<PAGE>
As filed with the Securities and Exchange Commission on August 22, 1996
Registration No. 333-1700
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Amendment No. 3 to
Form SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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COMMUNITY CARE SERVICES, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New York 8082 13-3677548
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
18 Sargent Place
Mount Vernon, New York 10550
(914) 665-9050
(Address and telephone number of principal executive offices
and place of business)
ALAN T. SHEINWALD, President
18 Sargent Place
Mount Vernon, New York 10550
(914) 665-9050
(Name, address and telephone number of agent for service)
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Copies to:
MICHAEL D. DIGIOVANNA, Esq. JAY M. KAPLOWITZ, Esq.
PARKER DURYEE ROSOFF & HAFT GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP
529 Fifth Avenue 575 Lexington Avenue
New York, New York 10017 New York, New York 10022
(212) 599-0500 (212) 752-9700
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Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each Proposed maximum Proposed
class of securities Amount to be offering price maximum aggregate Amount of
to be registered registered(1) per security(2) Offering price registration fee
- -------------------- -------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value (3) 1,495,000 $ 5.10 $ 7,624,500 $ 2,629.14
Class A Warrant(4) 1,495,000 $ .10 $ 149,500 $ 51.55
Common Stock(5) 1,495,000 $ 6.00 $ 8,970,000 $ 3,093.10
Underwriters'
Warrants 150,000 $ .00007 $ 10 $ 0.01
Common Stock(6) 150,000 $ 5.61 $ 841,500 $ 290.15
Class A 150,000 $ .11 $ 16,500 $ 5.68
Warrant(7)
Common Stock(8) 150,000 $ 6.00 $ 900,000 $ 310.32
Class A 4,158,332 $ .01 $ 41,583.32 $ 14.38
Warrant(9)
Common Stock(10) 4,158,332 $ 6.00 $ 24,949,992 $ 8,603.44
Common Stock(11) 220,000 $ 5.10 $ 1,122,000 $ 386.87
------- ------------ ------------- ------------
Total Registration Fee $ 15,384.52
</TABLE>
- ---------------------
(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable upon
the exercise of Warrants pursuant to anti-dilution provisions contained
therein, which shares of Common Stock are registered hereunder.
(2) Pursuant to Rule 457, estimated solely for the purpose of calculating the
registration fee.
(3) Includes shares of Common Stock issuable upon exercise of the
Underwriters' Over-Allotment Option.
(4) Includes Class A Warrants issuable upon exercise of the Underwriters'
Over-Allotment Option.
(5) Issuable upon exercise of the Class A Warrants . Includes shares issuable
upon exercise of the Class A Warrants issuable upon exercise of the
Underwriters' Over-Allotment Option.
(6) Issuable upon exercise of the Underwriters' Warrants.
(7) Issuable upon exercise of the Underwriters' Warrants.
(8) Issuable upon exercise of the Class A Warrants included in the
Underwriters' Warrants.
(9) Consists of Class A Warrants registered on behalf of Selling
Securityholders.
(10) Consists of Common Stock underlying Class A Warrants owned by Selling
Securityholders.
(11) Consists of Common Stock owned by Selling Securityholders.
<PAGE>
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
===============================================================================
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to
be used in connection with an Offering of 1,300,000 shares of Common Stock and
1,300,000 Class A Warrants , (the "Offering Prospectus"), and one to be used in
connection with the sale of shares of Common Stock and Class A Warrants by
certain selling securityholders (the "Selling Securityholders' Prospectus"). The
Offering Prospectus and the Selling Securityholders' Prospectus will be
identical in all respects except for the alternate pages for the Selling
Securityholders' Prospectus included herein which are labeled "Alternate Page
for Selling Securityholders' Prospectus."
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PRELIMINARY PROSPECTUS DATED AUGUST 22, 1996
SUBJECT TO COMPLETION
PROSPECTUS
COMMUNITY CARE SERVICES, INC.
1,300,000 Shares of Common Stock, $.01 par value
1,300,000 Class A Warrants
Community Care Services, Inc. (the "Company") is hereby offering
1,300,000 shares of Common Stock, $.01 par value of the Company (the "Common
Stock") and 1,300,000 Class A warrants each to purchase one share of Common
Stock at an exercise price of $6.00 per share (the "Class A Warrant") (the
"Offering"). The Class A Warrants are also referred to as the "Warrants". The
Warrants are exercisable for a period of five years commencing two years from
the effective date of the Offering (the "Effective Date"). The exercise price of
the Warrants is subject to adjustment in certain events pursuant to the
anti-dilution provisions thereof. Prior to this Offering, there has been no
public market for the Common Stock or the Warrants, and there can be no
assurance that a public market for such securities will develop or be sustained
on completion of the Offering. See "Risk Factors." Application has been made to
list the Common Stock and Warrants on The Nasdaq National Market System ("NMS")
under the proposed symbols - CCSV and CCSW, respectively. It is currently
expected that the initial public offering price will be $5.10 per share of
Common Stock and $.10 per Class A Warrant. The offering price has been
determined by negotiations between Maidstone Financial, Inc. (the
"Representative"), as representative of the several underwriters named herein
(the "Underwriters") and the Company, and does not necessarily bear any
relationship to any recognized criteria of value. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price.
The Warrants are redeemable, in whole or in part, at a price of $.10
per Warrant commencing two years from the Effective Date and prior to their
expiration, provided that (i) prior written notice of not less than 30 days is
given to the Warrantholders; (ii) the closing high bid price per share of the
Common Stock, or the last sale price per share if listed on a national exchange,
for the 10 consecutive trading days ending on the third business day prior to
the date on which the Company gives notice, has been at least $8.00 for the
Class A Warrants, subject to adjustment for certain events; and (iii)
Warrantholders shall have the exercise rights until the close of the business
day preceding the date fixed for redemption. See "Description of Securities -
Warrants."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION" ON PAGES FIVE AND
FIFTEEN, RESPECTIVELY, OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Underwriting Discounts
Price to Public and Commissions (1) Proceeds to Company (2)
<S> <C> <C> <C>
Per Share of
Common Stock $ 5.10 $ .51 $ 4.59
Per Class A $ .10 $ .01 $ .09
Warrant
Total(3) $ 6,760,000 $ 676,000 $ 6,084,000
</TABLE>
- ------------------------
(1) Excludes additional compensation to be received by the Underwriters in the
form of (a) Warrants to purchase 150,000 shares of Common Stock and
150,000 Class A Warrants and exercisable for a period of five years
commencing one year from the date of this Prospectus at $5.61 per share of
Common Stock and $.11 per Warrant; (b) a non-accountable expense allowance
of $202,800, or $233,220 if the Underwriters exercise the over-allotment
option in full; (c) a 36-month consulting agreement for an aggregate
payment of $108,000 payable in full at the closing of this Offering. The
underwriting agreement between the Company and the Underwriters (i)
provides for indemnification of the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended and (ii) gives the Representative the right to appoint a designee
to attend all meetings of the Board of Directors for a period of no less
than three years following the closing of this offering. See
"Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$350,000, excluding the Underwriters' non-accountable expense allowance
and consulting fees.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
195,000 additional shares of Common Stock and/or 195,000 Class A Warrants
solely to cover over-allotments (the "Over- Allotment Option"). If the
Over-Allotment Option is exercised in full, the Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$7,774,000, $777,400 and $6,996,600. See "Underwriting."
The shares of Common Stock and Class A Warrants are offered on a
"firm commitment" basis by the Underwriters named herein, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, subject to
approval of certain legal matters by the counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify the Offering and to
reject any order in whole or in part. It is expected that delivery of
certificates representing the shares of Common Stock and Warrants will be made
against payment therefor at the offices of Maidstone Financial, Inc., 101 E.
52nd Street, New York, New York 10022 on or about , 1996.
---------
MAIDSTONE FINANCIAL, INC. THE HARRIMAN GROUP, INC.
The date of this Prospectus is______ , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish to its shareholders annual reports
containing audited financial statements examined by its independent auditors. In
addition, the Company may furnish to its shareholders quarterly or semi-annual
reports containing unaudited financial information and such other interim
reports as the Company may determine.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus and should be read in conjunction with
the section entitled "Risk Factors." Unless otherwise indicated, all financial
and other information contained in this Prospectus (i) reflects the 2.2-for-one
stock dividend to be effected by the Company in August 1996, (ii) reflects the
exchange of 1,441,666 shares of Common Stock for 2,883,332 Class A Warrants to
be effected in August 1996 and (iii) assumes that the Over-Allotment Option has
not been exercised.
The Company
COMMUNITY CARE SERVICES, INC. (the "Company") is a provider of an
extensive variety of home health care products and services, medical equipment
and disposable medical supplies primarily in the five boroughs of New York City,
and Westchester, Rockland, and Nassau Counties, New York, as well as northern
New Jersey and southern Connecticut. The Company's equipment and products are
generally used for acute (short term) and long term medical care, and
respiratory, rehabilitative and wound care therapies.
The Company services the home health care market by coordinating with
various health care workers and payor case managers to determine the home health
needs for patients. The Company then supplies and delivers the necessary medical
products and equipment to the patients' homes. The Company works with
physicians, discharge planners, case/utilization managers, social workers,
nurses, patients and family members to identify the home care products and
equipment that are appropriate and cost effective, given the patients'
diagnosis, for care, treatment and recovery at home. The Company has developed a
diagnostic centered program pursuant to which its personnel is educated about
the various needs of, and appropriate products for, patients with particular
diseases such as cancer, AIDS or Alzheimer's disease, among others, and for
particular classes of patients such as the developmentally disabled and hospice
patients. The Company sells or rents, as appropriate, the relevant equipment
and/or supplies to the patient, with payment generally received from Medicare,
Medicaid, a private insurer and to a lesser extent, the patients themselves. See
"Risk Factors - Dependence Upon Third Party Reimbursement" and "Business -
Government Regulation and Reimbursement". The Company is accredited with
commendation by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO"), a private not-for-profit organization which surveys and
evaluates hospitals and health care organizations. A team of JCAHO experts
surveys an organization every three years in accordance with established
standards to determine its accreditation status, which ranges from a rating with
commendation, the highest standard, to no accreditation, the lowest standard.
The Company's objective is to become a leading regional provider of
comprehensive home health care equipment and products in the metropolitan New
York/New Jersey/Connecticut tri-state region. The Company's strategy to achieve
this objective is focused on continuing to provide to patients and referral
sources an integrated program of equipment, products and services, while
ensuring the highest quality delivery and set-up of medical equipment and
products. The specific areas of growth that the Company intends to target are
(i) increasing sales of basic medical equipment and disposable medical supplies
it currently offers to customers; (ii) adding additional product lines for high
growth markets, such as orthotics, mastectomy supplies and specialized wound
care products; and (iii) aggressively expanding its position as a supplier of
choice for home health care products to health maintenance organizations
("HMOs"), preferred provider organizations ("PPOs"), and other managed care
organizations and medical providers in the tri-state region. The Company has
recently experienced growth in the medical supplies portion of its business
since becoming a provider of disposable medical supplies for the largest
certified home health care agency in New York.
-1-
<PAGE>
The Company anticipates continued growth in the home health care
market generally due to the increasing emphasis on cost effective medical
treatment, the "Greying of our Society" and continuing advances in medical
technology, although there can be no assurance as to any such growth or
advances.
The Company intends to seek out regional acquisition opportunities
that are compatible with the Company's product lines and services. The Company
has not identified any specific acquisitions and there can be no assurance that
the Company will effect any acquisitions.
The Company was incorporated in the State of New York in July 1992
and acquired certain assets of Adam Health Care Equipment Corp. ("Adam"), a New
York based durable medical equipment and supply company, in April 1993. The
Company acquired the assets for cash and notes totaling $1,500,000.
Approximately $450,000 was paid at or prior to the closing of the acquisition
and the balance was payable in installments through March 31, 1995. The Company
has not paid the balance and is seeking rescission of the obligation. See "Risk
Factors - Pending Litigation; Potential Adverse Impact of Counterclaims" and
"Business - Legal Proceedings". The principal executive offices of the Company
are located at 18 Sargent Place, Mount Vernon, New York 10550 and its telephone
number is (914) 665-9050.
The Offering
Securities Offered by
the Company............................. 1,300,000 shares of Common Stock(1)
1,300,000 Class A Warrants(1)
Common Stock Outstanding
Before the Offering..................... 4,730,000 shares
Common Stock to be
Outstanding After the
Offering................................ 6,030,000 shares (2)
Class A Warrants to be
Outstanding After the
Offering................................ 5,458,332
Use of Proceeds.......................... The proceeds of this Offering will be
used for expanded marketing efforts;
technological upgrades; development of
an independent rehabilitation
division; repayment of loans in an
aggregate amount of $255,409, of which
$135,409 will be paid to Dean L.
Sloane, a director of the Company;
repayment of 8% promissory notes in
the aggregate principal amount of
$737,500; and working capital
purposes. See "Use of Proceeds."
Risk Factors and Dilution................ An investment in the securities
offered hereby is highly speculative
and involves substantial dilution.
Prospective investors should consider
carefully the factors set forth under
"Risk Factors" and "Dilution."
Proposed Symbols for
The Nasdaq NMS ......................... The Company has applied for listing of
the Common Stock and Warrants offered
hereby on The Nasdaq NMS. It is
anticipated that following this
Offering, the Common Stock and
Warrants offered hereby will be quoted
on The Nasdaq NMS under the following
proposed symbols: CCSV and CCSW,
respectively.(3)
-2-
<PAGE>
- -----------
(1) Does not include 220,000 shares of Common Stock and 4,158,332 Class A
Warrants being offered concurrently with this Offering by selling
securityholders pursuant to a Selling Securityholders' Prospectus.
(2) Does not include (i) 150,000 shares of Common Stock and 150,000 Warrants
issuable upon exercise of the Underwriters' Warrants, (ii) 195,000 shares
of Common Stock and 195,000 Class A Warrants which may be issued upon
exercise of the Over-Allotment Option and (iii) shares subject to exercise
of all Class A Warrants. See "Underwriting."
(3) The Nasdaq NMS listing does not imply that a liquid and active market will
develop, or be sustained, for the securities upon completion of the
Offering.
-3-
<PAGE>
Summary Financial Information
<TABLE>
<CAPTION>
Three Months Ended
Year Ended March 31, June 30,
------------------------------------------ -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statement of Operations:
Net revenues $6,181,757 $2,940,892 $2,487,381 $1,042,240
Cost of net revenues 2,335,751 1,159,996 1,103,358 421,000
Selling, general and
administrative (including
provision for doubtful
accounts) 2,958,882 1,746,777 1,052,538 531,819
Amortization of intangible
assets 107,966 245,012 43,024 23,753
Income (loss) from operations 779,158 (210,893) 288,461 65,668
Net income (loss) 427,925 (322,691) 125,588 39,609
Net income (loss)
per common share(1) .09 (.07) .03 .01
Weighted average number of
shares outstanding 4,730,000 4,510,000 4,730,000 4,730,000
March 31, June 30, 1996 (1)
-------------- -----------------------------------------------
1996
As
Actual Actual Adjusted (2)
------ ------ -----------
Balance Sheet Data:
Working capital (deficit) $ ( 978,683) $ (907,611) $ 3,915,161
Total assets 5,467,115 5,689,676 10,264,967
Total long-term debt 931,512 883,283 0
Total shareholders' 103,764 229,352 5,687,926
equity
</TABLE>
- -------------------------
(1) Gives effect to (i) the exchange of 1,441,666 shares of Common Stock for
2,883,332 Class A Warrants and (ii) the 2.2-for-one stock dividend to be
effected by the Company in August 1996.
(2) Gives effect to the 1,300,000 shares of Common Stock and 1,300,000 Class A
Warrants offered hereby and the application of the estimated net proceeds
therefrom.
-4-
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND SHOULD BE PURCHASED
ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT IN THE COMPANY.
EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS,
AS WELL AS ALL OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS.
1. History of Operating Losses. From the acquisition of the assets
of Adam in April 1993 through the end of the 1995 fiscal year, the Company had
sustained ongoing losses. The Company had an accumulated deficit of $699,281 and
$271,356 from inception through March 31, 1995 and March 31, 1996, respectively.
For the fiscal year ended March 31, 1995, the Company had a net loss of
$322,691, a shareholders' deficit of $649,281 and a working capital deficit of
$1,523,640. For the fiscal year ended March 31, 1996, the Company had net
income of $427,925, shareholders' equity of $103,764 and a working capital
deficit of $978,683. As of June 30, 1996, the Company had a shareholder's equity
of $229,352 and a working capital deficit of $907,611. There can be no
assurance as to the future profitability of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
2. Dependence Upon Third Party Reimbursement. Virtually all of the
Company's revenues are attributable to payments received from third-party
payors, including the Medicare and Medicaid programs and private insurers. For
the three months ended June 30, 1996, 32.3% and 29.6% of the Company's revenues
were derived from Medicare and Medicaid, respectively and for the fiscal year
ended March 31, 1996, 35.4% and 36.4% of the Company's revenues were derived
from Medicare and Medicaid programs, respectively. The revenues, cash flows and
profitability of the Company, like those of other companies in the health care
industry, are affected by the continuing efforts of third-party payors to
control expenditures for health care. In addition, reimbursement can be
influenced by the financial instability of private third-party payors and by
budget pressures and cost shifting by governmental payors. A reduction in
coverage or reimbursement rates by third-party payors could have a material
adverse effect on the Company's results of operations. Additionally, the third
party payors generally do not make payments until 75-90 days after invoicing.
See "Business-Government Regulation and Reimbursement."
3. Reliance on Key Sources of Referral. During the three months
ended June 30, 1996, the Company's five largest sources of referral, the
Visiting Nurse Service of New York - Manhattan, the Visiting Nurse Service of
New York - Bronx, the Visiting Nurse Service - Queens, the Visiting Nurse
Service - Brooklyn and Wyckoff Hospital- accounted for approximately 28.8%,
16.3%, 13.8%, 7.7% and 4.4%, respectively, of the Company's total revenues.
During the fiscal year ended March 31, 1996, the Visiting Nurse Service -
Manhattan, the Visiting Nurse Service - Bronx, Wyckoff Hospital, the Hospital
for Joint Diseases and the Visiting Nurse Service - Queens accounted for 18.4%,
12.4%, 9.2%, 6.7% and 5.5%, respectively, of the Company's total revenues. For
the three months ended June 30, 1996, the four borough offices of the Visiting
Nurse Service of New York ("VNS") collectively accounted for 66.6% of the
Company's revenues. Each of the VNS offices in Brooklyn, Queens, Manhattan and
the Bronx place orders separately. However, if the parent office of VNS were to
eliminate the Company as a provider, the Company could experience a material
adverse effect on its business. The loss of, or decrease in, business generated
by any of its major sources of referral could have a material adverse effect on
the Company's business. Although the Company has entered into agreements with
various providers which govern the terms of reimbursement, the Company does not
have any long term purchase orders but receives its purchase orders on an
individual basis. See "Business - Marketing Programs."
-5-
<PAGE>
4. Government Regulation; Medicaid and Medicare Reimbursement;
Anti-Kickback Laws. Health care in the U.S. is subject to laws and regulations
of federal, state and local governments. The failure to obtain, renew or
maintain required regulatory approvals or licenses, if any, could adversely
affect the Company's business, and could prevent it from offering any or all of
its products or services to patients. The Company is not currently subject to
any material regulatory approvals or licenses. If the Company fails to comply
with governmental requirements pertaining to Medicaid and Medicare
reimbursements, the Company can be terminated as a Medicaid and Medicare service
provider. This could jeopardize the ability of the Company to maintain
reimbursement from other programs. There can be no assurance that federal, state
or local laws or regulations will not be adopted which could increase the
Company's cost of doing business, reduce reimbursement levels or otherwise have
a material adverse effect on the Company's business, financial condition or
operating results. See "Business-Government Regulation and Reimbursement."
As suppliers of services under the Medicare and Medicaid programs,
the Company is also subject to Medicare and state health care program
anti-kickback laws. These laws generally prohibit any remuneration for the
referral of Medicare or Medicaid patients. Proposed federal legislation expands
the anti-kickback laws to include referrals of any patients regardless of payor
source. Violations of the anti-kickback laws may result in civil and criminal
penalties and exclusion from participation in the Medicare and state health
programs such as Medicaid.
5. Pending Litigation; Potential Adverse Impact of Counterclaims
Against the Company. In 1993, the Company commenced an action against Adam and
its principals in the Supreme Court of the State of New York, County of
Westchester. The action arises out of the acquisition of certain assets of Adam
by the Company in April 1993. The complaint alleges that the defendants made
numerous misrepresentations relating to the business previously conducted by
Adam. The complaint seeks recovery of damages of $1,500,000, additional punitive
damages, the reduction of the original purchase price or rescission of the
original purchase agreement. The defendants have asserted counterclaims against
the Company. The counterclaims seek the payment of the unpaid purchase price of
$1,050,000 and collection expense of over $175,000. Defendants also allege
various additional causes of action, claiming plaintiffs converted or interfered
with the collection of property owned or due to defendants and seek damages of
over $7,000,000, including $5,000,000 in punitive damages. The Company believes
it has meritorious defenses to the counterclaims. However, there can be no
assurance that the Company will be successful in recovering damages for its
claims or in defending itself against the counterclaims. A judgment against the
Company as a result of the counterclaims could have a material adverse effect on
its business. The action is still in its final pre-trial stages and the Company
expects a trial date to be set shortly. See "Business - Legal Proceedings."
6. Immediate and Substantial Dilution. This Offering involves an
immediate and substantial dilution to investors. Purchasers of shares of Common
Stock in the Offering will incur an immediate dilution of $4.30 per share in the
net tangible book value of their investment from the initial Offering price,
which dilution amounts to approximately 83% of the initial Offering price per
share of Common Stock. Investors in the offering will pay $5.20 per share of
Common Stock (giving effect to the aggregate offering price per share of Common
Stock and Class A Warrant), as compared with an average cash price of $.01 per
share of Common Stock paid by existing shareholders. See "Dilution."
7. Competition. The home health care market is highly competitive
and includes a large number of providers. Some of the Company's current and
potential competitors have, or may obtain, significantly greater financial and
marketing resources than the Company. There are relatively few barriers to entry
in the local markets that the Company serves. Other companies, hospitals and
health maintenance organizations ("HMOs") have entered the home health care
market in the past and others may do so in the future. There can be no assurance
that the Company will not encounter increased competition in the future that
could limit its ability to maintain or increase its market share. Such increased
competition could have a material adverse effect on the Company's business and
results of operations. See "Business - Competition."
-6-
<PAGE>
8. Potential Liability; Adequacy of Insurance Coverage.
Participants in the home health care market are subject to lawsuits alleging
negligence, product liability or other similar legal theories, many of which
involve large claims and significant defense costs. Although the Company
currently maintains liability insurance intended to cover such claims, there can
be no assurance that the coverage limits of such insurance will be adequate or
that all such claims will be covered by the insurance. In addition, such
insurance policies must be renewed annually. Such insurance varies in cost, is
difficult to obtain and may not be available in the future on acceptable terms,
if at all. A successful claim in excess of the insurance coverage could have a
material adverse effect on the Company's business and results of operations.
Claims, regardless of their merit or eventual outcome, may also have a material
adverse effect upon the Company's reputation. See "Business - Insurance."
9. Dependence on Key Personnel; Experience of Management. There are
only two executive officers of the Company. The Company is dependent on the
continued services of Alan T. Sheinwald, the Company's President and Chief
Executive Officer and Allan Goldfeder, the Company's Chief Operating Officer. If
such executive officers were to leave the Company, its operating results could
be adversely affected. Following this Offering, there can be no assurance that,
if the Company grows, the current management team will be able to continue to
adequately manage the Company's affairs. Further, there can be no assurance that
the Company will be able to identify and hire additional qualified managers on
terms economically feasible for the Company. See "Management - Directors,
Executive Officers and Key Employees."
10. Control by Current Shareholders and Management. Upon completion
of this Offering, the current shareholders of the Company will beneficially own
78.44% of the outstanding shares of Common Stock. The Company's directors and
executive officers and their affiliates will control approximately 76.92% of the
outstanding shares of Common Stock. As a result, these shareholders will be able
to determine the outcome of certain corporate actions requiring shareholder
approval, and will be able to elect the Board of Directors of the Company. Such
concentration of ownership may have the effect of preventing a change in control
of the Company. See "Dilution," "Principal Shareholders" and "Description of
Securities."
11. Broad Discretion in Application of Proceeds; Unspecified
Acquisitions. Approximately 62.7% of the net proceeds of this Offering, or
$3,398,291, will be applied to working capital and general corporate purposes.
In addition, the Company may utilize a portion of the net proceeds of this
Offering currently allocated to working capital for potential acquisitions. As
of the date of this Prospectus, the Company has not identified any particular
acquisition targets. Shareholders of the Company may have no opportunity to
approve specific acquisitions or to review the financial condition of any
potential target. Accordingly, management of the Company will have broad
discretion over the use of proceeds. See "Use of Proceeds."
12. Shareholder Inability to Review and Vote on Any Unspecified
Acquisitions. Pursuant to New York Corporate law, the Company's Board of
Directors has the authority to approve unspecified acquisitions to be made by
the Company. Such acquisitions are not subject to review or voting by the
shareholders of the Company.
13. Benefits to Affiliates. Certain of the Company's shareholders
and former shareholders and their affiliates have made loans to the Company in
an aggregate principal amount equal to $255,409. The Company intends to use the
proceeds of this Offering to repay these loans as follows: $135,409 to Dean L.
Sloane, a director and shareholder of the Company; $15,000 to each of Manuel N.
Wilson and Wade Wilson, former shareholders; and $90,000 to At Home Health Care
Supplies, Inc., an affiliate of two former shareholders of the Company. See "Use
of Proceeds."
14. Repayment of Debt. Approximately 12.3% of the proceeds of this
Offering, or $667,500, will be used to repay 8% promissory notes issued by the
Company in connection with a private placement in January
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<PAGE>
1996. In addition, approximately 1.8% of the proceeds of this Offering, or
$102,000, will be used to pay an 8% promissory note issued by the Company in
August, 1996 to fund its operating expenses. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
15. No Dividends and None Anticipated. To date, no dividends have
been declared or paid on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. Investors should, therefore, be
aware that it is unlikely that any dividends will be paid on the Common Stock in
the foreseeable future. See "Dividend Policy."
16. Lack of Market; Possible Volatility of Stock Price; Arbitrary
Determination of Offering Price. Prior to this Offering, there has been no
public market for the Company's Common Stock or Warrants, and there can be no
assurance that an active market in any securities of the Company will develop or
be sustained after this Offering. In the absence of an active public trading
market, an investor may be unable, to liquidate his or her investment. The price
of the shares of Common Stock and Class A Warrants being offered hereby, and the
exercise price and other terms of the Warrants were determined by negotiations
between the Company and the Underwriters and are not necessarily related to the
Company's assets, earnings, book value per share, its results of operations or
any other generally accepted criteria of value and should not be construed as
indicative of their value. See "Underwriting."
The stock market has, from time to time, experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of any particular company. In addition, the market prices of the securities of
many publicly-traded companies in the health care industry have in the past
been, and in the future can be expected to be, especially volatile. Various
factors and events, including future announcements of new services or products
offered by the Company or its competitors, developments or disputes concerning,
among other things, regulatory developments in the United States, and economic
and other external factors, as well as fluctuations in the Company's financial
results, could have a significant impact on the market price of the Company's
securities.
17. Concurrent Offering by Selling Securityholders; Potential
Adverse Impact on Price and Liquidity. Concurrently with this Offering, the
Company is registering for sale an aggregate of 220,000 shares of Common Stock
and 4,158,332 Class A Warrants owned by the Selling Securityholders. Such
Selling Securityholders holding warrants have entered into an agreement with the
Representative not to sell their warrants for a period of two years from the
Effective Date without the Representative's prior written consent. Selling
Securityholders owning shares of Common Stock have entered into an Agreement
with the Representative not to sell their shares for a period of 18 months from
the Effective Date without the Representative's written consent. The Company
anticipates that certain Selling Securityholders may request a release from
their lock up agreements. The Representative has the discretion to release such
lock-ups and has indicated that its decision to grant such consent will be
dependent on market conditions. The sale of such securities could have an
adverse effect on the market price and liquidity of the Company's securities.
18. Shares Eligible for Future Sale. Of the 4,730,000 shares of
Common Stock of the Company outstanding as of the date of this Prospectus,
4,638,335 shares are "restricted securities," which are owned by "affiliates" of
the Company, as those terms are defined in Rule 144 promulgated under the
Securities Act.
Absent registration under the Securities Act, the sale of such
"restricted securities" is subject to Rule 144, as promulgated under the
Securities Act. In general, under Rule 144, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company, who
has beneficially owned restricted shares of Common Stock for at least two years
is entitled to sell in brokerage transactions, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class, or if the Common Stock is quoted on The
Nasdaq SmallCap Market or a stock exchange, the average weekly trading volume
-8-
<PAGE>
during the four calendar weeks preceding the sale. Rule 144 also permits a
person who presently is not and who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned the shares of Common Stock for at least three years to sell such shares
without regard to any of the volume limitations as described above.
Also being registered for sale pursuant to the Selling
Securityholders' Prospectus are 220,000 shares of Common Stock and 4,158,332
Class A Warrants and the shares underlying such Warrants. All of the Company's
existing shareholders have agreed not to sell or otherwise dispose of any of
their warrants or shares of Common Stock now owned or issuable upon the exercise
of currently exercisable warrants for a period of 24 months from the date of
this Prospectus, without the prior written consent of the Representative, except
for the shareholders owning the 220,000 shares listed in the Selling
Securityholders' Prospectus who have agreed not to sell or otherwise dispose of
any of their shares for a period of 18 months from the date of this Prospectus
without the prior written consent of the Representative. The Representative may
release any shareholder from the "lock-up" agreement, although not prior to the
exercise or expiration of the Over-Allotment Option. No prediction can be made
as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices of the
Company's securities prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold pursuant to the Selling
Securityholders' Prospectus or under Rule 144 into the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital in the future through the sale of equity
securities. See "Shares Eligible for Future Sale."
19. Potential Adverse Effect of Future Issuances of Authorized
Preferred Stock. The Company's Certificate of Incorporation authorizes the
issuance of serial preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock, with such rates of dividends, redemption provisions,
liquidation preferences, voting rights, conversion privileges and other
characteristics as the Board of Directors may deem necessary. Such preferred
stock, if issued, could adversely affect the holders of the Common Stock. In
addition, the preferred stock could discourage, delay or prevent a takeover of
the Company. The Company has no present intention to issue any shares of
Preferred Stock. See "Description of Securities."
20. Dilutive Effect of Underwriters' Warrant and other Options. Upon
completion of this Offering, the Company will sell to the Underwriters a Warrant
to purchase up to 150,000 shares of Common Stock and Warrants, at a price per
share of Common Stock or Warrant equal to 110% of the initial public Offering
price of the shares of Common Stock and Warrants. The Underwriters' Warrant will
be exercisable at any time during the five-year period commencing one year from
the closing of this Offering. As of the date of this Prospectus, there are
Warrants outstanding to purchase an aggregate of 4,158,332 shares of Common
Stock. If the Underwriters' Warrant and the outstanding Warrants are exercised,
the percentage of Common Stock then held by the existing shareholders will be
reduced. The Underwriters' Warrant and the outstanding Warrants can be expected
to be exercised at a time when the Company would be able to obtain funds from
the sale of Common Stock or other securities at a price higher than the exercise
price thereof. See "Underwriting."
21. Need for Additional Financing. The Company believes that the
proceeds of the Offering will be sufficient to finance the Company's working
capital requirements for a period of at least 12 months following the completion
of this Offering. However, the Company is required to maintain a high level of
inventory relative to its business, and accounts receivable are paid primarily
by third party payors who do not generally make payments until 75-90 days after
invoicing. A greater than anticipated increase in volume may require the Company
to seek additional financing during such periods. In addition, the Company's
strategy is to acquire companies with related and complementary businesses,
although the Company has not presently identified any specific acquisitions. The
Company may require financing in connection with acquisitions. The Company could
also require financing if the defendants in the Adams litigation prevailed in
their counterclaims. There can be no assurance that additional financing will be
available on terms acceptable to the Company, or at all. In addition, for a
period of two years following the Effective Date, the Company cannot issue
shares of Common Stock (other than pursuant to the 1996 Stock Option Plan)
without the Representative's consent. Such limitation may adversely affect
the Company's ability to obtain financing. See "Underwriting." In the event that
the Company
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<PAGE>
is unable to obtain such additional financing as it becomes necessary, the
Company will not be able to achieve all of its business plans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
22. The Nasdaq NMS Eligibility and Maintenance Requirements;
Possible Delisting of Securities from The Nasdaq NMS; Risks of Low-Priced
Stocks. Prior to this Offering, there has been no established public trading
market for the Company's securities and there is no assurance that a public
trading market for the Company's securities will develop after the completion of
this Offering. If a trading market does in fact develop for the securities
offered hereby, there can be no assurance that it will be sustained.
The Company intends to apply for listing of the Common Stock and
Warrants on The Nasdaq NMS upon the Effective Date. The Commission has approved
rules imposing criteria for listing of securities on The Nasdaq NMS, including
standards for maintenance of such listing. For continued listing, a company,
among other things, must have $2,000,000 in assets, $1,000,000 net worth and a
minimum bid price of $1.00 per share. If the Company is unable to satisfy The
Nasdaq NMS' maintenance criteria in the future, its securities may be delisted
from The Nasdaq NMS. In the event the Company's securities are delisted from The
Nasdaq NMS, and not traded on any other exchange, trading, if any, in securities
would thereafter be conducted in the over-the-counter on the OTC Bulletin Board.
Consequently, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of the Company's securities. Quotation on
The Nasdaq NMS does not imply that a meaningful, sustained market for the
Company's securities will develop or, if developed, that it will be sustained
for any period of time.
23. Potential Adverse Effect of Redemption of Warrants. The Warrants
offered hereby are redeemable, in whole or in part, at a price of $.10 per
Warrant, commencing two years after the Effective Date and prior to their
expiration; provided that (i) prior notice of not less than 30 days is given to
the Warrantholders; (ii) the closing high bid price if traded on Nasdaq, or the
last sale price if traded on a national exchange, per share of Common Stock on
each of the 10 consecutive trading days ending on the third business day prior
to the date on which the Company gives notice of redemption has been at least
$8.00 for the Class A Warrants; and (iii) Warrantholders shall have exercise
rights until the close of the business day preceding the date fixed for
redemption. Notice of redemption of the Warrants could force the holders to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for them to do so, or to sell the Warrants at the current market
price when they might otherwise wish to hold them, or to accept the redemption
price, which may be substantially less than the market value of the Warrants at
the time of redemption. The Warrants may not be exercised unless the
registration statement pursuant to the Securities Act covering the underlying
shares of Common Stock is current and such shares have been qualified for sale,
or there is an exemption from applicable qualification requirements, under the
securities laws of the of the state of residence of the holder of the Warrants.
Although the Company does not presently intend to do so, the Company reserves
the right to call the Warrants for redemption whether or not a current
prospectus is in effect or such underlying shares are not, or cannot be,
registered in the applicable states. Such restrictions could have the effect of
preventing certain Warrantholders from liquidating their Warrants. See
"Description of Securities - Warrants."
24. Current Prospectus and State Blue Sky Registration Required to
Exercise Warrants. Holders of the Warrants will have the right to exercise the
Warrants for the purchase of shares of Common Stock only if a current prospectus
relating to such shares is then in effect and only if the shares qualified for
sale under the securities laws of the applicable state or states. The Company
has undertaken and intends to file and keep effective and current a prospectus
which will permit the purchase and sale of the Common Stock underlying the
Warrants, but there can be no assurance that the Company will be able to do so.
Although the Company intends to seek to qualify for sale the shares of Common
Stock underlying the Warrants in those states in which the securities are to be
offered,
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<PAGE>
no assurance can be given that such qualifications will occur. The Warrants may
lose or be of no value if a prospectus covering the shares issuable upon the
exercise thereof is not kept current or if such underlying shares are not, or
cannot be, registered in the applicable states. See "Description of Securities -
Warrants."
25. Penny Stock Regulation. In the event that the Company is unable
to satisfy the maintenance requirements for The Nasdaq NMS, is not subsequently
accepted for listing on the Nasdaq SmallCap Market and its Common Stock falls
below the minimum bid price of $1.00 per share, trading would be conducted on
the "pink sheets' or the NASD's Electronic Bulletin Board. In the absence of the
Common Stock being quoted on The Nasdaq NMS, or the Company's having $2,000,000
in stockholders' equity, trading in the Common Stock would be covered by Rule
15g-9 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for non-Nasdaq and non-exchange listed securities. Under such
rule, broker-dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are exempt from this rule
if the market price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny
stock to be any equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Such exceptions include an equity security
listed on Nasdaq, and an equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or (iii)
average revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
If the Company's securities were to become subject to the
regulations applicable to penny stocks, the market liquidity for the securities
would be severely affected, limiting the ability of broker-dealers to sell the
securities and the ability of purchasers in this Offering to sell their
securities in the secondary market. There is no assurance that trading in the
Company's securities will not be subject to these or other regulations that
would adversely affect the market for such securities.
26. Relationship of Underwriters to Trading; Potential Adverse
Impact on Liquidity and Market Price of Securities. The Underwriters may act as
brokers or dealers with respect to the purchase or sale of the Common Stock and
the Warrants in the over-the-counter market where each is expected to trade. The
Representative also has the right to act as the Company's exclusive agent in
connection with any future solicitation of Warrantholders to exercise their
Warrants. Unless granted an exemption by the Commission from Rule 10b-6 under
the Exchange Act, the Representative will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities during a period beginning nine business days prior to the
commencement of any such solicitation and ending on the later of the termination
of such solicitation activity or the termination (by waiver or otherwise) of any
right the Representative may have to receive a fee for the exercise of the
Warrants following such solicitation. As a result, the Representative and
soliciting broker/dealers may be unable to continue to make a market in the
Company's securities during certain periods while the exercise of the Warrants
is being solicited. Such a limitation, while in effect, could impair the
liquidity and market price of the Company's securities.
27. Consulting Agreement with Representative; Obligation to Make
Payment Out of Offering Proceeds. The Company has agreed to retain the
Representative as a financial consultant for a three-year period commencing on
the Effective Date. The consulting fees are payable to the Representative upon
the closing of the Offering. See "Use of Proceeds."
28. Non-Registration in Certain Jurisdictions of Shares Underlying
the Warrants. Although the shares of Common Stock and Warrants will not
knowingly be sold to purchasers in jurisdictions in which
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<PAGE>
they are not registered or otherwise qualified for sale, purchasers may buy
Warrants in the aftermarket or may move to jurisdictions in which the shares of
Common Stock issuable upon exercise of the Warrants are not so registered or
qualified during the period that the Warrants are exercisable. In such event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants unless and until the shares could be registered or
qualified for sale in the jurisdiction in which such purchasers reside, or an
exemption to such qualification exists or is granted in such jurisdiction. If
the Company was unable to register or qualify the shares in a particular state
and no exemption to such registration or qualification was available in such
jurisdiction, in order to realize any economic benefit from the purchase of the
Warrants, a holder might have to sell the Warrants rather than exercise them.
No assurance can be given, however, as to the ability of the Company to effect
any required registration or qualification of the Common Stock or Warrants in
any jurisdiction in which registration or qualification has not already been
completed. See "Description of Securities - Warrants."
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<PAGE>
USE OF PROCEEDS
The gross proceeds from the sale of shares of Common Stock and
Warrants in this Offering are estimated to be $6,760,000 and the offering
expenses are estimated to be $1,336,800 including underwriting commissions of
$676,000, the Underwriters' non-accountable expense allowance of $202,800,
consulting fees aggregating $108,000 for a 36 month consulting agreement and
$350,000 of other Offering expenses. The net proceeds to the Company from the
sale of shares of Common Stock and Warrants in this Offering are estimated to be
approximately $5,423,200 ($6,305,380 if the Over-Allotment Option is exercised
in full), after deducting the estimated underwriting discounts and offering
expenses payable by the Company. The Company intends to use the proceeds as
follows:
<TABLE>
<CAPTION>
Percentage of
Purpose Amount Net Proceeds
- ------- ------ ------------
<S> <C> <C>
Marketing........................................................$ 250,000 4.6%
Technological upgrades(1)........................................$ 200,000 3.7%
Development of independent rehabilitation division(2)............$ 550,000 10.2%
Repayment of shareholder loans(3)................................$ 255,409 4.7%
Repayment of 8% Notes(4).........................................$ 769,500 14.1%
Working capital..................................................$ 3,398,291 62.7%
Total.................................. $ 5,423,200 100.0%
</TABLE>
- ----------------
(1) Includes the costs of purchasing computer systems, and developing a
proprietary software system to upgrade the Company's order taking,
accounting and billing systems.
(2) Includes the costs of staffing of, and creation of a workroom for, the
independent rehabilitation division.
(3) Includes the repayment of (i) $15,000 to each of Manuel N. Wilson and Wade
Wilson, former shareholders of the Company, (ii) $90,000 to At Home Health
Care Supplies, Inc., an affiliate of two former shareholders of the
Company, and (iii) $135,409 to Dean Sloane, a director of the Company.
(4) Includes the repayment of principal and accrued interest pursuant to
promissory notes in the aggregate principal amount of $737,500. The
proceeds from such notes provided working capital which the Company used
to fund the expansion of its business.
The foregoing represents the Company's estimate of the allocation
of the net proceeds of the Offering, based upon the current status of its
operations and anticipated business plans. It is possible, however, that the
application of funds will differ considerably from the estimates set forth
herein due to changes in the economic climate and/or the Company's planned
business operations or anticipated complications, delays and expenses, as well
as any potential acquisitions that the Company may consummate, although no
specific acquisition has been identified. Any reallocation of the net proceeds
will be at the discretion of the Board of Directors of the Company.
Pending the foregoing uses, a portion of the net proceeds of this
Offering may be invested in certificates of deposit, United States government
obligations, prime commercial paper, money market funds or similar short-term
investments.
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<PAGE>
The Company estimates that the net proceeds from this Offering
will be sufficient to meet the Company's liquidity and working capital
requirements for a period of 12 months from the completion of this Offering. In
the event that the Company consummates any acquisition, such funds will be
derived from the funds currently allocated to working capital or from revenues
generated from the Company's operations. There can be no assurance that the
Company will generate sufficient revenues for such acquisitions. Additional
working capital financing may be required to finance the costs of the Company's
marketing and business plans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
DIVIDEND POLICY
The Company plans to retain any future earnings for use in its
business and, accordingly, the Company does not anticipate paying dividends in
the foreseeable future. Payment of dividends is within the discretion of the
Company's Board of Directors and will depend, among other factors, upon the
Company's earnings, financial condition and capital requirements.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of
the Company at June 30, 1996 after giving effect to (x) the 2.2-for-one stock
dividend and (y) the exchange of 1,441,666 shares of Common Stock for 2,883,332
Class A Warrants, and (ii) the capitalization as adjusted to reflect the sale of
the 1,300,000 shares of Common Stock and 1,300,000 Class A Warrants offered by
the Company hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds." This section should be read in conjunction with the
Company's financial statements and related notes appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
June 30, 1996(1)
---------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Total long-term debt, excluding current portion. ............................. $ 883,283 $ 0
Preferred Stock, $.01 par value; 1,000,000 shares authorized;
none issued and outstanding................................................... -- --
Common Stock, $.01 par value; 20,000,000 shares authorized; $ 47,300 $ 60,300
4,730,000 shares issued and outstanding; 6,030,000 shares
issued and outstanding as
adjusted. ..................................................................
Additional paid-in capital.................................................... $ 327,820 $ 5,836,394
Accumulated deficit........................................................... $ (145,768) $ (208,768)
Total shareholders' equity............................................... $ 229,352 $ 5,687,926
Total capitalization.............................................. $1,112,635 $ 5,687,926
</TABLE>
- ----------
(1) Does not include (i) 1,275,000 shares of Common Stock reserved for issuance
upon exercise of the Company's Class A Warrants issued to the holders of 8%
Notes, (ii) 2,883,332 shares of Common Stock reserved for issuance upon
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<PAGE>
exercise of the Company's Class A Warrants, which Warrants are to be issued
by the Company in August 1996 in exchange for 1,441,666 shares of the
Company's Common Stock, (iii) 1,300,000 shares of Common Stock reserved for
issuance upon the exercise of Class A Warrants offered hereby, (iv) 300,000
shares issuable upon exercise of Underwriters' Warrant and (v) 390,000
shares of the Company's Common Stock which may be issued upon exercise of
the Over-Allotment Option and the Warrants issued in connection therewith.
See "Underwriting."
DILUTION
At June 30, 1996, the Company had a net tangible book value
(deficit) of $(317,349), or $(.07) per share of outstanding Common Stock. Net
tangible book value per share represents the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to receipt of the estimated net proceeds from
the Company's sale of 1,300,000 shares of Common Stock at the Offering price of
$5.10 per share and 1,300,000 Class A Warrants at the Offering price of $.10 per
Warrant (after deducting the estimated offering expenses), the pro forma net
tangible book value of the Company would have been approximately $5,398,332, or
approximately $.90 per share of outstanding Common Stock, at June 30, 1996. This
represents an immediate dilution of $4.30 per share, or 83%, to purchasers of
Common Stock in this Offering. The following table illustrates the per share
dilution to be incurred by the public investors in the Offering:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial Offering price per Share of Common Stock(1) $5.20
Net tangible book value (deficit)
per share before Offering.................................... $ (.07)
Increase per share attributable to
shares offered hereby........................................ $ .97
Pro forma net tangible book value per ------
share after Offering. ............................................ $ .90
Dilution of net tangible book value -----
per share to new investors. ...................................... $4.30
=====
- ----------
(1) Aggregate price per share of Common Stock and Warrant for purposes of
calculating dilution.
</TABLE>
The following table sets forth as of June 30, 1996 the number of shares
of Common Stock purchased from the Company and the total consideration and
weighted average price per share paid by existing shareholders of the Company
and by new investors purchasing shares in this Offering, before deducting the
underwriting discount and estimated Offering expenses:
<TABLE>
<CAPTION>
Weighted
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1).... 4,730,000 78% $ 61,000 1% $ .01
New investors(2)............ 1,300,000 22% 6,760,000 99% $5.20
--------- --- --------- --- -----
Total.................... 6,030,000 100% $6,821,000 100%
========= ==== ========== ====
</TABLE>
(1) Gives effect to (i) the exchange of 1,441,666 shares of the Company's
Class A Common Stock for 2,883,332 Class A Warrants to be effected in
August 1996 and (ii) the 2.2 for-one stock dividend to be effected in
August 1996.
(2) Gives effect to the aggregate purchase price of shares of Common Stock
and Class A Warrants.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data as of and for the fiscal
years ended March 31, 1996 and March 31, 1995 derived from the audited financial
statements of the Company. The selected financial data as of and for the three
months ended June 30, 1996 and 1995 is derived from the financial statements of
the Company which have not been audited.
In the opinion of management, the selected financial data
presented below for the three months ended June 30, 1996 and 1995 include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for these
periods. The results of operations for the three months ended June 30, 1996 are
not necessarily indicative of the results to be expected for the full fiscal
year. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements of the Company included elsewhere herein.
Selected Financial Data
<TABLE>
<CAPTION>
Three Months Ended
Year Ended March 31, June 30,
---------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Operating Data:
Net Revenue $6,181,757 $2,940,892 $2,487,381 $1,042,240
---------- ---------- ---------- ----------
Costs and expenses:
Cost of net revenues:
Product and supply costs 2,084,306 1,014,181 1,020,657 367,042
Rental equipment depreciation 251,445 145,815 82,701 53,958
---------- ---------- ---------- ----------
2,335,751 1,159,996 1,103,358 421,000
Selling, general and
administrative expenses 2,660,071 1,621,777 1,009,743 479,320
Provision for doubtful
accounts 298,811 125,000 42,795 52,499
Amortization of intangible
assets 107,966 245,012 43,024 23,753
---------- ---------- ---------- ----------
5,402,599 3,151,785 2,198,920 976,572
---------- ---------- ---------- ----------
Operating income (loss) 779,158 (210,893) 288,461 65,668
Interest expense 155,233 111,798 64,201 26,059
---------- ---------- ---------- ----------
Income (loss) before
provision for income taxes 623,925 (322,691) 224,260 39,609
Provision for income taxes 196,000 0 98,672 0
---------- ---------- ---------- ----------
Net income (loss) 427,925 (322,691) 125,588 39,609
Net income (loss) per common share(1) .09 (.07) .03 .01
Weighted average number of
shares outstanding(1) 4,730,000 4,510,000 4,730,000 4,730,000
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
March 31, June 30, 1996(1)
1996 -----------------------------
---------
As
Balance Sheet Data: Actual Actual Adjusted(2)
- ------------------- ------ ------ -----------
<S> <C> <C> <C>
Working capital (deficit) $(978,683) $(907,611) $3,915,161
Total assets 5,467,115 5,689,676 10,264,967
Total long-term
debt 931,512 883,283 0
Total shareholders'
equity 103,764 229,352 5,687,926
</TABLE>
(1) Gives effect to (i) the 2.2-for-one stock dividend to be effected by the
Company in August 1996 and (ii) the exchange of 1,441,666 shares of the
Company's Common Stock for 2,883,332 Class A Warrants.
(2) Gives effect to the 1,300,000 shares of Common Stock and 1,300,000 Class A
Warrants offered hereby and the application of the estimated net proceeds
therefrom.
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Financial Statements and related Notes contained elsewhere in this
Prospectus.
General
The Company was formed to acquire and operate a home health care
medical equipment and supply business. It commenced operations in July 1992 and
in April 1993 expanded its operations by acquiring certain Adam assets,
primarily rental equipment and customer lists.
Fiscal Year Ended March 31, 1996
Compared with Fiscal Year Ended March 31, 1995
Net revenues increased by $3,240,865, or 110.2%, to $6,181,757 at
March 31, 1996 from $2,940,892 at March 31, 1995 . The increase in revenues was
due primarily to the Company's expansion of its medical supply lines and
rehabilitation products division.
Cost of net revenues increased by $1,175,755, or 101.4%, to
$2,335,751 for the year ended March 31, 1996 from $1,159,996 for the year ended
March 31, 1995. Cost of net revenues decreased as a percentage of net revenues
to 37.8% for the year ended March 31, 1996 from 39.4% for the year ended March
31, 1995. This decrease in cost of net revenues as a percentage of net revenues
in the year ended March 31, 1996 is primarily attributable to several volume
discounts received by the Company in connection with the initial bulk purchases
of medical supplies when the Company became a provider to the largest certified
home health care agency in New York.
Selling, general and administrative expenses increased by
$1,038,294, or 64.0%, to $2,660,071 at March 31, 1996 from $1,621,777 at March
31, 1995 representing a decrease as a percentage of net revenues of 12.1%, to
43% from 55.1%. The decrease was primarily attributed to certain fixed selling,
general and administrative expenses remaining constant as revenue increased.
Selling, general and administrative expenses increased due to the hiring of
additional personnel to support the growth in the Company's sales.
-18-
<PAGE>
The Company had income from operations of $779,158 for the year ended
March 31, 1996, as compared to a loss from operations of ($210,893) for the year
ended March 31, 1995 . This was mainly attributed to the Company's significant
increase in revenue while certain operating costs did not increase
proportionally with the increase in revenue. To a lesser degree, the increased
profits were also due to the expiration of certain intangible assets which
expired in the March 31, 1995 fiscal year and decreased legal fees in the year
ended March 31, 1996.
Interest expense increased by $43,435, or 38.9%, to $155,233 at
March 31, 1996 from $111,798 at March 31, 1995 . The increase was due to an
increase in outstanding indebtedness.
The Company had net income of $427,925 at March 31, 1996, compared
with a net loss of $(322,691) at March 31, 1995.
Three Months Ended June 30, 1996 Compared
with Three Months Ended June 30, 1995
Net revenues increased by $1,445,141, or 138.7%, to $2,487,381 for
the three months ended June 30, 1996 from $1,042,240 for the three months ended
June 30, 1995. This increase was primarily due to the expansion of the Company's
medical supply business after the Company became a provider of disposable
medical supplies for the largest certified home health care agency in New York
and further development of the Company's rehabilitation products division.
Cost of net revenues increased by $682,358, or 162.1%, to $1,103,358
for the three months ended June 30, 1996 from $421,000 for the three months
ended June 30, 1995. Cost of net revenues increased as a percentage of net
revenues to 44.4% for the three months ended June 30, 1996 from 40.4% for the
three months ended June 30, 1995. The increase in percentage of cost of net
revenues was due to the increase in net revenues from the sale of medical
supplies which has a higher product cost than durable medical equipment and
additionally, the increased sales, rather than rentals, of durable medical
equipment which results in a higher product cost for such equipment. Management
does not anticipate that the sales of medical supplies as a percentage of the
Company's net revenues will further materially increase.
Selling, general and administrative expenses increased by $530,423,
or 110.7%, to $1,009,743 for the three months ended June 30, 1996 from $479,320
for the three months ended June 30, 1995, but decreased as a percentage of net
revenues to 40.6%, from 46.0%. The decrease in expenses as a percentage of net
revenues was primarily due to fixed expenses remaining constant as net revenues
increased. Selling, general and administrative expenses increased due to the
hiring of additional personnel to support the growth in the Company's sales.
Income from operations increased by $222,793 to $288,461 for the
three months ended June 30, 1996 from income from operations of $65,668 for the
three months ended June 30, 1995. The operating income as a percentage of net
revenues was 11.6% for the three months ended June 30, 1996 as compared to 6.3%
for the three months ended June 30, 1995. The increase was primarily due to the
increase in net revenues and a decrease in the selling, general and
administrative expenses as a percentage of net revenues as stated above.
Interest expense increased by $38,142, or 146.4%, to $64,201 for the
three months ended June 30, 1996 from $26,059 for the three months ended June
30, 1995. The increase in outstanding indebtedness resulted from the Company's
need to finance its expansion. The Company experienced a .1% increase in
interest expense as a percentage of net revenues to 2.6% for the three months
ended June 30, 1996 from 2.5% for the three months ended June 30, 1995.
The Company had net income of $125,558 for the three months ended
June 30, 1996 and net income of $39,609 for the three months ended June 30,
1995.
Liquidity and Capital Resources
The Company's primary need for funds is to provide working capital to
support its business plans. From inception through the end of fiscal 1994, the
Company financed its operations, in part, through loans from its officers and
directors in the aggregate principal amount of $245,200. The Company has also
financed its operations through credit obtained from vendors, and, to a lesser
extent, from credit lines and bank notes. In connection with the expansion of
its business, the Company entered into lease agreements relating to the purchase
of inventory and rental equipment at interest rates ranging from 9% to 13% per
year. The Company currently has seven lease financing agreements outstanding
with three vendors which it expects to satisfy out of cash provided by operating
activities.
-19-
<PAGE>
Because of an increased need for working capital as a result of the
expansion of the Company's business, the Company completed two equity private
placements and one debt financing. Between April and December 1995, the Company
received net proceeds of $99,870 from the sale of 1,041,666 shares of its Common
Stock. In January 1996, the Company completed a private placement of 500,000
shares of Common Stock for a net consideration to the Company of $212,500. (In
August 1996, 1,441,666 of such shares of Common Stock were exchanged for
2,883,332 Class A Warrants.) In February 1996, the Company completed a private
placement of 25.5 units, each unit comprised of a promissory note in the
principal amount of $25,000 with interest payable at a rate of 8% per year and
50,000 Class A Warrants. The net consideration received by the Company in
connection with this debt financing was $553,500. The Company is obligated to
repay the aggregate principal amount of $637,500 plus accrued interest on the 8%
notes from the proceeds of the Offering. The Company also intends to repay, with
the proceeds of the Offering, the related party loans in the aggregate principal
amount of $255,409 (representing the original loans from officers and directors
in the aggregate principal amount of $245,200 plus $10,209 of accrued interest
which has been added to principal). See "Use of Proceeds."
In January 1996, one of the Company's vendors advanced funds to
enable the Company to satisfy in full an outstanding line of credit with NatWest
Bank in the aggregate principal amount of $106,338. As a result, the Company has
outstanding a one year note, secured by inventory, with such vendor in the
aggregate principal amount of $106,338 with monthly principal payments of $8,870
and interest at a rate of 1% over the prime rate of Chase Manhattan Bank, N.A.
The Company currently has a credit facility with the Bank of New York in the
aggregate principal amount of $200,000 which is fully drawn down, with interest
payable monthly at a rate of 1.0% above the prime rate of the Bank of New York,
as announced from time-to-time. At June 30, 1996, the Company had negative
working capital of $(907,611). In August 1996, the Company received a loan in
the principal amount of $100,000 with interest accruing at a rate of 8% per
year. The Company intends to repay such loan out of the proceeds of the
Offering. Virtually all of the Company's revenues are attributable to payments
received from third party payors who generally do not make payments for 75 to 90
days after invoicing. In order to manage the delay between invoicing and receipt
of payment, the Company has entered into various financing arrangements to fund
operations. See "Use of Proceeds."
The Company believes that internally generated funds and the proceeds
of this Offering will provide sufficient liquidity and enable it to meet its
currently foreseeable working capital requirements for at least the next 12
months. However, the Company may need to obtain additional financing to meet its
growth objectives or to continue its operations. There can be no assurance that
additional financings will be available if and when needed by or on terms
acceptable to the Company. Potential sources for any such financings have not
yet been identified. See "Risk Factors - Need for Additional Financing." In
addition, for a period of two years following the Effective Date, the Company
cannot issue shares of Common Stock (other than pursuant to the 1996 Stock
Option Plan) without the prior written consent of the Representative. Such
limitations could adversely affect the Company's ability to obtain additional
financing. See "Underwriting."
The Company believes that the adoption by the Financial Accounting
Standards Board of Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets to Be Disposed Of" and SFAS
No. 123, "Accounting for Stock Based-Compensation" will not have a material
impact on the Company's financial condition and results of operations.
The Company believes that a final judgment in the Adams litigation in
its favor would not affect its liquidity, operations or capital resources,
because management believes that a judgement in the Company's favor would result
in a reduction of the purchase price to be paid by the Company for the assets
and the Company's current portion of long-term debt would be reduced
accordingly. If the defendants were to prevail, the Company would, in all
likelihood, attempt to obtain the necessary financing to satisfy any additional
amounts required to be paid pursuant to a judgment requiring payment of the
original purchase price. The Company does not believe such a judgment would have
a material adverse effect on its liquidity, operations and capital resources.
Although the Company does not believe that a judgment in favor of the defendants
would include punitive damages, should such a judgment be awarded, it would have
a material adverse effect on the Company's liquidity, operations and capital
resources.
-20-
<PAGE>
Seasonality
The Company generally has not experienced seasonal fluctuation.
Inflation
The Company believes that the relatively moderate rates of inflation
in recent years have not had a significant impact on its net revenues or its
profitability.
-21-
<PAGE>
BUSINESS
The Company is a provider of an extensive variety of home health care
products and services, durable medical equipment, and disposable medical
supplies in the metropolitan New York region. The Company services the home
health care market by coordinating with various health care workers and payor
case managers to determine the home health needs of patients. In April 1993, the
Company acquired certain assets of Adam, including inventory, office equipment
and an assignment of the office lease, for a purchase price of $1,500,000.
Approximately $450,000 was paid at or prior to the closing of the Acquisition,
with the balance payable in installments through March 31, 1995. The Company has
not paid the balance and is seeking a rescission of the payment obligations. See
"Legal Proceedings." Since acquiring the assets of Adam, the Company's
management has expanded operations by implementing a sales strategy focusing on
an informed diagnostic-centered approach, signing new major payor contracts with
additional HMOs and PPOs including Metro Plus Health Maintenance Organization,
Beech Street Corporation, Group Health Insurance, Inc. and MultiPlan Inc., and
offering new equipment, products and services such as low air loss beds,
alternating pressure beds and standing wheelchairs. In addition, the Company has
recently significantly increased its sales of medical supplies as a result of
becoming a provider of disposable medical supplies for the largest certified
home health care agency in New York.
The Company anticipates continued growth in the home health care
market due to increasing emphasis on cost effective medical treatment, the
"Greying of Our Society" and continuing advances in medical technology. The
over-65 population, which has a higher incidence of illness and disability,
continues to increase. At the same time, home treatment of medical needs as
compared with hospital treatment is generally considered more cost effective.
The increased acceptance of home care has been bolstered by medical
technological advances which have facilitated the maintenance of high medical
standards in home care. The Company believes that cost containment initiatives
of managed care providers and continued limitations on reimbursement to hospital
and other institutions will contribute to continued strong demand for home
medical equipment and products.
Market Overview
Based on market research prepared by FIND/SVP, Inc., an independent
New York city-based research firm, the Company estimates that the size of the
home health care market in 1992 was $20 billion and is expected to grow to $42.5
billion by 1996. The Company estimates that the local tri-state market (New
York, New Jersey and Connecticut) was $4.2 billion in 1992, growing to $8.5
billion by 1996.
Aging Population. According to FIND/SVP, Inc., the number of
individuals over 65 in the U.S. has grown from 25.7 million in 1980, or 11.3%,
of the population, to approximately 31.6 million in 1990, or 12.6%, of the
population and is projected to increase to more than 33.8 million, or 13%, of
the population by 1996. The elderly have traditionally accounted for two to
three times the average per capita share of health care expenditures. As the
number of Americans over 65 increases, the need for home health care services is
also expected to increase. The Company estimates that 4.0 million people will
reach the age of 65 by 1996 in its local market.
Cost Effectiveness of Home Health Care Services. According to
FIND/SVP, Inc., health care expenditures in the United States increased from
approximately $248 billion in 1980 (9.1% of the gross national product ("GNP"))
to approximately $666 billion in 1990 (12.2% of GNP). In response to rapidly
rising costs, governmental (Medicare and Medicaid) and private payors have
adopted costs and containment measures that encourage reduced hospital
admissions, reduced lengths of stay in the hospitals, and delayed nursing
home/institutional admission. For example, the current hospital reimbursement
methodology is based on patient diagnosis with very specific limitations
-22-
<PAGE>
on the length of hospital stays, leading to the earlier discharge of patients
from hospitals. These measures have, in turn, fostered an increase in home
health care which, when appropriate, generally provides medically necessary
equipment and products at significantly less expense than in an institutional
setting.
Physician Acceptance. In the last decade, the medical professional
has shown greater acceptance of home health care in the clinical management of
patient care. Evidencing this greater acceptance, the American Medical
Association Councils on Scientific Affairs and Medical Education have
recommended that training in the principles and practice of home health care be
incorporated into the undergraduate, graduate and continuing education programs
for physicians. In addition, the reimbursement guidelines of payor sources
(which are increasingly drafted to limit or avoid hospital treatment) have
created a climate in which physicians must prescribe and arrange for home health
equipment and products for their patients.
Advanced Technology. Advances in technology have enabled numerous
patients who previously required hospitalization to be treated at home without
sacrificing the quality of care. The advances in the miniaturization and
computerization of equipment have fostered the development of portable medical
equipment. For example, such advances have enabled patients requiring acute
respiratory care to be treated at home because of the availability of portable
respiratory equipment. In addition, the development of advanced seating and
positioning equipment and power vehicles (such as wheelchairs and scooters) have
greatly enhanced the feasibility of home care for many developmentally disabled
individuals, as well as patients suffering from stroke, paralysis and head
injuries. The number of medical conditions that can be treated in the home is
growing significantly. These conditions include incontinence, wounds, diabetes,
infections and infectious diseases (including AIDS-related infections), impaired
digestive tracts and various forms of cancer.
Products and Services
The Company services patients referred to the Company by nurses,
physicians, social workers and payor case managers, as well as discharge
planners at hospitals, HMOs, PPOs and rehabilitation centers. Working with these
individuals, the Company's personnel coordinate the delivery and set-up of the
products and supplies to be used by patients in their home recovery and care.
Upon receipt of an order, the Company will arrange for the appropriate products
and supplies to be delivered to the patient at home. At the time of delivery,
the Company's personnel will set up equipment as necessary and spend time with
the patient and/or care givers to explain the proper use of the medical
equipment delivered. The Company handles customer service inquiries via an 800
telephone number and will generally send its personnel to visit the patient if
necessary to rectify any problems that may arise.
The primary categories of products provided by the Company (and
examples of the products available in each category) are set forth below:
Durable Medical Equipment - Hospital beds
- Wheelchairs
- Walking aids
- Bathroom safety equipment
- Patient lifts
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<PAGE>
Disposable Medical Supplies - Incontinent products (diapers,
liners, chux)
- Wound care products (dressings and
bandages for treating decubitus (bed
sores and lesions), pressure sores,
ulcerations, etc.)
- Nutritional products (Ensure,
Sustacal, etc.)
- Diabetic products/supplies
- Ostomy supplies
- Urological supplies (catheters, etc)
- Blood pressure products
- Skin care products
Rehabilitation Products - Power operated vehicles
(includes specialized versions (such as wheelchairs and scooters)
of durable medical products) - Advanced support surfaces (low air
loss beds, alternating pressure
mattresses)
- Specialized seating
Respiratory Equipment and Products - O2 concentrators
- Nebulizers with compressors
- Suction pumps
- Oximetry equipment
- C-PAP (Continuous positive air
pressure) equipment
- Bi-PAP (Bi-level positive air
pressure) equipment
The Company's inventory is housed in its 20,000 square foot
office/warehouse facility in Mount Vernon, New York. All of its products are
readily available from more than one supplier and the Company can generally fill
an order within 24 hours of placement. The Company operates on a regular basis
24 hours a day, Monday through Saturday and provides services on an emergency
basis on Sundays. The Company utilizes its 800 telephone number for customer
service calls. The Company's office receives calls from 8:00 A.M. to 6:00 P.M.
Monday through Friday and 9:00 A.M. to 1:00 P.M. on Saturdays while an answering
service handles calls at all other hours. The Company's service technicians are
available to handle calls on a 24-hour basis.
Generally, the cost of the Company's products and supplies is covered
by third party payor arrangements such as Medicaid, Medicare or private
insurance. Equipment such as hospital beds, wheelchairs and patient lifters
covered by Medicare is generally paid for on a rental basis over a 15 month
term. In many instances, such equipment is returned to the Company prior to the
15 month term, in which case the equipment is re-conditioned and available for a
new rental term. Generally, the equipment can be reconditioned for use to be
available for several rental terms for a period in excess of five years. The
Company receives a semi-annual maintenance payment for any equipment that is
used in excess of 15 months. Purchased equipment covered by Medicare is
reimbursed at approved published prices. Equipment covered by Medicaid is
generally sold pursuant to an approved price range or a cost plus fee basis.
Insurance payors use customary and usual standards for their reimbursement terms
which are generally comparable to Medicare terms. The Company usually receives
payment within 75 to 90 days of invoicing. An inconsequential percentage of the
Company's business is direct cash sales to customers. For the fiscal year ending
March 31, 1996, the allocation of net revenues among the Company's third party
payors was approximately 35.4% to Medicare, 36.4% to Medicaid and 28.2% to
private insurers and direct cash sales. See "Risk Factors -Dependence Upon Third
Party Reimbursement."
-24-
<PAGE>
Strategic Objectives
The Company's strategic objective is to become the leading provider of
home medical equipment, disposable medical supplies and services in the
metropolitan New York/New Jersey/Connecticut region by focusing on the following
objectives.
Integrated Care. The Company is committed to fulfilling the
physician's and/or payor source's need for a complete plan of care for their
patients at home by providing a full range of quality home medical equipment and
related services. The Company plans to seek out and negotiate agreements to
provide products and services in conjunction with providers of other home
medical services such as nursing companies and intravenous care providers. These
agreements will enable the Company to be considered a full service provider to
health care workers and customers for their home health care needs and will also
increase the number of the Company's referral sources. While the Company's core
business is its home medical equipment, the Company's revenues are enhanced by
its ability to provide other medical products (products for the treatment of
incontinence, diabetes and wound care, as well as advanced support surfaces,
etc.) to high acuity and multiple therapy patients.
Focus On Growth Markets. The Company is seeking to expand its core home
medical equipment business by enlarging its geographic sales territory and
increasing the number of referral sources with whom it has relationships. The
Company is also exploring the possibility of offering new products in some of
its existing high growth markets such as respiratory therapy, nutritional
products, decubitus care (skin sores or lesions), advanced support surfaces,
advanced seating and positioning products, power operated vehicles and
incontinence treatment. The Company is also exploring the possibility of adding
new product categories to its existing business. High growth markets being
considered include orthotics, mastectomy supplies, specialized wound care
products and products for the treatment of sleep disorders.
Increase Market Share. The metropolitan New York market is highly
fragmented, comprised of a large range of small local operators. The Company
estimates that there are 1,000 home medical equipment dealers in its market. The
Company believes 85% of such dealers generate revenues of up to $2.0 million,
13% generate revenues between $2.0 million and $5.0 million, and 2% generate
revenues of in excess of $5.0 million. There are a few regional or national home
medical equipment businesses. With the anticipated continued growth of the home
health care market, the Company believes that there is an opportunity to expand
its market share by providing the elements it believes are critical to the
success of home medical equipment providers - (i) providing high quality
products, (ii) offering a high level of customer service evidenced by prompt
responsiveness to, and good communications with, customers, and (iii)
understanding and adapting to the needs of local markets.
Improve Operating Efficiencies. Management is committed to reducing
operating expenses through the use of improved systems and controls to
streamline its operations in the areas of billing and collections,
administrative support and sales administration. The Company has implemented new
systems for tracking sales, enabling management and sales personnel to monitor
performance and target particular geographic or product areas for expansion. The
Company recently redesigned and computerized its intake procedures to simplify
phone ordering for both the order placer (usually a health care worker) and the
end user (the patient). Simplifying the intake process has improved the
Company's billing and collection procedures because of the improved accuracy and
completeness of data collected. In addition, the Company is in the process of
installing new computer systems that the Company believes will improve employee
productivity and further reduce administrative overhead.
In addition to expanding its business by increasing sales, the
Company may, if such opportunities arise, consider the expansion of its business
by means of acquisitions or joint ventures. The Company's ability to effect such
transactions could be adversely affected by its inability to issue shares of
Common Stock without the Representative's prior written consent for a period of
two years following the Effective Date. See "Underwriting." The Company is not
currently conducting formal negotiations for any such acquisitions.
-25-
<PAGE>
The Company's operating strategy to achieve the foregoing objectives
include the following elements:
Targeting Referral Sources. The Company has been developing an
effective sales force currently consisting of four field sales representatives,
seven institutional on-site sales and service representatives, thirteen customer
service representatives at the Company's offices who take orders and follow-up
calls from customers and referral sources and six equipment drivers/technicians
who generally work in the field to handle certain repairs and information
inquiries. The field and customer service representatives enable the Company to
market its home medical equipment and products to numerous sources of patient
referrals, including physicians, therapists, nurses, discharge/case management
professionals, social workers, hospitals, sub-acute facilities, clinics, nursing
homes, HMOs, PPOs, insurance companies and social service organizations as well
as directly to the end user. The Company is constantly training and tracking its
sales representatives to generate more revenues from the Company's existing
referral sources and to better target and penetrate new sources of patient
referrals.
Commitment to Quality Service. The Company believes that the quality of
its service is critical to its ability to obtain referrals and to expand its
business. To assure delivery of high quality service, the Company has
established policies and procedures prescribing standards for patient care and
has retained the services of a full time consultant who regularly examines its
operation/facility to assure compliance with those standards. The Company has
been accredited with commendation by the Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO").
Focus on Receivables Management. In selecting its equipment, products
and services, the Company carefully considers the adequacy of reimbursement and
the ease with which payment can be obtained. The Company's reimbursement staff
has significant experience in the industry as its primary billers average 16.5
years experience in reimbursement. Their knowledge and familiarity with the
various reimbursement forms, policies and categorizations expedites the
Company's billing procedures and facilitates the reimbursement process. The
Company's receivables management is also enhanced by its electronic billing of
Medicare and Medicaid which reduces the amount of paperwork to be handled and
the amount of time required to process reimbursement billing.
Management Information Systems. The Company has been implementing
updated computerized systems, including order entry, distribution, third-party
billing and customer information systems. These systems enable the Company to
have relatively easy access to all the information processed by it including
commencement of service, type of product utilized, the time period used and
clinical outcome (for rental equipment users) and frequency and nature of
service calls. These systems enable the Company to provide utilization reports
and relevant data to its referral sources who can use such information to
control the cost of managing home patient care. The Company intends to seek to
develop applications to integrate its database with those of its referral
sources and with other health care providers. This would allow the Company to
provide integrated patient discharge planning and detailed utilization review
data to its referral sources.
Marketing Programs
Diagnostic Centered Programs. The Company has developed a diagnostic
centered approach to meeting the needs of its customers. The Company's personnel
receives continuing education focused on the needs of customers classified by
diagnosis or special needs. As a result, the Company's representatives can
provide doctors, nurses, social workers, therapists, payor case managers, and
customers with information regarding products for a patient's home care needs,
both in terms of general care and product improvements. The Company believes
that this enhances the quality of the service it can offer to referral sources
as well as the products it supplies to the end users.
-26-
<PAGE>
Institutional Support Program. The Company's current management team
has developed a support program for the benefit of institutions such as
hospitals and certified home health agencies whereby the Company provides
certain of its personnel for on-site locations at these institutions. These
on-site managers work with the institution's personnel in determining the need
for medical equipment, products and services for patients about to be
discharged. They also help determine patient payor sources, order patient home
medical equipment and arrange for delivery of the equipment to the patient at
home. The Company believes that this program facilitates cost effective
treatments for the home patient, and enhances the Company's position as a source
of home medical equipment and supplies.
Rehabilitation Division. The Company has established a separate
division within its current facilities to provide specialized products for
individuals with acute, long-term home health care needs. These products include
specialized bathroom products, specialized vehicles and specialized support
services, many of which have to be customized to meet individual needs. Although
the Company has been providing such products for the past year, management has
recently established a separate division to sell, market and customize these
products. In addition to a separate sales staff, the Company is establishing a
workroom to customize the rehabilitation products as needed.
Additional Home Care Services. The Company is exploring the potential
for expanding its business to include additional home care services. Management
expects that its knowledge of the needs of patients and providers in connection
with durable medical goods can be applied to a broader range of home care
medical services. The establishment of additional related home care services
would enable the Company to offer providers a single source for coordinating all
of their patients' at home health care needs. By working through a single
source, the patient's needs can be monitored and coordinated to ensure that all
necessary services and goods are provided on a timely, efficient basis.
Competition
The home health care provider industry is highly competitive and
fragmented. While there are a few selected national providers, the Company
currently encounters its most significant competition in providing home health
care products from small commercial providers operating in the New York
metropolitan area. The Company believes that health care facilities in the
geographic area serviced by the Company consider quality of care, reliability
and reputation to be the most important factors in referring a home health care
provider to its patients, although other factors such as financial stability,
personnel policies and practices and cost are also considered. In addition to
present competition, other companies that do not currently provide home health
care products may enter the business.
Government Regulation and Reimbursement
The Company must comply with various requirements in connection with
its participation in Medicaid and Medicare. Medicaid is a combined federal-state
program for medical assistance to impoverished individuals who are aged, blind,
or disabled or members of families with dependent children. The Medicaid program
in New York is subject to federal requirements. The New York State Department of
Social Services has the authority to set levels of reimbursement within federal
guidelines. The Company receives, from its customers who are covered by
Medicaid, only the reimbursement permitted by Medicaid and is not permitted to
collect from the patient any difference between its customary charge to such
customers and the amount reimbursed. Any difference between the Company's
customary charge to its customers who are covered by Medicaid and amounts
reimbursed by Medicaid are not material to the Company's operating results
because the Company's customary charges to such customers generally do not
exceed amounts reimbursable by Medicaid.
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<PAGE>
Medicare is a federal health insurance program, for the elderly and for
chronically disabled individuals, which pays for equipment and services when
medically necessary. Medicare uses a charge-based reimbursement system for
purchased medical equipment based on approved published prices. Equipment such
as hospital beds, wheelchairs and patient lifters is generally paid for on a
rental basis over a 15 month term, with maintenance payments semi-annually
thereafter.
The Company, like other Medicaid and Medicare providers, is subject to
governmental audits of its Medicaid and Medicare reimbursement claims, but to
date has not experienced significant losses as a result of any such audit. The
Company is not subject to any pending audits or audit reports. As a provider of
services under the Medicaid and Medicare programs, the Company is also subject
to the Medicaid and Medicare fraud and abuse laws ("Fraud and Abuse Laws"). The
laws prohibit any bribe, kickback or rebate in return for the referral of
Medicaid or Medicare patients. Violations of these prohibitions may result in
civil and criminal penalties and exclusion from participation in the Medicaid
and Medicare programs. The United States Department of Health and Human Services
("HHS") has interpreted the Fraud and Abuse Laws as they apply to Medicare and
Medicaid broadly to include the intentional payment of anything of value to
influence the referral of Medicare or Medicaid recipients. HHS has issued
regulations that set forth certain so-called "safe harbors," representing
business relationships and payments that can be undertaken without violation of
the Fraud and Abuse Laws. The Company believes that it has arranged and will
continue to arrange its business relationships so as to comply with the Fraud
and Abuse Laws. The Company has not been the subject of any Medicaid or Medicare
fraud investigation to date.
The Company believes it is in substantial compliance with all material
statutes, regulations, standards and conditions applicable to its business.
However, new laws and/or regulations, standards or conditions may be adopted or
existing laws, regulations, standards or conditions may be interpreted by
governmental authorities in a manner which could adversely impact the Company's
operations. The Company cannot predict whether any such proposals or
interpretations will be adopted and, if adopted, what effect such proposals or
interpretations would have on the Company's business.
The Company's participation in the New York Medicaid program requires
it to enroll and re-enroll as an authorized provider with the New York State
Department of Social Services. Re-enrollment is required upon certain events
including a change of five (5%) percent or more of beneficial equity ownership
in the Company. An adverse determination, which is not subject to prior judicial
review, could have material adverse consequences to the Company. The Company has
recently received approval of its re-enrollment application.
Government funding for health care programs is subject to statutory and
regulatory changes, administrative rulings, interpretations of policy,
determinations by intermediaries and governmental funding restrictions, all of
which could materially increase or decrease program reimbursements for the
Company's products and services. Efforts have been made at various levels to
reduce the costs of such programs. No assurance can be given that future funding
levels for Medicare and Medicaid programs will be comparable to present levels.
Changes in reimbursement policies as a result of budget cuts or other government
action could adversely affect the Company's operations.
The Clinton Administration, as well as certain United States
Congressmen, have each proposed legislation that would affect major reforms of
the United States health care system, including increasing access to health care
for all citizens. Although such legislation has not been enacted, health care
reform proposals are still under consideration and, New York State is
considering various health care reform proposals of its own. The Company
anticipates that Congress and state legislatures will continue to review and
assess alternative health care delivery systems and cost-control measures, and
public debate of these issues will likely continue in the future. Given the
complexity of these issues and the early stage of the legislative process, the
Company cannot predict which, if any, reform measures will be adopted and, if
adopted, the effect such measures will have on the Company's business.
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<PAGE>
Insurance
The Company carries a broad range of general liability, comprehensive
property damage, worker's compensation, and other insurance coverages that
management considers adequate for the protection of its assets and operations,
although there can be no assurance that the coverage limits of such policies
will be adequate. The Company has general liability coverage of $1,000,000 per
occurrence and $3,000,000 aggregate and umbrella coverage of $1,000,000. A
successful claim against the Company in excess of its insurance coverage could
have a material adverse effect on the Company and its financial condition.
Claims against the Company, regardless of their merit or outcome, may also have
an adverse effect on the Company's reputation and business. See "Risk Factors -
Potential Liability; Adequacy of Insurance Coverage."
Employees
As of August 1, 1996, the Company had approximately 67 employees. Its
management team is comprised of two executives and two managers with extensive
experience in the home health care industry. Four field sales representatives
and seven institutional on-site sales and service representatives work on a
salary plus commission basis. Six drivers deliver products and are specially
trained by the Company to properly set up equipment and explain its use to
patients. The Company has nine warehouse workers, two wheelchair mechanics,
thirteen customer service and sales intake personnel, sixteen individuals who
handle reimbursement and a five person administrative staff. The Company also
has one supervisory staff respiratory therapist and a pool of respiratory
therapists who work on a consulting basis on an as needed basis to provide
service and advice to customers utilizing respiratory equipment. The Company
also has six contract drivers who make deliveries. The Company is not a party to
any collective bargaining agreements and considers its relations with employees
to be good.
Legal Proceedings
In 1993, the Company commenced an action against Adam and its
principals in the Supreme Court of the State of New York, County of Westchester.
The action arises out of the acquisition of the business and assets of Adam by
the Company in April 1993. The complaint alleges that the defendants made
numerous misrepresentations relating to the business previously conducted by
Adam. The complaint seeks recovery of damages of $1,500,000, additional punitive
damages, the reduction of the original purchase price or rescission of the
original purchase agreement. The defendants have asserted counterclaims against
the Company. The counterclaims seek the payment of the unpaid purchase price of
$1,050,000 and collection expense of over $175,000. Defendants also allege
various additional causes of action, claiming plaintiffs converted or interfered
with the collection of property owned or due to defendants and seek damages of
over $7,000,000, including $5,000,000 in punitive damages. A motion for summary
judgment filed by defendants has been denied in its entirety. Partial summary
judgment has been granted to the Company dismissing three of the counterclaims
asserted against it. A Notice of Appeal from these judgments has been filed by
defendants. The Company believes it has meritorious defenses to the remaining
counterclaims. However, there can be no assurance that the Company will be
successful in recovering damages for its claims or in defending itself against
the remaining counterclaims. A judgment against the Company as a result of the
counterclaims could have a material adverse effect on its business. See "Risk
Factors - Pending Litigation; Potential Adverse Impact of Counterclaims Against
the Company."
From time to time the Company is a party to litigation arising in the
ordinary course of business. There can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities occurring out of
such claims.
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<PAGE>
Facilities
The Company offices and warehouse are located in a 20,000 square foot
facility in Mount Vernon, N.Y., pursuant to a five year lease commencing January
1, 1996 which provides for annual rental payments of $114,000 for the first
three years of the lease term and $132,000 for the last two years of the lease
term.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The directors and executive officers of the Company are as follows:
Name Age Position
Alan T. Sheinwald 31 President, Chief Executive Officer,
Chief Financial Officer and Chairman
Allan C. Goldfeder 41 Chief Operating Officer and Secretary
Matthew J. McDonough 34 Operations Manager
Bruce L. Ansnes 53 Director
Bernard M. Kruger, M.D. 54 Director
Craig V. Sloane 45 Director
Dean L. Sloane 50 Director
Alan T. Sheinwald joined the Company in November 1995 as President,
Chief Executive Officer, Chief Financial Officer and Director and was elected
Chairman in June 1996. From April 1995 until joining the Company, he was
President and Chief Executive Officer of Alliance Care Services, Inc., a health
care consulting firm. From January 1990 until April 1995, Mr. Sheinwald was
employed by Mayflower Group, Inc. ("Mayflower"), initially as a General Manager
for a transportation facility, then as Senior Operations Manager overseeing
sales and operations for Mayflower's northeast division, a $20 million operating
division. In 1993, Mr. Sheinwald was named Vice President - Sales and Marketing
for Mayflower, overseeing the development and implementation, with agencies and
institutions nationwide, of transport systems, including medical transport
systems. From May 1987 until January 1990, Mr. Sheinwald was a Cavalry Tank
Platoon Leader, Division and Battalion Staff Officer for the United States Army.
Mr. Sheinwald has a B.S. from the United States Military Academy at West Point
and an M.B.A. from New York University.
Allan C. Goldfeder has been Chief Operating Officer of the Company
since September 1993 and Secretary of the Company since January 1996. From
January 1993 until September 1993, Mr. Goldfeder was an independent consultant
to the health care industry. From July 1989 until January 1993, he was a
Director of Operations and then Director of New Product Development for U.S.
Home Care Corporation. Mr. Goldfeder was a divisional Vice President from
February 1986 until June 1989 with Continental Health Affiliates, Inc. From
January 1977 until September 1985, Mr. Goldfeder was employed by Quality Care.
Mr. Goldfeder has a B.S. from City University of New York.
Matthew J. McDonough joined the Company in February 1996 as
Operations Manager. From December 1992 to July 1994, Mr. McDonough was a
Regional Manager for the Mayflower Group, Inc. and from July 1994 to February
1996 was an Assistant Station Manager with Airborne Express Inc. Mr. McDonough
has also gained significant operational experience as an engineering officer in
the United States Navy. He has a B.S. from Old Dominion University.
Bruce L. Ansnes became a director of the Company in August 1996.
Since 1986, he has been a private investor. From 1978 until 1983, Mr. Ansnes was
Treasurer, and from 1983 until 1986, Treasurer and Vice President, of Culbro
Corporation. He has a B.A. from Colby College and an M.B.A. from Columbia
University.
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<PAGE>
Bernard M. Kruger, M.D. became a Director of the Company in August
1996. He has been in the private practice of internal medicine and medical
oncology since 1979, and is affiliated with Lenox Hill Hospital, Beth Israel
Hospital, Mount Sinai Hospital and the Orthopedic Institute.
Craig V. Sloane has been a director of the Company since its
inception. Since December, 1990, he has served as Vice President - Operations
and a Director of Community Medical Transport, Inc., a publicly traded company.
From 1985 through October 1990, he was a futures analyst at Smith Barney Harris
Upham & Co.
Dean L. Sloane has been a director of the Company since its
inception. Since December, 1988, he has been Chairman of the Board, President
and a Director of Community Medical Transport, Inc., a publicly traded company.
Mr. Sloane has also been a director, since May, 1996, of SunStar Healthcare,
Inc., a publicly traded company. From 1973 through 1988, Mr. Sloane served as
Chief Executive Officer of Prime Medical Services Inc. (formerly known as C.P.
Rehab Corp.), a publicly traded specialty medical management service company.
Mr. Sloane co-founded and served as Chairman of the Board of National Home
Health Care Corp., a publicly traded medical management and home care company,
from 1983 to 1986. Mr. Sloane also served as a director of EPIC Health Group,
Inc., a publicly traded mail order pharmaceutical company, from 1984 to 1986.
Mr. Sloane has been a member of the Young Presidents Organization since 1985 and
is a Certified Public Accountant.
Dean L. Sloane and Craig V. Sloane are brothers.
Upon the closing of the Offering and for a period of three years
thereafter, the Underwriters shall have the right, but not the obligation, to
appoint a designee to serve as an advisor to the Board of Directors. The
Underwriters have not designated an individual to serve in such capacity.
Executive Compensation
The following table sets forth information concerning compensation
paid or accrued by the Company for services rendered during the fiscal years
ended March 31, 1994, 1995 and 1996 to the Company's Chief Executive Officer and
each of the Company's other executive officers (collectively, the "Named
Executive Officers"):
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------- ---------------------------------------
Other Annual Restricted
Name and Fiscal Compensation Stock Awards Options LTIP
Principal Position Year Salary ($) Bonus ($) Other Compensation Granted Payouts All
- ------------------------ ------ ---------- ----- ------------ ------------------ ------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan C. Goldfeder 1996 110,000 0 9,600 0 0 0 0
Chief Operating 1995 110,000 0 9,600 0 0 0 0
Officer(1) 1994 55,000 0 4,500 0 0 0 0
Alan T. Sheinwald 1996 48,077 0 3,150 0 0 0 0
Chief Executive
Officer(2)
</TABLE>
- -----------
(1) Mr. Goldfeder was the Company's principal executive officer for the fiscal
years ended March 31, 1995 and 1994.
(2) Mr. Sheinwald's employment with the Company commenced November 13, 1995.
Employment Agreements
Upon consummation of this Offering, the Company will enter into an
employment agreement with Alan T. Sheinwald, President, Chief Executive Officer
and Chief Financial Officer of the Company. The agreement will have a three-year
term which renews for an additional year on each anniversary of the agreement,
and provides for an annual base compensation of $150,000. The agreement provides
for certain employee benefits including medical insurance, vacation and a car
allowance, and also contains a non-competition provision covering the term of
the agreement plus one year following termination.
Upon consummation of this Offering, the Company will also enter
into an employment agreement with Allan Goldfeder, Chief Operating Officer of
the Company. The agreement will have a three-year term which renews for an
additional year on each anniversary of the agreement, and provides for an annual
base compensation of $120,000. The agreement provides for certain employee
benefits including medical insurance, vacation and a car allowance, and also
contains a non-competition provision covering the term of the agreement plus
one-year following termination.
Stock Option Plan
The Company's Board of Directors has adopted a 1996 Stock Option
Plan (the "Plan") for officers, employees, directors and consultants of the
Company or any of its subsidiaries. The Plan authorizes the granting of stock
options to purchase an aggregate of not more than 603,000 shares of the
Company's Common Stock. As of the date hereof, no options have been granted and
603,000 options are available for grant under the Plan.
The Plan is administered by a Stock Option Committee (the
"Committee"), consisting of two disinterested members of the Board of Directors.
In general, the Committee will select the persons to whom options will be
granted and will determine, subject to the terms of the Plan, the number, the
exercise period and other provisions of such options. The options granted under
the Plan will be exercisable in such installments as may be provided in the
grant.
Options granted to employees may be either incentive stock options
under the Internal Revenue Code ("ISOs") or non-ISOs. The Board may determine
the exercise price, provided that, in the case of ISOs, such price
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<PAGE>
may not be less than 100% (110% in the case of ISOs granted to holders of 10% of
the voting power of the Company's stock) of the fair market value (as defined in
the Plan) of the Company's Common Stock at the date of grant. The aggregate fair
market value (determined at time of option grant) of stock with respect to which
ISOs become exercisable for the first time in any year cannot exceed $100,000.
The Company does not expect the exercise price of non-ISO's to be less than fair
market value.
The options are evidenced by a written agreement containing the
above terms and such other terms and conditions consistent with the Plan as the
Board of Directors may impose. Each option, unless sooner terminated, shall
expire no later than 10 years (five years in the case of ISOs granted to holders
of 10% of the voting power of the Company's stock) from the date of the grant,
as the Board may determine. The Board has the right to amend, suspend or
terminate the Plan at any time, provided, however, that unless ratified by the
Company's shareholders within 12 months thereafter, no amendment or change in
the Plan will be effective: (a) increasing the total number of shares which may
be issued under the Plan; (b) reducing below fair market value on the date of
grant the price per share at which any option which is an ISO may be granted;
(c) extending the term of the Plan or the period during which any option which
is an ISO may be granted or exercised; (d) altering in any way the class of
persons eligible to participate in the Plan; (e) materially increasing the
benefits accruing to participants under the Plan; or (f) with respect to options
which are ISOs, amending the Plan in any respect which would cause such options
to no longer qualify for incentive stock option treatment pursuant to the
Internal Revenue Code of 1986.
Compensation of Directors
Following the consummation of this Offering, directors who are not
employed by the Company will be paid a fee of $1,000 for each meeting attended
and $500 for each committee meeting attended. All directors are reimbursed for
expenses incurred on behalf of the Company.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Common Stock as of August 21, 1996 (after giving
effect to the 2.2-for-one stock dividend and the exchange of 1,441,666 shares of
Common Stock for 2,883,332 Class A Warrants) by (i) each shareholder known by
the Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each director and executive officer of the Company, and (iii) all
directors and executive officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Percentage of Common Stock
------------------------- Number of Number of
Number of Shares Warrants Warrants
Beneficially Number of Shares Owned Beneficially
Owned Before Beneficially Owned Before Owned
Name Offering After Offering Before Offering After Offering Offering After Offering
---- ---------------- ------------------ --------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Ansnes(1) 110,000 110,000 2.32% 1.83% 0 0
15 Glen Park Road
Purchase, New York 10577
Bernard M. Kruger, M.D.(1) 18,335 18,335 .39% .30% 0 0
170 East 78th Street
New York, New York 10021
Dean L. Sloane 1,713,800 1,713,800 36.23% 28.42% 0 0
Community Medical Transport, Inc.
45 Morris Street
Yonkers, New York 10705
Craig V. Sloane 428,450 428,450 9.06% 7.10% 0 0
Community Medical Transport, Inc.
45 Morris Street
Yonkers, New York 10705
Alan T. Sheinwald 2,142,250 2,142,250 45.29% 35.53% 0 0
Community Care Services, Inc.
18 Sargent Place
Mount Vernon, New York 10550
Allan C. Goldfeder 225,500 225,500 4.77% 3.74% 0 0
Community Care Services, Inc.
18 Sargent Place
Mount Vernon, New York 10550
All Executive Officers
and Directors 4,638,335 4,638,335 98.06% 76.92% 0 0
- ----------
(1) The shares of Common Stock owned by Mr. Ansnes and Dr. Kruger are being
registered for sale in the Selling Securityholders' Prospectus. Each of Mr.
Ansnes and Dr. Kruger has entered into a lock-up agreement not to sell,
transfer or dispose of such shares for a period of 18 months from the date
of this Prospectus.
</TABLE>
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<PAGE>
CERTAIN TRANSACTIONS
All transactions with officers and shareholders and their
affiliates were made on terms no less favorable to the Company than those
available from unaffiliated parties. The Company expects future related party
transactions, if any, will be entered into on terms no less favorable than those
available from unaffiliated third parties.
Loans
The Company received loans from certain shareholders and former
shareholders and their affiliates in the aggregate amount of $255,409. All the
loans are currently non-interest bearing. The loans were made on March 31, 1993
to help finance the Company's operations. One loan of $80,000 bore interest at a
rate of 8-1/4% until September 30, 1994, at which time the accrued interest was
added to the principal outstanding. The Company expects to repay these loans
from the proceeds of this Offering as follows: $135,409 to Dean L. Sloane (which
includes accrued interest of $10,209 through September 30, 1994); $15,000 each
to Manuel N. Wilson and Wade Wilson; and $90,000 to At Home Health Care
Supplies, Inc. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Lease
The Company entered into a sublease on September 1, 1995 with At
Home Health Care Supplies, Inc., an affiliate of former shareholders and
directors of the Company for the office/warehouse space it currently occupies.
The Company paid $4,500 per month for 10,000 square feet of space plus a pro
rata share of expenses which aggregated $18,000 for the term of the lease. The
Company has terminated the sublease and entered into a new lease with the owner
of the premises to occupy 20,000 square feet at the same location. See
"Business - Facilities."
Consulting Agreement
During the fiscal year ended March 31, 1995, the Company paid
$35,136 to Purchase Marketing Associates, a consulting company whose president,
Manuel N. Wilson, was a former shareholder, director and promoter of the
Company, pursuant to a consulting agreement between the Company and such entity.
The agreement was amended on May 1, 1995 to provide for the same consulting
services to be provided for a fixed fee of $4,500 per month. The agreement was
terminated in November 1995 with payments made through January 31, 1996
aggregating $45,000.
Agreements with Representative
The Company expects to enter into a Consulting Agreement with the
Representative upon the closing of the Offering, whereby the Representative will
provide advisory services for a period of 36 months for an aggregate fee of
$108,000 payable at the closing out of the proceeds of the Offering. In
addition, the Representative shall have the right, for a period of three years,
after the closing of the Offering, to appoint a designee to serve as an advisor
to the Board of Directors. The Company has further agreed to appoint the
Representative as the Company's warrant solicitation agent pursuant to which the
Representative will receive a 10% fee upon exercise of the Warrants, subject to
NASD guidelines.
Exchange of Shares For Warrants
In August, 1996, the Company entered into an agreement to issue to
six shareholders an aggregate of 2,883,332 Class A Warrants in exchange for the
cancellation of 1,441,666 shares of Common Stock owned by such shareholders.
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<PAGE>
DESCRIPTION OF SECURITIES
The following descriptions of the Company's securities are
qualified in all respects by reference to the Certificate of Incorporation and
By-laws of the Company, and the warrant agreement (the "Warrant Agreement"),
dated _______________, 1996, by and between the Company and Continental Stock
Transfer & Trust Company (the "Warrant Agent"), copies of which are filed as
Exhibits to the Registration Statement of which this prospectus is a part. The
Certificate of Incorporation of the Company authorizes the Company to issue up
to 1,000,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), none of which is outstanding and 20,000,000 shares of Common Stock, par
value $.01 per share.
Common Stock
As of August 21, 1996, (after giving effect to the 2.2-for-one
stock dividend and the exchange of 1,441,666 shares of Common Stock for
2,883,332 Class A Warrants), there were 4,730,000 shares of Common Stock
outstanding. There will be 6,030,000 shares of Common Stock outstanding after
giving effect to the sale of the shares of Common Stock offered hereby. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the shareholders. Subject to preferential
rights with respect to any outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and satisfaction of preferential rights and have no rights to
convert their Common Stock into any other securities. All shares of Common Stock
have equal, non-cumulative voting rights, and have no preference, exchange,
preemptive or redemption rights. The outstanding shares of Common Stock are, and
the Common Stock to be outstanding upon completion of the Offering will be,
fully paid and nonassessable. See "Capitalization."
Warrants
Each Class A Warrant entitles its holder, commencing two years from
the Effective Date, to purchase one share of Common Stock at an exercise price
of $6.00 per share. The Warrants expire on _____________, 1999, seven years
after the Effective Date.
The Registration Statement of which this Prospectus is a part may
remain effective for a period of nine months following the Effective Date
although the Warrants will not be exercisable until one year after the Effective
Date.
The Warrants are redeemable by the Company at a price of $.10 per
Redeemable Warrant, commencing one year from the Effective Date and prior to
their expiration, on 30 days prior written notice to the registered holders of
the Warrants, provided the average closing price per share of the Common Stock
(if the Common Stock is then traded on a national securities exchange or quoted
on Nasdaq), for a period of 10 consecutive trading days ending not more than
three days prior to the date of any redemption notice equals or exceeds at least
$8.00, subject to adjustment, for the Class A Warrants. The Warrants shall be
exercisable until the close of the business day preceding the date fixed for
redemption. In addition, subject to the rules of the NASD, the Company has
agreed to engage the Representative as warrant solicitation agent, in connection
with which it would be entitled to a 10% fee upon exercise of the Warrants. See
"Underwriting."
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<PAGE>
The Warrants will be issued pursuant to the Warrant Agreement by
the Warrant Agent and will be evidenced by warrant certificates in registered
form.
The exercise price of the Warrants and the number and kind of
shares of Common Stock or other securities and property issuable upon exercise
of the Warrants are subject to adjustment in certain circumstances, including a
stock split of, stock dividend on, or a subdivision, combination or
recapitalization of the Common Stock. Additionally, an adjustment will be made
upon the sale of all or substantially all of the assets of the Company in order
to enable holders of Warrants to purchase the kind and number of shares of stock
or other securities or property (including cash) receivable in such event by a
holder of the number of shares of Common Stock that might otherwise have been
purchased upon exercise of the Warrant.
The Warrants do not confer upon the holder any voting or any other
rights of a stockholder of the Company. Upon notice to the Warrantholders, the
Company has the right to reduce the exercise price or extend the expiration date
of the Warrants.
Warrants may be exercised upon surrender of the Warrant certificate
evidencing those Warrants on or prior to the respective expiration date (or
earlier redemption date) of the Warrants at the offices of Continental Stock
Transfer & Trust Co., the warrant agent, with the form of "Election to Purchase"
on the reverse side of the warrant certificate completed and executed as
indicated, accompanied by payment of the full exercise price (by certified check
payable to the order of the warrant agent) for the number of Warrants being
exercised.
No Warrant will be exercisable or redeemable unless at the time of
exercise the Company has filed with the Commission a current prospectus covering
the issuance of shares of Common Stock issuable upon exercise of the Warrant and
the issuance of shares has been registered or qualified or is deemed to be
exempt from registration or qualification under the securities laws of the state
of residence of the holder of the Warrant. The Company has undertaken to use its
best efforts to maintain a current prospectus relating to the issuance of shares
of Common Stock upon the exercise of the Warrants until the expiration of the
Warrants, subject to the terms of the Warrant Agreement. While it is the
Company's intention to maintain a current prospectus, there is no assurance that
it will be able to do so. The Company anticipates that this Registration
Statement will remain effective for nine months following the Effective Date.
See "Risk Factors - Current Prospectus and State Blue Sky Registration Required
to Exercise Warrants."
The Company may reduce the exercise price or extend the exercise of
the Warrants provided a current prospectus reflecting such changed terms is in
effect prior to the exercise of any Warrants. The Company will insure that
information regarding such impending change is disseminated to Warrantholders
and the public in an adequate and timely manner. In the event that such action
is taken, the Company must file a new registration statement and have it
declared effective prior to any exercise of any Warrants.
No fractional shares will be issued upon exercise of the Warrants.
However, if a Warrantholder exercises all Warrants then owned of record by him
or her, the Company will pay to that Warrantholder, in lieu of the issuance of
any fractional share which otherwise issuable, an amount in cash based on the
market value of the Common Stock on the last trading day prior to the exercise
date.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance
of 1,000,000 shares of Preferred Stock with designations, rights and preferences
determined from time to time by its Board of Directors.
-38-
<PAGE>
Accordingly, the Company's Board of Directors is empowered, without shareholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of issuance, the
Preferred Stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
Preferred Stock, there can be no assurance that it will not do so in the future.
Underwriters' Warrant
In connection with this Offering, the Company has agreed to sell to
the Underwriters, or its designees, for $10, the Underwriters' Warrant to
purchase 150,000 shares of Common Stock and/or 150,000 Class A Warrants. The
Underwriters' Warrant is exercisable for a five-year period commencing one year
from the closing of this Offering and entitles the Underwriters to purchase each
share of Common Stock or Warrant covered thereby at an exercise price equal to
110% of the offering price per share of Common Stock or Warrant, subject to
adjustment in certain events. The Underwriters' Warrant may not be sold,
transferred, assigned or hypothecated except to officers of the underwriters or
members of the selling group or any officer or partner of any member of the
selling group. The prices payable for the securities upon exercise of the
Underwriters' Warrant and the number of securities underlying the Underwriters'
Warrant are subject to adjustment to prevent dilution. See "Underwriting."
Options
As of the date of this Prospectus, no options have been granted.
See "Management - Stock Option Plan."
Transfer and Warrant Agent
The transfer and warrant agent for the Common Stock is Continental
Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices.
Upon completion of this Offering, the Company will have
approximately 6,030,000 shares of Common Stock outstanding (assuming no exercise
of the Underwriters' over-allotment option). Of these shares, the 1,300,000
shares sold in this Offering will be freely tradeable
without restriction (except as to affiliates of the Company) or further
registration under the Act.
Each of the Company's current shareholders is expected to enter
into an agreement (the "Lock-Up Agreement") not to offer, sell, contract to sell
or grant any option to purchase or otherwise dispose of the remaining 4,730,000
shares of Common Stock, without the prior written consent of the Representative,
(i) with respect to the 4,510,000 shares owned by the Company's officers and
three of its directors, for a period of 24 months after the Effective Date, and
(ii) with respect to the remaining 220,000 shares owned by Selling
Securityholders, for a period of 18 months after the Effective Date. Each of the
Company's warrantholders is expected to enter into a Lock-Up Agreement for a
period of 24 months after the Effective Date. Following expiration or release
from the Lock-Up Agreement, (i) 4,510,000 shares will be
-39-
<PAGE>
eligible for immediate sale, subject to compliance with Rule 144 volume
limitations and (ii) 220,000 shares, and 4,158,332 Class A Warrants and the
shares underlying such warrants, all of which are being registered for sale
pursuant to the Selling Securityholders' Prospectus, will be eligible for
immediate sale. The Representative will not release the lock-up prior to the
exercise or expiration of the Over-Allotment Option.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities within the meaning
of Rule 144 ("Restricted Shares") for at least two years, including the holding
period of any securities which converted into the Restricted Shares and
including the holding period of any prior owner except an affiliate of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the then outstanding
shares of Common Stock or the average weekly trading volume of the Common Stock
reported during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to certain manner of sale provisions, notice requirements
and the availability of current public information about the Company. Any person
(or persons whose shares are aggregated with such person) who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned shares for at least three years (including
any period of ownership of preceding non-affiliated holders), would be entitled
to sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements.
Up to 150,000 shares of Common Stock and/or 150,000 Warrants may be
purchased by the Underwriters through the exercise of the Underwriters' Warrant.
Such shares may be freely tradeable, provided that the Company satisfies certain
securities registration and qualification requirements in accordance with the
terms of the Underwriters' Warrant. See "Underwriting."
-40-
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement") between the Company and the
Underwriters, the Company has agreed to sell to the Underwriters, and the
Underwriters, severally and not jointly, have agreed to purchase, on a "firm
commitment" basis, all of the 1,300,000 shares of Common Stock and the 1,300,000
Warrants offered hereby as follows:
Name Shares and Warrants
---- -------------------
Maidstone Financial Inc. .......................
The Harriman Group, Inc.........................
---------
Total........................................ 1,300,000
---------
The Underwriting Agreement provides that the obligations of the Underwriter are
subject to certain conditions precedent including the current effectiveness of
the Registration Statement, delivery of an opinion of Company's counsel, a
"comfort letter" from the Company's accountants, the delivery of an officer's
certificate certifying that all representations and warranties are true and
correct, the appointment of the Transfer and Warrant Agent and NASD approval of
the Underwriters' compensation. The Underwriting Agreement also provides that
the Underwriters will be obligated to purchase all of the shares of Common Stock
and Warrants if any are purchased.
-41-
<PAGE>
The Underwriters have advised the Company that they propose to
offer the shares of Common Stock and Warrants to the public at the offering
prices set forth on the cover page of this Prospectus and that the Underwriters
may allow to certain dealers, who are members of the National Association of
Securities Dealers, concessions not in excess of $ _______ per share of Common
Stock and $______ per Class A Warrant. After the Offering, the public offering
price and concessions and discounts and other offering terms may be changed.
The Company has granted an option to the Underwriters exercisable
during the 30-day period from the date of this Prospectus, to purchase up to a
maximum of 195,000 additional shares of Common Stock and/or 195,000 additional
Class A Warrants solely to cover over-allotments, if any, in the sale of the
shares of Common Stock and Warrants, at the Offering price, less the
underwriting discounts and commission set forth on the cover page of this
Prospectus.
The Company has agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of the Offering, including
the proceeds of the Over-Allotment Option, if and to the extent exercised, of
which $30,000 has been paid to date. The Underwriting Agreement provides for
reciprocal indemnification between the Company and the Underwriter against
certain liabilities in connection with this Offering, including liabilities
under the Securities Act of 1933, as amended (the "Act").
As additional compensation in connection with this Offering the
Company has agreed to sell to the Underwriters, for nominal consideration, the
Underwriters' Warrants to purchase 150,000 shares of Common Stock and/or
Warrants. The Underwriters' Warrant is exercisable for a five-year period
commencing one year from the closing of this Offering and entitles the
Underwriters to purchase each share of Common Stock and Warrant covered thereby
at an exercise price equal to 110% of the initial public Offering price per
share of Common Stock and Warrant, subject to adjustment in certain events. The
Underwriters' Warrant may not be sold, transferred, assigned or hypothecated
except to officers of the underwriter or members of the selling group or any
officer or partner of any member of the selling group. The prices payable for
the securities upon exercise of the Underwriters' Warrant and the number of
securities underlying the Underwriter's Warrant are subject to adjustment to
prevent dilution.
For the term of the Underwriters' Warrant, the holder or holders
thereof are given, at a nominal cost, the opportunity to profit from a rise in
the market price of the shares of Common Stock subject to the Underwriter's
Warrant with a resulting dilution in the interests of other shareholders. The
Company may find it more difficult to raise additional equity capital if it
should be needed for its business while the Underwriters' Warrant is
outstanding; and at any time when the holders of the Underwriters' Warrant might
be expected to exercise such Warrant, the Company would in all likelihood be
able to obtain additional equity capital on terms more favorable than those
provided in the Underwriters' Warrant. Any profit realized on the sale of the
Underwriters' Warrant and shares of Common Stock and Warrants subject to the
Underwriters' Warrant may be deemed additional underwriting compensation.
All of the Company's officers, three of its directors and all
warrantholders have agreed not to publicly sell, prior to 24 months from the
date hereof, any securities of the Company owned by them, without the prior
written approval of the Underwriter. The remaining Company shareholders have
agreed not to publicly sell prior to 18 months from the date hereof any
securities of the Company owned by them, without the prior written approval of
the Representative.
-42-
<PAGE>
The Underwriting Agreement gives the Representative the right to
appoint a designee to attend all meetings of the Company's Board of Directors
for a period of three years following the closing of this Offering.
The Underwriting Agreement also provides that the Company may not
issue shares of Common Stock (other than pursuant to its 1996 Stock Option Plan)
for a period of two years following the Effective Date without the
Representative's consent, which may not be unreasonably withheld.
The Company has agreed to retain the Representative as a financial
consultant, for a period of three years from the date of this Prospectus at an
annual fee of $36,000, all of which fees (an aggregate of $108,000) will be
payable in advance on the completion of this Offering. The Underwriters will
seek out and review potential acquisition and joint venture targets for the
Company, as well as assisting the Company in responding to any acquisitions for
the Company.
The Company has agreed to indemnify the Underwriters against
liabilities incurred by the Underwriters by reason of misstatements or omissions
to state material facts in connection with the statements made in this
Prospectus and the Registration Statement of which it forms a part. The
Underwriters, in turn, have agreed to indemnify the Company against liabilities
incurred by the Company by reason of misstatements or omissions to state
material facts in connection with statements made in the Registration Statement
and Prospectus based on information furnished by the Underwriters.
The foregoing does not purport to be a complete statement of the
terms and conditions of the Underwriting Agreement. Reference is made to a copy
of the Underwriting Agreement, which is an exhibit to the Registration Statement
of which this Prospectus forms a part.
Determination of Offering Price
There is currently no public market for the Company's securities.
Consequently, the Offering price has been determined by negotiations between the
Company and the Underwriters and does not necessarily bear any relationship to
any recognized criteria of value. In their negotiations of the Offering price,
the Company and the Underwriters took into account estimates of the business
potential and earning prospects of the Company, the present state of the
Company's development and prevailing market conditions. In this regard, greater
significance was given to the business potential and earnings prospects of the
Company than was given to historical financial information. The Offering price
set forth on the cover page of this Prospectus should not, however, be
considered an indication of the actual value of the securities of the Company.
Such market price is subject to change as a result of market conditions and
other factors.
There can be no assurance that an established trading market will
develop for the Common Stock, or, if such market develops and continues, that
the prevailing market price for such securities will bear a favorable
relationship to the Offering price of the Common Stock. See "Risk Factors - Lack
of Market; Possible Volatility of Stock Price; Arbitrary Determination of
Offering Price."
LEGAL MATTERS
The validity of the securities being offered hereby will be passed
upon for the Company by Parker Duryee Rosoff & Haft, A Professional Corporation,
New York, New York. Gersten, Savage, Kaplowitz & Curtin, L.L.P., New York, New
York will act as counsel for the Underwriters.
-43-
<PAGE>
EXPERTS
The financial statements of the Company as at March 31, 1996 and
for each of the years in the two-year period then ended included in this
Prospectus, have been audited by Richard A. Eisner & Company, LLP, independent
certified public accountants as set forth in their report thereon appearing
elsewhere herein. Such financial statements are included herein and in the
Registration Statement in reliance upon such report and upon the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form SB-2 in accordance with
the provisions of the Securities Act of 1933, as amended, with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits filed thereto. For
further information, reference is made to such Registration Statement and to the
exhibits filed therewith. Statements herein contained concerning the provisions
of any document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. The Registration Statement and the exhibits may be inspected without
charge at the offices of the Commission and, upon payment to the Commission of
prescribed fees and rates, copies of all or any part thereof may be obtained
from the Commission's principal office at the Public Reference Section, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at the
Northeast Regional Office, 7 World Trade Center, New York, New York 10048.
-44-
<PAGE>
COMMUNITY CARE SERVICES, INC.
- I N D E X -
PAGE
NUMBER
------
REPORT OF INDEPENDENT AUDITORS F-2
BALANCE SHEETS F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Community Care Services, Inc.
We have audited the accompanying balance sheet of Community
Care Services, Inc. as at March 31, 1996 and the related
statements of operations, changes in stockholders' equity and
cash flows for the years ended March 31, 1996 and March 31, 1995.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements enumerated above
present fairly, in all material respects, the financial position
of Community Care Services, Inc. at March 31, 1996, and the
results of its operations and its cash flows for the years ended
March 31, 1996 and March 31, 1995, in conformity with generally
accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
June 6, 1996
F-2
<PAGE>
COMMUNITY CARE SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
A S S E T S 1996 1996
----------- ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 190,429 $ 163,113
Accounts receivable, trade - net (Notes D and F). . . . . 2,808,265 2,955,638
Inventories (Notes B[2] and F). . . . . . . . . . . . . . 441,085 523,227
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . 4,377 18,452
--------- ---------
Total current assets . . . . . . . . . . . . . . . 3,444,156 3,660,430
Rental equipment, less accumulated depreciation of $418,760
and $485,211, respectively (Note B[3]). . . . . . . . . . 1,284,034 1,233,802
Property and equipment - net (Notes B[4] and E). . . . . . . 218,410 213,206
Covenants not to compete - net (Note B[5]) . . . . . . . . . 75,000 56,250
Accounts and customer lists - net (Note B[5]). . . . . . . . 139,972 134,970
Security deposits. . . . . . . . . . . . . . . . . . . . . . 35,805 35,537
Deferred offering costs (Note C) . . . . . . . . . . . . . . 192,738 292,481
Deferred debt costs. . . . . . . . . . . . . . . . . . . . . 77,000 63,000
--------- ---------
T O T A L. . . . . . . . . . . . . . . . . . . . . $5,467,115 $5,689,676
========== ==========
L I A B I L I T I E S
---------------------
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . $2,179,432 $2,407,497
Current portion of long-term debt (Note F). . . . . . . . 691,123 553,053
Note payable - bank (Note G). . . . . . . . . . . . . . . 200,000 200,000
Due to Adam Health Care Equipment Corp. (Note A). . . . . 1,170,985 1,170,985
Income taxes payable (Note L) . . . . . . . . . . . . . . 181,299 236,506
--------- ---------
Total current liabilities. . . . . . . . . . . . . 4,422,839 4,568,041
Long-term debt (Notes D and F) . . . . . . . . . . . . . . . 931,512 883,283
Deferred income taxes payable (Note L) . . . . . . . . . . . 9,000 9,000
---------- ----------
Total liabilities. . . . . . . . . . . . . . . . . 5,363,351 5,460,324
--------- ---------
Commitments and contingencies (Notes A, C and K)
STOCKHOLDERS' EQUITY
--------------------
(Note H)
Common stock, $.01 par value; authorized 20,000,000 shares,
issued and outstanding 4,730,000 shares at March 31, 1996
and June 30, 1996. . . . . . . . . . . . . . . . . . . . . 47,300 47,300
Preferred stock, $.01 par value; authorized 1,000,000
shares, none issued . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . 327,820 327,820
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . (271,356) (145,768)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . 103,764 229,352
--------- ---------
T O T A L . . . . . . . . . . . . . . . . . . . . $5,467,115 $5,689,676
========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-3
<PAGE>
COMMUNITY CARE SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended March 31, June 30,
-------------------------------- ----------------------------------
1996 1995 1996 1995
---------- --------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Net revenues. . . . . . . . . . . $6,181,757 $2,940,892 $2,487,381 $1,042,240
---------- ---------- ---------- ----------
Costs and expenses:
Cost of net revenues:
Product and supply costs . . 2,084,306 1,014,181 1,020,657 367,042
Rental equipment
depreciation . . . . . . . 251,445 145,815 82,701 53,958
--------- --------- --------- ---------
2,335,751 1,159,996 1,103,358 421,000
Selling, general and
administrative expenses. . . 2,660,071 1,621,777 1,009,743 479,320
Provision for doubtful
accounts . . . . . . . . . . 298,811 125,000 42,795 52,499
Amortization of intangible
assets . . . . . . . . . . . 107,966 245,012 43,024 23,753
--------- --------- --------- ---------
5,402,599 3,151,785 2,198,920 976,572
--------- --------- --------- ---------
Operating income (loss) 779,158 (210,893) 288,461 65,668
Interest expense. . . . . . . . . 155,233 111,798 64,201 26,059
--------- --------- --------- ---------
Income (loss) before provision
for income taxes . . . . . . . 623,925 (322,691) 224,260 39,609
Provision for income taxes. . . . 196,000 98,672
--------- --------- --------- ---------
NET INCOME (LOSS) . . . . . . . . $ 427,925 $ (322,691) $ 125,588 $ 39,609
========== ========== ========== ==========
Per share data (Note B[8]):
Net income (loss) per common
share. . . . . . . . . . . . $.09 $(.07) $.03 $.01
==== ===== ==== ====
Weighted average number of
shares outstanding . . . . . 4,730,000 4,510,000 4,730,000 4,730,000
========= ========= ========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE>
COMMUNITY CARE SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Note H)
<TABLE>
<CAPTION>
Common Stock
-----------------------------
Number Additional
of Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance - March 31, 1994. . 2,050,000 $ 20,500 $ 29,500 $(376,590) $(326,590)
Net (loss). . . . . . . . . (322,691) (322,691)
--------- -------- -------- --------- ---------
Balance - March 31, 1995. . 2,050,000 20,500 29,500 (699,281) (649,281)
Net income. . . . . . . . . 427,925 427,925
Warrants issued . . . . . . 12,750 12,750
Issuance of common stock. . 1,541,666 15,417 296,953 312,370
--------- -------- -------- --------- ---------
Balance - March 31, 1996. . 3,591,666 35,917 339,203 (271,356) 103,764
Conversion of common stock
to warrants. . . . . . . (1,441,666) (14,417) 14,417 - 0 -
Stock split of remaining
shares of common stock . 2,580,000 25,800 (25,800) - 0 -
Net income for the
three months ended
June 30, 1996. . . . . . 125,588 125,588
--------- -------- -------- --------- ---------
BALANCE - JUNE 30, 1996
(UNAUDITED). . . . . . . 4,730,000 $ 47,300 $327,820 $(145,768) $ 229,352
========= ======== ======== ========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE>
COMMUNITY CARE SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended March 31, June 30,
----------------------------- --------------------------
1996 1995 1996 1995
------------ ---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . $ 427,925 $(322,691) $ 125,588 $ 39,609
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization expense. . . . . . . . . 363,676 396,696 117,192 77,713
Amortization of deferred unit cost and debt discount . 8,000 16,124
Disposal of rental equipment . . . . . . . . . . . . . 29,600 77,000 8,750
Loss on disposal of equipment. . . . . . . . . . . . . 3,833
Provision for doubtful accounts. . . . . . . . . . . . 298,811 125,000 42,795 52,499
Interest added to loan balance . . . . . . . . . . . . 10,209
Deferred income taxes payable. . . . . . . . . . . . . 9,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable - trade. . . . . . (2,434,237) (182,525) (190,168) (318,775)
(Increase) in inventories. . . . . . . . . . . . . . (308,930) (68,149) (82,142) (22,221)
(Increase) decrease in prepaid expenses. . . . . . . 21,145 (22,668) (14,075) (5,263)
(Increase) decrease in security deposits . . . . . . (19,268) 268
Increase in accounts payable and accrued expenses. . 1,815,760 582,690 228,065 245,261
Increase in income taxes payable . . . . . . . . . . 181,299 55,207 488
----------- --------- --------- ---------
Net cash provided by operating activities. . . . . 396,614 595,562 307,604 69,311
----------- --------- --------- ---------
Cash flows from investing activities:
Acquisition of rental equipment. . . . . . . . . . . . . . (819,331) (415,712) (43,345) (190,524)
Acquisition of property and equipment. . . . . . . . . . . (51,962) (29,460) (3,408) (8,314)
----------- --------- --------- ---------
Net cash (used in) investing activities. . . . . . (871,293) (445,172) (46,753) (198,838)
----------- --------- --------- ---------
Cash flows from financing activities:
Proceeds of bank borrowings. . . . . . . . . . . . . . . . 200,000 80,000 100,606
Principal repayments of bank borrowings. . . . . . . . . . (168,750) (250,000)
Proceeds from notes payable to suppliers . . . . . . . . . 106,338
Principal repayments of notes payable to suppliers . . . . (241,337) (188,424)
Proceeds from debt offering. . . . . . . . . . . . . . . . 637,500
Deferred debt costs. . . . . . . . . . . . . . . . . . . . (84,000)
Deferred offering costs. . . . . . . . . . . . . . . . . . (172,738) (20,000) (99,743)
Proceeds from issuance of common stock . . . . . . . . . . 312,370 22,000
----------- --------- --------- ---------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . 589,383 (190,000) (288,167) 122,606
----------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . 114,704 (39,610) (27,316) (6,921)
Cash at beginning of year . . . . . . . . . . . . . . . . . . 75,725 115,335 190,429 75,725
----------- --------- --------- ---------
CASH AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . $ 190,429 $ 75,725 $ 163,113 $ 68,804
=========== ========= ========= =========
Supplementary disclosures of cash flow information:
Cash paid during the year:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 60,792 $ 32,543 $ 32,145 $ 573
Income taxes . . . . . . . . . . . . . . . . . . . . . . 6,189 43,472
</TABLE>
During the year ended March 31, 1996 the Company purchased property and
equipment with a note of $150,000. Also during the year ended March 31,
1996 suppliers have agreed to convert $726,474 of trade payables into notes
payable.
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE A) - Organization:
[1] The Company was incorporated in July 1992 in the State of
New York as Community Support Services, Inc. During July 1992, it
changed its name to Community Care Services, Inc. (the "Company").
The Company operates a home health care business which sells and rents
durable medical equipment and sells medical supplies primarily in the
five boroughs of New York City, and Westchester, Rockland and Nassau
Counties, New York, as well as northern New Jersey and southern
Connecticut.
From inception through March 31, 1993, the Company had minimal
activity. In April 1993, the Company purchased certain assets and business of
Adam Health Care Equipment Corp. ("Adam"), a company in the same industry, for
$1,500,000 (the "Purchase Price"). In addition, the Company paid Adam an
additional $86,000 representing an adjustment to the Purchase Price mainly for
used equipment and parts. The Company paid $150,000 at the execution of this
agreement and $300,000 at the closing. $1,000,000 of the balance was to be paid
in equal quarterly installments evidenced by promissory notes with interest at
6% per annum and a final payment due March 15, 1995. The remaining $50,000 would
be paid following the completion of a full Medicare billing cycle.
In 1993, the Company commenced an action against Adam and its
principals arising out of the acquisition of certain assets of Adam by the
Company in April 1993. The complaint alleges that the defendants made numerous
misrepresentations relating to the business previously conducted by Adam. The
complaint seeks recovery of damages of $1,500,000, additional punitive damages,
the reduction of the original purchase price or rescission of the original
purchase agreement. The defendants have asserted counterclaims against the
Company. The counterclaims seek the payment of the unpaid purchase price of
$1,050,000 and collection expense of over $175,000. Defendants also allege
various additional causes of action, claiming plaintiffs converted or interfered
with the collection of property owned or due to defendants and seek damages of
over $7,000,000, including $5,000,000 in punitive damages. The Company believes
it has meritorious defenses to the counterclaims. However, there can be no
assurance that the Company will be successful in recovering damages for its
claims or in defending itself against the counterclaims. A judgment against the
Company as a result of the counterclaims could have a material adverse effect on
its business. The action is still in its final pre-trial stages and the Company
expects a trial date to be set shortly.
(continued)
F-7
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE A) - Organization: (continued)
[2] The Company is in the process of raising additional funds
through an initial public offering of securities (the "IPO"). If the IPO
is not consummated, the Company intends to obtain additional bank financing.
However, there can be no guarantee that such financing will be available
and if available that these funds can be obtained on favorable terms.
(NOTE B) - Significant Accounting Policies:
Significant accounting policies in the preparation of the
financial statements are as follows:
[1] Revenue recognition:
Revenues are recognized on the date services and related
products are provided to patients and are recorded at amounts
estimated to be received under reimbursement arrangements with third
party payors, including private insurers, Medicare and Medicaid.
[2] Inventories:
Inventories are stated at the lower of cost (first-in,
first-out) or market and consist primarily of medical supplies sold
directly to patients for use in their home.
[3] Rental equipment:
Rental equipment consists of medical equipment rented to
patients for use in their homes and is stated at cost. Depreciation
is provided using the straight-line method over the useful life of the
equipment which is estimated at five years.
[4] Property and equipment:
Property and equipment are stated at cost. The Company
computed depreciation and amortization using the straight-line method
over the useful lives of the assets acquired which is estimated at
five years.
(continued)
F-8
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE B) - Significant Accounting Policies: (continued)
[5] Intangible assets:
Intangible assets consist of covenants not to compete and
accounts and customer lists. The covenants are being amortized on a
straight-line basis over their contractual lives which range from two
to four years. The accounts and customer lists are being amortized
using the straight-line method over the period of expected benefit
which is estimated at ten years. Intangible assets are evaluated
periodically, and adjusted if necessary, if events and circumstances
indicate that a permanent decline in value below the carrying amount
has occurred.
[6] Income taxes:
Effective August 10, 1992, the Company elected to be taxed
as an S corporation under the provisions of the Internal Revenue Code
and state tax laws. Under those provisions the Company did not pay
federal corporate income tax. However, it was subject to a limited
extent, to New York State corporate tax. The stockholders were liable
for individual income taxes on the Company's taxable income until
November 1995 when the S corporation status was automatically
terminated by the sale of common stock to an ineligible stockholder.
No pro forma tax provision benefit has been presented to reflect the
Company's taxes as if it were a C corporation. The Company would have
reported net operating losses if it were a C corporation for the year
ended March 31, 1995 resulting in a deferred tax asset which would be
netted against a valuation allowance thereby providing a zero tax
provision. For the period after the termination of the S corporation
tax status through June 30, 1996, a deferred tax liability has been
realized because the losses incurred as an S corporation are not
available to the Company for carryforward. See Note L in reference to
tax provision.
[7] Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(continued)
F-9
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE B) - Significant Accounting Policies: (continued)
[8] Per share data:
Net income per common share is based on the weighted average
number of common shares outstanding after giving retroactive effect to
the conversion of common shares for warrants and the 2.2 for 1 stock
split, both effected in August 1996. See Note H[2].
[9] Recently issued accounting pronouncements:
The Company believes that Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" and SFAS
No. 123, "Accounting for Stock-Based Compensation" issued by the
Financial Accounting Standards Board will not have a material impact
on the Company's financial position and results of operations. In
accordance with SFAS No. 123 the Company expects to continue to
account for employee stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and beginning in fiscal 1997 will make the
appropriate disclosures of pro forma net income (loss) and earnings
(loss) per share.
[10] Interim financial information:
The accompanying financial statements as of June 30, 1996
and for the three-month periods ended June 30, 1996 and June 30, 1995
are unaudited. In the opinion of management, they reflect all
adjustments (consisting only of normal and recurring adjustments)
necessary for a fair presentation of the Company's financial position,
results of operations and cash flows.
The results of operations and cash flows for the three
months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the full year ending March 31, 1997.
(NOTE C) - Proposed Public Offering:
The Company has signed a letter of intent with respect to a
proposed public offering of the Company's securities. There is no
assurance that such offering will be consummated. In connection
therewith the Company anticipates incurring substantial expenses
which, if the offering is not consummated, will be charged to expense.
(continued)
F-10
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE D) - Accounts Receivable:
Accounts receivable consists of the following:
March 31, June 30,
1996 1996
--------- --------
Billed . . . . . . . . . . . . $1,871,154 $2,069,620
Unbilled . . . . . . . . . . . 1,339,166 1,266,585
---------- ----------
Total. . . . . . . . 3,210,320 3,336,205
Less allowance for doubtful
accounts. . . . . . . . . . 402,055 380,567
---------- ----------
$2,808,265 $2,955,638
========== ==========
Unbilled receivables represent delivered products or services
rendered as of the balance sheet date which will be billed when the
Company obtains the physician's written prescription. Management
evaluates the adequacy of the allowance based on the specific payor
and general economic conditions including the aging of the account and
the nature of the payor (private or government agencies).
(NOTE E) - Property and Equipment:
Property and equipment consist of the following:
March 31, June 30,
1996 1996
---------- ----------
Machinery and equipment . . . . . . . . . $ 50,697 $ 54,106
Security system . . . . . . . . . . . . . 3,843 3,843
Furniture and fixtures. . . . . . . . . . 59,613 59,613
Vans. . . . . . . . . . . . . . . . . . . 5,447 5,447
Leasehold improvements. . . . . . . . . . 125,943 125,943
---------- ----------
245,543 248,952
Less accumulated depreciation
and amortization . . . . . . . . . . . 27,133 35,746
---------- ----------
$218,410 $213,206
======== ========
(continued)
F-11
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE F) - Long-Term Debt:
Long-term debt consists of the following:
March 31, June 30,
1996 1996
--------- --------
Notes payable to suppliers - payable at
monthly intervals thru June 1997,
with interest at 9% to 13%
collateralized by inventory and
accounts receivable. . . . . . . . . . . $ 741,476 $ 553,053
Notes payable bearing interest at 8%, due
August 1997 or upon closing of public
offering, face amount $637,500. The
effective interest rate is 9.53% . . . . 625,750 627,874
Loans payable to stockholders and
affiliates - noninterest bearing due
the earlier of an IPO or due on demand
after July 1, 1997. . . . . . . . . . . 255,409 255,409
--------- ---------
T o t a l . . . . . . . . . . . . 1,622,635 1,436,336
Less current maturities . . . . . . . . . . 691,123 553,053
--------- ---------
$ 931,512 $ 883,283
========== ==========
(NOTE G) - Note Payable - Bank:
The note payable - bank is collateralized by personal guarantees
of certain stockholders, former stockholders and an affiliated company
and a $200,000 certificate of deposit of a former stockholder. The
loan bears interest at 1% above prime and is due on demand.
(NOTE H) - Stockholders' Equity:
[1] During April 1995, the Company issued 200,000 common shares
for a purchase price of $22,000.
During November 1995, the Company issued 841,666 common
shares for an aggregate price of $101,000. The net proceeds of this
transaction were $77,870.
During January 1996, the Company issued 500,000 common
shares for an aggregate price of $250,000. The net proceeds of this
transaction were $212,500.
(continued)
F-12
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE H) - Stockholders' Equity: (continued)
[2] During April 1995, the Board of Directors authorized the
changes and increases of the Company's shares to reflect a change of
the Company's no par value common stock to $.01 par value and their
exchange at the rate of one share of no par value common stock for
13,666 2/3 shares of $.01 par value. The Board of Directors also
authorized the common stock $.01 par value to increase by an
additional 7,266,667 shares and authorized preferred stock $.01 par
value to increase to 1,000,000 shares. In August 1996 the Company
exchanged 1,441,666 shares of common stock for 2,883,332 Class A
warrants and then issued a 2.2 for 1 stock dividend on the remaining
outstanding shares. All references in the accompanying financial
statements to the number of shares and per share amounts reflect these
changes.
[3] In April 1996, the Company amended its Certificate of
Incorporation to increase the number of authorized shares of common
stock from 10,000,000 to 20,000,000 shares.
[4] During 1996, the Company adopted a 1996 Stock Option Plan
(the "Plan") which provides for the granting of options to purchase up
to 603,000 common shares to officers, employees, directors and
consultants. Options granted may be either Incentive Stock Options
within the meaning of the Internal Revenue Code or Nonstatutory Stock
Options. The Plan is administered by the Board of Directors or by a
committee consisting of at least two persons chosen by the Board of
Directors, which determines to whom options will be granted and will
determine, subject to the terms of the Plan, the number, the exercise
period and other provisions of such options.
Members of the committee (or all of the members of the Board
of Directors, if no committee is established) shall not be entitled to
receive discretionary grants of options under the Plan, but shall
automatically be granted, on the first day of each fiscal year,
Nonstatutory Stock Options to purchase 1,000 shares of common stock.
[5] In connection with the issuance of the 8% notes payable, the
Company issued warrants for the purchase of 1,275,000 shares of common
stock at a purchase price of $7.50 per share; exercisable commencing
February 1997 to February 2001. Upon closing of the proposed public
offering the warrants will be exchanged into an equal number of Class
A warrants which may be sold pursuant to the offering.
(continued)
F-13
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE I) - Related Party:
During the year ended March 31, 1995, the Company entered into an
agreement with another entity which is owned by one of the
stockholders of the Company, whereby the entity acted as a
nonexclusive agent to represent the Company with potential managed
care organizations.
On May 1, 1995, the Company entered into a new agreement with
this entity, whereby the entity was to provide the same services as the
above agreement for a fixed fee of $4,500 per month. The agreement
was terminated in November 1995 with payments to be made through
January 1996.
The amounts expensed were $45,000 and $35,136 for the years ended
March 31, 1996 and March 31, 1995, respectively.
(NOTE J) - Concentration of Risk:
Revenues from principal sources are as follows:
Three Months
Year Ended Ended
March 31, June 30,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
Medicare. . . . . . . . . . . 35.4% 42.9% 32.3% 42.8%
Medicaid. . . . . . . . . . . 36.4 34.0 29.6 31.7
Private insurance and other
nongovernment agencies . . 28.2 23.1 38.1 25.5
---- ---- ---- ----
T o t a l. . . . . . . . 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
The Company derives the majority of its revenues from reimbursements
by third-party payors, typically invoicing and collecting payments
directly from the third-party payor.
During the years ended March 31, 1996 and March 31, 1995 and for the
three months ended June 30, 1996 and June 30, 1995, the Company's five
largest sources of referral accounted for approximately 52%, 37%, 71% and
40% of the Company's total revenue, respectively.
Reimbursements can be influenced by the financial instability of
private third-party payors and the budget pressures and cost shifting by
governmental payors. A reduction in coverage or reimbursement rates by
third-party payors could have a material adverse effect on the Company's
results of operations.
(continued)
F-14
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE J) - Concentration of Risk: (continued)
The Company, like other Medicaid and Medicare providers, is subject
to governmental audits of its Medicaid and Medicare reimbursement claims.
As a provider of services, under the Medicaid and Medicare programs, the
Company is also subject to the Medicaid and Medicare fraud and abuse laws.
The percentage of accounts receivable is as follows:
March 31, June 30,
1996 1996
-------- -------
Medicaid. . . . . . . . . . . 34% 34%
Medicare. . . . . . . . . . . 32 31
Private insurance and other
nongovernment agencies . . 34 35
--- ---
100% 100%
=== ===
(NOTE K) - Commitments:
[1] Lease:
During January 1996, the Company became obligated under a
long-term lease agreement for its office and warehouse facilities. In
addition to the basic rental, the lease provides for increases due to
real estate taxes. Minimum future obligations on the lease are as
follows:
Year Ending
March 31,
---------
1997. . . . . . . . . . $114,000
1998. . . . . . . . . . 114,000
1999. . . . . . . . . . 118,500
2000. . . . . . . . . . 132,000
Later years . . . . . . 99,000
--------
T o t a l . . $577,500
========
(continued)
F-15
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE K) - Commitments: (continued)
[1] Lease: (continued)
Furthermore, the Company leases office space on a month-to-
month basis. The rent expense was $81,969, $69,156, $388,800 and
$12,030 for the years ended March 31, 1996 and March 31, 1995 and for
the three-month periods ended June 30, 1996 and June 30, 1995,
respectively.
[2] Employment agreement:
Upon consummation of the proposed public offering, the
Company will enter into an employment agreement with its President,
who is also its Chief Executive Officer and Chief Financial Officer.
The agreement will have a three-year term which renews for an
additional year on each anniversary of the agreement, and provides for
an annual base compensation of $150,000. A noncompetition provision
covering the term of the agreement plus one year following termination
is also included.
Upon consummation of the proposed public offering, the
Company will also enter into an employment agreement with its Chief
Operating Officer. The agreement will have a three-year term which
renews for an additional year on each anniversary of the agreement,
and provides for an annual base compensation of $120,000. The
agreement also provides for certain employee benefits and contains a
noncompetition provision covering the term of the agreement plus one
year following termination.
(continued)
F-16
<PAGE>
COMMUNITY CARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to the three months ended
June 30, 1996 and June 30, 1995)
(NOTE L) - Income Taxes:
See Note B[6] in reference to change in S corporation status.
The estimated provision for income taxes for the period subsequent to
termination of the S corporation status through March 31, 1996 and
June 30, 1996 consists of the following:
March 31, June 30,
1996 1996
--------- --------
Current. . . . . . . . . . . . . . . . . $187,000 $98,672
Deferred tax applicable to temporary
differences in depreciation expense . 9,000
-------- -------
Provision for income taxes . . $196,000 $98,672
======== =======
The difference between the tax provision and the amount that
would be computed by applying the statutory federal income tax rate to
income before taxes is attributable to the following:
March 31, June 30,
1996 1996
--------- --------
Income tax provision at 34%. . . . . . . $212,000 $76,500
State taxes, net of federal benefit. . . 37,000 22,172
Statutory federal income tax rate
applicable to income earned while
Company was an S corporation. . . . . (53,000)
-------- -------
$196,000 $98,672
======== =======
F-17
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Underwriters. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities, to any person in any jurisdiction where such offer or solicitation
would be unlawful. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary...........................................................1
The Company..................................................................1
Risk Factors.................................................................5
Use of Proceeds.............................................................13
Dividend Policy.............................................................14
Capitalization..............................................................14
Dilution....................................................................15
Selected Financial Data.....................................................16
Management's Discussion and Analysis of
Financial Condition and Results of Operations...............................18
Business....................................................................22
Management..................................................................31
Principal Shareholders......................................................35
Certain Transactions........................................................36
Description of Securities...................................................37
Shares Eligible for Future Sale.............................................39
Underwriting................................................................41
Legal Matters...............................................................43
Experts.....................................................................44
Additional Information......................................................44
Index to Financial Statements..............................................F-1
Until , 1996 (25 days after the date of this Prospectus), all dealers effecting
transactions in the Company's securities, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus with respect to their unsold
allotments or subscriptions.
<PAGE>
COMMUNITY CARE SERVICES, INC.
1,300,000 Shares of Common Stock
1,300,000 Class A Warrants
PROSPECTUS
Maidstone Financial, Inc.
The Harriman Group, Inc.
, 1996
<PAGE>
[Alternate Page for Selling Securityholder Prospectus]
SUBJECT TO COMPLETION, DATED AUGUST 22, 1996
PROSPECTUS
COMMUNITY CARE SERVICES, INC.
4,378,332 Shares of Common Stock and
4,158,332 Class A Warrants
This prospectus relates to 220,000 shares (the "Selling
Securityholders' Shares") of Common Stock, $0.01 par value per share (the
"Common Stock"), of Community Care Services, Inc. (the "Company"), which are
being offered for sale by certain selling securityholders (the "Selling
Shareholders"). This prospectus also relates to 4,158,332 Class A Warrants (the
"Selling Securityholder's Warrants") and the 4,158,332 shares of Common Stock
issuable upon exercise thereof which are being offered for sale by certain
Selling Warrantholders (the "Selling Warrantholders"); the Selling Shareholders
and Selling Warrantholders are referred to collectively as the "Selling
Securityholders." Each Class A Warrant entitles the holder to purchase one share
of Common Stock at $6.00 per share for a period of seven years commencing two
years from the date of this Prospectus. (The Selling Shareholders' Shares and
Selling Warrantholders Warrants are collectively referred to as the "Selling
Securityholders' Securities"). The Selling Shareholders may not sell or
otherwise dispose of any of such Selling Securityholders' Shares for a period of
18 months after the Effective Date without the prior written consent of the
Representative. The Selling Warrantholders may not sell or otherwise dispose of
any of the Selling Securityholders' Warrants for a period of 24 months after the
Effective Date without the prior written consent of the Representative. See
"Selling Securityholders and Plan of Distribution."
The Company will not receive any of the proceeds from the sales of
the Selling Securityholders' Securities by the Selling Securityholders. The
Company is paying the expenses incurred in connection with the registration for
sale of the Selling Securityholders' Securities. The Selling Securityholders'
Securities may be offered from time to time by the Selling Securityholders,
their pledgees and/or their donees (who will be identified in a prospectus
supplement as appropriate), through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale at negotiated prices.
The Selling Securityholders, their pledgees and/or their donees,
may be deemed to be "Underwriters" as defined in the Securities Act of 1933, as
amended (the "Securities Act"). If any broker-dealers are used by the Selling
Securityholders, their pledgees and/or their donees, any commissions paid to
broker-dealers and, if broker-dealers purchase any Selling Securityholders'
Securities as principals, any profits received by such broker-dealers on the
resale of the Selling Securityholders' Securities may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders, their pledgees and/or their
donees, may be deemed to be underwriting commissions. All costs, expenses and
fees in connection with the registration of the Selling Securityholders'
Securities will be borne by the Company except for any commission paid to
broker-dealers.
The Selling Securityholders' Securities offered by the Prospectus
may be sold from time to time by the Selling Securityholders, their pledgees
and/or their donees. No underwriting arrangements have been entered into by the
Selling Securityholders. The distribution of the Selling Securityholders'
Securities by the Selling Securityholders, their pledgees and/or their donees,
may be effected in one or more transactions that may take place on the
over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such shares as principals, at market prices prevailing at the
Alt-1
<PAGE>
time of sale, at prices related to such prevailing market prices or negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders, their pledgees and/or
their donees, in connection with sales of the Selling Securityholders'
Securities.
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering of 1,300,000
shares of Common Stock and 1,300,000 Class A Warrants (without giving effect to
the Underwriters's over-allotment option to purchase an additional 195,000
shares of Comm on Stock and/or 195,000 Class A Warrants, (the "Underwriters'
Over-Allotment Option") was declared effective by the Securities and Exchange
Commission. In connection with the Offering of the Common Stock and Class A
Warrants, the Company granted the Underwriters' warrants to purchase 150,000
shares of Common Stock and 150,000 Class A Warrants (the "Underwriters"
Warrant").
-----------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" AND "DILUTION" ON PAGES FIVE AND FIFTEEN, RESPECTIVELY, OF
THIS PROSPECTUS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Alt-2
<PAGE>
[Alternate Page for Selling Securityholder Prospectus]
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Registered (1) ............................ 4,378,332 shares of Common Stock. See "Description of
Securities" and "Selling Securityholders and Plan of
Distribution."
4,158,332 Class A Warrants
Risk Factors ......................................... This Offering involves a high degree of risk. See "Risk
Factors."
</TABLE>
- -------------
(1) The 4,378,332 shares of Common Stock include the 4,158,332 shares of
Common Stock issuable upon exercise of the Class A Warrants being
registered herein.
Alt-3
<PAGE>
[Alternate Page for Selling Securityholder Prospectus]
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The Company has issued an aggregate of 220,000 shares of Common
Stock to the Selling Securityholders and 4,158,332 Class A Warrants that are
being offered pursuant to this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." The Selling Securityholders have advised the Company that
sales of the shares of Common Stock and Class A Warrants may be effected from
time-to-time by themselves, their pledgees and/or their donees, in transactions
(which may include block transactions) in the over-the-counter market, in
negotiated transactions, through the writing of options on the Common Stock and
Class A Warrants, or a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Selling Securityholders, their pledgees and/or their
donees, may effect such transactions by selling Common Stock and Class A
Warrants directly to purchasers or through broker-dealers that may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholder and/or the
purchasers of shares of Common Stock for whom such broker-dealers may acts as
agents or to whom they sell as principals, or both.
The Selling Securityholders, their pledgees and/or their donees,
any broker-dealers that act in connection with the sale of the shares of Common
Stock and Class A Warrants as principals may be deemed to be " Underwriters"
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the shares of Common Stock and
Class A Warrants as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Securityholders' Securities
being registered on behalf of the Selling Securityholders are restricted
securities while held by the Selling Securityholders and the resale of such
securities by the Selling Securityholders is subject to prospectus delivery and
other requirements of the Act. The Selling Securityholders, their pledgees
and/or their donees, may agree to indemnify any agent, dealer or broker-dealer
who participates in transactions involving sales of the shares of Common Stock
and Class A Warrants against certain liabilities, including liabilities arising
under the Securities Act. The Company will not receive any proceeds from the
sales of the Selling Securityholders' Shares by the Selling Securityholders.
Sales of the Selling Securityholders' Securities by the Selling Securityholders,
or even the potential of such sales, would likely have an adverse effect on the
market price of the Company's Securities.
At the time a particular offer of the securities is made by or on
behalf of the Selling Securityholders, to the extent required, a prospectus
supplement will be distributed which will set forth the number of shares being
offered and the terms of the Offering, including the name or names of any
Underwriters, dealers or agents, the purchase price paid by any Underwritersfor
shares purchased from the selling stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public.
Under the Security Exchange Act of 1934, as amended (the "Exchange
Act"), and the regulations thereto, any person engaged in distribution of
Company securities offered by this prospectus may not simultaneously engage in
market-making activities with respect to Company securities during the
applicable "cooling off" period prior to the commencement of such distribution.
In addition, and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Rules 10b-6 and 10b-7,
in connection with transactions in the shares, which provisions may limit the
timing of purchases and sales of the Company's securities by the Selling
Securityholders.
The following table sets forth certain information with respect to
persons for whom the Company is registering the Selling Securityholders' Shares
for resale to the public. The Company will not receive any of the proceeds from
the sale of the Selling Securityholders' Securities. Beneficial ownership of the
Selling Securityholders' Securities by such Selling Securityholders after the
Offering will depend on the number of Selling Securityholders' Securities sold
by each Selling Securityholder. The securities held by the Selling
Securityholders are restricted securities while held by such Selling
Securityholders and the resale of such securities by the Selling Securityholders
is subject to prospectus delivery and other requirements of the Act. The Selling
Securityholders' Securities offered by the Selling Securityholders are not being
underwritten by the Underwriters.
Alt-4
<PAGE>
[Alternate Page for Selling Securityholder Prospectus]
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Selling After Selling
Securityholders' Amount of Shares Securityholders' Offering
Selling Securityholder(1) Offering of Shares Being Registered if all Shares are Sold
------------------ ---------------- ----------------------
<S> <C> <C> <C>
Bruce Ansnes 110,000 110,000 0
Bruce Haber 18,333 18,333 0
Bernard Kruger 18,335 18,335 0
Christopher Mahoney 18,333 18,333 0
Heather Morphy 7,333 7,333 0
John Morphy 7,333 7,333 0
Eyal Ofer 18,334 18,334 0
Renee Steinberg 14,666 14,666 0
Theodore Zimmerman 7,333 7,333 0
Total 220,000 220,000 0
Beneficial Ownership
Beneficial Ownership After Selling
Prior to Selling Securityholders'
Securityholders' Amount of Warrants Offering if all
Selling Securityholder(1) Offering of Warrants Being Registered Warrants are Sold
- ------------------------- -------------------- ---------------- -----------------
Alan Adler 525,000 525,000 0
Bruce Adler 400,000 400,000 0
Janet Adler 125,000 125,000 0
B-140 Holding Corp.(2) 800,000 800,000 0
David Cymrot 25,000 25,000 0
Fenner Reed & Jackson, 50,000 50,000 0
Inc.(3)
Richard Gershman 83,332 83,332 0
Matthew Gissen 50,000 50,000 0
Phyllis H. Kramer 400,000 400,000 0
Joel M. Pashcow 1,250,000 1,250,000 0
Laurence Putterman 50,000 50,000 0
Anthony Recchia 25,000 25,000 0
Martin Rosenman 100,000 100,000 0
Robert L. Rosenthal 50,000 50,000 0
Richard Schlanger 50,000 50,000 0
Steven P. Schwartz 75,000 75,000 0
</TABLE>
Alt-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Gilda Shapiro 100,000 100,000 0
</TABLE>
- --------------------------
(1) No Selling Securityholder other than Bruce Ansnes or Bernard Kruger, M.D.
is an officer, director or affiliate of the Company.
(2) Cynthia Levine is the beneficial owner of B-140 Holding Corp.
(3) Selwyn Rudnick and Patricia Rudnick are the beneficial owners of Fenner
Reed & Jackson, Inc.
Alt-6
<PAGE>
[Alternate Page for Selling Securityholder Prospectus]
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement
on Form SB-2 in accordance with the provisions of the Securities Act, with
respect to the securities offered hereby. This prospectus does not contain all
the information set forth in the Registration Statement and the exhibits
thereto. For further information, reference is made to the Registration
Statement and to the exhibits filed therewith. Statements herein contained
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. The Registration Statement and the
exhibits may be inspected without charge at the offices of the Commission and,
upon payment to the Commission of prescribed fees and rates, copies of all or
any part thereof may be obtained from the Commission's principal office at the
Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Northeast Regional Office, 7 World Trade
Center, New York, New York 10048.
EXPERTS
The financial statements of the Company as at March 31, 1996 and
for each of the years in the two-year period then ended included in this
Prospectus, have been audited by Richard A. Eisner & Company, LLP, independent
certified public accountants as set forth in their report thereon appearing
elsewhere herein. Such financial statements are included herein and in the
Registration Statement in reliance upon such report and upon the authority of
said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed
upon for the Company by Parker Duryee Rosoff & Haft, A Professional Corporation,
New York, New York. Gersten, Savage, Kaplowitz & Curtin, L.L.P., New York, New
York will act as counsel for the Underwriters.
Alt-7
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Underwriters. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities, to any person in any jurisdiction where such offer or solicitation
would be unlawful. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary..........................................................1
The Company.................................................................1
Risk Factors................................................................5
Use of Proceeds............................................................13
Dividend Policy............................................................14
Capitalization.............................................................14
Dilution...................................................................15
Selected Financial Data....................................................16
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................18
Business.................................................................22
Management...............................................................31
Principal Shareholders.....................................................35
Certain Transactions.......................................................36
Description of Securities..................................................37
Shares Eligible for Future Sale............................................39
Selling Securityholders and Plan of Distribution........................Alt-4
Additional Information..................................................Alt-7
Experts.................................................................Alt-7
Legal Matters...........................................................Alt-7
Index to Financial Statements.............................................F-1
Until , 1996 (25 days after the date of this Prospectus), all dealers effecting
transactions in the Company's securities, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus with respect to their unsold
allotments or subscriptions.
Alt back cover for Selling Securityholders' Prospectus
<PAGE>
COMMUNITY CARE SERVICES, INC.
4,378,332 Shares of Common Stock
and
4,158,332 Class A Warrants
PROSPECTUS
, 1996
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article 6 of the Certificate of Incorporation of the Company
contains the following provision which provides for the indemnification of
directors and officers of the Company:
6. The Corporation shall, to the fullest extent
permitted by Article 7 of the Business Corporation Law of the
State of New York, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have
power to indemnify under such Article from and against any and
all of the expenses, liabilities or other matters referred to
in or covered by such Article, and the indemnification
provided for herein shall not be deemed exclusive of any other
rights to which any person may be entitled under any By-Law,
resolution of shareholders, resolution of directors,
agreements or otherwise, as permitted by such Article, as to
action in any capacity in which he served at the request of
the Corporation. Any repeal or modification of this Article
SIX shall not adversely affect any right or protection of any
person existing hereunder with respect to any act or omission
occurring prior to such repeal or modification.
In accordance with Section 402(b)(7) of the BCL, Article 7 of
the Certificate of Incorporation of the Company eliminates the personal
liability of directors to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director with certain limited exceptions set
forth in Section 402(b)(7).
The Underwriting Agreement provides for reciprocal
indemnification between the Company and its controlling persons on the one hand
and the Underwriters and their respective controlling persons on the other hand
against certain liabilities in connection with this offering, including
liabilities under the Securities Act of 1933.
The Company intends to enter into an agreement with each of
its officers and directors pursuant to which they will be indemnified to the
fullest extent permitted under the BCL. The Company may also obtain and maintain
its own insurance for the benefit of its directors and officers and the
directors and officers of its subsidiaries, insuring such persons against
certain liabilities, including liabilities arising under the securities laws.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates of the
expenses to be incurred by it in connection with the issuance and distribution
of the securities being registered, other than underwriting discounts and
commissions:
Securities and Exchange Commission registration fee................$ 15,384.52
NASD registration fee ............................................$ 5,725.36
NASDAQ listing fee.................................................$ 1,000
Printing registration statement and other documents................$ *
Fees and expenses of Registrant's counsel..........................$ *
Underwriter's expense allowance....................................$ 202,800
Consulting fee.....................................................$ 108,000
Accounting fees and expenses.......................................$ *
Blue Sky expenses and counsel fees.................................$ *
Miscellaneous......................................................$ *
-----------
Total............................................$ *
===========
- ------------
* To be supplied by amendment.
Item 26. Recent Sales of Unregistered Securities.
Described below is information regarding all securities that
have been issued by the Company within the past three years.
In April 1995, the Company issued its Common Stock as follows:
(i) 50,000 shares to Susan Chestman for a purchase price of $5,500;
(ii) 100,000 shares to Phyllis H. Kramer for a purchase price of $11,000;
(iii) 50,000 shares to Collette Morgenstern for a purchase
price of $5,500.
No underwriter was engaged in connection with the foregoing sales of securities.
In November 1995, the Company issued its Common Stock as follows:
(i) 400,000 shares to B-140 Holding Corp. for a purchase price of $48,000;
(ii) 200,000 shares to Joel M. Pashcow for a purchase price of $24,000;
(iii) 100,000 shares to each of Alan Adler and Bruce Adler for a purchase
price of $12,000 each; and
(iv) 41,666 shares to Richard Gershman for a purchase price of $5,000.
II-2
<PAGE>
In January 1996, the Company issued 500,000 shares of its Common Stock
to the following persons for a purchase price of $.50 per share:
(i) 100,000 shares to each of Bruce Adler, Alan Adler and
Phyllis H. Kramer;
(ii) 200,000 shares to Joel M. Pashcow.
In February 1996, the Company issued 25 and one half units for a
purchase price of $25,000 per unit (the "Unit"), each unit consisting of one
promissory note in the principal amount of $25,000 with interest payable at a
rate of 8% per year and warrants to purchase 50,000 shares of Common Stock at
$7.50 per share as follows:
(i) one half Unit to each of Anthony Recchia and David Cymrot;
(ii) one Unit to each of Matthew Gissen, Laurence Putterman,
Robert L. Rosenthal, Richard Schlanger and Fenner Reed &
Jackson, Inc.;
(iii) one and one half Units to Steven P. Schwartz;
(iv) two Units to each of Martin Rosenman and Gilda Shapiro;
(v) two and one half Units to each of Alan Adler and Janet Adler;
(vi) nine Units to Joel M. Pashcow.
Maidstone Financial, Inc. was engaged as a placement agent for the
November 1995, January 1996 and February 1996 offerings of securities.
In August 1996, the Company issued 2,883,332 Class A Warrants in
exchange for 1,441,666 shares of Common Stock as follows:
(i) 800,000 Class A Warrants to B-140 Holding Corp. in exchange for
400,000 shares;
(ii) 800,000 Class A Warrants to Joel M. Pashcow in
exchange for 400,000 shares;
(iii) 400,000 Class A Warrants to Bruce
Adler in exchange for 200,000 shares
(iv) 400,000 Class A Warrants to
Alan Adler in exchange for 200,000 shares;
(v) 400,000 Class A Warrants
to Phyllis Kramer in exchange for 200,000 shares; and
(vi) 83,332 Class A Warrants to Richard Gershmann in exchange for
41,666 shares.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof.
II-3
<PAGE>
Item 27. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
------ ---------------------- ------
<S> <C>
* 1.01 -- Preliminary Form of Underwriting Agreement.
* 1.02 -- Form of Underwriter's Warrant.
3.01 -- Certificate of Incorporation of Registrant.
3.02 -- By-Laws of the Registrant.
3.03 -- Certificate of Amendment to Certificate of Incorporation.
3.04 -- Certificate of Amendment to Certificate of Incorporation.
3.05 -- Certificate of Correction to Certificate of Amendment.
3.06 -- Certificate of Amendment to Certificate of Incorporation.
* 4.01 -- Specimen Certificate representing the Common Stock, par
value $.01 per share.
* 5.01 -- Opinion of Parker Duryee Rosoff & Haft.
10.01 -- 1996 Stock Option Plan.
10.02 -- Form of Stock Option Agreement.
10.03 -- Form of Employment Agreement to be entered into
between the Registrant and Alan T. Sheinwald.
10.04 -- Form of Employment Agreement to be entered into
between the Registrant and Allan Goldfeder.
10.07 -- Lease dated January 1, 1996 by and between the Registrant
and Petrillo Realty Development Corporation.
*10.08 -- Form of Warrant Agreement.
10.09 Form of Conversion Agreement
21.01 -- Subsidiaries of the Registrant.
24.01 -- Consent of Parker Duryee Rosoff & Haft (included in
Exhibit 5).
24.02 -- Consent of Richard A. Eisner & Company, LLP.
25.01 -- Power of Attorney.
</TABLE>
- -----------------
* To be filed by amendment.
II-4
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because of the absence of
conditions under which they are required, or because the required information is
given in the financial statements or the notes thereto.
Item 28. Undertakings.
The Company hereby undertakes to file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration
Statement (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
The Company hereby undertakes that, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The Company hereby undertakes to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 403A and contained
II-5
<PAGE>
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized Amendment
No. 3 to this registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York, on August 22, 1996.
COMMUNITY CARE SERVICES, INC.
By : /s/ Alan T. Sheinwald
------------------------------
Alan T. Sheinwald
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Alan T. Sheinwald
- ---------------------- Director, President and Chief
Alan T. Sheinwald Executive Officer (Principal August 22, 1996
Executive Officer, Principal
Financial and Accounting Officer)
/s/ Alan T. Sheinwald
- ---------------------- Director August 22, 1996
Dean L. Sloane*
/s/ Alan T. Sheinwald
- ---------------------- Director August 22, 1996
Craig V. Sloane*
- ---------------------- Director August 22, 1996
Bruce L. Ansnes
- ---------------------- Director August 22, 1996
Bernard M. Kruger, M.D.
*By Alan T. Sheinwald as attorney-in-fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
------ ---------------------- ------
<S> <C>
* 1.01 -- Preliminary Form of Underwriting Agreement.
* 1.02 -- Form of Underwriter's Warrant.
3.01 -- Certificate of Incorporation of Registrant.
3.02 -- By-Laws of the Registrant.
3.03 -- Certificate of Amendment to Certificate of Incorporation.
3.04 -- Certificate of Amendment to Certificate of Incorporation.
3.05 -- Certificate of Correction to Certificate of Amendment.
3.06 -- Certificate of Amendment to Certificate of Incorporation.
* 4.01 -- Specimen Certificate representing the Common Stock, par
value $.01 per share.
* 5.01 -- Opinion of Parker Duryee Rosoff & Haft.
10.01 -- 1996 Stock Option Plan.
10.02 -- Form of Stock Option Agreement.
10.03 -- Form of Employment Agreement to be entered into between
the Registrant and Alan T. Sheinwald.
10.04 -- Form of Employment Agreement to be entered into between
the Registrant and Allan Goldfeder.
10.07 -- Lease dated January 1, 1996 by and between the Registrant
and Petrillo Realty Development Corporation.
*10.08 -- Form of Warrant Agreement.
10.09 -- Form of Conversion Agreement.
21.01 -- Subsidiaries of the Registrant.
24.01 -- Consent of Parker Duryee Rosoff & Haft (included in
Exhibit 5).
24.02 -- Consent of Richard A. Eisner & Company, LLP.
25.01 -- Power of Attorney.
- ----------------------
* To be filed by amendment.
</TABLE>
II-8
<PAGE>
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
COMMUNITY SUPPORT SERVICES, INC.
Under Section 402 of the Business Corporation Law
of the State of New York
1. The name of the Corporation is Community Support Services, Inc.
2. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York; provided, however, that the Corporation is not
formed to engage in any act or activity requiring the consent or approval of any
state official, department, board, agency or other body without such consent or
approval first being obtained.
3. The office of the Corporation is to be located in the County of
Westchester.
4. The Corporation is authorized to issue two hundred (200) shares of
common stock without par value.
5. The Secretary of State of the State of New York is hereby designated
as the agent of the Corporation upon whom process against the Corporation may be
served. The Secretary of State shall mail a copy of any process served against
the Corporation to the Corporation, c/o Dean L. Sloan, 45 Morris Street,
Yonkers, New York 10705.
IN WITNESS WHEREOF, I am a natural person over the age of eighteen
years, I have signed this Certificate of Incorporation this 9th day of July
1992, affirming that the statements made herein are true under the penalties of
perjury.
/s/ David P. Glasel
----------------------------------
David P. Glasel
c/o Sherrin & Glasel, Esqs.
74 No. Pearl Street
Albany, New York 12207
<PAGE>
STATE OF NEW YORK }
COUNTY OF ALBANY } ss.:
On this 9th day of July, 1992 before me, the subscriber, personally
appeared DAVID P. GLASEL to me personally known and known to me to be the same
person described in and who executed the within instrument, and he acknowledged
to me that he executed the same.
/s/ Janet M. Thayer
-----------------------------------
Notary Public
Janet M. Thayer
Notary Public, State of New York
Qualified in Albany County
No. 4917482
Commission Expires Feb. 21, 1993
2
<PAGE>
EXHIBIT 3.02
BY-LAWS
OF
COMMUNITY CARE SERVICES, INC.
(a New York corporation)
------------------
ARTICLE I:
OFFICES
Section 1. Principal Office
The principal office of the Corporation shall be in the County of
Westchester, State of New York.
Section 2. Additional Offices
The corporation may also have offices and places of business at such
other places, within or without the State of New York, as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II:
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place
1
<PAGE>
The annual meeting of the shareholders of the Corporation and all
special meetings of shareholders may be held at such time and place within or
without the State of New York and shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting
The annual meeting of shareholders shall be held annually on such date
a may be fixed from time to time by the Board of Directors. If no annual meeting
of shareholders has been held within thirteen (13) months following the date of
incorporation or the date of the last annual meeting of shareholders, then the
meeting shall be held on the 3rd Tuesday in June of such year, if not a legal
holiday and, if a legal holiday, then on the next business day thereafter. The
shareholders shall elect a Board of Directors at the meeting and transact such
other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting
Written notice of the place, date and hour of the annual meeting of
shareholders shall be given personally or by mail to each shareholder entitled
to vote thereat, not less than ten (10) nor more than fifty (50) days prior to
the meeting, if by first class mail and not less than twenty-four (24) nor more
than fifty (50) days prior to the meeting, if by third class mail.
Section 4. Special Meetings
Special meetings of the shareholders, for any purposes, unless
otherwise prescribed by law or by the Certificate of Incorporation, may be
called by the Chairman of the Board, President or by action of the Board of
Directors, and shall be called by the President at the written request of
shareholders holding at least twenty-five (25) percent of the shares of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meetings.
Section 5. Notice of Special Meeting
Written notice of a special meeting of shareholders stating the place,
date and hour of the meeting, the purpose or purposes for which the meeting is
called, and by or at whose direction it is being issued, shall be given
personally or by mail to each shareholder entitled to vote thereat, not less
than ten (10) nor more than fifty (50) days prior to the meeting.
Section 6. Quorum
2
<PAGE>
Except as otherwise provided by the Certificate of Incorporation, the
holders of a majority of the shares of the Corporation issued and outstanding
and entitled to vote thereat shall be necessary to and shall constitute a quorum
for the transaction of business at all meetings of the shareholders. If a quorum
shall not be present at any meeting of the shareholders, the shareholders
entitled to vote thereat present in person or represented by proxy shall have
power to adjourn the meeting from time to time until a quorum shall be present.
At least two (2) days prior to the adjourned meeting, notice thereof shall be
given, personally or by mail, to each shareholder entitled to vote thereat who
was not present in person at the meeting at the time originally called and,
unless announced at the meeting, to the other shareholders. At any such
adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally called.
Section 7. Voting
(a) At any meeting of the shareholders every shareholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided in the Certificate of Incorporation, each shareholder shall
have one (1) vote for each share of stock having voting power which is
registered in his name on the books of the Corporation. Except where another
date shall have been fixed as a record date for the determination of its
shareholders entitled to vote, no share of stock shall be voted at any election
of Directors which shall have been transferred on the books of the Corporation
within ten (10) days next preceding such election of Directors.
(b) Except as otherwise provided by law or by the Certificate of
Incorporation or these By-Laws, all elections of Directors shall be decided by a
plurality of the votes cast and all other matters shall be decided by a majority
of the votes cast.
(c) At each meeting of the shareholders, the polls shall be opened and
closed, the proxies and ballots shall be received and be taken in charge, and
all questions touching the qualification of voters, the validity of proxies and
the acceptance or rejection of votes shall be decided by two (2) inspectors.
Such inspectors shall be appointed by the chairman of the meeting. If, for any
reason, any of the inspectors appointed shall fail to attend or refuse or be
unable to serve, inspectors in place of any so failing to attend or refusing or
unable to serve shall be appointed in like manner. Such inspectors, before
entering upon the discharge of their duties, shall be sworn faithfully to
execute the duties of inspectors at such meeting with strict impartiality and
according to the best of their ability, and the oath so taken shall be
subscribed by them.
Section 8. Proxies
A proxy, to be valid, shall be executed in writing by the shareholder
or by his attorney-in-fact. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the
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pleasure of the shareholder executing it, except in those cases where an
irrevocable proxy is permitted by law.
Section 9. Consents
Whenever by any provision of law or of the Certificate of Incorporation
or of these By-Laws the vote of shareholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action, the meeting and
vote of shareholders may be dispensed with if all the shareholders who would
have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken. Nothing in this Section
9 shall be construed so as to alter or modify any provision of law under which
the written consent of the holders of less than all outstanding shares is
sufficient for corporate action.
ARTICLE III:
DIRECTORS
Section 1. Number; Tenure
(a) The number of Directors constituting the entire Board of Directors
shall be fixed from time to time by resolution of the Board but shall not be
less than three (3), except that where all the shares of the Corporation are
owned beneficially and of record by less than three (3) shareholders, the number
of Directors may be less than three (3) but not less than the number of
shareholders. Absent any such determination by the Board of Directors,
constituting the Board of Directors shall be four.
(b) Directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 3 of this Article III, and each
Director shall be elected to serve until his successor has been elected and has
qualified.
Section 2. Resignation; Removal
Any Director may resign at any time. The Board of Directors may, by a
majority vote of the Directors then in office, remove a Director for cause. Any
or all of the Directors may be removed without cause by a vote of the
shareholders. These provisions for the removal of Directors apply to the extent
permitted by the laws of the State of New York.
Section 3. Vacancies
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If any vacancies occur in the Board of Directors by reason of the
death, resignation, retirement, disqualification or removal from office of any
Director with or without cause or if any new directorships are created, all of
the Directors then in office may, by majority vote, choose successors, or fill
the newly created directorships, and the Directors so chosen shall hold office
until the next annual meeting of the shareholders and until their successors
shall be duly elected and qualified, unless sooner displaced; provided, however,
that if in the event of any such vacancy, the Directors remaining in office
shall be unable to fill such vacancy within thirty (30) days of the occurrence
thereof a special meeting of the shareholders may be called at which meeting
such vacancy may be filled.
Section 4. Executive Committee and Other Committees
The Board of Directors, by resolution adopted by a majority of all
Directors then in office, may designate from among its members an Executive
Committee and other Committees, each consisting of three or more Directors,
which Committees shall serve at the pleasure of the Board of Directors. The
Board of Directors may designate one or more Directors as alternate members of
any such Committee, who may replace any absent member or members of such
Committee. The Board of Directors, by resolution adopted by a majority of all
Directors then in office, may remove a member of any such Committee with or
without cause. To the extent provided in said resolution and to the extent
permitted by the laws of the State of New York, each such Committee shall have
and may exercise the powers of the Board of Directors. Each of such Committees
shall keep regular minutes of its proceedings and shall report thereon to the
Board from time to time as required.
ARTICLE IV:
MEETING OF THE BOARD
Section 1. Place
The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or without the State of New York.
Section 2. Regular Meetings
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board.
Section 3. Special Meetings
Special meetings of the Board of Directors may be called by the
Chairman of the Board, if any, or by the President or the Secretary on two (2)
days' notice to each Director, either personally or by mail or by telegram;
special meetings shall be called by the
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Chairman of the Board, if any, President or Secretary in like manner and on like
notice on the written request of two (2) Directors.
Section 4. Quorum
At all meetings of the Board of Directors, a majority of the Directors
then in office, shall be necessary to constitute a quorum for the transaction of
business except for a special meeting of the Board of Directors to consider the
dissolution of the Corporation. If a quorum shall not be present at any meeting
of the Board of Directors, a majority of the Directors present thereat may
adjourn the meeting from time to time until a quorum shall be present. Two (2)
days' notice of any such adjournment shall be given, either personally or by
mail or by telegram, to each Director who was not present and unless announced
at the meeting, to the other Directors.
Section 5. Voting
Except with respect to special meetings of the Board of Directors to
consider the dissolution of the Corporation, the number of votes of directors
that shall be necessary for the transaction of any business at any meeting of
directors shall be that of a majority of the directors then in office unless the
Certificate of Incorporation shall provide for a greater number. In such later
event, the vote of the number of directors provided for in the Certificate of
Incorporation shall be required to transact such business.
Section 6. Participation in Meeting by Electronic Means
Any one or more members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or any Committee
thereof by means of a conference telephone or similar communication equipment
allowing all persons participating in such meeting to hear each other at the
same time. Participation by such means shall constitute presence in person at
such meeting.
Section 7. Action in Lieu of Meeting
Any action required or permitted to be taken by the Board of Directors
or any Committee thereof may be taken without a meeting if all members of the
Board of Directors or the Committee consent in writing to the adoption of a
resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or Committee shall be filed
with the minutes of the proceedings of the Board of Directors or Committee.
Section 8. Compensation
Directors, as such, shall not receive any stated salary for their
services, but, by resolution of the Board of Directors, a fixed fee and expenses
of attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided,
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however, that nothing herein contained shall be construed to preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE V:
NOTICES
Section 1. Form; Delivery
Notices to Directors and shareholders shall be in writing and may be
delivered personally or by mail or, to Directors, by telegram. Such notice is
deemed to be given, if by mail, when deposited in the United States mail, with
postage thereon prepaid and, if by telegram when ordered or, if a delayed
delivery is ordered, as of such delayed delivery time, and directed to Directors
or shareholders at their addresses as they appear on the records of the
Corporation.
Section 2. Waiver
Whenever a notice is required to be given by any statute, the
Certificate of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to such notice. In addition,
any shareholder attending a meeting of shareholders in person or by proxy
without protesting prior to the conclusion of the meeting the lack of notice
thereof to him, and any Director attending a meeting of the Board of Directors
without protesting prior to the meeting or at its commencement such lack of
notice shall be conclusively deemed to have waived notice of such meeting.
ARTICLE VI:
OFFICERS
Section 1. Officers
The officers of the Corporation shall be a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers including a
Chairman of the Board as may be determined by the Board of Directors.
Section 2. Authority and Duties
All officers, as between themselves and the Corporation, shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these By-Laws, or, to the extent not so provided, by the
Board of Directors.
7
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Section 3. Term of Office; Removal
All officers shall be elected by the Board of Directors and shall hold
office for such time as may be prescribed by the Board. Any officer or agent
elected or appointed by the Board may be removed with or without cause at any
time by the Board.
Section 4. Compensation
The compensation of all officers of the Corporation shall be fixed by
the Board of Directors, and the compensation of agents shall either be so fixed
or shall be fixed by officers thereunto duly authorized. The fact that any
officer is a Director shall not preclude him from receiving a salary as an
officer, or from voting upon the resolution providing the same.
Section 5. Vacancies
If an office becomes vacant for any reason, the Board of Directors may
fill the vacancy. Any officer so appointed or elected by the Board shall serve
only until the unexpired term of his predecessor shall have expired unless
re-elected by the Board.
Section 6. The Chairman of the Board
The Chairman of the Board of Directors, if one be elected, shall
preside at all meetings of the Board of Directors and shall perform such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 7. The President
The President shall be the Chief Executive Officer of the Corporation;
he or she shall preside at all meetings of the shareholders; he shall be
ex-officio a member of all standing committees, shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board of Directors, and shall see that all orders and
resolutions of the Board are carried into effect.
Section 8. The Vice-President
The Vice-President or, if there be more than one, the Vice Presidents
in the order of their seniority or in any other order determined by the Board of
Directors, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President, and shall generally assist the
President and perform such other duties as the Board or the President shall
prescribe.
Section 9. The Secretary
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The Secretary shall attend all meetings of the Board of Directors and
all meetings of the shareholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like duties
for the standing Committees when required. He or she shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board, and shall perform such other duties as may be prescribed by the Board or
the President, under whose supervision he shall act. He or she shall keep in
safe custody the seal of the Corporation and, when authorized by the Board,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his or her signature or by the signature of the Treasurer or an
Assistant Treasurer or Assistant Secretary. He or she shall keep in safe custody
the certificate books and shareholder records and such other books and records
as the Board may direct and shall perform all other duties incident to the
office of the Secretary.
Section 10. Assistant Secretary
During the absence or disability of the Secretary, any Assistant
Secretary, or if there be more than one, the one so designated by the Secretary
or by the Board of Directors, shall have all the powers and functions of the
Secretary.
Section 11. The Treasurer
The Treasurer, if one shall be elected, shall have the care and custody
of the corporate funds and other valuable effects, including securities, and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render the President and Directors, at the
regular meeting of the Board, or whenever they may require it, an account of all
his transactions as Treasurer and of the financial condition of the Corporation.
Section 12. The Assistant Treasurer
During the absence or disability of the Treasurer, any Assistant
Treasurer, or if there be more than one, the one so designated by the Treasurer
or by the Board of Directors, shall have all the powers and functions of the
Treasurer.
Section 13. Bonds
In case the Board of Directors shall so require, any officer or agent
of the Corporation shall give the Corporation a bond for such term, in such sum
and with such surety or sureties as shall be satisfactory to the Board for the
faithful performance of the duties of his office, and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and
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other property of whatever kind in his possession or under his control belonging
to the Corporation.
ARTICLE VIII:
SHARE CERTIFICATES
Section 1. Form: Signature
The certificates for shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in books of the Corporation as they are issued. Each
certificate shall exhibit the registered holder's name and the number and class
of shares, and shall be signed by the President or a Vice-President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and shall bear the seal of the Corporation or a facsimile thereof. Where any
such certificate is countersigned by a transfer agent, or registered by a
registrar, the signature of any such officer may be a facsimile signature. In
case any officer who signed or whose facsimile signature or signatures was
placed on any such certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as it he were such officer at the date of issue.
Section 2. Lost Certificates
The Board of Directors may direct a new share certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 3. Registration of Transfer
Upon surrender to the Corporation or any transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation or such transfer agent to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
Section 4. Registered Shareholders
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Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends or other distributions and to vote as such
owner, and to hold liable for calls and assessments a person registered on its
books as the owner of shares, and shall not be found to recognize any equitable
or legal claim to or interest in such share or shares on the part of any other
person, whether or not it has actual or other notice thereof.
Section 5. Record Date
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other action affecting
the interest of shareholders, the Board of Directors may fix, in advance, a
record date. Such date shall not be more than fifty (50) nor less than ten (10)
days before the date of any such meeting, nor more than fifty (50) days prior to
any other action.
In each such case, except as otherwise provided by law, only such
persons as shall be shareholders of record on the date so fixed shall be
entitled to notice of, and to vote at, such meeting and any adjournment thereof,
or to express such consent or dissent, or to receive payment of such dividend or
such allotment or rights, or otherwise to be recognized as shareholders for the
related purpose, notwithstanding any registration or transfer of shares on the
books of the Corporation after any such record date so fixed.
ARTICLE IX:
GENERAL PROVISIONS
Section 1. Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
Section 2. Dividends
Dividends upon the capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting and may be paid in
cash, in property or in shares of the capital stock, subject to the provisions
of the laws of the State of New York.
Section 3. Reserves
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Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Directors
from time to time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purposes as the
Board shall deem conducive to the interests of the Corporation, and the Board
may modify or abolish any such reserve in the manner in which it was created.
Section 4. Checks
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
Section 5. Seal
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal New
York". The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or otherwise reproduced.
ARTICLE X:
INDEMNIFICATION
Section 1. Actions by or in the right of the Corporation
Any person made a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a Director or officer of the Corporation
shall be indemnified by the Corporation against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action or in connection with an appeal
therein, to the fullest extent permitted by the laws of State of New York.
Section 2. Action or Proceeding Other than by or in the Right of the Corporation
Any person made or threatened to be made a party to an action or
proceeding other than one by or in the right of the Corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign,
which any Director or officer of the Corporation served in any capacity at the
request of the Corporation, by reason of the fact that he, his testator or
intestate, was a Director or officer of the Corporation, or served such other
corporation in any capacity, shall be indemnified by the Corporation against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and
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necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such Director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation and, in
criminal actions or proceedings, in which he had no reasonable cause to believe
that his conduct was unlawful. The termination of any such civil or criminal
action or proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such Director or officer did not act in good faith for a purpose which he
reasonably believed to be in the best interests of the Corporation or that he
had reasonable cause to believe that his conduct was unlawful.
Section 3. Opinion of Counsel
In taking any action or making any determination pursuant to this
Article, the Board of Directors and each Director, officer or employee, whether
or not interested in any such action or determination, may rely upon an opinion
of counsel selected by the Board.
Section 4. Other Indemnification; Limitation
Officers and Directors shall also be indemnified to the fullest extent
permitted under Article VII of the Business Corporation Law of the State of New
York, as amended from time to time. The Corporation's obligations under this
Article shall not be exclusive or in limitation of but shall be in addition to
any other rights to which any such person may be entitled under any other
provision of these By-Laws, or by contract, or as a matter of law, or otherwise.
All of the provisions of this Article X of the By-Laws shall be valid only to
the extent permitted by the Certificate of Incorporation and the laws of the
State of New York.
ARTICLE XI:
AMENDMENTS
Section 1. Power to Amend
These By-Laws shall be subject to amendment or repeal and additional
By-Laws may be adopted either by the Board of Directors at any regular or
special meeting of the Board or by written consent in lieu of a meeting, or by
the shareholders at any regular or special meeting of the shareholders, or by
written consent in lieu of a meeting.
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Section 2. Amendment Affecting Election of Directors; Notice
If any By-Law regulating an impending election of Directors is adopted,
amended or repealed by the Board, there shall be set forth in the notice of the
next meeting of shareholders for the election of Directors the By-Law so
adopted, amended or repealed, together with a concise statement of the changes
made.
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EXHIBIT 3.03
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF COMMUNITY SUPPORT SERVICES, INC., UNDER SECTION 805
OF THE BUSINESS CORPORATION LAW
(1) The name of this corporation is Community Support Services, Inc.
(2) The certificate of incorporation of the Corporation was filed with
the Department of State on the 9th day of July, 1992.
(3) The purpose of the amendment of the Certificate of Incorporation is
to change the name of the corporation as follows: the name of the corporation is
Community Care Services, Inc.
(4) The amendment to the certificate of incorporation was authorized by
the unanimous vote of the Board of Directors of the corporation. Following the
vote of the Board of Directors, a unanimous vote of the holders of all
outstanding shares entitled to vote at a meeting of shareholders was received at
a meeting held on the 24th day of July, 1992.
/s/ Dean Sloan
----------------------------------
Dean Sloan, Secretary
STATE OF NEW YORK }
COUNTY OF WESTCHESTER } ss.:
I, DEAN SLOAN, being duly sworn, depose and state that I am the
Secretary of Community Care Services, Inc., the corporation named in and
described in the foregoing certificate and that I have read the foregoing
certificate and know the contents thereof to be true, except as to the matters
therein stated to be alleged upon information and belief, and as to those
matters, I believe them to be true.
/s/ Dean Sloan
-----------------------------------
Dean Sloan
Sworn to before me
this 27th day of July, 1992. Filed by: Sherrin & Glasel
74 No. Pearl St.
Albany, NY 12207
<PAGE>
/s/ Erica L. Faigman
- ------------------------------
Notary Public
ERICA L. FAIGMAN
Notary Public, State of New York
No. 4872106
Qualified in Westchester County
Commission Expires October 6, 1992
<PAGE>
EXHIBIT 3.04
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
COMMUNITY CARE SERVICES, INC.
*******************************************************************************
Under Section 805 of the Business Corporation Law
*******************************************************************************
Pursuant to Section 805 of the Business Corporation Law, the
undersigned, being the President and the Secretary of Community Care Services,
Inc., a New York corporation (the "Corporation"), do hereby certify that:
FIRST: The name of the Corporation is Community Care Services, Inc. The
name under which the Corporation was formed is Community Support Services, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on the 22nd day of July, 1992.
THIRD: Article Four of the Certificate of Incorporation of the
Corporation, relating to the authorized capitalization of the Corporation, is
hereby amended, from 200 shares of Common stock no par value to 10,000,000
shares of Common Stock, $,01 par value and 1,000,000 shares of Preferred Stock,
$,01 par value, to read as follows:
<PAGE>
4. (a) The Corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
Common 10,000,000 $.01
Preferred 1,000,000 $.01
(b) The designations and the powers, preferences and rights, and the
qualifications or restrictions thereof are as follows:
The Preferred Stock shall be issued from time to time in one or more
series, with such distinctive serial designations as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
shares from time to time adopted by the Board of Directors; and in such
resolution or resolutions providing for the issue of shares of each particular
series, the Board of Directors is expressly authorized to fix the annual rate or
rates of dividends for the particular series; the dividend payment dates for the
particular series and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend payment date shall be
cumulative; the redemption price or prices for the particular series; the voting
powers for the particular series; the rights, if any, of holders of the shares
of the particular series to convert the same into shares of any other series or
class or other securities of the Corporation, with any provisions for the
subsequent adjustment of such conversion rights; and to classify or reclassify
any unissued shares by fixing or altering from time to time any of the foregoing
rights, privileges and qualifications.
-2-
<PAGE>
All shares of Preferred Stock of any one series shall be identical
with each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative; and all Preferred Stock shall be of equal rank, regardless of
series, and shall be identical in all respects except as to the particulars
fixed by the Board of Directors as hereinabove provided or as fixed herein.
(c) The preemptive rights of shareholders are denied.
FOURTH: A new Article Six, relating to indemnification, and a new
Article Seven, relating to liability of directors, of the Certificate of
Incorporation of the Corporation are hereby added as follows:
6. The Corporation shall, to the fullest extent permitted by Article
7 of the Business Corporation Law of the State of New York, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under such Article from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by such Article, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which any person may be entitled under any By-law, resolution of
shareholders, resolution of directors, agreements, or otherwise, as permitted by
such Article, as to action in any capacity in which he served at the request of
the Corporation. Any repeal or modification of this Article Six shall not
adversely affect any right or protection of any person existing hereunder with
respect to any act or omission occurring prior to such repeal or modification.
-3-
<PAGE>
7. The personal liability of the directors of the Corporation is
eliminated to the fullest extent permitted by the provisions of paragraph (b) of
Section 402 of the Business Corporation Law of the State of New York, as the
same may be amended and supplemented. Any repeal or modification of this Article
Seven by the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing hereunder with
respect to any act or omission occurring prior to such repeal or modification.
FIFTH: This amendment provides for the following changes and increases
of the Corporation's shares effective immediately upon the filing of this
Certificate of Amendment: (i) one hundred and fifty (150) issued shares of no
par value Common Stock are changed into 2,050,000 shares of Common Stock, $.01
par value, at the rate of one share for 13,666 and 2/3 shares, (ii) fifty (50)
unissued shares of no par value Common Stock are changed into 683,333 shares of
Common Stock $.01 par value, at the rate of one share for 14,666 and 33/50
shares, (iii) the authorized Common Stock, $.01 par value, is increased by an
additional 7,266,667 shares, bringing the total shares of Common Stock $.01 par
value, authorized to be issued to 10,000,000 shares and (iv) the authorized
Preferred Stock, $.01 par value, is increased by 1,000,000 shares bringing the
total Shares of Preferred Stock, $.01 par value authorized to be issued to
1,000,000 Shares.
SIXTH: This amendment to the Certificate of Incorporation of the
Corporation was authorized by the unanimous written consents of the
Corporation's Board of Directors and shareholders.
-4-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has hereunto signed his
name and hereby subscribes and affirms that the statements made herein are true
under the penalties of perjury as of the 10th day of April, 1995.
/s/ Alan Goldfeder
-------------------------------------
Alan Goldfeder, President
/s/ Manuel N. Wilson
-------------------------------------
Manuel N. Wilson, Secretary
-5-
<PAGE>
EXHIBIT 3.05
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
COMMUNITY CARE SERVICES, INC.
Under Section 105 of the Business Corporation Law
The undersigned, being, respectively, the president and secretary of
the corporation, hereby certify and set forth as follows:
FIRST: The name of the corporation is Community Care Services, Inc.
SECOND: The date the certificate to be corrected was filed with the
Department of State is the 9th day of August, 1995.
THIRD: The error contained in the Certificate of Amendment related
to the rate of change of the unissued shares contained in
subparagraph (ii) of Paragraph FIFTH which read:
"(ii) fifty (50) unissued shares of no par value Common Stock
are changed into 683,333 shares of Common Stock $.01 par value, at the
rate of one share for 14,666 and 33/50 shares"
is corrected as follows:
"(ii) fifty (50) unissued shares of no par value Common Stock
are changed into 683,333 shares of Common Stock $.01 par value, at the rate of
one share for 13,666 and 33/50 shares"
IN WITNESS WHEREOF, we hereunto sign our names this 25th day of April,
1996, and affirm that the statements contained herein are true under the
penalties of perjury.
COMMUNITY CARE SERVICES, INC.
/s/ Alan T. Sheinwald
--------------------------------------
Alan T. Sheinwald, President
/s/ Allan C. Goldfeder
---------------------------------------
Allan C. Goldfeder, Secretary
<PAGE>
EXHIBIT 3.06
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
COMMUNITY CARE SERVICES, INC.
Under Section 805 of the Business Corporation Law
Pursuant to Section 805 of the Business Corporation Law, the
undersigned, being the President and the Secretary of Community Care Services,
Inc., a New York corporation (the "Corporation"), do hereby certify that:
FIRST: The name of the Corporation is Community Care Services, Inc.
The name under which the Corporation was formed is Community
Support Services, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on the 22nd day of July, 1992.
THIRD: Article Four of the Certificate of Incorporation of the
Corporation, relating to the authorized capitalization of the
Corporation, is hereby amended, from 10,000,000 shares of
Common Stock, $.01 par value and 1,000,000 shares of Preferred
Stock, $.01 par value, to read as follows:
"4. (a) The Corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
----- ---------------- ---------
<PAGE>
Common 20,000,000 $.01
Preferred 1,000,000 $.01
(b) The designations and the powers, preferences and rights,
and the qualifications or restrictions thereof are as follows:
The Preferred Stock shall be issued from time to time in one
or more series, with such distinctive serial designations as shall be
stated and expressed in the resolution or resolutions providing for the
issue of such shares from time to time adopted by the Board of
Directors; and in such resolution or resolutions providing for the
issue of shares of each particular series, the Board of Directors is
expressly authorized to fix the annual rate or rates of dividends for
the particular series; the dividend payment dates for the particular
series and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend payment date
shall be cumulative; the redemption price or prices for the particular
series; the voting powers for the particular series; the rights, if
any, of holders of the shares of the particular series to convert the
same into shares of any other series or class or other securities of
the Corporation, with any provisions for the subsequent adjustment of
such conversion rights; and to classify or reclassify any unissued
shares by fixing or altering from time to time any of the foregoing
rights, privileges and qualifications.
All shares of Preferred Stock of any one series shall be
identical with each other in all respects, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereon shall be cumulative; and all Preferred Stock
shall be of equal rank, regardless of series, and shall be identical in
all respects except as to the particulars fixed by the Board of
Directors as hereinabove provided or as fixed herein.
(c) The preemptive rights of shareholders are denied."
-2-
<PAGE>
FOURTH: This amendment provides for the authorized Common Stock, $.01
par value, to be increased by an additional 10,000,000 shares, bringing the
total shares of Common Stock $.01 par value, authorized to be issued to
20,000,000 shares and such increase of the Corporation's shares shall be
effective immediately upon the filing of this Certificate of Amendment.
FIFTH: This amendment to the Certificate of Incorporation of the
Corporation was authorized by the unanimous written consents of the
Corporation's Board of Directors and Shareholders.
IN WITNESS WHEREOF, each of the undersigned has hereunto signed his
name and hereby subscribes and affirms that the statements made herein are true
under the penalties of perjury as of the 25th day of April, 1996.
/s/ Alan T. Sheinwald
------------------------------------
Alan T. Sheinwald, President
/s/ Allan C. Goldfeder
------------------------------------
Allan C. Goldfeder, Secretary
-3-
<PAGE>
EXHIBIT 10.01
Community Care Services, Inc.
1996 Stock Option Plan
1. Purpose of the Plan. The Community Care Services, Inc. 1996 Stock
Option Plan (the "Plan") is intended to advance the interests of Community Care
Services, Inc. , a New York corporation (the "Company"), by inducing persons of
outstanding ability and potential to join and remain with the Company, by
encouraging and enabling employees to acquire proprietary interests in the
Company, and by providing the participating employees with an additional
incentive to promote the success of the Company. This is accomplished by
providing for the granting of "Options" (which term as used herein includes both
"Incentive Stock Options" and "Nonstatutory Stock Options" as later defined) to
qualified employees and non-employee Directors and consultants.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board of Directors") or by a committee (the
"Committee") consisting of at least two persons chosen by the Board of
Directors. Except as herein specifically provided, the interpretation and
construction by the Board of Directors or the Committee of any provision of the
Plan or of any Option granted under it shall be final and conclusive. The
receipt of Options by Directors, or any members of the Committee, shall not
preclude their vote on any matters in connection with the administration or
interpretation of the Plan, except as otherwise provided by law.
3. Shares Subject to the Plan. The capital stock subject to grant under
the Plan shall be shares of the Company's common stock, $.01 par value (the
"Common Stock"), whether authorized but unissued or held in the Company's
treasury or shares purchased from shareholders expressly for use under the Plan.
The maximum number of shares of Common Stock which may be issued pursuant to
Options granted under the Plan shall not exceed 580,000 shares, subject to
adjustment in accordance with the provisions of Section 12 hereof. The Company
shall at all times while the Plan is in force reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan. In the event any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available for
Options under the Plan.
4. Participation. The class of persons which shall be eligible to
receive Options under the Plan shall be (i) with respect to Incentive Stock
Options described in Section 6 hereof, all key employees (including officers) of
either the Company or any subsidiary corporation of the Company, and (ii) with
respect to Nonstatutory Stock Options described in Section 7 hereof, any key
employee (including any officer) of, any non-employee Director of, or any
non-employee consultant to, either the Company or any subsidiary corporation of
the Company. The Board of Directors or the Committee, in its sole discretion,
but subject to the provisions of the Plan, shall determine the employees and
non-employee Directors of and non-employee consultants to the Company or any
subsidiary corporation of the Company to whom Options shall be granted and the
number of shares, and the vesting thereof, to be covered by each Option taking
into account the nature of the employment or services rendered by the
individuals being considered, their annual compensation, their present and
potential contributions to the success of the Company and such other factors as
the Board of Directors or the Committee may deem relevant. Members of the
Committee (or all of the members of the Board of Directors, if no Committee is
established) shall not be entitled to receive discretionary grants of Options
under the Plan, but shall automatically be granted, on the first day of each
<PAGE>
fiscal year, Nonstatutory Stock Options to purchase 1,000 shares of Common Stock
at an exercise price equal to the closing price of the Common Stock as reported
by NASDAQ or by any principal exchange upon which the Common Stock is then
traded, which Options shall vest ratably over a two year period commencing on
the first anniversary of the grant thereof and be exercisable for a ten year
period from the date of grant.
5. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Board of Directors or the Committee and shall be evidenced by
a Stock Option Agreement which shall be executed by the Company and by the
person to whom such Option is granted. The Stock Option Agreement shall specify
the number of shares of Common Stock as to which any Option is granted, the
period during which the Option is exercisable and the option price per share
thereof.
6. Incentive Stock Options. The Board of Directors or the Committee may
grant Options under the Plan which are intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986 (the "Code") (such an Option
referred to herein as an "Incentive Stock Option"), and which are subject to the
following terms and conditions and any other terms and conditions as may at any
time be required by Section 422 of the Code:
(a) No Incentive Stock Option shall be granted to individuals other
than key employees of the Company or of a subsidiary corporation of the
Company.
(b) Each Incentive Stock Option under the Plan must be granted prior to
February 27, 2006, which is within ten years from the date the Plan was
adopted by the Board of Directors.
(c) The option price of the shares subject to any Incentive Stock
Option shall not be less than the fair market value of the Common Stock
at the time such Incentive Stock Option is granted; provided, however,
if an Incentive Stock Option is granted to an individual who owns, at
the time the Incentive Stock Option is granted, more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of a subsidiary corporation of the Company, the option price
of the shares subject to the Incentive Stock Option shall be at least
one hundred ten percent (110%) of the fair market value of the Common
Stock at the time the Incentive Stock Option is granted.
(d) No Incentive Stock Option granted under the Plan shall be
exercisable after the expiration of ten (10) years from the date of its
grant. However, if an Incentive Stock Option is granted to an
individual who owns, at the time the Incentive Stock Option is granted,
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of a subsidiary corporation of the
Company, such Incentive Stock Option shall not be exercisable after the
expiration of five years from the date of its grant. Every Incentive
Stock Option granted under the Plan shall be subject to earlier
termination as expressly provided in Sections 10 and 12(c) hereof.
(e) For purposes of determining stock ownership under this Section 6,
the attribution rules of Section 425(d) of the Code shall apply.
(f) For purposes of the Plan, fair market value shall be determined by
the Board of Directors or the Committee and, unless another reasonable
method for determining fair market value is specified by the Committee,
the closing sales price of a share of Common Stock as reported on the
NASDAQ Stock Market for the trading date next preceding the date in
question.
7. Nonstatutory Stock Options. The Board of Directors or the Committee
may grant Options under the Plan which are not intended to meet the requirements
of Section 422 of the Code, as well as Options which are intended to meet the
requirements of Section 422 of the Code, but the terms of which provide that
they will not be treated as Incentive Stock Options (referred to herein as a
"Nonstatutory Stock Option").
<PAGE>
Nonstatutory Stock Options which are not intended to meet these requirements
shall be subject to the following terms and conditions:
(a) A Nonstatutory Stock Option may be granted to any person eligible
to receive an Option under the Plan pursuant to Section 4(ii) hereof.
(b) The option price of the shares subject to a Nonstatutory Stock
Option shall be determined by the Board of Directors or the Committee,
in its absolute discretion, at the time of the grant of the
Nonstatutory Stock Option.
(c) A Nonstatutory Stock Option granted under the Plan may be of such
duration as shall be determined by the Board of Directors or the
Committee (not to exceed 10 years), and shall be subject to earlier
termination as expressly provided in Sections 10 and 12(c) hereof.
8. Rights of Option Holders. The holder of any Option granted under the
Plan shall have none of the rights of a shareholder with respect to the shares
covered by his Option until such shares shall be issued to him upon the exercise
of his Option.
9. Transferability. No Option granted under the Plan shall be
transferable by the individual to whom it was granted otherwise than by will or
the laws of descent and distribution, and, during the lifetime of such
individual, shall not be exercisable by any other person, but only by him.
10. Termination of Employment or Death.
(a) If the employment of an employee by, or the services of either a
non-employee Director of or a non-employee consultant to the Company or
a subsidiary corporation of the Company shall be terminated voluntarily
by the employee, the non-employee Director or the non-employee
consultant or for cause, then his Option shall expire forthwith. Except
as provided in subsections (b) and (c) of this Section 10, if such
employment or services shall terminate for any other reason, then such
Option may be exercised at any time within three months after such
termination, subject to the provisions of subparagraph (d) of this
Section 10. Notwithstanding the foregoing, the Board of Directors may
extend the period of time for exercise pursuant to this paragraph,
provided that such extension does not cause any Incentive Stock Options
to be disqualified as such. For purposes of the Plan, the retirement of
an individual either pursuant to a pension or retirement plan adopted
by the Company or at the normal retirement date prescribed from time to
time by the Company shall be deemed to be termination of such
individual's employment other than voluntarily or for cause. For
purposes of this subparagraph, an employee who leaves the employ of the
Company to become an employee of (i) a subsidiary corporation of the
Company or (ii) a corporation (or its parent or subsidiary) that has
assumed the Option of the Company as a result of a corporate
reorganization, etc., shall not be considered to have terminated his
employment.
(b) If the holder of an Option under the Plan dies (i) while employed
by, or while serving as either a non-employee Director of or a
non-employee consultant to, the Company or a subsidiary corporation of
the Company, or (ii) within three months after the termination of his
employment or his services other than voluntarily or for cause, then
such Option may, subject to the provisions of subparagraph (d) of this
Section 10, be exercised by the estate of the employee, the
non-employee Director or the non-employee consultant or by a person who
acquired the right to exercise such Option by bequest or inheritance or
by reason of the death of such employee, non-employee Director or
non-employee consultant at any time within one year after such death.
(c) If the holder of an Option under the Plan ceases employment because
of permanent and total disability (within the meaning of Section
22(e)(3) of the Code) while employed by, or
<PAGE>
while serving as a non-employee Director of or a non-employee
consultant to, the Company or a subsidiary corporation of the Company,
then such Option may, subject to the provisions of subparagraph (d) of
this Section 10, be exercised at any time within one year after his
termination of employment or termination of services due to the
disability.
(d) An Option may not be exercised pursuant to this Section 10 except
to the extent that the holder was entitled to exercise the Option at
the time of termination of employment, termination of services, or
death, and in any event may not be exercised after the expiration of
the Option.
(e) For purposes of this Section 10, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company
will be treated as continuing intact while he is on military or sick
leave or other bona fide leave of absence (such as temporary employment
by the Government) if such leave does not exceed ninety days, or, if
longer, so long as his right to reemployment is guaranteed either by
statute or by contract.
11. Exercise of Options.
(a) Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in
part from time to time, prior to expiration. The Board of Directors or
the Committee, in its absolute discretion, may provide in any Stock
Option Agreement that the exercise of any Option granted under the Plan
shall be subject (i) to such condition or conditions as it may impose,
including, but not limited to, a condition that the holder thereof
remain in the employ or service of the Company or a subsidiary
corporation of the Company for such period or periods of time from the
date of grant of the Option, as the Board of Directors or the
Committee, in its absolute discretion, shall determine; and (ii) to
such limitations as it may impose, including, but not limited to, a
limitation that the aggregate fair market value of the Common Stock
with respect to which Incentive Stock Options are exercisable for the
first time by any employee during any calendar year (under all plans of
the Company and its parent and subsidiary corporations) shall not
exceed One Hundred Thousand Dollars ($100,000). In addition, in the
event that under any Stock Option Agreement the aggregate fair market
value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any employee during any calendar
year (under all plans of the Company and its parent and subsidiary
corporations) exceeds One Hundred Thousand Dollars ($100,000), the
Board of Directors or the Committee may, when shares are transferred
upon exercise of such Options, designate those shares which shall be
treated as transferred upon exercise of an Incentive Stock Option and
those shares which shall be treated as transferred upon exercise of a
Nonstatutory Stock Option.
(b) An Option granted under the Plan shall be exercised by the delivery
by the holder thereof to the Company at its principal office (attention
of the Secretary) of written notice of the number of shares with
respect to which the Option is being exercised. Such notice shall be
accompanied by payment of the full option price of such shares, and
payment of such option price shall be made by the holder's delivery of
his check payable to the order of the Company; provided, however, that
notwithstanding the foregoing provisions of this Section 11 or any
other terms, provisions or conditions of the Plan, at the written
request of the optionee and upon approval by the Board of Directors or
the Committee, shares acquired pursuant to the exercise of any Option
may be paid for in full at the time of exercise by (i) the surrender of
shares of Common Stock of the Company held by or for the account of the
optionee at the time of exercise to the extent permitted by subsection
(c)(5) of Section 422 of the Code and, with respect to any person who
is subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 (the "Act"), to the extent permitted by
Section 16(b) of that Act and the Rules of the Securities and Exchange
Commission, without
<PAGE>
liability to the Company; (ii) subject to the approval of the Board of
Directors, the issuance of a promissory note in compliance with law for
a portion of the purchase price; or (iii) such other methods approved
by the Board of Directors, in compliance with law and provided that
such methods donot disqualify Incentive Stock Options from being
treated as such and comply with the provisions of Section 16(b) of the
Act. In the case of (i) above, the fair market value of the surrendered
shares shall be determined by the Board of Directors or the Committee
as of the date of exercise in the same manner as such value is
determined upon the grant of an Incentive Stock Option.
12. Adjustment Upon Change in Capitalization.
(a) In the event that the outstanding Common Stock is hereafter changed
by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock
dividends or the like, an appropriate adjustment shall be made by the
Board of Directors or the Committee in the aggregate number of shares
available under the Plan and in the number of shares and option price
per share subject to outstanding Options. Any adjustment in the number
of shares shall apply proportionately to only the unexercised portion
of the Option granted hereunder. If fractions of a share would result
from any such adjustment, the adjustment shall be revised to the next
lower whole number of shares.
(b) If the Company shall be reorganized, consolidated or merged with
another corporation, or if all or substantially all of the assets of
the Company shall be sold or exchanged, the holder of an Option shall
be entitled to receive upon the exercise of his Option (the timing of
which, as set forth in Section 11, is in the discretion of the Board of
Directors or the Committee) the same number and kind of shares of stock
or the same amount of property, cash or securities as he would have
been entitled to receive upon the happening of any such corporate event
as if he had been, immediately prior to such event, the holder of the
number of shares covered by his Option; provided, however, that in such
event the Board of Directors or the Committee shall have the
discretionary power to take any action necessary or appropriate to
prevent any Incentive Stock Option granted hereunder from being
disqualified as an "incentive stock option" under the then existing
provisions of the Code or any law amendatory thereof or supplemental
thereto.
13. Further Conditions of Exercise.
(a) Unless prior to the exercise of the Option the shares issuable upon
such exercise have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, the
notice of exercise shall be accompanied by a representation or
agreement of the individual exercising the Option to the Company to the
effect that such shares are being acquired for investment and not with
a view to the resale or distribution thereof or such other
documentation as may be required by the Company unless in the opinion
of counsel to the Company such representation, agreement or
documentation is not necessary to comply with such Act.
(b) The Company shall not be obligated to deliver any Common Stock
until it has been listed on each securities exchange on which the
Common Stock may then be listed or until there has been qualification
under or compliance with such state or federal laws, rules or
regulations as the Company may deem applicable. The Company shall use
reasonable efforts to obtain such listing, qualifications and
compliance.
14. Effectiveness of the Plan. The Plan was originally adopted as of
the Board of Directors on February 28, 1996. The Plan shall be subject to
approval by the affirmative vote of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
shareholders
<PAGE>
of the Company convened for such purposes, or by unanimous written consent,
prior to February 27, 1997, which is within one year of adoption of the Plan by
the Board of Directors. In the event such shareholder approval is withheld or
otherwise not received on or before the latter date, the Plan and all Options
which may have been granted thereunder shall become null and void.
15. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate on February 27, 2006, which is within ten years of the date
of its adoption by the Board of Directors, or sooner as hereinafter
provided, and no Option shall be granted after the termination of the
Plan.
(b) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Company present in person or by proxy at
a meeting of shareholders of the Company convened for such purpose.
(c) The Board of Directors may at any time, on or before the
termination date referred to in Section 15(a) hereof, terminate the
Plan, or from time to time make such modifications or amendments to the
Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
Company present in person or by proxy at a meeting of shareholders of
the Company convened for such purpose, increase (except as provided by
Section 12 hereof) the maximum number of shares as to which Incentive
Stock Options may be granted, or change the designation of the
employees or class of employees eligible to receive Options or make any
other change which would prevent any Incentive Stock Option granted
hereunder which is intended to be an "incentive stock option" from
disqualifying as such under the then existing provisions of the Code or
any law amendatory thereof or supplemental thereto.
(d) No termination, modification or amendment of the Plan may, without
the consent of the individual to whom an Option shall have been
previously granted, adversely affect the rights conferred by such
Option.
16. Not a Contract of Employment. Nothing contained in the Plan or in
any Stock Option Agreement executed pursuant hereto shall be deemed to confer
upon any individual to whom an Option is or may be granted hereunder any right
to remain in the employ or service of the Company or a subsidiary corporation of
the Company.
17. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
18. Indemnification of Board of Directors or Committee. In addition to
such other rights of indemnification as they may have, the members of the Board
of Directors or the Committee, as the case may be, shall be indemnified by the
Company to the fullest extent permitted under applicable law against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted thereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board of Directors or the Committee, as the case may be, shall notify the
Company in writing, giving the Company an opportunity at its own cost to defend
the same before such member or members undertake to defend the same on their own
behalf.
<PAGE>
19. Definitions. For purposes of the Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the same meanings as set
forth in Sections 425(e) and 425(f) of the Code, respectively, and the masculine
shall include the feminine and the neuter as the context requires.
20. Governing Law. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the laws of the State
of New York.
<PAGE>
EXHIBIT 10.02
STOCK OPTION AGREEMENT dated
_______, between COMMUNITY CARE
SERVICES, INC., a New York
corporation (the "Company") and
______________________ (Optionee").
--------------
Pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
the Company hereby grants Optionee the right and option to acquire shares of the
Company's common stock, $.01 par value (the "Common Stock" upon the following
terms and conditions:
1. Grant of Option. The Company hereby grants to Optionee the
right and option (the "Option") to purchase up to [ ]shares of Common Stock (the
"Shares"), to be issued upon the exercise hereof, fully paid and nonassessable.
The Option to acquire an aggregate of [ ]Shares is intended, as an Incentive
Stock Option (as defined under the Plan), to meet the requirements of Section
422A of the Internal Revenue Code of 1986 and the Option to acquire the
remaining [ ]shares, is a Nonstatutory Stock Option, and, as such, is not
intended to meet such requirements.
2. Exercise Price. The exercise price of the Option shall be
$[ ] per share. The Company shall pay all original issue taxes upon the
exercise of the Option.
3. Limitation on Exercisability of Option. Subject to the
provisions of Paragraphs 7 and 9 hereof, the Option shall be exercisable for the
first time by Optionee as follows:
[ ] Incentive Stock Options and [ ]
Nonqualified Stock Options, on each of [ ],
on a cumulative basis.
4. Expiration of Option. Subject to the provisions of
Paragraphs 7 and 9 hereof, the Option shall not be exercisable after the
expiration of ten (10) years from the date hereof.
5. Non-Assignability of Option. The Option shall not be given,
granted, sold, exchanged, transferred, pledged, assigned
<PAGE>
or otherwise encumbered or disposed of by Optionee, otherwise than by Will or
the laws of descent and distribution, and, during the lifetime of Optionee,
shall not be exercisable by any other person, but only by him.
6. Method of Exercise of Option. Optionee shall notify the
Company by written notice sent by registered or certified mail, return receipt
requested, addressed to its then principal office, or by hand delivery to such
office, properly receipted, as to the number of Shares which Optionee desires to
purchase under the Option, which written notice shall be accompanied by
Optionee's check payable to the order of the Company for the full exercise price
of such Shares. As soon as practicable after the receipt of such written notice,
the Company shall, at its principal office, tender to Optionee a certificate or
certificates issued in Optionee's name evidencing the Shares purchased by
Optionee hereunder.
7. Death or Termination of Employment or Services. If the
employment or services of Optionee by the Company or a subsidiary corporation of
the Company shall be terminated voluntarily by Optionee or for cause, the Option
shall expire forthwith, but if such employment or services shall be terminated
for any other reason (except death or disability), then the Option may, subject
to Paragraphs 3 and 4 hereof, be exercised at any time within three (3) months
after such termination. If Optionee dies (i) while employed by or in the service
of the Company or a subsidiary corporation of the Company, or (ii) within three
(3) months after the termination of employment or services other than
voluntarily or for cause, then the Option may, subject to Paragraphs 3 and 4
hereof, be exercised by the estate of Optionee, or by a person who acquired the
right to exercise the Option by bequest or inheritance from Optionee as a
consequence of the death of Optionee, at any time within one (1) year after such
death. If Optionee ceases employment or services because of permanent and total
disability while employed by or in the service of the Company or a subsidiary
corporation of the Company, the Option may, subject to Paragraphs 3 and 4
hereof, be exercised at any time within one (1) year after termination of
employment or service due to such disability.
8. Shares of Common Stock as Investment. By accepting the
Option, Optionee agrees that any and all Shares purchased upon the exercise
hereof shall be acquired for investment and not for distribution, and upon the
issuance of any or all of the Shares subject to the Option, Optionee shall
deliver to the Company a representation in writing that such Shares are being
acquired in good faith for investment and not with a view to resale or
2
<PAGE>
distribution. The Company may place an appropriate restrictive legend on the
certificate or certificates evidencing such Shares.
9. Adjustments upon Changes in Capitalization. In the event of
changes in the outstanding shares of Common Stock of the Company by reason of
stock dividends, splits, recapitalizations, mergers, consolidations,
combinations, exchanges of shares, separations, reorganizations, or
liquidations, the number of Shares issuable upon the exercise of the Option and
the exercise price thereof shall be correspondingly adjusted by the Company. Any
such adjustment in the number of Shares shall apply proportionately only to the
then unexercised portion of the Option. If fractional Shares would result from
any such adjustment, the adjustment shall be revised to the next lower whole
number of Shares. If the Common Stock of the Company shall cease to be publicly
traded at any time prior to [ ], any Options granted hereunder that have
not as yet vested shall thereupon automatically lapse in their totality. Except
as provided in the immediately preceding sentence, in the event of a merger,
consolidation, reorganization, liquidation or other similar extraordinary
corporate transaction, the Optionee shall be entitled to receive upon the
exercise of the Option (the timing of which is set forth in Paragraph 3 hereof)
the same number and kind of shares of stock or the same amount of property, cash
or securities as the Optionee would have been entitled to receive upon the
happening of any such corporate event as if he had been, immediately prior to
such event, the holder of the number of shares covered by the Option; provided,
however, that this provision shall not be deemed to prevent the Incentive Stock
Options granted hereunder from being qualified as "incentive stock options"
under the Internal Revenue Code of 1986 or any law amendatory` thereof or
supplemental thereto.
10. No Rights as Stockholder. Optionee shall have no rights as
a stockholder in respect to the Shares as to which the Option shall not have
been exercised and payment made as herein provided.
11. Binding Effect. Except as herein otherwise expressly
provided, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.
12. Conflict. In the event of any conflict between the Plan
and the Option, the terms of the Plan shall take precedence.
3
<PAGE>
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written.
COMMUNITY CARE SERVICES, INC.
By:___________________________
_____________________________
[OPTIONEE]
4
<PAGE>
EXHIBIT 10.03
COMMUNITY CARE SERVICES, INC.
18 Sargent Place
Mount Vernon, New York 10550
, 1996
Alan T. Sheinwald
203 Briarwood Drive
Somers, New York 10589
Dear Mr. Sheinwald:
Community Care Services, Inc. a New York corporation (the "Company"),
agrees to employ you and you agree to accept such employment under the following
terms and conditions:
1. Term of Employment.
Subject to the terms and conditions set forth herein, your employment
under this agreement shall be for an initial term commencing on the date hereof
(the "Effective Date") and terminating on the third anniversary of the Effective
Date (the "Initial Term"). The term of this Agreement shall be extended for
additional terms of one year each (the "Renewal Term") if neither party gives
written notice to the other not to renew at least thirty days before the end of
the Initial Term or the Renewal Term, as the case may be.
2. Compensation
You shall be compensated for all services rendered by you under this
agreement at the rate of $150,000 per annum from the Effective Date ("Base
Salary"),
<PAGE>
payable in such manner as is consistent with the Company's payroll practices for
executive employees.
The Base Salary shall be increased annually to reflect any
increases in the costs of living. Such increase shall be effective as at the
anniversary of the Effective Date (the "Anniversary Date") commencing on the
first anniversary. The amount of any such increase shall be determined by
multiplying the Base Salary by a percentage which shall be equal to the
percentage increase (expressed as a decimal), if any, in the Consumer Price
Index for all Urban Consumers - New Series (1967 = 100) for New York, New York-
Northeastern New Jersey, as published by the Bureau of Labor Statistics of the
United States Department of Labor (the "CPI") for the month immediately
preceding the Anniversary Date in the year in question when compared with the
CPI for the month immediately preceding the Anniversary Date for the preceding
year (but in no event shall such calculation operate to reduce the Base Salary,
as adjusted, payable to you in the immediately preceding year). Should the
Bureau of Labor Statistics change the manner of computing the CPI, the Bureau
shall be requested to furnish a conversion factor designed to adjust the new
index to the one previously in use, and adjustment to the new index shall be
made on the basis of such conversion factor. Should the publication of the CPI
be discontinued or suspended by the Bureau of Labor Statistics, then such other
index as may be published by that Bureau most nearly approximating the
discontinued or suspended CPI shall be used in making the adjustments herein
provided for.
Should the Bureau discontinue the publication of an index approximating
the CPI, then such index as may be published by another United States
governmental agency that most nearly approximates the CPI shall govern and be
substituted as the index to be used, subject to the application of an
appropriate conversion factor to be furnished by
2
<PAGE>
the governmental agency publishing the adopted index. If the Bureau of Labor
Statistics or such other governmental agency will not furnish any such
conversion factor or ceases to publish any index comparable to the CPI, then the
parties shall attempt to agree upon a conversion factor or a substitute index
and if they are unable to agree, an appropriate conversion factor or substitute
index shall be determined by arbitration held in the City of New York, State of
New York in accordance with the rules of the American Arbitration Association.
You shall also be entitled to receive incentive compensation as
determined in the discretion of the Board of Directors of the Company.
3. Duties.
(a) During the term of your employment hereunder, you agree to serve
as President, Chief Executive Officer and, until the Board of Directors has
appointed a successor, the Chief Financial Officer, of the Company and your area
of responsibility shall be that of a senior executive officer of the Corporation
subject to the direction of the Board of Directors. During the term of this
Agreement the duties assigned to you shall not be inconsistent therewith, and
further, you shall at all times have executive powers and authority as shall
reasonably be required to enable you to discharge such duties in an efficient
manner.
(b) You shall devote such time, energies and attention during normal
business hours (excluding the vacation periods provided in Section 5(c) below)
to the business and affairs of the Company, subsidiaries and affiliates, if any,
as the Company reasonably deems necessary for you to fulfill your
responsibilities hereunder.
3
<PAGE>
(c) You shall, except as otherwise provided herein, be subject to
the Company's rules, practices and policies applicable to the Company's senior
executive employees.
4. Work Situs and Relocation. Except for the travel which is an
integral part of your duties, you shall not be required to perform any
substantial part of your duties under this Agreement outside of the New York
area.
5. Benefits.
(a) You shall have the benefit of any additional life and medical
insurance plans, pensions and other similar plans as the Company may have or may
establish from time to time, and in which you would be entitled to participate
pursuant to the terms thereof, except that the Company shall pay the entire
amount of the premium for medical insurance coverage. The foregoing, however,
shall not be construed to require the Company to establish any such plans or to
prevent the Company from modifying or terminating any such plans, and no such
action or failure thereof, shall affect this Agreement.
(b) You shall be entitled to a vacation of three weeks each year.
(c) You shall receive a car allowance of $750 per month.
6. Expenses. The Company will reimburse you for reasonable expenses,
including traveling expenses, incurred by you in connection with the business of
the Company upon the presentation by you of appropriate substantiation for such
expenses, subject to the limitations and guidelines imposed by the Company.
7. Earlier Termination. Your employment hereunder shall terminate prior
to the end of the Term on the following terms and conditions:
4
<PAGE>
(a) This agreement shall terminate automatically on the date of your
death. Notwithstanding the foregoing the Company shall pay your estate any
compensation, benefits and reimbursable expenses which accrued to the date of
your death.
(b) In the event of your Total Disability (as that term is defined
below) for sixty (60) days in the aggregate during any consecutive six (6) month
period during the Initial Term or the Renewal Term, as the case may be, the
Company shall have the right to terminate this Agreement by giving you thirty
(30) days' prior written notice thereof, and upon the expiration of such thirty
(30) day period, your employment under this Agreement shall terminate. If you
shall resume your duties within thirty (30) days after receipt of such a notice
of termination and continue to perform such duties for four (4) consecutive
weeks thereafter, this Agreement shall continue in full force and effect,
without any reduction in salary and other benefits, and the notice of
termination shall be considered null and void and of no effect. Upon termination
of this Agreement under this paragraph 7(b), the Company shall have no further
obligations or liabilities under this Agreement, except to pay to you, (i) the
portion, if any, that remains compensation accrued but unpaid; (ii) the amount
of any expenses reimbursable in accordance with paragraph 6 above; and (iii) any
amounts due under any Company benefit, welfare or pension plan.
The term "Total Disability," as used herein, shall mean a mental or
physical condition which in the reasonable opinion of an independent medical
doctor selected by the Company renders you unable or incompetent to carry out
your material duties and responsibilities under this Agreement at the time the
disabling condition was incurred. Notwithstanding the foregoing, if you covered
under any policy of disability insurance under
5
<PAGE>
paragraph 5(a) above, under no circumstances shall the definition of Total
Disability be different from the definition of that term in such policy.
(c) The Company may discharge you for "Cause" upon notice and
thereby immediately terminate your employment under this Agreement. For purposes
of this Agreement the Company shall have "Cause" to terminate your employment if
you, in the reasonable judgment of the Company, (i) materially breach any of
your agreements, duties or obligations under this Agreement and have not cured
such breach or commenced in good faith to correct such breach within thirty (30)
days after notice; (ii) fail to carry out a lawful directive of the Board of
Directors of the Company; (iii) embezzle or convert to your own use any funds of
the Company or any client or customer of the Company; (iv) convert to your own
use or unreasonably destroy, intentionally, any property of the Company, without
the Company's consent; (v) are convicted of a crime; (vi) are abjudicated an
incompetent; (vii) are habitually intoxicated or diagnosed by an independent
medical doctor to be addicted to a controlled substance (any disagreement shall
be resolved by the reasonable opinion of an independent medial doctor selected
by the Company); or (viii) behave in a manner which, with intent to do so,
materially impairs the Company's relations with others in its industry.
8. Patents, Etc. Any interest in patents, patent applications,
inventions, copyrights, developments, and processes ("Such Inventions") which
you now or hereafter during the period you are employed by the Company under
this agreement or otherwise may own or develop relating to the fields in which
the Company may then be engaged shall belong to the Company; and forthwith upon
the request of the Company, you shall execute all such assignments and other
documents and take all such other action as the Company
6
<PAGE>
may reasonably request in order to vest in the Company all your right, title,
and interest in and to Such Inventions free and clear of all liens, charges, and
encumbrances.
9. Confidential Information. All confidential information which you may
now possess, may obtain during or create during your employment hereunder, or
otherwise relating to the business of the Company or of any customer or supplier
shall not be published, disclosed, or made accessible by you to any person,
firm, or corporation either during or after the termination of your employment
or used by you except during your employment hereunder in the business and for
the benefit of the Company. You shall return all tangible evidence of such
confidential information to the Company at the termination of your employment.
10. Life Insurance. If requested by the Company, you shall submit to
such physical examinations and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company at
its expense and for its own benefit, to obtain life insurance on your life.
11. Non-Interference. You agree that you will not, at any time during
your employment hereunder or within two (2) years after the termination of your
employment hereunder, for your own account or for the account of any other
person, interfere with the Company's relationship with, solicit or endeavor to
entice away from the Company or any subsidiary of the Company, any employee or
customer thereof.
12. Restrictive Covenants.
(a) You agree that during the term of this Agreement and for a
period of one year after termination of this Employment Agreement, you will not
directly or indirectly become associated with, render services to, invest in,
represent, advise or otherwise participate as an officer, employee, director,
stockholder, partner, agent of or consultant
7
<PAGE>
for, any firm, corporation, partnership or other entity, directly or indirectly
engaged in the business being conducted by the Company or its subsidiaries
during the term of this Agreement or on the date of such termination; provided,
however, that nothing herein shall prohibit or in any way impede you from owning
not more than 5% of the outstanding shares of capital stock of any entity with
one or more classes of its capital stock listed on a national securities
exchange or actively traded in the over-the-counter market, provided that your
involvement with such company is solely that of a passive stockholder.
(b) The parties hereto intend that the covenant contained in this
Section 12 shall be deemed a series of separate covenants for each state, county
and city. If, in any judicial proceeding, a court shall refuse to enforce all
the separate covenants deemed included in this Section 12, because, taken
together, they cover too extensive a geographic area, the parties intend that
those of such covenants (taken in order of the states, counties and cities
therein which are least populous), which, if eliminated would permit the
remaining separate covenants to be enforced in such proceeding, shall, for the
purpose of such proceeding, be deemed eliminated from the provisions of this
Section 12.
13. Entire Agreement; Modification. This agreement constitutes the full
and complete understanding of the parties, and supersedes all prior agreements
and understandings, oral or written, between the parties, with respect to the
subject matter hereof. This agreement may not be modified or amended except by
an instrument in writing signed by the party against which enforcement thereof
may be sought.
14. Severability. Any term or provision of this agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the
8
<PAGE>
remaining terms and provisions of this agreement or affecting the validity or
enforceability of any of the terms or provisions of this agreement in any other
jurisdiction.
15. Waiver of Breach. The waiver by either party of a breach of any
provision of this agreement shall not operate as or be construed as a waiver of
any subsequent breach.
16. Notices. All notices hereunder shall be in writing and shall be
sent by express mail or by certified or registered mail, postage prepaid, return
receipt requested, if to you, to your residence as listed in the Company's
records and if to the Company, to the address set forth above.
17. Assignability; Binding Effect. This agreement shall not be
assignable by either party without the prior written consent of the other party
hereto. This agreement shall be binding upon and inure to the benefit of you,
your legal representatives, heirs and distributees, and shall be binding upon
and inure to the benefit of the Company, its successors and assigns.
18. Governing Law. All questions pertaining to the validity,
construction, execution and performance of this agreement shall be construed and
governed in accordance with the laws of the State of New York, without giving
effect to the conflicts or choice of law provisions thereof.
19. Headings. The headings in this agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this agreement.
20. Equitable Relief. With respect to the covenants contained in
Sections 8, 9 and 12 of this agreement, you agree that any remedy at law for any
breach of said covenants may be inadequate and that the Company shall be
entitled to specific performance or any other mode of injunctive and/or other
equitable relief to enforce its
9
<PAGE>
rights hereunder or any other relief a court might award, including but not
limited to an injunction restraining such breach or threatened breach. In any
case no bond or other security shall be required in connection therewith.
If this letter correctly sets forth our understanding, please sign the
duplicate original in the space provided below and return it to the Company,
whereupon this shall constitute the employment agreement between you and the
Company effective as of and for the term as stated herein.
COMMUNITY CARE SERVICES, INC.
By:
-----------------------------
Agreed as of the date
first above written:
- -----------------------------
Alan T. Sheinwald
10
<PAGE>
EXHIBIT 10.04
COMMUNITY CARE SERVICES, INC.
18 Sargent Place
Mount Vernon, New York 10550
, 1996
Allan Goldfeder
49 Keene Lane
Woodsburgh, New York 11598
Dear Mr. Goldfeder:
Community Care Services, Inc. a New York corporation (the "Company"),
agrees to employ you and you agree to accept such employment under the following
terms and conditions:
1. Term of Employment.
Subject to the terms and conditions set forth herein, your
employment under this agreement shall be for an initial term commencing on the
date hereof (the "Effective Date") and terminating on the third anniversary of
the Effective Date (the "Initial Term"). The term of this Agreement shall be
extended for additional terms of one year each (the "Renewal Term") if neither
party gives written notice to the other not to renew at least thirty days before
the end of the Initial Term or the Renewal Term, as the case may be.
2. Compensation
You shall be compensated for all services rendered by you under this
agreement at the rate of $120,000 per annum from the Effective Date ("Base
Salary"),
<PAGE>
payable in such manner as is consistent with the Company's payroll practices for
executive employees.
The Base Salary shall be increased annually to reflect any increases
in the costs of living. Such increase shall be effective as at the anniversary
of the Effective Date (the "Anniversary Date") commencing on the first
anniversary. The amount of any such increase shall be determined by multiplying
the Base Salary by a percentage which shall be equal to the percentage increase
(expressed as a decimal), if any, in the Consumer Price Index for all Urban
Consumers - New Series (1967 = 100) for New York, New York-Northeastern New
Jersey, as published by the Bureau of Labor Statistics of the United States
Department of Labor (the "CPI") for the month immediately preceding the
Anniversary Date in the year in question when compared with the CPI for the
month immediately preceding the Anniversary Date for the preceding year (but in
no event shall such calculation operate to reduce the Base Salary, as adjusted,
payable to you in the immediately preceding year). Should the Bureau of Labor
Statistics change the manner of computing the CPI, the Bureau shall be requested
to furnish a conversion factor designed to adjust the new index to the one
previously in use, and adjustment to the new index shall be made on the basis of
such conversion factor. Should the publication of the CPI be discontinued or
suspended by the Bureau of Labor Statistics, then such other index as may be
published by that Bureau most nearly approximating the discontinued or suspended
CPI shall be used in making the adjustments herein provided for.
Should the Bureau discontinue the publication of an index
approximating the CPI, then such index as may be published by another United
States governmental agency that most nearly approximates the CPI shall govern
and be substituted as the index to be
<PAGE>
used, subject to the application of an appropriate conversion factor to be
furnished by the governmental agency publishing the adopted index. If the Bureau
of Labor Statistics or such other governmental agency will not furnish any such
conversion factor or ceases to publish any index comparable to the CPI, then the
parties shall attempt to agree upon a conversion factor or a substitute index
and if they are unable to agree, an appropriate conversion factor or substitute
index shall be determined by arbitration held in the City of New York, State of
New York in accordance with the rules of the American Arbitration Association.
You shall also be entitled to receive incentive compensation as
determined in the discretion of the Board of Directors of the Company.
3. Duties.
(a) During the term of your employment hereunder, you agree to serve
as President, Chief Executive Officer and, until the Board of Directors has
appointed a successor, the Chief Financial Officer, of the Company and your area
of responsibility shall be that of a senior executive officer of the Corporation
subject to the direction of the Board of Directors. During the term of this
Agreement the duties assigned to you shall not be inconsistent therewith, and
further, you shall at all times have executive powers and authority as shall
reasonably be required to enable you to discharge such duties in an efficient
manner.
(b) You shall devote such time, energies and attention during normal
business hours (excluding the vacation periods provided in Section 5(c) below)
to the business and affairs of the Company, subsidiaries and affiliates, if any,
as the Company reasonably deems necessary for you to fulfill your
responsibilities hereunder.
<PAGE>
(c) You shall, except as otherwise provided herein, be subject to
the Company's rules, practices and policies applicable to the Company's senior
executive employees.
4. Work Situs and Relocation. Except for the travel which is an
integral part of your duties, you shall not be required to perform any
substantial part of your duties under this Agreement outside of the New York
area.
5. Benefits.
(a) You shall have the benefit of any additional life and medical
insurance plans, pensions and other similar plans as the Company may have or may
establish from time to time, and in which you would be entitled to participate
pursuant to the terms thereof, except that the Company shall pay the entire
amount of the premium for medical insurance coverage. The foregoing, however,
shall not be construed to require the Company to establish any such plans or to
prevent the Company from modifying or terminating any such plans, and no such
action or failure thereof, shall affect this Agreement.
(b) You shall be entitled to a vacation of three weeks each year.
(c) You shall receive a car allowance of $500 per month.
6. Expenses. The Company will reimburse you for reasonable expenses,
including traveling expenses, incurred by you in connection with the business of
the Company upon the presentation by you of appropriate substantiation for such
expenses, subject to the limitations and guidelines imposed by the Company.
7. Earlier Termination. Your employment hereunder shall terminate prior
to the end of the Term on the following terms and conditions:
<PAGE>
(a) This agreement shall terminate automatically on the date of your
death. Notwithstanding the foregoing the Company shall pay your estate any
compensation, benefits and reimbursable expenses which accrued to the date of
your death.
(b) In the event of your Total Disability (as that term is defined
below) for sixty (60) days in the aggregate during any consecutive six (6) month
period during the Initial Term or the Renewal Term, as the case may be, the
Company shall have the right to terminate this Agreement by giving you thirty
(30) days' prior written notice thereof, and upon the expiration of such thirty
(30) day period, your employment under this Agreement shall terminate. If you
shall resume your duties within thirty (30) days after receipt of such a notice
of termination and continue to perform such duties for four (4) consecutive
weeks thereafter, this Agreement shall continue in full force and effect,
without any reduction in salary and other benefits, and the notice of
termination shall be considered null and void and of no effect. Upon termination
of this Agreement under this paragraph 7(b), the Company shall have no further
obligations or liabilities under this Agreement, except to pay to you, (i) the
portion, if any, that remains compensation accrued but unpaid; (ii) the amount
of any expenses reimbursable in accordance with paragraph 6 above; and (iii) any
amounts due under any Company benefit, welfare or pension plan.
The term "Total Disability," as used herein, shall mean a mental or
physical condition which in the reasonable opinion of an independent medical
doctor selected by the Company renders you unable or incompetent to carry out
your material duties and responsibilities under this Agreement at the time the
disabling condition was incurred. Notwithstanding the foregoing, if you covered
under any policy of disability insurance under
<PAGE>
paragraph 5(a) above, under no circumstances shall the definition of Total
Disability be different from the definition of that term in such policy.
(c) The Company may discharge you for "Cause" upon notice and
thereby immediately terminate your employment under this Agreement. For purposes
of this Agreement the Company shall have "Cause" to terminate your employment if
you, in the reasonable judgment of the Company, (i) materially breach any of
your agreements, duties or obligations under this Agreement and have not cured
such breach or commenced in good faith to correct such breach within thirty (30)
days after notice; (ii) fail to carry out a lawful directive of the Board of
Directors of the Company; (iii) embezzle or convert to your own use any funds of
the Company or any client or customer of the Company; (iv) convert to your own
use or unreasonably destroy, intentionally, any property of the Company, without
the Company's consent; (v) are convicted of a crime; (vi) are abjudicated an
incompetent; (vii) are habitually intoxicated or diagnosed by an independent
medical doctor to be addicted to a controlled substance (any disagreement shall
be resolved by the reasonable opinion of an independent medial doctor selected
by the Company); or (viii) behave in a manner which, with intent to do so,
materially impairs the Company's relations with others in its industry.
8. Patents, Etc. Any interest in patents, patent applications,
inventions, copyrights, developments, and processes ("Such Inventions") which
you now or hereafter during the period you are employed by the Company under
this agreement or otherwise may own or develop relating to the fields in which
the Company may then be engaged shall belong to the Company; and forthwith upon
the request of the Company, you shall execute all such assignments and other
documents and take all such other action as the Company
<PAGE>
may reasonably request in order to vest in the Company all your right, title,
and interest in and to Such Inventions free and clear of all liens, charges, and
encumbrances.
9. Confidential Information. All confidential information which you may
now possess, may obtain during or create during your employment hereunder, or
otherwise relating to the business of the Company or of any customer or supplier
shall not be published, disclosed, or made accessible by you to any person,
firm, or corporation either during or after the termination of your employment
or used by you except during your employment hereunder in the business and for
the benefit of the Company. You shall return all tangible evidence of such
confidential information to the Company at the termination of your employment.
10. Life Insurance. If requested by the Company, you shall submit to
such physical examinations and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company at
its expense and for its own benefit, to obtain life insurance on your life.
11. Non-Interference. You agree that you will not, at any time during
your employment hereunder or within two (2) years after the termination of your
employment hereunder, for your own account or for the account of any other
person, interfere with the Company's relationship with, solicit or endeavor to
entice away from the Company or any subsidiary of the Company, any employee or
customer thereof.
12. Restrictive Covenants.
(a) You agree that during the term of this Agreement and for a
period of one year after termination of this Employment Agreement, you will not
directly or indirectly become associated with, render services to, invest in,
represent, advise or otherwise
<PAGE>
participate as an officer, employee, director, stockholder, partner, agent of or
consultant for, any firm, corporation, partnership or other entity, directly or
indirectly engaged in the business being conducted by the Company or its
subsidiaries during the term of this Agreement or on the date of such
termination; provided, however, that nothing herein shall prohibit or in any way
impede you from owning not more than 5% of the outstanding shares of capital
stock of any entity with one or more classes of its capital stock listed on a
national securities exchange or actively traded in the over-the-counter market,
provided that your involvement with such company is solely that of a passive
stockholder.
(b) The parties hereto intend that the covenant contained in this
Section 12 shall be deemed a series of separate covenants for each state, county
and city. If, in any judicial proceeding, a court shall refuse to enforce all
the separate covenants deemed included in this Section 12, because, taken
together, they cover too extensive a geographic area, the parties intend that
those of such covenants (taken in order of the states, counties and cities
therein which are least populous), which, if eliminated would permit the
remaining separate covenants to be enforced in such proceeding, shall, for the
purpose of such proceeding, be deemed eliminated from the provisions of this
Section 12.
13. Entire Agreement; Modification. This agreement constitutes the full
and complete understanding of the parties, and supersedes all prior agreements
and understandings, oral or written, between the parties, with respect to the
subject matter hereof. This agreement may not be modified or amended except by
an instrument in writing signed by the party against which enforcement thereof
may be sought.
14. Severability. Any term or provision of this agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent
<PAGE>
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this agreement or affecting
the validity or enforceability of any of the terms or provisions of this
agreement in any other jurisdiction
15. Waiver of Breach. The waiver by either party of a breach of any
provision of this agreement shall not operate as or be construed as a waiver of
any subsequent breach.
16. Notices. All notices hereunder shall be in writing and shall be
sent by express mail or by certified or registered mail, postage prepaid, return
receipt requested, if to you, to your residence as listed in the Company's
records and if to the Company, to the address set forth above.
17. Assignability; Binding Effect. This agreement shall not be
assignable by either party without the prior written consent of the other party
hereto. This agreement shall be binding upon and inure to the benefit of you,
your legal representatives, heirs and distributees, and shall be binding upon
and inure to the benefit of the Company, its successors and assigns.
18. Governing Law. All questions pertaining to the validity,
construction, execution and performance of this agreement shall be construed and
governed in accordance with the laws of the State of New York, without giving
effect to the conflicts or choice of law provisions thereof.
19. Headings. The headings in this agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this agreement.
20. Equitable Relief. With respect to the covenants contained in
Sections 8, 9 and 12 of this agreement, you agree that any remedy at law for any
breach of said
<PAGE>
covenants may be inadequate and that the Company shall be entitled to specific
performance or any other mode of injunctive and/or other equitable relief to
enforce its rights hereunder or any other relief a court might award, including
but not limited to an injunction restraining such breach or threatened breach.
In any case no bond or other security shall be required in connection therewith.
If this letter correctly sets forth our understanding, please sign the
duplicate original in the space provided below and return it to the Company,
whereupon this shall constitute the employment agreement between you and the
Company effective as of and for the term as stated herein.
COMMUNITY CARE SERVICES, INC.
By:
-----------------------------
Agreed as of the date
first above written:
- ------------------------------
Allan Goldfeder
<PAGE>
EXHIBIT 10.07
STANDARD FORM OF LOFT LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
Agreement of Lease, made as of this 1st day of January 1996, between
PETRILLO REALTY DEVELOPMENT CORPORATION, a New York Corporation of 41 Edison
Avenue, Mount Vernon, New York 10550, party of the first part, hereinafter
referred to as LANDLORD, and Community Care Services, Inc., a New York
Corporation, 18 Sargent Place, Mount Vernon, New York 10550, party of the
second part, hereinafter referred to as TENANT,
Witnesseth: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the premises commonly known as 18 Sargent Place, Mount Vernon, New
York 10550, Inclusive of the building situate on the said premises, the said
building consisting of approximately twenty thousand (20,000) square feet,
for the term of five (5) years (or until such term shall sooner cease and
expire as hereinafter provided) to commence on the date hereof and to end on
the thirty-first day of December in the year Two Thousand, both dates
inclusive, at an annual rental rate of One Hundred Fourteen Thousand
($114,000.00) Dollars, in monthly installments of $9,500.00 for the first
three (3) years, and One Hundred Thirty Two Thousand Dollars in monthly
installments of $11,000.00, for the final two (2) years, which Tenant agrees
to pay in lawful money of the United States which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance on the first day of each month during
said term, at the office of Landlord or such other place as Landlord may
designate, without any set off or deduction whatsoever.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby
covenant as follows:
RENT OCCUPANCY:
1. Tenant shall pay the rent as above and as hereinafter provided.
2. Tenant shall use and occupy demised premises for the warehousing,
marketing, distribution and sale of health care related supplies and
equipment, and office uses in connection therewith, and for no other purpose.
ALTERATIONS:
3. Tenant shall make no changes in or to the demised premises of any
nature without Landlord's prior written consent. Subject to the prior written
consent of Landlord, and to the provisions of this article, Tenant at
Tenant's expense, may make alterations, installations, additions or
improvements which are non-structural and which do not affect utility
services or plumbing and electrical lines, in or to the interior of the
demised premises by using contractors or mechanic's first approved by
Landlord. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Landlord in Tenant's behalf, shall, upon installation, become the property of
Landlord and shall remain upon and be surrendered with the demised premises
unless Landlord, by notice to Tenant no later than twenty days prior to the
date fixed as the termination of this lease, elects to relinquish Landlord's
right thereto and to have them removed by Tenant, in which event, the same
shall be removed from the premises by Tenant prior to the expiration of the
lease, at Tenant's expense. Nothing in this article shall be construed to
give Landlord title to or to prevent Tenant's removal of trade fixtures,
moveable office furniture and equipment, but upon removal of any such from
the premises or upon removal of other installations as may be required by
Landlord, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any
damage to the demised premises or the building due to such removal. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Landlord, either be retained at Landlord's
property or may be removed from the premises by Landlord at Tenant's expense.
Tenant shall, before making any alterations, additions, installations or
improvements, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi- governmental bodies and (upon
completion ) certificates of final approval thereof and shall deliver
promptly duplicates of all such permits, approvals and certificates to
Landlord and Tenant agrees to carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and
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property damage insurance as Landlord may require. If any mechanic's lien is
filed against the demised premises, or the building of which the same forms a
part, for work claimed to have been done for, or materials furnished to,
Tenant, whether or not done pursuant to this article, the same shall be
discharged by Tenant within 30 days thereafter, at Tenant's expense, by
filing the bond required by law or by deposit.
REPAIRS:
4. Landlord shall maintain and repair the structural portions of the
building, both exterior and interior. Tenant shall, throughout the term of
this lease, take good care of the demised premises and the fixtures and
appurtenances therein and at Tenant's sole cost and expense, make all
non-structrual repairs thereto as and when needed to preserve them in good
working order and condition, reasonable wear and tear, obsolescence and
damage from the elements, fire or other casualty, expected. Notwithstanding
the foregoing, all damage or injury to the demised premises or to any other
part of the building, or to its fixtures, equipment and appurtenances,
whether requiring structural or non-structrual repairs, caused by or
resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's servants, employees, invitees or licensees, shall be repaired
promptly by Tenant at its sole cost and expense, to the satisfaction of
Landlord reasonably exercised. Tenant shall also repair all damage to the
building and the demised premises caused by the moving of Tenant's fixtures,
furniture or equipment. All the aforesaid repairs shall be of quality or
class equal to the original work or construction. If Tenant fails after ten
days notice to proceed with due diligence to make repairs required to be made
by Tenant, the same, may be made by the Landlord at the expense of Tenant and
the expenses thereof incurred by Landlord shall be collectible as additional
rent after rendition of a bill or statement thereof. If the demised premises
be or become infested with vermin, Tenant shall at Tenant's expense, cause
the same to be exterminated from time to time to the satisfaction of
Landlord. Tenant shall give Landlord prompt notice of any defective condition
in any plumbing, heating system or electrical lines located in, servicing or
passing through the demised premises and following such notice, Landlord
shall remedy the condition with due diligence but at the expense of Tenant if
repairs are necessitated by damage or injury attributable to Tenant, Tenant's
servants, agents, emloyees, invitees or licensees as aforesaid. Except as
specifically provided in Article 9 or elsewhere in this lease, there shall be
no allowance to the Tenant for a diminution of rental value and no liability
on the part of Landlord by reason of inconvenience, annoyance or injury to
business arising from Landlord, Tenant or others making or failing to make
any repairs, alterations, additions or improvements in or to any portion of
the building or the demised premises or in and to the fixtures, appurtenances
or equipment thereof. The provisions of this Article 4 with respect to the
making of repairs shall not apply in the case of fire or other casualty which
are dealt with in Article 9 hereof.
WINDOW CLEANING:
5. Tenant will not clean nor require, permit, suffer or allow any window
in the demised premises to be cleaned from the outside in violation of
Section 202 of the New York State Labor Law or any other applicable law or of
the Rules of the Board of Standards and Appeals, or of any other Board or
body having or asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
6. Prior in the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board
of Fire Underwriters or any similar body which shall impose any violation,
under or duly upon Landlord or Tenant with respect to the demised premises
whether or not arising out of Tenant's use or manner of use thereof, or with
respect to the building if arising out of Tenant's use or manner of use of
the premises or the building (including the use permitted under the lease).
Except as provided in Article 29 hereof, nothing herein shall require Tenant
to make structural repairs or alterations unless Tenant has by its manner of
use of the demised premises or method of operation therein, violated any such
laws, ordinances, orders, rules, regulations or requirements with respect
thereto. Tenant may, after securing Landlord to Landlord's satisfaction
against all damages, interest, penalties and expenses, including, but not
limited to, reasonable attorneys' fees, by cash
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deposit or by surety bond in an amount and in a company satisfactory to
Landlord, contest and appeal any such laws, ordinances, orders, rules,
regualations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Landlord to prosecution
for a criminal offense or constitute a default under any lease or mortgage
under which Landlord may be obligated, or cause the demised premises or any
part thereof to be condemned or vacated. Tenant shall not do or permit any
act or thing to be done in or to the demised premises which is contrary to
law, or which will invalidate or be in conflict with public liability, fire
or other policies of insurance at any time carried by or for the benefit of
Landlord with respect to the demised premises or the building of which the
demised premises form a part, or which shall or might subject Landlord to any
liability or responsibility to any person or for property damage, nor shall
Tenant keep anything in the demised premises except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization or other authority having jurisdiction, and then only in
such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy.
Tenant shall pay all costs, expenses, fines, penalties or damages, which may
be imposed upon Landlord by reason of Tenant's failure to comply with the
provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time
thereafter, be higher than it otherwise would be, then Tenant shall reimburse
Landlord, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant, and shall make such reimbursement upon the
first day of the month following such outlay by Landlord. In any action or
proceeding wherein Landlord and Tenant are parties a schedule or "make-up" of
rate for the building or demised premises issued by the New York Fire
Insurance Exchange, or other body making fire insurance sales applicable to
said premises shall be conclusive evidence of the facts herein stated and of
the several items and changes in the fire insurance rate then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed
to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, business machines and
mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Landlord's judgment,
to absorb and prevent vibration, noise and annoyance.
SUBORDINATION:
7. This lease is subject and subordinate to all mortgages which may now or
hereafter affect such leases or the real property of which demised premises
are a part and to all renewals, modifications, consolidations, replacements
and extensions of any such underlying leases and mortgages. This clause shall
be self-operative and no further instrument of subordination shall be
required by any ground or underlying leasee or by any mortgagee, affecting
any lease of the real property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Landlord may request.
8. [Omitted]
DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate notice thereof to Landlord and
this lease shall continue in full force and effect except as hereinafter set
forth, (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Landlord and the rent, until such repair shall be
substantially completed, shall be apportioned from the day following the
casualty according to the part of the premises which is usable, (c) If the
demised premises are totally damaged or rendered wholly unusable by fire or
other casualty, then the rent shall be proportionately paid up to the time of
the casualty and thenceforth shall cease until the date when the premises shall
have been repaired and restored by Landlord, subject to Landlord's right to
elect not to restore the same are hereinafter provided, (d) [Omitted]
(e)Nothing contained hereinabove shall receive Tenant from liability that may
exist as a result of damage from fire or other casualty. Notwithstanding the
foregoing, each party shall look first to any insurance in its favor before
making any claim against the other party for recovery for loss or damage
resulting from fire or other casualty, and to the extent that such insurance is
in force and collectible and to the extent permitted by law, Landlord and Tenant
each hereby releases and waives all right of recovery against the other or any
one claiming through or under each of them by way
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of subrogation or otherwise. The foregoing release and waiver shall be in
force only if both releasors' insurance policies contain a clause providing
that such a release or waiver shall not invalidate the insurance and also,
provided that such a policy can be obtained without additional premiums.
Tenant acknowledges that Landlord will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Landlord will not be
obligated to repair any damage thereto or replace the same, (f) Tenant hereby
waives the provisions of Section 227 of the Real Property Law and agrees that
the provisions of this article shall govern and control in lieu thereof.
EMINENT DOMAIN:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim
for the value of any unexpired term of said lease.
ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant, for itself, its heirs, distrubutees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Landlord in each
instance. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Landlord may,
after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but
no such assignment, underletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, under-tenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. The consent by
Landlord to an assignment or underletting shall not in any wise by construed
to relieve Tenant from obtaining the express consent in writing of Landlord
to any further assignment or underletting.
ELECTRIC CURRENT:
12. Tenant covenants and agrees that at all times its use of electric
current shall not exceed the capacity of existing feeders to the building or
the risers or wiring installation and Tenant may not use any electrical
equipment which, in Landlord's opinion, reasonably exercised, will overload
such installations or interfere with the use thereof by other tenants of the
building. The change at any time of the character of electric service shall
in no wise make Landlord liable or responsible to Tenant, for any loss,
damages or expenses which Tenant may sustain.
ACCESS TO PREMISES:
13. Landlord or Landlord's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and,
at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Landlord may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Landlord may elect to perform following Tenant's failure to make
repairs or perform any work which Tenant is obligated to perform under this
lease, or for the purpose of complying with laws, regulations and other
directions of governmental authorities. Tenant shall permit Landlord to use
and maintain and replace pipes and conduits in and through the demised
premises and to erect new pipes and conduits therein. Landlord may, during
the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Landlord shall have the
right to enter the demised premises at reasonable hours for the purpose of
showing the same to prospective purchasers or mortgagees of the building, and
during the last six months of the term for the purpose of showing the same to
prospective tenants and may, during said six months period, place upon the
premises the usual notices "To Let" and "For Sale" which notices Tenant shall
permit to remain thereon without molesation. If Tenant is
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not present to open and permit an entry into the premises, Landlord or
Landlord' agents may enter the same whenever such entry may be necessary or
permissible by master key or forcibly and provided reasonable care is
exercised to safeguard Tenant's property and such entry shall not render
Landlord or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
terms Tenant shall have removed all or substantially all of Tenant's property
therefrom. Landlord may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this lease or Tenant's obligations hereunder. Landlord shall have the right
at any time, without the same constituting an eviction and without incurring
liability to Tenant therefor to change the arrangement and/or location of
public entrances, passageways, doors, doorways, corridors, elevators, stairs,
toilets, or other public parts of the building and to change the name, number
or designation by which the building may be known.
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VAULT, VAULT SPACE, AREAS
14. No vaults, vault space or area, whether or not enclosed or covered,
not within the property line of the building is leased hereunder, anything
contained in or indicated on any sketch, blue print or plan, or anything
contained elsewhere in the lease to the contrary notwithstanding. Landlord
makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the
property line of the building, which Tenant may be permitted to use and/or
occupy, is to be used and/or occupied under a revocable license, and if any
such license be revoked, or if the amount of such space or area be diminished
or required by any federal, state or municipal authority or public utility,
Landlord shall not be subject to any liability nor shall Tenant be entitled
to any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual
eviction. Any tax, fee or charge of municipal authorities for such vault or
area shall be paid by Tenant.
OCCUPANCY:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to
Landlord's work, if any. In any event, Landlord makes no representation as to
the condition of the premises and Tenant agrees to accept the same subject to
violations whether or not of record.
BANKRUPTCY:
16. (a) If at the date fixed as the commencement of the term of this lease
or if at any time during the term hereby demised there shall be filed by or
against Tenant in any court pursuant to any statute either of the United
States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, and within 60 days thereof, Tenant fails to
secure a dismissal thereof, or if Tenant make an assignment for the benefit
of creditors or petition for or enter into an arrangement, this lease, at the
option of Landlord, exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and terminated
by written notice to the Tenant (but if any of such events occur prior to the
commencement date, this lease shall be ipso facto cancelled and terminated)
and whether such cancellation and termination occur prior to or during the
term, neither Tenant nor any person claiming through or under Tenant by
virtue of any statute or of any order of any court, shall be entitled to
possession or to remain in possession of the premises demised but shall
forthwith quit and surrender the premmises, and Landlord, in addition to the
other rights and remedies Landlord has by virtue of any other provision
herein or elsewhere in this lease contained or by virtue of any statute or
rule of law, may retain as liquidated damages, any rent, security deposit or
moneys received by him from Tenant or others in behalf of Tenant. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenants interest
in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Landlord shall forthwith, notwithstanding
any other provisions of this lease to the contrary, be entitled to recover
from Tenant as and for liquidated damages an amount equal to the difference
between the rent reserved hereunder for the unexpired portion of the term
demised and the fair and reasonable rental value of the demised premises for
the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the
period for which such instalment was payable shall be discounted to the date
of termination at the rate of four per cent (4%) per annum. If such premises
or any part thereof be re-let by the Landlord for the unexpired term of said
lease, or any part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved
upon such re-letting shall be deemed to be the fair and reasonable rental
value for the part on the whole of the premises so re-let during the term of
the re-letting. Nothing herein contained shall limit or prejudice the right
of the Landlord to prove for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or
role of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the differences referred to above.
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DEFAULT
17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or
if the demised premises become vacant or deserted; or if the demised premises
are damaged by reason of negligence or carelessness of Tenant, its agents,
employees or invitees; or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises
shall be taken or occupied by someone other than Tenant; or if Tenant shall
make default with respect to any other lease between Landlord and Tenant; or
if Tenant shall fail to move into or take possession of the premises within
fifteen (15) days after the commencement of the term of this lease, of which
fact Landlord shall be the sole judge; then, in any one or more of such
events, upon Landlord serving a written five (5) days notice upon Tenant
specifying the nature of said default and upon the expiration of said five
(5) days, if Tenant shall have failed to comply with or remedy such default,
or if the said default or omission complained of shall be of a nature that
the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced ending such default
within such five (5) day period, and shall not there- after with reasonable
diligence and in good faith proceed to remedy or cure such default, then
Landlord may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days, this lease
and the term thereunder shall end and expire as fully and completely as if
the expiration of such three (3) day period were the day herein definitely
fixed for the end and expiration of this lease and the term thereof and
Tenant shall then quit and surrender the demised premises to Landlord but
Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and
the term shall expire as aforesaid: of if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein
required; then and in any of such events Landlord may without notice,
re-enter the demised premises either by force or otherwise, and dispossess
Tenant by summary proceedings or otherwise, and the legal representative of
Tenant or other occupant of demised premises and remove their effects and
hold the premises as if this lease had not been made, and Tenant hereby
waives the service of notice of intention to re-enter or to institute legal
proceedings to that end. If Tenant shall make default hereunder prior to the
date fixed as the commencement of any renewal or extension of this lease,
Landlord may cancel and terminate such renewal or extension agreement by
written notice.
REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent shall become due thereupon and
be paid up to the time of such re-entry, dispossess and/or expiration,
together with such expenses as Landlord may incur for legal expenses,
attorneys' fees, brokerage, and/or putting the demised premises in good
order, or for preparing the same for re-rental; (b) Landlord may re-let the
premises or any part or parts thereof; either in the name of Landlord or
otherwise, for a term or terms, which may at Landlord's option be less than
or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a
higher rental than that in this lease, and/or (c) Tenant or the legal
representatives of Tenant shall also pay Landlord as liquidated damages for
the failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and/or covenanted
to be paid and the net amount, if any, of the rents collected on account of
the lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Landlord to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses
as Landlord may incur in connection with re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the demised premises
in good order or for preparing the same for re-letting. Any such liquidated
damages shall be paid in monthly installments by Tenant on the rent day
specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of
Landlord to collect the deficiency for any subsequent month by a similar
proceeding. Landlord, in putting the demise premises in good order or
preparing the same for re-rental may, at Landlord's option, make such
alterations, repairs, replacements, and/or decorations in the demised
premises as Landlord, in Landlord's sole judgment, considers advisable and
necessary for the purpose of re-letting the demised premises, and the making
of such alterations, reports, replacements, and/or decorations
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shall not operate or be construed to release Tenant from liability hereunder
as aforesaid. Landlord shall in no event be liable in any way whatsoever for
failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess,
if any, of such net rents collected over the sums payable by Tenant to
Landlord hereunder. In the event of a breach or threatened breach by Tenant
of any of the covenants or provisions hereof, Landlord shall have the right
of injunction and the right to invoke any remedy allowed at law or in equity
as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this lease of any particular remedy, shall not
preclude Landlord from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed
for any cause, or in the event of Landlord obtaining possession of demised
premises, by reason of the violation by Tenant of any of the covenants and
conditions of this lease, or otherwise.
FEES AND EXPENSES
19. If tenant shall default in the observance or performance of any rent
or covenant on tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease, landlord may immediately or at
any time thereafter and without notice perform the obligation of tenant
thereunder, and if landlord, in connection therewith or in connection with
any default by tenant in the covenant to pay rent hereunder, makes any
expenditures or incurs any obligations for the payment of money, including
but not limited to attorney's fees, in instituting, prosecuting or defending
any action or proceeding, such sums so paid on obligations incurred with
interest and costs shall be deemed to be additional rent hereunder and shall
be paid by tenant to landlord within five (5) days of rendition of any bill
or statement to tenant therefore, and if tenant's lease term shall have
expired at the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by landlord as damages.
NO REPRESENTATIONS BY LANDLORDS
20. Neither Landlord nor Landlord's agents have made any representations
or promises with respect to the physical condition of the building, the land
upon which it is erected or the demised premises, the rents, leases, expenses
of operation or any other matter or thing affecting or related to the
premises except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition, and agrees to take the same "as is" and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a
part were in good and satisfactory condition at the time such possession was
so taken, except as to patent defects. All understandings and agreements
heretofore made between the parties hereto are merged in this contract, which
alone fully and completely expresses the agreement between Landlord and
Tenant and any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect on abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
END OF TERMS
21. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Landlord the demised premises, xxxxx
clean, in good order and condition, ordinary wear excepted, and Tenant shall
remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If
the last day of the term of this lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it
be a legal holiday in which case it shall expire at noon on the preceding
business day.
QUIET ENJOYMENT:
22. Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 11 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
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FAILURE TO GIVE POSSESSION
23. If Landlord is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over
or retention of possession of any tenant, undertenant or occupants, or if the
premises are located in a building being constructed, because such building
has not been sufficiently completed to make the premises ready for occupancy
or because of the fact that a certificate of occupancy has not been presented
or for any other reason, Landlord shall not be subject to any liability for
failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in
any wise to extend the term of this lease, but the rent payable hereunder
shall be abated (provided Tenant is not responsible for the inability to
obtain possession) until after Landlord shall have given Tenant written
notice that the premises are substantially ready for Tenant's occupancy. If
permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the
date specified as the commencement of the term of this lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this lease, except as to the
covenant to pay rent. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of
Section 223-a of the New York Real Property Law.
NO WAIVERS
24. The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease shall
not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of
this lease shall not be deemed a waiver of such breach and no provision of
this lease shall be deemed to have been waived by Landlord unless such waiver
be in writing signed by Landlord. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated rent, nor shall any
endorsement or statement of any check or any letter accompanying any check or
payment as rent he deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this lease provided. No
act or thing done by Landlord or Landlord's agents during the term hereby
demised shall be deemed an acceptance of a surrender of said premises and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or Landlord's agent shall have any power to
accept the keys of said premises prior to the termination of the lease and
the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
WAIVER OF TRIAL BY JURY:
25. Is is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this lease,
the relationship of Landlord and Tenant, Tenant's use of or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Landlord commences any summary
proceeding for possession of the premises. Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding.
INABILITY TO PERFORM:
26. This lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant
to be performed shall in no wise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or implicitally to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying
any equipment or fixtures. If Landlord is prevented or delayed from so doing
by reason of strike or labor troubles or any cause whatsoever including, but
not limited to, government preemption in connection with a National Emergency
or by reason of any rule, order or regulation of any department or
subdivision thereof of any government agency or by reason of the conditions
of supply and demand which have been or are affected by way of other
emergency.
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BILLS AND NOTICES:
27. Except as otherwise in this lease provided, a bill, statement, notice
or communication which Landlord may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant
at the building of which the demised premises form a part or at the last
known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left
at the premises as herein provided. Any notice by Tenant to Landlord must be
served by registered or certified mail addressed to Landlord at the address
first hereinabove given or at such other address as Landlord shall designate
by written notice.
28. [Omitted]
SPRINKLERS:
29. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriter on the New York Fire Insurance
Exchange or any bureau, department or official of the federal, state or city
government require or recommend the installation of a sprinkler system or
that any changes, modifications, alterations, or additional sprinkler heads
or other equipment be made or supplied in an existing sprinkler system by
reason of Tenant's business, or the location of partitions, trade fixtures,
or other contents of the demised premises, or for any other reason, or if any
such sprinkler system installations, changes, modifications, alterations,
additional sprinkler heads or other such equipment, become necessary to
prevent the imposition of a penalty or charge against the full allowance for
a sprinkler system in the life insurance rate set by any said Exchange or by
any fire insurance company. Tenant shall, at Tenant's expense, promptly make
such sprinkler system installations, changes, modifications, alterations, and
supply additional sprinkler heads on other equipment as required whether the
work involved shall be structural or non-structural in nature. Tenant shall
pay to Landlord an additional rent the sum of $ , on the first day of each
month during the term of this lease, as Tenant's portion of the contract
price for sprinkler supervisory service.
30. [Omitted]
SECURITY
31. Tenant has deposited with Landlord the sum of $19,000.00 as security
for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event
Tenant defaults in respect of any of the terms, provisions and conditions of
this lease, including, but not limited to, the payment of rent and additional
rent, Landlord may use, apply or retain the whole or any part of the security
so deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default or for any
sum which Landlord may expend or may be required to expend by reason of
Tennant's default in respect of any of the terms, covenants and conditions of
this lease, including but not limited to, any damages or deficiency in the
re-letting of the premises, whether such damages or deficiency accrued before
or after summary proceedings or other re-entry by Landlord. In the event that
Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this lease, the security shall be returned to
Tennant after the date fixed as the end of the Lease and after delivery of
entire possession of the demised premises to Landlord. In the event of a sale
of the land and building or leasing of the building, of which the demised
premises form a part, Landlord shall have the right to transfer the security
to the vendee or lessee and Landlord shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look
to the new Landlord solely for the return of said security; and it is agreed
that the provisions hereof shall apply to every transfer or assignment made
of the security to a new Landlord, Tenant further covenants than it will not
assign or encumber or attempt to assign or encumber the monies deposited
herein as security and that neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment or
attempted encumbrance.
CAPTIONS:
32. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
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DEFINITIONS:
33. The term "Landlord" as used in this lease means only the owner, or the
mortgagee in possession, for the time being of the land and building (or the
owner of a lease of the building or of the land and building) of which the
demised premises form a part, so that in the event of any sale or sales of
said land and building, or of said lease, or in the event of a lease of said
building, or of the land and building, the said Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder, and it shall be deemed as construed without further agreement
between the parties or their successors in interest, or between the parties
and the purchaser, at any such sale, or the said lessee of the building, or
of the land and building, that the purchaser or the lessee of the building,
or of the land and building, that the purchaser or the lessee of the building
has assumed and agreed to carry out and any and all covenants and obligations
of Landlord hereunder. The words "re-enter" and "re-entry" as used in this
lease are not restricted to their technical legal meaning. The term "business
days" as used in this lease shall exclude Saturdays (except such portion
thereof as is covered by specific hours in Article 30 hereof), Sundays and
all days observed by the State or Federal Government as legal holidays.
ADJACENT EXCAVATION -- SHORING:
34. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter upon
the demised premises for the purpose of doing such work as said person shall
deem necessary to preserve the wall or the building of which demised premises
form a part from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against Landlord, or
diminution or abatement of rent.
35. [Omitted]
GLASS:
36. Landlord shall replace, at the expense of Tenant, any and all plate
and other glass damaged or broken from any cause whatsoever in and about the
demised premises. Landlord may insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of
Landlord. Bills for the premiums therefor shall be rendered by Landlord to
Tenant at such times as Landlord may elect, and shall be due from, and
payable by, Tenant when rendered, and the amount thereof shall be deemed to
be, and be paid as, additional rent.
SUCCESSORS AND ASSIGNS:
37. The convenants, conditions and agreements contained in this lease
shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
See the "RIDER ATTACHED TO AND FORMING PART OF (THIS) LEASE..." which is
attached to and made a part of, for additional terms, conditions, and
modifications of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
PETRILLO REALTY DEVELOPMENT
Witness for Landlord: CORPORATION
BY: /s/ Louis Petrillo
- -------------------------- ------------------------[SEAL]
Louis Petrillo, President
-------------------------[L. S.]
COMMUNITY CARE SERVICES, INC.
Witness for Tenant:
/s/ Allan C. Goldfeder BY: /s/ Alan T.Sheinwald
- -------------------------- -----------------------[L. S.]
Allan C. Goldfeder Alan T.Sheinwald, President
-----------------------------[SEAL]
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RIDER ATTACHED TO AND FORMING PART OF A LEASE BETWEEN
PETRILLO REALTY DEVELOPMENT CORPORATION, AS LANDLORD,
AND AT HOME HEALTH CARE SUPPLIES INC. AS TENANT.
-------------------------------------------------------
Notwithstanding anything to the contrary, it is agreed as follows:
38. Tenant shall furnish its own heat, and pay all gas, electric, water
and other utility charges.
39. Tenant shall take good care of the premises and shall at its own cost
and expense maintain the demised premises and make all repairs, excluding
exterior and interior structural repairs to the demised premises, but including
repairs to the sprinkler (if any), plumbing and heating systems. It is
understood and agreed that the heating and sprinkler systems (if any) shall
always remain the property of the Landlord, although same are to be maintained
by the Tenant during its occupancy of the premises. Any repair required to be
made to the roof shall be deemed a structural repair. The Landlord is required
to promptly effect exterior and interior structural repairs.
40. Tenant covenants to provide and keep in force during the term of this
Lease for the benefit of the Landlord, general policies of insurance, in
standard form, protecting the Landlord against any liability whatsoever,
occasioned by accident or disaster on or about the demised premises or any
appurtenances thereto. Such policies are to be written by an insurance company
authorized to do business in New York State, in the minimum amount of
$2,000,000.00 in respect to any one accident and $1,000,000.00 in respect to
injuries to any one person, and $500,000.00 for property damage, and the
liability policy shall cover the entire building and demised premises as well as
driveways, parking areas and the sidewalks fronting same. Proof of such
insurance shall be delivered to the Landlord before the Tenant takes possession
of the premises under this current lease term. Policies of such insurance shall
be delivered to the Landlord as soon as available.
41. The Tenant at its own cost and expense shall keep the entire
sidewalks, parking area and front walks of said premises free and clear of snow
and ice and shall remove the same within twelve hours after the snow shall cease
to fall. The Tenant shall keep the demised premises and sidewalks free from
rubbish and other debris. Tenant shall provide for rubbish and garbage removal.
Landlord shall not provide any cleaning, janitorial or other services to or for
Tenant.
42. Tenant agrees to indemnify and save Landlord harmless from and against
any and all claims and demands for, or in connection with, any accident, injury
or damage whatsoever caused to any person or property arising directly or
indirectly out of the business conducted in the premises or occurring in, on or
about the premises or any part thereof, or on the sidewalks adjoining the same,
or arising from any act or omission of Tenant or sub-tenant or their respective
licensees, servants, agents, employees or contractors, including any damage,
structural or otherwise, to the demised premises or the premises of which they
are a part and from and against any and all costs, expenses and liabilities
incurred in connection with any such claim or proceeding brought thereon as well
as for any costs, fines or penalties by any governmental agency, of any nature.
43. At the expiration or other termination of the term of this Lease, if
any alterations have been made by the Tenant, at the option of the Landlord, the
Tenant shall restore the demised premises to its original condition when the
Tenant first took possession. The Landlord shall give the Tenant at least thirty
(30) days notice prior to the expiration of this Lease as to those alterations
made by the Tenant which are to be removed and the premises restored.
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44. Tenant covenants and agrees to pay its proportional share of any and
all increases in the city, county and school taxes levied against the demised
premises above the taxes as levied on January 1, 1995 (base year), whether the
increase in taxation results front a higher tax rate or an increase in the
assessed valuation of the demised premises, or both. The amount of such increase
shall be paid within thirty days after demand therefor by the Landlord and shall
be collected as additional rent. A tax bill shall be sufficient evidence of the
amount of the tax as shall be a calculation of the amount to be paid by the
Tenant.
If the Landlord shall have received a refund of real estate taxes for a
period covered by the term of this Lease, Landlord shall refund the same to the
Tenant only in the amount which does not exceed the increased taxes paid by the
Tenant as provided hereunder, less a deduction for Landlord's expenses incurred
in obtaining such refund. The deduction for the Landlord's expenses will be
apportioned.
45. All understandings and agreements heretofore had between the parties
hereto are merged in this Lease, which alone fully and completely expresses
their agreement, and that the same is entered into after full investigation,
neither party relying upon any statement or representation, not embodied in this
Lease, made by the other. The Tenant has inspected the premises and is
thoroughly acquainted with its condition.
46. The Landlord is under no obligation and has made no agreement to do
any painting, decorating, alterations or improvements whatsoever, except that
Landlord agrees to deliver the premises broom clean with the heating units, air
conditioning system and all mechanical systems in working order. Tenant shall
assume full responsibility to maintain all such units and systems after taking
possession of the premises.
47. Tenant may make alterations, repairs or additions necessary for the
proper conduct of its business, provided the Landlord first gives its consent,
which consent will not be unreasonably withheld, and provided further that the
demised premises are restored to their present state, if the Landlord so
demands, within reasonable time from the expiration of the lease term or any
renewal thereof. All such alterations, repairs or additions shall be in
compliance with the rules and ordinances of the City of Mount Vernon and the
State of New York as well as any other appropriate governmental authority. The
Landlord hereby consents that the Tenant may install a conveyor belt system
between the first and second floors of the building and may install office
space, all in such location and manner as shall be necessary to meet the
Tenant's requirements. The Tenant may install such signs as it deems necessary,
provided all laws pertaining to signs are complied with and that at the
expiration of the term the Tenant shall remove such signs and repair any damage
to and restore the Landlord's building. Landlord shall be given copies of plans
for approval by Landlord and proof of contractors' licenses.
48. Tenant agrees to pay a late penalty of 5% if rent is not paid by the
l0th day of the month. This shall be in addition to all rents under this Lease.
The date of the mailing of the rent shall be deemed the date of payment.
49. If, by reason of the use of the premises by the Tenant, the rates for
the insurance of the demised premises against loss by fire are increased, as
compared with the rates absent such use, the Tenant agrees to pay as additional
rent any excess premiums caused thereby, such additional rent to become due
immediately upon effecting the insurance by the Landlord and payable with the
next succeeding installment of rent. This paragraph is intended to apply to
increases in premiums resulting from the nature of the Tenant's usage of the
premises, not its mere occupancy.
50. (a) Tenant shall, at any time and from time to time within ten
(10) days after written demand, execute, acknowledge and deliver to Landlord a
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statement in writing addressed to Landlord certifying that this Lease is in full
force and effect and is unmodified (or, if there have been modifications,
specifying same) and setting forth the dates to which rental and other charges
payable hereunder have been paid, and stating that Landlord is not in default in
the performance of any of the covenants or agreements on its part to be
performed hereunder (or if that is not the case, specifying each particular in
which Tenant alleges that Landlord is in default).
(b) In the event of an act or omission or alleged act or omission by
Landlord which would give Tenant the right to terminate the Lease or to claim a
partial or total eviction (if any), Tenant shall not exercise any such rights
unless (i) Tenant shall first have given written notice of such act or omission
to Landlord and to holder of any mortgages on the building containing the
demised premises (if the name and address of such mortgagee shall previously
have been furnished to Tenant) and (ii) neither Landlord nor any mortgagee shall
have commenced to cure such act or omission within a reasonable period of time
following the giving of such notice.
51. A transfer of more than forty percent (40%) of the shares of any class
of the issued and outstanding stock of any corporate tenant or the issuance of
additional shares of any class of its stock to the extent of more than 40% of
the number of shares of said class of stock issued and outstanding at the time
that it became the tenant hereunder, shall constitute an assignment of this
Lease and, unless in each instance the prior written consent of Landlord has
been obtained, shall constitute a default under this Lease and shall entitle
Landlord to exercise all rights and remedies provided for herein in the case of
default. The Landlord will not unreasonably interfere with efforts by the Tenant
to take itself public.
52. In any action or proceeding brought by Landlord against Tenant, Tenant
shall not interpose, and shall not have the right to interpose a counterclaim,
and the Tenant shall not have the right to a set-off for damages for the
Landlord's failure to perform unless such failure to perform on the Landlord's
part is of any of the terms, covenants and conditions the Landlord is required
to perform related to this Lease. As to any other such matter the Tenant shall
be relegated to an independent action for damages or for any other relief Tenant
may seek, and such independent action shall not at any time be joined or
consolidated with, or tried with, or otherwise interposed in such action or
proceeding brought by Landlord against Tenant.
53. No warranties, representations, guaranties, or promises have been made
by the Landlord to the Tenant, nor has the Landlord authorized any agent or
other person to make any warranties, representations, guaranties or promises to
the Tenant herein. This agreement represents the sole and entire understanding
between the parties as to the within premises and Lease.
54. Landlord makes no representation that the premises are usable for. Any
purpose which the Tenant intends to use the same, or now uses the same. Prior to
the execution of this Lease, Tenant shall make appropriate inquiry as to the
laws and ordinances affecting the use of the premises.
55. It is expressly understood and agreed that in the event that the Tenant
shall vacate, surrender, abandon or be removed from the demised premises, or
shall remove all or a substantial part of the Tenant's merchandise, and/or
equipment therefrom, or in the event that the Tenant shall cease to actively
conduct in the demised premises the business provided for in this Lease, or
should the Tenant indicate by any other means that the Tenant has vacated or
abandoned the premises or the business conducted therein, then and in any of
such events, the Landlord may reenter the premises and resume possession
thereof, and it shall be conclusively presumed that any and all furniture,
fixtures, equipment, goods, wares, merchandise and property of every kind and
nature remaining in the demised premises have been abandoned by the Tenant, and
the Landlord, without liability whatsoever or notice to anyone, may enter the
demised premises and remove therefrom any such
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furniture, fixtures, equipment, goods, wares, merchandise and property of every
kind and nature and dispose of the same in such manner and upon such basis as
the Landlord may deem proper or advisable without any duty to account therefor
to the Tenant. The provisions of this paragraph shall be applicable as well and
to the full extent thereof, to any sub-tenant or occupant of the demised
premises and to any assignee of this Lease. The Landlord shall not have a right
of re-entry and the premises shall not be deemed vacated, surrendered or
abandoned so long as the Tenant continues to pay rent, additional rent, and
otherwise complies with the requirements of this Lease.
56. If Tenant shall fail to comply fully with any of its obligations under
this Lease, including, without limitation, its obligations to make repairs,
maintain public liability insurance, comply with all laws, ordinances or
regulations and pay all bills for utilities, then Landlord shall have the right,
at its option, to cure such material breach at Tenant's expense. Tenant agrees
to reimburse Landlord (as additional rental) for all costs and expenses incurred
as a result thereof, together with interest at sixteen (16%) percent per annum,
within ten (10) days after demand.
57. Provided Tenant is not in default under any of the terms of this Lease
and shall not have paid rent late for more than two (2) months during the term
of the Lease, then Tenant shall have the right of first refusal in the event
Landlord elects to rent the premises at the expiration of the lease term herein.
Tenant shall indicate its exercise of this right of first refusal within ten
(10) days after notice by the Landlord of the terms of such rental agreement.
This paragraph shall not in any way obligate the Landlord to continue the lease
term herein beyond the Lease expiration date.
58. This Lease shall not be considered an offer on the part of Landlord
and shall not be binding until signed by the Landlord.
59. The premises leased to the Tenant is owned by the Landlord in its
entirety. The Landlord has not reserved any portion of the premises for its own
uses; the Landlord has no other tenant at the premises other than the Tenant;
and the Tenant is entitled to the exclusive use and enjoyment of the leased
premises so long as this Lease remains in force and effect. Reference in this
Lease to the "premises," "leased premises" or "demised premises" intends to
refer to the land and building leased to the Tenant.
60. At least thirty (30) days prior to the expiration of the lease term
the Landlord shall give the Tenant notice as to which of the modifications or
improvements installed by the Tenant are to be removed from the leased premises
by the Tenant at the expiration of the lease term. Upon removal of such
modifications or improvements the Tenant shall be required to restore the leased
premises to their condition prior to such improvements. Provided the contractors
and mechanics used by the Tenant to make or remove modifications or improvements
and restore the premises carry any licenses required by law and any necessary
workers compensation and disability insurance coverages as required by law, they
need not be pre-approved by the Landlord.
61. The Tenant, at its own cost and expense, shall be permitted to make
such modifications to the heating, ventilation and air-conditioning systems as
shall be necessary to accommodate its modifications to the premises. Any such
modifications shall be effected within the proper capacity and usage of existing
plumbing, heating plant, and air conditioning units. If during proper usage by
the Tenant, and whether due to normal wear, usage aging, or other reason not
attributable to any improper usage by the Tenant any heating unit, air
conditioning unit or other mechanical system of the Landlord shall fail, it will
be replaced by the Landlord at the Landlord's expense; this shall not apply to
Tenant modifications which shall be the Tenant's sole responsibility.
62. The Landlord represents it knows of no laws, orders or regulations it
is required to comply with but failed to comply with prior to its execution of
this Lease.
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63. Paragraph 9 (d) of the printed portion of this Lease shall not apply
during the lease term. If during the lease term the premises are rendered wholly
unusable the Tenant shall be permitted, if it so elects, to cancel this Lease
on twenty (20) days notice to the Landlord after such fire and casualty, and
upon such notice this Lease will come to an end as though the lease term had
expired. The foregoing to the contrary notwithstanding, if the Tenant is
responsible for the fire its obligation to pay rent as provided in this Lease
shall continue.
64. Wherever in this Lease the consent of the Tenant or the consent of the
Landlord is required, such consent shall not be withheld unreasonably by such
party.
65. The Landlord's right to access to the premises shall be during such
times as the Tenant is open for business, and upon verbal notice to the person
then in charge for the Tenant that the Landlord is in attendance at the premises
for an inspection. The Landlord shall wear a hard hat in all hard hat areas. The
Landlord will not receive a master key for the premises.
66. Except for attendance for inspections as aforesaid, the Landlord shall
not have a right to enter or re-enter the leased premises during the lease for
any purpose or under any circumstance except after notice and by court order.
Any provision of this Lease which gives or seems to give the Landlord the right
of re-entry without notice or without a court order is deemed deleted.
67. All notices except the notice under paragraph "67" of this Lease are to
be in writing, served by certified mail, return receipt requested. Notice to the
Landlord is to be addressed to the address of the Landlord at the top of this
Lease. Notice to the Tenant is to be addressed to the Tenant at the address of
the leased premises or at the address of the Tenant at the top of this Lease.
Service will be deemed made upon receipt or refusal of such notice.
68. The sprinkler system shall be considered a structural item. The Tenant
shall be required to make such changes and modifications to the sprinkler system
as are required as a result of the Tenant's modifications of the premises, and
any damage to the sprinkler system caused by the Tenant. There is no sprinkler
supervisory service.
69. The security deposit will be kept and maintained by the Landlord in an
interest earning bank account. The interest earned will be paid to the Tenant
annually during the lease term. The account will carry the Tenant's federal
taxpayer identification number, which is I.D. 13-3677548
PETRILLO REALTY DEVELOPMENT
CORPORATION
By: /s/ Louis Petrillo
------------------------------
Louis Petrillo, President
COMMUNITY CARE SERVICES, INC.
By: /s/ Alan T.Sheinwald
-------------------------------
Alan T. Sheinwald, President
16
<PAGE>
Exhibit 10.09
Agreement dated the day of ____ August, 1996 between Community Care
Services, Inc., a New York corporation with offices at 18 Sargent Place, Mount
Vernon, New York 10550 (the "Company"), and the person whose name appears on the
signature page attached hereto ( the "Holder").
Whereas, pursuant to a Subscription Agreement dated ________________
__, 1996, (the "Subscription Agreement") the Holder purchased the number of
shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common
Stock"), as set forth on the on the signature page attached hereto; and
Whereas, the Company has agreed to issue to each Holder, in exchange
for each share of Common Stock owned by such Holder, two Class A Warrants, each
to purchase one share of Common Stock at an exercise price of $6.00 per share
(the "Class A Warrant"); and
Whereas, the Company and Holder are aware that the NASDAQ Stock Market
("NASDAQ") has recently been reviewing the terms and conditions of financings
which were completed prior to the filing of the Company's Registration Statement
on Form SB-2 (the "Registration Statement") initially filed with the Securities
and Exchange Commission on February 28, 1996 and the effect of this agreement
may help expedite the NASDAQ review process.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Transaction. The Company agrees to issue, upon receipt of the
Holder's stock certificate representing the Shares, Class A Warrants issued in
the name of the Holder to purchase the number of shares of Common Stock as set
forth on the signature page attached hereto. Holder hereby agrees to deliver to
the Company the Shares, free and clear of all liens, pledges, encumbrances,
charges and claims thereon.
2. Delivery. Certificates evidencing the Shares shall be delivered to
Buyer, either duly endorsed in blank or accompanied by appropriate stock powers
endorsed in blank,(collectively, the "Instrument of Assignment") at the office
of Company's counsel in New York on the Closing Date (as hereinafter defined). A
warrant agreement issued in the name of the Holder (the "Warrant") shall be
delivered to the Holder at the office of Company's counsel in New York on the
Closing Date (as hereinafter defined).
3. Closing Date. The transfer of Shares and delivery of the Warrants
shall occur on or before August 20, 1996.
4. Authority. Each of the Company and Holder has the capacity to enter
into this Agreement and carry out his, her or its obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of the Company and
<PAGE>
Holder enforceable in accordance with its terms. Delivery of the certificates
evidencing the Shares being delivered by Buyer shall be free and clear of all
liens, charges, encumbrances and claims. Such Shares will have been duly and
validly issued and fully paid and non-assessable
5. Conversion. In the event the Company is unable or unwilling to
declare the Registration Statement effective as contemplated by the letter dated
June 27, 1996 between the Company and Maidstone Financial, Inc, (the "June
Letter"), the exchange of the Shares for Class A Warrants as provided in this
agreement will be deemed null and void and each shareholder will revert to his,
her or its same relative position prior to the exchange of Shares for Class A
Warrants. In the event of such reversion, the Registration Rights Agreement
dated ___________________ ,1996 between the Holder and the Company, and the
Subscription Agreement will be deemed to be in full force and effect with
respect to the shares of Common Stock received upon such conversion.
6. Absence of Approvals. No approval or consent or filing with any
governmental agency or authority is required on the part of such Holder to enter
into this Agreement and carry out his obligations hereunder.
7. Investment Intent. Holder represents that he, she or it is acquiring
the Warrant for investment only, for his, her or its own account, and not with a
view to, or for sale in connection with, any distribution thereof nor with any
present intention to sell such Warrant, except in compliance with the Securities
Act of 1933. No other person has a direct or indirect beneficial interest in the
Warrant.
8. Further Assurances. The Company and Holder will comply with any and
all requirements imposed by applicable federal law or state law which are
necessary to authorize and validate the transaction contemplated herein.
9. Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be personally
delivered by an overnight courier service, charges prepaid, by postage prepaid
mail or by facsimile transmission to the Company at the address set forth above
and to Holder at the address set forth on the signature page attached hereto (or
such other addresses as the parties may specify from time to time in accordance
with this Section). Any such notice shall, when sent in accordance with the
preceding sentence, be deemed to have been given and received on the earliest of
(i) the day delivered to such address or sent by facsimile transmission, (ii)
the fifth business day following the date deposited with the United States
Postal Service, or (iii) twenty-four hours after shipment by such courier
service.
10. Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
COMMUNITY CARE SERVICES, INC.
By:
------------------------------------------
------------------------------------------
Name:
Address:
No. of Shares Tendered:
No. of Warrants Received:
<PAGE>
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
NONE
<PAGE>
Exhibit 24.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement
on Form SB-2 Amendment No. 3 of our report dated June 6, 1996 on
our audits of the financial statements of Community Care
Services, Inc. We also consent to the reference to our firm
under the caption "Experts".
Richard A. Eisner & Company, LLP
New York, New York
August 22, 1996
<PAGE>
EXHIBIT 25.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Alan T. Sheinwald his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement and all documents relating thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Alan T. Sheinwald Director, President and Chief Executive February 27, 1996
- --------------------------- Officer (Principal Executive Officer,
Alan T. Sheinwald Principal Financial and Accounting Officer)
/s/ Stanley Morgenstern Director February 27, 1996
- ---------------------------
Stanley Morgenstern
/s/ Dean L. Sloane Director February 27, 1996
- ---------------------------
Dean L. Sloane
/s/ Craig V. Sloane Director February 27, 1996
- ---------------------------
Craig V. Sloane
</TABLE>
