<PAGE> 1
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 June 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.
(FORMERLY KNOWN AS NU-WAVE 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 August 12, 1998 was 2,774,515 (exclusive of Treasury Shares).
<PAGE> 2
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
------------- ------------
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents $ 324,940 $ 200,313
Accounts receivable, net 1,416,295 225,083
Inventory, net of allowance 1,404,873 275,980
Prepaids and other current assets 28,586 13,101
----------- -----------
Total current assets 3,174,694 714,477
Property, plant and equipment, at cost, net 1,691,546 117,804
Deposits 38,238 14,569
Investment in LLC 5,000 --
Intangible assets, net 2,805,622 10,916
----------- -----------
TOTAL ASSETS $ 7,715,100 $ 857,766
=========== ===========
L I A B I L I T I E S A N D S H A R E H O L D E R S ' E Q U I T Y
Current liabilities:
Accounts payable and accrued expenses $ 1,960,865 $ 351,396
Other payables 73,546 5,648
Interest payable -- 4,383
Capital lease obligations -- 8,708
Notes payable 83,391 3,211
Credit line payable 630,040 190,000
Related party notes payable 332,700 223,406
Unearned revenue 181,822 18,569
Current portion of long-term liabilities 547,798 --
----------- -----------
Total current liabilities 3,810,162 805,321
----------- -----------
Long-term liabilities:
Interest payable 28,817 --
Capital lease obligations 439,475 --
Notes payable 275,912 --
Mortgages payable 1,163,615 --
Current portion of long-term liabilities (547,798) --
----------- -----------
Total long-term liabilities 1,360,021 --
----------- -----------
TOTAL LIABILITIES 5,170,183 805,321
----------- -----------
Shareholders' equity:
Common stock 27,745 19,162
Preferred stock 4,000 --
Additional paid-in capital 3,143,409 823,515
Accumulated deficit (859,783) (832,330)
Net income 229,546 42,098
----------- -----------
NET SHAREHOLDERS' EQUITY 2,544,917 52,445
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 7,715,100 $ 857,766
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- --------------
<S> <C> <C>
Net revenues $ 6,745,119 $ 1,944,632
Cost of goods sold 6,182,660 1,696,840
----------- -----------
GROSS PROFIT 562,459 247,792
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 308,989 213,032
----------- -----------
OPERATING INCOME BEFORE
OTHER INCOME AND EXPENSE 253,470 34,760
Other income (expense):
Interest income 2,360 --
Other income and expenses, net 6,435 13,028
Interest expense (32,719) (5,690)
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (23,924) 7,338
----------- -----------
NET INCOME $ 229,546 $ 42,098
=========== ===========
Basic and diluted income
per share $ .09 $ .02
=========== ===========
Basic and diluted weighted number
of common shares outstanding 2,581,874 1,916,200
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income $ 229,546 $ 42,098
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 23,436 5,718
Changes in operating assets and liabilities:
Accounts receivable (357,137) (44,336)
Inventory (87,843) (128,952)
Prepaid expenses (8,094) 2,327
Accounts payable and accrued expenses (152,161) (5,910)
Unearned revenue (2,955) (13,620)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (355,208) (142,675)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 1,891 (2,282)
Purchases of property and equipment (127,328) (12,250)
Purchase of intangible assets (1,225) --
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (126,662) (14,532)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 537,546 106,708
Proceeds from shareholder loan -- 33,406
Distributions to stockholders (108,503) --
Proceeds from issuance of common stock 50,000 --
Principal payments of debt and capital lease obligations (128,752) (2,422)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES 350,291 137,692
--------- ---------
NET INCREASE (DECREASE) IN CASH (131,579) (19,515)
CASH AT BEGINNING OF PERIOD 456,519 219,828
--------- ---------
CASH AT END OF PERIOD $ 324,940 $ 200,313
========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE> 5
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
-------------- -------------
<S> <C> <C>
Supplemental cash flow information:
Cash paid during the period for interest $ 17,386 $ 2,154
Supplemental schedule of non-cash financing activities:
Capital lease obligations incurred for purchase of
property and equipment $ 56,147 $ 9,007
Conversion of related party notes payable and
accrued interest to common stock $ 81,331 $ --
Acquisition of Energy Factors, Inc. through
issuance of 400,000 shares of preferred stock $ 2,000,000 $ --
Acquisition of Becan Distributors, Inc. through
issuance of 1,500,000 new shares of common stock $ 2,250,000 $ --
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
Nu-Wave Health Products, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 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
period ended June 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.
The Board of Directors of the Company has authorized a one-for-three
reverse stock split of the Common Stock of the Company. The accompanying
unaudited condensed consolidated financial statements have been retroactively
adjusted, as of June 30, 1998 and 1997, to reflect the one-for-three reverse
stock split, the issuance of 400,000 shares of Series A Convertible Preferred
Stock, and the issuance of the 1,500,000 shares of Common Stock following the
one-for-three reverse stock split. In conjunction with the reverse stock split,
the effect of the elimination of fractional shares (which will be cashed out at
$1.50 per new share) is not reflected in the accompanying condensed consolidated
financial statements.
Effective June 15, 1998, the Company acquired Energy Factors, Inc.
(Energy Factors), a wholly-owned subsidiary of U.S. Diversified Technologies,
Inc. At the closing, the Company acquired legal title to the net assets of
Energy Factors. The acquisition was accounted for as a purchase. U.S.
Diversified Technologies, Inc. received in exchange for its capital stock in
Energy Factors, 400,000 shares of Series A Convertible Preferred Stock of the
Company representing a fair market value of approximately $2,000,000.
Effective June 26, 1998, the Company acquired Becan Distributors, Inc.
(Becan). The acquisition was accounted for as a pooling of interests for
accounting purposes. The Becan shareholders received a total of 1,500,000
shares of Common Stock of the Company representing a fair market value of
approximately $2,250,000. The Series A Convertible Preferred Stock and the
Common Stock were issued upon the filing by the Company on August 10, 1998 of
Articles of Amendment to its Articles of Incorporation which effected a
one-for-three reverse stock split.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Months ended June 30, 1998 and June 30, 1997
Sales are recognized at the time the product is shipped. Net sales
are net of discounts, allowances, and returns and credits. Net sales increased
247%, or $4,800,487, to $6,745,119 for the three months ended June 30, 1998
from $1,944,632 for the three months ended June 30, 1997. Of the $4,800,487
increase, $4,269,772 was attributable to net sales of Becan Distributors, Inc.,
acquired June 26, 1998 (accounted for as a pooling of interests), $86,023 was
attributable to net sales of Energy Factors, Inc., acquired June 15, 1998
(accounted for as a purchase), with the remainder due to increased volume of
the Company's private label sales resulting from continued expansion of
marketing efforts and the introduction of new products.
Gross profit increased 127%, or $314,667, to $562,459 for the three
months ended June 30, 1998 from $247,792 for the three months ended June 30,
1997. Gross margin decreased to 8.34% for the three months ended June 30, 1998
from 12.74% for the three months ended June 30, 1997. The decline was
primarily attributable to the change in the mix of sales with the acquisition
of Becan Distributors, Inc., which yields a lower gross margin than the
Company.
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 1.45%, or $95,957, to $308,989 for the three
months ended June 30, 1998 from $213,032 for the three months ended June 30,
1997. 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 Energy Factors acquisition. As a percentage of net sales,
selling, general and administrative expenses decreased to 4.58% for the three
months ended June 30, 1998 from 10.95% for the three months ended June 30,
1997.
Interest expense, net of interest income, increased $24,669 to $30,359
for the three months ended June 30, 1998 from $5,690 for the three months ended
June 30, 1997. The increase was a result of increased borrowings to finance
the purchase of
<PAGE> 8
additional machinery and equipment and to make necessary plant modifications,
and for financing of additional working capital needs with the acquisition of
Energy Factors.
The Company had no income tax expenses for the three months ended June
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 ended June 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 ($635,468) at June 30, 1998, as compared to ($90,844) in working capital at
June 30, 1997. The decrease was primarily due to an increase in accounts
payable and accrued expenses, and an increase in current portion of long-term
liabilities as a result of the Energy Factors acquisition.
Net cash used in operating activities was ($355,208) for the three
months ended June 30, 1998 and ($142,675) for the three months ended June 30,
1997. The usage of cash is primarily attributable to an increase in accounts
receivable ($357,137), as a result of increased sales by the Company during such
period, and an increase in inventory ($87,843), an increase in prepaid expenses
($8,094), an increase in accounts payable and accrued expenses ($152,161), and
an increase in unearned revenue ($2,955), primarily attributable to the
acquisition of Energy Factors.
Net cash used in investing activities was ($126,662), representing the
purchase of property and equipment, plant modifications, and the acquisition of
other assets, offset by a decrease in deposits $1,891.
Net cash provided by financing activities was $350,291 representing
proceeds from issuance of common stock, proceeds of long-term debt, and capital
lease obligations, and borrowings on lines of credit $537,546, offset by
distributions to Becan shareholders ($108,503), and repayments of debt and
capital lease obligations ($128,752).
<PAGE> 9
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 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.
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 Energy Factors, Inc.
for the purpose of assisting Energy Factors with its working capital needs. The
company has since acquired Energy Factors.
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 1.0% 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 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.
<PAGE> 10
Effective June 15, 1998, the Company acquired legal title to the net
assets of Energy Factors, Inc. in exchange for 400,000 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.
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 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.
The Company also is in the process of negotiating a $2,000,000 line of
credit with Republic Bank to refinance the building and equipment of the
Company, but provides no assurance as to the success of establishing the line
of credit.
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.
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.
The Company filed Articles of Amendment to Articles of Incorporation
of Nu-Wave Health Products, Inc. on August 10, 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.
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
<PAGE> 11
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.
Pursuant to Articles of Amendment to Articles of Incorporation of
Nu-Wave Health Products, Inc. filed August 10, 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 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.
3.1 Articles of Incorporation of Nu-Wave Acquisition, Inc. dated June
11, 1998 and filed June 12, 1998.
3.2 Articles of Amendment to Articles of Incorporation of Dynamic
Health Products, Inc., dated July 22, 1998 and filed July 23,
1998.
3.3 Articles of Amendment to Articles of Incorporation of Nu-Wave
Health Products, Inc., dated August 10, 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.
10.3 Revolving Line of Credit Agreement between the Company and
Republic Bank dated June 3, 1998.(1)
<PAGE> 12
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.
(b) REPORTS ON FORM 8-K.
During the three months ended June 30, 1998, the Company filed three
reports on Form 8-K.
Form 8-K dated April 1, 1998, with respect to the change of domicile of
or reincorporation of the Company to the State of Florida and the change of
name of the Company from Direct Rx, Inc. to Nu-Wave Health Products, Inc.
Form 8-K dated June 23, 1998, with respect to the June 15, 1998
acquisition of Energy Factors, Inc.
Form 8-K dated July 9, 1998, with respect to the June 26, 1998
acquisition of Becan Distributors, Inc.
<PAGE> 13
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: August 13, 1998 By: /s/ William L. LaGamba
-------------------------
William L. LaGamba
Chief Executive Officer
Date: August 13, 1998 By: /s/ Cani I. Shuman
-------------------------
Cani I. Shuman
Chief Financial Officer
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is made as of
June 12, 1998, by and among Nu-Wave Health Products, Inc., a Florida corporation
("Nu-Wave"), Nu-Wave Acquisition, Inc., a Florida corporation ("Nu-Wave Sub"),
Energy Factors, Inc., a Florida corporation (the "Company"), U.S. Diversified
Technologies, Inc., a Florida corporation (the "Shareholder"), Paul Santostasi,
an individual resident at 3651 Torrey Pines Blvd., Sarasota, Florida 34238,
Chris Starkey, an individual resident at 18523 Sea Oaks Lane, Tequesta, Florida,
and Marvin Deutsch, an individual resident at 314 LaHacienda, Indian Rocks
Beach, Florida 34635 (the "Parent Shareholders").
RECITALS
This Agreement contemplates a tax-free merger of the Nu-Wave Sub with
and into the Company in a reorganization pursuant to IRC Section 368(a)(1)(A).
The Shareholder will receive capital stock in Nu-Wave in exchange for its
capital stock in the Company. Nu-Wave is the owner of 100% of the issued and
outstanding capital stock of the Nu-Wave Sub. The Nu-Wave Sub and the Company
expect that the Merger will further certain of their business objectives,
including without limitation, providing expanded manufacturing facilities for
Nu-Wave and additional sales for the Company.
The Shareholder owns 100% of the issued and outstanding capital stock
of the Company and the Parent Shareholders collectively own approximately 90% of
the issued and outstanding capital stock of the Shareholder.
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:
"ACQUIRED COMPANIES" -- the Company and its Subsidiaries,
collectively.
"AMENDMENT" -- as defined in Section 12.1.
"APPLICABLE CONTRACT" -- any Contract (a) under which any
Acquired Company has or may acquire any rights, (b) under which any Acquired
Company has or may become subject to any obligation or liability, or (c) by
which any Acquired Company or any of the assets owned or used by it is or may
become bound.
<PAGE> 2
"APPROVAL DATE" -- the date that, under the FBCA, an amendment
to Article III of the Nu-Wave Articles of Incorporation becomes effective, which
date shall not be sooner than the date that Nu-Wave shareholder consents to such
amendment are effective as permitted under SEC Rule 14c-2(b).
"AVERAGE CLOSING PRICE" -- the average closing price of the
Nu-Wave common stock on the Nasdaq Stock Market, or in the event the Nasdaq
Stock Market is not the principal market on which the Nu-Wave common stock is
then traded or quoted, any principal stock exchange or market where the Nu-Wave
common stock is listed or included, for a period of 20 consecutive trading days
prior to the date 2 years after the date of this Agreement.
"ARTICLES OF MERGER" -- as defined in Section 2.3(c).
"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.
"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.
"NU-WAVE SUB" -- as defined in the first paragraph of this
Agreement.
"NU-WAVE SUB SHARE" -- any share of common stock, $.01 per
share, of Nu-Wave Sub.
"CLOSING" -- as defined in Section 2.2.
"CLOSING DATE" -- the date and time as of which the Closing
actually takes place.
"COMPANY" -- as defined in the Recitals of this Agreement.
"COMPANY SHARES" -- the issued and outstanding shares of
common stock, no par value, of the Company.
"CONSENT" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
2
<PAGE> 3
"CONTEMPLATED TRANSACTIONS" -- all of the transactions
contemplated by this Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance
of the Employment Agreement, the Noncompetition Agreements, the Releases,
the Lockup Agreement, and the Option Agreement; and
(c) the performance by Nu-Wave Sub, Nu-Wave,
the Shareholder, the Parent Shareholders and the Company of their respective
covenants and obligations under this Agreement.
"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 10.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the
Company to Nu-Wave Sub concurrently with the execution and delivery of this
Agreement.
"DISSENTING SHARE" -- any Company Share which any shareholder
of the Company who or which has exercised his or its appraisal rights under the
FBCA holds of record.
"EFFECTIVE TIME" -- as defined in Section 2.4(a).
"EMPLOYMENT AGREEMENT" -- as defined in Section 7.4(e).
"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.
"ENVIRONMENT" -- soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety
matters or conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical substances or
products);
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(b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental
Law or Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable Environmental
Law or Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees,
and the public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other prohibitions
and of the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels
the release of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the
release, or minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable
risks to human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological
amenities;
(f) reducing to acceptable levels the risks
inherent in the transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been
released, preventing the threat of release, or paying the costs of such
clean up or prevention; or
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(h) making responsible parties pay private
parties, or groups of them, for damages done to their health or the
Environment, or permitting self-appointed representatives of the public interest
to recover for injuries done to public assets.
"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 any Acquired Company and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"FBCA" -- the Florida Business Corporation Act, as amended.
"FORM 10" -- the Form 10-SB dated August 18, 1997 filed by
Nu-Wave with the SEC under Section 12(g) of the Securities Exchange Act of 1934.
"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.
"HAZARDOUS ACTIVITY" -- the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
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Environment, and any other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Acquired Companies.
"HAZARDOUS MATERIALS" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"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.
"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.
"LOCKUP AGREEMENT" -- as defined in Section 7.4(h).
"MERGER" -- as defined in Section 2.1.
"NONCOMPETITION AGREEMENTS" -- defined in Section 7.4(f).
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"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.
"OPTION AGREEMENT" -- as defined in Section 7.4(j).
"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 is not required to be specifically
authorized by the parent company (if any) of such Person; 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.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) 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.
"PLAN OF MERGER" -- as defined in Section 2.3(c).
"PREFERRED STOCK" -- the shares of Nu-Wave Convertible Series
A Preferred Stock created pursuant to the Articles of Amendment in the form of
Exhibit 1.
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"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.
"REGISTRATION RIGHTS AGREEMENT" -- as defined in
Section 7.4(h).
"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
(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 and former spouses, (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 20% of the
outstanding voting power of a
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Person or equity securities or other equity interests representing at least
20% 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.
"RELEASES" -- as defined in Section 7.4(c).
"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.
"SEC" -- the Securities and Exchange Commission.
"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.
"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.
"SURVIVING CORPORATION" -- as defined in Section 2.1.
"TARGET PRICE" -- as defined in Section 14.
"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.
"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
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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. BASIC TRANSACTION; CLOSING
2.1 THE MERGER. On and subject to the terms and conditions of
this Agreement, (i) the Nu-Wave Sub will merge with and into the Company (the
"Merger") at the Effective Time, (ii) the Company will be the corporation
surviving the Merger (the "Surviving Corporation"), and (iii) the 60 outstanding
Company Shares will be exchanged for 400,000 shares of Preferred Stock.
2.2 CLOSING. The closing of the Merger (the "Closing") will
take place at the offices of Nu-Wave Sub's counsel at 100 North Tampa Street,
Suite 1800, Tampa, Florida 33602 at 4:00 p.m. (local time) or at such other time
and place as the parties may agree. Subject to the provisions of Section 9,
failure to consummate the Contemplated Transactions provided for on the date and
time and at the place determined pursuant to this Section 2.2 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.3 ACTIONS AT THE CLOSING. At the Closing:
(a) The Company will deliver to the Nu-Wave
Sub the various certificates, instruments, and documents referred to in
Section 7.4;
(b) The Nu-Wave Sub will deliver to the Company
the various certificates, instruments, and documents referred to in
Section 8.4; and
(c) The Nu-Wave Sub and the Company will file
with the Secretary of State of the State of Florida Articles of Merger and a
Plan of Merger as an exhibit thereto in the form attached as Exhibit 2.3(c) (the
"Articles of Merger").
2.4 EFFECT OF MERGER.
(a) The Merger shall become effective at the
time (the "Effective Time") the Nu-Wave Sub and the Company file the
Articles of Merger with the Secretary of State of the State of Florida. The
Merger shall have the effect set forth in the FBCA. The Surviving Corporation
may, at any time after the Effective Time, take any action (including execution
and delivering any document) in the name and on behalf of either the Nu-Wave Sub
or the Company in order to carry out and effectuate the transactions
contemplated by this Agreement;
(b) The Articles of Incorporation of the Company
as amended as provided for in the Articles of Merger will become the
Articles of Incorporation of the Surviving Corporation;
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(c) The Bylaws of the Nu-Wave Sub in effect at
and as of the Effective Time will become the Bylaws of the Surviving Corporation
without any modification or amendment in the Merger;
(d) The directors and officers of the Nu-Wave
Sub in office at and as of the Effective Time will become the directors and
officers of the Surviving Corporation (retaining their respective positions and
terms of office);
(e) At and as of the Effective Time, all 60
issued and outstanding Company Shares collectively shall be exchanged for, after
the Approval Date, a total of 400,000 shares of Preferred Stock upon the
Approval Date. The Company Shares shall not be deemed to be outstanding or to
have any rights other than those set forth above in this Section 2.4(e) after
the Effective Time; and,
(f) Each Nu-Wave Sub Share issued and
outstanding at and as of the Effective Time will, without more, be converted
into and exchanged for one share of common stock of Energy Factors.
2.5 DELIVERY OF CERTIFICATE. As soon as practicable after the
Approval Date, Nu-Wave shall issue and deliver to the Shareholder a certificate
for the Preferred.
2.6 CLOSING OF TRANSFER RECORDS. After the close of business
on the Closing Date, transfers of the Company Shares outstanding prior to the
Effective Time shall not be made on the stock transfer books of the Surviving
Corporation.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE SHAREHOLDER, AND
THE PARENT SHAREHOLDERS. The Company, the Shareholder, and the Parent
Shareholders jointly and severally represent and warrant to Nu-Wave Sub as
follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) Part 3.1 of the Disclosure Letter contains
a complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired 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. Each Acquired 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.
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(b) The Company has delivered to Nu-Wave Sub
copies of the Organizational Documents of each Acquired Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid,
and binding obligation of the Company, the Shareholder, and the Parent
Shareholders, enforceable against the Shareholder and the Parent Shareholders in
accordance with its terms. Upon the execution and delivery by the Shareholder
and the Parent Shareholders, the Company's and Shareholders' Releases, and the
Noncompetition Agreements (collectively, the "Company's Closing Documents"), the
Company's Closing Documents will constitute the legal, valid, and binding
obligations of the Shareholder and the Parent Shareholders, enforceable against
the Shareholder and the Parent Shareholders in accordance with their respective
terms. The Company, the Shareholder and the Parent Shareholders have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Company's Closing Documents and to perform their
obligations under this Agreement and the Company's Closing Documents.
(b) Except as set forth in Part 3.2 of the
Disclosure Letter, 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
Acquired Companies, or (B) any resolution adopted by the board of directors or
the stockholders of any Acquired 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 any
Acquired Company or the Shareholder, or any of the assets owned or used by any
Acquired 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, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or any of the assets owned or used by, any
Acquired Company;
(iv) cause Nu-Wave Sub or any Acquired
Company to become subject to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any
Acquired Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
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(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
any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure
Letter, the Company is not or will not 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) The Shareholder is acquiring the Preferred
Stock for its own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consists of sixty (60) shares, no par value, of which sixty (60) shares
are issued, outstanding and owned of record and beneficially by the Shareholder.
The Shareholder is and will be on the Closing Date the record and beneficial
owner and holder of the Company Shares, free and clear of all Encumbrances. With
the exception of the Company Shares (all of which are owned by Shareholder), all
of the outstanding equity securities and other securities of each Acquired
Company are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all Encumbrances. No legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. All of the outstanding equity securities of
each Acquired 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 any Acquired
Company. None of the outstanding equity securities or other securities of any
Acquired Company was issued in violation of the Securities Act or any other
Legal Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
3.4 FINANCIAL STATEMENTS. The Company has delivered to
Nu-Wave Sub: (a) audited consolidated balance sheets of the Acquired Companies
as at December 31 in each of the years 1995 through 1996, and the related
audited consolidated statements of income, changes in stockholders' equity, and
cash flow for each of the fiscal years then ended, together with the report
thereon of Baum & Company, P.A., independent certified public accountants, (b) a
draft copy of consolidated balance sheet of the Acquired Companies as at
December 31, 1997 (including the notes thereto, the "Balance Sheet"), and the
related consolidated statements of income, changes and stockholders' equity, and
cash flow for the fiscal year then ended, together with the report thereon of
Baum & Company, P.A., independent certified public accountants, and (c) an
unaudited consolidated balance sheet of the Acquired Companies as at April 30,
1998 (the "Interim Balance Sheet") and the related unaudited consolidated
statements of income, changes
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in stockholders' equity, and cash flow for the four months then ended. Such
financial statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of the
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP; the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than the Acquired Companies are required by GAAP
to be included in the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS. The books of account, minute books,
stock record books, and other records of the Acquired Companies, all of which
have been made available to Nu-Wave Sub, 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 Acquired Companies are subject to that Section), including
the maintenance of an adequate system of internal controls. The minute books of
the Acquired Companies contain accurate 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 Acquired Companies,
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. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by any Acquired Company. The
Company has delivered or made available to Nu-Wave Sub copies of the deeds and
other instruments (as recorded) by which the Acquired Companies acquired such
real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of the Company or the
Acquired Companies and relating to such property or interests. The Acquired
Companies own (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 they purport to own located in the facilities owned or operated
by the Acquired Companies or reflected as owned in the books and records of the
Acquired Companies, including all of the properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.6 of the Disclosure Letter. All
material properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet 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 except, with
respect to all such properties and
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assets, (a) mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (c) liens for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of any Acquired Company, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Acquired Companies lie wholly within the boundaries of
the real property owned by the Acquired Companies and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings,
plants, structures, and equipment of the Acquired Companies are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The building,
plants, structures, and equipment of the Acquired Companies are sufficient for
the continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the
Acquired Companies that are reflected on the Balance Sheet or the Interim
Balance Sheet or on the accounting records of the Acquired Companies 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 the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). 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. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
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3.9 INVENTORY. All inventory of the Acquired Companies,
whether or not reflected in the Balance Sheet or the Interim Balance Sheet,
consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date, as the case may be. 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 Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part
3.10 of the Disclosure Letter, the Acquired Companies have no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES.
(a) The Acquired Companies have filed or caused
to be filed (on a timely basis since 1986) all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Legal Requirements.
The Company has delivered to Nu-Wave Sub copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed since 1992. The Acquired Companies have 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 the Shareholder
or any Acquired Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and state income
Tax Returns of each Acquired Company subject to such Taxes have been audited by
the IRS or relevant state tax authorities or are closed by the applicable
statute of limitations for all taxable years through 1996. Part 3.11 of the
Disclosure Letter contains a complete and accurate list of all audits of all
such Tax Returns, including a reasonably detailed description of the nature and
outcome of each audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described in Part 3.11 of the
Disclosure Letter, are being contested in good faith by appropriate proceedings.
Part 3.11 of the Disclosure Letter describes all adjustments to the United
States federal income Tax Returns filed by any Acquired Company or any group of
corporations including any Acquired Company for all taxable years since 1992,
and the resulting deficiencies proposed by the IRS. Except as described in Part
3.11 of the Disclosure Letter, neither the Shareholder nor any Acquired Company
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of
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any statute of limitations relating to the payment of Taxes of any Acquired
Company or for which any Acquired Company may be liable.
(c) The charges, accruals, and reserves with
respect to Taxes on the respective books of each Acquired Company are adequate
(determined in accordance with GAAP) and are at least equal to that Acquired
Company's liability for Taxes. There exists no proposed tax assessment against
any Acquired Company except as disclosed in the Balance Sheet or in Part 3.11 of
the Disclosure Letter. 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 any Acquired Company. All Taxes that any Acquired 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.
(d) All Tax Returns filed by (or that include
on a consolidated basis) any Acquired Company are true, correct, and complete.
There is no tax sharing agreement that will require any payment by any Acquired
Company after the date of this Agreement. No Acquired Company is, or within the
five-year period preceding the Closing Date has been, an "S" corporation.
3.12 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 any Acquired Company,
and no event has occurred or circumstance exists that may result in such a
material adverse change.
3.13 EMPLOYEE BENEFITS.
(a) As used in this Section 3.13, the following
terms have the meanings set forth below.
"COMPANY PLAN" means all Plans of which an Acquired
Company or an ERISA Affiliate of an Acquired Company is or was a Plan Sponsor,
or to which an Acquired Company or an ERISA Affiliate of an Acquired Company
otherwise contributes or has contributed, or in which an Acquired Company or an
ERISA Affiliate of an Acquired Company otherwise participates or has
participated. All references to Plans are to Company Plans unless the context
requires otherwise.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA
Section 3(37)(A).
"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 Section 132.
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"PENSION PLAN" has the meaning given in ERISA
Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"QUALIFIED PLAN" means any Plan that meets or
purports to meet the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are
subject to Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than
Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary
association under IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section
3(1).
(b) The Company has no Company Plan, VEBA,
Multi-Employer Plan, Other Benefit Obligations, Pension Plan, Plan, Qualified
Plan, Title IV Plan, or Welfare Plan.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times since December 31, 1997 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 any Acquired Company of, or a failure on the part of
any Acquired Company to comply with, any Legal Requirement, or (B) may give rise
to any obligation on the part of any Acquired Company to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature; and
(iii) no Acquired 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 any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains
a complete and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or to any of
the assets owned or used by, any Acquired Company. Each
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Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter is valid and in full force and effect. Except as set forth in
Part 3.14 of the Disclosure Letter:
(i) each Acquired 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 3.14 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 3.14 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 3.14 of the Disclosure Letter;
(iii) no Acquired 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 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 3.14 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 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses and
to permit the Acquired Companies to own and use their assets in the manner in
which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or
against any Acquired Company or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, any Acquired Company; or
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(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 Company, the Parent Shareholders, the
Shareholder and the Acquired Companies, (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. The
Company has delivered to Nu-Wave Sub copies of all pleadings, correspondence,
and other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) there is no Order to which any of
the Acquired Companies, or any of the assets owned or used by any Acquired
Company, is subject;
(ii) the Shareholder is not subject to
any Order that relates to the business of, or any of the assets owned or used
by, any Acquired Company; and
(iii) no officer, director, agent, or
employee of any Acquired 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 any Acquired Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) each Acquired Company is, and at
all times since December 31, 1997 has been, in full compliance with all of the
terms and requirements 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 any Acquired Company, or any of the assets owned or used
by any Acquired Company, is subject; and
(iii) no Acquired 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 any
actual, alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which any Acquired Company, or any of
the assets owned or used by any Acquired Company, is or has been subject.
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3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set
forth in Part 3.16 of the Disclosure Letter, since the date of the Balance
Sheet, the Acquired Companies have conducted their businesses only in the
Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized
or issued capital stock; grant of any stock option or right to purchase shares
of capital stock of any Acquired Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired 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 any Acquired Company;
(c) payment or increase by any Acquired 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 any Acquired Company;
(e) damage to or destruction or loss of any
asset or property of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Acquired Companies, 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 any
Acquired Company of at least $10,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of any Acquired Company or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of any Acquired 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 any Acquired Company in excess of $10,000;
(i) material change in the accounting methods
used by any Acquired Company; or
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(j) agreement, whether oral or written, by any
Acquired Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and the Company has delivered to Nu-Wave
Sub true and complete copies, of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or materials by one or
more Acquired Companies of an amount or value in excess of $10,000;
(ii) each Applicable Contract that
involves performance of services or delivery of goods or materials to one or
more Acquired Companies of an amount or value in excess of $10,000;
(iii) each Applicable Contract that was
not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Acquired Companies in excess of $10,000;
(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 any Acquired Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of any
Acquired Company or any Affiliate of an Acquired Company or limit the freedom of
any Acquired Company or any Affiliate of an Acquired 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;
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(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 any Acquired Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $10,000;
(xiii) each written warranty, guaranty,
and or other similar undertaking with respect to contractual performance
extended by any Acquired 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 3.17(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 Acquired Companies
under the Contracts, and the Acquired Companies' office where details relating
to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter:
(i) The Shareholder (and no Related
Person of the Shareholder) does not have or may not acquire any rights under,
and the Shareholder does not have or may not 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, any Acquired Company; and
(ii) no officer, director, agent,
employee, consultant, or contractor of any Acquired 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 any Acquired Company, or (B)
assign to any Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(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 3.17(d) of the
Disclosure Letter:
(i) each Acquired Company is, and at
all times since December 31, 1997 has been, in full compliance with all
applicable terms and requirements of
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each Contract under which such Acquired Company has or had any obligation or
liability or by which such Acquired Company or any of the assets owned or used
by such Acquired Company is or was bound;
(ii) each other Person that has or had
any obligation or liability under any Contract under which an Acquired Company
has or had any rights is, and at all times since December 31, 1997 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 any
Acquired 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) no Acquired Company has given to or
received from any other Person, at any time since December 31, 1997, 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 any Acquired Company under current or completed Contracts with any
Person and 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 Acquired Companies 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.
3.18 INSURANCE.
(a) The Company has delivered to Nu-Wave Sub:
(i) true and complete copies of all
policies of insurance to which any Acquired Company is a party or under which
any Acquired Company, or any director of any Acquired Company, is or has been
covered at any time within the five years preceding the date of this Agreement;
(ii) true and complete copies of all
pending applications for policies of insurance; and
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(iii) any statement by the auditor of any
Acquired Company's financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter
describes:
(i) any self-insurance arrangement by
or affecting any Acquired Company, including any reserves established
thereunder;
(ii) any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by any
Acquired Company; and
(iii) all obligations of the Acquired
Companies to third parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy under which such
coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets
forth, by year, for the current policy year and each of the five preceding
policy years:
(i) a summary of the loss experience
under each policy;
(ii) a statement describing each claim
under an insurance policy for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy
by insurer, type of insurance, and period of coverage; and
(C) the amount and a brief
description of the claim; and
(iii) a statement describing the loss
experience for all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) All policies to which any Acquired
Company is a party or that provide coverage to the Shareholder, any Acquired
Company, or any director or officer of an Acquired Company:
(A) are valid, outstanding, and
enforceable;
(B) are issued by an insurer that
is financially sound and reputable;
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(C) taken together, provide
adequate insurance coverage for the assets and the operations of the Acquired
Companies for all risks normally insured against by a Person carrying on the
same business or businesses as the Acquired Companies;
(D) are sufficient for compliance
with all Legal Requirements and Contracts to which any Acquired Company is a
party or by which any of them is bound;
(E) will continue in full force
and effect following the consummation of the Contemplated Transactions; and
(F) do not provide for any
retrospective premium adjustment or other experienced-based liability on the
part of any Acquired Company.
(ii) Neither the Shareholder nor any
Acquired Company has received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all
premiums due, and have otherwise performed all of their respective obligations,
under each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given
notice to the insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in part
3.19 of the disclosure letter, to the knowledge of the Shareholder and the
Parent Shareholders:
(a) Each Acquired Company is, and at all times
has been, in full compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. Neither the Shareholder nor any Acquired
Company has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any Governmental Body
or private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Shareholder or any
Acquired Company has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by the Shareholder, any
Acquired Company, or any other Person for whose conduct they are or may be held
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responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of
the Shareholder and the Parent Shareholders and the Acquired Companies,
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which the Shareholder or any Acquired Company has or had an interest.
(c) Neither the Shareholder, the Parent
Shareholders nor any Acquired Company has any basis to expect, nor has any of
them or any other Person for whose conduct they are or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Shareholder or any Acquired Company had
an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Shareholder, any Acquired Company, or any other Person for
whose conduct they are or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) Neither the Shareholder nor any Acquired
Company, or any other Person for whose conduct they are or may be held
responsible, has any Environmental, Health, and Safety Liabilities with respect
to the Facilities or with respect to any other properties and assets (whether
real, personal, or mixed) in which the Shareholder or any Acquired Company (or
any predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on
or in the Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Shareholder, Acquired Company, any other Person
for whose conduct they are or may be held responsible, nor any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Shareholder or any Acquired Company has or had
an interest.
(f) There has been no Release or, to the
Knowledge of the Shareholder, the Parent Shareholders and the Acquired
Companies, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous
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Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from or by any other
properties and assets (whether real, personal, or mixed) in which the
Shareholder or any Acquired Company has or had an interest, or any geologically
or hydrologically adjoining property, whether by the Shareholder, any Acquired
Company, or any other Person.
(g) The Company has delivered to Nu-Wave Sub
true and complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed or initiated by the Shareholder or any Acquired Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by the Shareholder, any Acquired Company,
or any other Person for whose conduct they are or may be held responsible, with
Environmental Laws.
3.20 EMPLOYEES.
(a) Part 3.20 of the Disclosure Letter contains
a complete and accurate list of the following information for each employee or
director of the Acquired Companies, 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 any Acquired Company's 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 any Acquired
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 Acquired Companies, or (ii) the
ability of any Acquired Company to conduct its business, including any
Proprietary Rights Agreement with the Shareholder or the Acquired Companies by
any such employee or director. To the Shareholder's, the Parent Shareholders and
the Acquired Companies' Knowledge, no director, officer, or other key employee
of any Acquired Company intends to terminate his employment with such Acquired
Company.
(c) Part 3.20 of the Disclosure Letter also
contains a complete and accurate list of the following information for each
retired employee or director of the Acquired Companies, 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.
3.21 LABOR RELATIONS; COMPLIANCE. Since December 31, 1997,
no Acquired Company has been or is a party to any collective bargaining or other
labor Contract. Since
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December 31, 1997, there has not been, there is not presently pending or
existing, and there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company.
Each Acquired Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. No Acquired Company is liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS. The term
"Intellectual Property Assets" includes:
(i) any trade names used by the Company,
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");
and
(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 any Acquired Company as licensee or
licensor.
(b) AGREEMENTS. Part 3.22(b) of the Disclosure
Letter contains a complete and accurate list and summary description, including
any royalties paid or received by the Acquired Companies, of all Contracts
relating to the Intellectual Property Assets to which any Acquired Company is a
party or by which any Acquired 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 Acquired
Company is the licensee. There are no outstanding and, to the Shareholder's, the
Parent Shareholders' and the Acquired Companies' Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
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(c) KNOW-HOW NECESSARY FOR THE BUSINESS.
(i) The Intellectual Property Assets
are all those necessary for the operation of the Acquired Companies' businesses
as they are currently conducted. One or more of the Acquired Companies 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 3.22(c)
of the Disclosure Letter, all former and current employees of each Acquired
Company have executed written Contracts with one or more of the Acquired
Companies that assign to one or more of the Acquired Companies all rights to any
inventions, improvements, discoveries, or information relating to the business
of any Acquired Company. No employee of any Acquired 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 Acquired Companies.
(d) PATENTS.
(i) Part 3.22(d) of the Disclosure
Letter contains a complete and accurate list and summary description of all
Patents. One or more of the Acquired Companies is the owner of all right, title,
and interest in and to each of the Patents, free and clear of all liens,
security interests, charges, encumbrances, entities, and other adverse claims.
(ii) All of the issued Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing Date.
(iii) No Patent has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To the Shareholder's, the Parent Shareholders' and the Acquired Companies'
Knowledge, there is no potentially interfering patent or patent application of
any third party.
(iv) No Patent is infringed or, to the
Shareholders, the Parent Shareholders' and the Acquired Companies' Knowledge,
has been challenged or threatened in any way. None of the products manufactured
and sold, nor any process or know-how used, by any Acquired Company infringes or
is alleged to infringe any patent or other proprietary right of any other
Person.
(v) All products made, used, or sold
under the Patents have been marked with the proper patent notice.
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(e) TRADEMARKS.
(i) Part 3.22(e) of Disclosure Letter
contains a complete and accurate list and summary description of all Marks. One
or more of the Acquired Companies 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.
(ii) 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, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing Date.
(iii) No Mark has been or is now involved
in any opposition, invalidation, or cancellation and, to the Shareholder's, the
Parent Shareholders' and the Acquired Companies' Knowledge, no such action is
Threatened with the respect to any of the Marks.
(iv) To the Shareholder's, the Parent
Shareholders' and the Acquired Companies' Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Mark is infringed or, to the
Shareholder's, the Parent Shareholders' and the Acquired Companies' Knowledge,
has been challenged or threatened in any way. None of the Marks used by any
Acquired Company infringes or is alleged to infringe any trade name, trademark,
or service mark of any third party.
(vi) All products and materials
containing a Mark bear the proper federal registration notice where permitted by
law.
(f) COPYRIGHTS.
(i) Part 3.22(f) of the Disclosure
Letter contains a complete and accurate list and summary description of all
Copyrights. One or more of the Acquired Companies is the owner of all right,
title, and interest in and to each of the Copyrights, free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims.
(ii) All the Copyrights have been
registered and are currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright is infringed or, to the
Shareholder's, the Parent Shareholders' and the Acquired Companies' Knowledge,
has been challenged or threatened in any way. None of the subject matter of any
of the infringes or is alleged to infringe any copyright of any third party or
is a derivative work based on the work of a third party.
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(iv) All works encompassed by the
Copyrights have been marked with the proper copyright notice.
(g) 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) The Shareholder and the Acquired
Companies have taken all reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.
(iii) One or more of the Acquired
Companies 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 the Shareholder's, the Parent Shareholders' and the
Acquired Companies' Knowledge, except as set forth in Part 3.22(g) of the
Disclosure Letter, have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Acquired Companies) or to
the detriment of the Acquired Companies. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS. Since December 31, 1997, no
Acquired Company or director, officer, agent, or employee of any Acquired
Company, or any other Person associated with or acting for or on behalf of any
Acquired 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 any Acquired
Company or any Affiliate of an Acquired 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 Acquired Companies.
3.24 DISCLOSURE.
(a) No representation or warranty of the
Shareholder, the Parent Shareholders and the Acquired Companies 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 5.5 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) Except as set forth in Part 3.24(c) of the
Disclosure Letter, there is no fact known to the Shareholder, the Parent
Shareholders or the Acquired Companies that has
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specific application to the Shareholder, the Parent Shareholders or the Acquired
Companies or any Acquired Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as the Shareholder,
the Parent Shareholders and the Acquired Companies can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Acquired Companies (on a consolidated basis) that
has not been set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Neither the
Shareholder, the Parent Shareholders nor any Related Person of the Shareholder,
the Parent Shareholders or of any Acquired Company has, or since the first day
of the next to last completed fiscal year of the Acquired Companies has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Acquired Companies' businesses.
Neither the Shareholder, the Parent Shareholders nor any Related Person of the
Shareholder, the Parent Shareholders or of any Acquired Company is, or since the
first day of the next to last completed fiscal year of the Acquired Companies
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 any Acquired Company other
than business dealings or transactions conducted in the Ordinary Course of
Business with the Acquired Companies at substantially prevailing market prices
and on substantially prevailing market terms, or (ii) engaged in competition
with any Acquired Company with respect to any line of the products or services
of such Acquired Company (a "Competing Business") in any market presently served
by such Acquired Company. Except as set forth in Part 3.25 of the Disclosure
Letter, neither the Shareholder, the Parent Shareholders nor any Related Person
of the Shareholder, the Parent Shareholders or of any Acquired Company is a
party to any Contract with, or has any claim or right against, any Acquired
Company.
3.26 BROKERS OR FINDERS. The Shareholder, the Parent
Shareholders nor the Acquired Companies and their 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.
3.27 DISPOSAL COSTS. The cost of disposing of the barrels
of product disclosed in item 3.19 of the Disclosure Letter will not exceed
$10,000.
4. REPRESENTATIONS AND WARRANTIES OF NU-WAVE SUB. Nu-Wave Sub
represents and warrants to the Company, the Shareholder and the Parent
Shareholders as follows:
4.1 ORGANIZATION AND GOOD STANDING. Nu-Wave Sub and
Nu-Wave are corporations duly organized, validly existing, and in good standing
under the laws of the State of Florida, with full corporate power and authority
to conduct their businesses as they are now being conducted, to own or use the
properties and assets that they purport to own or use, and to perform all their
obligations under this Agreement.
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4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid,
and binding obligation of Nu-Wave and Nu-Wave Sub, enforceable against Nu-Wave
and Nu-Wave Sub in accordance with its terms. Upon the execution and delivery by
Nu-Wave of the Employment Agreement, the Option Agreement and the Registration
Rights Agreement, the Employment Agreement, the Option Agreement and the
Registration Rights Agreement will constitute the legal, valid, and binding
obligations of Nu-Wave, enforceable against Nu-Wave in accordance with their
terms. Nu-Wave and Nu-Wave Sub have 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 Nu-Wave Sub nor the consummation
or performance of any of the Contemplated Transactions by Nu-Wave Sub will give
any Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Nu-Wave Sub's
Organizational Documents;
(ii) any resolution adopted by the board
of directors or the stockholders of Nu-Wave Sub;
(iii) any Legal Requirement or Order to
which Nu-Wave Sub may be subject; or
(iv) any Contract to which Nu-Wave Sub
is a party or by which Nu-Wave Sub may be bound.
Except as set forth in Schedule 4.2, Nu-Wave Sub 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 CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against Nu-Wave Sub and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions. To Nu-Wave Sub's Knowledge, no such
Proceeding has been Threatened.
4.4 BROKERS OR FINDERS. Nu-Wave Sub 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 hold the Shareholder and
the Parent Shareholder harmless from any such payment alleged to be due by or
through Nu-Wave Sub as a result of the action of Nu-Wave Sub or its officers or
agents.
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4.5 CAPITALIZATION. The authorized equity securities of
Nu-Wave consist of 9,000,000 shares of common stock, par value $0.01 per share,
of which 3,823,547 shares are issued and outstanding. Nu-Wave Sub is a
newly-formed, wholly-owned subsidiary of Nu-Wave. Information with respect to
the beneficial owners of the outstanding Common Stock of Nu-Wave is set forth in
the Form 10.
4.6 FORM 10. Since the filing of the Form 10 with the SEC,
there has been no material change in the information set forth therein, except
for the execution of this Agreement.
4.7 INTENT WITH RESPECT TO CAPITALIZATION AND ACQUISITION.
Nu-Wave agrees, after the Closing, to implement a one-for-three reverse stock
split of its common stock. Thereafter, it agrees to issue 1.5 million shares of
its common stock to acquire Beacon Distributors, Inc., a Pennsylvania
corporation ("Beacon").
4.8 LEGAL PROCEEDINGS AND ORDERS. There is no pending Legal
Proceeding that has commenced by or against Nu-Wave or the Nu-Wave Sub or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, Nu-Wave or the Nu-Wave Sub, or 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 Nu-Wave and the
Nu-Wave Sub, (i) no such Proceeding has been Threatened, and (ii) no event has
occurred or circumstance exists that may give rise to or serve as a basis for
the commencement of any such proceeding.
4.9 BEACON DISTRIBUTORS, INC. Nu-Wave has delivered to Paul
Santostasi the unaudited, internally prepared balance sheet of Beacon as at May
31, 1998 and the related statement of income for the five-month period ending
May 31, 1998. Since May 31, 1998, there has not been a material adverse change
in the financial condition of Beacon.
5. COVENANTS OF THE COMPANY PRIOR TO CLOSING DATE.
5.1 NEGATIVE COVENANT. Except as otherwise expressly
permitted by this Agreement, between the date of this Agreement and the Closing
Date, the Company will not, and will cause each Acquired Company not to, without
the prior consent of Nu-Wave Sub, take any affirmative action, or fail to take
any reasonable action within its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.2 REQUIRED APPROVALS. As promptly as practicable after the
date of this Agreement, the Company will, and will cause each Acquired Company
to, make all filings required by Legal Requirements to be made by them in order
to consummate the Contemplated Transactions. Between the date of this Agreement
and the Closing Date, the Company will, and will cause each Acquired Company to,
(a) cooperate with Nu-Wave Sub with respect to all filings that Nu-Wave Sub
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Nu-Wave Sub in obtaining
all consents identified in Schedule 4.2.
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5.3 NOTIFICATION. Between the date of this Agreement and the
Closing Date, the Shareholder, the Parent Shareholders and the Acquired
Companies will promptly notify Nu-Wave Sub in writing if the Shareholder, the
Parent Shareholders or any Acquired Company becomes aware of any fact or
condition that causes or constitutes a Breach of any of the Shareholder's, the
Parent Shareholders' or the Acquired Companies' representations and warranties
as of the date of this Agreement, or if the Shareholder, the Parent Shareholders
or any Acquired 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, the Company will promptly deliver to Nu-Wave Sub a supplement to the
Disclosure Letter specifying such change. During the same period, the
Shareholder, the Parent Shareholders and the Acquired Companies will promptly
notify Nu-Wave Sub of the occurrence of any Breach of any covenant of the
Shareholder, the Parent Shareholders or any of the Acquired Companies in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.4 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as
expressly provided in this Agreement, the Company or any Parent Shareholder will
cause all indebtedness owed to an Acquired Company by the Shareholder, the
Parent Shareholders or any Related Person of the Shareholder or any Parent
Shareholder to be paid in full prior to Closing.
5.5 NO NEGOTIATION. Until such time, if any, as this
Agreement is terminated pursuant to Section 9, the Company, the Shareholder and
the Parent Shareholders 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 Nu-Wave Sub) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company.
5.6 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, the Shareholder, the Parent Shareholders and the Acquired
Companies will use their Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.
6. COVENANTS OF NU-WAVE SUB PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as
practicable after the date of this Agreement, Nu-Wave Sub will, and will cause
each of its Related Persons to, make all filings required by Legal Requirements
to be made by them to consummate the Contemplated Transactions. Between the date
of this Agreement and the Closing Date, Nu-Wave Sub will, and will cause each
Related Person to, cooperate with the Company with respect to all filings that
the Company is required by Legal Requirements to make in connection with the
Contemplated
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Transactions, and (ii) cooperate with the Company in obtaining all consents
identified in Part 3.2 of the Disclosure Letter; provided that this Agreement
will not require Nu-Wave Sub to dispose of or make any change in any portion of
its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS. Except as set forth in the proviso to
Section 6.1, between the date of this Agreement and the Closing Date, Nu-Wave
Sub will use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
7. CONDITIONS PRECEDENT TO NU-WAVE SUB'S AND NU-WAVE'S OBLIGATION TO
CLOSE. Nu-Wave Sub's and Nu-Wave's obligation to consummate the Contemplated
Transactions and to take the other actions required to be taken by them at and
after 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 Nu-Wave Sub, in
whole or in part):
7.1 ACCURACY OF REPRESENTATIONS.
(a) All of the Shareholder's, the Parent
Shareholders' and the Acquired Companies' 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 the Shareholder's, the Parent
Shareholders' and the Acquired Companies' representations and warranties in
Sections 3.3, 3.4, 3.12, and 3.24 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.
7.2 THE COMPANY'S PERFORMANCE. All of the covenants and
obligations that the Company 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.
7.3 CONSENTS. Each of the Consents identified in
Part 3.2 of the Disclosure Letter, and each Consent identified in Schedule 4.2,
must have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following
documents and instruments must have been delivered to Nu-Wave Sub:
(a) an opinion of Schifino and Fleischer, P.A.,
dated the Closing Date, in the form of Exhibit 7.4(a);
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(b) [intentionally omitted];
(c) Releases, each in the form of Exhibit 7.4(c)
executed by the Shareholder and the Parent Shareholders (collectively,
"Releases");
(d) [intentionally omitted];
(e) an employment agreement in the form of
Exhibit 7.4(e) executed by Paul Santostasi (the "Employment Agreement");
(f) noncompetition agreements, each in the form
of Exhibit 7.4(f), executed by each of the Parent Shareholders other than Paul
Santostasi (the "Noncompetition Agreements");
(g) [intentionally omitted];
(h) a lock-up agreement in the form of
Exhibit 7.4(h), executed by the Shareholder (the "Lock-up Agreement");
(i) a registration rights agreement in the
form of Exhibit 7.4(i), executed by Nu-Wave and the Shareholder (the
"Registration Rights Agreement");
(j) an option agreement in the form of
Exhibit 7.4(j), executed by Paul Santostasi (the "Option Agreement");
(k) such other documents as Nu-Wave Sub may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
the Shareholder's, the Parent Shareholders' and the Acquired Companies'
representations and warranties, (iii) evidencing the performance by the Company
of, or the compliance by the Company with, any covenant or obligation required
to be performed or complied with by the Company, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions; and
(l) a Plan of Merger and Articles of Merger
executed by Nu-Wave Sub and the Company.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced or Threatened against Nu-Wave Sub, or against any
Person affiliated with Nu-Wave Sub, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, 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.
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7.6 NO CLAIM REGARDING STOCK OWNERSHIP. There must not have
been made or Threatened by any Person other than the Shareholder any claim
asserting that such Person 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, any of the Acquired Companies.
7.7 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 Nu-Wave Sub or any Person
affiliated with Nu-Wave Sub 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.
7.8 SHAREHOLDER APPROVAL. The Amendment must have been
approved by the Nu-Wave shareholders.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE. The
Company's obligation to consummate the Contemplated Transactions and to take the
other actions required to be taken by the Company 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 the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Nu-Wave Sub'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.
8.2 NU-WAVE SUB'S PERFORMANCE. All of the covenants and
obligations that Nu-Wave Sub 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
performed and complied with in all material respects.
8.3 CONSENTS. Each of the Consents identified in Part 3.2 of
the Disclosure Letter and the consent of the Shareholder must have been obtained
and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS. Nu-Wave Sub must have caused the
following documents to be delivered to the Company and Santostasi:
(a) an opinion of Johnson, Blakely, Pope, Bokor,
Ruppel & Burns, P.A., dated the Closing Date, in the form of Exhibit 8.4(a);
(b) a Certificate representing the Preferred Stock;
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(c) the Employment Agreement executed by the
Surviving Corporation;
(d) the Registration Rights Agreement executed by
Nu-Wave;
(e) the Option Agreement executed by Nu-Wave;
(f) such other documents as the Company may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of Nu-Wave Sub, (iii) evidencing the performance by
Nu-Wave Sub of, or the compliance by Nu-Wave Sub with, any covenant or
obligation required to be performed or complied with by Nu-Wave Sub, (ii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions;
(g) an assignment of the Company's cause of action
against Horizon Pharmaceuticals, Changes International, Twin Labs and related
parties arising out of the actions of Jeffrey Bliss, a former employee of the
Company relating to the theft of trade secrets and customer lists, and to
diverting business opportunities of the Company; and
(h) a Plan of Merger and Articles of Merger executed
by the Nu-Wave Sub and the Company.
8.5 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that (a) prohibits the consummation
of the Contemplated Transactions, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice
given prior to or at the Closing, be terminated:
(a) by either Nu-Wave Sub or the Company 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) (i) by Nu-Wave Sub if any of the conditions in
Section 7 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
Nu-Wave Sub to comply with its obligations under this Agreement) and Nu-Wave Sub
has not waived such condition on or before the Closing Date; or (ii) by the
Company, if any of the conditions in Section 8 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the
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failure of the Company to comply with its obligations under this Agreement) and
the Company has not waived such condition on or before the Closing Date;
(c) by mutual consent of Nu-Wave Sub and the
Company; or
(d) by either Nu-Wave Sub or the Company 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 July 1, 1998, or such later date as the parties may
agree upon or that may be necessitated by a review by the SEC of the Nu-Wave
Information Statement filed in conjunction with the shareholder approval of the
Amendment.
9.2 EFFECT OF TERMINATION. Each party's right of termination
under Section 9.1 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
9.1, all further obligations of the parties under this Agreement will terminate,
except that the obligations in Sections 11.1 and 11.3 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
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other certificate
or 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.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE
SHAREHOLDER AND THE PARENT SHAREHOLDERS. The Shareholder and the Parent
Shareholders, jointly and severally, will indemnify and hold harmless Nu-Wave
Sub, the Acquired Companies, 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
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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 the Shareholder and the Parent Shareholders 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 the Company, the Shareholder or the Parent Shareholders
pursuant to this Agreement;
(b) any Breach of any representation or warranty
made by the Shareholder or the Parent Shareholders in this Agreement as if such
representation or warranty were made on and as of the Closing Date without
giving effect to any supplement to the Disclosure Letter, other than any such
Breach that is disclosed in a supplement to the Disclosure Letter and is
expressly identified in the certificate delivered pursuant to Section 2.4(a)(v)
as having caused the condition specified in Section 7.1 not to be satisfied;
(c) any Breach by the Company, the Shareholder
of the Parent Shareholders of any covenant or obligation of the Company in this
Agreement;
(d) any product shipped or manufactured by, or
any services provided by, any Acquired Company prior to the Closing Date;
(e) any matter disclosed in the Disclosure
Letter; or
(f) 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 the Shareholder,
the Parent Shareholders or any Acquired Company (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be
exclusive of or limit any other remedies that may be available to Nu-Wave Sub or
the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE
SHAREHOLDER AND THE PARENT SHAREHOLDERS -- ENVIRONMENTAL MATTERS. In addition to
the provisions of Section 10.2, the Shareholder and the Parent Shareholders,
jointly and severally, will indemnify and hold harmless Nu-Wave Sub, the
Acquired Companies, and the other Indemnified Persons for, and will pay to
Nu-Wave Sub, the Acquired Companies, and the other Indemnified Persons the
amount of, any Damages (including costs of cleanup, containment, or other
remediation) arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety
Liabilities arising out of or relating to: (i) (A) the ownership, operation, or
condition at any time on or prior to the Closing Date of the Facilities or any
other properties and assets (whether real, personal, or mixed and
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whether tangible or intangible) in which the Shareholder, any Parent Shareholder
or any Acquired Company has or had an interest, or (B) any Hazardous Materials
or other contaminants that were present on the Facilities or such other
properties and assets at any time on or prior to the Closing Date; or (ii) (A)
any Hazardous Materials or other contaminants, wherever located, that were, or
were allegedly, generated, transported, stored, treated, Released, or otherwise
handled by the Shareholder, any Parent Shareholder or any Acquired Company or by
any other Person for whose conduct they are or may be held responsible at any
time on or prior to the Closing Date, or (B) any Hazardous Activities that were,
or were allegedly, conducted by the Shareholder, any Parent Shareholder or any
Acquired Company or by any other Person for whose conduct they are or may be
held responsible; or
(b) any bodily injury (including illness,
disability, and death, and regardless of when any such bodily injury occurred,
was incurred, or manifested itself), personal injury, property damage (including
trespass, nuisance, wrongful eviction, and deprivation of the use of real
property), or other damage of or to any Person, including any employee or former
employee of the Shareholder, any Parent Shareholder or any Acquired Company or
any other Person for whose conduct they are or may be held responsible, in any
way arising from or allegedly arising from any Hazardous Activity conducted or
allegedly conducted with respect to the Facilities or the operation of the
Acquired Companies prior to the Closing Date, or from Hazardous Material that
was (i) present or suspected to be present on or before the Closing Date on or
at the Facilities (or present or suspected to be present on any other property,
if such Hazardous Material emanated or allegedly emanated from any of the
Facilities and was present or suspected to be present on any of the Facilities
on or prior to the Closing Date) or (ii) Released or allegedly Released by the
Shareholder, any Parent Shareholder or any Acquired Company or any other Person
for whose conduct they are or may be held responsible, at any time on or prior
to the Closing Date.
Nu-Wave Sub will be entitled to control any Cleanup, any
related Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section
10.3. The procedure described in Section 10.9 will apply to any claim solely for
monetary damages relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY NU-WAVE SUB.
Nu-Wave Sub will indemnify and hold harmless the Shareholder and the Parent
Shareholders, and will pay to the Shareholder and the Parent Shareholders the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Nu-Wave Sub in
this Agreement or in any certificate delivered by Nu-Wave Sub pursuant to this
Agreement, (b) any Breach by Nu-Wave Sub of any covenant or obligation of
Nu-Wave Sub 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 Nu-Wave Sub (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.5 TIME LIMITATIONS. If the Closing occurs, the Shareholder
and the Parent Shareholders will have no liability (for indemnification or
otherwise) with respect to any
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representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections 3.3, 3.11,
3.13, and 3.19, unless on or before December 31, 2001 Nu-Wave Sub notifies the
Shareholder and the Parent Shareholders of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Nu-Wave Sub; a
claim with respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. If the Closing occurs, Nu-Wave Sub will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before December 31, 2001
the Shareholder or any of the Parent Shareholders notify Nu-Wave Sub of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by them.
10.6 LIMITATIONS ON AMOUNT -- SHAREHOLDER AND PARENT
SHAREHOLDERS. The Shareholder and the Parent Shareholders will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a), clause (b), to the extent relating to any failure to perform or
comply prior to the Closing Date, clause (c), and clause (d) of Section 10.2
until the total of all Damages with respect to such matters exceeds $20,000, and
then only for the amount by which such Damages exceed $20,000. However, this
Section 10.6 will not apply to any Breach of any of the Shareholder's and the
Parent Shareholders' representations and warranties of which the Shareholder or
a Parent Shareholder had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by the Shareholder
or any Parent Shareholder of any covenant or obligation, and the Shareholder and
the Parent Shareholders will be jointly and severally liable for all Damages
with respect to such Breaches.
10.7 LIMITATIONS ON AMOUNT -- NU-WAVE SUB. Nu-Wave Sub will
have no liability (for indemnification or otherwise) with respect to the matters
described in clause (a) or (b) of Section 10.4 until the total of all Damages
with respect to such matters exceeds $20,000, and then only for the amount by
which such Damages exceed $20,000. However, this Section 10.7 will not apply to
any Breach of any of Nu-Wave Sub's representations and warranties of which
Nu-Wave Sub had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Nu-Wave Sub of
any covenant or obligation, and Nu-Wave Sub will be liable for all Damages with
respect to such Breaches.
10.8 RIGHT OF SET-OFF AND CANCELLATION. Upon notice to the
Shareholder and the Parent Shareholders specifying in reasonable detail the
basis for such cancellation, Nu-Wave Sub and Nu-Wave may set off any amount to
which Nu-Wave Sub may be entitled under this Section 10 against the shares of
Preferred Stock (and the shares of Common Stock of Nu-Wave into which the
Preferred Stock has been converted) by canceling that number of shares or
fractional shares of Preferred Stock or such Common Stock equal in value to the
amount of the claim. Neither the exercise of nor the failure to exercise such
right of set-off and cancellation will constitute an election of remedies or
limit Nu-Wave Sub in any manner in the enforcement of any other remedies that
may be available to it. In addition, Nu-Wave Sub and Nu-Wave shall have the same
setoff and cancellation rights as provided for above in the following instances:
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(a) a setoff in the amount of any Damages
incurred by the Surviving Corporation that arise out of or relate to the matters
described in items 2 and 3 of Exhibit 3.15 to the Disclosure Letter; and,
(b) a setoff in the event that the total assets
of the Company, as shown on the 1997 fiscal year end audited financial
statements of the Company, when issued, are less than $2,823,747, in which case
the amount of the setoff shall be equal in amount to $2,823,747 minus the dollar
amount of the Company's total assets as shown on such audited financial
statements.
The certificate(s), when issued, evidencing the Preferred
Stock and any Nu-Wave common stock into which the Preferred Stock is convertible
shall bear a restrictive legend referring to such rights of setoff and
cancellation, but the Company agrees to remove such legend upon the expiration
of one year after the date hereof.
10.9 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified
party under Section 10.2, 10.4, or (to the extent provided in the last sentence
of Section 10.3) Section 10.3 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 10.9(a) 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 10 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
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party's consent unless (A) there is no finding or admission of any violation of
Legal 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) The Shareholder and each of the Parent
Shareholders 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 the Shareholder or any Parent Shareholder with respect to such a claim
anywhere in the world.
10.10 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.
11. GENERAL PROVISIONS
11.1 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. The Surviving Corporation
will pay all reasonable counsel fees and expenses of Schifino & Fleischer, P.A.,
related to the Contemplated Transactions. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
11.2 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 Nu-Wave Sub determines.
Unless consented to by Nu-Wave Sub in
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advance or required by Legal Requirements, prior to the Closing the Shareholder
and the Parent Shareholders shall, and shall cause the Acquired Companies to,
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person. The Company and Nu-Wave Sub will consult with each
other concerning the means by which the Acquired Companies' employees,
customers, and suppliers and others having dealings with the Acquired Companies
will be informed of the Contemplated Transactions, and Nu-Wave Sub will have the
right to be present for any such communication.
11.3 CONFIDENTIALITY. Between the date of this Agreement and
the Closing Date, Nu-Wave Sub, the Acquired Companies, the Shareholder and the
Parent Shareholders will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Nu-Wave Sub and the Acquired
Companies to maintain in confidence, any written information furnished by
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written information as the
other party may reasonably request.
11.4 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):
Company: Energy Factors, Inc.
Attention: Paul Santostasi
Address: 3651 Torrey Pines Blvd.
Sarasota, FL 34238
Facsimile No.: 813/544-4386
with a copy to: Schifino & Fleischer, P.A.
Attention: William J. Schifino, Esq.
Address: 201 N. Franklin Street, Suite 2700
Tampa, FL 33602-5187
Facsimile No.: (813) 223-3070
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Nu-Wave Sub: Nu-Wave Acquisition, Inc.
Attention: Dr. Kotha S. Sekharam
Address: 5770 Roosevelt Blvd., Suite 700
Clearwater, FL 34620
Facsimile No.: (813) 524-6610
with a copy to: Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A.
Attention: Philip M. Shasteen, Esq.
100 North Tampa Street, Suite 1800
Tampa, FL 33602-5145
Facsimile No.: (813) 225-1857
Shareholder: U.S. Diversified Technologies, Inc.
Attention: Paul Santostasi
Address: 3651 Torrey Pines Blvd.
Sarasota, FL 34238
Facsimile No.: 813/544-4386
Parent Shareholders: Paul Santostasi
3651 Torrey Pines Blvd.
Sarasota, FL 34238
Marvin Deutsch
314 La Hacienda
Indian Rocks Beach, FL 34635
Chris Starkey
18523 Sea Oaks Lane
Tequesta, FL 33469
11.5 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.
11.6 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
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purpose of carrying out the intent of this Agreement and the documents referred
to in this Agreement.
11.7 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.
11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter (including the Term Sheet) and constitutes (along with the documents
referred to in this Agreement) 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.
11.9 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.
11.10 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, except that Nu-Wave Sub may assign any of
its rights under this Agreement to any Subsidiary of Nu-Wave Sub. 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.
11.11 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.
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11.12 SECTION HEADINGS, CONSTRUCTION. The headings of
Sections in this Agreement are provided for convenience only and will not affect
its construction or 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.
11.13 TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
11.14 GOVERNING LAW. This Agreement will be governed by the
laws of the State of Florida without regard to conflicts of laws principles.
11.15 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.
12. ACTIONS OF NU-WAVE AFTER THE CLOSING.
12.1 BACKGROUND STATEMENTS.
(a) Article III of the Nu-Wave Articles of
Incorporation is not sufficient under the FBCA to grant to the directors of
Nu-Wave the authority to determine the terms of the Preferred Stock. An
amendment of the Nu-Wave Articles of Incorporation (the "Amendment") to so
provide requires the consent of the holders of a majority of the issued and
outstanding shares of Nu-Wave common stock. Nu-Wave intends to solicit and
obtain the consent of its shareholders to the Amendment. Under SEC Rule
14c-2(b), Nu-Wave must prepare and file with the Securities and Exchange
Commission and deliver to its shareholders an Information Statement at least 20
days prior to the earliest date on which the shareholder action set forth in the
consent may be taken. The Preferred Stock cannot be issued until the aforesaid
actions have been taken.
(b) The Company is in need of funds immediately
to pay its creditors, but Nu-Wave is unwilling to provide such funds until it
has acquired the Company.
12.2 SOLICITATION OF SHAREHOLDER CONSENT. Forthwith after
the date of this Agreement, Nu-Wave shall proceed with the preparation of the
required documents for a solicitation of the consent of its shareholders to the
Amendment in accordance with SEC Rule 14c-2(b).
12.3 GRANT OF PROXY. Simultaneously with the Closing,
Nu-Wave is delivering to Paul Santostasi an irrevocable Proxy in the form of
Exhibit 12.3 executed by the holder of more than 50% of its issued and
outstanding common stock.
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<PAGE> 51
12.4 APPOINTMENT TO BOARD. Paul Santostasi shall be
appointed to the Board of Directors of Nu-Wave.
13. COMPANY INTENTIONS WITH RESPECT TO PARENT SHAREHOLDERS.
13.1 NOTES PAYABLE. Nu-Wave shall cause the Surviving
Corporation to honor its notes payable to the Parent Shareholders subject to
delivering to the Surviving Corporation of canceled checks or wire transfer
evidence evidencing that such loans were made and shall pay such rates in full
upon the successful completion of its contemplated private placement of its
equity securities.
13.2 PERSONAL GUARANTEES. It is the intent of Nu-Wave to
cause the Surviving Corporation to use its best efforts within its means to
obtain releases of the Parent Shareholders from personal guaranties of Company
leases and notes. Nu-Wave shall indemnify and hold harmless the Parent
Shareholders from and against any and all expenses (including reasonable
attorney's fees) and judgments arising out of or relating to the failure of the
Surviving Corporation to pay amounts due the following creditors of the Company:
All lessors disclosed in the Disclosure Letter
14. ISSUANCE OF ADDITIONAL SHARES OF PREFERRED STOCK. If the
Average Closing Price is less than $5 per share (the "Target Price"), Nu-Wave
shall, within 10 days thereafter, issue and deliver to the Shareholder that
number of fully paid and non-assessable shares of its common stock determined in
accordance with the following formula:
$2,000,000 - (Average Closing Price per share x 400,000)
Average Closing Price per share = number of additional shares
For example, if the Average Closing Price is $4 per share,
Nu-Wave shall issue to the Shareholder shares of Nu-Wave common stock,
determined as follows:
$2,000,000 - ($4 x 400,000)
--------------------------- = 100,000 shares
$4
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
NU-WAVE SUB:
NU-WAVE ACQUISITION, INC.
By: /s/ Kotha S. Sekharam
-------------------------------
Kotha S. Sekharam, as President
51
<PAGE> 52
NU-WAVE HEALTH PRODUCTS, INC.
By: /s/ Kotha S. Sekharam
-------------------------------
Kotha S. Sekharam, as President
COMPANY:
ENERGY FACTORS, INC.
By: /s/ Paul Santostasi
-------------------------------
Paul Santostasi, as President
SHAREHOLDER:
U.S. DIVERSIFIED TECHNOLOGIES,
INC., a Florida corporation
By: /s/ Paul Santostasi
-------------------------------
Paul Santostasi, as President
PARENT SHAREHOLDERS:
/s/ Paul Santostasi
-----------------------------------
Paul Santostasi
/s/ Marvin Deutsch
-----------------------------------
Marvin Deutsch
/s/ Chris Starkey
-----------------------------------
Chris Starkey
52
<PAGE> 53
EXHIBIT 1
FORM OF
ARTICLES OF AMENDMENT
TO
ARTICLES INCORPORATION
OF
NU-WAVE HEALTH PRODUCTS, INC.
Article III of the articles of incorporation of Nu-Wave Health Products,
Inc. was amended by resolution of the corporation's board of directors on
_______, 1998. The corporation is filing these articles of amendment to articles
of incorporation pursuant to F.S. 607.0602.
FIRST: The name of the corporation is Nu-Wave Health Products, Inc.
SECOND: Article III of the articles of incorporation of Nu-Wave Health
Products, Inc. was amended as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
1.1 "Average Closing Price" shall mean the average closing
price of the Common Stock on the Applicable Trading Market.
1.2 "Board of Directors" shall mean the Board of Directors of
the Company or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.
1.3 "Common Stock" shall mean the common stock, par value $.01
per share, of the Company, or any other class of stock resulting from
successive changes or reclassifications of such common stock consisting solely
of changes in par value, or from par value to no par value, or as a result of a
subdivision, combination, or merger, consolidation or similar transaction in
which the Company is a constituent corporation.
1.4 "Company" shall mean Nu-Wave Health Products, Inc., a
Florida corporation.
1.5 "Conversion Date" shall mean the date upon which the
Company receives the Notice of Conversion provided for in Section 5.2.
1.6 "Conversion Rate" shall have the meaning provided for in
Section 5.1.
1
<PAGE> 54
1.7 "Junior Stock" shall mean the Common Stock and the shares
of any other class or series of stock of the Company created on or after the
issuance of the Series A Preferred Stock that, by the terms of the Articles of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Articles of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be junior to the
Series A Preferred Stock in respect of the right to receive dividends or to
participate in any other distribution of assets.
1.8 "Liquidation Preference" shall mean, with respect to
each share of Series A Preferred Stock, $5.00.
1.9 "Market Value Market" shall mean the Average Closing
Price for a five consecutive trading day period.
1.10 "Applicable Trading" shall mean the OTC Bulletin Board
or, if the Common Stock is listed for trading thereon, The Nasdaq Stock Market,
operated by the National Association of Securities Dealers, Inc., or if neither
of the foregoing is the principal market on which the Common Stock is then
Traded or quoted any principal successor stock exchange or market where the
Common Stock is listed or included
1.11 "Pari Passu Stock" shall mean the shares of any class or
series of stock of the Company created on or after the issuance of the Series A
Preferred Stock that, by the terms of the Articles of Incorporation or of the
instrument by which the Board of Directors, acting pursuant to authority granted
in the Articles of Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall, in the event that the amounts payable thereon in
liquidation are not paid in full, be entitled to share ratably with the Series A
Preferred Stock in any other distribution of assets in accordance with the sums
or other consideration which would be payable in such distribution if all sums
payable were discharged in full.
1.12 "Person" shall mean any individual, corporation, general
partnership, limited partnership, limited liability Partnership, joint venture,
association, joint-stock company, trust, limited liability Company,
unincorporated organization or government or any agency or political subdivision
thereof.
1.13 "Series A Preferred Stock" shall mean the Series A
Convertible Preferred Stock designated and created hereby.
2. CREATION AND DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK.
2.1 Pursuant to the authority conferred upon the Board of
Directors by Article III of the Articles of Incorporation of the Company, as
amended, there is hereby created and the Company is hereby authorized to issue
400,000 shares of a first series of preferred stock, designated "Series A
Convertible Preferred Stock," which shall have the
2
<PAGE> 55
terms, conditions, designation, preferences and privileges, relative,
participating, optional and other special rights, qualifications, limitations
and restrictions as provided for herein.
2.2 The shares of Series A Preferred Stock shall have no
voting rights except as required by law.
2.3 Each share of Series A Preferred Stock shall have the same
rights and preferences as and be identical in all respects with each other share
of Series A Preferred Stock.
2.4 The Company may create, authorize or issue any shares of
Junior Stock or Pari Passu Stock or increase or decrease the amount of
authorized capital stock of any class without the consent of the holders of
Series A Preferred Stock and in taking such actions the Company shall not be
deemed to have affected adversely the rights, preferences, privileges or voting
rights of holders of shares of Series A Preferred Stock.
3. VOTING.
The holders of record of the shares of Series A Preferred
Stock and the holders of record of the Common Stock, voting as a single class,
shall be entitled to one vote for each share on all matters submitted to the
shareholders, subject to the right of the Board of Directors to fix a record
date for the determination of shareholders entitled to notice of and to vote at
any meeting.
4. LIQUIDATION RIGHTS.
4.1 In the event of any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary, the holders of the shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
Company available for distribution to stockholders the Liquidation Preference in
preference to the holders of, and before any distribution is made on, any Junior
Stock, including, without limitation, on any Common Stock.
4.2 Neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Company nor the merger or
consolidation of the Company into or with any other corporation, or the merger
or consolidation of any other corporation into or with the Company, shall be
deemed to be a liquidation, dissolution or winding up, voluntary or involuntary,
for the purposes of this Section 4.
4.3 After the payment to the holders of the shares of Series A
Preferred Stock of full preferential amounts provided for in this Section 4, the
holders of Series A Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Company.
3
<PAGE> 56
4.4 In the event the assets of the Company available for
distribution to the holders of shares of Series A Preferred Stock upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which holders
are entitled pursuant to Section 4.1, no such distribution shall be made on
account of any shares of any Pari Passu Stock upon such liquidation, dissolution
or winding up unless proportionate distributable amounts shall be paid on
account of the shares of Series A Preferred Stock, ratably, in proportion to the
full distributable amounts for which holders of all Series A Preferred Stock and
Pari Passu Stock are entitled upon such liquidation, dissolution or winding up.
5. CONVERSION.
5.1 The holder of Series A Preferred Stock shall have the
right, at its option, at any time and from time to time to convert, subject to
the terms and provisions of this Section 5, any or all of the holder's shares of
Series A Preferred Stock. In such case, each share of Series A Preferred Stock
shall be converted into one (1) (the "Conversion Rate") fully paid and
nonassessable shares of Common Stock. In the event that the Average Closing
Price of the Common Stock for any five consecutive trading day period after the
date hereof is $5.00 per share or more (subject to adjustment upon the
occurrence of the same events and in the same manner as is provided for in this
Section 5.1), each holder of Series A Preferred Stock shall be deemed to have
automatically given notice of the conversion of all of such holder's shares of
Series A Preferred Stock.
5.2 The conversion right of a holder of Series A Preferred
Stock shall be exercised by the holder by the surrender of the certificates
representing shares to be converted to the Company at any time during usual
business hours at its principal place of business, accompanied by written notice
(the "Notice of Conversion") that the holder elects to convert all or a portion
of the shares of Series A Preferred Stock represented by such certificate. The
Notice of Conversion shall read substantially as follows:
The undersigned holder (the "Holder") is surrendering to
Nu-Wave Health Products, Inc., a Florida corporation (the
"Company"), one or more certificates representing shares of
Series A Convertible Series A Preferred Stock of the Company
(the "Series A Preferred Stock") in connection with the
Conversion of all or a portion of the Series A Preferred Stock
into shares of Common Stock, $.01 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Series A Preferred
Stock was issued by the Company pursuant to the exemption from
registration under the United States Securities Act of 1933,
as amended (the "Securities Act").
4
<PAGE> 57
2. The Holder represents and warrants that all offers
and sales of the Common Stock issued to the Holder upon such
conversion of the Series A Preferred Stock shall be made
either pursuant to an effective registration statement under
the Securities Act, in compliance with Rule 144, or pursuant
to some other exemption from registration.
3. The Holder is subject to a lockup agreement dated
June ___, 1998.
Number of shares of Series A Preferred Stock being converted:
___________.
Applicable Conversion Price: _______.
Number of shares of Common Stock issuable: __________.
Name of Holder:
---------------------
(Signature of Holder)
5.3 Immediately prior to the close of business on the date of receipt
by the Company of Notice of Conversion, the converting holder of Series A
Preferred Stock shall be deemed to be the holder of record of Common Stock
issuable upon conversion of such holder's Series A Preferred Stock
notwithstanding that certificates representing such Common Stock shall not then
be actually delivered to such person. On the Conversion Date, all rights with
respect to the shares of Series A Preferred Stock so converted, including the
rights, if any, to receive notices, will terminate, except only the rights of
holders thereof to (i) receive certificates for the number of shares of Common
Stock into which such shares of Series A Preferred Stock have been converted;
and (ii) exercise the rights to which they are entitled as holders of Common
Stock.
5.4 The Conversion Rate shall be subject to adjustment in case the
Company shall at any time or from time to time (A) make a redemption payment or
pay a dividend (or other distribution) payable in shares of Common Stock on any
class of capital stock (which, for purposes of this Section 5.4 shall include,
without limitation, any dividends or distributions in the form of options,
warrants or other rights to acquire capital stock) of the Company; (B) subdivide
the outstanding shares of Common Stock into a larger number of shares; (C)
combine the outstanding shares of Common Stock into a smaller number of shares;
(D) issue any shares of its capital stock in a reclassification of the Common
Stock; or (E) pay a dividend or make a distribution to all holders of shares of
Common Stock pursuant to a stockholder rights plan, "poison pill" or similar
arrangement then, and in each such case, the Conversion Rate in effect
immediately prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the
5
<PAGE> 58
Company) so that the holder of any share of Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series A Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 5.4 shall become
effective retroactively (x) in the case of any such dividend or distribution, to
the day immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
5.5 Upon any increase or decrease in the Conversion Rate,
then, and in each such case, the Company promptly shall deliver to each holder
of Series A Preferred Stock a certificate signed by an authorized officer of the
Company, setting forth in reasonable detail the event requiring the adjustment
and the method by which such adjustment was calculated and specifying the
increased or decreased Conversion Rate then in effect following such adjustment.
5.6 No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of any shares of
Series A Preferred Stock. If more than one share of Series A Preferred Stock
shall be surrendered for conversion at one time by the same holder the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate Liquidation Preference of the shares of Series A
Preferred Stock so surrendered. If the conversion of any share or shares of
Series A Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the last reported closing bid price of the Common Stock on the
Nasdaq Stock Market at the close of business on the trading day next preceding
the day of conversion shall be paid to such holder in cash by the Company.
5.7 In case of any capital reorganization or reclassification
or other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value), or in case of any consolidation or merger of the Company with or into
another Person (other than a consolidation or merger in which the Company is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Company (any of the foregoing, a "Transaction"), each share of Series A
Preferred Stock then outstanding shall, without the consent of any holder of
Series A Preferred Stock, become convertible only into the kind and amount of
shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock could
have been converted immediately prior to such Transaction after giving effect to
any adjustment event. The provisions of this Section
6
<PAGE> 59
4.4 and any equivalent thereof in any such certificate similarly shall apply to
successive Transactions. The provisions of this Section 5.7 shall be the sole
right of holders of Series A Preferred Stock in connection with any Transaction
and such holders shall have no separate vote thereon.
5.8 In the case of any distribution by the Company to its
stockholders of substantially all of its assets, each holder of Series A
Preferred Stock will participate pro rata in such distribution based on the
number of shares of Common Stock into which such holders' shares of Series A
Preferred Stock would have been convertible immediately prior to such
distribution.
5.9 The Company shall at all times reserve and keep available
for issuance upon the conversion of the Series A Preferred Stock, such number of
its authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series A Preferred Stock.
5.10 The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series A Preferred Stock shall be made without
charge to the converting holder of shares of Series A Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or in such names as may be
directed by, the holders of the shares of Series A Preferred Stock converted;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the holder of the shares of
Series A Preferred Stock converted, and the Company shall not be required to
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
6. OTHER PROVISIONS.
6.1 With respect to any notice to a holder of shares of Series
A Preferred Stock required to be provided hereunder, neither failure to mail
such notice, nor any defect therein or in the mailing thereof, to any particular
holder shall affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice with respect to the other holders or
affect the legality or validity of any distribution, rights, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any such action. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the holder receives the notice.
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<PAGE> 60
6.2 Shares of Series A Preferred Stock issued and reacquired
will be retired and canceled promptly after reacquisition thereof and, upon
compliance with the applicable requirements of Florida law, have the status of
authorized but unissued shares of Series A Preferred Stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of Series A Preferred Stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of Series A
Preferred Stock of the Corporation, except that any issuance or reissuance of
shares of Series A Preferred Stock must be in compliance with these Articles of
Amendment.
6.3 All notices periods referred to herein shall commence on
the date of the mailing of the applicable notice.
THIRD: The foregoing amendment to articles of incorporation was duly
adopted by the board of directors on June 12, 1998.
Signed this 12th day of June, 1998.
NU-WAVE HEALTH PRODUCTS, INC.
By:
-------------------------------
Kotha S. Sekharam, as President
8
<PAGE> 61
SCHEDULE 4.2
Approval of shareholders of Nu-Wave Sub.
<PAGE> 62
EXHIBIT 2.3(c)
FORM OF
ARTICLES OF MERGER
OF
NU-WAVE ACQUISITION, INC.
INTO
ENERGY FACTORS, INC.
Articles of Merger between Nu-Wave Acquisition, Inc., a Florida
corporation ("Nu-Wave Sub") and Energy Factors, Inc., a Florida corporation
("Energy Factors").
Pursuant to Section 607.1105 of the Florida Business Corporation Act,
Nu-Wave Sub and Energy Factors adopt the following Articles of Merger.
1. PLAN OF MERGER. The Plan of Merger dated June 12, 1998,
between Nu-Wave Sub and Energy Factors, a copy of which is attached hereto as
Exhibit 1 (the "Plan of Merger"), and pursuant to which Nu-Wave Sub will be
merged into Energy Factors (the "Merger") was approved and adopted by the sole
shareholder of Nu-Wave Sub on June 12, 1998 and was adopted by the sole
shareholder of Energy Factors on June 12, 1998.
2. EFFECTIVE DATE. The effective date of the merger shall be
the date that these Articles of Merger are filed with the Florida Department of
State.
3. SURVIVING CORPORATION; NAME. Pursuant to the Plan of
Merger, Energy Factors is the surviving corporation and has amended and
restated its articles of incorporation to, among other things, change its name
to Dynamic Health Products, Inc.
Executed on June 12, 1998.
Nu-Wave Acquisition, Inc. Energy Factors, Inc.
By: By:
--------------------------------- -----------------------------
Kotha S. Sekharam, as President Paul Santostasi, as President
<PAGE> 63
Exhibit 7.4(a)
Form of Opinion Letter
[SCHIFINO & FLEISCHER, P.A. LETTERHEAD]
June 12, 1998
Nu-Wave Acquisition, Inc.
Nu-Wave Health Products, Inc.
5770 Roosevelt Blvd., Suite 700
Clearwater, FL 34620
Attention: Dr. Kotha S. Sekharam
Gentlemen:
We have acted as counsel to Energy Factors, Inc. (the "Company"), a Florida
corporation, and U.S. Diversified Technologies, Inc. (the "Shareholder"), a
Florida corporation (collectively, "Sellers"), in connection with the Agreement
and Plan of Reorganization dated June 12, 1998 (the "Agreement"). This is the
opinion contemplated by Section 7.4(a) of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement or the Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Florida.
On June 12, 1998, pursuant to Chapter 607.0704 of the Florida Business
Corporation Act, Messrs. Paul Santostasi, Chris Starkey and Marvin Deutsch,
owners of approximately 90% of the outstanding shares of capital stock of the
Shareholder, approved the adoption of the Agreement. Florida law requires that
within ten (10) days after the approval of the Agreement, notice must be given
to those shareholders of the corporation who have not consented in writing to
the Agreement. We have been advised that proper notice will be given within the
ten day period.
Based on the foregoing, and assuming compliance with Chapter 607.0704 of
the Florida Business Corporation Act, is our opinion that:
1. The Agreement is enforceable against the Sellers. The Lockup Agreement
is enforceable against the Shareholder. The Releases, the
Noncompetition Agreements and the Employment Agreement are enforceable
against each Parent Shareholder executing them.
2. The authorized capital stock of the Company consists of 60 shares of
stock, no par value, of which 60 shares are outstanding. The
Shareholder owns all of the outstanding Stock of record and
beneficially, free and clear of all adverse claims.
<PAGE> 64
3. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, with full
corporate power and authority to own its properties and to engage in
its business as presently conducted or contemplated. The outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and were not
issued in violation of the preemptive rights of any Person.
4. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the Contemplated Transactions (a)
breaches or constitutes a default (or an event that, with notice or
lapse of time or both, would constitute a default) under any agreement
or commitment known to us to which the Company is a party or by which
any of their respective property or assets is bound to which either
Seller is party or (b) violates any statute, law, regulation or rule,
or, to our knowledge, any judgment, decree or order of any court or
other Governmental Body applicable to either Seller.
5. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the Contemplated Transactions (a)
violates any provision of the certificates of incorporation or bylaws
(or other governing instrument) of Sellers, (b) breaches or
constitutes a default (or an event that, with notice or lapse of time
or both, would constitute a default) under, or results in termination
of, or accelerates the performance required by, or excuses performance
by any Person of any of its obligations under, or causes the
acceleration of the maturity of any debt or obligation pursuant to, or
results in the creation or imposition of any Encumbrance upon any
property or assets of either Seller under, any agreement or commitment
known to us to which either Seller is a party or by which any of their
respective property or assets is bound or to which any of the
properties or assets of either Seller are subject, and which breach or
default would have a material adverse effect on the operations of the
Sellers. It should be noted however that compliance with Chapter
607.0704 affords the shareholders of the Shareholder dissenters rights
of appraisal.
This opinion is delivered solely in connection with the consummation of
the transactions described herein, and may not be relied upon by you for any
other purpose nor by any other person for any purpose.
Very truly yours,
SCHIFINO & FLEISCHER, P.A.
/s/ William J. Schifino
---------------------------------
William J. Schifino
<PAGE> 65
EXHIBIT 7.4(c)
FORM OF
RELEASE
This Release is being executed and delivered in accordance with Section
7.4(c) of the Agreement of Reorganization dated June 12, 1998 (the "Agreement")
between Nu-Wave Acquisition, Inc., a Florida corporation ("Nu-Wave Sub"), Energy
Factors, Inc., a Florida corporation (the "Company") and others. Capitalized
terms used in this Release without definition have the respective meanings given
to them in the Agreement.
The undersigned Parent Shareholders acknowledge that execution and
delivery of this Release is a condition to Nu-Wave Sub's and Nu-Wave's
obligation to consummate the transactions contemplated in the Agreement and that
they are relying on this Release in consummating such transactions.
The undersigned, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound,
in order to induce Nu-Wave Sub and Nu-Wave to consummate the transactions
provided for in the Agreement, hereby agree as follows:
Each Parent Shareholder, on behalf of himself and each of his Related
Persons, hereby releases and forever discharges Nu-Wave Sub and Nu-Wave, the
Company and each of the other Acquired Companies, and each of their respective
individual, joint or mutual, past, present and future Representatives,
affiliates, stockholders, controlling persons, Subsidiaries, successors and
assigns (individually, a "Releasee" and collectively, "Releasees") from any and
all claims, demands, Proceedings, causes of action, Orders, obligations,
contracts, agreements, debts and liabilities whatsoever, whether known or
unknown, suspected or unsuspected, both at law and in equity, which each of the
Parent Shareholders or any of their respective Related Persons now has, have
ever had or may hereafter have against the respective Releasees arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date, including, but not limited to, any rights to indemnification
or reimbursement from the Company or any other Acquired Company, whether
pursuant to their respective Organizational Documents, contract or otherwise and
whether or not relating to claims pending on, or asserted after, the Closing
Date; provided, however, that nothing contained herein shall operate to release
any obligations of Nu-Wave Sub or Nu-Wave arising under the Agreement or any
obligation of any Acquired Company which obligation has been disclosed in
Section 3.25 of the Disclosure Letter.
Each Parent Shareholder hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any proceeding of any kind against any
Releasee, based upon any matter purported to be released hereby.
<PAGE> 66
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each Parent Shareholder, jointly and severally, shall
indemnify and hold harmless each Releasee from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorney's fees)
whether or not involving third party claims, arising directly or indirectly from
or in connection with (i) the assertion by or on behalf of the Parent
Shareholders or any of their Related Persons of any claim or other matter
purported to be released pursuant to this Release and (ii) the assertion by any
third party of any claim or demand against any Releasee which claim or demand
arises directly or indirectly from, or in connection with, any assertion by or
on behalf of the Parent Shareholders or any of their Related Persons against
such third party of any claims or other matters purported to be released
pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Florida without
regard to principles of conflicts of law.
All words used in this Release will be construed to be of such gender
or number as the circumstances require.
Each of the undersigned have executed and delivered this Release as of
this 12th day of June, 1998.
-------------------------------
Paul Santostasi
-------------------------------
Marvin Deutsch
-------------------------------
Chris Starkey
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<PAGE> 67
EXHIBIT 7.4(c)
FORM OF
RELEASE
This Release is being executed and delivered in accordance with Section
7.4(c) of the Agreement of Reorganization dated June 12, 1998 (the "Agreement")
between Nu-Wave Acquisition, Inc., a Florida corporation ("Nu-Wave Sub"), Energy
Factors, Inc., a Florida corporation (the "Company") and others. Capitalized
terms used in this Release without definition have the respective meanings given
to them in the Agreement.
The undersigned Shareholder acknowledges that execution and delivery of
this Release is a condition to Nu-Wave Sub's and Nu-Wave's obligation to
consummate the transactions contemplated in the Agreement and that they are
relying on this Release in consummating such transactions.
The undersigned, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound,
in order to induce Nu-Wave Sub and Nu-Wave to consummate the transactions
provided for in the Agreement, hereby agree as follows:
The Shareholder, on behalf of itself and each of its Related Persons,
hereby releases and forever discharges Nu-Wave Sub and Nu-Wave, the Company and
each of the other Acquired Companies, and each of their respective individual,
joint or mutual, past, present and future Representatives, affiliates,
stockholders, controlling persons, Subsidiaries, successors and assigns
(individually, a "Releasee" and collectively, "Releasees") from any and all
claims, demands, Proceedings, causes of action, Orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown,
suspected or unsuspected, both at law and in equity, which the Shareholder or
any of its respective Related Persons now has, have ever had or may hereafter
have against the respective Releasees arising contemporaneously with or prior to
the Closing Date or on account of or arising out of any matter, cause or event
occurring contemporaneously with or prior to the Closing Date, including, but
not limited to, any rights to indemnification or reimbursement from the Company
or any other Acquired Company, whether pursuant to their respective
Organizational Documents, contract or otherwise and whether or not relating to
claims pending on, or asserted after, the Closing Date; provided, however, that
nothing contained herein shall operate to release any obligations of Nu-Wave Sub
or Nu-Wave arising under the Agreement or any obligation of any Acquired Company
which obligation has been disclosed in Section 3.25 of the Disclosure Letter.
The Shareholder hereby irrevocably covenants to refrain from, directly
or indirectly, asserting any claim or demand, or commencing, instituting or
causing to be commenced, any proceeding of any kind against any Releasee, based
upon any matter purported to be released hereby.
<PAGE> 68
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, the Shareholder, jointly and severally, shall
indemnify and hold harmless each Releasee from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorney's fees)
whether or not involving third party claims, arising directly or indirectly from
or in connection with (i) the assertion by or on behalf of the Shareholder or
any of its Related Persons of any claim or other matter purported to be released
pursuant to this Release and (ii) the assertion by any third party of any claim
or demand against any Releasee which claim or demand arises directly or
indirectly from, or in connection with, any assertion by or on behalf of the or
any of its Related Persons against such third party of any claims or other
matters purported to be released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Florida without
regard to principles of conflicts of law.
All words used in this Release will be construed to be of such gender
or number as the circumstances require.
The undersigned has executed and delivered this Release as of this 12th
day of June, 1998.
U.S. Diversified Technologies, Inc.
By:
--------------------------------
Paul Santostasi, as President
2
<PAGE> 69
EXHIBIT 7.4(e)
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 1st day of
May, 1995, by and between Nu-Wave Health Products, Inc., a Florida corporation
(the "Employer") and Paul Santostasi, residing at 3651 Torrey Pines Blvd.,
Sarasota, FL 34238 (the "Employee").
WITNESSETH:
1. EMPLOYMENT. The Employer hereby employs the Employee as the Vice
Chairman of the Board of Directors of the Employer, and the Employee hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM. Subject to the provisions of termination as hereinafter
provided, the term of employment under this Agreement shall begin as of June 12,
1998, and terminate on June 13, 2001.
3. COMPENSATION; REIMBURSEMENT, ETC.
(a) The compensation payable to the Employee shall be fixed at
an annual salary of $125,000. Such compensation may be paid in weekly or in
other convenient installments, as determined by the Employer. In addition, the
Board of Directors of Employer may, in its discretion, establish a bonus plan
which may include the Employee. The terms of any such bonus plan shall be in the
discretion of the Employer.
(b) The Employer shall reimburse the Employee on a monthly
basis for all reasonable expenses incurred by the Employee in the performance of
his duties under this Agreement; provided, however, that the Employer will not
reimburse the Employee for any expense which had not been approved by the
Employer prior to such expense; and provided further, that the Employee shall
have previously furnished to the Employer an itemized account, satisfactory to
the Employer, in substantiation of such expenditures.
(c) The Employer currently provides to the Employee a leased
automobile, with ____ months remaining on such lease. The Employer shall
maintain such lease until its expiration, at which time such vehicle shall be
returned to the lessor. Thereafter, Employer shall pay to Employee an automobile
allowance of $750 per month for each month during the term hereof.
(d) The Employer shall maintain a life insurance policy on the
life of the Employee during the term of this Agreement in the face amount of
$500,000. The Employee, his designee or estate shall be the beneficiary of
$250,000 of the death benefit of such life insurance policy and, until the date
that the Employer refinances its existing note and mortgage
<PAGE> 70
encumbering its facilities (the "Note"), $250,000 of the death benefit shall be
payable to the Employer, but pledged as additional security for the Note. After
the Note is refinanced, the death benefit previously pledged as additional
security for the Note shall be payable to the Employee's designated beneficiary.
4. DUTIES. The Employee is engaged as the Vice Chairman of the Board
of the Employer. Employee shall report to and take direction from Employer's
Chairman of the Board. Employee's primary responsibility shall be business
development and acquisitions. The Employee shall adhere to the minimum
performance standards set forth in Exhibit "A" hereto. In addition, the Employee
shall have such other duties and hold such offices as may from time to time be
reasonably assigned to him by the Board of Directors of the Employer.
5. EXTENT- OF SERVICES. During the term of his employment under this
Agreement, the Employee shall devote his entire time, attention, energies and
skill to the benefit and business of the Employer, and shall not during the term
of this Agreement be employed by any other person without board approval.
6. BENEFITS. The Employee shall be entitled to the same benefits
package made available by the Employer to its management personnel, including
health insurance for employee and his immediate family. The Employee shall be
entitled to four (4) weeks vacation time during each fiscal year of the
Employer.
7. DISABILITY, ILLNESS OR INCAPACITY.
(a) The Employee shall receive full compensation for any
period of disability, illness or incapacity during the term hereof which renders
the Employee at least temporarily unable to perform the services required under
this Agreement, provided, however, that if the Employee's disability, illness or
incapacity extends beyond a period of one hundred twenty (120) days, the
Employee shall not be entitled, after the expiration of such one hundred twenty
(120) day period, to any further compensation hereunder until he returns to full
time service hereunder, but he shall be entitled only to such disability
payments as may be provided by a disability insurance policy or policies
purchased by the Employer.
(b) Successive periods of disability, illness or incapacity
will be considered separate periods unless the later period of disability,
illness or incapacity is due to the same or related cause and commences less
than six (6) months after the ending of the previous period of disability.
(c) If and when the period of disability, illness or
incapacity of the Employee totals six (6) months, his employment with the
Employer may be terminated by the Board. If the Employee and the Employer agree,
the Employee may thereafter be employed by the Employer upon such terms as may
be mutually agreeable.
(d) Any dispute regarding the existence, extent or continuance
of the disability, illness or incapacity shall be resolved by the determination
of a majority of three competent doctors who are not employees of the Employer,
one of which shall be selected by the
2
<PAGE> 71
Employer, one of which shall be selected by the Employee and a third selected by
the other two doctors.
8. DEATH OR RETIREMENT.
(a) All rights of the Employee hereunder (other than rights
accrued prior thereto) shall terminate upon his death, except that the Employer
shall pay to the estate of the Employee such compensation as would otherwise
have been payable to the Employee up to six months after the death occurs. The
Employer shall. have no additional financial obligation under this Agreement to
the Employee or his estate.
(b) All rights of the Employee hereunder (other than rights
accrued prior thereto) shall terminate upon his retirement, except that the
Employer shall pay to the Employee such compensation as would otherwise have
been payable to the Employee up to the end of the month in which his retirement
occurs. The Employer shall have no additional financial obligation under this
Agreement to the Employee.
9. OTHER TERMINATIONS.
(a) (i) The Employer may terminate the employment of the
Employee hereunder without notice (1) upon the Employee's breach of any
provision of this Agreement, or (2) for good cause (as defined below).
(ii) The term "good cause" as used in this Agreement
shall include, but shall not necessarily be limited to fraud, habitual
absenteeism, a pattern of conduct which tends to hold the Employer up to
ridicule in the community, conduct disloyal to the Employer, conviction of any
crime of moral turpitude and substantial dependence, as determined by the Board
of Directors of the Employer, on any addictive substance, including but not
limited to alcohol, amphetamines, barbiturates, methadone, cannabis, cocaine,
PCP, THC, LSD or other illegal or narcotic drugs. If any determination of
substantial dependence by the Board of Directors is disputed by the Employee,
the parties hereto agree to abide by the decision of a panel of three physicians
selected in the manner provided in Section 7(d) of this Agreement. The Employee
agrees to make himself available for and submit to examinations by such
physicians as may be directed by the Employer. Failure to submit to any such
examination shall constitute a breach of a material part of this Agreement.
(b) If the employment of the Employee is terminated pursuant
to this Section 9, the Employer shall pay to the Employee any compensation
earned but not paid to the Employee prior to such termination. Such payment
shall be in full and complete discharge of any and all liabilities or
obligations of the Employer to the Employee hereunder, and the Employee shall be
entitled to no further benefits under this Agreement, except as provided in
Section 9 of this Agreement.
(c) In the event termination for reasons other than those
pursuant to this Section 9 the Employer will pay the balance of compensation due
pursuant to that contact, less any bonus, up to the termination date of this
contract.
10. DISCLOSURE.
3
<PAGE> 72
(a) The Employee agrees that he will fully disclose and
disclose only to the Employer all ideas, methods, plans, developments,
improvements or patentable inventions, of any kind, which relate directly or
indirectly to the business of the Employer and which are known, made or
discovered by him during the performance of his duties under this Agreement. All
disclosures are to be made promptly after conception or discovery of the idea,
method, plan, development, improvement or invention. Nothing in this Section 10
shall be construed as requiring any communication to the Employer of the idea,
method, plan, development, improvement or invention if lawfully protected by any
other lawful prohibition against such communication.
(b) Any idea, method, plan, development, improvement or
invention which the Employee is obligated to disclose to the Employer under this
Section 10 shall be the property of the Employer, regardless of whether it is
disclosed by the Employee to the Employer. The Employee agrees that he will
provide any and all assistance to the Employer in making any patent applications
or other applications for obtaining exclusive rights in, and will do all other
things that may be reasonably necessary to vest in the Employer or its assigns,
the ideas, methods, plans, developments, improvements or inventions.
11. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, lie will not, without prior written consent of the
Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
12. NONCOMPETITION AND NONSOLICITATION.
(a) During the term of this Agreement, except as contemplated
herein, and for a period of three (3) years after the termination of his
employment with the Employer, regardless of the reason for such termination, the
Employee shall not, directly or indirectly, within Florida, enter into, engage
in, be employed by, or consult with any business in competition with the
business of the Employer or Nu-Wave Health Products, Inc., a Florida corporation
("Nu-Wave") as it is then carried on (except for vitamin outlets); further, the
Employee shall not sell to, market, produce or otherwise deal with any customer
of the Employer or Nu-Wave. The restrictions of this Section 12 shall extend to
any and all activities of the Employee, whether as an independent contractor,
partner or joint venturer, or as an officer, director, stockholder, agent,
employee or salesman for any person, firm, partnership, corporation or other
entity, or otherwise. The restrictions of this Section 12 shall not be violated
by the ownership of no more than 2% of the outstanding securities of any company
whose stock is traded on a national securities exchange or is quoted in the
Automated Quotation System of the National Association of Securities Dealers
(NASDAQ). Solicitation or acceptance of orders outside of any prohibited
territory as described above for shipment to, delivery in or service in any
restricted territory shall also constitute engaging in business within the
restricted territories in violation of this Section 12.
4
<PAGE> 73
(b) During his employment with the Employer, except as
contemplated herein, and for a period of one (1) year after the termination of
his employment with the Employer, regardless of the reason for such termination,
the Employee agrees he will refrain from and will not, directly or indirectly,
as independent contractor, employee, consultant, agent, partner, joint venturer,
or otherwise, (1) solicit any of the employees of the Employer or Nu-Wave to
terminate their employment or (2) accept employment with or seek remuneration by
any of the customers of the Employer or Nu-Wave with whom the Employer or
Nu-Wave did business during the term of the Employee's employment.
(c) The period of time during which the Employee is prohibited
from engaging in certain business practices pursuant to Sections 12(a) or (b)
shall be extended by any length of time during which the Employee is in breach
of such covenants.
(d) It is understood by and between the parties hereto that
the foregoing restrictive covenants set forth in Sections 12(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and the Employee that if any
portion of the covenants set forth in this Section 12 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Employer and Employee agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 12 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, nonarbitrary and not against public policy may be enforced
against the Employee. The Employer and the Employee agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Employer.
13. SPECIFIC PERFORMANCE. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 10, 11 or 12 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 10, 11 or 12 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
14. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and
war-rants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provisions of or the termination of or constitute
5
<PAGE> 74
a default under any Agreement to which the Employee is a party or by which the
Employee is or may be bound.
15. WAIVER OR BREACH. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
16. BINDING EFFECT ASSIGNMENT. The rights and obligations of the
Employer under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
18. HEADINGS. The headings contained in this Agreement are for
reference purposes and shall not affect the meaning or interpretation of this
Agreement.
19. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
20. NOTICES. Any notice required or permitted to be given under this
Agreement shall Sufficient if in writing and if sent by certified or registered
mail, first class, return receipt requested, to the parties at the following
addresses:
To the Employer: Nu-Wave Health Products, Inc.
c/o Nu-Wave Health Products, Inc.
5770 Roosevelt Boulevard, Suite 700
Clearwater, Florida 34620
Attention: Kotha S. Sekharam,
President
To the Employee at his address herein first above written.
The parties hereto have executed this Agreement the day and year first
above written.
EMPLOYER:
NU-WAVE HEALTH PRODUCTS, INC.
By:
----------------------------
Kotha S. Sekharam, President
6
<PAGE> 75
EMPLOYEE:
----------------------------
Paul Santostasi
7
<PAGE> 76
EXHIBIT 7.4(f)
FORM OF
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of June 12,
1998, by and between Energy Factors, Inc., a Florida corporation (the
"Company"), and Chris Starkey, residing at 18523 Sea Oaks Lane, Tequesta, FL
33469 ("Parent Shareholder").
RECITALS
Concurrently with the execution and delivery of this Agreement, Nu-Wave
Acquisition, Inc., a Florida corporation, is merging into Energy Factors, with
the result that Energy Factors will become a wholly-owned subsidiary of Nu-Wave
Health Products, Inc., a Florida corporation ("Nu-Wave") pursuant to the terms
and conditions of a reorganization agreement made as of June 12, 1998, (the
"Reorganization Agreement"). Section 7.4(f) of the Reorganization Agreement
requires that noncompetition agreements be executed and delivered by the Parent
Shareholder as a condition to the consummation of the transactions provided for
in the Reorganization Agreement.
AGREEMENT
For valuable consideration, the parties, intending to be legally bound,
agree as follows:
1. DEFINITIONS. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Reorganization Agreement.
2. ACKNOWLEDGMENTS BY PARENT SHAREHOLDER. Parent Shareholder acknowledges
that (a) Parent Shareholder has occupied a position of trust and confidence with
the Acquired Companies prior to the date hereof and has become familiar with one
or more of the following, any and all of which constitute confidential
information of the Acquired Companies, (collectively the "Confidential
Information"): (i) any and all trade secrets concerning the business and affairs
of the Acquired Companies, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information, of the Acquired Companies and
any other information, however documented, of the Acquired Companies that is a
trade secret within the meaning of Section 688, et sec., Florida Statutes; (ii)
any and all information concerning the business and affairs of the Acquired
Companies (which includes historical financial statements, financial projections
and budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of
<PAGE> 77
key personnel, personnel training and techniques and materials), however
documented; and (iii) any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Acquired Companies
containing or based, in whole or in part, on any information included in the
foregoing, (b) the business of the Acquired Companies is national in scope, (c)
its products and services are marketed throughout the United States; (d) the
Acquired Companies compete with other businesses that are or could be located in
any part of the United States; (e) the Company has required that Parent
Shareholder make the covenants set forth in Sections 3 and 4 of this Agreement
as a condition to Nu-Wave Sub and Nu-Wave consummating the transactions provided
for in the Reorganization Agreement and A; (f) the provisions of Sections 3 and
4 of this Agreement are reasonable and necessary to protect and preserve the
Acquired Companies' business, and (g) the Acquired Companies would be
irreparably damaged if Parent Shareholder were to breach the covenants set forth
in Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION. Parent Shareholder acknowledges and agrees
that all Confidential Information known or obtained by Parent Shareholder,
whether before or after the date hereof, is the property of the Acquired
Companies. Therefore, Parent Shareholder agrees that Parent Shareholder will
not, at any time, disclose to any unauthorized Persons or use for his own
account or for the benefit of any third party any Confidential Information,
whether Parent Shareholder has such information in Parent Shareholder's memory
or embodied in writing or other physical form, without the Company's written
consent, unless and to the extent that the Confidential Information is or
becomes generally known to and available for use by the public other than as a
result of Parent Shareholder's fault or the fault of any other Person bound by a
duty of confidentiality to the Company or the Acquired Companies. Parent
Shareholder agrees to deliver to the Company at the time of execution of this
Agreement, and at any other time the Company may request, all documents,
memoranda, notes, plans, records, reports, and other documentation, models,
components, devices, or computer software, whether embodied in a disk or in
other form (and all copies of all of the foregoing), relating to the businesses,
operations, or affairs of the Acquired Companies and any other Confidential
Information that Parent Shareholder may then possess or have under Parent
Shareholder's control.
4. NONCOMPETITION. As an inducement for Nu-Wave Sub and Nu-Wave to enter
into the Reorganization Agreement and as additional consideration under the
Reorganization Agreement, Parent Shareholder agrees that:
(a) For a period of three years after the Closing, Parent Shareholder
shall not, directly or indirectly, within Florida, enter into, engage in, be
employed by, or consult with any business in competition with the business of
the Company or Nu-Wave as it is then carried on (except for vitamin outlets);
further, the Parent Shareholder shall not sell to, market, produce or otherwise
deal with any customer of the Company or Nu-Wave. The restrictions of this
paragraph 4 shall extend to any and all activities of the Parent Shareholder,
whether as an independent contractor, partner or joint venturer, or as an
officer, director, stockholder, agent, employee or salesman for any person,
firm, partnership, corporation or other entity, or otherwise. The restrictions
of this paragraph 4 shall not be violated by the ownership of no more than 2% of
the outstanding securities of any company whose stock is traded on a national
securities exchange or is quoted in the Automated Quotation System of the
National Association of Securities Dealers (NASDAQ). Solicitation or acceptance
of orders outside of any prohibited territory as described above for shipment
to, delivery in or service in any restricted territory shall
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<PAGE> 78
also constitute engaging in business within the restricted territories in
violation of this paragraph 4.
(b) For a period of one (1) year after the Closing, the Parent
Shareholder agrees he will refrain from and will not, directly or indirectly, as
independent contractor, employee, consultant, agent, partner, joint venturer, or
otherwise, (1) solicit any of the employees of the Company or Nu-Wave to
terminate their employment or (2) accept employment with or seek remuneration by
any of the customers of the Company or Nu-Wave with whom the Company or Nu-Wave
did business during the three year period prior to the Closing.
(c) The period of time during which the Parent Shareholder is
prohibited from engaging in certain business practices pursuant to paragraph 4
shall be extended by any length of time during which the Parent Shareholder is
in breach of such covenants.
(d) It is agreed by the Parent Shareholder and the Company that if any
portion of the covenants set forth in this paragraph 4 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The parties agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
paragraph 4 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
nonarbitrary and not against public policy may be enforced against the Parent
Shareholder. The parties agree that the foregoing covenants are appropriate and
reasonable when considered in light of the nature and extent of the business
conducted by the Company and Nu-Wave.
5. SPECIFIC PERFORMANCE. The Parent Shareholder agrees that damages at law
will be an insufficient remedy to the Company if the Parent Shareholder violates
the terms of paragraphs 3 and 4 of this Agreement and that the Company and
Nu-Wave would suffer irreparable damage as a result of such violation.
Accordingly, it is agreed that the Company shall be entitled, upon application
to a court of competent jurisdiction, to obtain injunctive relief to enforce the
provisions of such paragraphs, which injunctive relief shall be in addition to
any other rights or remedies available to the Company. The Parent Shareholder
agrees to pay to the Company all costs and expenses incurred by the Company
relating to the enforcement of the terms of paragraphs 3 and 4 of this
Agreement, including reasonable fees and disbursements of counsel (both at trial
and in appellate proceedings).
6. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon the parties
and will inure to the benefit of the parties and their affiliates, successors
and assigns.
7. 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 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 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
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<PAGE> 79
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.
8. GOVERNING LAW. This Agreement will be governed by the laws of the State
of Florida without regard to conflicts of laws principles.
9. 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.
10. SEVERABILITY. Whenever possible each provision and term of this
Agreement will be interpreted in a manner to be effective and valid but if any
provision or term of this Agreement is held to be prohibited by or invalid, then
such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement.
11. ENTIRE AGREEMENT. This Agreement and the Reorganization Agreement
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior written and oral agreements and
understandings between the parties with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
Company:
ENERGY FACTORS, INC. Parent Shareholders:
By:
--------------------------------- ------------------------------
Kotha S. Sekharam, as President Chris Starkey
4
<PAGE> 80
EXHIBIT 7.4(f)
FORM OF
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of June 12,
1998, by and between Energy Factors, Inc., a Florida corporation (the
"Company"), and Marvin Deutsch, residing at 314 LaHacienda, Indian Rocks Beach,
FL 34635 ("Parent Shareholder").
RECITALS
Concurrently with the execution and delivery of this Agreement, Nu-Wave
Acquisition, Inc., a Florida corporation, is merging into Energy Factors, with
the result that Energy Factors will become a wholly-owned subsidiary of Nu-Wave
Health Products, Inc., a Florida corporation ("Nu-Wave") pursuant to the terms
and conditions of a reorganization agreement made as of June 12, 1998, (the
"Reorganization Agreement"). Section 7.4(f) of the Reorganization Agreement
requires that noncompetition agreements be executed and delivered by the Parent
Shareholder as a condition to the consummation of the transactions provided for
in the Reorganization Agreement.
AGREEMENT
For valuable consideration, the parties, intending to be legally bound,
agree as follows:
1. DEFINITIONS. Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Reorganization Agreement.
2. ACKNOWLEDGMENTS BY PARENT SHAREHOLDER. Parent Shareholder acknowledges
that (a) Parent Shareholder has occupied a position of trust and confidence with
the Acquired Companies prior to the date hereof and has become familiar with one
or more of the following, any and all of which constitute confidential
information of the Acquired Companies, (collectively the "Confidential
Information"): (i) any and all trade secrets concerning the business and affairs
of the Acquired Companies, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information, of the Acquired Companies and
any other information, however documented, of the Acquired Companies that is a
trade secret within the meaning of Section 688, et sec., Florida Statutes; (ii)
any and all information concerning the business and affairs of the Acquired
Companies (which includes historical financial statements, financial projections
and budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of
<PAGE> 81
key personnel, personnel training and techniques and materials), however
documented; and (iii) any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Acquired Companies
containing or based, in whole or in part, on any information included in the
foregoing, (b) the business of the Acquired Companies is national in scope, (c)
its products and services are marketed throughout the United States; (d) the
Acquired Companies compete with other businesses that are or could be located in
any part of the United States; (e) the Company has required that Parent
Shareholder make the covenants set forth in Sections 3 and 4 of this Agreement
as a condition to Nu-Wave Sub and Nu-Wave consummating the transactions provided
for in the Reorganization Agreement and A; (f) the provisions of Sections 3 and
4 of this Agreement are reasonable and necessary to protect and preserve the
Acquired Companies' business, and (g) the Acquired Companies would be
irreparably damaged if Parent Shareholder were to breach the covenants set forth
in Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION. Parent Shareholder acknowledges and agrees
that all Confidential Information known or obtained by Parent Shareholder,
whether before or after the date hereof, is the property of the Acquired
Companies. Therefore, Parent Shareholder agrees that Parent Shareholder will
not, at any time, disclose to any unauthorized Persons or use for his own
account or for the benefit of any third party any Confidential Information,
whether Parent Shareholder has such information in Parent Shareholder's memory
or embodied in writing or other physical form, without the Company's written
consent, unless and to the extent that the Confidential Information is or
becomes generally known to and available for use by the public other than as a
result of Parent Shareholder's fault or the fault of any other Person bound by a
duty of confidentiality to the Company or the Acquired Companies. Parent
Shareholder agrees to deliver to the Company at the time of execution of this
Agreement, and at any other time the Company may request, all documents,
memoranda, notes, plans, records, reports, and other documentation, models,
components, devices, or computer software, whether embodied in a disk or in
other form (and all copies of all of the foregoing), relating to the businesses,
operations, or affairs of the Acquired Companies and any other Confidential
Information that Parent Shareholder may then possess or have under Parent
Shareholder's control.
4. NONCOMPETITION. As an inducement for Nu-Wave Sub and Nu-Wave to enter
into the Reorganization Agreement and as additional consideration under the
Reorganization Agreement, Parent Shareholder agrees that:
(a) For a period of three years after the Closing, Parent Shareholder
shall not, directly or indirectly, within Florida, enter into, engage in, be
employed by, or consult with any business in competition with the business of
the Company or Nu-Wave as it is then carried on (except for vitamin outlets);
further, the Parent Shareholder shall not sell to, market, produce or otherwise
deal with any customer of the Company or Nu-Wave. The restrictions of this
paragraph 4 shall extend to any and all activities of the Parent Shareholder,
whether as an independent contractor, partner or joint venturer, or as an
officer, director, stockholder, agent, employee or salesman for any person,
firm, partnership, corporation or other entity, or otherwise. The restrictions
of this paragraph 4 shall not be violated by the ownership of no more than 2% of
the outstanding securities of any company whose stock is traded on a national
securities exchange or is quoted in the Automated Quotation System of the
National Association of Securities Dealers (NASDAQ). Solicitation or acceptance
of orders outside of any prohibited territory as described above for shipment
to, delivery in or service in any restricted territory shall
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<PAGE> 82
also constitute engaging in business within the restricted territories in
violation of this paragraph 4.
(b) For a period of one (1) year after the Closing, the Parent
Shareholder agrees he will refrain from and will not, directly or indirectly, as
independent contractor, employee, consultant, agent, partner, joint venturer, or
otherwise, (1) solicit any of the employees of the Company or Nu-Wave to
terminate their employment or (2) accept employment with or seek remuneration by
any of the customers of the Company or Nu-Wave with whom the Company or Nu-Wave
did business during the three year period prior to the Closing.
(c) The period of time during which the Parent Shareholder is
prohibited from engaging in certain business practices pursuant to paragraph 4
shall be extended by any length of time during which the Parent Shareholder is
in breach of such covenants.
(d) It is agreed by the Parent Shareholder and the Company that if any
portion of the covenants set forth in this paragraph 4 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The parties agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
paragraph 4 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
nonarbitrary and not against public policy may be enforced against the Parent
Shareholder. The parties agree that the foregoing covenants are appropriate and
reasonable when considered in light of the nature and extent of the business
conducted by the Company and Nu-Wave.
5. SPECIFIC PERFORMANCE. The Parent Shareholder agrees that damages at law
will be an insufficient remedy to the Company if the Parent Shareholder violates
the terms of paragraphs 3 and 4 of this Agreement and that the Company and
Nu-Wave would suffer irreparable damage as a result of such violation.
Accordingly, it is agreed that the Company shall be entitled, upon application
to a court of competent jurisdiction, to obtain injunctive relief to enforce the
provisions of such paragraphs, which injunctive relief shall be in addition to
any other rights or remedies available to the Company. The Parent Shareholder
agrees to pay to the Company all costs and expenses incurred by the Company
relating to the enforcement of the terms of paragraphs 3 and 4 of this
Agreement, including reasonable fees and disbursements of counsel (both at trial
and in appellate proceedings).
6. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon the parties
and will inure to the benefit of the parties and their affiliates, successors
and assigns.
7. 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 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 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
3
<PAGE> 83
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.
8. GOVERNING LAW. This Agreement will be governed by the laws of the State
of Florida without regard to conflicts of laws principles.
9. 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.
10. SEVERABILITY. Whenever possible each provision and term of this
Agreement will be interpreted in a manner to be effective and valid but if any
provision or term of this Agreement is held to be prohibited by or invalid, then
such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement.
11. ENTIRE AGREEMENT. This Agreement and the Reorganization Agreement
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior written and oral agreements and
understandings between the parties with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
Company:
ENERGY FACTORS, INC. Parent Shareholders:
By:
---------------------------------- ----------------------------------
Kotha S. Sekharam, as President Marvin Deutsch
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<PAGE> 84
EXHIBIT 7.4h
FORM OF LOCKUP AGREEMENT
To: Nu-Wave Health Products, Inc.
5770 Roosevelt Blvd., Suite 700
Clearwater, FL 33760
Re: Nu-Wave Health Products, Inc. (the "Company")
Ladies and Gentlemen:
The undersigned is the owner of record and beneficially of 40,000
shares of Series A convertible preferred stock of the Company ("Preferred
Stock"). The undersigned recognizes that the Company's financing plans will be
of benefit to the undersigned and that in order to further such financing plans,
it would be beneficial to the Company for the undersigned to agree not to
dispose of the Preferred Stock and any common stock into which the Preferred
Stock is convertible except as set forth herein.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not, without the prior written consent of the Company
(which consent may be withheld in its sole discretion), directly or indirectly
sell, offer, contract or grant any options to sell (including without limitation
any short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934,
as amended, (the "Exchange Act"), or otherwise dispose of any shares of
Preferred Stock and any shares of common stock into which the Preferred Stock is
convertible, or publicly announce the undersigns intention to do any of the
foregoing, for a period commencing on the date of the consummation of the merger
between Nu-Wave Acquisition, Inc., a Florida corporation and Energy Factors,
Inc., a Florida corporation and continuing to a date twelve months thereafter.
The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of the shares of Preferred Stock or common stock into which the
Preferred Stock is convertible in compliance with the foregoing restrictions.
The undersigned further agrees to an inscription on the certificate representing
the Preferred Stock and the common stock into which the Preferred Stock is
convertible stating that such securities are restricted securities under
applicable federal securities laws and may not be transferred in the absence of
an effective registration statement or an opinion of counsel satisfactory to the
Company that registration is not required.
This Agreement is irrevocable and is binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
Dated: U.S. Diversified Technologies, Inc.
----------------
By:
-------------------------------
as
----------------------------
<PAGE> 85
EXHIBIT 7.4(i)
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of ______________, 1998, by and between Nu-Wave Health Products, Inc., a
Florida corporation (the "Company") and U.S. Diversified Technologies, Inc., a
Florida corporation (the "Initial Purchaser").
This Agreement is made pursuant to the Agreement and Plan of Merger dated
June ___, 1998 (the "Merger Agreement"), by and among the Company, the Initial
Purchaser and others.
The parties agree as follows:
Section 1. DEFINITIONS. As used in this Registration Rights Agreement, the
following capitalized terms shall have the following meanings:
ACT: The Securities Act of 1933, as amended.
COMMISSION: The Securities and Exchange Commission.
REGISTRABLE SECURITIES: The Common Stock into which the
Preferred Stock is convertible.
Section 2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the
Company within one year after the date hereof proposes to register common stock
for sale for cash under the Securities Act, in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act and the Registrable Securities will not be salable under
Commission Rule 144 at the anticipated date of effectiveness of such
registration, it will give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2. Upon the written request of any such holder made within 20 days after
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register, provided that if,
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
<PAGE> 86
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each holder
of Registrable Securities and, thereupon, (a) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration, and (b) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. The Company will pay all Registration Expenses in connection
with the registration of Registrable Securities requested pursuant to this
Section 2.
(b) PRIORITY IN INCIDENTAL REGISTRATION. If a
registration pursuant to this Section 2 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, the Company will include in such
registration to the extent of the number which the Company is so advised can be
sold in such offering as follows: (i) first, the securities proposed by the
Company to be sold for its own account, and (ii) second, any Registrable
Securities requested to be included in such registration, pro rata among the
holders thereof requesting such registration on the basis of the number of
shares of such securities requested to be included by such holders.
Section 3. REGISTRATION PROCEDURES. If and whenever the Company is
required to file a registration statement under the Securities Act pertaining
to any Registrable Securities as provided in Section 2, the Company will as
expeditiously as possible:
(a) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as may be
required by the Securities Act or the rules and regulations promulgated
thereunder) to effect such registration and use its best efforts to cause such
registration statement to become effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness of such
registration statement and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement 90 days after such
registration statement becomes effective;
(c) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act;
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<PAGE> 87
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions as
each seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (d) be obligated to be so qualified or to consent to general service
of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, and at the request of any such holder promptly
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
(g) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the securities of the same class as the Registrable Securities are
then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by the acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (f) of this Section
3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (f) of this
Section 3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than
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<PAGE> 88
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
Section 4. UNDERWRITTEN OFFERINGS.
(a) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 2 and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of Section 2(b), use its best efforts,
if requested by any holder of Registrable Securities, to arrange for such
underwriters to include the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters. The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. No holder of Registrable Securities shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder and such holder's intended method of distribution and any
other representation required by law.
(b) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing underwriter, not
to effect any public sale or distribution of such securities during the seven
days prior to and the 90 days after the closing of any underwritten registration
pursuant to Section 2 has become effective, or, if the managing underwriter
advises the Company in writing that, in its opinion, no such public sale or
distribution should be effected for a specified period longer than 90 days after
such underwritten registration in order to complete the sale and distribution of
securities included in such registration and the Company gives notice to such
holder of Registrable Securities of such advice, during a reasonably longer
period after such underwritten registration, except as part of such underwritten
registration, whether or not such holder participates in such registration.
Section 5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of the registration statement under the Securities Act,
the Company will give the holders of Registrable Securities registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants, the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
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<PAGE> 89
Section 6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the seller of
Registrable Securities covered by any registration statement filed pursuant to
Section 2, its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls any such seller or any such underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such seller and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
wit respect to any seller the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller specifically stating that it is for use in the
preparation thereof, and, provided, further, that the Company shall not be
liable to any Person who participates as an underwriter, in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the company within the meaning of the Securities Act, with respect to any
statement or alleged
5
<PAGE> 90
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall consent to entry of any judgment or enter into any settlement
without the consent of the indemnified party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to
that specified in the preceding subdivisions of this Section 6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required
by this Section 6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
Section 7. MISCELLANEOUS.
(a) 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
6
<PAGE> 91
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):
Company: Dynamic Health Products, Inc.
Attention: Dr. Kotha S. Sekharam
Address: 5770 Roosevelt Blvd., Suite 700
Clearwater, FL 34620
Facsimile No.: (813) 524-6610
with a copy to: Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A.
Attention: Philip M. Shasteen, Esq.
100 North Tampa Street, Suite 1800
Tampa, FL 33602-5145
Facsimile No.: (813) 225-1857
Initial Purchaser: U.S. Diversified Technologies, Inc.
Attention: Paul Santostasi
Address: 3651 Torrey Pines Blvd.
Sarasota, FL 34238
Facsimile No.: ________________
(b) 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.
(c) ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter and constitutes (along with the documents referred to in this Agreement)
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.
(d) 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. 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.
7
<PAGE> 92
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.
(e) 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.
(f) SECTION HEADINGS, CONSTRUCTION. The headings of
Sections in this Agreement are provided for convenience only and will not affect
its construction or 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.
(g) GOVERNING LAW. This Agreement will be governed by the
laws of the State of Florida without regard to conflicts of laws principles.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the date first above written.
Nu-Wave Health Products, Inc.,
a Florida corporation
By:
-------------------------------
Its:
-------------------------------
U.S. Diversified Technologies, Inc.,
a Florida corporation
By:
-------------------------------
Its:
-------------------------------
8
<PAGE> 93
EXHIBIT 7.4(j)
FORM OF
NU-WAVE HEALTH PRODUCTS, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of this _____ day of June, 1998, between Nu-Wave
Health Products, Inc., a corporation existing under the laws of the State of
Florida (hereinafter referred to as the "Company"), and Paul Santostasi
(hereinafter referred to as "Optionee").
In consideration of the services to be rendered by Optionee to the Company
as provided in the Employment Agreement between Optionee and Dynamic Health
Products, Inc., a Florida corporation and a wholly-owned subsidiary of the
Company, of even date herewith (the "Employment Agreement"), the parties hereto
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee the right and
option hereinafter called "Option" to purchase all or any part of an aggregate
of 600,000 shares of its Common Stock (the "Shares") on the terms and conditions
herein set forth.
2. PURCHASE PRICE. The purchase price of the Shares covered by the Option
granted hereunder shall be the greater of Three Dollars ($3.00) per Share or the
purchase price of the Company Common Stock offered in the Company's initial
public offering of its Common Stock.
3. EXPIRATION. Anything to the contrary contained therein notwithstanding,
the Option contained herein shall expire and shall in no event be exercisable
after five years after the date hereof.
4. VESTING; EXERCISE RIGHTS; TERMINATION.
(a) The Option shall vest and shall be exercisable in three
equal annual installments of 200,000 shares each, with the first installment
vesting at 12:00 midnight one year after the date hereof, the second installment
vesting at 12:00 midnight two years after the date hereof, and the third and
final installment vesting at 12:00 midnight three years after the date hereof;
provided, however, all Shares subject to this Option shall vest in the event
that the closing bid price of the Common Stock of the Company on the primary
market on which it is traded is Eight Dollars or more for a period of twenty
consecutive trading days.
(b) Anything to the contrary contained in this paragraph 4
notwithstanding, in the event that the Employment Agreement is terminated for
any reason other than the death of Optionee, all Options not vested at the time
of such termination shall automatically terminate.
5. RECAPITALIZATIONS, ETC. In the event after the date hereof of any
change in the outstanding Common Stock of the Corporation by reason of any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
combination, or exchange of shares, rights offering to purchase the Common Stock
at a price substantially below fair market value, or of any similar change
affecting the Common Stock, the number and kind of shares which thereafter may
be purchased hereunder and the purchase price per share thereof shall be
appropriately adjusted consistent with such change in such manner as the
Company's Board of Directors may deem equitable to prevent substantial
<PAGE> 94
dilution or enlargement of the rights granted hereunder. The decision of the
Board of Directors in this respect shall be final and binding as Optionee.
6. DEATH. In the event of the death of the Optionee any option or
unexercised portion thereof granted to him, if otherwise vested and exercisable
by the Optionee at the date of death, may be exercised by his personal
representative, heirs, or legatees at any time prior to the expiration of twelve
(12) months after the date of the death of the Optionee, but in any event not
later than five years after the date hereof. All Options invested at the time
of death shall terminate.
7. METHOD OF EXERCISE; PAYMENT. Vested options may be exercised in whole
at any time, or in part from time to time with respect to whole shares only,
within the period permitted for the exercise thereof, and shall be exercised by
delivery of written notice of intent to exercise the Option with respect to a
specified number of shares delivered to the Company at its principal office
accompanied by payment in full to the Company at said office of the amount of
the purchase price for the number of shares of Stock with respect to which the
Option is then being exercised, which payment may be by any of the following
means or any combination thereof: cash, or certified or cashier's check payable
to the Company or by cashless exercise.
8. RESTRICTIONS ON TRANSFERABILITY OF OPTION. This Option shall not be
transferable other than by a will of the Optionee or by the laws of descent and
distribution. During his lifetime, the Option shall be exercisable only by the
Optionee or by the Optionee's attorney-in-fact or conservator.
9. RIGHTS IN STOCK BEFORE ISSUANCE AND DELIVERY. No person shall be
entitled to the privileges of stock ownership in respect of any Shares issuable
upon exercise of this Option, unless and until such Shares have been issued to
such person as fully paid Shares.
10. REQUIREMENTS OF LAW. By accepting this Option, the Optionee represents
and agrees for himself or herself and his or her transferees by will or the laws
of descent and distribution that, unless a registration statement under the
Securities Act of 1933 is in effect as to Shares purchased upon exercise of this
Option, (a) any and all Shares so purchased shall be acquired for his or her
personal account and not with a view to or for a sale in connection with any
distribution, and (b) each notice of the exercise of any portion of this Option
shall be accompanied by a representation and warranty in writing, signed by the
person entitled to exercise the same, that the Shares are being so acquired in
good faith for his or her personal account and not with a view to or for a sale
in connection with any distribution. No certificate or certificates for shares
of stock purchased upon exercise of this Option shall be issued and delivered
unless and until, in the opinion of legal counsel for the Company, such Shares
may be issued and delivered without causing the Company to be in violation of or
incur any liability under any federal, state or other securities law or other
requirement of law or any regulatory body having jurisdiction over the Company.
Unless registered under applicable securities laws, certificates evidencing
shares of stock purchased upon exercise of this Option shall bear a customary
restrictive legend. Optionee understands that the Common Stock of the Company
issued upon exercise of the Option will not be registered under applicable
federal and state securities laws and will therefore constitute "restricted
securities" under applicable securities laws. Such common stock may not be
resold in the absence of registration under applicable securities laws or
exemption therefrom. The Company may require an opinion of counsel acceptable to
it that registration is not required upon any transfer of the Shares. The
undersigned understands that as a condition of exemption from registration under
federal securities laws, Optionee may be required to hold the Common Stock for a
period of one
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<PAGE> 95
year after such Common Stock is issued and that Optionee may be required to
comply with other applicable provisions of Securities and Exchange Commission
Rule 144.
11. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
constitute the entire agreement between the parties hereto concerning the
subject matter hereof, and supersede all prior agreements, memoranda,
correspondence, conversations and negotiations.
12. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida as to all matters, including but not limited to matters of
validity, construction, effect, performance, and remedies. This Agreement shall
be binding upon the successors, assigns, and transferees of the undersigned.
13. NOTICES. All notices given hereunder must be in writing and shall be
deemed to have been properly given if: (i) personally delivered; (ii) deposited
for delivery by federal express or other nationally recognized overnight courier
services; or (iii) sent by registered or certified mail, return receipt
requested, first class postage prepaid; in each case addressed to the party
entitled to receive the same at the address specified below:
If to the Company: Nu-Wave Health Products, Inc.
5770 Roosevelt Boulevard, Suite 700
Clearwater, Florida 34620
Attention: Kotha S. Sekharam, President
If to Optionee: Paul Santostasi
3651 Torrey Pines Blvd.
Sarasota, FL 34238
Either party may alter the address to which notice is to be sent by giving
notice of such change of address in conformity with the provisions set forth
above providing for the giving of notice.
IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to
be duly executed by its officer thereunto duly authorized, and Optionee has
hereunto set his hand upon this Agreement to be effective as of the date and
year first written above.
OPTIONEE: COMPANY:
Nu-Wave Health Products, Inc.
By:
- ----------------------------------- ----------------------------
(Signature) Kotha S. Sekharam, President
- -----------------------------------
(Street Address)
- -----------------------------------
(City) (State) (Zip Code)
- -----------------------------------
(Social Security Number)
3
<PAGE> 96
[JOHNSON, BLAKELY, POPE, BOKOR, RUPPEL & BURNS, P.A. LETTERHEAD]
FILE NO. 39625.99157
EXHIBIT 8.4(a)
Form of Opinion Letter
June 23, 1998
U.S. Diversified Technologies, Inc.
3651 Torrey Pines Blvd.
Sarasota, FL 34238
Gentlemen:
We have acted as counsel to Nu-Wave Acquisition, Inc. and Nu-Wave Health
Products, Inc., both Florida corporations, in connection with the Agreement and
Plan of Reorganization dated June 12, 1998 (the "Agreement"). This is the
opinion contemplated by Section 8.4(a) of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement or the Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State(s)
of Florida.
Based on the foregoing, our opinion is as follows:
<PAGE> 97
U.S. Diversified Technologies, Inc.
June 23, 1998
Page 2
1. The Agreement is enforceable against Nu-Wave Sub and Nu-Wave. The
Registration Rights Agreement and the Option Agreement are enforceable against
Nu-Wave.
2. Neither the execution and delivery of the Agreement, the Registration
Rights Agreement and the Option Agreement nor the performance of Nu-Wave's and
Nu-Wave Sub's obligations thereunder (a) violates any provision of the
certificate of incorporation or bylaws (or other governing instrument) of
Nu-Wave and Nu-Wave Sub, (b) breaches or constitutes a default (or an event
that, with notice or lapse of time or both, would constitute a default) under
any agreement or commitment known to us to which either Nu-Wave or Nu-Wave Sub
is a party or by which any of their respective property or assets is bound to
which either Nu-Wave or Nu-Wave Sub is party or (c) violates any statute, law,
regulation or rule, or any judgment, decree or order of any court or
Governmental Body applicable to either Nu-Wave or Nu-Wave Sub.
Very truly yours,
JOHNSON, BLAKELY, POPE,
BOKOR, RUPPEL & BURNS, P.A.
<PAGE> 98
EXHIBIT 12.3
FORM OF
IRREVOCABLE PROXY
The undersigned hereby appoints Paul Santostasi ("Santostasi") as the
proxy of the undersigned, to vote as designated below all of the shares of
common stock of Nu-Wave Health Products, Inc., a Florida corporation ("Nu-Wave")
held of record by the undersigned on the date hereof, at any meeting of the
shareholders of Nu-Wave held for the purpose of approving the amendment to
Article III of the Nu-Wave Articles of Incorporation in the form attached hereto
as Exhibit "A" (the "Amendment") and for the purpose of executing any written
consent of the shareholders of Nu-Wave pursuant to Section 607.0704 of the
Florida Business Corporation Act for the same purpose ("Consent").
Santostasi agrees to vote in favor of the Amendment or to execute a
Consent if no meeting is held.
This Proxy is coupled with an interest and is irrevocable through the
date that the Amendment is approved by the shareholders of Nu-Wave.
Dated:
---------------- ------------------------------
Manju Taneja
------------------------------
Paul Santostasi
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") dated June 26,
1998, is by and between Nu-Wave Health Products, Inc., a Florida corporation
("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" and together the
"Sellers") each of which is a stockholder of Becan Distributors, Inc., an Ohio
corporation (the "Company").
RECITALS:
The Sellers own an aggregate of 642.85 shares of voting common stock,
no par value, of the Company, constituting all of the issued and outstanding
capital stock of the Company (the "Shares"). The Buyer desires to acquire all of
the Shares, and the Stockholders desire to exchange all of the Shares for 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 Stockholders are selling to the Buyer, and the Buyer is purchasing from the
Stockholders solely in exchange for shares of voting common stock of the Buyer,
all of the 642.85 issued and outstanding Shares of the Company.
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> 2
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'S 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 Sellers to
Buyer;
(b) the performance by Buyer and Sellers 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 5.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by
Sellers to Buyer concurrently with the execution and delivery of this Agreement.
2
<PAGE> 3
"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.
"ENVIRONMENT" -- soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost,
damages, expense, liability, obligation, or other responsibility arising from
or under Environmental Law or Occupational Safety and Health Law and consisting
of or relating to:
(a) any environmental, health, or safety
matters or conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical substances or
products);
(b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational Safety and Health
Law;
(c) financial responsibility under Environmental
Law or Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable Environmental
Law or Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees,
and the public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other prohibitions
and of the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
3
<PAGE> 4
(b) preventing or reducing to acceptable levels
the release of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the
release, or minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable risks
to human health or the Environment when used or disposed of;
(e) protecting resources, species, or
ecological amenities;
(f) reducing to acceptable levels the risks
inherent in the transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been
released, preventing the threat of release, or paying the costs of such clean
up or prevention; or
(h) making responsible parties pay private
parties, or groups of them, for damages done to their health or the
Environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
"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;
4
<PAGE> 5
(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.
"HAZARDOUS ACTIVITY" -- the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"HAZARDOUS MATERIALS" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"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.
"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
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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 is not required to be specifically authorized
by the parent company (if any) of such Person]; 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.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate
of incorporation and the bylaws 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.
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"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
(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 [and former
spouses], (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.
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"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.
"SELLERS" -- as defined in the first paragraph of this
Agreement.
"SELLERS' RELEASES" -- 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.
"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, Sellers will sell and transfer the Shares to Buyer,
and Buyer will purchase the Shares from Sellers.
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2.2 CONSIDERATION. Sellers understand that Buyer will within
10 days after the date hereof effect a one for three reverse stock split (the
"Reverse Split") and that the Buyer's Shares (as defined below) are post-reverse
split shares, certificates for which will be issued a reasonable time after the
Reverse Split. In consideration of the sale and transfer of the Shares, the
Buyer will, after the Reverse Split, deliver in full payment for the Shares, an
aggregate of 1,500,000 post-reverse split shares of common stock, $.001 par
value, of Buyer ("Buyer's Shares"), with each of the Sellers receiving the
number of Buyer's Shares set forth in Schedule 2.2 hereof.
2.3 CLOSING. The purchase and sale (the "Closing") provided
for in this Agreement will take place simultaneously with the execution of this
Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the
Shares, duly endorsed (or accompanied by duly executed stock powers),
for transfer to Buyer;
(ii) releases in the form of
Exhibit 2.4(a)(ii) executed by Sellers (collectively, "Sellers' Releases");
(b) Buyer will deliver to Sellers certificates
representing the Buyer Shares within a reasonable time after the reverse split.
Such certificates shall bear a customary restrictive legend applicable to
restricted securities issued privately.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant 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) Sellers have delivered to Buyer copies of
the Organizational Documents of the Company, as currently in effect.
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<PAGE> 10
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal,
valid, and binding obligation of Sellers, enforceable against Sellers in
accordance with its terms. Sellers have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and to
perform their obligations under this Agreement.
(b) Except as set forth in Part 3.2 of the
Disclosure Letter, 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 either 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, 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.
Except as set forth in Part 3.2 of the Disclosure Letter,
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.
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(c) Sellers are acquiring the Buyer's Shares
for their 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 consist of 850 shares of common stock, no par value, of which 500 shares
are issued and outstanding and constitute the Shares. Sellers are the record and
beneficial owners and holders of the Shares, free and clear of all Encumbrances.
Manju Taneja, Mihir K. Taneja, and Mandee P. Taneja each own 150 of the Shares
and LaGamba owns 50 of the Shares. 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 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
a balance sheet of the Company as at December 31, 1997 (including the notes
thereto, the "Balance Sheet"), and the related statements of income, changes in
stockholders' equity, and cash flow for the fiscal year then ended, together
with the report thereon of Shalek & Associates, CPA's Inc., independent
certified public accountants, and (b) an unaudited balance sheet of the Company
as at May 31, 1997 (the "Interim Balance Sheet") and the related unaudited
statements of income, changes in stockholders' equity, and cash flow for the
five months then ended, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements.
3.5 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 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
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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.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by the Company. Sellers 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 Sellers 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 they purport to own located in the facilities owned or
operated by the Company or reflected as owned in the books and records of the
Company, including all of the properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in Part 3.6 of the Disclosure
Letter and personal property sold since the date of the Balance Sheet and the
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice. All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet 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 except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (c) liens for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto. 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.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings,
plants, structures, and equipment of the Company are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Company are sufficient for the continued
conduct of the Company's business after the Closing in substantially the same
manner as conducted prior to the Closing.
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3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the
Company that are reflected on the Balance Sheet or the Interim Balance Sheet or
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 the respective
reserves shown on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging). 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. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date, as the case may be. 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.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part
3.10 of the Disclosure Letter, the Company has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for liabilities or obligations reflected or reserved
against in the Balance Sheet or the Interim Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
3.11 TAXES.
(a) The Company has filed or caused to be filed
(on a timely basis since 1996) all Tax Returns that are or were required to be
filed by or with respect to it, pursuant to applicable Legal Requirements.
Sellers have delivered or made available to Buyer copies of, all such Tax
Returns filed since 1996. 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 Sellers or the
Company, except such Taxes,
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if any, as are listed in Part 3.11 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet and the Interim
Balance Sheet.
(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 except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. 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.
3.12 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.
3.13 EMPLOYEE BENEFITS.
(a) As used in this Section 3.13, 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 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 Section 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 Section 132.
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"PENSION PLAN" has the meaning given in ERISA
Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"QUALIFIED PLAN" means any Plan that meets or
purports to meet the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that
are subject to Title IV of ERISA, 29 U.S.C. Section 1301 et seq.
"VEBA" means a voluntary employees' beneficiary
association under IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA
Section 3(1).
(b) The Company has no Plan, Company Plan,
Other Benefit Obligations, Pension Plan, Qualified Plan, Title IV Plans, VEBA
or Welfare Plan.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) the Company is, and at all times
since December 31, 1997 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 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 3.14 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 3.14 of the Disclosure Letter is valid and in
full force and effect. Except as set forth in Part 3.14 of the Disclosure
Letter:
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(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 3.14 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 3.14 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 3.14 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 3.14 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 3.14
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.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 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 Sellers 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. Sellers have delivered to Buyer copies of
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all pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 3.15 of the Disclosure Letter. The Proceedings listed in Part
3.15 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 3.15 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) neither Seller is 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 Sellers 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 3.15 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 and
requirements 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
(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 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.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set
forth in Part 3.16 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;
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(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 $25,000;
(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 $25,000;
(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.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and Sellers 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 $25,000;
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(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 $25,000;
(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 $25,000;
(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 $25,000 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;
(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 $25,000;
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(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 3.17(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 3.17(b) of the
Disclosure Letter:
(i) neither Seller (and no Related
Person of either Seller) has or may acquire any rights under, and neither Seller
has or may 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 Sellers 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.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in Part
3.17(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 3.17(d) of the
Disclosure Letter:
(i) the Company is, and at all times
since December 31, 1997 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, 1997 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
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<PAGE> 21
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, 1997, 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 Sellers 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.
3.18 INSURANCE.
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all
policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the two years preceding the date of this Agreement;
(ii) true and complete copies of all
pending applications for policies of insurance; and
(iii) any statement by the auditor of the
Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter
describes:
(i) any self-insurance arrangement by
or affecting the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to
third parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which such
coverage is provided.
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(c) Part 3.18(c) of the Disclosure Letter sets
forth, by year, for the current policy year and each of the two preceding
policy years:
(i) a summary of the loss experience
under each policy;
(ii) a statement describing each claim
under an insurance policy for an amount in excess of $25,000, which sets forth:
(A) the name of the claimant;
(B) a description of the
policy by insurer, type of insurance, and period of coverage; and
(C) the amount and a brief
description of the claim; and
(iii) a statement describing the loss
experience for all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) All policies to which the
Company is a party or that provide coverage to either Seller, the Company, or
any director or officer of an the Company:
(A) are valid, outstanding,
and enforceable;
(B) are issued by an insurer
that is financially sound and reputable;
(C) taken together, provide
adequate insurance coverage for the assets and the operations of the Company for
all risks to which the Company is normally exposed;
(D) are sufficient for
compliance with all Legal Requirements and Contracts to which the Company is a
party or by which it is bound;
(E) will continue in full
force and effect following the consummation of the Contemplated Transactions;
and
(F) do not provide for any
retrospective premium adjustment or other experienced-based liability on the
part of the Company.
(ii) No Seller or the Company has
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force
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<PAGE> 23
or effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums
due, and has otherwise performed all of its obligations, under each policy to
which the Company is a party or that provides coverage to the Company or a
director thereof.
(iv) The Company has given notice to the
insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in
part 3.19 of the disclosure letter:
(a) The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. No Seller or the Company has any basis to expect,
nor has any of them or any other Person for whose conduct they are or may be
held to be responsible received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, the Company, or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge
of Sellers and the Company, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Sellers or the Company has or had an
interest.
(c) No Seller or the Company has Knowledge of
any basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible, received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company had an interest, or with respect to any property
or facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, the Company, or any other
Person for whose conduct
23
<PAGE> 24
they are or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(d) No Seller or the Company, or any other
Person for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities or,
to the Knowledge of Sellers and the Company, with respect to any other
properties and assets (whether real, personal, or mixed) in which Sellers or the
Company (or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
(e) There are no Hazardous Materials present on
or in the Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure
therein or thereon. No Seller, the Company, any other Person for whose conduct
they are or may be held responsible, or to the Knowledge of Sellers and the
Company, any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Sellers or the
Company has or had an interest except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the
Knowledge of Sellers and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Sellers or the Company has or had an interest, or to the Knowledge of Sellers
and the Company any geologically or hydrologically adjoining property, by
Sellers or the Company.
(g) Sellers have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Sellers or the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by Sellers, the Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES.
(a) Part 3.20 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 pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock
24
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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 Sellers or
the Company by any such employee or director. To Sellers' Knowledge, no
director, officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) Part 3.20 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.
3.21 LABOR RELATIONS; COMPLIANCE. Since December 31, 1997, the
Company has been or is a party to any collective bargaining or other labor
Contract. Since December 31, 1997, there has not been, there is not presently
pending or existing, and to Sellers' Knowledge there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Company or its premises, or
(c) any application for certification of a collective bargaining agent. To
Sellers' Knowledge, no event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS -- The term
"Intellectual Property Assets" includes:
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<PAGE> 26
(i) the name Becan Distributors, 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 3.22(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 $10,000 under which an the Company
is the licensee. There are no outstanding and, to Sellers' Knowledge, no
Threatened disputes or disagreements with respect to any such agreement.
(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 3.22(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.
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(ii) Sellers 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
Sellers' 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.
3.23 CERTAIN PAYMENTS. Since December 31, 1997, neither the
Company nor any director, officer, agent, or employee of the Company, or to
Sellers' 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.
3.24 DISCLOSURE.
(a) No representation or warranty of Sellers 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 5.5 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.
3.25 RELATIONSHIPS WITH RELATED PERSONS. No Seller or any
Related Person of Sellers 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. No Seller or any Related Person
of Sellers 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
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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 3.25 of the Disclosure Letter, no Seller or any Related Person of
Sellers or of the Company is a party to any Contract with, or has any claim or
right against, the Company.
3.26 BROKERS OR FINDERS. Sellers and their 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.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers 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.
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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 hold Sellers 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.
5. INDEMNIFICATION; REMEDIES
5.1 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.
5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.
Sellers, jointly and severally, 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 Sellers in this Agreement (without giving effect to any supplement to
the Disclosure
29
<PAGE> 30
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by Sellers pursuant to this Agreement;
(b) any Breach of any representation or
warranty made by Sellers 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.
The remedies provided in this Section 5.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or
the other Indemnified Persons.
5.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS --
ENVIRONMENTAL MATTERS. In addition to the provisions of Section 5.2, Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company,
and the other Indemnified Persons for, and will pay to Buyer, the Company,
and the other Indemnified Persons the amount of, any Damages (including costs
of cleanup, containment, or other remediation) arising, directly or indirectly,
from or in connection with:
(a) any Environmental, Health, and Safety
Liabilities arising out of or relating to: (i) (A) the ownership, operation,
or condition at any time on or prior to the Closing Date of the Facilities or
any other properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Sellers or the Company has or had an interest,
or (B) any Hazardous Materials or other contaminants that were present on the
Facilities or such other properties and assets at any time on or prior to the
Closing Date; or (ii) (A) any Hazardous Materials or other contaminants,
wherever located, that were, or were allegedly, generated, transported, stored,
treated, Released, or otherwise handled by Sellers or the Company or by any
other Person for whose conduct they are or may be held responsible at any time
on or prior to the Closing Date, or (B) any Hazardous Activities that were, or
were allegedly, conducted by Sellers or the Company or by any other Person for
whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness,
disability, and death, and regardless of when any such bodily injury occurred,
was incurred, or manifested itself), personal injury, property damage (including
trespass, nuisance, wrongful eviction, and deprivation of the use of real
property), or other damage of or to any Person, including any employee or former
employee of Sellers or the Company or any other Person for whose conduct they
are or may be
30
<PAGE> 31
held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of the Company prior to the Closing Date, or from
Hazardous Material that was (i) present or suspected to be present on or before
the Closing Date on or at the Facilities (or present or suspected to be present
on any other property, if such Hazardous Material emanated or allegedly emanated
from any of the Facilities and was present or suspected to be present on any of
the Facilities on or prior to the Closing Date) or (ii) Released or allegedly
Released by Sellers or the Company or any other Person for whose conduct they
are or may be held responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section 5.3.
The procedure described in Section 5.9 will apply to any claim solely for
monetary damages relating to a matter covered by this Section 5.3.
5.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer
will indemnify and hold harmless Sellers, and will pay to Sellers 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.
5.5 TIME LIMITATIONS. Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or before June
26, 2001, Buyer notifies Sellers of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time. Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before June 26, 2001, Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.
5.6 LIMITATIONS ON AMOUNT -- SELLERS. Sellers will have no
liability (for indemnification or otherwise) with respect to the matters
described in clause (a), clause (b) or, to the extent relating to any failure to
perform or comply prior to the Closing Date, clause (c) of Section 5.2 until the
total of all Damages with respect to such matters exceeds $20,000, and then only
for the amount by which such Damages exceed $20,000. Sellers will have no
liability (for indemnification or otherwise) with respect to the matters
described in clause (d) of Section 5.2 until the total of all Damages with
respect to such matters exceeds $20,000, and then only for the amount by which
such Damages exceed $20,000. However, this Section 5.6 will not apply to any
31
<PAGE> 32
Breach of any of Sellers' representations and warranties of which either Seller
had Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by either Seller of any covenant or
obligation, and Sellers will be jointly and severally liable for all Damages
with respect to such Breaches.
5.7 LIMITATIONS ON AMOUNT -- BUYER. Buyer will have no
liability (for indemnification or otherwise) with respect to the matters
described in clause (a) or (b) of Section 5.4 until the total of all Damages
with respect to such matters exceeds $20,000, and then only for the amount by
which such Damages exceed $20,000. However, this Section 5.7 will not apply to
any Breach of any of Buyer's representations and warranties of which Buyer had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.
5.8 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified
party under Section 5.2, 5.4, or (to the extent provided in the last sentence of
Section 5.3) Section 5.3 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
5.9(a) 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 5 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
Requirements or any violation of the rights of any Person and no effect on any
other claims that
32
<PAGE> 33
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) Sellers 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 Sellers with
respect to such a claim anywhere in the world.
5.9 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.
6. GENERAL PROVISIONS
6.1 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. Sellers will cause the
Company not to incur any out-of-pocket expenses in connection with this
Agreement.
6.2 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 Sellers shall, and shall cause the Company to, keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers 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 will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
33
<PAGE> 34
6.3 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):
Sellers: Manju Taneja, Mihir K. Taneja
and Mandee P. Taneja
5770 Roosevelt Blvd., Suite 700
Attention: Jugal K. Taneja
Facsimile No.: (813) 524-6610
Buyer: Nu-Wave Health Products, Inc.
5905-A Hampton Oaks Parkway
Tampa, FL 33610
Attention: Kotha S. Sekharam
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
6.4 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.
6.5 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.
34
<PAGE> 35
6.6 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.
6.7 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.
6.8 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.
6.9 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.
6.10 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.
6.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections
in this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or
35
<PAGE> 36
"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.
6.12 TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
6.13 GOVERNING LAW. This Agreement will be governed by the
laws of the State of Florida without regard to conflicts of laws principles.
6.14 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.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
NU-WAVE HEALTH PRODUCTS, INC.,
a Florida corporation
By:
-----------------------------------
Kotha S. Sekharam, President
SELLERS:
---------------------------------------
Manju Taneja
---------------------------------------
Mihir K. Taneja
---------------------------------------
Mandeep K. Taneja
---------------------------------------
William LaGamba
36
<PAGE> 37
CONTINUATION OF SIGNATURE PAGE FOR AGREEMENT AND PLAN OF REORGANIZATION FOR
NU-WAVE HEALTH PRODUCTS, INC./BECAN DISTRIBUTORS, INC.
------------------------------------
William LaGamba custodian for
Anthony LaGamba
------------------------------------
William LaGamba custodian for
Nicholl LaGamba
------------------------------------
William LaGamba custodian for
Courtney LaGamba
------------------------------------
Michele LaGamba
------------------------------------
Phillip J. Laird
37
<PAGE> 38
FORM OF EXHIBIT 2.4(A)(II)
RELEASE
This Release is being executed and delivered in accordance with Section
2.4(a)(ii) of the Stock Purchase Agreement dated June 26, 1998 (the "Agreement")
between Nu-Wave Health Products, Inc., a Florida corporation ("Buyer"), Manju
Taneja, Mihir K. Taneja, Mandeep K. Taneja, William LaGamba, William LaGamba
custodian for Anthony LaGamba, William LaGamba custodian for Nicholl LaGamba,
William LaGamba as custodian for Courtney LaGamba, and Michele LaGamba, and
Phillip J. Laird. Capitalized terms used in this Release without definition have
the respective meanings given to them in the Agreement.
Each Seller acknowledges that execution and delivery of this Release is
a condition to Buyer's obligation to purchase the outstanding capital stock of
the Company pursuant to the Agreement and that Buyer is relying on this Release
in consummating such purchase.
Each Seller, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound,
in order to induce Buyer to purchase the outstanding capital stock of the
Company pursuant to the Agreement, hereby agrees as follows:
Each Seller, on behalf of himself and each of his Related Persons,
hereby releases and forever discharges the Buyer, the Company and each of the
other Acquired Companies, and each of their respective individual, joint or
mutual, past, present and future Representatives, affiliates, stockholders,
controlling persons, Subsidiaries, successors and assigns (individually, a
"Releasee" and collectively, "Releasees") from any and all claims, demands,
Proceedings, causes of action, Orders, obligations, contracts, agreements, debts
and liabilities whatsoever, whether known or unknown, suspected or unsuspected,
both at law and in equity, which each of the Sellers or any of their respective
Related Persons now has, have ever had or may hereafter have against the
respective Releasees arising contemporaneously with or prior to the Closing Date
or on account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the Closing Date, including, but not limited
to, any rights to indemnification or reimbursement from the Company, whether
pursuant to their respective Organizational Documents, contract or otherwise and
whether or not relating to claims pending on, or asserted after, the Closing
Date.
Each Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each Seller, jointly and severally, shall indemnify
and hold harmless each Releasee from and against all loss, liability, claim,
damage (including incidental and consequential damages) or expense (including
costs of investigation and defense and reasonable attorney's fees) whether or
not involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of the Sellers or any of their
Related Persons of any claim or other matter purported to be released pursuant
to this Release and (ii) the assertion by any third party of any claim or demand
against any Releasee which claim or demand arises directly or indirectly from,
or in
<PAGE> 39
connection with, any assertion by or on behalf of the Sellers or any of their
Related Persons against such third party of any claims or other matters
purported to be released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Florida without
regard to principles of conflicts of law.
All words used in this Release will be construed to be of such gender
or number as the circumstances require.
This Release may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument. This Release shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories hereto.
IN WITNESS WHEREOF, each of the undersigned have executed and
delivered this Release as of this ___ day of June, 1998.
-----------------------------
Manju Taneja
-----------------------------
Mihir K. Taneja
-----------------------------
Mandee P. Taneja
-----------------------------
William LaGamba
2
<PAGE> 40
CONTINUATION OF SIGNATURE PAGE FOR AGREEMENT AND PLAN OF REORGANIZATION FOR
NU-WAVE HEALTH PRODUCTS, INC./BECAN DISTRIBUTORS, INC.
------------------------------------
William LaGamba custodian for
Anthony LaGamba
------------------------------------
William LaGamba custodian for
Nicholl LaGamba
------------------------------------
William LaGamba custodian for
Courtney LaGamba
------------------------------------
Michele LaGamba
------------------------------------
Phillip J. Laird
3
<PAGE> 41
SCHEDULE 2.2
<TABLE>
<CAPTION>
COMPANY SHARES CONVEYED COMPANY SHAREHOLDERS BUYER SHARES TO BE
ISSUED AFTER SPLIT
<S> <C> <C>
145.00 Manju Taneja 338,334
145.00 Mandeep K. Taneja 338,333
145.00 Mihir K. Taneja 338,333
48.43 William LaGamba 113,000
18.00 William LaGamba custodian for Anthony LaGamba 42,000
18.00 William LaGamba custodian for Nicholl LaGamba 42,000
18.00 William LaGamba custodian for Courtney LaGamba 42,000
84.00 Michele LaGamba 196,000
21.42 Phillip J. Laird 50,000
Total 642.85 1,500,000
</TABLE>
<PAGE> 42
FORM OF DISCLOSURE LETTER
BECAN DISTRIBUTORS, INC.
275 Curry Hollow Road
Pittsburgh, PA 15236
June 26, 1998
Nu-Wave Health Products, Inc. CONFIDENTIAL
5905A Hampton Oaks Parkway
Tampa, FL 33610
Gentlemen:
We refer to the Agreement and Plan of Reorganization dated June 26,
1998 (the "Agreement"), by and among Nu-Wave Health Products, Inc., a Florida
corporation ("Buyer"), Manju Taneja and William LaGamba ("Sellers") pursuant to
which Sellers are to sell and Buyer is to purchase all of the issued and
outstanding capital stock of Becan Distributors, Inc., an Ohio corporation (the
"Company") as provided in the Agreement.
This letter constitutes the Disclosure Letter referred to in Section 3
of the Agreement. The representations and warranties of Sellers in Section 3 of
the Agreement are made and given subject to the disclosures in this Disclosure
Letter. The disclosures in this Disclosure Letter are to be taken as relating to
the representations and warranties in the section of the Agreement to which they
expressly relate and to no other representation or warranty in the Agreement.
Terms defined in the Agreement are used with the same meaning in this
Disclosure Letter. References to Appendices are to the Appendices to this
Disclosure Letter.
By reference to Section 3 of the Agreement (using the numbering in such
Section), the following matters are disclosed:
3.2 None
3.6 1993 Saturn station wagon I pallet jack
12 bays of shelving
I four wheel dolly
HP fax/copier/printer
BP printer
PB computer & monitor
3 desks
<PAGE> 43
Industrial refrigerator
6 phones
3.8 Accounts receivables in the amount of $3,887.07 are in ninety
days past and may not be collected.
3.10 None.
3.11 None.
3.14 The state of Louisiana had sent a letter indicated that Becan
Distributors, Inc. was in violation for not have a license to
distribute pharmaceuticals in the state. Upon receipt of the
letter Becan Distributors, Inc. filed for and received a
license to distribute pharmaceuticals in Louisiana.
3.15 Stellar Health Products, a current customer of Nu-Waves',
had threatened to file a law suit against both Becan
Distributors, Inc. and Nu-Wave in regards to the similarities
of the label for ARTH-AID Arthritis cream. Currently the
owner of Stellar Health Products has indicated to Dr. Kotha S.
Sekharam, President of Nu-Wave, that he is not going to file
a law suit against either Becan Distributors, Inc. or Nu-Wave
Health products, Inc. In addition Becan Distributors, Inc. has
changed the design of the label in question.
3.16 Changes: William LaGamba's ownership in Becan
Distributors, Inc. has changed from ten percent ownership to
thirty percent ownership. Manju Taneia's ownership in Becan
Distributors, Inc. has changed from ninety percent ownership
to seventy percent ownership.
William LaGamba's salary has changed from one hundred
thousand dollars per year to one hundred and twenty five
thousand dollars per year.
Phillip Laird's salary has changed from fifty thousand
dollars per year to sixty thousand dollars per year.
3.17 See attached.
3.17(a) None.
3.17(b) None.
3.17(c) None.
3.17(d) None.
<PAGE> 44
3.18(b) Insurance to chains.
3.18(c) None.
3.18(d) Copy of insurance policy on William LaGamba.
3.19(d) None.
3.20 William LaGamba's salary has changed from one hundred thousand
dollars per year to one hundred twenty five thousand dollars
per year. Phillip Laird's salary has changed from fifty
thousand dollars per year to sixty thousand dollars per year.
3.22(b) ARTH-AID agreement with Nu-Wave Trademark on ARTH-AID
3.22(c) No employees have executed written contracts with one or more
of the company that assign to one ore more of the company all
rights to any inventions, improvements, discoveries, or
information relating to the business of the company.
------------------------------
Manju Taneja
------------------------------
Mihir K. Taneja
------------------------------
Mandee P. Taneja
------------------------------
William LaGamba
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
NU-WAVE ACQUISITION, INC.
ARTICLE I - NAME AND MAILING ADDRESS
The name of this corporation is Nu-Wave Acquisition, Inc. 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, Florida 33602, and the name of the
initial registered agent of this corporation at that address is Philip M.
Shasteen.
<PAGE> 2
ARTICLE V - BOARD OF DIRECTORS
The Board of Directors of this corporation shall consist of not less than
four 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, Florida 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 11th day of June, 1998.
/s/ Philip M. Shasteen
---------------------------------
Philip M. Shasteen
INCORPORATOR
2
<PAGE> 3
CERTIFICATE DESIGNATING REGISTERED AGENT
AND STREET ADDRESS FOR SERVICE OF PROCESS
WITHIN FLORIDA
Pursuant to Florida Statutes Section 48.091, Nu-Wave Acquisition, Inc.
desiring to organize under the laws of the State of Florida, hereby designates
Philip M. Shasteen, 100 North Tampa Street, Suite 1800, Tampa, Florida 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> 1
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DYNAMIC HEALTH PRODUCTS, INC.
Pursuant to the provisions of section 607.1006, Florida Statutes, this
corporation adopts the following articles of amendment to its Articles of
Incorporation:
FIRST: The Certificate of Incorporation of the Corporation be amended by
striking Article One in its entirety and replacing therefor:
"Article I - Name
The name of this Corporation is Innovative Health Products, Inc."
SECOND: The date of the amendment's adoption: July 22, 1998.
THIRD: The amendment was approved by the director and sole shareholder of
the corporation.
Signed this 22nd day of July, 1998.
/s/ Kotha Sekharam
---------------------------------
Kotha Sekharam, President
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
NU-WAVE HEALTH PRODUCTS, INC.
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, this corporation adopts the following articles of amendment to
its Articles of Incorporation:
1. The name of the corporation is Nu-Wave Health Products, Inc.
2. Article I is amended in its entirety to read as follows:
"Article I. Name
The name of the corporation is Dynamic Health Products, Inc."
3. Article III of this corporation's Articles of Incorporation is
amended in its entirety to read as follows:
"ARTICLE III. SHARES
The total number of shares which the corporation shall have
the authority to issue shall be twenty two million
(22,000,000) shares, consisting of twenty million
(20,000,000) shares of common stock and two million
(2,000,000) shares of preferred stock, all having a par value
of $0.01 per share. The preferred stock may be issued from
time to time in one or more series, each of such series to
have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such
series adopted by the Board of Directors of the Corporation as
hereinafter provided. Any shares of preferred stock which may
be redeemed, purchased or acquired by the Corporation may be
reissued except as otherwise provided by law. Different
shares of preferred stock shall not be construed to constitute
different classes of shares for the purposes of voting by
classes unless expressly provided.
Authority is hereby expressly granted to the Board of
Directors from time to time to provide for the issuance of
preferred stock in one or more series, and in connection
<PAGE> 2
with the creation of any such series, by resolution or
resolutions providing for the issue of the shares thereof, to
determine and fix such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including
without limitation, dividend rights, special voting rights,
conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted
by the Florida Business Corporation Act. Without limited the
generality of the foregoing, the resolutions providing for
issuance of any series of preferred stock may provide that
such series shall be superior or ranked equally or be junior
to the preferred stock of any other series to the extent
permitted by law. Except as otherwise specifically provided
in a resolution establishing a series of preferred stock, no
vote of the holders of the preferred stock or common stock
shall be a prerequisite to the issuance of any shares of any
series of the preferred stock authorized by and complying with
the conditions of these Articles of Incorporation.
The shares of each class or series of the Preferred Stock may
vary from the shares of any other class or series thereof in
any respect. The Board of Directors may increase the number
of shares of the Preferred Stock designated for any existing
class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of
Directors may decrease the number of shares of the Preferred
Stock designated for any existing class or series of the
Preferred Stock and the shares so subtracted shall become
authorized, unissued and undesignated shares of the Preferred
Stock.
Prior to the issuance of any shares of a series, but after
adoption by the Board of Directors of the resolution
establishing such series, the appropriate officers of the
Corporation shall file such documents with the State of
Florida as may be required by the Florida Business Corporation
Act including, without limitation, an amendment to the
Articles of Incorporation."
In connection with the adoption of the aforesaid amendment, the
corporation is effectuating a one for three (1:3) reversed stock split whereby
each three (3) shares of common stock, par value $.01 per share (the "Old
Common
2
<PAGE> 3
Stock"), outstanding immediately prior to the adoption of the aforesaid
amendment, as well as any shares issuable upon exercise of outstanding options,
will become equivalent to and be exchanged for one (1) share of common stock,
par value $.01 per share (the "New Common Stock"). Fractional shares of New
Common Stock will not be issued as part of the aforesaid exchange of New Common
Stock for shares of Old Common Stock, but any shareholder who would be entitled
to a fractional share of New Common Stock in such exchange will, pursuant to
Section 607.0604(5), Florida Statutes, be paid in money the fair value thereof.
4. This amendment was adopted on August 10, 1998.
5. This amendment was approved by the shareholders of the
corporation. The number of votes cast for the amendment was sufficient for
approval.
Signed this 10th day of August, 1998.
Nu-Wave Health Products, Inc.
By: /s/ Kotha S. Sekharam
----------------------
Kotha S. Sekharam
<PAGE> 4
ARTICLES OF AMENDMENT
TO
ARTICLES INCORPORATION
OF
NU-WAVE HEALTH PRODUCTS, INC.
The corporation is filing these articles of amendment to articles of
incorporation pursuant to F.S. 607.0602 to establish a series of shares of
preferred stock.
FIRST: The name of the corporation is Nu-Wave Health Products, Inc.
SECOND: Article III of the articles of incorporation of Nu-Wave Health
Products, Inc. was amended as follows:
ESTABLISHMENT OF SERIES A CONVERTIBLE PREFERRED STOCK.
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
1.1 "Average Closing Price" shall mean the average closing
price of the Common Stock on the Applicable Trading Market.
1.2 "Applicable Trading Market" shall mean the OTC Bulletin
Board or, if the Common Stock is listed for trading thereon, The Nasdaq Stock
Market, operated by the National Association of Securities Dealers, Inc., or if
neither of the foregoing is the principal market on which the Common Stock is
then Traded or quoted any principal successor stock exchange or market where
the Common Stock is listed or included.
1.3 "Board of Directors" shall mean the Board of Directors of
the Company or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.
1.4 "Common Stock" shall mean the common stock, par value $.01
per share, of the Company, or any other class of stock resulting from
successive changes or reclassifications of such common stock consisting solely
of changes in par value, or from par value to no par value, or as a result of a
subdivision, combination, or merger, consolidation or similar transaction in
which the Company is a constituent corporation.
1.5 "Company" shall mean Nu-Wave Health Products, Inc., a
Florida corporation.
1.6 "Conversion Date" shall mean the date upon which the
Company receives the Notice of Conversion provided for in Section 5.2.
1.7 "Conversion Rate" shall have the meaning provided for in
Section 5.1.
<PAGE> 5
1.8 "Junior Stock" shall mean the Common Stock and the shares
of any other class or series of stock of the Company created on or after the
issuance of the Series A Preferred Stock that, by the terms of the Articles of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Articles of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be junior to the
Series A Preferred Stock in respect of the right to receive dividends or to
participate in any other distribution of assets.
1.9 "Liquidation Preference" shall mean, with respect to
each share of Series B Preferred Stock, $5.00.
1.10 "Market Value Market" shall mean the Average Closing
Price for a five consecutive trading day period.
1.11 "Pari Passu Stock" shall mean the shares of any class or
series of stock of the Company created on or after the issuance of the Series A
Preferred Stock that, by the terms of the Articles of Incorporation or of the
instrument by which the Board of Directors, acting pursuant to authority granted
in the Articles of Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall, in the event that the amounts payable thereon in
liquidation are not paid in full, be entitled to share ratably with the Series A
Preferred Stock in any other distribution of assets in accordance with the sums
or other consideration which would be payable in such distribution if all sums
payable were discharged in full.
1.12 "Person" shall mean any individual, corporation, general
partnership, limited partnership, limited liability Partnership, joint venture,
association, joint-stock company, trust, limited liability Company,
unincorporated organization or government or any agency or political subdivision
thereof.
1.13 "Series A Preferred Stock" shall mean the Series A
Convertible Preferred Stock designated and created hereby.
2. CREATION AND DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK.
2.1 Pursuant to the authority conferred upon the Board of
Directors by Article III of the Articles of Incorporation of the Company, as
amended, there is hereby created and the Company is hereby authorized to issue
400,000 shares of a first series of preferred stock, designated "Series A
Convertible Preferred Stock," par value $.01 which shall have the
<PAGE> 6
terms, conditions, designation, preferences and privileges, relative,
participating, optional and other special rights, qualifications, limitations
and restrictions as provided for herein.
2.2 Each share of Series A Preferred Stock shall have the same
rights and preferences as and be identical in all respects with each other share
of Series A Preferred Stock.
2.3 The Company may create, authorize or issue any shares of
Junior Stock or Pari Passu Stock or increase or decrease the amount of
authorized capital stock of any class without the consent of the holders of
Series A Preferred Stock and in taking such actions the Company shall not be
deemed to have affected adversely the rights, preferences, privileges or voting
rights of holders of shares of Series A Preferred Stock.
3. VOTING.
The holders of record shares of Series A Preferred Stock and
the holders of record of the Common Stock, voting as a single class, shall be
entitled to one vote for each share on all matters submitted to the
shareholders, subject to the right of the Board of Directors to fix a record
date for the determination of shareholders entitled to notice of and to vote at
any meeting.
4. LIQUIDATION RIGHTS.
4.1 In the event of any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary, the holders of the shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
Company available for distribution to stockholders the Liquidation Preference in
preference to the holders of, and before any distribution is made on, any Junior
Stock, including, without limitation, on any Common Stock.
4.2 Neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Company nor the merger or
consolidation of the Company into or with any other corporation, or the merger
or consolidation of any other corporation into or with the Company, shall be
deemed to be a liquidation, dissolution or winding up, voluntary or involuntary,
for the purposes of this Section 4.
4.3 After the payment to the holders of the shares of Series A
Preferred Stock of full preferential amounts provided for in this Section 4, the
holders of Series A Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Company.
<PAGE> 7
4.4 In the event the assets of the Company available for
distribution to the holders of shares of Series A Preferred Stock upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which holders
are entitled pursuant to Section 4.1, no such distribution shall be made on
account of any shares of any Pari Passu Stock upon such liquidation, dissolution
or winding up unless proportionate distributable amounts shall be paid on
account of the shares of Series A Preferred Stock, ratably, in proportion to the
full distributable amounts for which holders of all Series A Preferred Stock and
Pari Passu Stock are entitled upon such liquidation, dissolution or winding up.
5. CONVERSION.
5.1 The holder of Series A Preferred Stock shall have the
right, at its option, at any time and from time to time to convert, subject to
the terms and provisions of this Section 5, any or all of the holder's shares of
Series A Preferred Stock. In such case, each share of Series A Preferred Stock
shall be converted into one (1) (the "Conversion Rate") fully paid and
nonassessable shares of Common Stock. In the event that the Average Closing
Price of the Common Stock for any five consecutive trading day period after the
date hereof is $5.00 per share or more (subject to adjustment upon the
occurrence of the same events and in the same manner as is provided for in this
Section 5.1), each holder of Series A Preferred Stock shall be deemed to have
automatically given notice of the conversion of all of such holder's shares of
Series A Preferred Stock.
5.2 The conversion right of a holder of Series A Preferred
Stock shall be exercised by the holder by the surrender of the certificates
representing shares to be converted to the Company at any time during usual
business hours at its principal place of business, accompanied by written notice
(the "Notice of Conversion") that the holder elects to convert all or a portion
of the shares of Series A Preferred Stock represented by such certificate. The
Notice of Conversion shall read substantially as follows:
The undersigned holder (the "Holder") is surrendering to
Nu-Wave Health Products, Inc., a Florida corporation (the
"Company"), one or more certificates representing shares of
Series A Convertible Preferred Stock of the Company (the
"Series A Preferred Stock") in connection with the Conversion
of all or a portion of the Series A Preferred Stock into
shares of Common Stock, $.01 par value per share, of the
Company (the "Common Stock") as set forth below.
1. The Holder understands that the Series A Preferred
Stock was issued by the Company pursuant to the exemption from
registration under the United States Securities Act of 1933,
as amended (the "Securities Act").
<PAGE> 8
2. The Holder represents and warrants that all offers
and sales of the Common Stock issued to the Holder upon such
conversion of the Series A Preferred Stock shall be made
either pursuant to an effective registration statement under
the Securities Act, in compliance with Rule 144, or pursuant
to some other exemption from registration.
3. The Holder is subject to a lockup agreement dated
June ___, 1998.
Number of shares of Series A Preferred Stock being converted:
___________.
Applicable Conversion Price: _______.
Number of shares of Common Stock issuable: __________.
Name of Holder:
---------------------
(Signature of Holder)
5.3 Immediately prior to the close of business on the date of receipt
by the Company of Notice of Conversion, the converting holder of Series A
Preferred Stock shall be deemed to be the holder of record of Common Stock
issuable upon conversion of such holder's Series A Preferred Stock
notwithstanding that certificates representing such Common Stock shall not then
be actually delivered to such person. On the Conversion Date, all rights with
respect to the shares of Series A Preferred Stock so converted, including the
rights, if any, to receive notices, will terminate, except only the rights of
holders thereof to (i) receive certificates for the number of shares of Common
Stock into which such shares of Series A Preferred Stock have been converted;
and (ii) exercise the rights to which they are entitled as holders of Common
Stock.
5.4 The Conversion Rate shall be subject to adjustment in case the
Company shall at any time or from time to time (A) make a redemption payment or
pay a dividend (or other distribution) payable in shares of Common Stock on any
class of capital stock (which, for purposes of this Section 5.4 shall include,
without limitation, any dividends or distributions in the form of options,
warrants or other rights to acquire capital stock) of the Company; (B) subdivide
the outstanding shares of Common Stock into a larger number of shares; (C)
combine the outstanding shares of Common Stock into a smaller number of shares;
(D) issue any shares of its capital stock in a reclassification of the Common
Stock; or (E) pay a dividend or make a distribution to all holders of shares of
Common Stock pursuant to a stockholder rights plan, "poison pill" or similar
arrangement then, and in each such case, the Conversion Rate in effect
immediately prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the
<PAGE> 9
Company) so that the holder of any share of Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series A Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 5.4 shall become
effective retroactively (x) in the case of any such dividend or distribution, to
the day immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
5.5 Upon any increase or decrease in the Conversion Rate,
then, and in each such case, the Company promptly shall deliver to each holder
of Series A Preferred Stock a certificate signed by an authorized officer of the
Company, setting forth in reasonable detail the event requiring the adjustment
and the method by which such adjustment was calculated and specifying the
increased or decreased Conversion Rate then in effect following such adjustment.
5.6 No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of any shares of
Series A Preferred Stock. If more than one share of Series A Preferred Stock
shall be surrendered for conversion at one time by the same holder the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate Liquidation Preference of the shares of Series A
Preferred Stock so surrendered. If the conversion of any share or shares of
Series A Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the last reported closing bid price of the Common Stock on the
Nasdaq Stock Market at the close of business on the trading day next preceding
the day of conversion shall be paid to such holder in cash by the Company.
5.7 In case of any capital reorganization or reclassification
or other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value), or in case of any consolidation or merger of the Company with or into
another Person (other than a consolidation or merger in which the Company is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Company (any of the foregoing, a "Transaction"), each share of Series A
Preferred Stock then outstanding shall, without the consent of any holder of
Series A Preferred Stock, become convertible only into the kind and amount of
shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock could
have been converted immediately prior to such Transaction after giving effect to
any adjustment event. The provisions of this Section
<PAGE> 10
5.7 and any equivalent thereof in any such certificate similarly shall apply to
successive Transactions. The provisions of this Section 5.7 shall be the sole
right of holders of Series A Preferred Stock in connection with any Transaction
and such holders shall have no separate vote thereon.
5.8 In the case of any distribution by the Company to its
stockholders of substantially all of its assets, each holder of Series A
Preferred Stock will participate pro rata in such distribution based on the
number of shares of Common Stock into which such holders' shares of Series A
Preferred Stock would have been convertible immediately prior to such
distribution.
5.9 The Company shall at all times reserve and keep available
for issuance upon the conversion of the Series A Preferred Stock, such number of
its authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series A Preferred Stock.
5.10 The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series A Preferred Stock shall be made without
charge to the converting holder of shares of Series A Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or in such names as may be
directed by, the holders of the shares of Series A Preferred Stock converted;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the holder of the shares of
Series A Preferred Stock converted, and the Company shall not be required to
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
6. OTHER PROVISIONS.
6.1 With respect to any notice to a holder of shares of Series
B Preferred Stock required to be provided hereunder, neither failure to mail
such notice, nor any defect therein or in the mailing thereof, to any particular
holder shall affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice with respect to the other holders or
affect the legality or validity of any distribution, rights, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any such action. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the holder receives the notice.
<PAGE> 11
6.2 Shares of Series A Preferred Stock issued and reacquired
will be retired and canceled promptly after reacquisition thereof and, upon
compliance with the applicable requirements of Florida law, have the status of
authorized but unissued shares of Series A Preferred Stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of Series A Preferred Stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of Series A
Preferred Stock of the Corporation, except that any issuance or reissuance of
shares of Series A Preferred Stock must be in compliance with these Articles of
Amendment.
6.3 All notices periods referred to herein shall commence on
the date of the mailing of the applicable notice.
THIRD: The foregoing amendment to articles of incorporation was duly
adopted by the board of directors on June 12, 1998.
Signed this 10th day of August, 1998.
NU-WAVE HEALTH PRODUCTS, INC.
By: /s/ Kotha S. Sekharam
-------------------------------
Kotha S. Sekharam, as President
<PAGE> 1
EXHIBIT 10.2
NOTE AND SECURITY AGREEMENT R2
[MELLON BANK]
FOR REVOLVING LINE OF CREDIT
PENNSYLVANIA
$700,000.00 March 16, 1998
For value received, Undersigned promises to pay to Mellon Bank, N.A. ("Bank") or
its order at Pittsburgh, Pennsylvania, the sum of Seven Hundred Thousand Dollars
($700,000.00), or such lesser or greater principal amount as may be outstanding
from time to time under the revolving line of credit described herein (as
amended, extended and supplemented from time to time, the "Line of Credit"),
extended by Bank to Undersigned, with interest on the outstanding balance from
the date of this Note and Security Agreement ("Note") at the rate(s)
("Contractual Rate(s)") specified herein. This Note is a/the Note referred to
in the Loan Agreement dated March 16, 1998, between Undersigned and Bank.
Undersigned has requested Bank to make loans (the "Loans") to Undersigned from
time to time during the period set forth below (the "Commitment Period") in an
aggregate principal amount outstanding at any one time not to exceed Bank's
commitment set forth below (the "Commitment Amount") and, subject to the terms
and conditions set forth herein and in the other Credit Documents (hereinafter
defined) and, relying upon the representations and warranties herein and therein
set forth, Bank is willing to make such Loans.
COMMITMENT PERIOD:
From the date hereof to but not including March 1, 1999 (the "Termination
Date").
BANK MAY EXTEND THE COMMITMENT PERIOD FROM TIME TO TIME BY ISSUING TO
UNDERSIGNED A "NOTICE OF RENEWAL" IN WRITING, CITING THIS NOTE AND EXTENDING THE
TERMINATION DATE TO SUCH DATE AS BANK MAY SPECIFY.
COMMITMENT AMOUNT
The lesser of (a) $700,000.00, or (b) the sum of (i) 75% of Eligible Accounts
and (ii) 70% of Eligible Inventory (both as hereinafter defined). PROVIDED,
HOWEVER, THAT (b)(ii) ABOVE SHALL IN NO EVENT EXCEED $250,000.00.
Within the limits of time and amount set forth above and subject to the terms
and conditions set forth herein and in the other Credit Documents, Undersigned
may borrow, repay and reborrow hereunder.
LOANS ABOVE COMMITMENT AMOUNT:
Notwithstanding any other provision of this Note or of any other Credit
Document, if Bank determines that the principal balance of the Loans hereunder
shall at any time exceed the Commitment Amount, Undersigned shall pay such
excess to Bank on Bank's demand. If Bank allows Loans above the Commitment
Amount, all the terms and conditions set forth herein and in the other Credit
Documents will apply to such Loans.
The obligations of Undersigned to repay the Loans, to pay interest thereon and
to pay fees with respect to the Commitment Amount shall be evidenced by this
Note, which together with any Loan Agreement, including any Supplement thereto,
and any security agreements, instruments and other documents executed in
connection herewith are sometimes referred to herein as the "Credit Documents."
Principal of the aggregate of all Loans shall be repaid on the Termination Date.
Interest on the aggregate of all Loans shall be paid on the first day of each
month commencing the calendar month after the first Loan is made, and shall be
calculated at a rate per annum which is 1.0% plus the Prime Rate, such rate to
change from time to time as of the effective date of each announced change in
such Prime Rate. Interest shall be calculated on the basis of a 360-day year
and actual days elapsed. (Prime Rate" shall mean the interest rate per annum
announced from time to time by Bank as its Prime Rate. The Prime Rate may be
greater or less than other interest rates charged by Bank to other borrowers and
is not solely based or dependent upon the interest rate which Bank may charge
any particular borrower or class of borrowers.)
After maturity, whether by acceleration or otherwise, or if Bank so elects after
the occurrence of any Event of Default, interest shall accrue at a rate 2
percent per annum plus the Contractual Rate(s) specified until all matured sums
due hereunder are paid, or until any Event of Default invoked by Bank has been
cured prior to maturity. If Undersigned fails to make a scheduled payment
within 15 days of its due date, or fails to satisfy a demand for payment within
15 days of demand, Undersigned will pay a late charge (not less than $25.00)
equal to 3% of the unpaid portion of such payment. Interest shall continue to
accrue after the entry of judgment by confession or otherwise at the Contractual
Rate(s) until all sums due hereunder and/or under the judgment are paid, unless
the Contractual Rate(s) is (are) altered by subsequent maturity.
FACILITY FEE: Undersigned agrees to pay to Bank, as consideration for the Line
of Credit, a facility fee of $500.00, payable on the date hereof.
1
<PAGE> 2
1. SECURITY INTEREST. Undersigned hereby grants to Bank a security interest
in the following property now owned or hereafter acquired by Undersigned: (a)
all equipment, wherever located, including machinery, motor vehicles, furniture
and fixtures; (b) all inventory (whether held for sale or lease or to be
furnished under contracts of service), raw materials, work in process, and
materials used or consumed in the conduct of Undersigned's business, and all
books, records, invoices and other documents which describe or evidence the
same; (c) all accounts, contract rights, general intangibles, choses in action,
instruments, chattel paper, documents (including all documents of title and
warehouse receipts) and all rights to the payment of money, however evidenced or
arising; and (d) in addition to the foregoing, Undersigned (1) grants to Bank a
security interest in all accessions, parts, accessories, attachments and
appurtenances in any way used with, attached or related to, or installed in, any
equipment or inventory constituting "Collateral" hereunder; (2) grants to Bank a
security interest in all substitutions for, renewals of, improvements,
replacements and additions to, and the products and proceeds (cash and non cash)
of all property constituting "Collateral" hereunder and any insurance policies
relating thereto; (3) grants to Bank a security interest in, lien upon, and
right of setoff against, all deposit accounts, credits, securities, moneys or
other property of Undersigned which may at any time be in the possession of,
delivered to, or owed by Bank, including any proceeds or returned or unearned
premiums of insurance, and the proceeds (cash and non-cash) of all the foregoing
property; and (4) assigns to Bank all moneys which may become payable on any
policy of insurance required to be maintained under this Note, including any
returned or unearned premiums.
All such property subject to Bank's security interests described in this Section
1 is referred to herein collectively as the "Collateral." With respect to
Section 5 hereunder, the term "Collateral" shall not include the property
described in subsections (d)(3) and (d)(4) of this Section 1. All security
interests in Collateral shall be deemed to arise and be perfected under and
governed by the Uniform Commercial Code, except to the extent that such law does
not apply to certain types of transactions or Collateral, in which case
applicable law shall govern.
2. OBLIGATIONS SECURED. The Collateral shall secure the following obligations
("Obligations") of Undersigned to Bank: (a) all amounts at anytime owing or
payable under this Note; (b) all costs and expenses incurred by Bank in the
collection or enforcement of this Note or the protection of the Collateral; (c)
all future advances made by Bank for taxes, levies, insurance, and repairs to or
maintenance of the Collateral; and (d) any other indebtedness, liability or
obligation of Undersigned to Bank, past, present, or future, direct or indirect,
absolute or contingent, individual, joint or several, now due or to become due,
whether as drawer, maker, endorser, surety or otherwise.
3. CONDITIONS. The obligation of Bank to make any Loan hereunder is subject
to the performance by Undersigned of its obligations to be performed hereunder
and under the other Credit Documents on or before the date of such Loan and to
the satisfaction of the following further conditions: (a) The representations
and warranties contained herein and in the other Credit Documents shall be true
on and as of the date of each Loan hereunder with the same effect as though made
on and as of each such date; on each such date no "Event of Default" shall have
occurred and be continuing or exist or shall occur or exist after giving effect
to the Loan to be made on such date; and any request for borrowing under Section
3(b) below shall constitute a certification by Undersigned to both such effects.
(b) Undersigned shall have provided Bank with written notice (or telephonic
notice confirmed in writing) of the proposed Loan specifying the principal
amount thereof and the proposed date thereof, which notice shall be received by
Bank at its designated office no later than 1:00 p.m., local time at the place
where the proposed Loan is to be payable, on the date (which shall be a day on
which Bank is opened for business) of such proposed Loan. Such proposed Loan
shall be in an amount no less than $10,000.00. Such notice shall contain a
certification as to the amounts of the then current Eligible Accounts and
Eligible Inventory. In the event Bank receives telephonic notice, Bank may act
in reliance upon such telephonic notice, provided Bank has acted in good faith.
(c) The conditions, if any, specified herein or in any Credit Document shall
have been met to the satisfaction of Bank. (d) All legal details and proceedings
in connection with the transactions contemplated by this Note shall be
satisfactory to Bank and Bank shall have received all such counterpart originals
or certified or other copies of such documents and records of proceedings in
connection with such transactions, in form and substance satisfactory to Bank,
as Bank may from time to time request.
4. REPRESENTATIONS. Undersigned hereby makes the following representations
and warranties which shall be true and correct on the date of this Note and
shall continue to be true and correct at the time of the creation of any
Obligation accrued hereby and until the Obligations secured hereby shall have
been paid in full: (a) Undersigned's residence and/or Chief Executive Office,
as the case may be, is as stated below or as otherwise stated in a subsequent
written notice delivered to Bank pursuant to the terms hereof; (b) Undersigned
has good and marketable title to the Collateral subject to no security interest,
lien or encumbrance, except as indicated to the contrary to Bank in writing
prior to the execution of this Note; (c) Undersigned has all Environmental
Permits (as hereinafter defined) necessary for the conduct of its business; and
(d) Undersigned is not subject to any contingent liability on account of any
Environmental Law.
5. COVENANTS. Undersigned covenants and agrees that until the Obligations
secured hereunder
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have been paid in full. Undersigned shall: (a) use the proceeds of the Loans
evidenced hereby only for the purpose(s) specified to the Bank at or prior to
the execution hereof; (b) not permit use of the Collateral for any illegal
purposes; (c) promptly notify Bank in writing of any change in its or their
Chief Executive Office; (d) not permit removal of any of the Collateral from
county to county or state to state unless Bank has given written consent in
advance; (e) maintain at all times good and marketable title to all Collateral,
free and clear of any security interest, lien or encumbrance (except as to
which Bank may grant its prior written consent pursuant to section 5(f) below),
and defend such title against the claims and demands of all persons; (f) not
(1) affix the Collateral or permit the Collateral to be affixed to real estate
or to any other goods, (2) lease, mortgage, pledge or encumber the Collateral,
(3) permit the Collateral's identity to be lost, (4) permit the Collateral to
be levied upon or attached under any legal process, (5) permit or cause any
security interest or lien to arise with respect to the Collateral (other than
those created in this Note), or (6) except Collateral customarily sold by
Undersigned in the ordinary course of business and so sold in such manner for
full value, sell, consign, part with possession of, or otherwise dispose of the
Collateral or any rights therein, except as Bank may grant its prior specific
written consent with respect to acts or events specified in subsections (1),
(2), (5) or (6) hereof; (g) maintain the Collateral in good condition and
repair, excepting only reasonable wear and tear; pay and discharge all taxes and
other levies on the Collateral, as well as the costs of repair and maintenance
thereof; and furnish to Bank upon request documentary proof of payment of such
taxes, levies and costs; (h) provide additional collateral at such times and
having such value as Bank may request, if Bank shall have reasonable grounds
for believing that the value of the Collateral has become insufficient to
secure all Obligations evidenced or secured by this Note; (i) purchase and
maintain policies of insurance (including flood insurance) to protect the
Collateral or other property against such risks and casualties, and in such
amounts, as shall be required by Bank and/or applicable law, which policies
shall (1) be in form and substance satisfactory to Bank, (2) designate Bank as
lender loss payee and, at Bank's option, as additional insured, and (3) be (or
certificates evidencing same shall be) deposited with Bank; (j) provide, upon
request, financial or other information, documentation or certifications to
Bank (including balance sheets and income statements), all in form and content
satisfactory to Bank; (k) execute, upon demand by Bank, any financing
statements or other documents which Bank may deem necessary to perfect or
maintain perfection of the security interest(s) created in this Note and pay
all costs and fees pertaining to the filing of any financing, continuation or
termination statements with regard to such security interests; (l) procure, and
cause a statement of Bank's security interest to be noted on, any certificate
of title issued or required by law to be issued with respect to any motor
vehicle constituting part of the Collateral, and cause any such certificate to
be delivered to Bank within 10 days from the later of the date of this Note or
the date of the issuance of such certificate; (m) pay, upon demand, all amounts
incurred by Bank in connection with any action or proceeding taken or commenced
by Bank to enforce or collect this Note or protect, insure or realize upon the
Collateral, including attorney's fees actually incurred by Bank and attorney's
costs and all costs of legal proceedings; (n) immediately notify Bank if any of
Undersigned's accounts arise out of contracts with the United States or any
department, agency or instrumentality thereof, and execute any instruments and
take any steps required by Bank in order that all moneys due and to become due
under any such contracts shall be assigned to Bank and notice thereof given to
the United States under the Federal Assignment of Claims Act; and (o) not
violate any Environmental Law (as hereinafter defined).
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default" hereunder: (a) default in payment or performance of any
of the Obligations evidenced or secured by this by this Note or any other
evidence of liability of Undersigned to Bank; (b) the breach by any Obligor
(defined as Undersigned and each surety or guarantor of any of Undersigned's
liabilities to Bank, as well as any person or entity granting Bank a security
interest in property to secure the Obligations evidenced hereby) of any covenant
contained in the Loan Agreement, this Note, or in any separate security,
guaranty or suretyship agreement between Bank and any Obligor or in any other
Credit Document, the occurrence of any default hereunder or under the terms of
any such agreement, or the discovery by Bank of any false or misleading
representation made by an Obligor herein or in any such agreement or in any
other information submitted to Bank by any Obligor; (c) with respect to any
Obligor: (1) death or incapacity of any individual or general partner; or (2)
dissolution of any partnership or corporation; (d) any assignment for the
benefit of creditors by any Obligor; (e) insolvency of any Obligor; (f) the
filing or commencement of any petition, action, case or proceeding, voluntary or
involuntary, under any state or federal law regarding bankruptcy, insolvency,
reorganization, receivership or dissolution, including the Bankruptcy Reform Act
of 1978, as amended, by or against any Obligor; (g) default under the terms any
lease of or mortgage on the premises where any Collateral is located; (h)
garnishment, attachment or taking by governmental authority of any Collateral or
other property of the Undersigned which is in the Bank's possession; (i) a
determination by Bank, which determination shall be conclusive if made in good
faith, that a material adverse change has occurred in the financial or business
condition of Undersigned; (j) the maturity of any life insurance policy held as
collateral for this Note by reason of the death of the insured or otherwise; (k)
the revocation, termination, cancellation, denial of liability, or the attempt
of any of the foregoing by any Obligor of any obligation of liability whatsoever
of the Obligor to the Bank, including without limitation any security, guarantee
or suretyship agreement; or (l) default by Undersigned in the
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payment of any indebtedness of Undersigned or in the performance of any of
Undersigned's obligations (other than indebtedness or obligations evidenced by
this Note or any other evidence of liability of Undersigned to Bank) and such
default shall continue for more than any applicable grace period.
7. ACCELERATION: REMEDIES. Upon the occurrence of any Event of Default: (a)
Bank's obligation to make Loans under the Line of Credit shall terminate; (b)
all amounts due under this Note, including the unpaid balance of principal and
interest hereof, shall become, at the option of Bank, immediately due and
payable, without any demand or notice whatsoever; (c) Undersigned shall, upon
demand by Bank, assemble the Collateral and promptly make it available to Bank
at any place designated by Bank which is reasonably convenient to both parties;
(d) Bank may immediately and without demand exercise any of its rights and
remedies granted herein, under applicable law, or which it may otherwise have,
against the Undersigned, the Collateral, or otherwise; and (e) Bank may,
without notice or process of any sort, peaceably enter any premises where any
vehicle constituting a part of the Collateral is located and take possession,
retain and dispose of such vehicle and all property located in or upon it.
Bank shall have no obligation to return any property not constituting
Collateral found in any such vehicle unless Bank actually receives
Undersigned's written request therefor specifically describing such property
within 72 hours after repossession thereof. Notwithstanding any provision to
the contrary contained herein, upon the occurrence of an Event of Default as
described in Section (6)(f) hereof, all amounts due under this Note shall
become immediately due and payable, without any demand, notice, or further
action by Bank whatsoever, and an action therefor shall immediately accrue.
8. BANK'S RIGHTS. Undersigned hereby authorizes Bank, and Bank shall have
the continuing right, at its sole option and discretion, to: (a) do anything
which Undersigned is required but fails to do hereunder, and in particular Bank
may, if Undersigned fails to do so, (1) insure or take any reasonable steps to
protect the Collateral, (2) pay all taxes, levies, expenses and costs arising
with respect to the Collateral, or (3) pay any premiums payable on any policy
of insurance required to be obtained or maintained hereunder, and add any
amounts paid under this Section 8(a) to the principal amount of the
indebtedness secured by this Note; (b) direct any insurer to make payment of
any insurance proceeds, including any returned or unearned premiums, directly
to Bank, and apply such moneys to any Obligations or other amounts evidenced or
secured hereby in such order or fashion as Bank may elect; (c) inspect the
Collateral at any reasonable time; (d) pay any amounts Bank elects to pay or
advance hereunder on account of insurance, taxes, or other costs, fees or
charges arising in connection with the Collateral, either directly to the payee
of such cost, fee or charge, directly to Undersigned, or to such payee(s) and
Undersigned jointly; and (e) pay the proceeds of the Loans evidenced by this
Note to any or all of the Undersigned individually or jointly, or to such other
persons as any of the Undersigned may direct.
9. MISCELLANEOUS PROVISIONS. (a) Bank shall be entitled to exercise any
right notwithstanding any prior exercise, failure to exercise or delay in
exercising any such right. (b) Bank shall retain any security interest
previously granted to secure repayment of the indebtedness evidenced hereby.
(c) If any provision hereof shall for any reason be held invalid or
unenforceable, no other provision shall be affected thereby, and this Note shall
be construed as if the invalid or unenforceable provision had never been a part
of it. The descriptive headings of this Note are for convenience only and
shall not in any way affect the meaning or construction of any provision
hereof. (d) The rights and privileges of Bank contained in this Note shall
inure to the benefit of its successors and assigns, and the duties of
Undersigned shall bind all successors and assigns. (e) This note shall in all
respects be governed by the laws of Pennsylvania (except to the extent that
federal law governs), and all references to the Uniform Commercial Code shall
be deemed to refer to the Uniform Commercial Code as enacted in such state. (f)
Undersigned hereby irrevocably appoints Bank and each holder hereof as
Undersigned's attorney-in-fact to: (1) endorse Undersigned's name to any draft
or check which may be payable to Undersigned in order to collect the proceeds
of any insurance or any returned or unearned premiums in respect of any
policies of insurance required to be maintained hereunder; and (2) take any
action Bank deems necessary to perfect any security interest granted to Bank
herein, including executing any document on Undersigned's behalf. (g)
Undersigned shall bear the risk of loss of, damage to, or destruction of the
Collateral, and Undersigned hereby releases Bank from all claims for loss or
damage to the Collateral caused by any act or omission on the part of Bank,
except for willful misconduct. (h) Copies or reproductions of this document or
of any financing statement may be filed as a financing statement.
10. DEFINITIONS. As used herein: (a) "account", "chattel paper", "contract
right", "document", "instrument", and "inventory" have the same respective
meanings given to those terms in the Uniform Commercial Code; "general
intangibles" has the meaning given to that term in the Uniform Commercial Code,
including without limitation, customer lists, books and records (including
without limitation, all correspondence, files, tapes, cards, book entries,
computer runs, computer programs and other papers and documents, whether in the
possession or control of Undersigned or any computer service bureau), rights
in franchises and sales contracts, patents, copyrights, trademarks, logos,
goodwill, trade names, label designs, royalties, brand names, plans,
blueprints, inventions, patterns, trade secrets, licenses, jigs, dies, molds,
and formulas; (b) "Chief Executive Office" means the place from which the main
part of the business operations of an entity is managed; (c) "Eligible
Accounts" shall be defined as trade accounts
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receivable created or acquired by Undersigned in the ordinary course of
business, aged no more than 90 days from the date of invoice, which are and at
all times continue to be acceptable to Bank and in which Bank has a Prior
Security interest at all times. Standards of acceptability shall be fixed and
may be revised from time to time solely by Bank in its exclusive judgment. (d)
"Eligible Inventory" shall be defined as Undersigned's inventory, excluding
work in process, of saleable raw materials and finished goods manufactured or
acquired by Undersigned in the ordinary course of business, in its sole
possession or control, stored in a location or locations and in a manner
acceptable to Bank, valued at the lower of cost or market value, which
inventory is and at all times continues to be acceptable to Bank and in which
Bank has a Prior Security Interest at all times. Standards of acceptability
shall be fixed and may be revised from time to time solely by Bank in its
exclusive judgment. (e) "Environmental Law" means any federal, state or local
environmental law, statute, regulation, rule, ordinance, court or
administrative order or decree, or private agreement or interpretation, now or
hereafter in existence, relating to the use, handling, collection, storage,
treatment, disposal or otherwise of Hazardous Substances, or in any way
relating to pollution or protection of the environment, including but not
limited to: the Clean Air Act, 42 U.S.C. 7401 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601
et seq.; the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq.; the
Hazardous Material Transportation Act, 49 U.S.C. 1801 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 138 et seq.; the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. 6901 et seq.; the Toxic
Substances Control Act, 10 U.S.C. 2601 et seq.; all as amended. (f)
"Environmental Permits" mean any federal, state or local permit, license or
authorization issued under or in connection with any Environmental Law. (g)
"Hazardous Substances" means petroleum and petroleum products, radioactive
materials, asbestos or any materials or substances defined as or included in
the definition of "hazardous wastes," "hazardous substances," "hazardous
materials," "toxic substances," "hazardous air pollutants," and "toxic
pollutants," as those terms are used in any Environmental Law. (h) "Prior
Security Interest" shall be defined as an enforceable, perfected security
interest (under the Uniform Commercial Code), which interest is senior and
prior to all liens (including without limitation all security interests,
pledges, bailments, leases, mortgages, conditional sales and title retention
agreements, charges, claims, encumbrances, judgments, levies and all other
types of liens whatsoever).
Capitalized terms not defined in this Note shall have the meanings set forth in
the Loan Agreement.
11. Confession of Judgment. Upon the occurrence of any Event of Default,
Undersigned hereby empowers any attorney of any court of record or the clerk of
any state or federal court of record in the United States of America to appear
for Undersigned and to confess judgment as often as necessary against
Undersigned in favor of the holder hereof, as of any term, for the above sum
plus interest due under the terms hereof, together with costs of legal
proceedings which are actually incurred and attorney's fees incurred by Bank,
with release of all errors. Undersigned waives all laws exempting real or
personal property from execution.
Witness the due execution hereof, under seal, intending to be legally
bound this 16th day of March, 1998.
BECAN DISTRIBUTORS, INC.
By: /s/ WILLIAM LAGAMBA (Seal)
---------------------------
Name: William LaGamba
Title: President
Attest:
/s/ WILLIAM LAGAMBA, PRESIDENT
- -----------------------------------
Name, Title:
(CORPORATE SEAL)
Business Address:
275 Curry Hollow Road
Pittsburgh, PA 15236
MELLON BANK, N.A.
By: /s/ SCOTT A. BIDDLE
---------------------------
Name: Scott A. Biddle
Title: AVP
Business Address:
6400 Steubenville Pk.
--------------------------------
Pittsburgh, PA 15205
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LOAN AGREEMENT [MELLON BANK LOGO]
- -------------------------------------------------------------------------------
BECAN DISTRIBUTORS, INC. ("Borrower") has requested Mellon Bank, N.A.
("Bank") to make loan(s), extend discretionary line(s) of credit, or otherwise
extend credit accommodations(s) (the "Borrowings") to Borrower, and Bank has
agreed to make or extend such loan(s), discretionary line(s) of credit or
extension(s) of credit to Borrower upon the following terms and conditions. The
Borrowings shall be evidenced by such notes, instruments or other documents
("Notes") as may be requested from time to time by Bank, and Borrower agrees to
comply with the terms contained herein and in any written supplement now or
hereafter executed by Borrower in which reference to this Agreement is made.
1. REPRESENTATIONS AND WARRANTIES. In addition to the representations and
warranties contained in the Notes, Borrower hereby makes the following
representations and warranties which shall be true and correct on the date
hereof and shall continue to be true and correct at the time of the creation of
any of the Borrowings and until the Borrowings shall have been paid in full:
(a) ORGANIZATION--CORPORATION AND PARTNERSHIP. If Borrower is a corporation or
a partnership, Borrower is duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which Borrower is incorporated
or was formed; Borrower has the power and authority to own its properties and
assets, to carry on its businesses as now being conducted and is qualified to
do business in every jurisdiction in which it is required to qualify to do
business;
(b) VALIDITY AND BINDING NATURE. Borrower has the power to execute, deliver,
and perform this Agreement, the Notes, and to execute and deliver any other
documents evidencing or relating to the Borrowings; and when executed and
delivered, this Agreement, the Notes and such documents will be valid and
binding obligations of Borrower, enforceable in accordance with their terms;
provided, however, that this representation with respect to enforceability is
limited by bankruptcy, insolvency, or other laws of general application
relating to or affecting the enforcement of creditors' rights.
(c) DUE AUTHORIZATION--CORPORATION AND PARTNERSHIP. The execution, delivery
and performance of this Agreement, the Notes and any other documents evidencing
or relating to the Borrowings, have been duly authorized by all corporate or
partnership action required for the lawful creation and issuance of such
documents and will not violate any provisions of law, any order of any court or
governmental agency, the charter documents and by-laws of, or partnership
agreement of Borrower.
(d) CONFLICTING INSTRUMENTS. The execution, delivery and performance of this
Agreement, the Notes and any other documents evidencing or relating to the
Borrowings will not violate any provisions of any indenture, agreement, or
other instrument to which Borrower or any of Borrower's properties or assets
are bound, and will not be in conflict with, result in a breach of, or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon
any of the properties or assets of Borrower.
(e) AUTHORIZATION AND CONSENTS. No authorization, consent, approval, license or
exemption of, and no registration, qualification, designation, declaration or
filing with any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign is necessary to the valid
execution and delivery of this Agreement, the Notes or any other documents
evidencing or relating to the Borrowings.
(f) FINANCIAL CONDITION. The most recent financial statements of Borrower
delivered to the Bank are true and correct and represent fairly its financial
position as of the date thereof; and the results of its operations for the
period indicated; and show all known liabilities, direct or contingent, of
Borrower as of the date thereof. Since the date of such financial statements,
there has been no material adverse change in the condition, financial or
otherwise, of Borrower or in the business and properties of Borrower and, since
such date, Borrower has not incurred, other than in the ordinary course of
business, any indebtedness, liabilities, obligations or commitments, contingent
or otherwise.
(g) LITIGATION. Except as previously disclosed in writing to Bank prior to the
date of this Agreement, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending, or to knowledge of Borrower, threatened by or against or affecting
Borrower or any of its properties or rights of Borrower which, if adversely
determined, would impair the right of Borrower to carry on its business
substantially as now conducted or would adversely affect the financial
condition, business or operations of Borrower.
(h) MISREPRESENTATION. Neither this Agreement nor any other document,
statement, financial statement, or certificate furnished to Bank by or on
behalf of Borrower in connection herewith, contains an untrue statement of a
material fact with respect to the financial condition or properties of
Borrower or omits to state a material fact necessary to make the statements
contained therein not misleading or, insofar as Borrower can now foresee, may
in the future materially adversely affect the financial condition or properties
of Borrower which has not been set forth in this Agreement or in a document,
statement, financial statement, or certificate furnished to Bank in connection
herewith.
2. GENERAL COVENANTS. In addition to the covenants contained in the Notes,
Borrower hereby covenants and agrees that, so long as any of the Borrowings are
outstanding, Borrower shall, except as Bank may otherwise agree in writing:
(a) FINANCIAL STATEMENTS--ANNUAL. Furnish to Bank, within 90 days after the
end of each fiscal year of Borrower, a financial statement of Borrower's profit
and loss and surplus for such fiscal year and a balance sheet as of the end of
such fiscal year, all in reasonable detail and REVIEWED BY AN INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT NOT UNSATISFACTORY TO BANK.
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<PAGE> 7
(b) FINANCIAL STATEMENTS--OTHER. Furnish to Bank each financial statement
required to be delivered to Bank by any supplement, addendum or amendment
hereto, and such other information concerning the financial or business affairs
of Borrower as may be requested by Bank from time to time.
(c) PROPERTY. Maintain and keep all its property in good repair, working order
and condition and make or cause to be made all necessary or appropriate
repairs, renewals, replacements, substitutions, additions, betterments and
improvements thereto so that the efficiency of all such properties shall at
all times be properly preserved and maintained.
(d) TAXES AND ASSESSMENTS. Duly pay and discharge all taxes, assessments and
governmental charges levied upon or assessed against it or against its
properties or income prior to the date on which penalties are attached thereto,
unless and except to the extent only that such taxes, assessments and charges
shall be contested in good faith and by appropriate proceedings diligently
conducted by Borrower (unless and until foreclosure, distraint, sale or other
similar proceedings shall have been commenced) and provided that such reserve
or their appropriate provisions, if any, as shall be required by generally
accepted accounting principles shall have been made therefor.
(e) LITIGATION. Promptly give notice in writing to Bank of the occurrence of
any material litigation, arbitration or governmental proceeding affecting
Borrower, and of any governmental investigation or labor dispute pending or, to
the knowledge of Borrower, threatened which could reasonably be expected to
interfere substantially with normal operations of the business of Borrower or
materially adversely affect the financial condition of Borrower.
(f) BOOKS AND RECORDS. Maintain and keep proper records and books of account in
conformance with generally accepted accounting principles applied on a
consistent basis in which full, true and correct entries shall be made of all
its dealings and business affairs.
(g) ACCESS TO PROPERTIES, BOOKS AND RECORDS. Permit any of the officers,
employees or representatives of Bank to visit and inspect any of the properties
of Borrower and to examine its books and records and discuss the affairs,
finances and accounts of Borrower with representatives thereof, during normal
business hours, and as often as Bank may request.
(h) FINANCIAL INFORMATION--GUARANTORS. Cause any third party guarantor of the
Borrowings to submit annually or at any time there is a material change in
their financial position, personal or business financial statements containing
such financial information as may be requested by Bank from time to time.
(i) OTHER OBLIGATIONS. Maintain all obligations of Borrower in whatsoever
manner incurred, including but not limited to obligations for borrowed money
or for services or goods purchased by Borrower, in a current status.
(j) CONTINUANCE OF BUSINESS. Not engage in any line of business other than
those in which it is actively engaged in on the date hereof.
(k) SALE OF ASSETS. Except for sales or other dispositions of inventory in the
ordinary course of business, not sell, lease, transfer, or otherwise dispose of
in a single transaction, or a series of related transactions, all or a
substantial part of the property and assets of Borrower, whether now owned or
hereafter acquired, to any person, firm or corporation.
(l) ACQUISITION OF ASSETS. Not purchase or otherwise acquire all or
substantially all of the operating assets of any other person, firm or
corporation and, if Borrower is a corporation, not merge or consolidate with or
into any other person, firm or corporation, or permit any other person, firm or
corporation to merge with or into it, or acquire all or substantially all of
the property or assets of any other person, firm or corporation.
(m) SELLING ACCOUNTS RECEIVABLE. Not sell, assign or discount any of its
accounts receivable or any promissory note held by it, with or without recourse,
other than the discount of such receivables or notes in the ordinary course of
business for collection.
(n) RETIREMENT OF OUTSTANDING STOCK. Not purchase, redeem or retire or make
any distribution on account of, if Borrower is a corporation, any shares of
the capital stock of Borrower or if Borrower is a partnership, any capital
account of any partner of such partnership.
(o) AFFILIATED ENTITIES. Not establish any partnership, subsidiary,
corporation, joint venture or other form of business combination.
(p) INSURANCE. Keep all insurable property, real and personal, now owned or
hereafter acquired, insured at all times against loss or damage by fire and
extended coverage risks and other hazards of the kinds customarily insured
against and in amounts customarily carried by businesses engaged in comparable
businesses and comparably situated; effect all such insurance under valid and
enforceable policies issued by insurers of recognized responsibility not
unacceptable to Bank; and, promptly from time to time upon request of Bank,
deliver to Bank a summary schedule indicating all insurance then in effect.
(q) INVESTMENTS. Not purchase, own, invest in or otherwise acquire, directly or
indirectly, any stock or other securities, or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person, firm or corporation or permit to exist any loans or advances for
such purposes except for investments in direct obligations of the United States
of America or any agency thereof, obligations guaranteed by the United States
of America, certificates of deposit issued by a bank or trust company organized
under the laws of the United States, or any state thereof, or marketable
securities which are publicly traded on a nationally recognized market.
(r) PATENTS. Preserve and protect its patents, franchises, licenses,
trademarks, trademark rights, tradenames, tradename rights, and copyrights used
or useful in the conduct of its business.
(s) GUARANTEES AND CONTINGENCIES. Not endorse, assume, guarantee, become surety
for, or otherwise become or remain liable in connection with the obligations of
any person, firm or corporation except Borrower may endorse negotiable or other
instruments for deposit or collection or similar transactions in the ordinary
course of its business.
(t) TRANSACTIONS WITH AFFILIATES. Not enter into any transaction, including,
without limitation, the purchase, sale, leasing or exchange of property, real
or personal, or the rendering of any service, with any person, firm or
corporation affiliated with Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair
and reasonable terms no less favorable to Borrower than would be obtained in a
comparable arm's-length transaction with any other person, firm or corporation
not affiliated with Borrower.
Page 2 of 4
<PAGE> 8
(u) MODIFICATIONS TO OTHER AGREEMENTS. Not amend or modify any existing
agreement with any person, firm or corporation in any manner materially
adverse to Borrower.
(v) NOTICE OF EVENT OF DEFAULT. Promptly give notice in writing to Bank of the
occurrence of any event of default and of any condition, event, act or omission
which, with the giving of notice or the lapse of time or both, would constitute
an event of default hereunder or under the Notes, or under any agreement or
document securing, evidencing or relating to the Notes.
(w) EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA). As soon as
possible and in any event within 30 days after Borrower knows or has reason to
know that any reportable event has occurred with respect to any plan subject to
the Employment Retirement Income Security Act of 1974, as amended ("ERISA") or
that the Pension Benefits Guaranty Corporation ("PBGC") has instituted or will
institute proceedings under Title IV of ERISA, as amended, to terminate any such
plan, deliver to Bank a certificate of the principal financial officer of
Borrower setting forth details as to such reportable event and the action
Borrower proposes to take with respect thereto, together with a copy of any
notice of such reportable event that may be required to be filed with PBGC, or
any notice delivered by PBGC evidencing its intent to institute such proceedings
or any notice to PBGC that such plan is to be terminated, as the case may be;
for all purposes of this paragraph, Borrower shall be deemed to have all
knowledge or knowledge of all facts attributable in the administrator of such
plan.
3. MATERIAL ADVERSE CHANGE. It shall be an event of default under the Notes, if
a material adverse change occurs in the financial or business condition of
Borrower as determined by Bank, such determination being conclusive if made in
good faith. Upon the occurrence of such event of default, Bank shall be
entitled to exercise any of the rights and remedies provided in any of the
Notes or in any separate security, guaranty or suretyship agreement relating to
or securing any of the Notes.
4. GENERAL PROVISIONS.
(a) WAIVERS. The provisions of this Agreement may from time to time be waived
in writing by Bank in its sole discretion. Any such waiver of any kind on the
part of Bank of any breach or default under this Agreement or any waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent set forth in such writing. No delay by Bank in
exercising any right or remedy hereunder shall operate as a waiver thereof.
(b) FINANCIAL COVENANTS. Compliance or non-compliance with all financial
covenants of Borrower contained herein, or in any supplement, addendum or
amendment hereto, shall be determined in accordance with generally accepted
accounting principles applied on a consistent basis. All financial statements
of Borrower required to be delivered to Bank hereby, or by any written
supplement now or hereafter executed by Borrower in which reference to this
Agreement is made, shall be prepared on the basis of generally accepted
accounting principles applied on a consistent basis.
(c) BINDING NATURE. The rights and privileges of Bank contained in this
Agreement shall inure to the benefit of its successors and assigns, and the
duties of Borrower shall bind all heirs, personal representatives, successors,
and assigns. "Borrower" refers individually and collectively to all signers of
this Agreement, including, in the case of any partnership, all general partners
of such partnership individually and collectively, whether or not such partners
sign below. Each of the signers shall be jointly and severally bound by the
terms hereof, and, with respect to any partnership executing this Agreement,
each general partner shall be bound hereby both in such general partner's
individual and partnership capacities.
(d) GOVERNING LAW. Time of performance hereunder is of the essence of this
Agreement. This Agreement and any written supplement hereto executed by
Borrower in which reference to this Agreement is made shall in all respects be
governed by the laws of the state where the Notes are payable (except to the
extent that federal law governs).
(c) SEVERABILITY. If any provision hereof shall for any reason be held invalid
or unenforceable, no other provision shall be affected thereby, and this
Agreement shall be construed as if the invalid or unenforceable provision had
never been a part of it. The descriptive headings hereof are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof.
<PAGE> 9
5. SPECIAL COVENANTS. In addition to the covenants contained herein or in the
Notes, Borrower hereby agrees that, so long as any of the Borrowings are
outstanding, Borrower shall, except as Bank may grant its prior written
consent, comply with the special provisions or covenants set forth in any
written supplement, now or hereafter executed by Borrower, in which reference
to this Agreement is made. Further, Borrower hereby acknowledges that some or
all of the Borrowings may be discretionary on the part of Bank and/or may be
payable upon demand of Bank. In this regard, it is hereby agreed and
acknowledged by Borrower that nothing contained in this Agreement, the Notes or
in any such written supplement hereto now or hereafter executed by Borrower
shall in any way modify, limit, diminish, negate or eliminate the demand and/or
discretionary features or aspects of any Borrowing.
- --------------------------------------------------------------------------------
SIGNATURES
Witness the due execution hereof intending to be legally bound the 16th day of
March 1998
- -------------------------------------------------------------------------------
Corporation or Other Entity
BECAN DISTRIBUTORS, INC.
Attest/Witness: By: (Signature/Title)
/s/ WILLIAM LAGAMBA /s/ WILLIAM LAGAMBA, President
- ------------------------------------- ------------------------------
Business Address: By: (Signature/Title)
275 CURRY HOLLOW ROAD X (Seal)
PITTSBURGH, PA 15236 -----------------------------
By: (Signature/Title)
X (Seal)
-----------------------------
By: (Signature/Title)
X (Seal)
(Corporate Seal) -----------------------------
<PAGE> 10
The following constitutes the special provisions and/or special covenants and/or
modifications referred to in that Loan Agreement dated March 16, 1998 (the "Loan
Agreement") covering the Borrowings (as that term is defined in the Loan
Agreement) of the undersigned (the "Borrower") from Mellon Bank, N.A. ("Bank").
The following shall supersede any special provision or covenant contained in any
prior Supplement to Loan Agreement and shall be applicable to all Borrowings in
existence on the date hereof or incurred hereafter.
1. The provisions of this Supplement shall, as of the date hereof, be deemed
to be fully incorporated by reference in, constitute a part of, and supplement
the provisions of, the Loan Agreement, which, except as supplemented hereby,
shall continue in full force and effect in accordance with its terms and
conditions.
2. Borrower hereby covenants and agrees that, so long as any Borrowings are
outstanding, Borrower shall, except as Bank may grant its prior written consent:
A) FURNISH TO BANK, WITHIN 45 DAYS AFTER THE END OF EACH QUARTER OF EACH
FISCAL YEAR OF BORROWER, A STATEMENT OF BORROWER'S PROFIT AND LOSS FOR
SUCH PERIOD AND A BALANCE SHEET AS OF THE END OF SUCH PERIOD, ALL IN
REASONABLE DETAIL AND PREPARED ON AN UNAUDITED BASIS.
B) FURNISH OR CAUSE TO BE FURNISHED TO BANK, AT SUCH TIMES AS ARE
REQUESTED BY BANK BUT IN ANY EVENT AT LEAST ONCE DURING EACH TWELVE
MONTH PERIOD, A PERSONAL FINANCIAL STATEMENT OF GUARANTOR'S INCOME AND
A BALANCE SHEET, ALL IN REASONABLE DETAIL AND IN FORM AND CONTENT
SATISFACTORY TO BANK IN ITS SOLE DISCRETION. BORROWER AGREES, UPON
BANK'S REQUEST, TO PROVIDE OR CAUSE TO BE PROVIDED SUCH INFORMATION ON
BANK'S FINANCIAL STATEMENT FORMS, WHICH SHALL BE COMPLETED IN THEIR
ENTIRETY AND SIGNED BY GUARANTOR. AS USED IN THIS PARAGRAPH,
"GUARANTOR" (WHETHER ONE OR MORE) SHALL MEAN: WILLIAM LAGAMBA AND
JUGAL K. TANEJA.
C) FURNISH OR CAUSE TO BE FURNISHED TO BANK, WITHIN 30 DAYS AFTER THE
FILING THEREOF, A TRUE AND CORRECT COPY OF ALL FEDERAL INCOME TAX
RETURNS, INCLUDING ALL SCHEDULES AND ATTACHMENTS, FILED BY GUARANTOR
WITH THE INTERNAL REVENUE SERVICE. AS USED IN THIS PARAGRAPH,
"GUARANTOR" (WHETHER ONE OR MORE) SHALL MEAN: WILLIAM LAGAMBA AND
JUGAL K. TANEJA.
D) FURNISH TO BANK, WITHIN 90 DAYS AFTER THE END OF EACH FISCAL YEAR OF
CARNEGIE CAPITAL, LTD., A FINANCIAL STATEMENT OF CARNEGIE CAPITAL,
LTD.'S PROFIT AND LOSS AND SURPLUS FOR SUCH FISCAL YEAR AND A BALANCE
SHEET AS OF THE END OF SUCH FISCAL YEAR ALL IN REASONABLE DETAIL AND
COMPILED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT NOT
UNSATISFACTORY TO BANK.
E) MAINTAIN AT ALL TIMES A RATIO OF BORROWER'S TOTAL LIABILITIES (LESS
SUBORDINATED DEBT) TO TANGIBLE NET WORTH (PLUS SUBORDINATED DEBT) OF
NOT MORE THAN 3.75 TO 1.
F) MAINTAIN AT ALL TIMES A RATIO OF BORROWER'S CASH FLOW (DEFINED AS THE
SUM OF NET PROFIT BEFORE TAX PLUS INTEREST) FOR EACH FISCAL YEAR TO
INTEREST EXPENSE (DEFINED AS THE SUM OF ALL SCHEDULED PAYMENTS OF
INTEREST COMING DUE ON ALL INDEBTEDNESS) DUE IN SUCH FISCAL YEAR OF
NOT LESS THAN 3.0 TO 1.
G) FURNISH TO BANK, ON OR BEFORE THE 15TH DAY OF EACH MONTH, (I) A
LISTING AND AGING OF BORROWER'S ACCOUNTS RECEIVABLE AS OF THE END OF
THE PREVIOUS MONTH, AND (II) A DESCRIPTION OF BORROWER'S INVENTORY AS
OF THE END OF THE PREVIOUS MONTH, AND (III) A BORROWING BASE
CERTIFICATE IN THE FORM ATTACHED HERETO AS EXHIBIT "A", ALL IN
REASONABLE DETAIL, IN FORM AND CONTENT SATISFACTORY TO BANK.
Witness the due execution hereof intending to be legally bound this 16th day of
March 1998.
Corporation or Other Entity:
BECAN DISTRIBUTORS, INC.
Attest/Witness: By: (Signature/Title)
/s/ WILLIAM LAGAMBA X /s/ WILLIAM LAGAMBA, President (Seal)
- ------------------------------------- ------------------------------
By: (Signature/Title)
Business Address:
275 CURRY HOLLOW ROAD X (Seal)
PITTSBURGH, PA 15236 -----------------------------
By: (Signature/Title)
X (Seal)
-----------------------------
By: (Signature/Title)
X (Seal)
-----------------------------
(Corporate Seal)
<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> JUN-30-1998
<CASH> 324,940
<SECURITIES> 0
<RECEIVABLES> 1,474,795
<ALLOWANCES> (58,500)
<INVENTORY> 1,404,873
<CURRENT-ASSETS> 3,174,694
<PP&E> 1,758,206
<DEPRECIATION> 66,660
<TOTAL-ASSETS> 7,715,100
<CURRENT-LIABILITIES> 3,810,162
<BONDS> 0
4,000
0
<COMMON> 27,745
<OTHER-SE> 2,513,172
<TOTAL-LIABILITY-AND-EQUITY> 7,715,100
<SALES> 2,368,285
<TOTAL-REVENUES> 6,745,119
<CGS> 6,182,660
<TOTAL-COSTS> 6,182,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,719
<INCOME-PRETAX> 229,546
<INCOME-TAX> 0
<INCOME-CONTINUING> 229,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229,546
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
