<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-23031
NU-WAVE HEALTH PRODUCTS, INC.
(Formerly known as Direct Rx, Inc.)
-----------------------------------
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
STATE OF FLORIDA 34-1711778
---------------- ----------
(State of or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
5905-A Hampton Oaks, Parkway, Tampa, Florida 33610
-------------------------------------------- -----
(Address of Principal Executive Officers) (Zip Code)
</TABLE>
Issuer's telephone number: (813) 628-0804
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
-----
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock (without par value)
--------------------------------
(Title of Class)
Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if there is no disclosure of delinquent filers
in response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $2,368,285.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, cannot be determined. There is currently no established
trading market for the common stock of the Company, and the shares are not
presently listed, therefore aggregate market value cannot be determined. The
Company has filed Form 15C211 with NASDAQ to list the common stock of the
company on the OTC Bulletin Board in order to create marketability for the
stock.
Number of shares outstanding of the issuer's common stock, as of June
1, 1998 was 3,823,547.
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
Direct Rx, Inc. ("Direct Rx"), an Ohio corporation, was incorporated on
June 30, 1992. Direct Rx, through it's Diabetes Supplies division, is engaged in
the mail order business of selling a broad range of diabetic equipment and
supplies and, through its wholly-owned subsidiary, in the business of creating,
manufacturing and packaging of non-prescription pharmaceutical and health
products on an international basis.
Nu-Wave Health Products, Inc. ("Nu-Wave") was a wholly-owned subsidiary
corporation of Direct Rx, Inc. Nu-Wave was incorporated on May 1, 1995, as a
Florida corporation under the name of Solstice, Inc. Pursuant to amended
Articles of Incorporation, its name was changed to Nu-Wave on September 25,
1995. In September 1995, Direct Rx, Inc. acquired 80% of the issued and
outstanding common stock of Nu-Wave. On July 15, 1997, Direct Rx, Inc. acquired
the remaining 20% minority interest, resulting in Direct Rx, Inc. then owning
100% of Nu-Wave. Nu-Wave is engaged in the business of creating, manufacturing
and packaging of non-prescription medications and health products on an
international basis.
It was determined by Management that it would be in the best interest
of Direct Rx and Nu-Wave to change the domicile of the corporation or
reincorporate to the State of Florida, where its executive offices are now
located and a substantial portion of its business is now located. In addition,
all of the Directors and Officers of the Company now reside in Florida. It was
further determined to consolidate the operations of Direct Rx and Nu-Wave and to
change the name of the corporation to Nu-Wave Health Products, Inc. ("Company"),
which has significant name recognition with the Company's market. The above has
been accomplished through two merger transactions approved by the various Boards
Of Directors and Management as controlling shareholders of the Company.
First, a new wholly-owned subsidiary of the Direct Rx, Inc. was formed
under the name of Direct Rx Healthcare, Inc., incorporated on January 27, 1998,
as a Florida corporation. Direct Rx, Inc. was then merged into Direct Rx
Healthcare, Inc. on March 19, 1998, with Direct Rx Healthcare, Inc. as the
surviving corporation.
Subsequently, Nu-Wave, the already existing subsidiary of Direct Rx,
Inc., was merged into Direct Rx Healthcare, Inc. with Direct Rx Healthcare, Inc.
as the surviving corporation. Its Articles of Incorporation were amended on
April 1, 1998 to change the name of the corporation to Nu-Wave Health Products,
Inc. It is not believed that the merger will have any material effect on the
operations or the management of the Company. All officers and management of the
Company remained the same.
The Company is a "small business issuer" for purposes of disclosure and
filings under the Securities Act of 1933 and the Securities Exchange Act of
1934.
A. COMPANY
The Company is engaged in the business of creating, manufacturing and
packaging of a wide variety of non-prescription medications and health products
for companies that sell through numerous channels of distribution, on an
international basis. These products include nutritional supplements,
over-the-counter pharmaceuticals, cosmetics, extracts, lotions, creams, gels,
liquids, powders, capsules and tablets. Depending upon the specific needs of the
customer, the products are manufactured in bulk or packaged under private label.
Although the Company has customers on an international basis, the highest
concentration of its customer base is currently located in the in the United
States.
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<PAGE> 3
The Company manufactures and packages approximately 99% of its
non-prescription medications and health products. The Company's manufacturing
processes are specifically designed to insure the highest quality control.
Substantially all of the Company's products are manufactured from readily
available raw material. Significant difficulties have not been encountered in
purchasing supplies of principal raw material or finished goods.
The Company markets its manufactured products to companies, which sell
through numerous different channels of distribution, including health food,
drug, convenience and mass market stores, through direct salespersons, brokers,
manufacturer representatives, distributors, and through marketing companies.
The Diabetes Supplies division has been engaged in the mail-order sale
of diabetic supplies and equipment for use in measuring and controlling blood
sugar levels. The primary products are testing meters and strips. The Company
also sells a variety of associated products, such as transfer pipets and glucose
tablets for diabetics. The Diabetes Supplies division of the Company markets its
products of diabetic supplies and equipment to customers through print media and
manufacturer referral.
The mail-order Diabetes Supplies division is a small portion of the
business of the Company. The Company is currently considering various options of
divesting the Diabetes Supplies division in order that it may concentrate its
efforts on its manufacturing operations.
The principal office of the Company and its manufacturing facility is
currently located at 5905-A Hampton Oaks Parkway, Tampa, Florida. The Diabetes
Supplies division of the Company is operated out of its offices located at 275
Curry Hollow Road, Pittsburgh, Pennsylvania.
The business or any of the segments of the business of the Company is
not seasonal and the business or any of the segments of the business of the
Company are not in any material way dependent upon any patents, trademarks,
licenses, franchises or concessions.
B. COMPETITION
The industry in which the Company is engaged is characterized by
intense competition. The Company competes against established pharmaceutical and
consumer product companies that currently market products which have identical
active ingredients or are equivalent or functionally similar to or in
competition with those which the Company manufactures. In addition, numerous
companies are developing or may, in the future, engage in the development of
products competitive with those manufactured by the Company. The Company
believes it competes effectively against its competitors on the basis its
ability to develop new products, the quality of products, competitive pricing,
and service.
The industry in which the Diabetes Supplies division of the Company is
engaged is characterized by intense competition. The Company competes against
established pharmaceutical and consumer product companies that currently market
products which have identical active ingredients or are equivalent or
functionally similar to or in competition with those which the Diabetes Supplies
division markets. The Company believes it competes effectively against its
competitors on the basis of price and service.
C. QUALITY CONTROL
The manufacture of the Company's products is in accordance with the
Good Manufacturing Practices prescribed by the FDA, all other applicable
regulatory standards, and the Company's own rigorous quality control procedures.
The Company places special emphasis on quality control. The Company has formal
written quality control procedures that outline specific procedures to be
followed from the acceptance of raw materials, production processes, inspections
during the manufacturing, labeling, and packaging process, through the testing
of finished products. See "Business - Government Regulation" below.
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<PAGE> 4
The Company maintains a modern well-equipped manufacturing facility,
that has the capability of adhering to any current and anticipated regulatory
requirements. Raw materials when received, are initially held in quarantine
during which time the Company's quality assurance department confirms the
product against the manufacturer's certificate of analysis. Once cleared, a lot
number is assigned, required samples are retained, and the material is processed
by formulating, blending, and encapsulating when required.
D. GOVERNMENT REGULATION
The Company is subject to regulation by one or more federal agencies in
processing, formulation, packaging, labeling and advertising of the Company's
products including the United States Food and Drug Administration ("FDA"), the
Federal Trade Commission, the Consumer Product Safety Commission, the United
States Postal Service, the United States Department of Agriculture and the
Environmental Protection Agency. Activities of the Company are also regulated by
various agencies of the states and localities in which the Company's products
are sold.
The Company manufactures vitamins, minerals, herbs, and other similar
nutritional substances ("dietary supplements") and over-the-counter drug
products. The FDA is primarily responsible for regulation of the manufacture,
labeling, and sale of vitamins and mineral supplements. The Dietary Supplement
Health and Education Act of 1994 ("DSHEA") was signed into law in October 1994.
This law, which amends the Federal Food, Drug and Cosmetic Act, defines dietary
supplements as a separate and distinct entity, and not as food additives.
Vitamins, minerals, herbs and other nutritional substances are included in this
definition. It provides for the use of third party scientific literature which
shall not be regulated as labeling by the FDA, so long as it is not false or
misleading. The DSHEA also delayed the FDA's requirements for extensive product
label changes which were to be applied to products manufactured after July 1,
1995. It directs the FDA to publish new label regulations for supplements with a
mandatory effective date of December 31, 1996, and provides a set of different
label requirements for ingredient content information. No modifications were
made on the requirements and proscriptions regarding health claims for dietary
supplements. The DSHEA also introduced the concept of Good Manufacturing
Practices to the industry of dietary supplement manufacturers. Thus far, the
Company has not incurred additional expenses in order to comply with FDA
requirements.
In house training is provided to all applicable employees and safety
meetings are frequently held to insure compliance with regulations. The record
keeping and reporting requirements of the FDA have been complied with by the
Company. The Company believes that it is in compliance with all environmental
regulations affecting the Company.
E. INDUSTRY SEGMENTS
For the year ended March 31, 1998, the Company had the following
revenues from the mail-order business, Diabetes Supplies, and from the health
products manufacturing business, Nu-Wave:
<TABLE>
<CAPTION>
Revenue As Gross Profit As
Revenues A Percentage A Percentage
March 31, 1998 Of Total Gross Of Total
(12 months) Revenues Profit Revenues
----------- -------- ------ --------
<S> <C> <C> <C> <C>
Mail-order business, Diabetes Supplies $ 461,349 19% $ 23,500 1%
Health products manufacturer 1,906,936 81% 518,120 22%
</TABLE>
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<PAGE> 5
F. EMPLOYEES
As of March 31, 1998, the Company had twenty (20) employees (deemed
leased employees) and a consultant in connection with its health products
manufacturing operation, all of which are located in the Tampa, Florida office.
The employees at the Tampa location are deemed leased employees pursuant to a
Service Agreement by and between the Company and Nations Staffing, Inc. ("NSI"),
with offices at 11701 Belcher Road, Suite 116, Largo, Florida. Pursuant to the
agreement, NSI pays all payroll and salaries of the employees and provides
workers' compensation insurance and hospital and medical benefits. The Company
had one (1) full-time and one (1) part-time employee in connection with the
mail-order Diabetes Supplies division, all of which are located in the
Pittsburgh, Pennsylvania office.
At the present time, the Company has no profit sharing or pension plan
or any other form of retirement plan for its employees, including executive
officers. The Company considers its employee relations to be satisfactory and
has experienced no work stoppages. Employees of the Company are not represented
by a labor union.
G. RISK FACTORS
If any source of a product's ingredients becomes unavailable, the
Company believes that alternative sources of supply are available at comparable
prices. In the event the Company was unable to find alternate sources at
competitive prices on a timely basis for its principal products, the Company
could be materially adversely affected.
For the year ended March 31, 1998, four (4) customers represented
approximately 67% of consolidated revenues in fiscal 1998. The loss of one or
more of these customers in all likelihood would have a material adverse effect
on the financial condition of the Company, at least on a short term basis.
Any modifications to the FDA's regulatory authority could subject the
Company to additional expenses in order to comply with more stringent
requirements or could have a materially adverse impact on the Company if
products were to become limited.
H. FUTURE PLANS
Additional manufacturing and/or packaging equipment has been purchased
during fiscal year 1998 and subsequently to fiscal year end, to help meet the
expanded capacity requirements of its current and future business.
Management of the Company is considering acquiring manufacturing
companies, distribution companies, and marketing companies. In order to
accomplish its future plans, the Company is considering raising capital either
through private placement or a secondary public offering.
ITEM 2. PROPERTIES.
The Company does not own or hold any legal or equitable interest in any
real estate. The offices in Tampa, Florida are leased pursuant to a five year
lease that expires on November 30, 2000. The Company has an option to renew the
lease at the end of the five year term. The rental under the lease is $7,032.50
per month subject to yearly adjustment for shared property operating expenses.
This facility serves as the Company's corporate headquarters, manufacturing,
warehousing, and shipping facility. Management is currently seeking an
additional manufacturing facility to meet the increased capacity requirements of
growing customer demand. The Company uses offices in Pittsburgh, Pennsylvania of
one of its principal customers at no cost to the Company.
In January 1998, the Company leased a second property in Tampa, Florida
which is being utilized for additional storage and warehouse for its
manufacturing operations. This lease is for a term of two years that expires on
December 30, 2000, a with an annual rental of $15,300.00.
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<PAGE> 6
In the judgment of management, the leases described above reflect rent
at current fair market value.
As of March 31, 1998, the Company had furniture, equipment, and
leasehold improvements, net of accumulated depreciation, in the amount of
$176,462.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Direct Rx, Inc. (the Ohio corporation) held a meeting of its
shareholders on February 10, 1998, at the offices of the corporation, 5905-A
Hampton Oaks Parkway, Tampa, FL 33610 for approval of the merger of the
corporation into Direct Rx Healthcare, Inc. (the newly formed Florida
corporation), for the purpose of changing the domicile of the Corporation to the
State of Florida, pursuant to the Agreement and Plan of Merger. Present in
person and/or by proxy were persons holding 2,568,761 shares of common stock of
the corporation, which represented 75% of the issued and outstanding shares of
such common stock. There was therefore a quorum present. The merger was
unanimously approved by all the shareholders present holding 2,568,761 shares of
the common stock of Direct Rx, Inc.
Direct Rx Healthcare, Inc. (the Florida Corporation), being the holder
of 100% of the issued and outstanding common stock and the sole shareholder of
Nu-Wave Health Products, Inc. (the wholly-owned subsidiary) took action by
unanimous written consent, in lieu of a meeting of its shareholders, on February
28, 1998 to approve the merger of Nu-Wave Health Products, Inc. (the
wholly-owned subsidiary) into Direct Rx Healthcare, Inc. pursuant to the
Agreement and Plan of Merger. The merger was adopted by the Board of Directors
and the Shareholders of Direct Rx, Healthcare Inc. on February 28, 1998.
Direct Rx Healthcare, Inc. (the Florida Corporation), held a meeting of
its shareholders on March 2, 1998, at the offices of the corporation, 5905-A
Hampton Oaks Parkway, Tampa, FL 33610 for approval of the merger of Nu-Wave
Health Products, Inc. (the wholly-owned subsidiary) into Direct Rx Healthcare,
Inc. pursuant to the Agreement and Plan of Merger. Present in person and/or by
proxy were persons holding 2,568,761 shares of common stock of the corporation,
which represented 75% of the issued and outstanding shares of such common stock.
There was therefore a quorum present. The merger was unanimously approved by all
the shareholders present holding 2,568,761 shares of the common stock of Direct
Rx Healthcare, Inc.
Pursuant to the Articles of Merger filed March 19, 1998, effective
April 1, 1998 by and between Direct Rx Healthcare, Inc. and Nu-Wave Health
Products, Inc. the Articles of Incorporation of Direct Rx Healthcare, Inc. were
amended to change the name of the corporation to Nu-Wave Health Products, Inc.,
as per Restated and Amended Articles of Incorporation.
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<PAGE> 7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is currently no established trading market for the common stock
of the Company, and the shares are not presently listed. In October 1997, the
Company filed Form 10-SB with the United States Securities And Exchange
Commission. The Company has filed Form 15C211 with NASD to list the common stock
of the company on the OTC Bulletin Board in order to create marketability for
the stock
As of June 1, 1998, there were approximately 400 stockholders, each
holding shares of the Company's common stock.
Historically, the Company has not paid dividends on its common stock
and has no present intention of paying dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Fiscal Year 1998 compared to Fiscal Year 1997
Net sales for fiscal year ended 1998 were $2,368,285 as compared to net
sales in 1997 of $960,340. This represents a 147% increase over sales in 1997.
The increase is primarily attributable to increased volume in private label
sales resulting from continued expansion of marketing efforts and the
introduction of new products.
Gross profits amounted to $541,620 or 23% of sales in 1998 as compared
with $347,958 or 36% of sales in 1997. The decrease in the gross margin is
principally attributable to the offering of competitive pricing to attract new
customers, and an increase in raw material and other production expenses due to
certain inefficiencies resulting from growth, which such inefficiencies have now
been corrected. It is anticipated by management that this gross margin is now
increasing.
Selling, general and administrative expenses were $527,609 in 1998 and
$485,710 in 1997. As a percentage of sales, selling, general and administrative
expenses were 22% in 1998 and 51% in 1997. The overall decrease in the
percentage of selling, general and administrative expenses is primarily
attributable to increased management efficiency and maximum performance of
existing personnel.
Interest expense, net of interest income, was $18,272 in 1998, as
compared to $13,859 in 1997. The increase in interest expense in 1998 is a
result of greater borrowings to finance the purchase of additional machinery and
equipment, and to make additional necessary plant modifications.
The Company had no income tax expense for the fiscal years 1998 and
1997.
Management believes that there was no material effect on operations or
the financial condition of the Company as a result of inflation in 1998 and
1997. Management also believes that its business is not seasonal; however,
significant promotional activities can have a direct impact on sales volume in
any given quarter.
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<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $173,804 and ($172,473) at the end
of 1998 and 1997, respectively.
The Company's statement of cash flows for 1998 reflects cash provided
by operating activities of $21,085. The provision of cash is primarily
attributable to an increase in accounts payable and accrued expenses $213,695,
and an increase in unearned revenues $15,341, offset by an increase in accounts
receivable ($90,561), an increase in prepaid expenses ($5,064), and an increase
in inventory ($171,964). The change in accounts payable, accounts receivable,
and inventory is a result of increased sales and operations as well as
anticipated future growth.
Net cash used in investing activities was $50,346 representing the
purchase of property and equipment ($37,147) and the acquisition of other assets
($13,199).
Net cash was also provided by financing activities of $238,633,
representing proceeds from related party borrowings $20,000, and proceeds from
long-term debt $240,200, offset by repayment of capital lease obligations
($9,321), and repayment of principal borrowings ($12,246).
During fiscal year 1998, $156,146.40 of notes payable to related
parties were converted to 1,561,464 shares of common stock of the Company.
Subsequent to fiscal year end, on May 29, 1998, the remaining notes payable to
related parties of $81,331.80, including principal and unpaid accrued interest,
were converted to 813,318 shares of common stock of the Company.
The Company expects to meet its cash requirements from operations,
current cash reserves, and existing financial arrangements. In addition, the
Company is considering raising additional capital for acquisitions and working
capital either through private placement or a secondary public offering.
During March and April 1998, the Company received $250,000 from
investors and issued non-negotiable promissory notes with stock warrants
attached. The notes bear interest at 10% per annum, compounded annually. The due
date shall be the earlier of (i) April 30, 1999, or (ii) the closing of a
minimum of an additional $1,000,000 of equity financing, by private placement or
other non-public offering. The note may be prepaid at any time by the Company to
Payee without any penalty or premium. The attached stock warrant entitles the
Payee to purchase common stock of the Company (based on one share for each one
dollar amount of the principal amount reflected in the note) at a purchase price
of $.50 per share. The stock warrant shall expire the earlier of, one year from
the closing of an additional $1,000,000 of equity financing, or December 31,
1999.
In May 1998, 100,000 shares of common stock of the Company were sold to
a non-affiliated third party investor at $.50 per share, for gross proceeds of
$50,000.
On May 13, 1998, the Company loaned $100,000 to Energy Factors, Inc.
(EFI), a subsidiary of U.S. Diversified Technologies, Inc., for the purpose of
assisting EFI with its working capital needs. The note bears interest at 2% per
annum above the Prime Rate as periodically announced by The Wall Street Journal,
and is secured by a mortgage on all real and personal property of EFI. The
Company is currently in the process of acquiring EFI.
In June 1998, the Company established a bank line of credit. The
principal amount of the note is $200,000. The note bears interest at 4.08% per
annum on the unpaid outstanding principal of each advance, payable monthly. The
due date is June 3, 1999. The note or any portion thereof may be prepaid without
penalty. This line of credit is secured by $200,000 cash maintained in a Money
Market account with the bank.
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<PAGE> 9
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See financial statements following Item 13 of this Annual Report on
Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the names and certain information regarding the
current Directors and Executive Officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jugal K. Taneja 53 Chairman of the Board, Chief Executive Officer,
Secretary, and Director
Kotha S. Sekharam 47 President, Treasurer, and Director
Cani I. Shuman 41 Chief Financial Officer
Mihir K. Taneja 23 Vice President of Marketing, Assistant Secretary
Martin A. Traber 51 Director
</TABLE>
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Officers are elected
annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board.
No director of the Company or Nu-Wave receives any compensation or
other remuneration for serving on the Board of Directors, except for the
reimbursement of any out-of-pocket expenses, if any, incurred by any director in
connection with attendance at a meeting of the Board of Directors.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
Jugal K. Taneja, has been Chairman of the Board, Chief Executive
Officer and a Director of the Company since October, 1991 and has been Chairman
of the Board, Secretary and a Director of Nu-Wave since September, 1995. Mr.
Taneja also serves as Director, Chief Executive Officer, and Secretary of NuMED
Home Health Care Inc. Prior to his association with the Company, Mr. Taneja
served as Senior Vice President of Union Commerce Bank and Huntington National
Bank from 1979 to 1983.
Kotha S. Sekharam, has been a Co-Founder, Director, President, and
Treasurer of Nu-Wave Health Products, Inc. He has a Ph.D in Food Sciences from
Central Food Technological Research Institute, Mysore, India (a United Nations
University center) and over 17 years experience in the manufacturing industry,
covering foods, supplements, pharmaceuticals, and cosmetics. Prior to Nu-Wave,
he was the Director of Research and Development at Energy Factors, Inc. a
manufacturer of health products.
Cani I. Shuman, holds a B.S. degree in Accounting from the University
of South Florida and is a Certified Public Accountant. She is presently Chief
Financial Officer of Nu-Wave Health Products, Inc. Prior to her employment with
Nu-Wave in January 1998, she was employed in public accounting for Hacker,
Johnson, Cohen & Grieb, PA, and Copeland and Company, CPAs. Prior to that, she
held accounting positions in private industry.
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Mihir K. Taneja, holds a B.A. degrees in Finance and Marketing from the
University of Miami. He is presently Vice President of Marketing for Nu-Wave
Health Products, Inc. Prior to his employment with Nu-Wave in June 1997, he was
employed in various accounting and financial functions for NuMED Home Health
Care, Inc., AT Broad & Co., and Bancapital Corp.
Martin A. Traber, is a partner in the Tampa, Florida office of Foley &
Lardner, a national law firm. He has practiced in the areas of corporate finance
and securities law for 25 years and is a director of numerous companies
(including several in the medical technology field). Mr. Traber graduated magna
cum laude in 1970 from Indiana University School of Law, where he was Associate
Editor of the Law Review.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)
----------------------
(a) (b) (c) (d) (e)
Name and Other Annual
Principal Position Year Salary($) Bonus($) Compensation($)
- ------------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Jugal K. Taneja, CEO 1998 $75,000 $5,414 $ -0-
1997 $ -0- $ -0- $ -0-
Kotha S. Sekharam, President 1998 $75,000 $5,414 $ -0-
1997 $52,500 $ -0- $ -0-
</TABLE>
(1) All employees, including executive officer, except for employees of the
Diabetes Supplies division of the Company, are paid by Nu-Wave and deemed leased
employees, pursuant to a Service Agreement by and between Nu-Wave and Nations
Staffing, Inc. See "Part I, Item 1. Business, F. Employees. Employees of the
Diabetes Supplies division of the Company are paid directly by the Company.
EMPLOYMENT AGREEMENTS
On July 15, 1997, the Company entered into an employment agreement with
Jugal K. Taneja. Pursuant to the agreement, Mr. Taneja is entitled to a
performance bonus based upon a percentage of net income, before taxes, and a
percentage of annual revenues.
On July 15, 1997, the Company entered into an employment agreement with
Kotha S. Sekharam. Pursuant to the agreement, Dr. Sekharam is entitled to a
performance bonus based upon a percentage of net income, before taxes, and a
percentage of annual revenues. Dr. Sekharam was granted a stock option for a
total of 200,000 shares of the common stock of the Company. The stock option
expired December 31, 1997. In addition, Dr. Sekharam is eligible for stock
options at such times and on such terms as determined by the Company's Board of
Directors.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information, as of June 1, 1998
with respect to the beneficial ownership of the outstanding Common Stock by (i)
any holder of more than five (5%) percent; (ii) each of the Company's officers
and directors; and (iii) the directors and officers of the Company as a group.
An asterick indicates beneficial ownership of less than 1% of the outstanding
Common Stock. Except as otherwise indicated, each of the shareholders listed
below has sole voting and investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF APPROXIMATE
TITLE OF NAME AND ADDRESS BENEFICIAL PERCENT
CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ----- ------------------- --------- --------
<S> <C> <C> <C>
Common Manju Taneja 1,964,553 (1) 51%
c/o Nu-Wave Health Products, Inc.
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Common Jugal K. Taneja
c/o Nu-Wave Health Products, Inc. 484,229 (2) 13%
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Common Kotha S. Sekharam 255,000 7%
c/o Nu-Wave Health Products, Inc.
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Common Cani I. Shuman -0- -0-
c/o Nu-Wave Health Products, Inc.
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Common Mihir K. Taneja 5,000 *
c/o Nu-Wave Health Products, Inc.
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Common Martin A. Traber 30,000 *
Foley & Lardner
100 North Tampa Street
Tampa, FL 33602
Common All officers and directors as
a group (5 persons) 774,229 (3) 20%
</TABLE>
- -----------------------------
*Less than one percent.
(1) Excludes beneficial ownership of (i) 59,000 shares of common stock owned by
Jugal Taneja, (ii) 210,229 shares of common stock owned by Carnegie Capital,
(iii) 210,000 shares of common stock owned by First Delhi Trust, (iv) 5,000
shares of common stock owned by Mandeep Taneja, as to which Mrs. Taneja
exercises no voting or disposition rights.
-11-
<PAGE> 12
(2) Includes beneficial ownership of (i) 210,229 shares of common stock owned by
Carnegie Capital, (ii) 210,000 shares of common stock owned by First Delhi
Trust, (iii) 5,000 shares of common stock owned by Mandeep Taneja. Excludes
1,964,553 shares beneficially owned by his wife, Manju Taneja, as to which Mr.
Taneja exercises no voting or disposition rights.
(3) Includes shares beneficially owned by Jugal Taneja, Kotha Sekharam, Cani
Shuman, Mihir Taneja, and Martin Traber.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 15, 1997, the Company issued 100,000 shares of its common stock
for the remaining 20% of the issued and outstanding common stock of Nu-Wave,
resulting in Direct Rx, Inc. then owning 100% of Nu-Wave. Of the 100,000 shares
of the Company's common stock issued to the shareholders of Nu-Wave, Kotha
Sekharam was issued 55,000 shares of the Company's common stock.
On August 12, 1997, the Company entered into a joint venture agreement
to form 21st Century Health Care Products, LLC ("21st Century"), an Ohio limited
liability company. Under the terms of the agreement, the Company will have a 50%
ownership and will share profits and losses equally. 21st Century was
specifically formed to develop and distribute a children's multivitamin and
vegetable supplement product, "Jungle Jerry's Gummy Pals".
During fiscal 1998, the Company began manufacturing products for
J.Labs, Inc. (J.Labs). J.Labs is a company which holds patents for various
products which the Company manufactures. The Company pays royalty/brokerage fees
for each unit of product sold for which J.Labs holds a patent. J.Labs is a
corporation owned by Manju Taneja (the spouse of Jugal Taneja), Mandeep Taneja
(the son of Jugal Taneja), Mihir Taneja, Kotha Sekharam, and Madhavi Sekharam
(the wife of Kotha Sekharam). The Company is presently considering acquiring
J.Labs.
As of March 31, 1998, the Company owed related parties, the sum of
$79,145. The notes bear interest at the prime rate (8.5% at March 31, 1998)
which is payable quarterly. The notes and unpaid accrued interest may be repaid
in cash or at the holder's option, converted into common stock of the Company at
$.10 per share. During fiscal year 1998, $156,146.40 of notes payable and
accrued interest were converted into 1,561,464 shares of the common stock of the
Company. On May 29, 1998, $81,313.80 of notes payable and unpaid interest, were
converted into 813,318 shares of the common stock of the Company.
The Company believes that material affiliated transactions and loans
between the Company and its directors, officers, principal shareholders or any
affiliates thereof have been and will be in the future on terms no less
favorable than could be obtained from unaffiliated third parties.
-12-
<PAGE> 13
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS.
<TABLE>
<S> <C>
Index to Consolidated Financial Statements and Schedules F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets as of March 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
March 31, 1998 and 1997 F-4
Consolidated Statements of Shareholders' Equity(Deficit) for
the years ended March 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1998 and 1997 F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F-15
</TABLE>
(A)(2) EXHIBITS.
The following exhibits are filed with this report:
<TABLE>
<S> <C>
2.1 Articles of Merger between Direct Rx Healthcare, Inc. and Direct Rx,
Inc. filed March 19, 1998.
2.2 Articles of Merger between Direct Rx Healthcare, Inc. and Nu-Wave
Health Products, Inc. filed March 19, 1998, effective April 1,1998.
3.1 Articles of Incorporation of Direct Rx Healthcare, Inc., filed January
27, 1998.
10.1 Service Agreement between the Company and Nations Staffing, Inc. dated
December 23, 1996.
10.2 Employment Agreement between the Company and Jugal K. Taneja dated July
15, 1997.
10.3 Employment Agreement between the Company and Dr. Kotha S. Sekharam
dated July 15, 1997.
10.4 Promissory Note in favor of the Company from Energy Factors, Inc. dated
May 13, 1998.
10.5 Revolving Line of Credit Agreement between the Company and Republic
Bank dated June 3, 1998.
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
(B) REPORTS ON FORM 8-K.
The Company filed a report on Form 8-K dated April 1, 1998 in
connection with the merger, change of domicile and change of name of the
company.
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NU-WAVE HEALTH PRODUCTS, INC.
DATED: June 15, 1998 By:/s/ Jugal K. Taneja
--------------------------------
Jugal K. Taneja, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jugal K. Taneja Chairman of the Board, June 15, 1998
- ---------------------- Chief Executive Officer,
Jugal K. Taneja Secretary, and Director
/s/ Kotha S. Sekharam President, Treasurer, and Director June 15, 1998
- ----------------------
Kotha S. Sekharam
/s/ Martin A. Traber Director June 15, 1998
- ----------------------
Martin A. Traber
/s/ Cani I. Shuman Chief Financial Officer June 15, 1998
- ----------------------
Cani I. Shuman
</TABLE>
-14-
<PAGE> 15
NU-WAVE HEALTH PRODUCTS, INC.
(FORMERLY DIRECT RX HEALTHCARE, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of March 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
March 31, 1998 and 1997 F-4
Consolidated Statements of Shareholders' Equity(Deficit) for
the years ended March 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1998 and 1997 F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F-15
</TABLE>
F-1
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors
Direct Rx Healthcare, Inc.:
We have audited the accompanying consolidated balance sheets of Direct Rx
Healthcare, Inc. and Subsidiary as of March 31, 1998 and 1997 and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for the years ended March 31, 1998 and 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated 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 consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Direct
Rx Healthcare, Inc. and Subsidiary as of March 31, 1998 and 1997 and the results
of its consolidated operations and its consolidated cash flows for the years
ended March 31, 1998 and 1997, in conformity with generally accepted accounting
principles.
By: /s/Kirkland, Russ, Murphy & Tapp
--------------------------------
Kirkland, Russ, Murphy & Tapp
May 7, 1998
F-2
<PAGE> 17
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 245,953 36,581
Accounts receivable, net of allowance for uncollectible
accounts of $33,500 in 1998 and $19,000 in 1997 193,829 117,768
Inventory, net of reserve for obsolescence of $4,000
in 1998 and $3,000 in 1997 296,642 124,678
Prepaid expenses 20,492 15,428
--------- --------
Total current assets 756,916 294,455
Furniture, equipment and leasehold improvements, net 176,462 104,948
Intangible assets, net 17,869 12,021
Investment in joint venture 5,000 --
Other assets 20,486 12,287
--------- --------
$ 976,733 423,711
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 8,587 5,633
Current portion of capital lease obligation 20,340 --
Accounts payable and accrued expenses 427,510 239,106
Related party notes payable 79,145 190,000
Unearned revenue 47,530 32,189
--------- --------
Total current liabilities 583,112 466,928
--------- --------
Long-term debt 225,000 --
Capital lease obligations 33,974 --
--------- --------
Total liabilities 842,086 466,928
--------- --------
Shareholders' equity (deficit):
Common stock, no par value, 3,000,000 shares authorized,
2,910,229 and 1,248,765 shares issued and outstanding 500 500
Additional paid-in capital 958,323 792,177
Accumulated deficit (824,176) (835,894)
--------- --------
Net shareholders' equity (deficit) 134,647 (43,217)
--------- --------
$ 976,733 423,711
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 18
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Revenues:
Diabetic supplies $ 461,349 171,017
Manufacturing 1,906,936 789,323
---------- ---------
Total revenues 2,368,285 960,340
Cost of goods sold:
Diabetic supplies 437,849 155,408
Manufacturing 1,388,816 456,974
---------- ---------
Total of cost of goods sold 1,826,665 612,382
---------- ---------
Gross profit 541,620 347,958
General and administrative expenses 527,609 485,710
---------- ---------
Operating income (loss) 14,011 (137,752)
Other income (expense):
Management fees -- (5,700)
Interest (18,272) (13,859)
Other income and expenses, net 15,976 (35,134)
---------- ---------
(2,296) (54,693)
---------- ---------
Income (loss) before
income taxes 11,718 (192,445)
Income taxes -- --
---------- ---------
Net income (loss) $ 11,718 (192,445)
Basic and diluted income (loss) per share $ .01 (.15)
========== =========
Basic and diluted weighted number of common shares outstanding 2,058,446 1,248,765
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 19
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL NET
COMMON STOCK PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES DOLLARS CAPITAL DEFICIT EQUITY (DEFICIT)
--------- ------------ ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1996 1,248,765 $500 792,177 (643,449) 149,228
Net loss -- -- -- (192,445) (192,445)
--------- ---- ------- -------- --------
Balances at March 31, 1997 1,248,765 500 792,177 (835,894) (43,217)
Acquisition of minority interest
at $.10 per share 100,000 -- 10,000 -- 10,000
Conversion of note payable to
stock at $.10 per share 1,561,464 -- 156,146 -- 156,146
Net income -- -- -- 11,718 11,718
--------- ---- ------- -------- --------
Balances at March 31, 1998 2,910,229 $500 958,323 (824,176) 187,647
========= ==== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 20
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 11,718 (192,445)
Adjustment to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 33,420 28,128
Allowance for uncollectible accounts 14,500 19,000
Gain on disposal of assets -- (6,245)
Changes in operating assets and liabilities:
Accounts receivable (90,561) (101,270)
Inventory (171,964) 16,192
Prepaid expenses (5,064) (15,428)
Accounts payable and accrued expenses 213,695 140,274
Unearned revenue 15,341 32,188
--------- --------
Net cash provided by (used in)
operating activities 21,085 (79,606)
--------- --------
Cash flows from investing activities:
Decrease (increase) in other assets (13,199) 11,427
Proceeds from sale of equipment -- 2,000
Purchases of property and equipment (37,147) (27,530)
Decrease in related party advances -- 33,100
--------- --------
Net cash provided by (used in)
investing activities (50,346) 18,997
--------- --------
Cash flows from financing activities:
Proceeds from related party notes payable 20,000 99,022
Principal payments on capital lease obligations (9,321) (7,267)
Proceeds from long-term debt 240,200 --
Repayments of long-term debt (12,246) --
--------- --------
Net cash provided by financing activities 238,633 91,755
--------- --------
Net increase in cash 209,372 31,146
Cash at beginning of year 36,581 5,435
--------- --------
Cash at end of year $ 245,953 36,581
========= ========
</TABLE>
(continued)
F-6
<PAGE> 21
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
1998 1997
-------- -----
<S> <C> <C>
Supplemental cash flow information:
Cash paid during the year for interest $ 31,097 3,921
======== =====
Supplemental schedule of non-cash financing activities:
Capital lease obligations incurred for purchase of
property and equipment $ 63,635 --
======== =====
Acquisition of minority interest through issuance of
common stock $ 10,000 --
======== =====
Conversion of related party notes payable and
accrued interest to common stock $156,146 --
======== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 22
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Business Activity
Direct Rx Healthcare, Inc. and its wholly-owned subsidiary,
Nu-Wave Health Products, Inc. (Company) sell diabetic supplies
through the mail to customers located throughout the United
States and manufacturer and package non-prescription medications
on a contractual basis for customers located primarily in
Florida.
(b) Basis of Presentation
The consolidated financial statements include the accounts of
Direct Rx Healthcare, Inc. and its wholly-owned subsidiary,
Nu-Wave Health Products, Inc. Significant intercompany balances
and transactions have been eliminated in consolidation.
On July 15, 1997, the Company acquired the remaining 20%
interest in its' subsidiary through a stock exchange. The
Company exchanged 100,000 shares of its common stock (valued at
$.10 per share, its fair market value) for the outstanding stock
held by the minority interest. The transaction was accounted for
by the purchase method of accounting.
(c) Management Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at March
31, 1998 and 1997 and revenues and expenses for the years then
ended. The actual outcome of the estimates could differ from the
estimates made in the preparation of the consolidated financial
statements.
(d) Inventory
Inventory is stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(e) Property and Equipment
Property and equipment are recorded at cost. Depreciation
expense is computed using the straight-line basis over the
estimated useful lives of the furniture and equipment, which
range from five to seven years. Leasehold improvements are
depreciated over the life of the lease.
(continued)
F-8
<PAGE> 23
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(f) Intangible Assets
Covenants not to compete are amortized using the straight-line
basis over the five year term of the agreements. Organization
costs represent legal and other costs incurred when organizing
the Company. The costs are being amortized using the
straight-line basis over five years. Goodwill is being amortized
over twenty years using the straight-line method.
(g) Income Taxes
The Company utilizes the guidance of Financial Accounting
Standards No. 109 to account for income taxes. Under the asset
and liability method of Statement No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement No. 109,
the effect on deferred tax asset and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
(h) Concentration of Credit Risk
Four customers represented approximately 67% of consolidated
revenues in 1998.
Cash balances are maintained in a financial institution.
Occasionally, deposits exceed amounts insured by the Federal
Deposit Insurance Corporation.
(i) Earnings Per Share
In the fourth quarter of fiscal 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, Earnings
per Share (SFAS 128). Under SFAS 128, basic net income (loss)
per share of common stock is computed by dividing income
available to common stockholders by the weighted average number
of common shares actually outstanding during the period. Diluted
net income (loss) per share of common stock presents income
attributable to common shares actually outstanding plus dilutive
potential common shares outstanding during the period. The
Company's options and warrants were not included in computing
dilutive net income (loss) per common stock because their
effects were anti-dilutive.
(continued)
F-9
<PAGE> 24
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) PROPERTY AND EQUIPMENT
At March 31, 1998 and 1997, property and equipment consists of the
following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Machinery and equipment $196,784 107,814
Furniture and fixtures 2,708 2,798
Office equipment 12,199 9,849
Leasehold improvements 13,766 4,304
-------- --------
225,547 124,765
Less accumulated depreciation and
amortization (19,085) (19,817)
$176,462 104,948
======== ========
</TABLE>
(3) INTANGIBLE ASSETS
At March 31, 1998 and 1997, intangible assets consists of the
following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Covenants not to compete $16,726 16,726
Organization costs -- 5,391
Goodwill 10,000 --
------- -------
26,726 22,117
Less accumulated amortization (8,857) (10,096)
------- -------
$17,869 12,021
======= =======
</TABLE>
(4) RELATED PARTY TRANSACTIONS
At March 31, 1998, the Company has demand notes payable to the spouse
of the Chairman of the Company totaling $79,145, which may be increased
as determined by the Board of Directors. The notes bear interest at the
prime rate (8.5% at March 31, 1998) which is payable quarterly. The
notes and unpaid accrued interest may be repaid in cash or at the
holder's option, converted into common stock at $.10 per share. During
fiscal year 1998, $156,146 of notes payable and accrued interest were
converted into 1,561,464 shares of common stock.
(continued)
F-10
<PAGE> 25
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) INCOME TAXES
The Company had no income tax expense for the years ended 1998 and
1997.
Income taxes for the years ended March 31, 1998 and 1997 differ from
the amounts computed by applying the effective U.S. federal income tax
rate of 34% to income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Computed "expected" tax expense $ 4,000 (65,000)
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit 1,000 (8,000)
Change in valuation allowance (5,000) 73,000
------- -------
Income tax expense $ -- --
======= =======
</TABLE>
Temporary differences which give rise to deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Deferred tax assets:
Bad debts $ 13,000 8,000
Inventories 2,000 1,000
Net operating loss carryforwards 294,000 294,000
--------- --------
Gross deferred tax assets 309,000 303,000
Less: valuation allowance (295,000) (300,000)
--------- --------
$ 14,000 3,000
========= ========
Deferred tax liabilities:
Fixed asset $ 14,000 3,000
========= ========
</TABLE>
(6) COMMITMENTS
The Company has operating leases for office and warehouse space that
expire in 2000. The lease for the office space has an option to extend
the lease for five years. Future minimum lease payments as of March 31,
1998 are as follows:
<TABLE>
<CAPTION>
Year Ending March 31:
---------------------
<S> <C>
1999 $ 72,888
2000 53,692
--------
Total minimum lease payments $126,580
========
</TABLE>
(continued)
F-11
<PAGE> 26
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) COMMITMENTS - CONTINUED
The monthly rent payments on the office space also include payments for
common area maintenance and real estate taxes.
Rent expense for the operating lease was $93,386 and $77,695 for the
years ended March 31, 1998 and 1997, respectively.
The Company is obligated under various capital leases for certain
machinery and equipment. The gross amount of related property and
equipment at March 31, 1998 subject to lease is as follows:
<TABLE>
<S> <C>
Machinery and equipment $63,635
Less accumulated depreciation and
amortization (3,781)
-------
$59,854
=======
</TABLE>
The present value of future minimum capital lease payments as of March
31, 1998 are as follows:
<TABLE>
<CAPTION>
Year Ending March 31,:
----------------------
<S> <C>
1999 $ 27,672
2000 23,677
2001 15,194
--------
Total minimum lease payments 66,543
Less amount representing interest (12,228)
--------
Obligations under capital leases 54,314
Current installment of capital lease
obligations (20,340)
--------
Capital lease obligations, less current
installments $ 33,974
========
</TABLE>
(continued)
F-12
<PAGE> 27
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1998:
<TABLE>
<S> <C>
Unsecured 9% note payable, due in installments of
$1,759, including interest, through August 1998 $ 8,587
Unsecured 10% note payable due on April 30, 1999 with
interest 35,000
Unsecured 10% note payable due on April 30, 1999 with
interest $ 25,000
Unsecured 10% note payable due on April 30, 1999 with
interest 40,000
Unsecured 10% note payable due on April 30, 1999 with
interest 25,000
Unsecured 10% note payable due on April 30, 1999 with
interest 100,000
--------
233,587
Less current installments (8,587)
--------
$225,000
========
</TABLE>
Scheduled maturities of long-term debt at March 31, 1998 as follows:
<TABLE>
<S> <C>
1999 $ 8,587
2000 225,000
========
</TABLE>
Unsecured 10% notes payable may be due earlier than April 30, 1999,
should the Company complete an equity offering, as defined, prior to
April 30, 1999.
Subsequent to March 31, 1998, the holders of unsecured 10% notes
payable were issued common stock purchase warrants. Each stock warrant
entitles the holder to purchase one (1) share of common stock for each
$1 of principal amount lent at $.50 per share and expire the earlier
of, one year from the closing of an equity financing, as defined, or
December 31, 1999.
(continued)
F-13
<PAGE> 28
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) STOCK OPTIONS
Accounting for Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (SFAS 123). Accordingly, no compensation cost has been
recognized for the Company's granted stock options. Had compensation
and other costs for the Company's granted stock options been determined
based on the fair value at the grant date or issuance for awards in
1998 consistent with the provisions of SFAS 123, the impact of net
income would have been immaterial.
Aggregate Stock Option Activity
The following table summarizes information about the aggregate stock
option activity for the years ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
-------------------- -------------------
Weighted Weighted
average average
Number exercise Number exercise
of shares price of shares price
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of year -- -- -- --
Granted 600,000 $.23 -- --
Exercised -- -- -- --
Expired 600,000 .23 -- --
------- ---- ---- ----
Outstanding, end of year -- -- -- --
------- ---- ---- ----
Options vested, end of year -- -- -- --
------- ---- ---- ----
</TABLE>
(9) JOINT VENTURE AGREEMENT
On August 12, 1997, the Company entered into a joint venture agreement
with a group to form an Ohio limited liability company to market one of
its products. Under the terms of the agreement, the Company will have a
50% ownership and will share profits and losses equally. The Company is
required to contribute half of the costs incurred in the initial
marketing of the product.
The Company will account for the investment under the cost method of
accounting.
(continued)
F-14
<PAGE> 29
DIRECT RX HEALTHCARE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) SUBSEQUENT EVENT
Effective April 1, 1998, the Company merged with its subsidiary and
became Nu-Wave Health Products, Inc.
In May 1998, the Company entered into a non-binding letter of intent to
provide certain working capital financing to U.S. Diversified
Technologies, Inc. Additionally, the Companies have agreed to combine
upon completion of certain items, including a public stock offering.
F-15
<PAGE> 1
Exhibit 2.1
ARTICLES OF MERGER
These Articles of Merger and Share Exchange are hereby entered into this
15 day of February by and between Direct Rx Healthcare, Inc., a Florida
Corporation, and Direct Rx, Inc., an Ohio Corporation.
WITNESSETH:
1. PLAN OF MERGER AND SHARE EXCHANGE
Direct Rx, Inc., an Ohio Corporation, shall be merged into Direct Rx
Healthcare, Inc., a Florida Corporation ("Merger"). Direct Rx Healthcare, Inc.
shall be the surviving corporation. Direct Rx, Inc. owns 100% of the issued and
outstanding common capital stock of Direct Rx Healthcare, Inc., and therefore
this is a Merger of a parent corporation into its wholly-owned subsidiary
corporation and is done for the purpose of changing the domicile of Direct Rx,
Inc., to the State of Florida. All issued and outstanding common capital stock
of Direct Rx, Inc. shall be exchanged for common capital stock of Direct Rx
Healthcare, Inc. on a one for one basis. ("Share Exchange"). The complete
terms and conditions of the Merger and Share Exchange are set forth in the
Agreement and Plan of Merger, attached hereto and incorporated herein by
reference as Exhibit A.
2. SURVIVING CORPORATION
The surviving corporation shall be Direct Rx Healthcare, Inc., a Florida
Corporation.
3. EFFECTIVE DATE OF MERGER
The Merger shall be effective on the date of filing these Articles of
Merger and Share Exchange with the Florida Department of State.
4. ADOPTION BY DIRECTORS AND SHAREHOLDERS
a. Direct Rx Healthcare, Inc. The Merger and Share Exchange was adopted
by the Board of Directors and the Shareholders of Direct Rx Healthcare, Inc. on
January 28, 1998.
b. Direct Rx, Inc. The Merger and Share Exchange was adopted by the
Board of Directors of Direct Rx, Inc., on January 28, 1998, and by the
Shareholders of Direct Rx, Inc. on February 10, 1998.
EXECUTED on the date and year first written above.
DIRECT RX HEALTHCARE, INC., Florida Corporation DIRECT RX, INC., an Ohio
Corporation
By: /s/ Kotha S. Sekharam By: /s/ Jugal Taneja
--------------------------------------------- ------------------------
Dr. Kotha S. Sekharam, President Jugal Taneja, Chairman
of the Board
<PAGE> 2
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into this 30th day of
January, 1998, by and between Direct Rx, Inc., an Ohio corporation, (hereafter
referred to as "Ohio Direct") and Direct Rx Healthcare, Inc., a newly formed
Florida corporation (hereafter referred to as "Florida Direct").
RECITALS:
WHEREAS, Ohio Direct is a corporation duly organized and incorporated
pursuant to and under the laws of the State of Ohio and is the parent
corporation of Direct Rx Healthcare, Inc., a Florida corporation ("Florida
Direct") and owns beneficially one hundred percent (100%) of the issued and
outstanding stock of Florida Direct; and
WHEREAS, the principal office of Ohio Direct is now in Tampa, Florida and
a substantial portion of the consolidated business and revenues of Ohio Direct
is generated in Florida; and
WHEREAS, it has been determined by and resolved by the Board of Directors
of Ohio Direct that it is in the best interests of the business and
operations of Ohio Direct for Ohio Direct to be domiciled in Florida; and
WHEREAS, Florida Direct was formed for the purpose of merging with Ohio
Direct so as to change the domicile of Ohio Direct to the State of Florida; and
WHEREAS, this Agreement and Plan of Merger ("Agreement") has been
authorized, approved and recommended by the Board of Directors of Ohio Direct,
subject to the approval of the shareholders of Ohio Direct as required by law,
and has been duly authorized and approved by both the Board of Directors and
shareholders of Florida Direct.
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained herein and other good and valuable consideration, Ohio Direct and
Florida Direct hereby agree as follows:
1. RECITALS INCORPORATED. The above Recitals are incorporated by
reference into this Agreement.
2. MERGER. Subject to the approval of the shareholders of Ohio Direct as
required by law and its Articles of Incorporation, Ohio Direct shall be merged
into Florida Direct and Florida Direct shall be the surviving corporation
("Merger"), as a Florida corporation, pursuant to the following terms and
conditions:
a. Upon the effective date of the Merger, Ohio Direct as an Ohio
corporation shall no longer exist except to the extent and for such
purposes as required by the laws of the State of Ohio.
b. Upon the effective date of the Merger, Florida Direct shall be the
surviving corporation and shall continue to be a domestic Florida
corporation, with its principal office located at:
5905-A Hampton Oaks Parkway
Tampa, FL 33610
c. Upon the effective date of the Merger, Florida Direct, as the
surviving corporation, desires to continue to transact business in
the State of Ohio, and in that respect appoints the
<PAGE> 3
following as its statutory agent for purposes of service of any
process, notice or demand upon such statutory agent or the Ohio
Secretary of State:
d. Upon the effective date of the Merger, all of the assets of Ohio
Direct, of any nature whatsoever, tangible or intangible, shall be and
become the property of Florida Direct and Florida Direct shall assume
and become responsible for all debts and liabilities, of any nature
whatsoever, of Ohio Direct.
e. As a part of the Merger, there shall be an exchange of the common
capital stock of Ohio Direct for the common capital stock of Florida
Direct, pursuant to Paragraph 5 below.
f. The Merger shall be in compliance with the laws of the State of Ohio
as to Ohio Direct and its shareholders and the State of Florida as to
Florida Direct and its subsidiaries.
g. Any shareholder of record of Ohio Direct to the extent that he/she/it
does not vote in favor of the Merger shall be entitled to and have the
rights of a dissenting shareholder with respect to the Merger,
pursuant to Sections 1701.84 and Section 1701.85 of the Ohio General
Corporation Law, and the Board of Directors of Ohio Direct shall fully
advise all shareholders in writing of such dissenters' rights in any
proxy statement or other notice applicable to the meeting of
shareholders at which such shareholders will vote on the Merger.
h. The sole shareholder of the issued and outstanding stock of Florida
Direct, has authorized and approved the Merger, and, therefore, there
exist no rights of dissenting shareholders of Florida Direct pursuant
to Florida Corporation Laws.
i. Upon the effective date of the Merger, the Articles of Incorporation
and By-Laws of Florida Direct, which are substantially the same as
the Articles and By-Laws of Ohio Direct, shall be and remain as they
exist as of the date of this Agreement.
j. Upon the effective date of the Merger, the Directors and Officers of
Florida Direct shall be the same as the present Directors and Officers
of Ohio Direct.
3. FILING OF CERTIFICATES OR ARTICLE OF MERGER. Upon the approval of the
Merger by the shareholders of Ohio Direct, Ohio Direct, through its respective
officers, shall file with the Ohio Secretary of State, such certificates or
articles of merger as is require by law to effectuate the completion of the
Merger ("Ohio Certificate"). Upon the approval of the Merger by the
shareholders of Ohio Direct, Florida direct, through its respective officers,
shall file with the Florida Secretary of State, such certificates or articles
of merger as is require by law to effectuate the completion of the Merger
("Florida Certificate").
4. EFFECTIVE DATE. The effective date of the Merger shall be the latest
of the date upon which the last to be filed of the Ohio Certificate and Florida
Certificate is filed.
5. STOCK EXCHANGE. The common capital stock of Ohio Direct shall be
converted into and exchanged for the common capital stock of Florida Direct, the
surviving corporation, in the following manner and on the following basis:
<PAGE> 4
a. It is intended that as a result of the Merger: (i) each present
shareholder of Ohio Direct shall have the same number of shares of common
capital stock and the same percentage of equity in Florida Direct as such
shareholder presently has in Ohio Direct; and (ii) each holder of any
option or other right to purchase or otherwise acquired common capital
stock of Ohio Direct shall have the same rights to purchase or otherwise
acquire the same number of shares of common capital stock of Florida
Direct.
b. The stock exchange shall be on a one (1) to one (1) basis, i.e. each one
(1) share of common capital stock of Ohio Direct shall be exchanged for one
(1) share of common capital stock of Florida Direct ("Stock Exchange").
c. Each option or other right to purchase or otherwise acquire common capital
stock of Ohio Direct shall be converted into an identical option or other
right to purchase or otherwise acquire common capital stock of Florida
Direct, subject to the same terms and conditions as presently exist
("Option Conversion").
d. Simultaneously with the Stock Exchange and the Option Conversion, the
existing issued and outstanding common capital stock of Florida Direct
shall be redeemed or canceled without any payment or other monetary
consideration.
e. The Stock Exchange and Option Conversion shall be pursuant to a
procedure determined by the Boards of Ohio Directors of Ohio Direct and
Florida Direct in accordance with and in compliance with all applicable
federal and state laws, including but not limited to applicable federal and
state securities laws, rules and regulations.
6. Compliance. This Agreement shall be performed and the Merger accomplished
in conformity and compliance with all applicable federal and state laws, rules
and regulations.
7. Abandonment. This Agreement and the Merger may be terminated and abandoned
at any time prior to the first to be filed of the Ohio Certificate or the
Florida Certificate by the Board of Directors of Ohio Direct.
EXECUTED on the date and year first written above in Tampa, Florida.
<TABLE>
<S> <C>
Direct Rx, Inc., an Ohio corporation Direct Rx Healthcare, Inc., a Florida corporation
By /s/ Jugal Taneja By /s/ Dr. Kotha S. Sekharam
----------------------------------- --------------------------------
Jugal Taneja, Chairman of the Board Dr. Kotha S. Sekharam, President
</TABLE>
<PAGE> 1
Exhibit 2.2
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
April 2, 1998
Terence L. Eads, Esquire
% Eads & Murphy, P.C.
7351 Shadeland Station, Suite 185
Indianapolis, IN 46256
RE: Document Number P98000009368
The Articles of Merger were filed March 19, 1998, effective April 1, 1998, for
DIRECT RX HEALTHCARE, INC. which changed its name to NU-WAVE HEALTH PRODUCTS,
INC., the surviving Florida corporation.
Should you have any further questions concerning this matter, please feel free
to call (850) 487-6050, the Amendment Filing Section.
Louise Flemming-Jackson
Corporate Specialist Supervisor
Division of Corporations Letter Number:698A00017715
Division of Corporations - P.O. Box 6327 - Tallahassee Florida 32314
<PAGE> 2
ARTICLES
OF
MERGER
These Articles of Merger are hereby entered into this 5th day of March
by and between Direct Rx Healthcare, Inc., a Florida Corporation, and Nu-Wave
Health Products, Inc., a Florida Corporation.
WITNESSETH:
1. PLAN OF MERGER
Nu-Wave Health Products, Inc., a Florida Corporation shall be merged
into Direct Rx Healthcare, Inc., a Florida Corporation ("Merger"). Direct Rx
Healthcare, Inc. shall be the surviving corporation. Direct Rx Healthcare, Inc.
owns 100% of the issued and outstanding common capital stock of Nu-Wave Health
Products, Inc., and therefore this is a Merger of a wholly-owned subsidiary
corporation into its parent corporation. There will be no share exchange as a
part of this Merger. The complete terms and conditions of the Merger are set
forth in the Agreement and Plan of Merger, attached hereto and incorporated
herein by reference as Exhibit A.
2. SURVIVING CORPORATION
The surviving corporation shall be Direct Rx Healthcare, Inc., a
Florida Corporation.
3. AMENDMENT OF ARTICLES OF INCORPORATION - CHANGE OF NAME
Pursuant to the terms of the Merger, the Articles of Incorporation of
Direct Rx Healthcare, Inc. shall be amended to change the name of the
corporation to Nu-Wave Health Products, Inc., as per Restated and Amended
Articles of Incorporation attached hereto and incorporated herein by reference
as Exhibit B.
4. EFFECTIVE DATE OF MERGER
The Merger shall be effective on the date of filing these Articles of
Merger and Share Exchange with the Florida Department of State.
5. ADOPTION BY DIRECTORS AND SHAREHOLDERS
a. Nu-Wave Health Products, Inc. The Merger was adopted by the Board
of Directors and the Shareholders of Direct Rx Healthcare, Inc. on February 28,
1998.
b. Direct Rx, Inc. The Merger was adopted by the Board of Directors of
Direct Rx, Inc. on February 28, 1998, and by the Shareholders of Direct Rx,
Inc. on March 2, 1998.
<PAGE> 3
EXECUTED on the date and year first written above.
DIRECT RX HEALTCARE, INC., Nu-Wave Health Products, Inc., a
Florida Corporation Florida Corporation
By: /s/ Dr. Kotha S. Sekharam By: /s/ Jugal Taneja
---------------------------------- -----------------------------------
Dr. Kotha S. Sekharam, President Jugal Taneja, Chairman of the Board
<PAGE> 4
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into this 5th day of March
1998, by and between Direct Rx Healthcare, Inc., Florida corporation, (hereafter
referred to as "Direct") and Nu-Wave Health Products, Inc., a Florida
corporation (hereafter referred to as "Nu-Wave").
RECITALS:
WHEREAS, Direct is a corporation duly organized and incorporated pursuant
to and under the laws of the State of Florida and is the parent corporation of
Nu-Wave and owns beneficially one hundred percent (100%) of the issued and
outstanding stock of Nu-Wave; and Nu-Wave is a corporation duly organized and
incorporated pursuant to and under the laws of the State of Florida and is the
wholly-owned subsidiary of Direct; and
WHEREAS, a substantial portion of the consolidated business and revenues of
Direct and Nu-Wave in generated by and through Nu-Wave and in connection with
such business there exists significant product recognition related to the name
of Nu-Wave; and
WHEREAS, it has been determined by and resolved by the respective Boards of
Directors of Direct and Nu-Wave that it is in the best interests of the business
and operations of Direct and Nu-Wave for Nu-Wave to merge into Direct and to
change the name of Direct to Nu-Wave Health Products, Inc.; and
WHEREAS, this Agreement and Plan of Merger ("Agreement") has been
authorized and approved by the Board of Directors of Direct and has been
authorized and approved by the Board of Directors of Nu-Wave; and
WHEREAS, this is a merger of a wholly-owned subsidiary corporation into its
parent corporation but the approval of the shareholders of Direct or Nu-Wave is
necessary and required by law since the Agreement and Plan of Merger proposed to
change the name of Direct to Nu-WaveHealth Products, Inc., which constitutes an
amendment to the surviving corporation's Articles of Incorporation.
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained herein and other good and valuable consideration, Direct and Nu-Wave
hereby agree as follows:
1. RECITALS INCORPORATED. The above Recitals are incorporated by
reference into this Agreement.
2. MERGER. Nu-Wave shall be merged into Direct and Direct shall be the
surviving corporation ("Merger"), pursuant to the following terms and
conditions:
a. The Merger is and shall be deemed a merger of a wholly-owned Florida
subsidiary corporation into its Florida parent corporation.
b. Upon the effective date of the Merger, Nu-Wave as an Florida
corporation shall no longer exist except to the extent required by
the laws of the State of Florida.
<PAGE> 5
c. Upon the effective date of the Merger, Direct shall be the surviving
corporation and shall continue to be a domestic Florida corporation,
with its principal office located at:
5905-A Hampton Oaks Parkway
Tampa, FL 33610
d. Upon the effective date of the Merger, all of the assets of Nu-Wave,
of any nature whatsoever, tangible or intangible, shall be and become
the property of Direct and Direct shall assume and become responsible
for all debts and liabilities, of any nature whatsoever, of Nu-Wave.
e. As a part of the Merger, there shall be no exchange or conversion of
the common capital stock of either Direct or Nu-Wave and all of the
outstanding common capital stock of Nu-Wave wholly-owned by Direct
shall be deemed redeemed and cancelled without consideration.
f. The Merger shall be in compliance with the laws of the State of
Florida.
g. Direct, as the sole shareholder of record of Nu-Wave, by its signing
of this Agreement hereby agrees to the Merger and hereby waives and
relinquishes any and all of its rights of a dissenting shareholder
with respect to the Merger, and therefore, there are no shareholders
that have any rights of a dissenting shareholder with respect to the
Merger.
h. Upon the effective date of the Merger, the Articles of Incorporation
and By-Laws of Direct shall be unchanged and shall remain as they
exist as of the date of this Agreement, except that the name of the
corporation shall be changed to Nu-Wave Health Products, Inc. and the
Articles of Incorporation and By-Laws shall be so amended, by the
Restated and Amended Articles of Incorporation attached hereto and
incorporated herein by reference as Exhibit A.
3. FILING OF CERTIFICATES OR ARTICLES OF MERGER. Upon the completion of
the Merger, Direct, through its respective officers, shall file with the
Florida Department of State, such certificates or articles of merger as is
require by law to effectuate the completion of the Merger ("Florida
Certificate").
4. EFFECTIVE DATE. The effective date of the Merger shall be April 1, 1998.
5. COMPLIANCE. This Agreement shall be performed and the Merger
accomplished in conformity and compliance with all applicable federal and state
laws, rules and regulations.
6. ABANDONMENT. This Agreement and the Merger may be terminated and
abandoned at any time prior to the filing of the Florida Certificate by the
Board of Directors of Direct.
EXECUTED on the date and year first written above in Tampa, Florida.
Direct Rx Healthcare, Inc. Nu-Wave health Products, Inc.
By /s/ Jugal Taneja By /s/ Kotha S. Sekharam
------------------------------------ --------------------------------------
Jugal Taneja, Chairman of the Board Dr. Kotha S. Sekharam, President
<PAGE> 6
Exhibit B
RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF
DIRECT RX HEALTHCARE, INC.
THE UNDERSIGNED, DIRECT RX HEALTHCARE, INC., hereinafter the
"Corporation", under the Florida Business Corporation Act, Chapter 607 of the
Florida Statutes, as hereafter amended and modified (the "Act"), hereby adopts
the following Restated and Amended Articles of Incorporation for the
Corporation:
ARTICLE I. NAME
The name of the Corporation is:
Nu-Wave Health Products, Inc.
ARTICLE II. BUSINESS AND ACTIVITIES
The corporation may, and in authorized to, engage in any activity or
business permitted under the laws of the United States and of the State
of Florida.
ARTICLE III. SHARES
The total number of shares which the corporation shall have the authority
to issue shall be Ten million (10,000,000) shares, consisting of: Nine
million (9,000,000) shares of common stock and One million (1,000,000)
shares of preferred stock, all having a par value of $0.01 per share and
the By-Laws of the Corporation shall provide for any terms, conditions
limitations and preferences of any class of common or preferred stock.
ARTICLE IV. PREEMPTIVE RIGHTS
No shareholder of the Corporation shall have any preferential or
preemptive right to subscribe for or purchase from the Corporation any new
or additional shares of capital stock or securities convertible into shares
of capital stock, of the Corporation, whether now or hereafter authorized.
ARTICLE V. PRINCIPAL OFFICE
The address of the Principal Office of the Corporation is 5905-A Hampton
Oaks Parkway, Tampa, Florida 33610. The location of the Principal Office
shall be subject to change as may be provided in bylaws duly adopted by the
Corporation.
ARTICLE VI. MAILING ADDRESS
The mailing address of the corporation is 5905-A Hampton Oaks Parkway,
Tampa, Florida 33610
ARTICLE VII. INITIAL REGISTERED OFFICE AND AGENT
The address of the Registered office of the Corporation is 1200 S. Pine
Island Road, Plantation, Florida 33324, and the Initial Registered Agent at
such address is CT Corporation System.
<PAGE> 7
ARTICLE VIII. BOARD OF DIRECTORS
The number of Directors constituting the Board of Directors of the
Corporation is three (3). The number of Directors may be increased or
decreased from time to time in the bylaws of the Corporation, but in no
event shall the number of Directors be less than three (3).
ARTICLE IX. INDEMNIFICATION
The corporation shall indemnify such persons as it is permitted to
indemnify by Section 607.0850 of the Florida Business Corporation Act, and
the heirs, executors, and administrators of such persons, to the full
extent permitted by, but in accordance with the provisions of that Section.
Reference to Section 607.0850 in the previous sentence shall constitute a
reference to any legislation hereafter enacted by the Florida Legislature
on the same general subject as present Section 607.0850, whether by
amendment of that Section or by substitution of differently numbered
material for it. Notwithstanding the foregoing, except as otherwise
required by Section 607.0850, a person who would be entitled to indemnity
only as an agent (a director, officer, employee or trustee not to be
considered an "agent" for purposes of this sentence) of the corporation or
only as an agent or other entity, shall not be entitled to indemnity.
ARTICLE X. MAJORITY VOTE
Notwithstanding any provision of the Florida Business Corporation Act now
or hereafter in force requiring for any purpose the vote, consent, waiver,
approval, adoption or release of the holders of shares entitling them to
exercise two-thirds, or any other proportion, of the voting power of the
Corporation or any class of classes of shares thereof, such action, unless
otherwise expressly required by statute, may be taken by the vote,
consent, waiver, approval, adoption or release of the holders of shares
entitling them to exercise a majority of the voting power of the
Corporation or of such class or classes.
ARTICLE XI. INCORPORATOR
The name and address of the Incorporator of the Corporation is: Dr. Kotha S.
Sekharam, 5905-A Hampton Oaks Parkway, Tampa, Florida 33610.
IN WITNESS WHEREOF, these Restated and Amended Articles of Incorporation
have been signed by the undersigned this 5th day of March, 1998.
Direct Rx Healthcare, Inc.
By: /s/ Kotha S. Sekharam
----------------------------------
Dr. Kotha S. Sekharam, President
2
<PAGE> 1
Exhibit 3.1
[STATE OF FLORIDA DEPARTMENT OF STATE LOGO]
I certify the attached is a true and correct copy of the Articles of
Incorporation of DIRECT RX HEALTHCARE, INC., a Florida corporation, filed on
January 27, 1998, as shown by the records of this office.
The document number of this corporation is P98000009368.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capitol, this the
Second day of February, 1998
[STATE OF FLORIDA SEAL] /s/ Sandra B. Mortham
Sandra B. Mortham
Secretary of State
<PAGE> 2
ARTICLES OF INCORPORATION
OF
DIRECT RX HEALTHCARE, INC.
THE UNDERSIGNED, acting as the sole incorporator of DIRECT RX HEALTHCARE,
INC., hereinafter the "Corporation", under the Florida Business Corporation
Act, Chapter 607 of the Florida Statutes, as hereafter amended and modified
(the "Act"), hereby adopts the following Articles of Incorporation for the
Corporation:
ARTICLE I. NAME
The name of the Corporation is:
Direct Rx Healthcare, Inc.
ARTICLE II. BUSINESS AND ACTIVITIES
The Corporation may, and in authorized to, engage in any activity or
business permitted under the laws of the United States and of the State of
Florida.
ARTICLE III. SHARES
The total number of shares which the corporation shall have the authority
to issue shall be Ten million (10,000,000) shares, consisting of Nine
million (9,000,000) shares of common stock and One million (1,000,000)
shares of preferred stock, all having a par value of $0.01 per share and.
ARTICLE IV. PREEMPTIVE RIGHTS
No shareholder of the Corporation shall have any preferential or preemptive
right to subscribe for or purchase from the Corporation any new or
additional shares of capital stock or securities convertible into shares of
capital stock, of the Corporation, whether now or hereafter authorized.
ARTICLE V. PRINCIPAL OFFICE
The address of the Principal Office of the Corporation is 5905-A Hampton
Oaks Parkway, Tampa, Florida 33610. The location of the Principal Office
shall be subject to change as may be provided in bylaws duly adopted by the
Corporation.
ARTICLE VI. MAILING ADDRESS
The mailing address of the corporation is 5905-A Hampton Oaks Parkway,
Tampa, Florida 33610.
ARTICLE VII. INITIAL REGISTERED OFFICE AND AGENT
The address of the Registered office of the Corporation is 1200 S. Pine
Island Road, Plantation, Florida 33324, and the initial Registered Agent at
such address is CT Corporation System.
<PAGE> 3
ARTICLE VIII. INITIAL BOARD OF DIRECTORS
The number of Directors constituting the initial Board of Directors of the
Corporation is one (1). The number of Directors may be increased or
decreased from time to time in the bylaws of the Corporation, but in no
event shall the number of Directors be less than one (1).
ARTICLE IX. INDEMNIFICATION
The Corporation shall indemnify such persons as it is permitted to
indemnify by Section 607.0850 of the Florida Business Corporation Act, and
the heirs, executors, and administrators of such persons to the full extent
permitted by, but in accordance with the provisions of that Section.
Reference to Section 607.0850 in the previous sentence shall constitute a
reference to any legislation hereafter enacted by the Florida Legislature
on the same general subject as present Section 607.0850, whether by
amendment of that Section or by substitution of differently numbered
material for it. Notwithstanding the foregoing, except as otherwise
required by Section 607.0850, a person who would be entitled to indemnity
only as an agent (a director, officer, employee or trustee not to be
considered an "agent" for purposes of this sentence) of the corporation
or only as an agent of another entity, shall not be entitled to indemnity.
ARTICLE X. MAJORITY VOTE
Notwithstanding any provision of the Florida Business Corporation Act now
or hereafter in force requiring for any purpose the vote, consent, waiver,
approval, adoption or release of the holders of shares entitling them to
exercise two-thirds, or any other proportion, of the voting power of the
Corporation or any class of classes of shares thereof, such action,
unless otherwise expressly required by statue, may be taken by the vote,
consent, waiver, approval, adoption or release of the holders of shares
entitling them to exercise a majority of the voting power of the
Corporation or of such class or classes.
ARTICLE XI. INCORPORATOR
The name and address of the Incorporator of the Corporation is: Dr. Kotha S.
Sekharam, 5905-A Hampton Oaks Parkway, Tampa, Florida 33610.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed by the
undersigned this 26 day of January, 1998.
/s/ Kotha s. Sekharam
--------------------------------------
Dr. Kotha S. Sekharam
Incorporator
<PAGE> 1
Exhibit 10.1
SERVICE AGREEMENT
This is an Agreement for Services [the "Agreement"], dated 23 December,
1996 and is between, the ["Client"] Nu-Wave Health Products, Inc., whose address
is 5905-A Hampton Oaks Parkway, Tampa, Florida 33610, and Nations Staffing,
Inc., with offices at 7557 Ulmerton Road, [Suite D], Largo, Florida, 33771
["NSI"].
1. TERM OF AGREEMENT
A. The initial term of this Agreement shall be one year [the "Initial
Term"]. Following the completion of the Initial Term, this agreement
shall remain in full force and effect from year to year until either
party gives written notice to the other party by delivering notice as
specified in Section 11K, below, at least thirty [30] days prior to the
effective date of intended termination. In addition, NSI may at any
time immediately terminate this Agreement in the event of breach by the
Client of any of the terms of this Agreement or upon the occurrence of
any of the events set forth in Section 6C or 11E, below.
2. SERVICES
A. NSI agrees to furnish to Client employees to perform job functions
identified by workers' compensation code classifications. Client
warrants that the list of workers' compensation classification is
accurate and complete, that employees performing these job functions do
so at the location specified in this Agreement as Client's address.
client understands and agrees that prior written approval from NSI
workers' compensation carrier must be obtained prior to the addition of
any worker's compensation classification or location to this Agreement.
B. Client expressly agrees and understands that no employee shall become
employed by NSI, covered by NSI workers' compensation insurance or any
other benefit or term and condition of employment or issued a payroll
check, unless the individual has, prior to commencing work for NSI,
completed NSI's employment application, W-4 withholding form, and form
I-9, all of which must be delivered to NSI before the employee commences
employment. NSI shall not be considered an employer for any employee
until that individual completes these forms and Client is notified
that the employee has been hired by NSI as a leased employee. In
addition, NSI shall not be considered to be an employer of any
individual for whom payroll information is not supplied during any
payroll period [except as may be required by law]. Client assumes full
responsibility for workers' compensation claims of other Parties hired
by or working for Client, whether as an employee, independent
contractor, or in any other status.
C. NSI shall have sufficient authority so as to maintain a right of
direction and control over leased employees assigned to Client's
location, and shall retain authority to hire, terminate, discipline and
reassign employees. Client shall, however, retain such sufficient
direction and control over the leased employees as is necessary to
conduct Client's business and without which Client would be unable to
conduct its business, discharge any fiduciary responsibility that it
may have, or comply with any applicable licensure, regulatory, or
<PAGE> 2
statutory requirement of Client. Additionally, NSI assumes
responsibility for the payment of wages to the leased employees without
regard to payments by Client to NSI and NSI assumes full responsibility
for the payment of payroll taxes and collection of taxes from payroll on
leased employees. NSI will give written notice of the relationship
between NSI and Client to each leased employee it assigns to perform
services for Client. NSI does not assume any responsibility for, and
makes no assurances, warranties, or guarantees as to the ability or
competence of any leased employee.
D. Client agrees to provide all facilities, supplies, equipment, and all
other necessary items that may be required by employees to perform their
employees service.
3. SERVICE NOT PROVIDED
A. NSI will only provide the services provided for herein and no other
services shall be provided or implied, including without limitation any
strategic, operational or other business related decisions with regard
to Client's business. Such decisions shall exclusively be the
responsibility of Client and NSI shall bear no responsibility nor
liability for any actions or inactions by Client. When implementing
such decisions, whether or not the actions are implemented by leased
employees, Client shall be acting solely on its own volition and
responsibility. If NSI is leasing any supervisory employees to Client,
such supervisory employee's scope of employment is strictly limited.
Supervisor's actions which are in violation of law or which result in
liability will be outside the scope of their responsibility as NSI's
leased employees and in such an event supervisory employees will be
acting solely as the agents of Client.
4. WORKERS' COMPENSATION
A. NSI shall secure workers' compensation coverage in such amounts as is
required by applicable law and shall be responsible for the management
of workers' compensation claims, claims filings and related procedures
for its leased employees for services which they perform as leased
employees.
B. While NSI shall retain a right of direction and control over the
management of safety, risk and hazard control involving leased employees
performing work at Client work sites, as may be required by applicable
state and federal laws, compliance with all applicable laws related to
such matters is a responsibility of Client. Client acknowledges that it
is responsible to maintain a safe working environment, provide proper
training in compliance with state and federal OSHA standards, and
establish and maintain such safety programs, safety policies, and safety
committees as may be required by law or by NSI. NSI shall provide such
assistance and maintain such responsibility for performing safety
inspections of Client equipment and premises and assistance and
responsibility for the promulgation and administration of employment and
safety policies as is required by applicable law; however, Client
acknowledges that NSI in either providing or not providing such
assistance and responsibility
2
<PAGE> 3
assumes no liability. Client further agrees to comply with NSI's workers'
compensation managed care arrangement, workers' compensation light duty
requirements and shall comply with such Drug Free Workplace Act policies,
if any, as may be implemented by NSI.
C. Client represents that its working environment, equipment, machinery,
supplies and training for existing employees currently meet all state and
federal OSHA standards and that they will be maintained in compliance with
such standards during the duration of the Agreement. Client shall provide
and ensure use of all personal protection gear and equipment, as required
by law, or as deemed necessary of NSI or NSI's workers' compensation
carrier.
5. BENEFIT PLANS
A. The Client acknowledges that NSI has available employee benefit plans for
the possible application to employees. Any other employee benefit plans
maintained by the Client, regardless of whether they provide benefits to
the employees, shall be the sole responsibility of the Client, including
responsibility for complying with provisions of the Internal Revenue Code
of 1986 [the code], relating to such plans.
B. NSI agrees to assume responsibility for the current COBRA participants on
Client's group health plan in effect as of the effective date of the
Agreement [current COBRA participants], who have all been listed by Client
on Exhibit B, provided such current COBRA participants were eligible for
coverage under Client's plan in accordance with federal law. Client agrees
that upon termination of the Agreement, should Client at any time obtain
any form of group employee benefit coverage from an insurance carrier,
another employee leasing company/professional employer or otherwise, which
will provide group health insurance coverage to any of the employees,
Client will assume full responsibility for the continuation of coverage
under COBRA for the current COBRA participants in addition to any employees
who may elect COBRA coverage under NSI's plans during the term of this
Agreement, for the remainder of their COBRA eligibility period.
6. FEES & DEPOSITS
A. For services to be rendered under this Agreement, NSI shall be entitled to
a fee. Said fee to be paid at the end of each pay period and shall be
calculated by multiplying the billing factors in Exhibit A by the gross
amount of all wages and/or earnings for the employees covered by the
agreement during each pay period. All funds due NSI [including but not
limited to payroll, payroll taxes and administrative fees] are payable in
immediately negotiable funds [wire transfers or cashiers check] to NSI
prior to issuance of payroll checks each pay period. Should the Client
require additional services not included in this Agreement, the fee for any
such additional services shall be negotiated and paid separately The
billing factors and related fees set forth in Exhibit A are subject to
adjustment by NSI based upon changes in local, state and/or federal
employment law, changes in insurance requirement, or worker's compensation
classifications, or costs or changes in the Client's payroll. Upon written
3
<PAGE> 4
notification to the Client from NSI of a billing factor, or fee adjustment,
the Client shall have the right to terminate this Agreement by giving
notice or termination to NSI within seven [7] days of receipt from N.S.I.
of notice of a fee adjustment, and after payment of all accrued fees by
Client within this seven [7] day period.
B. Prior to the commencement of the First Pay Period [1/1/97], Client will
deposit with NSI the amounts of $0 [one months medical insurance premium]
and $418 [one months workers' compensation insurance premium] for a total
deposit of $418. Said amount to be applied to the final invoice upon
termination of this agreement.
C. If for any reason whatsoever payment is not timely submitted to NSI for its
services in accordance with this contract, or the payment received is
unable to be immediately negotiated, it will be considered a material
breach of contract and NSI shall have the sole right to immediately
terminate this Agreement, and shall be entitled to bring suit seeking
applicable damages. NSI, in its sole discretion, may waive this breach on
one or more occasions. By doing so, NSI in no way waives its ongoing rights
under this paragraph.
D. In the event of a default by Client under this Agreement, NSI shall have
the right as attorney-in-fact to file such instruments as it deems
necessary in its sole discretion and without recourse by Client, against
the assets of Client, which filing shall be terminated upon Client's
satisfaction of its obligation hereunder.
E. A late payment charge of one and one-half percent [1 1/2%] will be added to
all accounts not paid when due. Checks returned unpaid from Client's bank
will be subject to the late payment charge plus any additional costs
incurred by NSI. An unpaid balance will also be subject to periodic charge
of one and one-half percent [1 1/2%] per calender month [or such lesser
interest amount if set by applicable law at a lower amount] until paid in
full.
7. INDEMNIFICATIONS
A. Client will provide proof of comprehensive general liability insurance
coverage of its operations and all employees, with a minimum limit of
liability no less than one million [$1,000,000.00] dollars per occurrence.
If any leased employee will operate a vehicle owned or otherwise of any
kind for Client, Client shall furnish liability insurance therefor against
uninsured motorists, each with a minimum limit of liability no less than
one million [$1,000,000.00] dollars. Such policies shall also include
blanket collateral liability and personal injury liability coverage. In
addition, if professional employees are leased, professional liability
coverage will be secured and maintained by Client with a limit of liability
of no less than one million [$1,000,000.00] dollars. Client agrees, at its
own expense, to include N.S.I. as an additional named insured on all of
Client's insurance policies, including without limitation professional
liability policies and fidelity bonds. Client shall at the request of NSI
deliver to NSI a certificate evidencing such insurance and the agreement
[s] of the insurer [s] that such insurance may not be canceled without
twenty [20] days prior notice to
4
<PAGE> 5
NSI. Any protection against the dishonest or criminal conduct or
misappropriation of any funds engaged in by any employee maintained
hereunder, such as fidelity bonding, shall be at Client's expense. All
insurance policies shall waive Client's subrogation rights in favor of
NSI. Client's obligation under this Section shall survive termination of
this Agreement.
B. Client hereby unconditionally indemnifies, holds harmless, protects and
defends NSI, and all subsidiary, affiliate and parent companies, their
shareholders, non-leased employees, attorneys, officers, directors, agents
and representatives from any and all claims, demands, damages [including
punitive and compensatory], injuries, deaths, actions, costs and expenses
[including attorney's fees and expenses at all levels of proceedings],
losses and liabilities of whatever nature [including liability to third
parties], and other consequences of any sort, including but not limited to:
1. Actions or incidents [whether actual or alleged] by Client, or any
leased or non-leased employee, of negligence, other tortious conduct,
breach of contract, criminal or dishonest activity, those actions or
incidents covered by all liability policies, professional liability
policies, and fidelity bonds as set forth in Section 7A, those costs
attendant to the administration of any collective bargaining agreement,
and any liabilities or claims against NSI arising out of any non payment
or payment to or participation in a labor organization's health and
welfare retirement or other benefit fund, including the cessation of
payment thereto or withdraw from participation therein.
2. Employment-related matters which shall encompass matters arising under
local, state and/or federal right-to-know laws, environmental laws, OSHA,
EEOC, ADA, [including without limitation those relating to employment,
public access and public accommodation], WARN, ERISA, all laws governing
wages and hours [including without limitation: prevailing wage rate;
exempt and non exempt status; child labor; and minimum wage and overtime
matters], NLRB laws, disclosed and undisclosed benefit plans, all other
labor laws;
3. Any and all other laws, regulations and ordinances, or causes of action
arising out of, occasioned by, or in connection with any obligations of
either party arising out of this Agreement, including without limitation
those arising from products or services [professional or otherwise]
produced or provided by the employees;
4. Any matter relating to Client's use of any leased employee including
the use of the Client's [or any employee, if such employee is acting or
alleged to be acting on behalf of the Client or NSI] machinery,
facilities, equipment and/or vehicles, whether leased, rented, borrowed or
owned;
5. Injuries occurring to any individual performing work for Client while
not performing work as a leased employee, and for such acts of negligence
towards any employee as are beyond the coverage of the workers'
compensation coverage.
5
<PAGE> 6
C. Client agrees that, notwithstanding any other provision of this
Agreement, that access to any property, whether real, appurtenant, or
personal, as well as the accommodation of said property to any person
who may be handicapped or disabled, or perceived as being handicapped
or disabled, over which real or personal property the Client has
ownership, administration, maintenance or some other control, shall be
the sole and exclusive responsibility of the Client. Client agrees to
indemnify, hold harmless and defend NSI, and all subsidiary, affiliate
and parent companies, their shareholders, non-leased employees,
attorneys, officers, directors, agents and representatives, from and
against any and all claims, demands, damages, injuries, deaths,
actions, costs and expenses [including attorney's fees and expenses at
all levels of proceedings], losses and liabilities of whatever nature
[including liability to third parties], and other consequences of any
sort arising out of the Client's obligations set forth herein.
D. Client acknowledges that it will receive the bulk of the economic
benefits arising out of its business and that, therefore, it is fair
and reasonable that it, rather than NSI, should bear the risks of its
business as set forth above.
E. All indemnifications shall survive the termination of this Agreement.
8. GOVERNMENT INVESTIGATIONS / LEGAL ACTIONS / INQUIRIES
A. Client acknowledges that it is essential to NSI's performance under
this Agreement that NSI have complete knowledge of any government
investigation or inquiry or private adversary action which could in any
manner impact upon the types of duties contemplated by this Agreement.
For example, but not by limitation, an audit by the Bureau of Workers'
Compensation could affect the performance of functions under this
Agreement. Thus, Client hereby makes complete and full disclosure of
any such administrative proceeding [including but not limited to EEOC,
NLRB, OSHA, or Wage and Hour matters], investigation, lawsuit, or other
adversary proceeding, including those which are threatened as well as
those not yet asserted, in which Client has been involved during the
last five [5] years.
B. NSI shall not be considered to be an employer of leased employees for
purposes of claims of discrimination involving disability, race, sex,
sexual harassment, religion, color, age, national origin, marital
status, veteran status, retaliation, or any other claim pursuant to any
local, state or federal law regulation, or ordinance unless the action
is taken by Client in compliance with a written corporate NSI policy,
procedure or NSI corporate direction, which is illegal under any
applicable local, state or federal law.
6
<PAGE> 7
9. CLIENT OBLIGATIONS AND RIGHTS
A. Client has the right to accept or cancel the assignment of any
leased employee. Client agrees that in making such decisions it
will at all times comply with all applicable laws. Client
further agrees that it will at all times comply with the Family
and Medical Leave Act and Client's responsibilities to reinstate
employees and in all other manner to comply with the Family and
Medical Leave Act shall survive termination of this Agreement.
B. Client agrees that it will obtain and provide to NSI at the end
of each pay period records of actual time worked by each
employee, verify their exempt or nonexempt status and that all
hours worked by employees that are reported to NSI are accurate
and are in accordance with the requirements of the Fair Labor
Standards Act and other laws administered by the U.S. Department
of Labor's Wage and Hour Division and any applicable state law.
These records submitted to NSI shall become the basis for NSI to
issue all payroll checks. NSI shall not be responsible for
incorrect, improper or fraudulent records of hours worked, or for
improper determination of exempt status. Should Client fail to
meet the processing and payment schedule, the delivery of payroll
checks by NSI will be delayed and an out of cycle processing
charge could be billed to Client at NSI's option. Similarly, any
changes to the hours reported to NSI after the reporting time
could be subject to an out of cycle check charge at NSI's option.
10. EFFECT OF TERMINATION
A. If for any reason payment is not made when due, Client agrees
that NSI will have the right to immediately terminate its
performance hereunder and bring suit seeking damages. Upon
termination of this Agreement, for any reason, or should Client
fail to timely pay NSI for its services, all the employees shall
be deemed to have been laid off by NSI and immediate notification
of this shall be provided by Client to employees who had been
leased pursuant to this Agreement. Client shall immediately
assume all federal, state and local obligations of an employer to
the employees which are not in conflict with state or federal
law, and shall immediately assume full responsibility for
providing workers' compensation coverage. NSI shall immediately
be released from such obligations as are permitted by law. It is
the intent of the parties that, where allowed by law, they be
placed in their respective positions immediately before their
entry into this Agreement in the event of a termination or
Client's failure to pay NSI. If for any reason [whether or not
required by applicable law] NSI makes any payment to any of the
employees after this Agreement has been terminated, NSI shall be
entitled to full reimbursement for such expenditures.
7
<PAGE> 8
II. GENERAL PROVISIONS
A. Client acknowledges that it has not been induced to enter into this
Agreement by any representation or warranty not set forth in this
Agreement including but not limited to any statement made by any
marketing agent of NSI. Client acknowledges that NSI has made no
representation concerning whether NSI services will improve the
performance of Client's business.
B. Client acknowledges that NSI shall not be liable for any Client loss
of business, good will, profits or other damages.
C. Client specifically authorizes NSI to conduct a credit and background
reference check on Client and such officers of Clients and NSI deems
appropriate in compliance with the requirements of law.
D. Client may not assign this Agreement nor its rights and duties
hereunder, nor any interest herein, without the prior written consent
of NSI. Any attempt by Client to assign any of its rights, duties or
obligations which arise under this Agreement without such consent will
be void and shall constitute cause for NSI to terminate this
Agreement.
E. This Agreement may be terminated by NSI if, at any time, the Client
breaches any terms of this Agreement. NSI may also terminate this
Agreement if, at any time, NSI, in its sole discrection, determines
that a material adverse change has occurred in the financial condition
of the Client, or that the Client is unable to pay its debts as they
become due in the ordinary course of business. This Agreement may also
be terminated, upon fourteen day's notice by NSI, in the event of any
federal or state legislation, regulatory action, or judicial decision
which, in the sole discretion of NSI, adversely affects its interest
under this Agreement.
F. Client acknowledges and agrees that NSI is not engaged in the
practices of law or the provision of legal service, and that Client
alone is completely and independently responsible for its own legal
rights and obligations.
G. This Agreement constitutes the entire agreement between the parties
with regard to this subject matter and supersedes all existing
agreements and all other oral, written or other communications between
them concerning its subject matter. No other agreement, statement,
promise or practice between the parties relating to the subject matter
shall be binding on the parties. This Agreement may be changed only by
a written amendment signed by both parties.
H. Failure by either party at any time to require strict performance by
the other party or to claim a breach of any provision of this
Agreement will not be construed as a waiver of any subsequent breach
or default nor affect the effectiveness of this Agreement, or any part
thereof, or prejudice either party as regards to any subsequent action
at law or equity.
8
<PAGE> 9
I. This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida [excluding the laws of Florida relating to
conflicts of laws of different jurisdictions] and venue shall be in the
applicable court in Pinellas County, Florida. Client hereby irrevocably
consents to be subject to the jurisdiction of the courts in the State of
Florida pertaining to any case or controversy arising out of or relating to
this agreement.
J. In the event of any lawsuit or other proceeding to enforce the provisions
of this Agreement, the prevailing party shall be entitled to an award of
its costs and reasonable attorney's fees incurred at all levels of
proceedings.
K. Any notice or demand given hereunder shall be accomplished by the personal
delivery in writing [with written receipt] or by other delivery with proof
of delivery or attempted delivery to the address set forth herein for the
other party, and shall be deemed effective upon proof of attempted delivery
[actual delivery to be made as soon as is practicable following attempted
delivery].
L. No rights of any third party are created by this Agreement and no person
not a party to this Agreement may rely on any aspect of this Agreement
notwithstanding any representation, written or oral, to the contrary.
M. Client agrees it will comply with the Worker Adjustment and Retraining
Notification Act ["WARN"] and that it will give NSI at least sixty-two
[62] days notice prior to effecting any plant closing or mass lay-off as
defined in WARN.
N. In the event that any provision contained in this Agreement is held to be
invalid, illegal, or unenforceable by a court of competent jurisdiction,
the validity, legality, or enforceability of the remainder of this
Agreement shall in no way be affected or impaired thereby.
O. NSI will notify all employees of this Agreement at inception and
termination of Agreement. Client shall also immediately upon termination of
this Agreement notify all employees of the termination of this Agreement
and inform them that they are no longer covered by NSI's worker's
compensation policy.
P. This Agreement shall be valid and enforceable only upon signature by an
authorized Controlling Person of NSI.
Q. The termination of this Agreement shall not relieve Client of any
obligation set forth herein, including but not limited to its payment
obligations to NSI.
R. The headings in this Agreement are intended for convenience or reference
and shall not affect its interpretation.
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<PAGE> 10
IN WITNESS HEREOF, the parties have hereunto set their hand on the date written
below.
NATIONS STAFFING, INC. CLIENT
- ---------------------- ------
Approved: Signed: /s/ Kotha S. Sekharam
----------------------------- ---------------------------
Name: David B. Stroyan Name: Kotha S. Sekharam
--------------------------------- ------------------------------
[Type or Print] [Type or Print]
Title: President Title: President
-------------------------------- -----------------------------
Date: Date: December 23, 1996
--------------------------------- ------------------------------
THIS AGREEMENT SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AN AUTHORIZED
CONTROLLING PERSON OR NATIONS STAFFING, INC. NATIONS STAFFING, INC. MARKETING
AGENTS DO NOT HAVE THE AUTHORITY TO BIND NATIONS STAFFING, INC.
10
<PAGE> 11
EXHIBIT A
<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
Client Name Nu-Wave
- ------------------------------------------------------------------------------
Address 5905-A Hampton Oaks Parkway Tampa, FL 33610
- ------------------------------------------------------------------------------
Telephone (813)628-0804
- ------------------------------------------------------------------------------
Fax (813)612-9604
- ------------------------------------------------------------------------------
Contact Dr. Kotha S. Sekharam
- ------------------------------------------------------------------------------
Pay Period Frequency Weekly
- ------------------------------------------------------------------------------
First Pay Period Begins 1 Jan 1997
- ------------------------------------------------------------------------------
Pay Period Ends 3 Jan 1997 (Friday)
- ------------------------------------------------------------------------------
Checks Dated 3 Jan 1997 report on 2 Jan (Thurs.)
- ------------------------------------------------------------------------------
Benefits Effective N/A
- ------------------------------------------------------------------------------
</TABLE>
The above Billing Factors, Fees and Deposits are based on information given to
Nations Staffing, Inc. by Client adjustments will be made if corrections are
needed. Plus a fixed admin. fee of $600 per month or $138.50 per week, so long
as total wages remain at or below $400,000 annualized.
<TABLE>
- -----------------------------------
<S> <C> <C>
W/C Codes 4,825 8,810
- -----------------------------------
Billing
Factors 114.96 111.71
- -----------------------------------
</TABLE>
The above billing factors will be charged on gross wages.
The Client will also pay Nations Staffing, Inc. the following fees:
An ENROLLMENT FEE of $25.00 per employee initially converted and $15.00 for
each employee subsequently added to NSI's payroll system. The total initial
set up fee is $250.
A DELIVERY FEE of $10.00 for each delivery of payroll checks and related
documents including replacement or omitted checks.
11
<PAGE> 12
EXHIBIT B
The following individuals are the current COBRA participants on our existing
group health plan:
<TABLE>
<CAPTION>
- -----------------------------------------------------
Name Address
- -----------------------------------------------------
<S> <C> <C>
1
- -----------------------------------------------------
2
- -----------------------------------------------------
3
- -----------------------------------------------------
4
- -----------------------------------------------------
5
- -----------------------------------------------------
6
- -----------------------------------------------------
7
- -----------------------------------------------------
8
- -----------------------------------------------------
9
- -----------------------------------------------------
10
- -----------------------------------------------------
</TABLE>
If none, so state here: none
------------
By: /s/ Kotha S. Sekharam Date: 12/23/96
----------------------- -------------------
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into on July 15, 1997, by and between
DIRECT Rx, INC. an Ohio corporation (the "Company"), and JUGAL K. TUNEJA
("Executive") currently holding the position of President.
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as Executive is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Executive as its Chairman of the
Board and Secretary and Executive desires to accept such employment, all on the
terms and conditions as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and covenants set forth
in this Agreement, the parties hereto agree as follows:
I. TERM
1.1 The Company hereby employs Executive and Executive hereby accepts
employment by the Company for a period of two years beginning on the date
of this Agreement, subject to the terms and conditions contained in this
Agreement. This Agreement will be renewed automatically thereafter for
successive periods of one year, unless not less than thirty days prior to
the end of the initial two year period or prior to the end of any one year
renewal period, one of the parties sends written notice to the other party
of its intent to terminate this Agreement at the end of such period.
II. DUTIES
2.1 Executive shall hold the office of and shall function as Chairman of the
Board and Secretary. In such capacities, Executive shall perform such
duties as determined by the Board of Directors and will report to the Board
of Directors.
III. BASE SALARY
3.1 As compensation for the services to be rendered by Executive hereunder and
all services as an officer of the Company, the Company agrees to pay or
cause to be paid to Executive an annual base salary of not less than
Seventy-Five Thousand Dollars ($75,000), payable in equal bi-weekly
installments in accordance with the Company's standard payroll schedule.
Executive's base salary shall be increased annually by an amount to be
determined in the sole discretion of the Board of Directors based upon the
Board's review of Executive's individual performance and the financial
performance of the Company.
<PAGE> 2
3.2 This salary is based on the assumption that Executive continues to accept
the responsibilities assigned to him by the Board of Directors, meets the
Company's goals agreed to by the Executive and the Board of Directors, and
continues to satisfactorily perform the duties of President, as presented
in this Agreement and as indicated to the Board of Directors.
IV. PERFORMANCE BONUS AND STOCK OPTIONS
4.1 As additional compensation, Executive shall receive an annual bonus in
the first year of this Agreement as determined in the sole discretion of
the Board of Directors based upon the Board's evaluation of Executive's
individual performance and the financial performance of the Company.
4.2 Executive shall receive an annual bonus in the second year of this
Agreement in an amount to be determined as set forth below, with any such
amount to be subject to an increase or decrease as determined by the Board
of Directors based upon the Board's evaluation of Executive's individual
performance and the financial performance of the Company:
4.2.1 Two and one-half percent (2.5%,) of income before federal and
state income taxes, and
4.2.2 Two percent (2%) of annual revenues exceeding the "Base".
Executive's bonus for Year 2 will have a base equal to the total
audited revenues for Year 1. Subsequent years will be calculated in
the same manner.
4.3 The bonus shall be paid to Executive, or Executive's designee, as soon as
practicable following the close of the Company's fiscal year and the
preparation of the Company's financial statements. This bonus shall
continue as long as Executive is employed by the Company. Upon termination
of Executive's employment, Executive shall receive a pro rata amount of
this Bonus through the date of such termination.
4.4 Subject to the grant and approval of the Board of Directors, Executive
shall be eligible for the grant of stock options to purchase additional
common shares of the Company at such times and on such terms as shall be
determined by the Board of Directors.
V. FULL TIME
5.1 Executive agrees to devote 100* of his professional time, attention and
energies during each normal business day to the performance of the
business of the Company, except as may otherwise be authorized by the
Board of Directors, or except for minor personal matters.
VI. FRINGES
6.1 Executive shall be entitled to vacations, health care benefits, fringe
benefits and
<PAGE> 3
reimbursement for reasonable out-of-pocket expenses, including but not
limited to those hereinafter detailed, in accordance with the Company's
practices covering executive personnel. The Company shall use reasonable
efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
6.1.1 Health Insurance coverage with major medical, dental and disability
insurance benefits equal to those benefits available to employees;
the Company will pay 100% of the monthly premiums for Executive and
immediate family members;
6.1.2 Reimbursement of all properly approved travel and business related
expenses normally paid by the Company. All expense reports must be
approved by the President or the Board of Directors prior to
reimbursement;
6.1.3 Paid vacation per calendar year of not more than 3 weeks unless
otherwise authorized by the Board of Directors at any time or times
selected by Executive taking into account the convenience of the
Company. Executive shall give the Board of Directors of the Company
at least 14 calendar days prior notice of selected vacation times
of one week or more. Unused vacation time will not be cumulative
from year to year unless approved by the Board of Directors.
6.1.4 5 days paid sick leave annually;
6.1.5 A holiday on the following days with full pay: New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, the Executive's birthday, one floating holiday and
such other holidays or personal days as the Company shall declare;
VII. TERMINATION
7.1 Executive's employment by the Company may be terminated by the Company at
any time upon:
7.1.1 the death or disability of Executive (as defined below);
7.1.2 the termination of this Agreement by the Company for justifiable
cause (as defined below); or
7.1.3 a decision by the Board of Directors of the Company, in the
exercise of their reasonable business judgment, to cease to conduct
operations.
7.2 In the event that this Agreement is terminated as a result of the
Executive's death or disability, the Company shall pay to Executive or
Executive's estate or beneficiary Executive's base salary as provided in
Section III for a period of three months following the
<PAGE> 4
date of death or termination for disability as defined in 7.3.
7.3 The term "disability" shall mean the inability of Executive, due to
illness, accident, or any other physical or mental incapacity, to perform
Executive's duties is a normal manner for a period for a period of twelve
(12) consecutive weeks or for a total of twenty (20) weeks (whether or not
consecutive) in any twelve-month period during the term of this Agreement.
7.4 The term "justifiable cause," shall be defined as the commission by the
Executive of (a) fraud, (b) embezzlement, (c) a felony, or (d) an act
which (I) involves moral turpitude, (ii) action that brings the Company
into public disrespect or disgrace, (iii) action that injures the goodwill
of the Company, or (iv) causes material harm to its customer, supplier, or
employee relations or the operations or business prospects of the Company
(unless such act was expressly authorized or ratified by the Board). If
there is a dispute as to whether or not "justifiable cause" shall exist,
the parties agree to settle the dispute by arbitration in accordance with
the commercial arbitration rules of the American Arbitration Association
and the judgement upon award of the arbitrators may be entered in any
court having jurisdiction thereof.
7.5 If Executive terminates this Agreement, Executive shall be entitled to
receive Executive's base salary earned through the date of termination by
Executive and a pro rata amount of the performance bonus and fringe
benefits, including vacation through date of such termination. No
additional remuneration shall be payable by the Company to Executive and
the Company shall have no other obligations or liabilities to Executive,
except to the extent provided by law.
7.6 Notwithstanding any other provisions of this Agreement, the Company can
terminate Executive's employment at any time upon giving not less than
four weeks advance notice of such termination to Executive, and if the
Company so terminates Executive, the Company shall pay to Executive as
consideration for the Executive's covenants set forth below in Section
VIII:
7.6.1 Executive's base salary through the end of the then applicable
term of this Agreement pursuant to Section I; and
7.6.2 any bonus payable to Executive pursuant to Section IV.
VIII. NONDISCLOSURE, NONSOLICITATION AND AGREEMENT NOT TO COMPETE
8.1 Executive understands and agrees that Executive will acquire certain
confidential information regarding the Company, including, without
limitation, information concerning customers, accounts, employees;
suppliers, prices, business methods, competitive and marketing strategies,
and similar business matters, (the "Confidential Information"). Executive
further understands and agrees that use or disclosure of the Confidential
<PAGE> 5
Information to compete, directly or indirectly, with the Company, will result in
irreparable harm and financial loss to the Company.
For a period of three (3) years after termination of this Agreement, Executive
shall not without prior written consent of the Company:
8.1.1 disclose directly or indirectly any Confidential Information to
any individual, firm, company, or other entitiy, or use any of
the Confidential Information to Executive's own-benefit;
8.1.2 contact or solicit, directly or indirectly, any of the Company's
customers, accounts, or vendors for purposes of diverting such
customers, accounts, or vendors to Executive's benefit or for the
benefit of any individual, entity, or person (other than the
Company) which is engaged or intends to engage in the same or
substantially the same businesses) in which the Company is then
engaged.
8.1.3 engage in any business in which the Company is then engaged, or
otherwise compete with the Company in any manner in the markets
in which the Company operates in the United States and Canada;
8.1.4 offer employment to any present employee of the Company or offer
any independent Contractor relationship to any contractor of the
Company.
IX. REPRESENTATION
9.1 Executive represents and warrants that Executive is free to enter into
this Agreement and that Executive is not a party to or otherwise bound by
any other contracts preventing full performance of Executive's duties
hereunder.
X. INDEMNIFICATION
10.1 The Company agrees to indemnify Executive to the maximum extent permitted
by the corporate laws of the State of Ohio including all amendments
thereto, if such are applicable; subject, however, to the limitations of
other applicable laws, if any.
XI. ENTIRE AGREEMENT/BINDING EFFECT
11.1 This Agreement contains the entire agreement of the parties and supersedes
all prior understandings and agreements between the parties with respect to
the subject matter hereof. This Agreement shall be binding upon the legal
representatives, heirs, distributees, successors and assigns of the parties
and may not be changed orally but only by a writing signed by the parties.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any
subsequent breach by that same party. This Agreement shall be governed by
the laws of the State of Ohio.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to
be executed the day and year first above written.
EXECUTIVE: DIRECT Rx, INC.
/s/ Jugal K. Taneja By: /s/ Dr. Kotha S. Sekharam
- -------------------------------------- -------------------------------------
Jugal K. Taneja Dr. Kotha S. Sekharam, President
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into on July 15, 1997, by and between
DIRECT Rx, INC. and Ohio corporations (the "Company"), and DR. KOTHA S.
SEKHARAM ("Executive") currently holding the position of President.
WITNESSETH:
WHEREAS, the Company believes that the attraction and retention of key
employees such as Executive is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Executive as its President and
Executive desires to accept such employment, all on the terms and conditions as
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and covenants set forth
in this Agreement, the parties hereto agree as follows:
I. TERM
1.1 The Company hereby employs Executive and Executive hereby accepts
employment by the Company for a period of two years beginning on the date
of this Agreement, subject to the terms and conditions contained in this
agreement. This Agreement will be renewed automatically thereafter for
successive periods of one year, unless not less than thirty days prior to
the end of the initial two year period or prior to the end of any one year
renewal period, one of the parties sends written notice to the other party
of its intent to terminate this Agreement at the end of such period.
II. DUTIES
2.1 Executive shall hold the office of and shall function as President. In
such capacities, Executive will supervise the Company's research and
production operations and report to the Board of Directors.
III. BASE SALARY
3.1 As compensation for the services to be rendered by Executive hereunder and
all services as an officer of the Company, the Company agrees to pay or
cause to be paid to Executive an annual base salary of not less than
Seventy-five Thousand Dollars ($75,000), payable in equal bi-weekly
installments in accordance with the Company's standard payroll schedule.
Executive's base salary shall be increased annually by an amount to be
determined in the sole discretion of the Board of Directors based upon the
Boards's review of Executive's individual performance and the financial
performance of the Company.
<PAGE> 2
3.2 This salary is based on the assumption that Executive continues to
accept the responsibilities assigned to him by the Board of Directors,
meets the Company's goals agreed to by the Executive and the Board of
Directors, and continues to satisfactorily perform the duties of
President, as presented in this Agreement and as indicated to the Board
of Directors.
IV. PERFORMANCE BONUS AND STOCK OPTIONS
4.1 As additional compensation, Executive shall receive an annual bonus in
the first year of this Agreement as determined in the sole discretion
of the Board of Directors based upon the Board's evaluation of
Executive's individual performance and the financial performance of
the Company.
4.2 Executive shall receive an annual bonus in the second year of this
Agreement in an amount to be determined as set forth below, with any
such amount to be subject to an increase or decrease as determined by
the Board of Directors based upon the Board's evaluation of
Executive's individual performance and the financial performance of
the Company:
4.2.1 Two and one-half percent (2.5%,) of income before federal and
state income taxes, and
4.2.2 Two percent (2%) of annual revenues exceeding the "Base".
Executive's bonus for Year 2 will have a base equal to the total
audited revenues for Year 1. Subsequent years will be
calculated in the same manner.
4.3 The bonus shall be paid to Executive, or Executive's designee, as soon
as practicable following the close of the Company's fiscal year and
the preparation of the Company's financial statements. This bonus
shall continue as long as Executive is employed by the Company. Upon
termination of Executive's employment, Executive shall recieve a pro
rata amount of this Bonus through the date of such termination.
4.4 Subject to the grant and approval of the Board of Directors, Executive
shall be eligible for the grant of stock option to purchase additional
common shares of the Company at such times and on such terms as shall
be determined by the Board of Directors.
V. FULL TIME
5.1 Executive agrees to devote 100* of his professional time, attention
and energies during each normal business day to the performance of the
business of the Company, except as may otherwise be authorized by
the Board of Directors, or except for minor personal matters.
VI. FRINGES
6.1 Executive shall be entitled to vacations, health care benefits, fringe
benefits and
<PAGE> 3
reimbursement for reasonable out-of-pocket expenses, including but not
limited to those hereinafter detailed, in accordance with the Company's
practices covering executive personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any,
applicable to particular benefits. Such benefits shall include:
6.1.1 Health Insurance coverage with major medical, dental and
disability insurance benefits equal to those benefits available
to employees; the Company will pay 100% of the monthly premiums
for Executive and immediate family members;
6.1.2 Reimbursement of all properly approved travel and business
related expenses normally paid by the Company. All expense
reports must be approved by the President or the Board of
Directors prior to reimbursement;
6.1.3 Paid vacation per calendar year of not more than 3 weeks unless
otherwise authorized by the Board of Directors at any time or
times selected by Executive taking into account the convenience
of the Company. Executive shall give the Board of Directors
of the Company at least 14 calendar days prior notice of
selected vacation times of one week or more. Unused vacation
time will not be cumulative from year to year unless approved
by the Board of Directors.
6.1.4 5 days paid sick leave annually;
6.1.5 A holiday on the following days with full pay: New Year's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, the Executive's birthday, one floating holiday
and such other holidays or personal days as the Company shall
declare;
VII. TERMINATION
7.1 Executive's employment by the Company may be terminated by the Company
at any time upon:
7.1.1 the death or disability of Executive (as defined below);
7.1.2 the termination of this Agreement by the Company for
justifiable cause (as defined below); or
7.1.3 a decision by the Board of Directors of the Company, in the
exercise of their reasonable business judgment, to cease to
conduct operations.
7.2 In the event that this Agreement is terminated as a result of the
Executive's death or disability, the Company shall pay to Executive or
Executive's estate or beneficiary Executive's base salary as provided
in Section III for a period of three months following the
<PAGE> 4
date of death or termination for disability as defined in 7.3.
7.3 The term "disability" shall mean the inability of Executive, due to
illness, accident, or any other physical or mental incapacity, to perform
Executive's duties in a normal manner for a period of twelve (12)
consecutive weeks or for a total of twenty (20) weeks (whether or not
consecutive) in any twelve-month period during the term of this
Agreement.
7.4 The term "justifiable cause," shall be defined as the commission by the
Executive of (a) fraud, (b) embezzlement, (c) a felony, or (d) an act
which (I)involves moral turpitude, (ii) action that brings the Company
into public disrespect or disgrace, (iii) action that injures the
goodwill of the Company, or (iv) causes material harm to its customer,
supplier, or employee relations or the operations or business prospects
of the Company (unless such act was expressly authorized or ratified by
the Board). If there is a dispute to whether or not "justifiable cause"
shall exist, the parties agree to settle the dispute by arbitration in
accordance with the commercial arbitration rules of the American
Arbitration Association and the judgment upon award of the arbitrators
may be entered in any court having jurisdiction thereof.
7.5 If Executive terminates this Agreement, Executive shall be entitled to
receive Executive's base salary earned through the date of termination by
Executive and a pro rata amount of the performance bonus and fringe
benefits, including vacation through the date of such termination. No
additional remuneration shall be payable by the Company to Executive and
the Company shall have no other obligations or liabilities to Executive,
except to the extent provided by law.
7.6 Notwithstanding any other provisions of this Agreement, the Company can
terminate Executive's employment at any time upon giving not less than
four weeks advance notice of such termination to Executive as
consideration for the Executive's covenants set forth below in Section
VIII:
7.6.1 Executive's base salary through the end of the then applicable
term of this Agreement pursuant to Section I; and
7.6.2 any bonus payable to Executive pursuant to Section IV.
VIII. NONDISCLOSURE, NONSOLICITATION AND AGREEMENT NOT TO COMPETE
8.1 Executive understands and agrees that Executive will acquire certain
confidential information regarding the Company, including, without
limitation, information concerning customers, accounts, employees;
suppliers, prices, business methods, competitive and marketing
strategies, and similar business matters, (the "Confidential
Information"). Executive further understands and agrees that use or
disclosure of the Confidential
<PAGE> 5
Information to compete, directly or indirectly, with the Company, will
result in irreparable harm and financial loss to the Company.
For a period of three (3) years after termination of this Agreement,
Executive shall not without prior written consent of the Company:
8.1.1 disclose directly or indirectly any Confidential Information
to any individual, firm, company, or other entity, or use any
of the Confidential Information to Executive's own-benefit;
8.1.2 contact or solicit, directly or indirectly, any of the
Company's customers, accounts, or vendors for purposes of
diverting such customers, accounts, or vendors to Executive's
benefit or for the benefit of any individual, entity, or
person (other than the Company) which is engaged or intends to
engage in the same or substantially the same businesses) in
which the Company is then engaged.
8.1.3 engage in any business in which the Company is then engaged,
or otherwise compete with the Company in any manner in the
markets in which the Company operates in the United States and
Canada;
8.1.4 offer employment to any present employee of the Company or
offer any independent Contractor relationship to any
contractor of the Company.
IX. REPRESENTATION
9.1 Executive represents and warrants that executive is free to enter into
this Agreement and that Executive is not a party to or otherwise bound
by any employment contracts, restrictive covenants or any other
contracts preventing full performance of Executive's duties hereunder.
X. INDEMNIFICATION
10.1 The Company agrees to indemnify Executive to the maximum extent
permitted by the corporate laws of the State of Ohio including all
amendments thereto, if such are applicable; subject, however, to the
limitations of other applicable laws, if any.
XI. ENTIRE AGREEMENT/BINDING EFFECT
11.1 This Agreement contains the entire agreement of the parties and
supersedes all prior understandings and agreements between the parties,
including but not limited to the Employment Agreement by and between
Solstice, Inc. and Dr. Kotha S. Sekharam dated September 15, 1995, with
respect to the subject matter hereof. This Agreement shall be binding
upon the legal representatives, heirs, distributees, successors and
assigns of the parties and may not be changed orally but only by a
writing signed by the parties. It is agreed that a waiver by either
party of a breach of any provision of this Agreement shall not
<PAGE> 6
operate or be construed as a waiver of any subsequent breach by that same
party. This Agreement shall be governed by the laws of the State of Ohio
IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to
be executed the day and year first above written.
EXECUTIVE DIRECT RX, INC.
/s/ Dr. Kotha S. Sekharam By: /s/ Jugal Taneja
- -------------------------------------- -------------------------------------
Dr. Kotha S. Sekharam Jugal Taneja, Chairman of the Board
<PAGE> 1
Exhibit 10.4
U.S.$100,000.00 Clearwater, Florida
May 13 , 1998
-------------
PROMISSORY NOTE
BEING INDEBTED, FOR VALUE RECEIVED, the undersigned (the "Borrower"),
promises to pay to the order of NU-WAVE HEALTH PRODUCTS, INC., a Florida
corporation (the "Lender"), or order, its successors or assigns, at its offices
at 5905-A Hampton Oaks Parkway, Tampa, FL 33610, the sum of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00), together with interest on the unpaid balance,
calculated in the manner herein stated, from the dates of disbursements until
maturity, both principal and interest being payable in lawful money of the
United States of America.
The interest charged on the unpaid balance owed pursuant to this Note is a
floating simple interest rate equal to the sum of (a) a rate which is two
percent (2%) per annum during the term of the Note (the "FIXED RATE") plus (b)
an interest rate per annum (the "FLOATING RATE") defined as the rate
periodically announced by The Wall Street Journal, from time to time as the
Prime Rate (the "Prime Rate"). The interest rate charged shall be calculated on
a daily basis and changes in the rate may occur daily. Interest shall be
calculated on a 360-day year based on actual days elapsed and shall be payable
monthly on the outstanding principal balance due and owing from time to time.
Principal together with all accrued interest thereon shall be due exactly
six (6) months from the date of this Note, without demand.
In no event shall the amount of interest due or payments in the nature of
interest payable hereunder exceed the maximum rate of interest allowed by
applicable law, as amended from time to time, and in the event any such
payment is paid by the Borrower or received by the Lender, then such excess
sums shall be credited as a payment of principal, unless the Borrower shall
notify the Lender, in writing, that the Borrower elects to have such excess sum
returned to it forthwith.
This Note may be prepaid in whole or in part at any time without payment
of premium or penalty. Any prepayments shall be applied to the last
installments due hereunder from time to time without notice to endorsers or
guarantors.
This Note is secured by Mortgage, Security Agreement, Financing Statements
and such other security or supporting documents as are executed in conjunction
with it (the "Loan Documents") between the Borrower and Lender on real and/or
personal property, improvements, furnishings, fixtures, appurtenances, and
hereditaments (the "Premises"). This Note and the Lender are entitled to all
of the benefits provided for in the Loan Documents or referred to within them,
to which Loan Documents reference is hereby specifically made and they are
hereby incorporated herein by reference for a statement of the terms and
conditions under which the due date of this Note may be accelerated.
PREPARED FOR AND RETURN TO:
Roger A. Larson, Esq.
Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.
911 Chestnut Street, Clearwater, Florida 33756
<PAGE> 2
Time is of the essence of this obligation.
In the event of either a failure to pay any monetary sum when due, or an
occurrence of any default as defined under the Loan Documents, the principal
sum above mentioned or any balance remaining unpaid shall be immediately due
and payable from the Borrower to the Lender without further notice, together
with all interest, all just and reasonable expenses, costs and disbursements,
including a reasonable attorney's fee, whether incurred for suit enforcement,
protection of the collateral or collection, whether or not suit be brought,
such attorney's fees to include those incurred in appellate and Bankruptcy
proceedings, if any. Notice, when required, shall be deemed to have been made
upon deposit in the United States mails by the Lender to the Borrower, at the
address shown beneath the signatures undersigned.
In the event this Note is accelerated pursuant to a failure to timely pay
or perform, then the entire unpaid principal shall bear interest at the maximum
rate permitted by applicable law as changed from time to time from the time
that payment or performance should have occurred. In the event a judgment is
obtained, the judgment amount shall bear interest at the default rate recited
herein or the rate of interest established by Section 55.03 Florida Statutes,
which ever is the greater, until the full amount of the judgment is collected.
The remedies of the Lender, as provided herein or in the Mortgage or any
other Loan Documents, shall be cumulative and concurrent, and may be pursued
singularly, successively or together, at the sole discretion of the Lender, and
may be exercised as often as occasion therefor shall arise. No act of omission
or commission of the Lender, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by the Lender and then only to the extent specifically recited
therein. A waiver or release with reference to any one event shall not be
construed as continuing, as a bar to, or as to a subsequent event.
Where applicable, the term Lender shall include any subsequent or
successor holder of this Note and the Loan Documents.
For and in consideration of the funding of this Note by the Lender or any
renewal or extension thereof, should any occur, the undersigned Borrower hereby
agrees to cooperate or to reexecute any and all Loan Documents deemed necessary
or desirable in the Lender's discretion, in order to correct or to adjust for
any clerical errors or omissions contained in any document executed in
connection with the loan.
WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY AGREES THAT:
(A) NEITHER THE BORROWER NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL
REPRESENTATIVE OF THE SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION OR
2
<PAGE> 3
PROCEDURE ARISING FROM OR BASED UPON THIS PROMISSORY NOTE, ANY OTHER LOAN
AGREEMENT OR ANY LOAN DOCUMENT EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS OR TO THE DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE PARTIES
THERETO;
(B) NEITHER THE BORROWER NOR THE LENDER WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE
PARTIES HERETO AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS;
(D) NEITHER THE BORROWER NOR THE LENDER HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT
BE FULLY ENFORCED IN ALL INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO
THIS TRANSACTION.
THE UNDERSIGNED ACKNOWLEDGE THAT THE LOAN EVIDENCED HEREBY IS FOR
COMMERCIAL PURPOSES ONLY AND NOT FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSE.
Florida Documentary stamps in the amount of $350 have been affixed to the
original Note and canceled.
ENERGY FACTORS, INC., a Florida corporation
By: /s/ Paul Santostasi
----------------------------------------
PAUL SANTOSTASI, CEO
6950 Bryan Dairy Rd.
Largo, FL 33776
<PAGE> 1
Exhibit 10.5
BUSINESS LOAN AGREEMENT
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
$200,000.00 06-03-1998 06-03-1999 4000044208 4A 155 809
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BORROWER: Nu-Wave Health Products, Inc. (TIN: TBO) LENDER: REPUBLIC BANK
5906-A Hampton Oaks Parkway CORPORATE BANKING/NORTH PINELLAS
Tampa, FL 33810 P.O. BOX 33008
RBC SUITE 202
ST. PETERSBURG, FL 33733
</TABLE>
THIS BUSINESS LOAN AGREEMENT between Nu-Wave Health Products, Inc. ("Borrower")
and REPUBLIC BANK ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing or extending of any Loan by Lender at all
times shall be subject to Lender's sole judgment and discretion; and (c) all
such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of June 3, 1998, and shall continue
thereafter until all indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meaning when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means Nu-Wave Health Products, Inc. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever whether created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surely, or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means REPUBLIC BANK, its successors and assigns.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether, now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" means: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the care of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens;" (e) liens and security interests which, as of the date of this
Agreement, have been disclosed and approved by the Lender in writing; and
(f) those liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net value
of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements and
<PAGE> 2
06-03-1998 BUSINESS LOAN AGREEMENT PAGE 2
LOAN NO 4000044208 (CONTINUED)
documents, whether now or hereafter existing, executed in connection with
the indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the term of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan; (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
Related Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceed, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Florida and
is validly existing and in good standing in all states in which Borrower
is doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its
businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of
any other person, regulatory authority or governmental body; and do not
conflict with, result in violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most
recent financial statement supplied to the Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed and security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing statement
under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Material Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. Except as disclosed to and acknowledged
by Lender in writing, Borrower represents and warrants that: (a) During the
period of Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release or threatened release of
any hazardous waste or substance on, under, about or from the properties by
any prior owners or occupants of the properties, or (ii) any actual or
threatened litigation or claims of any kind by any person relating to such
matters. (c) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the properties shall use, generate, manufacture,
store, treat, dispose of, or release any hazardous waste or substance on,
under, about or from any of the properties; and any such activity shall be
conducted in compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and
its agents to enter upon the properties to make such inspections and tests
as Lender may deem appropriate to determine compliance of the properties
with this section of the Agreement. Any inspections or tests made by Lender
shall be at Borrower's expense and for Lender's purposes only and shall not
be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous wastes and hazardous substances.
Borrower hereby (a) releases and waives any future claims against Lender
for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under such laws, and (b) agrees to indemnify and
hold harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or indirectly
sustain or suffer resulting from a breach of this section of the Agreement
or as a consequence of any use, generation, manufacture, storage,
treatment, disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or not the same
was or should have been known to Borrower. The provisions of this section
of the Agreement, including the obligation to indemnity, shall survive the
payment of the indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any interest
in any of the properties, whether by foreclosure or otherwise.
<PAGE> 3
06-03-1998 BUSINESS LOAN AGREEMENT PAGE 3
LOAN NO 4000044208 (CONTINUED)
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of
the Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYMENT BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has designated otherwise
in writing this location is also the office or offices where Borrower keeps
its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understanding and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force
and effect until such time as Borrower's indebtedness shall be paid in full
or until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceeding
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower of the financial
condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at
all reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, aging of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon
request to Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans. Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN FEES AND CHARGES. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligation, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties
long as (a) the legality of the same shall be contested in good faith by
corporate proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax, charge,
levy, lien, or claim in accordance with generally accepted accounting
practices. Borrower, upon demand of Lender, will furnish to Lender evidence
of payment of the assessments, taxes, charges, levies, liens and claims and
will authorize the appropriate governmental official to deliver to Lender
at any time a written statement of any assessments, taxes, charges, levies,
liens and claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experiences as the present executive
<PAGE> 4
06-03-1998 BUSINESS LOAN AGREEMENT Page 4
Loan No 4000044208 (Continued)
and management personnel: provide written notice to Lender of any change
in executive and management personnel: conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act
and with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party
to permit Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request, all at
Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the certificate and further certifying that, as of the date
of the certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part
or on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities: shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c)
pay any dividends on Borrower's stock (other than dividends payable in
(its stock), provided, however that notwithstanding the foregoing, but
only so long as no Event of Default has occurred and is continuing or
would result from the payment of dividends, if Borrower is a "Subchapter S
Corporation" (as defined in the Internal Revenue Code of 1986, as
amended). Borrower may pay cash dividends on its stock to its shareholders
from time to time in amounts necessary to enable the shareholders to pay
income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their
status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital
structure. Other than those previously disclosed in Bank.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money
or assets. (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if: (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that Borrower
or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is
adjudged a bankrupt: (c) there occurs a material adverse change in Borrower's
financial condition, in the financial condition of any Guarantor, or in the
value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the
Loan or any other loan with Lender, or (e) Lender in good faith deems itself
insecure, even though no Event of Default shall have occurred.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts. Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's
or any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to Create a valid and perfected Security interest) at
any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout or the commencement of any
<PAGE> 5
06-03-1998 BUSINESS LOAN AGREEMENT PAGE 5
Loan No 4000044208 (Continued)
processing under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on
or of any of Borrower's deposit accounts with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor of
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the indebtedness. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sale discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement.
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED
BY LENDER IN THE STATE OF FLORIDA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
PINELLAS COUNTY, THE STATE OF FLORIDA. LENDER AND BORROWER HEREBY WAIVE
THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF FLORIDA.
CAPTION HEADINGS. Caption Headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interest may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation reasonable attorneys' fees, incurred
in connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that amount.
This includes, subject to any limits under applicable law, Lender's
reasonable attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including reasonable attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collections
services. Borrower also will pay any court costs, in addition to all other
sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party whom the
notice is to be given at the address shown above. Any party may change its
address for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute notice to
all Borrowers. For notice purposes, Borrower will keep Lender informed at
all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person of
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offering provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
<PAGE> 6
BUSINESS LOAN AGREEMENT Page 6
(Continued)
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made
by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and ?Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any obligations of Borrower or of any Grantor as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent in subsequent instances where such
consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JUNE
3, 1998.
BORROWER:
Nu-Wave Health Products, Inc.
By: /s/ Kotha S. Sekharam, President 6/3/98
--------------------------------------------
Kotha S. Sekharam, President
LENDER:
REPUBLIC BANK
By: /s/ William Tsukalas
--------------------------------------------
Authorized Officer
<PAGE> 7
REPUBLIC BANK
PROMISSORY NOTE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$200,000.00 06-03-1998 06-03-1999 400004 4208 4A 155 809
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular ican or item.
Borrower: Nu-Wave Health Products, Inc. (TIN: TBD) Lender: REPUBLIC BANK
5905-A Hampton Oaks Parkway CORPORATE BANKING/NORTH PINELLAS
Tampa, FL 33810 P.O. BOX 33008
RBC SUITE 202
ST. PETERSBURG, FL 33733
=====================================================================================================
PRINCIPAL AMOUNT: $200,000.00 INTEREST RATE: 4.080% DATE OF NOTE: June 3, 1998
</TABLE>
PROMISE TO PAY. Nu-Wave Health Products, Inc. ("Borrower") promises to pay to
REPUBLIC BANK ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Two Hundred Thousand and 00/100 Dollars
($200,000,00) or so much as may be outstanding, together with interest at the
rate of 4.080% per annum on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on June 3, 1999. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
July 3, 1998, and all subsequent interest payments are due on the same day of
each month after that. Interest on this Note is computed on a 365/365 simple
interest basis; that is, by applying the ratio of the annual interest rate over
the number of days in a year, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid collection costs
and any late charges, then to any unpaid interest, and any remaining amount to
principal.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
LATE CHARGE. If a late payment is 10 DAYS OR MORE LATE, Borrower WILL BE CHARGED
5.000% OF THE REGULARLY SCHEULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within,
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sold discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the interest rate on this Note to 18.000% per annum,
if an to the extent that the increase does not cause the interest rate to
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender the amount of these costs and expenses, which includes, subject
to any limits under applicable law, Lender's reasonable attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including reasonable
attorney's fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF FLORIDA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF PINELLAS COUNTY, THE
STATE OF FLORIDA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.
RIGHT OF SET OFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to Borrower's accounts
with Lender (whether checking, saving, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant or a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by a Commercial Pledge Agreement form Nu-Wave
Health Products, Inc. to Lender executed simultaneously herewith.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advance under
this Note may be requested only in writing by Borrower or any authorized
person. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advance under the line of
credit until Lender receives from Borrower at Lender's
<PAGE> 8
Page 2
06-03-1998 PROMISSORY NOTE
Loan No 4000044208 (Continued)
address shown above written notice of revocation of their authority: Kotha S.
Sekharam, President. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Florida
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be returned
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
Nu-Wave Health Products, Inc.
By: /s/ Kotha S. Sekharam
---------------------------------------
Kotha S. Sekharam, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF NU WAVE HEALTH AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 245,953
<SECURITIES> 0
<RECEIVABLES> 227,329
<ALLOWANCES> (33,500)
<INVENTORY> 296,642
<CURRENT-ASSETS> 756,916
<PP&E> 225,547
<DEPRECIATION> 19,085
<TOTAL-ASSETS> 976,733
<CURRENT-LIABILITIES> 583,112
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 134,147
<TOTAL-LIABILITY-AND-EQUITY> 976,933
<SALES> 2,368,285
<TOTAL-REVENUES> 2,358,285
<CGS> 1,826,665
<TOTAL-COSTS> 1,826,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,272
<INCOME-PRETAX> 11,718
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,718
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
