SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
DYNAMIC HEALTH PRODUCTS, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
DYNAMIC HEALTH PRODUCTS, INC.
6950 BRYAN DAIRY ROAD
LARGO, FL 33777
Dear Fellow Shareholders:
This Information Statement is furnished in connection with the approval
of Articles of Restatement of the Articles of Incorporation of Dynamic Health
Products, Inc., the classification of directors, and the adoption of the
Company's 1999 Stock Option Plan, all of which were approved by the Written
Consent of the record holders of more than a majority of the issued and
outstanding shares of voting securities of the Company. The Articles of
Restatement amend the Company's old Articles of Incorporation, as previously
amended, as described in this Information Statement.
Dated: March , 1999.
Sincerely,
DYNAMIC HEALTH PRODUCTS, INC.
By:/s/ JUGAL K. TANEJA
------------------------------
As Chairman of the Board
<PAGE>
TABLE OF CONTENTS
PAGE
----
Letter to Shareholders............................................... Cover
General.............................................................. 1
Voting Securities.................................................... 3
Executive and Director Compensation.................................. 3
Principal Shareholders............................................... 6
Matters Acted Upon................................................... 8
Amendments to Old Articles.................................... 8
Classification of Directors................................... 15
Approval of 1999 Stock Option Plan................................... 15
Attachments:
Notice of Shareholder Written Consent to Action............... A-1
Shareholder Written Consent to Action......................... A-2
Articles of Restatement....................................... A-4
1999 Stock Option Plan........................................ B-1
<PAGE>
PRELIMINARY
INFORMATION STATEMENT
WITH REGARD TO WRITTEN CONSENT OF SHAREHOLDERS
DYNAMIC HEALTH PRODUCTS, INC.
THIS INFORMATION STATEMENT IS PROVIDED TO YOU TO COMPLY WITH THE
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
GENERAL
The date of this Information Statement is March , 1999. This
Information Statement is first being mailed to shareholders on or about March ,
1999.
The principal executive offices of Dynamic Health Products, Inc. (the
"Company") are located at 6950 Bryan Dairy Road, Largo, FL 33777.
Management of the Company has determined that it is advisable for the
Company to amend and restate its Articles of Incorporation (the "Old Articles")
by proposing to the shareholders for approval Articles of Restatement (the
"Restated Articles") which:
(a) classify the Board of Directors into three classes,
as nearly equal in number as possible;
(b) provide that directors may be removed only with the
approval of the holders of at least 75% of the voting
power of the Company entitled to vote generally in
the election of the directors;
(c) provide that any vacancy on the Board shall be filled
by the majority of the directors then in office,
although less than a quorum;
(d) require that a special meeting of shareholders can
only be called by the chairman, the Board of
Directors or at the request of the holders of at
least 35% of the shares entitled to vote at the
special meeting;
(e) require advance notice of shareholder introduction of
business at shareholder meetings;
<PAGE>
(f) increase the shareholder vote required to alter,
amend or repeal the foregoing amendments to the
Articles from a majority to 75% of the voting power
of the Company;
(g) eliminate provisions of the Old Articles negating the
existence of preemptive rights;
(h) delete provisions of the Old Articles which were of
historical interest only;
(i) combine and re-word provisions of the Old Articles to
better conform to the applicable provisions of
ss.607.0202 of the Florida Business Corporation Act;
and
(j) eliminate provisions of the Old Articles which
reduced to a majority any requirement of the Florida
Business Corporation Act which required a two-thirds
vote of the Company's voting shares.
The purpose of amendments (a) - (f) was to enhance the likelihood of
continuity and stability of the Company's policies in the future, since a
majority of the directors at any given time will have prior experience as
directors. In addition, the Board believes those amendments will permit it to
represent more effectively the interests of all shareholders in a variety of
situations, including response to circumstances created by demands or actions by
a substantial shareholder or shareholder group.
The purpose of amendments (g) - (j) was to consolidate all prior
amendments to the Old Articles in the Restated Articles as permitted under the
Florida Business Corporation Act, and to amend or delete provisions of the Old
Articles not consistent with or unnecessary under the provisions of the Florida
Business Corporation Act or as otherwise determined by the Board of Directors to
be in the best interests of the Company.
Management also sought shareholder approval of its 1999 Stock Option
Plan (the "Plan") because it intends to conduct a public offering of Common
Stock and to list its Common Stock for trading on the Nasdaq National Market.
Nasdaq rules require shareholder approval of compensatory plans such as the Plan
as a condition of listing. In addition, since the Plan permits the Company to
grant options in the form of incentive stock options, applicable provisions of
the Internal Revenue Code of 1996 require shareholder approval of the Plan. The
purpose of the Plan is to foster the success of the Company by making available
Common Stock of the Company for purchase by officers, directors, employees of
the Company and its affiliates and consultants to the Company, and thus to
provide an additional incentive to such individuals to continue in the service
of the Company or its affiliates and to give them a greater interest as
shareholders in the success of the Company.
The consent of the holders of a majority of the total outstanding
voting shares was necessary to approve the Restated Articles, classify the Board
of Directors and approve the Private Placement Memorandum. The owners of
2,340,541 shares of Common Stock, or
2
<PAGE>
approximately 60.86% of the issued and outstanding voting shares of the Company
have approved by Written Consent to Action (the "Consent") the Restated Articles
and the Plan. In connection with the approval of the Restated Articles, the
shareholders also approved the classification of the existing directors of the
Company. The Consent is not effective until twenty calendar days after this
Information Statement is mailed to the remaining shareholders who are not
signatories to the Consent. A copy of the executed form of the Consent (to which
the Restated Articles are attached) is attached to the Notice of Shareholder
Written Consent to Action, which is attached to this Information Statement as
Attachment "A."
VOTING SECURITIES
The outstanding classes of voting securities of the Company are its
common stock, $.01 par value (the "Common Stock") and its Series A Convertible
Preferred Stock, $.01 par value (the "Series A Preferred Stock"). The holders of
Common Stock and the holders of Series A Preferred Stock vote as one class on
all matters upon which they are entitled to vote. Each share of Common Stock and
each share of Series A Preferred Stock are entitled to one vote on all matters
upon which the shareholders are entitled to vote. At the close of business on
March 11, 1999, 3,535,224 shares of Common Stock and 310,000 shares of Series A
Preferred Stock were issued, outstanding, and entitled to vote.
No record date was established for the determination of shareholders
entitled to give their consent because none of the Company's voting securities
are traded publicly. The determination of the security holders entitled to give
consent was made based on the shareholder records of the Company and its
transfer agent.
EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth certain information regarding
compensation earned by Jugal K. Taneja (the "Named Executive Officer"), during
the year ended March 31, 1998. Mr. Taneja served as the Company's Chief
Executive Officer until June, 1998. No executive officer of the Company had
total cash and non-cash compensation in excess of $100,000 during that year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
FISCAL -------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
--------------------------- ---- ------ -----
Jugal K. Taneja, Chief Executive Officer........ 1998 $75,000 $5,414
1997 $ -0- $ -0-
1996 $ -0- $ -0-
3
<PAGE>
On March 10, 1999, the Company's Board of Directors adopted the
Company's 1999 Stock Option Plan, which has been approved by the Company's
shareholders, subject to the mailing of an Information Statement in accordance
with Securities and Exchange Commission rules. A copy of the Plan is attached as
Exhibit B to the attached Shareholder Written Consent to Action. The purpose of
the Plan is to enable the Company to attract and retain top-quality employees,
officers, directors and consultants and to provide such employees, officers,
directors and consultants with an incentive to enhance stockholder return. The
Plan provides for the grant to officers, directors, or other key employees and
consultants of the Company of options to purchase up to an aggregate of
1,500,000 shares of Common Stock.
The Plan may be administered by the board of directors or a committee
of the Board (in either case, the "Committee"), which has complete discretion to
select the optionees and to establish the terms and conditions of each option,
subject to the provisions of the Plan. Options granted under the Plan may be
"incentive stock options" as defined in Section 411 of the Internal Revenue Code
of 1986 or so-called nonqualified options.
The exercise price of incentive stock options may not be less than 100%
of the fair market value of the Common Stock as of the date of grant (110% of
the fair market value if the grant is to an employee who owns more than 10% of
the total combined voting power of all classes of capital stock of the Company).
The Internal Revenue Code currently limits to $100,000 the aggregate value of
Common Stock that maybe acquired in any one year pursuant to incentive stock
options under the Plan or any other option plan adopted by the Company.
Nonqualified options may be granted under the Plan at an exercise price of not
less than 100% of the fair market value of the Common Stock on the date of
grant. Nonqualified options also may be granted without regard to any
restriction on the amount of Common Stock that may be acquired pursuant to such
options in any one year.
Subject to the limitations contained in the Plan, options become
exercisable at such times and in such installments (but not less than 20% per
year) as the Committee shall provide in the terms of each individual stock
option agreement. The Committee must also provide in the terms of each stock
option agreement when the option expires and becomes unexercisable, and may also
provide the option expires immediately upon termination of employment for any
reason. No option held by directors, executive officers or other persons subject
to Section 16 of the Securities Exchange Act of 1934 may be exercised during the
first six months after such option is granted.
Unless otherwise provided in the applicable stock option agreement,
upon termination of employment of an optionee, all options that were then
exercisable would terminate three months (twelve months in the case of
termination by reason of death or disability) following termination of
employment. Any options which were not fully vested and exercisable on the date
of such termination would immediately be cancelled concurrently with the
termination of employment.
4
<PAGE>
Options granted under the Plan may not be exercised more than ten years
after the grant (five years after the grant if the grant is an incentive stock
option to an employee who owns more than 10% of the total combined voting power
of all classes of capital stock of the Company). Options granted under the Plan
are not transferable and may be exercised only by the respective grantees during
their lifetime or by their heirs, executors or administrators in the event of
death. Under the Plan, shares subject to cancelled or terminated options are
reserved for subsequently granted options. The number of options outstanding and
the exercise price thereof are subject to adjustment in the case of certain
transactions such as mergers, recapitalizations, stock splits or stock
dividends. The Plan is effective for ten years, unless sooner terminated or
suspended.
Commencing in March, 1999, the Company reimburses each director for
reasonable expenses incurred in attending meetings of the Company's Board of
Directors. Directors currently receive no other compensation for their services
as directors. Following completion of this offering, however, the Company
intends to pay each non-employee director a fee of $500 for each meeting
attended by such director, but not less than $2,000 per year if they attend at
least three meetings during the year. Outside directors who serve on board
committees will be paid a fee of $100 for each committee meeting attended by
such director. Directors will also be eligible to receive grants of options
under the Plan.
In March, 1999, the Board of Directors established a two-person audit
committee of the Board. The audit committee will make recommendations to the
Board of Directors regarding the selection of independent auditors, will review
the results and scope of the audit and other services provided by the Company's
independent certified public accountants and will review the Company's financial
statements.
A two-person compensation committee of the Board of Directors will also
be established following the completion of this offering. The compensation
committee will make recommendations to the Board of Directors concerning
executive compensation and incentive compensation for officers and employees,
including the administration of the Company's 1999 Stock Option Plan.
The Board of Directors currently has no standing nominating committee.
Effective March 15, 1999, the Company entered into Employment
Agreements with Messrs. Jugal Taneja, Santostasi, LaGamba, Sekharam, Mihir
Taneja, and Laird. Each employment, except for Mr. Santostasi's, has a term of
three years. Mr. Santostasi's Employment Agreement ends on June 13, 2001. All
Employment Agreements are renewed automatically for successive periods of one
year after their expiration unless not less than 30 days prior to the end of the
initial term or any one-year renewal period, one of the parties sends written
notice to the other party of its intent to terminate the agreement. Salaries
payable under the agreements are: Jugal Taneja - $150,000, Santostasi -
$125,000, LaGamba - $125,000, Sekharam - $90,000, Mihir Taneja - $60,000, and
Laird - $85,000.
In each case, the employees are permitted to participate in benefits
and employee benefit plans of the Company that may be in effect from time to
time, to the extent eligible, and each
5
<PAGE>
employee is entitled to receive an annual bonus as determined in the sole
discretion of the Company's Board of Directors based on the Board's evaluation
of the employee's performance and the financial performance of the Company. Each
of the employees are eligible for grant of stock options in accordance with the
provisions of the Plan, as determined by the Administrator of the Plan.
The Company's Articles of Incorporation provide that the Company will
indemnify its officers, directors and other eligible persons to the fullest
extent permitted under the laws of the State of Florida. The Company has also
entered into indemnification agreements with each of its current directors and
executive officers which will provide for indemnification of, and advancement of
expenses to, such persons for expenses and liability incurred by them by reason
of the fact that they are or were a director, officer, shareholder of the
Company including indemnification under circumstances in which indemnification
and advancement of expenses are discretionary under Florida law.
The Company believes that it is the position of the Securities and
Exchange Commission that, insofar as the foregoing provisions may be invoked to
disclaim liability for damages arising under the Securities Act of 1933, the
provisions are against public policy as expressed in the Securities Act of 1933
and are, therefore, unenforceable.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of Company
voting securities as of March 11, 1999, by (i) each person known by the Company
to beneficially own 5% or more of the outstanding shares of voting securities,
(ii) each director of the Company, (iii) the Named Executive Officer of the
Company, and (iv) all directors and executive officers of the Company as a
group. The information set forth in the table and accompanying footnotes has
been furnished by the named beneficial owners. An asterisk denotes beneficial
ownership of less than 1%. The Company's voting securities are its common stock
and its Series A Convertible Preferred Stock, which vote together as one voting
group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) OF CLASS
-------------- --------------------------- ------------ --------
<S> <C> <C> <C>
Common Stock Jugal K. Taneja(3)....................... 1,172,927 33.2%
Common Stock Manju Taneja(4).......................... 1,032,851 29.2%
Common Stock William L. LaGamba(5).................... 435,000 12.3%
Common Stock Michele LaGamba(6) 435,000 12.3%
Common Stock Mihir K. Taneja.......................... 369,999 10.5%
Common Stock Mandeep Taneja........................... 369,999 10.5%
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock Kotha S. Sekharam(7)..................... 115,616 3.3%
Common Stock Martin A. Traber......................... 10,000 *
100 N. Tampa Street, 27th floor
Tampa, FL 33602
Common Stock All executive officers and directors..... 1,718,542 48.6%
as a group (9 persons)(9)
</TABLE>
- --------------
(1) Except as otherwise indicated, the address of each beneficial owner is
c/o the Company at 6950 Bryan Dairy Road, Largo, FL 33777.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to the shares shown. Except where indicated by footnote and subject to
community property laws where applicable, the persons named in the table
have sole voting and investment power with respect to all shares of
voting securities shown as beneficially owned by them.
(3) Includes 1,013,185 shares beneficially owned by Manju Taneja, Mr.
Taneja's wife, as to which Mr. Taneja exercises no investment or voting
power and disclaims beneficial ownership. Also includes (i) 70,076 shares
owned by Carnegie Capital, Ltd. and (ii) 70,000 shares owned by First
Delhi Family Partnership, Ltd. Mr. Taneja is the general partner of
Carnegie Capital, Ltd. and of First Delhi Family Partnership, Ltd. As
such, Mr. Taneja holds sole voting and investment power with respect to
the shares held of record by Carnegie Capital and First Delhi Family
Partnership, Ltd.
(4) Includes 19,666 shares beneficially owned by Jugal K. Taneja, Mrs.
Taneja's husband, as to which Mrs. Taneja exercises no investment or
voting power and disclaims beneficial ownership. Excludes (i) 70,076
shares owned by Carnegie Capital, Ltd., and (ii) 70,000 shares owned by
First Delhi Family Partnership, Ltd., as to which Mrs. Taneja exercises
no investment or voting power and disclaims beneficial ownership.
(5) Includes 196,000 shares owned by Michele LaGamba, Mr. LaGamba's wife, as
to which Mr. LaGamba exercises no investment or voting power and
disclaims beneficial ownership. Also includes and 126,000 shares held by
Mr. LaGamba as custodian for their minor children.
(6) Includes 113,000 shares owned by William L. LaGamba, Mrs. LaGamba's
husband and 126,000 shares held by Mr. LaGamba as custodian for their
minor children, as to which Mrs. LaGamba exercises no investment or
voting power and disclaims beneficial ownership.
(7) Includes 10,000 shares owned by Dr. Sekharam's wife, as to which Dr.
Sekharam exercises no investment or voting power and disclaims beneficial
ownership.
7
<PAGE>
(8) Paul A. Santostasi, a director and the Vice chairman of the Company, does
not beneficially own any common stock. Mr. Santostasi holds options to
purchase 600,000 shares of common stock, none of which may be exercised
within 60 days. Mr. Santostasi is a director, the president and the owner
of 30% of the outstanding voting securities of U.S. Diversified
Technologies. U.S. Diversified Technologies owns 310,000 shares of
Company Series A Preferred Stock, each of which is entitled to one vote.
As such, Mr. Santostasi shares investment and voting power with respect
to the shares of Series A Preferred Stock held of record by U.S.
Diversified Technologies as to which he disclaims beneficial ownership.
Rakesh K. Sharma, M.D., a director of the Company, does not own any
common shares.
MATTERS ACTED UPON
The Restated Articles, the classification of the existing directors of
the Company, and the 1999 Plan were approved by the written consent of the
holders of record of approximately 60.86% of the Company's issued and
outstanding shares of Common Stock and Series A Preferred Stock, voting as one
class. The Restated Articles will be filed with the Florida Secretary of State
and will be effective on the first business day following the twentieth day
after this Information Statement is mailed to the shareholders or as soon
thereafter as is practical. At that time, the Restated Articles will be
effective. Options under the Plan will be available for issuance at any time
after the effective date of the Consent.
The Company is required, pursuant to Section 607.0704 of the Florida
Business Corporation Act to give notice to those shareholders who have not
consented in writing to the matters described herein. That notice is attached
hereto as Attachment "A."
AMENDMENTS TO OLD ARTICLES
GENERAL DISCUSSION. The Company's Board of Directors unanimously
determined that certain amendments to the Old Articles were advisable and voted
to recommend them to the Company's shareholders for approval. The Board of
Directors also determined that it would be in the best interests of the Company
to restate the Old Articles. The Restated Articles (a) classify the Board of
Directors into three classes, as nearly equal in number as possible, each of
which, after an interim arrangement, will serve for three years, with one class
being elected each year; (b) provide that directors may be removed only with the
approval of the holders of at least 75% of the voting power of the Company
entitled to vote generally in the election of directors; (c) provide that any
vacancy on the Board shall be filled by the majority of the directors then in
office, though less than a quorum; (d) require that special meetings of
shareholders can only be called by the Chairman of the Board, the Board of
Directors or upon the request of the holders of at least 35% of the shares
entitled to vote at the meeting; (e) require advance notice of stockholder
introduction of business at stockholder meetings; and (f) increase the
stockholder vote required to alter, amend or repeal the foregoing amendments or
related amendments to the Bylaws from a majority to 75% of the voting power of
the Company.
8
<PAGE>
As more fully discussed below, the Board of Directors believes the
Restated Articles will enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and in the policies formulated
by the Board, and, at the same time, effectively reduce the possibility that a
third party could effect a sudden or surprise change in majority control of the
Company's Board of Directors without the support of the incumbent Board.
However, adoption of the Restated Articles may have significant effects on the
ability of shareholders of the Company to change the composition of the
incumbent Board of Directors and to benefit from certain transactions which are
opposed by the incumbent Board.
Approval of the Restated Articles has been obtained in an effort to
secure fair treatment of the Company's shareholders in takeover situations and
to reduce operational disruptions from such events. The Restated Articles were
not proposed in direct response to any specific effort of which the Company is
aware to obtain control of the Company.
The Old Articles and the Bylaws do not now contain any provision
intended by the Company to have or, to the knowledge of the Board of Directors
having, an anti-takeover effect. However, under both the Old Articles and the
Restated Articles, the shareholders have authorized and, as of March 10, 1999
there were unissued 3,535,224 shares of Common Stock, and 1,660,000 shares of
unissued and undesignated Preferred Stock. Although the Board has no present
intent of doing so (except with respect to 3,190,000 shares of Common Stock
reserved for issuance upon exercise of outstanding warrants and options and upon
conversion of Series A and Series B Preferred Stock), shares of authorized and
unissued Common Stock and Preferred Stock and shares of Common Stock which may,
in the future, be held in the treasury could be issued in one or more
transactions or Preferred Stock could be issued with terms, provisions and
rights which would make more difficult and, therefore, less likely, to effect a
takeover of the Company. It should be noted that the voting rights to be
accorded to any series of Preferred Stock remain to be fixed by the Board of
Directors. Accordingly, if the Board so authorized, the holders of Preferred
Stock may be entitled to vote separately as a class in connection with approval
of certain extraordinary corporate transactions under circumstances where
Florida law does not require such class vote, or might be given a
disproportionately large number of votes.
ITEM (a) - AMENDMENT OF OLD ARTICLES TO PROVIDE FOR CLASSIFICATION OF
THE BOARD OF DIRECTORS. The Bylaws now provide that all directors are to be
elected to the Company's Board of Directors annually for a term of one year. The
Bylaws authorize the number of directors to be increased or decreased from time
to time, subject to the provisions of the Old Articles. New Article V of the
Restated Articles (as set forth in Attachment A) provides that the Board will be
divided into three classes of directors, each class to be as nearly equal in
number of directors as possible. The Company's existing directors have been
divided into three classes. Two directors will serve for a term expiring at the
1999 annual meeting of shareholders, two directors will serve for a term
expiring at the 2000 annual meeting of shareholders and two directors will serve
for a term expiring at the 2001 annual meeting of shareholders (in each case,
until their respective successors are duly elected and qualified). Upon the
effective date of the Restated Articles, the Bylaws will be amended to be
consistent with the Restated Articles relating to classification of the Board.
9
<PAGE>
The Restated Articles do not permit cumulative voting in the election
of directors. Accordingly, the holders of a majority of the voting power of the
outstanding shares of the Company's stock could now elect all of the directors
being elected at any annual or special meeting of the Company's shareholders.
However, the classification of the Board pursuant to the Restated Articles will
apply to every election of directors, whether or not a change in control of the
Company had occurred or the holders of a majority of the voting power of the
Company desired to change the Board. The classification of directors will have
the effect of making it more difficult to change the composition of the Board of
Directors. At least two shareholder meetings, instead of one, will be required
to effect a change in the control of the Board. The Board believes that the
longer time required to elect a majority of a classified Board will help to
assure the continuity and stability of the Company's management and policies in
the future, since a majority of the directors at any given time will have prior
experience as directors of the Company. It should also be noted that the
classification provision will apply to every election of directors, whether or
not a change in the Board would be beneficial to the Company and its
shareholders and whether or not a majority of the Company's shareholders
believes that such a change would be desirable.
ITEM (b) - REMOVAL OF DIRECTORS AND FILLING VACANCIES ON THE BOARD.
Article V, Section 3 of the Restated Articles provides, in part, that a
director, or the entire Board of Directors, may be removed, with or without
cause, by the affirmative vote of the holders of at least 75% of the voting
power of the shares entitled to vote generally in the election of directors.
Under the Florida Business Corporation Act, the shareholders may remove one or
more directors with or without cause unless the articles of incorporation
provide that directors may be removed only for cause. The Company's Old Articles
did not provide otherwise. A majority of the votes entitled to be cast on such
removal would constitute a quorum for action on that matter. If a quorum exists,
action on the removal of a director would be approved if the votes cast favoring
the action exceeds the votes cast opposing the action. The Florida Business
Corporation Act permits a company's articles of incorporation to require a
greater number of affirmative votes for the removal of a director.
Currently, Section 3.7 of the Company's Bylaws provides that a vacancy
on the Board may be filled by a vote of a majority of the remaining directors,
although less than a quorum or by the shareholders. Article V, Section 2
Restated of the Articles provides that a vacancy on the Board occurring during
the course of the year, including a vacancy created by an increase in the number
of directors, may be filled only by the remaining directors, and thus does not
permit shareholders to fill Board vacancies, including vacancies resulting from
removal of directors. In addition, Article V, Section 2 of the Restated Articles
provides that any new director elected to fill a vacancy on the Board will serve
for the remainder of the full term of the class in which the vacancy occurred
rather than (as is presently the case) until the next annual meeting of
shareholders. It also provides that no decrease in the number of directors shall
shorten the term of any incumbent. Upon the effective date of the Restated
Articles, the Bylaws will be amended to be consistent with the Restated Articles
relating to Board vacancies.
10
<PAGE>
The provisions of the Restated Articles relating to the removal of
directors and the filling of vacancies on the Board will promote continuity and
stability in the Company's management, business and policies by precluding a
third party from removing incumbent directors and simultaneously gaining control
of the Board by filling the vacancies with its own nominees unless such third
party controls 75% of the voting power of the Company's voting stock. Moreover,
the provision that newly created directorships are to be filled by the Board
would prevent a third party seeking majority representation on the Board of
Directors from obtaining such representation simply by enlarging the Board and
filling the new directorships created thereby with its own nominees.
ITEM (c) - NOMINATIONS OF DIRECTOR CANDIDATES. Article VIII of the
Restated Articles provides that nominations for the election of directors may be
made by the Board of Directors or by any stockholder entitled to vote in them
election of directors generally. However, shareholders intending to nominate
candidates for election must deliver written notice thereof to the Secretary of
the Company not later than 60 days in advance of meetings at which directors are
scheduled to be elected. The Restated Articles further provide that the notice
must set forth certain information concerning such nominee(s), including the
name and business and residence address of each nominee, the principal
occupation or employment of each such nominee, the number of shares of capital
stock of the Company beneficially owned by each nominee and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the nominee(s), and the consent of each nominee to
serve as a director of the Company if so elected. Under the Amendment, if the
Chairman of the meeting determines that a nomination of any person was not made
in compliance with the foregoing procedure, such nomination will be void.
The advance notice requirement, by regulating shareholder nominations
at any meeting of shareholders, will afford the Board of Directors the
opportunity to consider the qualifications of the proposed nominees and, to the
extent deemed necessary or desirable by the Board, inform shareholders about
such qualifications. Although the Amendment does not give the Board of Directors
any power to approve or disapprove of shareholder nominations for the election
of directors, it may have the effect of precluding a contest for the election of
directors if the procedures established by it are not followed and may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors, without regard to whether this might be
harmful or beneficial to the Company and its shareholders.
ITEM (d) - INTRODUCTION OF BUSINESS AT SHAREHOLDERS' MEETING. Article
VII of the Restated Articles provides that for business to be properly brought
before an annual meeting, such business must be specified in a notice of meeting
given by the Board or otherwise properly proposed by the Board, or be brought by
a shareholder by giving notice thereof not less than 60 days before the meeting.
That section also provides that a shareholder proposal must contain a brief
description of the business and reasons for conducting the business at an annual
meeting, the name and address of the shareholder making the proposal, the class
and number of shares beneficially owned by such shareholder and any material
interest of the shareholder in the business. The Amendment also provides that
the Chairman of the meeting may determine that a
11
<PAGE>
shareholder proposal was not properly brought and therefore will not be placed
before the meeting.
This advance notice requirement will enable the Board of Directors to
consider the merits of shareholder proposals and, if deemed necessary or
desirable by the Board, to inform shareholders as to its position on any such
proposals. Although the Amendment does not enable the Board to prevent the
introduction of business, it may have the effect of precluding the introduction
of a shareholder proposal if the procedures are not followed or it may
discourage a shareholder from introducing a proposal, without regard to whether
this might be harmful or beneficial to the Company and its shareholders.
ITEM (e) - CALLING OF SPECIAL SHAREHOLDER MEETINGS. Article VI of the
Restated Articles requires that shareholder action be taken at an annual meeting
of shareholders or at a special meeting of shareholders called by the Chairman
of the Board of Directors, pursuant to a resolution adopted by a majority of the
entire Board, or upon the application of shareholders owning at least
thirty-five percent (35%) of the stock entitled to vote at the special meeting.
Under current Bylaw Section 2.3, which will be amended upon the effective date
of the Restated Articles, the President or the Board of Directors can call a
special meeting of the shareholders and the Company is required to call such a
special meeting upon the application of shareholders owning one-tenth of the
shares entitled to vote.
After the effective date of the Restated Articles, shareholders owning
less than 35% of the vote could not force shareholder consideration of a
proposal over the opposition of the Board of Directors by calling a special
meeting of shareholders prior to such time as the Board believed such
consideration to be appropriate. Such a limitation will avoid the time and
expense of requiring the Company to hold special meetings of shareholders on the
application of a small minority of shareholders.
ITEM (f) - INCREASED SHAREHOLDER VOTE FOR ALTERATION, AMENDMENT OR
REPEAL OF PROPOSED AMENDMENTS. Under the Florida Business Corporation Act,
unless otherwise provided in the articles of incorporation, amendments to the
articles require approval by a majority of the votes entitled to be cast on the
amendment by any voting group with respect to which the amendment would create
dissenters' rights and, if the amendment would not create dissenters' rights, if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action. With respect to such super-majority provisions, the Florida
Business Corporation Act requires that any amendment to the articles of
incorporation that adds, changes, or deletes a greater voting requirement must
be adopted by the same vote and voting groups required to take action under the
voting requirements then in effect or proposed to be adopted, whichever is
greater. As permitted by the provisions of the Florida Business Corporation Act,
Articles V, VI, VII and VIII of the Restated Articles discussed above (see Items
(a) - (e)) would require the concurrence of the holders of at least 75% of the
voting power of the Company entitled to vote generally in the election of
directors for any addition, change or deletion thereof.
12
<PAGE>
The requirement of an increased shareholder vote is designed to prevent
a shareholder with a majority of the voting power of the Company from avoiding
the requirements of the proposed amendments by simply repealing them.
PURPOSE AND EFFECTS OF THE AMENDMENT ITEMS (a) THROUGH (f). The purpose
of the amendments to the Old Articles (Items (a) through (f)) and the related
matters discussed above is to discourage certain types of transactions,
described below, which involve an actual or threatened change of control of the
Company. They are designed to make it more difficult and time-consuming to
change majority control of the Board and thus to reduce the vulnerability of the
Company to an unsolicited proposal for the takeover of the Company or an
unsolicited proposal for the restructuring or sale of all or part of the
Company. As more fully described below, the Board believes that, as a general
rule, such unsolicited proposals are not in the best interests of the Company
and its shareholders.
There has been a trend toward the accumulation of substantial stock
positions in public companies by third parties as a prelude to proposing a
takeover or a restructuring or sale of all or part of the Company or other
similar extraordinary corporate action. Such actions are often undertaken by the
third party without advance notice to or consultation with management of the
Company. In many cases, the purchaser seeks representation on the Company's
board of directors in order to increase the likelihood that its proposal will be
implemented by the Company. If the Company resists the efforts of the purchaser
to obtain representation on the Company's board, the purchaser may commence a
proxy contest to have its nominees elected to the board in place of certain
directors or the entire board. In some cases, the purchaser may not truly be
interested in taking over the Company, but uses the threat of a proxy fight
and/or a bid to take over the Company as a means of forcing the Company to
repurchase its equity position at a substantial premium over market price.
The Board of Directors of the Company believes that the imminent threat
of removal of the Company's management in such situations would severely curtail
management's ability to negotiate effectively with such purchasers. Management
would be deprived of the time and information necessary to evaluate the takeover
proposal, to study alternative proposals and to help ensure that the best price
is obtained in any transaction involving the Company which may ultimately by
undertaken. If the real purpose of a takeover bid were to force the Company to
repurchase an accumulated stock interest at a premium price, management would
face the risk that if it did not repurchase the purchaser's stock interest, the
Company's business and management would be disrupted, perhaps irreparably.
Takeovers or changes in management of the Company which are proposed
and effected without prior consultation and negotiation with the Company's
management are not necessarily detrimental to the Company and its shareholders.
However, the Board believes that the benefits of seeking to protect its ability
to negotiate with the proponent of an unfriendly or unsolicited proposal to take
over or restructure the Company outweigh the disadvantages of discouraging such
proposals.
13
<PAGE>
The Restated Articles make more difficult or discourage a proxy contest
or the assumption of control by a holder of a substantial block of the Company's
stock or the removal of the incumbent Board and could thus increase the
likelihood that incumbent directors will retain their positions. However, the
Restated Articles help ensure that the Board, if confronted by a surprise
proposal from a third party which has acquired a block of the Company's stock,
will have sufficient time to review the proposal and alternatives thereto and,
if deemed appropriate, to seek a premium price for the shareholders.
The Restated Articles are intended to encourage persons seeking to
acquire control of the Company to initiate such an acquisition through arm's
length negotiations with the Company's management and Board of Directors. The
Restated Articles could also have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of the Company,
even though such an attempt might be beneficial to the Company and its
shareholders. In addition, since the Restated Articles are designed to
discourage accumulations of large blocks of the Company's stock by purchasers
whose objective is to have such stock repurchased by the Company at a premium,
the Restated Articles could tend to reduce temporary fluctuations in the market
price of the Company's stock which are caused by accumulations of large blocks
of the Company's stock. Accordingly, shareholders could be deprived of certain
opportunities to sell their stock at a temporarily higher market price.
ITEM (g) - ELIMINATION OF PROVISION NEGATING EXISTENCE OF PREEMPTIVE
RIGHTS. The Restated Articles eliminate Article IV of the Old Articles negating
the existence of preemptive rights because the Florida Business Corporation Act
already provides that unless otherwise provided in the Articles of
Incorporation, preemptive rights do not exist.
ITEM (h) - COMBINATION AND REWORDING OF ARTICLES V AND VI OF THE OLD
ARTICLES. The Restate Articles combine and reword Articles V and VI of the Old
Articles dealing with the Company's principal office and mailing address, to
better conform to the applicable provisions of ss.607.0202 of the Florida
Business Corporation Act.
ITEM (i) - ELIMINATION OF ARTICLE X OF THE OLD ARTICLES DEALING WITH
SUPER MAJORITY VOTE. The Restated Articles eliminate the provisions of Article X
of the Old Articles which reduced to a majority any requirement of the Florida
Business Corporation Act which requires a two-thirds vote of the Company's
voting shares. The Board of Directors does not believe that such a provision is
necessary or desirable.
ITEM (j) - DELETION OF ARTICLE XI OF THE OLD ARTICLES DEALING WITH THE
COMPANY'S INCORPORATOR. The Restated Articles delete Article XI of the Old
Articles, which identified the Company's incorporator and was of historical
interest only.
CLASSIFICATION OF DIRECTORS
After the effective date of the Restated Articles, the term of one of
the present directors, Martin A. Traber, will expire at the 1999 annual meeting
of shareholders, the end of the one-year
14
<PAGE>
term to which he was elected at the 1998 annual meeting; two present directors,
Paul Santostasi and Kotha S. Sekharam, will serve for a term expiring at the
2000 annual meeting of shareholders; and the two remaining directors William L.
LaGamba and Jugal K. Taneja will serve for a term expiring at the 2001 annual
meeting of shareholders (or, in all cases, until their respective successors are
elected and qualified). In the event of the death or disqualification or
inability to serve of any of the directors listed above, the vacancy so arising
will be filled by the Board of Directors. It is expected that the director whose
term will expire at the 1999 annual meeting will be nominated for election to a
three year term at that time.
APPROVAL OF THE 1999 STOCK OPTION PLAN
GENERAL. The Plan provides for the grant of options in the form of
incentive stock options ("incentive stock options") meeting the applicable
statutory requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), and options not meeting such requirements ("nonqualified stock
options"). Each option granted under the Plan will be evidenced by a written
stock option grant and agreement. The Plan is attached to this Proxy Statement
as Attachment B. The summary of the Plan set forth herein is qualified in its
entirety by reference to the Plan. The purposes of shareholder approval of the
Plan were: (i) to permit the options to purchase 1,500,000 shares of Common
Stock under the Plan to qualify for incentive stock option treatment pursuant to
Section 422 of the Code; and (ii) to satisfy the applicable requirements of The
Nasdaq Stock Market, in the event that the Company's Common Stock is, in the
future, listed for trading on the Nasdaq Market.
SHARES SUBJECT TO OPTIONS. The Plan permits options to be granted to
purchase up to 1,500,000 shares of Common Stock in the aggregate. As of the date
hereof, no options have been granted under the Plan.
A this time, it is not known which eligible directors, officers,
employees and consultants, if any, will receive grants under the Plan or the
number of shares which will be covered by any such grants. Such determinations
will be made from time to time by the Administrator (as hereinafter defied). To
the extent that options granted under the Plan expire or terminate without
having been exercised in full, the Common Stock subject thereto will become
available for further options under the Plan. Provision is made under the Plan
for appropriate adjustment in the number of shares of Common Stock covered by
each option granted thereunder and the related option price, in the event of any
change in the Common Stock by reason of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation,
issuance of rights, or any other change in the capital structure of the Company.
ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or a committee (the "Committee") appointed by the Board
(the "Administrator") which must be constituted to comply with applicable laws.
Subject to the provisions of the Plan and, in the case of a Committee,
the specific duties delegated by the Board to the Committee, and subject to the
approval of any relevant authorities, the Administrator has the authority in its
discretion to determine the fair market value of the
15
<PAGE>
Company's Common Stock, to select the persons to whom options may from time to
time be granted under the Plan, to determine the number of shares to be covered
by each option, to approve forms of option grants for use under the Plan, and to
determine the terms and conditions of options granted under the Plan. Such terms
and conditions include, but are not limited to, the exercise price, the time or
times when options may be exercised (which may be based on performance
criteria), any vesting, acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any option or the Common Stock relating
thereto, based in each case on such factors as the Administrator, in its
discretion, will determine. The Administrator also has the authority to
determine whether and under what circumstances an option may be settled in cash
instead of Common Stock, to reduce the exercise price of any option to the then
fair market value if the fair market value of the Common Stock covered by the
option has declined since the date the option was granted, to initiate an option
exchange program, to prescribe, amend and rescind rules and regulations relating
to the Plan, to allow optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the shares to be issued upon exercise
of an option that number of shares having a fair market value equal to the
amount required to be withheld and to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan. All decisions, determinations and
interpretations of the Administrator are final and binding on all optionees.
ELIGIBILITY. Directors and employees of the Company, including officers
and directors employed by any parent or subsidiary of the Company and persons
who are engaged by the Company or any parent or subsidiary of the Company to
render consulting or advisory services are eligible to receive awards under the
Plan. Such persons are referred to in the Plan as "Service Providers."
Non-statutory stock options may be granted to Service Providers. Incentive stock
options may only be granted to employees and are subject to certain limitations
set forth in the Plan.
TERM OF PLAN. The Plan became effective upon its adoption by the Board
and continues in effect for a term of 10 years unless sooner terminated under
the provisions of the Plan.
TERM OF OPTIONS. The term of each option granted under the Plan must be
stated in the option grant. However, the term can be no more than 10 years after
the date of grant, subject to certain limitations in the case of incentive stock
options.
OPTION EXERCISE PRICE AND CONSIDERATION. The per share exercise price
for the shares to be issued upon exercise of an option will be such price as is
determined by the Administrator, but in the case of an incentive stock option
granted to an employee who at the time of grant owns stock representing more
than 10% of the voting power of all classes of stock of the Company or any
parent or subsidiary, the exercise price must be no less than 110% of the fair
market value per share on the date of grant. Incentive stock options granted to
other employees must be at a purchase price not less than 100% of the fair
market value per share on the date of grant.
In the case of a non-statutory stock option granted to a person who, at
the time of grant owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any parent or subsidiary, the exercise
price must be no less than 110% of the fair
16
<PAGE>
market value per share on the date of grant. Non-statutory stock options granted
to other persons must be at a per share exercise price no less than 100% of the
fair market value on the date of grant. Notwithstanding the foregoing, options
may be granted with a per share exercise price other than as described above
pursuant to a merger or other corporate transaction.
The consideration to be paid for the shares to be issued upon exercise
of an option, including the method of payment, is determined by the
Administrator. Such consideration may consist of cash, check, promissory note,
other shares of Company Common Stock, consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or any combination of the foregoing.
EXERCISE OF OPTIONS. Options granted under the Plan are exercisable
according to the terms of the Plan at such times and under such conditions as
determined by the Administrator and set forth in the option grant. Except in the
case of options granted to Company officers, directors and consultants, options
must become exercisable at a rate of not less than 20% per year over five years
after the date of grant. Unless the Administrator determines otherwise, vesting
of options is tolled during any unpaid leave of absence.
If an optionee ceases to be a service provider under the Plan, such
optionee may exercise his or her option within such period of time as is
specified in the option grant (at least 30 days) to the extent that the option
is vested on the date of termination, but in no event later than the expiration
of the term of the option as set forth in the option grant. In the absence of a
specified time in the option grant, the option remains exercisable for three
months following the optionee's termination. If, on the date of termination, the
optionee is not vested as to his or her entire option, the shares covered by the
unvested portion of the option revert to the Plan. If, after termination, the
optionee does not exercise his or her option within the time specified by the
administrator, the option terminates and the shares covered by the option revert
to the Plan.
If an optionee ceases to be a service provider as a result of the
optionee's disability, as defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended, the optionee may exercise his or her option within
such period of time as is specified in the option grant (at least six months) to
the extent the option is vested on the date of termination, but in no event
later than the expiration of the term of the option as set forth in the option
grant. In the absence of a specified time in the option grant, the option
remains exercisable for 12 months following the optionee's termination. If on
the date of termination, the optionee is not vested as to his or her entire
option, the shares covered by the unvested portion of the option revert to the
Plan. If after termination, the optionee does not exercise his or her option
within the time specified in the Plan, the option terminates and the shares
covered by the option revert to the Plan.
If an optionee dies while a service provider, the option may be
exercised within such period of time as is specified in the option grant (at
least six months) to the extent that the option is vested on the date of death
(but in no event later than the expiration of the term of the option as set
forth in the option grant) by the optionee's estate or by a person who acquires
the right to exercise the option by bequest or inheritance. In the absence of a
specified time in the option grant, the option remains exercisable for 12 months
following the optionee's termination. If, at
17
<PAGE>
the time of death, the optionee is not vested as to the entire option, the
shares covered by the unvested portion of the option immediately revert to the
Plan. If the option is not so exercised within the time specified in the Plan,
the option terminates and the shares covered by the option revert to the Plan.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time amend,
alter, suspend or terminate the Plan, but no such action will impair the rights
of any optionee, unless mutually agreed otherwise between the optionee and the
Administrator in writing.
FEDERAL INCOME TAX CONSIDERATIONS. Under current federal tax law, the
holder of an option that qualifies as an incentive stock option under Section
422 of the Code generally does not recognize income for federal income tax
purposes at the time of the grant or exercise of an incentive stock option (but
the spread between the exercise price and the fair market value of the
underlying shares on the date of exercise generally will constitute a tax
preference item for purposes of the alternative minimum tax). The optionee
generally will be entitled to long-term capital gain treatment upon the sale of
shares acquired pursuant to the exercise of an incentive stock option if the
shares have been held for more than two years from the date of grant of the
option and for more than eighteen months after exercise, and the Company will
not be entitled to any deduction for federal income tax purposes. If the
optionee disposes of the stock before the expiration of either of these holding
periods (a :disqualifying disposition"), the gain realized on disposition will
be compensation income to the optionee to the extent the fair market value of
the underlying stock on the date of exercise (or, if less, the amount realized
on disposition of the underlying stock) exceeds the applicable exercise price
and a corresponding deduction will be allowed to the Company.
Under current federal tax law, an optionee does not recognize income
for federal income tax purposes upon the grant of a nonqualified stock option
but must recognize ordinary income upon exercise to the extent of the excess of
the fair market value of the underlying shares on the date of exercise over the
exercise price of the option. The Company generally will be entitled to a
deduction in the same amount and at the same time as ordinary income is
recognized by the optionee. A subsequent disposition of the shares acquired
pursuant to the exercise of a nonqualified option typically will give rise to
capital gain or loss to the extent the amount realized for the sale differs from
the fair market value of the shares on the date of exercise. This capital gain
or loss will be long-term gain or loss if the shares sold had been held for more
than eighteen months after the date of exercise.
18
<PAGE>
ATTACHMENT "A" TO INFORMATION STATEMENT
NOTICE OF SHAREHOLDER WRITTEN CONSENT TO ACTION
OF
THE SHAREHOLDERS
OF
DYNAMIC HEALTH PRODUCTS, INC.
To: Shareholders of Dynamic Health Products, Inc.
The attached copy of the Shareholder Written Consent to Action
("Consent") was signed by persons holding at least a majority of the issued and
outstanding shares of voting stock of Dynamic Health Products, Inc. (the
"Corporation"). The Consent approved (i) Articles of Amendment to the
Corporation's Articles of Incorporation, (ii) the classification of the
Corporation's Board of Directors, and (iii) the Corporation's 1999 Stock Option
Plan.
The Consent is subject to and the actions taken pursuant thereto are
not effective until twenty days after the Corporation has filed with the
Securities and Exchange Commission an Information Statement describing the
actions taken in the Consent.
Dated this 11th day of March, 1999.
DYNAMIC HEALTH PRODUCTS, INC.
By:/s/ JUGAL K. TANEJA
-------------------------------------
Jugal K. Taneja, Chairman of the Board
A-1
<PAGE>
ATTACHMENT TO NOTICE OF SHAREHOLDER WRITTEN CONSENT TO ACTION
SHAREHOLDER WRITTEN CONSENT TO ACTION
The undersigned, as the holders of at least a majority of the issued
and outstanding shares of Common Stock and Series B 6% Cumulative Convertible
Preferred Stock, of Dynamic Health Products, Inc., a Florida corporation (the
"Company") voting as one class, agree, adopt, consent to, and take the following
actions under Section 607.0704 of the Florida Business Corporation Act (the
"Act"):
1. The undersigned waive all formal requirements, including the
necessity of holding a formal or informal meeting and any requirement that
notice of such meeting be given.
2. The undersigned take the following corporate actions:
WHEREAS, it has been determined that it is in the
best interests of the Company for it to (i) amend and restate its
Articles of Incorporation in the form attached hereto as Exhibit "A"
(the "Articles of Restatement") to provide for a classified Board of
Directors and other related matters, and (ii) approve the Company's
1999 Stock Option Plan, the form of which is attached hereto as Exhibit
"B" (the "Plan");
WHEREAS, the Company must, before the Articles of
Restatement are filed with the Florida Secretary of State, comply with
the requirements of Section 14 of the Securities and Exchange Act of
1934 (the "Act") by filing with the Securities and Exchange Commission
and mailing to shareholders an Information Statement.
NOW, THEREFORE:
BE IT RESOLVED, that the Articles of Restatement and
the Plan are approved.
BE IT FURTHER RESOLVED, that after the effective date
of the Articles of Restatement, the term of Martin A. Traber will
expire at the 1999 annual meeting of shareholders, the terms of Messrs.
Santostasi and LaGamba will expire at the 2000 annual meeting of
shareholders, and the terms of Messrs. Sekharam and Taneja will expire
at the 2001 annual meeting of shareholders.
BE IT FURTHER RESOLVED, that the Amendment shall not
be filed with the Florida Secretary of State until the Company has
filed with the Securities and Exchange Commission and mailed to
shareholders an Information.
A-2
<PAGE>
The undersigned execute the foregoing Shareholder Action by Written
Consent for the purpose of giving their consent as of the 10th day of March,
1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OWNED OF RECORD
---- ----------------
<S> <C> <C>
/S/ MANJU TANEJA ................................... 1,013,185(1)
- -------------------------
Manju Taneja
/S/ JUGAL K. TANEJA ................................... 19,666(1)
- -------------------------
Jugal K. Taneja
/S/ MIHIR TANEJA ................................... 369,999
- -------------------------
Mihir Taneja
/S/ MANDEEP TANEJA ................................... 369,999
- -------------------------
Mandeep Taneja
/S/ WILLIAM L. LAGAMBA ............................. 196,000
- -------------------------------
William L. LaGamba
/S/ WILLIAM L. LAGAMBA, AS CUSTODIAN........................ 126,000
- ------------------------------------
William L. LaGamba, as custodian
Carnegie Capital, Ltd.
By:/S/ JUGAL K. TANEJA .................. 70,076
---------------------------------------
Jugal K. Taneja, general partner
First Delhi Partnership, Ltd.
By:/S/ JUGAL K. TANEJA .................. 70,000
---------------------------------------
Jugal K. Taneja, general partner
/S/ KOTHA S. SEKHARAM ............................... 105,616(1) % OF VOTING SECURITIES
- ----------------------------- ------- ----------------------
Kotha S. Sekharam
Total 2,340,541 60.86%
(1) Common Stock.
Total issued and outstanding shares of common stock as of March 10, 1999: 3,535,224
Total issued and outstanding shares of 6% cumulative convertible preferred
stock as of March 10, 1999: 310,000
---------
Total voting securities: 3,845,224
=========
</TABLE>
A-3
<PAGE>
EXHIBIT "A" TO SHAREHOLDER
WRITTEN CONSENT TO ACTION
ARTICLES OF RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
DYNAMIC HEALTH PRODUCTS, INC.
Pursuant to Section 607.5007 of the Florida Business Corporation Act,
this Corporation adopts the following Articles of Restatement of its Articles of
Incorporation as follows:
1. The name of the corporation before and after restatement is Dynamic
Health Products, Inc.
2. The text of the restated Articles of Incorporation is attached
hereto.
3. The restated Articles of Incorporation contain amendments to the
Corporation's Articles of Incorporation requiring shareholder approval. These
Articles of Restatement were duly adopted pursuant to Sections 607.1003 and
607.1007 of the Florida Business Corporation Act by the Board of Directors of
the Corporation on March 10, 1999 and by the Shareholder Written Consent to
Action dated as of March 10, 1999. The number of votes cast in favor of these
Articles of Restatement by the holders of the shares of Common Stock and Series
A Convertible Preferred Stock, voting together as a class, was sufficient for
the approval by such holders.
4. The date of the adoption of the Restated Articles of Incorporation
was March 10, 1999.
5. These Articles of Restatement shall be effective upon filing.
Date: _____________, 1999.
/S/_______________________________
Jugal K. Taneja, Chairman of the Board
A-4
<PAGE>
ARTICLES OF INCORPORATION
OF
DYNAMIC HEALTH PRODUCTS, INC.
ARTICLE I
NAME
The name of the Corporation is Dynamic Health Products, Inc.
ARTICLE II
PRINCIPAL OFFICE
The Corporation shall maintain its principal office at 6950 Bryan Dairy
Road, Largo, FL 33777, or at such other place as the Board of Directors may
designate from time to time.
ARTICLE III
AUTHORIZED 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 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
A-5
<PAGE>
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.
ESTABLISHMENT OF SERIES A CONVERTIBLE PREFERRED STOCK.
Section 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 Dynamic Health Products, Inc., a
Florida corporation.
A-6
<PAGE>
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.
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" 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.
Section 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 Amended and Restated 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 per share
which shall have the 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.
A-7
<PAGE>
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.
Section 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.
Section 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.
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.
A-8
<PAGE>
Section 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
Dynamic 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").
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:
___________.
A-9
<PAGE>
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 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 B Preferred Stock a certificate signed by an authorized officer of the
Company, setting forth in reasonable detail the
A-10
<PAGE>
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
Applicable Trading 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 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.
A-11
<PAGE>
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.
Section 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.
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.
ESTABLISHMENT OF SERIES B 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
Section 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
1.1 "ACCRUED DIVIDENDS" shall mean, with respect to any share
of Preferred Stock, as of any date, the accrued and unpaid dividends on such
share from and including the most recent Dividend Payment Date (or the Issue
Date, if such date is prior to the first Dividend Payment Date) to but not
including such date.
A-12
<PAGE>
1.2 "AVERAGE CLOSING PRICE" shall mean the average closing
price of the Common Stock on the Applicable Trading Market.
1.3 "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
1.4 "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.
1.5 "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.
1.6 "COMPANY" shall mean Dynamic Health Products, Inc., a
Florida corporation.
1.7 "CONVERSION DATE" shall mean the date upon which the
Company receives the Notice of Conversion provided for in Section 5.2.
1.8 "CONVERSION RATE" shall have the meaning provided for in
Section 5.1.
1.9 "DIVIDEND PAYMENT DATE" shall mean August 15 of each year,
commencing August 15, 1999.
1.10 "DIVIDEND RECORD DATE" shall mean, with respect to each
Dividend Payment Date, a date not more than 60 days nor less than 10 days
preceding a Dividend Payment Date, as shall be fixed by the Board of Directors.
1.11 "ISSUE DATE" shall mean the date a share of Preferred
Stock is issued by the Company.
1.12 "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.
1.13 "LIQUIDATION PREFERENCE" shall mean, with respect to each
share of Series B Preferred Stock, $2.50.
A-13
<PAGE>
1.14 "MARKET VALUE" shall mean the Average Closing Price for a
five consecutive trading day period.
1.15 "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 B
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 B
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.
1.16 "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.
1.17 "SERIES B PREFERRED STOCK" shall mean the Series B 6%
Cumulative Convertible Preferred Stock designated and created hereby.
Section 2. CREATION AND DESIGNATION OF SERIES B 6% CUMULATIVE
CONVERTIBLE PREFERRED STOCK.
2.1 Pursuant to the authority conferred upon the Board of
Directors by Article III of the Amended and Restated Articles of Incorporation
of the Company, as amended, there is hereby created and the Company is hereby
authorized to issue 800,000 shares of a second series of preferred stock,
designated "Series B 6% Cumulative Convertible Preferred Stock," par value $.01
per share, which shall have the 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 B Preferred Stock shall have no
voting rights except as required by law.
2.3 Each share of Series B Preferred Stock shall have the same
rights and preferences as and be identical in all respects with each other share
of Series B Preferred Stock.
2.4 The shares of Series B Preferred Stock shall share ratably
with the shares of Series A Convertible Preferred Stock of the Company ("Series
A Preferred Stock") in amounts payable upon liquidation of the Company as
provided for in Section 4 hereof.
2.5 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 B 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 B Preferred Stock.
A-14
<PAGE>
Section 3. DIVIDENDS.
3.1 The holders of shares of the outstanding Preferred Stock
on the Dividend Record date shall be entitled, out of funds legally available
therefor, to receive dividends on each outstanding share of Preferred Stock,
payable annually, in arrears, at the annual rate of 6% of the Liquidation
Preference (the "Dividend Rate"). Such dividends shall be cumulative from the
Issue Date and shall accrue on a day-to-day basis, whether or not earned or
declared, from and after the Issue Date. Dividends payable for any partial
dividend period shall be computed on the basis of actual days elapsed over a
360-day year consisting of twelve 30-day months.
3.2 Dividends may, at the option of the Company, be paid on
any Dividend Payment Date either in cash, by issuing fully paid and
nonassessable shares of Common Stock or a combination thereof. If the Company
elects to pay dividends in shares of Common Stock, the number of shares of
Common Stock to be distributed will be calculated by dividing such payment by
the Market Value ending on the Dividend Payment Date. If the shares of Common
Stock issued hereunder are not subject to an effective registration statement
under the Securities Act of 1933, such shares shall be "restricted securities"
and shall bear a restrictive legend prohibiting transfer without an opinion of
counsel that registration is not required.
3.3 No dividends or other distributions (other than a dividend
or distribution in Junior Stock, other than the Common Stock) may be declared,
made or paid or set apart for payment on the Common Stock, Junior Stock or Pari
Passu Stock, unless full cumulative dividends shall have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on all outstanding shares of Preferred
Stock and such other Pari Passu Stock. Notwithstanding the foregoing, if full
dividends have not been paid on the Preferred Stock or on any Pari Passu Stock,
dividends may be declared and paid on the Preferred Stock and such Pari Passu
Stock so long as the dividends are declared and paid pro rata so that the
amounts of dividends declared per share of the Preferred Stock and such Pari
Passu Stock will in all cases bear to each other the same ratio that Accrued
Dividends on the shares of Preferred Stock and such Pari Passu Stock bear to
each other.
3.4 Holders of shares of Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on the Preferred Stock. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the Preferred Stock which may be in arrears.
3.5 Accrued and unpaid dividends, with respect to converted
shares shall be prorated based on a 360 day year and paid upon conversion.
3.6 To the extent that the amount of any dividend payable to a
holder of Preferred Stock (in respect of all shares held by such holder) is
payable in shares of Common Stock and does not equal a whole number of shares of
Common Stock, such fractional amount shall be paid in cash to such holder of
Preferred Stock.
A-15
<PAGE>
Section 4. LIQUIDATION RIGHTS.
4.1 Subject to the provisions of Section 2.4 hereof, in the
event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, the holders of the shares of Series B Preferred Stock
shall be entitled to receive out of the assets of the Company available for
distribution to stockholders the Liquidation Preference plus Accrued Dividends
thereon 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 and Series B Preferred Stock of full preferential amounts
provided for in this Section 4, the holders of Series A Preferred Stock and
Series B Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Company.
4.4 In the event the assets of the Company available for
distribution to the holders of shares of Series A Preferred Stock and Series B
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 and
Series B Preferred Stock, ratably, in proportion to the full distributable
amounts for which holders of all Series A Preferred Stock and Series B Preferred
Stock and Pari Passu Stock are entitled upon such liquidation, dissolution or
winding up.
Section 5. CONVERSION.
5.1 The holder of Series B 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 B Preferred Stock. In such case, each share of Series B Preferred Stock
shall be converted into one (1) (the "Conversion Rate") fully paid and
nonassessable shares of Common Stock. No payment or adjustment shall be made in
respect of dividends on the Common Stock or the Series B Preferred Stock upon
conversion. 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 B
Preferred Stock shall be deemed, on the first day after such five-day period, to
have automatically given notice of the conversion of all of such holder's shares
of Series B Preferred Stock and in that event all holders shall follow the
procedure set forth in Section 5.2.
A-16
<PAGE>
5.2 The conversion right of a holder of Series B 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 B Preferred Stock represented by such certificate. The
Notice of Conversion shall read substantially as follows:
The undersigned holder (the "Holder") is surrendering to
Dynamic Health Products, Inc., a Florida corporation (the
"Company"), one or more certificates representing shares of
Series B 6% Cumulative Convertible Preferred Stock of the
Company (the "Series B Preferred Stock") in connection with
the Conversion of all or a portion of the Series B 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 B 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").
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 B 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.
Number of shares of Series B 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 B
Preferred Stock shall be deemed to be the holder of record of Common Stock
issuable upon conversion of such holder's Series B 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
A-17
<PAGE>
shares of Series B Preferred Stock so converted, including the rights, if any,
to receive dividends and 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 B 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 Company) so that the holder of any share of Series
B 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 B 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 B 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 B Preferred Stock. If more than one share of Series B 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 B
Preferred Stock so surrendered. If the conversion of any share or shares of
Series B 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
Applicable Trading 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.
A-18
<PAGE>
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 B
Preferred Stock then outstanding shall, without the consent of any holder of
Series B 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 B Preferred Stock could
have been converted immediately prior to such Transaction after giving effect to
any adjustment event. The provisions of this Section 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 B 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 B
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 B
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 B 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 B
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 B Preferred Stock.
5.10 The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series B Preferred Stock shall be made without
charge to the converting holder of shares of Series B 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 B 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 B 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.
A-19
<PAGE>
Section 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.
6.2 Shares of Series B 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 B Preferred Stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of Series B 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 B
Preferred Stock of the Corporation, except that any issuance or reissuance of
shares of Series B 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.
ARTICLE IV
REGISTERED AGENT AND OFFICE
The registered agent of the Corporation is CT Corporation System and
its address is 1200 S. Pine Island Road, Plantation, Florida 33324.
ARTICLE V
BOARD OF DIRECTORS
Section 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. Except as otherwise
fixed by or pursuant to the provisions of Article III hereof relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of the Directors of the
Company shall be fixed from time to time by or pursuant to the Bylaws of the
Company. The Directors, other than those who may be elected by the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as shall be provided in the manner specified in the Bylaws of the
Company, one class to be originally classified for a term
A-20
<PAGE>
expiring at the annual meeting of shareholders to be held in 1999, another class
to be originally classified for a term expiring at the annual meeting of
shareholders to be held in 2000, and another class to be originally classified
for a term expiring at the annual meeting of shareholders to be held in 2001,
with each director to hold office until his or her successor shall have been
duly elected and qualified. At each meeting of the shareholders of the Company,
the successors of the class of Directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the year of their election.
Section 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as
otherwise provided for or fixed by or pursuant to the provisions of Article III
hereof relating to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the affirmative
vote of a majority of the remaining Directors then in office, even though less
than a quorum of the Board of Directors. Any Director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duty elected and
qualified. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
Section 3. REMOVAL. Subject to the rights of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect Directors under specified circumstances, any Director may
be removed from office, with or without cause, only by the affirmative vote of
the holders of 75% of the voting power of all shares of the Company entitled to
vote generally in the election of Directors, voting together as a single class.
Section 4. AMENDMENT, REPEAL, OR ALTERATION. Notwithstanding anything
contained in these Amended and restated Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 75% of the voting
power of all shares of the Company entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article V.
ARTICLE VI
Section 1. CALLING OF SPECIAL SHAREHOLDERS MEETINGS. Subject to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, special meetings of
shareholders of the Company may be called only by the Chairman of the Board, by
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors or by written requests signed, dated and delivered to
the Secretary of the Company by the holders of record of at least 35% of all the
votes entitled to be cast on the issues proposed to be considered at the meeting
and describing the purposes for which it is to be held.
Section 2. AMENDMENT, REPEAL, OR ALTERATION. Notwithstanding anything
contained in these Articles of Incorporation to the contrary, the affirmative
vote of the holders of at least 75% of the voting power of all shares of the
Company entitled to vote generally in the election of
A-21
<PAGE>
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article VI.
ARTICLE VII
Section 1. NOTICE OF SHAREHOLDER BUSINESS. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (iii) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Company. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company, not less than 60 days prior to the meeting. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
Company's books, of the shareholder proposing such business, (c) the class and
number of shares of the Company which are beneficially owned by the shareholder,
and (d) any material interest of the shareholder in such business.
Notwithstanding anything in this Articles to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Article VII. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this Article
VII and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
Section 2. AMENDMENT, REPEAL, OR ALTERATION. Notwithstanding anything
contained in these Amended and Restated Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 75% of the voting
power of all shares of the Company entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article VII.
ARTICLE VIII
Section 1. ELIGIBILITY TO MAKE NOMINATIONS. Nominations of candidates
for election as directors of the Company at any meeting of shareholders called
for election of directors, in whole or in part (an "Election Meeting"), may be
made by the Board of Directors ("Board") or by any shareholder entitled to vote
at such Election Meeting.
Section 2. PROCEDURE FOR NOMINATIONS BY THE BOARD OF DIRECTORS.
Nominations made by the Board shall be made as provided in the Bylaws.
Section 3. PROCEDURE FOR NOMINATIONS BY SHAREHOLDERS. Not less than 60
days prior to the date of the Election Meeting any shareholder who intends to
make a nomination at
A-22
<PAGE>
the Election Meeting shall deliver a notice to the Secretary of the Company
setting forth (i) the name, age, business address and residence address of each
nominee proposed in such notice, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of capital stock of the Company
which are beneficially owned by each such nominee and (iv) such other
information concerning each such nominee as would be required, under the rules
of the SEC, in a proxy statement soliciting proxies for the election of such
nominees. Such notice shall include a signed consent to serve as a director of
the Company, if elected, of each such nominee.
Section 4. SUBSTITUTION OF NOMINEES. In the event that a person is
validly designated as a nominee in accordance with paragraph 2 or paragraph 3
hereof and shall thereafter become unable or unwilling to stand for election to
the Board, the Board or the shareholder who proposed such nominee, as the case
maybe, may designate a substitute nominee.
Section 5. DETERMINATION OF COMPLIANCE WITH PROCEDURES. If the Chairman
of the Election Meeting determines that a nomination was not made in accordance
with the foregoing procedures, such nomination shall be void.
Section 6. AMENDMENT, REPEAL, OR ALTERATION. Notwithstanding anything
contained in these Amended and Restated Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 75% of the voting
power of all shares of the Company entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article VIII, unless such alteration, amendment, or repeal is
unanimously recommended by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify such persons as it is permitted to
indemnify by Section 607.0850 of the Florida Business Corporation Act, and the
heirs, executors, and administrators of such persons, to the full extent
permitted by, but in accordance with the provisions of that Section. Reference
to Section 607.0850 in the previous sentence shall constitute a reference to any
legislation hereafter enacted by the Florida Legislature on the same general
subject as present Section 607.0850, whether by amendment of that Section or by
substitution of differently numbered material for it. Notwithstanding the
foregoing, except as otherwise required by Section 607.0850, a person who would
be entitled to indemnity only as an agent (a director, officer, employee or
trustee not to be considered an "agent" for purposes of this sentence) of the
corporation or only as an agent of another entity, shall not be entitled to
indemnity.
A-23
<PAGE>
EXHIBIT "B" TO SHAREHOLDER WRITTEN CONSENT TO ACTION
DYNAMIC HEALTH PRODUCTS, INC.
1999 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan (the
"Plan") are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees,
Directors and Consultants and to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Non-statutory
Stock Options, as determined by the Administrator at the time of grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall
be administering the Plan in accordance with Section 4 hereof.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options are granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board
in accordance with Section 4 hereof.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Dynamic Health Products, Inc., a Florida
corporation.
(h) "CONSULTANT" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such entity.
(i) "DIRECTOR" means a member of the Board of Directors of the Company.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider (defined below) shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Non statutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
B-1
<PAGE>
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Values
hall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "NON-STATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION GRANT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Grant is subject to the terms and conditions of the Plan.
(s) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "OPTIONED STOCK" means the Common Stock subject to an Option.
(u) "OPTIONEE" means the holder of an outstanding Option granted under
the Plan.
(v) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this Dynamic Health Products, Inc. 1999 Stock Option
Plan.
(x) "SECTION 16(B)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(y) "SERVICE PROVIDER" means an Employee, Director or Consultant.
B-2
<PAGE>
(z) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(aa) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 1,500,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock. If an Option expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of an Option, shall not be returned to the Plan and shall not
become available for future distribution under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion: (i) to determine the
Fair Market Value; (ii) to select the Service Providers to whom Options may from
time to time be granted hereunder; (iii) to determine the number of Shares to be
covered by each such award granted hereunder; (iv) to approve forms of Option
Grants for use under the Plan; (v) to determine the terms and conditions of any
Option granted hereunder. Such terms and conditions include, but are not limited
to, the exercise price, the time or times when Options may be exercised (which
may be based on performance criteria), any vesting, acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine; (vi) to determine
whether and under what circumstances an Option may be settled in cash under
subsection 9(e) instead of Common Stock; (vii) to reduce the exercise price of
any Option to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option has declined since the date the Option was
granted; (viii) to initiate an Option Exchange Program; (ix) to prescribe, amend
and rescind rules and regulations relating to the Plan; (x) to allow Optionees
to satisfy withholding tax obligations by electing to have the Company withhold
from the Shares to be issued upon exercise of an Option that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and (xi)
to construe and interpret the terms of the Plan and awards granted pursuant to
the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. ELIGIBILITY.
(a) Non-statutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.
B-3
<PAGE>
(b) Each Option shall be designated in the Option Grant as either an
Incentive Stock Option or a Non-statutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Non-statutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate such relationship at any time, with or
without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be stated in the Option
Grant; provided, however, that the term shall be no more than ten (10) years
after the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years after the date of grant or such shorter term as may be
provided in the Option Grant.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than 10% of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Non-statutory Stock Option
(A) granted to a Service Provider who, at the time of grant of
such Option, owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any other Service Provider, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
B-4
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (l) cash,(2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTIONS.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Grant. Except in the case of Options granted to Officers, Directors and
Consultants, Options shall become exercisable at a rate of no less than 20% per
year over five (5) years after the date the Options are granted. Unless the
Administrator provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share. An Option shall be deemed exercised when the Company
receives:
(i) written or electronic notice of exercise (in accordance with
the Option Grant) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option
is exercised. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option Grant and
the Plan. Shares issued upon exercise of an Option shall be issued in the name
of the Optionee or, if requested by the Optionee, in the name of the Optionee
and his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a shareholder shall exist with respect to the Shares, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 11 of the Plan. Exercise of an
Option in any manner shall result in a decrease in the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Grant (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Grant). In the absence of a specified time in the
Option Grant, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
B-5
<PAGE>
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Grant (of
at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Grant). In the absence of a specified time in
the Option Grant, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Grant (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Grant) by the Optionee's estate
or by a person who acquires the right to exercise the Option by bequest or
inheritance. In the absence of a specified time in the Option Grant, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS. The Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to
B-6
<PAGE>
the effective date of such proposed transaction. The Administrator in its
discretion may provide for an Optionee to have the right to exercise his or her
Option until fifteen (15) days prior to such transaction as to all of the
Optioned Stock covered thereby, including Shares as to which the Option would
not otherwise be exercisable. In addition, the Administrator may provide that
any Company repurchase option applicable to any Shares purchased upon exercise
of an Option shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option will
terminate immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with
or into another corporation, or the sale of all or substantially all of the
assets of the Company, each outstanding Option shall be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully exercisable for a period of fifteen (15) days after the
date of such notice, and the Option shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option or right confers
the right to purchase or receive, for each Share of Optioned Stock subject to
the Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
B-7
<PAGE>
14. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
15. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
18. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options outstanding, and, in the case of an individual who
acquires Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. The Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.
Adopted by the Board of Directors on ______________, 1999.
B-8
<PAGE>
DYNAMIC HEALTH PRODUCTS, INC.
1999 STOCK OPTION PLAN STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this "Option Grant".
I. NOTICE OF STOCK OPTION GRANT. The undersigned Optionee has been granted
an Option to purchase Common Stock of the Company, subject to the terms and
conditions of the Plan and this Option Grant, as follows:
Optionee ____________________
Date of Grant _______________
Exercise Price per Share $______________
Total Number of Shares Granted _______________
Type of Option: Incentive Stock Option/Non-statutory Stock Option
Stock Option Expiration Date: The Option shall terminate with respect to
the vested portions thereof three (3) months following termination of Optionee's
employment with the Company; provided, however, that in the case of termination
of employment by reason of death or disability, the Option shall terminate with
respect to the vested portions thereof three (3) years following termination of
employment. The Option shall be cancelled with respect to the non-vested portion
thereof on the date of termination of employment.
Vesting Schedule: This Option shall be exercisable, in whole or in part,
according to the following vesting schedule: [HOLD].
II. AGREEMENT
1. GRANT OF OPTION. The Administrator of the Company hereby grants to
______________ the Optionee named in the Notice of Grant (the "Optionee"), an
option (the "Option") to purchase the number of Shares set forth in the Notice
of Grant, at the exercise price per Share set forth in the Notice of Grant (the
"Exercise Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 13(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Grant, the terms and conditions of the Plan shall prevail. If designated in the
Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section
422(d), this Option shall be treated as a Non-statutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and with
the applicable provisions of the Plan and this Option Grant.
B-9
<PAGE>
(b) METHOD OF EXERCISE. This Option shall be exercisable by delivery of
an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price. No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
4. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be:
(a) by cash or check; or
(b) in the sole discretion of the Administrator and upon request of the
Optionee, by either of the following, or a combination thereof: (1)
consideration received by the Company under a formal cashless exercise program
adopted by the Company in connection with the Plan; or (2) surrender of other
Shares which, (i) in the case of Shares acquired upon exercise of an option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
the aggregate Exercise Price of the Exercised Shares.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
6. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Grant shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
7. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF ISO. If this Option qualifies as an ISO, there will be
no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an
B-10
<PAGE>
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to the alternative minimum tax in the year of exercise.
(b) EXERCISE OF NON-STATUTORY STOCK OPTION. There may be a regular
federal income tax liability upon the exercise of a Non-statutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and for at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held. In addition to the holding periods
described above, in order to realize the lowest capital gains tax rates under
the Taxpayer Relief Act of 1997, the Shares must be held for at least eighteen
months.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Grant constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of Florida.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION GRANT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
B-11
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof Optionee has reviewed
the Plan and this Option Grant in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option Grant.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: DYNAMIC HEALTH PRODUCTS, INC.
_______________________________ By: _________________________________
Signature
Title _______________________________
_______________________________
Print Name
Residence Address:
_______________________________
_______________________________
_______________________________
B-12
<PAGE>
EXHIBIT A TO PLAN STOCK OPTION GRANT
1999 STOCK OPTION PLAN EXERCISE NOTICE
Dynamic Health Products, Inc.
Attention: President
1. EXERCISE OF OPTION. Effective as of today, _____________________, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
__________ shares of the Common Stock (the "Shares") of Dynamic Health Products,
Inc. (the "Company") under and pursuant to the 1999 Stock Option Plan (the
"Plan") and the Stock Option Grant dated _______________ (the "Option Grant").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Grant.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Grant and agrees to abide
by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 11 of the Plan.
5. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(b) STOP TRANSFER NOTICES. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its
B-13
<PAGE>
transfer agent, if any, and that, if the Company transfers its own securities,
it may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
9. GOVERNING LAW SEVERABILITY. This Agreement is governed by the internal
substantive laws but not the choice of law rules of Florida.
10. ENTIRE AGREEMENT. The Plan and Option Grant are incorporated herein by
reference. This Agreement, the Plan, the Option Grant and the Investment
Representation Statement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and may not be modified adversely to the Optionee's
interest except by means of a writing signed by the Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: DYNAMIC HEALTH PRODUCTS, INC.
_______________________________ By: ________________________________
Signature
Title: _____________________________
_______________________________
Print Name
Date Received: ________________
Residence Address:
_______________________________
_______________________________
_______________________________
B-14
<PAGE>
EXHIBIT B TO PLAN STOCK OPTION GRANT
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: COMPANY: DYNAMIC HEALTH PRODUCTS, INC.
SECURITY: COMMON STOCK
AMOUNT: $__________________________
DATE: _____________________________
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, a legend prohibiting their transfer without the
consent of the Commissioner of Corporations of the State of Florida and any
other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. Because the Company is
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three
B-15
<PAGE>
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable. In the event that the Company does
not qualify under Rule 701 at the time of grant of the Option, then the
Securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than one
year after the later of the date the Securities were sold by the Company or the
date the Securities were sold by an affiliate of the Company, within the meaning
of Rule 144; and, in the case of acquisition of the Securities by an affiliate,
or by a non-affiliate who subsequently holds the Securities less than two years,
the satisfaction of the conditions set forth in sections (1), (2), (3) and (4)
of this paragraph.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
___________________________________________
Signature of Optionee
___________________________________________
Print Name
B-16
