<PAGE>
As filed with the Securities and Exchange Commission on February , 1999
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUNSTAR HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-3361076
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 International Pkwy., Suite 230
Heathrow, Florida 32746
(407) 304-1066
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
David A. Jesse
Executive Vice President, Chief Operating Officer and Secretary
SunStar Healthcare, Inc.
300 International Pkwy., Suite 230
Heathrow, Florida 32746
(407) 304-1066
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of communications to:
Robert N. Blackford, Esq.
Holland & Knight LLP
200 South Orange Avenue, Suite 2600
Orlando, Florida 32801
(407) 425-8500
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of earlier effective registration statement for
the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Maximum Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of Shares To Be Registered Registered Per Unit(1) Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share........ 464,330 $3.97 $1,843,390 $512.46
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</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act solely for
purposes of calculating the Registration Fee. The fee is based upon the
average high and low price for shares of Common Stock of the registrant
reported on the Nasdaq SmallCap Market on February 4, 1999.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY , 1999
PROSPECTUS
SunStar Healthcare, Inc.
464,330 Shares of Common Stock
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This Prospectus relates to 464,330 shares (the "Shares") of common stock,
par value $.001 per share ("Common Stock"), of SunStar Healthcare, Inc., a
Delaware corporation (the "Company"), which may be offered and sold, from time
to time, by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders.
The Selling Stockholders may from time to time sell the Shares to or through
one or more underwriters, directly to other purchasers or through agents, on
the Nasdaq SmallCap Market in ordinary brokerage transactions, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
prices related to the then-prevailing market price or at negotiated prices.
See "Plan of Distribution."
The Company's Common Stock is listed on the Nasdaq SmallCap Market under the
symbol "SUNS".
----------------
See "Risk Factors" beginning on page 3 for a discussion of certain factors
that should be considered by prospective investors.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the disclosures in this Prospectus. Any representation
to the contrary is a criminal offense.
----------------
The information in this Prospectus is not complete and may be changed. The
Selling Stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this Prospectus is February , 1999.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act. You may read and copy
such materials at the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
The Company has filed with the SEC a Registration Statement on Form S-3 (the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Shares. This Prospectus does not contain all the information set forth in the
Registration Statement because certain portions have been omitted as permitted
by the rules and regulations of the SEC. In addition, certain documents filed
by the Company with the SEC have been incorporated in this Prospectus by
reference. See "Incorporation of Certain Documents by Reference." Statements
made in this Prospectus concerning the contents of any documents referred to
herein are not necessarily complete. With respect to each such document filed
with the SEC as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description. Each such statement shall be
deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC are hereby
incorporated in this Prospectus by reference and made a part hereof:
(1) The Company's Annual Report on Form 10-KSB, as amended, for the year
ended July 31, 1998.
(2) The Company's Quarterly Report on Form 10-QSB for the quarter ended
October 31, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering being made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the respective date of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
The Company will provide without charge to any person, including a
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the information that has been
incorporated by reference in this Prospectus but not delivered with this
Prospectus, including the foregoing documents (other than certain exhibits to
such documents). You may make written requests to SunStar Healthcare, Inc.,
300 International Pkwy., Suite 230, Heathrow, Florida 32746, Attention: David
A. Jesse, Secretary. You may make telephone requests to David A. Jesse,
Secretary of the Company, at (407) 304-1066.
2
<PAGE>
THE COMPANY
The Company provides managed healthcare services in the State of Florida by
operating a health maintenance organization ("HMO") which is currently
licensed to operate as an HMO in 52 counties in the state. As originally
organized, the Company also operated seven outpatient primary care medical
centers (the "Medical Centers") located in central Florida. On April 15, 1998,
the Company sold substantially all of the assets of the Medical Centers. The
sale of the Medical Centers completed the Company's transformation from a
"provider" of medical services through its Medical Centers to a "payor" for
medical services through its HMO. The Company's sale of the Medical Centers
has permitted the Company to focus its full attention and resources on its
rapid expansion plan for its HMO.
The Company was incorporated in Delaware in December 1995. The Company's
principal offices are located at 300 International Pkwy., Suite 230, Heathrow,
Florida 32746, and its telephone number is (407) 304-1066.
RISK FACTORS
In addition to the other information contained in this Prospectus, you
should consider carefully the following risk factors before making an
investment decision concerning the Shares:
Signficant and Continuing Losses; Going Concern Paragraph in Independent
Accountants' Report. For the year ended July 31, 1998 and the quarter ended
October 31, 1998, the Company incurred net losses from continuing operations
of approximately $5,390,000 and $1,199,900 respectively, primarily as a result
of an increase in the Company's selling, general and administrative expenses.
These additional expenses resulted primarily from the Company's accelerated
HMO expansion into additional Florida markets, its development of marketing
materials, and its increase in infrastructure and personnel needed to
accelerate the Company's transformation from a provider of medical services to
a payor for medical services. The recent sale of the Medical Centers, which
will result in a loss of the revenue and earnings historically generated by
them, and the Company's anticipated increase in expenditures to fund the
Company's accelerated growth plans could have a material adverse effect on the
Company's operating results. While these recent net losses are consistent with
management's expectations with respect to costs associated with the start-up,
development and expansion of the HMO, if they continue without the Company
obtaining additional financing, the net losses would have a material adverse
effect on the Company's business and financial condition. See "--Need for
Additional Financing."
The Company's financial statements for the year ended July 31, 1998 were
prepared on a "going concern" basis, contemplating the realization of assets
and settlement of liabilities and commitments in the normal course of
business. The Company's independent public accountants included an explanatory
paragraph in their report on the financial statements, stating that certain
factors raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
may result from the possibility of the Company's failure to continue as a
going concern.
Need for Additional Financing. The Company is currently seeking additional
financing to comply with the Nasdaq listing requirements and HMO regulatory
requirements discussed below, to fund its expansion plans, to acquire new HMO
members through sales, marketing and related expenses and for working capital.
The Company has retained investment banking advisors and independent
consultants to counsel the Company on a possible sale of equity securities as
well as to introduce the Company to and assist it in the evaluation of
potential merger and partnering opportunities. Such additional financing may
not be available to the Company on acceptable terms, if at all. If the Company
is unable to obtain adequate additional financing or enter into a business
alliance, the Company will be unable to meet its ongoing cash needs. Such a
result would have a material adverse effect on the Company's business and
financial condition. While the Company has signed a letter of intent for a
private placement of its securities, the proposed offering is subject to a
number of conditions, and there can be no assurance that it will be completed.
See "Recent Developments--Proposed Private Placement."
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Possible Delisting of Securities from Nasdaq SmallCap Market. The Company's
Common Stock is listed on the Nasdaq SmallCap Market. The Company must meet
certain listing standards to permit the continuation of the trading market for
the Company's Common Stock on the Nasdaq SmallCap Market. These standards
require that the Company have:
.) either $2 million in net tangible assets (total assets, excluding
goodwill, minus total liabilities), $35 million of market capitalization
or $500,000 of net income (in the last fiscal year or two of the last
three fiscal years);
.) a public float of 500,000 shares having a market value of at least
$1,000,000;
.) a minimum bid price of not less than $1 per share
.) at least two market makers; and
.) at least 300 round lot shareholders (holders of 100 shares or more).
As of October 31, 1998, the Company did not comply with the net tangible
asset requirement of the listing standards. As a result, the Common Stock
could be delisted from trading on the Nasdaq SmallCap Market. A delisting
would materially 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 OTC Electronic Bulletin Board or the "pink
sheets", and trading could be subject to the "Penny Stock" regulations
discussed below. See "Risk Factors--Penny Stock Regulation." As a result, you
may find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, the Common Stock. This could result in lower prices
and larger spreads in the bid and ask prices for the Common Stock.
Penny Stock Regulation. If the Common Stock is delisted from trading on the
Nasdaq SmallCap Market and the trading price of the Common Stock is less than
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of Rule 15g-9 under the Exchange Act. Under this rule,
broker/dealers who recommend low-priced securities to persons other than
established customers and accredited investors must satisfy special sales
practice requirements. The broker/dealer must make an individualized written
suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
The SEC's regulations also require additional disclosure in connection with
any trades involving a stock defined as a "penny stock" (generally, a stock
with a market price of less than $5.00 per share), including the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining the
penny stock market and its associated risks. Such requirements could severely
limit the liquidity of the Common Stock in the secondary market, as few
broker/dealers would likely undertake such compliance activities.
Absence of Profitability. Since its initial public offering in 1996, the
Company has not achieved profitability. The Company's operating expenses have
increased and are expected to continue to increase significantly in connection
with the Company's continued and accelerated expansion of its HMO into new
markets within Florida (including expenses associated with obtaining licenses
to offer its products in additional counties throughout Florida, the
acceleration of expenses in the areas of advertising, marketing and materials,
personnel and related expenses and in obtaining regulatory approval to provide
HMO products to Medicare recipients). Further, in the past the Company derived
a material portion of its earnings from the operation of the Medical Centers
which the Company sold in April 1998. Accordingly, the Company's future
profitability will depend on increases in earnings from its HMO operations.
Future events, including unanticipated expenses, increased competition or
changes in governmental regulation, or the failure of the HMO operations to
replace the earnings previously generated by the Medical Centers, could
adversely affect the Company's operating margins and results of operations.
The foregoing factors may adversely affect the Company's future operating
results, and the Company's future operations may not be profitable.
Risks Associated with Continuing Expansion. The Company is seeking
additional debt or equity financing to fund ongoing business operations and to
satisfy the Nasdaq listing standards described above and the HMO
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regulatory requirements discussed below. The acceleration of the Company's
expansion schedule has caused the Company to incur up-front costs associated
with such expansion, including licensing and marketing expenses which are not
expected to generate additional revenue for several months after such
expenditures are made. This, in conjunction with the sale of the Medical
Centers earlier than projected in the Company's business plan, could result in
a short-term decrease in the Company's earnings or a fluctuation in the
Company's quarterly financial results. To the extent that the Company finances
its continuing expansion with a combination of cash and equity financing, any
such issuance of equity securities would result in dilution to the interest of
the Company's current stockholders. Additionally, to the extent that the
Company incurs indebtedness or issues debt securities in connection with its
continuing expansion, the Company will be subject to risks associated with
incurring such indebtedness, including the risks that interest rates may
fluctuate and that cash flow may be insufficient to pay principal and interest
on any such indebtedness.
Government Approval Process. The process of obtaining government approval
in establishing HMO operations can be lengthy, expensive and uncertain. Prior
to commencing a general operation in additional counties, the Company must
obtain regulatory approval to operate an HMO in other Florida counties. In
order to obtain such approvals, the Company must demonstrate its continuing
ability to provide a full range of healthcare services consistent with
prevailing professional standards and statutory requirements. To date, the
Company has received regulatory approval to conduct HMO operations in 52
counties in Florida, but the Company may not be able to obtain the required
regulatory approvals to expand or continue its HMO operations.
The Company's business plan assumes that the Company may begin to enroll
Medicare beneficiaries commencing March 1, 1999. Although the Company filed
for regulatory approval on January 13, 1998, the Company has not yet received
approval of its application. The Company's application may not be approved
before March 1, 1999 or at all. Failure to gain approval or a delay in
obtaining such approval beyond the March 1, 1999 could have a material adverse
effect on the Company's business or operating results.
Compliance with State Requirements for HMOs. The Department of Insurance of
the State of Florida (the "DOI") regulates the Company's HMO. The DOI requires
that all HMOs satisfy the following minimum requirements (the "HMO
Requirements"):
.) a minimum surplus of assets over liabilities in an amount which is the
greater of (i) $800,000 (increasing to $1,150,000 on September 30,
1999), (ii) 10% of the HMO's total liabilities or (iii) 1% (increasing
to 1.25% on September 30, 1999) of the HMO's annualized premiums; and
.) net income before taxes over the past four quarterly reporting periods
of not less than 2% of the total revenue of the HMO.
As of October 31, 1998, the Company was in compliance with the HMO
Requirements. The Company's failure to meet or maintain compliance with the
HMO Requirements could result in one or more of the following penalties:
.) an order of compliance;
.) delinquency proceedings;
.) suspension of authority to enroll new subscribers in the Company's HMO;
.) imposition of administrative supervision;
.) revocation of the Company's Certificate of Authority to operate an HMO;
.) imposition of an order requiring that the Company file and implement a
corrective action plan; and
.) imposition of a fine.
Failure to continue to satisfy the HMO Requirements could cause the Company
to stop or significantly curtail its growth and expansion plans, terminate a
number of employees or accept alternative financing on terms
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less favorable to the Company, any of which could have a material adverse
effect on the Company and its financial results.
Government Regulation. Federal and state agencies have broad discretion to
interpret and enforce expensive, stringent and frequently changing federal and
state rules and regulations on the healthcare industry. Federal and state laws
require that as an HMO the Company must maintain minimum capital surplus
accounts and subscriber grievance procedures and comply with regulations
governing the marketing and sale of healthcare services and products. The
Company believes that it complies with all federal, state and local laws,
rules and regulations applicable to its current operations and has obtained
all licenses necessary to conduct its business. Amendments to existing
statutes and regulations, adoption of new statutes and regulations and the
Company's expansion into new operations in other jurisdictions could require
the Company to obtain additional licenses, modify its arrangements with
physicians or otherwise alter its methods of operation at substantial costs.
The Company may not be financially or otherwise able to comply with all
applicable laws and regulations and licensing requirements, which could
subject the Company to civil remedies, including significant fines, penalties,
injunctions and expulsion from participation in Medicare and Medicaid
programs, as well as possible criminal sanctions, which would have a material
adverse effect on the Company's business and operating results.
Competition. The managed healthcare industry is very competitive and has
experienced significant changes in recent years, primarily due to rising
healthcare costs. Employer groups have demanded a variety of healthcare
options, such as traditional indemnity insurance, HMOs, point of service plans
and preferred provider options, offered either through third-parties or by
self-funding. The Company's HMO will compete with providers of all of these
products, including Humana Medical Plan, Inc., Prudential Healthcare, Inc.,
United Healthcare of Florida, Inc., Health Options, Inc. and CIGNA Healthcare
of Florida, Inc., most of which have substantially greater financial,
management, marketing, personnel and other resources than the Company. The
Company must respond to various competitive factors affecting the healthcare
industry generally, including trends relating to demand for healthcare
services, regulatory, economic and political factors, changes in patient
demographics and competitive pricing strategies by HMOs and other healthcare
plans. The Company will face significant competition in any new geographic
areas it may enter, with respect to any products it may offer and with respect
to any commercial and governmental healthcare programs developed. The Company
may not be able to compete successfully in any such market.
Uncertainty of HMO Operations. The Company's HMO operations largely depend
upon the Company's ability to maintain and to continue to establish
satisfactory relationships with specialty and acute care physician groups and
provider networks (including hospitals) on a timely and competitive basis.
Such relationships enable the Company to provide reasonably priced managed
healthcare products suitable for individuals and employer groups. The
Company's ability to implement effective marketing programs to attract and
enroll significant numbers of members will significantly affect the Company's
business and operating results. The Company may not be able to successfully
expand its HMO operations or maintain required governmental approvals.
Further, expansion of such operations may not result in increased revenue or
profitable operations.
Control Over Predictability of Healthcare Costs. The Company's future
profitability will depend greatly on its ability to maintain effective control
over healthcare costs, including costs related to physician groups, hospitals
and ancillary providers such as pharmaceutical suppliers, laboratory and non-
physician specialists. The Company's success will depend upon its ability to
predict and control future healthcare costs through utilization management and
negotiation of favorable provider contracts. However, future provider
agreements may result in substantially higher healthcare costs. Inflation, new
technologies, major epidemics, natural disasters and numerous external factors
relating to the delivery of healthcare services may adversely affect the
ability of the Company's HMO to control and predict healthcare costs.
Potential Malpractice and Excess Claims Liability. Although the Company has
sold the Medical Centers, the Company could under certain circumstances become
liable for negligent acts performed by employees of the Medical Centers while
such centers were owned and operated by the Company. While the Company may be
6
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indemnified by the buyer of the Medical Centers, or is otherwise insured,
against liability for such acts, the Company could be subject to potential
professional liability claims to the extent that such claims exceed the limits
of any applicable insurance coverage.
As an HMO operator, the Company could become liable for the negligent acts
of physicians and for negligence in recruiting and selecting physicians. The
Company currently maintains malpractice liability insurance with limits of
$3,000,000 in the aggregate and $1,000,000 per occurrence and requires
physicians to maintain malpractice liability insurance in amounts which it
deems adequate for the type of medical services provided. However, such
insurance coverage may not be sufficient to cover potential claims, and
adequate levels of coverage may not be available in the future at a reasonable
cost. A partially or completely uninsured successful claim against the Company
could have a material adverse effect on the Company's business and financial
condition.
The Company insures its malpractice risks on a claims-made basis. The
Company has secured claims-made coverage from December 3, 1998 through
December 3, 1999, with retroactive coverage through July 1, 1993. The Company
does not accrue for possible losses attributable to incidents which may have
occurred and not been identified under the Company's incident reporting system
because the amount, if any, is not readily estimable.
The Company also 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 medical expenses, and insurance recoveries,
if any, are reported as a reduction of medical expenses. Under the excess loss
reinsurance policies, the Company recovers 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.
Dependence Upon Key Personnel. The success of the Company largely depends on
the personal efforts of Warren D. Stowell, its President and Chief Executive
Officer, David A. Jesse, its Executive Vice President and Chief Operating
Officer, and other key personnel. The loss of services of either such
individual or certain other key employees could have a material adverse effect
on the Company's business and prospects. The Company has obtained "key-man"
insurance on the life of Mr. Stowell in the amount of $1,000,000. The
Company's success will also depend upon the Company's ability to hire and
retain additional management, financial, marketing and other personnel.
Competition for qualified personnel in the healthcare industry is intense, and
the Company may not be able to attract and retain additional qualified
personnel.
Effect of Outstanding Options and Warrants. As of November 30, 1998, 200,000
shares of Common Stock were reserved for issuance upon the exercise of stock
options under the Company's 1996 Stock Option Plan. The Company has awarded
107,500 of such options to its officers and/or employees. Prior to its initial
public offering, the Company also granted options to purchase 250,000 shares
at an exercise price per share of $0.25 to Mr. Stowell and 25,000 shares at an
exercise price per share of $0.25 to Mr. Jesse, in each case in connection
with his employment by the Company. An additional 280,000 shares of Common
Stock are reserved for issuance upon the exercise of warrants issued by the
Company in connection with its initial public offering and the Private
Placement (as defined below). The subsequent exercise of such options and
warrants could have a dilutive effect on the Company's stockholders. Moreover,
the terms of additional equity financing may be adversely affected by such
options and warrants because the holders of the options and warrants may be
expected to exercise them at a time when the Company would likely be able to
obtain additional financing on terms more favorable to the Company than those
provided in the options and warrants.
No Dividends. The Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash dividends in the
foreseeable future. The Company currently intends to retain any future
earnings for use in its business.
7
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Indemnification of Directors and Officers. The Company's Certificate of
Incorporation provides that no director of the Company shall be personally
liable to the Company or to any stockholder for monetary damages arising out
of such director's breach of fiduciary duty, except to the extent that the
elimination or limitation of liability is not permitted by the Delaware
General Corporation Law. The Delaware General Corporation Law, as currently in
effect, permits charter provisions eliminating the liability of directors for
breach of fiduciary duty, except that such charter provisions may not
eliminate or limit the liability of directors for:
.) any breach of the director's duty of loyalty to a corporation or its
stockholders;
.) any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
.) any payment of a dividend or approval of a stock purchase or other
transaction that is illegal under Section 174 of the Delaware General
Corporation Law; or
.) any transaction from which the director derived an improper personal
benefit.
A principal effect of this provision of the Certificate of Incorporation is
to limit or eliminate the potential liability of the Company's directors for
monetary damages arising from any breach of their duty of care, unless the
breach involves one of the four exceptions described above. The Certificate of
Incorporation and the Company's Bylaws further provide for the indemnification
of the Company's directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, including circumstances
in which indemnification is otherwise discretionary. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
As of November 30, 1998, there was no pending litigation or proceeding
involving any director, officer, employee or agent of the Company in which
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
The foregoing provisions may reduce the likelihood of derivative litigation
against directors and may discourage or deter stockholders from suing
directors for breaches of their duty of care, even though such an action, if
successful, might otherwise benefit the Company and its stockholders.
Control by Current Executive Officers, Directors and Stockholders. As of
November 30, 1998, the Company's executive officers, directors and principal
shareholders (including National Home Healthcare Corp ("NHHC"), the Company's
largest stockholder) owned 38.9% of the issued and outstanding shares of
Common Stock. As a result, they can significantly influence the election of
the Company's Board of Directors and the outcome of other matters requiring a
vote of stockholders. Additionally, NHHC's ownership of 30.5% of the Company's
issued and outstanding Common Stock as of November 30, 1998, could give NHHC
significant influence over the Company and its operations. Further, the voting
power of NHHC and the Company's executive officers and directors could delay,
defer or prevent a change in control of the Company, adversely affecting the
market price of the Common Stock.
In addition, each Selling Stockholder entered into a subscription agreement
with the Company which permits the Company's executive officers to vote, in
their sole and exclusive discretion, the Shares with respect to any proposal
upon which the Company's stockholders may vote, including any issuance or
issuances of additional Company securities for the purpose of raising funds
for the Company. These stockholder voting agreements and irrevocable proxies
terminate with respect to a Share on the first to occur of July 16, 1999 or
the transfer of the Share by the Selling Stockholder. These voting rights will
increase the executive officers' ability to influence the election of the
Company's Board of Directors and the outcome of other matters requiring a vote
of stockholders. The Company will only enforce these voting rights against the
Selling Stockholders; subsequent holders of the Shares will have the right to
vote the Shares. See "Recent Developments" and "Description of Capital Stock--
Stockholder Voting Agreement and Irrevocable Proxy."
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Authorization of Preferred Stock. The Company's Certificate of Incorporation
authorizes the issuance of 1,000,000 shares of "blank check" preferred stock
with such designation, rights and preferences as may be determined from time
to time by the Board of Directors. Accordingly, without stockholder approval,
the Board of Directors may issue preferred stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting
power or other rights of the holders of Common Stock. Further, under certain
circumstances, the Board of Directors could use the preferred stock as a
method of discouraging, delaying or preventing a change in control of the
Company.
FORWARD-LOOKING STATEMENTS
This Prospectus may contain or incorporate by reference forward-looking
statements. The factors identified under "Risk Factors" are important factors
(but not necessarily all important factors) that could cause actual results to
differ materially from those expressed in any forward-looking statement made
by, or on behalf of, the Company.
Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the Company
cautions that, while such assumptions or bases are believed to be reasonable
and are made in good faith, assumed facts or bases almost always vary from
actual results, and the differences between assumed facts or bases and actual
results can be material, depending on the circumstances. Where, in any
forward-looking statement, the Company or its management expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and is believed to have a reasonable basis, but there
can be no assurance that the statement of such expectation or belief will
result or be achieved or accomplished. The words "believe", "expect",
"estimate", "project" and "anticipate" and similar expressions identify
forward-looking statements.
RECENT DEVELOPMENTS
July Private Placement. On July 16, 1998, the Company completed the private
placement (the "Private Placement") of 474,330 shares of Common Stock to the
Selling Stockholders (and certain other stockholders) at a per share price of
$3.375. The Common Stock issued to the Selling Stockholders in the Private
Placement was not registered with the SEC under the Securities Act and was
offered and sold in reliance on exemptions from registration provided in
Section 4(2) and Section 4(6) of the Securities Act and Rule 506 of Regulation
D under the Securities Act.
The Private Placement was not underwritten. The Company entered into a
Placement Agent Agreement with H.J. Meyers & Co, Inc. (the "Placement Agent")
pursuant to which the Placement Agent received 10% of the aggregate value of
the Common Stock issued in the Private Placement and is being issued 150,000
warrants to purchase 150,000 shares of Common Stock at $4.00 per share which
expire in four years. The Placement Agent also received a non-accountable
expense allowance of 3% of the Private Placement proceeds.
In connection with the Private Placement, each Selling Stockholder entered
into a Registration Rights Agreement with the Company (collectively, the
"Registration Rights Agreements") pursuant to which the Company agreed to use
its reasonable best efforts to file and obtain effectiveness of this
Registration Statement covering the Shares issued to the Selling Stockholders
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 SEC within such 90 day period other than by reason of delay of a Selling
Stockholder or its counsel or the activity or inactivity of the SEC, 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. All
expenses incurred in any registration of the 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
Stockholder. See "Plan of Distribution."
9
<PAGE>
Each Selling Stockholder also entered a Subscription Agreement with the
Company (collectively, the "Subscription Agreements") in connection with the
Private Placement pursuant to which each Selling Stockholder agreed to vote
its Shares as directed by Warren D. Stowell or David A. Jesse, as officers and
directors of the Company, and granted its irrevocable proxy to Messrs. Stowell
or Jesse in connection with such voting agreement. Either of Messrs. Stowell
and Jesse has the right to vote, in their sole and exclusive discretion, such
Shares with respect to any proposal upon which the Company's stockholders may
vote, including any issuance or issuances of additional Company securities for
the purpose of raising funds for the Company. These stockholder voting
agreements and irrevocable proxies terminate with respect to a Share on the
first to occur of July 16, 1999 or the transfer of the Share by the Selling
Stockholder. The Selling Stockholders are obligated to execute any additional
proxy documents, stockholders voting agreements and/or take any further action
Messrs. Stowell or Jesse may reasonably request to carry out the purposes of
the stockholder voting agreements and irrevocable proxies. The Company will
only enforce these voting rights against the Selling Stockholders; subsequent
holders of the Shares will have the right to vote the Shares.
The Company received approximately $1,300,000 of net proceeds from the
Private Placement and has used such proceeds to permit the Company to maintain
compliance with the HMO Requirements, to fund its expansion and growth plans
and for working capital and other general corporate purposes.
Proposed Private Placement. On December 2, 1998, the Company signed a letter
of intent with Brookstreet Securities Corporation ("Brookstreet") for a
proposed private placement to accredited investors of $6,000,000 in $10.00
units consisting of one share of Preferred Stock and one warrant to purchase
Common Stock at an exercise price of $5.00 per share. The Preferred Stock
would have a $10.00 liquidation preference per share, would accrue dividends
at 10% per annum, payable quarterly, and would be convertible at $3.75 per
share of common stock, to be adjusted after 2 and 4 years to 75% of the market
price of the Company's common stock (but in no cases below $2.75 per share).
The Company would be required to register the shares of common stock into
which the Preferred Stock would be convertible and into which the warrants
would be exercisable within 90 days following the completion of the offering.
In connection with this offering, Brookstreet would receive a 10% commission,
an expense reimbursement of 3%, a warrant to purchase up to 100,000 shares of
common stock at $1.50 per share and a warrant to purchase up to 500,000 shares
of common stock at $4.00 per share.
This proposed private placement is subject to a number of conditions,
including the completion of a due diligence review by Brookstreet and approval
of the stockholders of the Company in the event the Company desires to issue
more than 150,000 units. While the Company intends to proceed with this
offering, there can be no assurance that it will be completed.
Continued Operating Losses. For the period since October 31, 1998, the
Company has continued to incur operating losses consistent with management's
expectations with respect to costs associated with the start-up, development
and expansion of the HMO.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders.
10
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of Shares beneficially owned by
each of the Selling Stockholders and included herein, and the nature of any
relationship which the Selling Stockholders have had within the past three
years with the Company. The Shares offered by this Prospectus may be offered
from time to time by the Selling Stockholders named below. All of the Selling
Stockholders own less than 1% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Owned Prior Number of Shares Owned After
Name of Selling Stockholder to this Offering Being Offered this Offering(*)
- --------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Andrew S. Ramsey............ 7,500 7,500 0
Anoop K. Srivastava......... 5,000 5,000 0
Anthony C. Diana and Maria
B. Diana................... 5,000 5,000 0
Bernard Moskowitz........... 5,000 5,000 0
Carl N. Saporito and Brenda
K. Saporito................ 43,000 30,000 13,000
Charles Duelfer............. 5,000 5,000 0
Charles Levey............... 19,500 5,500 14,000
Charles W. Moore............ 7,100 7,000 100
Charlotte Mencarini (AKA
Shirley Mencarini)......... 40,000 40,000 0
Clayton C. Connolly......... 3,000 3,000 0
Cowen & Co., Inc. IRA
FBO/Anthony Gentile........ 17,500 3,000 14,500
Cowen & Co., Inc IRA
FBO/Marty A. DiFusco-SEP-
IRA........................ 4,400 1,100 3,300
David K. Armstrong.......... 5,000 5,000 0
David L. Genecco............ 20,000 20,000 0
David Taub.................. 5,000 5,000 0
Gerald Gordon............... 30,000 30,000 0
Gwen P. Watkins............. 17,500 17,500 0
Hanan Ofer.................. 54,000 38,000 16,000
Harry Ben Turner............ 2,750 1,750 1,000
Harry Silverman and Karen
Silverman.................. 12,000 12,000 0
Hubert Riegler.............. 20,000 20,000 0
Hytech Enterprises.......... 7,600 7,600 0
Irving Schotz............... 5,000 5,000 0
John A. Kruger.............. 1,500 1,500 0
John Saporito............... 52,000 12,000 40,000
Jon P. Morris and Cynthia M.
Morris..................... 5,000 5,000 0
Joseph E. Oliveri........... 5,000 5,000 0
Kathleen Coughlin-Glanz..... 6,000 5,000 1,000
Laurie A. Testa............. 23,000 5,000 18,000
Leo Genecco & Sons, Inc..... 20,000 20,000 0
Living Trust of Stuart K.
Mathis..................... 5,000 5,000 0
Mark C. Codianna............ 1,500 1,500 0
Marvin O. Livingston and
Betty J. Livingston........ 6,000 6,000 0
Max K. Miethe............... 2,250 2,250 0
Melvin Katz................. 5,000 5,000 0
Michael J. Rolfs............ 26,611 11,111 15,500
Pradeep Gandhi.............. 10,000 5,500 4,500
Paul Enquist................ 3,129 3,129 0
Peter Gun, Inc.............. 15,000 5,000 10,000
Philip J. and Susan P.
Villapiano................. 15,174 4,890 10,284
Philip Licciardi............ 5,000 5,000 0
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Owned Prior Number of Shares Owned After
Name of Selling Stockholder to this Offering Being Offered this Offering(*)
- --------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Ralph C. Surman............... 15,000 5,000 10,000
Ralph Sacheli................. 5,000 3,000 2,000
Ramon R. Bradway and Robert W.
Bradway...................... 1,500 1,500 0
Richard K. Clarkson........... 5,500 5,500 0
Richard P. Iannuzzo........... 5,000 5,000 0
Richard W. Johnson............ 7,000 7,000 0
Robert A. and Rosemary W.
Reed......................... 30,000 10,000 20,000
Rolfe A. Lindberg............. 5,000 5,000 0
Ronald C. Nayman.............. 5,000 5,000 0
Russel T. Boyle, Jr........... 5,000 5,000 0
S. David Harris and Nancy J.
Harris....................... 7,000 7,000 0
Steven C. Balonek............. 5,000 5,000 0
Terry Overholser.............. 1,500 1,500 0
Thomas P. Cregan.............. 3,000 3,000 0
Werner Beutel................. 5,300 3,000 2,300
William W. Patterson, III and
Judith K. Patterson.......... 7,000 6,000 1,000
------- ------- -------
TOTAL....................... 660,814 464,330 196,484
======= ======= =======
</TABLE>
- --------
(*) Assumes all Shares held by such Selling Stockholder and registered hereby
will be offered and sold and that such Shares will not be sold to
affiliates of such Selling Stockholder.
12
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered and sold from time to time by the Selling
Stockholders. The Selling Stockholders will act independently of the Company
in making decisions with respect to the timing, manner and size of each sale.
As used herein, "Selling Stockholders" includes pledgees, donees, transferees
and other successors in interest to the Selling Stockholders selling shares
received from a Selling Stockholder after the date of this Prospectus. Such
sales may be made on the Nasdaq SmallCap Market in ordinary brokerage
transactions or otherwise, at market prices prevailing at the time of the
sale, at prices related to the then- prevailing market price or in negotiated
transactions, including pursuant to an underwritten offering or pursuant to
one or more of the following methods: (i) purchases by a broker-dealer as
principal and resale by such broker-dealer for its account pursuant to this
Prospectus; (ii) ordinary brokerage transactions and transactions in which a
broker solicits purchasers; (iii) block trades in which a broker-dealer so
engaged will attempt to sell the shares as agent but may take a position and
resell a portion of the block as principal to facilitate the transaction; and
(iv) exchange distributions in accordance with applicable rules. In effecting
sales, broker-dealers engaged by the Selling Stockholders may arrange for
other broker-dealers to participate. Broker-dealers may receive commissions or
discounts from the Selling Stockholders in amounts to be negotiated
immediately prior to the sale.
In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares in the course of hedging the positions they assume with the Selling
Stockholders. The Selling Stockholders may also sell Shares short and
redeliver such Shares to close out such short positions. The Selling
Stockholders may also enter into option or other transactions with broker-
dealers which require the delivery to the broker-dealer of Shares, which the
broker-dealer may resell or otherwise transfer. The Selling Stockholders may
also loan or pledge Shares to a broker-dealer and the broker-dealer may sell
the Shares so loaned, or upon a default of the broker-dealer may effect sales
of the pledged Shares.
In connection with the sales of Shares, underwriters or agents may receive
compensation from the Selling Stockholders or from purchasers of the Shares
for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell Shares to or through dealers and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they act as agents. Underwriters, dealers and agents that participate in
the distribution of Shares may be deemed to be underwriters, and any discounts
or commissions received by them from the Selling Stockholders and any profit
on the resale of Shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Registration Rights Agreements provide that the Company will indemnify
the Selling Stockholders against certain liabilities, including liabilities
under the Securities Act. The Selling Stockholders may agree to indemnify any
broker-dealer or agent that participates in transactions involving sales of
Shares against certain liabilities, including liabilities under the Securities
Act. The Registration Rights Agreements also provide that costs, fees and
expenses in connection with the registration of the Shares will be borne by
the Company, and that commissions and discounts, if any, attributable to the
sale of the Shares will be borne by the Selling Stockholders.
The offering of the Shares pursuant to this Prospectus will terminate on the
earlier of (i) the time when all of the Shares offered pursuant to this
Prospectus have been sold by the Selling Stockholders or (ii) the time when
all such Shares are eligible to be sold pursuant to Rule 144(k) under the
Securities Act.
13
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock, par value $.001 per share, and 1,000,000 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock"). As of November 30,
1998, the number of outstanding shares of Common Stock was 2,919,330, and
there were no issued or outstanding shares of Preferred Stock.
Common Stock
Each record holder of Common Stock is entitled to one vote for each share
held on all matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by the
Company's Certificate of Incorporation. Holders of outstanding shares of
Common Stock are entitled to those dividends declared by the Board of
Directors out of legally available funds. In the event of liquidation,
dissolution, or winding up of the affairs of the Company, holders of Common
Stock are entitled to receive, ratably, the net assets of the Company
available to them. Holders of outstanding Common Stock do not have preemptive,
conversion or other subscription rights, and there are no sinking fund or
redemption provisions applicable to the Common Stock. All of the issued and
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable.
Dividend Policy
The Company has never declared or paid any dividends on its Common Stock and
has no plans to pay any dividends on Common Stock in the foreseeable future.
The policy of the Company's Board of Directors is to retain all available
earnings for working capital and general corporate purposes and to finance the
development of its business. Any future determination to pay dividends on the
Common Stock will be at the discretion of the Company's Board of Directors and
will be dependent upon the Company's financial condition, results of
operations, capital requirements and such other factors as the Board of
Directors deems relevant.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of "blank check" Preferred Stock, with such designation,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, without stockholder approval, the Board of Directors
may issue preferred stock with dividend, liquidation, conversion, voting or
other rights that could adversely affect the voting power or other rights of
the holders of Common Stock. Further, under certain circumstances, the Board
of Directors could use the preferred stock as a method of discouraging,
delaying or preventing a change in control of the Company.
Delaware Law
The Company is subject to Section 203 of the Delaware General Corporation
Law. This statute generally prohibits a publicly-held Delaware corporation
from engaging, under certain circumstances, in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
prior to the date at which the person became an interested stockholder, the
board of directors approved either the business combination or the transaction
in which the person becomes an interested stockholder; (ii) the stockholder
acquires more than 85% of the outstanding voting stock of the corporation
(excluding shares held by directors who are officers or held in certain
employee stock plans) upon consummation of the transaction in which the person
becomes an interested stockholder; or (iii) the business combination is
approved by the board of directors and by at least 66 2/3% of the outstanding
voting stock of the corporation (excluding shares held by the interested
stockholder) at a meeting of stockholders (and not by written consent) held on
or subsequent to the date such person became an interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at
14
<PAGE>
any time within the prior three years did own) 15% or more of the
corporation's voting stock. Section 203 defines a "business combination" to
include mergers, consolidations, stock sales, asset-based transactions and
other transactions resulting in a financial benefit to the interested
stockholder.
Stockholder Voting Agreement and Irrevocable Proxy
Pursuant to the Subscription Agreements, the Shares are subject to
stockholders voting agreements and irrevocable proxies coupled with an
interest whereby each Selling Stockholder agreed to vote its Shares as
directed by Warren D. Stowell or David A. Jesse, as officers and directors of
the Company, and granted its irrevocable proxy to Messrs. Stowell or Jesse in
connection with such voting agreement. Either of Messrs. Stowell and Jesse has
the right to vote, in their sole and exclusive discretion, such Shares with
respect to any proposal upon which the Company's stockholders may vote,
including any issuance or issuances of additional Company securities for the
purpose of raising funds for the Company. These stockholder voting agreements
and irrevocable proxies terminate with respect to a Share on the first to
occur of July 16, 1999 or the transfer of the Share by the Selling
Stockholder. The Selling Stockholders are obligated to execute any additional
proxy documents, stockholders voting agreements and/or take any further action
Messrs. Stowell or Jesse may reasonably request to carry out the purposes of
the stockholder voting agreements and irrevocable proxies. The Company will
only enforce these voting rights against the Selling Stockholders; subsequent
holders of the Shares will have the right to vote the Shares.
Registration Rights Agreements
Each of the Selling Stockholders has entered into a Registration Rights
Agreement with the Company pursuant to which the Company agreed to use its
reasonable best efforts to file and obtain effectiveness of this Registration
Statement covering the Shares issued to the Selling Stockholders 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 SEC
within such 90 day period other than by reason of delay of a Selling
Stockholder or its counsel or the activity or inactivity of the SEC, 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. All
expenses incurred in any registration of the 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
Stockholder. See "Plan of Distribution."
Transfer Agent
American Stock Transfer & Trust Company, New York, New York, is the
Company's transfer agent and registrar for the Common Stock.
15
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the offering and sale of the Shares
will be passed upon for the Company by Holland & Knight LLP, Orlando, Florida.
EXPERTS
The consolidated financial statements of the Company as of July 31, 1998 and
for each of the years in the two year period ended July 31, 1998, have been
incorporated by reference herein and in the registration statement on Form S-3
in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The report of KPMG LLP covering the July 31, 1998 financial statements
contains an explanatory paragraph that states that the Company has experienced
significant operating losses and is seeking additional financing to meet its
regulatory surplus and capital requirements and to fund additional expansion
efforts. If the additional financing is not obtained and the Company fails to
meet these regulatory and capital requirements, there is substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Company has not authorized any dealer, salesperson or other person to
give any information or to represent anything not contained in this Prospec-
tus. You must not rely upon any unauthorized information. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy to any
person in any jurisdiction where such an offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale shall under any circum-
stances create any implication that there has been no change in the affairs of
the Company since the date hereof or that the information contained herein is
correct as of any time subsequent to the date of this Prospectus.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Risk Factors............................................................... 3
Forward-Looking Statements................................................. 9
Recent Developments........................................................ 9
Use of Proceeds............................................................ 10
Selling Stockholders....................................................... 11
Plan of Distribution....................................................... 13
Description of Capital Stock............................................... 14
Legal Matters.............................................................. 16
Experts.................................................................... 16
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SunStar Healthcare, Inc.
464,330 Shares of Common Stock
---------------
PROSPECTUS
---------------
February , 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder.
<TABLE>
<S> <C>
SEC registration fee................................................ $ 512
Nasdaq SmallCap Market additional listing fee....................... 4,743
Printing expenses................................................... 1,500
Accounting fees and expenses........................................ 500
Legal fees and expenses............................................. 15,000
Blue Sky fees and expenses.......................................... 2,525
-------
Total............................................................. $24,780
=======
</TABLE>
All of the above expenses except the SEC registration fee and the Nasdaq
SmallCap Market listing fee are estimated. The Company will bear all of such
expenses.
Item 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or to any stockholder for
monetary damages arising out of such director's breach of fiduciary duty,
except to the extent that the elimination or limitation of liability is not
permitted by the Delaware General Corporation law. The Delaware General
Corporation Law, as currently in effect, permits charter provisions
eliminating the liability of directors for breach of fiduciary duty, except
that such charter provisions may not eliminate or limit the liability of
directors for: (i) any breach of the director's duty of loyalty to a
corporation or its stockholders; (ii) any acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (iii)
any payment of a dividend or approval of a stock purchase or other transaction
that is illegal under Section 174 of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. A principal effect of this provision of the Certificate of
Incorporation is to limit or eliminate the potential liability of the
Company's directors for monetary damages arising from any breach of their duty
of care, unless the breach involves one of the four exceptions described in
clauses (i) through (iv) of the immediately preceding sentence.
The Certificate of Incorporation and the Company's Bylaws further provide
for the indemnification of the Company's directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
The Certificate of Incorporation of the Company provides that (i) the
Company will indemnify any director, officer, employee, or agent of the
Company with respect to actions, suits, or proceedings relating to the Company
and (ii) subject to certain limitations, a director will not be personally
liable for monetary damages for breach of his or her fiduciary duty. In
addition, the Company has entered into an indemnification agreement with each
of the directors of the Company which provides that the director is entitled
to indemnification to the fullest extent permitted by law. Such
indemnification will cover expenses, liabilities, judgments, penalties, fines,
and amounts paid in settlement which are incurred or imposed upon the director
if the director is a party or is threatened to be made a party to any action,
suit, or proceeding of any kind by reason of the fact that such person served
or serves as a director of the Company or served as a director, officer,
employee, or agent with any other enterprise
II-1
<PAGE>
at the request of the Company. The Company also maintains directors' and
officers' liability insurance policy for the benefit of its officers and
directors.
As of November 30, 1998, there was no pending litigation or proceeding
involving any director, officer, employee or agent of the Company in which
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Item 16. Exhibits
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
4.1 Certificate of Incorporation (incorporated by reference from Exhibit
3.1 to the Company's Form SB-2 Registration Statement filed on
February 26, 1996, File No. 333-1650).
4.2 Bylaws (incorporated by reference from Exhibit 3.2 to the Company's
Form SB-2 Registration Statement filed on February 26, 1996, File No.
333-1650).
4.3 Specimen Common Stock Certificate (incorporated by reference from
Exhibit 4.1 to Amendment No. 2 to the Company's Form SB-2 Registration
Statement filed on May 9, 1996, File No. 33-1650).
4.4* Form of Registration Rights Agreement between the Company and the
Selling Stockholders.
4.5* Form of Subscription Agreement between the Company and the Selling
Stockholders.
5.1* Opinion of Holland & Knight LLP as to validity of Common Stock being
offered.
23.1* Consent of Holland & Knight LLP (included in Exhibit 5.1).
23.2* Consent of KPMG LLP.
24.1* Power of Attorney (included on pages II-4 and II-5).
</TABLE>
- --------
*Filed herewith.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the indemnification provisions described herein, or
otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement.
(2) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the
II-2
<PAGE>
Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Heathrow, State of Florida, on February 4, 1999.
Sunstar Healthcare, Inc.
/s/ Warren D. Stowell
By: _________________________________
Warren D. Stowell,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Warren D. Stowell and David A. Jesse and each
of them acting alone, his true and lawful attorneys-in-fact and against, each
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Warren D. Stowell President, Chief Executive February 4, 1999
______________________________________ Officer and Director
Warren D. Stowell (Principal Executive
Officer)
/s/ Jack W. Shields Vice President and Chief February 4, 1999
______________________________________ Financial Officer
Jack W. Shields (Principal Financial and
Accounting Officer)
/s/ David A. Jesse Executive Vice President, February 4, 1999
______________________________________ Chief Operating Officer,
David A. Jesse Secretary and Director
/s/ Frederick H. Flalkow Director February 8, 1999
______________________________________
Frederick H. FLalkow
/s/ Steven Flalkow Director February 5, 1999
______________________________________
Steven FLalkow
/s/ Bernard Levine, M.D. Director February 4, 1999
______________________________________
Bernard Levine, M.D.
/s/ Richard Seidelman, M.D. Director January 14, 1999
______________________________________
Richard Seidelman, M.D.
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page Number
------- ----------- -----------
<C> <S> <C>
4.1 Certificate of Incorporation (incorporated by reference
from Exhibit 3.1 to the Company's Form SB-2 Registration
Statement filed on February 26, 1996, File
No. 333-1650).
4.2 Bylaws (incorporated by reference from Exhibit 3.2 to
the Company's Form SB-2 Registration Statement filed on
February 26, 1996, File No. 333-1650).
4.3 Specimen Common Stock Certificate (incorporated by
reference from Exhibit 4.1 to Amendment No. 2 to the
Company's Form SB-2 Registration Statement filed on May
9, 1996, File No. 33-1650).
4.4* Form of Registration Rights Agreement between the
Company and the Selling Stockholders.
4.5* Form of Subscription Agreement between the Company and
the Selling Stockholders.
5.1* Opinion of Holland & Knight LLP at to validity of Common
Stock being offered.
23.1* Consent of Holland & Knight LLP (included in Exhibit
5.1).
23.2* Consent of KPMG LLP.
24.1* Power of Attorney (included on pages II-4 and II-5).
</TABLE>
- --------
* Filed herewith.
<PAGE>
EXHIBIT 4.4
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into by
---------
SUNSTAR HEALTHCARE, INC., a Delaware corporation (the "Company"), and the person
-------
whose name appears on the signature page attached thereto (individually a
"Holder" and, together with the holders of other shares of Common Stock of the
------
Company issued pursuant to the Company's confidential offering memorandum,
hereinafter described as the "Holders").
-------
R E C I T A L S:
---------------
WHEREAS, pursuant to a Confidential Offering Memorandum dated June 5, 1998
(the "Memorandum"), the Company has offered for sale Four Hundred Seventy-Four
----------
Thousand Three Hundred Thirty (474,330) shares of its Common Stock, $.001 par
value per share (the "Common Stock"), at a price of $3.75 per share; and
------------
WHEREAS, pursuant to the terms of the Memorandum and in order to induce
each of the Holders to enter into a certain subscription agreement between the
Company and each Holder (each a "Subscription Agreement" and together the
----------------------
"Subscription Agreements") to purchase Common Stock, the Company has agreed to
-----------------------
enter into this Agreement and grant to the Holders the registration rights
granted herein; and
WHEREAS, it is intended by the Company that this Agreement shall become
effective immediately upon the acquisition by the Holders of the Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Subscription Agreements, the Company hereby agrees
for the benefit of the Holders as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
capitalized terms shall have the following meanings:
"Commission" shall mean the Securities and Exchange Commission.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with the provisions of this Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of Company counsel for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars and costs of insurance,
but excluding any Selling Expenses and expenses of counsel for the Holders of
the Registrable Stock.
"Registrable Stock" shall mean the shares of Company's Common Stock,
-----------------
issued
<PAGE>
pursuant to the terms and conditions of the Subscription Agreement and
the Memorandum which could not be, in the opinion of counsel to the Company,
publicly sold as of the date in question pursuant to Rule 144 under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Selling Expenses" shall mean all transfer taxes, underwriting
----------------
discounts, selling commissions and underwriter expense reimbursement allowances
applicable to the sale of Registrable Stock, as well as all fees and expenses of
counsel for any Holders.
2. Mandatory Registration.
----------------------
(a) The Company shall prepare and file with the Commission, and, on or
prior to the ninetieth (90) day after the closing date, use its reasonable best
efforts to cause to go effective a registration statement on Form S-3 (or, if
such form is unavailable for such a registration, on such other form as is
available for such a registration) covering the resale of the Registrable Stock.
The number of shares of Common Stock initially included in such registration
statement shall be no less than all of the shares of Registrable Stock issued
pursuant to the Memorandum at the final closing of the Offering.
(b) In connection with any registration pursuant to Section 2(a), the
Holders holding a majority of the Registerable Stock shall have, at their sole
expense, the right to select one legal counsel. The Company shall reasonably
cooperate with any such counsel.
(c) The Company shall have the option to include other securities in
the registration statement filed pursuant to Section 2(a).
3. Certain Damages. The Company shall use its reasonable best efforts to
---------------
obtain effectiveness of the registration statement within 90 days following the
final closing date of the Offering. If the registration statement covering the
Registrable Stock required to be filed by the Company pursuant to Section 2(a)
hereof is not declared effective by the Commission within 90 days following the
final closing date of the Offering (other than by reason of any act or failure
to act in a timely manner by the Holders or Holders' counsel, or if extended due
to any review or revisions contemplated under Section 6(b), then the Company
will make payments to the Holders in such amounts and at such times as shall be
determined pursuant to this Section 3 as partial relief for the damages to the
Holders by reason of any such delay in or reduction of their ability to sell
the Registrable Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay cash equal to
1% of the aggregate subscription price for the first month, and 2% of the
aggregate subscription price per month thereafter (the "Penalty(ies)") to each
------------
Holder in the event that such registration statement has not been declared
effective by the Commission within 90 days of the last closing. These time
periods, the Penalties, and other obligations under the registration rights
agreement may be extended or suspended under terms and conditions mutually
agreed to by the Company and each
C-2
<PAGE>
Holder. However, in no event shall such Penalties total greater than the
aggregate subscription amount. There shall be excluded from such period any
delays which are solely attributable to changes required by the Holder, or its
counsel, in the registration statement, or the form of the registration
statement, including, without limitation, changes in the plan of distribution,
or to the failure of the Holder to conduct a review of the registration
statement pursuant to Section 6(b) below in a reasonably prompt manner, or such
period as may be caused by reason of activity or inactivity on the part of the
Commission or other regulatory body, including, but not limited to any period
during which the Company must complete its annual audit. Such amounts shall be
paid in readily available funds. Payments in readily available funds pursuant
hereto shall be made within ten days after the end of each period that gives
rise to such obligation. Upon agreement of both the Holder and the Company, any
liquidated damages due under the provisions of this subparagraph may be paid in
shares of Common Stock, with registration rights identical to the Registrable
Stock.
4. Expiration of Registration Rights. The obligations of the Company to
---------------------------------
register shares of the Registrable Stock under Sections 2 of this Agreement,
shall terminate upon the earlier of the date on which all of the Registerable
Stock has been sold or upon the date on which, in the opinion of counsel to the
Holders, the Registerable Stock may be publicly sold pursuant to Rule 144(k)
under the Securities Act, unless such obligations terminate earlier in
accordance with the terms of this Agreement.
5. Cooperation with Company. Holders will cooperate with the Company in
------------------------
all reasonable respects in connection with this Agreement, including, without
limitation, timely supplying all information reasonably requested by the Company
and executing and returning all documents reasonably requested in connection
with the registration and sale of the Registrable Stock. Failure of any Holder
to promptly and adequately respond to the Company's reasonable requests or to
cooperate with the Company shall be deemed an extension of the 90 day
registration period set forth in Section 2(a) hereinabove, equal to the duration
of such non-cooperative or non-responsive period.
6. Registration Procedures. If and whenever the Company is required by
-----------------------
any of the provisions of this Agreement to use its reasonable best efforts to
effect the registration of any shares of Registrable Stock under the Securities
Act, the Company shall (except as otherwise provided in this Agreement), as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement and
shall use its reasonable best efforts to cause such registration statement to
become effective and remain effective for the period of distribution
contemplated thereby (determined as hereinafter provided). The Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.;
C-3
<PAGE>
(b) furnish to the Holder copies of reasonably complete drafts of all
such documents proposed to be filed (including exhibits, if any), and the Holder
shall have the opportunity to object, within three business days, to any
information pertaining solely to such Holder that is contained therein and the
Company will make the corrections reasonably requested by such Holder with
respect to such information prior to filing any such registration statement or
amendment. Any period of review and revisions resulting from such review shall
be added to the time in which the registration statement is to be filed and no
penalty shall be assessed as a result of such period;
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of distribution and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(d) furnish to each seller of Registrable Stock and/or its legal
counsel such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus or any amendment or supplement to any
prospectus, in conformity with the requirements of the Securities Act, and such
other documents, as such persons may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Stock covered by such
registration statement;
(e) use its reasonable best efforts to register and qualify the
Registrable Stock covered by such registration statement under such other
securities laws or "blue sky" laws of such jurisdictions as the sellers of the
Registrable Stock reasonably shall request, and do any and all other acts and
things which may be necessary or advisable to enable such seller of Registrable
Stock to consummate the public sale or other disposition in such jurisdiction of
the Registrable Stock owned by such seller, except that the Company shall not
for any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or to file
therein any general consent to service of process: or shall not be obligated to
file a registration statement at any time if a special audit of the Company
would be required by the rules and regulations of the Commission: or to take any
other actions or submit itself or its directors or officers or any resolutions,
obligations or burdens having a material adverse economic effect on it or them;
(f) use its reasonable best efforts to list the Registrable Stock
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed, if the listing of such securities is
then permitted under the rules of such exchange. The Company shall provide a
transfer agent and registrar, which may be a single entity, for the Registrable
Stock not later than the effective date of the Registration Statement; and
(g) promptly notify each seller of Registrable Stock at any time when
a
C-4
<PAGE>
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and
(h) cooperate with each Holder who holds Registrable Stock being
offered and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Stock to be sold pursuant to the registration
statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the managing underwriter or underwriters, if any, or such
Holder may reasonably request and registered in such names as the managing
underwriters or underwriters, if any, as the Holder may request.
In connection with registration hereunder, the sellers of Registrable Stock
will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In the event the registration pertains to an underwritten offering, the
Company and each seller agree to enter into a written agreement with the
managing underwriter containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
For purposes of Section (6) hereof, the period of distribution of
Registrable Stock shall be deemed to extend until the earlier of the sale of all
Registrable Stock covered thereby or the date on which, in the opinion of
counsel to the Holder, the Registerable Stock may be publicly sold pursuant to
Rule 144(k) under the Securities Act.
7. Expenses. The Company will pay all Registration Expenses in
--------
connection with each registration of Registrable Stock pursuant to the
provisions of this Agreement. All Selling Expenses in connection with each such
registration statement shall be borne by the Holders in proportion to the number
of shares sold by each, or by such Holders other than the Company (except to the
extent the Company shall be a seller) as they may agree.
8. Indemnification and Contribution.
--------------------------------
(a) Company Indemnity. In the event of a registration of any of
-----------------
Holder's Registrable Stock under the Securities Act pursuant to the provisions
of this Agreement, the Company shall indemnify and hold harmless, to the extent
permitted by law, each seller of such Registrable Stock thereunder, and each
other person, if any, who controls such seller within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, or controlling person may become subject under
the Securities Act or
C-5
<PAGE>
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Stock was registered under the Securities Act
pursuant to the provisions of this Agreement, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such seller, and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided that the Company will not be liable in any such
case if and to the extent that any such loss, claim, damage or liability arises
out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished by
any such seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus; or (ii) such
Holder's failure to deliver a copy of the final prospectus as then amended or
supplemented after the Company has furnished such Holder with a sufficient
number of copies of the same, but only if delivery of same is required by law
and the same would have cured the defect giving rise to any such loss,
claim, damage, liability or expense.
(b) Holder Indemnity. In the event of a registration of any of the
----------------
Registrable Stock under the Securities Act pursuant to the provisions of this
Agreement, each seller of such Registrable Stock thereunder, severally and not
jointly, will indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of the Securities Act, each officer of
the Company who signs the registration statement, each director of the Company,
each underwriter and each person who controls any underwriter within the meaning
of the Securities Act, against all losses, claims, damages or liabilities,
joint or several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement under which such Registrable Stock was registered under the Securities
Act pursuant to the provisions of this Agreement, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damages, liability or action; provided that such
seller will be liable hereunder in an amount not to exceed the net proceeds
received by such seller in the sale of its Registrable Stock pursuant to such
registration statement and, in any such case, if and only to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller furnished in writing to the Company by such seller specifically for use
in such registration statement or prospectus.
C-6
<PAGE>
(c) Notice: Right to Defend. Promptly after receipt by an indemnified
-----------------------
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party, in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any such liability other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party if such
indemnifying party is prejudiced by such omission. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party under this Section
9 to such effect, the indemnifying party shall not be liable for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided that if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise participate in
the defense of such action, with the expenses and fees of such separate counsel
and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder of Registrable Stock exercising rights under this
Agreement, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 9 but it is judicially determined (by
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 9, then, and in each such case,
the Company and such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of its Registrable
Stock offered by the registration statement bears to the public offering price
of all securities offered by such registration statement (in an amount in any
case not to exceed the net proceeds received by such seller in the sale of its
Registrable Stock pursuant to such registration statement), and the Company is
responsible for the remaining portion; provided that, in any such case, no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
C-7
<PAGE>
10. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Registrable Stock without
registration.
11. Successors and Assigns. The rights of the Holders granted under this
----------------------
Agreement, including the rights to cause the Company to register the Registrable
Stock, may not be assigned without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the Company and each of
the Holders.
12. Entire Agreement. This Agreement and the Subscription Agreement of
----------------
even date herewith express the entire understanding of the Company and each of
the Holders of Registrable Stock and contemporaneous agreements and undertakings
of the Company and each of the Holders of Registrable Stock with respect to the
subject matter of this Agreement.
13. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed with confirmation of
receipt, or delivered by hand or by a nationally recognized overnight delivery
service, addressed as follows:
(e) If to the Company, at: SUNSTAR HEALTHCARE, INC.
300 International Parkway
Suite 230
Heathrow, Florida 32746
Attention: David A. Jesse
C-8
<PAGE>
Telecopier: (407)304-1088
or at such other address or addresses as shall have been furnished in writing to
the Holders, or
(f) If to any Holder, to the address of such Holder as it appears in
the stock ledger of the Company.
(g) Any notice so addressed, when mailed by registered or certified
mail shall be deemed to be given three days after so mailed, when telexed shall
be deemed to be given when transmitted, or when delivered by hand or overnight
shall be deemed to be given when delivered.
14. Amendment and Waiver. This Agreement may be amended, and the
--------------------
observance of any term of this Agreement may be waived, but only with the
written consent of the Company and persons holding not less than 51% of all
outstanding Registrable Stock.
15. Governing Law. This Agreement shall be construed in accordance with
-------------
and governed by the internal, substantive laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
16. Invalidity of Provisions. If any provisions of this Agreement shall
------------------------
be determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
17. Headings. The headings in this Agreement are for purposes of
--------
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any of the provisions of this Agreement.
18. Time of the Essence. Time shall be of the essence in this Agreement.
-------------------
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the ____ day of ____________________, 1998.
SUNSTAR HEALTHCARE, INC.,
a Delaware corporation
C-9
<PAGE>
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
HOLDER
By:
----------------------------------
Name:
--------------------------------
C-10
<PAGE>
EXHIBIT 4.5
<PAGE>
Name of Subscriber:_____________________________________________
Total Number of Shares of Common Stock: ________________________
SUNSTAR HEALTHCARE, INC.
SUBSCRIPTION AGREEMENT, STOCKHOLDER VOTING AGREEMENT AND PROXY
(QUESTIONNAIRE AND INVESTMENT REPRESENTATION)
THE SECURITIES BEING SUBSCRIBED FOR HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE
STATE SECURITIES LAWS DUE TO THE LIMITED
NUMBER OF PERSONS BEING OFFERED TO
AND THE PRIVATE NATURE
OF THE OFFERING.
FURTHER, THE SECURITIES BEING SUBSCRIBED FOR MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO TRANSACTIONS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES
LAWS, OR COMPLIANCE
THEREWITH.
1. Instructions. This subscription agreement, stockholder voting
------------
agreement and proxy (questionnaire and investment representation) (this
"Agreement") must be executed and delivered by each prospective investor (the
---------
"Subscriber") in the Common Stock (the "Securities") of SunStar Healthcare,
---------- ----------
Inc., a Delaware corporation (the "Company") being offered pursuant to a
-------
Confidential Memorandum dated ____________, 1998, and any amendments or
supplements thereto, including copies of the Company's 1997 annual report filed
on Form 10-KSB and its quarterly report on Form 10-QSB for the period ended
January 31, 1998 (collectively the "Memorandum"). If your answer to any of the
----------
following questions, representations or warranties is negative or not
applicable, you must indicate such in writing: otherwise, your answer will be
deemed to be in the affirmative or otherwise as indicated.
If the investor is a partnership, it must furnish a copy of its partnership
agreement and such further information as may be required to satisfy the Company
that such partnership is a pre-existing business entity which was not formed
specifically for the purpose of making this investment. If the investor is a
business trust (IRA, Keogh plan trust, qualified pension and/or
D - 1
<PAGE>
profit sharing plan trust, custodial account or other such account) or a
corporation or other legal entity, unless otherwise indicated, all responses are
being made on behalf of each of the principal beneficiaries of the trust and the
shareholders of the corporation. In addition, you must furnish the Company with
a copy of the instrument (including all amendments) creating the entity.
Your answers will be kept strictly confidential at all times; provided,
however, that the Company may disclose the information provided for the purpose
of proving compliance with any and all applicable laws, including securities and
tax laws.
Any questions regarding this Agreement or your investment should be
directed to Mr. David A. Jesse, Executive Vice President and Chief Operating
Officer, SunStar Healthcare, Inc., 300 International Parkway, Suite 230,
Heathrow, Florida 32746, Telephone: 407-304-1066, Facsimile: 407-304-1088.
Prospective Investors should retain their own professional advisors to
review and evaluate the economic, tax and other consequences of an investment in
the Company.
THE SECURITIES OFFERED PURSUANT TO THIS AGREEMENT (QUESTIONNAIRE AND
INVESTMENT REPRESENTATION), AND THE MEMORANDUM (COLLECTIVELY, THE
"OFFERING MATERIALS") HAVE NOT BEEN FILED OR REGISTERED WITH OR
------------------
APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"), NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
----------
ADEQUACY OF THE OFFERING MATERIALS.
THE SECURITIES OFFERED HEREBY ARE BEING OFFERED PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS FOR NON-PUBLIC OFFERINGS. SUCH
EXEMPTIONS LIMIT THE NUMBER AND TYPES OF INVESTORS TO WHICH THE
OFFERING WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFER OF THE
INTERESTS.
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO
CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS
WILL BE REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND
UNDERSTAND THE TERMS OF THIS OFFERING.
D - 2
<PAGE>
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY.
REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS
NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION
REQUIREMENTS.
THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES
TO RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED
DOCUMENTS TO THE COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO
PURCHASE ANY OF THE SECURITIES OFFERED HEREBY.
THE OFFERING MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE
PLACEMENT OF THE SECURITIES AND DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT AUTHORIZED. ANY REPRODUCTION OR DISTRIBUTION OF
THE OFFERING MATERIALS IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY
OF THEIR CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY,
IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING
RESTRICTIONS MAY PLACE HIMSELF AND THE COMPANY IN VIOLATION OF FEDERAL
OR STATE SECURITIES LAWS.
NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE
OFFERING AND SALE OF SECURITIES, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON
D - 3
<PAGE>
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
APPLICABLE STATE SECURITIES LAWS. PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
2. General Information.
Age: ____________________________________________
Residence Address: ____________________________________________
____________________________________________
____________________________________________
Mailing Address: ____________________________________________
(if different) ____________________________________________
____________________________________________
Telephone: ____________________________________________
Social Security No.: ____________________________________________
Occupation: ____________________________________________
Business Name and
Address: ____________________________________________
____________________________________________
____________________________________________
____________________________________________
Business Telephone: ____________________________________________
Describe Current Employment or Business Activity:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
D - 4
<PAGE>
How Long: ____________________________________________
3. Knowledge and Experience in Business and Financial Affairs.
Have you invested with the Company previously:
Yes____ No____
Have you ever invested in any "restricted" stock or unmarketable securities
previously:
Yes____ No____
If so, please briefly explain the nature of the investments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(In lieu of answering the two immediately preceding questions, please attach
such information as you feel is necessary to provide the information requested.)
4. Accredited Investor Status. The Subscriber represents and warrants
that the answers to the following questions are correct (check if applicable).
If none of the following applies to you please leave a blank.
_____(i) I am a natural person whose individual net worth,
individually or together with my spouse, at the time of
purchase exceeds $1,000,000 (at the time of his or her
purchase);
_____(ii) I am a natural person who had an individual income in excess
of $200,000 or a joint income with my spouse in excess of
$300,000 in each of the two most recent years;
_____(iii) I am a broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934;
_____(iv) I am an employee benefit plan, including an individual
retirement account, within the meaning of Title I of
the Employee Retirement Income Security Act of 1974,
and (a) investment decisions are made by a plan
fiduciary, as defined in section 3(21) of such Act,
which is either a bank, savings and loan association,
insurance company or registered investment adviser, or
(b) such employee benefit plan has total assets in
excess of
D - 5
<PAGE>
$5,000,000 or, (c) it is a self-directed plan and
investment decisions are made solely by persons that
are accredited investors;
_____(v) I am a private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
_____(vi) I am an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, a corporation, a
Massachusetts or similar business trust, or a partnership,
not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000;
_____(vii) I am a director or executive officer of Company;
_____(viii) I am a trust with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii)
under the Act;
_____(ix) I am an entity in which all of the equity owners are
"accredited investors" under Rule 501 (a) of the Securities
Act of 1933, as amended;
_____(x) I am a plan established and maintained by a state, its
political subdivisions, or an agency or instrumentality of
a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000;
_____(xi) I am a bank as defined in Section 3(a)(2) of the Securities
Act or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or
fiduciary capacity;
_____(xii) I am an insurance company as defined in Section 2(13) of
the Securities Act;
_____(xiii) I am an investment company registered under the Investment
Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act; or
_____(xiv) I am a small business investment company licensed by the
U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958.
5. Consideration for Purchase. The undersigned (the "Subscriber")
----------
hereby elects to purchase the Common Stock (the "Securities") in the aggregate
----------
principal amount indicated on the initial page hereof.
6. Understandings of the Subscriber. The Subscriber acknowledges,
understands
D - 6
<PAGE>
and agrees that:
(a) The Company reserves the right to reject all or any part of this
subscription in its sole discretion.
(b) This Agreement is and shall be irrevocable, except that the
Subscriber shall have no obligations hereunder in the event that it is for any
reason rejected by the Company.
(c) The Subscriber will be promptly notified by the Company whether
this subscription has been accepted, either in whole or in part, and if not
accepted in whole, agrees to accept the return of a proportionate part of the
funds tendered to the Company as a refund or a return, and in either case
without interest or deduction.
(d) The Securities shall not be deemed issued to or owned by the
Subscriber until the Company has executed this Subscription Agreement and
received payment for the shares of Common Stock subscribed for herein (evidenced
by a receipt), such executed agreement and receipt constituting evidence of
Subscriber's ownership interest in the Common Stock.
(e) The Securities have not been registered under the Securities Act
of 1933, as amended, or any applicable state law (collectively, the "Securities
----------
Act"): further, the Securities may not be sold, offered for sale, transferred,
- ---
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act: further, the legal consequences of the foregoing mean that the
Subscriber must bear the economic risk of the investment in the Securities for
an indefinite period of time: further, if the Subscriber desires to sell or
transfer all or any part of the Securities, the Company may require the
Subscriber's counsel to provide a legal opinion that the transfer may be made
without registration under the Securities Act and applicable state securities
laws; further, other restrictions discussed elsewhere herein may be applicable;
and further, the Subscriber is subject to the restriction on transfer described
herein and the Company will issue stop transfer orders with the Company's
transfer agent to enforce such restrictions.
(f) No federal or state agency has made any findings or determination
as to the fairness of an investment in the Company, or any recommendation or
endorsement of this investment.
7. Representations and Warranties of the Subscriber. The Subscriber
represents and warrants to the Company as follows:
(a) Subscriber's commitment to investments that are not readily
marketable is not disproportionate to Subscriber's net worth, and Subscriber's
investment in the Securities will not cause such overall commitment to become
excessive.
(b) Subscriber has the financial ability to bear the economic risks of
Subscriber's investment in the Securities, has adequate means of providing for
Subscriber's current needs and
D - 7
<PAGE>
personal contingencies, and has no need for liquidity in this investment.
(c) Subscriber has evaluated the high risks of investing in the
Company and has such knowledge and experience in financial and business matters
in general and in particular with respect to this type of investment that
Subscriber is capable of evaluating the merits and risks of any investment in
the Securities. Subscriber is aware that there is no guarantee that the
Subscriber will realize any gain from this investment, and that the Subscriber
could lose the total amount of the Subscriber's investment in the Securities.
(d) Subscriber has carefully read the Memorandum for the Securities
and all the exhibits to the Memorandum and has been given the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of this investment, and to obtain additional information necessary to
verify the accuracy of the information Subscriber desired in order to evaluate
Subscriber's investment, and in evaluating the suitability of this investment
Subscriber has not relied upon any representations or other information (whether
oral or written), other than that furnished to Subscriber by the Company or its
representatives.
(e) Subscriber has had the opportunity to discuss with Subscriber's
professional, legal, tax, and financial advisors the suitability of an
investment in the Securities for Subscriber's particular tax and financial
situation and all information that Subscriber has provided to the Company
concerning Subscriber and Subscriber's financial position is correct and
complete as of the date set forth below, and if there should be any material
change in such information prior to Subscriber's admission as a shareholder of
the Company, Subscriber will immediately provide such information to the
Company.
(f) The address shown under the Subscriber's signature at the end of
this Subscription Agreement is the Subscriber's principal residence, if
Subscriber is an individual, or its principal business address if a corporation
or other entity.
(g) In making the decision to purchase the Securities, Subscriber has
relied solely upon independent investigations made by Subscriber or on
Subscriber's behalf.
(h) Subscriber is acquiring the Securities for Subscriber's own
personal account, for investment purposes only, and is not purchasing with a
view to, or for, the resale, distribution, subdivision or fractionalization
thereof, and shall not make any sales, or pledge or other transfer thereof
without registration under the Securities Act and any applicable securities laws
of any stale unless an exemption from registration is available under those
laws.
(i) Subscriber is an accredited investor as that term is defined in
Section 501 (a) under Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act. Subscriber is financially able to bear the
economic risk of this investment, including the ability to afford holding the
Securities for an indefinite period of time.
D - 8
<PAGE>
(j) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES ONLY:
If the Subscriber is a partnership, corporation, trust or other entity, (i) the
Subscriber represents and warrants that it was not organized or reorganized for
the specific purpose of acquiring the Securities, (ii) the person on behalf of
Subscriber executing this Agreement has the full power and authority to execute
this Agreement on behalf of such entity and to make the representations and
warranties made herein on its behalf, and (iii) this investment has been
affirmatively authorized, if required, by the governing board of such entity and
is not prohibited by the governing documents of the entity.
(k) The Subscriber understands that the purchase of the Securities is
a highly speculative investment and involves a high degree of risk, including
but not limited lo the risk of economic loss from operations of the Company and
risks described under the heading "Risk Factors" in the Memorandum that the
Company may need additional financing in the future, and that the Company makes
no assurance whatever concerning the present or prospective value of the
Debentures.
The foregoing representations, warranties, agreements, undertakings and
acknowledgments are made by Subscriber with the intent that they be relied upon
in determining Subscriber's suitability as a purchaser of the Securities. In
addition, Subscriber agrees to notify the Company immediately of any change in
any representation, warranty or other information. If more than one person is
signing this Agreement, each representation, warranty and undertaking herein
shall be a joint and several representation, warranty and undertaking of each
such person.
8. Indemnity by Subscriber. The Subscriber understands and acknowledges
that the Company and its officers and directors are relying upon the
representations, warranties and agreements made by the Subscriber to and with
the Company herein and, thus, hereby agrees to indemnify the Company, its
officers and directors, agents, attorneys, and employees, and agrees to hold
each of them harmless from and against any and all loss, damage, liability, or
expense, including reasonable attorneys' fees, that it or any of them may
suffer, sustain, or incur by reason of or in connection with any
misrepresentation or breach of warranty or agreement made by the Subscriber
under this Agreement, or in connection with the sale or distribution of the
Securities by the Subscriber in violation of the Securities Act or any other
applicable law.
9. Miscellaneous Provisions.
(a) No Assignment. The Subscriber agrees that the Subscriber may not
transfer, assign, cancel, terminate or revoke this Agreement or any agreement of
the Subscriber made hereunder (except as otherwise specifically provided
herein).
(b) Further Assurances. At any time and from time to time after the
date of this Agreement, each party shall execute such additional instruments and
take such other and further actions as may be reasonably requested by any other
party to confirm or perfect title to any
D - 9
<PAGE>
property transferred hereunder or otherwise to carry out the intent and purpose
of this Agreement. In addition, in the event the Company or its executive
officers request additional representations by Subscriber, or documentation of
the representations herein set forth, in order better to evaluate Subscriber's
suitability for investment in the Company, the Subscriber will promptly furnish
such additional representations or documentation or, in the alternative, if the
Subscriber considers such additional request to be unreasonable, the Subscriber
will request that his, her or its subscription for the Securities be withdrawn.
(c) Waiver. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed; however, waiver on one
occasion does not operate to effectuate a waiver on any other occasion.
(d) Headings. The article and paragraph headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH. THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
(f) No Oral Modification. This Agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected thereby.
(g) Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements contained herein shall
survive the sale of the Securities pursuant to this Agreement.
(h) Entire Agreement; Binding Agreement. The parties have not made
any representations and warranties with respect to the subject matter hereof not
set forth herein and this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties and, as applicable, their respective heirs, personal
representatives, successors and permitted assigns.
(i) Representation of the Company. The Company has delivered to the
Holder, or has otherwise confirmed delivery to the Holder, of the Company's
Memorandum, including all supplements and Exhibits thereto, in connection with
the sale of the Securities. To the best of the Company's knowledge, the
Memorandum does not, at the date thereof, and as amended or supplemented through
the closing date will not at the closing date, contain any untrue statement
D - 10
<PAGE>
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein in light of
circumstances under which they were made not misleading.
(j) Stockholder Voting Agreement and Proxy.
(i) For a period of 12 months from the date of the closing of
this offering, the Subscriber agrees to vote or cause to be voted all of the
Securities acquired hereby according to the direction of either Warren E.
Stowell or David A. Jesse, officers and directors of the Company, with respect
to any proposal(s) upon which the stockholders of the Company may vote,
including, but not limited to, the issuance of additional securities of the
Company in order to raise or secure additional equity investment in or debt
financing for the Company.
(ii) For a period of 12 months from the date of the closing of
this offering, this executed Agreement shall constitute an irrevocable proxy
coupled with an interest pursuant to the stockholders voting agreement set forth
above in subsection (j)(i) above. During such period, either Warren E. Stowell
or David A. Jesse shall have the right to vote or execute a written consent on
behalf of the Securities acquired by the Subscriber pursuant to the terms and
conditions of this Agreement as Warren E. Stowell or David A. Jesse, in their
sole and exclusive discretion, choose. The Subscriber shall execute any
additional proxy documents and take any further action either Warren E. Stowell
or David A. Jesse may reasonably request to carry out the purposes of the
stockholders voting agreement set forth above.
(k) Registration Rights Agreement. The subscriber has executed and
delivered to the Company, simultaneously herewith, a registration rights
agreement substantially in the same form as attached to the Memorandum as
Exhibit C.
- ---------
D - 11
<PAGE>
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
____________________/$______________________
(Number of Shares/Purchase Price of the shares of Common Stock Subscribed For)
Make checks payable to: SunStar Healthcare, Inc.
Manner in which Title is to be held (Please Check One):
---
1. [] Individual 6. [] IRA of________________________________
2. [] Joint Tenants With 7. [] Trust/Estate/Pension or
Right of Survivorship Profit Sharing Plan
Date Opened:_____________________________
3. [] Community Property 8. [] As a Custodian for
_________________________________________
Under the Uniform Gift to
Minors Act of the State of
4. [] Tenants in Common 9. [] Married with Separate
Property
5. [] Corporation 10. [] Keogh of______________________________
CERTIFICATION: Under penalties of perjury, I certify that the number shown below
is my valid tax identification number and that I am not subject to backup
withholding either because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding. Taxpayer Identification Number: ____________________________.
IN WITNESS WHEREOF, the undersigned has executed this Agreement on this
________ day of ____________, 1998.
_______________________________
Signature of Subscriber
D - 12
<PAGE>
EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON
- --------------------------------------------------------------------------------
Exact Name in Which Title is to be Held
- --------------------------------------------------------------------------------
(Signature)
- --------------------------------------------------------------------------------
Name (Please Print)
- --------------------------------------------------------------------------------
Residence Address: Number and Street
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
Social Security Number
Accepted this ___________ day of ______________, 1998, on behalf of
SunStar Healthcare, Inc.
SUNSTAR HEALTHCARE, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
D - 13
<PAGE>
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
- ----------------------------------------
Name of Entity (Please Print)
By:
------------------------------------
Title:
---------------------------------
Attest:
--------------------------------
Title:
---------------------------------
- ---------------------------------------
Address
- ---------------------------------------
Taxpayer Identification Number
Accepted this ________ day of ________________________, 1998, on behalf of
SunStar Healthcare, Inc.
SUNSTAR HEALTHCARE, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
D - 14
<PAGE>
EXHIBIT 5.1
<PAGE>
February 5, 1999
SunStar Healthcare, Inc.
300 International Pkwy., Suite 230
Heathrow, Florida 32746
Ladies and Gentlemen:
We refer to the registration statement of SunStar Healthcare, Inc., a
Delaware corporation (the "Company") on Form S-3 (the "Registration Statement"),
which is to be filed with the Securities and Exchange Commission (the
"Commission") concurrently herewith, covering the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of 474,330 shares of
the Company's Common Stock, par value $.001 per share (the "Shares"), to be sold
by certain selling stockholders of the Company. This opinion is being delivered
pursuant to the requirements of Item 601(b)(5) of Regulation S-B promulgated by
the Commission under the Securities Act.
This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this opinion
letter should be read in conjunction therewith.
As counsel for the Company, we have examined the Registration
Statement, and we are familiar with the proceedings taken by the Company
relating to it. We also have examined the Certificate of Incorporation and the
Bylaws of the Company and such Company records, certificates and other documents
as we have considered necessary or appropriate for the purposes of this opinion.
In addition, we have made such investigations and have examined such
certificates of public officials and officers of the Company and such other
documents and records as we deemed necessary for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures
on all documents submitted to us as originals, the authenticity of all documents
submitted to us as originals or certified, photostatic or facsimile copies, and
the conformity to the originals of all documents submitted to us as copies. We
also have relied upon the accuracy of the aforementioned certificates of public
officials and, as to matters of fact, of officers of the Company. We have also
relied on Company records and have assumed the accuracy and
<PAGE>
SunStar Healthcare, Inc.
February 5, 1999
Page 2
- --------------------------
completeness thereof.
Based upon the foregoing, it is our opinion that the Shares have been
duly authorized and are validly issued, fully paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement
as counsel who will pass upon the legality of the Shares for the Company and as
having prepared this opinion, and to the use of this opinion as an exhibit
(Exhibit 5.1) to the Registration Statement.
In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Holland & Knight LLP
HOLLAND & KNIGHT LLP
<PAGE>
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
To the Board of Directors
SunStar Healthcare, Inc.:
We consent to the use of our report dated September 18, 1998 relating to
the consolidated balance sheet of SunStar Healthcare, Inc. as of July 31, 1998
and the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the years in the two-year period ended July
31, 1998 incorporated herein by reference in the registration statement
(No. 333) on Form S-3 of SunStar Healthcare, Inc. (the "Company") and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report dated September 18, 1998, which report appears in the July 31,
1998 annual report on Form 10-KSB of SunStar Healthcare, Inc. contains an
explanatory paragraph that states that the Company has experienced significant
operating losses and is seeking additional financing to meet its regulatory
surplus and working capital requirements and to fund additional expansion
efforts. If the additional financing is not obtained and the Company fails to
meet these regulatory and capital requirements, there is substantial doubt about
the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ KPMG LLP
Jacksonville, Florida
February 9, 1999
