SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-23031
DYNAMIC HEALTH PRODUCTS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
STATE OF FLORIDA 34-1711778
- - ------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6950 BRYAN DAIRY ROAD, LARGO, FLORIDA 33777
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (727) 544-8866
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
The number of shares outstanding of the Issuer's common stock at $.01 par value
as of November 13, 1998 was 2,874,515 (exclusive of Treasury Shares).
<PAGE>
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 35,973 $ 143,770
Accounts receivable, net 1,421,772 426,956
Inventory, net of allowance 1,811,800 263,435
Prepaids and other current assets 209,331 6,978
----------- -----------
Total current assets 3,478,876 841,139
----------- -----------
Property, plant and equipment, at cost, net 2,190,331 126,072
Deposits 104,801 16,467
Investment in LLC 5,000 --
Intangible assets, net 2,723,083 709,622
----------- -----------
TOTAL ASSETS $ 8,502,091 $ 1,693,300
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,628,219 $ 673,814
Other payables 90,975 1,648
Interest payable 13,018 4,699
Notes payable 69,662 --
Credit line payable 630,000 --
Related party notes payable 553,700 143,324
Unearned revenue 97,102 36,643
Current portion of long-term liabilities 395,083 --
----------- -----------
Total current liabilities 3,477,759 860,128
----------- -----------
Long-term liabilities:
Interest payable 12,687 --
Capital lease obligations 401,234 7,590
Notes payable 275,226 --
Mortgages payable 1,150,262 --
Minority interest in subsidiary 78,400 --
Current portion of long-term liabilities (395,083) --
----------- -----------
Total long-term liabilities 1,522,726 7,590
----------- -----------
TOTAL LIABILITIES 5,000,485 867,718
----------- -----------
Shareholders' equity:
Common stock, at par value 28,745 22,333
Series A Convertible Preferred stock,
at face value 1,550,000 --
Series B 6% Cumulative Convertible
Preferred stock, at face value 550,000 --
Additional paid-in capital 1,985,808 1,604,867
Accumulated deficit (859,783) (853,698)
Net income 246,836 52,080
----------- -----------
NET SHAREHOLDERS' EQUITY 3,501,606 825,582
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,502,091 $ 1,693,300
=========== ===========
See notes to consolidated financial statements
- 2 -
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Distributor sales $ 6,912,297 $ 2,079,264 $ 12,712,200 $ 3,639,551
Manufacturing 1,144,279 397,865 2,058,823 782,191
Other revenues 58,632 -- 58,632 --
------------ ------------ ------------ ------------
TOTAL REVENUES 8,115,208 2,477,129 14,829,655 4,421,742
------------ ------------ ------------ ------------
Cost of goods sold:
Distributor sales 6,697,668 2,010,507 12,254,398 3,529,953
Manufacturing 765,588 292,793 1,362,312 522,111
Other revenues 10,877 -- 10,877 --
------------ ------------ ------------ ------------
TOTAL OF COST OF GOODS SOLD 7,474,133 2,303,300 13,627,587 4,052,064
------------ ------------ ------------ ------------
GROSS PROFIT 641,075 173,829 1,202,068 369,678
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 627,592 165,705 934,096 327,081
------------ ------------ ------------ ------------
OPERATING INCOME BEFORE
OTHER INCOME AND EXPENSE 13,483 8,124 267,972 42,597
Other income (expense):
Interest income 3,184 -- 6,443 --
Gain on involuntary conversion of land 81,192 -- 81,192 --
Other income and expenses, net 13,786 9,608 20,140 22,636
Interest expense (98,293) (7,749) (128,912) (13,153)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (131) 1,859 (21,136) 9,483
------------ ------------ ------------ ------------
NET INCOME 13,352 9,983 246,836 52,080
Accrued preferred share dividends 3,483 -- 3,483 --
------------ ------------ ------------ ------------
NET INCOME AVAILABLE
TO COMMON SHAREHOLDERS $ 9,869 $ 9,983 $ 243,353 $ 52,080
============ ============ ============ ============
Basic income per share $ -- $ 0.01 $ 0.12 $ 0.09
============ ============ ============ ============
Basic weighted number of
common shares outstanding 2,774,515 685,074 1,974,094 551,394
============ ============ ============ ============
Diluted income per share $ -- $ 0.01 $ 0.11 $ 0.09
============ ============ ============ ============
Diluted weighted number of
common shares outstanding 3,084,515 685,074 2,200,927 551,394
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
- 3 -
<PAGE>
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 246,836 $ 52,081
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 94,466 12,610
Changes in operating assets and liabilities:
Accounts receivable (466,257) (262,359)
Inventory (494,770) (116,408)
Prepaid expenses (74,020) 8,450
Accounts payable and accrued expenses (479,637) 312,824
Unearned revenue (87,675) 4,454
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,261,057) 11,652
----------- -----------
Cash flows from investing activities:
Deposits (64,672) (4,179)
Purchases of property and equipment (159,946) (29,665)
Involuntary conversion of land 17,908 --
Decrease (increase) in intangible assets (6,544) (325)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (213,254) (34,169)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 577,219 47,097
Proceeds from shareholder loans 223,000 --
Distributions to stockholders (108,503) --
Proceeds from issuance of common stock 50,000 --
Proceeds from issuance of preferred stock 550,000 --
Principal payments of debt and capital lease obligations (237,952) (100,638)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,053,764 (53,541)
----------- -----------
NET INCREASE (DECREASE) IN CASH (420,547) (76,058)
CASH AT BEGINNING OF PERIOD 456,520 219,828
----------- -----------
CASH AT END OF PERIOD
$ 35,973 $ 143,770
=========== ===========
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
Supplemental cash flow information:
Cash paid during the period for interest $ 103,979 $ 5,166
Supplemental schedule of non-cash financing activities:
Capital lease obligations incurred for purchase of
property and equipment $ 56,147 $ 9,007
Acquisition of minority interest through
issuance of common stock $ -- $ 10,000
Conversion of related party notes payable and
accrued interest to common stock $ 81,331 $ 85,123
Acquisition of Energy Factors, Inc. through
issuance of 310,000 shares of preferred stock $1,550,000 $ --
Acquisition of Becan Distributors, Inc. through
issuance of 1,500,000 shares of common stock $2,250,000 $ --
Acquisition of J. Labs, Inc. through
issuance of 100,000 shares of common stock $ 150,000 $ --
</TABLE>
See notes to consolidated financial statements
-5-
<PAGE>
Dynamic Health Products, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1998
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instruction to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month and six
month periods ended September 30, 1998 and 1997 are not necessarily indicative
of the results that may be expected for the year ending March 31, 1999. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's Form 10-KSB for the year ended March 31,
1998.
NOTE B-ACQUISITIONS AND DISPOSITIONS
On June 15, 1998, the Company acquired legal title to the net assets
of Energy Factors, Inc. In exchange for the capital stock in Energy Factors,
Inc., 310,000 shares of Series A Convertible Preferred Stock of the Company
were issued to the shareholders of Energy Factors, Inc. The transaction was
accounted for as a purchase.
The aggregate cost of this acquisition was as follows:
Assumption of liabilities $2,874,000
Issuance of preferred stock 1,550,000
----------
$4,424,000
==========
The aggregate purchase price was allocated as follows:
Accounts receivable $ 26,000
Inventory 575,000
Property, plant and equipment 1,925,000
Other assets 75,000
Goodwill 1,823,000
----------
$4,424,000
==========
-6-
<PAGE>
On June 26, 1998, the Company acquired all of the issued and
outstanding capital stock of Becan Distributors, Inc. in exchange for
1,500,000 new shares of common stock of the Company. The merger was accounted
for as a combination of entities under common control and treated as if a
"pooling of interests". The merger resulted in goodwill of approximately
$700,000 due to the acquisition of the minority interest. The financial
statements have been retroactively adjusted to reflect the results of Becan
Distributors, Inc. for all periods presented.
The Company also made other immaterial acquisitions during the three
months ended September 30, 1998. The results of operations of the acquired
companies are included in the accompanying consolidated financial statements
since the respective date of acquisition.
NOTE C-PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include
the accounts of Dynamic Health Products, Inc. ("DHP") and its subsidiaries,
Innovative Health Products, Inc. ("IHP"), Becan Distributors, Inc. ("Becan") and
its subsidiary Discount Rx, Inc. ("Discount"), Incredible Products of Florida,
Inc. ("IP"), and J.Labs, Inc. ("JL") (collectively the "Company"). All
intercompany balances and transactions have been eliminated.
NOTE D-STOCKHOLDERS' EQUITY
On August 11, 1998, upon the filing by the Company of Articles of
Amendment to its Articles of Incorporation, a one-for-three reverse stock split
of the Common Stock of the Company was effected. The accompanying unaudited
condensed consolidated financial statements have been retroactively restated, as
of September 30, 1997, to reflect the one-for-three reverse stock split. In
conjunction with the reverse stock split, the effect of the elimination of
fractional shares (which are being cashed out at $1.50 per new share) is not
reflected in the accompanying condensed consolidated financial statements.
The Company has adopted Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic
earnings per common share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share gives effect to convertible preferred
shares which are considered to be dilutive common stock equivalents. Earnings
per share was retroactively restated, as of September 30, 1997, to reflect FASB
No. 128.
Series B 6% Cumulative Convertible Preferred Stock shareholders are
entitled to cumulative annual dividends, from the date of issuance, payable
annually in arrears. The Company may make dividend payments on the Preferred
Stock in cash or by delivery of fully paid nonassessable shares of common stock
of the Company, or through a combination thereof.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Months and Six Months ended September 30, 1998 and September 30, 1997
Sales are recognized at the time the product is shipped. Net sales are
net of discounts, allowances, and returns and credits. Distributor sales
increased 232% and 249%, or $4,833,033 and $9,072,649, to $6,912,297 and
$12,712,200 for the three months and six months ended September 30, 1998, as
compared to $2,079,264 and $3,639,551 in the three months and six months ended
September 30, 1997. The increase was due to increased sales with existing
customers and expansion of the customer base resulting from increased marketing
efforts. Manufacturing sales increased 188% and 163%, or $746,414 and
$1,276,632, to $1,144,279 and $2,058,823, as compared to $397,865 and $782,191
in the corresponding period. The increase was primarily attributable to
increased volume of the Company's private label sales resulting from continued
expansion of marketing efforts and the introduction of new products. Other
revenues of $58,632 were attributable to direct marketing efforts of Incredible
Products of Florida, Inc., a 51% owned subsidiary of the Company, incorporated
on August 20, 1998.
Gross profit from distributor sales increased 212% and 318%, or
$145,872 and $348,204, to $214,629 and $457,802 for the three months and six
months ended September 30, 1998, as compared to $68,757 and $109,598 in the
three months and six months ended September 30, 1997. Gross profit from
manufacturing increased 260% and 168%, or $273,619 and $436,431, to $378,691 and
$696,511, as compared to $105,072 and $260,080 in the corresponding period.
Gross profit from other revenues was $47,755. Gross margin from distributor
sales decreased to 3.11% for the three months ended September 30, 1998 from
3.31% for the three months ended September 30, 1997. The decline was primarily
attributable to an increase in the mix of sales, which yields a lower gross
margin. For the six months ended September 30, 1998, the gross margin from
distributor sales increased to 3.60% from 3.01% in the corresponding period.
Gross margin from manufacturing increased to 33.09% and 33.83% for the three
months and six months ended September 30, 1998, from 26.41% and 33.25% in the
corresponding period. Gross margin from other revenues was 81.45%.
Selling, general and administrative expenses consist primarily of
advertising and promotional expenses, personnel costs related to general
management functions, finance, accounting and information systems, payroll
expenses and sales commissions, professional fees related to legal, audit and
tax matters, and depreciation and amortization expense. Selling, general and
administrative expenses increased 279% and 186%, or $461,887 and $607,015, to
$627,592 and $934,096 for the three months and six months ended September 30,
1998, as compared to $165,705 and $327,081 in the corresponding period. The
increase was primarily due to additional advertising, promotional and payroll
expenses to support increased net sales and the Company's growth, as well as
additional amortization of goodwill and depreciation of fixed assets associated
with the June 15, 1998 acquisition of IHP and the June 26, 1998 acquisition of
Becan. As a percentage of net sales, selling, general and administrative
expenses increased to 7.73% for the three months ended September 30, 1998 from
6.69% for the three months ended September 30, 1997, and decreased to 6.30% for
the six months ended September 30, 1998 from 7.40% in the corresponding period.
-8-
<PAGE>
Interest expense, net of interest income, increased $87,360 and
$109,316, to $95,109 and $122,469 for the three months and six months ended
September 30, 1998, from $7,749 and $13,153 for the three months and six months
ended September 30, 1997. The increase was a result of increased borrowings to
finance the purchase of additional machinery and equipment and to make necessary
plant modifications, and for financing of additional working capital needs with
the June 15, 1998 acquisition of IHP.
The Company had no income tax expenses for the three months and six
months ended September 30, 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 for the three
months and six months ended September 30, 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.
Although in the opinion of the management of the Company, the above
data reflects positive information concerning the present operations of the
Company, there can be no assurance that the Company's results of operations will
continue to the same extent or in the same manner as reflected above.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations through funds from
operations and loans from within the Company. The Company had working capital of
($1,117) at September 30, 1998, as compared to ($18,989) in working capital at
September 30, 1997. The decrease was primarily due to an increase in accounts
payable and accrued expenses, an increase in a credit line, and an increase in
current portion of long-term liabilities as a result of the IHP acquisition.
Net cash used in operating activities was ($1,261,057) for the six
months ended September 30, 1998 as compared to net cash provided by operating
activities of $11,652 for the six months ended September 30, 1997. The usage of
cash is primarily attributable to an increase in accounts receivable ($466,257),
as a result of increased sales by the Company during such period, and an
increase in inventory ($494,770), an increase in prepaid expenses ($74,020), an
increase in accounts payable and accrued expenses ($479,637), and an increase in
unearned revenue ($87,675), primarily attributable to the acquisition of IHP.
Net cash used in investing activities was ($213,254), representing the
purchase of property and equipment, plant modifications, and the acquisition of
other assets, offset by a decrease representing an involuntary conversion of
land $17,908.
Net cash provided by financing activities was $1,053,764 representing
proceeds from issuance of preferred stock, proceeds of long-term debt, capital
lease obligations, and borrowings on lines of credit, proceeds from shareholder
loans, offset by repayments of debt and capital lease obligations ($128,752).
Management is hopeful liquidity and capital difficulties will be
resolved but provides no assurance. The Company expects to meet its cash
requirements from operations, current cash reserves, and existing financial
arrangements. In addition, the Company has initiated a Private Placement
offering
-9-
<PAGE>
of a maximum of 800,000 shares of Series B 6% Cumulative Convertible
Preferred Stock, par value $.01 per share, for $2.50 per share, but provides no
assurance as to the success of the offering.
In 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
$1.50 per new 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.
On March 16, 1998, Becan Distributors, Inc. established a bank line of
credit. The principal amount of the note is $700,000. The note bears interest at
1% plus the Prime Rate of the Bank per annum on the unpaid outstanding principal
of each advance payable monthly. The due date is March 1, 1999. The note or any
portion thereof may be prepaid without penalty. This line of credit is secured
by a blanket lien on all business assets of Becan and is also secured by
personal guarantees from the Company's Chairman of the Board, and the Company's
Chief Executive Officer.
In May 1998, 100,000 shares of common stock of the Company were sold to
a non-affiliated third party investor at $.50 per old share, for gross proceeds
of $50,000. Proceeds were used for capital expenditures and plant modifications.
On May 13, 1998, the Company loaned $100,000 to IHP, formerly Energy
Factors, Inc. for the purpose of assisting Energy Factors with its working
capital needs. The company has since acquired Energy Factors.
On May 29, 1998, notes payable to related parties of $81,331.80,
including principal and unpaid accrued interest were converted to 813,318 old
shares of common stock of the Company.
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.
Effective June 15, 1998, the Company acquired legal title to the net
assets of IHP, formerly Energy Factors, Inc., in exchange for 310,000 shares of
Series A Convertible Preferred Stock in the Company.
Effective June 26, 1998, the Company acquired all of the issued and
outstanding capital stock of Becan Distributors, Inc. in exchange for 1,500,000
new shares of common stock in the Company.
-10-
<PAGE>
In August, 1998, 220,000 shares of Series B 6% Cumulative Preferred
Stock of the Company were sold to non-affiliated third party investors at $2.50
per share, for gross proceeds of $550,000. Proceeds were used for the initial
capitalization of Discount and IP, and for repayment of debt associated with
IHP.
Effective August 20, 1998, the Company caused the formation of
Incredible Products of Florida, Inc., a Florida corporation. Pursuant to an
Agreement to Fund Subsidiary, dated September 1, 1998, the Company agreed to
contribute $160,000 in capital to IP in exchange for 51 shares of common stock
of IP, representing 51% interest in IP.
Effective September 30, 1998, the Company acquired all of the issued
and outstanding capital stock of J.Labs, Inc. in exchange for 100,000 shares of
common stock in the Company.
On November 12, 1998, Becan and its subsidiary, Discount (collectively
"BecanD") obtained a commitment for a $2,000,000 line of credit to provide
additional working capital for BecanD to support its continued growth. The line
of credit is to be secured by a blanket lien on all business assets of BecanD
and is also secured by personal guarantee from the Company's Chairman of the
Board.
The Company is also in the process of negotiating a line of credit to
refinance the building and equipment of the Company, and to provide for
additional working capital in support of Inventory, Accounts Receivable, and
general business growth, but provides no assurance as to the success of
establishing the line of credit.
-11-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time the Company is subject to litigation incidental to
its business. Such claims, if successful, could exceed applicable insurance
coverage. The Company is not currently a party to any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
The Company filed Articles of Amendment to Articles of Incorporation of
Nu-Wave Health Products, Inc. on August 11, 1998 to increase its authorized
shares to 20,000,000 shares of common stock, $.01 par value and 2,000,000 shares
of preferred stock, $.01 par value and to effectuate a one-for-three reverse
stock split such that each three (3) shares of currently issued and outstanding
common stock shall be converted into one (1) share of common stock, $.01 par
value per share.
In August, 1998, following the one-for-three reverse stock split,
1,500,000 shares of common stock of the Company were issued pursuant to the
Agreement and Plan of Reorganization dated June 26, 1998, effective June 26,
1998 for the exchange of shares for the acquisition of Becan Distributors, Inc.
In August, 1998, following the one-for-three reverse stock split,
310,000 shares of Series A Convertible Preferred Stock of the Company were
issued pursuant to the Agreement and Plan of Reorganization dated June 12, 1998,
effective June 15, 1998 for the acquisition of Energy Factors, Inc.
In August, 1998, 220,000 shares of Series B 6% Cumulative Convertivle
Preferred Stock of the Company were sold to non-affiliated third party investors
at $2.50 per share, for gross proceeds of $550,000. Proceeds were used for the
initial capitalization of Discount and IP, and for repayment of debt associated
with IHP.
ITEM 3. - NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Nu-Wave Health Products, Inc., held a meeting of its shareholders on
July 2, 1998, at the offices of the corporation, 5905-A Hampton Oaks Parkway,
Tampa, FL 33610 for approval of amendment to its Articles Of Incorporation to
increase its authorized shares, to authorize the one-for-three reverse stock
split, and to amend its Articles of Incorporation to change the name of the
Company to Dynamic Health Products, Inc. Present in person and/or by proxy were
persons holding 2,278,553 shares of common stock of the corporation, which
represented 59.6% of the issued and outstanding stock. There was therefore a
quorum present. The amendment of Articles Of Incorporation of the Company was
unanimously approved by all of the shareholders present holding 2,278,553 shares
of the common stock of Nu-Wave Health Products, Inc.
Pursuant to Section 607.0704 of the Florida Business Corporation Act,
the Company gave notice to those shareholders who had not consented in writing
to the matters described herein.
-12-
<PAGE>
Pursuant to Articles of Amendment to Articles of Incorporation of
Nu-Wave Health Products, Inc. filed August 11, 1998, the Articles of
Incorporation were amended to authorize 20,000,000 shares of common stock, $.01
par value and 2,000,000 shares of preferred stock, $.01 par value and to
effectuate a one-for-three reverse stock split, and to change the name of the
Company to Dynamic Health Products, Inc.
ITEM 5. OTHER INFORMATION.
The Company has filed Form 15C211 with NASDAQ and is in the process of
listing its outstanding common stock on Pink Sheets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
The following exhibits are filed with this report:
2.1 Agreement and Plan of Reorganization dated June 12, 1998, effective
June 15, 1998, by and among Nu-Wave Health Products, Inc., Nu-Wave
Acquisition, Inc., Energy Factors, Inc., U.S. Diversified Technologies,
Inc., Paul Santostasi, Chris Starkey, and Marvin Deutsch. (2)
2.2 Agreement and Plan of Reorganization dated June 26, 1998, effective
June 26, 1998, by and between Nu-Wave Health Products, Inc., buyer, and
Manju Taneja, Mihir K. Taneja, Mandeep K. Taneja, William LaGamba
custodian for Anthony LaGamba, William LaGamba custodian for Nicholl
LaGamba, William LaGamba custodian for Courtney LaGamba, Michele
LaGamba, and Phillip J. Laird and William LaGamba, each individually a
seller, each of which is a stockholder of Becan Distributors, Inc. (2)
2.3 Agreement to Fund Subsidiary dated September 1, 1998, by and between
Dynamic Health Products, Inc., Incredible Products of Florida, Inc.,
and Gary A. Shawkey.
2.4 Agreement and Plan of Reorganization dated September 1, 1998, by and
between Incredible Products of Florida, Inc., buyer and Gary A.Shawkey,
seller.
2.5 Agreement to Exchange Shares dated September 1, 1998, by and between
the Company and Gary A. Shawkey.
2.6 Stock Purchase Agreement dated September 30, 1998, by and among Dynamic
Health Products, Inc. and J. Labs, Inc.
3.1 Articles of Incorporation of Nu-Wave Acquisition, Inc., dated June 11,
1998 and filed June 12, 1998. (2)
3.2 Articles of Amendment to Articles of Incorporation of Dynamic Health
Products, Inc., dated July 22, 1998 and filed July 23, 1998. (2)
3.3 Articles of Amendment to Articles of Incorporation of Nu-Wave Health
Products, Inc., dated August 10, 1998. (2)
-13-
<PAGE>
3.4 Articles of Incorporation of Incredible Products of Florida, Inc. dated
August 20, 1998, filed August 20, 1998.
10.1 Promissory Note in favor of the Company from Energy Factors, Inc. dated
May 13, 1998.(1)
10.2 Revolving Line of Credit Agreement between Becan Distributors, Inc. and
Mellon Bank dated March 16, 1998. (2)
10.3 Revolving Line of Credit Agreement between the Company and Republic
Bank dated June 3, 1998. (1)
27.1 Financial Data Schedule (for SEC use only).
(1) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1998, file number 0-23031,
filed in Washington, D.C.
(2) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1998, file number 0-23031, filed
in Washington, D.C.
(b) REPORTS ON FORM 8-K.
During the three months ended September 30, 1998, the Company filed no
reports on Form 8-K.
-14-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DYNAMIC HEALTH PRODUCTS, INC.
Date: November 13, 1998 By: /s/ WILLIAM L. LAGAMBA
-----------------------
William L. LaGamba
Chief Executive Officer
Date: November 13, 1998 By: /s/ CANI I. SHUMAN
--------------------
Cani I. Shuman
Chief Financial Officer
-15-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- - ------- -----------
2.3 Agreement to Fund Subsidiary dated September 1, 1998, by and between
Dynamic Health Products, Inc., Incredible Products of Florida, Inc.,
and Gary A. Shawkey.
2.4 Agreement and Plan of Reorganization dated September 1, 1998, by and
between Incredible Products of Florida, Inc., buyer and Gary A.Shawkey,
seller.
2.5 Agreement to Exchange Shares dated September 1, 1998, by and between
the Company and Gary A. Shawkey.
2.6 Stock Purchase Agreement dated September 30, 1998, by and among Dynamic
Health Products, Inc. and J. Labs, Inc.
3.4 Articles of Incorporation of Incredible Products of Florida, Inc. dated
August 20, 1998, filed August 20, 1998.
27.1 Financial Data Schedule (for SEC use only).
EXHIBIT 2.3
AGREEMENT TO FUND SUBSIDIARY
This Agreement is made this 1st day of September 1998, by and between
Dynamic Health Products, Inc., a Florida corporation ("Parent"), Incredible
Products of Florida, Inc., a Florida corporation ("Subsidiary") and Gary A.
Shawkey ("Shawkey").
Background Statements:
I. Subsidiary is currently a wholly-owned subsidiary of Parent.
II. Subsidiary is, simultaneously with the execution of this Agreement,
entering into an Employment Agreement with Shawkey.
III. Shawkey desires assurance that Subsidiary will be capitalized by
Parent in the amount of $160,000.
In consideration of the mutual covenants contained herein, together with
other good and valuable consideration, the adequacy, sufficiency and receipt of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
1. BACKGROUND STATEMENTS. The background statements set forth above are
true and correct and are incorporated herein by reference.
2. AGREEMENT TO CONTRIBUTE CAPITAL. Parent agrees to contribute to
Subsidiary $160,000 in capital to be used by Subsidiary as follows:
/bullet/ $10,000 per month for six months to cover the salary of
Shawkey.
/bullet/ $100,000 for start-up expenses and operating expenses approved
in advance by Parent, on an as-needed basis.
3. THIRD-PARTY BENEFICIARY. Shawkey is an intended third-party beneficiary
of this Agreement with respect to his salary.
4. ENTIRE AGREEMENT; MODIFICATION. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
<PAGE>
SIGNATURE PAGE TO AGREEMENT TO FUND SUBSIDIARY BETWEEN DYNAMIC HEALTH PRODUCTS,
INC., INCREDIBLE PRODUCTS OF FLORIDA, INC. AND GARY A. SHAWKEY.
Dynamic Health Products, Inc.
By: /s/ JUGAL K. TANEJA
----------------------------
as Chairman
Incredible Products of Florida, Inc.
By: /s/ JUGAL K. TANEJA
----------------------------
as Vice President
/s/ GARY A. SHAWKEY
-----------------------
Gary A. Shawkey
2
EXHIBIT 2.4
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated September
1, 1998, is by and between Incredible Products of Florida, Inc., a Florida
corporation ("Buyer"), and Gary A. Shawkey ("Seller") the sole stockholder of
Incredible Products, Inc., an Ohio corporation (the "Incredible-Ohio") and of
Gary Shawkey International, Inc., an Ohio corporation ("Shawkey Corp.").
Incredible-Ohio and Shawkey Corp. are referred to together herein as the
"Company").
RECITALS:
The Seller owns an aggregate of 100 shares of voting common stock, no
par value, of Incredible-Ohio, constituting all of the issued and outstanding
capital stock of the Company and 850 shares of voting common stock, no par
value, of Shawkey Corp., constituting all of the issued and outstanding capital
stock of Shawkey Corp. (the "Shares"). The Buyer desires to acquire all of the
Shares, and the Stockholder desires to exchange all of the Shares for 49 shares
of voting common stock, par value $.01 per Share, of the Buyer, in an exchange
that qualifies under Sections 354 and 368 of the Internal Revenue Code of 1986,
as amended.
This Agreement is being entered into for the purpose of implementing the
foregoing desires, and sets forth the terms and conditions pursuant to which the
Seller is selling to the Buyer, and the Buyer is purchasing from the Seller
solely in exchange for shares of voting common stock of the Buyer, all of the
100 issued and outstanding shares of Incredible-Ohio and the 850 issued and
outstanding shares of Shawkey Corp.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT" -- any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any of
the assets owned or used by it is or may become bound.
"BALANCE SHEET" -- as defined in Section 3.4.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not
<PAGE>
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER" -- as defined in the first paragraph of this Agreement.
"BUYER SHARES" -- as defined in Section 2.2.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing
actually takes place.
"COMPANY" -- as defined in the first paragraph of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their
respective covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Shares
and exercise of control over the Company.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 8.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
2
<PAGE>
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.22.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
3
<PAGE>
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
4
<PAGE>
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws (or regulations, for an Ohio corporation) of a
corporation; and (b) any amendment to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" -- as defined in Section 3.13.
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
5
<PAGE>
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SELLER'S RELEASE" -- as defined in Section 2.4.
"SHARES" -- as defined in the Recitals of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"TAX RETURN" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
6
<PAGE>
"THREATENED" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Seller will sell and transfer the Shares to Buyer,
and Buyer will purchase the Shares from Seller.
2.2 CONSIDERATION. In consideration of the sale and transfer of
the Shares, the Buyer will deliver in full payment for the Shares, an aggregate
of 49 shares of common stock, $.01 par value, of Buyer ("Buyer Shares"),
constituting 49% of the issued and outstanding shares of capital stock of Buyer.
2.3 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place at the offices of Buyer's counsel at 100 North
Tampa Street, Suite 1800, Tampa, FL 33602-5145 at 10:00 a.m. (Local Time) five
business days after Seller acquires ownership of all of the Shares, or at such
other time and place as the parties may agree. Subject to the provisions of
Section 7, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers), for transfer to Buyer;
(ii) a release with respect to each Company in
the form of Exhibit 2.4(a)(ii) executed by Seller ("Seller's Release"); and,
(iii) a certificate executed by Seller
representing and warranting to Buyer that each of Seller's representations and
warranties in this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by Seller to Buyer prior to the Closing Date in accordance
with Section 5.3).
7
<PAGE>
(b) Buyer will deliver to Seller a certificate
representing the Buyer Shares. Such certificate shall bear a customary
restrictive legend applicable to restricted securities issued privately.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification.
(b) Seller has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. Seller has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform his obligations
under this Agreement.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the stockholders of
the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which the Company
or Seller, or any of the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw,
8
<PAGE>
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by the Company or that otherwise relates to the business of, or any of the
assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject
to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company
to be reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by the
Company.
Neither Seller nor the Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(c) Seller is acquiring the Buyer's Shares for his own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consists of 100 shares of common stock, no par value, all of which are
issued and outstanding and constitute the Shares. Seller is or, prior to the
Closing, will be the record and beneficial owner and holder of the Shares, free
and clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act or
any other Legal Requirement. The Company does not own, nor does the Company have
any Contract to acquire, any equity securities or other securities of any Person
(other than The Company) or any direct or indirect equity or ownership interest
in any other business.
3.4 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Company is subject to that Section), including the
maintenance of an adequate system of internal controls. The minute book of the
Company contains accurate
9
<PAGE>
and complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. All of those books and records are in the
possession of the Company.
3.5 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.5 of the Disclosure
Letter contains a complete and accurate list of all real property, leaseholds,
or other interests therein owned by the Company. Seller have delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Company acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
Seller or the Company and relating to such property or interests. The Company
owns (with good and marketable title in the case of real property, subject only
to the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own located in the facilities owned or operated by the
Company or reflected as owned in the books and records of the Company. All
material properties and assets of the Company are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature. All buildings, plants, and structures owned by the
Company lie wholly within the boundaries of the real property owned by the
Company and do not encroach upon the property of, or otherwise conflict with the
property rights of, any other Person.
3.6 CONDITION AND SUFFICIENCY OF ASSETS. The equipment of the
Company is in good operating condition and repair, and is adequate for the use
to which it is being put, and none of such equipment is in need of maintenance
or repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The equipment of the Company is sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
3.7 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
that are reflected on the accounting records of the Company as of the Closing
Date (collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of reserves shown on the accounting records of the Company as of
the Closing Date (which reserves are adequate and calculated consistent with
past practice). Subject to such reserves, each of the Accounts Receivable either
has been or will be collected in full, without any set-off, within ninety days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable.
3.8 INVENTORY. All inventory of the Company consists of a quality
and quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and
10
<PAGE>
items of below-standard quality, all of which have been written off or written
down to net realizable value on the accounting records of the Company as of the
Closing Date. All inventories not written off have been priced at the lower of
cost or market on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.9 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for a lease of its space at 1951 South
Main Street, Akron, Ohio 44301.
3.10 TAXES.
(a) The Company has filed or caused to be filed (on a
timely basis) all Tax Returns that are or were required to be filed by or with
respect to it, pursuant to applicable Legal Requirements. Seller has delivered
or made available to Buyer copies of, all such Tax Returns. The Company has
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Seller or the Company.
(b) The charges, accruals, and reserves with respect to
Taxes on the books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by the Company. All Taxes that the
Company is or was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person.
(c) All Tax Returns filed by the Company are true,
correct, and complete. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement.
3.11 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of the Company, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.12 EMPLOYEE BENEFITS.
(a) As used in this Section 3.12, the following terms
have the meanings set forth below.
"COMPANY PLAN" means all Plans of which an the Company
or an ERISA Affiliate of the Company is or was a Plan Sponsor, or to which an
the Company or an ERISA
11
<PAGE>
Affiliate of the Company otherwise contributes or has contributed, or in which
an the Company or an ERISA Affiliate of the Company otherwise participates or
has participated. All references to Plans are to Company Plans unless the
context requires otherwise.
"ERISA AFFILIATE" means, with respect to an the Company,
any other person that, together with the Company, would be treated as a single
employer under IRC ss. 414.
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of IRC ss. 132.
"PENSION PLAN" has the meaning given in ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"QUALIFIED PLAN" means any Plan that meets or purports to
meet the requirements of IRC ss. 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject
to Title IV of ERISA, 29 U.S.C. ss. 1301 et seq.
"VEBA" means a voluntary employees' beneficiary
association under IRC ss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) The Company has no Plan, Company Plan, Other Benefit
Obligations, Pension Plan, Qualified Plan, Title IV Plans, VEBA or Welfare Plan.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Part 3.13 of the Disclosure
Letter:
(i) the Company is, and at all times since
December 31, 1995 has been, in full compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, or (B) may give
12
<PAGE>
rise to any obligation on the part of the Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(iii) the Company has received, at any time since
December 31, 1997, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement, or (B) any actual, alleged, possible, or potential obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(b) Part 3.13 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each Governmental Authorization listed or
required to be listed in Part 3.13 of the Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.13 of the Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1997 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.13 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.13 of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.13 of the Disclosure Letter;
(iii) the Company has not received, at any time
since December 31, 1997, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization;
and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.13 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.13 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
13
<PAGE>
3.14 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.14 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against the
Company or that otherwise relates to or may affect the business of, or any of
the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
To the Knowledge of Seller and the Company, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.14 of the Disclosure Letter. The Proceedings listed in Part 3.14 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) there is no Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(ii) Seller is not subject to any Order that
relates to the business of, or any of the assets owned or used by, the Company;
and
(iii) to the Knowledge of Seller and the Company,
no officer, director, agent, or employee of the Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the Company is, and at all times since
December 31, 1991 has been, in full compliance with all of the terms
andrequirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which the Company, or any of the assets owned or used by the Company, is
subject; and
14
<PAGE>
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
term or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is or has been subject.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth
in Part 3.15 of the Disclosure Letter, since the date of the Balance Sheet, the
Company has conducted its business only in the Ordinary Course of Business and
there has not been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least $5,000;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with
a value to the Company in excess of $5,000;
15
<PAGE>
(i) material change in the accounting methods used by
the Company; or
(j) agreement, whether oral or written, by the Company
to do any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS.
(a) Part 3.16(a) of the Disclosure Letter contains a
complete and accurate list, and Seller have delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of $5,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to one or more The
Company of an amount or value in excess of $5,000;
(iii) each Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
one or more The Company in excess of $5,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $5,000 and with terms of less than
one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
16
<PAGE>
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of the
Company or limit the freedom of the Company to engage in any line of business or
to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $5,000;
(xiii) each written warranty, guaranty, and or
other similar undertaking with respect to contractual performance extended by
the Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.16(a) of the Disclosure Letter sets forth reasonably
complete details concerning such Contracts, including the parties to the
Contracts, the amount of the remaining commitment of the Company under the
Contracts, and the Company's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.16(b) of the
Disclosure Letter:
(i) Seller (and no Related Person of Seller) has
not nor may Seller acquire any rights under, and Seller has not nor may he
become subject to any obligation or liability under, any Contract that relates
to the business of, or any of the assets owned or used by, the Company; and
(ii) to the Knowledge of Seller and the Company,
no officer, director, agent, employee, consultant, or contractor of the Company
is bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
17
<PAGE>
(c) Except as set forth in Part 3.16(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.16(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.16(d) of the
Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995 has been, in full compliance with all applicable terms and
requirements of each Contract under which the Company has or had any obligation
or liability or by which the Company or any of the assets owned or used by the
Company is or was bound;
(ii) each other Person that has or had any
obligation or liability under any Contract under which an the Company has or had
any rights is, and at all times since December 31, 1995 has been, in full
compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received
from any other Person, at any time since December 31, 1995, any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Contracts with any Person and,
to the Knowledge of Seller and the Company, no such Person has made written
demand for such renegotiation.
(f) The Contracts relating to the sale, design,
manufacture, or provision of products or services by the Company have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Legal Requirement.
3.17 EMPLOYEES.
(a) Part 3.17 of the Disclosure Letter contains a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's
18
<PAGE>
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee or director of the Company is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Seller or
the Company by any such employee or director. To Seller' Knowledge, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) Part 3.17 of the Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.18 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS -- The term
"Intellectual Property Assets" includes:
(i) the names Incredible Products and Cholest-X,
all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable (collectively, "Patents");
(iii) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor.
(b) AGREEMENTS -- Part 3.18(b) of the Disclosure Letter
contains a complete and accurate list and summary description, including any
royalties paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $5,000 under which an the Company is the licensee. There are
no outstanding and, to Seller' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
19
<PAGE>
(c) KNOW-HOW NECESSARY FOR THE BUSINESS.
(i) The Intellectual Property Assets are all
those necessary for the operation of the Company's businesses as they are
currently conducted. The Company is the owner of all right, title, and interest
in and to each of the Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 3.18(c) of the
Disclosure Letter, all former and current employees of the Company have executed
written Contracts with one or more of the Company that assign to one or more of
the Company all rights to any inventions, improvements, discoveries, or
information relating to the business of the Company. No employee of the Company
has entered into any Contract that restricts or limits in any way the scope or
type of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than one or more of the Company.
(d) TRADE SECRETS.
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
(ii) Seller and the Company have taken all
reasonable precautions to protect the secrecy, confidentiality, and value of
their Trade Secrets.
(iii) The Company has good title and an absolute
(but not necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to Seller's
Knowledge, have not been used, divulged, or appropriated either for the benefit
of any Person (other than the Company) or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
3.19 CERTAIN PAYMENTS. Since December 31, 1997, neither the
Company nor any director, officer, agent, or employee of the Company, or to
Seller's Knowledge any other Person associated with or acting for or on behalf
of the Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company or
any Affiliate of an the Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
20
<PAGE>
3.20 DISCLOSURE.
(a) No representation or warranty of Seller in this
Agreement and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.3 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to either Seller that has
specific application to either Seller or the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as either Seller can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or the Disclosure Letter.
3.21 RELATIONSHIPS WITH RELATED PERSONS. Neither Seller nor
any Related Person of Seller or of the Company has, or since the first day of
the next to last completed fiscal year of the Company has had, any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Company's business. Neither Seller nor
any Related Person of Seller or of the Company is, or since the first day of the
next to last completed fiscal year of the Company has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with the Company other than business dealings or transactions
conducted in the Ordinary Course of Business with the Company at substantially
prevailing market prices and on substantially prevailing market terms, or (ii)
engaged in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Part 3.21 of the Disclosure Letter, neither Seller nor any Related Person of
Seller or of the Company is a party to any Contract with, or has any claim or
right against, the Company.
3.22 BROKERS OR FINDERS. Seller and his agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.23 INVESTMENT INTENT. Seller is acquiring the Buyer Shares
for his own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Certificates evidencing the Buyer Shares
will bear a standard restrictive legend applicable to privately placed
securities.
21
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Buyer has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement.
(b) Except as set forth in Schedule 4.2, neither the
execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which
Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and
22
<PAGE>
hold Seller harmless from any such payment alleged to be due by or through Buyer
as a result of the action of Buyer or its officers or agents.
4.6 PERCENTAGE OF OUTSTANDING SHARES. The Buyer's Shares
constitute 49% of the issued and outstanding shares of capital stock of Buyer.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the Company and its
Representatives to, (a) afford Buyer and its Representatives full and free
access to each Acquired Company's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish Buyer with copies of all such
contracts, books and records, and other existing documents and data as Buyer may
reasonably request, and (c) furnish Buyer with such additional financial,
operating, and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the
date of this Agreement and the Closing Date, Seller will, and will cause the
Company to cease al business operations.
5.3 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Seller will promptly notify Buyer in writing if Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Seller's representations and warranties as of the date of this
Agreement, or if the Seller or the Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Seller will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, Seller will
promptly notify Buyer of the occurrence of any Breach of any covenant of Seller
in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 6 impossible or unlikely.
5.4 NO NEGOTIATION. Until such time, if any, as this Agreement
is terminated pursuant to Section 7, Seller will not, and will cause each
Acquired Company and each of their Representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
23
<PAGE>
5.5 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers will use his Best Efforts to cause the conditions in
Section 6 to be satisfied.
5.6 LEASE. Seller shall pay one-half of the lease payments for
the property located at 1951 South Main Street, Akron, Ohio 44301.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS.
(a) All of Seller's representations and warranties in
this Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter.
(b) Each of Seller's representations and warranties
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
6.2 SELLER'S PERFORMANCE.
(a) All of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered, and each of the other covenants and
obligations in Section 5.5 must have been performed and complied with in all
respects.
6.3 ACQUISITION OF OWNERSHIP OF SHARES; RELEASE. Seller shall
have acquired all of the Shares, including any shares of capital stock of the
Company which may be owned of record or beneficially by Dr. William S. Gandee
together with an executed release in the form attached hereto as Exhibit 6.3.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with,
24
<PAGE>
any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is entitled to all or any
portion of the consideration payable for the Shares.
6.6 NO PROHIBITION. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause Buyer or any Person
affiliated with Buyer to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise proposed by or before any
Governmental Body.
7. TERMINATION
7.1 TERMINATION EVENTS. This Agreement may, by notice given
prior to or at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of
any provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) by Buyer if any of the conditions in Section 6 has
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before December 31, 1998, or such later date as the parties may agree upon.
7.2 EFFECT OF TERMINATION. Each party's right of termination
under Section 7.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
7.1, all further obligations of the parties under this Agreement will terminate,
except that the obligations in Section 9.1 will survive; provided, however, that
if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
25
<PAGE>
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
8. INDEMNIFICATION; REMEDIES
8.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, and any other document delivered pursuant to
this Agreement will survive the Closing. The right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller
will indemnify and hold harmless Buyer, the Company, and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made
by Seller in this Agreement (without giving effect to any supplement to the
Disclosure Letter), the Disclosure Letter, the supplements to the Disclosure
Letter, or any other certificate or document delivered by Seller pursuant to
this Agreement;
(b) any Breach of any representation or warranty made
by Seller in this Agreement;
(c) any Breach by either Seller of any covenant or
obligation of such Seller in this Agreement;
(d) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(e) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either Seller or
the Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; and
26
<PAGE>
(f) any claim by Dr. William S. Gandee (i) to ownership
of Shares, or (ii) against Buyer or the Company.
The remedies provided in this Section 8.2 will not be exclusive
of or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer
will indemnify and hold harmless Seller, and will pay to Seller the amount of
any Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
8.4 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party
under Section 8.2 or 8.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 8.5 is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 8 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal
27
<PAGE>
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Seller hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Seller with respect to such a
claim anywhere in the world.
8.5 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
9. GENERAL PROVISIONS
9.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Seller will cause the Company
not to incur any out-of-pocket expenses in connection with this Agreement.
9.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Unless consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Seller shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Seller and Buyer will consult with each other concerning the means by
which the Company's employees, customers, and suppliers and others having
dealings with the Company
28
<PAGE>
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
9.3 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Seller: Gary A. Shawkey
3571 Potts Drive
Barberton, OH 44203
Buyer: Incredible Products of Florida, Inc.
5770 Roosevelt Blvd., Suite 700
Clearwater, FL 33760
Attention: Jugal K. Taneja
Facsimile No.: (813) 524-6610
with a copy to: Philip M. Shasteen, Esq.
Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A.
Post Office Box 1100
Tampa, FL 33601-1100
Facsimile No.: (813) 225-1857
9.4 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Florida, County of Pinellas, or, if it has or can acquire jurisdiction, in
the United States District Court for the Middle District of Florida, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
9.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
29
<PAGE>
9.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
9.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter and constitutes a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
9.8 DISCLOSURE LETTER. In the event of any inconsistency
between the statements in the body of this Agreement and those in the Disclosure
Letter (other than an exception expressly set forth as such in the Disclosure
Letter with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
9.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
9.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections
in this Agreement are provided for convenience only and will not affect its
construction or
30
<PAGE>
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.12 TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
9.13 GOVERNING LAW. This Agreement will be governed by the
laws of the State of Florida without regard to conflicts of laws principles.
9.14 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION FOR INCREDIBLE PRODUCTS
OF FLORIDA, INC. AND GARY A. SHAWKEY
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
INCREDIBLE PRODUCTS OF FLORIDA,
INC., a Florida corporation
By: /s/ JUGAL K. TANEJA
-----------------------------
Jugal K. Taneja, as President
SELLER:
/s/ GARY A. SHAWKEY
--------------------------------
Gary A. Shawkey
31
<PAGE>
SCHEDULE 4.2
Buyer Board of Directors Approval
EXHIBIT 2.5
AGREEMENT TO EXCHANGE SHARES
This Agreement to Exchange Shares is made as of September 1, 1998, by and
between Dynamic Health Products, Inc., a Florida corporation ("Dynamic") and
Gary A. Shawkey ("Shawkey").
BACKGROUND STATEMENTS:
I. Effective August 20, 1998, Dynamic caused the formation of
Incredible Products of Florida, Inc., as a Florida corporation
("Incredible-Florida").
II. Incredible-Florida issued 51 shares of its common stock to Dynamic,
which shares constitute the only issued and outstanding shares of
Incredible-Florida common stock.
III. Incredible-Florida has entered into an Agreement and Plan of
Reorganization dated September 1, 1998 which, among other things, and subject to
certain contingencies set forth therein, provides for the acquisition by
Incredible-Florida of 100% of the issued and outstanding capital stock of
Incredible Products, Inc., an Ohio corporation in return for the issuance by
Incredible-Florida to Shawkey of 49 shares of Incredible-Florida common stock.
IV. The purpose of this Agreement is to provide for an exchange by
Dynamic of 450,000 shares of its common stock (subject to reduction as provided
for below) for Shawkey's 49 shares of Incredible-Florida common stock, when
issued.
In consideration of the mutual covenants contained herein, together with
other good and valuable consideration, the adequacy, sufficiency and receipt of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
1. BACKGROUND STATEMENTS. The background statements set forth above are
true and correct and are incorporated herein by reference.
2. EXCHANGE OF SHARES. If, by March 1, 1999, Incredible-Florida has met a
target of at least $200,000 in net income during any month since inception
through March 1, 1999 (the "Target"), Dynamic will exchange on a tax-free basis,
450,000 shares of its common stock for Shawkey's 49 shares of Incredible-Florida
common stock. Such exchange shall be accomplished pursuant to an agreement in
form and substance agreeable to Dynamic and Shawkey. In the event that the
Target is not met, the number of shares of Incredible-Florida common stock to be
exchanged shall be reduced on a pro rata basis based on the shortfall of
revenues and net income below the Target. Shawkey will, prior to the issuance of
the shares provided for hereunder to him, be provided with copies of Dynamic's
publicly filed periodic reports and Shawkey will enter into a customary
investment letter with respect to such shares. Shawkey understands that such
shares will not be registered under the Securities Act of 1933 and consequently
will constitute "restricted securities" which are not publicly saleable except
pursuant to the provisions of Rule 144 of the Securities and Exchange
Commission.
<PAGE>
3. MISCELLANEOUS.
3.1 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
3.2 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
3.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
DYNAMIC HEALTH PRODUCTS,
INC., a Florida corporation
By: /s/ JUGAL K. TANEJA
--------------------------
Chairman
/s/ GARY A. SHAWKEY
-----------------------------
Gary A. Shawkey
2
EXHIBIT 2.6
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") entered into as of September 30, 1998, is by and
among Dynamic Health Products, Inc., a Florida corporation ("Purchaser"), J.
Labs, Inc., a Florida corporation ("Corporation"), and those persons who are
signatories hereto (collectively referred herein to as "Sellers").
WHEREAS, the Corporation presently has authorized a single class of common stock
of which 500,000 shares (the "Shares") have been issued to the Sellers and are
outstanding as described in Exhibit "A" hereto; and
WHEREAS, the Shares are the only issued and outstanding capital stock of the
Corporation; and
WHEREAS, Purchaser desires to purchase from Sellers and Sellers desire to sell
to Purchaser all of the Shares on the terms and subject to the conditions set
forth herein;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
SECTION 1. PURCHASE OF SHARES.
1.1 PURCHASE OF SHARES. Subject to the terms and conditions set forth herein,
simultaneously with the execution hereof by all parties, Sellers will sell all
of the Shares to Purchaser and Purchaser will purchase all of the Shares from
Sellers, said Shares constituting one hundred percent (100%) of all of the
issued and outstanding capital stock of the Corporation as of the Closing.
1.2 CONSIDERATION. In consideration of the sale of the Shares by Sellers to
Purchaser, Purchaser will issue to Sellers a total of 100,000 shares of
Purchaser's common stock, ("Purchaser's Shares"), with each Seller receiving the
number of shares set forth in Exhibit "B" hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND SELLERS. As a
material inducement to Purchaser to enter into this Agreement and purchase the
Shares, Sellers and the Corporation, jointly and severally, represent and
warrant that:
2.1 ORGANIZATION AND CORPORATE POWER. The Corporation is a corporation duly
incorporated and validly existing under the laws of the state of Florida. The
Corporation has all requisite corporate power and authority necessary to own its
properties. The copies of the Corporation's charter documents and bylaws have
been furnished to Purchaser's counsel reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete.
2.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of the
Corporation consists of 1,000,000 shares of common stock, 500,000 of which are
issued and
1
<PAGE>
outstanding and are owned, beneficially and of record, by Sellers and
no other stock of the Corporation is issued and outstanding. The Corporation
does not have outstanding and has not agreed, orally or in writing, to issue any
stock or securities convertible or exchangeable for any shares of its stock, nor
does it have outstanding nor has it agreed, orally or in writing, to issue any
options or rights to purchase or otherwise acquire its stock. The Corporation is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its stock. All of the outstanding
shares of the Corporation's capital stock are validly issued, fully paid, and
nonassessable. Sellers have, and upon purchase thereof pursuant to the terms of
this Agreement Purchaser will have, good and marketable title to the Shares,
free and clear of all security interests, liens, encumbrances, or other
restrictions or claims, subject only to restrictions as to marketability imposed
by securities laws.
2.3 NO UNDISCLOSED LIABILITIES. Neither the Corporation nor any of the
property of the Corporation is subject to any material liability or obligation.
2.4 OWNERSHIP OF TRADE NAMES. Exhibit "C" contains a complete and accurate
list of all fictional business names, trading names, registered and unregistered
trademarks, servicemarks and applications (collectively, "Marks"). The Company
is the owner of all right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims. All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable. No
Mark has been or is now involved in any opposition, invalidation, or
cancellation and, to Sellers' knowledge, no such action is threatened with
respect to any of the Marks. To Sellers' knowledge, there is no potentially
interfering trademark or trademark application of any third party. No Mark is
infringed or, to Sellers' knowledge, has been challenged or threatened in any
way. None of the Marks used by the Corporation infringes or is alleged to
infringe any tradename, trademark, or servicemark of any third party.
2.5 LITIGATION. There are no actions, suits, proceedings, orders,
investigations, or claims pending or, to the best of Sellers' and the
Corporation's knowledge, overtly threatened against the Corporation or any
property of either, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency, or instrumentality; the
Corporation is not subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of Sellers' and the
Corporation's knowledge, any governmental investigations or inquiries; and, to
the best knowledge of Sellers' and the directors and responsible officers of the
Corporation, there is no basis for any of the foregoing.
2.6 TAX MATTERS. (i) The Corporation has prepared in a substantially correct
manner and has filed all federal, state, local, and foreign tax returns and
reports heretofore required to be filed by it and has paid all taxes shown as
due thereon; and (ii) no taxing authority has asserted any deficiency in the
payment of any tax or informed the Corporation that it intends to assert any
such deficiency or to make any audit or other investigation of the Corporation
for the purpose of determining whether such a deficiency should be asserted
against the Corporation.
2
<PAGE>
2.7 DISCLOSURE. This Agreement does not contain any untrue statement of a
material fact or omit a material fact necessary to make each statement contained
herein or therein not misleading. No Seller has intentionally concealed any fact
known by such person to have a material adverse effect upon the Corporation's
assets.
2.8 POWER OF ATTORNEY. No material power of attorney or similar authorization
given by the Corporation is presently in effect.
2.9 AGREEMENTS AND COMMITMENTS. Except for this Agreement, the Company is a
party to no agreement, contract, instrument, and commitment (including license
agreements).
2.10 PROPERTY. Other than the Marks, the Corporation owns no property.
2.11 EMPLOYEES. The Company has no employees.
2.12 INVESTMENT REPRESENTATIONS
2.12.1 Sellers are acquiring the Purchaser's Shares for their own account
for purposes of investment and without expectation, desire, or need for resale
and not with the view toward distribution, resale, subdivision, or
fractionalization of the Purchaser's Shares.
2.12.2 During the course of the negotiation of this Agreement, Seller's
have reviewed all information provided to them by the Purchaser and have had the
opportunity to ask questions of and receive answers from representatives of the
Purchaser concerning the Purchaser, the Purchaser's Shares, and this purchase,
and to obtain certain additional information requested by Sellers.
2.12.3 Sellers understand that the Purchaser's Shares have not been
registered under Securities Act of 1933 ("1933 Act"), or under any state
securities law.
2.12.4 Sellers understand that the Purchaser's Shares cannot be resold in
a transaction to which the 1933 Act and state securities laws apply unless (i)
subsequently registered under the 1933 Act and applicable state securities laws
or (ii) exemptions from such registrations are available.
2.12.5 Seller's understand that no public market now exists for the
Purchaser's Shares and that it is uncertain that a public market will ever exist
for the Purchaser's Shares.
2.12.6 Seller's understand that the certificates for the Purchaser's
Shares will bear a restrictive legend in the following form or such other form
as is determined by Purchaser:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION
3
<PAGE>
COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES
ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE CORPORATION, STATING
THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE
STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144
UNDER THE SECURITIES ACT OF 1933.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. As a material inducement
to Sellers to enter into this Agreement and sell the Shares, Purchaser hereby
represents and warrants to Sellers as follows:
3.1 ORGANIZATION; POWER. Purchaser is a corporation duly incorporated and
validly existing under the laws of the state of Indiana, and has all requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
3.2 AUTHORIZATION. The execution, delivery, and performance by Purchaser of
this Agreement and all other agreements contemplated hereby to which Purchaser
is a party have been duly and validly authorized by all necessary corporate
action of Purchaser, and this Agreement and each such other agreement, when
executed and delivered by the parties thereto, will constitute the legal, valid,
and binding obligation of Purchaser enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, and similar statutes affecting creditors' rights generally and
judicial limits on equitable remedies.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. The execution, delivery,
and performance by Purchaser of this Agreement and all other agreements
contemplated hereby to which Purchaser is a party will not result in a breach or
violation of, or constitute a default under, its Articles of Incorporation or
Bylaws or any material agreement to which Purchaser is a party or by which
Purchaser is bound.
SECTION 4. COVENANTS OF THE CORPORATION AND SELLERS.
4.1 ACTION AFTER THE CLOSING. Upon the reasonable request of any party hereto,
any other party will take all action and will execute all documents and
instruments necessary or desirable to consummate and give effect to this
purchase. These include, by way of illustration and not by way of limitation,
the following:
4.1.1 Resignations of each of the directors of the Corporation;
4.1.2 Provisions relating to delivery of Corporate books and records;
4
<PAGE>
SECTION 5. CLOSING.
5.1 TIME, PLACE, AND MANNER OF CLOSING. The closing ("Closing") will be held
at the offices of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A., at 100
North Tampa Street, Suite 1800, Tampa, Florida, or such other place as the
parties may agree, simultaneously with the execution hereof. At the Closing the
Sellers will deliver certificates evidencing the Shares, duly endorsed for
transfer. Purchaser shall deliver certificates evidencing the Purchaser's Shares
a reasonable time after the Closing. After the Closing, Sellers, at Purchaser's
cost, will execute, deliver, and acknowledge all such further instruments of
transfer and conveyance and will perform all such other acts as Purchaser may
reasonably request to effectively transfer the Shares.
5.2 CONSUMMATION OF CLOSING. All acts, deliveries, and confirmations
comprising the Closing regardless of chronological sequence shall be deemed to
occur contemporaneously and simultaneously upon the occurrence of the last act,
delivery, or confirmation of the Closing and none of such acts, deliveries, or
confirmations shall be effective unless and until the last of the same shall
have occurred. The time of the Closing has been scheduled to correspond with the
close of business at the principal office of the Corporation and, regardless of
when the last act, delivery, or confirmation of the Closing shall take place,
the transfer of the Shares shall be deemed to occur as of the close of business
at the principal office of the Corporation on the date of the Closing.
SECTION 6. MISCELLANEOUS PROVISIONS.
6.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement may
be amended, modified, or supplemented only by a written agreement signed by
Purchaser and Sellers.
6.2 WAIVER OF COMPLIANCE; CONSENTS
6.2.1 Any failure of any party to comply with any obligation, covenant,
agreement, or condition herein may be waived by the party entitled to the
performance of such obligation, covenant, or agreement or who has the benefit of
such condition, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement, or condition will not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
6.2.2 Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent will be given in a manner consistent with the
requirements for a waiver of compliance as set forth above.
6.3 TITLES AND CAPTIONS. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
6.4 ENTIRE AGREEMENT. This Agreement contains the entire understanding between
and among the parties and supersedes any prior understandings and agreements
among them respecting the subject matter of this Agreement.
5
<PAGE>
6.5 AGREEMENT BINDING. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
6.6 ATTORNEY FEES. In the event an arbitration, suit or action is brought by
any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
6.7 COMPUTATION OF TIME. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
6.8 PRONOUNS AND PLURALS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or persons may require.
6.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
6.10 ARBITRATION. If at any time any dispute, difference, or disagreement shall
arise upon or in respect of the Agreement, and the meaning and construction
hereof, every such dispute, difference, and disagreement shall be referred to a
single arbiter agreed upon by the parties, or if no single arbiter can be agreed
upon, an arbiter or arbiters shall be selected in accordance with the rules of
the American Arbitration Association and such dispute, difference, or
disagreement shall be settled by arbitration in accordance with the then
prevailing commercial rules of the American Arbitration Association, and
judgment upon the award rendered by the arbiter may be entered in any court
having jurisdiction thereof.
6.11 PRESUMPTION. This Agreement or any section thereof shall not be construed
against any party due to the fact that said Agreement or any section thereof was
drafted by said party.
6.12 FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
6.13 PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
6
<PAGE>
6.14 SAVINGS CLAUSE. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
6.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties shall survive the Closing.
Dated: September 30, 1998
/s/ MANJU TANEJA
-----------------------------
Manju Taneja
/s/ MANDEEP TANEJA
-----------------------------
Mandeep Taneja
/s/ MIHIR TANEJA
-----------------------------
Mihir Taneja
/s/ MADHAVI SEKHARAM
-----------------------------
Madhavi Sekharam
/s/ KOTHA SEKHARAM
-----------------------------
Kotha Sekharam
7
EXHIBIT 3.4
[SEAL]
FLORIDA DEPARTMENT OF STATE
SANDRA B. MORTHAM
SECRETARY OF STATE
August 24, 1998
PHILIP M. SHASTEEN, ESQ.
100 N. TAMPA ST., STE. 1800
TAMPA, FL 33602
The Articles of Incorporation for INCREDIBLE PRODUCTS OF FLORIDA, INC. were
filed on August 20, 1998 and assigned document number P98000073577. Please refer
to this number whenever corresponding with this office regarding the above
corporation.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATE STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION OF
YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO INSURE THAT YOU RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL
REPORT. TO OBTAIN A FEI NUMBER, CONTACT THE IRS AS 1-800-829-3676 AND REQUEST
FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICE REACH
YOU.
Should you have any questions regarding corporation, please contact this office
at the address given below.
Tracy Smith, Document Specialist
New Filing Section Letter Number: 698A00043693
Division of Corporations - P.O. BOX 6327 - Tallahassee, Florida 32314
<PAGE>
ARTICLES OF INCORPORATION
OF
INCREDIBLE PRODUCTS OF FLORIDA, INC.
ARTICLE I - NAME AND MAILING ADDRESS
The name of this corporation is Incredible Products of Florida and the
mailing address of this corporation is 5770 Roosevelt Blvd., Suite 700,
Clearwater, FL 33760.
ARTICLE II - DURATION; EFFECTIVE DATE
This corporation shall have perpetual existence, commencing upon the
filing of these Articles of Incorporation.
ARTICLE III - CAPITAL STOCK
This corporation is authorized to issue one Hundred (100) Shares One
Cent ($.01) par value of common stock, which shall be designated as "Common
Shares", having a par value of $.01 per share.
ARTICLE IV - INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of this corporation
is 100 North Tampa Street, Suite 1800, Tampa, FL 33602, and the name of the
initial registered agent of this corporation at that address is Philip M.
Shasteen.
<PAGE>
ARTICLE V - BOARD OF DIRECTORS
The Board of Directors of this corporation shall consist of not less
than three directors.
ARTICLE VI - INCORPORATOR
The name and address of the person signing these Articles of
Incorporation is Philip M. Shasteen, 100 North Tampa Street, Suite 1800, Tampa,
FL 33602.
ARTICLE VII - INDEMNIFICATION
The corporation shall indemnify any officer or director, or any former
officer or director, to the fullest extent permitted by law.
ARTICLE VIII - AMENDMENT
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment thereto, and any
right conferred upon the shareholders is subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 19th day of August 1998.
/s/ PHILIP M. SHASTEEN
----------------------------
Philip M. Shasteen
INCORPORATOR
2
<PAGE>
CERTIFICATE DESIGNATING REGISTERED AGENT
AND STREET ADDRESS FOR SERVICE OF PROCESS
WITHIN FLORIDA
Pursuant to Florida Statutes Section 48.091, Incredible Products of
Florida, Inc. desiring to organize under the laws of the State of Florida,
hereby designates Philip M. Shasteen, 100 North Tampa Street, Suite 1800, Tampa,
FL 33602, as its registered agent to accept service of process within the State
of Florida.
ACCEPTANCE OF DESIGNATION
The undersigned hereby accepts the above designation as registered
agent to accept service of process for the above-named corporation, at the place
designated above, and agrees to comply with the provisions of Florida Statutes
Section 48.091(2) relative to maintaining an office for the service of process.
/s/ PHILIP M. SHASTEEN
----------------------------
Philip M. Shasteen
3
<PAGE>
ORGANIZATIONAL WRITTEN CONSENT OF
THE INCORPORATOR
OF
INCREDIBLE PRODUCTS OF FLORIDA, INC.
The incorporator named in the Articles of Incorporation of Incredible
products of Florida, Inc. (the "Corporation"), acting without meeting pursuant
to Section 607.0205(2) of the Florida Business Corporation Act, hereby consents
to and adopts the following actions, preambles, and resolutions:
1. ARTICLES OF INCORPORATION. It is noted that the Corporation's
Articles of Incorporation were duly filed in the office of the Secretary of
State of the State of Florida. An acknowledged copy thereof are to be filed in
the minute book.
2. DATE OF ACTIVATION. It is noted that pursuant to such filing with
the Secretary of State of Florida, the effective date of incorporation is August
20, 1998.
3. BYLAWS.
RESOLVED, that the proposed form of Bylaws for the regulation and
management of the affairs of the Corporation which has been read, section by
section, is hereby unanimously adopted and ordered to be made a part of the
permanent records to follow the Articles of Incorporation in the Minute Book.
4. STOCK CERTIFICATE.
RESOLVED, that the form of stock certificate attached to these
minutes is adopted and approved.
<PAGE>
5. ELECTION OF DIRECTORS.
RESOLVED, that the following persons are hereby elected to be
Directors of the Corporation to assume the duties and responsibilities fixed by
the Bylaws and to serve until their respective successor or successors are
chosen and qualified:
William LaGamba Jugal K. Taneja
Gary A. Shawkey
6. ELECTION OF OFFICERS.
RESOLVED, that the following persons are hereby elected to be
officers of the Corporation to assume the duties and responsibilities fixed by
the Bylaws and to serve until their respective successor or successors are
chosen and qualified:
Gary Shawkey President Founder
Jugal K. Taneja Vice President
Cani I. Shuman Secretary, Treasurer
7. REGISTERED OFFICE/AGENT.
RESOLVED, that the registered office and registered agent of the
Corporation, initially designated in the Articles of Incorporation, are hereby
approved and ratified.
8. RATIFICATION OF ACTS.
RESOLVED, that the acts of the incorporator from the date of
incorporation to the present date be and the same hereby are ratified and
confirmed.
2
<PAGE>
9. OFFERS FOR STOCK.
WHEREAS, the Corporation has received an offer from Dynamic
Health Products, Inc., A Florida corporation (the "Parent") to purchase 51
shares of stock of the Corporation for $1.
RESOLVED, that upon receipt of the consideration a stock
certificate shall be issued to the Parent described above as soon as possible to
reflect the ownership of the shares so purchased.
10. MINUTE BOOK.
RESOLVED, that the Corporation shall maintain as part of its
corporate records, a corporate minute book which shall include a record of its
Articles of Incorporation and Amendments thereto, its Bylaws and Amendments
thereto, minutes of all meetings, or written actions in lieu thereof of its
Directors and Shareholders, and its stock transfer agent.
11. ORGANIZATIONAL EXPENSES.
RESOLVED, the Treasurer be and hereby is authorized to pay all
expenses incident to and necessary for the organization of this Corporation.
The undersigned, being the incorporator of Incredible Products
of Florida, Inc. does hereby ratify, approve, consent to, and confirm all of the
above preambles, resolutions, and actions.
DATED as of the 20th day of August, 1998.
/s/ PHILIP M. SHASTEEN
-----------------------
Philip M. Shasteen, Incorporator
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 35,973
<SECURITIES> 0
<RECEIVABLES> 1,480,272
<ALLOWANCES> (58,500)
<INVENTORY> 1,811,800
<CURRENT-ASSETS> 3,478,876
<PP&E> 2,987,362
<DEPRECIATION> 77,031
<TOTAL-ASSETS> 8,502,091
<CURRENT-LIABILITIES> 3,477,759
<BONDS> 0
2,100,000
0
<COMMON> 28,745
<OTHER-SE> 1,372,861
<TOTAL-LIABILITY-AND-EQUITY> 8,502,091
<SALES> 6,970,929
<TOTAL-REVENUES> 8,115,208
<CGS> 7,474,133
<TOTAL-COSTS> 7,474,133
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,293
<INCOME-PRETAX> 13,352
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,352
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
