As filed with the Securities and Exchange Commission on June 22, 1998
File No. _______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Metropolitan Health Networks, Inc.
(Exact name of issuer as specified in its charter)
Florida 65-0635748
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5100 Town Center Circle, Suite 560
Boca Raton, Florida 33486
(Address of principal executive offices) (Zip Code)
STOCK COMPENSATION AGREEMENT
(Full title of the plan)
Noel J. Guillama, President
5100 Town Center Circle, Suite 560
Boca Raton, Florida 33486
Telephone No.: (561) 416-9484
(Name and address of agent for service)
Copy to:
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, FL 33301
(954) 763-1200
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to be price per offering registration
to be registered registered share(1) price(1) fee(1)
================================================================================
Common Stock
($.001 par value) 30,000 shares $3.04 $91,200 $26.91
- --------------------------------------------------------------------------------
(1) Pursuant to Rule 457(c), the maximum offering price was calculated based
upon the average of the bid and ask price of the Common Stock of the Company on
the NASDAQ SmallCap Market on June 10, 1998.
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
Form S-8 Item Number and Caption Caption in Prospectus
<S> <C>
1. Forepart of Registration Facing Page of Registration Statement
Statement and Outside Front and Cover Page of Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Cover Page of Prospectus and
Cover Pages of Prospectus Outside Cover Page of Prospectus
3. Summary Information, Risk Not Applicable
Factors and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Sales by Selling Security Holders
8. Plan of Distribution Cover Page of Prospectus and Sales by Selling
Security Holders
9. Description of Securities to be Description of Securities;
Registered Consulting Agreements
10. Interests of Named Experts Legal Matters
and Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Incorporation of Certain Documents
Information by Reference by Reference
13. Disclosure of Commission Indemnification of Directors and Officers;
Position on Indemnification for Undertakings
Securities Act Liabilities
</TABLE>
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PROSPECTUS
METROPOLITAN HEALTH NETWORKS, INC.
30,000 Shares of Common Stock
($.001 par value)
Issued Pursuant to a Stock Compensation Agreement
This Prospectus is part of a Registration Statement which registers
30,000 shares of Common Stock, $.001 par value (such shares being referred to as
the "Shares"), of Metropolitan Health Networks, Inc. (the "Company"), which have
been issued, as set forth herein, to Jan Atlas, Esq. ("Atlas") and Charles
Pearlman, Esq. ("Pearlman") (Atlas and Pearlman sometimes collectively referred
to as "Selling Security Holders") pursuant to the terms of a written Stock
Compensation Agreement dated May 15, 1998 between the Company and the Selling
Security Holders ("Stock Compensation Agreement").
The Company has been advised by the Selling Security Holders that they
may sell all or a portion of the Shares from time to time in the
over-the-counter market, in negotiated transactions, directly or through brokers
or otherwise, and that such Shares will be sold at market prices prevailing at
the time of such sales or at negotiated prices, and the Company will not receive
any proceeds from such sales.
No person has been authorized by the Company to give any information or
to make any representation other than as contained in this Prospectus, and if
given or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither the delivery of this Prospectus
nor any distribution of the Shares issuable under the terms of the Agreement
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is June ____, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Company's Common Stock is traded on the NASDAQ SmallCap Market under the symbol
"MDPA." Electronic Reports and other information found through the Electronic
Data Gathering, Analysis & Retrieval System are probably available through the
Commission's website (http://www.sec.gov.).
The Company has filed with the Commission a Registration Statement on
Form S-8 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), with respect to the resale of up to an aggregate of up to
30,000 shares of the Company's Common Stock, which may be issued to the Selling
Security Holders pursuant to the written Agreement. This Prospectus, which is
Part I of the Registration Statement, omits certain information contained in the
Registration Statement. For further information with respect to the Company and
the shares of the Common Stock offered by this Prospectus, reference is made to
the Registration Statement, including the exhibits thereto. Statements in this
Prospectus as to any document are not necessarily complete, and where any such
document is an exhibit to the Registration Statement or is incorporated by
reference herein, each such statement is qualified in all respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full statement of the provisions thereof. A copy of the Registration
Statement, with exhibits, may be obtained from the Commission's office in
Washington, D.C. (at the above address) upon payment of the fees prescribed by
the rules and regulations of the Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the year
ended June 30, 1997.
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarterly periods ended September 30, 1997, December 31, 1997 and March 31,
1998.
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(c) The Company's Current Reports on Form 8-K and amendments
thereto filed August 21, 1997, October 20, 1997, March 9, 1998, April 17, 1998
and May 8, 1998.
(d) All reports and documents filed by the Company pursuant to
Sections 13, 14 or 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
respective date of filing of such documents. Any statement incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document, which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Metropolitan
Health Networks, Inc., 5100 Town Center Circle, Suite 560, Boca Raton, Florida
33486.
THE COMPANY
Metropolitan Health Networks, Inc. (the "Company") was incorporated in
the State of Florida in January 1996 for the purpose of developing a vertically
and horizontally integrated health care delivery network (the "Network"). The
Network provides primary and sub-specialty physician care as well as diagnostic
and therapeutic services.
The Company is developing its Network through the acquisition,
expansion and integration of (i) physician care practices (the "Physician
Practices") together with (ii) laboratories, pharmacies and diagnostic and
rehabilitation centers ("Ancillary Services").
The Company is organized, in principal part, as a multi-county
vertically and horizontally integrated medical group practice. As such, all of
the physicians to be employed by the Company will provide an aggregate minimum
of 75% of their services through the group practice and all physician services
are to be billed under one common Medicare provider number. The Company believes
it will meet all government requirements of a "group practice" to avail itself
of benefits available to group practices under Florida and federal laws.
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<PAGE>
The Company's goal through its Network is to provide quality, cost
effective and outcome oriented health care in Dade, Broward and Palm Beach
Counties, Florida, a tri-county area with a population in excess of four
million.
The Company's strategy is to develop and expand a locally prominent,
integrated health care delivery network in Dade, Broward and Palm Beach counties
Florida within a medical group practice structure, that provides a high quality
and cost-effective health care delivery system. The Company's principal strategy
for developing and expanding its network is through the acquisition of (through
purchases, merger or otherwise) or affiliation with physicians, medical groups,
and other health care providers in the South Florida market. The Company seeks
to acquire or otherwise affiliate with physician groups and other providers in
their local markets with reputations for providing quality cost effective
healthcare services. The Company also seeks to acquire Ancillary Services,
including laboratories, pharmacies and diagnostic and rehabilitation centers
within its group practice structure. The Company believes that by increasing
marketing activities, enhancing patient service and improving the accessibility
of care, it will increase the Company's market share. The Company also believes
strategic alliances with hospitals and health plans will improve the delivery of
managed health care. The Company also believes that by the consolidation of
management and administrative services that its costs should be reduced.
The Company has completed the acquisition of General Medical
Associates, a multi-disciplinary musculoskeletal practice. The Company has also
acquired Magnetic Resonance Imaging Center, a fixed and mobile magnetic
resonance imagery business which is engaged in performing and reading magnetic
resonance images for patients primarily located in South Florida and Datascan of
Florida, Inc., a mobile diagnostic services company which provides nerve
conduction, vascular and ultrasound studies in South Florida. Most recently, the
Company acquired the assets and operations of two primary medical offices from
Primedica Healthcare, Inc. located in North Miami Beach, Florida.
On March 9, 1998, the Company consummated an agreement with Trident
Medical Concepts, Inc. ("Trident") wherein Trident was to merged into Metcare,
VI, Inc., a wholly owned subsidiary of the Company. However, on May 1, 1998 the
agreement, pursuant to its terms was unwound by the Company for failure to
obtain Trident's lenders consent to the transaction.
Stock Compensation Agreement
On May 15, 1998, the Company and Jan Atlas, Esq. and Charles Pearlman,
Esq., entered into a Stock Compensation Agreement pursuant to which Atlas and
Pearlman will receive an aggregate of 30,000 shares of Common Stock of the
Company in consideration for certain litigation related legal services,
performed, and to be performed, by Atlas and Pearlman on behalf of the Company
through September 1998.
4
<PAGE>
Restrictions Under Securities Laws
The sale of any shares of Common Stock must be made in compliance with
federal and state securities laws. Officers, directors and 10% or greater
stockholders of the Company, as well as certain other persons or parties who may
be deemed to be "affiliates" of the Company under the Federal Securities Laws,
should be aware that resales by affiliates can only be made pursuant to an
effective Registration Statement, Rule 144 or any other applicable exemption.
Officers, directors and 10% and greater stockholders are also subject to the
"short swing" profit rule of Section 16(b) of the Securities Exchange Act of
1934.
SALES BY SELLING SECURITY HOLDERS
The following table sets forth the name of the Selling Security
Holders, the amount of shares of Common Stock held directly or indirectly or
underlying the maximum number of options to be issued to the Selling Security
Holders, the exercise price for the Options, the amount of Common Stock to be
owned by the Selling Security Holders following sale of such shares of Common
Stock and the percentage of shares of Common Stock to be owned by the Selling
Security Holder following completion of such offering (based on 6,057,633 shares
of Common Stock of the Company outstanding at June 10, 1998).
<TABLE>
<CAPTION>
Estimated Percentage
Shares to be to be Owned
Name of Selling Number of Shares to Owned After After
Security Holder Shares Owned be Offered Offering Offering
- --------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Jan Atlas, Esq. 15,000 15,000 0 0
Charles Pearlman, Esq. 15,000 15,000 0 0
</TABLE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, $.001 par value per share of which 6,057,633 were
outstanding as of June 10, 1998. Holders of the Common Stock do not have
preemptive rights to purchase additional shares of Common Stock or other
subscription rights. The Common Stock carries no conversion rights and is not
subject to redemption or to any sinking fund provisions. All shares of Common
Stock are entitled to share equally in dividends from sources legally available
therefor when, as and if declared by the Board of Directors and, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, to
share equally in the assets of the Company available for distribution to
stockholders. All outstanding shares of Common Stock are validly authorized and
issued, fully paid and nonassessable.
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<PAGE>
PREFERRED STOCK
The Board of Directors has the ability to issue up to 10,000,000 shares
of Preferred Stock in one or more series and to fix the rights, preferences,
privileges, qualifications, limitations and restrictions thereof, including
dividend rights, voting rights, terms of redemption, redemption prices,
liquidation preferences, and the number of shares constituting any series or the
designation of any such series, without further vote or action by the
shareholders. The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company without further action by the
shareholders. The issuance of Preferred Stock with voting and conversion rights
may adversely affect the voting power of the holders of Common Stock, including
the loss of voting control to others.
The Board of Directors has designated 5,000 shares of Preferred Stock
as Series A Convertible Preferred Stock of which 5,000 shares are currently
outstanding. The Board of Directors has also designated 2,000 shares of
Preferred Stock Class B Convertible Preferred Stock of which 1,200 shares are
currently issued and outstanding.
Series A Preferred Stock.
Designation and Number of Shares. The Company has designated 5,000
shares of its Preferred Stock as "Series A Preferred Stock" of a par value of
$.001 per share.
Dividend Rights. Holders of the Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available therefor, and the Company shall pay, cumulative dividends at
the rate per share, as a percentage of the stated value of $100 per share
("Stated Value") equal to 10% percent per annum ("Initial Dividends"), payable,
in cash or shares of Common Stock (subject to the terms and conditions hereof)
at the option of the Company quarterly in arrears, but in no event later than
conversion applicable to such share of Series A Preferred Stock.
Conversion.
(a) Each share of Series A Preferred Stock shall be
convertible into shares of Common Stock at the Conversion Ratio (as defined
herein) at the option of the holder in whole or in part as at any time after the
expiration of the 360th day after the date of issuance. "Conversion Ratio"
means, at any time, a fraction, of which the numerator is Stated Value plus
accrued but unpaid dividends (including any accrued but unpaid interest thereon)
but only to the extent not paid in shares of Common Stock in accordance with the
terms hereof, and of which the denominator is the Conversion Price at such time.
The holder shall not convert more than 50,000 shares of Series A Preferred Stock
in any one quarter. The Company shall have the right to deny conversion of the
Series A Preferred Stock, at which time the holder shall be entitled to
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<PAGE>
receive and the Company shall pay additional cumulative dividends at the rate
per share (as a percentage of the Stated Value) equal to 5% per annum, and
together with the Initial Dividend rate, to equal fifteen (15%) percent per
annum payable under the same terms as the Initial Dividends.
(b) The conversion price for each share of Series A Preferred
Stock (the "Conversion Price") in effect on any conversion date shall be the
lesser of (a) 85% of the average closing bid price of the Common Stock reported
by the principal exchange on which the Common Stock is traded, the NASDAQ Small
Cap Market or any other exchange the Common Stock is then traded, for the ten
(10) trading days immediately preceding the Conversion Date, or (b) $6.00.
(c) The Conversion Price will be subject to adjustment in
certain events, including (i) the issuance of capital stock as a dividend or
distribution on Common Stock, (ii) subdivision, combinations, reverse stock
splits and reclassification of the Common Stock, (iii) the fixing of a record
date for the issuance to all holders of Common Stock of rights or warrants
entitling them (for a period expiring within 45 days of such record date) to
subscribe for Common Stock and (iv) the fixing of a record date for the
distribution to all holders of Common Stock of evidence of indebtedness or
assets (other than cash dividends) of the Company or subscription rights or
warrants (other than those referred to above).
Redemption. The Company shall have the right, exercisable at any time
upon ten (10) trading days notice to the holders of the Series A Preferred Stock
given at any time after the expiration of two years after the date of issuance
to redeem, from funds legally available therefor at the time of such redemption,
all or any portion of the shares of Series A Preferred Stock which have not
previously been converted or redeemed, at a price equal to 105% of the product
of (i) the number of shares of Preferred Stock then held by the holder, and (ii)
the Stated Value.
Voting Rights. Except as provided by law, the Series A Preferred Stock
shall not be entitled to vote on matters submitted to a vote of the shareholders
of the Company.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of the Series A Preferred Stock shall be
entitled to receive, after due payment or provision for payment for the debts
and other liabilities of the Company, a liquidating distribution before any
distribution may be made to holders of Common Stock of the Company. The holders
of the Series A Preferred Stock outstanding shall be entitled to receive an
amount equal to the Stated Value, plus declared dividends to the date of the
final distribution, whether or not such liquidation, dissolution or winding up
is voluntary or involuntary on the part of the Company.
Miscellaneous. The Series A Preferred Stock has no preemptive rights.
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Series B Convertible Preferred Stock
Designation and Amount. The Company has designated 2,000 shares of
Preferred Stock as Series B Preferred Stock with the stated value as One
Thousand Dollars ($1,000) per share (the "Stated Value").
Rank. The Series B Preferred Stock shall rank (i) prior to the
Company's common stock, par value $.001 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Company hereafter created
(unless, with the consent of the holders of Series B Preferred Stock, such class
or series of capital stock specifically, by its terms, ranks senior to or pari
passu with the Series B Preferred Stock) (collectively, with the Common Stock,
"Junior Securities"); (iii) pari passu with any class or series of capital stock
of the Company hereafter created (with the consent of the holders of Series B
Preferred Stock) specifically ranking, by its terms, on parity with the Series B
Preferred Stock ("Pari Passu Securities"); and (iv) junior to any class or
series of capital stock of the Company hereafter created (with the consent of
the holders of Series B Preferred Stock obtained in accordance with Article IX
hereof) specifically ranking, by its terms, senior to the Series B Preferred
Stock ("Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
Dividends. The Series B Preferred Stock shall not bear any dividends.
Liquidation Preference
(a) At the option of any holder of Series B Preferred Stock,
upon the sale, conveyance or disposition of all or substantially all of the
assets of the Company, the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or the consolidation, merger or other business
combination of the Company with or into any other entity when the Company is not
the survivor shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Company pursuant to which the Company shall be required to
distribute upon consummation of such transaction an amount equal to 120% of the
Liquidation Preference with respect to each outstanding share of Series B
Preferred Stock or (ii) be treated pursuant to the provisions under "Conversion
at the Option of the Holder" described herein.
(b) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series B Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof plus (ii) and amount equal to five
percent (5%) per annum of such Stated Value for the period beginning on the date
of issuance of the Series B Preferred Stock (the "Issue Date") and ending on the
date of final distribution to the holder thereof (prorated for any portion of
such period).
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Redemption
(a) If any of the following events (each, a "Mandatory
Redemption Event") shall occur:
(i) The Company fails to issue shares of Common Stock
to the holders of Series B Preferred Stock upon exercise by the holders of their
conversion rights fails to transfer or to cause its transfer agent to transfer
any certificate for shares of Common Stock issued to the holders upon conversion
of the Series B Preferred Stock as and when required, fails to remove any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate or any shares of Common Stock issued to the holders
of Series B Preferred Stock upon conversion of the Series B Preferred Stock, or
fails to fulfill its obligations pursuant to certain Sections of the Purchase
Agreement therefor and any such failure shall continue uncured for ten (10)
business days;
(ii) The Company fails to obtain effectiveness with
the Securities and Exchange Commission (the "SEC") of a Registration Statement
registering the shares of Common Stock underlying the Series B Preferred Stock
prior to October 31, 1998 or such Registration Statement lapses in effect (or
sales otherwise cannot be made thereunder, whether by reason of the Company's
failure to amend or supplement the prospectus included therein for more than
thirty (30) consecutive days or sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective;
(iii) The Company shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for all or substantially all of its property or business;
or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Company or any subsidiary of the Company;
(v) The Company shall fail to maintain the listing of
the Common Stock on the Nasdaq National Market, the Nasdaq SmallCap Market
("Nasdaq SmallCap"), the New York Stock Exchange or the American Stock Exchange
and such failure shall remain uncured for at least ten (10) business days, then,
upon the occurrence and during the continuation of any Mandatory Redemption
Event, the Company shall purchase each holder's shares of Series B Preferred
Stock for an amount per share equal to the greater of (1) 120% multiplied by the
sum of (a) the Stated Value of the shares to be redeemed plus (b) an amount
equal to five (5%) percent per annum of such Stated Value for the period
beginning on the Issue Date and ending on the date of payment of the Mandatory
Redemption Amount (the "Mandatory Redemption Date"),
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and (2) the "parity value" of the shares to be redeemed, where parity value
means the product of (a) the number of shares of Common Stock issuable upon
conversion of such shares multiplied by (b) the Closing Price for the Common
Stock on such "Conversion Date" (the greater of such amounts being referred to
as the "Mandatory Redemption Amount").
In the case of a Mandatory Redemption Event, if the Company
fails to pay the Mandatory Redemption Amount for each share within five (5)
business days of written notice that such amount is due and payable, then
(assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series B Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, to require the
Company, upon written notice, to immediately issue in lieu of the Mandatory
Redemption Amount, with respect to each outstanding share of Series B Preferred
Stock held by such holder, the number of shares of Common Stock of the Company
equal to the Mandatory Redemption Amount divided by the Conversion Price then in
effect.
(b) If the Series B Preferred Stock ceases to be convertible
as a result of the limitations described under "Conversion at the Option of the
Holder" described herein (a "19.99% Redemption Event"), and the Company has not
prior to, or within thirty (30) days of, the date that such 19.99% Redemption
Event arises, (i) obtained approval of the issuance of the additional shares of
Common Stock by the requisite vote of the holders of the then-outstanding Common
Stock (not including any shares of Common Stock held by present or former
holders of Series B Preferred Stock that were issued upon conversion of Series B
Preferred Stock); or (ii) received other permission pursuant to Nasdaq
Marketplace Rule 4460(i) allowing the Company to resume issuances of shares of
Common Stock upon conversion of Series B Preferred Stock, then the Company shall
be obligated to redeem immediately all of the then outstanding Series B
Preferred Stock, in accordance with this Article 5(b). An irrevocable Redemption
Notice shall be delivered promptly to the holders of Series B Preferred Stock at
their registered address appearing on the records of the Company and shall state
(1) that 19.99% of the Outstanding Common Amount (as defined herein) has been
issued upon exercise of the Series B Preferred Stock; (2) that the Company is
obligated to redeem all of the outstanding Series B Preferred Stock; and (3) the
Mandatory Redemption Date, which shall be a date within five (5) business days
of the date of the Redemption Notice. On the Mandatory Redemption Date, the
Company shall make payment of the Mandatory Redemption Amount (as defined in
Article 5(a) above) in cash. If the Company fails to redeem in accordance with
the provisions hereof, in addition to all other remedies available to the
holders of the Series B Preferred Stock, upon request of a majority-in-interest
of the Series B Preferred Stock, the Company shall terminate the listing of its
Common Stock on Nasdaq SmallCap (and any other exchange or quotation system with
a rule substantially similar to Rule 4460(i)) and cause its Common Stock to be
eligible for trading on the over-the-counter electronic bulletin board.
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(c) So long as no Mandatory Redemption Event shall have
occurred and be continuing, the Company shall have the right, on the date which
is the third (3rd) anniversary of the date on which the Registration Statement
is declared effective by the SEC, exercisable on not less than twenty (20)
Trading Days prior written notice to the holders of Series B Preferred Stock, to
redeem all of the outstanding shares of Series B Preferred Stock in accordance
herewith. If the Company exercises its right to redeem the Series B Preferred
Stock, the Company shall make payment to the holders of an amount in cash (the
"Optional Redemption Amount") equal to 120% multiplied by the sum of (i) the
Stated Value of the shares of Series B Preferred Stock to be redeemed; and (ii)
an amount equal to five percent (5%) per annum of such Stated Value for the
period beginning on the Issue Date and ending on the Optional Redemption Date,
for each share of Series B Preferred Stock then held.
6. Conversion at the Option of the Holder
(a) Each holder of shares of Series B Preferred Stock may,
convert any or all of the shares of Series B Preferred Stock into Common Stock
as follows (an "Optional Conversion"). Each share of Series B Preferred Stock
shall be convertible into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (1) the sum of (a) the Stated Value
thereof plus (b) the Premium Amount (as defined below), by (2) the then
effective Conversion Price (as defined below). The "Premium Amount" means the
product of the Stated Value, multiplied by .05, multiplied by (N/365), where "N"
equals the number of days elapsed from the Issue Date to and including the
Conversion Date (as defined in Paragraph 6, below).
(b) The "Conversion Price" shall be the lesser of the Market
Price (as defined herein) and the Fixed Conversion Price (as defined herein),
subject to certain adjustments as described herein. "Market Price" shall mean
the average of the three (3) lowest Closing Bid Prices during the twelve (12)
consecutive Trading Day period ending one (1) Trading Day prior to the date (the
"Conversion Date") the Conversion Notice is sent by a holder to the Company via
facsimile (the "Pricing Period"). The "Fixed Conversion Price" shall mean $4.00.
Notwithstanding anything contained in the foregoing the
Conversion Prices subject to certain adjustments including in the event of
merger, consolidation, stock dividends, stock splits as set forth in the
Company's Articles of Incorporation.
7. Automatic Conversion
So long as a Registration Statement cover the Common Stock underlying
the Series B Preferred Stock is effective and there is not then a continuing
Mandatory Redemption Event, each share of Series B Preferred Stock issued and
outstanding on April 24, 2003, subject to any adjustment (the "Automatic
Conversion Date"), automatically shall be converted into shares of Common Stock
on such date at the then
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<PAGE>
effective Conversion Price in accordance with, and subject to, the provisions of
Article VI hereof (the "Automatic Conversion"). The Automatic Conversion Date
shall be delayed by one (1) Trading Day each for each Trading Day occurring
prior thereto and prior to the full conversion of the Series B Preferred Stock
that (i) sales cannot be made pursuant to the Registration Statement (whether by
reason of the Company's failure to properly supplement or amend the prospectus
included therein in accordance with the terms of the Registration Rights
Agreement or otherwise including any Allowed Delays; or (ii) any Default Event
exists, without regard to whether any cure periods shall have run.
8. Voting Rights
The holders of the Series B Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Florida Company Law ("FCL").
9. Protective Provisions
So long as shares of Series B Preferred Stock are outstanding, the
Company shall not, without first obtaining the approval (by vote or written
consent, as provided by the FCL) of the holders of at least a majority of the
then outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series B Preferred Stock or any Senior Securities so as to affect adversely
the Series B Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company;
(c) create any new class or series of capital stock ranking
pari passu with the Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company;
(d) increase the authorized number of shares of Series B
Preferred Stock; or
(e) do any act or thing not authorized or contemplated by the
terms of the Series B Preferred Stock which would result in taxation of the
holders of shares of the Series B Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended).
12
<PAGE>
Company has not paid any cash dividends on its common stock and Company
does not currently intend to declare or pay cash dividends in the foreseeable
future. Company intends to retain any earnings that may be generated to provide
funds for the operation of its business.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The transfer agent and registrar for the securities of the Company is
Florida Atlantic Stock Transfer, Tamarac, Florida.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., Counsel for the Company, Fort Lauderdale, Florida. Members of Atlas,
Pearlman, Trop & Borkson, P.A. own an aggregate of 55,000 shares of the
Company's Common Stock.
INDEMNIFICATION
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such statute. The Company's Articles of Incorporation provide
that the Company shall indemnify and may insure its officers and directors to
the fullest extent permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (i) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (ii)
deriving an improper personal benefit from a transaction, (iii) voting for or
assenting to an unlawful distribution, and (iv) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with
13
<PAGE>
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
14
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The documents listed in (a) through (d) below are incorporated by
reference in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.
(a) The Company's Annual Report on Form 10-KSB for the year
ended June 30, 1997.
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarterly periods ended September 30, 1997, December 31, 1997 and March 31,
1998.
(c) The Company's Current Reports on Form 8-K filed August 21,
1997, October 20, 1997, March 9, 1998, April 17, 1998 and May 8, 1998.
(d) All other reports filed pursuant to Section 13(a) or 15(d)
of the Exchange Act since the end of the fiscal year covered by the Registrant's
document referred to in (a) above.
Item 4. Description of Securities
A description of the Company's securities is set forth in the
Prospectus incorporated as a part of this Registration Statement.
Item 5. Interests of Named Experts and Counsel
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., Counsel for the Company, Fort Lauderdale, Florida. Members of Atlas,
Pearlman, Trop & Borkson, P.A. own an aggregate of 55,000 shares of the
Company's Common Stock.
Item 6. Indemnification of Directors and Officers
The Company has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such
II-1
<PAGE>
statute. The Company's Articles of Incorporation provide that the Company shall
indemnify and may insure its officers and directors to the fullest extent
permitted by law.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (i) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (ii)
deriving an improper personal benefit from a transaction, (iii) voting for or
assenting to an unlawful distribution and (iv) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by or in the
right of the Company to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Item 7. Exemption from Registration Claimed
Inasmuch as the Selling Security Holders who will receive the Shares of
the Company are knowledgeable, sophisticated and has access to comprehensive
information relevant to the Company, such transaction was undertaken in reliance
on the exemption from registration provided by Section 4(2) of the Act. As a
condition precedent to such grant, the Selling Security Holders are required to
express an investment intent and consent to the imprinting of a restrictive
legend on each stock certificate to be received from the Company except upon
sale of the underlying Shares of Common Stock pursuant to a registration
statement.
II-2
<PAGE>
Item 8. Exhibits
Exhibit Description
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to
the issuance of shares of securities pursuant to the above
Consulting Agreement
(10.1) Stock Compensation Agreement dated May 15, 1998 between the
Company and Jan Atlas, Esq. and Charles Pearlman, Esq.
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in
the opinion filed as exhibit (5) hereto
(23.2) Consents of independent certified public accountants
- --------------------------
Item 9. Undertakings
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offerings 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 the Registration Statement or any material change to such
information in the Registration Statement;
(b) That, for the purposes of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) 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.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 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 the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(3) Insofar as indemnification for liabilities arising under the Act
may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the 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 Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton, and the State of Florida, on the
18th day of June, 1998.
METROPOLITAN HEALTH NETWORKS, INC.
By:/s/ Noel J. Guillama
-----------------------------------
Noel J. Guillama
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
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>
President, Chief Executive
and Operating Officer
(Principal Executive
/s/Noel J. Guillama Operating Officer) and June 18, 1998
- ----------------------- Chairman of the Board
Noel J. Guillama
Chief Financial Officer and
/s/Donald B. Cohen Director
- -----------------------
Donald B. Cohen June 17, 1998
_______________________ Director June __, 1998
Robert L. Kagan, M.D.
/s/ Kenneth J. Hall Director June 17, 1998
- -----------------------
Kenneth J. Hall
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of shares of securities
pursuant to the above Consulting Agreement
(10.1) Consulting Agreement dated May 15, 1998 between
the Company and Jan Atlas, Esq. and Charles
Pearlman, Esq.
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A.
included in the opinion filed as exhibit (5) hereto
(23.2) Consents of independent certified public accountants
II-6
June 11, 1998
Metropolitan Health Networks, Inc.
5100 Town Center Circle, Suite 560
Boca Raton, Florida 33486
Re: Registration Statement on Form S-8 - Metropolitan Health Networks,
Inc. - Common Stock issued pursuant to a Stock Compensation
Agreement
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission (the "Commission") with respect to the
registration by Metropolitan Health Networks, Inc. (the "Company") of an
aggregate of 30,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), issued by the Company to Jan Atlas, Esq. and Charles Pearlman,
Esq. pursuant to a Stock Compensation Agreement (the "Agreement").
In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Agreement, the
Company's Certificate of Incorporation (as amended), By-Laws and corporate
minutes provided to us by the Company. In all such examinations, we have assumed
the genuineness of all signatures on original documents, and the conformity to
originals or certified documents of all copies submitted to us as conformed,
photostat or other copies. In passing upon certain corporate records and
documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company and we
express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the shares of Common Stock when issued in accordance with the terms of the
Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion in the Registration
Statement on Form S-8 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
-----------------------------------------
STOCK COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the 15th day of May, 1998 by and between
METROPOLITAN HEALTH NETWORKS, INC. (the "Company") and JAN ATLAS, ESQ.
("ATLAS"), and CHARLES B. PEARLMAN, ESQ. ("PEARLMAN"), (Atlas and Pearlman
collectively referred to as "Attorneys").
WHEREAS, the Company is a publicly-held company.
WHEREAS, Attorneys have represented the Company in various litigation
matters, including but not limited to, One Stop Medical Funding Group, Inc.
d/b/a One Stop Medical Billing and American Medical Billing v. Dr. Frederick J.
Kunen, Florida Rehabilitative Services, Inc. and Metropolitan Health Networks,
Inc., and Metropolitan Health Networks, Inc. and MetRehab Group, Inc. f/k/a
MetCare I, Inc. v. Florida Rehabilitation Services, Inc., Southeast Medical
Staffing, Inc. and Frederick J. Kunen since September 1997 (the
"Representation"); and
WHEREAS, the Attorneys are partners in the law firm of Atlas, Pearlman,
Trop & Borkson, P.A. (the "Firm") which Firm also represents the Company with
regard to various corporate and securities matters ("Corporate Representation");
and
WHEREAS, in connection with such Representation, the Company currently
owes Attorneys approximately $70,000 for legal services and related costs and
expenses associated with the Representation (the "Outstanding Amounts"); and
WHEREAS, the Company desires to compensate Attorneys for the
Outstanding Amounts; and
WHEREAS, the Company desires to engage Attorneys to continue the
Representation and other litigation related matters from the date hereof and
through September 1998 ("Continued Representation"); and
WHEREAS, Attorneys have agreed to be compensated for the Outstanding
Amounts and to the Continued Representation upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals, promises and
conditions in this Agreement, the parties hereto agree as follows:
(a) Recitals. The foregoing recitals are true and correct.
(b) Engagement. The Company has engaged Attorneys to provide it with
all manner of legal services as same relate to matters involving the
Representation and the Continued Representation and Attorneys hereby accept such
engagement.
(c) Compensation. As full and complete compensation for the
Representation and the Continued Representation, as well as payment in full of
the Outstanding Amounts, the Company shall pay Attorneys an aggregate of 30,000
shares of the Company's common stock (the "Compensation Stock") with 15,000
shares of such Compensation Stock being paid to Atlas and 15,000 shares of such
Compensation Stock
<PAGE>
to Pearlman. In connection therewith, the Company shall file a registration
statement on Form S-8 with the Securities and Exchange Commission registering
the Compensation Stock under the Securities Act of 1933, as amended.
(d) Representations and Warranties. The Company and the Attorneys
agree that the Compensation Stock will not constitute compensation with regard
to, or satisfaction of any fees due and payable to the Firm now, or in the
future, for the Corporate Representation (the "Corporate Fees") and that such
Corporate Fees shall be due an payable pursuant to the fee structure agreed to
by the parties. In addition thereto, the Company and the Attorneys agree that
the Compensation Stock shall not constitute compensation for services rendered
in connection with the Representation or the Continued Representation by the
Attorneys or the Firm subsequent to September 1998.
(e) Miscellaneous.
i. Any notice, request, demand or other communication required
or permitted hereunder shall be deemed to be properly given when personally
served in writing or when deposited in the United States mail, first class
postage prepaid, addressed to the other party at the addresses appearing in this
Agreement. Either party may change its address by written notice made in
accordance with this section.
ii. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
administrators, executors, successors, subsidiaries and affiliates.
iii. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida.
iv. This Agreement constitutes the entire agreement between
the parties with respect to the Representation and the Continued Representation.
No promises, guarantees, inducements or agreements, oral or written, express or
implied, have been made other than as contained in this Agreement. This
Agreement can only be modified or changed in writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and date first above written.
METROPOLITAN HEALTH NETWORKS,
INC.
By:/s/ Noel J. Guillama
-----------------------------
Noel J. Guillama, President
/s/ Jan D. Atlas
-----------------------------
Jan D. Atlas, Esq.
/s/ Charles B. Pearlman
-----------------------------
Charles B. Pearlman, Esq.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement on Form S-8
of our report, dated September 26, 1997, relating to the consolidated financial
statements of Metropolitan Health Networks, Inc. and Subsidiaries.
/s/ Kaufman Rossin & Co., P.A.
--------------------------------
Kaufman Rossin & Co., P.A.
Miami, Florida
June 11, 1998
