Common Stock were $.94 and $1.03, respectively. On that
date there were nine market makers publishing quotes.
The Company has paid no dividends on the Common Stock since inception and does
not expect to pay dividends in the foreseeable future. There are, however, no
restrictions on the payment of dividends.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Results of Operations: The Company, previous to 1994, operated solely as a
research and development facility. From October, 1993, until April 23, 1996, the
Company merely held a minority stake in a limited partnership, which was
transferred to trust on the latter date. As a result of the recision of the
acquisition of Famous Sam's, the Company had no operations during 1996 or 1997.
The Company had no revenues or income in 1997, 1996 or 1995 from any source
whatsoever. During 1994, the Company realized $100,000 in revenue from the sale
of a portion of its partnership interest. In 1993, the Company realized $500,000
in revenue from the sale of its flywheel technology and licenses to the
partnership.
The Company's expenses during the years ended December 31, 1997, 1996, 1995 and
1994 were entirely administrative in nature. No meaningful comparison can be
made between these years since the business of the Company during these years
was solely administrative in nature.
Liquidity and Capital Resources: The Company transferred all liabilities to
trust on April 23, 1996, and all other liabilities, to the limited extent that
there were any, during 1996 to the date of the recision of the Reorganization
Agreement, March 11, 1997, with the exception of the legal fees of Mr. Pierce,
were satisfied by Famous Sam's. The Company had no other source of liquidity
during 1997 or 1996, other than the largesse of Mr. Pierce in his extension of
credit and personal funds. The Company had no source of liquidity during 1995,
and, as a result, became delinquent in payments to its creditors, one of whom
sued for payment and obtained a judgement. In fulfillment of a condition
precedent to closing of the Famous Sam's acquisition, management arranged for
the advancement of sums to satisfy in full these former obligations of the
Company, as previously transferred to the liquidating trust, and assigned in
consideration its claims in this regards against the trust.
4
<PAGE>
In the last quarter of 1997, the Company sold 435,000 shares of Common Stock
under an option with a consultant at a price per share of $.875, for aggregate
consideration of $385,000. The Company then paid all past due obligations with
these monies, and continues to use this cash in the development of its business.
Compliance with Beneficial Ownership Reporting Rules: Section 16(a) of the
Securities Act of 1934, as amended ("Exchange Act"), requires the executive
officers and directors of the Company, and persons who beneficially own more
than 10% of the Common Stock, to file initial reports of ownership and reports
of changes in ownership with the Commission. These officers, directors and
shareholders are also required to furnish the Company with copies of certain of
these reports. Based solely on a review of copies of reports furnished to the
Company during its fiscal year ended December 31, 1997, and thereafter, or
written representations, if any, received by the Company from these persons that
no other reports were required, the Company believes that, during 1997, all
applicable Section 16(a) filing requirements were satisfied.
Item 7. Financial Statements.
HALLIBURTON, HUNTER & ASSOCIATES, P.C.
Certified Public Accountants
To the Board of Directors and Shareholders
BioProgress Technology International, Inc.
(Formerly Famous Sam's Group, Inc., and Subsidiary)
We have audited the accompanying balance sheets of BioProgress Technology
International, Inc. (formerly Famous Sam's Group, Inc., and subsidiary), a
development stage company, as of December 31 1997 and 1996, and the related
statements of operations, stockholders' equity, and cash flows for the three
years ended ended December 31, 1997. These statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of BioProgress
Technology International, Inc. (formerly Famous Sam's Group, Inc., and
subsidiary), a development stage company, as of December 31, 1997, and December
31, 1996, and the results of its operations and cash flows for the three years
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Halliburton, Hunter & Associates, P.C.
Littleton, Colorado
March 13, 1998
5
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
(A Development Stage Company)
BALANCE SHEETS
December 31,
1997 1996
----------- -----------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ -- $ --
----------- -----------
Total Current Assets -- --
----------- -----------
Other Assets: --
----------- -----------
Intercompany 120,000 --
Distributorship Agreement 4,000 --
Total Assets $ 124,000 $ --
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable (Note 5) $ -- $ 47,083
----------- -----------
Total Current Liabilities -- 47,083
----------- -----------
Shareholders' Equity (Deficit)
Common Stock, $.001 par value, 10,000,000
shares authorized, 4,999,753 outstanding in
1997 and 390,367 in 1996 (Note 1) 5,000 390
Additional paid-in capital 4,313,065 3,868,419
Preferred Stock, $.01 par value, 1,000,000
shares authorized, no shares outstanding
(Note 1) -- --
Deficit accumulated during the development stage (4,039,065) (3,915,892)
----------- -----------
279,000 (47,083)
Less stock subscription receivable 155,000 --
Total Shareholders' Equity (Deficit) (124,000) (47,083)
----------- -----------
Total Liabilities and Shareholders' Equity (Deficit) $ 124,000 $ --
=========== ===========
The auditors report and accompanying notes are an
integral part of these statements.
6
</TABLE>
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Years ended December 31
1997 1996 1995
-------- -------- --------
Total Income -- -- --
-------- -------- --------
Expenses
Miscellaneous -- -- 8,969
Professional fees 123,173 154,493 --
Total Expenses 123,173 154,493 8,969
-------- -------- --------
Income (loss) before Provision for
Income Taxes (123,173) (154,493) (8,969)
Provisions for Income Taxes -- -- --
-------- -------- --------
Net Loss (123,173) (154,493) (8,969)
======== ======== ========
Net Loss per share (Note 2) (.14) (.93) (.49)
======== ======== ========
The auditors report and accompanying notes are an
integral part of these statements.
7
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Formerly FAMOUS SAM'S GROUP, INC., and Subsidiairy
(A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
Total
Common Stock Additional Accumulated Equity
Shares Amount Paid-In Capital (Deficit) (Deficit)
------ ------ --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 12,010,000 $ 12,010 $ 3,712,313 $(3,761,399) $ (37,076)
Reverse 1:1000 common share (11,991,543) (11,992) 11,992 -- --
split on May 31, 1996
Issuance of common shares 287,000 287 59,289 -- 59,576
for services on July 23, 1996
Issuance of common shares 84,910 85 84,825 -- 84,910
for services on September 5, 1996
Net Loss for the year ended December
31, 1996 -- -- -- (154,493) (154,493)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 390,367 $ 390 $ 3,868,419 $(3,915,892) $ (47,083)
Reverse 1:5 common share
split on October 30, 1997 (310,614) (310) 310 -- --
Issuance of common shares under
incentive stock ownership plan 100,000 100 -- -- 100
Issuance of common shares for all
of the outstanding stock of BioProgress
Technology, Inc., on November 17, 1997 4,000,000 4,000 -- -- 4,000
Issuance of common shares in
payment of legal expenses 385,000 385 59,771 -- 60,456
Exercise of option to purchase
shares for cash 435,000 435 384,565 -- 385,000
Net Loss for the year ended December
31, 1997 -- -- -- (123,173) (123,173)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 4,999,753 $ 5,000 $ 4,313,065 $(4,039,065 $ 279,000
=========== =========== =========== =========== ===========
The auditors report and accompanying notes are an
integral part of these statements.
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
(a Development Stage Company)
STATEMENTS OF CASH FLOW
Years Ended December 31,
1997 1996 1995
--------- --------- ---------
Cash flows (used) by operating activities:
<S> <C> <C> <C>
Net loss $(123,173) $(154,493) $ (8,969)
Adjustments to reconcile net gain (loss) to net
cash provided by operating activities:
Increase in intercompany receivable (120,000) -- --
(Decrease) in accounts payable (47,083) 10,007 8,030
--------- --------- ---------
Net Cash Flows (used)
by Operating Activities (290,256) (144,486) (939)
--------- --------- ---------
Cash Flows Provided by Financing Activities:
Proceeds from sale of stock 385,000 144,486 --
Stock issued in payment of liabilities 60,256 -- --
Less stock subscription receivable (155,000) -- --
--------- --------- ---------
Net cash flows from financing activities 290,256 144,486 --
--------- --------- ---------
Increase (decrease) in Cash -- -- (939)
Cash at Beginning of the Period -- -- 939
--------- --------- ---------
Cash at End of the Period -- -- --
========= ========= =========
Non-cash transaction of 4,000,000 shares of common stock for all stock of subsidiary, whose sole asset
is distributorship agreement.
The auditors report and accompanying notes are an
integral part of these statements.
9
</TABLE>
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Organization and Business.
Organization - The Company was incorporated March 5, 1990.
Name change - On December 11, 1997, the name of the Company was changed to
BioProgress Technology International, Inc.
Reorganization - Effective March 31, 1996, the assets and liabilities of the
Company were transferred into an irrevocable liquidating trust. On April 24,
1996, the Company adopted a new plan of business to investigate and, if
appropriate, capitalize such business opportunities as may from time to time
present themselves. Effective May 31, 1996, the Board of Directors and
shareholders of the Company approved the sale of all of the assets of the
Company to Famous Sam's Group, Inc., a Nevada corporation, in a tax-free
reorganization pursuant to the provisions of Section 368(c) of the Internal
Revenue Code.
Acquisition - On July 24, 1996, the Company agreed to acquire all of the
outstanding proprietary interest of Famous Sam's Franchise Corporation ("Famous
Sam's") in exchange for 700,000 shares of the Company's common stock. This
acquisition was subsequently rescinded by the Company and Famous Sam's, among
others, on March 11, 1997.
Change in Control of Company - Acquisition of BioProgress Technology, Inc., as a
wholly-owned subsidiary of registrant: On October 30, 1997, the Company entered
into a letter of intent with Jade Partnership, Inc., a Delaware corporation, to
purchase all the outstanding share capital of BioProgress Technology, Inc., in
exchange for 4,000,000 shares of Common Stock in the Company, which was followed
on November 17, 1997, by a formal agreement (the "Reorganization Agreement").
Pursuant to the Reorganization Agreement, the Company agreed to acquire all of
the outstanding capital stock of BioProgress Technology in exchange for
4,000,000 post-split shares of Common Stock. Immediately prior to closing, the
Company had reverse split its outstanding capitalization on a one for five (1:5)
basis.
On November 6, 1997, the Board of Directors issued an option to buy 435,000
shares of Common Stock for $385,000 to an individual who subsequently exercised
the option. At December 31, 1997, $155,000 of the purchase price was unpaid.
The $155,000 was paid subsequently.
Business of BioProgress Technology International, Inc. - BioProgress Technology,
Inc., has entered into an "Exclusive Distributor Agreement" with BioProgress
Technology, Ltd., an entity incorporated in the United Kingdom (the
"Distributor"). The Distributor is engaged in the development, manufacture, sale
and distribution of materials and processes used to replace gelatin in the
manufacture of soft capsules. BioProgress Technology, Inc., under this
agreement, has been granted the right to serve as the "Exclusive Distributor" of
the foregoing products in the United States and Canada, and has agreed to
purchase 34,500,000 capsules over a twelve month period beginning in January,
1998, at a price of $66.00 per thousand. The volume purchased will increase by
20% per annum after the first year of the agreement through the fifth year; by
15% per annum in years six through ten; 10% per annum in years 11 through 15;
and 5% per annum in years 16 through 20. If this purchase schedule is not met,
BioProgress Technology, Inc., will lose the exclusive distributorship in the
United States and Canada for the products. The Distributor remains the sole
owner of the technical know-how and intellectual property rights associated with
the products.
The Company issued 4,000,000 shares of its common stock to Jade Partnership,
Inc. ("JPII"), a Delaware corporation which owned all of the outstanding shares
of BioProgress Technology, Inc.
10
<PAGE>
2. Summary of Significant Accounting Policies.
Development Stage Company - The Company is considered to be a development stage
company for financial reporting purposes since it had not generated significant
operating income.
Income Taxes - On January 1, 1992, the Company adopted SFAS No. 10-9,
"Accounting for Income Taxes," which requires a liability approach to financial
accounting and reporting for income taxes. The difference between the financial
statement and tax basis for assets and liabilities is determined annually.
Deferred income tax assets and liabilities are computed for those differences
that have future tax consequences using the currently enacted tax laws and rates
that apply to the periods in which they are expected to affect taxable income.
Valuation allowances are established, if necessary, to reduce deferred tax asset
accounts to the amounts that will more likely than not be realized. Income tax
expense is the current tax payable or refundable for the period, plus or minus
the net change in the deferred tax asset and liability accounts.
Income tax expense is provided on the income reported on the statement of
income. The differences between book income and tax income for tax purposes are
insignificant and, therefore, the effect of adopting SFAS No. 109 on net income
has not been recorded.
Per Share Information - Per share information is based on the weighted average
number of common shares outstanding during the reporting period. Shares used in
the calculations were 881,406 on a weighted bais for 1997, and 18,457 (post-
split shares) for 1996 and 1995.
3. Due to An Affilite. As of December 31, 1996, the Company owed Mr. Mark S.
Pierce, an individual who was then affiliated with the Company, but who was not
at the time of the incurrence of the debt, the sum of $47,083 in accrued, but
unpaid legal fees. The indebtedness, plus an additional $13,073, was satisfied
by assignment of 385,000 restricted shares of the Company's common stock in
November, 1997.
4. Other Events. In connection with the execution and delivery of the
Reorganization Agreement, the Company entered into an agreement with the
shareholders of the Distributor that gives the Company the option of acquiring
all or any part, on a pro rata basis, of the issued and outstanding proprietary
interest of the Distributor on or before June 30, 1998. The Company, if an
election is made, would be required to issue one and 1/2 shares of Common Stock
for each share outstanding of the Distributor, which has 10,100,000 shares
outstanding; thus, if the option were exercised in full, the Company would issue
15,150,000 shares of Common Stock. On exercise of this election, the Distributor
may have no more than 10,100,000 shares outstanding, and the Company may have no
more than 5,000,000 shares of Common Stock issued and outstanding and must have
completed or be in a position to complete the sale of such number of shares of
Common Stock at a price of no less than $5.00 per share so as to generate no
less than $4,000,000 net of all costs.
5. New Management. The Board of Directors, as a result of the BioProgress
Technology acquisition, now consits of one member, Mr. Barry J. Muncaster, who,
it is anticipated, will appoint additional directors in the near future. The
following table sets forth all those persons who are now officers of the
Company.
NAME POSITION WITH COMPANY (1)
Barry J. Muncaster Chairman, Chief Executive Officer and President
Malcolm D. Brown Executive Vice-President of Research and Development
James T.C. Longley Chief Financial and Accounting Officer, Treasurer
(1) None of the above individuals has any arrangement or understanding whereby
they are or will be selected as a director or nominee of the Company or of
BioProgress Technology, Inc. All directors and executive officers will hold
office until the next annual meeting of shareholders and until their successors
have been elected and qualified. All officers are elected by the Board of
Directors at its annual meeting immediately following the shareholders' annual
meeting and hold office until their death or until they earlier resign or are
removed from office. There are no written or other contracts providing for the
election of directors or term of employment of executive officers, all of whom
serve on an "at will" basis.
11
<PAGE>
6. Related Party Transaction. The Company advanced $120,000 of those proceeds
resulting from the sale of Common Stock to BioProgress Technology, Inc., its
wholly-owned subsidiary.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: In May, 1996, the Company advised Caldwell, Becker,
Dervin, Petrick & Company that it would not retain them as the independent
accountant to audit the financial statements of the Company as of and for the
year ended December 31, 1995, because the Company had found an auditing firm
whose costs for these services would be substantially less expensive. The
Company had no disagreement with its former accountant on any matter of
accounting principal or practice, financial statement disclosure or auditing
scope or procedure which would have caused the accountant to make reference in
its report upon the subject matter of the disagreement. Further, the former
principal accountant's report on the financial statements did not contain an
adverse opinion or a disclaimer of opinion or qualification as to audit scope or
accounting principle. The decision to change accountants was approved by the
full Board of Directors, which at that time had no audit or similar committee.
PART III
Item 9. Directors and Executive Officers of the Company: The following table
sets forth all current directors and executive officers of the Company, as well
as their ages:
Name Age Position with Company
---- --- ---------------------
Barry J. Muncaster 52 Chairman of the Board of Directors,
Chief Executive Officer and President
Malcolm D. Brown 39 Executive Vice-President of Research and
Development
James T.C. Longley 38 Chief Financial and Accounting Officer,
Treasurer
No current director has any arrangement or understanding whereby they are or
will be selected as a director or nominee. The directors and executive
officerswill hold office until the next annual meeting of shareholders and until
their respective successor has been duly elected and qualified or until his
earlier resignation. Officers are generally elected by the Board of Directors at
its annual meeting immediately following the shareholders' annual meeting and
hold office until their death or until they earlier resign or are removed from
office. There are no written or other contracts providing for the election of
directors or term of employment of the executive officer, who serves on an "at
will" basis. The Company does not have any standing audit, nominating or
compensation committees, or any committees performing similar functions.
Profiles of Directors and Executive Officers of the Company and BioProgress
Technology:
Barry J. Muncaster, Chairman, Chief Executive Officer and President. Mr.
Muncaster is Chairman of the Board of Directors, Chief Executive Officer and
President of the Company and BioProgress Technology, having served in these
capacities since November 17, 1997, and inception, respectively.
Mr. Muncaster trained as a telecommunications engineer with British Telecom, and
obtained a diploma in Telecommunications Engineering from the Cambridge College
of Arts and Technology. Since 1970, Mr. Muncaster has been involved at executive
and senior executive level with companies engaged in the development and
commercialization of high technology products, which include: laser based
systems employed in high energy physics experiments, electronic taxi meters,
personal computer systems and home banking systems. He was a cofounder, and
served as Chief Executive Officer of Oric Products International, Limited which,
within three years of start-up, manufactured and sold in excess of 300,000
personal computers, achieving sales revenues in excess of $45,000,000 prior to
its sale in 1983 to an investment company quoted on the London Stock Exchange.
Since 1987, Mr. Muncaster has been a partner in the Jade Partnership, a firm of
management consultants, which specializes in assisting developmental companies
engaged in high technology activities. The Jade Partnership was the sole
shareholder of BioProgress Technology and now owns approximately 80% of the
outstanding common stock of the Company.
Malcolm D. Brown, Executive Vice-President of Research and Development. Mr.
Brown has served the Company since November 17, 1997, and BioProgress Technology
from inception. He is responsible for the direction and implementation of the
research and development programme of BioProgress Technology, the production
12
<PAGE>
engineering of its products, and for the environmental, safety and performance
compliance of all raw materials used by BioProgress Technology. Mr. Brown holds
a Bachelor of Science Degree (Honors) in Applied Biology, and a Master of
Science Degree in Microbiology.
Prior to cofounding his affiliation with BioProgress Technology, Mr. Brown held
senior research positions with Gestetner Corporation and with Ferrisgate
Limited, where he worked on the formulation of specialist inks and coatings used
in industrial processes.
James T.C. Longley, Chief Financial and Accounting Officer and Treasurer. Mr.
Longley has been with the Company since November 17, 1997, and with BioProgress
Technology since inception. He received an accounting degree with honors from
Leeds University, and was admitted to the Institute of Chartered Accountants in
England in July, 1983, at which time he joined Arthur Andersen & Co., a "Big 6"
accounting firm, where he worked for two years, attaining the position of Senior
Accountant, Auditing Division. He then served for three years as a manager in
the Merchant Banking Division of Creditanstahl-Bankverein before leaving to join
Touche Ross and Co., another Big 6 accounting firm, as a senior manager in its
corporate financial division. In 1991, Mr. Longley founded Chapman Longley
Chartered Accountants and Registered Auditors in the United Kingdom, where, in
addition to providing services to a range of clients, he participated as part of
a management team which successfully completed a Li.10.5 million management
buy-in within the manufacturing industry, and also served as the finance
director of The Fleet Management Group Limited which had annual revenues of
Li.18 million during this time.
Consultants to BioProgress Technology:
Dawn M. Franklin. Ms. Franklin served for 21 years as Marketing Property Manager
for Mars, Inc., where she was responsible for the management, registration and
prosecution of intellectual property and trademarks. She has a very high
standing in the international trademark community and holds the following
positions: (i) Member of Board of Directors of International Trademark
Association; (ii) Chairman of Membership Committee of International Trademark
Association; (iii) Vice-Chairman of Public Relations Committee of International
Trademark Association; (iv) Vice-Chairman of British Brands Group; (v) Member of
Trademark Committee of AIM (European Association of Branded Goods
Manufacturers); (vi) Delegate representing AIM at World Intellectual Property
Organization ("WIPO"); (vii) Member of Committee of Experts on Subject of Famous
Marks at WIPO; (viii) Consultant to WIPO and Member of Committee of Experts at
WIPO on Subject of International Trademark Licensing; and (ix) Member of MARQUES
(Association of European Trademark Proprietors).
Item 10. Executive Compensation: No compensation was paid during 1997 to the
Board of Directors or executive officers of the Company in their capacities as
such.
Item 11. Security Ownership of Management and Certain Others: Based upon
information which has been made available to the Company by its stock transfer
agent, the following table sets forth, as of April 6, 1998, the shares of Common
Stock owned by each current director, by directors and executive officers as a
group and by each person known by the Company to own more than 5% of the
outstanding Common Stock:
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Number of Shares Percent of Class (1)
-------------- ------------------------ ---------------- --------------------
<S> <C> <C> <C>
Common Stock The Jade Partnership (2) 4,000,000 80%
Directors and Executive 4,000,000 80%
Officers as a Group:
</TABLE>
(1) Based on approximately 4,999,753 shares of common stock issued and
outstanding on April 6, 1998.
(2) The Jade Partnership is a Delaware corporation, the equity ownership of
which is as follows: (i) 42.49% - Barry J. Muncaster; (ii) 21.22% - Joe
Muncaster, the son of Barry J. Muncaster; (iii) 7.067% - Linda Muncaster, the
wife of Barry J. Muncaster; and (iv) 29.23% - Malcolm D. Brown.
13
<PAGE>
Item 12. Certain Transactions:
During 1996 and 1997, Mr. Mark S. Pierce, a former affiliate of the Company,
extended services to and incurred costs on behalf of the Company. In 1996, the
accruals were incurred while Mr. Pierce was not an affiliate. Mr. Pierce became
an affiliate of the Company on March 11, 1997, and ceased his association as
such on November 14, 1997. All amounts owed Mr. Pierce were satisfied on this
latter date.
In the latter part of 1997, the Company advanced funds to BioProgress Technology
which, in turn, loaned the same over to the Distributor.
Item 13. Exhibits and Reports on Form 8-K:
(a) Exhibits:
3.1(a) Articles of Incorporation and Amendments (California).*
3.1(b) Articles of Incorporation and Amendments (Nevada).**
3.1(c) Articles of Incorporation and Amendments (Nevada).****
3.2(a) Bylaws (California).*
3.2(a) Bylaws (Nevada).**
4.1 Specimen stock certificate.*
10.1 Partnership Agreement dated October 20, 1993, among the Company,
Costner Industries, Inc., a California corporation, Jack Bitterly and
Steve Bitterly.*
10.2 Asset Purchase Agreement dated October 20, 1993, among the Company,
the Partnership, Jack Bitterly, Steve Bitterly, Bruce Swartout, U.S.
Flywheel, Inc., a California corporation and Sunbird Technologies,
Inc.*
10.3 U.S. Flywheel Systems Unit Purchase Agreement dated July 16, 1994,
between the Company and Costner Industries, Inc.*
10.4 Straight Note dated October 21, 1993, between the Company and
Sunbird.*
10.5 Consulting Agreement dated October 20, 1993, between the Partnership
and Bruce Swartout.*
10.6 Asset Purchase Agreement dated May 31, 1996, changing name and
domicile to Nevada and reverse splitting outstanding capitalization
and increasing authorized capital.**
10.7 Reorganization Agreement between the Company and Famous Sam's.**
10.8 Liquidating Trust.**
10.9 Recision Agreement.****
10.10 Reorganization Agreement between the Company and BioProgress.****
- --------------------------------------------------------------------------------
* Filed as an exhibit to the Company's Registration Statement on Form
10-SB dated August 23,1994, or October 21, 1994 (Registration No.
0-24736).
** Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 1995.
*** Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 1996.
**** Filed herewith.
- --------------------------------------------------------------------------------
(b) Forms 8-KSB: Form 8-KSB dated March 11, 1997.
Form 8-KSB dated November 14, 1997.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cambridge,
United Kingdom on the 10th day of April, 1998.
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
(Registrant)
By: /s/ Barry J. Muncaster
- -------------------------------------------
Barry J. Muncaster, Chief Executive Officer
and President
By: /s/ James T.C. Longley
- -------------------------------------------
James T.C. Longley, Chief Financial
and Accounting Officer, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 10th day of April, 1998.
/s/ Barry J. Muncaster
- -------------------------------------------
Barry J. Muncaster, Director
15
EXHIBIT 10.9
Form 8-K dated March 11, 1997, and attached Recision Agreement
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 11, 1997
(Date of Report)
Famous Sam's Group, Inc.
(Exact Name of Registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-24736 88-0361701
(Commission File Number) (IRS Employer Identification Number)
4221 E. Pontatoc Canyon Dr., Tucson, AZ 85718
(Address of principal executive offices including zip code)
(520) 577-6611
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
Item 1. Change in Control of Registrant: See Item 2, below.
Item 2. Acquisition or Disposition of Assets: On March 11, 1997 (the "Closing
Date"), Registrant, Famous Sam's Group, Inc., executed, delivered and closed
under a Recision, Release and Final Settlement Agreement (the "Recision
Agreement") with Famous Sam's Franchise Corporation ("FSFC") and the former
shareholders of FSFC, whereby Registrant returned to the Shareholders all of the
outstanding proprietary interest of its sole wholly-owned subsidiary, FSFC, in
exchange for a release of any and all liabilities between Registrant, FSFC and
the Shareholders. The effect of the Recision Agreement was the recision of the
acquisition of FSFC from the Shareholders on July 24, 1996, as if the
acquisition had never been agreed to. The Recision Agreement was entered into in
an effort by Registrant to avoid what it considered to be otherwise unnecessary
litigation if the disputes which had arisen with the Shareholders had not been
resolved, which litigation Registrant could not have afforded.
The Shareholders transferred the 700,000 common shares of Registrant issued in
the acquisition of FSFC back to the treasury of Registrant. Concurrent with the
recision, the existing board and officers of Registrant resigned, and counsel to
Registrant, Mr. Mark S. Pierce, was appointed to the board. Mr. Pierce is now
the sole director and executive officer of Registrant.
Item 3. Bankruptcy or Receivership: Not Applicable.
16
<PAGE>
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events: None.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits: Not
Required.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Famous Sam's Group, Inc.
(Registrant)
By: /s/ Mark S. Pierce
- ------------------------------
Mark S. Pierce, Chief
Executive Officer
DATE: March 13, 1997
EXHIBITS
Exhibit 1. - Recision, Release and Final Settlement Agreement registrant, Famous
Sam's Franchise Corporation and the former shareholders of Famous Sam's
Franchise Corporation
RESCISSION, RELEASE AND FINAL SETTLEMENT
(March 11, 1997)
THIS AGREEMENT is made and entered into this 11th day of March, 1997, by and
among Famous Sam's Group, Inc., a Nevada corporation formerly known as U.S.
Flywheel, Inc. ("FSGI"), and Famous Sam's Franchise Corporation, an Arizona
corporation ("FSFC"), and the former shareholders of FSFC, Mr. Gerald Ross and
Ms. Sandra Ross (collectively, "Mr. and Mrs. Ross").
RECITALS:
The following recitals are true and correct and form an integral part of this
Agreement.
1. FSGI, FSFC and the Rosses entered into an agreement (the "B Reorg Agreement")
on the 24th day of July, 1996, pursuant to which FSGI acquired from the Rosses
all of the outstanding proprietary interest of FSFC;
2. Dan Hodges ("Hodges") was the subject of two contracts with FSGI pursuant to
which he identified, negotiated and obtained the agreement of the Rosses to sell
their shares in FSFC to FSGI, all as the authorized agent of FSGI;
3. Hodges, in obtaining the foregoing agreement from the Rosses to sell their
shares of FSFC to FSGI, made many representations and warranties to, and
covenants with, the Rosses on behalf of FSGI, each of which was material in
obtaining their agreement;
17
<PAGE>
4. Hodges specifically represented, warranted and covenanted, among other
matters, to FSGI and Mr. and Mrs. Ross that he would (i) arrange for the
infusion of $2,000,000 in equity capital into FSGI following the acquisition,
(ii) provide a market for the common equity of FSGI following the acquisition
and the infusion of the foregoing capital so that a $5.00 share price would be
maintained, (iii) guarantee the Rosses the return of their shares in FSFC and
money if he were unable to perform the foregoing;
5. Hodges had no ability whatsoever to provide for the undertakings he made to
the Rosses, each of which was materially false and misleading and instrumental
to the Rosses in their coming to their decision, and each of which was made by
Hodges knowing the same to be materially false and misleading;
6. Hodges obtained shares in FSGI for his services, liquidated those shares to
his significant economic advantage, and failed to provide for any of the
undertakings which he made, never intending to do so, and intending only to
profit through the loss of FSGI, FSFC and the Rosses;
7. FSGI, FSFC and the Rosses, after discovering the materially false and
misleading actions of Hodges, as set forth in part above, have endeavored since
October 1, 1996, to resolve the issues with Hodges which have arisen.
8. Hodges has not even performed under these agreements, the result of which has
been the loss of two separate financing opportunities to FSGI, FSFC and the
Rosses for the business of FSFC, and the complete collapse of the market for the
FSGI equity shares;
9. The parties have now concluded that Hodges had no intent whatsoever to
fulfill his obligations under his latest set of agreements, or any of his prior
agreements either for that matter, all to the detriment of the parties;
10. FSFC and the Rosses, as a result of those actions set forth above, among
other actions, have the right under Section 17 of the Securities Act of 1933, as
amended (the "Securities Act"), Sections 10(b), 18 and 29 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the "Arizona
Securities Act" to sue FSGI for recision of the B Reorg Agreement and for their
damages in regards of the same;
11. The parties have now determined that it is in the best interests of the
parties to rescind the B Reorg Agreement, without the necessity of litigation,
and return themselves, as best they are able, to the position they were in prior
to July 24, 1996; and
12. The parties further desire to compromise all claims between themselves in
regards of the aforesaid on the terms and conditions set forth herein.
COVENANTS:
NOW, THEREFORE, for Ten ($10) Dollars and other good and valuable consideration,
the receipt and sufficiency of which are each hereby acknowledged, THE PARTIES
AGREE AS FOLLOWS:
ARTICLE I
RECISION
1.1 Rescission of B Reorg Agreement. The parties hereby rescind the B Reorg
Agreement nunc pro tunc to the date thereof in accordance with the provisions of
the Securities Act, the Exchange Act and the Arizona Securities Act, all of
which are set forth in the premises above.
1.2 Return of FSFC Shares by FSGI to the Rosses; Return of FSGI Shares to
Treasury by the Rosses. FSGI hereby delivers to the Rosses all of its right,
title and interest in and to FSFC, including all its outstanding proprietary
interest in FSFC. FSFC and the Rosses hereby return to FSGI all of their right,
title and interest in and to FSGI, including all of their shares of capital
stock and all options and other rights to acquire shares of FSGI, whether under
FSGI's current Incentive Stock Ownership Plan ("ISOP") or otherwise. FSFC and
the Rosses also hereby return to FSGI all outstanding options and other rights
outstanding under the aforesaid ISOP or otherwise, whether owned by the Rosses
or anyone else.
18
<PAGE>
1.3 Return of FSGI Corporate Records by the Rosses; Resignation of Rosses and
their Employees as Officers and Directors of FSGI; Appointment of New Director;
Assets and Liabilities of FSGI; Change of Name by FSGI. The Rosses hereby return
to FSGI its corporate record and minute book, as well as any and all other
corporate records of FSGI in their possession or control. The current board of
FSGI has appointed a new director immediately prior to the execution and
delivery hereof, that being Mr. Mark S. Pierce, and have obtained the
resignation of the remaining directors and officers of FSGI effective
immediately prior to the execution and delivery hereof. The Rosses hereby
represent and warrant to FSGI that there are no assets or outstanding
liabilities of FSGI as of the date hereof. FSGI covenants that it will endeavor
as soon as economically practicable to change its names from Famous Sam's Group,
Inc.
ARTICLE II
MUTUAL AND FINAL RELEASES AND COVENANTS NOT TO SUE
2.1 Release of the FSFC and the Rosses by FSGI. For and in consideration of the
above and foregoing premises and the mutual covenants, promises and agreements
contained herein, FSGI hereby releases, acquits and forever discharges FSFC and
the Rosses, as well as FSFC's officers, directors, shareholders, affiliates,
successors and assigns, if any, from and against any and all actions, causes of
action, suits, claims, demands, rights, controversies, debts, agreements,
damages, costs, expenses, liabilities and compensation whatsoever which it now
has or may hereafter have on account of or arising out of any matter, thing or
event which has happened, developed or occurred, whether known or unknown, at
any time at or prior to the execution and delivery of this Agreement.
2.2 Release of FSGI by FSFC and the Rosses. For and in consideration of the
above and foregoing premises and the mutual covenants, promises and agreements
contained herein, FSFC and the Rosses hereby release, acquit and forever
discharge FSGI, as well as FSGI's current officer and director, and Joseph Craig
& Co., as well as its officers, directors, shareholders and advisors, including
Messrs. Matthew Milonas and Craig Edelman, from and against any and all actions,
causes of action, suits, claims, demands, rights, controversies, debts,
agreements, damages, costs, expenses, liabilities and compensation whatsoever
which they now have or may hereafter have on account of or arising out of any
matter, thing or event which has happened, developed or occurred, whether known
or unknown, at any time at or prior to the execution and delivery of this
Agreement.
2.3 FSGI's Covenant Not to Sue. FSGI further covenants and agrees that it will
not bring, commence, institute, maintain, prosecute or instigate any action at
law, proceeding in equity, administrative proceeding or otherwise, nor prosecute
or sue either FSFC and/or the Rosses and/or FSFC's officers, directors,
shareholders, affiliates, successors or assigns, if any, either affirmatively or
by way of cross-claim, defense or counterclaim, or by any other manner, for any
alleged claim, demand, liability or cause of action in any way stemming from any
claimed action or inaction of either FSFC and/or the Rosses at or prior to the
execution and delivery of this Agreement.
2.4 FSFC's and the Ross' Covenant Not to Sue. FSFC and the Rosses each further
covenant and agree that they will not bring, commence, institute, maintain,
prosecute or instigate any action at law, proceeding in equity, administrative
proceeding or otherwise, nor prosecute or sue FSGI, as well as FSGI's current
officer and director, and Joseph Craig & Co., as well as its officers,
directors, shareholders and advisors, including Messrs. Matthew Milonas and
Craig Edelman, either affirmatively or by way of cross-claim, defense or
counterclaim, or by any other manner, for any alleged claim, demand, liability
or cause of action in any way stemming from any claimed action or inaction of
FSGI at or prior to the execution and delivery of this Agreement.
2.5 Final Settlement. The parties each acknowledge, understand and agree that
they are aware that they or their attorneys may hereafter discover facts
different from or in addition to the facts which they now know or believe to be
true, but that it is their intention to fully, finally, absolutely and forever
settle any and all claims, disputes and differences which now exist, may exist
or may have existed between them, and that in furtherance of such intention, the
general and other releases given herein shall be and remain in effect as full
and complete releases, notwithstanding any mistake of fact or the discovery of
any different or additional facts.
19
<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Representations and Warranties of FSGI. FSGI hereby represents and warrants
to FSFC and the Rosses as follows: (i) All necessary action has been taken to
make this Agreement a legal, valid and binding obligation of the Hodges Group,
and this Agreement is enforceable in accordance with its terms and conditions;
and (ii) The execution and delivery of this Agreement and the performance by
FSGI of its obligations hereunder will not result in any material breach or
violation of or material default under any material agreement, indenture, lease,
license, mortgage, instrument, or understanding, nor result in any violation of
any law, rule, regulation, statute, order or decree of any kind to which FSGI is
a party.
3.2 Representations and Warranties of FSFC and the Rosses. FSFC and the Rosses
each represent and warrant to FSFC as follows: (i) All necessary action has been
taken to make this Agreement a legal, valid and binding obligation of FSFC and
of the Rosses, and this Agreement is enforceable in accordance with its terms
and conditions; and (ii) The execution and delivery of this Agreement and the
performance by FSFC and the Rosses of their respective obligations hereunder
will not result in any material breach or violation of or material default under
any material agreement, indenture, lease, license, mortgage, instrument, or
understanding, nor result in any violation of any law, rule, regulation,
statute, order or decree of any kind to which either FSFC or the Rosses are a
party.
ARTICLE IV
MISCELLANEOUS
4.1 Entire Agreement; Modification. This Agreement sets forth and constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements, understandings,
promises, and representations made by any party to any other concerning the
subject matter hereof and/or the terms applicable hereto. This Agreement may not
be released, discharged, amended or modified in any manner except by an
instrument in writing signed by duly authorized representatives of the parties
hereto.
4.2 Severability. The invalidity or unenforceabilty of one or more provisions of
this Agreement shall not affect the validity or enforceability of any of the
other provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provisions are omitted.
4.3 Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Arizona. All parties agree to venue in the City of Tucson, County of Pima, State
of Arizona, and agree to submit any disagreements hereunder to the appropriate
court in said city and state.
4.4 Waivers. The failure of any party hereto to insist, in any one or more
instances, upon the performance of any of the terms, covenants or conditions of
this Agreement, or to otherwise exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition or the future exercise of such right, but the
obligations of the party with respect to such future performance shall continue
in full force and effect.
4.5 Headings. The headings of the articles, sections and paragraphs used in this
Agreement are included for convenience only and are not to be used in construing
or interpreting this Agreement.
4.6 Successor and Assigns. This Agreement, and each and every provision hereof,
shall be binding upon and inure to the benefit of the parties, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any party, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, who
shall hold such interest subject to all the terms and conditions of this
Agreement.
4.7 Survival of Representations. The representations, warranties and agreements
of the parties hereto which are contained in this Agreement shall survive the
execution hereof, and shall be unaffected by any investigation made by any party
at any time.
20
<PAGE>
4.8 Further Assurances. Each party hereto further agrees that they shall, either
collectively or individually, take such further and additional action as may be
reasonable and necessary to carry into full effect the intent of this agreement
and to otherwise provide for the fulfillment hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
date first above written.
Famous Sam's Group, Inc. Famous Sam's Franchise Corporation
By: \s\ Mark S. Pierce By: \s\ Gerald Ross
- ------------------------- --------------------------
Mark S. Pierce, President Gerald Ross, President
\s\ Sandra Ross \s\ Gerald Ross
- ------------------------- -------------------------
Sandra Ross, Individually Gerald Ross, Individually
21
EXHIBIT 10.10
Form 8-K dated November 17, 1997, and attached Reorganization Agreement
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KSB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
November 14, 1997
(Date of Report)
Famous Sam's Group, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-24736 88-0361701
(Commission File Number) (IRS Employer Identification Number)
1999 Broadway, Ste. 3235, Denver, Colorado 80202
(Address of principal executive offices including zip code)
(303) 292-2992
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
Item 1. Change in Control of Registrant.
Acquisition of BioProgress Technology, Inc., as a Wholly-Owned Subsidiary of
Registrant:
On October 30, 1997, Famous Sam's Group, Inc., a Nevada corporation (the
"Company"), entered into a letter of intent with BioProgress Technology, Inc., a
Colorado corporation ("BioProgress Technology"), which was followed on November
17, 1997, by a formal agreement (the "Reorganization Agreement"). Pursuant to
the Reorganization Agreement, the Company agreed to acquire all of the
outstanding capital stock of BioProgress Technology in exchange for 4,000,000
post-split shares of Common Stock. Immediately prior to closing the Company had
reverse split its outstanding capitalization on a one for five (1:5) basis.
Business of BioProgress Technology:
BioProgress Technology has entered into an "Exclusive Distributor Agreement"
with BioProgress Technology, Limited, an entity incorporated in the United
Kingdom (the "Distributor"). The Distributor is engaged in the development,
manufacture, sale and distribution of materials and processes used to replace
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<PAGE>
gelatin in the manufacture of soft capsules, as discussed in more detail below.
BioProgress Technology, under this agreement, has been granted the right to
serve as the "Exclusive Distributor" of the foregoing products in the United
States and Canada, and has agreed to purchase 34,500,000 products over a twelve
month period beginning in January of next year at a price per thousand of
$66.00. The volume purchased will increase by 20% per annum after the first year
of the agreement through the fifth year, by 15% per annum in years six through
ten, 10% per annum in years eleven through 15, and 5% per annum in years 16
through 20. If this purchase schedule is not met, BioProgress Technology will
lose the exclusive right to distribute these products, but may not lose its
distribution rights altogether, i.e., it may remain as a non-exclusive
distributor; however, the Distributor will then have the right to find another
exclusive distributor in the United States and Canada for the products. The
Distributor remains the sole owner of the technical know-how and intellectual
property rights associated with the products.
The Gelatin Capsule Industry and the Opportunity:
BioProgress Technology, as a result of the Exclusive Distributor Agreement, aims
to take commercial advantage of certain external factors adversely affecting the
gelatin industry, particularly soft gelatin encapsulation, by providing the
industry with a cost effective commercial substitute and flexible manufacturing
process for the gelatin capsule. Gelatin capsules are currently used to
encapsulate a wide range of consumer products, including cosmetics and dietary
supplements. This represents an extremely large and lucrative market which is
urgently seeking a replacement for gelatin, product under attack on various
fronts.
Gelatin is a protein derived from animal renderings, which is used to
encapsulate dietary supplements, oils, cosmetic preparations and, in some cases,
drug delivery systems. The global annual consumption of gelatin by weight
exceeds 210,000 tonnes, of which 21,000 tonnes are used to produce around 50
billion soft capsule products annually. Expansion of the encapsulation market
into those groups with religious and ethical concerns about the use of animal
derived materials would open up such markets as the Muslim population which now
stands globally at approximately 935 million, and vegetarians, of which there
are an estimated 29 million in the USA alone. Currently, these groups are
supplied either with hard cellulose capsules or, in the case of Muslims, with
gelatin derived solely from bones. In addition, the fear of contraction of
Bovine Spongiform Encephalopathy ("Mad Cow Disease") from the ingestion of
gelatin based capsules has opened up further opportunities.
Management of the Distributor and BioProgress Technology have identified
weaknesses in the processing requirements and in-use performance of gelatin, and
the Distributor has filed a patent application in respect of a new process using
a replacement material ("X-GelTM"). In addition, trials of this new process have
been concluded and have proved the principle and commercial viability of the
technology.
BioProgress Technology has landed the contractual right to exploit the
formulation and engineering necessary to perfect an encapsulation system which
does not require the unique properties of gelatin. Trial manufacturing processes
have concluded, and management believes that the product is now ready for
commercial use, which, under the means proposed, does not require governmental
approval.
New Management:
The Board of Directors, as a result of the BioProgress Technology acquisition,
now consists of one member, Mr. Barry J. Muncaster, who, it is anticipated, will
appoint additional directors in the near future. Mr. Muncaster is also presently
the sole executive officer of the Company. The following table sets forth all
those persons who are now officers of BioProgress Technology.
NAME POSITION WITH COMPANY(1)
Barry J. Muncaster Chairman
Malcolm D. Brown Chief Executive Officer
James T.C. Longley Chief Financial Officer
Edward Z. Nowak Director of Research & Development
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- --------------------------------------------------------------------------------
(1) None of the above individuals has any arrangement or understanding whereby
they are or will be selected as a director or nominee of the Company or of
BioProgress Technology. All directors and executive officers will hold office
until the next annual meeting of shareholders and until their successors have
been elected and qualified. All officers are elected by the Board of Directors
at its annual meeting immediately following the shareholders' annual meeting and
hold office until their death or until they earlier resign or are removed from
office. There are no written or other contracts providing for the election of
directors or term of employment of executive officers, all of whom serve on an
"at will" basis.
- --------------------------------------------------------------------------------
Profiles of Directors and Executive Officers of the Company and BioProgress
Technology:
Barry J. Muncaster, Chairman. Mr. Muncaster is Chairman of the Board of
Directors and the sole executive officer of the Company. He is also Chairman of
BioProgress Technology.
Mr. Muncaster trained as a telecommunications engineer with British Telecom, and
obtained a diploma in Telecommunications Engineering from the Cambridge College
of Arts and Technology. Since 1970, Mr. Muncaster has been involved at executive
and senior executive level with companies engaged in the development and
commercialization of high technology products, which include: laser based
systems employed in high energy physics experiments, electronic taxi meters,
personal computer systems and home banking systems. He was a cofounder, and
served as Chief Executive Officer of Oric Products International, Limited which,
within three years of start-up, manufactured and sold in excess of 300,000
personal computers, achieving sales revenues in excess of $45,000,000 prior to
its sale in 1983 to an investment company quoted on the London Stock Exchange.
Since 1987, Mr. Muncaster has been a partner in the Jade Partnership, a firm of
management consultants, which specializes in assisting developmental companies
engaged in high technology activities. The Jade Partnership was the sole
shareholder of BioProgress Technology and now owns approximately 80% of the
outstanding common stock of the Company.
Malcolm D. Brown, Chief Executive Officer. Mr. Brown is responsible for the
direction and implementation of the research and development programme of
BioProgress Technology, the production engineering of its products, and for the
environmental, safety and performance compliance of all raw materials used by
BioProgress Technology.
Mr. Brown holds a Bachelor of Science Degree (Honors) in Applied Biology, and a
Master of Science Degree in Microbiology.
Prior to cofounding his affiliation with BioProgress Technology, Mr. Brown held
senior research positions with Gestetner Corporation and with Ferrisgate
Limited, where he worked on the formulation of specialist inks and coatings used
in industrial processes.
James T.C. Longley, Chief Financial Officer. Mr. Longley received an accounting
degree with honors from Leeds University, and was admitted to the Institute of
Chartered Accountants in England in July, 1983, at which time he joined Arthur
Andersen & Co., a "Big 6" accounting firm, where he worked for two years,
attaining the position of Senior Accountant, Auditing Division. He then served
for three years as a manager in the Merchant Banking Division of
Creditanstahl-Bankverein before leaving to join Touche Ross and Co., another Big
6 accounting firm, as a senior manager in its corporate financial division. In
1991, Mr. Longley founded Chapman Longley Chartered Accountants and Registered
Auditors in the United Kingdom, where, in addition to providing services to a
range of clients, he participated as part of a management team which
successfully completed a Li.10.5 million management buy-in within the
manufacturing industry, and also served as the finance director of The Fleet
Management Group Limited which had annual revenues of Li.18 million during this
time.
Edward Z. Nowak, Director of Research & Development. Mr. Nowak has spent his
career in the agrochemical and specialty chemical industries. After serving as a
trainee chemist with Fisons, he joined Ciba Geigy, where he progressed to Senior
Chemist and finally to Head of the Formulation Group, pioneering new
formulations and processes for products designed for use in crop protection and
animal health. In 1989, Mr. Nowak joined Jeyes Group plc as Research and
Development Manager. As well as being involved in numerous brand improvements,
24
<PAGE>
Mr. Nowak was responsible for improving the environmental profile of a number of
consumer products. In his last position as European Technical Manager for Bush
Boake Allen Limited, he helped "blue chip" organizations develop new products to
complement their existing branded range.
Consultants to BioProgress Technology:
Dawn M. Franklin. Ms. Franklin served for 21 years as Marketing Property Manager
for Mars, Inc., where she was responsible for the management, registration and
prosecution of intellectual property and trademarks. She has a very high
standing in the international trademark community and holds the following
positions: (i) Member of Board of Directors of International Trademark
Association; (ii) Chairman of Membership Committee of International Trademark
Association; (iii) Vice-Chairman of Public Relations Committee of International
Trademark Association; (iv) Vice-Chairman of British Brands Group; (v) Member of
Trademark Committee of AIM (European Association of Branded Goods
Manufacturers); (vi) Delegate representing AIM at World Intellectual Property
Organization ("WIPO"); (vii) Member of Committee of Experts on Subject of Famous
Marks at WIPO; (viii) Consultant to WIPO and Member of Committee of Experts at
WIPO on Subject of International Trademark Licensing; and (ix) Member of MARQUES
(Association of European Trademark Proprietors).
Present Capital Structure:
The Company's equity capitalization consists of two classes of stock, common and
preferred. There are 10,000,000 shares of Common Stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share, which
are authorized to be issued. All outstanding shares of Common Stock are fully
paid for and nonassessable. A holder of Common Stock is entitled to one vote per
share on all matters submitted for action by the stockholders. A quorum for the
transaction of business at any meeting of the holders of Common Stock is
one-third of the shares outstanding. All shares of Common Stock are equal to
each other with respect to the election of directors; therefore, the holders of
more than 50% of the outstanding Common Stock present at a meeting at which a
quorum is present and at which directors are being elected can, if they choose
to do so, elect all of the directors. Thus, the holders of as little as 16.51%
of the outstanding Common Stock could elect directors. The terms of the
directors are not staggered. Directors are elected annually to serve until the
next annual meeting of stockholders and until their successor is elected and
qualified. There are no preemptive rights to purchase any additional shares of
Common Stock or other securities of the Company, nor is cumulative voting
applicable to the election of the Board of Directors. The shares of Common Stock
have those dividend rights prescribed by the laws of the State of Nevada, are
not convertible into any other security, do not have sinking fund provisions
applicable to them and are not subject to redemption or to any restrictions on
transfer.
As of November 17, 1997, the transfer ledgers maintained by the Company's stock
transfer agent, including individual participants in security position listings,
indicated that there were approximately 5,000,000 shares of Common Stock issued
and outstanding. These were held more than 2,400 shareholders on that date.
The Articles of Incorporation vest the Board of Directors with the authority to
divide the Preferred Stock into series and to fix and determine the relative
rights and preferences of the shares of any preferred series established to the
full extent permitted by the laws of the State of Nevada and the Articles of
Incorporation with respect to, among other things, (a) the number of shares to
constitute a series and the distinctive designation thereof, (b) the rate and
preference of dividends, if any, the time of payment of dividends, whether
dividends are cumulative and the date from which any dividends begin accruing,
(c) whether shares may be redeemed and, if so, the redemption price and the
terms and conditions of redemption, (d) the liquidation preferences payable in
the event of involuntary or voluntary liquidation, (e) sinking fund or other
provisions, if any, for the redemption or purchase of shares, (f) the terms and
conditions upon which shares may be converted, if convertible, and (g) voting
rights, if any. The Company, as of November 17, 1997, had no Preferred Stock
outstanding.
There are no issued or outstanding options, warrants or calls entitling any
person to purchase any shares of Common Stock or other securities of the
Company.
Fidelity Transfer Company, 1800 South West Temple, Suite 301, Salt Lake City,
Utah 84115 has been engaged by the Company to serve as the transfer agent for
the Common Stock.
25
<PAGE>
No dividends have been declared on the Common Stock by the Company since
inception, and no dividends are planned in the foreseeable future; however,
there are no restrictions at present on the declaration or payment of dividends.
Properties:
The Company, as of the date of this report, owned no real or personal property,
tangible or intangible, other than its ownership of all of the issued and
outstanding common shares of BioProgress Technology. Conversely, the Company had
no liabilities which had not either been paid in their entirety or fully
provided for.
BioProgress , as of the date of this report, was being allowed the use of office
space from its form principal shareholder at St. John's Innovation Centre,
Cowley Road, Cambridge, England. Management is presently investigating a
location for the operations of the entity in the United States.
Item 2. Acquisition or Disposition of Assets: See Item 1, above.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events.
In conjunction with the execution and delivery of the Reorganization Agreement,
BioProgress Technology entered into an agreement with the shareholders of the
Distributor which gives BioProgress Technology the option of acquiring all or
any part, on a pro rata basis, of the issued and outstanding proprietary
interest of the Distributor on or before June 30, 1998. The Company, if an
election is made, would be required to issue one and 1/2 shares of Common Stock
for each share outstanding of BioProgress Technology. BioTechnology has
10,100,000 shares outstanding; thus, if the option were exercised in full, the
Company would issue 15,150,000 shares of Common Stock. On exercise of this
election, BioProgress may have no more than 10,100,000 shares outstanding, and
the Company may have no more than 5,000,000 shares of Common Stock issued and
outstanding and must have completed or be in a position to complete the sale of
such number of shares of Common Stock at a price of no less than $5.00 per share
so as to generate no less than $4,000,000 net of all costs.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits: Not
Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAMOUS SAM'S GROUP, INC.
(Registrant)
By: /s/ Barry J. Muncaster
- -------------------------------------------
Barry J. Muncaster, Chief Executive Officer
Date: December 10, 1997
26
<PAGE>
EXHIBITS
Exhibit 1. - Plan and Agreement of Reorganization
PLAN AND AGREEMENT OF REORGANIZATION
under
SECTION 368(b) of the Internal Revenue Code
THIS AGREEMENT has been made and entered into this 14th day of November, 1997
(the "Closing Date"), and is by and between, on the first part, Famous Sam's
Group, Inc., a publicly-held and traded Nevada corporation ("FSGI"), and, on the
second part, BioProgress Technology, Inc., a privately-held Colorado corporation
("BPTI"), and the sole shareholder of BPTI, The Jade Partnership International,
Inc., a Delaware corporation ("JPII"). The following premises are an integral
part of this agreement.
1. JPII currently owns all of the outstanding proprietary interest of BPTI (the
"BioProgress Shares").
2. JPII desires to transfer and convey the BioProgress Shares to FSGI in
exchange for 4,000,000 post-November 3, 1997, reverse split common shares of
FSGI, which FSGI Shares shall aggregate no less than 80% of the outstanding
share capitalization of FSGI after the transfer and conveyance of the
BioProgress Shares to FSGI (the "FSGI Shares").
3. FSGI desires to acquire the BioProgress Shares in exchange solely for the
FSGI Shares.
4. JPII, BPTI and FSGI desire to effect the foregoing conveyances and transfers
of the BioProgress and FSGI Shares on a tax-free basis pursuant to the
provisions of Section 368(b) of the Internal Revenue Code, as the same is
presently effective ("IRC").
THE PARTIES, THEREFORE, hereby adopt this plan and reorganization agreement
("Agreement") under the aforesaid provisions of the IRC and further agree as
follows:
ARTICLE I
TRANSFER AND CONVEYANCE OF THE BIOPROGRESS AND FSGI SHARES; RESIGNATIONS
1.1. Transfer and Conveyance. Subject to all of the terms, conditions,
representations, warranties and covenants set forth herein, JPII hereby
transfers and conveys (without reservation and free and clear from all
encumbrances) to FSGI the BPTI Shares and FSGI hereby transfers and conveys
(without reservation and free and clear from all encumbrances) to JPII the FSGI
Shares.
1.2. Resignation of FSGI Directors and Officers. The current members of the
board of directors of FSGI have appointed Mr. Barry J. Muncaster to the board
and, subsequently, have resigned all positions which they had with FSGI,
releasing FSGI from any further compensation for their services.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. Representations and Warranties of FSGI. FSGI represents and warrants to
JPII and BPTI, jointly and severally, as of the Closing Date as follows:
(a) All necessary action has been taken to make this Agreement a legal, valid
and binding obligation of FSGI enforceable in accordance with its terms and
conditions.
(b) The execution and delivery of this Agreement and the performance by FSGI of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
27
<PAGE>
rule, regulation, statute, order or decree of any kind, to which FSGI or any of
its affiliates is a party or by which they or any of their property is or may be
or become subject, nor in the violation of the articles or bylaws governing the
conduct of FSGI.
(c) FSGI has delivered to BPTI and JPII its annual report on Form 10-KSB (and
the amendment thereto on Form 10- KSB/A) for the year ended December 31, 1996,
and its quarterly reports on Form 10-QSB for the fiscal quarters ended March 31,
1997, June 30, 1997, and September 30, 1997, all of which were true and correct
as of the date of filing and remain true and correct in all material respects as
of the date hereof, with the exception that all liabilities of FSGI have been
satisfied through the issuance of approximately 920,000 post-November 3, 1997,
reverse split FSGI common shares prior to the delivery of the FSGI Shares. Also,
FSGI has provided to BPTI and JPII full access to any and all information it
desired concerning the business and operations of FSGI, and FSGI has made
available to BPTI and JPII such personnel as has been requested to answer any
and all questions which BPTI and JPII may have had concerning its investment in
FSGI. Further, FSGI is current in all of its required reports under the
Securities Exchange Act of 1934, as amended.
(d) The FSGI Shares have each been validly issued and are fully paid for and
nonassessable.
(e) The FSGI Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
FSGI Shares are not the subject of any other agreement in regards thereof.
(f) The FSGI Shares represent 80% of the outstanding proprietary interest of
FSGI, and there are no outstanding commitments (direct or indirect) which would
cause the issuance or transfer out of treasury of any additional proprietary
interest of FSGI, whether common stock, preferred stock or debt.
2.2 Representations and Warranties of BPTI and JPII. BPTI and JPII each hereby
represents and warrants, jointly and severally, to FSGI as of the Closing Date
as follows:
(a) All necessary action has been taken to make this Agreement a legal, valid
and binding obligations of BPTI and JPII enforceable in accordance with its
terms and conditions.
(b) The execution and delivery of this Agreement and the performance by BPTI and
JPII of their respective obligations hereunder will not result in any material
breach or violation of or material default under any material agreement,
indenture, lease, license, mortgage, instrument, or understanding, nor result in
any violation of any law, rule, regulation, statute, order or decree of any
kind, to which either BPTI and/or JPII or any of their respective affiliates is
a party or by which they or any of them or any of their property is or may be or
become subject, nor in the violation of the articles or bylaws governing the
conduct of either BPTI or JPII.
(c) The BPTI Shares have each been validly issued and are fully paid for and
nonassessable.
(d) The BPTI Shares are not and shall not be or become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
BPTI Shares are not the subject of any other agreement in regards thereof.
(e) The BPTI Shares represent 100% of the outstanding proprietary interest of
BPTI, and there are no outstanding commitments (direct or indirect) which would
cause the issuance or transfer out of treasury of any additional proprietary
interest of BPTI, whether common stock, preferred stock or debt.
(f) The sole asset of BPTI is the Exclusive Distribution Agreement dated even
date herewith by and between BioProgress Technology, Limited, an English entity,
and BPTI. BPTI has no other assets or liabilities of any kind.
(g) JPII and BPTI have provided to FSGI full access to any and all information
it desired concerning the business and operations of JPII and/or BPTI, and JPII
and BPTI have made available to FSGI such personnel as has been requested to
answer any and all questions which FSGI may have had concerning its investment
in BPTI.
2.3 Understandings of FSGI. FSGI acknowledges, understands and agrees that:
28
<PAGE>
(a) JPII and BTPI make no warranties (expressed or implied) regarding the value
or potential value of the Exclusive Distribution Agreement between BPTI and
BioProgress Technology Limited.
(b) In order to fully maximize the benefit, if any of the Exclusive distribution
Agreement, additional and substantial funds may be required, all of which are
the responsibility of FSGI.
2.4 Understandings of JPII. JPII acknowledges, understands and agrees that:
(a) The certificate representing the FSGI Shares will bear a legend restricting
its transfer under Rule 144 of the Securities Act of 1933, as amended, and will
be issued solely in the name of JPII.
(b) The FSGI Shares have not been registered under the Securities Act of 1933,
as amended, or any applicable state law (collectively, the "Securities Act");
further, the FSGI Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act; further, FSGI has no obligation, and does not intend, to cause
the FSGI Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales of all or
any portion of the FSGI Shares; further, the legal consequences of the foregoing
mean that JPII must bear the economic risk of the investment in the FSGI Shares
for an indefinite period of time; and, further, if JPII desires to sell or
transfer all or any part of the FSGI Shares within the restricted period, FSGI
may require JPII's counsel to provide a legal opinion that the transfer may be
made without registration under the Securities Act.
(c) No federal or state agency has made any findings or determination as to the
fairness of an investment in FSGI, or any recommendation or endorsement of this
investment.
(d) There is presently only an extremely limited market for the FSGI Shares and
no market may exist in the future for any sale or sales of all or any portion
thereof.
(e) Its commitment to investments that are not readily marketable is not
disproportionate to its net worth, and its investment in the FSGI Shares will
not cause such overall commitment to become excessive.
(f) It has the financial ability to bear the economic risks of its investment,
has adequate means of providing for its current needs, and has no need for
liquidity in this investment.
(g) It has evaluated the high risks of investing in the FSGI Shares and has such
knowledge and experience in financial and business matters in general and in
particular with respect to this type of investment that it is capable of
evaluating the merits and risks of an investment in the FSGI Shares.
(h) It has been given the opportunity to ask questions of and receive answers
from FSGI concerning the terms and conditions of this investment, and to obtain
additional information necessary to verify the accuracy of the information it
desired in order to evaluate its investment, and in evaluating the suitability
of an investment in the FSGI Shares has not relied upon any representations or
other information (whether oral or written) other than that furnished to it by
FSGI or the representatives of FSGI.
(i) It has had the opportunity to discuss with its professional, legal, tax and
financial advisers the suitability of an investment in the FSGI Shares for its
particular tax and financial situation and all information that it has provided
to FSGI concerning itself and its financial position is correct and complete as
of the date set forth below.
(j) In making the decision to purchase the FSGI Shares it has relied solely upon
independent investigations made by it or on its behalf.
(k) It is acquiring the FSGI Shares solely for its own account, for investment
purposes only, and is not purchasing with a view to, or for, the resale,
distribution, subdivision or fractionalization thereof, other than the possible
distribution of said shares to the shareholders of JPII.
29
<PAGE>
ARTICLE III
MISCELLANEOUS
3.1. Entire Agreement; Modification. This Agreement sets forth and constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements, understandings,
promises, warranties, covenants and representations made by any party to the
other concerning the subject matter hereof and the terms applicable hereto. This
Agreement may not be released, discharged, amended or modified in any manner
except by an instrument in writing signed by duly authorized representations of
the parties hereto.
3.2. Severability. The invalidity or unenforceabilty of one or more provisions
of this Agreement shall not affect the validity or enforceability of any of the
other provisions hereof, and this Agreement shall be construed in all respects
as if such invalid or unenforceable provisions are omitted.
3.3. Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Nevada.
3.4. Waivers. The failure of any party hereto to insist, in any one or more
instances, upon the performance of any of the terms, covenants or conditions of
this Agreement or to otherwise exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition or the future exercise of such right, but the
obligations of the party with respect to such future performance shall continue
in full force and effect.
3.5. Headings. The headings in the articles, section and paragraphs used in this
Agreement are included for convenience only and are not to be used in construing
or interpreting this Agreement.
3.6. Notice. All notices, demands, or requests hereunder shall be in writing and
served either personally, by certified mail, return receipt requested, by
Federal Express or other reputable overnight courier, or by facsimile, as
follows:
If to FSGI:
Famous Sam's Group, Inc.
c/o Mr. Mark S. Pierce
1999 Broadway, Ste. 3235
Denver, CO 80202
(303) 292-2882: FAX
If to JPII or BPTI:
9055 Huntcliff Trace
Atlanta, GA 30350
(770) 594-8613: FAX
3.7. Successor and Assigns. This Agreement, and each and every provision
thereof, shall be binding upon and shall inure to the benefit of the parties,
their respective successors, successors-in-title, heirs and assigns, and each
and every successor-in-interest to any party, whether such successor acquires
such interest by way of gift, purchase, foreclosure, or by any other legal
method, who shall hold such interest subject to all the terms and conditions of
this Agreement.
3.8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
3.9. Attorneys' Fees. In the event of any dispute with respect to this
Agreement, the prevailing party shall be entitled to its reasonable attorneys'
fees and other costs and expenses incurred in resolving such dispute.
3.10. Expenses. Each party shall pay the expenses incurred by them under or in
connection with this Agreement, including counsel fees and expenses of their
respective representatives.
30
<PAGE>
3.11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of FSGI, BPTI and JPII contained in
this Agreement shall survive the execution hereof, and shall be unaffected by
any investigation made by any party at any time.
3.12. Further Assurances. At any time and from time to time after the date of
this Agreement, each party shall execute such additional instruments and take
such other and further action as may be reasonably requested by any other party
or otherwise to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered the date first above written.
FAMOUS SAM'S GROUP, INC., a Nevada corporation ("FSGI")
By: /s/ Mark S. Pierce
- -------------------------------------
Mark S. Pierce, President
BIOPROGRESS TECHNOLOGY, INC., a Colorado corporation ("BPTI")
By: /s/ Barry J. Muncaster
- -------------------------------------
Barry J. Muncaster, President
THE JADE PARTNERSHIP INTERNATIONAL, INC., a Delaware corporation ("JPII")
By: /s/ Barry J. Muncaster
- -------------------------------------
Barry J. Muncaster, President
31
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<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (121,000)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 123,173
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (123,173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,173)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
