<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1999
---------------------------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from_______________to_________________
Commission file number 1-14382
----------------
SUNSTAR HEALTHCARE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 59-3361076
- ------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
300 International Pkwy, Ste 230, Heathrow, Florida 32746
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 304-1066
-------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
There were 2,919,330 shares of the Registrant's common stock outstanding as of
July 31, 1999.
Transitional Small Business Disclosure Format (check one): YES___ NO X
----
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Consolidated Financial Statements (unaudited) of SunStar
Healthcare, Inc. and Subsidiaries.......................................................... 2
Consolidated Balance Sheet (unaudited)..................................................... 2
Consolidated Statements of Operations - three months ended
June 30, 1999 (unaudited).................................................................. 3
Consolidated Statements of Operations - six months ended
June 30, 1999 (unaudited).................................................................. 4
Consolidated Statements of Cash Flows (unaudited).......................................... 5
Notes to Consolidated Financial Statements................................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................ 16
Part II. Other Information............................................................................... 23
Item 2. Changes in Securities and Use of
Proceeds................................................................................... 23
Item 6. Exhibits and Reports on Form 8-K........................................................... 24
Signatures ........................................................................................... 26
Item 1. Consolidated Financial Statements (unaudited) of SunStar Healthcare,
Inc. and Subsidiaries
</TABLE>
1
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Assets
------
Current assets:
<S> <C>
Cash and cash equivalents $12,591,501
Prepaid expenses 328,160
Estimated claim payment recoveries, net of an allowance 4,500,000
Other current assets 2,687,834
-----------
Total current assets 20,107,495
Furniture and equipment, net 453,157
Deposits and other assets 382,869
Deferred taxes 100,000
-----------
Total assets $21,043,521
===========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Medical claims payable $12,529,460
Unearned premium - HMO 3,773,546
Accounts payable and accrued expenses 881,966
Estimated Medicare settlement 103,175
Capital lease obligations, current 65,191
-----------
Total current liabilities 17,353,338
Capital lease obligations, noncurrent 126,662
-----------
Total liabilities 17,480,000
Redeemable preferred stock, par value $.001 per share, 1,000,000
shares authorized; 690,000 shares designated as Series A,
506,425 shares issued and outstanding as of June 30, 1999,
redemption price $15 per share (note 1 and note 3) 3,518,742
Shareholders' equity
Common stock, par value $.001 per share, 10,000,000 shares
authorized, 2,919,330 shares issued and outstanding 2,919
Additional paid-in capital 10,949,315
Preferred stock dividends (1,739,910)
Unearned compensation from stock options (5,426)
Accumulated deficit (9,162,119)
-----------
Total shareholders' equity 44,779
Total liabilities and shareholders' equity $21,043,521
===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended June 30, 1998 and 1999
(unaudited)
<TABLE>
<CAPTION>
1998 1999
------------ -------------
<S> <C> <C>
Revenues:
HMO premiums $ 4,045,136 $23,513,236
Investment income 67,593 230,798
Other -0- 327,414
----------- -----------
Total revenues 4,112,729 24,071,448
Operating expenses:
HMO medical costs 2,995,251 16,055,675
Selling, general and administrative 2,627,318 8,089,974
Option based compensation 16,275 16,276
Amortization of intangibles 8,361 -0-
----------- -----------
Total operating expenses 5,647,205 24,161,925
Loss before income taxes (1,534,476) (90,477)
Provision for income taxes -0- -0-
----------- -----------
Loss from continuing operations (1,534,476) (90,477)
Loss from disposal of assets -0- -0-
----------- -----------
Loss before discontinued operations (1,534,476) (90,477)
Discontinued operations:
Income from discontinued operations -0- -0-
Gain on sale of discontinued operations 667,933 -0-
----------- -----------
Total discontinued operations 667,933 -0-
----------- -----------
Net loss $ (866,543) $ (90,477)
=========== ===========
Net loss per share - (Note 1i) $ (0.35) $ (0.61)
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the six months ended June 30, 1998 and 1999
(unaudited)
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Revenues:
HMO premiums $ 5,649,221 $46,894,312
Investment income 109,288 444,207
Other -0- 642,893
----------- -----------
Total revenues 5,758,509 47,981,412
Operating expenses:
HMO medical costs 4,007,475 33,315,965
Selling, general and administrative 4,483,414 15,323,370
Option based compensation 32,550 32,553
Amortization of intangibles 14,503 44,585
----------- -----------
Total operating expenses 8,537,942 48,716,473
Loss before income taxes (2,779,433) (735,061)
Provision for income taxes -0- -0-
----------- -----------
Loss from continuing operations (2,779,433) (735,061)
Loss from disposal of assets -0- (9,000)
----------- -----------
Loss before discontinued operations (2,779,433) (744,061)
Discontinued operations:
Income from discontinued operations 120,292 -0-
Gain on sale of discontinued operations 667,933 -0-
----------- -----------
Total discontinued operations 788,225 -0-
----------- -----------
Net loss $(1,991,208) $ (744,061)
=========== ===========
Net loss per share - (Note 1i) $ (0.81) $ (0.85)
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30, 1998 and 1999
(unaudited)
<TABLE>
<CAPTION>
1998 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,991,208) $ (744,061)
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Depreciation and amortization 74,573 161,834
Noncash compensation 32,552 32,552
Gain on sale of medical centers (667,933) -0-
Gain on sale of furniture and equipment (1,224) -0-
Changes in operating assets and liabilities:
Increase in accounts receivables (13,846) (1,355,991)
Increase in estimated claim payment recoveries -0- (4,500,000)
Decrease (increase) in prepaid expenses and other assets 85,769 (131,452)
Increase in accounts payable and accrued expenses 370,770 129,513
Increase (decrease) in medical claims payable 1,700,975 (1,291,727)
Increase in unearned premium 500,173 248,266
Decrease in estimated Medicare settlement (125,132) -0-
----------- -----------
Net cash used in operating activities (34,531) (7,451,066)
Cash flows from investing activities:
Proceeds from sale of medical centers 1,500,000 -0-
Proceeds from sale of held-to-maturity investments 280,000 -0-
Purchase of furniture and equipment (90,768) (164,998)
Disposal of furniture and equipment 1,345 9,000
----------- -----------
Net cash provided by (used in) investing activities 1,690,577 (155,998)
Cash flows from financing activities:
Issuance of redeemable preferred stock -0- 5,846,742
Issuance of common stock 681,800 -0-
Exercise of common stock options 12,500 -0-
Preferred stock dividends -0- (1,739,910)
Principal payments under capital lease obligations (63,065) 108,572
----------- -----------
Net cash provided by financing activities 631,235 4,215,404
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,287,281 (3,391,660)
Cash and cash equivalents, beginning of period 3,807,187 15,983,161
----------- -----------
Cash and cash equivalents, end of period 6,094,468 12,591,501
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 8,040 8,617
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Organization
------------
SunStar Healthcare, Inc. ("SunStar" or the "Company") was incorporated
in December 1995 and issued 875,000 shares (prior to a stock split) of
common stock. In January 1996, National Home Health Care Corp.
("NHHC"), then the sole shareholder of the Company, contributed to
SunStar 100% of the outstanding capital stock of its wholly owned
subsidiaries, First Health, Inc. ("First Health") and Brevard Medical
Center, Inc. ("Brevard"), which included 100% of the outstanding
capital stock of Brevard's wholly owned subsidiary, SunStar Health
Plan, Inc. ("SHP"). Subsequent thereto, the Company restructured its
subsidiaries such that Brevard, First Health, and SHP all became
direct, wholly-owned subsidiaries of SunStar.
SunStar is engaged in providing managed healthcare services in the
State of Florida by operating a health maintenance organization
("HMO") through SHP. As originally organized, the Company also
operated seven primary care medical centers through Brevard and First
Health. On April 15, 1998, the Company sold substantially all the
assets of Brevard and First Health, thereby completing its
transformation from a "provider" of medical services through its
primary care medical centers to a "payor" for medical services through
its statewide HMO.
Throughout fiscal 1997, SunStar's management was active in developing
and obtaining certification for its HMO product. On February 24,
1997, SHP was issued a Certificate of Authority by the Insurance
Department of the State of Florida to operate an HMO in accordance
with the provisions of Chapter 641, Florida Statutes. Effective May
1, 1997, the Company began accepting its first HMO members. Through
June 30, 1999, the Company was approved to operate its HMO in 52
counties in the State of Florida and has accepted members in all of
those counties. Costs associated with the development of SunStar's
HMO, including management salaries and benefits, administrative and
other indirect costs, have been reflected as selling, general and
administrative expense in the accompanying consolidated financial
statements.
The Company entered into a service agreement with a third party
administrator ("TPA") for enrollment and underwriting administration,
claims processing, payment of agents' commissions and premium billing
and collection. Service fees charged to operations under such
contract were approximately $407,000 and $2,288,000 for the quarters
ended June 30, 1998 and 1999, respectively. At June 30, 1999, the
Company had a receivable of approximately $2,326,000 for premiums and
collections due from the TPA, which is included in other current
assets.
In February 1999, the Company verbally notified the TPA of its
intention to terminate
6
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
the service agreement effective July 1, 1999. Subsequent thereto, the
Company received a written notice of termination from the TPA. On
March 26, 1999 and effective July 1, 1999, the Company's management
finalized an agreement for similar services with a different TPA.
(b) Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
solely of normal recurring adjustments, necessary for a fair
presentation of the financial results for the interim periods
presented. Operating results for the three and six month periods
ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. Pursuant to the
rules and regulations of the Securities and Exchange Commission,
certain footnote disclosures which would substantially duplicate the
disclosures contained in the audited financial statements of the
Company have been omitted from these interim financial statements.
Although the Company believes that the disclosures presented below are
adequate to make the interim financial statements presented not
misleading, it is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in
the Company's Annual Report on Form 10-KSB for the period ended
December 31, 1998.
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP").
These financial statements include the accounts of SunStar and SHP.
All significant intercompany transactions and balances have been
eliminated in consolidation.
As discussed in note 2, effective April 15, 1998, the Company sold
substantially all the assets of Brevard and First Health pursuant to
an Asset Purchase Agreement (the "Asset Purchase Agreement").
Accordingly, the results of operations for Brevard and First Health
for all periods presented are reported in the accompanying
consolidated statements of operations under discontinued operations.
Pursuant to the Asset Purchase Agreement, the Company agreed to assign
the existing Health Care Financing Administration ("HCFA") contract
held by SHP to the buyer subject to HCFA approval. Thus, related HCFA
revenues and program costs were also included in discontinued
operations in the accompanying consolidated statements of operations
for the three months and the six months ended June 30, 1998. HCFA did
not approve the assignment of the contract during 1998, prompting SHP
to renew the contract for 1999. As a result, HCFA revenues, net of
program costs, are included as other operating revenue in the
accompanying statement of operations for the three months and the six
months ended June 30, 1999.
(c) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include short-term investments with original
maturities of 90 days or less.
7
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
(d) Estimated Claim Payment Recoveries
----------------------------------
During the second quarter 1999, the Company contracted the services of
independent consultants to perform an operational assessment of the
TPA, including a random claim audit. As a result of such operational
assessment, the consultants identified material potential claim
payment error rates, primarily attributed to overpayments. In
addition, the Company contracted the services of claim recovery
consultants to identify and document such claim payment errors. To
date, the claim recovery consultants have identified and documented
extensive claim overpayments. Such overpayments are attributed to
different situations such as payments made to providers in excess of
contracted rates, payments to providers for non-covered benefits, etc.
The Company is in the process of recovering such amounts from
providers. Some claim overpayments will be offset from future claim
payments and some claim overpayments will be recovered through cash
collections. The claim payment recoveries have been estimated at
$4,500,000, net of an allowance for uncollectable balances, and are
presented in the current assets section of the balance sheet.
(e) Furniture and Equipment
------------------------
Furniture and equipment are stated at cost and depreciated over
estimated useful lives of three to ten years on a straight-line basis.
(f) Medical Claims Payable
----------------------
Medical claims payable consist of actual claims reported but not paid
and estimates of medical services incurred but not reported. The
medical claims payable is based on historical data, current
enrollment, health service utilization statistics, premium revenues
and other related information. These accruals are continually
monitored and reviewed. Modification in assumptions for medical costs
caused by variances in actual experience could cause these estimates
to change.
(g) Redeemable Preferred Stock
--------------------------
The carrying value of the Series A Preferred Stock is net of the
estimated effect of beneficial common stock conversion features and
offering costs paid in connection with the offering. These amounts
are amortized over periods through the first applicable conversion
date with respect to the related preferred stock agreements, which was
a 30 day period for the offering costs and 2 years for the beneficial
conversion amount. Amortization amounts are included in preferred
stock dividends in the accompanying financial statements.
(h) Revenue Recognition
-------------------
Premium revenue under the Company's HMO is recognized as earned on a
pro rata basis over the contract period. Reimbursement for the
Company's participation under a federal third-party reimbursement
contract is based on cost reimbursement principles and
8
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
is subject to audit and retrospective adjustment. The accompanying
consolidated financial statements reflect an estimated Medicare
settlement for open-year cost reports under the aforementioned HCFA
contract which are subject to audit. As discussed in note 1(b), the
Company has retained the HCFA contract through 1999.
(i) Per Share Data
--------------
Common stock options, warrants and convertible preferred stock are not
included in the following computation of diluted earnings per share as
their effect is antidilutive due to the Company's net losses
attributable to common shares.
9
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------------
1998 1999 1998 1999
--------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Loss from continuing operations (1,534,476) (90,477) (2,779,433) (735,061)
Preferred stock dividends -0- (1,699,376) -0- (1,739,910)
----------------------------- ------------------------------
Loss from continuing operations
available to common stockholders (1,534,476) (1,789,853) (2,779,433) (2,474,971)
Average shares outstanding 2,445,000 2,919,330 2,445,000 2,919,330
----------------------------- ------------------------------
Earnings per share (0.63) (0.61) (1.14) (0.85)
============================= ==============================
Discontinued operations 667,933 -0- 788,225 -0-
Preferred stock dividends -0- -0- -0- -0-
----------------------------- ------------------------------
Discontinued operations available
to common stockholders 667,933 -0- 788,225 -0-
Average shares outstanding 2,445,000 2,919,330 2,445,000 2,919,330
----------------------------- ------------------------------
Earnings per share 0.27 0.00 0.32 0.00
============================= ==============================
Net loss (866,543) (90,477) (1,991,208) (744,061)
Preferred stock dividends -0- (1,699,376) -0- (1,739,910)
----------------------------- ------------------------------
Net loss available to common
stockholders (866,543) (1,789,853) (1,991,208) (2,483,971)
Average shares outstanding 2,445,000 2,919,330 2,445,000 2,919,330
----------------------------- ------------------------------
Earnings per share (0.35) (0.61) (0.81) (0.85)
============================= ==============================
</TABLE>
10
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SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
(h) Reclassifications
-----------------
Certain reclassifications have been made to the prior year's financial
statement amounts to conform to the current year's financial statement
presentation.
(2) Discontinued Operations
-----------------------
On April 15, 1998, the Company sold substantially all the assets of its
primary care medical centers, Brevard and First Health, pursuant to the
Asset Purchase Agreement, to Brevard Medical Care, Inc. for $1,500,000. The
assets sold consisted primarily of accounts receivable, furniture,
equipment and leasehold improvements and capital lease commitments
associated with these assets as well as physician and other payor
agreements. Pursuant to the Asset Purchase Agreement, the Company agreed to
assign the existing HCFA contract held by SHP to the buyer subject to HCFA
approval. HCFA, however, did not approve the assignment of the contract
during 1998, prompting SHP to renew the contract for 1999.
Assets excluded from the sale consist of cash and cash equivalents. The
Company retained substantially all obligations and liabilities which arose
from or in connection with operations prior to the sales transaction,
except for those capital lease commitments previously discussed.
The results of operations for Brevard and First Health and HCFA revenues
and program costs for the three months and the six months ended June 30,
1998 are reported in the accompanying consolidated statements of operations
under discontinued operations.
Information with respect to discontinued operations is summarized as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
---------------------------- ----------------------------
<S> <C> <C>
Revenues $305,698 $1,306,985
Expenses 305,698 1,186,693
-------- ----------
Income from discontinued operations $ -0- $ 120,292
-------- ----------
Gain on sale of discontinued operations $667,933 $ 667,933
-------- ----------
</TABLE>
(3) Commitments, Contingencies and Other Matters
--------------------------------------------
(a) Professional Liability
----------------------
The Company insures its professional liability risks on a claims-
made basis. The Company has secured claims-made coverage with limits
of $3,000,000 in the aggregate and $1,000,000 per incident, from
August 1, 1998 through August 1, 1999, with retroactive coverage
through July 1, 1993 to insure for potential professional liability
claims by patients and others as a result of the negligence of
physicians that occurred prior to the divestment of the primary care
medical centers. The Company could become liable for the negligent
acts of physicians, as well as negligence in recruiting and
selecting physicians. The Company currently maintains professional
liability insurance coverage through December 1999 with limits of
$1,000,000 in the aggregate and $1,000,000 per
11
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
occurrence and requires physicians to maintain malpractice liability
insurance in amounts which it deems adequate for the type of medical
services provided. No accrual for possible losses attributable to
incidents which may have occurred and not been identified under the
Company's incident reporting system has been made because management
has not identified any such incidents.
The Company carries "stop-loss" reinsurance to reimburse it for costs
resulting from catastrophic injuries or illnesses to its HMO members.
Premiums for these policies are reported as HMO medical costs and
insurance recoveries, if any, are recorded as a reduction of HMO
medical costs. Under the excess loss reinsurance policies, recoveries
are made for claims of each enrollee or each covered dependent of each
enrollee, on an annual basis, in excess of the deductible established
in the policy subject to certain limitations. The deductible under the
policy for commercial healthcare claims is currently $50,000 and the
maximum life time reinsurance indemnity payable under the agreement
for any one member is $2,000,000.
(b) Regulatory Requirements
-----------------------
As an HMO licensed in Florida, SHP is required, pursuant to Section
641 of the Florida Insurance Code, to maintain a minimum capital
surplus in an amount which is the greater of $800,000 or 10% of total
liabilities or 1% of annualized premium, which at June 30, 1999 was
approximately $1,660,000. SHP was in compliance with this requirement
and had an unaudited statutory surplus of $3,820,834 at June 30, 1999.
Dividends are restricted to 10% of statutory surplus or the entire net
operating profits and related net capital gains derived during the
immediately preceding fiscal year unless prior approval is received
from the Insurance Department of the State of Florida.
Pursuant to the Florida Administrative Code, the Department may
require an HMO to submit a corrective action plan in the event that
net income before taxes during the annual reporting period or over the
past four quarterly reporting periods is less than 2% of total
revenue. SHP's reported audited net income for the year ended December
31, 1998 did not meet the 2% criteria and a correction plan was filed
in 1999. SHP's reported, unaudited, net income for the quarters ended
March 31, 1999 and June 30, 1999 does meet the 2% criteria.
(c) Nasdaq Listing Requirements
---------------------------
The Company's shares of Common Stock, $.001 par value per share ("the
Common Stock"), are traded on the Nasdaq SmallCap Market. Continued
trading of the Common Stock on the Nasdaq SmallCap Market is
conditioned upon the Company meeting certain criteria. The National
Association of Securities Dealers ("NASD"), which administers Nasdaq,
currently requires, among other things, that for the continued listing
of the Common Stock on the Nasdaq SmallCap Market, the Company must
have: (a) either $2,000,000 in net tangible assets (total assets,
excluding goodwill, minus total liabilities), $35,000,000 market
capitalization or $500,000 net income (in the last fiscal year or two
of the last three fiscal years); (b) a public float of 500,000 shares
having a
12
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SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
market value of at least $1,000,000; (c) a minimum bid price of not
less than $1 per share; (d) two market makers; and (e) at least 300
round lot shareholders (holders of 100 shares or more). As of March
31, 1999, the Company did not meet the net tangible assets maintenance
requirement, and had received a delisting letter from Nasdaq. During
April 1999, the Company completed a private offering ("the Offering")
under Rule 506 of Regulation D, resulting in net proceeds to the
Company of approximately $4,200,000. The Company appeared before a
Nasdaq panel at a hearing on April 22, 1999 to appeal the proposed
delisting as contained in the Nasdaq letter. On July 28, 1999, the
Nasdaq panel issued its decision regarding the Company's hearing. The
panel determined to continue the listing of the securities on the
Nasdaq SmallCap Market pursuant to an exception. For the quarter ended
June 30, 1999, the Company is required to evidence a minimum of
$3,500,000 in net tangible assets and a net loss of no more than
$500,000, among other things. The Company's net tangible assets and
net loss for the quarter ended June 30, 1999 are $3,563,521 and
$90,477, respectively. In order to fully comply with the terms of this
exception, the Company must be able to demonstrate compliance with all
requirements for continued listing on the Nasdaq SmallCap market. In
the event the Company fails to comply with any of the terms of this
exception, the Common Stock could be delisted from trading on the
Nasdaq SmallCap Market. A delisting could adversely affect the trading
market for the Common Stock. In such event, trading in the Common
Stock would be conducted in the over-the-counter market known as the
NASD OTC Electronic Bulletin Board, or the "pink sheets", whereupon
trading in the Company's securities would be subject to the "Penny
Stock" regulations. As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's Common Stock.
(d) Sale of Unregistered Securities
-------------------------------
On July 16, 1998, the Company completed the Private Placement of
474,330 shares of previously unissued Common Stock, at a per share
price of $3.375, resulting in net proceeds to the Company of
$1,355,251. Under the terms of the Private Placement, the Company
agreed to use its reasonable best efforts to file and obtain
effectiveness of a registration statement under the Securities Act
covering the resale of the shares issued in the Private Placement no
later than 90 days after the closing of the Private Placement. If the
registration statement is not declared effective by the Securities and
Exchange Commission within such 90-day period other than by reason of
delay of a selling shareholder or its counsel or the activity or
inactivity of the Securities and Exchange Commission, then the Company
is obligated to pay cash equal to 1% of the aggregate subscription
price of the Private Placement for the first month of such delay and
2% of such aggregate subscription price for each month of delay
thereafter; provided, however, that in calculating the period of any
delay, there shall be excluded any delays attributable to the failure
by a selling shareholder to review the registration statement in a
reasonably prompt manner. All expenses incurred in any registration
of these shares will be paid by the Company, but the Company will not
be liable for any underwriter discounts or commissions, brokerage fees
or stock transfer taxes incurred with respect to the shares or for the
fees and expenses of counsel for any selling shareholder. On February
10, 1999, the Company filed a registration statement covering these
shares with the Securities and
13
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Exchange Commission ("SEC"). On June 7, 1999, the Company filed an
application for the withdrawal of the registration statement, which
withdrawal was accepted by the SEC. The Company intends to file a
registration statement with the SEC covering these shares, but there
can be no assurance that such registration statement will ultimately
become effective.
On April 16, 1999, the Company completed the Offering and sold 506,425
Units (the Units, each a Unit). The securities issued in the Offering
were not registered with the SEC under the Act and were offered and
sold solely to "accredited investors" in reliance on exemptions from
registration provided in Section 4(2) and Rule 506 of Regulation D
under the Act. The Offering resulted in net proceeds to the Company of
approximately $4,200,000. Each Unit consisted of (i) one share of
Series A Preferred Stock, par value $.001 per share (the Series A
Preferred Stock), of the Company, each share of Series A Preferred
Stock convertible into shares of Common Stock, subject to adjustment,
and accruing dividends at the cumulative rate of 10% per share per
annum; and (ii) one warrant to purchase one share of Common Stock at
$5.00 per share up to 60 months from the date of the Offering. The
purchase price per Unit was $10.00. The Company may, at its option,
redeem all or any portion of the outstanding shares of Series A
Preferred Stock at any time at an amount equal to $15 per share, plus
all accrued and unpaid dividends. The Series A Preferred Stock must be
redeemed in cash by the Company at the redemption price per share if
the Company fails to comply with any of the covenants below until such
time the Company surpasses 90,000 enrolled HMO plan members and does
not cure such failure within 90 days following such failure. Unless
the Company requests and receives a waiver from Brookstreet Securities
Corporation, Inc. or the holders of a majority of the issued and
outstanding shares of Series A Preferred Stock. The covenants are: (a)
the Company will maintain a 3,750 new member net minimum quarterly
growth rate in each calendar quarter, commencing with the calendar
quarter ended March 31, 1999; (b) the Company's medical expense ratio
will not exceed 86% as of the end of each calendar quarter, commencing
with the calendar quarter ending March 31, 1999; (c) the Company will
not obtain secured and/or unsecured financing and/or off balance sheet
financing in excess of $2,500,000; and (d) the Company will maintain
reporting requirement of the Securities Exchange Act of 1934, as
amended. Under the terms of the Offering the Company agreed to use its
reasonable best efforts to file and obtain effectiveness of a
registration statement under the Securities Act covering the resale of
the shares issued in the Private Placement no later than 90 days after
the closing of the Offering. The Company intends to file a
registration statement with the SEC covering these shares, but there
can be no assurance that such registration statement will ultimately
become effective.
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<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
(e) 1999 Stock Option Plan
----------------------
In January 1999 the Board of Directors adopted, and in June 1999
the stockholders approved, the Company's 1999 Stock Option Plan
pursuant to which 500,000 shares of Common Stock were reserved
for issuance upon the exercise of options designated as either
(i) options intended to constitute incentive stock options under
the Internal Revenue Code of 1986, as amended, or (ii) non-
qualified options. Incentive stock options may be granted under
the 1999 Plan to the employees and officers of the Company. Non-
qualified options may be granted to consultants, directors,
employees or officers of the Company. The 1999 Plan is intended
to qualify under Rule 16b-3 of the Securities Exchange Act of
1934, as amended. Unless sooner terminated, the 1999 Plan will
expire on January 24, 2009. As of June 30, 1999, the Company has
granted options to purchase an aggregate of 427,500 shares under
the 1999 Plan.
(4) Subsequent Event
----------------
The Company's consolidated financial statements for the period ended
December 31, 1998 have been prepared on a going concern basis which
contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company incurred a
net loss of $1,991,208 and $744,061 for the six months ended June 30,1998
and 1999, respectively, and as of June 30, 1999 had an accumulated deficit
of $9,162,119. The Company expects to incur substantial expenditures to
further its HMO development and to expand its current commercial service
area and enter into the Medicare market. There can be no assurance that the
Company's working capital at June 30, 1999 will be sufficient to fund
ongoing business operations. Management believes that the Company will
require additional resources to enable it to continue operations.
The Company is currently reviewing its options for possible sale of
additional equity securities as well as potential merger and partnering
opportunities. However, no assurance can be given that the Company will be
successful in raising additional capital or entering into a business
alliance. Further, there can be no assurance, assuming the Company
successfully raises additional funds or enters into a business alliance,
that the Company will achieve profitability or that the funds will be
sufficient to sustain the Company's losses. If the Company is unable to
obtain adequate additional financing or enter into such business alliance,
it may not be able to meet ongoing business operation needs. To the extent
that the Company's available cash resources are insufficient to allow the
Company to engage in operations sufficient to generate meaningful revenues
or achieve profitable operations, the inability to obtain additional
financing will have a material adverse effect on the Company. Additional
equity financing may involve substantial dilution to the interests of the
Company's existing stockholders. The consolidated financial statements do
not include any adjustments that may result from the possible inability of
the Company to continue as a going concern.
15
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
"FORWARD-LOOKING" INFORMATION
This report on Form 10-QSB contains certain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which represent the Company's expectations and
beliefs, including, but not limited to, statements concerning the Company's
expected growth. The words "believe," "expect," "anticipate," "estimate,"
"project," and similar expressions identify forward-looking statements, which
speak only as of the date such statement was made. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
the Company's control, and actual results may differ materially depending on a
variety of important factors, including the Company's ability to forge
satisfactory relationships with physician groups and provider networks and
enroll sufficient numbers of HMO members; continued efforts to control
healthcare costs; future membership composition and premium rates for the
commercial business; proposed future efforts to control administrative costs;
the ability of the Company to effectively manage any future outsourcing provider
conversions; the individual and group renewal process; future health care and
administrative costs, future provider network, future provider utilization
rates, future medical-loss ratio levels, future claims payment, service
performance and other operations matters; the Company's ability to comply with
regulatory requirements; the Company's ability to meet the listing requirements
of The Nasdaq SmallCap Market; future government regulation and relations and
the future of the health care industry; the Company's ability to attract members
that are of sufficient underwriting risk; the ability of the Company to price
its products competitively for this assumed underwriting risk; sources for
sufficient additional capital to meet the Company's growth and operations; the
failure to properly manage growth and successfully integrate additional
physician groups and providers; changes in economic conditions; demand for the
Company's products; and changes in the competitive and regulatory environment.
Future events and actual results could differ materially from those expressed
in, contemplated by, or underlying any such forward-looking statements.
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AS OF
JUNE 30, 1999 AND THE COMPANY'S RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1998 AND 1999 SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
ALTHOUGH THE COMPANY BELIEVES THAT THE DISCLOSURES PRESENTED BELOW ARE ADEQUATE
TO MAKE THE INTERIM FINANCIAL STATEMENTS PRESENTED NOT MISLEADING, IT IS
SUGGESTED THAT THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BE
READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE
NOTES THERETO INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FIVE MONTHS ENDED DECEMBER 31, 1998.
GENERAL.
On February 24, 1997, SHP was awarded its HMO Certificate of Authority in
the State of Florida by the Department of Insurance ("DOI"). SHP accepted its
first HMO members effective May 1, 1997 in its initial service area of Brevard
County, Florida. During the fiscal year ended July 31, 1997 ("fiscal 1997"),
SHP accelerated its plans to enter markets that the Company believed were under-
served by its managed healthcare competitors. Thus, SHP has rapidly expanded
and been approved by the Agency for Health Care Administration ("AHCA") to offer
its HMO products in 52 counties in central, northern,
16
<PAGE>
southwestern and southeastern Florida, including the metropolitan areas of
Tampa, Orlando, Jacksonville, Sarasota, Naples, Fort Meyers, Miami, Fort
Lauderdale and Palm Beach. As a result of this accelerated growth, development
costs were also accelerated in the areas of advertising, marketing and
materials, personnel and related expenses. SHP intends to complete this
expansion throughout the entire state of Florida over the next twelve months. As
of July 31, 1999 the Company provided coverage to approximately 83,000 members
in its current service areas. The Company has established a distribution network
of more than 2,500 brokers and 40 general agencies to market its HMO products.
The Company has also established a comprehensive delivery system of contractual
providers numbering approximately 17,000 physicians and 130 hospitals. The net
losses for the three and six months ended June 30, 1999 and 1998 are consistent
with management's expectations with respect to the costs associated with the
attainment of SHP's HMO license and the related start-up, development and
expansion costs of an HMO. However, if such losses continue without the Company
obtaining additional financing, they could have a material adverse effect on the
Company's business and financial condition. See "Financial Condition, Liquidity
and Capital Resources."
As originally organized, the Company also provided managed healthcare
services pursuant to contractual arrangements, as well as on a fee-for-service
basis, through its seven primary care Medical Centers in central Florida. On
April 15, 1998, the Company sold substantially all the assets of the Medical
Centers and agreed to assign the existing HCFA contract held by SHP upon
approval by HCFA pursuant to the Asset Purchase Agreement, thereby completing
the Company's transformation from a "provider" of medical services through its
Medical Centers to a "payor" for medical services through its statewide HMO.
The Company's sale of its Medical Centers has permitted it to focus its full
attention and resources on the rapid expansion of SHP. During November 1998,
HCFA determined the existing contract held by SHP was not transferrable pursuant
to the Asset Purchase Agreement. Effective January 1, 1999, SHP obtained HCFA
approval to convert the existing prepaid cost reimbursement contract into a cost
contract and entered into an agreement to exclusively use Brevard Medical Care,
Inc. to provide medical services under the new plan.
Since accepting its first HMO members in May 1997, the Company's initial
focus had been on the marketing and sale of its HMO product in the medically
underwritten individual market. The majority of the Company's initial growth
came from the sale of its products in the individual market. The Company's
objective has been to establish a sufficient base of customers for its HMO
product in the individual market within a geographic area, and then to broaden
its focus to the marketing and sale of its HMO products to include the small and
large group markets. During 1999 the Company is continuing to broaden its focus
in the geographic areas in which the Company is currently licensed.
On April 20, 1998, the Board of Directors approved a change in the
Company's fiscal year end from July 31 to December 31, to be effective beginning
December 31, 1998.
17
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUSIDIARIES
GENERAL FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1999
------------------ ------------------
<S> <C> <C>
Total revenue $ 5,758,509 $47,981,412
Loss from continuing operations (2,779,433) (735,061)
Loss from disposal of assets -0- (9,000)
Discontinued operations 788,225 -0-
Net loss (1,991,208) (744,061)
Net loss per common share - basic (0.81) (0.85)
Total assets 7,091,460 21,043,521
Long term obligations 82,080 126,662
</TABLE>
Results of Operations.
- ----------------------
Six months ended June 30, 1999 compared to six months ended June 30, 1998.
Total revenues increased by approximately $42,223,000 from approximately
$5,759,000 for the six months ended June 30, 1998 to approximately $47,982,000
for the six months ended June 30, 1999. This increase is attributable to a
$41,245,000 increase in revenues generated by the Company's HMO, which commenced
operations in the fourth quarter of fiscal 1997, coupled with an increase in
other revenues of approximately $643,000 due to the renewal of the HCFA contract
effective January 1, 1999 and higher interest income of approximately $335,000.
As a result of the Company obtaining an HMO Certificate of Authority on
February 24, 1997 and commencing the enrollment of its members effective May 1,
1997, the Company realized approximately $5,649,000 and $46,894,000 in HMO
premium revenues for the six months ended June 30, 1998 and 1999, respectively.
This HMO premium revenue increase is consistent with enrolled membership growth
to approximately 80,000 at June 30, 1999 from approximately 18,000 at June 30,
1998. The Company anticipates that HMO premium revenues will continue to
increase over the next six-month period as the Company further implements its
growth plan. However, there can be no assurance that such growth will occur as
the Company expects.
HMO medical costs were approximately $4,007,000 and $33,316,000 for the six
months ended June 30, 1998 and 1999, respectively, resulting in medical loss
ratios of approximately 71% for the respective periods. HMO medical costs
include amounts accrued for actual claims reported but not paid and estimates of
medical services incurred but not reported. Total medical payments, including
net reinsurance premiums paid, for all dates of service were approximately
$2,207,000 and $38,195,000 for the six months ended June 30, 1998 and 1999,
respectively. During the second quarter 1999, the Company contracted the
services of KPMG, LLP to perform an operational assessment of the TPA, including
a random claim audit. As a result of such operational assessment, the
consultants identified material potential claim payment error rates, primarily
attributed to overpayments. In addition, the Company contracted the services of
claim recovery consultants to identify and document such claim payment errors.
To date, the claim recovery consultants have identified and documented extensive
claim overpayments. Such overpayments are attributed to different situations
such as payments made to providers in excess of contracted rates, payments to
providers for non-covered benefits, etc. The
18
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Company is in the process of recovering such amounts. Some claim overpayments
will be offset from future claim payments and some claim overpayments will be
recovered through cash collections. The claim payment recoveries have been
estimated at $4,500,000, net of an allowance for uncollectable balances.
Selling, general and administrative expenses increased by approximately
$10,840,000 from approximately $4,483,000 for the six months ended June 30, 1998
to approximately $15,323,000 for the six months ended June 30, 1999. The
increase is primarily the result of an increase in professional and outsourcing
fees of $4,470,000; an increase in sales and marketing salaries, benefits and
commission expense related to the HMO products of approximately $4,247,000;
additional administrative salaries and related benefits of approximately
$1,460,000; and an increase in occupancy, insurance, general office and related
costs of approximately $353,000 coupled with an increase of approximately
$310,000 in other general and administrative expenses, including costs related
to HMO enrollee medical records, benefit statements and other miscellaneous
office expenses. These additional expenses were primarily incurred in connection
with the Company's accelerated expansion into additional Florida markets, the
development of marketing materials and increased infrastructure and personnel to
effect the Company's transformation into an HMO. Selling, general and
administrative expenses as a percentage of total revenues decreased to 32% for
the six months ended June 30, 1999 from 78% for the six months ended June 30,
1998. The Company expects selling, general and administrative expenses as a
percentage of revenues to continue to decrease as membership and premium
revenues grow. However, there can be no assurance that such membership and
revenue growth or a decline in selling, general and administrative expenses as a
percentage of revenues will occur as the Company anticipates.
As a result of the foregoing, the net loss decreased from approximately
$1,991,000 for the six months ended June 30, 1998 to approximately $744,000 for
the six months ended June 30, 1999.
Financial Condition, Liquidity and Capital Resources.
- -----------------------------------------------------
At June 30, 1999 the Company had positive working capital of approximately
$2,754,000 as compared to negative working capital of approximately $674,000 at
December 31, 1998. The increase in working capital from the end of fiscal year
1998 is attributable primarily to proceeds received in connection with the
preferred stock funds received under the Offering, offset by development,
marketing and personnel costs incurred in order to support and manage the
continued growth and expansion of the HMO.
Net cash used in operating activities was approximately $35,000 and
$7,451,000 for the six months ended June 30, 1998 and 1999, respectively. Net
cash used in operating activities at June 30, 1999 was primarily attributable to
an increase in estimated claim payment recoveries of approximately $4,500,000,
an increase in accounts receivable of approximately $1,356,000, a decrease in
medical claims payable and reserves for incurred but not reported claims of
approximately $1,292,000, a net loss of approximately $744,000 and an increase
in prepaid expenses and other assets of approximately $131,000 offset by
additional cash received related to unearned and deferred revenues of
approximately $248,000, depreciation expenses of approximately $162,000, an
increase in accounts payable of approximately $130,000 and non cash compensation
expenses of approximately $32,000.
19
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Net cash provided by investing activities for the six months ended June 30,
1998 was approximately $1,691,000 as compared to net cash used in investing
activities for the six months ended June 30, 1999 of approximately $156,000. The
decrease in cash from investing activities at June 30, 1999 was primarily the
result of purchases of furniture and equipment associated with the development
of the Company's administrative offices.
Net cash provided by financing activities for the six months ended June 30,
1998 and 1999 was approximately $631,000 and $4,215,000, respectively. Net cash
provided by financing activities at June 30, 1999 was primarily attributable to
the receipt of approximately $4,268,000 in net proceeds from the preferred stock
subscriptions in connection with the Offering offset by approximately $162,000
in preferred dividends declared and coupled with an increase in capital lease
obligations of approximately $109,000.
During the current and next fiscal year, the Company's liquidity will be
affected by continued accelerated HMO development, marketing and operation.
Effective September 30, 1998, SHP is required to maintain a minimum capital
surplus in an amount which is the greater of $800,000 or 10% of total
liabilities or 1% of annualized premium pursuant to Section 641 of the Florida
Insurance Code. Based on this criteria, at June 30, 1999, SHP is required to
maintain a minimum capital surplus of approximately $1,660,000. At June 30,
1999, SHP's unaudited statutory financial statements reflect an actual surplus
of approximately $3,821,000. In accordance with the Florida Insurance Code, the
minimum capital surplus requirements will change effective September 30, 1999 to
an amount which is the greater of $1,150,000 or 10% of total liabilities or
1.25% of annualized premium. The Company's cash balances are currently
maintained as a cash equivalent of a Money Market Trust Fund which invests in
securities issued or guaranteed by the U.S. Treasury and repurchase agreements
relating to such securities. There can be no assurance that the Company will
continue to be able to comply with the State regulatory requirements.
HMO development costs will continue to be incurred by SHP in fiscal year
1999 to further establish arrangements with physicians, hospitals and other
healthcare providers as well as to develop marketing materials and strategies
necessary to operate and maintain HMO operations in accordance with statutory
requirements (which shall include the costs of key salaries and expenses). In
order to support the significant growth of the Company's HMO operations,
additional marketing, development and other personnel were hired throughout 1998
and 1999 to augment the Company's efforts to support and manage this growth.
Expenditures for such employees' salaries and related benefits will continue to
be incurred in the future and may increase as additional personnel are needed to
support further HMO membership growth. In addition, the Company anticipates that
it will make additional capital expenditures associated with, among other
things, furniture and equipment necessary due to personnel increases. There can
be no assurance that the foregoing factors will not adversely affect the
Company's future operating results.
The Company sold 506,425 Units pursuant to the Offering, resulting in net
proceeds to the Company of approximately $4,200,000. The Series A Preferred
Stock issued in the Offering was not registered with the Securities and Exchange
Commission under the Securities Act and was offered and sold solely to
"accredited investors" in reliance on exemptions from registration provided in
Section 4(2) of the Securities Act and Rule 506 of Regulation D. The Placement
Agent received a retail commission of 8% of the aggregate amount of the Offering
and received five-year warrants (the "Placement Agent
20
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Warrants") to purchase 100,000 shares of Common Stock at $1.50 per share and
422,021 shares of Common Stock at $4.00 per share. The Placement Agent Warrants
are not exercisable until one year after the completion of the Offering and
thereafter are exercisable over a period of four years. The Placement Agent also
received non-accountable expenses of 3% of the aggregate amount of the Offering
and non-accountable marketing expenses of 2% of the aggregate amount of the
Offering. Under the terms of the Offering, the Company is to file a registration
statement on the appropriate form with the Securities and Exchange Commission
not later than 90 days following the closing of the Offering covering all of the
shares of Common Stock underlying the Series A Preferred Stock and Warrants sold
pursuant to the Offering and the Placement Agent Warrants. The Company intends
to file a registration statement with the SEC covering these shares, but there
can be no assurance that such registration statement will ultimately become
effective.
The Company conducted an initial public offering ("IPO") in May 1996, a
Private Placement in July 1998 and the Offering in April 1999 to provide funds
for its growth and expansion plans. The net proceeds from such offerings,
approximating $11,600,000, have been used to implement such expansion and for
the support of its HMO operations. The Company anticipates, based on currently
proposed plans and assumptions relating to its operations (including the costs
associated with its accelerated expansion), that additional offering proceeds
will be needed to fund ongoing business operations, to satisfy in the future its
net tangible asset requirements as governed by the Nasdaq SmallCap Market and to
comply with other equity requirements as governed by certain regulatory entities
including, without limitation, the Florida DOI, AHCA and HCFA. Management's
plans include consideration of the sale of additional equity securities under
appropriate market conditions, alliances or other partnership agreements with
entities interested in the Company with resources to support the Company's
expansion plans, or other business transactions which would generate sufficient
resources to assure continuation of the Company's operations.
The Company's shares of Common Stock are traded on the Nasdaq SmallCap
Market. Continued trading of the Common Stock on the Nasdaq SmallCap Market is
conditioned upon the Company meeting certain criteria. The National Association
of Securities Dealers ("NASD"), which administers Nasdaq, currently requires,
among other things, that for the continued listing of the Company's Common Stock
on the Nasdaq SmallCap Market, the Company must have: (a) either $2,000,000 in
net tangible assets (total assets, excluding goodwill, minus total liabilities),
$35,000,000 market capitalization or $500,000 net income (in the last fiscal
year or two of the last three fiscal years); (b) a public float of 500,000
shares having a market value of at least $1,000,000; (c) a minimum bid price of
not less than $1 per share; (d) two market makers; and (e) at least 300 round
lot shareholders (holders of 100 shares or more). As of March 31, 1999, the
Company did not meet the net tangible assets maintenance requirement, and had
received a delisting letter from Nasdaq. During April 1999, the Company
completed the Offering under Rule 506 of Regulation D, resulting in net proceeds
to the Company of approximately $4,200,000. The Company appeared before a Nasdaq
panel at a hearing on April 22, 1999 to appeal the proposed delisting as
contained in the Nasdaq letter. On July 28, 1999, the Nasdaq panel issued its
decision regarding the Company's hearing. The panel determined to continue the
listing of the securities on the Nasdaq SmallCap Market pursuant to an
exception. For the quarter ended June 30, 1999, the Company is required to
evidence a minimum of $3,500,000 in net tangible assets and a net loss of no
more than $500,000, among other things. The Company's net tangible assets and
net loss for the quarter ended June 30, 1999 are $3,563,521 and $90,477,
respectively. In order to fully comply with the terms of this exception, the
Company must be able to demonstrate compliance with all requirements for
continued
21
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
listing on the Nasdaq SmallCap market. In the event the Company fails to comply
with any of the terms of this exception, the Common Stock could be delisted from
trading on the Nasdaq SmallCap Market. A delisting could adversely affect the
trading market for the Common Stock. In such event, trading in the Common Stock
would be conducted in the over-the-counter market known as the NASD OTC
Electronic Bulletin Board, or the "pink sheets", whereupon trading in the
Company's securities would be subject to the "Penny Stock" regulations. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's Common Stock.
Year 2000 Readiness.
- --------------------
The Company has completed its assessment of its computer systems and
facilities that could be affected by the "Year 2000" date conversion and is
continuing to carry out the implementation plan to resolve the Year 2000 date
issue which it developed as a result of the assessment. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's programs that have time-
sensitive software may recognize the date "00" as the year 1900 rather than the
year 2000. This could result in system failure or miscalculations. The Company
is utilizing internal resources to identify, correct or reprogram, and test the
systems for Year 2000 compliance.
As of June 30, 1999, the Company was 85% complete with its Year 2000
compliance program and anticipates being complete with all phases of the program
by November 1999. The Company's Year 2000 compliance program requires
remediation of certain programs and the replacement of certain hardware within
particular time frames in order to avoid disruption of the Company's operations.
Although the Company believes it will complete the remediation of these programs
within the applicable time frames, there can be no assurance that such
remediation will be completed or that the Company's operations will not be
disrupted to some degree.
The Company is communicating with certain material vendors to determine the
extent to which the Company may be vulnerable to such vendors' failure to
resolve their own Year 2000 issues. The Company is attempting to mitigate its
risk with respect to the failure of such vendors to be Year 2000 compliant by,
among other things, requesting project plans, status reports and Year 2000
compliance certifications or written assurances from its material vendors,
including business partners, landlords and suppliers. The effect of such
vendors' noncompliance, if any, is not reasonably estimable at this time.
The Company estimates that the costs in connection with its Year 2000
compliance efforts will be less than $100,000. The cost of this project and the
date on which the Company plans to complete the necessary Year 2000
modifications are based on management's best estimate, which includes
assumptions of future events including the continued availability of certain
resources. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans.
22
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
As of April 16, 1999, the Company sold 506,425 Units pursuant to the
Offering, resulting in net proceeds to the Company of approximately $4,200,000.
Each Unit consisted of (i) one share of Series A Preferred Stock, par value
$.001 per share ("the Series A Preferred Stock"), of the Company, each share of
Series A Preferred Stock convertible into shares of Common Stock, subject to
adjustment, and accruing dividends at the cumulative rate of 10% per share per
annum; and (ii) one warrant to purchase one share of Common Stock at $5.00 per
share up to 60 months from the date of the Offering. The purchase price per Unit
was $10.00. The Series A Preferred Stock issued in the Offering was not
registered with the Securities and Exchange Commission under the Securities Act
and was offered and sold solely to "accredited investors" in reliance on
exemptions from registration provided in Section 4(2) of the Securities Act and
Rule 506 of Regulation D. The Placement Agent received a retail commission of 8%
of the aggregate amount of the Offering and received five-year warrants (the
"Placement Agent Warrants") to purchase 100,000 shares of Common Stock at $1.50
per share and 422,021 shares of Common Stock at $4.00 per share. The Placement
Agent Warrants are not exercisable until one year after the completion of the
Offering and thereafter are exercisable over a period of four years. The
Placement Agent also received non-accountable expenses of 3% of the aggregate
amount of the Offering and non-accountable marketing expenses of 2% of the
aggregate amount of the Offering. Under the terms of the Offering, the Company
is to file a registration statement on the appropriate form with the Securities
and Exchange Commission not later than 90 days following the closing of the
Offering covering all of the shares of Common Stock underlying the Series A
Preferred Stock and Warrants sold pursuant to the Offering and the Placement
Agent Warrants. The Company intends to file a registration statement with the
SEC covering these shares, but there can be no assurance that such registration
statement will ultimately become effective.
23
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Item 6. Exhibits and reports on Form 8-K
Exhibit Exhibit Description
- ------- -------------------
2.1 Asset Purchase Agreement, dated April 15, 1998, between Brevard
Medical Care, Inc. and SunStar Healthcare, Inc.****
3.1 Certificate of Incorporation*
3.1 Certificate of Designation******
3.2 By-Laws*
4.1 Specimen Certificate of the Company's Common Stock**
4.2 Form of Warrant Agreement (including Form of Underwriter's Common
Stock Purchase Warrant)*
4.2 Form of Warrant Agreement (for Offering)******
4.2 Form of Registration Rights Agreement (for Offering)******
4.3 1996 Stock Option Plan*
4.4 Form of 1996 Stock Option Contract**
4.5 1999 Stock Option Plan*******
4.6 Form of 1999 Stock Option Contract*******
10.3 Agreement for Third Party Administrator Services, dated March 7, 1997,
between Healthplan Services, Inc. and SunStar Health Plan, Inc.***
10.3 Agreement for Third Party Administrator Services, dated March 26,
1999, between Companion Information Management Resources, Inc. and
SunStar Health Plan, Inc.******
10.4 Lease, dated November 26, 1997 between the Company and Pizzuti*****
10.4 Agreement for Health Care Prepayment Plan, dated September 30, 1992,
between the Health Care Financing Administration and Boro Medical
Corporation*
10.4 Agreement for Health Care Cost-Based Plan, dated January 1, 1999,
between the Health Care Financing Administration and SunStar Health
Plan, Inc. ******
10.5 Certificate from State of Florida, Agency for Health Care
Administration certifying Boro Medical Corporation a Healthcare
Provider*
10.6 Employment Agreement, dated as of June 7, 1999, by and between the
Company and Warren Stowell*******
10.7 Employment Agreement, dated as of June 7, 1999, by and between the
Company and David Jesse*******
10.8 Employment Agreement, dated as of June 7, 1999, by and between the
Company and Robyn Stowell*******
10.9 Agreement, dated June 10, 1999, by and between the Company and The
Ulysses Group Advisors, Inc.*******
10.10 Financial Consulting and Investment Banking Agreement, dated June 30,
1999, by and between the Company and Schneider Securities, Inc.*******
10.11 Warrant to purchase 100,000 shares of Common Stock, dated as of April
22, 1999, between the Company and Brookstreet Securities Corporation,
Inc.*******
10.12 Warrant to purchase 422,021 shares of Common Stock, dated as of April
22, 1999, between the Company and Brookstreet Securities Corporation,
Inc.*******
11. Statement of Per Share Earnings (included in Consolidated Financial
Statements attached to this report)
24
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
23.1 Consent of KPMG Peat Marwick LLP******
27.1 Financial Data Schedule *******
* Filed as same exhibit reference to Form SB-2 Registration Statement,
filed on February 26, 1996, File No. 333-1650
** Filed as same exhibit reference to Amendment No. 2 to Form SB-2
Registration Statement, filed on May 9, 1996, File No. 333-1650.
*** Filed as Exhibit 10.12 to Form 10-KSB for the fiscal year ended July
31, 1997.
**** Filed as same exhibit reference to Form 10-QSB, for the quarterly
period ended April 30, 1998.
***** Filed as same exhibit reference to Form 10-KSB for the fiscal year
ended July 31, 1998.
****** Filed as same exhibit reference to Form 10-KSB for the five months
ended December 31, 1998.
******* Filed herewith.
Reports on Form 8-K:
Item 5. Other events concerning the resignation of directors, filed on
April 12, 1999.
Item 5. Other events concerning the completion of the Company's private
placement of securities, filed on April 21, 1999.
25
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SUNSTAR HEALTHCARE, INC.
Date: 08/16/99 /s/ Warren Stowell
-------- ------------------
Warren Stowell
President, Chief Executive Officer
and Chairman
(principal financial and accounting
officer)
SUNSTAR HEALTHCARE, INC.
Date: 08/16/99 /s/ David Jesse
-------- ---------------
David Jesse
Executive Vice President and
Chief Operating Officer
26
<PAGE>
Exhibit 4.5
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
1999 STOCK OPTION PLAN
of
SUNSTAR HEALTHCARE, INC.
1. Purposes of the Plan. This stock option plan (the "Plan") is intended
to provide an incentive to key employees (including directors and officers
who are key employees) and to consultants and directors who are not
employees of SUNSTAR HEALTHCARE, INC., a Delaware corporation (the
"Company"), or any of its Subsidiaries (as defined in Paragraph 19), and to
offer an additional inducement in obtaining the services of such persons.
The Plan provides for the grant of "incentive stock options" ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and nonqualified stock options which do not qualify
as ISOs ("NQSOs"). The Company makes no representation or warranty, express
or implied, as to the qualification of any option as an "incentive stock
option" under the Code.
2.
3. Stock Subject to the Plan. Subject to the provisions of Paragraph 12,
the aggregate number of shares of Common Stock, $.001 par value per share,
of the Company ("Common Stock") for which options may be granted under the
Plan shall not exceed 500,000. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of
Directors"), consist either in whole or in part of authorized but unissued
shares of Common Stock or shares of Common Stock held in the treasury of
the Company. Subject to the provisions of Paragraph 13, any shares of
Common Stock subject to an option which for any reason expires, is canceled
or is terminated unexercised or which ceases for any reason to be
exercisable, shall again become available for the granting of options under
the Plan. The Company shall at all times during the term of the Plan
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.
4.
5. Administration of the Plan. The Plan shall be administered by the
Board of Directors which, to the extent it shall determine, may delegate
its powers with respect to the administration of the Plan to a committee of
the Board of Directors (the "Committee") consisting of not less than two
directors (or such greater number as required by law), each of whom shall
be a "non-employee director" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). References in the Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors. Except as otherwise
provided by the Board of Directors, the By-laws of the Company or
applicable law, a majority of the members of the Committee shall constitute
a quorum, and the acts of a majority of the members present at any meeting
at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.
6.
7. Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine: the key
employees, consultants and Non-Employee Directors (as defined in Paragraph
19) who shall be granted options; the type of option to be granted to a key
employee; the times when an option shall be granted; the number of shares
of Common Stock to be subject to each option; the term of each option; the
date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments,
the number of shares of Common Stock to be subject to each installment,
whether the installments shall be cumulative, the date each installment
shall become exercisable and the term of each installment; whether to
accelerate the date of exercise of any option or installment; whether
shares of Common Stock may be issued upon the exercise of an option as
partly paid and, if so, the dates when future installments of the exercise
price shall become due and the amounts of such installments; the exercise
price of each option; the form of payment of the exercise price; whether to
restrict the sale or other disposition of the shares of Common Stock
acquired upon the exercise of an option and, if so, whether and under what
conditions to waive any such restriction; whether and under what conditions
to
29
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
subject all or a portion of the grant or exercise of an option or the
shares acquired pursuant to the exercise of an option to the fulfillment of
certain restrictions or contingencies as specified in the contract referred
to in Paragraph 11 hereof (the "Contract") including, without limitation,
restrictions or contingencies relating to entering into a covenant not to
compete with the Company, any of its Subsidiaries or a Parent (as defined
in Paragraph 19), to financial objectives for the Company, any of its
Subsidiaries or a Parent, a division of any of the foregoing, a product
line or other category, and/or to the period of continued employment of the
optionee with the Company, any of its Subsidiaries or a Parent, and to
determine whether such restrictions or contingencies have been met; whether
an optionee has a Disability (as defined in Paragraph 19); the amount, if
any, necessary to satisfy the obligation of the Company, a Subsidiary or
Parent to withhold taxes or other amounts; the fair market value of a share
of Common Stock; to construe the respective Contracts and the Plan; with
the consent of the optionee, to cancel or modify an option, provided, that
--------
the modified provision is permitted to be included in an option granted
under the Plan on the date of the modification, and further, provided, that
------- --------
in the case of a modification (within the meaning of Section 424(h) of the
Code) of an ISO, such option as modified would be permitted to be granted
on the date of such modification under the terms of the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; and to make
all other determinations necessary or advisable for administering the Plan.
Any controversy or claim arising out of or relating to the Plan, any option
granted under the Plan or any Contract shall be determined unilaterally by
the Committee in its sole discretion. The determinations of the Committee
on the matters referred to in this Paragraph 3 shall be conclusive and
binding on the parties. No member or former member of the Committee shall
be liable for any action, failure to act or determination made in good
faith with respect to the Plan, any Contract or any option hereunder.
8.
9. Eligibility. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant options to (a)
key employees (including officers and directors who are key employees) of
the Company or any of its Subsidiaries, (b) consultants to the Company or
any of its Subsidiaries and (c) Non-Employee Directors. Such options
granted shall cover such number of shares of Common Stock as the Committee
may determine, in its sole discretion, as set forth in the applicable
Contract; provided, however, that the maximum number of shares subject to
-------- -------
options that may be granted to any employee in any fiscal year of the
Company under the Plan (the "162(m) Maximum") may not exceed 100,000; and
further, provided, that the aggregate market value (determined at the time
------- --------
the option is granted in accordance with Paragraph 5) of the shares of
Common Stock for which any eligible employee may be granted ISOs under the
Plan or any other plan of the Company, or of a Parent or a Subsidiary of
the Company, which are exercisable for the first time by such optionee
during any calendar year shall not exceed $100,000. Such ISO limitation
shall be applied by taking ISOs into account in the order in which they
were granted. Any option granted in excess of such ISO limitation amount
shall be treated as a NQSO to the extent of such excess.
10.
11. Exercise Price. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee, in its sole
discretion, as set forth in the applicable Contract; provided, however,
-------- -------
that the exercise price shall not be less than 100% of the fair market
value of the Common Stock subject to such option on the date of grant; and
further, provided, that if, at the time an ISO is granted, the optionee
------- --------
owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company, of any of its Subsidiaries or of a Parent, the
exercise price of such ISO shall not be less than 110% of the fair market
value of the Common Stock subject to such ISO on the date of grant.
12.
13. The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of
Common Stock on such day as reported by such exchange or on a composite
tape reflecting transactions on such exchange, (b) if the principal market
for the Common Stock is not a national securities exchange and the Common
Stock is quoted on The Nasdaq Stock Market ("Nasdaq"), and (i) if actual
sales price information is available with respect to the Common Stock, the
average of the highest and
30
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
lowest sales prices per share of Common Stock on such day on Nasdaq, or
(ii) if such information is not available, the average of the highest bid
and lowest asked prices per share of Common Stock on such day on Nasdaq, or
(c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the
average of the highest bid and lowest asked prices per share of Common
Stock on such day as reported on the OTC Bulletin Board Service or by
National Quotation Bureau, Incorporated or a comparable service; provided,
--------
however, that if clauses (a), (b) and (c) of this Paragraph are all
-------
inapplicable, or if no trades have been made or no quotes are available for
such day, the fair market value of the Common Stock shall be determined by
the Board of Directors or the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options.
14.
15. Term. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion, as
set forth in the applicable Contract; provided, however, that the term of
-------- -------
each ISO granted pursuant to the Plan shall be for a period not exceeding
10 years from the date of grant thereof; and further, provided, that if, at
------- --------
the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the term of the ISO shall be for a period not
exceeding five years from the date of grant. Options shall be subject to
earlier termination as hereinafter provided.
16.
17. Exercise. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is
being exercised and accompanied by payment in full of the aggregate
exercise price therefor (or the amount due on exercise if the applicable
Contract permits installment payments) (a) in cash or by certified check or
(b) if the applicable Contract permits, with previously acquired shares of
Common Stock having an aggregate fair market value on the date of exercise
(determined in accordance with Paragraph 5) equal to the aggregate exercise
price of all options being exercised, or with any combination of cash,
certified check or shares of Common Stock having such value. The Company
shall not be required to issue any shares of Common Stock pursuant to any
such option until all required payments, including any required
withholding, have been made.
18.
19. A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such
shares of Common Stock until the date of issuance of a stock certificate
for such shares or in the case of uncertificated shares, an entry is made
on the books of the Company's transfer agent representing such shares;
provided, however, that until such stock certificate is issued or book
-------- -------
entry is made, any optionee using previously acquired shares of Common
Stock in payment of an option exercise price shall continue to have the
rights of a stockholder with respect to such previously acquired shares.
20.
21. In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
22.
23. Termination of Relationship. Except as may otherwise be expressly
provided in the applicable Contract, an optionee whose relationship with
the Company, its Parent and Subsidiaries as an employee or a consultant has
terminated for any reason (other than as a result of the death or
Disability of the optionee) may exercise his options, to the extent
exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event
after the date the option would otherwise have expired; provided, however,
-------- -------
that if such relationship is terminated either (a) for Cause (as defined in
Paragraph 19), or (b) without the consent of the Company, such option shall
terminate immediately. Except as may otherwise be expressly provided in the
applicable Contract, options granted under the Plan to an employee or
consultant shall not be affected by any change in the status of the
optionee so long as the optionee continues to be an employee of, or a
consultant to, the Company, or any of the Subsidiaries or a
31
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Parent (regardless of having changed from one to the other or having been
transferred from one corporation to another).
24.
25. For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company, any of its
Subsidiaries or a Parent if, at the time of the determination, the
individual was an employee of such corporation for purposes of Section
422(a) of the Code. As a result, an individual on military, sick leave or
other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's
right to reemployment with the Company, any of its Subsidiaries or a Parent
is guaranteed either by statute or by contract. If the period of leave
exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
26.
27. Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose relationship with the Company as a Non-Employee
Director ceases for any reason (other than as a result of his death or
Disability) may exercise his options, to the extent exercisable on the date
of such termination, at any time within three months after the date of
termination, but not thereafter and in no event after the date the option
would otherwise have expired; provided, however, that if such relationship
-------- -------
is terminated for Cause, such option shall terminate immediately. Except as
may otherwise be expressly provided in the applicable Contract, options
granted to a Non-Employee Director shall not be affected by the optionee
becoming an employee of the Company, any of its Subsidiaries or a Parent.
28.
29. Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the
Company, any of its Subsidiaries or a Parent to terminate the optionee's
relationship at any time for any reason whatsoever without liability to the
Company, any of its Subsidiaries or a Parent.
30.
31. Death or Disability of an Optionee. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a)
while he is an employee of, or consultant to, the Company, any of its
Subsidiaries or a Parent, (b) within three months after the termination of
such relationship (unless such termination was for Cause or without the
consent of the Company) or (c) within one year following the termination of
such relationship by reason of his Disability, the options that were
granted to him as an employee or consultant may be exercised, to the extent
exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
32.
33. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee of, or consultant
to, the Company, its Parent and Subsidiaries has terminated by reason of
such optionee's Disability may exercise the options that were granted to
him as an employee or consultant, to the extent exercisable upon the
effective date of such termination, at any time within one year after such
date, but not thereafter and in no event after the date the option would
otherwise have expired.
34.
35. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as a Non-Employee Director ceases
as a result of his death or Disability may exercise the options that were
granted to him as a Non-Employee Director, to the extent exercisable on the
date of such termination, at any time within one year after the date of
termination, but not thereafter and in no event after the date the option
would otherwise have expired. In the case of the death of the Non-Employee
Director, the option may be exercised by his Legal Representative.
36.
32
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
37. Compliance with Securities Laws. The Committee may require, in its
sole discretion, as a condition to the exercise of any option that either
(a) a Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock to be
issued upon such exercise shall be effective and current at the time of
exercise, or (b) there is an exemption from registration under the
Securities Act for the issuance of the shares of Common Stock upon such
exercise. Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act or to keep
any Registration Statement effective or current.
38.
39. The Committee may require, in its sole discretion, as a condition to
the receipt of an option or the exercise of any option that the optionee
execute and deliver to the Company his representations and warranties, in
form, substance and scope satisfactory to the Committee, which the
Committee determines are necessary or convenient to facilitate the
perfection of an exemption from the registration requirements of the
Securities Act, applicable state securities laws or other legal
requirement, including without limitation that (a) the shares of Common
Stock to be issued upon the exercise of the option are being acquired by
the optionee for his own account, for investment only and not with a view
to the resale or distribution thereof, and (b) any subsequent resale or
distribution of shares of Common Stock by such optionee will be made only
pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being
sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the optionee shall
prior to any offer of sale or sale of such shares of Common Stock provide
the Company with a favorable written opinion of counsel satisfactory to the
Company, in form, substance and scope satisfactory to the Company, as to
the applicability of such exemption to the proposed sale or distribution.
40.
41. In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to any option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of an option or the issuing of shares of
Common Stock thereunder, such option may not be granted and such option may
not be exercised in whole or in part unless such listing, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
42.
43. Contracts. Each option shall be evidenced by an appropriate Contract
which shall be duly executed by the Company and the optionee, and shall
contain such terms, provisions and conditions not inconsistent herewith as
may be determined by the Committee. The terms of each option and Contract
need not be identical.
44.
45. Adjustments Upon Changes in Common Stock. (a) Notwithstanding any
other provision of the Plan, in the event of a stock dividend,
recapitalization, merger or consolidation in which the Company is the
surviving corporation, or a spin-off, split-up, combination or exchange of
shares or the like which results in a change in the number or kind of
shares of Common Stock which is outstanding immediately prior to such
event, the Committee shall appropriately adjust the aggregate number and
kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding option and the exercise price thereof. Such
adjustments shall be conclusive and binding on all parties and may provide
for the elimination of fractional shares which might otherwise be subject
to options without payment therefor.
46.
47. (b) Notwithstanding any other provision of the Plan, in the event of:
(i) any transaction (which shall include a series of transactions occurring
within 60 days or occurring pursuant to a plan), that has the result that
stockholders of the Company immediately before such transaction cease to
own at least 50.1% of the voting stock of the Company or of any entity that
results from the participation of the Company in a reorganization,
consolidation, merger, liquidation or any other form of corporate
transaction; (ii) approval by the Company's stockholders of a plan of
merger, consolidation, reorganization, liquidation or dissolution in
33
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
which the Company does not survive (unless the approved merger,
consolidation, reorganization, liquidation or dissolution is subsequently
abandoned); or (iii) approval by the Company's stockholders of a plan for
the sale, lease, exchange or other disposition of all or substantially all
of the property and assets of the Company (unless such plan is subsequently
abandoned), each outstanding option shall become immediately vested and
fully exercisable.
48.
49. Amendments and Termination of the Plan. The Plan was adopted by the
Board of Directors on January 25, 1999. No option may be granted under the
Plan after January 24, 2009. The Board of Directors, without further
approval of the Company's stockholders, may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time in
such respects as it may deem advisable, including, without limitation, in
order that ISOs granted hereunder meet the requirements for "incentive
stock options" under the Code, to comply with the provisions of Rule 16b-3
promulgated under the Exchange Act, Section 162(m) under the Code and to
conform to any change in applicable law, regulations, rulings or
interpretations of any administrative agency; provided, however, that no
-------- -------
amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph
12, increase the maximum number of shares of Common Stock for which options
may be granted under the Plan or the 162(m) Maximum, (b) change the
eligibility requirements to receive options hereunder or (c) make any other
change for which applicable law requires stockholder approval. No
termination, suspension or amendment of the Plan shall, without the consent
of the optionee, adversely affect his rights under any option granted under
the Plan. The power of the Committee to construe and administer any option
granted under the Plan prior to the termination or suspension of the Plan
nevertheless shall continue after such termination or during such
suspension.
50.
51. Non-Transferability. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the
optionee, only by the optionee or his Legal Representatives. Except to the
extent provided above, options may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process, and any such attempted assignment, transfer, pledge, hypothecation
or disposition shall be null and void ab initio and of no force or effect.
52.
53. Withholding Taxes. The Company, a Subsidiary or Parent may withhold
(a) cash, (b) shares of Common Stock to be issued upon exercise of an
option having an aggregate fair market value on the relevant date
(determined in accordance with Paragraph 5), or (c) any combination
thereof, in an amount equal to the amount which the Committee determines is
necessary to satisfy the obligation of the Company, a Subsidiary or Parent
to withhold federal, state and local income taxes or other amounts incurred
by reason of the grant, vesting, exercise or disposition of an option, or
the disposition of the underlying shares of Common Stock. Alternatively,
the Company may require the holder to pay to the Company such amount, in
cash, promptly upon demand.
54.
55. Legends; Payment of Expenses. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a)
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act and any applicable state securities
laws, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or
(c) permit the Company to determine the occurrence of a "disqualifying
disposition," as described in Section 421(b) of the Code, of the shares of
Common Stock issued or transferred upon the exercise of an ISO granted
under the Plan.
56.
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
57. The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the
Plan, as well as all fees and expenses incurred by the Company in
connection with such issuance.
58.
59. Use of Proceeds. The cash proceeds received upon the exercise of an
option under the Plan shall be added to the general funds of the Company
and used for such corporate purposes as the Board of Directors may
determine.
60.
61. Substitutions and Assumptions of Options of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the
Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as
defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
62.
63. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth
64.
65. (a) "Cause" shall mean (i) in the case of an employee or
consultant, if there is a written employment or consulting agreement
between the optionee and the Company, any of its Subsidiaries or a Parent
which defines termination of such relationship for cause, cause as defined
in such agreement, and (ii) in all other cases, cause as defined by
applicable state law.
66.
67. (b) "Constituent Corporation" shall mean any corporation which
engages with the Company, any of its Subsidiaries or a Parent in a
transaction to which Section 424(a) of the Code applies (or would apply if
the option assumed or substituted were an ISO), or any Parent or any
Subsidiary of such corporation.
68.
69. (c) "Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
70.
71. (d) "Legal Representative" shall mean the executor, administrator
or other person who at the time is entitled by law to exercise the rights
of a deceased or incapacitated optionee with respect to an option granted
under the Plan.
72.
73. (e) "Non-Employee Director" shall mean a person who is a director
of the Company, but is not an employee of the Company, any of its
Subsidiaries or a Parent.
74.
75. (f) "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
76. (g) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.
77.
78. Governing Law; Construction. The Plan, the options and Contracts
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to
conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
79.
80. Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing
the Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include
the singular and plural, and any term stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and neuter.
81.
82. Partial Invalidity. The invalidity, illegality or unenforceability of
any provision in the Plan, any option or Contract shall not affect the
validity, legality or enforceability of any other provision, all of which
shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
83.
84. Stockholder Approval. The Plan shall be subject to approval by a majority
of the votes present in person or by proxy and entitled to vote hereon at the
next duly held meeting of the Company's stockholders at which a quorum is
present. No options granted hereunder may be exercised prior to such approval;
provided, however, that the date of grant of any option shall be determined as
- -------- -------
if the Plan had not been subject to such approval. Notwithstanding the
foregoing, if the Plan is not approved by a vote of the stockholders of the
Company on or before January 25, 2000, then the Plan and any options granted
hereunder shall terminate.
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
Exhibit 4.5
1999 STOCK OPTION PLAN
of
SUNSTAR HEALTHCARE, INC.
1. Purposes of the Plan. This stock option plan (the "Plan") is intended
to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are
not employees of SUNSTAR HEALTHCARE, INC., a Delaware corporation (the
"Company"), or any of its Subsidiaries (as defined in Paragraph 19), and
to offer an additional inducement in obtaining the services of such
persons. The Plan provides for the grant of "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and nonqualified stock options which
do not qualify as ISOs ("NQSOs"). The Company makes no representation or
warranty, express or implied, as to the qualification of any option as
an "incentive stock option" under the Code.
2.
3. Stock Subject to the Plan. Subject to the provisions of Paragraph 12,
the aggregate number of shares of Common Stock, $.001 par value per
share, of the Company ("Common Stock") for which options may be granted
under the Plan shall not exceed 500,000. Such shares of Common Stock
may, in the discretion of the Board of Directors of the Company (the
"Board of Directors"), consist either in whole or in part of authorized
but unissued shares of Common Stock or shares of Common Stock held in
the treasury of the Company. Subject to the provisions of Paragraph 13,
any shares of Common Stock subject to an option which for any reason
expires, is canceled or is terminated unexercised or which ceases for
any reason to be exercisable, shall again become available for the
granting of options under the Plan. The Company shall at all times
during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements
of the Plan.
4.
5. Administration of the Plan. The Plan shall be administered by the Board
of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of
the Board of Directors (the "Committee") consisting of not less than two
directors (or such greater number as required by law), each of whom
shall be a "non-employee director" within the meaning of Rule 16b-3 (or
any successor rule or regulation) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). References in the
Plan to determinations or actions by the Committee shall be deemed to
include determinations and actions by the Board of Directors. Except as
otherwise provided by the Board of Directors, the By-laws of the Company
or applicable law, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present
at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the
Committee.
6.
7. Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, to determine: the key employees,
consultants and Non-Employee Directors (as defined in Paragraph 19) who
shall be granted options; the type of option to be granted to a key
employee; the times when an option shall be granted; the number of
shares of Common Stock to be subject to each option; the term of each
option; the date each option shall become exercisable; whether an option
shall be exercisable in whole, in part or in installments and, if in
installments, the number of shares of Common Stock to be subject to each
installment, whether the installments shall be cumulative, the date each
installment shall become exercisable and the term of each installment;
whether to accelerate the date of exercise of any option or installment;
whether shares of Common Stock may be issued upon the exercise of an
option as partly paid and, if so, the dates when future installments of
the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of
the exercise price; whether to restrict the sale or other disposition of
the shares of Common Stock acquired upon the exercise of an option and,
if so, whether and under what conditions to waive any such restriction;
whether and under what conditions to
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
subject all or a portion of the grant or exercise of an option or the
shares acquired pursuant to the exercise of an option to the fulfillment
of certain restrictions or contingencies as specified in the contract
referred to in Paragraph 11 hereof (the "Contract") including, without
limitation, restrictions or contingencies relating to entering into a
covenant not to compete with the Company, any of its Subsidiaries or a
Parent (as defined in Paragraph 19), to financial objectives for the
Company, any of its Subsidiaries or a Parent, a division of any of the
foregoing, a product line or other category, and/or to the period of
continued employment of the optionee with the Company, any of its
Subsidiaries or a Parent, and to determine whether such restrictions or
contingencies have been met; whether an optionee has a Disability (as
defined in Paragraph 19); the amount, if any, necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold taxes or
other amounts; the fair market value of a share of Common Stock; to
construe the respective Contracts and the Plan; with the consent of the
optionee, to cancel or modify an option, provided, that the modified
--------
provision is permitted to be included in an option granted under the
Plan on the date of the modification, and further, provided, that in the
------- --------
case of a modification (within the meaning of Section 424(h) of the
Code) of an ISO, such option as modified would be permitted to be
granted on the date of such modification under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan;
and to make all other determinations necessary or advisable for
administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract
shall be determined unilaterally by the Committee in its sole
discretion. The determinations of the Committee on the matters referred
to in this Paragraph 3 shall be conclusive and binding on the parties.
No member or former member of the Committee shall be liable for any
action, failure to act or determination made in good faith with respect
to the Plan, any Contract or any option hereunder.
8.
9. Eligibility. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant options to
(a) key employees (including officers and directors who are key
employees) of the Company or any of its Subsidiaries, (b) consultants to
the Company or any of its Subsidiaries and (c) Non-Employee Directors.
Such options granted shall cover such number of shares of Common Stock
as the Committee may determine, in its sole discretion, as set forth in
the applicable Contract; provided, however, that the maximum number of
-------- -------
shares subject to options that may be granted to any employee in any
fiscal year of the Company under the Plan (the "162(m) Maximum") may not
exceed 100,000; and further, provided, that the aggregate market value
------- --------
(determined at the time the option is granted in accordance with
Paragraph 5) of the shares of Common Stock for which any eligible
employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such optionee during any calendar year
shall not exceed $100,000. Such ISO limitation shall be applied by
taking ISOs into account in the order in which they were granted. Any
option granted in excess of such ISO limitation amount shall be treated
as a NQSO to the extent of such excess.
10.
11. Exercise Price. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee, in its sole
discretion, as set forth in the applicable Contract; provided, however,
-------- -------
that the exercise price shall not be less than 100% of the fair market
value of the Common Stock subject to such option on the date of grant;
and further, provided, that if, at the time an ISO is granted, the
------- --------
optionee owns (or is deemed to own under Section 424(d) of the Code)
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the exercise price of such ISO shall not be less than 110% of
the fair market value of the Common Stock subject to such ISO on the
date of grant.
12.
13. The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national
securities exchange, the average of the highest and lowest sales prices
per share of Common Stock on such day as reported by such exchange or on
a composite tape reflecting transactions on such exchange, (b) if the
principal market for the Common Stock is not a national securities
exchange and the Common Stock is quoted on The Nasdaq Stock Market
("Nasdaq"), and (i) if actual sales price information is available with
respect to the Common Stock, the average of the highest and
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
lowest sales prices per share of Common Stock on such day on Nasdaq, or
(ii) if such information is not available, the average of the highest
bid and lowest asked prices per share of Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on
Nasdaq, the average of the highest bid and lowest asked prices per share
of Common Stock on such day as reported on the OTC Bulletin Board
Service or by National Quotation Bureau, Incorporated or a comparable
service; provided, however, that if clauses (a), (b) and (c) of this
-------- -------
Paragraph are all inapplicable, or if no trades have been made or no
quotes are available for such day, the fair market value of the Common
Stock shall be determined by the Board of Directors or the Committee by
any method consistent with applicable regulations adopted by the
Treasury Department relating to stock options.
14.
15. Term. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion, as
set forth in the applicable Contract; provided, however, that the term
-------- ------
of each ISO granted pursuant to the Plan shall be for a period not
exceeding 10 years from the date of grant thereof; and further,
-------
provided, that if, at the time an ISO is granted, the optionee owns (or
--------
is deemed to own under Section 424(d) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company, of any of its Subsidiaries or of a Parent, the term of the
ISO shall be for a period not exceeding five years from the date of
grant. Options shall be subject to earlier termination as hereinafter
provided.
16.
17. Exercise. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option
is being exercised and accompanied by payment in full of the aggregate
exercise price therefor (or the amount due on exercise if the applicable
Contract permits installment payments) (a) in cash or by certified check
or (b) if the applicable Contract permits, with previously acquired
shares of Common Stock having an aggregate fair market value on the date
of exercise (determined in accordance with Paragraph 5) equal to the
aggregate exercise price of all options being exercised, or with any
combination of cash, certified check or shares of Common Stock having
such value. The Company shall not be required to issue any shares of
Common Stock pursuant to any such option until all required payments,
including any required withholding, have been made.
18.
19. A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such
shares of Common Stock until the date of issuance of a stock certificate
for such shares or in the case of uncertificated shares, an entry is
made on the books of the Company's transfer agent representing such
shares; provided, however, that until such stock certificate is issued
-------- -------
or book entry is made, any optionee using previously acquired shares of
Common Stock in payment of an option exercise price shall continue to
have the rights of a stockholder with respect to such previously
acquired shares.
20.
21. In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
22.
23. Termination of Relationship. Except as may otherwise be expressly
provided in the applicable Contract, an optionee whose relationship with
the Company, its Parent and Subsidiaries as an employee or a consultant
has terminated for any reason (other than as a result of the death or
Disability of the optionee) may exercise his options, to the extent
exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event
after the date the option would otherwise have expired; provided,
--------
however, that if such relationship is terminated either (a) for Cause
-------
(as defined in Paragraph 19), or (b) without the consent of the Company,
such option shall terminate immediately. Except as may otherwise be
expressly provided in the applicable Contract, options granted under the
Plan to an employee or consultant shall not be affected by any change in
the status of the optionee so long as the optionee continues to be an
employee of, or a consultant to, the Company, or any of the Subsidiaries
or a
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<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
Parent (regardless of having changed from one to the other or having
been transferred from one corporation to another).
24.
25. For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company, any of its
Subsidiaries or a Parent if, at the time of the determination, the
individual was an employee of such corporation for purposes of Section
422(a) of the Code. As a result, an individual on military, sick leave
or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the
individual's right to reemployment with the Company, any of its
Subsidiaries or a Parent is guaranteed either by statute or by contract.
If the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such
leave.
26.
27. Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose relationship with the Company as a Non-
Employee Director ceases for any reason (other than as a result of his
death or Disability) may exercise his options, to the extent exercisable
on the date of such termination, at any time within three months after
the date of termination, but not thereafter and in no event after the
date the option would otherwise have expired; provided, however, that if
-------- -------
such relationship is terminated for Cause, such option shall terminate
immediately. Except as may otherwise be expressly provided in the
applicable Contract, options granted to a Non-Employee Director shall
not be affected by the optionee becoming an employee of the Company, any
of its Subsidiaries or a Parent.
28.
29. Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the
Company, any of its Subsidiaries or a Parent to terminate the optionee's
relationship at any time for any reason whatsoever without liability to
the Company, any of its Subsidiaries or a Parent.
30.
31. Death or Disability of an Optionee. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a)
while he is an employee of, or consultant to, the Company, any of its
Subsidiaries or a Parent, (b) within three months after the termination
of such relationship (unless such termination was for Cause or without
the consent of the Company) or (c) within one year following the
termination of such relationship by reason of his Disability, the
options that were granted to him as an employee or consultant may be
exercised, to the extent exercisable on the date of his death, by his
Legal Representative (as defined in Paragraph 19) at any time within one
year after death, but not thereafter and in no event after the date the
option would otherwise have expired.
32.
33. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee of, or
consultant to, the Company, its Parent and Subsidiaries has terminated
by reason of such optionee's Disability may exercise the options that
were granted to him as an employee or consultant, to the extent
exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.
34.
35. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as a Non-Employee Director
ceases as a result of his death or Disability may exercise the options
that were granted to him as a Non-Employee Director, to the extent
exercisable on the date of such termination, at any time within one year
after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired. In the case of the
death of the Non-Employee Director, the option may be exercised by his
Legal Representative.
36.
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
37. Compliance with Securities Laws. The Committee may require, in its sole
discretion, as a condition to the exercise of any option that either (a)
a Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock to be
issued upon such exercise shall be effective and current at the time of
exercise, or (b) there is an exemption from registration under the
Securities Act for the issuance of the shares of Common Stock upon such
exercise. Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act or to
keep any Registration Statement effective or current.
38.
39. The Committee may require, in its sole discretion, as a condition to
the receipt of an option or the exercise of any option that the optionee
execute and deliver to the Company his representations and warranties,
in form, substance and scope satisfactory to the Committee, which the
Committee determines are necessary or convenient to facilitate the
perfection of an exemption from the registration requirements of the
Securities Act, applicable state securities laws or other legal
requirement, including without limitation that (a) the shares of Common
Stock to be issued upon the exercise of the option are being acquired by
the optionee for his own account, for investment only and not with a
view to the resale or distribution thereof, and (b) any subsequent
resale or distribution of shares of Common Stock by such optionee will
be made only pursuant to (i) a Registration Statement under the
Securities Act which is effective and current with respect to the shares
of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such
exemption, the optionee shall prior to any offer of sale or sale of such
shares of Common Stock provide the Company with a favorable written
opinion of counsel satisfactory to the Company, in form, substance and
scope satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
40.
41. In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common
Stock subject to any option on any securities exchange, Nasdaq or under
any applicable law, or the consent or approval of any governmental
agency or regulatory body, is necessary or desirable as a condition to,
or in connection with, the granting of an option or the issuing of
shares of Common Stock thereunder, such option may not be granted and
such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
42.
43. Contracts. Each option shall be evidenced by an appropriate Contract
which shall be duly executed by the Company and the optionee, and shall
contain such terms, provisions and conditions not inconsistent herewith
as may be determined by the Committee. The terms of each option and
Contract need not be identical.
44.
45. Adjustments Upon Changes in Common Stock. (a) Notwithstanding any other
provision of the Plan, in the event of a stock dividend,
recapitalization, merger or consolidation in which the Company is the
surviving corporation, or a spin-off, split-up, combination or exchange
of shares or the like which results in a change in the number or kind of
shares of Common Stock which is outstanding immediately prior to such
event, the Committee shall appropriately adjust the aggregate number and
kind of shares subject to the Plan, the aggregate number and kind of
shares subject to each outstanding option and the exercise price
thereof. Such adjustments shall be conclusive and binding on all parties
and may provide for the elimination of fractional shares which might
otherwise be subject to options without payment therefor.
46.
47. (b) Notwithstanding any other provision of the Plan, in the event of:
(i) any transaction (which shall include a series of transactions
occurring within 60 days or occurring pursuant to a plan), that has the
result that stockholders of the Company immediately before such
transaction cease to own at least 50.1% of the voting stock of the
Company or of any entity that results from the participation of the
Company in a reorganization, consolidation, merger, liquidation or any
other form of corporate transaction; (ii) approval by the Company's
stockholders of a plan of merger, consolidation, reorganization,
liquidation or dissolution in
33
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
which the Company does not survive (unless the approved merger,
consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); or (iii) approval by the Company's stockholders
of a plan for the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Company (unless such
plan is subsequently abandoned), each outstanding option shall become
immediately vested and fully exercisable.
48.
49. Amendments and Termination of the Plan. The Plan was adopted by the
Board of Directors on January 25, 1999. No option may be granted under
the Plan after January 24, 2009. The Board of Directors, without further
approval of the Company's stockholders, may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time
in such respects as it may deem advisable, including, without
limitation, in order that ISOs granted hereunder meet the requirements
for "incentive stock options" under the Code, to comply with the
provisions of Rule 16b-3 promulgated under the Exchange Act, Section
162(m) under the Code and to conform to any change in applicable law,
regulations, rulings or interpretations of any administrative agency;
provided, however, that no amendment shall be effective without the
-------- -------
requisite prior or subsequent stockholder approval which would (a)
except as contemplated in Paragraph 12, increase the maximum number of
shares of Common Stock for which options may be granted under the Plan
or the 162(m) Maximum, (b) change the eligibility requirements to
receive options hereunder or (c) make any other change for which
applicable law requires stockholder approval. No termination, suspension
or amendment of the Plan shall, without the consent of the optionee,
adversely affect his rights under any option granted under the Plan. The
power of the Committee to construe and administer any option granted
under the Plan prior to the termination or suspension of the Plan
nevertheless shall continue after such termination or during such
suspension.
50.
51. Non-Transferability. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the
optionee, only by the optionee or his Legal Representatives. Except to
the extent provided above, options may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of
law or otherwise) and shall not be subject to execution, attachment or
similar process, and any such attempted assignment, transfer, pledge,
hypothecation or disposition shall be null and void ab initio and of no
-- ------
force or effect.
52.
53. Withholding Taxes. The Company, a Subsidiary or Parent may withhold (a)
cash, (b) shares of Common Stock to be issued upon exercise of an option
having an aggregate fair market value on the relevant date (determined
in accordance with Paragraph 5), or (c) any combination thereof, in an
amount equal to the amount which the Committee determines is necessary
to satisfy the obligation of the Company, a Subsidiary or Parent to
withhold federal, state and local income taxes or other amounts incurred
by reason of the grant, vesting, exercise or disposition of an option,
or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company
such amount, in cash, promptly upon demand.
54.
55. Legends; Payment of Expenses. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a)
prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act and any applicable state
securities laws, (b) implement the provisions of the Plan or any
agreement between the Company and the optionee with respect to such
shares of Common Stock, or (c) permit the Company to determine the
occurrence of a "disqualifying disposition," as described in Section
421(b) of the Code, of the shares of Common Stock issued or transferred
upon the exercise of an ISO granted under the Plan.
56.
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
57. The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in
connection with such issuance.
58.
59. Use of Proceeds. The cash proceeds received upon the exercise of an
option under the Plan shall be added to the general funds of the Company
and used for such corporate purposes as the Board of Directors may
determine.
60.
61. Substitutions and Assumptions of Options of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the
Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation
(as defined in Paragraph 19) or assume the prior options of such
Constituent Corporation.
62.
63. Definitions. For purposes of the Plan, the following terms shall be defined
as set forth below:
64.
65. (a) "Cause" shall mean (i) in the case of an employee or consultant, if
there is a written employment or consulting agreement between the
optionee and the Company, any of its Subsidiaries or a Parent which
defines termination of such relationship for cause, cause as defined
in such agreement, and (ii) in all other cases, cause as defined by
applicable state law.
66.
67. (b) "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a
transaction to which Section 424(a) of the Code applies (or would
apply if the option assumed or substituted were an ISO), or any
Parent or any Subsidiary of such corporation.
68.
69. (c) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
70.
71. (d) "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted
under the Plan.
72.
73. (e) "Non-Employee Director" shall mean a person who is a director of the
Company, but is not an employee of the Company, any of its
Subsidiaries or a Parent.
74.
75. (f) "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.
76. (g) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.
77.
78. Governing Law; Construction. The Plan, the options and Contracts
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to
conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
79.
80. Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it
appears appropriate, any term stated in either the singular or plural
shall include the singular and plural, and any term stated in the
masculine, feminine or neuter gender shall include the masculine,
feminine and neuter.
81.
82. Partial Invalidity. The invalidity, illegality or unenforceability of
any provision in the Plan, any option or Contract shall not affect the
validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent
permitted by applicable law.
35
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIAREIS
83.
84. Stockholder Approval. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy and entitled to vote
hereon at the next duly held meeting of the Company's stockholders at
which a quorum is present. No options granted hereunder may be exercised
prior to such approval; provided, however, that the date of grant of any
-------- -------
option shall be determined as if the Plan had not been subject to such
approval. Notwithstanding the foregoing, if the Plan is not approved by
a vote of the stockholders of the Company on or before January 25, 2000,
then the Plan and any options granted hereunder shall terminate.
36
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Exhibit 4.6
1999 STOCK OPTION PLAN
STOCK OPTION CONTRACT
---------------------
THIS STOCK OPTION CONTRACT (the "Contract") is entered into as of the
__ day of ___, 1999 by and between SunStar Healthcare, Inc., a Delaware
corporation (the "Company"), and ____________ (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
1. The Company, in accordance with the allotment made by a committee of the
Board of Directors (the "Committee") and subject to the terms and
conditions of the 1999 Stock Option Plan (the "Plan"), grants as of the
date hereof to the Optionee an option to purchase an aggregate of ______
shares of the Common Stock, $.001 par value per share, of the Company
("Common Stock") at $____ per share, being at least 100% of the fair
market value of such shares of Common Stock on the date hereof, which
option shall be exercisable as to ____ of the shares subject thereto on
the date hereof and an additional ____ of the shares subject thereto on
the first anniversary of the date hereof.
1. The term of this option shall be ten years from the date hereof, subject
to earlier termination as provided in the Plan. This option shall be
exercisable as to the shares of Common Stock subject hereto as provided
in Paragraph 1. The right to purchase shares of Common Stock under this
option shall be cumulative, so that if the full number of shares
purchasable in a period shall not be purchased, the balance may be
purchased at any time or from time to time thereafter. Notwithstanding
the foregoing, in no event may a fraction of a share of Common Stock be
purchased under this option.
1. This option shall be exercised by giving written notice to the Company at
its principal office, presently 300 International Parkway, Suite 230,
Heathrow, Florida, Attention: Stock Option Committee, stating that the
Optionee is exercising this nonqualified stock option, specifying the
number of shares being purchased and accompanied by payment in full of
the aggregate purchase price therefor (a) in cash or by certified check,
(b) with previously acquired shares of Common Stock having an aggregate
fair market value on the date of exercise equal to the aggregate exercise
price of all options being exercised, or (c) a combination of the
foregoing.
1. Notwithstanding the foregoing, this option shall not be exercisable by
the Optionee unless (a) a registration statement under the Securities Act
of 1933, as amended (the "Securities Act") with respect to the shares of
Common Stock to be received upon the exercise of the option shall be
effective and current at the time of exercise, or (b) there is an
exemption from registration under the Securities Act for the issuance of
the shares of Common Stock upon exercise. At the request of the
Committee, the Optionee shall execute and deliver to the Company his
representation and warranty, in form and substance satisfactory to the
Committee, that the shares of Common Stock to be issued upon the exercise
of the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution
thereof. In addition, the Committee may require the Optionee to represent
and warrant to the Company in writing that any subsequent resale or
distribution of shares of Common Stock by him will be made only pursuant
to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being
sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the Optionee shall
prior to any offer of sale or sale of such shares of Common Stock provide
the Company with a favorable written opinion of counsel, in form and
substance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
37
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
1. Notwithstanding anything herein to the contrary, if at any time the
Committee shall determine in its discretion that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of an option, or
the issue of shares of Common Stock thereunder, this option may not be
exercised in whole or in part unless such listing, qualification, consent
or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
1. Nothing in the Plan or herein shall confer upon the Optionee any right to
continue in the employ of the Company, its parent or any of its
subsidiaries, or interfere in any way with the right of the Company, its
parent or its subsidiaries to terminate such employment at any time for
any reason whatsoever without liability to the Company, its parent or any
of its subsidiaries.
1. The Company may affix appropriate legends upon the certificates for
shares of Common Stock issued upon exercise of this option and may issue
such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or
appropriate to (a) prevent a violation of, or to perfect an exemption
from, the registration requirements of the Securities Act, (b) implement
the provisions of the Plan or any agreement between the Company and the
Optionee with respect to such shares of Common Stock, or (c) permit the
Company to determine the occurrence of a "disqualifying disposition," as
described in Section 421(b) of the Internal Revenue Code, of the shares
of Common Stock transferred upon the exercise of this option.
1. As provided in the Plan, the Company may withhold cash and/or shares of
Common Stock in the amount necessary to satisfy its obligation to
withhold taxes or may require the Optionee to pay the Company such amount
in cash. In the event of any disposition of the shares of Common Stock
acquired pursuant to the exercise of this option within two years from
the date hereof or one year from the date of transfer of such shares to
him, the Optionee shall notify the Company thereof in writing within 30
days after such disposition. In addition, the Optionee shall provide the
Company on demand with such information as the Company shall reasonably
request in connection with determining its obligation to withhold any
federal, state and local income taxes or other taxes incurred by reason
of such disqualifying disposition, including the amount thereof, and
shall pay the Company in cash on demand the amount, if any, which the
Company determines is necessary to satisfy such obligation.
1. The Company and the Optionee agree that they will both be subject to and
bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made a part hereof. In the event the employment of
the Optionee terminates or in the event of the Optionee's death or
disability (as defined in the Plan), the Optionee's rights hereunder
shall be governed by and be subject to the provisions of the Plan. In the
event of a conflict between the terms of this Contract and the terms of
the Plan, the terms of the Plan shall govern.
1. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of the
option and the disposition of the shares of Common Stock acquired upon
exercise of the option, including, without limitation, federal and state
securities and "blue sky" laws.
1. This option is not transferable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee or the Optionee's legal representatives.
Except to the extent provided herein, options may not be assigned,
transferred,
38
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
pledged, hypothecated or disposed of in any way (whether by operation of
law or otherwise) and shall not be subject to execution, attachment or
similar process, and any such attempted assignment, transfer, pledge,
hypothecation or disposition shall be null and void ab initio and of no
-- ------
force or effect.
1. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee,
executor, administrator or legal representative entitled by law to the
Optionee's rights hereunder.
1. This Contract shall be governed by and construed in accordance with the
laws of the State of Delaware.
1. The invalidity or illegality of any provision herein shall not affect the
validity of any other provision.
1. The Optionee agrees that the Company may amend the Plan and the options
granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract
on the day and year first above written.
39
<PAGE>
SUNSTAR HEALTHCARE, INC.
By:
THE OPTIONEE
(name of optionee)
Address
40
<PAGE>
Exhibit 10.6
Employment Agreement
--------------------
This Agreement, dated as of June 7, 1999 by and between SunStar Healthcare,
Inc., a Delaware corporation, with offices at 300 International Parkway Heathrow
Florida, or any successor corporation thereto (the "Company"), and WARREN D.
STOWELL, an individual residing at 2704 Shad Lane, Geneva, Florida 32732
("Employee").
WITNESSETH
----------
WHEREAS, the Company wishes to employ Employee and Employee wishes to accept
such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. Employment.
----------
A. The Company hereby agrees to employ Employee and Employee agrees to be
employed by the Company upon the terms and conditions set forth below.
Subject to earlier termination as provided herein, the employment provided
for herein shall commence on the date hereof, for a period of three years,
thereafter, this Agreement may be renewed for successive one-year
Employment Periods upon terms and conditions mutually agreed to by Employee
and the Company unless, within 30 days of the end of the then-current
Employment Period, either party notifies the other of its election not to
so renew this Agreement. During the Employment Period(s), Employee will
hold the position of President and Chief Executive Officer of the Company
and Chairman of the Board of Directors and shall perform all duties and
services incident to those positions that Employee, in his reasonable
discretion, deems to be consistent with his positions and in the best
interest of the Company. Employee will devote all his working time and
efforts to the business of the Company to accomplish the duties of the
position and will perform those duties to the best of Employee's ability
and will devote Employee's best efforts to advance the interests of the
Company.
B.
During the term hereof, Employee shall serve as Chairman of the Board of
Directors of the Company and shall have the authority to appoint two additional
members to the Board of Directors of the Company, subject to the amendment of
the Certificate of Incorporation and/or Bylaws of the Company, if necessary, and
any other arrangements necessary to implement the foregoing, all of which
arrangements the Company agrees to use its best efforts to effect; provided,
however, that the provisions of this paragraph lB shall terminate upon the
termination of this Agreement.
2. Compensation.
------------
A. For all services performed by Employee for the Company during the term
hereof the Company will pay Employee a salary at an initial rate of $325,000 per
annum, payable in accordance with the normal payment practices of the Company.
Provided further, that the salary and any incentive bonus (the "Remuneration"),
and the terms and conditions thereof for each successive employment period
following the initial Employment Period shall be mutually agreed to by Employee
and the Company: (i) no later than January 1, 2000 for the first such successive
employment period, and (ii) prior to the commencement of each subsequent
successive employment period. The Renumeration for each successive period will
at a minimum, equal the Renumeration for HMO executives holding comparable
positions of authority and resposibility as Employee. During the Employment
Period(s), the Company will provide Employee the use of an automobile, purchased
or leased by the Company, selected by Employee. Employee will be entitled to
vacation during the Employment Period in accordance with the policies of the
SunStar Employee Manual. The vacation may be taken at times agreed upon by
Employee and the Company. During that vacation, Employee will receive Employee's
usual compensation. Recognizing the time necessary to develop and operate the
company, additional compensation will be paid to Employee for vacation time that
is not taken. Employee will be entitled to participate, at a level commensurate
with his position, in any benefit plans, including health, pension and any other
plans adopted by the Company for its employee's.
B.
As additional compensation for services rendered during each year of the
Employment Period(s), pursuant to stock option contracts to be established
between the Company and the Employee, Employee will be granted ten-year non-
qualified stock options (the "Options") to purchase no less than one hundred and
fifty thousand (150,000) shares of common stock, par value $.00l per share, of
the Company ("Common Stock"), at an exercise price per share equal to fair
market value at the time of the grant. The Options shall vest and be exercisable
immediately upon grant as to one-half of the shares covered thereby and shall
vest and be exercisable as to one-half of the shares covered thereby on each
successive anniversary of the day before the date of grant provided that
Employee is employed by the
41
<PAGE>
Company on each such vesting date. In the event this Agreement is terminated for
any reason, the Employee may exercise the Options, only to the extent then
exercisable, for a period of 90 days from the date of termination, unless the
Employee is terminated for Cause, as defined in paragraph 5 herein, in which
case the Options shall terminate immediately. The Company agrees to use its best
efforts, subject to applicable securities and other laws, to file with the
Securities and Exchange Commission a registration statement relating to the
Options.
C.
Upon signing this agreement employee shall receive a cash bonus of $129,600
payable immediately.
D.
Effective January 1, 1999 and for the term of this agreement, Employee will be
eligible to receive incentive compensation as determined by the compensation
committee of the Board of Directors. Such incentive compensation will include
cash and stock options and will be based on the achievement of various levels of
profits and revenues as well as increases in the share price. As soon as
practical, the terms of the incentive compensation will be added as an addendum
to this agreeement.
3. Reimbursement of Expenses
-------------------------
As of the date hereof and during the Employment Period, the Company recognizes
that Employee, in performing Employee's duties hereunder, may be required to
spend sums of money in connection with those duties on behalf of or for the
benefit of the Company. Employee may present to the Company, an itemized voucher
listing all sums of money paid or expenses incurred by Employee in the
performance of Employee's duties on behalf of or for the benefit of the Company,
and on presentation of that itemized voucher and receipts for all such expenses
the Company will reimburse Employee or pay the expense incurred in conformity
with Company policy for all such reasonable expenses including, but not limited
to, travel, meals, lodging, entertainment and promotion.
4. Termination:
------------
(A.) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Employee's death. If the Company determines in good faith that the
Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(B) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(C) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by this
agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Employee;
(ii) any failure by the Company to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or location
more than thirty five miles from Orlando, Florida except for travel reasonably
required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 13 of this
Agreement.
For purposes of this Section (C), any determination of "Good Reason" made in
good faith by the Employee shall be
42
<PAGE>
prima facie evidence of "Good Reason."
- -----------
(D) Notice of Termination. Any termination by the Company for Cause or by the
---------------------
Employee for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by the Employee to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Employee hereunder or preclude the Employee from asserting such
fact or circumstance in enforcing his rights hereunder.
(E) Date of Termination. "Date of Termination" means the date of receipt of
-------------------
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Employee's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
(A) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination (ii) the product of the Annual Bonus paid to the Employee for the
last full fiscal year and a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365, and (iii) any compensation previously deferred by
the Employee (together with any accrued interest thereon) and not yet paid by
the Company and any accrued vacation pay not yet paid by the Company (such
amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as
"Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(B) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee shall be entitled after the
Disability Effective Date to receive disability and other benefits
including fully paid life and health insurance coverage for both the
Employee and his dependents and at least equal to the most favorable of
those provided by the Company and its subsidiaries to disabled employees
and/or their families in accordance with such plans, programs, practices
and policies relating to disability, if any, in accordance with the most
favorable plans, programs, practices and policies of the Company and its
subsidiaries.
(C) Cause; Other than for Good Reason. If the Employee's employment shall
---------------------------------
be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the
Employee the Highest Base Salary through the Date of Termination plus the
amount of any compensation previously deferred by the Employee (together
with accrued interest thereon). If the Employee terminates employment
other than for Good Reason, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination.
43
<PAGE>
(D) Good Reason, Other Than for Cause or Disability. If, during the Employment
-----------------------------------------------
Period, the Company shall terminate the Employee's employment other than for
Cause, Disability or death, or if the Employee shall terminate his employment
for Good Reason:
(1) the Company shall pay to the Employee in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:
(a.) to the extent not theretofore paid, the Employees Highest Base Salary
through the Date of Termination; and
(b) the product of (x) the Annual Bonus paid to the Employee for the last full
fiscal year (if any) ending during the Employment Period or, if higher, the
Annual Bonus paid to the Employee in the prior fiscal year. (as applicable, the
"Recent Bonus") and (y) a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination and the denominator
of which is 365; and
(c) the product of (x) 2.5, multiplied times (y) the sum of (i) the Employee's
annual salary based upon the Highest Base Salary (the "Highest Annual Base
Salary") and (ii) the Recent Bonus or if higher, the annual bonus paid to the
employee for the last full fiscal year prior to the termination.
(d) in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet paid by the
Company; and
(e) all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(2) for the remainder of the Employment Period, or a period not less than two
years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in this
Agreement if the Employee's employment had not been terminated, including
health, dental, disability insurance and life insurance, in accordance with the
most favorable plans, practices, programs or policies of the Company and its
subsidiaries. For purposes of eligibility for retiree benefits pursuant to such
plans, practices, programs and policies, the Employee shall be considered to
have remained employed until the end of the Employment Period and to have
retired on the last day of such period.
5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
-------------------------
the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries
6. Full Settlement.
---------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others.
In no event shall the Employee be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement. The Company agrees to pay, to
the full extent permitted by law, all legal fees and expenses which the
Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Employee
about the amount of any payment pursuant to this Agreement), plus in each
case interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
7. Confidential Information. The Employee shall hold in a fiduciary capacity
------------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries, and their respective
businesses, which shall have been obtained by the Employee during the Employee's
employment by the Company or any of its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment
44
<PAGE>
with the Company, the Employee shall not, without the prior written consent of
the Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section I constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
8. Restrictive Covenants:
---------------------
During the Employment Period and for a period of six months thereafter, Employee
will not directly or indirectly, either as an individual or as a partner, joint
venturer, independent contractor, consultant, stockholder, director, employee or
officer, engage in or participate in the management or ownership of any business
or activity in, Florida, which directly or indirectly competes with the business
conducted by the Company; provided, however, that this paragraph 8 shall not
apply in the event that Employee is actually discharged by the Company without
cause.
9. Ownership of Inventions Discoveries and Improvements:
----------------------------------------------------
Employee shall promptly disclose in writing to the Board of Directors of the
Company all inventions, discoveries, designs, developments, processes, software
programs, works of authorship, formulas, data, techniques and any other
improvements conceived, devised, created, or developed by Employee (either alone
or with others) while in the employ of the Company (collectively, "Invention"),
and Employee shall transfer and assign to the Company all right, title and
interest in and to such Invention, including any and all domestic and foreign
patent rights, domestic and foreign copyright rights therein, and any renewal
thereof Such disclosure is to be made promptly after the conception of each
Invention, and each Invention is to become and remain the property of the
Company, whether or not patent or copyright applications are filed thereon by
the Company. On request of the Company, Employee shall execute from time to
time, during or after the termination of employment, such further instruments
including, without limitation, applications for patents and copyrights and
assignments thereof as may be deemed necessary or desirable by the Company to
effectuate the provisions of this paragraph 8.
referred to therein shall be extended but not decreased for a period of time
equal to the period that the violation occurred.
10. Jurisdiction:
------------
Each of the Company and Employee hereby consents to the jurisdiction of the
State of Florida for all purposes in connection with arbitration or for
obtaining the relief, and further consents that any process or notice of motion
therewith may be served by certified or registered mail or personal service.
11. Severability:
------------
If any of the provisions of this Agreement is held to be invalid, illegal, or
unenforceable, that determination will not affect the enforceability of any
other provisions of this Agreement, and the remaining provisions of this
Agreement will be valid and enforceable according to their terms.
12. Prior Agreement:
---------------
Employee, and the Company agree that this Agreement supersedes the Prior
Agreement which expired on May16, 1998 in its entirety.
13. Successors
----------
(a) This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
contemplated hereby.
14. Change of Control:
-----------------
The Board of Directors of the Company (the "Board"), has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee,
45
<PAGE>
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined below) of the Company.
The Board believes it is imperative to diminish the inevitable distraction of
the Employee by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control, to encourage the Employee's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Employee with
compensation arrangements upon a Change of Control which provide the Employee
with individual financial security and which are competitive with those of other
corporations.
A. Certain Definitions:
-------------------
(1.) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section A.2) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated within 180 days prior to
the date on which a Change of Control occurs, and it is reasonably demonstrated
that such termination (1) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control, or (2) otherwise
arose in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination.
(2.) The "Change of Control Period" is the period commencing on the
date hereof and ending on the second anniversary of such date, Provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended, unless at least sixty (60) days prior to the
Renewal Date the Company shall give written notice to the Employee that the
Change of Control Period shall not be so extended.
B. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(1.) The acquisition , at any time after the date hereof, by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either the then outstanding shares of common stock (unless
held purely for investment),or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election of
directors; or
(2.) The individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(3.) Approval by the shareholders of the Company of (i) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, , or (ii) the sale of all or substantially all of the assets of the
Company, unless the approved reorganization, merger, consolidation, liquidation,
dissolution or sale is subsequently abandoned.
(4.) A liquidation or dissolution of the Company.
C. Employment Period. In the event of a change in control the Company
-----------------
hereby agrees to continue the Employee in its employ, and the Employeee hereby
agrees to remain in the employ of the Company, for the period commencing on the
Effective Date and ending on the second anniversary of such date ("Employment
Period").
D. Terms of Employment.
-------------------
46
<PAGE>
(1.) Position and Duties.
-------------------
(i) During the Employment Period, (a.) the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 180-day period
immediately preceding the Effective Date, and (b.) the Employee's
services shall be performed at the location where the Employee was
employed immediately preceding the Effective Date, or any office or
location less than thirtyfive (35) miles from such location or in
Orlando or central Florida.
(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Employee is entitled, the Employee agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (c) manage personal investments, so long
as such activities do not materially and adversely interfere with the
performance of the Employee's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Employee prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Employee's responsibilities to the Company.
2. Compensation. (i) Base Salary. During the Employment Period,
------------ ---- ------
the Employee shall receive a base salary ("Base Salary") at a monthly rate at
least equal to the highest monthly base salary paid or payable to the Employee
by the Company during the twelve-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Base Salary
shall be reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base salary
awarded in the ordinary course of business to other key Employees of the Company
and its subsidiaries. Any increase in Base Salary shall not serve to limit or
reduce any other obligation to the Employeee under this Agreement. Base Salary
shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the Employee
------------
shall be awarded, for each fiscal year during the Employment Period, an annual
bonus (an "Annual Bonus") (either pursuant to any then-established incentive
compensation plan(s) of the Company or otherwise) in cash at least equal to the
highest bonus payable to the Employee from the Company and its subsidiaries in
respect of any of the three fiscal years immediately preceding the fiscal year
in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In addition to Base Salary
---------------------------------------
and Annual Bonus payable as hereinabove provided, the Employee shall be entitled
to participate during the Employment Period in all incentive, savings and
retirement plans, practices, policies and programs applicable to other key
Employees of the Company and its affiliates, in each case comparable to those in
effect or as subsequently amended. Such plans, practices, policies and programs,
in the aggregate, shall provide the Employee with compensation, benefits and
reward opportunities at least as favorable as the most favorable of such
compensation, benefits and reward opportunities provided by the Company for the
Employee under such plans, practices, policies and programs as in effect at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Employeee, as provided at any time thereafter with respect
to other key Employees.
(iv) Welfare Benefit Plans. During the Employment Period, the Employee
---------------------
and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 180 day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key Employees.
47
<PAGE>
(v) Expenses. During the Employment Period, the Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable expenses incurred by the
Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
180-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
Employees.
(vi) Fringe Benefits. During the Employment Period, the Employee shall be
---------------
entitled to fringe benefits, including use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its subsidiaries in effect at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key Employees.
(vii) Office and Support Staff. During the Employment Period, the Employee
------------------------
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee by the Company and
its subsidiaries at any time during the 180 day period immediately preceding the
Effective Date or, if more favorable to the Employee, as provided at any time
thereafter with respect to other key Employees of the Company and its
subsidiaries.
(viii) Vacation. During the Employment Period, the Employee shall be entitled
--------
to paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its subsidiaries as in effect at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key Employees of the Company and its subsidiaries.
D. Termination.
-----------
(1.) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Employee's death. If the Company determines in good faith that the
Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(2) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(3) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
D.1.of this agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial or inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(ii) any failure by the Company to comply with any of the provisions of
Section D.(2) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or
location other than that described in Section D hereof, except for travel
reasonably required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
48
<PAGE>
(v) any failure by the Company to comply with and satisfy Section J of this
Agreement.
For purposes of this Section D(3), any determination of "Good Reason" made in
good faith by the Employee shall be prima facie evidence of "Good Reason."
-----------
(4) Notice of Termination. Any termination by the Company for Cause or by the
---------------------
Employee for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section K.(2) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Employee's employment under the
provision so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen (15) days after the giving of such
notice). The failure by the Employee to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good Reason shall not
waive any right of the Employee hereunder or preclude the Employee from
asserting such fact or circumstance in enforcing his rights hereunder.
(5) Date of Termination. "Date of Termination" means the date of receipt of
-------------------
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Employee's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.
E. Obligations of the Company upon Termination.
-------------------------------------------
(1) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest rate in effect at any time from the
180-day period preceding the Effective Date through the Date of Termination (the
"Highest Base Salary"), (ii) the product of the Annual Bonus paid to the
Employee for the last full fiscal year and a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (iii) any compensation previously
deferred by the Employee (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred
to as "Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(2) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including
for this purpose, all Accrued Obligations. All such Accrued Obligations shall be
paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Employee shall be entitled after the Disability Effective Date to receive
disability and other benefits including fully paid life and health insurance
coverage for both the Employee and his dependents and at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
Employees and their families.
(3) Cause; Other than for Good Reason. If the Employee's employment shall be
---------------------------------
terminated for Cause, this Agreement shall terminate without further obligations
to the Employee other than the obligation to pay to the Employee the Highest
Base Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Employee (together with accrued interest thereon). If
the Employee terminates
49
<PAGE>
employment other than for Good Reason, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash within
30 days of the Date of Termination.
(4) Good Reason, Other Than for Cause or Disability. If, during the
-----------------------------------------------
Employment Period, the Company shall terminate the Employee's employment other
than for Cause, Disability or death, or if the Employee shall terminate his
employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. to the extent not theretofore paid, the Employees Highest Base
Salary through the Date of Termination; and
B. the product of (x) the Annual Bonus paid to the Employee for the last
full fiscal year (if any) ending during the Employment Period or, if higher, the
Annual Bonus paid to the Employee for the last full fiscal year prior to the
Effective Date (as applicable, the "Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination and the denominator of which is 365; and
C. the product of (x) 2.5, multiplied times (y) the sum of (i) the
Employee's annual salary based upon the Highest Base Salary (the "Highest Annual
Base Salary") and (ii) the Recent Bonus or if higher, the annual bonus paid to
the employee for the last full fiscal year prior to the Effective Date.
D. in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet paid by the
Company; and
E. all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(ii) for the remainder of the Employment Period, or a period not less than two
years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in this
Agreement if the Employee's employment had not been terminated, including
health, dental, disability insurance and life insurance, in accordance with the
most favorable plans, practices, programs or policies of the Company and its
subsidiaries during the 180 day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key Employees and their families and for purposes of
eligibility for retiree benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day of such period.
G. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program.
H. Full Settlement.
---------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others. In
no event shall the Employee be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement. The Company agrees to pay, to
the full extent permitted by law, all legal fees and expenses which the
Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Employee
about the amount of any payment pursuant to this Agreement), plus in each
50
<PAGE>
case interest at the applicable Federal rate provided for in Section 7872(f)(2)
of the Code.
I. Confidential Information. The Employee shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section I constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
J. Successors
----------
(1) This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
(2) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(3) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as contemplated hereby.
K. Miscellaneous.
-------------
(1) This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(2) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
- ------------------
Warren Stowell
2704 Shad Lane
Geneva, Florida 32730
If to the Company:
- -----------------
SunStar Healthcare, Inc.
300 International Parkway
Heathrow, Florida 32746
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(3) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(4) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
51
<PAGE>
(5) The Employee's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(6) This Agreement contains the entire understanding of the Company and the
Employee with respect to the subject matter hereof.
(7) The Employee and the Company acknowledge that, except as set forth in any
written employment agreement between the Employee and the Company and effective
from and after the date hereof, the employment of the Employee by the Company is
"at will," and, prior to the Effective Date, may be terminated by either the
Employee or the Company at any time. Upon a termination of the Employee's
employment prior to the Effective Date, there shall be no further rights under
this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents
to be executed in its name on its behalf, all as of the day and year first above
written.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYEE SUNSTAR HEALTHCARE, INC
____________________ __________________________
its, ______________________
______________________
52
<PAGE>
Exhibit 10.7
Employment Agreement
--------------------
This Agreement, dated as of June 7, 1999 by and between SunStar Healthcare,
Inc., a Delaware corporation, with offices at 300 International Parkway Heathrow
Florida, or any successor corporation thereto (the "Company"), and David A.
Jesse, an individual residing at 735 Bridgecreek Court, Lake forest, Florida
32771 ("Employee").
WITNESSETH
----------
WHEREAS, the Company wishes to employ Employee and Employee wishes to accept
such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
2. Employment.
----------
C. The Company hereby agrees to employ Employee and Employee agrees to be
employed by the Company upon the terms and conditions set forth below.
Subject to earlier termination as provided herein, the employment provided
for herein shall commence on the date hereof, for a period of three years,
thereafter, this Agreement may be renewed for successive one-year
Employment Periods upon terms and conditions mutually agreed to by Employee
and the Company unless, within 30 days of the end of the then-current
Employment Period, either party notifies the other of its election not to
so renew this Agreement. During the Employment Period(s), Employee will
hold the position of Senior Vice President of the Company and shall perform
all duties and services incident to those positions that Employee, in his
reasonable discretion, deems to be consistent with his positions and in the
best interest of the Company. Employee will devote all his working time and
efforts to the business of the Company to accomplish the duties of the
position and will perform those duties to the best of Employee's ability
and will devote Employee's best efforts to advance the interests of the
Company.
2. Compensation.
------------
A. For all services performed by Employee for the Company during the term
hereof the Company will pay Employee a salary at an initial rate of $250,OOO per
annum, payable in accordance with the normal payment practices of the Company.
Provided further that the salary and any incentive bonus (the "Remuneration"),
and the terms and conditions thereof for each successive employment period
following the initial Employment Period shall be mutually agreed to by Employee
and the Company: (i) no later than January 1, 2000 for the first such successive
employment period, and (ii) prior to the commencement of each subsequent
successive employment period. The Renumeration for each successive period will
at a minimum, equal the Renumeration for HMO executives holding comparable
positions of authority and responsibility as Employee. During the Employment
Period(s), the Company will provide Employee the use of an automobile, purchased
or leased by the Company, selected by Employee. Employee will be entitled to
vacation during the Employment Period in accordance with the policies of the
SunStar Employee Manual. The vacation may be taken at times agreed upon by
Employee and the Company. During that vacation, Employee will receive Employee's
usual compensation. Recognizing the time necessary to develop and operate the
company, additional compensation will be paid to Employee for vacation time that
is not taken. Employee will be entitled to participate, at a level commensurate
with his position, in any benefit plans, including health, pension and any other
plans adopted by the Company for its employee's.
D. As additional compensation for services rendered during each year of the
Employment Period(s), pursuant to stock option contracts to be established
between the Company and the Employee, Employee will be granted ten-year
non-qualified stock options (the "Options") to purchase no less than one
hundred thousand (100,000) shares of common stock, par value $.00l per
share, of the Company ("Common Stock"), at an exercise price per share
equal to fair market value at the time of the grant. The Options shall vest
and be exercisable immediately upon grant as to one-half of the shares
covered thereby and shall vest and be exercisable as to one-half of the
shares covered thereby on each successive anniversary of the day before the
date of grant provided that Employee is employed by the Company on each
such vesting date. In the event this Agreement is terminated for any
reason, the Employee may exercise the Options, only to the extent then
exercisable, for a period of 90 days from the date of termination, unless
the Employee is terminated for Cause, as defined in paragraph 5 herein, in
which case the Options shall terminate immediately. The Company agrees to
use its best efforts, subject to applicable securities and other laws, to
file with the Securities and Exchange Commission a registration statement
relating to the Options.
E. Upon signing this agreement Employee shall receive a cash bonus of $108,000
payable immediately.
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<PAGE>
F. Effective January 1, 1999 and for the term of this agreement, Employee
will be eligible to receive incentive compensation as determined by the
Compensation Committee of the Board of Directors. Such incentive
compensation will include cash and stock options and will be based on the
achievement of various levels of profits and revenues as well as increases
in the share price. As soon as practical, the terms of the incentive
compensation will be added as an addendum to this agreement.
4. Reimbursement of Expenses
-------------------------
As of the date hereof and during the Employment Period, the Company recognizes
that Employee, in performing Employee's duties hereunder, may be required to
spend sums of money in connection with those duties on behalf of or for the
benefit of the Company. Employee may present to the Company, an itemized voucher
listing all sums of money paid or expenses incurred by Employee in the
performance of Employee's duties on behalf of or for the benefit of the Company,
and on presentation of that itemized voucher and receipts for all such expenses
the Company will reimburse Employee or pay the expense incurred in conformity
with Company policy for all such reasonable expenses including, but not limited
to, travel, meals, lodging, entertainment and promotion.
4. Termination:
------------
(A.) Death or Disability. This Agreement shall terminate automatically upon
-------------------
the Employee's death. If the Company determines in good faith that the
Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(B) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(C) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by this
agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Employee;
(ii) any failure by the Company to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or
location more than thirty five miles from Orlando, Florida except for travel
reasonably required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 13 of this
Agreement.
For purposes of this Section (C), any determination of "Good Reason" made in
good faith by the Employee shall be prima facie evidence of "Good Reason."
-----------
(D) Notice of Termination. Any termination by the Company for Cause or by
---------------------
the Employee for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by
55
<PAGE>
the Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
(E) Date of Termination. "Date of Termination" means the date of receipt of
-------------------
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Employee's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
--------------------------------------------
(A) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination (ii) the product of the Annual Bonus paid to the Employee for the
last full fiscal year and a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365, and (iii) any compensation previously deferred by
the Employee (together with any accrued interest thereon) and not yet paid by
the Company and any accrued vacation pay not yet paid by the Company (such
amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as
"Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(D) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of
Termination, including for this purpose, all Accrued Obligations. All
such Accrued Obligations shall be paid to the Employee in a lump sum in
cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, the Employee shall be entitled
after the Disability Effective Date to receive disability and other
benefits including fully paid life and health insurance coverage for both
the Employee and his dependents and at least equal to the most favorable
of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with
the most favorable plans, programs, practices and policies of the Company
and its subsidiaries.
(E) Cause; Other than for Good Reason. If the Employee's employment shall
---------------------------------
be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the
Employee the Highest Base Salary through the Date of Termination plus the
amount of any compensation previously deferred by the Employee (together
with accrued interest thereon). If the Employee terminates employment
other than for Good Reason, this Agreement shall terminate without
further obligations to the Employee, other than those obligations accrued
or earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All
such Accrued Obligations shall be paid to the Employee in a lump sum in
cash within 30 days of the Date of Termination.
(D) Good Reason, Other Than for Cause or Disability. If, during the
-----------------------------------------------
Employment Period, the Company shall terminate the Employee's employment
other than for Cause, Disability or death, or if the Employee shall
terminate his employment for Good Reason:
(1) the Company shall pay to the Employee in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following
amounts:
(a.) to the extent not theretofore paid, the Employees Highest Base Salary
through the Date of Termination; and
56
<PAGE>
(b) the product of (x) the Annual Bonus paid to the Employee for the last
full fiscal year (if any) ending during the Employment Period or, if
higher, the Annual Bonus paid to the Employee in the prior fiscal year.
(as applicable, the "Recent Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date
of Termination and the denominator of which is 365; and
(c) the product of (x) 2.5, multiplied times (y) the sum of (i) the
Employee's annual salary based upon the Highest Base Salary (the "Highest
Annual Base Salary") and (ii) the Recent Bonus or if higher, the annual
bonus paid to the employee for the last full fiscal year prior to the
termination.
(d) in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon)
and not yet paid by the Company, and any accrued vacation pay not yet
paid by the Company; and
(e) all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(2) for the remainder of the Employment Period, or a period not less than two
years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided
to them in accordance with the plans, programs, practices and policies
described in this Agreement if the Employee's employment had not been
terminated, including health, dental, disability insurance and life
insurance, in accordance with the most favorable plans, practices,
programs or policies of the Company and its subsidiaries. For purposes of
eligibility for retiree benefits pursuant to such plans, practices,
programs and policies, the Employee shall be considered to have remained
employed until the end of the Employment Period and to have retired on
the last day of such period.
5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries
6. Full Settlement.
----------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others.
In no event shall the Employee be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement. The Company agrees to pay, to
the full extent permitted by law, all legal fees and expenses which the
Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Employee
about the amount of any payment pursuant to this Agreement), plus in each
case interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
7. Confidential Information. The Employee shall hold in a fiduciary capacity
------------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries, and their respective
businesses, which shall have been obtained by the Employee during the Employee's
employment by the Company or any of its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section I constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
8. Restrictive Covenants:
---------------------
During the Employment Period and for a period of six months thereafter, Employee
will not directly or indirectly, either as an individual or as a partner, joint
venturer, independent contractor, consultant, stockholder, director,
57
<PAGE>
employee or officer, engage in or participate in the management or ownership of
any business or activity in, Florida, which directly or indirectly competes with
the business conducted by the Company; provided, however, that this paragraph 8
shall not apply in the event that Employee is actually discharged by the Company
without cause.
9. Ownership of Inventions Discoveries and Improvements:
----------------------------------------------------
Employee shall promptly disclose in writing to the Board of Directors of the
Company all inventions, discoveries, designs, developments, processes, software
programs, works of authorship, formulas, data, techniques and any other
improvements conceived, devised, created, or developed by Employee (either alone
or with others) while in the employ of the Company (collectively, "Invention"),
and Employee shall transfer and assign to the Company all right, title and
interest in and to such Invention, including any and all domestic and foreign
patent rights, domestic and foreign copyright rights therein, and any renewal
thereof Such disclosure is to be made promptly after the conception of each
Invention, and each Invention is to become and remain the property of the
Company, whether or not patent or copyright applications are filed thereon by
the Company. On request of the Company, Employee shall execute from time to
time, during or after the termination of employment, such further instruments
including, without limitation, applications for patents and copyrights and
assignments thereof as may be deemed necessary or desirable by the Company to
effectuate the provisions of this paragraph 8 referred to therein shall be
extended but not decreased for a period of time equal to the period that the
violation occurred.
10. Jurisdiction:
-------------
Each of the Company and Employee hereby consents to the jurisdiction of the
State of Florida for all purposes in connection with arbitration or for
obtaining the relief, and further consents that any process or notice of motion
therewith may be served by certified or registered mail or personal service.
12. Severability:
-------------
If any of the provisions of this Agreement is held to be invalid, illegal, or
unenforceable, that determination will not affect the enforceability of any
other provisions of this Agreement, and the remaining provisions of this
Agreement will be valid and enforceable according to their terms.
12. Prior Agreement:
---------------
Employee, and the Company agree that this Agreement supersedes the Prior
Agreement which expired on May16, 1998 in its entirety.
13. Successors
----------
(a) This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
contemplated hereby.
15. Change of Control:
-----------------
The Board of Directors of the Company (the "Board"), has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations.
A. Certain Definitions:
--------------------
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<PAGE>
(1.) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section A.2) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated within 180 days prior to
the date on which a Change of Control occurs, and it is reasonably demonstrated
that such termination (1) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control, or (2) otherwise
arose in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination.
(2.) The "Change of Control Period" is the period commencing on the
date hereof and ending on the second anniversary of such date, Provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended, unless at least sixty (60) days prior to the
Renewal Date the Company shall give written notice to the Employee that the
Change of Control Period shall not be so extended.
B. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(1.) The acquisition , at any time after the date hereof, by
any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either the then outstanding shares of common
stock(unless held purely for investment) or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or
(2.) The individuals who, as of the date hereof, constitute
the Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(3.) Approval by the shareholders of the Company of (i) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, , or (ii) the sale of all or substantially all of the assets of the
Company, unless the approved reorganization, merger, consolidation, liquidation,
dissolution or sale is subsequently abandoned.
(4.) A liquidation or dissolution of the Company.
C. Employment Period. In the event of a change in control the Company
-----------------
hereby agrees to continue the Employee in its employ, and the Employee hereby
agrees to remain in the employ of the Company, for the period commencing on the
Effective Date and ending on the second anniversary of such date ("Employment
Period").
D. Terms of Employment.
-------------------
(2.) Position and Duties.
-------------------
(i) During the Employment Period, (a.) the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 180-day period
immediately preceding the Effective Date, and (b.) the Employee's
services shall be performed at the location where the Employee was
employed immediately preceding the Effective Date, or any office or
location less than thirty five (35) miles from such
59
<PAGE>
location or in Orlando or central Florida.
(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Employee is entitled, the Employee agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Employee hereunder, to use
the Employee's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Employee to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (c)
manage personal investments, so long as such activities do not materially
and adversely interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Employee prior to the
Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
2. Compensation. (i) Base Salary. During the Employment Period, the
------------ ---- ------
Employee shall receive a base salary ("Base Salary") at a monthly rate at least
equal to the highest monthly base salary paid or payable to the Employee by the
Company during the twelve-month period immediately preceding the month in which
the Effective Date occurs. During the Employment Period, the Base Salary shall
be reviewed at least annually and shall be increased at any time and from time
to time as shall be substantially consistent with increases in base salary
awarded in the ordinary course of business to other key Employees of the Company
and its subsidiaries. Any increase in Base Salary shall not serve to limit or
reduce any other obligation to the Employee under this Agreement. Base Salary
shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the Employee shall
------------
be awarded, for each fiscal year during the Employment Period, an annual bonus
(an "Annual Bonus") (either pursuant to any then-established incentive
compensation plan(s) of the Company or otherwise) in cash at least equal to the
highest bonus payable to the Employee from the Company and its subsidiaries in
respect of any of the three fiscal years immediately preceding the fiscal year
in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In addition to Base Salary and
---------------------------------------
Annual Bonus payable as hereinabove provided, the Employee shall be entitled to
participate during the Employment Period in all incentive, savings and
retirement plans, practices, policies and programs applicable to other key
Employees of the Company and its affiliates, in each case comparable to those in
effect or as subsequently amended. Such plans, practices, policies and programs,
in the aggregate, shall provide the Employee with compensation, benefits and
reward opportunities at least as favorable as the most favorable of such
compensation, benefits and reward opportunities provided by the Company for the
Employee under such plans, practices, policies and programs as in effect at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as provided at any time thereafter with respect
to other key Employees.
(iv) Welfare Benefit Plans. During the Employment Period, the Employee and/or
---------------------
the Employee's family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its subsidiaries (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs), at least as favorable as the most favorable of
such plans, practices, policies and programs in effect at any time during the
180 day period immediately preceding the Effective Date or, if more favorable to
the Employee and/or the Employee's family, as in effect at any time thereafter
with respect to other key Employees.
(v) Expenses. During the Employment Period, the Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable expenses incurred by the
Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
180-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
Employees.
(vi) Fringe Benefits. During the Employment Period, the Employee shall be
---------------
entitled to fringe benefits, including use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its subsidiaries in effect at any time
during the 180-day period
60
<PAGE>
immediately preceding the Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter with respect to other key Employees.
(vii) Office and Support Staff. During the Employment Period, the Employee
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee by the Company and
its subsidiaries at any time during the 180 day period immediately preceding the
Effective Date or, if more favorable to the Employee, as provided at any time
thereafter with respect to other key Employees of the Company and its
subsidiaries.
(viii) Vacation. During the Employment Period, the Employee shall be entitled
---------
to paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its subsidiaries as in effect at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key Employees of the Company and its subsidiaries.
D. Termination.
------------
(1.) Death or Disability. This Agreement shall terminate
-------------------
automatically upon the Employee's death. If the Company determines in good faith
that the Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(2) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(3) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
D.1.of this agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial or inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(ii) any failure by the Company to comply with any of the provisions of
Section D.(2) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or
location other than that described in Section D hereof, except for travel
reasonably required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section J of this
Agreement.
For purposes of this Section D(3), any determination of "Good Reason" made in
good faith by the Employee shall be prima facie evidence of "Good Reason."
-----------
(4) Notice of Termination. Any termination by the Company for Cause or by
---------------------
the Employee for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section K.(2) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the
61
<PAGE>
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than fifteen (15)
days after the giving of such notice). The failure by the Employee to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing his
rights hereunder.
(5) Date of Termination. "Date of Termination" means the date of receipt of the
-------------------
Notice of Termination or any later date specified therein, as the case may be;
provided, however, that (i) if the Employee's employment is terminated by the
Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Employee of such termination, and (ii) if
the Employee's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Employee or the Disability
Effective Date, as the case may be.
E. Obligations of the Company upon Termination.
--------------------------------------------
(1) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest rate in effect at any time from the
180-day period preceding the Effective Date through the Date of Termination (the
"Highest Base Salary"), (ii) the product of the Annual Bonus paid to the
Employee for the last full fiscal year and a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (iii) any compensation previously
deferred by the Employee (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred
to as "Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(2) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including
for this purpose, all Accrued Obligations. All such Accrued Obligations shall be
paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Employee shall be entitled after the Disability Effective Date to receive
disability and other benefits including fully paid life and health insurance
coverage for both the Employee and his dependents and at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
Employees and their families.
(3) Cause; Other than for Good Reason. If the Employee's employment shall be
---------------------------------
terminated for Cause, this Agreement shall terminate without further obligations
to the Employee other than the obligation to pay to the Employee the Highest
Base Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Employee (together with accrued interest thereon). If
the Employee terminates employment other than for Good Reason, this Agreement
shall terminate without further obligations to the Employee, other than those
obligations accrued or earned and vested (if applicable) by the Employee through
the Date of Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination.
(4) Good Reason, Other Than for Cause or Disability. If, during the Employment
-----------------------------------------------
Period, the Company shall terminate the Employee's employment other than for
Cause, Disability or death, or if the Employee shall terminate his employment
for Good Reason:
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<PAGE>
(i) the Company shall pay to the Employee in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. to the extent not theretofore paid, the Employees Highest
Base Salary through the Date of Termination; and
B. the product of (x) the Annual Bonus paid to the Employee for the last
full fiscal year (if any) ending during the Employment Period or, if higher, the
Annual Bonus paid to the Employee for the last full fiscal year prior to the
Effective Date (as applicable, the "Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination and the denominator of which is 365; and
C. the product of (x) 2.5, multiplied times (y) the sum of (i) the
Employee's annual salary based upon the Highest Base Salary (the "Highest Annual
Base Salary") and (ii) the Recent Bonus or if higher, the annual bonus paid to
the employee for the last full fiscal year prior to the Effective Date.
D. in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet paid by the
Company; and
E. all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(ii) for the remainder of the Employment Period, or a period not less than two
years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in this
Agreement if the Employee's employment had not been terminated, including
health, dental, disability insurance and life insurance, in accordance with the
most favorable plans, practices, programs or policies of the Company and its
subsidiaries during the 180 day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key Employees and their families and for purposes of
eligibility for retiree benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day of such period.
G. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program.
I. Full Settlement.
---------------
The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts
payable to the Employee under any of the provisions of this Agreement. The
Company agrees to pay, to the full extent permitted by law, all legal fees
and expenses which the Employee may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Employee about the amount of any payment pursuant to
this Agreement), plus in each case interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code.
I. Confidential Information. The Employee shall hold in a fiduciary capacity
------------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries, and their
63
<PAGE>
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section I constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
J. Successors
----------
(1) This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
(2) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(3) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as contemplated hereby.
K. Miscellaneous.
-------------
(1) This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(2) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
- ------------------
David Jesse
735 Bridgecreek Ct.
Lake Forest, Florida 32771
If to the Company:
- -----------------
SunStar Healthcare, Inc.
300 International Parkway
Heathrow, Florida 32746
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(3) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(4) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(5) The Employee's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision or any other
provision thereof.
(6) This Agreement contains the entire understanding of the Company and the
Employee with respect to the subject matter hereof.
(7) The Employee and the Company acknowledge that, except as set forth in any
written employment agreement between the Employee and the Company and effective
from and after the date hereof, the employment of the Employee by the Company is
"at will," and, prior to the Effective Date, may be terminated by either the
Employee or the Company at any time. Upon a termination of the Employee's
employment prior to the Effective Date, there shall be no further rights under
this Agreement.
64
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents
to be executed in its name on its behalf, all as of the day and year first above
written.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYEE SUNSTAR HEALTHCARE, INC
- --------------------------------------------------------------------------------
65
<PAGE>
Exhibit 10.8
Employment Agreement
--------------------
This Agreement, dated as of June 7, 1999 by and between SunStar Healthcare,
Inc., a Delaware corporation, with offices at 300 International Parkway Heathrow
Florida, or any successor corporation thereto (the "Company"), and Robyn J.
Stowell, an individual residing at 2704 Shad Lane, Geneva, Florida 32732
("Employee").
WITNESSETH
----------
WHEREAS, the Company wishes to employ Employee and Employee wishes to accept
such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
3. Employment.
----------
G. The Company hereby agrees to employ Employee and Employee agrees to be
employed by the Company upon the terms and conditions set forth below.
Subject to earlier termination as provided herein, the employment provided
for herein shall commence on the date hereof, for a period of three years,
thereafter, this Agreement may be renewed for successive one-year
Employment Periods upon terms and conditions mutually agreed to by Employee
and the Company unless, within 30 days of the end of the then-current
Employment Period, either party notifies the other of its election not to
so renew this Agreement. During the Employment Period(s), Employee will
hold the position of Senior Vice President of the Company and shall perform
all duties and services incident to those positions that Employee, in his
reasonable discretion, deems to be consistent with his positions and in the
best interest of the Company. Employee will devote all his working time and
efforts to the business of the Company to accomplish the duties of the
position and will perform those duties to the best of Employee's ability
and will devote Employee's best efforts to advance the interests of the
Company.
2. Compensation.
------------
A. For all services performed by Employee for the Company during the term
hereof the Company will pay Employee a salary at an initial rate of $190,OOO per
annum, payable in accordance with the normal payment practices of the Company.
Provided further that the salary and any incentive bonus (the "Remuneration"),
and the terms and conditions thereof for each successive employment period
following the initial Employment Period shall be mutually agreed to by Employee
and the Company: (i) no later than January 1, 2000 for the first such successive
employment period, and (ii) prior to the commencement of each subsequent
successive employment period. The Renumeration for each successive period will
at a minimum, equal the Renumeration for HMO executives holding comparable
positions of authority and resposibility as Employee. During the Employment
Period(s), the Company will provide Employee the use of an automobile, purchased
or leased by the Company, selected by Employee. Employee will be entitled to
vacation during the Employment Period in accordance with the policies of the
SunStar Employee Manual. The vacation may be taken at times agreed upon by
Employee and the Company. During that vacation, Employee will receive Employee's
usual compensation. Recognizing the time necessary to develop and operate the
company, additional compensation will be paid to Employee for vacation time that
is not taken. Employee will be entitled to participate, at a level commensurate
with his position, in any benefit plans, including health, pension and any other
plans adopted by the Company for its employee's.
H. As additional compensation for services rendered during each year of the
Employment Period(s), pursuant to stock option contracts to be established
between the Company and the Employee, Employee will be granted ten-year
non-qualified stock options (the "Options") to purchase no less than one
hundred thousand (100,000) shares of common stock, par value $.00l per
share, of the Company ("Common Stock"), at an exercise price per share
equal to fair market value at the time of the grant. The Options shall vest
and be exercisable immediately upon grant as to one-half of the shares
covered thereby and shall vest and be exercisable as to one-half of the
shares covered thereby on each successive anniversary of the day before the
date of grant provided that Employee is employed by the Company on each
such vesting date. In the event this Agreement is terminated for any
reason, the Employee may exercise the Options, only to the extent then
exercisable, for a period of 90 days from the date of termination, unless
the Employee is terminated for Cause, as defined in paragraph 5 herein, in
which case the Options shall terminate immediately. The Company agrees to
use its best efforts, subject to applicable securities and other laws, to
file with the Securities and Exchange Commission a registration statement
relating to the Options.
66
<PAGE>
C.
Upon signing this agreement Employee shall receive a cash bonus of $55,200,
payable immediately.
D.
Effective January 1, 1999 and for the term of this agreement, Employee will be
eligible to receive incentive compensation as determined by the Compensation
Committee of the Board of Directors. Such incentive compensation will include
cash and stock options and will be based on the achievement of various levels of
profits and revenues as well as increases in the share price. As soon as
practical, the terms of the incentive compensation will be added as an addendum
to this agreement.
5. Reimbursement of Expenses
-------------------------
As of the date hereof and during the Employment Period, the Company recognizes
that Employee, in performing Employee's duties hereunder, may be required to
spend sums of money in connection with those duties on behalf of or for the
benefit of the Company. Employee may present to the Company, an itemized voucher
listing all sums of money paid or expenses incurred by Employee in the
performance of Employee's duties on behalf of or for the benefit of the Company,
and on presentation of that itemized voucher and receipts for all such expenses
the Company will reimburse Employee or pay the expense incurred in conformity
with Company policy for all such reasonable expenses including, but not limited
to, travel, meals, lodging, entertainment and promotion.
4. Termination:
-----------
(A.) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Employee's death. If the Company determines in good faith that the
Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(B) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(C) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by this
agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Employee;
(ii) any failure by the Company to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or location
more than thirty five miles from Orlando, Florida except for travel reasonably
required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 13 of this
Agreement.
For purposes of this Section (C), any determination of "Good Reason" made in
good faith by the Employee shall be prima facie evidence of "Good Reason."
-----------
(D) Notice of Termination. Any termination by the Company for Cause or by the
---------------------
Employee for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances
67
<PAGE>
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated, and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than fifteen (15) days after the
giving of such notice). The failure by the Employee to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
(E) Date of Termination. "Date of Termination" means the date of receipt of
-------------------
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Employee's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
-------------------------------------------
(A) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination (ii) the product of the Annual Bonus paid to the Employee for the
last full fiscal year and a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365, and (iii) any compensation previously deferred by
the Employee (together with any accrued interest thereon) and not yet paid by
the Company and any accrued vacation pay not yet paid by the Company (such
amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as
"Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(F) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's D isability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee as of the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination. Anything in this Agreement to
the contrary notwithstanding, the Employee shall be entitled after the
Disability Effective Date to receive disability and other benefits
including fully paid life and health insurance coverage for both the
Employee and his dependents and at least equal to the most favorable of
those provided by the Company and its subsidiaries to disabled employees
and/or their families in accordance with such plans, programs, practices
and policies relating to disability, if any, in accordance with the most
favorable plans, programs, practices and policies of the Company and its
subsidiaries.
(G) Cause; Other than for Good Reason. If the Employee's employment shall
---------------------------------
be terminated for Cause, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the
Employee the Highest Base Salary through the Date of Termination plus the
amount of any compensation previously deferred by the Employee (together
with accrued interest thereon). If the Employee terminates employment
other than for Good Reason, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination.
(D) Good Reason, Other Than for Cause or Disability. If, during the Employment
-----------------------------------------------
Period, the Company shall terminate the Employee's employment other than
for Cause, Disability or death, or if the Employee shall terminate his
employment for Good Reason:
(1) the Company shall pay to the Employee in a lump sum in cash within 30 days
after the Date of
68
<PAGE>
Termination the aggregate of the following amounts:
(a.) to the extent not theretofore paid, the Employees Highest Base Salary
through the Date of Termination; and
(b) the product of (x) the Annual Bonus paid to the Employee for the last
full fiscal year (if any) ending during the Employment Period or, if higher, the
Annual Bonus paid to the Employee in the prior fiscal year. (as applicable, the
"Recent Bonus") and (y) a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination and the denominator
of which is 365; and
(c) the product of (x) 2.5, multiplied times (y) the sum of (i) the
Employee's annual salary based upon the Highest Base Salary (the "Highest Annual
Base Salary") and (ii) the Recent Bonus or if higher, the annual bonus paid to
the employee for the last full fiscal year prior to the termination.
(d) in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet paid by the
Company; and
(e) all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(2) for the remainder of the Employment Period, or a period not less than
two years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in this
Agreement if the Employee's employment had not been terminated, including
health, dental, disability insurance and life insurance, in accordance with the
most favorable plans, practices, programs or policies of the Company and its
subsidiaries. For purposes of eligibility for retiree benefits pursuant to such
plans, practices, programs and policies, the Employee shall be considered to
have remained employed until the end of the Employment Period and to have
retired on the last day of such period.
5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries
6. Full Settlement.
----------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others.
In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. The Company agrees
to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Employee about the amount of any payment pursuant to
this Agreement), plus in each case interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code.
7. Confidential Information. The Employee shall hold in a fiduciary capacity
------------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries, and their respective
businesses, which shall have been obtained by the Employee during the Employee's
employment by the Company or any of its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section I constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
69
<PAGE>
8. Restrictive Covenants:
---------------------
During the Employment Period and for a period of six months thereafter, Employee
will not directly or indirectly, either as an individual or as a partner, joint
venturer, independent contractor, consultant, stockholder, director, employee or
officer, engage in or participate in the management or ownership of any business
or activity in, Florida, which directly or indirectly competes with the business
conducted by the Company; provided, however, that this paragraph 8 shall not
apply in the event that Employee is actually discharged by the Company without
cause.
9. Ownership of Inventions Discoveries and Improvements:
----------------------------------------------------
Employee shall promptly disclose in writing to the Board of Directors of the
Company all inventions, discoveries, designs, developments, processes, software
programs, works of authorship, formulas, data, techniques and any other
improvements conceived, devised, created, or developed by Employee (either alone
or with others) while in the employ of the Company (collectively, "Invention"),
and Employee shall transfer and assign to the Company all right, title and
interest in and to such Invention, including any and all domestic and foreign
patent rights, domestic and foreign copyright rights therein, and any renewal
thereof Such disclosure is to be made promptly after the conception of each
Invention, and each Invention is to become and remain the property of the
Company, whether or not patent or copyright applications are filed thereon by
the Company. On request of the Company, Employee shall execute from time to
time, during or after the termination of employment, such further instruments
including, without limitation, applications for patents and copyrights and
assignments thereof as may be deemed necessary or desirable by the Company to
effectuate the provisions of this paragraph 8.
referred to therein shall be extended but not decreased for a period of time
equal to the period that the violation occurred.
10. Jurisdiction:
------------
Each of the Company and Employee hereby consents to the jurisdiction of the
State of Florida for all purposes in connection with arbitration or for
obtaining the relief, and further consents that any process or notice of motion
therewith may be served by certified or registered mail or personal service.
13. Severability:
------------
If any of the provisions of this Agreement is held to be invalid, illegal, or
unenforceable, that determination will not affect the enforceability of any
other provisions of this Agreement, and the remaining provisions of this
Agreement will be valid and enforceable according to their terms.
12. Prior Agreement:
---------------
Employee, and the Company agree that this Agreement supersedes the Prior
Agreement which expired on May16, 1998 in its entirety.
13. Successors
----------
(a) This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
contemplated hereby.
16. Change of Control:
-----------------
The Board of Directors of the Company (the "Board"), has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the
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<PAGE>
Employee with individual financial security and which are competitive with those
of other corporations.
A. Certain Definitions:
--------------------
(1.) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section A.2) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated within 180 days prior to
the date on which a Change of Control occurs, and it is reasonably demonstrated
that such termination (1) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control, or (2) otherwise
arose in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination.
(2.) The "Change of Control Period" is the period commencing on the
date hereof and ending on the second anniversary of such date, Provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended, unless at least sixty (60) days prior to the
Renewal Date the Company shall give written notice to the Employee that the
Change of Control Period shall not be so extended.
B. Change of Control. For the purpose of this Agreement, a "Change of
--------- -------
Control" shall mean:
(1.) The acquisition , at any time after the date hereof, by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either the then outstanding shares of common stock( unless
held purely for investment) or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election of
directors; or
(2.) The individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(3.) Approval by the shareholders of the Company of (i) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, , or (ii) the sale of all or substantially all of the assets of the
Company, unless the approved reorganization, merger, consolidation, liquidation,
dissolution or sale is subsequently abandoned.
(4.) A liquidation or dissolution of the Company.
C. Employment Period. In the event of a change in control the Company
-----------------
hereby agrees to continue the Employee in its employ, and the Employee hereby
agrees to remain in the employ of the Company, for the period commencing on the
Effective Date and ending on the second anniversary of such date ("Employment
Period").
D. Terms of Employment.
-------------------
(3.) Position and Duties.
-------------------
(i) During the Employment Period, (a.) the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time
71
<PAGE>
during the 180-day period immediately preceding the Effective Date,
and (b.) the Employee's services shall be performed at the location
where the Employee was employed immediately preceding the Effective
Date, or any office or location less than thirtyfive (35) miles from
such location or in Orlando or central Florida.
(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Employee is entitled, the Employee agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (c) manage personal investments, so long
as such activities do not materially and adversely interfere with the
performance of the Employee's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Employee prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Employee's responsibilities to the Company.
2. Compensation. (i) Base Salary. During the Employment Period, the
------------ ---- ------
Employee shall receive a base salary ("Base Salary") at a monthly rate at least
equal to the highest monthly base salary paid or payable to the Employee by the
Company during the twelve-month period immediately preceding the month in which
the Effective Date occurs. During the Employment Period, the Base Salary shall
be reviewed at least annually and shall be increased at any time and from time
to time as shall be substantially consistent with increases in base salary
awarded in the ordinary course of business to other key Employees of the Company
and its subsidiaries. Any increase in Base Salary shall not serve to limit or
reduce any other obligation to the Employee under this Agreement. Base Salary
shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the Employee
------------
shall be awarded, for each fiscal year during the Employment Period, an annual
bonus (an "Annual Bonus") (either pursuant to any then-established incentive
compensation plan(s) of the Company or otherwise) in cash at least equal to the
highest bonus payable to the Employee from the Company and its subsidiaries in
respect of any of the three fiscal years immediately preceding the fiscal year
in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In addition to Base Salary
---------------------------------------
and Annual Bonus payable as hereinabove provided, the Employee shall be entitled
to participate during the Employment Period in all incentive, savings and
retirement plans, practices, policies and programs applicable to other key
Employees of the Company and its affiliates, in each case comparable to those in
effect or as subsequently amended. Such plans, practices, policies and programs,
in the aggregate, shall provide the Employee with compensation, benefits and
reward opportunities at least as favorable as the most favorable of such
compensation, benefits and reward opportunities provided by the Company for the
Employee under such plans, practices, policies and programs as in effect at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Employeee, as provided at any time thereafter with respect
to other key Employees.
(iv) Welfare Benefit Plans. During the Employment Period, the Employee
---------------------
and/or the Employee's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
during the 180 day period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key Employees.
(v) Expenses. During the Employment Period, the Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable expenses incurred by the
Employee in accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any time during the
180-day period immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to other key
Employees.
72
<PAGE>
(vi) Fringe Benefits. During the Employment Period, the Employee shall be
---------------
entitled to fringe benefits, including use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its subsidiaries in effect at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key Employees.
(vii) Office and Support Staff. During the Employment Period, the Employee
------------------------
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to the Employee by the Company and
its subsidiaries at any time during the 180 day period immediately preceding the
Effective Date or, if more favorable to the Employee, as provided at any time
thereafter with respect to other key Employees of the Company and its
subsidiaries.
(viii) Vacation. During the Employment Period, the Employee shall be entitled
---------
to paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and its subsidiaries as in effect at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with respect to
other key Employees of the Company and its subsidiaries.
D. Termination.
-----------
(1.) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Employee's death. If the Company determines in good faith that the
Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Employee (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Employee shall not
have returned to full-time performance of the Employee's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(2) Cause. The Company may terminate the Employee's employment for "Cause."
-----
For purposes of this Agreement, "Cause" means (i) repeated violations by the
Employee of the Employee's obligations under this Agreement which are
demonstrably willful and deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company
(3) Good Reason. The Employee's employment may be terminated by the Employee
-----------
for "Good Reason". For purposes of this Agreement, "Good Reason" means
(i) the assignment to the Employee of any duties inconsistent in any respect
with the Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
D.1.of this agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial or inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
(ii) any failure by the Company to comply with any of the provisions of
Section D.(2) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any office or
location other than that described in Section D hereof, except for travel
reasonably required in the performance of the Employee's responsibilities
(iv) any purported termination by the Company of the Employee's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section J of this
Agreement.
For purposes of this Section D(3), any determination of "Good Reason" made in
good faith by the Employee shall be prima facie evidence of "Good Reason."
-----------
(4) Notice of Termination. Any termination by the Company for Cause or by the
---------------------
Employee for Good Reason
73
<PAGE>
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section K.(2) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by the Employee to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Employee hereunder or preclude the Employee from asserting such
fact or circumstance in enforcing his rights hereunder.
(5) Date of Termination. "Date of Termination" means the date of receipt of
-------------------
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Employee's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Employee
or the Disability Effective Date, as the case may be.
E. Obligations of the Company upon Termination.
-------------------------------------------
(1) Death. If the Employee's employment is terminated by reason of the
-----
Employee's death, this Agreement shall terminate without further obligations to
the Employee's legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the Employee as of
the Date of Termination, including, for this purpose (i) the Employee's full
Base Salary through the Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest rate in effect at any time from the
180-day period preceding the Effective Date through the Date of Termination (the
"Highest Base Salary"), (ii) the product of the Annual Bonus paid to the
Employee for the last full fiscal year and a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (iii) any compensation previously
deferred by the Employee (together with any accrued interest thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred
to as "Accrued Obligations"). All such Accrued Obligations shall be paid to the
Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the Company and any of
its subsidiaries for a period of two years following the death of Employee.
(2) Disability. If the Employee's employment is terminated by reason of the
----------
Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including
for this purpose, all Accrued Obligations. All such Accrued Obligations shall be
paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Employee shall be entitled after the Disability Effective Date to receive
disability and other benefits including fully paid life and health insurance
coverage for both the Employee and his dependents and at least equal to the most
favorable of those provided by the Company and its subsidiaries to disabled
employees and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's family, as in effect at any time thereafter with respect to other key
Employees and their families.
(3) Cause; Other than for Good Reason. If the Employee's employment shall be
---------------------------------
terminated for Cause, this Agreement shall terminate without further obligations
to the Employee other than the obligation to pay to the Employee the Highest
Base Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Employee (together with accrued interest thereon). If
the Employee terminates employment other than for Good Reason, this Agreement
shall terminate without further obligations to the Employee, other than those
obligations accrued or earned and vested (if applicable) by the Employee through
the Date of Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination.
(4) Good Reason, Other Than for Cause or Disability. If, during the
-----------------------------------------------
Employment Period, the Company shall
74
<PAGE>
terminate the Employee's employment other than for Cause, Disability or death,
or if the Employee shall terminate his employment for Good Reason:
(i) the Company shall pay to the Employee in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. to the extent not theretofore paid, the Employees Highest Base
Salary through the Date of Termination; and
B. the product of (x) the Annual Bonus paid to the Employee for the last
full fiscal year (if any) ending during the Employment Period or, if higher, the
Annual Bonus paid to the Employee for the last full fiscal year prior to the
Effective Date (as applicable, the "Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination and the denominator of which is 365; and
C. the product of (x) 2.5, multiplied times (y) the sum of (i) the
Employee's annual salary based upon the Highest Base Salary (the "Highest Annual
Base Salary") and (ii) the Recent Bonus or if higher, the annual bonus paid to
the employee for the last full fiscal year prior to the Effective Date.
D. in the case of compensation previously deferred by the Employee, all
amounts previously deferred (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet paid by the
Company; and
E. all other amounts accrued or earned by the Employee through the Date of
Termination and amounts otherwise owing under the then existing plans and
policies at the Company; and
(ii) for the remainder of the Employment Period, or a period not less than two
years, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue benefits to the Employee and/or the
Employee's family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies described in this
Agreement if the Employee's employment had not been terminated, including
health, dental, disability insurance and life insurance, in accordance with the
most favorable plans, practices, programs or policies of the Company and its
subsidiaries during the 180 day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key Employees and their families and for purposes of
eligibility for retiree benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day of such period.
G. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program.
J. Full Settlement.
---------------
The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. The Company agrees
to pay, to the full extent permitted by law, all legal fees and expenses
which the Employee may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
by the Employee about the amount of any payment pursuant to this Agreement),
plus in each case interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code.
75
<PAGE>
I. Confidential Information. The Employee shall hold in a fiduciary capacity
------------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries, and their respective
businesses, which shall have been obtained by the Employee during the Employee's
employment by the Company or any of its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section I constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
J. Successors
----------
(1) This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal representatives.
(2) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(3) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as contemplated hereby.
K. Miscellaneous.
-------------
(1) This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(2) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
- ------------------
Robyn Stowell
2704 Shad Lane
Geneva, Florida 32730
If to the Company:
- -----------------
SunStar Healthcare, Inc.
300 International Parkway
Heathrow, Florida 32746
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(3) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(4) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
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<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
(5) The Employee's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(6) This Agreement contains the entire understanding of the Company and the
Employee with respect to the subject matter hereof.
(7) The Employee and the Company acknowledge that, except as set forth in
any written employment agreement between the Employee and the Company and
effective from and after the date hereof, the employment of the Employee by the
Company is "at will," and, prior to the Effective Date, may be terminated by
either the Employee or the Company at any time. Upon a termination of the
Employee's employment prior to the Effective Date, there shall be no further
rights under this Agreement.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents
to be executed in its name on its behalf, all as of the day and year first above
written.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
EMPLOYEE SUNSTAR HEALTHCARE, INC
________________________ __________________________
its, _________________________
_________________________
77
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Exhibit 10.9
The Ulysses Group
June 10, 1999
Mr. Warren Stowell
Chairman, President & CEO
SunStar Healthcare, Inc.
300 International Parkway, Suite 300
Heathrow, FL 32746
Dear Warren:
This is to confirm that The Ulysses Group Advisors, Inc. ("Ulysses")
has been engaged by SunStar Healthcare, Inc. ("SUNS" or the "Company") to assist
the Company in acquisition and growth strategy and implementation of the
strategy. Ulysses will also provide assistance to the Company regarding investor
relations.
As regards acquisitions Ulysses will:
. approach and initiate discussions with designated parties;
. analyze and determine the financial performance and projections of the
designated parties and determine the appropriate valuation; and
. assist in structuring and negotiating the transaction.
As compensation for its services, Ulysses will receive success fees equal
to $150,000 for each designated party acquired plus 1.0% of the transaction
value in excess of $ 10.0 million. The Company also agrees to pay Ulysses a
retainer of $7,500 per month. 50% of the will be credited against success fees
as such fees are earned.
78
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SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
To the extent consistent with legal requirements, all information given to
Ulysses by the Company and its officers, agents and others, unless publicly
available or otherwise available to Ulysses without restriction or breach of any
confidentiality agreement, will be held by Ulysses in confidence and will not be
disclosed to anyone without the Company's prior approval or used for any purpose
other than those referred to in this agreement. Certain information will not be
divulged to potential acquirors until such acquirors have entered into a
purchase contract with the Company.
520 Madison Avenue * 7th Floor * New York, NY 10022
Tel: (212) 308-1465 * Fax: (212) 308-4359 * e-mail: [email protected]
The Ulysses Group
Whether or not the transaction contemplated hereby is consummated, the
Company will reimburse Ulysses for its reasonable out-of-pocket expenses
incurred as a result of this engagement. These expenses will include, but are
not limited to travel expenses and fees to counsel, should such advice be
required, and will not exceed ten thousand dollars ($10,000) without the written
permission of the Company.
This engagement may be terminated by the Company or by Ulysses at any time
without cause, with written notice to that effect by the other party. This
engagement will terminate one year from the date of entering into the agreement.
However, Ulysses shall be entitled to full compensation in the event that at any
time prior to the expiration of one year after termination of this agreement, a
transaction is consummated by the Company with a designated party with which
Ulysses has had discussions regarding such transaction.
Any other advisory engagement and compensation arrangements between Ulysses
and the Company not contemplated herein may be mutually agreed upon at that
time.
If the foregoing meets with your approval, please sign this letter and
return one copy to us.
Very truly yours,
The Ulysses Group Advisors, Inc.
By: _______________________
Jerry Balter, Partner
Agreed and Accepted:
Warren Stowell, Chairman, President & CEO
SunStar Healthcare, Inc.
By: _____________________________
Date: ___________________________
<PAGE>
Exhibit 10.10
Schneider Securities, Inc.
FINANCIAL CONSULTING AND INVESTMENT BANKING AGREEMENT
-----------------------------------------------------
THIS AGREEMENT is made as of this 30th day of June, 1999 by and between
Sunstar Healthcare, Inc., a Florida corporation having its principal office at
300 International Parkway, Suite 230, Healthrow, FL 32746 (the "Company"), and
Schneider Securities, Inc, a Colorado corporation having an office at 1120
Lincoln Street, Suite 900, Denver, Colorado 80203 ("SSI").
Whereas, during the months of February and March of 1999, representatives
of the Company and SSI had discussions regarding the provisions of this
Agreement.
Now, Therefore, in consideration of the mutual premises contained herein
and on the terms and conditions hereinafter set forth, the Company and SSI agree
as follows:
1. PROVISION OF SERVICES. The Company hereby retains SSI to perform
non-exclusive consulting service related to corporate finance and investment
banking matters, and SSI hereby accepts such retention and shall undertake all
reasonable efforts to perform for the Company the duties described herein. In
this regard, SSI shall devote such time and attention to the business of the
Company as shall be determined by SSI, in its sole discretion.
(a) SSI agrees, to the extent reasonably requested by the Company, and
at the Company's written request to an officer in the Corporate Finance
department of SSI, to place at the disposal of the Company its judgment and
experience and to provide business development services to the Company including
the following:
(i) advice with regard to stockholder relations are public
relations matters, and
(ii) evaluation of financial matters and assistance in financial
arrangements and investment banking and/or transactions.
(b) Notwithstanding the foregoing, SSI may provide general services to
the Company in connection with mergers, acquisitions, consolidations, joint
ventures and similar corporate finance transactions; however, for each such
specific transaction or transactions, SSI and the Company may formalize their
arrangement in a separate agreement at the time specific service is provided.
(c) SSI shall use reasonable efforts in furnishing advice
recommendations, and for this purpose SSI shall at all times maintain or keep
and make available qualified personnel or a network of qualified outside
professionals for the performance of its obligation under this Agreement, at its
sole expense. To the extent reasonably practicable, SSI shall so use its own
personnel rather than outside professionals.
(d) The Company shall use reasonable efforts to invite a representative
appointed by SSI to attend and participate in at least one meeting of its Board
of Directors for every year that this Agreement is in effect. The Company shall
provide notice of such meetings to SSI at least one (1)
<PAGE>
week prior to the date that the meeting is scheduled to occur. SSI will use its
reasonable efforts to attend any other meetings of the Company's Board of
Directors to which the Company requests SSI's attendance. Any reasonable
expenses incurred by SSI in attending such meetings shall be borne for by the
Company.
2. TERM. Unless otherwise provided for in this Agreement, SSI's intention
hereunder shall be for a term of two (2) years commencing on the date of this
Agreement and expiring on the second anniversary date of this Agreement (the
"Termination Date"). Except as provided for in paragraph 8 below, SSI may not
terminate this Agreement without the written consent of the Company prior to the
Termination Date. In the event that the Company desires to terminate this
Agreement, without "cause", prior to the Termination Date, it shall provide SSI
with at least thirty (30) days prior written notice of its intention to
terminate this Agreement and this Agreement shall terminate following the
expiration of this period, without any further responsibility for either party;
provided, however, that SSI shall be entitled to receive all compensation and
un-reimbursed expenses, if any, outstanding as of the date of termination,
unless such termination is for "cause" as determined by ?? court of competent
jurisdiction, in which case, the Warrant (as defined below) shall terminate as
to any un-exercised portion thereof.
3. COMPENSATION. In consideration for the services provided by SSI hereunder,
the Company shall:
(a) pay to SSI the sum of $50,000 as follows: $25,000 payable upon
the execution of this Agreement and the remaining $25,000 payable on the first
anniversary date of this Agreement; and
(b) issue to SSI a warrant (the "Warrant") to purchase up to 50,000
shares of the common stock of the Company (the "Underlying Common Stock") at a
per share price of $4.75, on substantially the same terms and conditions as
those set forth in the Warrant Agreement attached hereto as Schedule A.
4. REPRESENTATIONS AND WARRANTIES OF SSI. SSI represents and warrants that:
(a) it is a securities broker-dealer duly licensed and registered
pursuant to federal and state securities laws rules and regulations;
it has the authority and ability to provide the services contemplated in this
Agreement and this Agreement, and the performance by SSI hereunder, will not
violate any rules or laws or breach any agreement to which SSI is a party;
(c) it is a member in good standing with the NASD and is in good
standing with all states within which it is registered to conduct securities
business; and
(d) it is acquiring the Warrants for its own account for investment
and not with a view to the distribution thereof and that it will not sell,
transfer or otherwise dispose of the Warrants or the Underlying Common Stock
unless a registration statement is effective or counsel for SSI acceptable to
the Company opines that an exemption from such registration is available,
provided, however, that SSI may transfer its interests in the Warrants to
certain of its employees, officers and/or directors which it designates
provided further that such designees acquire the Warrants subject to the
parameters set forth in this subparagraph (d).
5. INDEMNIFICATION. The Company agree to indemnify and hold harmless SSI and
its affiliates, the respective directors, officers, partners, agents and
employees and such other person, if any,
<PAGE>
controlling SSI or any of its affiliates (collectively the "SSI Parties") from
all losses, claims, damages, liabilities and expenses incurred by them hereunder
and only hereunder (including attorney's fees and disbursements) that result
from any violations of securities laws or rules or any untrue statements made or
any statements omitted to be made in connection with securities related matters
by the Company, its agents or employees. SSI will indemnify and hold harmless
the Company and the respective directors, officers, agents and employees of the
Company (the "Company Partners") from and against all losses, claims, damages,
liabilities and expenses that result from malfeasance, or gross negligence in
the performance of SSI's duties hereunder. Each person or entity seeking
indemnification hereunder shall promptly notify the Company, or SSI as
applicable, of any loss, claims, damage or expense for which the Company or SSI
as applicable, may become liable pursuant to this Section 5. Neither party shall
pay, settle or acknowledge liability under any such claim without the written
consent of the party liable for indemnification, and shall permit the Company or
SSI as applicable reasonable opportunity to cure any underlying problem or to
mitigate damages. The scope of this indemnification between SSI and the Company
shall be limited to, and pertain only to certain transactions contemplated or
entered into pursuant only to this Agreement.
The Company or SSI, as applicable, shall have the opportunity to demand any
claim for which it may be liable hereunder, provided it notifies the party
claiming the right to indemnification within fifteen (15) days of notice of the
claim.
6. STATUS OF SSI. SSI shall at all times be an independent contractor of the
Company and, except as expressly provided or authorized in this Agreement, shall
have no authority to act for or represent the Company or bind it to any
agreements.
7. OTHER ACTIVITIES OF SSI. The Company recognizes that SSI now renders and may
continue to render financial consulting, management, investment banking and
other services to other companies that may or may not conduct business and
activities similar to those of the Company. SSI shall be free to render such
advice and other services and the Company hereby consents thereto. SSI shall not
be required to devote its full time and attention to the performance of its
duties under this Agreement, but shall devote only so much of its time and
attention as it deems reasonable or necessary for such purposes, in its sole
discretion. Similarly, SSI recognizes that the Company's relationship with SSI
hereunder is not exclusive and that the Company currently has, or may have,
investment banking relationships with other firms.
8. COVENANTS OF THE COMPANY. The Company covenants, promises and agrees that:
(a) unless otherwise prohibited by contract or law, during the term of
this Agreement, the Company shall provide SSI at least fifteen (15) days prior
written notice of the proposed sale of any securities of the Company in a
"Regulation S" or "Regulation D" offering. Such notice shall specify the type of
securities to be offered, the purchase price thereof, the terms and conditions
of the offering and the proposed offering date. SSI shall be entitled to
immediately terminate this Agreement and retain all of the compensation set
forth herein without offset and with no further liability to the Company, in the
event that, during the term of this Agreement, the Company completes a sale of
its securities pursuant to a Regulation S offering, without SSI's prior written
consent thereto, which consent may not be unreasonably withheld;
(b) it shall immediately notify SSI in the event that it is deleted from
the NASDAQ Small Cap Market; and
<PAGE>
(c) during the term of this Agreement, the Company shall furnish SSI
with copies of its annual, quarterly and proxy filings with the SEC, promptly
upon the Company's filing thereof.
9. CONTROL. Nothing contained herein shall be deemed to require the Company to
take any action contrary to its Certificate of Incorporation or By-Laws, or any
applicable statute or regulation, or to deprive its Board of Directors of their
responsibility for any control of the affairs of the Company.
10. PUBLIC DISCLOSURE REQUIREMENT. Within thirty (30) business days of the
final execution of this Agreement, the Company shall cause the release of a
public announcement which sets forth, in pertinent part, a brief and general
description of this Agreement, including without limitation, the name of SSI,
the nature of the services to be provided hereunder by SSI and the compensation
paid to it in connection herewith. At least three (3) business days prior to the
dissemination of any such public announcement or filing containing the above
required description, the Company shall submit to SSI, for its review and
comment, the proposed public announcement or description. SSI shall thereafter
have three (3) business days within which to submit its proposed editions or
amendments to the public announcement and or description for inclusion therein,
which editions and amendments may be incorporated in the final version
disseminated by the Company.
11. NOTICES. Any notices hereunder shall be sent to the Company and SSI at
their respective addresses above set forth. Any notice shall be given by
registered certified mail, postage prepaid, and shall be deemed to have been
given when deposited in the United States Mail. Either party may designate any
other address to which notice shall be given, by giving written notice to the
other of such change of address in the manner herein provided.
12. ADDITIONAL COMPENSATION. In the event that SSI introduces a candidate for
appointment to the Board of Directors of the Company, which candidate is
eventually nominated and appointed by the Company as a director, the Company
shall issue to SSI, as additional compensation, 25,000 shares of the Company's
common stock which shall be unregistered and which shall be locked up for a
period of eighteen (18) months following the date of such appointment.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties with respect to its subject matter and
supersedes all prior discussion, agreements and understandings between them with
respect thereto. This Agreement may not be modified except in a writing signed
by the parties.
14. JURISDICTION AND VENUE. This Agreement has been made in the State of New
York and shall be governed by and construed in accordance with the laws thereof
without regard to principles of conflict of laws. Any proceeding commenced by
SSI to enforce or interpret any provision of this Agreement may be brought in
the City and County of New York, New York. The Company hereby submits to the
jurisdiction of the courts of the State of New York, including the federal
courts, for such purposes.
15. NO ASSIGNMENT. Neither this Agreement nor the rights of either party
hereunder shall be assigned by either party without the prior written consent of
the other party.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute the one and the same instrument.
17. NON-COMPLIANCE. If any provision of this Agreement conflicts with any law,
rule or regulation of any federal, state or self-regulatory organization,
including the Securities and Exchange
<PAGE>
Commission, the blue-sky laws of any state, the National Association of
Securities Dealers, Inc., or any other governmental authority having
jurisdiction over the activities or services described herein, then in that
event, such provision shall be deemed null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
Schneider Securities, Inc. Sunstar Healthcare, Inc.
/s/ David J. Mira
________________________________ _________________________________
By: David J. Mira By: Warren D. Stowell
Its: Senior Vice President Its: President
Corporate Finance
<PAGE>
Exhibit 10.11
WARRANT
TO PURCHASE 100,000 SHARES
THIS WARRANT (this "Warrant") is made and entered into as of April 22,
1999, between SUNSTAR HEALTHCARE, INC., a Delaware corporation (the "Company")
and BROOKSTREET SECURITIES CORPORATION ("Holder").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company proposes to issue to Holder this Warrant
entitling Holder to purchase 100,000 shares of Common Stock, $.001 par value, of
the Company (the "Exercise Shares," "Shares," or the "Common Stock"); and
WHEREAS, this Warrant is being issued by the Company to Holder as part
of consideration payable to Holder in connection with a financial consulting and
investment banking agreement of even date herewith.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
A G R E E M E N T
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1. Right to Exercise Warrants. This Warrant may be exercised only from
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the first anniversary of the date hereof until the fifth anniversary of the date
hereof (the "Expiration Date"). If this Warrant is not exercised on or before
the Expiration Date, it shall expire immediately following the Expiration Date.
This Warrant shall entitle Holder to purchase from the Company 100,000
shares of Common Stock at an exercise price of $1.50 per share, subject to
adjustment as set forth below ("Exercise Price").
The Company shall not be required to issue fractional shares of
capital stock upon the exercise of this Warrant. In the event that a fraction
of an Exercise Share would, except for the provisions of this Section 1, be
issuable upon the exercise of this Warrant, the Company shall pay to Holder
exercising the Warrant an amount in cash equal to such fraction multiplied by
the current market value of the Exercise Share. For purposes of this Warrant,
the current market value shall be determined as follows:
(1) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or, if not so reported, the average of the closing
bid and asked prices for an Exercise Share as furnished to the Company by any
member of the National Association of Securities Dealers, Inc., selected by the
Company for that purpose.
(2) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded or
in the NASDAQ Reporting System, as the case may be, on the last business day
prior to the date
<PAGE>
of the exercise of this Warrant. The closing price referred to in this Clause
(b) shall be the last reported sales price or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices, in either case on the national securities exchange on which the Exercise
Shares are then listed or in the NASDAQ Reporting System; or
(3) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
2. Registration of Exercise. Notwithstanding the foregoing, this Warrant
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shall not be exercisable unless (a) a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock to be received upon the exercise of the Warrant shall be
effective and current at the time of exercise or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock upon exercise. At the request of the Company, the Holder shall execute and
deliver to the Company its representation and warranty, in form and substance
satisfactory to the Company, that the shares of Common Stock to be issued upon
the exercise of this Warrant are being acquired by the Holder for its own
account, for investment only and not with a view to the resale or distribution
thereof. In addition, the Company may require the Holder to represent and
warrant to the Company in writing that any subsequent resale or distribution of
shares of Common Stock by it will be made only pursuant to (i) a registration
statement under the Securities Act which is effective and current with respect
to the Exercise Shares being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the Holder shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel, in form
and substance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
3. Rights of Holder. The Holder shall not, by virtue of anything
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contained in this Warrant or otherwise, prior to exercise of this Warrant, be
entitled to any right whatsoever, either in law or equity, of a stockholder of
the Company, including without limitation, the right to receive dividends or to
vote or to consent or to receive notice as a shareholder in respect of the
meetings of shareholders or the election of directors of the Company of any
other matter.
4. Investment Intent. Holder represents and warrants to the Company that
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the Holder is acquiring this Warrant for investment and with no present
intention of distributing or reselling the Warrant or any of the Exercise Shares
for which this Warrant may be exercisable.
5. Certificates to Bear Language. The Exercise Shares for which this
-----------------------------
Warrant may be exercisable and the certificate or certificates therefor shall
bear the following legend by which each holder shall be bound:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTR ATION OR AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE."
6. Piggyback Registration.
----------------------
(a) (i) Subject to Section 6(d), if the Company at any time
proposes to register any of its securities under the Securities Act by
registration on Forms SB-2, S-1, S-2, S-3 (but not Forms S-4 or S-8) or any
successor or similar form(s) (except registrations of securities in connection
with (a) an employee benefit plan,
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<PAGE>
including any stock option plan, or dividend reinvestment plan or a
merger, consolidation or other business combination, or (b) debt
securities), whether or not for sale for its own account, it shall,
each such time, give written notice to the Holder of its intention to
do so and of the Holder's rights under this Section 6 at least 10 days
prior to the filing of a registration statement with respect to such
registration with the United States Securities and Exchange Commission
(the "Commission"). Upon the written request of the Holder made within
5 days after the receipt of that notice, which request shall specify
the Exercise Shares purchased through exercise of this Warrant
intended to be registered and disposed of by the Holder, the Company
shall, subject to the provisions hereof, use its best efforts to
effect the registration under the Securities Act of all such Exercise
Shares that the Company has been so requested to register by the
Holder.
(ii) If, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder and upon giving that notice (a) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Exercise Shares in connection therewith), without prejudice; and
(b) in the case of a determination to delay registering, the Company shall be
permitted to delay registering any Exercise Shares for the same period as the
delay in registering such other securities.
(iii) The Company shall pay all Registration Expenses (as defined
below) in connection with registration of Exercise Shares requested pursuant to
this Section 6.
(1) Exercise Shares shall cease to be registrable hereunder when (i) a
registration statement with respect to its public sale shall have become
effective under the Securities Act, (ii) it has been disposed of as permitted
by, and in compliance with, Rule 144 (or successor provision) promulgated under
the Securities Act, (iii) it may be disposed of as permitted by, and in
compliance with, subsection (k) of such Rule 144 (or successor provision) or
(iv) they shall have ceased to be outstanding.
(2) As used in this agreement, "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with the provisions of
the Section 6 including, without limitation, all registration and filing fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Exercise Shares), all printing expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of "comfort" letters required by or incident to such performance and
compliance, and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities; provided, however, that Registration Expenses
-------- -------
shall exclude, and the Holder shall pay, underwriters fees and underwriting
discounts and commissions and transfer taxes in respect of the Exercise Shares
being registered as well as any fees and expenses of counsel or other advisors
to the Holder relating to the Exercise Shares.
(3) Anything in Section 6(a) to the contrary notwithstanding, if the
managing underwriter or underwriters of any underwritten offering shall inform
the Company in writing of its belief that the number or type of securities
requested to be included in such registration would materially and adversely
affect such offering, then the Company shall include the Exercise Shares in such
registration only to the extent of the number and type that the Company is so
advised can be sold in (or during the time of) such offering, only after all
securities proposed by the Company to be sold for its own account or by or for
the account of any other present or future securityholders of the Company shall
have been so included.
(4) If the Company at any time shall register Exercise Shares under the
Securities Act as contemplated hereunder, then the Holder shall not sell
pursuant to an effective registration statement, publicly make
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<PAGE>
any short sale of, publicly grant any option for the purchase of, or otherwise
publicly dispose of any shares of Common Stock (other than those Exercise Shares
included in such registration pursuant to this Section 6) without the prior
written consent of the managing underwriter for a period required by the
underwriters and designated by the Company, which period shall not begin more
than thirty (30) days prior to the effectiveness of the registration statement
pursuant to which such public offering shall be made and shall not last more
than one hundred eighty (180) days after the effective date of such registration
statement in the case of the Company's initial public offering, or ninety (90)
days after the effective date of such registration statement in the case of any
such other offering. The Company may legend and impose stop transfer
instructions on any certificate evidencing Exercise Shares relating to the
restrictions provided in this Section 6(e).
7. Adjustment of Number of Exercise Shares and Class of Capital Stock
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Purchasable. The Number of Exercise Shares purchasable under this Warrant
- -----------
Agreement are subject to adjustment from time to time as set forth in this
Section 7.
(1) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(1) pays a dividend or makes a distribution on its Common Stock,
in each case, in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its shares of Common Stock any
shares of its capital stock;
then the number and classes of shares purchasable upon exercise of this Warrant
in effect immediately prior to such action shall be adjusted so that the holder
of this Warrant thereafter exercised may receive the number and classes of
shares of capital stock of the Company which such holder would have owned
immediately following such action if such holder had exercised the Warrant
immediately prior to such action.
For a dividend or distribution the adjustment shall become effective
immediately after the record date for the dividend or distribution. For a
subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
If after an adjustment the holder of this Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Company, the
Board of Directors of the Company shall in good faith determine the allocation
of the adjusted Exercise Price between or among the classes of capital stock.
After such allocation, that portion of the Exercise Price applicable to each
share of each such class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Agreement. Notwithstanding the allocation of the Exercise Price between or among
shares of capital stock as provided by this Section 7(a), this Warrant may only
be exercised in full by payment of the entire Exercise Price currently in
effect.
(2) Consolidation, Merger or Sale of the Company. If the Company is a
--------------------------------------------
party to a consolidation, merger or transfer of assets which reclassifies or
changes its outstanding Common Stock, the
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<PAGE>
successor corporation (or corporation controlling the successor corporation or
the Company, as the case may be) shall by operation of law assume the Company's
obligations under this Warrant. Upon consummation of such transaction this
Warrant shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Warrant would have
owned immediately after the consolidation, merger or transfer if the holder had
exercised this Warrant immediately before the effective date of such
transaction.
8. Successors. All the covenants and provisions of this Warrant by or for
----------
the benefit of the Company or Holder shall bind and inure to the benefit of
their respective successor and assigns hereunder.
9. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all proposes be deemed to
be an original, and such counterparts shall together constitute by one and the
same instrument.
10. Notices. All notices or other communications under this Warrant shall
-------
be in writing and shall be deemed to have been given if delivered by hand or
mailed by certified mail, postage prepaid, return receipt requested, addressed
as follows: if to the Company: SunStar Healthcare, Inc., 300 International
Parkway, Suite 230, Heathrow, Florida, 32746, Attention: President, and to the
Holder: Brookstreet Securities Corporation, 2361 Campus Drive, Suite 210,
Irvine, California 02612.
Either the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 10.
11. Supplements and Amendments. The Company may from time to time
--------------------------
supplement or amend this Warrant without the approval of the Holder in order to
cure any ambiguity or to be correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision, or to make any
other provisions in regard to matters or questions herein arising hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interest of the Holder.
12. Severability. If for any reason any provision, paragraph or term of
------------
this Warrant Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
13. Governing Law and Venue. This Warrant shall be deemed to be a contract
-----------------------
made under the laws of the State of New York and for all purposes shall be
governed and construed in accordance with the laws of said State. Any proceeding
arising under this Warrant shall be instituted in the State of New York.
14. Headings. Sections and subsection headings, used herein are included
--------
herein for convenience of reference only and shall not affect the construction
of this Warrant nor constitute a part of this Warrant for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this to be duly
executed, as of the date and year first above written.
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<PAGE>
SUNSTAR HEALTHCARE, INC. BROOKSTREET SECURITIES CORPORATION
________________________ __________________________
By: Warren D. Stowell By:
Its: President
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
Exhibit 10.12
WARRANT
TO PURCHASE 422,021 SHARES
THIS WARRANT (this "Warrant") is made and entered into as of April 22,
1999, between SUNSTAR HEALTHCARE, INC., a Delaware corporation (the "Company")
and BROOKSTREET SECURITIES CORPORATION ("Holder").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company proposes to issue to Holder this Warrant
entitling Holder to purchase 422,021 shares of Common Stock, $.001 par value, of
the Company (the "Exercise Shares," "Shares," or the "Common Stock"); and
WHEREAS, this Warrant is being issued by the Company to Holder as part
of consideration payable to Holder in connection with a financial consulting and
investment banking agreement of even date herewith.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
A G R E E M E N T
- - - - - - - - -
15. Right to Exercise Warrants. This Warrant may be exercised only from
--------------------------
the first anniversary of the date hereof until the fifth anniversary of the date
hereof (the "Expiration Date"). If this Warrant is not exercised on or before
the Expiration Date, it shall expire immediately following the Expiration Date.
This Warrant shall entitle Holder to purchase from the Company 422,021
shares of Common Stock at an exercise price of $4.00 per share, subject to
adjustment as set forth below ("Exercise Price").
The Company shall not be required to issue fractional shares of
capital stock upon the exercise of this Warrant. In the event that a fraction
of an Exercise Share would, except for the provisions of this Section 1, be
issuable upon the exercise of this Warrant, the Company shall pay to Holder
exercising the Warrant an amount in cash equal to such fraction multiplied by
the current market value of the Exercise Share. For purposes of this Warrant,
the current market value shall be determined as follows:
(1) if the Exercise Shares are traded in the over-the-counter market
and not on any national securities exchange and not in the NASDAQ Reporting
System, the average of the mean between the last bid and asked prices per share,
as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, for the last business day prior to the date on which
this Warrant is exercised, or, if not so reported, the average of the closing
bid and asked prices for an Exercise Share as furnished to the Company by any
member of the National Association of Securities Dealers, Inc., selected by the
Company for that purpose.
(2) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
listed or traded or in the NASDAQ Reporting System, as the case may be, on the
last business day prior to the date of the exercise of this Warrant. The closing
price referred to in this Clause (b) shall be the last reported sales price or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in either case on the national securities
exchange on which the Exercise Shares are then listed or in the NASDAQ Reporting
System; or
(3) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
16. Registration of Exercise. Notwithstanding the foregoing, this Warrant
------------------------
shall not be exercisable unless (a) a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock to be received upon the exercise of the Warrant shall be
effective and current at the time of exercise or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock upon exercise. At the request of the Company, the Holder shall execute and
deliver to the Company its representation and warranty, in form and substance
satisfactory to the Company, that the shares of Common Stock to be issued upon
the exercise of this Warrant are being acquired by the Holder for its own
account, for investment only and not with a view to the resale or distribution
thereof. In addition, the Company may require the Holder to represent and
warrant to the Company in writing that any subsequent resale or distribution of
shares of Common Stock by it will be made only pursuant to (i) a registration
statement under the Securities Act which is effective and current with respect
to the Exercise Shares being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the Holder shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel, in form
and substance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
17. Rights of Holder. The Holder shall not, by virtue of anything
----------------
contained in this Warrant or otherwise, prior to exercise of this Warrant, be
entitled to any right whatsoever, either in law or equity, of a stockholder of
the Company, including without limitation, the right to receive dividends or to
vote or to consent or to receive notice as a shareholder in respect of the
meetings of shareholders or the election of directors of the Company of any
other matter.
18. Investment Intent. Holder represents and warrants to the Company that
-----------------
the Holder is acquiring this Warrant for investment and with no present
intention of distributing or reselling the Warrant or any of the Exercise Shares
for which this Warrant may be exercisable.
19. Certificates to Bear Language. The Exercise Shares for which this
-----------------------------
Warrant may be exercisable and the certificate or certificates therefor shall
bear the following legend by which each holder shall be bound:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE."
20. Piggyback Registration.
----------------------
(a) (i) Subject to Section 6(d), if the Company at any time
proposes to register any of its securities under the Securities Act by
registration on Forms SB-2, S-1, S-2, S-3 (but not Forms S-4 or S-8) or any
-88-
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
successor or similar form(s) (except registrations of securities in connection
with (a) an employee benefit plan, including any stock option plan, or dividend
reinvestment plan or a merger, consolidation or other business combination, or
(b) debt securities), whether or not for sale for its own account, it shall,
each such time, give written notice to the Holder of its intention to do so and
of the Holder's rights under this Section 6 at least 10 days prior to the filing
of a registration statement with respect to such registration with the United
States Securities and Exchange Commission (the "Commission"). Upon the written
request of the Holder made within 5 days after the receipt of that notice, which
request shall specify the Exercise Shares purchased through exercise of this
Warrant intended to be registered and disposed of by the Holder, the Company
shall, subject to the provisions hereof, use its best efforts to effect the
registration under the Securities Act of all such Exercise Shares that the
Company has been so requested to register by the Holder.
(ii) If, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder and upon giving that notice (a) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Exercise Shares in connection therewith), without prejudice; and
(b) in the case of a determination to delay registering, the Company shall be
permitted to delay registering any Exercise Shares for the same period as the
delay in registering such other securities.
(iii) The Company shall pay all Registration Expenses (as defined
below) in connection with registration of Exercise Shares requested pursuant to
this Section 6.
(1) Exercise Shares shall cease to be registrable hereunder when (i)
a registration statement with respect to its public sale shall have become
effective under the Securities Act, (ii) it has been disposed of as permitted
by, and in compliance with, Rule 144 (or successor provision) promulgated under
the Securities Act, (iii) it may be disposed of as permitted by, and in
compliance with, subsection (k) of such Rule 144 (or successor provision) or
(iv) they shall have ceased to be outstanding.
(2) As used in this agreement, "Registration Expenses" means all
expenses incident to the Company's performance of or compliance with the
provisions of the Section 6 including, without limitation, all registration and
filing fees, all listing fees, all fees and expenses of complying with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Exercise Shares), all printing expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "comfort" letters required by or incident
to such performance and compliance, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities; provided,
--------
however, that Registration Expenses shall exclude, and the Holder shall pay,
- -------
underwriters fees and underwriting discounts and commissions and transfer taxes
in respect of the Exercise Shares being registered as well as any fees and
expenses of counsel or other advisors to the Holder relating to the Exercise
Shares.
(3) Anything in Section 6(a) to the contrary notwithstanding, if the
managing underwriter or underwriters of any underwritten offering shall inform
the Company in writing of its belief that the number or type of securities
requested to be included in such registration would materially and adversely
affect such offering, then the Company shall include the Exercise Shares in such
registration only to the extent of the number and type that the Company is so
advised can be sold in (or during the time of) such offering, only after all
securities proposed by the Company to be sold for its own account or by or for
the account of any other present or future securityholders of the Company shall
have been so included.
-89-
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
(4) If the Company at any time shall register Exercise Shares under
the Securities Act as contemplated hereunder, then the Holder shall not sell
pursuant to an effective registration statement, publicly make any short sale
of, publicly grant any option for the purchase of, or otherwise publicly dispose
of any shares of Common Stock (other than those Exercise Shares included in such
registration pursuant to this Section 6) without the prior written consent of
the managing underwriter for a period required by the underwriters and
designated by the Company, which period shall not begin more than thirty (30)
days prior to the effectiveness of the registration statement pursuant to which
such public offering shall be made and shall not last more than one hundred
eighty (180) days after the effective date of such registration statement in the
case of the Company's initial public offering, or ninety (90) days after the
effective date of such registration statement in the case of any such other
offering. The Company may legend and impose stop transfer instructions on any
certificate evidencing Exercise Shares relating to the restrictions provided in
this Section 6(e).
21. Adjustment of Number of Exercise Shares and Class of Capital Stock
------------------------------------------------------------------
Purchasable. The Number of Exercise Shares purchasable under this Warrant
- -----------
Agreement are subject to adjustment from time to time as set forth in this
Section 7.
(1) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(1) pays a dividend or makes a distribution on its Common Stock,
in each case, in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its shares of Common Stock any
shares of its capital stock;
then the number and classes of shares purchasable upon exercise of this Warrant
in effect immediately prior to such action shall be adjusted so that the holder
of this Warrant thereafter exercised may receive the number and classes of
shares of capital stock of the Company which such holder would have owned
immediately following such action if such holder had exercised the Warrant
immediately prior to such action.
For a dividend or distribution the adjustment shall become effective
immediately after the record date for the dividend or distribution. For a
subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
If after an adjustment the holder of this Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Company, the
Board of Directors of the Company shall in good faith determine the allocation
of the adjusted Exercise Price between or among the classes of capital stock.
After such allocation, that portion of the Exercise Price applicable to each
share of each such class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Agreement. Notwithstanding the allocation of the Exercise Price between or among
shares of capital stock as provided by this Section 7(a), this Warrant may only
be exercised in full by payment of the entire Exercise Price currently in
effect.
-90-
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
(2) Consolidation, Merger or Sale of the Company. If the Company is
--------------------------------------------
a party to a consolidation, merger or transfer of assets which reclassifies or
changes its outstanding Common Stock, the successor corporation (or corporation
controlling the successor corporation or the Company, as the case may be) shall
by operation of law assume the Company's obligations under this Warrant. Upon
consummation of such transaction this Warrant shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the holder of this Warrant would have owned immediately after the consolidation,
merger or transfer if the holder had exercised this Warrant immediately before
the effective date of such transaction.
22. Successors. All the covenants and provisions of this Warrant by or
----------
for the benefit of the Company or Holder shall bind and inure to the benefit of
their respective successor and assigns hereunder.
23. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all proposes be deemed to
be an original, and such counterparts shall together constitute by one and the
same instrument.
24. Notices. All notices or other communications under this Warrant
-------
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by certified mail, postage prepaid, return receipt requested,
addressed as follows: if to the Company: SunStar Healthcare, Inc., 300
International Parkway, Suite 230, Heathrow, Florida, 32746, Attention:
President, and to the Holder: Brookstreet Securities Corporation, 2361 Campus
Drive, Suite 210, Irvine, California 02612.
Either the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 10.
25. Supplements and Amendments. The Company may from time to time
--------------------------
supplement or amend this Warrant without the approval of the Holder in order to
cure any ambiguity or to be correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision, or to make any
other provisions in regard to matters or questions herein arising hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interest of the Holder.
26. Severability. If for any reason any provision, paragraph or term of
------------
this Warrant Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
27. Governing Law and Venue. This Warrant shall be deemed to be a contract
-----------------------
made under the laws of the State of New York and for all purposes shall be
governed and construed in accordance with the laws of said State. Any proceeding
arising under this Warrant shall be instituted in the State of New York.
28. Headings. Sections and subsection headings, used herein are included
--------
herein for convenience of reference only and shall not affect the construction
of this Warrant nor constitute a part of this Warrant for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this to be duly
executed, as of the date and year first above written.
SUNSTAR HEALTHCARE, INC. BROOKSTREET SECURITIES CORPORATION
-91-
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
_____________________________ _________________________________
By: Warren D. Stowell By:
Its: President
-92-
<PAGE>
SUNSTAR HEALTHCARE, INC. AND SUBSIDIARIES
93
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<PERIOD-START> DEC-31-1998
<PERIOD-END> JUN-30-1999
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3,519
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