FORM 10-K
ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13
OR 15(d) FOR THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from_________________to_______________________________
Commission file number 0-22319
PATIENT INFOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1476509
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
46 Prince Street, Rochester, NY 14607
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 242-7200
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class registered Name of each exchange on which
registered
None
----
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, $.01 Par Value Per Share
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(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of February 28, 1999, 8,020,042 shares of common stock were outstanding,
and the aggregate market value of the common shares of Patient Infosystems, Inc.
held by non-affiliates was approximately $8 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant's 1998 Annual Meeting of
Stockholders to be filed prior to April 30, 1999 are incorporated by reference
in Part III.
<PAGE>
PART I
Item 1. Description of Business.
General
Patient Infosystems, Inc. (the "Company" or "Patient Infosystems") was
incorporated in the State of Delaware on February 22, 1995 under the name DSMI
Corp., changed its name to Disease State Management, Inc. on October 13, 1995,
and then changed its name to Patient Infosystems, Inc. on June 28, 1996. The
Company's principal executive offices are located at 46 Prince Street,
Rochester, New York 14607 and its telephone number is 716-242-7200.
Patient Infosystems provides patient-centered health care information
systems and services to manage, collect and analyze information to improve
patient compliance with prescribed treatment protocols, to improve the process
of off-site patient management and to enhance patient and provider information.
The Company's technology platform integrates an advanced voice recognition
telephone system, high speed data processing and analysis capability, and demand
publishing and information distribution capabilities, utilizing the Internet and
Internet technologies. The system utilizes trained telephone operators and
computerized interactive voice response technology and behavior modification
based treatment to communicate via telephone directly with the patient at home
in order to gather relevant patient data. This data is subsequently evaluated
and automatically transmitted via computer generated reports to health care
payors, providers and patients, with these reports being tailored to the
specific needs of each recipient. The Company markets its services to
pharmaceutical manufacturers, pharmacy benefit managers ("PBMs") and health care
payors, such as managed care organizations ("MCOs"), integrated delivery
networks ("IDNs") and insurance companies and health care providers, to collect
data outside of the physician office and institutional setting to enhance
compliance by patients with prescribed treatment protocols. The Company`s
systems may also be used to address the full spectrum of health care information
needs with respect to care quality, patient satisfaction and patient and
provider education.
During its first two years of operations, the Company emphasized the
development of disease management programs, which accounted for a substantial
portion of its revenue during 1997. However, during 1997 and 1998, the Company
devoted increased resources to the development of other applications of its
technology platform, including demand management, patient surveys and outcomes
analysis.
Information Capture, Delivery and Analysis Technologies Utilizing the Internet
The Company's technology platform integrates an advanced voice recognition
telephone system, high speed data processing and analysis capability, demand
publishing and information distribution capabilities and behavior modification
based compliance algorithms with a real time Internet on-line communication
system . The system utilizes trained telephone operators and computerized
interactive voice response technology to communicate via telephone directly with
the patient at home as well as with payors and providers in order to gather and
deliver relevant patient data. In order to minimize costly live operator
interaction, a computer initiates each call to the patient, which call is
automatically transferred to an operator and finally routed to an automated
speech application. Patients respond to the recorded speech application by
speaking normally. This approach is designed to enable a wider variety of
possible responses than is achievable via telephone key pad. Depending on the
patient's response, situation-specific algorithms are applied to modify future
questions and thus help customize the collection of data.
The Company's system analyzes and prepares the captured data for automatic
delivery to the payor, provider and patient using the Internet and demand
publishing capabilities. The Company's new Internet capabilities acquired with
the HealthDesk purchase enables the Company's systems to interface on a real
time basis with patients, payors and providers. Demand publishing technology
enables the creation of highly individualized reports by inserting stored
graphic images and text which can be customized for race, gender and age. These
reports are also customized to the patient's specific situation, and the system
utilizes the information received during contacts with the patient to further
customize the content of the report. The data relevant to the separate report
for health care providers is formatted in a customized report to be
automatically transmitted via mail, fax or on-line.
Each contact with a patient contributes to the establishment of a
longitudinal data base which can be analyzed to provide information about
treatment modalities for patients, providers and payors. The Company's system is
designed to analyze patient compliance to prescribed treatment regimens and
gather additional clinical information so that improvements in such regimens can
be developed.
Internet Capabilities
On February 26, 1999, the Company, through its newly formed, wholly-owned
subsidiary, Patient Infosytems Acquisition Corp., acquired substantially all the
assets of HealthDesk Corporation ("HealthDesk"), a consumer healthcare software
company that focuses on general health and chronic disease management through
ongoing targeted support for patients, families and caregivers. The acquired
assets include HealthDesk OnLine and HealthDesk OnLine for Diabetes, which are
both accessible through the Internet and on CD-ROM. The Company also acquired
HealthDesk's Care Team Connect product, which is accessible over the Internet
and provides a communication mechanism between patients and their caregivers.
The Company uses the core technologies associated with these products to support
the Company's other programs which include disease management, case management,
demand management, patient surveys and clinical studies. (See Note 10 to
financial statements)
Integrated Disease State Management System
The Company's first application of its integrated information capture and
delivery technology is its integrated disease state management system. This
system is designed to provide caregivers with the ability to monitor, on a
cost-effective basis, patient condition and behavior while the patient is
between physician consultations. The Company believes that this will permit
caregivers to improve patient compliance and, as a consequence, improve patient
outcomes.
The Company's disease state management system has three primary components.
First, using a panel of recognized medical and clinical experts, the Company
develops a disease-specific patient intervention and compliance program that
includes a template for the integration of each patient's history, current
medical status and treatment protocol. If the program is being developed on a
custom basis for a particular customer, the program is developed in consultation
with the customer's clinical staff and consultants. Second, the Company
establishes periodic telephone contacts with each patient to monitor the
patient's compliance with prescribed therapies as well as the patient's
treatment progress. Third, using the information obtained from patient contacts
and other available information regarding the patient and his or her treatment,
such as physician records and pharmacy information, personalized reports are
prepared, typically following each patient contact, for evaluation by the
patient, the patient's health care provider and, on a routine basis, payors.
Development of Disease-Specific Protocols
The Company's disease-specific compliance programs are developed for
targeted diseases either on a customized or standardized basis. The Company
retains an internal clinical staff and panels of independent medical and
clinical experts to identify guidelines of generally accepted treatment
protocols and diagnostic interventions for particular diseases. These guidelines
serve as a template for information to be gathered from each patient. If the
program is being developed on a custom basis for a particular customer, the
program is developed in consultation with the customer's clinical staff and
consultants. In addition, the Company's internal clinical staff conducts
research of available databases and gathers information provided by medical
experts, insurance providers, governmental agencies, Medicare and Medicaid and
other sources to develop with the medical experts the disease-specific program
structure. The resulting compliance protocols are designed to enable the Company
to gather the necessary patient information to determine the extent of a
patient's compliance with his or her prescribed treatment, the effectiveness of
treatment and the progress of the patient's disease. As the Company's database
of disease-specific treatments expands, the Company intends to use that data to
modify, update and enhance its own disease state management compliance programs
and assist health care providers in improving treatment protocols.
Patient Enrollment
When a patient is enrolled in one of the Company's disease state management
programs a patient history is obtained, including the histories of the chronic
illness, medications, and surgical procedures as well as other information
deemed relevant by the disease-specific compliance program. This information is
included in the Company's database for each patient and is used to create
customized reports for distribution to each of the patient's health care
provider and payor as well as the patient. The patient report can include
information on the prescribed treatment of the patient's disease as well as the
use of the program and social support services to improve compliance with the
patient's treatment regimen. In addition, the Company's demand publishing
technology provides personalized behavior modification and educational materials
for the patient. The health care provider report contains the relevant clinical
and behavioral information gathered from the patient.
The Company has found patient enrollment to be one of the particularly
challenging components to establishing effective programs. Although the Company
has completed the development of several disease management programs, the
Company's customers have been able to provide only limited patients to enroll in
the programs. To the extent that the Company's revenue is dependent upon the
number of contacts it is able to achieve, it will be required to work closely
with its customers to develop methods to increase patient enrollment.
Patient Contacts
In accordance with a designated patient contact schedule, a patient will
periodically receive telephone calls from a live operator who, after confirming
the identity of the patient, will transfer the patient to an automated system
that will ask specific questions determined in accordance with the
disease-specific compliance program and provide information and motivational
feedback. Patient contact schedules are established for each disease state
management program, with the frequency of patient contact varying with the
disease under management and the goal of the applicable treatment and occurring
as often as daily or as infrequently as on a quarterly basis. The data gathered
from the patient during each contact is processed and stored in the Company's
database.
The compliance program takes into account patient responses to treatment
follow-up questions and initiates specific courses of action which can include
positive reinforcement messages, confirmation of prescription instructions and
scheduled callbacks to remind the patient of the need to take prescribed
medication. In addition, questions to be asked in future calls are modified
based upon the patient's responses during previous calls.
The Company's disease state management system captures and processes the
information obtained from the patient during the contact and integrates this
information with the other data maintained by the Company, including prior
patient responses, patient medical history, treatments administered to date and
the mandated treatment protocols for the disease. This system automatically
prepares distinct reports using the Company's demand publishing technologies for
the patient and for the physician or other caregiver. Each report is tailored
for the particular requirements of each recipient. The patient's report, for
example, may include pictures, diagrams and informative discussions relating to
the treatment course intended to modify or reinforce certain behaviors. The
physician's report would likely be more factual and direct and summarize the
clinical and behavioral information that has been gathered.
On a routine basis the Company will provide data to the patient's health
care payor with respect to that patient's progress. The Company will be able to
include information from various data sources in these reports for the purpose
of providing additional information with respect to a patient. For example, the
Company may be able to interact with the pharmacy services division of a payor
to determine the renewal frequency of prescriptions, which provides an
indication of whether a patient is taking his or her medication. In addition,
the system provides the flexibility to allow other information from physicians'
reports and hospital tests to be included in the periodic reports.
Compliance Assistance
The Company assists payors and health care providers in monitoring patient
compliance and works with health care providers to develop compliance and
education programs that can be implemented through the Company's system. The
Company's publishing technology enables production of patient-specific
compliance and education literature that is customized for an individual
patient. Once this literature is prepared it may be delivered to a patient by
mail, facsimile or on-line. In addition, the Company can implement a variety of
procedures including medication reminders via wireless two-way communication and
more frequent telephone communications for non-compliant patients or patients
with more difficult treatment regimens. The Company can provide additional
support services, such as an 800 number that will provide recorded information
with respect to a variety of patient education topics or other support messages.
Patient Infosystems Programs
The Company is developing customized disease state management and risk
assessment programs in conjunction with a number of customers, as well as
standardized disease state management programs in the areas of asthma, diabetes
and hypertension. Each of the Company's customer agreements for its customized
programs provide for development fees to be paid to the Company upon the
achievement of certain milestones. In addition, the agreements for customized
disease state management programs may provide for some form of exclusivity
period, during which the Company is prohibited from engaging or participating in
other projects involving the specific disease target that is the subject of that
program. The exclusivity periods extend until, in general, a certain date or
certain period (ranging from eight to 24 months) following the achievement of a
specified milestone in the development or implementation of the program. The
Company enrolled its first patients in a disease state management program in
October 1996, and has less than 20,000 patients currently enrolled in those
programs.
All of the Company's customer agreements, which are typically terminable
without cause by either party, require payment to the Company of operational
fees per enrolled patient. The amount of the per patient program operational fee
varies with the length, complexity and frequency of patient contacts as dictated
by the respective program protocols. Patient enrollment in each of the Company's
programs will depend upon the identification and referral by the Company's
customers of patients to the Company's system which will vary from program to
program.
The Company has developed or is developing programs in the following areas:
Asthma
The Company has developed a disease state management program for asthmatic
patients that has been marketed to payors and other participants in the health
care industry, and such program has been provided to patients since January
1997. Through February 1999, the Company has had approximately 4,100
interventions with patients participating in these programs. American
HomePatient, Inc. ("American HomePatient"), Centra Healthcare Administrative
Services, Inc. ("Centra"), Harris Methodist Health Plan ("Harris Methodist") and
Health Alliance, a Division of Astra Pharma Inc. ("Health Alliance") have
retained the Company to provide disease state management programs for patients
who are suffering from asthma and are enrolled in health care programs for which
these companies provide services.
Congestive Heart Failure
The Company has a services agreement with Bristol-Myers to develop,
implement and operate a disease state management program to aid in the treatment
of patients suffering from congestive heart failure. The Company has completed
the development of the program in congestive heart failure in the English
language, and is currently developing the program in the Spanish language. This
program has been provided to patients since April 1997, and through February
1999, the Company has had approximately 9,900 interventions with patients
participating in this program.
Diabetes
The Company has developed a disease state management program for diabetic
patients that has been marketed to payors and other participants in the health
care industry. Bristol-Myers, Centra and Health Resources have retained the
Company to provide this disease state management program for patients who are
suffering from diabetes and are enrolled in health care programs for which these
companies provide services. These programs have been provided to patients since
August of 1997, and through February 1999, the Company has had approximately
2,600 interventions with patients participating in these programs.
Secondary Cardiovascular Disease
The Company has entered into a services agreement with Bristol-Myers to
develop, implement and operate a disease state management program relating to
the prevention of cardiovascular sequelae in patients who have recently
experienced certain cardiovascular illnesses or treatments such as angina,
cardiac bypass surgery or myocardial infarction. The Company has completed the
development of this program in the English language and is continuing to develop
the program in the Spanish language. This program has been provided to patients
since January 1997, and through February 1999, the Company has had 115
interventions with patients participating in this program.
Hypertension
The Company has completed the development of a compliance program for
patients with hypertension that has been marketed to payors and other
participants in the health care industry. Bristol-Myers has retained the Company
to provide this compliance program for patients who are suffering from
hypertension and are enrolled in health care programs for which these companies
provide services. Patients are currently being enrolled into this program.
Additional Disease Targets
The Company has identified additional opportunities in large chronic
disease markets, including in the treatment of, chronic obstructive pulmonary
disease, depression, cancer, osteoporosis, arthritis, HIV infection and high
risk pregnancy. Each of these targets has been identified as having
characteristics which make them attractive candidates for the Company's
programs. The Company is currently involved in discussions with customers for
the development of programs in a variety of these areas.
Significant Customer Concentration
The Company's current contracts are concentrated in a small number of
customers, with several of the Company's most significant contracts being with
Bristol-Myers and Aetna U.S. HealthCare. The Company expects that its sales of
services will be concentrated in a small number of customers for the foreseeable
future. Consequently, the loss of any one of its customers could have a material
adverse effect on the Company and its operations. There can be no assurance that
customers will maintain their agreements with the Company, enroll a sufficient
number of patients in the programs developed by the Company for the Company to
achieve or maintain profitability, or that customers will renew their contracts
upon expiration or on terms favorable to the Company.
Other Applications of the Integrated Information Capture and Delivery Technology
Demand Management
Demand management involves assisting providers in evaluating patient
treatment needs to identify those patients who may not require immediate or
intensive services. The goal of demand management is to reduce the need for and
use of costly, often clinically unnecessary, medical services and arbitrary
managed-care interventions while improving the overall quality of life of
patients. The Company believes that its system can be used to provide automated
or semi-automated demand management services. The Company is currently providing
demand management to approximately 150,000 patients for Kentucky Medicaid, CHA
HMO, Inc. and Managed Care Assistance Corporation.
Outcomes Analysis
The Company intends to utilize information gathered from patients enrolled
in its programs to serve two purposes. First, information regarding treatment
results, success of the compliance program and patient reaction to differing
treatments or compliance protocols may be used by the Company to further improve
each disease-specific compliance program. Second, this information may be used
by payors, pharmaceutical companies and health care providers to assist in the
development of improved treatment modalities. The Company has developed
analytical methodologies using database management and information technologies.
The Company intends to use these data analysis technologies to predict the best
treatment methodologies for patients.
Clinical Studies
Many pharmaceutical companies and contract research organizations are
seeking more economical, efficient and reliable methods for compiling and
analyzing clinical data in conducting clinical trials. Furthermore, many drug
development protocols have begun to emphasize subjective criteria and outcomes
information. The Company believes that its system will allow it to develop
programs tailored to the measurement of outcomes data relating to the conduct of
later stage clinical trials. The Company believes that its system can also
assist pharmaceutical companies in studying and documenting the efficacy of
approved products in order to provide ongoing information to FDA or for
marketing purposes.
Patient Surveys
Organizations in many different areas of the health care industry survey
users regarding their products and services for a variety of reasons including
regulatory, marketing and research purposes. The Company's information systems,
with their ability to proactively contact patients in a cost-efficient manner,
may be used for this type of application. The Company has developed a series of
10 automated surveys ranging from general health to disease specific
instruments. The product line includes surveys for SF-12; child health
questionnaire; patient satisfaction; asthma; diabetes; back pain; depression;
prostatis; maternity; and the Pra Plus for elderly populations. The Company has
completed approximately 125,000 surveys during 1998 through February 1999.
Case Management
Patients who are prescribed complex or high cost treatment regimens may
require a higher level of monitoring, interaction, care planning and
reassessment than patients with less complicated treatment regimens. The Company
believes that its system is capable of providing these enhanced services to such
patients to eliminate or minimize the unnecessary costs and medical attention
that result from a patient's lack of compliance with a prescribed treatment
regimen.
Sales and Marketing
Through 1997, the Company's efforts focused primarily on the development of
disease management programs. During 1998, the Company began aggressively
marketing the other services that its technology platform can provide including
demand management, patient surveys and outcomes analysis. The Company markets
its integrated disease state management system to organizations within the
health care industry that are involved in the treatment of disease or payment of
medical services for patients who require complex or long-term medical
therapies. These industry organizations include five distinct groups:
pharmaceutical companies, medical service companies, PBMs, health care payors
and employer groups. The Company employs a sales and marketing staff of twelve
persons to market the Company's systems. In addition, the senior members of the
Company's management are actively engaged in marketing the Company's programs.
The Company has expanded its marketing efforts by conducting patient
surveys, clinical studies and implementing other measures designed to document
the clinical and cost benefits it believes will result from the application of
its integrated information capture and delivery system. In collaboration with
the members of its expert panels who are retained to develop program protocols
and other research and clinical technicians, the Company intends to promote the
benefits of its system through publication in clinical journals and
presentations at scientific conferences of the results of these studies. The
Company is conducting such studies designed to produce significant short-term
data with respect to its asthma, diabetes and cardiac programs.
The Company entered into a joint venture agreement with MacLean Hunter
Publishing Limited, an Ontario, Canada corporation, in November 1998 to market
and sell, on an exclusive basis in Canada, products and services developed by
the Company and to manage jointly, finance and operate the business entity
Patient Infosystems Canada, Inc., which is dedicated to the development of a
commercially viable business built around the sale, marketing and service of the
Company's products and services.
Research and Development
Research and development expenses consist primarily of salaries and related
benefits and administrative costs allocated to the Company's research and
development personnel for development of certain components of its integrated
information capture and delivery system, as well as development of the Company's
standardized disease state management programs. Research and development costs
have decreased as the Company has completed the development of its primary
disease management programs. The Company anticipates that research and
development expenses will continue to decrease in future periods, as the Company
continues to expand its operations.
The development and maintenance of the telecommunications and computer
publishing systems through which the Company operates its integrated information
capture and delivery system is a major component of its business. The
communications and information technology industries are subject to rapid and
significant technological change, and the ability of the Company to operate and
compete is dependent in significant part on its ability to update and enhance
its system continuously. In order to do so, the Company must be able to utilize
effectively its research and development capabilities and implement new
technology in order to enhance its systems. At the same time, the Company must
not jeopardize its ability to contact patients and to process and publish
patient information or adapt to customer preferences or needs. The Company will
maintain a significant investment in its technology, and therefore is subject to
the risk of technological obsolescence.
Competition
The market for health care information products and services is intensely
competitive. Competitors vary in size and in scope and breadth of products and
services offered, and the Company competes with various companies in each of its
disease target markets. Many of the Company's competitors have significantly
greater financial, technical, product development and marketing resources than
the Company. Furthermore, other major information, pharmaceutical and health
care companies not presently offering disease state management or other health
care information services may enter the markets in which the Company intends to
compete. In addition, with sufficient financial and other resources, many of
these competitors may provide services similar to those of the Company without
substantial barriers. The Company does not possess any patents with respect to
its integrated information capture and delivery system, and although it has
filed a patent application with respect to certain aspects of its integrated
information capture and delivery system and its integrated disease state
management system, there can be no assurance that this application will result
in the issuance of a patent, or if issued, that a patent would provide the
Company with any competitive advantage.
The Company's potential competitors include specialty health care
companies, health care information system and software vendors, health care
management organizations, pharmaceutical companies and other service companies
within the health care industry. Many of these competitors have substantial
installed customer bases in the health care industry and the ability to fund
significant product development and acquisition efforts. The Company will also
compete against other companies that provide statistical and data management
services, including clinical trial services to pharmaceutical companies.
The Company is aware of several large pharmaceutical and medical service
companies that have publicly stated that they intend to be involved in providing
comprehensive disease state management services. The Company believes that the
principal competitive factors in its market are the ability to link patients,
health care providers and payors, and provide the relevant health care
information at an acceptable cost. In addition, the Company believes that the
ability to anticipate changes in the health care industry and identify current
needs are important competitive factors.
Quality Control
The Company has developed quality control measures designed to insure that
information obtained from patients is accurately transcribed, that reports
covering each patient contact are delivered to health care providers and
patients and that the Company's personnel and technologies are interacting
appropriately with patients and health care providers. Quality control systems
include random monitoring of telephone calls, patient surveys to confirm patient
participation and effectiveness of the particular program, and supervisory
reviews of telephone agents.
Government Regulation
The health care industry, including the current and proposed business of
the Company, is subject to extensive regulation by both the Federal and state
governments. A number of states have extensive licensing and other regulatory
requirements applicable to companies that provide health care services.
Additionally, services provided to health benefit plans in certain cases are
subject to the provisions of the Employee Retirement Income Security Act
("ERISA") and may be affected by other state and Federal statutes. Generally,
state laws prohibit the practice of medicine and nursing without a license. Many
states interpret the practice of nursing to include health teaching, health
counseling, the provision of care supportive to or restorative of life and well
being and the execution of medical regimens prescribed by a physician.
Accordingly, to the extent that the Company assists providers in improving
patient compliance by publishing educational materials or providing behavior
modification training to patients, such activities could be deemed by a state to
be the practice of medicine or nursing. Although the Company has not conducted a
survey of the applicable law in all 50 states, it believes that it is not
engaged in the practice of medicine or nursing. There can be no assurance,
however, that the Company's operations will not be challenged as constituting
the unlicensed practice of medicine or nursing. If such a challenge were made
successfully in any state, the Company could be subject to civil and criminal
penalties under such state's law and could be required to restructure its
contractual arrangements in that state. Such results or the inability to
successfully restructure its contractual arrangements could have a material
adverse effect on the Company.
The confidentiality of patient information is subject to regulation by
state law. A variety of statutes and regulations exist safeguarding privacy and
regulating the disclosure and use of medical information. State constitutions
may provide privacy rights and states may provide private causes of action for
violations of an individual's "expectation of privacy." Tort liability may
result from unauthorized access and breaches of patient confidence. The Company
intends to comply with state law and regulations governing medical information
privacy.
In addition, on August 21, 1996 Congress passed the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"), P.L. 104-191. This
legislation requires the Secretary of the Department of Health and Human
Services to adopt national standards for electronic health transactions and the
data elements used in such transactions. The Secretary is required to adopt
safeguards to ensure the integrity and confidentiality of such health
information. Violation of the standards is punishable by fines and, in the case
of wrongful disclosure of individually identifiable health information,
imprisonment. The Secretary has promulgated and published proposed rules
addressing the standards, however, no final rules have been adopted to date.
Final rules may be adopted during 1999.
The Company and its customers may be subject to Federal and state laws and
regulations which govern financial and other arrangements between health care
providers. These laws prohibit certain fee splitting arrangements between health
care providers, as well as direct and indirect payments, referrals or other
financial arrangements that are designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider for medical
products and services. Possible sanctions for violation of these restrictions
include civil and criminal penalties. Specifically, HIPAA increased the amount
of civil monetary penalties from $2,000 to $10,000. Criminal penalties range
from misdemeanors, which carry fines of not more than $10,000 or imprisonment
for not more than one year, or both, to felonies, which carry fines of not more
than $25,000 or imprisonment for not more than five years, or both. Further,
criminal violations may result in permanent mandatory exclusions and additional
permissive exclusions from participation in Medicare and Medicaid programs.
Furthermore, the Company and its customers may be subject to federal and
state laws and regulations governing the submission of false healthcare claims
to the government and private payers. Possible sanctions for violations of these
laws and regulations include minimum civil penalties between $5,000-$10,000 for
each false claim and treble damages.
Regulation in the health care field is constantly evolving. The Company is
unable to predict what government regulations, if any, affecting its business
may be promulgated in the future. The Company's business could be adversely
affected by the failure to obtain required licenses and governmental approvals,
comply with applicable regulations or comply with existing or future laws, rules
or regulations or their interpretations.
Intellectual Property
The Company considers its methodologies, processes and know-how to be
proprietary. The Company seeks to protect its proprietary information through
confidentiality agreements with its employees. The Company's policy is to have
employees enter into confidentiality agreements containing provisions
prohibiting the disclosure of confidential information to anyone outside the
Company, requiring employees to acknowledge, and, if requested, assist in
confirming the Company's ownership of any new ideas, developments, discoveries
or inventions conceived during employment, and requiring assignment to the
Company of proprietary rights to such matters that are related to the Company's
business.
Employees
As of February 28, 1999, the Company had 121 full and part-time employees.
Financial Information
For financial information concerning the Company, see the financial
statements and the notes thereto included elsewhere herein.
Item 2. Description of Properties.
The Company's executive and corporate offices are located in Rochester, New
York in approximately 13,000 square feet of leased office space under an
operating lease that expires on November 30, 1999. The Company leases office
space for its Demand Management call center in Wayne, Pennsylvania in
approximately 2,047 square feet of leased office space under a lease agreement
that expires in May 2001. The Company leases office space for its Berkeley,
California office in approximately 2,800 square fee of lease office space under
a lease agreement that expires in October 1999.
The Company believes its plants and facilities are suitable and adequate,
and have sufficient productive capacity, to meet its current needs.
Item 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters To A Vote Of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1998.
<PAGE>
PART II
Item 5. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
(a) Market Information
The Company's common stock is traded on the NASDAQ National Market System
under the symbol "PATI". The following table sets forth, for the periods
indicated, the range of the high and low closing sale price for the Company's
Common Stock as reported on the NASDAQ National Market.
High Low
1997
First Quarter $9.25 $6.38
Second Quarter $6.25 $4.50
Third Quarter $5.00 $2.88
Fourth Quarter $4.38 $2.63
1998
First Quarter $4.50 $2.63
Second Quarter $5.00 $2.50
Third Quarter $3.44 $1.81
Fourth Quarter $1.88 $1.00
(b) Holders
The approximate record number of holders of the Company's common stock as
of February 28, 1999 is 87. However, the Company believes that there are in
excess of 400 beneficial holders of Common Stock of the Company.
(c) Dividends
The Company has never paid cash dividends on its capital stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain all future earnings, if any, to fund the development
and growth of its business. Any future determination to pay cash dividends will
be at the discretion of the Board of Directors.
(d) Use of Proceeds
The Company has used and continues to use the proceeds from its initial
public offering of common stock in December 1996 for capital improvements and
expansion of its telephone and computer capabilities for sales and marketing and
for general corporate purposes as more fully discussed in financial statements
and notes thereto appearing elsewhere herein. Recently, the Company used
$761,000 in connection with the acquisition of the assets of HealthDesk.
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Period from
February 22, 1995
(Inception) to
Year Ended December 31, December 31,
----------------------- ------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ........................... $ 2,344,072 $ 2,062,373 $ 845,412 $ 113,000
Costs and Expenses:
Cost of Sales ..................... 2,529,619 1,629,128 748,322 111,870
Sales and Marketing ............... 1,795,921 1,609,837 913,547 375,384
General and Administrative ........ 3,062,204 2,442,269 1,759,044 678,498
Research and Development .......... 298,686 489,115 310,552 89,909
------- ------- ------- ------
Total Costs and Expenses ........ 7,686,430 6,170,349 3,731,465 1,255,661
--------- --------- --------- ---------
Operating Loss ...................... (5,342,358) (4,107,976) (2,886,053) (1,142,661)
Other Income and Expenses ........... 556,592 835,116 81,333 26,009
Provision for taxes ................. 43,701 (9,509) 1,716 --
------ ------ ----- -----
Net Loss .......................... $(4,829,467) $ (3,263,351) $ (2,806,436) $ (1,116,652)
============ ============ ============ ============
Net Loss Per Share - Basic
and Diluted ........................$ (0.60) $ (0.41) $ (0.44) $ (0.18)
============ ============ ============ ============
Weighted Average Common
and Potential Common Shares ...... 8,018,398 7,980,094 6,347,716 5,954,299
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents ....... $ 6,316,955 $ 779,317 $ 15,666,609 $ 1,182,080
Working Capital ................. 7,992,894 13,242,387 14,591,700 611,655
Total Assets .................... 10,519,727 15,036,473 17,085,387 1,763,629
Total Liabilities ............... 894,339 587,728 1,631,650 598,464
Total Stockholders' Equity ...... 9,625,388 14,448,745 15,453,737 1,165,165
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Management's discussion and analysis provides a review of the Company's
operating results for the years ended December 31, 1998, 1997 and 1996, and its
financial condition at December 31, 1998. The focus of this review is on the
underlying business reasons for significant changes and trends affecting the
revenues, net earnings, and financial condition of the Company. This review
should be read in conjunction with the accompanying financial statements.
In an effort to give investors a well-rounded view of the Company's current
condition and future opportunities, this Annual Report on Form 10-K includes
forecasts by the Company's management about future performance and results.
Because they are forward-looking, these forecasts involve uncertainties. They
include risks of market acceptance of or preference for the Company's systems
and services, competitive forces, the impact of, and changes in, government
regulations, general economic factors in the healthcare industry, and other
factors discussed in the Company's filings with the Securities and Exchange
Commission.
Overview
The Company was formed on February 22, 1995 and has a limited operating
history from which to evaluate its performance. Although the Company has
completed the development of its integrated information capture and delivery
system and has developed several disease state management programs for specific
diseases, the Company is continuing to refine its products for additional
applications. In October 1996 the Company began enrolling patients in its first
disease state management program and only began substantial patient contacts
during 1998. The Company currently has patients enrolled in five of its
disease-specific programs. Through February 1999, an aggregate of approximately
350,000 persons have enrolled and participated in Company programs. The
enrollment of patients in the Company's programs has been limited by several
factors, including the limited ability of clients to provide the Company with
accurate information with respect to the specific patient populations, including
coding errors that necessitated extensive labor intensive data processing prior
to program implementation. In addition, the Company has encountered resistance
from patients and other sources of information to the Company's systems.
In response to these market dynamics, the Company has taken several
tactical and strategic steps including, formal designation of internal personnel
at customer sites to assist clients with implementation; closer integration of
Company systems personnel with clients to facilitate accurate data transfers;
and most importantly, promotion of a broader product line to enable clients to
enter the Company's disease management programs through a variety of channels.
The Company now markets two additional services, demand management services and
automated surveys (general health and disease-specific), both of which can
provide mechanisms for enrollment to the Company's disease management programs.
Nevertheless, no assurance can be given that the Company's efforts will succeed
in increasing patient enrollment in Company programs.
The Company has entered into services agreements to develop, implement and
operate programs for: (i) patients who have recently experienced certain
cardiovascular events; (ii) patients who have been diagnosed with primary
congestive heart failure; (iii) patients suffering from anorexia or cachexia
secondary to diagnosis of cancer or AIDS; (iv) patients suffering from chronic
pain, and (v) patients who are at increased risk of suffering from epilepsy. In
addition, the Company has entered into services agreements to operate its
disease management programs for patients suffering from asthma, diabetes and
hypertension. These contracts provide for, and the Company anticipates future
contracts will provide for, fees paid by its customers based upon the number of
patients participating in each of its programs, as well as initial program
development fees from customers for the development of a disease-specific
program. To the extent that the Company has had limited enrollment of patients
in its programs, the Company's operations revenue has been, and may continue to
be limited. Moreover, as the Company has completed the development of its
primary disease management programs, it anticipates that development revenue
will also decline over the next twelve months unless and until the Company
enters into new development agreements. The Company's program development
contracts typically require payment from the customer at the time that the
contract is executed, with additional payments made as certain development
milestones are met. Development contract revenue is recognized on a percentage
of completion basis, in accordance with the ratio of total development cost
incurred to the estimated total development costs for the entire project.
Losses, if any, related to program development will be recognized in full as
identified. The Company's contracts call for a fixed program operational fee to
be paid by the customer for each patient enrolled for a series of program
services as defined in the contract. The timing of customer payments for the
delivery of program services varies by contract. Revenues from program
operations are recognized ratably as the program services are delivered. The
amount of the per patient fee varies from program to program depending upon the
number of patient contacts required, the complexity of the interventions and the
detail of the reports generated. The Company has not capitalized any costs
related to the development of software for use in its disease state management
programs since all of such software has been developed for internal use.
Revenues from Operations, which includes fees received by the Company for
operating its programs has increased substantially and has become the most
significant source of the Company's revenues. Furthermore, as enrollment in
Company operated disease management programs continues to increase, the Company
anticipates that these revenue sources will become the primary source of the
Company's revenues. Currently, the Company's demand management programs generate
more revenue than the Company's disease management programs. However, the
Company is continuing to devote significant marketing efforts to increasing the
number of disease management programs that are in operation. Nevertheless, the
Company is still supporting a substantial infrastructure in maintaining the
capacity necessary to deliver its services and to offer its services to new
customers. Therefore, the Company will be required to increase substantially the
number of patient contacts and management programs to cover the costs necessary
to maintain the capability to service its customers. In that the Company has
only begun substantial patient contacts during 1998, the Company is continually
examining its costing structures to determine the levels that will be necessary
to achieve profitability.
The sales cycle for the Company's programs may be extensive from initial
contact to contract execution. During these periods, the Company may expend
substantial time, effort and funds to prepare a contract proposal and negotiate
the contract. The Company may be unable to consummate a commercial relationship
after the expenditure of such time, effort and financial resources.
The Company began to provide other services to customers in the healthcare
industry during 1997 which included new applications of its information capture
and delivery system. These consisted of patient surveys, health risk
assessments, nursing support lines and marketing support functions.
In February, 1999, the Company, through its newly formed, wholly-owned
subsidiary, Patient Infosystems Acquisition Corp., acquired substantially all of
the assets of HealthDesk Corporation, a consumer healthcare software company,
primarily engaged in the business of designing and developing Internet based
products in the healthcare, wellness and disease management industries for
$761,463. The Company obtained funds for the HealthDesk acquisition from its
available cash. The assets that were acquired by the Company included inventory,
intellectual property, hardware and software.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues
Revenues are comprised of revenues from operations fees, development fees
and licensing fees. Revenues increased 14% from $2,062,373 for the year ended
December 31, 1997 to $2,344,072 for the year ended December 31, 1998. A summary
of these revenues by category is as follows:
December 31,
------------
1998 1997
---- ----
Revenues
- --------
Operations Fees ...................................... $1,385,720 $ 735,841
Development Fees ..................................... 689,157 826,532
Licensing Fees ....................................... 269,195 500,000
------- -------
Total Revenues ....................................... $2,344,072 $2,062,373
========== ==========
Revenues from operations increased 88% from $735,841 for the year ended
December 31, 1997 to $1,385,720 for the year ended December 31, 1998. Operations
revenues are generated as the Company provides services to its customers for
their disease-specific programs. Operations revenues increased significantly in
1998, as the Company continues to increase the membership levels in the
Company's disease state management programs and primarily from the Company's
demand management programs. The demand management programs operate from the
Company's medical call center which was established in May 1998, in Wayne,
Pennsylvania The medical call center is staffed by registered nurses on a 24
hour, 7 day a week schedule.
Revenues from development fees decreased 17% from $826,532 for the year
ended December 31, 1997 to $689,157 for the year ended December 31, 1998. The
Company received $689,157 in development revenues for the year ended December
31, 1998, related almost entirely to fees from Bristol-Myers for the development
of disease state management agreements. The Company also received development
revenues from a small number of other customers related to other
disease-specific programs. The Company has completed substantially all services
under these agreements and is currently receiving revenues in connection with
only the development of three programs. Development revenues include clinical,
technical and operational design or modification of the Company's primary
disease management programs. Development revenue declined from the year ended
December 31, 1997 to December 31, 1998 as the Company reduced its development
fees charged to certain customers. The Company anticipates that revenue from
development fees will continue to decline unless the Company enters into new
development agreements.
Revenues from licensing fees decreased 46% from $500,000 for the year ended
December 31, 1997 to $269,195 for the year ended December 31, 1998. Licensing
revenue represents amounts that the Company charges its customers, on a one-time
fee basis, for the right to enroll patients in or the right to license other
entities certain of its programs, primarily but not limited to, the Company's
standardized asthma and diabetes programs. The Company had licensing fees of
$99,750 from the sale of consumer healthcare software which are Internet based
products.
The Company also provides other services to customers in the healthcare
industry which involve new applications of its information capture and delivery
system. These services include patient surveys, health risk assessments, patient
satisfaction surveys, physician education programs and marketing support
functions.
Costs and Expenses
Cost of sales include salaries and related benefits, services provided by
third parties, and other expenses associated with the development of the
Company's customized disease state management programs, as well as the operation
of each of its disease state management programs.
Cost of sales increased 55% from $1,629,128 for the year ended December 31,
1997 to $2,529,619 for the year ended December 31, 1998. The increase in these
costs primarily reflects an increased level of program development and
operational activities, as well as the Company's creation of the capacity
necessary to handle anticipated increases in the number of individuals to whom
the Company provides services.
Sales and marketing expenses increased 12% from $1,609,837 for the year
ended December 31, 1997 to $1,795,921 for the year ended December 31, 1998.
These costs consist primarily of salaries, related benefits and travel costs,
sales materials and other marketing related expenses. Spending in this area has
remained consistent as the Company's sales and marketing staff has not expanded
during the twelve month period ended December 31, 1998. However, it is
anticipated that the Company will continue to invest in the sales and marketing
process, and that such expenses will increase in future periods.
General and administrative expenses include the costs of corporate
operations, finance and accounting, human resources and other general operating
expenses of the Company. General and administrative expenses increased 25% from
$2,442,269 for the year ended December 31, 1997 to $3,062,204 for the year ended
December 31, 1998. These expenditures were incurred to develop the corporate
infrastructure necessary to support anticipated program development and
operations. The increase in these costs was caused by an increase in the
Company's level of business activity, and the addition of required
administrative personnel. The Company expects that general and administrative
expenses will continue to increase in future periods.
Research and development expenses consist primarily of salaries and related
benefits and administrative costs allocated to the Company's research and
development personnel for development of certain components of its integrated
information capture and delivery system, as well as development of the Company's
standardized disease state management programs. Research and development
expenses decreased 39% from $489,115 for the year ended December 31, 1997 to
$298,686 for the year ended December 31, 1998. The decrease in research and
development expenses reflects the Company's completion of the development of its
primary disease management programs.
The Company generates net investment income primarily from cash balances
and investments. Investment income decreased to $556,592 for the year ended
December 31, 1998 from $835,116 for the year ended December 31, 1997. The
decrease in interest income reflects the use by the Company of its available
cash and the reduction of proceeds that can earn interest.
The Company had a net loss of $4,829,467 for the year ended December 31,
1998 compared to $3,263,351 for the year ended December 31, 1997. This
represents a loss of $.60 per share for 1998 and $.41 for 1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues
Revenues are comprised of revenues from development fees, operations fees
and licensing fees. Revenues increased 144% from $845,412 for the year ended
December 31, 1996 to $2,062,373 for the year ended December 31, 1997. A summary
of these revenues by category is as follows:
December 31,
------------
Revenues 1997 1996
- -------- ---- ----
Development Fees ..................................... $ 826,532 $ 798,138
Operations Fees ...................................... 735,841 11,718
Licensing Fees ....................................... 500,000 35,556
------- ------
Total Revenues ....................................... $2,062,373 $ 845,412
========== ==========
Revenues from development fees increased 3.6% from $798,138 for the year
ended December 31, 1996 to $826,532 for the year ended December 31, 1997. The
Company received $826,532 in development revenues for the year ended December
31, 1997, primarily related to fees from Bristol-Myers for the development of
six disease state management contracts. The Company also received development
revenues from a small number of other customers related to other
disease-specific programs. The Company has completed substantially all services
under these agreements and is currently receiving revenues in connection with
only the development of three programs.
The Company's development contracts generally require that payments be made
by the customer at the time of contract execution and at the achievement of
certain milestones in the development process. These payments are normally
received in advance of the Company's recognition of the associated revenue. The
timing of customer payments for program operation services varies by contract,
but typically occurs prior to the associated services being provided. The
Company recognizes deferred revenue for amounts billed for these services in
advance of the rendering of the services. The advance payments have been a
source of liquidity for the Company.
Revenues from operations increased 6180% from $11,718 for the year ended
December 31, 1996 to $735,841 for the year ended December 31, 1997. Operations
revenues are generated as the Company provides services to its customers for
their disease-specific programs. Operations revenues increased significantly in
1997, as the Company began enrolling patients and implementing its disease state
management programs during 1997. Operations revenue consisted primarily of
$440,000 in fees received from Abbott Laboratories in connection with a
teleconference program completed during the year ended December 31, 1997.
Revenues from licensing fees increased 1306% from $35,556 for the year
ended December 31, 1996 to $500,000 for the year ended December 31, 1997.
Licensing revenue represents amounts that the Company charges its customers for
the right to enroll patients in or the right to market to other entities certain
of its programs, primarily the Company's standardized asthma and diabetes
programs, and the right to have access to data collected from patients enrolled
in such programs. The Company did not initiate any licensing activity until the
second quarter of 1996, therefore licensing revenues for the year ended December
31, 1997 were significantly higher that those generated during the year ended
December 31, 1996. In 1997, the Company received licensing revenues of $150,000
from the PulseGroup, Inc. for a licensing contract related to the Company's
asthma and diabetes programs.
The Company began to provide other services to customers in the healthcare
industry during 1997 which involve new applications of its information capture
and delivery system. These services include patient surveys, health risk
assessments, nursing support lines and marketing support functions.
Costs and Expenses
Cost of sales include salaries and related benefits, services provided by
third parties, and other expenses associated with the development of the
Company's customized disease state management programs, as well as the operation
of each of its disease state management programs. In addition, cost of sales for
1997 and 1996 includes accrued losses on program development in accordance with
the Company's policy of recognizing such losses, if any, in full as identified.
The accrued loss for 1997 and 1996 is a result of a particular contract for
which the amount of the program development fee is based upon the success of the
program, and the fact that the guaranteed development revenue for this program
is less than the estimated cost of its development. To the extent that the
Company enters into any contracts of this type in the future, and that those
contracts provide for guaranteed development revenue which is less than the
estimated cost of program development, such losses will continue to be accrued.
Cost of sales increased 118% from $748,322 for the year ended December 31,
1996 to $1,629,128 for the year ended December 31, 1997. The increase in these
costs primarily reflects an increased level of program development and
operational activities.
Sales and marketing expenses increased 76% from $913,547 for the year ended
December 31, 1996 to $1,609,837 for the year ended December 31, 1997. These
costs consist primarily of salaries, related benefits and travel costs. These
expenditures allowed the Company to undertake initial marketing efforts to
pharmaceutical companies, payors and other health care services organizations.
The increase in these costs reflects an increase in the size of the Company's
sales and marketing staff.
General and administrative expenses include the costs of corporate
operations, finance and accounting, human resources and other general operating
expenses of the Company. General and administrative expenses increased 39% from
$1,759,044 for the year ended December 31, 1996 to $2,442,269 for the year ended
December 31, 1997. These expenditures were incurred to develop the corporate
infrastructure necessary to support anticipated program development and
operations. The increase in these costs was caused by an increase in the
Company's level of business activity, and the addition of required
administrative personnel.
Research and development expenses consist primarily of salaries and related
benefits and administrative costs allocated to the Company's research and
development personnel for development of certain components of its integrated
information capture and delivery system, as well as development of the Company's
standardized disease state management programs. Research and development
expenses increased 57% from $310,552 for the year ended December 31, 1996 to
$489,115 for the year ended December 31, 1997. The increase in these costs
reflects initiation of development of the Company's standardized disease state
management programs for patients suffering from asthma and diabetes.
The Company generates net interest income primarily from cash balances and
investments. Interest income increased to $835,116 for the year ended December
31, 1997 from $81,333 for the year ended December 31, 1996. The increase in
interest income reflects the additional funds available to the Company for
investment as a result of its initial public offering on December 19, 1996.
The Company had a net loss of $3,263,351 for the year ended December 31,
1997 compared to $2,806,436 for the year ended December 31, 1996. This
represents a loss of $.41 per share for 1997 and $.44 for 1996.
Liquidity and Capital Resources
At December 31, 1998 the Company had working capital of $7,992,894, as
compared to $13,242,387 at December 31, 1997. Since its inception the Company
has primarily funded its operations, working capital needs and capital
expenditures from the sale of equity securities. On December 19, 1996 the
Company completed an initial public offering of its common stock which generated
net proceeds to the Company of $14,082,048. On January 8, 1997, an additional
300,000 shares of common stock were sold pursuant to an underwriters
over-allotment provision, which generated net proceeds to the Company of
$2,232,000. The Company has continued to expend increasing amounts to expand its
operational capabilities including increasing its administrative and technical
costs. To the extent that revenues do not increase, the Company's losses will
increase, creating an increased burden on the Company's available capital. If
the Company is not able to operate profitably or to reduce its losses
significantly, it will be required to seek additional capital or reduce its
operations.
Capital expenditures during 1998 were $594,663, as compared to expenditures
of $394,161 during 1997 and $494,577 during 1996. The expenditures during these
periods represented the purchase of the significant technology platform
components of the integrated information capture and delivery system as well as
purchases required to support the Company's growing employee base.
The Company has been substantially dependent upon the public and private
sale of securities to fund its research and development activities and working
capital requirements. In order to implement programs using the Company's
integrated information capture and delivery system, the Company will be required
to devote substantial additional assets to the development of technology, the
construction of physical facilities and the acquisition of telephone and
computer equipment. The Company will also be required to retain the services of
employees in advance of obtaining contracts to provide services.
Inflation
Inflation did not have a significant impact on the Company's costs during
1998, 1997 or 1997. The Company continues to monitor the impact of inflation in
order to minimize its effects through pricing strategies, productivity
improvements and cost reductions.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activity, which is required to
be adopted by the Company in 2001. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges of underlying transactions must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. Management has not yet
determined the effect SFAS No. 133 will have, if any, on the Company's
consolidated financial position, results of operations or cash flows.
Year 2000 Issues
The Year 2000 issue refers to the inability of computerized systems and
technologies to recognize and process dates beyond December 31, 1999. The
Company has reviewed the Company's information technology systems, cable network
equipment and other embedded technologies. A significant portion of the
Company's computerized systems and technologies have been developed, installed
or upgraded in recent years and are generally more likely to be Year 2000 ready.
The Company is also evaluating the potential impact as a result of its reliance
on third-party systems that may have year 2000 issues.
Computerized business applications that could be adversely affected by the
year 2000 issue include:
* information processing and financial reporting systems,
* customer billing systems,
* customer service systems,
* telecommunication transmission and reception systems, and
* facility systems.
System failure or miscalculation could result in an inability to process
transactions, send invoices, accept customer orders or provide customers with
products and services. Customers could also experience a temporary inability to
receive or use the Company's products and services.
The Company has developed a program to assess and address the year 2000
issue. This program consists of the following phases:
* inventorying and assessing the impact on affected technology and systems,
* developing solutions for affected technology and systems,
* modifying or replacing affected technology and systems
* testing and verifying solutions
* implementing solutions, and
* developing contingency plans.
The Company has substantially completed inventorying and assessing the
affected computerized systems and technologies. The Company is in various stages
of its year 2000 compliance program with respect to the remaining phases as it
relates to the affected systems and technologies. The Company has completed
adaptation of all internally created systems and has begun surveying its
customers and suppliers regarding their readiness for the year 2000. Final
testing to independently validate readiness will begin when the Company has
received all third party hardware and software promised to date.
Costs incurred to date directly related to addressing the year 2000 are
approximately $50,000. The Company currently estimates the total cost of its
year 2000 remediation program to be approximately $60,000. Although the Company
will continue to incur substantial capital expenditures in the ordinary course
of meeting its telecommunications system upgrade through the year 2000, it will
not specifically accelerate its expenditures to facilitate year 2000 readiness,
and accordingly such expenditures are not included in the above estimate.
The Company has begun communicating with others with whom it does
significant business to determine their year 2000 readiness and to determine the
extent to which the Company is vulnerable to year 2000 issues related to those
third parties. The Company purchases much of its technology from third parties.
There can be no assurance that the systems of other companies on which the
Company's systems rely will be year 2000 ready or timely converted into systems
compatible with the Company's systems. The Company's failure or a third party's
failure to become year 2000 ready or the Company's inability to become
compatible with third parties with which the Company has a material
relationship, may have a material adverse effect on the Company, including
significant service interruption or outages, however, the Company cannot
currently estimate the extent of any such adverse effects.
The Company is in the process of identifying secondary sources to supply
its systems or services in the event it becomes probable that any of its systems
will not be year 2000 ready prior to the end of 1999. The Company is also in the
process of identifying secondary vendors and service providers to replace those
vendors and service providers whose failure to be year 2000 ready could lead to
a significant delay in the Company's ability to provide its service to its
customers.
Forward Looking Statements
When used in this and in future filings by the Company with the Securities
and Exchange Commission, in the Company's press releases and in oral statements
made with the approval of an authorized executive officer of the Company, the
words or phrases "will likely result," "expects," "plans," "will continue," "is
anticipated," "estimated," "project," or "outlook" or similar expressions
(including confirmations by an authorized executive officer of the Company of
any such expressions made by a third party with respect to the Company) are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. The
Company has no obligation to publicly release the result of any revisions which
may be made to any forward-looking statements to reflect anticipated or
unanticipated events or circumstances occurring after the date of such
statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to changes in interest rates primarily in its cash
transactions. The Company does not believe it is exposed to changes in foreign
currently exchange rates because it does not currently invest in foreign
currency instruments. A discussion of the Company's accounting policies for
financial instruments is included in the Summary of Significant Accounting
Policies in the Notes to the Financial Statements. The Company currently does
not have any international operations nor does invest its cash in foreign
currency instruments. The balances the Company has in cash or cash equivalents
are generally available without legal restrictions to fund ordinary business
operations. The Company regularly invests excess operating cash in certificates
of deposit and U.S. government bonds and other bonds that are subject to changes
in short-term interest rates. Accordingly, the Company believes that the market
risk arising from its holding of these financial instruments is minimal. The
Company made purchases of available-for-sale securities in the amounts of
$7,826,910 in 1998 and $18,121,444 in 1997.
<PAGE>
Item 8. Financial Statements And Supplemental Data
Index to Financial Statements Page
Independent Auditors' Report 26
Balance Sheets 27
Statements of Operations 28
Statements of Stockholders' Equity 29
Statements of Cash Flows 30
Notes to Financial Statements 31-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Patient Infosystems, Inc.:
We have audited the accompanying balance sheets of Patient Infosystems, Inc. as
of December 31, 1998 and 1997 and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Patient Infosystems, Inc. at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Rochester, New York
February 5, 1999
(February 26, 1999 as to Note 10)
<PAGE>
<TABLE>
<CAPTION>
PATIENT INFOSYSTEMS, INC
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
ASSETS ..................................................
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 6,316,955 $ 779,317
Available-for-sale securities ......................... 1,029,674 12,232,335
Accounts receivable, net .............................. 1,320,626 412,956
Prepaid expenses and other current assets ............. 219,978 405,507
------- -------
Total current assets ............................ 8,887,233 13,830,115
PROPERTY AND EQUIPMENT, net ............................. 1,182,494 958,965
OTHER ASSETS ............................................ 450,000 247,393
------- -------
TOTAL ASSETS ............................................ $ 10,519,727 $ 15,036,473
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ...................................... $ 304,436 $ 89,674
Accrued salaries and wages ............................ 277,931 320,272
Accrued expenses ...................................... 58,904 79,236
Deferred revenue ...................................... 253,068 67,549
Accrued loss on development contracts ................. -- 30,997
------- ------
Total current liabilities ....................... 894,339 587,728
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value: shares - authorized:
20,000,000; issued and outstanding: 1998 - 8,020,042
1997 - 8,011,522 .................................... 80,200 80,115
Additional paid-in capital ............................ 21,561,094 21,550,009
Other comprehensive income ............................ -- 5,060
Accumultated deficit .................................. (12,015,906) (7,186,439)
----------- ----------
Total stockholders' equity ...................... 9,625,388 14,448,745
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............. $ 10,519,727 $ 15,036,473
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PATIENT INFOSYSTEMS, INC
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES ................................... $ 2,344,072 $ 2,062,373 $ 845,412
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of revenue .......................... 2,529,619 1,629,128 748,322
Sales and marketing ...................... 1,795,921 1,609,837 913,547
General and administrative ............... 3,062,204 2,442,269 1,759,044
Research and development ................. 298,686 489,115 310,552
------- ------- -------
Total costs and expenses ........... 7,686,430 6,170,349 3,731,465
--------- --------- ---------
OPERATING LOSS ............................. (5,342,358) (4,107,976) (2,886,053)
Other income ............................... 556,592 835,116 81,333
------- ------- ------
Loss before income taxes ................... (4,785,766) (3,272,860) (2,804,720)
Income taxes ............................... 43,701 (9,509) 1,716
------ ------ -----
NET LOSS ................................... $(4,829,467) $(3,263,351) $(2,806,436)
=========== =========== ===========
NET LOSS PER SHARE - BASIC
AND DILUTED ............................. $ (.60) $ (.41) $ (.44)
=========== =========== ===========
WEIGHTED AVERAGE COMMON
AND POTENTIAL COMMON SHARES ............. 8,018,398 7,980,094 6,347,716
========= ========= =========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
PATIENT INFOSYSTEMS, INC
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Additional Other Total
Preferred Stock Common Stock Paid-in Comprehensive Accumulated Stockholders'
Shares Amount Shares Amount Capital Income Defict Equity
------ ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996 1,800,000 $18,000 3,602,880 $36,029 $ 2,227,788 $ -- $(1,116,652) $ 1,165,165
Sale of Series B convertible
preferred stock at $5.00 per share
in May and June 1996
(net of issuance costs
of $3,250) 600,000 6,000 -- -- 2,990,750 -- -- 2,996,750
Compensation expense related to
issuance of stock warrants -- -- -- -- 13,208 -- -- 13,208
Exercise of stock warrants -- -- 4,322 43 2,959 -- -- 3,002
Sale of common stock at $8.00
per share in December 1996
(net of issuance costs
of $1,917,952) -- -- 2,000,000 20,000 14,062,048 -- -- 14,082,048
Conversion of Series A and B
convertible preferred stock to
common stock (2,400,000)(24,000) 2,046,000 20,460 3,540 -- -- --
Comprehensive Income (loss)
Net loss for the year end
December 31, 1996 -- -- -- -- -- -- (2,806,436) (2,806,436)
-----------------------------------------------------------------------------------------------
Total Comprehensive loss -- -- -- -- -- -- -- (2,806,436)
-----------------------------------------------------------------------------------------------
Balances, December 31, 1996 -- -- 7,653,202 76,532 19,300,293 -- (1,116,652) 15,453,737
Sale of common stock at $8.00
per share in January 1997
(net of issuance costs
of $168,000) -- -- 300,000 3,000 2,229,000 -- -- 2,232,000
Compensation expense related
to issuance of stock warrants -- -- -- -- 8,283 -- -- 8,283
Exercise of stock options -- -- 58,320 583 12,433 -- -- 13,016
Comprehensive Income (loss)
Unrealized gain on investments
available-for-sale -- -- -- -- -- 5,060 -- 5,060
Net loss for the year end
December 31, 1997 -- -- -- -- -- -- (3,263,351) (3,263,351)
-----------------------------------------------------------------------------------------------
Total Comprehensive loss -- -- -- -- -- -- -- (3,258,291)
-----------------------------------------------------------------------------------------------
Balances, December 31, 1997 -- -- 8,011,522 80,115 21,550,009 5,060 (1,116,652) 14,448,745
Compensation expense related
to issuance of stock warrants -- -- -- -- 7,388 -- -- 7,388
Exercise of stock options -- -- 8,520 85 3,697 -- -- 3,782
Comprehensive Income (loss)
Unrealized loss on investments
available-for-sale -- -- -- -- -- -- -- (5,060)
Net loss for the year end
December 31, 1998 -- -- -- -- -- -- (4,829,467) (4,829,467)
-----------------------------------------------------------------------------------------------
Total Comprehnsive loss -- -- -- -- -- (5,060) -- (4,834,527)
-----------------------------------------------------------------------------------------------
Balances, December 31, 1998 -- $ -- 8,020,042 $80,200 $21,561,094 $ -- $(1,116,652) $ 9,625,388
===============================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PATIENT INFOSYSTEMS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATING :
Net loss .................................................................. $ (4,829,467) $ (3,263,351) $ (2,806,436)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ......................................... 366,474 293,763 186,050
Loss on sale of property .............................................. 1,350 2,171 --
Amortization of premiums and discounts on available-for-sale securities (142,054) (209,832) --
Compensation expense related to issuance of stock warrants ............ 7,388 8,283 13,208
Increase in accounts receivable ....................................... (907,670) (26,741) (382,160)
Decrease (increase) in prepaid expenses and other current assets ...... 185,529 (234,980) (146,542)
Increase (decrease) in accounts payable ............................... 214,762 (107,000) (166,095)
(Decrease) increase in accrued salaries and wages ..................... (42,341) 193,243 78,770
(Decrease) increase in accrued expenses ............................... (20,332) (132,221) 192,076
Increase (decrease) in deferre+d revenue ............................... 185,519 (515,234) 414,728
(Decrease) increase in accrued loss on development contracts .......... (30,997) (36,142) 67,139
------- ------- ------
Net cash used in operating activities ........................... (5,011,839) (4,028,041) (2,549,262)
---------- ---------- ----------
INVESTING:
Property and equipment additions .......................................... (594,663) (394,161) (494,577)
Proceeds from sale of property ............................................ 3,310 1,299 --
Purchases of available-for-sale securities ............................... (7,826,910) (18,121,444) --
Maturities of available-for-sale securities ............................... 19,166,565 6,104,000 --
Increase in other assets .................................................. (202,607) (247,393) --
-------- -------- --------
Net cash provided by (used in) investing activities ............... 10,545,695 (12,657,699) (494,577)
---------- ----------- --------
FINANCING:
Proceeds from issuance of common and preferred stock, net ................. 3,782 2,245,016 17,081,800
(Decrease) increase in accrued initial public offering costs .............. -- (446,568) 446,568
----- -------- -------
Net cash provided by financing activities ....................... 3,782 1,798,448 17,528,368
----- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................... 5,537,638 (14,887,292) 14,484,529
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR ......................................................... 779,317 15,666,609 1,182,080
------- ---------- ---------
CASH AND CASH EQUIVALENTS AT
END OF YEAR ............................................................... $ 6,316,955 $ 779,317 $ 15,666,609
============ ============ ============
Supplemental disclosures of cash flow information
Cash paid (received) for income taxes, net ............................... $ 43,701 $ (9,509) $ 1,716
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Patient Infosystems, Inc. ("the Company") designs and
develops health care information systems and services to manage,
collect and analyze patient-related information to improve patient
compliance with prescribed treatment protocols. Through its various
patient compliance programs for disease state management, the Company
provides important benefits for the patient, the health care provider
and the payor. The Company was incorporated in Delaware on February 22,
1995 under the name DSMI Corp., changed its name to Disease State
Management, Inc. on October 13, 1995, and on June 28, 1996 changed its
name to Patient Infosystems, Inc. Prior to January 1, 1997, the Company
was a development stage enterprise.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual amounts could differ
from those estimates.
Fair Value of Financial Instruments - The Company's financial
instruments consist of cash and cash equivalents and available-for-sale
securities. The carrying values of cash and cash equivalents and
available-for-sale securities approximate fair value.
Revenue Recognition and Deferred Revenue - The Company's principal
source of revenue to date has been from contracts with various
pharmaceutical companies and managed care organizations for the
development and operation of disease management programs for chronic
diseases, disease management programs and other health care information
system applications. Deferred revenue represents amounts billed in
advance under these contracts.
Development Contracts - The Company's program development contracts
typically require payment from the customer at the time that the
contract is executed, with additional payments made as certain
development milestones are met. Development contract revenue is
recognized on a percentage of completion basis, in accordance with the
ratio of total development cost incurred to the estimated total
development costs for the entire project. Losses, if any, are
recognized in full as identified.
Program Operations - The Company's program operation contracts call for
a per enrolled patient fee to be paid by the customer for a series of
program services as defined in the contract. The timing of customer
payments varies by contract, but typically occurs in advance of the
associated services being provided. Revenues from program operations
are recognized ratably as the program services are delivered.
Cash and Cash Equivalents - Cash and cash equivalents include all
highly liquid debt instruments with original maturities of three months
or less.
Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentration of credit risk consist principally
of cash and cash equivalents and accounts receivable. The Company
places its cash and cash equivalents with high credit quality
institutions.
The Company's current contracts are concentrated in a small number of
customers, consequently, the loss of any one of its customers could
have a material adverse effect on the Company and its operations.
During the years ended December 31, 1998 and 1997, approximately
$755,000 (33%) and $925,800 (45%), respectively, of the Company's
revenues arose from contracts with one customer. At December 31, 1998
and 1997, accounts receivable included balances of $736,650 and
$231,484, respectively, from contracts with that customer.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 10 years.
The Company regularly assesses all of its long lived assets for
impairment and recognizes a loss when the carrying value of an asset
exceeds its fair value. The Company determined that no impairment loss
need be recognized for applicable assets in 1998 or 1997.
Research and Development - Research and development costs consist
principally of compensation and benefits paid to Company employees. All
research and development costs are expensed as incurred.
Income Taxes - The Company uses the asset and liability method of
accounting for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and net
operating loss and tax credit carryforwards.
Net Loss Per Share - Net loss per share is based on the weighted
average number of common shares outstanding subsequent to the Company's
initial public offering in 1996. Pursuant to rules of the Securities
and Exchange Commission Staff, all common and potential common shares
issued by the Company at a price less than the initial public offering
price during at least the 12 months preceding the offering date (using
the treasury stock method until shares are issued) have been included
in the calculation of common and potential common shares outstanding
for all periods presented prior to the December 1996 initial public
offering. (See Note 8)
Retirement Plan - The Company has a retirement plan which qualifies
under Section 401(k) of the Internal Revenue Code This retirement plan
allows eligible employees to contribute 1% to 15% of their income on a
pretax basis to the plan. The Company's annual contribution to the plan
is at the discretion of the Board of Directors. The Company made no
contributions to this plan in 1998 or 1997.
Stock Split - On November 22, 1996, the Company effected a .72-for-1
reverse stock split of all outstanding shares of common stock.
Statement of Financial Accounting Standards No. 130 - In 1998, the
Company adopted SFAS No. 130, "Reporting Comprehensive Income" and
restated the prior years' financial statements to conform to the new
reporting standard. This Statement establishes standards for reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial
statements. Comprehensive income for the Company includes net loss and
the unrealized gain or loss on available-for-sale securities.
Statement of Financial Accounting Standards No. 131 - In 1998, the
Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Statement requires that a
public company report financial and descriptive information about its
reportable operating segments using the management approach. SFAS also
requires that segment information of earlier years be restated to
conform to the new standard. The adoption of SFAS No. 131 had no effect
on the consolidated financial position, results of operations, or cash
flows of the Company.
Statement of Position 97-2 - In 1998, the Company adopted Statement of
Position (SOP) 97-2, "Software Revenue Recognition," which provides
guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. The implementation of SOP
97-2 did not have a material effect on the Company's revenues or
earnings.
Statement of Financial Accounting Standards No. 133 - In June 1998, the
Financial Accounting Standards Bard issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activity, which is required to be
adopted by the Company in 2001. The Statement will require the Company
to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges of underlying transactions must be
adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
Management has not yet determined the effect SFAS No. 133 will have, if
any, on the Company's consolidated financial position, results of
operations or cash flows.
Reclassifications - Certain 1997 and 1996 amounts have been
reclassified to conform with 1998 presentations.
2. AVAILABLE -FOR-SALE SECURITIES
The following is a summary of available-for-sale securities at December
31:
1998 1997
---- ----
Certificates of Deposit $1,029,674 $ -
U.S. Government Securities - 12,232,335
---------- ----------
Total Available-for-Sale Securities $1,029,674 $12,232,335
========== ===========
Realized and unrealized gains and losses on available-for-sale
securities were immaterial as of and for the years ended December 31,
1998, 1997 and 1996.
The cost and estimated fair value of available-for-sale securities by
contractual maturity at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less ................ $ 1,029,674 $ 1,029,674 $ 2,824,280 $ 2,823,704
Due after one year through two years ... -- -- 9,400,389 9,408,631
--------- --------- --------- ---------
$ 1,029,674 $ 1,029,674 $12,224,669 $12,232,335
=========== =========== =========== ===========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Computer software ............................ $ 545,467 $ 380,831
Computer equipment ........................... 795,996 600,279
Telephone equipment .......................... 301,172 189,479
Leasehold improvements ....................... 43,979 41,504
Office furniture and equipment ............... 363,387 249,291
------- -------
2,050,001 1,461,384
Less accumulated depreciation and amortization 867,507 502,419
------- -------
Property and equipment, net .................. $1,182,494 $ 958,965
========== ==========
</TABLE>
4. INCOME TAXES
Income tax expense for the years ended December 31, 1998, 1997 and 1996
consists of:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
U.S. federal ............ $ -- $ -- $ --
State and local ......... 43,701 (9,509) 1,716
Deferred:
U.S. federal ............ -- -- --
State and local ......... -- -- --
------- ------- ------
Income Tax Expense (Credit) $43,701 $(9,509) $ 1,716
======= ======= =======
</TABLE>
Income tax expense for the years ended December 31, 1998, 1997 and 1996
differed from the amounts computed by applying the U.S. federal income
tax rate of 34 percent as a result of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense ................. $(1,627,160) $(1,109,539) $ (953,605)
Increase in income taxes resulting from:
Change in the valuation allowance
for deferred tax assets .................. 1,628,997 1,094,833 949,726
State and local income taxes, net of federal
income tax benefit ....................... 28,843 (6,276) 1,133
Other, net ................................. 13,021 11,473 4,462
------ ------ -----
$ 43,701 $ (9,509) $ 1,716
=========== =========== ===========
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets: .................................................
Accounts receivable, principally due
to allowance for doubtful accounts ................................. $ 20,000 $ 20,000
Deferred revenue ..................................................... 101,000 27,000
Compensation ......................................................... 89,000 67,000
Net operating loss carryforwards ..................................... 4,569,000 2,711,000
Tax credit carryforwards ............................................. 59,000 59,000
Other ................................................................ 20,000 12,000
------ ------
Total gross deferred tax assets ................................. 4,858,000 2,896,000
Less valuation allowance ........................................ (4,711,000) (2,737,000)
---------- ----------
Net deferred tax assets ......................................... 147,000 159,000
------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation
and amortization ................................................... (69,000) (66,000)
Other ................................................................ (78,000) (93,000)
Total gross deferred tax liability .............................. (147,000) (159,000)
-------- --------
Net deferred tax assets ......................................... $ -- $ --
=========== ===========
</TABLE>
At December 31, 1998, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $11,437,000 which are
available to offset future federal taxable income, if any, through
2018. The Company also has investment tax credit carryforwards for
federal income tax purposes of approximately $59,000 which are
available to reduce future federal income taxes, if any, through 2018.
5. PUBLIC OFFERING OF COMMON STOCK
In December 1996, the Company sold 2,000,000 shares of common stock
through an initial public offering which generated net proceeds of
$14,082,048 after deducting applicable issuance costs and expenses. On
January 8, 1997, an additional 300,000 shares of common stock were sold
pursuant to an underwriters over-allotment provision, which generated
net proceeds to the Company of $2,232,000 after deducting underwriting
discounts and commissions.
In connection with this initial public offering, the Company's
outstanding shares of Series A and B convertible preferred stock were
converted into 2,046,000 shares of common stock.
6. STOCK OPTIONS AND WARRANTS
The Company has an Employee Stock Option Plan (the "Stock Option Plan")
for the benefit of certain employees, non-employee directors, and key
advisors. The Company has adopted the disclosures-only provision of
SFAS No. 123, "Accounting for Stock-Based Compensation". No
compensation cost has been recognized for the Stock Option Plan as it
relates to employees since the exercise price of the options on the
date of grant approximated fair market value. Had compensation cost for
the Company's stock option plan been determined based on the fair value
at the date of grant for awards consistent with the provisions of SFAS
No. 123, the Company's net loss and net loss per share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss - as reported .... $ (4,829,467) $ (3,263,351) $ (2,806,436)
Net loss - pro forma ...... $ (4,849,320) $ (3,406,973) $ (2,879,457)
Net loss per share - basic
and diluted - as reported $ (0.60) $ (0.41) $ (.44)
Net loss per share - basic
and diluted - pro forma . $ (0.60) $ (0.43 $ (.46)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model using an assumed risk-free
interest rates of 5.32% for year ended December 31, 1998, 5.98% for the
year ended December 31, 1997 and 7% for the year ended December 31,
1996 and an expected life of 7 years. As the Company was still
considered a private company for the purposes of applying SFAS No. 123
for the period from Inception to June 30, 1996, the Company did not
include a volatility factor assumption in its fair value model. For the
options granted after July 1, 1996, the Company has used a volatility
factor of .94 for year ended December 31, 1998, .53 for year ended
December 31, 1997 and .60 for year ended December 31, 1996. For
purposes of pro forma disclosure, the estimated fair value of each
option is amortized to expense over that option's vesting period. The
Stock Option Plan authorizes 1,080,000 shares of common stock to be
issued.
Stock options granted under the Stock Option Plan may be of two types:
(1) incentive stock options and (2) nonqualified stock options. The
option price of such grants shall be determined by a Committee of the
Board of Directors (the "Committee"), but shall not be less than the
estimated fair market value of the common stock at the date the option
is granted. The terms of the grants shall be fixed by the Committee,
with no term lasting longer than ten years. The ability to exercise
such options shall be determined by the Committee when the options are
granted. All of the outstanding options vest at the rate of 20% per
year with the exception of 36,000 options which were vested as of the
date of grant.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Outstanding Weighted-Average
Options Exercise Price
------- --------------
<S> <C> <C>
Options outstanding at January 1, 1996 .................. 590,400 $ 0.33
Options granted during the year ended December 31, 1996
(weighted average fair value of $3.24) ................ 365,400 $ 5.32
Options forfeited by holders during the year
ended December 31, 1996 ............................... (63,840) $ 0.87
-------
Options outstanding at December 31, 1996 ................ 891,960 $ 2.34
Options granted during the year ended December 31, 1997
(weighted average fair value of $5.16) ................ 307,000 $ 4.39
Options forfeited by holders during the year
ended December 31, 1997 ............................... (342,580) $ 4.83
Options exercised during the year ended December 31, 1997 (58,320) $ 0.22
-------
Options outstanding at December 31, 1997 ................ 798,060 $ 2.21
Options granted during the year ended December 31, 1998
(weighted average fair value of $1.38) ................ 399,200 $ 1.38
Options forfeited by holders during the year
ended December 31, 1998 ............................... (320,820) $ 3.15
Options exercised during the year ended December 31, 1998 (8,520) $ 0.44
------
Options outstanding at December 31, 1998 ................. 867,920 $ 0.91
-------
Options exercisable at December 31, 1998 ................. 290,816 $ 0.49
-------
Options available for grant at December 31, 1998 ........ 212,080
-------
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
- -------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$.14 - $.99 376,200 1.29 $ .30 240,120 $ 0.29
$1.00 - $1.99 488,740 4.07 $ 1.37 47,716 $ 1.36
$2.00 - $4.99 2,980 -- $ 3.15 2,980 $ 3.15
----- -----
867,920 290,816
======= =======
</TABLE>
The Company also has outstanding stock purchase warrants entitling the
holders to purchase a total of 23,400 shares of common stock at a price
of $1.38 per share (weighted average exercise price of $1.38). At
December 31, 1998, 9,360 of these warrants are currently vested, with
the remaining 14,040 warrants vesting at 20% per year. The Company has
recorded compensation costs in connection with the issuance of these
warrants for the years ended December 31, 1998, 1997 and 1996 in the
amount of $7,388, $8,283 and $13,208 respectively.
7. COMMITMENTS
The Company leases office space for its main operating facility in
Rochester, New York, under an operating lease agreement expiring in
November 1999. Additionally, the Company subleases office space for its
Wayne, Pennsylvania facility under an operating lease agreement
expiring in May 2001 and leases office space for its Berkeley,
California facility under an operating lease agreement expiring in
October 1999. Rent expense from these leases for the years ended
December 31, 1998, 1997 and 1996 was $210,375, $154,907 and $70,479
respectively.
At December 31, 1998, future minimum lease payments under these leases
are summarized as follows:
1999 $ 253,301
2000 40,200
2001 16,750
------
$ 310,251
=========
8. NET LOSS PER SHARE
Net loss per share is based on weighted average number of common shares
outstanding subsequent to the Company's initial public offering in
1996. Pursuant to rules of the Securities and Exchange Commission
Staff, all common and potential common shares issued by the Company at
a price less than the initial public offering price during at least the
12 months preceding the offering date (using the treasury stock method
until shares are issued) have been included in the calculation of
common and potential common shares outstanding for all periods
presented prior to the December 1996 initial public offering. Because
the Company incurred a loss in 1998 and 1997, outstanding options to
purchase 867,920 and 798,060 shares of common stock at $.14 to $4.99
per share, were not included in the computation of diluted loss per
share as they would be antidilutive.
<TABLE>
<CAPTION>
Net Loss Shares Per-Share
Numerator Denominator Amount
--------- ----------- ------
<S> <C> <C> <C>
For the year ended December 31, 1998
Basic and diluted ................................................ $(4,829,467) 8,018,398 $ (0.60)
=========== ========= ========
For the year ended December 31, 1997
Basic and diluted ................................................ $(3,263,351) 7,980,094 $ (0.41)
=========== ========= ========
For the year ended December 31, 1996
Loss available to Common Shareholders ............................ $(2,806,436)
Weighted average common stock outstanding ........................ 3,678,435
Series A Convertible Preferred Stock ............................. 1,296,000
Series B Convertible Preferred Stock ............................. 437,500
Potential common shares calculated
using the treasury stock method:
Series B Convertible Preferred
Stock issued May and June 1996 ............................ 177,365
Common stock options ........................................ 758,416
-------------------------------------
Basic and diluted ................................................ $(2,806,436) 6,347,716 $ (0.44)
=========== ========= ========
</TABLE>
9. JOINT VENTURE
On November 12, 1998, the Company entered into a joint venture
agreement with MacLean Hunter Publishing Limited to market and sell, on
an exclusive basis in Canada, products and services developed by the
Company and to jointly manage, finance and operate the business entity
Patient Infosystems Canada, Inc., which is dedicated to the development
of a commercially viable business built around the sale, marketing and
service of the Company's products and services.
10. SUBSEQUENT EVENT
On February 26, 1999, the Company, through its newly formed,
wholly-owned subsidiary, Patient Infosystems Acquisition Corp.,
acquired substantially all of the assets of HealthDesk Corporation, a
consumer healthcare software company primarily engaged in the business
of designing and developing Internet based products in the healthcare,
wellness and disease management industries. The acquired assets include
inventory, intellectual property, hardware and software. The principal
consideration paid for the transaction was $761,463. The Company paid
for the acquisition using its available cash.
11. QUARTERLY RESULTS (UNAUDITED)
The following is a summary of the unaudited interim results of
operations by quarter:
<TABLE>
<CAPTION>
First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Revenues ..................................................... $ 290,354 $ 874,119 $ 465,181 $ 714,418
Gross margin ................................................. (94,933) 324,848 (243,116) (172,346)
Net loss ..................................................... (1,055,038) (680,017) (1,348,843) (1,745,569)
Net loss per common share .................................... (0.13) (0.08) (0.17) (0.22)
Year ended December 31, 1997:
Revenues ..................................................... $ 523,477 $ 570,330 $ 433,059 $ 535,507
Gross margin ................................................. 172,407 35,839 34,363 190,636
Net loss ..................................................... (588,524) (892,906) (1,097,562) (684,359)
Net loss per common share .................................... (0.07) (0.11) (0.14) (0.09)
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures.
None
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1998.
Item 11. Executive Compensation.
Director Compensation
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1998.
Executive Compensation
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1998.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements:
The financial statements of the Company are included in Part II, Item
8.
(b) Reports on Form 8 - K:
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1998.
(c) Exhibits:
Exhibit # Description of Exhibits
(3) Articles of Incorporation and By-Laws:
Certificate of Incorporation
Incorporated herein by reference from Exhibit 3.1 on Form S-1
Registration Statement of the Company, filed with the
Commission on December 17, 1996.
By-Laws
Incorporated herein by reference from Exhibit 3.3 on Form S-1
Registration Statement of the Company, filed with the
Commission on December 17, 1996.
(10) Material contracts:
10.15 Asset Purchase Agreement dated as of September 29, 1998
among Patient Infosystems Acquisition Corp., the Company and
HealthDesk Corporation.
10.16 Amendment to Asset Purchase Agreement dated as of December
1, 1998 among Patient Infosystems Acquisition Corp., the Company
and HealthDesk Corporation.
10.17 Second Amendment to Asset Purchase Agreement dated as of
February 1, 1999 among Patient Infosystems Acquisition Corp., the
Company and HealthDesk Corporation.
10.18 Sublease dated as of September 29, 1998 between HealthDesk
Corporation and Patient Infosystems Acquisition Corporation.
10.19 Consulting Agreement dated as of March 8, 1999 between the
Company and John V. Crisan.
10.20 Lease Agreement dated as of February 22, 1995 between the
Company and Conifer Prince Street Associates.
10.21 First Addendum to Lease Agreement dated as of August 22,
1995 between the Company and Conifer Prince Street Associates.
10.22 Second Addendum to Lease Agreement dated as of November 17,
1995 between the Company and Conifer Prince Street Associates.
10.23 Third Addendum to Lease Agreement dated as of March 28,
1996 between the Company and Conifer Prince Street Associates.
10.24 Fourth Addendum to Lease Agreement dated as of October 29,
1996 between the Company and Conifer Prince Street Associates.
10.25 Fifth Addendum to Lease Agreement dated as of November 30,
1996 between the Company and Conifer Prince Street Associates.
10.26 Sixth Addendum to Lease Agreement dated as of November 24,
1997 between the Company and Conifer Prince Street Associates.
10.27 Sublease Agreement dated as of March 30, 1998 between the
Company and Medecision, Incorporated.
10.28 Joint Venture and Stockholders Agreement dated as of
November 12, 1998 between the Company and Maclean Hunter
Publishing Limited.
10.29 Lease Agreement dated as of October 12, 1998 between the
Company and Parker Associates.
(11) Statement of Computation of Per Share Earnings
(21) Subsidiaries
(27) Financial Data Schedule
Filed electronically
All other exhibits are omitted because they are not applicable or the
required information is shown elsewhere in this Annual Report on Form
10-K.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PATIENT INFOSYSTEMS, INC.
By: /s/ Donald A. Carlberg April 13, 1999
---------------------- --------------
Donald A. Carlberg Date
Director, President, and Chief Executive Officer
Pursuant to the requirements the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By: /s/ Donald A. Carlberg April 13, 1999
- -------------------------- --------------
Donald A. Carlberg Date
Director, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ John V. Crisan April 13, 1999
- ---------------------- --------------
John V. Crisan Date
Chief Financial Officer
(Principal Financial and Accounting Officer)
By: /s/ Derace L. Schaffer, M.D. April 13, 1999
- -------------------------------- --------------
Derace L. Schaffer, M.D. Date
Chairman of the Board
By: /s/ John Pappajohn April 13, 1999
- ---------------------- --------------
John Pappajohn Date
Director
By: /s/ Barbara J. McNeil, M.D., Ph.D. April 13, 1999
- -------------------------------------- --------------
Barbara J. McNeil, M.D., Ph.D. Date
Director
By: /s/ Carl F. Kohrt, Ph.D. April 13, 1999
- ---------------------------- --------------
Carl F. Kohrt, Ph.D. Date
Director
By: /s/ David B. Nash, M.D. April 13, 1999
- --------------------------- --------------
David B. Nash, M.D. Date
Director
EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 29, 1998
AMONG
PATIENT INFOSYSTEMS ACQUISITION CORP.,
PATIENT INFOSYSTEMS, INC.
AND
HEALTHDESK CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. TRANSFER OF ASSETS..................................................1
1.1 Intellectual Property........................................1
1.2 Inventories..................................................1
1.3 Equipment and Packaged Software..............................1
1.4 Books and Records............................................2
1.5 Prepaid Expenses.............. ..............................2
1.6 Permits, etc.................................................2
1.7 All Property Not Elsewhere Described.........................2
1.8 Excluded Assets..............................................2
ARTICLE 2. PURCHASE PRICE......................................................2
2.1 Payment of Purchase Price....................................2
2.2 Allocation of Purchase Price.................................3
ARTICLE 3. THE CLOSING............................................ ............3
ARTICLE 4. ASSUMPTION OF LIABILITIES...........................................3
ARTICLE 5. EXCISE AND PROPERTY TAXES...........................................3
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SELLER............................3
6.1 Organization, Good Standing and Qualification................4
6.2 Financial Statements............................. ...........4
6.3 Absence of Specified Changes.................................4
6.4 Taxes...................................... ................5
6.5 Real Property................................................6
6.6 Inventories..................................................6
6.7 Intellectual Property.......................... .............6
6.8 Trade Secrets................................................6
6.9 Title to Assets................................. ............6
6.10 Customers and Sales..........................................7
6.11 Existing Employment Contracts................................7
6.12 Insurance Policies...........................................7
6.13 Other Contracts..............................................7
6.14 Compliance with Laws............................. ...........7
6.15 Litigation...................................................7
6.16 Assets Sufficient for Conduct of Business....................8
6.17 Agreement Will Not Cause Breach or Violation.................8
6.18 Authority and Consents.......................................8
6.19 Interest in Customers, Suppliers and Competitors.............8
6.20 Employee Identification and Compensation.....................8
6.21 No Subsidiaries..............................................8
6.22 Environmental Matters........................................8
6.23 Employee Benefit Plans......................................10
6.24 Product Warranties..........................................10
6.25 Software....................................................10
6.26 Documents Delivered.........................................10
6.27 Full Disclosure.............................................11
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.................11
7.1 Organization................................................11
7.2 Authority and Consents......... ...........................11
7.3 Agreement Will Not Cause Breach Or Violation................11
ARTICLE 8. OBLIGATIONS OF THE PARTIES BEFORE CLOSING..........................12
8.1 Buyer's Access to Premises and Information........ .........12
8.2 Conduct of Business in Normal Course.................... ..12
8.3 Preservation of Business and Relationships..................12
8.4 Maintenance of Insurance....................................12
8.5 Employees and Compensation..................................12
8.6 New Transactions............................................12
8.7 Payment of Liabilities and Waiver of Claims.................13
8.8 Existing Agreements............................... .........13
8.9 Consent of Others...........................................13
8.10 Representations and Warranties True at Closing..............13
8.11 Sales and Use Tax on Prior Sales.............. .............13
8.12 Statutory Filings........................ ..................13
8.13 Negotiations with Certain Customers.........................13
8.14 License Agreement...........................................13
8.15 Sublease....................................................14
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE........................14
9.1 Accuracies of Seller's Representations and Warranties.... .14
9.2 Absence of Liens............................................14
9.3 Seller's Performance........................................14
9.4 Certification by Seller......................... ...........14
9.5 Assignment and Assumption Agreements........................14
9.6 Bill of Sale................................................14
9.7 Opinion of Seller's Counsel.................................14
9.8 Absence of Litigation.......................................14
9.9 Corporate Approval..........................................15
9.10 Good Standing Certificate................... ...............15
9.11 Consents....................................................15
9.12 Approval of Documentation...................................15
9.13 Employment Arrangements.....................................15
9.14 Bulk Transfer Notice........................................15
9.15 Change of Corporate Name....................................15
9.16 Condition of Assets.........................................15
9.17 MIIX Agreement..............................................15
9.18 HBOC Agreement.................................... .........15
ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE......................15
10.1 Accuracy of Buyer's Representations and Warranties..........15
10.2 Buyer's and Parent's Performance......... .................16
10.3 Payment of Purchase Price...................................16
ARTICLE 11. OBLIGATIONS OF THE PARTIES AFTER THE CLOSING......................16
11.1 Preservation of Goodwill....................................16
11.2 Change of Name..............................................16
11.3 Access to Records...........................................16
11.4 Nonsolicitation of Employees................................17
11.5 Further Assurances..........................................17
11.6 Termination of IAC Contract.................................17
ARTICLE 12. INDEMNIFICATION...............................................17
12.1. Indemnification by Seller...................................17
12.2. Indemnification by Buyer....................................17
12.3. Notice and Defense of Third Party Claims....................17
ARTICLE 13. COSTS............................................................18
13.1 Finder's or Broker's Fees................. .................18
13.2 Expenses....................................................18
ARTICLE 14. FORM OF AGREEMENT...............................................18
14.1 Headings....................................................18
14.2 Entire Agreement; Modification; Waiver......................18
14.3 Counterparts................................................18
ARTICLE 15. PARTIES.........................................................19
15.1 Parties in Interest.........................................19
15.2 Assignment..................................................19
ARTICLE 16. TERMINATION.....................................................19
16.1. Termination by Mutual Consent...............................19
16.2. Termination by Buyer or Seller..............................19
16.3. Effect of Termination..................... .................19
ARTICLE 17. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............19
ARTICLE 18. NOTICES.........................................................20
ARTICLE 19. GOVERNING LAW...................................................20
ARTICLE 20. MISCELLANEOUS...................................................20
20.1 Recovery of Litigation Costs..................... ........20
20.2 Announcements...............................................20
20.3 References..................................................21
This Asset Purchase Agreement (the "Agreement"), dated as of September
29, 1998 among PATIENT INFOSYSTEMS ACQUISITION CORP., a Delaware corporation
("Buyer"), PATIENT INFOSYSTEMS, INC., a Delaware corporation ("Parent"), and
HEALTHDESK CORPORATION, a California corporation ("Seller").
WITNESSETH:
WHEREAS, Seller owns certain assets which it uses in the operation of
its business being generally the design, development and marketing of the
HealthDesk Online software, the CareTeam Connect software and software related
products for use in the healthcare, wellness and disease management industries
(such business currently operated by Seller being referred to herein as the
"Business").
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer, on the terms and subject to the conditions of this Agreement,
substantially all of the assets and properties used in the Business, other than
certain excluded assets described below.
THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE 1.........TRANSFER OF ASSETS
Subject to the terms and conditions set forth in this Agreement, Seller
agrees to sell, convey, transfer, assign and deliver to Buyer, and Buyer agrees
to purchase from Seller at the Closing described in Article 3 hereof, all the
assets, properties and business of Seller of every kind, character and
description, whether tangible, intangible, real, personal or mixed, and wherever
located (but excluding any assets specifically excluded in the following
Sections of this Article 1), all of which are sometimes collectively referred to
in this Agreement as the "Assets," including, but not limited to, the following:
1.1......Intellectual Property. All trade names (including, but not
limited to, the name "HealthDesk"), trademarks, service marks, copyrights,
patents, patent rights, inventions, licenses, computer programs (regardless of
state of completion and including all work product), brand names, trade secrets,
technical know-how, goodwill and other intangibles (including without limitation
(i) tort or insurance proceeds arising out of any damage or destruction of any
of the Assets between the date of this Agreement and the Closing Date (as
hereinafter defined), (ii) all right, title and interest of Seller in the
license and service agreements identified on Schedule 1.1(the "License
Agreements"), (iii) the intellectual property identified on Schedule 6.7, and
(iv) the software identified on Schedule 6.25 and all programs, designs and
documentation for such software used by Seller in (or owned by Seller and useful
in) the operation of the Business) (the assets described in this Section 1.1,
collectively, the "Intellectual Property");
1.2......Inventories. All of Seller's finished goods and raw materials
(whether expensed or not), including work in process, shrink wraps, CD roms,
spare parts and repair materials that are actually on hand with Seller as of the
Closing Date, an approximate summary of which items currently on hand is
attached hereto as Schedule 1.2 (hereinafter referred to collectively as the
"Inventories");
1.3......Equipment and Packaged Software. Seller's office equipment and
computer hardware specifically set forth on Schedule 1.3 (the "Equipment") and
the Packaged Software listed on Schedule 1.3a (the "Packaged Software");
1.4......Books and Records. All papers, computerized databases, files
and records in Seller's care, custody or control relating to any or all of the
above described Assets and the operation thereof, including, but not limited to,
all blueprints and specifications, product designs, marketing materials,
demonstration packages and product materials, environmental control records,
sales records, marketing materials, maintenance and production records, and
plans and designs of buildings, structures, fixtures and equipment, but
excluding personnel and labor relations records and accounting and financial
records;
1.5......Prepaid Expenses. All prepaid expenses and other prepaid
items relating to any of the Assets and the operation of the Business;
1.6......Permits, etc. All permits, licenses, franchises, consents or
authorizations issued by, and all registrations and filings with, any
governmental agency in connection with the Business, whenever issued or filed,
excepting only those which by law or by their terms are non-transferable and
those which have expired; and
1.7......All Property Not Elsewhere Described. All other properties of
Seller of every kind, character or description owned, used or held for use
(whether or not exclusively) in connection with the Business, wherever located
and whether or not similar to the things set forth elsewhere in this Article 1,
but excluding any assets specifically excluded in this Article 1.
1.8......Excluded Assets. The following assets are specifically
excluded from the assets being purchased by Buyer pursuant to this Agreement
(collectively, the "Excluded Assets"):
(a)......all furniture, PCs, laptops and office equipment not
specifically set forth on Schedule 1.3;
(b)......all cash, bank balances, money in possession of banks and
other depositories, including security deposits with landlords and equipment
lessors, and similar cash items held by or for the account of Seller;
(c)......all of Seller's accounts receivable;
(d)......Seller's franchise as a corporation, its articles of
incorporation, corporate seal, minute books and stock books, stock transfer
records and similar records relating to Seller's organization, existence or
capitalization, and the capital stock of Seller and all other records which
Seller is required by law to keep in its possession;
(e)......Seller's federal, state and local tax returns and rights to
refunds, if any; and
(f)......Seller's rights relating to its proposed acquisition of
MCInformatics ("MCI") and any assets acquired in connection with such
acquisition. The term "Business" as used herein expressly excludes any matter
relating to MCI.
ARTICLE 2.........PURCHASE PRICE
2.1......Payment of Purchase Price. In consideration for the transfer
and assignment by Seller of the Assets and in consideration of the
representations, warranties and covenants of Seller set forth herein, Buyer
shall, subject to the conditions set forth herein,
(a) deliver to Seller at the Closing (as hereinafter
defined) the sum of (i) $500,000, representing
payment for the Assets other than the Equipment; (ii)
$115,040, representing payment for the Equipment
(such sums collectively referred to as the "Purchase
Price"); and (iii) $11,238, representing payment for
the Packaged Software, payable in cash as more fully
described in Section 10.3 hereof; and
(b) assume and discharge, and shall indemnify Seller
against, liabilities and obligations of Seller under
the leases, contracts or other agreements, if any,
specified on Schedule 1.1. and Schedule 4 but only to
the extent that such liabilities or obligations
accrue on or after the Closing Date.
2.2......Allocation of Purchase Price. The parties shall determine and
agree upon the allocation of the Purchase Price at, or prior to, the Closing and
such allocation will be used by the parties in reporting the transaction
contemplated by this Agreement for federal and state tax purposes.
ARTICLE 3.........THE CLOSING.
The closing of the purchase and sale of the Assets by Seller to Buyer
(the "Closing") shall take place at the offices of Gibbons, Del Deo, Dolan,
Griffinger & Vecchione, One Riverfront Plaza, Newark, New Jersey 07102-5497, at
10:00 a.m. local time, within five days of satisfying the conditions to closing
set forth herein, or at such other place and/or time as the parties may agree in
writing (the "Closing Date"). If on the original or any postponed Closing Date
Seller shall have been unable to obtain all waivers and consents of private
parties and governmental agencies required by this Agreement, then Buyer, on
written notice, may postpone the Closing to a time not later than November 30,
1998.
ARTICLE 4.........ASSUMPTION OF LIABILITIES
Buyer is not assuming any debt, liability or obligation of Seller,
whether known or unknown, fixed or contingent (including without limitation the
litigation set forth on Schedule 6.15), except as herein specifically otherwise
provided. Seller agrees to indemnify and hold Buyer harmless against all debts,
claims, liabilities and obligations of Seller not expressly assumed by Buyer
hereunder, and to pay any and all attorneys' fees and legal costs reasonably
incurred by Buyer, its successors and assigns in connection therewith. Buyer
shall have the benefit of and shall perform and assume the License Agreements
and all leases, contracts and agreements, if any, specifically listed on
Schedule 4, in accordance with the terms and conditions thereof, except to the
extent modifications are specifically set forth on such Schedule 4 and except to
the extent set forth in the assignments or assignment and assumption agreements
for such leases, contracts and agreements.
ARTICLE 5.........EXCISE AND PROPERTY TAXES
Buyer shall pay all sales, use and transfer taxes arising out of the
transfer of the Assets and shall pay its portion, prorated as of the Closing
Date, of state and local real and personal property taxes of the Business. Buyer
shall not be responsible for any business, occupation, withholding or similar
tax, or for any taxes of any kind related to any period before the Closing Date.
ARTICLE 6.........REPRESENTATIONS AND WARRANTIES OF SELLER.
Except as set forth in the Schedules delivered by Seller concurrently
with the execution of this Agreement and incorporated herein, Seller hereby
represents and warrants to Buyer and Parent that the following facts and
circumstances are and, except as contemplated hereby, at all times up to the
Closing Date, will be true and correct, and hereby acknowledge that such facts
and circumstances constitute the basis upon which Buyer and Parent are induced
to enter into and perform this Agreement. Each warranty set forth in this
Article 6 shall survive the Closing and any investigation made by or on behalf
of Buyer and Parent.
6.1......Organization, Good Standing and Qualification. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of California, has all necessary corporate powers to own its properties and
to carry on its business as now owned and operated by it, and is duly qualified
to transact intrastate business and is in good standing in all jurisdictions in
which the nature of its business or of its properties makes such qualification
necessary.
6.2......Financial Statements.
(a) Seller has timely filed with the Securities and Exchange
Commission (i) the balance sheet of Seller as of December 31,
1997, and the related statement of income and retained
earnings for the year then ending, certified by Coopers &
Lybrand L.L.P. (now known as PricewaterhouseCoopers LLP),
Seller's independent certified public accountants, and (ii)
the unaudited balance sheet of Seller as of June 30, 1998,
together with related unaudited statement of income and
retained earnings for the three month period then ending,
[certified by the chief financial officer of Seller.] Such
financial statements are referred to as the "Financial
Statements."
(b) The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently
followed by Seller throughout the periods indicated, and
fairly present the financial position of Seller as of the
respective dates of the balance sheets included in the
Financial Statements, and the results of its operations for
the respective periods indicated. Seller has no liabilities or
obligations of any nature (known or unknown, absolute,
accrued, contingent or otherwise) of the type required to be
reflected or disclosed in a balance sheet (or the notes
thereto) prepared in accordance with GAAP that were not fully
reflected or reserved against in the Financial Statements.
6.3......Absence of Specified Changes. Since June 30, 1998, except as
set forth on Schedule 6.3, there has not been any:
(a) Transaction by Seller except in the ordinary course
of business as conducted on that date;
(b) Capital expenditure by Seller exceeding $25,000;
(c) Adverse change in the financial condition,
liabilities, assets, business or prospects of Seller;
(d) Destruction, damage to, or loss of any assets of
Seller (whether or not covered by insurance) that
adversely affects the financial condition, business
or prospects of Seller;
(e) Labor trouble or other event or condition of any
character adversely affecting the financial
condition, business, assets or prospects of Seller;
(f) Change in accounting methods or practices (including,
without limitation, any change in depreciation or
amortization policies or rates) by Seller;
(g) Revaluation by Seller of any of its assets;
(h) Increase in the salary or other compensation payable
or to become payable by Seller to any of its
officers, directors or employees, or the declaration,
payment or commitment or obligation of any kind for
the payment by Seller of a bonus or other additional
salary or compensation to any such person;
(i) Sale or transfer of any asset of Seller, except in
the ordinary course of business;
(j) Execution, creation, amendment or termination of any
contract, agreement or license to which Seller is a
party and which is proposed to be assigned hereunder,
except in the ordinary course of business;
(k) Loan by Seller to any person or entity, or guaranty
by Seller of any loan;
(l) Waiver or release of any right or claim of Seller,
except in the ordinary course of business;
(m) Mortgage, pledge or other encumbrance of any asset of
Seller;
(n) Other event or condition of any character that has or
might reasonably have an adverse effect on the
financial condition, business, assets or prospects of
Seller; or
(o) Agreement by Seller to do any of the things described
in the preceding clauses (a) through (n).
6.4......Taxes. Seller has filed or caused to be filed all federal,
state and local tax returns and reports that are or were required to be filed by
or with respect to Seller, pursuant to applicable law. All such returns were
correct and complete in all respects. Seller has paid, or has provided for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by Seller, except
such taxes, if any, as are listed in Schedule 6.4 and are being contested in
good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Financial Statements. Except as set forth in
Schedule 6.4, no audit of any tax return of Seller is in progress or, to
Seller's knowledge, threatened; no director, officer or employee of Seller
responsible for tax matters expects any governmental authority to assess any
additional taxes for any period for which tax returns have been filed; and no
waiver or agreement by Seller is in force for the extension of time for the
assessment or payment of any tax. To Seller's knowledge, no claim has ever been
made by any governmental authority in a jurisdiction where Seller does not file
tax returns that it is or may be subject to taxation by that jurisdiction.
.........Seller has withheld and paid or collected and remitted all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, supplier, vendor, creditor, stockholder
or other third party. There is no dispute or claim concerning any tax liability
of Seller, (i) claimed or raised by any governmental authority in writing or
(ii) as to which Seller or the directors and officers of Seller has knowledge.
As of the date hereof, there have been no, and Seller has no knowledge of any,
threatened or intended reappraisals by any governmental authority with respect
to the value of the Assets.
6.5......Real Property. Seller does not own any real property.
6.6......Inventories. The Inventories consist of items of a quality and
quantity useable, salable or rentable in the ordinary course of business by
Seller, except for obsolete and slow-moving items and items below standard
quality, all of which have been written down on the books of Seller to net
realizable market value or have been provided for by adequate reserves. All
items included in the Inventories are the property of Seller, except for sales
made in the ordinary course of business; for each of these sales either the
purchaser has made full payment or the purchaser's liability to make payment is
reflected in the books of Seller. No items included in the Inventories have been
pledged as collateral or are held by Seller on consignment from the others. All
the Inventories are free of defects and, to the extent that they consist of
finished or semi-finished goods, also comply with the specifications submitted
by the purchasers thereof.
6.7......Intellectual Property. Schedule 6.7 lists all of the
Intellectual Property owned or used by Seller in connection with the Business
(other than shrink wrap software generally available to the public). No person
(other than Seller) owns any Intellectual Property, the use of which is
necessary or contemplated in connection with the performance of any contract to
which Seller is a party, except manufacturer's trademarks and trade names on
goods sold in Seller's Business. Except as set forth in Schedule 6.7 or 6.15,
there have not been any administrative, judicial arbitration, or other adversary
proceedings concerning the Intellectual Property. Seller does not violate or
infringe on any intellectual property or personal right of any person, firm or
corporation, and Seller has not infringed and is not now infringing on any
intellectual property or other right belonging to any person, firm or
corporation. Except as set forth in Schedule 6.7 or Schedule 1.1, Seller is not
a party to any license, agreement or arrangement, whether as licensee, licensor
or otherwise, with respect to any Intellectual Property.
6.8......Trade Secrets. Seller has taken all reasonable security
measures to protect the secrecy, confidentiality and value of all trade secrets
used by Seller (or owned by Seller and useful in) the operation of the Business.
Any of its employees and any other persons who, either alone or in concert with
others, developed, invented, discovered, derived, programmed or designed these
secrets, or who have knowledge of or access to information relating to them,
have been put on notice and have entered into appropriate agreements that these
secrets are proprietary to Seller and are not to be divulged or misused. All
these trade secrets are presently valid and protectible, and are not part of the
public knowledge or literature, nor to Seller's knowledge have they been used,
divulged or appropriated for the benefit of any past or present employees or
other persons, or to the detriment of Seller.
6.9......Title to Assets. Seller has good and marketable title to all
the Assets and its interests in the Assets, whether real, personal, mixed,
tangible or intangible, which constitute all the Assets and interests in Assets
that are used in the Business. All the Assets are free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, claims, easements, rights of
way, covenants, conditions or restrictions, except for (i) those disclosed in
Schedule 6.9; (ii) the lien of current taxes not yet due and payable; and (iii)
possible minor matters that, in the aggregate, are not substantial in amount and
do not materially detract from or interfere with the present or intended use of
any of these assets, nor materially impair business operations. All the Assets
are in good operating condition and repair, ordinary wear and tear excepted.
Seller is in possession of all premises leased to it from others. Neither any
officer, director or employee of Seller, nor any spouse, child or other relative
of any of these persons, owns, or has any interest, directly or indirectly, in
any of the real or personal property owned by or leased to Seller or any
Intellectual Property or trade secrets licensed by Seller.
6.10.....Customers and Sales. Schedule 6.10 to this Agreement is a
correct and current list of all customers of Seller. Except as indicated in
Schedule 6.10, Seller has no information and is not aware of any facts
indicating that any of these customers intend to cease doing business with
Seller or materially alter the amount of the business that they are presently
doing with Seller.
6.11.....Existing Employment Contracts. Schedule 6.11 to this Agreement
is a list of all employment contracts and collective bargaining agreements, and
all pension, bonus, profit-sharing, stock option or other agreements or
arrangements providing for employee remuneration or benefits to which Seller is
a party or by which Seller is bound. All of these contracts and arrangements are
in full force and effect, and neither Seller nor any other party is in default
under them. There have been no claims of defaults and, to Seller's knowledge,
there are no facts or conditions which if continued, or on notice, will result
in a default under these contracts or arrangements. There is no pending or, to
Seller's knowledge, threatened labor dispute, strike or work stoppage affecting
the Business.
6.12.....Insurance Policies. Seller has maintained and now maintains
(i) insurance on all the Assets of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (ii) adequate insurance
protection against all liabilities, claims and risks against which it is
customary to insure, including without limitation earthquakes as to properties
located in California.
6.13.....Other Contracts. Except as set forth in Schedule 1.1 or
Schedule 4, Seller is not a party to, nor are the Assets bound by, any license
or service agreement, any output or requirements agreement, any agreement not
entered into in the ordinary course of business, any indenture, mortgage, deed
of trust, lease or any other agreement that is unusual in nature, duration or
amount (including without limitation any agreement requiring the performance by
Seller of any obligation for a period of time extending beyond one year from the
Closing Date or calling for consideration of more than $25,000 or requiring
purchases at prices in excess of, or sales at prices lower than, prevailing
market prices). All contracts which will be assigned to or assumed by Buyer
under this Agreement are valid and binding upon the parties thereto. There is no
default or event that, with notice or lapse of time or both, would constitute a
default by any party to any of the agreements listed in Schedule 1.1 or Schedule
4. Seller has not received notice that any party to any of the agreements listed
in Schedule 1.1 or Schedule 4 intends to cancel or terminate any of these
agreements or to exercise or not exercise any options under any of these
agreements.
6.14.....Compliance with Laws. Seller has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including without limitation any applicable environmental, health, building,
zoning or other law, ordinance or regulation) affecting its properties or the
operation of the Business. Seller is in possession of all permits, licenses,
franchises, consents or authorizations issued by and in compliance with all
registrations and filings required by any governmental authority in connection
with the Business or the Assets. All of such permits, licenses, franchises and
authorizations are valid and in full force and effect.
6.15.....Litigation. Except as set forth in Schedule 6.15, there is no
suit, action, arbitration or legal, administrative or other proceeding, or
governmental investigation, pending or, to Seller's knowledge, threatened
against or affecting Seller, or any of its business, assets or financial
condition. The matters set forth in Schedule 6.15, if decided adversely to
Seller, will not result in a material adverse change in the business, assets or
financial condition of Seller. Seller has furnished or made available to Buyer
copies of all relevant court papers and other documents relating to the matters
set forth in Schedule 6.15. Seller is not in default with respect to any order,
writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality. Except as set forth in Schedule 6.15,
Seller is not presently engaged in any legal action to recover moneys due to it
or damages sustained by it.
6.16.....Assets Sufficient for Conduct of Business. The Assets,
together with the Excluded Assets, constitute all of the assets required for
Buyer to conduct the Business as it is presently conducted.
6.17.....Agreement Will Not Cause Breach or Violation. Neither the
entry into this Agreement nor the consummation of the transactions contemplated
hereby will result in or constitute any of the following: (i) a breach of any
term or provision of this Agreement; (ii) a default or an event that, with
notice or lapse of time or both, would be a default, breach or violation of the
certificate of incorporation or bylaws of Seller or of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust or other agreement, instrument or arrangement to which Seller is a
party or by which Seller or the Assets are bound; (iii) an event that would
permit any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation; (iv) the creation or imposition of any lien,
charge or encumbrance on any of the Assets; or (v) the violation of any law,
regulation, ordinance, judgment, order or decree applicable to or affecting
Seller or the Assets.
6.18.....Authority and Consents. Seller has the right, power, legal
capacity and authority to enter into, and perform its obligations under, this
Agreement, and, except as set forth on Schedule 6.18, no approvals or consents
of any persons other than the stockholders of Seller are necessary in connection
with it. The execution and delivery of this Agreement and the consummation of
this transaction by Seller have been, or prior to the Closing will have been,
duly authorized by all necessary corporate action of Seller (including any
necessary action by Seller's stockholders). This Agreement constitutes a legal,
valid and binding obligation of Seller enforceable in accordance with its terms
except as limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally.
6.19.....Interest in Customers, Suppliers and Competitors. Except as
set forth in Schedule 6.19, neither Seller nor any officer or director of
Seller, nor, to Seller's knowledge, any spouse or child of any of them, has any
direct or indirect interest in any competitor, supplier or customer of Seller or
in any person with whom Seller is doing business (excluding ownership of less
than 10% of any corporation or other entity traded publicly).
6.20.....Employee Identification and Compensation. Schedule 6.20
contains a list of the names of all current officers, directors, employees and
manufacturer's representatives of Seller, stating the rates of compensation
payable to each and setting forth all vacation time, sick leave and other paid
time off accrued for each of them through the Closing Date. No other person,
except accountants, auditors and attorneys, regularly performs compensable
services for Seller.
6.21.....No Subsidiaries. Seller has no subsidiaries.
6.22.....Environmental Matters.
.........(a) Except as set forth in Schedule 6.22, to Seller's
knowledge, there have not been any activities on or at the real property leased
by the Seller at 2560 9th Street, Suite 220, Berkeley, California or any other
real property by Seller (the "Real Property") or at any time during which such
property was owned or leased by Seller or at any time prior thereto involving
the use, generation, treatment, storage, or Disposal of any Hazardous Substances
or Petroleum Products in violation of applicable Environmental Laws (as defined
below).
.........(b) Except as set forth in Schedule 6.22, to Seller's
knowledge, there have not been any Releases or threatened Releases of any
Hazardous Substances or Petroleum Products at or from the Real Property at any
time during which such property was occupied by Seller or at any time prior
thereto that (i) would be in violation of applicable Environmental Laws; or (ii)
could give rise to an action to compel an investigation and/or cleanup or to pay
material civil administrative fines, penalties or other damages.
.........(c) Except as set forth in Schedule 6.22, to Seller's
knowledge, there have not been any Hazardous Substances or Petroleum Products
located in or on the Real Property at any time during which such property was
leased by Seller or at any time prior thereto that (i) would be in violation of
applicable Environmental Laws; or (ii) could reasonably be expected to give rise
to an action to compel a investigation and/or cleanup or to pay civil
administrative fines, penalties or other damages;
.........(d) Except as set forth in Schedule 6.22, (i) Seller is now
and has been at all times in compliance with all Environmental Laws; (ii) there
are no pending environmental litigation, enforcement actions, administrative
orders or notices of violation brought under any Environmental Law and Seller
does not know of any threats of such litigation, enforcement actions,
administrative orders or notices of violation; (iii) Seller has not received any
request for information, notice of claim, demand or other notification that it
may be potentially responsible for any threatened or actual Release of Hazardous
Substance or Petroleum Products; and (iv) Seller has all material permits,
licenses, orders, approvals, authorizations, concessions or franchises or every
governmental authority having jurisdiction under an Environmental Law required
to conduct the Business substantially as it is currently being conducted. All
such permits, licenses, orders, approvals, authorizations, concessions and
franchises are listed on Schedule 6.22 and are in full force and effect, and, to
Seller's knowledge, there is no state of facts or event which could reasonably
be expected to form the basis for any revocation, non-renewal or any such permit
or authorization.
.........(e) Capitalized terms used in this Section 6.22 shall have the
following meanings:
"Environmental Laws" means any federal, state or local law, regulation,
ordinance or order pertaining to the protection of natural resources, the
environment and the health and safety of the public, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss.ss.9601 et seq., the Resource Conservation and Recovery
Act ("RCRA"), as amended, 42 U.S.C. ss.ss.6901 et seq., the Hazardous Material
Transportation Act, as amended, 49 U.S.C. ss.ss.1801 et seq., the Occupational
Safety and Health Act, as amended, 29 U.S.C. ss.ss. 651 et seq., California
Health & Safety Code ss.ss.19015 and ss.ss.25300 et seq., California Civil Code
ss.ss.1102 et seq., and ss.2079, California Civil Procedure Code ss.726 and
California Business and Professional Code ss.7180 et seq.
"Hazardous Substances" means any oil, flammable substances, explosives,
hazardous wastes or substances (including polychlorinated biphenyls), toxic
wastes or substances or any other wastes.
"Hazardous Wastes" means hazardous wastes as defined by RCRA and the
regulations thereunder.
"Disposal" means disposal as defined by RCRA and the regulations
thereunder.
"Petroleum Products" means petroleum, gasoline, oil, fuel oil, diesel
fuel and petroleum solvents.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, placing, discharging, injecting, escaping, dumping or disposing into
the environment, whether intentional or unintentional.
6.23.....Employee Benefit Plans
.........(a) Schedule 6.23 sets forth a true and complete list of all
written and oral Employee Benefit Plans (as defined below) and other programs,
commitments or funding arrangements maintained by Seller or to which Seller is a
party, in respect of, or which otherwise cover or benefit, any Subject Employees
(as defined below) or their beneficiaries.
.........(b) Except for the Employee Benefit Plans identified in
Schedule 6.23, there is no "employee pension benefit plan", "employee welfare
benefit plan" or "employee benefit plan" within the meaning of Sections 3(1),
3(2) and 3(3) of the ERISA. No Employee Benefit Plan to which Seller or any
ERISA Affiliate (as hereinafter defined) has maintained or contributed to is
subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of
1986, as amended (the "Code").
..................(c) Capitalized terms used in this Section 6.23 shall
have the following meanings:
.................. "Employee Plan" includes all pension, retirement,
disability, medical, dental or other health insurance plans, life insurance or
other death benefit plans, profit sharing, deferred compensation, stock option,
bonus or other incentive plans, vacation benefit plans, severance plans or other
employee benefit plans or arrangements, including, without limitation, any
pension plan as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and any welfare plan as defined in
Section 3(1) of ERISA, whether or not funded, covering any Subject Employee or
to which Seller is a party or bound or makes or has made any contribution or by
which Seller may have any liability to any Subject Employee (including any such
plan formerly maintained by or in connection with which Seller may have any
liability to any Subject Employee, and any such plan which is a multiemployer
plan as defined in Section 3(37) (A) of ERISA).
.................."ERISA Affiliate" means a trade or business (whether or
not incorporated) which is under common control with Seller within the meaning
of Sections 414(b) and 414(c) of the Code or the regulations promulgated
thereunder.
.................."Subject Employee" includes all current or former
officers, directors, employees or consultants who are or were employed or
otherwise compensated in connection with activities involving the Assets being
purchased.
6.24.....Product Warranties. To Seller's knowledge, no person has
asserted any claim or has any reasonable basis for any claim relating to
warranties or guaranties with respect to any product, service or contract for
Software (as defined in Section 6.25) sold or provided by Seller.
6.25.....Software. Seller owns or is licensed to use all computer
software (including databases and related documentation ("Software")) which is
material to the conduct of the Business, a list of which is included on Schedule
6.25. Except for non-customized software readily available from multiple
sources, Seller is not subject to any commitment to pay royalties or other fees
for the use of the Software. To Seller's knowledge, no person or entity is
materially interfering with or infringing upon, and no person or entity has
misappropriated any of, the Software or source-code owned by Seller ("Owned
Software"). To Seller's knowledge, none of such Owned Software infringes upon,
is a misappropriation of, or otherwise conflicts with, any patent, copyright,
trade secret or other proprietary right of any person.
6.26.....Documents Delivered. Each copy or original of any agreement,
contract or other instrument which is identified in any exhibit delivered by
Seller or its counsel to Buyer (or its counsel or representatives), whether
before or after the execution of this Agreement, is in fact what it is purported
to be by Seller and has not been amended, canceled or otherwise modified.
6.27.....Full Disclosure. None of the representations and warranties
made by Seller or made in any letter, certificate or memorandum furnished or to
be furnished by Seller, or on its behalf, contains or will contain any untrue
statement of a material fact, or omits any material fact the omission of which
would make the statements made misleading. There is no fact known to Seller
which materially adversely affects, or in the future may (so far as Seller can
now reasonably foresee) materially adversely affect, the condition, Assets,
liabilities, business, operations or prospects of Seller that has not been set
forth herein or heretofore communicated to Buyer in writing pursuant hereto.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent hereby represent and warrant to Seller that the
following facts and circumstances are true and correct, and hereby acknowledge
that such facts and circumstances constitute the basis upon which Seller is
induced to enter into and perform this Agreement. Each warranty set forth in
this Article 7 shall survive the Closing, as set forth in Article 17.
7.1......Organization. Each of Buyer and Parent is a corporation duly
organized, existing and in good standing under the laws of Delaware.
7.2......Authority and Consents. Each of Buyer and Parent has the
right, power, legal capacity and authority to enter into, and perform its
obligations under, this Agreement, and no approvals or consents of any persons
other than Buyer and Parent, as applicable, are necessary in connection with it.
The execution and delivery of this Agreement and the consummation of this
transaction by Buyer or Parent, as the case may be, has been duly authorized by
all necessary corporate action of Buyer or Parent, as the case may be. The
execution and delivery of this Agreement and the consummation of this
transaction by Buyer and Parent have been duly authorized by all necessary
corporate action of Buyer or Parent, as the case may be. This Agreement
constitutes a legal, valid and binding obligation of each of Buyer and Parent
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally.
7.3......Agreement Will Not Cause Breach Or Violation. Neither the
execution of this Agreement, nor the consummation of the transactions
contemplated hereby, will result in or constitute any of the following: (i) a
default or an event that, with notice or lapse of time or both, would be a
default, breach or violation of the articles of incorporation or bylaws of Buyer
or Parent or of any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or other agreement, instrument or
arrangement to which Buyer or Parent is a party or by which Buyer or Parent is
bound; (ii) an event that would permit any party to terminate any agreement or
to accelerate the maturity of any indebtedness or other obligation; or (iii) the
violation of any law, regulation, ordinance, judgment, order or decree
applicable to or affecting Buyer or Parent, other than violations, conflicts,
breaches, terminations, accelerations and defaults which could not reasonably be
expected to have a material adverse effect on Buyer's or Parent's ability to
perform their respective obligations under this Agreement.
ARTICLE 8.........OBLIGATIONS OF THE PARTIES BEFORE CLOSING.
The parties covenant and agree that, except as otherwise agreed in
writing by the parties, from the date of this Agreement until the Closing:
8.1......Buyer's Access to Premises and Information. Buyer, Parent and
their counsel, accountants and other representatives shall be entitled to have
full access during normal business hours to all of Seller's properties, books,
accounts, records, contracts and documents of or relating to the Assets. Seller
shall furnish or cause to be furnished to Buyer, Parent and their
representatives all data and information concerning the Business, and the
finances and properties of Seller that may reasonably be requested.
8.2......Conduct of Business in Normal Course. Seller shall carry on
its business and activities diligently and in substantially the same manner as
they previously have been carried on, and shall not make or institute any
unusual or novel methods of manufacture, purchase, sale, lease, management,
accounting or operation that will vary materially from the methods used by
Seller as of the date of this Agreement.
8.3......Preservation of Business and Relationships. Seller shall use
its best efforts, without making any commitments on behalf of Buyer, to preserve
its business organization intact, to keep available to Seller its present
officers and employees, and to preserve its present relationships with
suppliers, customers and others having business relationships with it.
8.4......Maintenance of Insurance. Seller shall continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of the Business. At the request of Buyer and at Buyer's sole expense,
the amount of insurance against fire and other casualties which, at the date of
this Agreement, Seller carries on any of the Assets or in respect of its
operations shall be increased by such amount or amounts as Buyer shall specify.
8.5......Employees and Compensation. The parties acknowledge and agree
that certain employees of Seller listed in Section 9.11 shall be terminated by
Seller and offered employment by Buyer prior to the Closing. Seller shall permit
Buyer to contact Seller's employees at all reasonable times for the purpose of
discussing with such employees prospective employment by Buyer on or after the
Closing Date, and Seller shall use its best efforts to encourage all employees
of Seller to accept any employment offered by Buyer.
8.6......New Transactions. Except for transactions contemplated by
Seller's proposed acquisition of MCI, Seller shall not do or agree to do any of
the following acts:
(a) Enter into any contract, commitment or transaction
not in the usual and ordinary course of the Business;
or
(b) Enter into any contract, commitment or transaction in
the usual and ordinary course of business involving
an amount exceeding $25,000, individually, or $50,000
in the aggregate; or
(c) Make any capital expenditures in excess of $25,000
for any single item or $50,000 in the aggregate, or
enter into any leases of capital equipment or
property under which the annual lease charge is in
excess of $25,000; or
(d) Sell or dispose of any capital assets with a net book
value in excess of $25,000 individually, or $50,000
in the aggregate.
8.7......Payment of Liabilities and Waiver of Claims. Seller shall not
do, or agree to do, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current liabilities; (ii) waive or
compromise any right or claim; or (iii) cancel, without full payment, any note,
loan or other obligation owing to Seller.
8.8...... Existing Agreements. Seller shall not modify, amend, cancel
or terminate any of the contracts or agreements to be assigned to Buyer pursuant
to this Agreement, or agree to do any of those acts.
8.9......Consent of Others. As soon as reasonably practical after the
execution and delivery of this Agreement, and in any event on or before the
Closing Date, Seller shall obtain the written consent of the persons described
in Schedule 6.18 to this Agreement in form and substance satisfactory to Buyer
and shall furnish to Buyer executed copies of those consents.
8.10.....Representations and Warranties True at Closing. Seller shall
use its best efforts to assure that all representations and warranties of Seller
set forth in this Agreement and in any written statements delivered to Buyer by
Seller under this Agreement will also be true and correct as of the Closing Date
as if made on that date and that all conditions precedent to Closing shall have
been met. Seller shall promptly disclose to Buyer any information contained in
the Schedules to this Agreement which, because of an event occurring after the
date hereof, is incomplete or is no longer correct as of all times after the
date hereof until the Closing Date; provided, however, that none of such
disclosures shall be deemed to modify, amend or supplement the representations
and warranties of Seller or the Schedules hereto for the purposes of Article 12
hereof, unless Buyer shall have consented thereto in writing.
8.11.....Sales and Use Tax on Prior Sales. Seller agrees to use its
best efforts to furnish to Buyer a clearance certificate from the appropriate
governmental agency and any related certificates that Buyer may reasonably
request as evidence that all sales and use and other tax liabilities of Seller
(other than income tax liabilities) accruing before the Closing Date have been
fully satisfied or provided for.
8.12.....Statutory Filings. Seller shall file, and shall cooperate
fully with Buyer in preparing and filing, all information and documents
necessary or desirable under any statutes or governmental rules or regulations
pertaining to the transactions contemplated by this Agreement.
8.13.....Negotiations with Certain Customers. Seller agrees to
negotiate with HBO & Company of Georgia ("HBOC") and Intel to evaluate the
current state of their respective agreements, contracts and relationships.
8.14.....License Agreement. Seller and Buyer shall enter into a license
agreement in substantially the form of Exhibit A attached hereto (the "Interim
License Agreement"), pursuant to which Seller grants to Buyer an exclusive
license to use the Software from the date of this Agreement until the Closing
Date.
8.15.....Sublease. Seller and Buyer shall enter into a Sublease in
substantially the form of Exhibit B attached hereto (the "Sublease"), pursuant
to which Buyer shall sublease from Seller the premises located at 2560 Ninth
Street, Suite 220, Berkeley, California from the date of this Agreement until
the Closing Date.
ARTICLE 9.........CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer to purchase the Assets under this Agreement
are subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 9. Buyer may waive any or all of these conditions in
accordance with Section 15.2 hereof; provided, however, that no such waiver of a
condition shall constitute a waiver by Buyer of any of its other rights or
remedies, at law or in equity, if Seller shall be in default of any of its
representations, warranties or covenants under this Agreement.
9.1......Accuracies of Seller's Representations and Warranties. All
representations and warranties by Seller in this Agreement or in any written
statement that shall be delivered to Buyer by Seller under this Agreement shall
be true in all material respects on and as of the Closing Date as though made at
that time.
9.2......Absence of Liens. At or prior to the Closing, Buyer shall have
received a UCC search report dated as soon as practicable prior to the Closing
Date issued by the appropriate governmental authorities indicating that there
are no filings under the Uniform Commercial Code on file with such governmental
authority which name Seller as debtor or otherwise indicating any lien on the
Assets, except for the liens otherwise disclosed in the Schedules hereto.
9.3......Seller's Performance. Seller shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller on or before the Closing
Date.
9.4......Certification by Seller. Buyer shall have received a
certificate, dated the Closing Date, signed by Seller's president or vice
president or its chief financial officer, certifying, in such detail as Buyer
and its counsel may reasonably request, that all representations and warranties
of Seller made in Article 6 are true and correct as of the Closing Date and that
the conditions specified in Sections 9.1 and 9.3 have been fulfilled.
9.5......Assignment and Assumption Agreements. Seller and Buyer shall
have entered into assignment and assumption agreements for the License
Agreements and any other agreements of Seller to be assumed pursuant to Article
4, in form and substance reasonably satisfactory to Buyer's counsel.
9.6......Bill of Sale. Seller shall have executed a bill of sale in
substantially the form of Exhibit C attached hereto,
with respect to the Assets.
9.7......Opinion of Seller's Counsel. Buyer shall have received from
Gray Cary Ware & Freidenrich, LLP, counsel for Seller, an opinion dated the
Closing Date, in form reasonably satisfactory to Buyer's counsel .
9.8......Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
9.9......Corporate Approval. The execution and delivery of this
Agreement by Seller, and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and Buyer
shall have received copies of all resolutions of directors and stockholders
pertaining to that authorization, certified by the secretary of Seller.
9.10.....Good Standing Certificate. Buyer shall have received a good
standing certificate for Seller dated as soon as practicable prior to the
Closing Date, issued by the appropriate governmental authorities.
9.11.....Consents. All agreements and consents of any parties to the
consummation of the transaction set forth on Schedule 6.18 shall have been
obtained by Seller and delivered to Buyer.
9.12.....Approval of Documentation. The form and substance of all
certificates, instruments, opinions and other documents delivered to Buyer under
this Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
9.13.....Employment Arrangements.. Buyer shall have entered into
employment arrangements with each of Gerald Zieg, James Martin, Brian Cronin,
Mark Fossen, Vicky Hilton, Jessica Radocy, Jan Maisler and Tim Wheeler.
9.14.....Bulk Transfer Notice. Division 6 of the California Uniform
Commercial Code shall have been complied with or waived.
9.15.....Change of Corporate Name. Seller shall have changed its
corporate name to a name not using "HealthDesk" or any similar name.
9.16.....Condition of Assets. The Assets shall not have been materially
or adversely affected in any way as a result of any fire, accident, storm or
other casualty or labor or civil disturbance or act of God or the public enemy.
9.17.....MIIX Agreement.. Buyer shall have entered into a royalty
agreement with MIIX Healthcare Group, Inc.
9.18.....HBOC Agreement. HBOC shall amend its existing agreement with
Seller, which shall be assigned to Buyer pursuant thereto, or Buyer shall have
entered into a revised marketing agreement with HBOC.
ARTICLE 10........CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller to sell and transfer the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
following conditions:
10.1.....Accuracy of Buyer's and Parent's Representations and
Warranties. All representations and warranties by Buyer and Parent contained in
this Agreement or in any written statement delivered by Buyer or Parent under
this Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of that date.
10.2.....Buyer's and Parent's Performance. Before or at the Closing,
Buyer and Parent shall have performed and complied with all covenants and
agreements, and satisfied all conditions required by this Agreement to be
performed, complied with, or satisfied.
10.3.....Payment of Purchase Price. Buyer shall deliver to Seller
against delivery of the items specified in Article 9 hereof a certified or bank
cashier's check, or a wire transfer of immediately available funds, in the
amount of $626,278, payable to Seller.
ARTICLE 11........OBLIGATIONS OF THE PARTIES AFTER THE CLOSING
11.1.....Preservation of Goodwill. Following the Closing, Seller will
restrict its activities so that Buyer's reasonable expectations with respect to
the goodwill, business reputation, employee relations and prospects connected
with the Assets will not be materially impaired. In furtherance but not in
limitation of this general obligation, Seller agrees that, for a period of three
years following the Closing Date, or as long as Buyer or its heirs, assigns or
successors in interest carry on a like business in the counties or areas
specified, whichever is shorter:
(a) Seller will not engage in any business or activity which is
substantially the same as, or represents an outgrowth of, any
business or activity presently conducted by Seller if such
business or activity extends to any of the geographic areas
set forth in Schedule 11.1 in which Seller has heretofore
engaged in business or otherwise established its goodwill,
business reputation, or any customer relations.
The parties intend that the covenant contained in the
preceding portion of this Section 11.1(a) shall be construed
as a series of separate covenants, one for each geographic
area specified in Schedule 11.1. Except for geographic
coverage, each separate covenant shall be deemed identical in
terms to the covenant contained in the preceding paragraph.
If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this
Section, then this unenforceable covenant shall be deemed
eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
(b) Seller will not disclose to any person, or use for its own
benefit, any price lists, pricing data, customer lists or
similar matters possessed by them relating to the Assets or
the Business transferred to Buyer unless it first clearly
demonstrates to Buyer that such matters are, at the time of
the proposed disclosure or use, of common knowledge within the
trade.
11.2.....Change of Name. Seller agrees that after the Closing Date it
shall not use or employ in any manner, directly or indirectly, the name
"HealthDesk", or any variation thereof, and that it will take and cause to be
taken all necessary action by Seller's board of directors, stockholders and any
other persons in order to make this change in Seller's name effective on or
before the Closing Date.
11.3.....Access to Records. From and after the Closing, Seller shall
allow Buyer, and its counsel, accountants and other representatives, such access
to records which after the Closing are in the custody or control of Seller as
Buyer reasonably requires in order to comply with its obligations under the law
or under contracts assumed by Buyer pursuant to this Agreement.
11.4.....Nonsolicitation of Employees. Seller shall not, prior to the
third anniversary of the Closing, solicit any employee of Buyer or Parent or of
any direct or indirect subsidiary of Buyer or Parent to leave such employment if
such employee was at any time between the date hereof and the Closing an
employee of Seller.
11.5.....Further Assurances. At any time after the Closing Date, each
of Seller, Buyer and Parent shall execute, acknowledge and deliver any further
deeds, assignments, conveyances and other assurances, documents and instruments
of transfer, reasonably requested by any other party, and shall take any other
action consistent with the terms of this Agreement that may reasonably be
requested by such other party in furtherance of the transactions contemplated by
this Agreement.
11.6.....Termination of IAC Contract. Buyer agrees to pay to
Information Access Company ("IAC"), on or about November 15, 1998 or the Closing
Date, whichever is later, the sum of $65,000 in connection with the termination
of that certain Online Vendor License Agreement, dated August 12, 1996, between
IAC and Seller, as amended (the "IAC Agreement"); provided, however, that IAC
agrees to continue its obligations under the IAC Agreement, and Buyer shall be
entitled to all of Seller's rights under the IAC Agreement, until February 28,
1999.
ARTICLE 12. INDEMNIFICATION
12.1.....Indemnification by Seller. Seller shall defend, indemnify and
hold harmless each of Buyer, Parent and their respective employees, successors
and assigns (Buyer, Parent and such persons, collectively, "Buyer's Indemnified
Persons"), and shall reimburse Buyer's Indemnified Persons, for, from and
against each and every demand, claim, loss (which shall include any diminution
in value), liability, judgment, damage, cost and expense (including, without
limitation, interest, penalties, costs of preparation and investigation, and the
reasonable fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses") imposed on or incurred by
Buyer's Indemnified Persons, directly or indirectly, relating to, resulting from
or arising out of: (a) any inaccuracy in any representation or warranty, or any
breach or nonfulfillment of any covenant, agreement or other obligation of the
Seller under this Agreement, the schedules hereto or any certificate or other
document delivered or to be delivered pursuant hereto; and (b) any obligation of
Seller relating to the Assets and any other matter arising out of or related to
the operation of the Business arising prior to or on the Closing Date. The
maximum liability of Seller under this Section 12.1 shall be limited to the
Purchase Price.
12.2.....Indemnification by Buyer and Parent. Buyer and Parent shall
defend, indemnify and hold harmless the Seller, its successors and assigns
(Seller and such persons, collectively, "Seller's Indemnified Persons"), and
shall reimburse Seller's Indemnified Persons, for, from and against all Losses
imposed on or incurred by Seller's Indemnified Persons, directly or indirectly,
relating to, resulting from or arising out of: (a) any inaccuracy in any
representation or warranty, or any breach or non-fulfillment of any covenant,
agreement or other obligation of Buyer or Parent under this Agreement or any
certificate or other document delivered or to be delivered pursuant hereto; and
(b) any obligation of Buyer relating to the License Agreements or any other
matter arising out of or related to the operation of the Business arising after
the Closing Date.
12.3.....Notice and Defense of Third Party Claims. If any action, claim
or proceeding shall be brought or asserted under this Article 12 against an
indemnified party or any successor thereto (the "Indemnified Person") in respect
of which indemnity may be sought under this Article 12 from an indemnifying
person or any successor thereto (the "Indemnifying Person"), the Indemnified
Person shall give prompt written notice of such action or claim to the
Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses; except that any delay or failure to so notify the
Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that it is prejudiced by reason of such
delay or failure. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnified
Person shall in good faith determine that representation by the same counsel is
inappropriate due to material conflicts of interest. In the event that the
Indemnifying Person, within ten days after notice of any such action or claim,
fails to assume the defense thereof, the Indemnified Person shall have the right
to undertake the defense, compromise or settlement of such action, claim or
proceeding for the account of the Indemnifying Person, subject to the right of
the Indemnifying Person to assume to the defense of such action, claim or
proceeding with counsel reasonably satisfactory to the Indemnified Person at any
time prior to the settlement, compromise or final determination thereof.
Anything in this Article 12 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior written consent, settle
or compromise any action or claim or proceeding or consent to entry of any
judgment with respect to any such action or claim that requires solely the
payment of money damages by the Indemnifying Person and that includes as an
unconditional term thereof the release by the claimant or the plaintiff of the
Indemnified Person from all liability in respect of such action, claim or
proceeding.
ARTICLE 13. COSTS.
13.1.....Finder's or Broker's Fees. Each of the parties represents and
warrants that it has not dealt with any broker or finder in connection with any
of the transactions contemplated by this Agreement, and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
13.2.....Expenses. Each of the parties shall pay all costs and
expenses, including but not limited to attorneys' fees, incurred or to be
incurred by it in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.
ARTICLE 14. FORM OF AGREEMENT.
14.1.....Headings. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
14.2.....Entire Agreement; Modification; Waiver. This Agreement,
together with the License Agreement and the Voting Agreement, constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations
and understandings of the parties. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
14.3.....Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ARTICLE 15. PARTIES
15.1.....Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties hereto and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over against any party hereto.
15.2.....Assignment. This Agreement shall be binding on and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
ARTICLE 16. TERMINATION
16.1.....Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent
of Buyer and Seller.
16.2.....Termination by Buyer or Seller. This Agreement may be
terminated at any time prior to the Closing Date by Buyer or Seller (i) if the
Closing has not occurred on or before November 30, 1998, unless the party
seeking to invoke this subclause (i) is then in material breach of any of its
obligations hereunder; (ii) if a court of competent jurisdiction or any
governmental authority shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable, or
(iii) if the other party shall have breached or failed to comply in all material
respects with its representations, warranties, covenants and agreements
contained in this Agreement; provided, however, that if such breach or failure
is reasonably capable of being cured on or before November 30, 1998 and such
party commences such cure as soon as practicable and diligently prosecutes
(subject to any other limitations of this Agreement) such cure, such party shall
be entitled to postpone the Closing Date for a period reasonably sufficient to
effect such cure to the reasonable satisfaction of the party asserting such
breach or failure, but in no event beyond November 30, 1998.
16.3.....Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 16, no party hereto (or, in the case of
Buyer, any of its directors or officers) shall have any liability or further
obligation to any other party to this Agreement, provided that, if this
Agreement is so terminated by a party because one or more of the conditions to
such party's obligations hereunder is not satisfied as a result of the other
party's willful failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies for breach of contract or
otherwise, including, without limitation, damages relating thereto, shall also
survive such termination unimpaired.
ARTICLE 17. NATURE AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES.
All representations, warranties, covenants and agreements of the
parties contained in this Agreement, or in any instrument, certificate, opinion
or other writing provided for hereunder, shall survive the Closing for a period
of one year.
ARTICLE 18. NOTICES.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail registered or certified, postage prepaid, and
properly addressed as follows:
Buyer and Parent: Patient InfoSystems, Inc.
Patient InfoSystems Acquisition Corp.
46 Prince Street
Rochester, New York 14607
Attn: Donald A. Carlberg
with copy to: Gibbons, Del Deo, Dolan,
Griffinger & Vecchione
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
Attn: Jeffrey A. Baumel, Esq.
Seller: HealthDesk Corporation
c/o Equity Dynamics
2116 Financial Center
Des Moines, Iowa 50309
Attn: Joseph Dunham
with copy to: Gray Cary Ware & Freidenrich, LLP
400 Hamilton Avenue
Palo Alto, California 94301-1825
Attn: Peter M. Astiz, Esq.
Any party may change its address for purposes of this Article by giving
the other parties written notice of the new address in the manner set forth
above.
ARTICLE 19. GOVERNING LAW
This Agreement shall be construed in accordance with, and governed by,
the laws of the State of New York, without giving effect to conflicts of laws
principles.
ARTICLE 20. MISCELLANEOUS
20.1.....Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
20.2.....Announcements. Seller shall not make any announcements to the
public or to employees of Seller concerning this Agreement or the transactions
contemplated hereby without the prior approval of Buyer, which will not be
unreasonably withheld. Notwithstanding any failure of Buyer to approve it,
Seller may make an announcement of substantially the same information as
theretofore announced to the public by Buyer, or any announcement required by
applicable law, but Seller shall in either case notify Buyer of the contents
thereof reasonably promptly in advance of its issuance.
20.3.....References. Unless otherwise specified, references to
Sections or Articles are to Sections or Articles in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
as of the day and year first above-written.
BUYER: PATIENT INFOSYSTEMS
ACQUISITION CORP.
By: /s/ Donald A. Carlberg
Name: Donald A. Carlberg
Title: President
PARENT: PATIENT INFOSYSTEMS, INC.
By: /s/ Donald A. Carlberg
Name: Donald A. Carlberg
Title: President
SELLER: HEALTHDESK CORPORATION
By: /s/ Terry Brandt
Name: Terry Brandt
Title: Chief Technical Officer
EXHIBIT 10.16
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT, effective as of December 1,
1998, by and among PATIENT INFOSYSTEMS ACQUISITION CORP., a Delaware corporation
("Buyer"); PATIENT INFOSYSTEMS, INC., a Delaware corporation ("Parent"); and
HEALTHDESK CORPORATION, a California corporation ("Seller").
RECITALS:
WHEREAS, the parties are parties to an Asset Purchase Agreement, dated
as of September 29, 1998 (the "Agreement"; capitalized terms used herein and not
otherwise defined have the meanings set forth in the Agreement), pursuant to
which Seller has agreed to sell to Buyer, and Buyer has agreed to purchase from
Seller, substantially all of the assets and properties used in the Business;
WHEREAS, the parties desire to amend the Agreement to extend the
closing date and termination dates, all as more fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1........Article 3 of the Agreement is amended to change the reference
to "November 30, 1998" in the last sentence to "January 31, 1999."
2........Section 16.2 of the Agreement is amended to change each
reference to "November 30, 1998" therein to "January 31, 1999."
3........Except as specifically amended by and/or inconsistent with
this Amendment, all of the terms and conditions of the Agreement shall remain
unchanged and in full force and effect and are hereby ratified, adopted and
confirmed in all respects. All references to the Agreement in any document or
instrument shall hereafter be deemed to refer to the Agreement as amended by
this Amendment.
4........This Amendment may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same agreement and shall become effective when one or
more counterparts have been executed by each of the parties and delivered to the
others.
5........This Amendment shall be governed by the laws of the State o
New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date and year set forth above.
......... PATIENT INFOSYSTEMS
......... ACQUISITION CORP.
......... By: /s/ Donald A. Carlberg
-----------------------
......... Name: Donald A. Carlberg
......... Title: President & CEO
......... PATIENT INFOSYSTEMS, INC.
....... By: /s/ Donald A. Carlberg
----------------------
......... Name: Donald A. Carlberg
......... Title: President & CEO
......... HEALTHDESK CORPORATION
......... By: /s/ Joseph R. Dunham II
------------------------
......... Name: Joseph R. Dunham II
......... Title: Director
EXHIBIT 10.17
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT, effective as of
February 1, 1999, by and among PATIENT INFOSYSTEMS ACQUISITION CORP., a Delaware
corporation ("Buyer"); PATIENT INFOSYSTEMS, INC., a Delaware corporation
("Parent"); and HEALTHDESK CORPORATION, a California corporation ("Seller").
RECITALS:
WHEREAS, the parties are parties to an Asset Purchase Agreement, dated
as of September 29, 1998, as amended by First Amendment to Asset Purchase
Agreement, effective as of December 1, 1998 (the Asset Purchase Agreement, as so
amended, the "Agreement"; capitalized terms used herein and not otherwise
defined have the meanings set forth in the Agreement), pursuant to which Seller
has agreed to sell to Buyer, and Buyer has agreed to purchase from Seller,
substantially all of the assets and properties used in the Business;
WHEREAS, the parties desire to further amend the Agreement to extend
the closing date and termination dates, all as more fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1........Article 3 of the Agreement is amended to change the reference
to "January 31, 1999" in the last sentence to "March 15, 1999."
2........Section 16.2 of the Agreement is amended to change each
reference to "January 31, 1999" therein to "March 15, 1999."
3........Except as specifically amended by and/or inconsistent with
this Second Amendment, all of the terms and conditions of the Agreement shall
remain unchanged and in full force and effect and are hereby ratified, adopted
and confirmed in all respects. All references to the Agreement in any document
or instrument shall hereafter be deemed to refer to the Agreement as amended by
this Second Amendment.
4........This Second Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been executed by each of the parties and
delivered to the others.
5........This Second Amendment shall be governed by the laws of the
State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date and year set forth above.
......... PATIENT INFOSYSTEMS
......... ACQUISITION CORP.
......... By: /s/ Donald A. Carlberg
-----------------------
......... Name: Donald A. Carlberg
......... Title: President & CEO
......... PATIENT INFOSYSTEMS, INC.
......... By: /s/ Donald A. Carlberg
-----------------------
......... Name: Donald A. Carlberg
......... Title: President & CEO
......... HEALTHDESK CORPORATION
......... By: /s/ Terry M. Brandt
--------------------
......... Name: Terry M. Brandt
......... Title: Vice President
EXHIBIT 10.18
SUBLEASE
THIS SUBLEASE (the "Sublease") is made as of the 29th day of September,
1998, between HEALTHDESK CORPORATION, a California corporation, having its
principal place of business at 2560 Ninth Street, Suite 220, Berkeley,
California 94710 ("Sublandlord") and PATIENT INFOSYSTEMS ACQUISITION CORP., a
Delaware corporation, having its principal place of business at 46 Prince
Street, Rochester, New York 14607 ("Subtenant").
RECITALS:
A. Sublandlord is tenant under an Office Lease (the "Prime Lease," a
complete copy of which is annexed hereto as Schedule A) dated September 11, 1995
with Parker Associates, a California limited partnership (the "Prime Lessor"),
relating to property identified as Suite 220 in Parker Plaza, 2560 Ninth Street,
Berkeley, California, more particularly described in the Prime Lease, and
referred to herein as the "Premises."
B. Sublandlord desires to sublet to Subtenant, and Subtenant desires to
sublet from Sublandlord, all of the Premises.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereby agree:
1........Sublease. Sublandlord hereby subleases the Premises to
Subtenant, and Subtenant hereby subleases the Premises from Sublandlord, on the
terms and conditions hereinafter set forth.
2........Term of Sublease. The Sublease shall commence on the date
hereof (the "Commencement Date") and shall be a month-to-month tenancy
terminable upon 10 business days advance written notice by either party.
3........Rent. Subtenant shall pay Sublandlord the Rent at the office
of Sublandlord first above appearing, or at such other place as Sublandlord may
designate in writing. Rent shall be payable in equal monthly installments in
advance on the first day of each calendar month during the Term.
4........Occupancy. Subject to the terms and provisions hereinafter set
forth, Subtenant shall be permitted to enter into occupancy of the Premises on
the Commencement Date.
5........Prime Lease; Inapplicable Provisions. This Sublease is subject
to and subordinate to the Prime Lease, and all defined terms used herein, unless
otherwise indicated, shall have the meanings given to them in the Prime Lease.
The term "Landlord" as used in the Prime Lease shall refer to Sublandlord
hereunder, "Tenant" as used in the Prime Lease shall refer to Subtenant
hereunder, "Commencement Date" shall refer to the Commencement Date of this
Sublease and "Term" shall refer to the Term of this Sublease, except as
otherwise expressly provided in this Sublease. The obligations of Sublandlord in
the Prime Lease shall be the obligations of Subtenant hereunder, and Subtenant
assumes and shall perform all of the terms of the Prime Lease to be performed by
Sublandlord as tenant thereunder with respect to the Premises for the term of
this Sublease, except to the extent the provisions of the Prime Lease are
inconsistent with or are superseded or supplemented by specific terms and
provisions of this Sublease. The following provisions of the Prime Lease shall
not apply to this Sublease:
.........(a) The Term (paragraph 3(a));
.........(b) Security Deposit (paragraph 15);
.........(c) Rental Adjustment (paragraph 29);
.........(d) Taxes Payable by Tenant (paragraph 30); and
.........(e) Basic Operating Costs (Paragraph 38).
6. Prime Lease Indemnity. Subtenant shall neither do nor permit
anything to be done which would cause the Prime Lease to be terminated or
forfeited by reason of any right of termination or forfeiture reserved or vested
in the Prime Lessor under the Prime Lease, and Subtenant shall indemnify and
hold Sublandlord harmless from and against all claims of any kind whatsoever by
reason of any breach or default on the part of Subtenant by reason of which the
Prime Lease may be terminated or forfeited.
7. "As Is" Condition. Subtenant has inspected the Premises and accepts
the same from Sublandlord in its present condition "as is." Subtenant
acknowledges and agrees with Sublandlord that neither Sublandlord, nor any
employee of Sublandlord, nor other party claiming to act on Sublandlord's behalf
has made any representation, warranty, estimation, or promise of any kind or
nature whatsoever relating to the physical condition of the Premises.
8. Prime Lessor Consent. The Sublease shall be of no force and effect,
and the parties shall have no rights or liabilities hereunder, until the terms
hereof are approved in writing by Prime Lessor. Either party can terminate this
Sublease if the contingency in the prior sentence has not been satisfied or
waived by September 30, 1998.
9........Miscellaneous.
.........(a) Each party warrants that it is authorized to enter into
the Sublease, that the person signing on its behalf is duly authorized to
execute the Sublease, and that no other signatures are necessary.
.........(b) All prior understandings and agreements between the parties
with respect to the subject matter hereof are merged within this Sublease, which
alone fully and completely sets forth the understanding of the parties. This
Sublease shall not be modified, altered or amended in any way except by
agreement in writing, signed by the parties hereto.
.........(c) The terms, covenants and conditions contained in this Sublease
shall be binding on and inure to the benefit of the parties hereto and their
respective permitted successors and permitted assigns.
.........(d) If any provision of the Sublease is invalid or unenforceable
to any extent, then that provision and the remainder of this Sublease shall
continue in effect and be enforceable to the fullest extent permitted by law.
.........(e) The parties chose this Sublease document because it is fair to
both parties. Therefore, the parties agree that it shall be construed as if both
parties were equally responsible for drafting the Sublease and the rule of
construction of construing against the drafter shall not apply.
.........(f) This Sublease shall be governed by the laws of the State of
California.
.........(g) This Sublease shall not be binding unless signed by both
parties and an originally signed counterpart is delivered to Subtenant.
.........(h) Subtenant warrants and represents to Sublandlord that this
Sublease and the transaction contemplated hereby is legally binding on, and
enforceable against Subtenant in accordance with its terms.
.........(i) Notices shall be sent and deemed to have been given as
provided in Paragraph 28 of the Prime Lease, to Sublandlord and Subtenant at
their addresses in the first paragraph of this Sublease.
<PAGE>
INTENDING TO BE LEGALLY BOUND, this instrument has been executed as of
the day and year first appearing.
......... SUBLANDLORD:
......... EALTHDESK CORPORATION
......... By: /s/ Terry M. Brandt
--------------------
......... Name: Terry M. Brandt
......... Title: Chief Technical Officer
......... SUBTENANT:
......... PATIENT INFOSYSTEMS
......... ACQUISITION CORP.
......... By: /s/ Donald A. Carlberg
----------------------
......... Name: Donald A. Carlberg
......... Title: President
EXHIBIT 10.19
CONSULTING AGREEMENT
THIS AGREEMENT dated as of March 8, 1999 between PATIENT
INFOSYSTEMS, INC., a Delaware corporation (the "Company"), and JOHN V. CRISAN,
having an address at 591 Fallen Leaf Way, Incline Village, NV 89451 (the
"Consultant").
R E C I T A L S:
WHEREAS, the Company desires to retain the Consultant as a
consultant to the Company and a member of the Board of Directors on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 "Basic Consulting Fee" shall have the meaning assigned to that term
in Section 5 of this Agreement.
1.2 "Board" shall mean the Board of Directors of the Company as duly
constituted from time to time.
1.3 "Business" shall mean the business of the provision of
patient-centered health care information systems and services to manage, collect
and analyze information to improve patient compliance with prescribed treatment
protocols, to improve the process of off-site patient management and to enhance
patient and provider information.
1.4 "Cause" shall mean any of the following:
(a) The conviction of Consultant for a felony, or the willful
commission by Consultant of a criminal act that in the reasonable judgment of
the Company, causes or will likely cause substantial economic damage to the
Company or substantial injury to the business reputation of the Company;
(b) The commission by Consultant of an act of fraud,
misappropriation, embezzlement, theft, dishonesty or breach of duty of loyalty
in the performance of Consultant's duties on behalf of the Company; or
(c) The willful failure of Consultant to perform or
Consultant's gross negligence in the performance of the material duties of
Consultant to the Company (other than any such failure resulting from
Consultant's incapacity due to physical or mental illness) after written notice
thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to Consultant
by the Company.
For purposes of this subparagraph, no act, or failure to act,
on Employee's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules, regulations and interpretations issued thereunder.
1.6 "Confidential Information" shall include, without limitation by
reason of specification, any information, including, without limitation, trade
secrets, vendor and customer lists, pricing policies, operational methods,
methods of doing business, technical processes, formulae, designs and design
projects, inventions, research projects, strategic plans, product information,
manufacturing and advertising know-how, possible acquisition information and
other business affairs of the Company, which (i) is or are designed to be used
in, or are or may be useful in connection with the Business, or which results
from any of the research or development activities of the Business, or (ii) is
private or confidential in that it is not generally known or available to the
public, except as the result of unauthorized disclosure by or information
supplied by the Consultant, or (iii) gives the Company an opportunity or the
possibility of obtaining an advantage over competitors who may not know or use
such information or who are not lawfully permitted to use the same.
1.7 "Disability" shall mean the inability of the Consultant to perform
the Consultant's Duties for the Company pursuant to the terms of this Agreement,
because of physical or mental disability, where such disability shall have
existed for a period of more than 180 days in any 365 day period. The existence
of a Disability means that the Consultant's mental and/or physical condition
substantially interferes with the Consultant's performance of his Duties for the
Company as specified in this Agreement. The fact of whether or not a Disability
exists hereunder shall be determined by appropriate medical experts selected by
the Board.
1.8 "Duties" shall have the meaning assigned to that term in Section 2
of this Agreement.
1.9 "Consulting Year" shall mean each twelve-month period, or part
thereof, during which the Consultant is retained hereunder, commencing on the
Commencement Date and ending on the same day of the subsequent calendar year.
1.10 "Term Date" shall be the date on which the Term expires if during
the period of the initial Term or the date that the Renewal Term expires if
during the period of the Renewal Term.
1.11 "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
1.12 "Term" shall have the meaning assigned to that term in Section 3 of
this Agreement and any renewals thereof as provided for in Section 7 of this
Agreement.
1.13 "Renewal Term" shall have the meaning assigned to that term in
Section 7 of this Agreement. 1.14 "Voting Stock" shall mean the Common
Stock of the Company, par value $.01 per share.
Wherever from the context it appears appropriate, each word or phrase
stated in either the singular or the plural shall include the singular and the
plural, and each pronoun stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
2. RETENTION AND DUTIES OF THE CONSULTANT
The Company agrees to retain the Consultant, and the Consultant agrees
to be retained by the Company upon the terms and conditions hereinafter
provided. During the Term, the Consultant agrees to serve as a consultant to the
Company and a member of the Board and will have such powers and duties as set
forth on Exhibit A, as are commensurate with such position and as may be
conferred upon him by the Board (the "Duties"). The Consultant shall devote such
amount of time, attention, skill and efforts to his duties as a Board member and
to such other Consultant duties as are reasonably assigned to him from time to
time by the Board; provided, however, that Consultant shall not provide less
than 24 nor be obligated to devote more than 30 weeks per year toward the
performance of his duties hereunder. During the Term, Consultant: (i) shall
comply with all laws, statutes, ordinances, rules and regulations relating to
the Business, and (ii) shall not engage in or become employed, directly or
indirectly, in a business which competes with the Business of the Company,
without the prior written consent of the Chief Executive Officer of the Company,
nor shall he act as a consultant to or provide any services to, whether on a
remunerative basis or otherwise, the commercial or professional business of any
other Person which competes with the Business of the Company, without such
written consent, which, in both instances, may be given or withheld by the Chief
Executive Officer in his absolute discretion.
3. TERM OF RETENTION
The retention of the Consultant pursuant to this Agreement shall be for
the period of two (2) years (the "Term") commencing on the date hereof (the
"Commencement Date"), unless renewed pursuant to Section 7 or sooner terminated
pursuant to Section 8.
4. COMPENSATION AND BENEFITS
The Company shall pay the Consultant, as compensation for all of the
services to be rendered by him hereunder during the Term, and in consideration
of the various restrictions imposed upon the Consultant during the Term, the
Basic Consulting Fee and other benefits as provided for and determined pursuant
to Sections 5 and 6, inclusive, of this Agreement; provided, however, that no
compensation shall be paid to the Consultant under this Agreement for any period
subsequent to the termination of the Consultant for any reason whatsoever,
except as provided in Section 8.
5. BASIC CONSULTING FEE
The Company shall pay the Consultant, as compensation for all of the
services to be rendered by him hereunder during each Year, a fee of $5,000 per
week during which services are provided by the Consultant to the Company (the
"Basic Consulting Fee"), payable monthly, less such deductions or amounts as are
required to be deducted or withheld by applicable laws or regulations,
deductions for the Consultant contributions to welfare benefits provided by the
Company to the Consultant and such other deductions or amounts, if any, as are
authorized by the Consultant. The Basic Consulting Fee shall be prorated for
portions of weeks for which services are rendered. The Basic Consulting Fee
shall also be prorated for the month in which retention by the Company commences
or terminates.
6. ADDITIONAL BENEFITS, REIMBURSEMENT FOR EXPENSES AND STOCK OPTIONS
6.1 Additional Benefits. Except as provided in Sections 6.2 and 6.3
herein, the Company shall not provide any additional benefits to the Consultant.
It is expressly understood that Consultant is not an employee of the Company and
is therefore not entitled to participate or share in the Company's insurance,
health or other benefit plans.
6.2 Reimbursement for Expenses. The Company shall pay or reimburse the
Consultant for all reasonable business expenses actually incurred or paid by him
during the Term in the performance of his services under this Agreement,
including business-related travel expenses to and from his home inNevada and
Rochester, New York and temporary housing expenses in Rochester, New York, upon
presentation of such bills, expense statements, vouchers or such other
supporting information as the Board may reasonably require.
6.3 Stock Options. (a) On the date hereof, the Company shall grant the
Consultant options to purchase during a ten (10) year term up to an aggregate of
150,000 shares of Common Stock of the Company, par value $.01 per share (the
"Shares"), at a price of $1.50 per share, which options, to the extent possible,
shall qualify as Incentive Stock Options under the Company's Stock Option Plan
and which options shall vest as follows:
(i) Options to purchase first 75,000 Shares shall vest on the
first anniversary of this Agreement;
(ii) Options to purchase the next 37,500 Shares shall vest
on the second anniversary of this Agreement;
(iii) Options to purchase the final 37,500 Shares shall vest
on the third anniversary of this Agreement;
provided, however, that no options shall vest if the Consultant is not
retained by the Company on the date of vesting.
(b) In the event of a Change of Control of the Company, all
options granted hereunder shall immediately vest. For purposes of this
Agreement, a "Change of Control" of the Company shall be deemed to have occurred
upon the earliest of the following events:
(i) any "person," as such term is defined under Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") who is not an Affiliate of Company on the date
hereof, becomes a "beneficial owner," as such term is used in
Rule 13d-3 under the Exchange Act, of a majority of the
Company's Voting Stock;
(ii) the Company adopts any plan of liquidation providing
for the distribution of all or substantially all of its
assets; or
(iii) the Company is party to a merger, consolidation, other
form of business combination or a sale of all or substantially
all of its assets, unless the business of Company is continued
following any such transaction by a resulting entity (which
may be, but need not be, Company) and the shareholders of
Company immediately prior to such transaction hold, directly
or indirectly, a majority of the voting power of the resulting
entity.
7. RENEWAL OF TERM
If the Consultant's retention hereunder has not previously been
terminated in accordance with Section 8 hereof, then the Term shall be extended
only upon the mutual written agreement of the parties.
8. TERMINATION OF RETENTION
8.1 Death. If the Consultant dies during the Term, his retention under
this Agreement shall automatically terminate on the date of his death and no
further compensation shall be due hereunder to the Consultant or the
Consultant's estate.
8.2 Disability. If, during the Term, the Consultant has a Disability,
the Company may, at any time after the Consultant has a Disability, terminate
the Consultant's retention by written notice to him. In the event that the
Consultant's retention is terminated as a result of a Disability, the Consultant
shall cease to receive any further compensation hereunder.
8.3 Voluntary Termination. If the Consultant terminates his retention
with the Company at any time during the term of this Agreement and except as
expressly permitted under Section 8.5, he shall be deemed to have been
terminated by the Company for Cause and shall be subject to the provisions of
Section 8.4 hereof.
8.4 Termination for Cause. The Company may terminate the Consultant's
retention hereunder for Cause at any time by written notice given to the
Consultant by the Board. If the Consultant's retention is terminated for Cause,
he shall be entitled to receive only the portion of his Basic Consulting Fee
accrued and not theretofore paid to him and reimbursement for any expenses
properly incurred by the Consultant and supported by appropriate vouchers, which
expenses have been incurred prior to the date of such termination and not
theretofore reimbursed. Except as set forth in the immediately preceding
sentence, all of the Consultant's rights to compensation hereunder shall be
terminated.
8.5 Termination without Cause. Either party may terminate this Agreement
for any reason and without liability for a period of ninety (90) days from the
date of this Agreement. The Company may terminate the Consultant's retention
hereunder without Cause upon written notice to the Consultant at any time during
the Term of this Agreement, provided that if the Company terminates the
Consultant for any reason after 90 days from the date of this Agreement, other
than (i) the failure by Consultant to perform his Duties in the reasonable
judgment of the Board or (ii) for Cause, the Company shall pay to the Consultant
severance payments equal to the amount of the Basic Consulting Fee previously
paid to the Consultant under this Agreement up to the date of termination but
not to exceed $100,000, to be payable in equal monthly installments of not more
than $20,000 installments as set forth in Section 5. In addition, in the event
the Company terminates the Consultant for any reason, the Company shall
reimburse the Consultant for any expenses properly incurred by the Consultant
and supported by proper vouchers, which expenses have been incurred prior to the
date of such termination and not theretofore reimbursed.
9. REPRESENTATION AND WARRANTY BY THE CONSULTANT
The Consultant hereby represents and warrants to the Company, the same
being part of the essence of this Agreement, that, as of the Commencement Date,
he is not a party to any agreement, contract or understanding, and that no facts
or circumstances exist, which would in any way restrict or prohibit him in any
material way from undertaking or performing any of his obligations under this
Agreement. The foregoing representation and warranty shall remain in effect
throughout the Term.
10. CONFIDENTIAL INFORMATION AND PROPRIETARY INTERESTS
10.1 Acknowledgment of Confidentiality. The Consultant understands and
acknowledges that he may obtain Confidential Information during the course of
his retention by the Company. The Consultant further acknowledges that the
services to be rendered by him are of a special, unique and extraordinary
character and that, in connection with such services, he will have access to
Confidential Information vital to the Company. Accordingly, the Consultant
agrees that he shall not, during the Term or thereafter, (i) use or disclose any
such Confidential Information, (ii) furnish to any third party or allow any
third party to use any such Confidential Information, (iii) publish any works,
speeches or articles with respect thereto, or (iv) except as required in the
proper performance of his services hereunder, remove or aid in the removal of
any Confidential Information or any property or material relating thereto from
the premises of the Company.
The foregoing confidentiality provisions shall cease to be
applicable to any Confidential Information which becomes generally available to
the public (except by reason of or as a consequence of a breach by the
Consultant of his obligations under this Section 10).
In the event the Consultant is required by law or a court order
to disclose any such Confidential Information, he shall promptly notify the
Company of such requirement and provide the Company with a copy of any court
order or of any law which in his opinion requires such disclosure and, if the
Company so elects, to the extent that he is legally able, permit the Company an
adequate opportunity, at its own expense, to contest such law or court order.
10.2 Delivery of Material. The Consultant shall promptly, and without
charge, deliver to the Company on the termination of his retention hereunder, or
at any other time the Company may so request, all memoranda, notes, records,
reports, manuals, computer disks, videotapes, drawings, blueprints and other
documents (and all copies thereof) relating to the Business, and all property
associated therewith, which he may then possess or have under his control.
10.3 Customer and Vendor Lists. The Consultant acknowledges that (i) all
lists of customers and vendors of the Company developed prior to or during the
course of the Consultant's retention and/or by the Company are and shall be the
sole and exclusive property of the Company and the Consultant further
acknowledges and agrees that he neither has nor shall have any personal right,
title or interest therein; (ii) such lists are and must continue to be
Confidential Information; and (iii) such lists are not readily accessible to
competitors of the Company or any other third parties.
10.4 Ideas, Programs, Etc. If, during the Term, the Consultant invents
or develops any ideas, vendor lists or the like, relating to or useful in
connection with the Business, the same are and shall remain the property of the
Company, and the Consultant shall promptly deliver all copies of the same to the
Company, assign his interest therein to the Company and execute such documents
as the Company's counsel may request to convey title thereof to the Company. The
Consultant shall not be entitled to any compensation, other than as provided in
this Agreement, for carrying out his obligations to the Company under this
Section 10.4 or any other subsection of this Section 10.
10.5 Extension of Section 10. All of the provisions of Section 10 shall
be deemed to be applicable to all Confidential Information and to all ideas,
programs, etc., as referred to in Section 10.4, to which the Consultant may have
obtained access or which he may have invented or developed during his retention
by the Company.
11. COMPETITIVE ACTIVITY
The Consultant shall not engage, directly or indirectly in any
Competitive Activity for a period of one (1) year after the termination of
Consultant's retention with the Company, provided however, that if the
Consultant is terminated without Cause as defined in Section 1.4 hereof, he will
not be subject to the provisions of this Section 11. For purposes of this
Agreement, Consultant shall be considered to have engaged in a "Competitive
Activity" if Consultant:
(i) directly or indirectly, takes any action or engages, or
participates in or within or becomes interested in or associated with
enters into the employment of, renders any service, engages, owns,
manages, operates, joins, or otherwise offers other assistance to or
participates in or becomes connected with, as an officer, director,
employee, principal, agent, creditor, proprietor, representative,
stockholder, partner, associate, consultant or otherwise, any Person
that is engaged or becomes engaged in a business which is in
competition with the Business; provided, however, Consultant shall not
be prohibited from making an investment in less than 1% of the equity
of a public company;
(ii) whether for his own account or for the account of any Person,
attempts to solicit, endeavor to entice away from the Company, or
otherwise interferes with any relationship of the Company with any
person who is (i) employed by, or otherwise engaged to perform services
for, the Company or was so employed or engaged by the Company (or any
of its predecessors) at any time during the one year period prior to
the date of the termination of Employee's employment, including, but
not limited to, any independent contractors, or (ii) any Person who is
or was, within the then most recent eighteen (18) month period, a
customer or client of the Company.
(iii) otherwise interferes with the relationships between the Company
and its employees, customers or suppliers.
12. DISPUTES AND REMEDIES
12.1 Injunctive Relief. If the Consultant commits a breach, or threatens
to commit a breach, of any of the provisions of Sections 8.4, 10 or 11, the
Company shall have the following rights and remedies (each of which shall be
independent of the other, and shall be severally enforceable, and all of which
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company at law or in equity):
(i) the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged by the Consultant that any such breach or threatened
breach will or may cause irreparable injury to the Company and that
money damages will or may not provide an adequate remedy to the
Company; and
(ii) the right and remedy to require the Consultant to account for and
pay over to the Company all compensation, profits, monies, increments,
things of value or other benefits, derived or received by the
Consultant as the result of any acts or transactions constituting a
breach of any of the provisions of Sections 8.4, 10 or 11, of this
Agreement, and the Consultant hereby agrees to account for and pay over
all such compensation, profits, monies, increments, things of value or
other benefits to the Company.
12.2 Partial Enforceability. If any provision contained in Sections 8.4,
10 or 11, or any part thereof, is construed to be invalid or unenforceable, the
same shall not affect the remainder of the Consultant's agreements, covenants
and undertakings, or the other restrictions which he has accepted, in Sections
8.4, 10 or 11, and the remaining such agreements, covenants, undertakings and
restrictions shall be given the fullest possible effect, without regard to the
invalid parts.
12.3 Intention of Parties. It is distinctly understood and agreed that
the confidentiality, proprietary right and restrictive covenant provisions of
this Agreement have been accepted and agreed to by the Consultant in
contemplation of this Agreement. It is therefore the specific intention of the
parties, any general considerations of public policy to the contrary
notwithstanding, that the provisions of Sections 8.4, 10 or 11, of this
Agreement shall be enforced as written and to the fullest extent possible.
12.4 Adjustment of Restrictions. Despite the prior provisions of this
Section 12, if any covenant or agreement contained in Sections 8.4, 10 or 11, or
any part thereof, is held by any court of competent jurisdiction to be
unenforceable because of the duration of such provision or the geographic area
covered thereby, the court making such determination shall have the power to
reduce the duration or geographic area of such provision and, in its reduced
form, such provision shall be enforceable.
13. SURVIVAL
The provisions of Sections 8, 9, 10, 11, 12 and this Section 13 shall
survive termination of this Agreement and remain enforceable according to their
terms.
14. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall in no way affect the validity or enforceability of any other provisions
hereof.
15. NOTICES
All notices, demands and requests required or permitted to be given
under the provisions of this Agreement shall be deemed duly given if made in
writing and delivered personally or mailed by postage prepaid certified or
registered mail, return receipt requested, accompanied by a second copy sent by
ordinary mail, which notices shall be addressed as follows:
If to the Company:
Patient Infosystems, Inc.
46 Prince Street
Rochester, New York 14607
If to the Consultant:
John V. Crisan
591 Fallen Leaf Way
Incline Village, NV 89451
By notifying the other parties in writing, given as aforesaid, any party
may from time to time change his or its address or the name of any person to
whose attention notice is to be given, or may add another person to whose
attention notice is to be given, in connection with notice to any party.
16. ASSIGNMENT AND SUCCESSORS
Neither this Agreement nor any of his rights or Duties hereunder may be
assigned or delegated by the Consultant. This Agreement may not be assigned by
the Company without the consent of the Consultant except to any successor in
interest which takes over all or substantially all of the business of the
Company as it is conducted at the time of such assignment. Any corporation into
or with which the Company is merged or consolidated or which takes over all or
substantially all of the business of the Company shall be deemed to be a
successor of the Company for purposes hereof. This Agreement shall be binding
upon and, except as aforesaid, shall inure to the benefit of the parties and
their respective successors and permitted assigns.
17. ENTIRE AGREEMENT, WAIVER AND OTHER
17.1. Integration. This Agreement contains the entire agreement of the
parties hereto on its subject matter and supersedes all previous agreements
between the parties hereto, written or oral, express or implied, covering the
subject matter hereof. No representations, inducements, promises or agreements,
oral or otherwise, not embodied herein, shall be of any force or effect.
17.2. No Waiver. No waiver or modification of any of the provisions of
this Agreement shall be valid unless in writing and signed by or on behalf of
the party granting such waiver or modification. No waiver by any party of any
breach or default hereunder shall be deemed a waiver of any repetition of such
breach or default or shall be deemed a waiver of any other breach or default,
nor shall it in any way affect any of the other terms or conditions of this
Agreement or the enforceability thereof. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Consultant with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
The Consultant shall not have the right to sign any waiver or
modification of any provisions of this Agreement on behalf of the Company, nor
shall any action taken by the Consultant reduce his obligations under this
Agreement.
This Agreement may not be supplemented or rescinded except by instrument
in writing signed by the parties hereto after the date hereof. Neither this
Agreement nor any of the rights of any of the parties hereunder may be
terminated except as provided herein. No waiver of any provision of this
Agreement or any amendment of this Agreement shall be binding upon the Company
unless approved by the Board.
18. GOVERNING LAW
This Agreement shall be governed by and construed, and the rights and
obligations of the parties hereto enforced, in accordance with the laws of the
State of New York, without regard to conflicts of laws principles.
19. HEADINGS
The Section and subsection headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above, to be effective as of the Commencement Date.
PATIENT INFOSYSTEMS, INC.
By: /s/ Donald A. Carlberg
Name: Donald A. Carlberg
Title: President
/s/ John V. Crisan
John V. Crisan
<PAGE>
EXHIBIT A
Duties
- Oversee financial affairs and internal operations of the Company
- Assist senior and mid-level managers in establishing and achieving
both corporate and individual goals and objectives
- Plan for and manage through anticipated growth
- Achieve and expand Company profitability
- Establish organizational discipline and focus so as to deliver
steadily improving and predictable operating results
- Assist CEO with investor relations responsibilities
Exhibit 10.20
LEASE AGREEMENT
CONIFER PRINCE STREET ASSOCIATES
46 PRINCE STREET
AGREEMENT, made on the 22nd day of February , l995, by and between
CONIFER PRINCE STREET ASSOCIATES, a Limited Partnership organized and existing
under the laws of the State of New York, 46 Prince Street, Rochester, New York
("LANDLORD") and DSMI CORPORATION ("TENANT").
WITNESSETH: That the Landlord does hereby let and demise to Tenant and
Tenant does take from the Landlord, the premises outlined on the floor plan
designated Exhibit "A" attached hereto, being 3,573 square feet of the 1st floor
of the three story building known as , 46 Prince Street, Rochester, New York
(hereinafter called the "Building") together with 10 parking spaces.
l. TERM
a.) The lease term shall be for a period of two years commencing on
March 1, l995 and terminating on February 28, 1997 the "Lease Term").
b.) Tenant shall have a one-time right to extend the Term of this Lease
Agreement for a period of three additional and consecutive years. To be
effective, Tenant must not be in default of any of its lease obligations.
Furthermore, Tenant must provide Landlord with at least 180 days prior written
notice stating its intention to exercise this extension option. With the
exception of Rental all other provisions of this Lease Agreement shall remain
unchanged.
Should Tenant exercise its extension option the Base Rent during such
period shall be as follows:
TERM $ per sq. ft. Annual Base Rent
-------------- ------------- ----------------
3/1/97-2/28/98 $13.50 $48,235.50
3/1/98-2/28/99 $14.00 $50,022.00
3/1/99-2/28/00 $14.50 $51,808.50
2. RENTAL
The Base Rent during the initial year of the Lease Term shall be $12.50
per square foot per annum. The Base Rent shall be increased by $.50 per annum
per square foot effective March 1, l996 and again upon Tenants exercise of its
extension period, as stated above. Refer to Schedule A for details of Annual and
Monthly rent amounts due during the initial term.
a) The Base Rent will be payable in twelve equal monthly installments
due without demand at its office at 46 Prince Street, on the first day
of each month. Rent for partial months shall be pro-rated based on the
number of days occupied by Tenant, due and payable on the first day of
tenancy. A penalty of $50.00 will be imposed for rent received after
the 10th day of each month.
b) Tenant shall pay, as additional rent, all electric costs for the
leased premises, calculated as follows:
Heating and Air Conditioning - The air conditioning units serving the
leased premises shall be individually gauged. The actual heating and
cooling costs of the air conditioning units will be calculated by
multiplying the actual electric bill to Landlord by a fraction, the
numerator of which is calculated kilowatt hours used by the air
conditioning unit serving the leased premises for the billing period
and the denominator of which is the total kilowatt hours billed to
Landlord for the same period.
In the event the leased premises is less than the total area served by
an air conditioning unit, then tenant shall pay a pro rata share of the
cost of heat and air cooling based upon the percentage of the area
served by the air conditioning unit which is occupied by Tenant. That
percentage shall be agreed upon at execution of the lease and set forth
on Schedule A hereto.
Other Electric - The remaining electric cost for the building will be
calculated by deducting the total heating cost from the total electric
bill. Tenants share of the bill will be the electric cost multiplied by
a fraction, the numerator of which is the square footage covered by the
Lease and the denominator of which is the total rental square footage
of the building occupied during the applicable billing period as set
forth in Schedule A hereto.
c) The additional rent payment for electricity will be calculated and
billed by Landlord to Tenant, due and payable on the first day of the
month following receipt of the bill by Tenant.
d) Tenant shall pay as additional rent its proportionate share of
increases in property liability insurance premiums over a base year of
1995 and real property taxes, assessments or government levies in lieu
of taxes over a base year of 1995 for City School and 1995 for County
as set out on Schedule A.
3. SECURITY DEPOSIT
Tenant has this day deposited with Landlord the sum of $3,638.54 (the
"Security Deposit") as security for the full and faithful performance of Tenant
of all the terms, covenants and conditions of this Lease upon Tenant's part to
be performed. The Security Deposit may be commingled with other funds and assets
of Landlord and it shall be returned to Tenant after the time fixed as the
expiration of the Term, provided Tenant has duly and faithfully carried out all
of said terms, covenants and conditions on Tenant's part to be performed. In the
event of a bona fide sale of the Premises subject to this Lease, Landlord shall
have the right to transfer the Security Deposit to the vendee for the benefit of
Tenant and Landlord shall be considered released by Tenant from all liability
for the return of the Security Deposit, and Tenant agrees to look to the new
Landlord solely for the return of the Security Deposit and it is agreed that
this shall apply to every transfer or assignment made of the Security Deposit to
a new Landlord. Provided Tenant has not defaulted on its lease obligations
during the initial twelve months of the Term of the Lease, Landlord shall refund
Tenants' Security Deposit prior to the completion of the 13th month of said
Term.
4. DELAYS
If Landlord is unable to give possession of the premises on the date of
commencement of the term of this Lease by reason of the holding over of any
Tenant or occupant, or because construction, repairs, or improvements which are
Landlord's responsibility are not completed, rent shall abate for the period
that possession by Tenant is delayed. If such delay shall continue for more than
sixty (60) days, then Tenant may, within thirty (30) days after the expiration
of said sixty (60) day period, give Landlord a notice of election to terminate
this lease. Unless possession of the premises shall sooner be made available to
Tenant, this Lease shall terminate on the 30th day after the giving of such
notice and Landlord shall return to Tenant the consideration paid and Landlord
shall have no obligation to Tenant for failure to give possession except as
provided above.
In the event Tenant delays in providing Landlord with all necessary
information required for Landlord to construct tenant improvements, then
Landlord shall be entitled to an extension of time to complete such improvements
and rent shall not abate during such extension of time.
5. SERVICES
Landlord agrees to furnish electricity for usual office requirements.
Landlord agrees to furnish heat in the leased premises adequate and
reasonable for the business use of premises and through the heating system and
air cooling to the leased premises. Landlord agrees to provide the additional
services set forth on Schedule B attached hereto, subject to the rules,
regulations and limitations set forth herein.
Prior to Tenant's occupancy of the demised premises, anticipated to
take place March 1, 1995, Landlord shall shampoo the entire carpet within said
space as well as repaint the suite in a color to be selected by Tenant.
With the exception of those modifications to the existing floor plan of
the demised premises, the space is leased to Tenant in an "as-is" basis.
6. USE AND OCCUPANCY
Tenant shall use and occupy the premises for the business and
professional office purposes set forth on Schedule C attached hereto, and for no
other use or purpose.
7. CARE AND REPAIR OF PREMISES
Tenant shall commit no act of waste and shall take good care of the
premises and the fixtures and appurtenances therein and shall, in the use and
occupancy of the premises, conform to all laws, orders, and regulations of the
Federal, State, and municipal governments or any of their departments.
Landlord shall make all necessary repairs to the premises, except where
the repair has been made necessary by misuse or neglect by Tenant or Tenant's
agents, servants, visitors, or licensee.
All improvements made by Tenant to the premises which are so attached
to the premises that they cannot be removed without material injury to the
premises, shall become the property of Landlord upon installation.
Not later than the last day of the Lease Term, Tenant shall, at
Tenant's expense, remove all of Tenant's personal property and those
improvements made by Tenant which have not become the property of Landlord,
including trade fixtures, cabinetwork, movable paneling, partitions, and the
like, repair all injury done by or in connection with the installation or
removal of said property or improvements, and surrender the premises broom clean
in as good condition as they were at the beginning of the term, reasonable wear,
and damage by fire, the elements, casualty, or other causes not due to the
misuse of neglect of Tenant or Tenant's agents, servants, visitors, or
licensees, excepted. All property of Tenant remaining on the premises after the
last day of the term of this Lease shall be deemed abandoned and may be removed
by Landlord, and Tenant shall reimburse Landlord for the cost of such removal.
Landlord may have any such property stored at Tenant's risk and
expense. Any alternative, additions, or improvements to the premises shall be
only with Landlord's prior written consent.
Tenant shall not, without first obtaining the written consent of
Landlord, abandon the premises, or allow the premises to become vacant or
deserted.
8. ASSIGNMENT OR SUBLEASE
Tenant shall not, without first obtaining the written consent of
Landlord, assign, mortgage, pledge, or encumber this Lease, in whole or in part,
or sublet the premises or any part thereof and Landlord will not unreasonably
withhold assignment of this lease.
Any subletting of the premises shall be further subject to the written
consent of the University of Rochester, pursuant to certain restrictive
covenants in the deed of transfer of the premises to Landlord. This covenant
shall be binding upon the legal representatives of Tenant, and upon every person
to whom Tenant's interest under this Lease passes by operation by law.
9. COMPLIANCE WITH RULES AND REGULATIONS
Tenant shall observe and comply with the rules and regulations
hereinafter set forth, which are made a part hereof, and with such further
reasonable rules and regulations as Landlord may prescribe, on written notice to
the Tenant, for the safety, care and cleanliness of the building and the
comfort, quiet, and convenience of other occupants of the building.
Tenant shall comply will all present and future laws, ordinances,
rules, regulations, or governmental or quasi-governmental directives (including
without limitation those requirements of the Occupational Safety and Health
Administration that relate to the Premises) regarding the indoor air quality of
the Premises and the maintenance of any heating, ventilating, and
air-conditioning equipment or system for which the Tenant is responsible
pursuant to this Lease.
10. COMPLIANCE WITH ENVIRONMENTAL RULES AND REGULATIONS
"Environmental Laws" mean all federal, state and local environmental, land use,
zoning, health, chemical use, safety and sanitation laws, statutes, ordinances
and codes relating to the protection of the Environment and/or governing the
use, storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and the rules, regulations,
policies, guidelines, interpretations, decisions, orders and directives of
federal, state and local governmental agencies and authorities with respect
thereto.
"Hazardous Substance" means, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials,
as defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et
seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
Sections 2601, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
Sections 2601, et seq.), Articles 15 and 27 of the New York State Environmental
Conservation Law or any other applicable Environmental Law and the regulations
promulgated thereunder.
"Environmental Permits" mean all permits, licenses, approvals, authorizations,
consents or registrations required by any applicable
Environmental Law in connection with the ownership, use and/or operation of the
Premises for the storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances or the sale, transfer
or conveyance of the Premises.
1. Lessee shall keep, and shall cause all operators, licensees and
occupants of the Premises to keep the Premises free of all Hazardous
Substances and shall not cause or permit the Premises or any part
thereof to be used for the storage, treatment, generations,
transportation, processing, handling, production or disposal of any
Hazardous Substances.
2. Lessee shall comply with, and shall cause all operators, licensees and
occupants of the Premises to comply with all applicable Environmental
Laws and shall obtain and comply with, and shall cause all operators,
tenants, subtenants, licensees and occupants of the Premises to obtain
and comply with all Environmental Permits.
3. Lessee shall not cause or permit any change to be made in the present
or intended use of the Premises which would (i) involve the storage,
treatment, generation, transportation, processing, handling, production
or disposal of any Hazardous Substance or the use of the Premises as a
landfill or other waste disposal site or for military, manufacturing or
industrial purposes or for the storage of petroleum or petroleum based
products, (ii) violate any applicable Environmental Law, (iii)
constitute non-compliance with any Environmental Permit of (iv)
increase the risk of a release of any Hazardous Substance.
11. DAMAGE TO BUILDING
If the building is damaged by fire or any other cause to such extent
that the cost of restoration, as reasonably estimated by Landlord, will equal or
exceed fifty percent (50%) of the replacement value of the building just prior
to the occurrence of the damage, then Landlord may, no later than the 30th day
following the damage, give Tenant a notice of election to terminate this Lease.
In such event, this Lease shall be deemed to terminate on the 30th day after the
giving of said notice, and Tenant shall surrender possession of the premises
within a reasonable time thereafter, and the rent, and any additional rent,
shall be apportioned as of the date of said surrender and any rent paid for any
period beyond said date shall be refunded to Tenant.
If the cost of restoration, as estimated by Landlord, shall amount to
less than fifty percent (50%) of said replacement value of the building, or if,
despite the cost, Landlord does not elect to terminate this Lease, Landlord
shall restore the building and the premises with reasonable promptness, subject
to delays beyond Landlord's control and delays in the making of insurance
adjustments between Landlord and his insurance carrier, and Tenant shall have no
right to terminate this lease except as herein provided. Landlord need not
restore fixtures and improvements owned by Tenant. In any case in which use of
the premises is affected by any damage to the building, there shall be either an
abatement or an equitable reduction in rent depending on the period for which
and the extent to which the premises are not reasonably usable for the purpose
for which they are leased hereunder. The words "restoration" and "restore" as
used in this Paragraph 9 shall include repairs.
If damage results from the fault of the Tenant, or Tenant's agents,
servants, visitors, or licensees, Tenant shall not be entitled to any abatement
or reduction of rent, except to the extent, if any, that Landlord receives the
proceeds of rent insurance in lieu of such rent.
If more than 25 per cent of the premises leased by Tenant are rendered
untenantable and Landlord fails to restore said premises to a tenantable
condition within ten (10) days, then and in such event Tenant may cancel this
lease on notice to Landlord.
12. WAIVERS OF SUBROGATION
Notwithstanding the provisions of Paragraph 9 of this Lease, in the
event of loss or damage to the building, the premises and/or any contents, each
party shall look first to any insurance in its favor before making any claim
against the other party; and, to the extent possible without additional cost,
each party shall obtain, for each policy of such insurance, provisions
permitting waiver of any claim against the other party for loss or damage within
the scope of such insurance, and each party, to the extent permitted, for itself
and its insurers waives all such insured claims against the other party. The
provisions of this paragraph shall apply only upon the delivery by each party to
the other of an effective endorsement to this policy of insurance waiving
subrogation and to the extent therein permitted.
13. CONDEMNATION - TOTAL TAKING
If the leased premises or any part thereof are taken by eminent domain,
this Lease shall terminate on the date when title vests pursuant to such taking.
The rent, or any additional rent, shall be apportioned as of such terminate date
and any rent paid for any period beyond said date shall be repaid to Tenant.
Tenant shall not be entitled to any part of the award for such taking
or any payment in lieu thereof, except that Tenant reserves the right to assert
claim against the condemning authority for the cost of removal and relocation.
14. LESSOR'S REMEDIES IN DEFAULT
If Tenant defaults in the payment of rent, or any additional rent, or
defaults in the performance of any of the other covenants or conditions hereof,
Landlord may give Tenant notice of such default and if Tenant does not cure any
rent, or additional rent default within five (5) days, or other default, within
twenty (20) days, after the giving of such notice, or if such other default is
of such nature that it cannot be completely cured within such period, if Tenant
does not commence such curing within such twenty (20) days and thereafter
proceed with reasonable diligence and in good faith to cure such default, then
Landlord may terminate this Lease on not less than five (5) days' notice to
Tenant, and on the date specified in said notice the term of this Lease shall
terminate, and Tenant shall then quit and surrender the premises to Landlord,
but Tenant shall remain liable as hereinafter provided. If this Lease shall have
been so terminated by Landlord, Landlord may at any time thereafter resume
possession of the premises by any lawful means and remove tenant or other
occupants and their effects.
In the event that the relation of Landlord and Tenant may cease or
terminate by reason of the re-entry of Landlord under the terms and covenants
contained in this Lease or by the ejectment of Tenant by summary proceedings or
otherwise, or after the abandonment of the Premises by Tenant, it is hereby
agreed that, at Landlord's option, either (a) the remaining rent to be paid by
Tenant for the term subsequent to the re-entry of Landlord shall accelerate and
become immediately due and payable, or (b) Tenant shall remain liable and shall
pay in monthly payments the rent which accrues subsequent to the re-entry by
Landlord, and Tenant expressly agrees to pay as damages for the breach of the
covenants herein contained, the difference between the rent reserved and the
rent collected and received, if any, by Landlord during the remainder of the
unexpired Term, such difference or deficiency between the rent herein reserved
and the rent collected, if any, shall become due and payable in monthly payments
during the remainder of the unexpired Term, as the amounts of such difference or
deficiency shall from time to time be ascertained; and it is mutually agreed
between Landlord and Tenant that the respective parties hereto shall and hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other on any matters whatsoever arising out of
or in any wan connected with this Lease, Tenant's use or occupancy of Premises,
and/or any claim of injury or damage. The Tenant's obligation to pay the rent
accruing or to accrue after Landlord's re-entry shall survive the termination of
this Lease and Landlord's reletting of the Premises, subject to the credits for
collected rent, if any, as herein set forth.
15. DEFICIENCY
In any case where Landlord has recovered possession of the premises by
reason of Tenant's default, Landlord may, at Landlord's option, occupy the
premises or cause the premises to be redecorated, altered, divided, consolidated
with other adjoining premises, or otherwise changed or prepared for reletting,
and may relet the premises or any part thereof as agent of Tenant, and receive
the rent therefor. Rent so received shall be applied first to the payment of
such expenses as Landlord may have incurred in connection with the recovery of
possession, redecorating, altering, dividing, consolidating with other adjoining
premises, or otherwise changing or preparing for reletting, and the reletting,
including brokerage and reasonable attorney's fees, and then to the payment of
damages in amounts equal to the rent hereunder and to the cost and expenses of
performance of the covenants of Tenant as herein provided.
Tenant agrees in any such case, whether or not Landlord has relet, to
pay to Landlord damages equal to the rent and other sums herein agreed to be
paid by Tenant, less the net proceeds of reletting, if any, as ascertained from
time to time, and the same shall be payable by Tenant on the several rent days
above specified.
In reletting the premises as aforesaid, Landlord may grant rent
concessions, and Tenant shall not be credited therewith. No such reletting shall
constitute a surrender and acceptance or be deemed evidence thereof. If Landlord
elects, pursuant hereto, actually to occupy and use the premises or any part
thereof during any part of the balance of the term as originally fixed or since
extended, there shall be allowed against Tenant's obligation for rent or damages
as herein defined, during the period of Tenant's occupancy, the reasonable value
for such occupancy, not to exceed in any event the rent herein reserved and such
occupancy shall not be construed as a relief of Tenant's liability hereunder.
Tenant hereby waives all right of redemption to which Tenant or any
person claiming under Tenant might be entitled by any law now or hereafter in
force.
Landlord's remedies hereunder are in addition to any remedy allowed by
law.
16. SECURITY INTEREST
Landlord, subordinate to financial or lending institutions, shall have
a security interest and first lien paramount to all other on every right and
interest of Tenant in and of this Lease, on any building or improvement on or
hereafter placed on the leased property, and on all furnishings, equipment,
fixtures, or other personal property of any kind belonging to Tenant, or the
Tenant's equity therein, on the leased property. The security interest and lien
are granted for the purposes of securing payment of rents, taxes, assessments,
charges, liens, penalties, and damages, and of securing the performance of all
of Tenant's obligations under this Lease. The security interest and lien shall
be in addition to all other rights granted to Landlord under present or future
laws of this state.
17. NO WAIVER OF COVENANTS OR CONDITIONS
The failure of either party to insist on strict performance of any
covenant or condition hereof, or to exercise any option herein contained, shall
not be construed as a waiver of such covenant, condition, or option in any other
instance. This Lease cannot be changed or terminated orally.
18. COLLECTION OF RENT FROM ANY OCCUPANT
If the premises are sublet or occupied by anyone other than Tenant and
Tenant is in default hereunder, or if this lease is assigned by Tenant, Landlord
may collect rent from the assignee, subtenant, or occupant, and apply the net
amount collected to the rent therein reserved. No such collection shall be
deemed a waiver of the covenant herein against assignment and subletting, or the
acceptance of such assignee, subtenant, or occupant as Tenant, or a release of
Tenant from further performance of the covenants herein contained.
19. SUBORDINATION OF LEASE
This lease shall be subject and subordinate to all underlying leases
and mortgages and trust deeds which may now or hereafter affect such leases or
the real property of which the premises form a part, and also to all renewals,
modifications, consolidations, and replacements of said underlying leases,
mortgages, and trust deeds. Although no instrument or act on the part of Tenant
shall be necessary to effectuate such subordination, Tenant will, nevertheless,
execute and deliver such further instruments confirming such subordination of
this lease as may be desired by the holders of said mortgages and trust deeds or
by any of the Landlords under any such underlying leases. Tenant hereby appoints
Landlord attorney in fact, irrevocably, to execute and deliver any such
instrument for Tenant.
20. RIGHT TO-CURE TENANT'S BREACH
If Tenant breaches any covenant or condition of this Lease, Landlord
may, after giving Tenant twenty days notice of the covenant or condition claimed
to have been breached, and upon Tenant's failure to cure the same, (except that
no notice need be given in case of emergency) cure such breach at the expense of
Tenant and the reasonable amount of all expenses, including attorney's fees,
incurred by Landlord in so doing (whether paid by Landlord or not) shall be
deemed additional rent payable on demand.
21. MECHANIC'S LIENS
Tenant shall within ten (10) days after notice from Landlord discharge
any mechanics' liens for material or labor claimed to have been furnished to the
premises on Tenant's behalf.
22. NOTICES
Any notice by either party to the other shall be in writing and shall
be deemed to have been duly given only if delivered personally or sent by
registered or certified mail in a postpaid envelope addressed; if to Tenant, at
the above described building; if to Landlord, at Landlord's address as set forth
above; or, to either, at such other address as Tenant or Landlord, respectively,
may designate in writing.
23. RIGHT TO INSPECT AND REPAIR
Landlord may, but shall not, except as required by provisions of
Paragraph 6, be obligated to, enter the premises at any reasonable times, on
reasonable notice to Tenant (except that no notice need be given in case of
emergency) for the purpose of inspection or the making of such repairs,
replacements, or addition in, to, on or about the premises or the building, as
Landlord deems necessary or desirable. Tenant shall have no claim or cause of
action against Landlord by reason thereof except as provided in Paragraph 25
hereof.
24. INTERRUPTION OF SERVICES OR USE
Interruption or curtailment of any service maintained in the building,
if caused by strikes, mechanical difficulties, or any causes beyond Landlord's
control whether similar or dissimilar to those enumerated, shall not entitle
Tenant to any claim against Landlord or to any abatement in rent, and shall not
constitute constructive or partial eviction, unless Landlord fails to take such
measures as may be reasonable in the circumstances to restore the service
without undue delay.
25. CONDITIONS OF LESSOR'S LIABILITY
Tenant shall not be entitled to claim a constructive eviction from the
premises unless Tenant shall have first notified Landlord in writing of the
condition or conditions giving rise hereto, and, if the complaints be justified,
unless Landlord shall have failed within a reasonable time after receipt of such
notice to remedy such conditions.
26. RIGHT TO SHOW PREMISES
Landlord may show the premises to prospective purchasers and mortgagees
and, during the six (6) months prior to termination of this lease, to
prospective tenants, during business hours on reasonable notice to Tenant.
27. NO OTHER REPRESENTATIONS
No representations or promises shall be binding on the parties hereto
except those representations and promises contained herein or in some further
writing signed by the party making such representations or promises.
28. QUIET ENJOYMENT
Landlord covenants that if, and so long as, Tenant pays the rent, and
any additional rent as herein provided, and performs the covenants hereof,
Tenant shall peaceably and quietly have, hold, and enjoy the premises for the
term herein mentioned, subject to the provisions of this Lease.
29. TENANT'S ESTOPPEL
Tenant shall, from time to time, on not less than ten (10) days' prior
written request by Landlord, execute, acknowledge, and deliver to Landlord a
written statement certifying that the Lease is unmodified and in full force and
effect, and that the Lease is in full force and effect as modified and listing
the instruments or modification; the dates to which the rents and other charges
have been paid; and whether or not to the best of Tenant's knowledge Landlord is
in default hereunder and, if so, specifying the nature of the default. It is
intended that any such statement delivered pursuant to this Paragraph may be
relied upon by a prospective purchaser of Landlord's interest or mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
building.
30. WAIVER OF JURY TRIAL
To the extent such waiver is permitted by law, the parties waive trial
by jury in any action or proceeding brought in connection with this lease or the
premises.
31. PARAGRAPH HEADINGS
The paragraph headings in this Lease are intended for convenience only
and shall not be taken into consideration in any construction or interpretation
of this Lease or any of its provisions.
32. APPLICABILITY TO HEIRS AND ASSIGNS
The provision of this lease shall apply to, bind, and inure to the
benefit of Landlord and Tenant, and their respective heirs, successors, legal
representatives, and assigns. It is understood that the term "Landlord" as used
in this Lease means only the owner, a mortgagee in possession, or a term Tenant
of the building, so that in the event of any sale of the building or of any
lease thereof, or if a mortgagee shall take possession of the premises, the
Landlord named herein shall be and hereby is entirely freed of relief and all
covenants and obligation of Landlord hereunder occurring thereafter, and it
shall be deemed without further agreement that the purchaser, the term Tenant of
the building, or the mortgagee in possession has assumed and agreed to carry out
any and all covenants and obligations of the Landlord hereunder.
33. FIRST RIGHT TO LEASE
Provided Tenant is not in default of any of its lease obligations,
Tenant shall have the Right to Lease the remaining balance of space on the first
floor of 46 Prince Street, Rochester, New York 14607. At the time the Landlord
enters into serious conversation with regards to leasing said approximately
3,741 square feet or any portion thereof, on the first floor, it must provide
Tenant with written notice that said space is being considered for lease by a
third party. Tenant has five (5) business days to inform Landlord, in writing,
of its intention to either expand into said space or reject leasing the
additional space at that time. Should Tenant elect to lease the additional space
it must agree to extend the remaining Term of its lease so that at least three
(3) years remain at the time of Tenants occupancy of the additional space with
the exception of the initial two years of the lease term. The three year minimum
extension period shall apply to the entire amount of space Tenant leases at the
time of the expansion. Landlord agrees to repaint and shampoo carpet within the
expansion space. The Base Rent for the expansion space shall be equal to the
Tenant's then-current Base Rent Per Square Foot Rate.
34. Landlord shall recarpet the main stairwell within the building prior to June
1, 1995 notwithstanding any delays caused by actions or lack of actions beyond
Landlord's control.
IN WITNESS WHEREOF, the parties hereto have duly executed in this Lease
the 22nd day of February, l995.
LANDLORD: TENANT:
CONIFER PRINCE ST. ASSOCIATES DSMI CORPORATION
BY:/s/ Richard C. Crossed BY: /s/ Donalrd A. Carlberg
Richard C. Crossed Donald A. Carlberg, CEO
TITLE President TITLE Agent for Corporation in
formation and without individual liability
<PAGE>
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RULES AND REGULATIONS
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1. OBSTRUCTION OF PASSAGEWAYS
The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and public parts of the building shall not be
obstructed or encumbered by Tenant or used by Tenant for any purpose
other than ingress and egress.
2. PROJECTIONS FROM BUILDING
No awning, air conditioning units, or other fixtures shall be attached
to the outside walls or the windowsills of the building, or otherwise
affixed so as to project from the building, without the prior written
consent of Landlord.
3. SIGNS
No sign or lettering shall be affixed by Tenant to any part of the
inside of the premises so as to be clearly visible from the outside of
the premises without the prior written consent of Landlord. However,
Tenant shall have the right to place its name on any door leading into
the premises; the size, color, and style thereof is to be subject to
Landlord's approval, which approval shall not be unreasonably withheld.
Landlord shall place Tenant's name on the directory in the lobby of the
building. Tenant shall not have the right to have additional names
placed on the directory without Landlord's prior written consent;
however, such consent shall not be unreasonably withheld.
4. WINDOWS
Windows in the premises shall not be obstructed by Tenant. No bottles,
parcels,or other articles shall be placed on the windowsills, in the
halls, or in any other part of the building other than the leased
premises. No article shall be thrown out of the doors or windows of the
premises. All window treatments must be white or beige to the exterior
and shall be subject to Landlord's approval.
5. FLOOR COVERING
Tenant shall not lay linoleum or other similar floor covering so that
the same shall come in direct contract with the floor of the premises.
If linoleum or other similar floor covering is desired to be used, an
interlining of builder's deadening felt first shall be fixed to the
floor by a paste or other material that may easily be removed with
water, the use of cement or other similar adhesive material being
expressly prohibited.
6. INTERFERENCE WITH OCCUPANTS OR BUILDING
Tenant shall not make, or permit to be made, any unseemly or disturbing
noises and shall not interfere with other tenants or those having
business with them.
7. LOCKS: KEYS
No additional locks or bolts of any kind shall be placed on any of the
doors or windows by Tenant. Tenant shall, on termination of its
tenancy, deliver to Landlord all keys to any space within the building;
either furnished to or otherwise procured by Tenant, and in the event
of the loss of any keys furnished, Tenant shall pay to Landlord the
cost thereof.
8. MOVEMENT OF FURNITURE, FREIGHT, OR BULKY MATTER
The carrying in or out of freight, furniture, or bulky matter of any
description must take place during such hours as Landlord may from time
to time reasonably determine and only after advance notice to the
superintendent of the building. The person employed by Tenant for such
work must be reasonably acceptable to Landlord. Tenant may, subject to
such provisions, move freight, furniture, bulky matter, and other
material into or out of the premises on Saturdays between the hours of
eight (8) a.m. and six (6) p.m., provided Tenant pays additional costs,
if any, incurred by Landlord for elevator operators or security guards,
and for other expenses occasioned by such activity by Tenant.
9. SAFES AND OTHER HEAVY EQUIPMENT
Landlord reserves the right to prescribe the weight and position of all
safe and other heavy equipment so as to distribute properly the weight
thereof and to present any unsafe condition from arising. Business
machines and other equipment shall be placed and maintained by Tenant
at Tenant's expense in settings sufficient in Landlord's reasonable
judgment to absorb and prevent unreasonable vibrations, noise and
annoyance.
10. ADVERTISING
No advertising, publication, sign or other form of communication by the
Tenant shall utilize the name of the University of Rochester or the
Memorial Art Gallery, or make reference to any art exhibit, shows,
exhibitions or other activities conducted by the University of
Rochester or the Memorial Art Gallery, for the purpose of identifying
the location of the premises or for the purpose of promoting or selling
goods, products or services offered by the Tenant.
<PAGE>
SCHEDULE A
BASE RENT
TERM ANNUAL MONTHLY
3/1/95-2/28/96 $44,662.50 $3,721.88
3/1/96-2/28/97 $46,449.00 $3,870.75
COMMON AREA MAINTENANCE
ADDITIONAL RENT
UTILITIES
Total Square Footage of building 30,375
Square Footage Covered by Lease 3,573
Tenant's Share Electric 11.76%
ADDITIONAL RENT
Heating and Air Conditioning
The heat pump units serving the leased premises shall be individually gauged and
the monthly charges shall be calculated as set forth on the attached and further
explained as follows:
l. The heat pump units serving the leased premises shall be identified by model
number.
2. The actual heat pump operating hours will be recorded for each month (column
3) and multiplied by the energy use factor (column 4) applicable to the heat
pump model to establish the total energy units (column 5)
3. The total energy units for all heat pumps is then added to the total
auxiliary usage to establish the grand total usage and energy cost (total KWH)
for the building.
4. The grand total usage and energy cost is multiplied by the utility company's
rate per KWH to establish the total cost for kilowatt hours.
5. The total KWH are divided by the total heat pump usage and charges to
establish the heat pump hourly rate (column 6).
6. The monthly tenant charge is the heat pump hourly rate multiplied by the
total energy units (column 5).
7. Tenant will also pay 11.76% of general usage/common area electric.
ADDITIONAL RENT
Real Estate and Insurance Escalation
In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 11.76% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 11.76% of the increase in property and
liability insurance premiums (payable in February of the following year).
<PAGE>
SCHEDULE B
SERVICES PROVIDED BY LANDLORD
1. Housekeeping of the common area.
2. Building, landscape and elevator maintenance.
3. Snow removal and the removal of trash from a common receptacle.
4. Automatic operatorless passenger elevator.
5. Common lavatory facilities, including supplies.
6. Parking for 10 cars.
<PAGE>
SCHEDULE C
USE AND OCCUPANCY OF LEASED-SPACE
Professional Office Space
EXHIBIT 10.21
FIRST ADDENDUM TO LEASE
This First Addendum to Lease is made and entered into the 22nd day of August,
1995, between Conifer Prince Street Associates (Landlord) and DSMI Corporation
(Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 3,573 square
feet of office space at 46 Prince Street, Rochester, New York 14607 pursuant to
a Lease Agreement dated February 22, 1995 (Lease). WHEREAS, Tenant and Landlord
desire to expand Tenant's Leased Premises as illustrated on Exhibit A-1 attached
hereto, and made a part of the First Addendum to Lease.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective upon full execution of this First Addendum to Lease, Tenant's
leased premises shall be approximately 5,504 rentable square feet.
2. Effective upon full execution of this First Addendum to Lease, Section
1, "TERM", Paragraph A, of the Lease Agreement shall be modified, in part, to
read "... and terminating on September 30, 1999..." Additionally, Tenant has
hereby exercised a modification of the extension period as stated within Section
1, Paragraph B, of the Lease Agreement. Therefore, the provisions of Section 1.
"TERM", Paragraph B, of the Lease Agreement shall now be null and void.
3. Effective upon full execution of this First Addendum to Lease, Section
2, "RENTAL", of the Lease Agreement shall be modified, in part, as follows "...
the Base Rent shall be increased as follows:
Period $/Sq.ft. Monthly Annual
Base Rent Base Rent
10/1/95-2/28/96 $12.50 $ 5,136.46* N/A
3/1/96-2/28/97 $13.00 $ 5,962.67 $ 71,552.00
3/1/97-2/28/98 $13.50 $ 6,192.00 $ 74,304.00
3/1/98-2/28/99 $14.00 $ 6,421.33 $ 77,055.96
3/1/99-9/30/99 $14.50 $ 6,650.67 N/A
* Landlord agrees to abate the Base Rent for 573 square feet of the newly
created demised premises during the period of October 1, 1995 through February
28, 1996. Therefore, Base Rent is based on 4,931 square feet during such period.
4. Effective upon full execution of this First Addendum to Lease, Section
5, "Services", of the Lease Agreement shall be modified to include Exhibit AA
"Landlord/Tenant Work Letter" attached to and made part of this First Addendum
to Lease.
5. Effective upon full execution of this First Addendum to Lease, Section
33, "First Right To Lease", of the Lease Agreement shall be modified, in part,
to read"...space within the building..." and the words "said approximately 3,741
square feet or any portion thereof on the first floor" shall be replaced by the
following, "space within the Building"
6. Effective upon full execution of this First Addendum to Lease, Schedule
A, of the Lease Agreement shall be replaced by Schedule A-2, attached and made a
part of this First Addendum to Lease.
7. Effective upon full execution of this First Addendum to Lease, Schedule
B "Services Provided by Landlord" of the Lease Agreement, shall be modified, in
part, to read "...Item 6, Parking for 17 effective October 1, 1995 and increased
to 25 effective February 1, 1996".
8. Tenant shall have a one-time opportunity to terminate the Lease
Agreement effective September 30, 1998. Tenant must provide Landlord with a
minimum of 120 days written notice of its intention to exercise its termination
option. Furthermore, in order for Tenant's option to be effective, it's written
notice must be delivered to Landlord together with an early termination penalty
equal to $10,500.00.
9. Prior to Tenant's occupancy of the expansion space, Landlord shall
relocate the ground wire connection servicing Tenant's electrical panel from its
current position, so that it connects directly into a ground pole within the
panel.
Except as modified above, all other terms and conditions of the Lease
Agreement dated February 22, 1995 shall remain unchanged and in full force and
effect.
Agreed to by: Agreed to by:
DSMI CORPORATION CONIFER PRINCE STREET ASSOCIATES
By: /s/ Gregory D. Brown By: /s/ C. Terrance Butwid
Date: August 18, 1995 Date: August 22, 1995
-------------------------------- ------------------------------
EXHIBIT 10.22
SECOND ADDENDUM TO LEASE
This Second Addendum To Lease is made and entered into the 17th day of November,
1995, between Conifer Prince Street Associates (Landlord) and DSMI Corporation
(Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 5,504 square
feet of office space at 46 Prince Street, Rochester, New York 14607 pursuant to
a Lease Agreement and First Addendum To Lease, dated February 22, 1995 and
August 18, 1995, respectively.
WHEREAS, Tenant and Landlord desire to expand Tenant's Lease Premises to include
approximately 1,720 square feet of office space located on the lower level of
the Building as illustrated by Exhibit A-2 attached hereto and made part of this
Second Addendum To Lease.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective upon full execution of this Second Addendum To Lease,
Tenant's lease premises shall be approximately 7,224 rentable square feet.
2. Effective December 1, 1995, Tenant agrees to pay, in addition to its
Base Rent as stated in the First Addendum To Lease, the following
monthly Base Rent:
Period $/Sq.ft. Monthly
--------------- -------- --------
Month-to-Month Base Rent
-------------- ---------
12/1/95-2/28/96 $12.50 $1,096.88
3/1/96-2/28/97 $13.00 $1,140.75
3/1/97-2/28/98 $13.50 $1,184.63
3/1/98-2/28/99 $14.00 $1,228.50
3/1/99-9/30/99 $14.50 $1,272.38
4. Landlord or Tenant may terminate this Second Addendum To Lease by
providing the other with thirty (30) days prior written notice of its
desire to terminate the provisions of this Second Addendum To Lease.
5. Effective upon full execution of this Second Addendum To Lease,
Schedule A-2 of the Lease Agreement shall be replaced by Schedule A-3,
attached and made a part of this Second Addendum To Lease.
Except as modified above, all other terms and conditions of the Lease Agreement
and First Addendum To Lease, dated February 22, 1995 and August 18, 1995,
respectively, shall remain unchanged and in full force and effect.
Agreed to by: Agreed to by:
DSMI CORPORATION CONIFER PRINCE STREET ASSOCIATES
By: /s/ Donald A. Carlberg By: /s/ Thomas L. Fountain
Agent for Owner
Date: November 17, 1995 Date: November 17, 1995
<PAGE>
SCHEDULE A-3
COMMON AREA MAINTENANCE
ADDITIONAL RENT
UTILITIES
Total Square Footage of Building 30,375
Square Footage Covered by Lease 7,224
Tenant's Share Electric 23.78%
ADDITIONAL RENT
Heating and Air Conditioning
The heat pump units serving the leased premises shall be individually gauged and
the monthly charges shall be calculated as set forth on the attached and further
explained as follows:
1. The heat pump units serving the lease premises shall be identified by model
number.
2. The actual heat pump operating hours will be recorded for each month (column
3) and multiplied by the energy use factor (column 4) applicable to the heat
pump model to establish the total energy units (column 5).
3. The total energy units for all heat pumps is then added to the total
auxiliary usage to establish the grand total usage and energy cost (total KWH)
for the building.
4. The grand total usage and energy cost is multiplied by the utility company's
rate per KWH to establish the total cost for kilowatt hours.
5. The total KWH are divided by the total heat pump usage and charges to
establish the heat pump hourly rate (column 6).
6. The monthly tenant charge is the heat pump hourly rate multiplied by the
total energy units (column 5).
7. Tenant will also pay 23.78% of general usage/common area electric.
<PAGE>
ADDITIONAL RENT
Real Estate and Insurance Escalation
In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 23.78% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 23.78% of the increase in property and
liability insurance premiums (payable in February of the following year).
EXHIBIT 10.23
THIRD ADDENDUM TO LEASE
This Third Addendum To Lease is made and entered into the 28th day of March,
1996, between Conifer Prince Street Associates (Landlord) and DSMI Corporation
(Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 7,224 square
feet of office space at 46 Prince Street, Rochester, New York 14607 pursuant to
a Lease Agreement; First and Second Addendums To Lease, dated February 22, 1995,
August 18, 1995 and November 17, 1995, respectively.
WHEREAS, Tenant and Landlord desire to increase the Base Rent associated with
the 1,720 square feet leased and occupied by Tenant, located on the lower level
of the Building as illustrated by Exhibit A-2 of the Second Addendum To Lease.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective April 1, 1996, Tenant agrees to pay, in addition to its Base
Rent as stated in the First Addendum To Lease, the following monthly
Base Rent:
Period $/Sq.ft. Monthly
Month-to-Month Base Rent
4/1/96-2/28/97 $12.00 $1,720.00
3/1/97-2/28/98 $12.50 $1,791.67
3/1/98-2/28/99 $13.00 $1,863.33
3/1/99-9/30/99 $13.50 $1,935.00
2. Landlord or Tenant may terminate this Second Addendum To Lease by
providing the other with prior written notice of its desire to
terminate the provisions of this Second Addendum To Lease. The
effective date of termination will be the last day of the first full
month following the receipt of said written notice.
Except as modified above, all other terms and conditions of the Lease Agreement,
First and Second Addendums To Lease, dated February 22, 1995 , August 18, 1995
and March 23, 1996, respectively, shall remain unchanged and in full force and
effect.
Agreed to by: greed to by:
DSMI CORPORATION CONIFER PRINCE STREET ASSOCIATES
Home Properties of New York
By: /s/ Gregory D. Brown By: /s/ Thomas L. Fountain
Date: March 28, 1996 Date: April 1, 1996
EXHIBIT 10.24
FOURTH ADDENDUM TO LEASE
This Fourth Addendum To Lease is made and entered into the 29th day of October,
1996, between Conifer Prince Street Associates (Landlord) and Patient
Infosystems, Inc. formerly DSMI Corporation (Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 7,224 square
feet of office space at 46 Prince Street, Rochester, New York 14607 pursuant to
a Lease Agreement and First, Second and Third Addendums To Lease, dated February
22, 1995, August 18, 1995, November 17, 1995 and March 28, 1996, respectively.
WHEREAS, Tenant and Landlord desire to expand Tenant's Lease Premises to include
approximately 5,893 square feet of office space located on the third and fourth
levels of the Building as illustrated by Exhibit A-4 attached hereto and made
part of this Fourth Addendum To Lease and certain provisions of the Lease
Agreement and First, Second and Third Addendums To Lease stated above.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective December 1, 1996, Tenant's lease premises shall be approximately
13,117 rentable square feet.
2. Effective December 1, 1996, Tenant agrees to pay, Base Rent for space leased
on the lower level of the Building, consisting of approximately 1,720 square
feet as follows:
Period $/Sq.ft. Monthly
Month-to-Month Base Rent Base Rent
12/1/96-2/28/97 $12.00 $1,720.00
3/1/97-2/28/98 $12.50 $1,791.67
3/1/98-2/28/99 $13.00 $1,863.33
3/1/99-11/30/99 $13.50 $1,935.00
3. Landlord or Tenant may terminate the obligations of the Lease Agreement,
First, Second and Third Addendums To Lease stated above. related to Tenant's
lower level space of the Building, as stated in Paragraph 2 above, without
penalty, by providing the other with a minimum of thirty (30) days prior written
notice of its desire to terminate said obligations.
4. Effective December 1, 1996, Tenant agrees to pay, Base Rent for space leased
on the first, third and fourth levels of the Building, consisting of
approximately 11,397 square feet as following:
Period $/Sq.ft. Monthly
Month-to-Month Base Rent Base Rent
12/1/96-2/28/97 $13.00 $12,346.75
3/1/97-2/28/98 $13.50 $12,821.63
3/1/98-2/28/99 $14.00 $13,296.50
3/1/99-11/30/99 $14.50 $13,771.38
5. Effective upon the full execution of this Fourth Addendum To Lease, Tenant
hereby exercises it extension option, as stated in Paragraph 1,"TERM", of the
Lease Agreement, with the exception that the term of said extension option
period is modified, in part, to provide for a lease termination date of November
30, 1999.
6. Effective upon the full execution of this Fourth Addendum To Lease, Paragraph
8 of the First Addendum To Lease will become null and void and the Lease, with
the exception of the provisions stated as in Paragraph 3 of this Fourth Addendum
To Lease, shall no longer provide Tenant with a right to early termination of
the Lease.
7. Landlord will patch and paint the walls, doors and trim within Tenant's space
located on the third and fourth levels of the Building. Tenant and Landlord must
agree upon paint color(s) prior to October 17, 1996. Additionally, Landlord will
install, within the third level area of Tenant's demised premises only, new
carpet in the common hallways, receptionist desk area, internal stairway and
private offices. Landlord shall also replace existing VCT flooring in the
receptionist/storage area. Provided Landlord has enough carpet, Tenant agrees to
allow Landlord to install carpet, in the common hallways and internal stairway
of Tenant's third level space, that matches the existing carpet in the suite
adjacent to Tenant's third level space. Carpet to be installed in the private
offices and receptionist area, stated above, shall be a "Patcraft Einstein" 28
ounce grade carpet or equal. If determined by Landlord's contractor, there is an
insufficient amount of the matching carpet stated above, "Patcraft Einstein" 28
ounce carpet or equal will be used as a substitute in the common hallways and
internal stairway mentioned above. Landlord and Tenant must agree upon carpet
selection by October 17, 1996. Landlord shall have the carpet in the large open
section of Tenant's fourth level space professionally stretched. Landlord will
also professionally shampoo the carpet on the entire fourth level and in the
third level conference room. Provided the above dates are adhered to, Landlord
will completed said work prior to December 1, 1996.
8. Effective December 1, 1996, Tenant's parking allowance will be increased from
25 on-site spaces to 41.
9. Effective December 1, 1996, Schedule A-3 of the Second Addendum To Lease will
be replaced by Schedule A-4, attached and made a part of this Fourth Addendum To
Lease .
Except as modified above, all other terms and conditions of the Lease Agreement
and First, Second and Third Addendus To Lease, dated February 22, 1995, August
18, 1995, November 17, 1995 and March 28, 1996, respectively, shall remain
unchanged and in full force and effect.
Agreed to by: Agreed to by:
PATIENT INFOSYSTEMS CONIFER PRINCE STREET ASSOCIATES
FORMERLY DMSI CORPORATION
By: /s/ Donald A. Carlberg By: /s/ Dick Crossed
Date: October 25, 1996 Date: October 29, 1996
<PAGE>
SCHEDULE A-4
COMMON AREA MAINTENANCE
ADDITIONAL RENT
UTILITIES
Total Square Footage of Building 30,375
Square Footage Covered by Lease 13,117
Tenant's Share Electric 43.2%
ADDITIONAL RENT
Heating and Air Conditioning
The heat pump units serving the leased premises shall be individually gauged and
the monthly charges shall be calculated as set forth on the attached and further
explained as follows:
1. The heat pump units serving the lease premises shall be identified by model
number.
2. The actual heat pump operating hours will be recorded for each month (column
3) and multiplied by the energy use factor (column 4) applicable to the heat
pump model to establish the total energy units (column 5).
3. The total energy units for all heat pumps is then added to the total
auxiliary usage to establish the grand total usage and energy cost (total KWH)
for the building.
4. The grand total usage and energy cost is multiplied by the utility company's
rate per KWH to establish the total cost for kilowatt hours.
5. The total KWH are divided by the total heat pump usage and charges to
establish the heat pump hourly rate (column 6).
6. The monthly tenant charge is the heat pump hourly rate multiplied by the
total energy units (column 5).
7. Tenant will also pay 43.2% of general usage/common area electric.
ADDITIONAL RENT
Real Estate and Insurance Escalation
In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 43.2% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 43.2% of the increase in property and
liability insurance premiums (payable in February of the following year).
EXHIBIT 10.25
FIFTH ADDENDUM TO LEASE
This Fifth Addendum To Lease is made and entered into the 30th day of November,
1996, between Conifer Prince Street Associates (Landlord) and Patient
Infosystems, Inc. formerly DSMI Corporation (Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 13,117
square feet of office space at 46 Prince Street, Rochester, New York 14607
pursuant to a Lease Agreement and First, Second, Third and Fourth Addendums To
Lease, dated February 22, 1995; August 18, 1995; November 17, 1995; March 28,
1996 and October 29, 1996 respectively.
WHEREAS, Tenant and Landlord desire to terminate it lease obligation regarding
the space leased on the lower level of the Building thereby reducing the amount
of square footage and corresponding its rental obligation effective December 1,
1996.
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective December 1, 1996, Tenant's lease premises shall be approximately
11,397 rentable square feet.
2. Effective December 1, 1996, Tenant shall no longer be obligated for costs
associated with space previously leased by Tenant on the lower level of the
Building, consisting of approximately 1,720 square feet. However, Tenant shall
remain responsible for all appropriate charges incurred prior to December 1,
1996.
3. Effective December 1, 1996, Tenant agrees to pay, Base Rent for space leased
on the first, third and fourth levels of the Building, consisting of
approximately 11,397 square feet as following:
Period $/Sq.ft. Monthly
Month-to-Month Base Rent Base Rent
12/1/96-2/28/97 $13.00 $12,346.75
3/1/97-2/28/98 $13.50 $12,821.63
3/1/98-2/28/99 $14.00 $13,296.50
3/1/99-11/30/99 $14.50 $13,771.38
4. Effective December 1, 1996, Schedule A-5 shall replace Schedule A-4 and
Tenant's pro rata share of taxes, utilities and insurance will be 37.5%.
Except as modified above, all other terms and conditions of the Lease Agreement
and First, Second, Third and Fourth Addendums To Lease, dated February 22, 1995;
August 18, 1995; November 17, 1995; March 28, 1996 and October 29, 1996
respectively, shall remain unchanged and in full force and effect.
Agreed to by: Agreed to by:
PATIENT INFOSYSTEMS, INC. CONIFER PRINCE STREET ASSOCIATES
formerly DSMI CORPORATION
By: /s/ Gregory D. Brown By: /s/ Thomas L. Fountain
Date: November 30, 1996 Date: November 26, 1996
<PAGE>
SCHEDULE A-4
COMMON AREA MAINTENANCE
ADDITIONAL RENT
UTILITIES
Total Square Footage of Building 30,375
Square Footage Covered by Lease 11,397
Tenant's Share Electric 37.5%
ADDITIONAL RENT
Heating and Air Conditioning
The heat pump units serving the leased premises shall be individually gauged and
the monthly charges shall be calculated as set forth on the attached and further
explained as follows:
1. The heat pump units serving the lease premises shall be identified by model
number.
2. The actual heat pump operating hours will be recorded for each month (column
3) and multiplied by the energy use factor (column 4) applicable to the heat
pump model to establish the total energy units (column 5).
3. The total energy units for all heat pumps is then added to the total
auxiliary usage to establish the grand total usage and energy cost (total KWH)
for the building.
4. The grand total usage and energy cost is multiplied by the utility company's
rate per KWH to establish the total cost for kilowatt hours.
5. The total KWH are divided by the total heat pump usage and charges to
establish the heat pump hourly rate (column 6).
6. The monthly tenant charge is the heat pump hourly rate multiplied by the
total energy units (column 5).
7. Tenant will also pay 37.5% of general usage/common area electric.
ADDITIONAL RENT
Real Estate and Insurance Escalation
In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 37.5% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 37.5% of the increase in property and
liability insurance premiums (payable in February of the following year).
EXHIBIT 10.26
SIXTH ADDENDUM TO LEASE
This Sixth Addendum To Lease is made and entered into the 24th day of November,
1997, between Conifer Prince Street Associates (Landlord) and Patient
Infosystems, Inc. formerly DSMI Corporation (Tenant).
WITNESSETH: that Tenant currently leases and occupies approximately 11,397
square feet of office space at 46 Prince Street, Rochester, New York 14607
pursuant to a Lease Agreement and First, Second, Third, Fourth and Fifth
Addendus To Lease, dated February 22, 1995; August 18, 1995; November 17, 1995;
March 28, 1996; October 29, 1996 and November 30, 1997, respectively.
WHEREAS, Tenant and Landlord desire to expand Tenant's leased premises by Tenant
leasing additional office space, consisting of approximately 1,557 square feet,
on the Building's lower level (Expansion Space).
NOW, THEREFORE, it is mutually agreed upon by Landlord and Tenant to modify
certain provisions of the Lease as follows:
1. Effective February 1, 1998, Tenant's lease premises shall be increased to
include approximately 1,557 rentable square feet of office space located on the
lower level of the Building. Therefore, effective February 1, 1998 Tenant's
leased premises will consist of approximately 12,954 rentable square feet.
2. Tenant agrees to pay, Base Rent for its' leased premises, consisting of
approximately 12,954 square feet as following:
Period Per Sq.ft. Monthly
Month-to-Month Base Rent Base Rent
2/28/98 $13.50 $14,573.26
3/1/98-02/28/99 $14.00 $15,113.00
3/1/99-11/30/99 $14.50 $15,652.76
3. Effective February 1, 1998, Schedule A-6 shall replace Schedule A-4 and
Tenant's pro rata share of taxes, utilities and insurance will be 42.65%.
4. Prior to Tenant's occupancy of the Expansion Space, Landlord shall, at its'
sole cost and expense, complete the Scope of Work, as stated on Exhibit A-6.
Except as modified above, all other terms and conditions of the Lease Agreement
and First, Second, Third, Fourth and Fifth Addendus To Lease, dated February 22,
1995; August 18, 1995; November 17, 1995; March 28, 1996; October 29, 1996 and
November 30, 1997, respectively, shall remain unchanged and in full force and
effect.
Agreed to by: Agreed to by:
PATIENT INFOSYSTEMS, INC. CONIFER PRINCE STREET ASSOCIATES
formerly DSMI CORPORATION
By: /s/ Donald A. Carlberg By: /s/ Thomas L. Fountain
Date: November 24, 1997 Date: November 25, 1997
-------------------------- ---------------------------
<PAGE>
SCHEDULE A-6
COMMON AREA MAINTENANCE
ADDITIONAL RENT
UTILITIES
Total Square Footage of Building 30,375
Square Footage Covered by Lease 12,954
Tenant's Share Electric 42.65%
ADDITIONAL RENT
Heating and Air Conditioning
The heat pump units serving the leased premises shall be individually gauged and
the monthly charges shall be calculated as set forth on the attached and further
explained as follows:
1. The heat pump units serving the lease premises shall be identified by model
number.
2. The actual heat pump operating hours will be recorded for each month (column
3) and multiplied by the energy use factor (column 4) applicable to the heat
pump model to establish the total energy units (column 5).
3. The total energy units for all heat pumps is then added to the total
auxiliary usage to establish the grand total usage and energy cost (total KWH)
for the building.
4. The grand total usage and energy cost is multiplied by the utility company's
rate per KWH to establish the total cost for kilowatt hours.
5. The total KWH are divided by the total heat pump usage and charges to
establish the heat pump hourly rate (column 6).
6. The monthly tenant charge is the heat pump hourly rate multiplied by the
total energy units (column 5).
7. Tenant will also pay 42.65% of general usage/common area electric.
ADDITIONAL RENT
Real Estate and Insurance Escalation
In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 42.65% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 42.65% of the increase in property and
liability insurance premiums (payable in February of the following year).
EXHIBIT 10.27
SUBLEASE AGREEMENT
BETWEEN
MEDECISION, INC.
AND
PATIENT INFOSYSTEMS, INC.
DATED: March 30, 1998
MEDecision, Inc. ("MED") is the tenant under that certain office lease (as
amended from time to time) dated as of August 4, 1995 (the "Lease" attached
hereto as Exhibit A) with EOP - One Devon Square, L.P. as landlord ("Landlord")
respecting a portion of the second floor (the "Leased Space") of the building
commonly known as One Devon Square (the "Building"), situate at 724 West
Lancaster Avenue, Wayne, PA 19087. MED hereby agrees to sublease a portion of
the Leased Space to Patient InfoSystems, Inc. ("Subtenant") and Subtenant hereby
agrees to sublease such space from MED, on the following terms and conditions:
1) The Space:
The subleased space (the "Premises") will consist of a portion of the second
floor consisting of approximately 2,047 rentable square feet as shown on the
attached floor plan entitled Exhibit B.
2) The Term:
The term of the sublease agreement (the "Sublease") shall commence on the
later of June 1, 1998, or upon MED's occupancy of the premises, and shall
terminate at midnight at the close of May 31, 2001 without the requirement
of any further notice thereof by either party to the other, except as may be
provided elsewhere in this Sublease.
3) Sublease Rent:
Sublease rent payable by the Subtenant to MED shall be $3,350.00 per month.
Rent shall be paid monthly in advance of the first of each month, without
demand or set-off.
4) Additional Rent:
Notwithstanding anything contained in the Lease between MED and the Landlord
to the contrary or in the Sublease herein, the Subtenant shall be directly
responsible for the cost of electricity which will be billed to Subtenant
according to paragraph 5.03 of the Lease between MED and Landlord, and for
their proportionate share (according to the formula in paragraph 5.04(a) of
the Lease between MED and Landlord) of increases in the cost of operating
and maintaining the Building during all or part of any calendar year in
which this Sublease is in effect.
5) Improvements:
Subtenant acknowledges that it has inspected the Premises and agrees to accept
the Premises in their present "as-is" condition and any improvements will be at
the sole cost of the Subtenant,
6) Insurance:
Subtenant shall maintain, with MED and Landlord named as additional insured's,
such liability and other insurance as is required to be maintained by MED under
the Lease, with such limits and otherwise in accordance such requirements as are
set forth in the Lease.
Subtenant shall provide a Certificate of Insurance to MED indicating such
coverage.
7) Further Subletting:
Subtenant shall not have the right to further sublease of the Premises.
8) MED Lease:
This Sublease is subject to all of the terms and conditions of the Lease, each
of which is hereby incorporated herein by reference and made a part thereof, and
the parties agree that:
(a) Subtenant shall fully and faithfully perform, with regard to the Premises,
all of the duties and obligations contained in the terms, covenants and
conditions of the Lease to be performed by MED as tenant. Each event of
default set forth in the Lease respecting MED and the Leased Space shall
be equally applicable to Subtenant and the Premises.
(b) MED, in its relations with Subtenant hereunder, shall have all of the
rights and remedies afforded to Landlord in it relations with MED as
tenant as set forth in the Lease. Without limiting the generality of the
foregoing, the consent of MED shall be required for any action of
Subtenant which, pursuant to the Lease, would require consent of Landlord
as to the tenant.
(c) MED is hereby released and relieved of (i) all of the obligations of
Landlord as set forth in the Lease other than any obligation to give
notice prior to exercising its rights and remedies, and (ii) any liability
to Subtenant for any default by Landlord under the Lease or any failure by
landlord to perform any of its obligations thereunder, but MED agrees to
reasonably cooperate with Subtenant, upon the written request of Subtenant
and at Subtenant's sole expense, in enforcing any of such obligations and
causing landlord to perform same; provided, however, that MED shall not be
liable to Subtenant in damages if, after reasonable diligence on the part
of MED, landlord shall fail to perform such obligations.
(d) Subtenant acknowledges that the rights granted to it under this Sublease
agreement are not in any sense greater or broader than the rights
granted to MED as tenant under the Lease.
9) Indemnification:
Subtenant agrees to indemnify and save harmless MED against and from any and all
claims by or on behalf of any person or persons, firm or firms, corporation or
corporations, arising from Subtenant's use of the Premises (or the Leased Space)
or the conduct of its business or from any activity, work or thing done,
permitted or suffered by Subtenant, in or about the Premises (or the Leased
Space), and from any and all claims arising from any breach or default on
Subtenant's part in the performance of any covenant or agreement on Subtenant's
part to be performed pursuant to the terms of this Sublease agreement, or any of
its agents, contractors, servants, employees or licensees.
10) Damage to Property:
Neither MED nor its agents or employees shall be liable for (a) any damages to
property of Subtenant or of others entrusted to employees of Landlord, nor (b)
any injury or damage to persons or property resulting from any cause of
whatsoever nature unless caused by or due to the negligence of MED, its agents,
servants, or employees, nor (c) any damage caused by other tenants or persons in
the building, nor (d) any latent defects in the Premises or in the Building.
11) Effective Date:
This Sublease agreement shall not be effective until it is executed by MED and
Subtenant and approved by Landlord.
12) Time:
Time is of the essence of this Sublease Agreement and of the performance by
Subtenant of each and every term and condition hereof and of each and every term
and condition of the Lease which Subtenant has herein agreed to keep and
perform.
13) Expiration and Termination:
This Sublease Agreement will become null and void unless executed by all parties
on or before April 3, 1998.
After the first twenty-four months of the sublease term has expired, or after
May 31, 2000, Subtenant shall have the right to submit written notice to MED
requesting early termination of the Sublease agreement conditioned upon MED's
need for the Leased Space. MED, in its sole discretion, will determine its need
for the Leased Space at that time. If MED elects to occupy the Leased Space,
Subtenant will be granted early termination and be released from the Sublease
Agreement. If MED decides it does not need additional Leased Space at that time,
MED will so notify Subtenant and Subtenant will continue to be bound by the
terms and conditions of this Sublease agreement for the remainder of the
Sublease term.
MED shall have the right, at any time after the first eighteen months of the
sublease term has expired, or after November 30, 1999, to give six months notice
of termination of this Sublease agreement to Subtenant.
14) Complete Agreement:
This Sublease agreement contains all of the agreements between MED and Subtenant
respecting the subject matter hereof and may not be modified except by written
instrument duly executed by the parties.
The terms and conditions of this Sublease agreement shall extend to and be
binding upon the successors and permitted assigns of MED and Subtenant.
By signing in the spaces provided below, MED and Subtenant agree to the terms
and conditions herein set forth, intending to be legally bound thereby.
TENANT
MEDECISION, INC.
BY: /s/ David St. Claire
ITS:-CEO
SUBTENANT
PATIENT INFOSYSTEMS, INC.
BY: /s/ Donald A Carlberg
ITS: President & CEO
EXHIBIT 10.28
JOINT VENTURE AND STOCKHOLDERS AGREEMENT
AGREEMENT made as of the 12th day of November, 1998, by and among
Maclean Hunter Publishing Limited, an Ontario corporation ("MHPL"), having an
address at 777 Bay Street, Toronto, Ontario and Patient InfoSystems, Inc., a
Delaware corporation ("PATI"), having an address at 46 Prince Street, Rochester,
New York (both of the foregoing are hereinafter sometimes collectively called
"Stockholders", and individually called "Stockholder"); and Patient InfoSYSTEMS
Canada Inc., an Ontario corporation with offices at 777 Bay Street, Toronto,
Ontario (hereinafter sometimes called the "Corporation").
WITNESSETH
WHEREAS, the Stockholders own all of the issued and outstanding common
shares (the "Common Shares") of the Corporation; and
WHEREAS, the Stockholders wish to enter into a joint venture to market
and sell, on an exclusive basis in Canada, products and services developed by
PATI and to jointly manage, finance and operate the Corporation as set forth in
this Agreement; and
WHEREAS, the Stockholders desire to make certain provisions with
reference to their respective stock holdings in the Corporation;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained, and other good and valuable consideration, the parties hereto agree
as follows:
I Definitions
When used in this Agreement, the following words and phrases shall be deemed to
have the following meanings:
(a) "transfer", "dispose" and any other term or terms of similar purpose
shall, without limitation, be deemed to include the making or granting of any
sale, exchange, assignment, gift, pledge, hypothecation, mortgage, security
interest, encumbrance or other transfer or disposition whatsoever, voluntary,
involuntary or by operation of law, affecting title to or the right to the
possession of, any shares of stock of the Corporation or any interest therein.
(b) "Stock", "Shares" and "Shares of Stock" (unless expressly otherwise
stated) shall be deemed to mean all the Common Shares of the Corporation, now
owned or hereafter acquired by the parties hereto or by persons, who may
hereafter become a party or agree to be bound by the terms hereof, irrespective
of the time and manner of such acquisition, including, without limitation, any
shares resulting from a split-up, stock dividend or exchange of any stock.
2 . The Corporation
(a) Election of Directors. The board of directors of the Corporation
(the "Board of Directors") shall consist of four directors and each Stockholder
shall have the right to designate two representatives to the Board of Directors
to serve as a director of the Corporation. In the event any directorship
occupied becomes vacant for any reason, such vacancy shall be filled by the
party having the right to designate such director.
(b) Directors' Proceedings. Unless waived in writing by all the
directors of the Corporation, not less than four Business Days (being a day
which is not a Saturday, Sunday or public holiday in Toronto, Ontario and
Rochester, New York) notice shall be given of all meetings. of the Board of
Directors. A quorum for meetings of the Board of Directors shall be two
directors, including at least one nominee of each Stockholder, in each case
present in person or present by means of such telephone, electronic or other
communications facilities as permit all persons participating in the meeting to
communicate with each other simultaneously and instantaneously (and, for greater
certainty, a meeting of the Board of Directors may be constituted at which some
directors are present in person and other directors are present by means of such
communication facilities), All questions proposed for consideration of the
directors at a meeting of the Board of Directors shall be determined and all
resolutions shall be passed, in order to be effective, by the votes of not less
than a majority of the directors present at such meeting, provided that if one
but not both of the designees of either Stockholder is present at any meeting of
the Board of Directors, the designee of such Stockholder who is present at such
meeting may cast, in addition to his own vote, an additional vote.
(c) Matters reserved to Shareholders. Notwithstanding any statute or
other law to the contrary, none of the following matters shall be carried out or
effected by the Corporation without the prior written approval of both
Stockholders:
(i) any amendments to the articles of incorporation or by-laws of
the Corporation or any amalgamation, arrangement, continuance,
winding up, dissolution, liquidation or reorganization of the
Corporation;
(ii) any issue of Shares or the granting of any option or right
(including convertible securities, warrants, or convertible
obligations of any nature) for the purchase or issuance of any
Shares or other securities of the Corporation, except as
expressly permitted by any other provisions of this Agreement;
(iii) any transfer of Shares of the Corporation by a Stockholder,
except as expressly permitted by any other provisions of this
Agreement;
(iv) any purchase by the Corporation of any of its Shares or any
other return of capital of the Corporation;
(v) any material change in the business of the Corporation from the
Business defined in section 3(b);
(vi) the change in number of directors on the Board of Directors;
(vii) any appointment or removal of the accountants or auditors of the
Corporation;
(viii) the approval of any Budget, or the approval of any material
alteration in any Budget previously approved in accordance
with section 2(g);
(ix) any purchase of any shares or any material assets by the
Corporation, including without limitation any investments in or
purchase of any business by the Corporation, whether directly or
by acquiring the entity through or by which the business is
operated or in any other manner;
(x) any borrowing or financing by the Corporation or the application
for, or obtaining of, any line of credit by the Corporation from
any financial institution or any material alteration in any such
financing arrangements;
(xi) any capital or other expenditures in excess of $10,000 for any single
such expenditure or any leasing of capital equipment
by the Corporation, in each case
unless provided for in a Budget previously approved in accordance
with section 2(g);
(xii) any proposed sale, lease, exchange or other disposition of
property or assets of the Corporation;
(xiii) any assignment, mortgage, charge, pledge, encumbrance of or
grant of any security interest in, property or assets of the
Corporation;
(xiv) any provision of any guarantee, indemnity or other financial
support by or to the Corporation; and
(xv) any transactions between the Corporation and any person not
dealing at arm's length with the Corporation or any of the
Stockholders, except as specifically referred to in any paragraph
of this Agreement or as provided for in a Budget approved in
accordance with section 2(g).
(d) Stockholders' Proceedings. Unless waived in writing by all of the
Stockholders, not less than ten Business Days notice shall be given of any
meeting of the Stockholders. A quorum for meetings of the Stockholders shall
require the attendance of each Stockholder present in person or by proxy.
(e) No Casting Vote. Neither the President of the Corporation or the
chairman of any meeting of the Board of Directors of the Corporation or of the
Shareholders shall by virtue of his office, position or for any other reason be
entitled to any second or casting vote in respect of any matters coming before
such meeting.
(f) Accountants. Until changed in accordance with section 2(c)(vii), the
accountants of the Corporation shall be KPMG.
(g) Annual Budget. Not less than 45 days prior to the commencement of
each fiscal year of the Corporation, the officers of the Corporation shall
prepare and deliver to the Board of Directors and to the Stockholders a proposed
business plan and budget for such fiscal year, which business plan and budget
shall set out in reasonable- detail the projected revenue and proposed
expenditures of the Corporation for such fiscal year. The Board of Directors and
the Stockholders shall meet prior to the commencement of such fiscal year to
consider and approve such business plan and budget, with such amendments or
modifications thereto as the Board of Directors and the Stockholders deem
appropriate (which business plan and budget, as approved, is herein referred to
as a "Budget").
(h) Election of 0fficers Until changed by the Board of Directors, the
following persons shall be elected as officers of the Corporation:
President Allan Cook
Vice President, Finance Timothy L. Root
Secretary/Controller Barbara Angier
(i) Compensation and Duties of President. Allan Cook,- the President of
the Corporation, will continue to be employed on a full-time basis by PATI. Mr.
Cook's compensation will be the sole responsibility of PATI; provided that the
Corporation will reimburse PATI for a pro rata portion of Mr. Cook's base salary
for a year based on the percentage of Mr. Cook's time spent on the affairs of
the Corporation in such year, but in no event shall MHPL be required to
reimburse PATI for an amount in respect of Mr. Cook's salary in excess of the
amount specified in the Budget approved in accordance with Section 2(g) for such
year. In providing his services as President of the Corporation, Mr. Cook will
perform such duties for the Corporation and its subsidiaries as may from time to
time be assigned to him by the Board of Directors and he will devote the time
necessary and exercise the power and authority to fulfil the responsibilities
conferred upon him, honestly, diligently, in good faith and in the best interest
of the Corporation and its subsidiaries. For so long as this Agreement is in
effect, Mr. Cook agrees that any business opportunity or proposal originated or
offered to Mr. Cook that could reasonably be considered related to the Business
of the Corporation shall constitute and be considered property of the
Corporation and shall be referred to and brought to the attention of the Board
of Directors of the Corporation at the earliest possible opportunity. Mr. Cook
covenants and agrees that in addition to any and all terms of this Agreement, he
shall fulfil all fiduciary obligations that he owes to the Corporation by virtue
of his position with the Corporation and that the duty to fulfil all such
obligations shall survive the termination of his tenure as President and such
termination of his tenure shall not operate as a waiver or release of any such
duty.
3 . Covenants
(a) Disclosure of Trade Secrets. During the term of this Agreement and
thereafter, each Stockholder will not, except as properly required in conducting
the Business of the Corporation, disclose or utilize, or authorize or cause
anyone else to disclose or utilize for the profit of anyone other than the
Corporation, any trade secret or confidential information, knowledge or data of
the Corporation of which it has knowledge, including, without limitation, any
customer lists not made public by the Corporation.
(b) Covenant Not to Compete Each Stockholder covenants and
agrees with the Corporation and the other Stockholder that it will not during
the term of this Agreement and for so
long as it owns Stock (the "Term') directly or indirectly own, manage, operate,
control, finance or otherwise be interested or participate in the ownership,
management, operation or control of any person, corporation or other entity or,
sell or produce products in Canada which are directly competitive with the
Business of the Corporation. Each of the Stockholders hereby acknowledges that
the provisions of this subparagraph 3(b) shall serve as a prohibition against
directly or indirectly hiring, offering to hire, enticing away or in any way
persuading or attempting to persuade any officers, employees, agents or,
customers or prospective customers of the Corporation to discontinue or alter
his or its relationship with the Corporation during the Term. For the purposes
hereof, the "Business" of the Corporation shall mean the business carried on by
the Corporation consisting of the provision to patients and health care
providers in Canada of patient-directed health care information systems and
services to manage, collect and analyze information to improve patient
compliance with prescribed treatment protocols, to improve the process of
off-site management and to enhance patient and provider information.
Notwithstanding the foregoing, neither Stockholder shall be precluded from:
(i) carrying on any business currently carried on by such Stockholder or
any successor to such business or from continuing to publish any publication
currently published by such Stockholder, or successor to any such publication;
(ii) acquiring securities of a class which are traded on a stock exchange
or over the counter as long as such securities represent not more than_20% of
the issued. and outstanding securities of such class; or
(iii) acquiring an interest in a business, either through the acquisition
of shares, assets or otherwise, where the acquired business (the "Acquired
Business") contains, as a part hereof, a business (the "Competing Segment"), the
operation of which would cause the Stockholder to be in breach of the provisions
of this section 3, providedthat this exception shall only apply so long as the
following conditions are applicable: (A) the Competing Segment did not, in the
financial year preceding the acquisition by Stockholder or in any subsequent
financial year, account for 40% or more of the revenue of the Acquired Business;
and (B) if the Competing Segment did, in the financial year preceding the
acquisition by the Stockholder or in any subsequent financial year, account for
10% or more of the revenues of the Acquired Business, the Stockholder uses its
reasonable efforts to dispose of the Competing Segment to a third party on
normal commercial terms within a reasonable period of time following such
acquisition or following such subsequent financial year, as the case may
(c) Further Assurances. The parties hereto covenant and agree to do or
cause to be done all acts and things, whether by the Board of Directors or
otherwise, to execute and deliver or cause to be executed and delivered all such
instruments and to exercise or cause to be exercised any and all voting rights
attaching to the Common Shares of the Corporation held by each of them in order
that all provisions of this Agreement shall be fully and effectively carried
out, implemented and given effect to in accordance with the term hereof.
4 . Stock of the Corporation
(a) Ownership of Stock. The parties acknowledge and agree that as of the
date hereof there are 100 Common Shares issued and outstanding (and no more),
which are owned as follows:
Stockholder No. of Common Shares Owned
Maclean Hunter Publishing Limited 50
Patient InfoSystems, Inc. 50
The Stockholders represent and warrant that they are the legal and beneficial
owners of such Stock and hold such Stock free and clear of all liens, security
interests, claims or encumbrances whatsoever.
(b) Restrictions on Transfer of Stock. Except as provided in this
Agreement, no Stockholder shall transfer or dispose of any of the Stock of the
Corporation now or hereafter owned or held by it without the prior written
consent of the other Stockholder. Any attempted or purported transfer of Stock
by any Stockholder in violation of the terms of this Agreement shall be void and
the Corporation shall reject and refuse to transfer on the books any Stock which
may have been transferred in violation of the provisions of this Agreement, and
the Corporation shall not recognize any person receiving any Stock as a
Stockholder nor shall any such person have any rights as a Stockholder of the
Corporation. Notwithstanding the foregoing, either Stockholder shall be entitled
to, without the consent of the other Stockholder, transfer all (but not less
than all) of the Stock owned by such Stockholder to an affiliate (as defined in
the Business Corporations Act (Ontario)) of such Stockholder; provided that such
affiliate agrees in writing to be bound by the terms of this Agreement and
further provided that notwithstanding such transfer, the transferring
Stockholder shall continue to be bound by the terms of this Agreement.
(c) Negotiated Sale. If, at any time following the second anniversary of
the date of this Agreement, either Stockholder shall desire to transfer all (but
not part) of its Stock to the other Stockholder, the Stockholder desiring to
transfer ("Selling Stockholder") shall give written notice ("Selling
Stockholder's Notice") to the Corporation and the remaining Stockholder of the
Corporation ("Purchasing Stockholder"), stating that the Selling Stockholder
desires to transfer all of the Stock owned by it to the Purchasing Stockholder.
Following the delivery of a Selling Stockholder's Notice, the Selling
Stockholder and the Purchasing Stockholder shall, in good faith,conduct
negotiations with a view to agreeing upon the terms of the sale of the Stock of
the Selling Stockholder to the Purchasing Stockholder including the price, which
the parties agree shall be based on the fair market value of such Stock at the
time of delivery of the Selling Stockholder's Notice and the terms of any
ongoing services to be provided by the Selling Stockholder to the Corporation
following such sale. The Selling-Stockholder and the Purchasing Stockholder
shall also, in good faith, consider alternative methods by which the Selling
Stockholder may dispose of its interest in the Corporation, including by way of
the wind up and dissolution of the Corporation as contemplated by paragraph 7
and by way of the sale of all of the Stock of the Selling Stockholder only or of
both the Selling Stockholder and the Purchasing Stockholder or of the property
and assets of the Corporation to a third party. If the Selling Stockholder and
the Purchasing Stockholder are unable, following such good faith negotiations,
to reach an agreement for the sale of the Selling Stockholder's Stock to the
Purchasing Stockholder or an agreement as to an alternative manner in which the
Selling Stockholder may dispose of its interest in the Corporation within 60
days following the delivery of the Selling Stockholder's Notice, the Selling
Stockholder and the Purchasing Stockholder shall continue as Stockholders, shall
not be required to continue to negotiate and the terms of this Agreement shall
continue in full force and effect. MHPL and PATI agree that neither one of them
shall be permitted to deliver a Selling Stockholder's Notice until after 180
days following the delivery of a previous Selling Stockholder's Notice.
5 . Legend on Certificate
There shall be endorsed upon the Certificate of Stock of the Corporation
heretofore or hereafter issued to the Stockholders or to any other person
acquiring Stock pursuant to this Agreement, an endorsement reading as follows:
"The sale, transfer, pledge, assignment granting of a security interest
in, or other disposition or encumbrance of all shares represented by
this Certificate are subject to the terms and conditions of a certain
Agreement entered into between this Corporation and all of its
Stockholders as of the 12th day of November, 1998, for the purposes
therein provided, and any owner hereof is subject to the obligations
therein set forth and contained."
6 . Contributions of the Stockholders
(a) Each of the Stockholders agrees to make the following contribution to the
Corporation of materials, services and facilities:
(A) Contributions by PATI.
(i) PATI agrees to provide to the Corporation on an
exclusive basis within Canada all products and services offered
by PATI throughout the world for use by the Corporation in the
conduct of its Business. The fees and costs to be charged by PATI
for such products and services shall be at a discount from the
lowest costs and fees charged by PATI for such products and
services to any of its third party customers, with the amount of
such discount in each particular case to be as agreed to between
MHPL and PATI, acting reasonably.
(ii) PATI will provide all product, services, hardware,
software, and support (the "Products") necessary to operate
programs sold to the Corporation by PATI. PATI will be
responsible for all such Products, including the content thereof
and will indemnifyand hold harmless MHPL and the Corporation from
any claim or loss suffered by MHPL or the Corporation relating to
such Products or the content thereof.
(iii) PATI will provide on an ongoing basis, at no charge to the
Corporation, training and marketing expertise as needed by the Corporation.
(iv) PATI agrees to offer to the Corporation, on an exclusive basis
within Canada, all products and services developed by PATI for which it has the
right under development agreements, to the extent appropriate, to offer such
rights to the Corporation. If any such products or services are not accepted by
the Corporation, PATI shall be free to offer and sell any such products and
services to any third parties. The fees and costs to be charged by PATI for such
products and services shall be at a discount from the lowest costs and fees
charged by PATI for such products and services to any of its third party
customers, with the amount of such discount in each particular case to be as
agreed to between MHPL and PATI, acting reasonably.
(v) PATI, at its own cost and expense, agrees to support the development
of new products and services unique to the Canadian market.
(vi) PATI agrees to provide such capital contributions as are agreed to
by the Board of Directors and contemplated by a Budget approved in accordance
with section 2(g) hereof with such capital contributions to be equal to the
capital contributions of MHPL.
(B) Contributions to the Corporation by MHPL.
(i) MHPL will provide sales, sales support and marketing services to the
Corporation through its Customer Communications Division. All commission payment
rates and other payments to be charged by MHPL for such services shall be at a
discount from the lowest rates charged by MHPL for such services to any of its
third party customers, with the amount of such discount in each particular case
to be as agreed to between MHPL and PATI, acting reasonably.
(ii) MHPL will provide to the Corporation all required infrastructure
support for the Corporation, including, but not limited to, occupancy,
telephone, secretarial, accounting, billing, collection, reporting, cash
management, tax and regulatory requirements. The costs payable by the
Corporation for such support shall be $20,000 for the initial year of this
Agreement, and for subsequent years, shall be such amount as is provided in a
Budget for such year approved in accordance with section 2(g) hereof.
(iii) MHPL will generate content for use by the Corporation. The fees to
be charged by MHPL for such content hall be at a discount from the lowest fees
charged by MHPL for such content to any of its third party customers, with the
amount of such discount in each particular case to be as agreed to between MHPL
and PATI, acting reasonably. MHPL will be responsible for all such content, and
will indemnify and hold harmless PATI and the Corporation from any claim or loss
suffered by PATI or the Corporation relating to such content.
(iv) MHPL agrees to use its reasonable best efforts to identify
opportunities for the Corporation to develop new products and services using
technology of PATI that could be unique to the Canadian market. Where such
products and services are sold outside Canada by PATI or its affiliates, PATI
agrees to pay to the Corporation a royalty to be agreed upon at the time of such
offer and sale by the Corporation and PATI, acting reasonably.
(v) MHPL agrees to provide such capital contributions as are agreed to by
the Board of Directors and contemplated by a Budget approved in
accordance with section 2(g) hereof with such capital contributions to
be equal to the capital contributions of PATI.
(b) Equity Option
PATI hereby grants to MHPL an irrevocable option (the "Option") to acquire
200,000 shares of Common Stock of PATI (the "Option Shares") at an exercise
price of $3.50 per share exercisable over a period of five years. The
parties acknowledge that the Option Shares represent 2.5% of the issued and
outstanding shares of PATI on the date hereof. PATI agrees that if after
the date hereof, it completes a reconstruction or reorganization or
recapitalization of PATI or if PATI amalgamates into or with another
corporation or if it completes a redivision, consolidation,
reclassification, subdivision or other change of the common stock of PATI
(the "Reorganization"), the Option shall, without further act or formality,
be deemed to be amended in order to provide to MHPL upon exercise with the
same number and class of securities as would have been received by MHPL if
the Option had been exercised immediately prior to such Reorganization.
Upon the termination of this Agreement, MHPL may exercise the Option at any
time during the period of 30 days following the termination of this
Agreement provided that at the end of such 30 day period, the unexercised
portion of the Option shall expire. PATI shall forthwith after the date
hereof deliver to MHPL an option agreement reflecting the foregoing terms
of the Option and shall obtain all necessary regulatory approvals to the
granting of the Option, and shall arrange for the listing of the Option
Shares on the applicable exchange.
7 . Duration of Agreement
This Agreement shall remain in full force and effect for as long as both of
the Stockholders own Stock of the Corporation and the Corporation is
actively engaged in the Business; provided that: (a) if both Stockholders
agree in writing, the Corporation may at any time be dissolved and its
business and assets liquidated in an orderly wind-up of the affairs of the
Corporation, with all benefits or costs to be shared equally, and this
Agreement shall terminate effective upon such dissolution; and (b) at any
time after the second anniversary of the date of this Agreement, either
Stockholder (the "Electing Stockholder") may, by delivery of written notice
to the Corporation and to the other Stockholder, elect to surrender its
Stock to the Corporation for cancellation, and upon receipt of such notice
and the certificate of the Electing Stockholder representing the Stock, the
Corporation shall forthwith distribute to the Stockholders by way of
dividend the balance of the retained earnings of the Corporation and both
parties shall be released from their obligations under this Agreement.
8 . Miscellaneous Provisions
(a) All prior agreements with regard to the shares of Stock are hereby
cancelled.
(b) The captions of the various paragraphs herein are inserted only for
reference and for the convenience of the parties, and in no way define, limit or
describe the scope of this Agreement, nor the intent of any of the provisions
thereof.
(c) This Agreement is made under, and shall be governed by the laws of
the Province of Ontario in all respects, including matters of construction,
validity and performance.
(d) This Agreement cannot be changed or terminated orally. A waiver in
one instance shall not be effective unless it is in writing and shall not be
deemed a continuing waiver.
(e) This Agreement and the confidentiality agreement between the parties
hereto constitute the entire Agreement between the parties.
(f) All pronouns and words shall be read in appropriate number and
gender, the
masculine, feminine and neuter shall be interpreted interchangeably and the
singular shall include the plural and vice versa, as the circumstances may
require.
9 . Notice
Any notice permitted to be given pursuant to this Agreement shall
be in writing addressed as follows, and given by prepaid private courier or
otherwise hand delivered or sent by telecopier or other similar means of
electronic communication:
If to MHPL or the Corporation:
Maclean Hunter Publishing Limited
Maclean Hunter Building
777 Bay Street
Toronto, Ontario
M5W IA7
Attention: Mr. James 0. Hall, Vice-President
Telecopier: (416) 596-5901
and
Attention: Mr. Timothy L. Root, Vice President, Finance
Telecopier-. (416) 593-3175
with a copy to:
Rogers Communications Inc.
333 Bloor Street
10th Floor
Toronto, Ontario
M4W I G9
Attention: Mr. David P. Miller
Vice-President, General Counsel
Telecopier: (416) 935-3546
If to PATI or Allan Cook:
46 Prince Street
Rochester, New York 14607
Attention: Mr. Allan Cook and Mr. Don Carlberg
Telecopier: (716) 244-1367
with a copy to:
Gibbons, DelDeo, Dolan, Giffinger and Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Mr. Jeffrey A. Baumel
Telecopier: (973) 639-6260
Any notice given in accordance with the provisions of this section 9 shall be
deemed to have been given and received when so delivered or if sent by
telecopier or other electronic means of communication, on the day of
transmission thereof if given on a Business Day and during the normal business
hours of the recipient and if not so given, on the next Business Day. Any party
hereto may change its address for notice by notice to the other parties in the
manner as aforesaid.
10. Extent Obligations
This Agreement shall be binding, not only upon the parties hereto, but also
upon their successors and permitted assigns, and they severally agree to execute
any instrument in writing which shall be necessary or proper in carrying out the
purposes and intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
Maclean Hunter Publishing Limited
Per: /s/ Timothy Root
Per: /s/ Jim Hall
Patient InfoSystems, Inc.
Per: /s/ Don A Carlberg
Per: /s/ Kent A Tapper
Patient InfoSYSTEMS Canada Inc.
Per: /s/ Jim Hall
Per: /s/ Allan Cook
The provisions of section 2(i) are hereby accepted and agreed to as of the
12th day of November, 1998.
/s/ Allan Cook /s/ Marc Thibideau
-------------- --------------------
Allan Cook Witness
EXHIBIT 10.29
BASIC LEASE INFORMATION
OFFICE LEASE
Lease Date: October 7, 1998
Landlord: Parker Associates
Address of Landlord: 2560 Ninth Street, Suite 117
Berkeley, California 94710
Tenant: Patient Infosystems
Address of Tenant: Suite 220
@ Parker Plaza
Contact: James Martin Telephone: 883-2160 x134
Premises: Suite 110 in Parker Plaza
2560 Ninth Street
Berkeley, California
Scheduled Term Commencement Date: October 26, 1998
Scheduled Length of Term: 1 year
Scheduled Term Expiration Date: October 25, 1999
Rent:
Base Rent $4,200.00 /month
Estimated $ /month
Basic Operating Costs. $ /month
Total Rent $_____________/month
Security Deposit and Last Month's Rent: $6300.00
Tenant's Proportionate Share:
Permitted Use: General Office
Occupancy Density: N/A
The foregoing Basic Lease Information it Incorporated Into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above set forth and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease the latter shall control.
LANDLORD: Parker Associates TENANT
Patient Infosystems
By: /s/ Michael Haimovitz By: /s/ Donald A Carlberg
Its General Partner Its C.E.O.
Date: 10/19/98 Date: 10/12/98
forth in any statement provided by landlord under paragraph 29(C) above. Tenant
shall have the right not later than (20) days following the receipt of such
statement, and upon condition that Tenant shall first deposit with Landlord the
full amount in dispute, to cause Landlord's books and records with respect to
such calendar year to be audited by certified public accountants selected by
Tenant subject to Landlord's reasonable right of approval. The Basic Operating
Cost Adjustment shall be appropriately adjusted on the basis of such audit. If
such audit discloses a liability for a refund or credit by Landlord to Tenant in
excess of (10%) of Tenant's Proportionate Share of the Basic Operating Cost
Adjustment previously reported, the cost of such audit shall be borne by
Landlord. Otherwise the cost of such audit shall be paid by Tenant, if Tenant
shall not request an audit In accordance with the provisions of this paragraph
29(e) within twenty (20) days of receipt of Landlord's statement provided
pursuant to paragraph 29(d), such statement shall be final and binding for all
purposes hereof,
(a) Tenant shall pay before delinquency any and all taxes levied or assessed and
which become payable by Landlord (or Tenant) during the Term of this Lease.
whether or not now customary or within the contemplation of the parties hereto,
which are based upon, measured by or otherwise calculated with respect to: (a)
the value of Tenant's equipment, furniture, fixtures or other personal property
located in the Premises: (b) the value of any leasehold improvements,
alterations, or additions made in or to the Premises, regardless of whether
title to such improvements, alterations or additions shall be in Tenant or
Landlord: or (c) this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises.
(b) In the event that it shall not be lawful for Tenant so to reimburse
Landlord, the Rent shall be revised to net Landlord the same net rent after
imposition of any such tax upon Landlord as would-have been payable to Landlord
prior to the imposition of any such tax. All taxes payable by Tenant under this
Paragraph 30 shall be additional rental.
31.Subject to the provisions of paragraph 10 hereof, the terms, covenants and
conditions contained herein shall be binding upon and inure to the benefit of
the heirs, successors, executors. administrators and assigns of the parties
hereto.
32.In the event that any action or proceeding is brought to enforce any term,
covenant or condition of this Lease on the part of Landlord or Tenant, the
prevailing party in such litigation shall be entitled to reasonable
attorneys' fees to be fixed by the court in such action or proceeding.
33. No diminution of light, air or view by any structure which mayhereafter be
erected @whether or not by Landlord) shall entitle Tenant to any reduction of
Rent, result in any liability of Landlord to Tenant. or in any other way affect
this Lease or Tenant's obligations hereunder.
34.Tenant shall establish and maintain during the Term hereof a program to
encourage maximum use of public transportation by personnel of Tenant employed
on the Promises, Including without limitation the distribution to such employees
of written materials explaining the convenience and availability of public
transportation facilities adjacent or proximate to the Building, staggering
working hours of employees, and encouraging use of such facilities, all at
Tenant's sole reasonable cost and expense.
35.(a) The term "Premises" shall be deemed to include (except where such meaning
would be clearly repugnant to the context) the off ice space demised and
improvements now or at any time hereinafter comprising or built in the space
hereby demised.
(b) The paragraph headings herein are for convenience of reference and shall in
no way define, increase, limit or describe the scope or intent of any provision
of this Lease,
(C) The term "Landlord" in these presents shall include the Landlord, its
successors and assigns. In any case where this Lease is signed by more than one
person, the obligations hereunder shall be joint and several.
(d) The term "Tenant" or any pronoun used in place thereof shall indicate and
include the masculine or feminine, the singular or plural number, individuals,
firms or corporations. and their and each of their respective successors,
executors, administrators and permitted assigns, according to the context
thereof.
(e) Time is of the essence of this Lease and all of its
provisions, (f) This Lease shall in all respects be governed by
the laws of the State of California. (g) This Lease, together
with its exhibits, contains all the agreements of the parties
hereto and supersedes any previous negotiations. (h) There have
been no representations made by the Landlord or understandings
made between the parties other than those set forth in this Lease
and its exhibits (1) This Lease may not be modified except by a
written instrument by the parties hereto. (j) If for any reason
whatsoever any of the provisions hereof shall be unenforceable or
ineffective, all of the other provisions shall be and remain in
full force and effect. (k)
36. Submission of this instrument for examination or signature by Tenant does
not constitute a reservation or option for lease, and it is not effective as a
lease or otherwise until execution and delivery by both Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year
first above written.
"LANDLORD"
Parker Associates
Date 10/19/98 By: /s/ Michael Haimovitz
Its: General Partner
"TENANT"
Patient Infosystems
Date 10/12/98 By: /s/ Donald A Carlberg
Its: C.E.O.
EXHIBIT 11
Statement of Computation of Per Share Earnings.
<TABLE>
<CAPTION>
PATIENT INFOSYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Loss .......................................................................... $(4,829,467) $(3,263,351) $(2,806,436)
Weighted average Common Stock outstanding ......................................... 8,018,398 7,980,094 3,678,435
Weighted average Series A Convertible Preferred
Stock outstanding .............................................................. -- -- 1,296,000
Weighted average Series B Convertible Preferred
Stock outstanding .............................................................. -- -- 437,500
Series B Convertible Preferred Stock issued May and
June 1996, calculated using the treasury stock method .......................... -- -- 177,365
Dilutive effect of stock options granted in the preceding
preceding twelve months, calculated using
the treasury stock method ....................................................... -- -- 758,416
--------- --------- ---------
Weighted average common and potential common shares ............................... 8,018,398 7,980,094 6,347,716
========= ========= =========
Net Loss per share - Basic and Diluted ............................................ $ (0.60) $ (0.41) $ (0.44)
=========== =========== ===========
</TABLE>
EXHIBIT 21
Subsidiaries
Name Jurisdicition of Organization Trade Name
- ---- ----------------------------- ----------
Patient Infosystems
Acquisition Corp. Delaware HealthDesk
Patient Infosystems Patient Infosystems
Canada, Inc. Ontario, Canada Canada, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001017813
<NAME> PATIENT INFOSYSTEMS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,316,955
<SECURITIES> 1,029,674
<RECEIVABLES> 1,370,626
<ALLOWANCES> (50,000)
<INVENTORY> 0
<CURRENT-ASSETS> 8,887,233
<PP&E> 2,050,001
<DEPRECIATION> 867,507
<TOTAL-ASSETS> 10,519,727
<CURRENT-LIABILITIES> 894,339
<BONDS> 0
0
0
<COMMON> 80,200
<OTHER-SE> 21,561,094
<TOTAL-LIABILITY-AND-EQUITY> 9,625,388
<SALES> 2,344,072
<TOTAL-REVENUES> 2,344,072
<CGS> 2,529,619
<TOTAL-COSTS> 7,686,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,785,766)
<INCOME-TAX> 43,701
<INCOME-CONTINUING> (4,829,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,829,467)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
