<PAGE>
As filed with the Securities and Exchange Commission on October 7, 1997
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CERTIFIED DIABETIC SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 8099 65-0765452
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1951 J&C Boulevard
Naples, Florida 34109
(941) 591-1061
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Peter J. Fiscina
President and Principal Executive Officer
Certified Diabetic Services, Inc.
1951 J&C Boulevard
Naples, Florida 34109
(941) 591-1061
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all correspondence to:
Stephan J. Mallenbaum, Esq. Robert S. Matlin, Esq.
Jonathan H. Spanbock, Esq. William N. Haddad, Esq.
Bryan Cave LLP Camhy Karlinsky & Stein LLP
245 Park Avenue 1740 Broadway
New York, New York 10167 New York, New York 10019
(212) 692-1800 (212) 977-6600
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
===============================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed
Proposed Maximum
Maximum Aggregate
Title of Each Class of Securities to be Amount to be Offering Price Per Offering Amount of
Registered Registered Share(2) Price(2) Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value(1) ............ 575,000 $ 6.50 $3,737,500 $1,132.46
- -------------------------------------------------------------------------------------------------------------------------
Representative's Warrants, each to purchase
one share of Common Stock, par value $.01 ... 50,000 $ .0001 $5 (3)
- -------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 ............... 50,000(4) $ 7.80 $ 390,000 $ 118.17
- -------------------------------------------------------------------------------------------------------------------------
Total ....................................................................................... $1,250.63
========================================================================================================================
</TABLE>
(1) Includes 75,000 shares of Common Stock issuable upon exercise of an
over-allotment option granted to the Underwriters. See "Underwriting."
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(3) None pursuant to Rule 457(g).
(4) This Common Stock is issuable upon exercise of the Representative's
Warrants and is identical to that offered to the public hereunder.
Pursuant to Rule 416 under the Securities Act, this Registration Statement
also covers such indeterminate number of shares of Common Stock as may be
issuable by reason of the anti-dilution provisions contained therein.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to completion, dated October 7, 1997
500,000 Shares
[LOGO]
CERTIFIED DIABETIC SERVICES, INC.
Common Stock
This Prospectus relates to an offering (the "Offering") of 500,000 shares
of Common Stock, par value $.01 per share (the "Common Stock") by Certified
Diabetic Services, Inc., a Delaware corporation ("Certified" or, individually
or with one or more of its operating subsidiaries and/or their predecessor
corporations, the "Company"). See "Description of the Securities." Prior to
this Offering, shares of the Common Stock have been traded, and the price of
such shares has been quoted, pursuant to Rule 15c2-11 of the Securities
Exchange Act of 1934, as amended, on the "OTC Electronic Bulletin Board" of the
National Association of Securities Dealers, Inc. ("NASD") under the symbol
CDSP. On October 1, 1997, the last reported sale price of the Common Stock on
the OTC Electronic Bulletin Board was $7.00 per share. It is anticipated that
the initial public offering price of the Common Stock will be between $5.50 and
$6.50 per share. The Company has filed an application for the Common Stock to
be quoted on the NASDAQ SmallCap Market ("NASDAQ SmallCap") under the symbol
"CDSP." There can be no assurance that the application will be accepted.
---------------------
These securities are highly speculative and involve a high degree of risk
and immediate and substantial dilution. See "Risk Factors" beginning on page 7
and "Dilution" on page 18.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
===============================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------
Per Share ...... $______ $______ $______
- -------------------------------------------------------------------------------
Total (3) ...... $______ $______ $______
===============================================================================
(1) Excludes (i) additional compensation payable to Jesup & Lamont Securities
Corporation as representative (the "Representative") of the several
underwriters (the "Underwriters") in the form of a non-accountable expense
allowance equal to 3% of the gross proceeds of this Offering, and (ii) the
value of five year warrants (the "Representative's Warrants") to purchase
up to an aggregate of 50,000 shares of Common Stock at an exercise price
of $______ per share (120% of the Price to the Public of the Common
Stock). The Company has also agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting offering expenses payable by the Company, estimated at
$__________, excluding the non-accountable expense allowance payable to
the Representative.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 75,000 shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $__________, $__________ and $___________, respectively.
See "Underwriting."
The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify the Offering or to reject any orders in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
against payment therefor at the offices of Jesup & Lamont Securities
Corporation, New York, New York on or about ____________, 1997.
---------------------
Jesup & Lamont Securities Corporation
The date of this Prospectus is _________, 1997
<PAGE>
Picture Summaries
1. Pictures of products sold by three major manufacturers.
The Company intends to furnish its stockholders with annual reports containing
audited financial statements, quarterly reports containing unaudited interim
financial information for the first three quarters of each fiscal year of the
Company, and such other periodic reports as the Company deems appropriate or as
may be required by law.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS ON
THE NASDAQ SMALLCAP MARKET OR OTHERWISE, WHICH STABILIZE, MAINTAIN OR OTHERWISE
AFFECT THE MARKET PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY
OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR AND PURCHASE SHARES
OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
This discussion contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as they
relate to the Company or its management are intended to identify such forward
looking statements. The Company's actual results, performance or achievements
could differ materially from those expressed in, or implied by, these
forward-looking statements as a result of, among other things, the factors set
forth in the section entitled "Risk Factors."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and must be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its entirety.
The Company
Certified Diabetic Services, Inc. ("Certified" or, individually or with
one or more of its operating subsidiaries and/or their predecessor
corporations, the "Company") markets and sells by mail order products and
services for diabetic retail customers throughout the United States. These
products include home blood glucose monitors ("meters"), test strips, control
solution, lancets and lancing devices (the meters and such other products
referred to, collectively, as "test products") used for testing the blood sugar
levels of diabetics, as well as insulin and syringes. The Company's sales
revenues are primarily generated from reimbursements by Medicare and private
insurance carriers on behalf of the diabetic retail customers. As of September
17, 1997, the Company estimates that it had in excess of 7,500 active customers
(a customer generally being considered active if he or she has placed and paid
for orders in the last 90 days).
Persons suffering from diabetes, a chronic disease for which no cure
presently exists, must manage their disease by maintaining their blood sugar
levels as close to normal as possible. Blood testing permits diabetics to
monitor their blood sugar levels on a regular basis so that other treatment
steps, particularly the use of insulin and/or other medication, can be
administered effectively, in the appropriate dosages and at the appropriate
time intervals. Diabetics generally test their blood one to three times per
day, every day, from the time of diagnosis for the duration of their lives. The
Centers for Disease Control and Prevention (the "CDC") estimates that, as of
1995, 16,000,000 Americans had diabetes, of whom approximately 8,000,000 had
actually been diagnosed as suffering from the disease. The CDC estimates that
of these diagnosed diabetics, up to 10%, or 800,000 Americans, suffer from Type
I insulin dependent diabetes ("IDDM") and require daily injections of insulin.
The remaining number of diabetics suffer from Type II non-insulin dependent
diabetes ("NIDDM"). Current estimates are that more than 600,000 new cases of
diabetes are diagnosed annually in the United States.
The Company is developing its business in order to capitalize on the
continuing regulatory and marketplace changes occurring in the healthcare
industry and the opportunities presented thereby. Since inception, the Company
has primarily focused on obtaining individual IDDM customers, covered by
Medicare and private insurance. These customers have been generated through a
nationwide targeted advertising and marketing program. Presently the Company
receives approximately 60% of its sales revenues from Medicare reimbursement
and substantially all of its remaining sales revenues from private insurance
reimbursement.
The Company has recently adopted a new business strategy which emphasizes
capturing large numbers of additional customers by negotiating contracts with
preferred provider organizations ("PPOs"), third party health plan
administrators ("TPAs"), self-insured plans, managed care programs and other
similar groups (all referred to, collectively, as "Groups") to provide diabetic
test products to their participants. In addition to increasing substantially
its active customer base through such provider contracts, the sale of products
to Group participants is more profitable because the Groups are self-insured or
employ private insurance carriers which provide higher reimbursement rates for
test products than that provided by Medicare. In order to promote its efforts
to enter into provider contracts with Groups, the Company has engaged two
senior executives with extensive experience and relationships in the healthcare
industry. These executives will direct and coordinate the Company's efforts to
enter into such provider contracts, pursuant to which the Company would be
listed as a provider of test products and supplies for diabetics, and
participants in the contracting Groups would be informed of, or have access to
information about, the Company's products and services. Recently, the Company
entered into provider contracts with a leading PPO and a large TPA.
Participants in these Groups are not yet customers of the Company.
3
<PAGE>
The Company is also modifying its advertising and marketing program
targeted at individuals, and positioning itself to capture substantial numbers
of additional customers who are non-insulin dependent. Effective July 1, 1998,
sales of test products to such NIDDMs become eligible for Medicare
reimbursement in accordance with a provision (the "NIDDM Provision") of the
Balanced Budget Act of 1997 (the "Balanced Budget Act") which was recently
signed into law by President Clinton. Whereas, previously, Medicare only
provided reimbursement for IDDM customers, the NIDDM Provision expands coverage
to all diabetics.
In order to increase the number of customers and to service the
anticipated growth in customers from contracting with Groups and the impact of
the NIDDM Provision, the Company is expanding its facilities and its staff. It
is anticipated that the proceeds of the Offering will help support this
expansion.
The Offering
<TABLE>
<S> <C>
Common Stock offered by the Company ...... 500,000 shares.
Common Stock outstanding before the
Offering .............................. 10,825,000 shares.
Common Stock to be outstanding after the
Offering(1) ........................... 11,325,000 shares.
Use of Proceeds by the Company ......... Repayment of indebtedness; working capital and
general corporate purposes including capital
expenditures (such as purchase and installation of
telecommunications, information and other sys-
tems).
Risk Factors and Dilution ............... The purchase of shares of Common Stock offered
hereby involves a high degree of risk and imme-
diate and substantial dilution. Prospective inves-
tors should review and carefully consider the
information set forth under "Risk Factors" and
"Dilution."
Current NASD Trading Symbol(2) ......... CDIP
Proposed NASDAQ Symbol .................. CDSP
</TABLE>
- ------------
(1) Assumes no exercise of the Representative's over-allotment option. See
"Underwriting." Excludes 8,000,000 shares of Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan (the "Plan"), of which
options to purchase 6,550,000 shares have been granted as of September 15,
1997. Also excludes 50,000 shares of Common Stock issuable upon exercise
of the Representative's Warrants. See "Management -- Benefit Plans,"
"Description of Capital Stock" and "Underwriting."
(2) The NASD has assigned the trading symbol CDIP to Certified. However, the
Common Stock has been traded, and the price of such shares has been quoted
on the OTC Electronic Bulletin Board, under the symbol CDSP which was
assigned to the Company's predecessor corporation, Certified Diabetic
Supplies Inc., a Florida corporation. (See "The Company").
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(in thousands, except per share data)
The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus. Such information
should be read in conjunction with such financial statements, including the
notes thereto.
Statement of Income Data:
<TABLE>
<CAPTION>
For the For the
Period from Period from
Nine-Month September September
Period 28, 1995 28, 1995
Ended (Inception) to (Inception) to
July 31, 1997 July 31, 1996 October 31, 1996
--------------- ---------------- -----------------
<S> <C> <C> <C>
Net sales ........................... $ 4,523 $ 1,622 $ 2,588
Net income ........................... 575 36 62
Net income per share
Primary ........................... 0.04 0.00 0.01
Fully diluted ..................... 0.04 -- --
Weighted average number of common shares
outstanding
Primary ........................... 13,665 10,554 10,554
Fully diluted ..................... 14,182 -- --
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
July 31, 1997
-------------------------------------------------
Actual Pro Forma(2) As Adjusted(3)
-------------- -------------- ---------------
<S> <C> <C> <C>
Working capital ............ $ 896 $ 616 $ 2,995
Total assets ............... 2,858 3,258 4,999
Total liabilities ......... 1,096 1,496 1,027
Stockholders' equity ...... 1,762(1) 1,762 3,972
</TABLE>
- ------------
(1) Gives effect to the exchange of 10,825,000 shares of Common Stock, par
value $.01 per share for 10,825,000 shares of the Common Stock par value
$.001 per share of Certified Diabetic Supplies Inc., a Florida corporation
which was the predecessor to the Company, such exchange being made in
connection with the reorganization of the Company. See "The Company".
(2) Gives pro forma effect to the receipt of proceeds from the line of credit
loan of $400,000, of which $280,000 was disbursed as a deposit relating to
the acquisition of the Company's new facility, see "Business - Properties."
(3) As adjusted to give effect to the sale of the Common Stock offered hereby
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization".
5
<PAGE>
THE COMPANY
Certified is a non-operating holding company which wholly owns the
following operating subsidiaries: (i) Certified Diabetic Supplies, Inc.
("Delaware Supplies"), a Delaware corporation; (ii) CDS Medical Supplies, Inc.
("Medicalco"), a Delaware corporation; (iii) CDS Health Management, Inc.
("Healthco"), a Delaware corporation, and (iv) CDS Insurance Products, Inc.
("Insuranceco"), a Delaware corporation. The Company's business was commenced
in November 1995 by Certified Diabetic Supplies, Inc., a Florida corporation
("Florida Supplies") which was the predecessor corporation to Delaware
Supplies. Florida Supplies was incorporated in Florida on September 28, 1995,
under the name Diabetic Supplies of Collier, Inc., and adopted the name
Certified Diabetic Supplies, Inc. on October 12, 1995. Florida Supplies made
its first shipments of medical products to customers on November 1, 1995. On
November 28, 1995, Florida Supplies became a registered Medicare supplier of
durable medical equipment, eligible to take assignments of customers' rights to
reimbursement, to invoice Medicare directly, and to receive payments for
eligible products shipped.
Business operations consisting of the marketing, sale and shipping of
medical products for diabetics continued to be conducted through Florida
Supplies until August 12, 1997. On August 12, 1997, Florida Supplies was merged
with and into Delaware Supplies (the "Merger") as part of a general
reorganization of the Company in which the Company changed its state of
incorporation from Florida to Delaware and adopted its current holding
company/operating subsidiary structure. Existing shareholders of Florida
Supplies received an equivalent number of shares in Certified. The Merger did
not effect any change in the ownership of the Company or the conduct of its
business. Delaware Supplies continues to conduct, as a registered Medicare
supplier (and as a subsidiary of Certified), the business previously conducted
by Florida Supplies.
The Company's Medicalco subsidiary seeks to enter into provider contracts
with Groups. Healthco processes certain types of private insurance claims.
Insuranceco is presently inactive.
The Company's principal executive offices are located at 2373 N. Horseshoe
Drive, Naples, Florida 34104, and its telephone number is 941-403-0500. The
Company's Internet web site is located at http://www.cdiabetic.com. Information
contained in the Company's web site shall not be deemed to be part of this
Prospectus.
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective investors in evaluating
the Company before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements that involve risks and uncertainties.
Actual results could differ from those discussed in the forward-looking
statements as a result of certain factors, including those set forth below and
elsewhere in this Prospectus.
Limited Operating Experience
The Company has conducted operations only for approximately two years. Its
business -- the sale of diabetic supplies -- is evolving, with the Company's
initial contracts to provide diabetic products to participants in Groups having
been signed in May and June 1997. Thus, the Company's business, in its current
form, has only minimal operating history upon which investors may base an
evaluation as to likely future performance. Investors should consider the
Company's likelihood of success in light of the expenses, difficulties and
delays frequently encountered in developing and establishing new businesses,
and in light of the possibility that the Company may not succeed in penetrating
the managed care market for Groups. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Need for Additional Financing
The Company believes the net proceeds of the Offering, together with cash
on hand and cash expected to be generated from operations, will be adequate to
satisfy its capital requirements for at least 12 months from the date hereof.
However, if the Company's plans relating to the implementation of its business
strategy change or the Company's assumptions regarding the implementation of
its business strategy prove to be inaccurate (due to a number of factors
including, without limitation, unanticipated expenses, difficulties, delays or
otherwise) or the proceeds of this Offering otherwise prove to be insufficient
to fund the implementation of the Company's business strategy and working
capital requirements, the Company could be required to seek additional
financing. Such financing could involve the issuance of additional debt or
equity securities or borrowings from banks or other sources. The Company's
ability to obtain additional financing may be limited for a number of reasons,
including the then current levels of existing indebtedness, restrictive
covenants under the then existing credit agreements, and the fact that a
substantial portion of the Company's assets may then be subject to existing
liens and encumbrances. Furthermore, the Company has agreed to grant the
Representative a 12 month right to consent to filings of registration
statements relating to the offer and sale of the Company's securities. This
agreement may have the effect of further limiting the Company's ability to
obtain additional financing through the issuance of additional securities. See
"Underwriting." There can be no assurance that any additional financing will be
available to the Company, when needed, on commercially reasonable terms, or at
all. Any inability to obtain additional financing when needed would have a
material adverse effect on the Company. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations --
Liquidity and Capital Resources." In addition, any additional financing may
result in further dilution to Company stockholders resulting from the issuance
of Common Stock or securities exercisable for or convertible into Common Stock.
See "Dilution."
Dependence on Reimbursement by Third Party Payors
The levels of revenues and profitability of the Company, like those of
other healthcare providers, are affected by the continuing efforts of third
party payors to contain or reduce the costs of healthcare by lowering
reimbursement rates, increasing case management review of services, and
negotiating reduced-rate contract pricing. As the Company received
approximately 60% of its revenues from Medicare reimbursement in the nine
months ended July 31, 1997, any reduction in Medicare reimbursement rates will
reduce the Company's sales revenues by a corresponding amount without the
Company obtaining a corresponding reduction in its costs for the products that
it sells. The result would be a reduction in the Company's overall profit
margin on its product sales. There have been, and management expects that there
will continue to be, proposals to limit Medicare reimbursement for healthcare
products and services by an increasing emphasis on managed care systems and
other means. The Company cannot predict whether any of these proposals will be
adopted, but if adopted and
7
<PAGE>
implemented, such proposals could have a material adverse effect upon the
Company's business and financial condition and results of operations by
reducing the Company's profit margins on the products that it sells. The
Company is attempting to address these risks, in part, by emphasizing the
addition of customers who maintain private insurance and/or who are
participants in Groups serviced by the Company pursuant to provider contracts.
However, the Company cannot predict the degree of success, if any, it will have
in such efforts. Moreover, significant changes in the terms of private
insurance coverage, contractual arrangements with Groups, or Medicare coverage
for the products sold by the Company, could also have a material adverse effect
on the Company's business and financial condition and results of operations.
Additionally, the Company does not presently and has no plans to sell its
products to that portion of the population enrolled in health maintenance
organizations ("HMOs"). See "Business -- Shipping, Billing and Payment
Procedures" and "Business -- Reimbursement."
To the extent it seeks full payment from customers without supplementary
insurance coverage (beyond the primary coverage provided by Medicare or private
insurers), the Company must collect directly from the customers a portion of
the purchase price of products sold and is subject to a credit risk on such
amounts. See "Business -- Shipping, Billing and Payment Procedures" and
"Business -- Reimbursement."
The Company May Not Be Successful in Contracting With Managed Care Programs
A key component of the Company's business strategy is to enter into
contracts with Groups, pursuant to which the Company would provide products to
participants in such Groups. Competition to enter into provider contracts with
Groups is intense, and there can be no assurance that the Company will obtain
additional such contracts, or that such contracts will yield the number of
customers for the Company's products that management is seeking. Additionally,
the Company, in order to obtain such provider contracts, will be required to
offer such Groups terms and pricing for its products which are competitive with
those of other vendors competing for the same contracts, thus reducing margins
for the Company's products.
In May 1997, the Company entered into a non-exclusive, two year provider
contract (the "Provider Contract") with a leading, nationally recognized
preferred provider organization (the "Contracting PPO"). The contract was the
Company's first provider contract with a Group. Pursuant to the Provider
Contract, the Contracting PPO will list the Company as a supplier of diabetic
products in its network of providers of medical services and products. The
Company anticipates that the Contracting PPO, together with Groups affiliated
with the Contracting PPO, will publicize the Company, its products and services
to participants in such affiliated Groups. However, the Contracting PPO has the
legal right to, and may, enter into provider contracts with other suppliers of
products for diabetics. Furthermore, the Contracting PPO and its member Groups
may not effectively publicize the Company's goods and services to participants
in such member Groups. Additionally, participants will continue to have the
option of purchasing such products from pharmacies or other vendors included in
the Contracting PPO's network of providers. The Provider Contract with the
Contracting PPO has an initial term of only two years, and there can be no
assurance that such contract will be extended beyond the initial term, even if
the Provider Contract yields positive results for both the Company and the
Contracting PPO. For these and other reasons, there can be no assurance that
the contract with the Contracting PPO will produce significant numbers of new
customers.
In June 1997, the Company entered into a five year provider contract with
a TPA affiliated with the Contracting PPO. The TPA's participants will retain
the option to purchase diabetic products from other sources. Furthermore, the
TPA retains the legal right to enter into additional provider contracts with
other vendors of products for diabetics. There can be no assurance that this
contract will produce significant numbers of new customers. See "Business --
Provider Contracts," "Business -- Business Strategy and Plan."
Difficulty of Maintaining Profit Margins
Reimbursements for test products sold by the Company are made pursuant to
Medicare and private insurance fee schedules. Because the Health Care Financing
Administration ("HCFA") and private insurers determine the reimbursement
levels, the Company cannot increase its revenues by raising the price of the
test products it sells. Accordingly, the only means by which the Company can
maintain or expand profit margins is to contain its own costs and expenses.
The Company expends substantial efforts to contain its operating costs and
to purchase products for sale to its customers at the lowest possible prices.
However, as increases in its own expenses cannot generally be passed
8
<PAGE>
along to customers, such increases can lead to reductions in profit margins,
and could have a material adverse effect on the Company's business and
financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
Dependence on Suppliers of the Company's Products
The medical equipment and products sold by the Company to its customers
are purchased by the Company from manufacturers of such products. The Company
seeks to purchase such products from manufacturers in sufficient commercial
quantities and at commercially reasonable prices to service the demand of its
customers and to generate sufficient profit margins. The Company has neither
the facilities nor the capability to manufacture any of such products. The
Company has never experienced an availability shortage of the products it sells
or an inability to fill customers' orders. The Company believes that it will
continue to be able to purchase the products it requires, at commercially
acceptable prices, from a variety of manufacturers and suppliers, even as the
need for such products grows in conjunction with the growth in the size of the
Company's customer list. Furthermore, the Company intends to use a portion of
the proceeds from the Offering to enable it to maintain approximately an eight
week supply of inventory, further protecting it against potential temporary
short-term disruptions in supplies. Nevertheless, there can be no assurance
that the Company will be able to purchase its products in sufficient quantities
and at commercially favorable costs. Were such products to be unavailable, or
available only at significantly higher prices, even for a temporary period,
such shortage or price increase could have a material adverse effect on the
Company's business and financial condition and results of operations. See
"Business -- Suppliers."
Changes in Government Regulation May Have an Effect on Operations
Healthcare is an area of extensive and dynamic regulation, and the
Company, as a supplier of medical equipment, is subject to certain government
regulation. Changes in laws or regulations or new interpretations of existing
laws or regulations can have a material effect on methods of doing business,
costs of doing business and levels of reimbursement by government and private
third party payors, and the Company cannot predict what changes in or new
interpretations of existing laws or regulations may occur. Any such changes
could have a material adverse effect on the Company's business and financial
condition and results of operations. See "Business -- Government Regulatory
Matters."
The Company May Not Successfully Implement Its Business Strategy
The long-term success of the Company's business is dependent on the
Company's ability to implement successfully the key elements in its business
strategy, including without limitation (i) increasing the numbers of customers
serviced, (ii) broadening the target audience for the Company's products, and
(iii) completing the relocation to, and expansion and renovation, of its new
facility. There can be no assurance that the Company will be able to implement
successfully its business strategy. A failure to effect successfully
significant portions of the business strategy could result in the Company's
inability to grow or to achieve the types of operating efficiencies which
management believes are required in order to participate successfully in a
competitive market. See "Business -- Business Strategy and Plan."
Risks Associated With Managing Growth
The Company's growth has been rapid during the last 12 months and
management believes such growth will continue. Such continued growth could
place a significant strain on the Company's management, human, physical,
operational and other resources. In particular, continued and accelerating
growth will make acute the need for the Company to hire additional management
personnel. There can be no assurance that the Company will be able to identify
or attract qualified management or other personnel.
The Company's ability to manage its growth will require it to continue to
invest in its operational, financial, and information systems, and to attract,
retain, motivate, and effectively manage its employees. The inability of the
Company's management to manage growth effectively would have a material adverse
effect on the Company's business and financial condition and results of
operations. See "Business -- Business Strategy and Plan."
9
<PAGE>
Competition
The market for the Company's products is geographically dispersed and
fragmented. The Company has numerous competitors, including local pharmacies,
mail order catalogue businesses and many large nationwide retail chains.
Competitors are located in all markets in which the Company's customers and
potential customers are located. Some of the Company's competitors are
substantially larger than the Company and have substantially greater resources
than the Company. Furthermore, the barriers to entry into the Company's
business are relatively low. See "Business -- Competition."
The key competitive factors for the Company and other vendors of diabetic
products are the quality of service to customers, the scope and effectiveness
of marketing efforts, including media advertising campaigns and, increasingly,
the ability to develop new sources of customers through such means as obtaining
and servicing provider contracts with Groups.
The Company will face significant competition in obtaining provider
contracts with Groups. The Company believes that its efforts to date to obtain
provider contracts with Groups have been successful, and the Company intends to
continue and to intensify these efforts. However, management believes that
competitors of the Company may be conducting similar efforts to enter into
provider contracts. To the extent the provider contracts yield significant
numbers of new customers, competitors of the Company are likely to intensify
their own efforts to obtain such provider contracts.
In order to maintain and improve the quality of its service, the Company
is making, and will continue to be required to make, significant capital
investments in such areas as personnel, training, systems (including
telecommunications and information systems), and physical facilities. The
continuing need to make such capital investments and to incur costs in
maintaining and improving service can reduce profit margins on the sale of
products.
Management believes that the success of its television and radio
advertising efforts have, recently, prompted competitors to initiate
substantial television and radio advertising campaigns, some of which are
significantly larger and more aggressive than that of the Company. Successful
advertising campaigns conducted by competitors of the Company may have an
adverse impact on the Company's ability to retain existing customers and
attract new ones, and may also make it necessary for the Company to increase
the scope of its own advertising. The Company could be forced to purchase
greater amounts of media time, some or all of such time at more expensive
rates, and to incur additional costs in the production of advertisements.
Greater investment in advertising could have the effect of significantly
increasing the cost of the Company's sales.
Certain of the Company's competitors are larger and may have substantially
greater capital and human resources than the Company, making them better able
to pursue provider contracts with Groups, to make capital investments and incur
costs associated with maintaining and improving the quality of service, and to
conduct and absorb the costs associated with more extensive advertising
campaigns.
Inability to Complete the Purchase of New Facility
On October 10, 1997, the Company relocated its offices and inventory to a
new, larger facility. Presently, the Company occupies the new facility pursuant
to a short-term lease expiring December 15, 1997. The Company has also entered
into an agreement to purchase the new facility, pursuant to which it has paid a
$280,000 nonrefundable deposit. Closing of the purchase and sale is scheduled
for December 15, 1997. In anticipation of the purchase of the new facility, the
Company undertook, and has completed, an initial phase of renovations of the
new facility for a cost of approximately $700,000.
Should the purchase and sale of the new facility not be completed by
December 15, 1997, and should the seller of the new facility not extend the
date for the closing of the purchase and sale and not extend the lease of the
new facility, the Company could lose its entire investment in the new facility,
including the purchase price deposit and the renovation costs. Furthermore, the
Company could lose its right to occupy the facility and be forced to obtain
other suitable space. There is no assurance that the Company would identify, or
be able to sustain the costs associated with relocating to other suitable
space. The loss of the Company's investment in the new facility and the need to
identify and relocate to new space, would have a material adverse effect on the
Company's business and financial condition and results of operations. See
"Business -- Properties."
10
<PAGE>
Dependence on Key Personnel
The Company's business is directed by a small number of executive and
management personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its ability to manage its
planned growth successfully will depend in large part on its continued ability
to attract and retain highly skilled and qualified personnel.
Although the Company has written employment agreements with its President
and Principal Executive Officer, Peter J. Fiscina, its Treasurer and Principal
Financial Officer, Myron M. Blumenthal, and its Vice President, Albert R.
Ayala, there can be no assurance that any of such persons will remain available
to the Company. The unavailability of any of Messrs. Fiscina, Blumenthal and
Ayala would have a material adverse effect upon the Company.
The Company also has written employment agreements with Joseph L. Marotta,
the President of Medicalco, and Ronald G. Hersch, the President of Healthco.
Messrs. Marotta and Hersch are responsible for the Company's efforts to obtain
provider contracts with Groups. Messrs. Marotta and Hersch have extensive
experience and relationships in the healthcare industry. Other members of the
Company's management team have much more limited experience and relationships.
There can be no assurance that Messrs. Marotta and Hersch will remain available
to the Company or, if either were to become unavailable, that a suitable and
effective replacement could be identified and engaged. The unavailability of
either Mr. Marotta or Mr. Hersch and the inability of the Company to identify
and engage a suitable replacement would have a material adverse effect on the
Company. See "Management."
Control By Principal Stockholders
Upon completion of the Offering Messrs. Fiscina, Ayala and Blumenthal will
beneficially own approximately 22.2%, 20.4%, and 10.7% of the outstanding
voting securities of the Company, respectively (approximately 22.0%, 20.2% and
10.6%, respectively, if the Underwriters' over-allotment option is exercised in
full). Furthermore, if all of the outstanding options to purchase Common Stock
in the Company held by such individuals were to vest, and such individuals were
to exercise all such options, and the Company made no further issuances of its
voting securities, such individuals would own approximately 30.8%, 19.1%, and
17.9%, respectively, of the outstanding voting securities of the Company. In
either event, Messrs. Fiscina, Ayala, and Blumenthal, collectively, will have,
as a practical matter, the ability to exercise effective control over the
election of the Company's Board of Directors and the outcome of corporate
actions requiring stockholder approval. See "Management" and "Principal
Stockholders."
Product Liability; Adequacy of Insurance
While the Company does not manufacture the products it sells to its
customers, a purchaser of products distributed by the Company believing that an
injury suffered by him or her resulted from a defect in one of such products
could seek to impose liability upon the Company in respect of such injury, and
the Company could be found liable as the provider of such product. As of the
date of this Prospectus, the Company maintains product liability insurance in
the amount of $1,000,000 and has been unable to obtain additional amounts of
such insurance. Management believes that insurance companies generally will not
sell distributors such as the Company product liability insurance in excess of
$1,000,000.
The Company has never been the subject of a material claim made, nor has
it been made aware of any material claim against it based upon the use or
failure of the products it sells to customers. There can be no assurance,
however, that the Company will not be subject to such claims, that any claim
will be successfully defended, that the available insurance will be sufficient
to fund the defense of such claim or a corresponding counterclaim against a
manufacturer or other party, or that if the Company is found liable, the claim
and liability will not exceed the limits of the Company's insurance. There is
also no assurance that the Company will be able to continue to obtain product
liability insurance on acceptable terms. Any product liability claims could
have a material adverse effect on the Company's business and financial
condition and results of operations. See "Business -- Product Liability and
Insurance."
11
<PAGE>
Discretion in Use of Proceeds
A substantial portion of the net proceeds from the Offering has been
designated for general corporate and working capital purposes and may be
expended at the discretion of management. See "Use of Proceeds."
Dividends
The Company has not paid any dividends on its Common Stock and does not
expect to pay any such dividends in the foreseeable future. Instead, the
Company intends to retain earnings, if any, to finance the development and
expansion of its business. See "Dividend Policy."
Blank Check Preferred Stock
The Company's Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action
by the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of shares of
Preferred Stock, while potentially providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, including
additional capital raising, could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present intention to issue shares of Preferred
Stock.
Immediate and Substantial Dilution
Purchasers of the shares of Common Stock offered hereby will suffer an
immediate and substantial dilution of approximately $5.69 per share, in the pro
forma net tangible book value per share of the Common Stock as of July 31,
1997, from the initial public offering price of $6.00 per share. Furthermore,
options to purchase 6,550,000 shares of the Common Stock at exercise prices
ranging from $1.00 per share to $9.00 per share are currently outstanding
(although none of such options are currently exercisable), including 4,000,000
options with exercise prices of $1.00 per share and 300,000 options with
exercise prices of $5.00 per share. The exercise of such options or of the
Representative's Warrants will result in further dilution in such pro forma net
tangible book value per share from the initial public offering price. See
"Dilution" and "Management -- Benefit Plans."
Prior Rule 504 Offering and Secondary Trading in "Free Trading" Securities
In December 1996, Florida Supplies, the Company's predecessor, completed
the private placement of 2,000,000 shares of its Common Stock (the
"Unrestricted Shares") to subscribers in an offering exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") pursuant to Rule 504 of Regulation D promulgated under the
Securities Act. In accordance with the provisions of Regulation D, the shares
issued to the subscribers in such offering are deemed to be "free trading"
shares of stock.
The Company understands that on or about April 1, 1997, The Hamilton-Shea
Group ("HSG") commenced market making activities with respect to the
Unrestricted Shares pursuant to Rule 15c2-11 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Pursuant to Rule
15c2-11, broker-dealers are permitted to publish a quotation for a security, or
submit such a quotation for publication, in a "quotation medium" (as defined in
such Rule) provided the broker-dealer maintains in its records certain
specified documents and information concerning the company whose stock is being
quoted, and makes such documents and information available to persons
expressing an interest in effecting a transaction in such security, in
accordance with the provisions of such rule. The Company further understands
that in addition to HSG, at least four other broker-dealers (collectively, with
HSG, "Market Makers") have similarly conducted market making activities in the
Unrestricted Shares and caused trading in such shares to be conducted through,
and the price of the shares to be quoted on, the "OTC Electronic Bulletin
Board" of the NASD. These market making activities have continued from April
1997 through the date hereof. The Company also understands that the secondary
trading in the Company's shares conducted by the Market Makers is subject to
regulation under the state securities "blue sky" laws of the states in which
transactions in the Company's shares have either occurred or been proposed.
12
<PAGE>
The market in securities traded and quoted pursuant to Rule 15c2-11 is not
regulated to the same extent as NASDAQ SmallCap. Furthermore, the Company is
not currently obligated to file periodic reports with the United States
Securities and Exchange Commission (the "Commission") or any state securities
commission or otherwise to disseminate current public information. The Company
has no control over the activities of the Market Makers and has not monitored,
and does not believe it is under any obligation to monitor, the activities of
the Market Makers. Nevertheless, in the event of any violations or possible
violations by the Market Makers, the Company could be exposed to inquiries,
investigations, actions and penalties based on or arising out of such
violations or possible violations. The Company would vigorously contest any
claims against it arising out of the Market Makers' activities. Nevertheless,
any such inquiries, investigations, actions or penalties could have a material
adverse effect on the liquidity of the Common Stock, and/or the Company and its
business and financial condition and results of operations.
Prior Activities of Peter Fiscina
From December 1994 through August 1995, Peter J. Fiscina, the co-founder,
president, principal executive officer and a director of the Company, was a
principal in a business engaged in the sale and distribution of diabetic
supplies similar to those marketed by the Company to retail customers, pursuant
to a franchise agreement with a franchisor/supplier of such products. This
business ceased operations in August 1995 following the franchisor/supplier's
failure to supply the products necessary for distribution to customers. The
company through which Mr. Fiscina conducted this earlier business was dissolved
in August 1995, and Mr. Fiscina has had no communications with the
franchisor/supplier since April 1996. The Company believes that there are
presently no claims or liabilities against or involving Mr. Fiscina or his
company arising out of or otherwise related to Mr. Fiscina's earlier business
including confidentiality and non-competition agreements included in the
franchise agreement. The Company has had no connection with the activities
conducted by Mr. Fiscina and his company. Were any third party to press any
claims against Mr. Fiscina or his company arising out of or in connection with
the activities carried out by either, it is possible that such party might also
seek to make claims against the Company by reason of Mr. Fiscina's positions
and involvement with the Company. The Company does not believe that any grounds
exist for a claim against Mr. Fiscina or his company in connection with the
earlier business and, further, that no grounds exist for any claim against the
Company in connection with Mr. Fiscina's earlier business. However, were any
party to press such a claim against the Company, the Company would be forced to
defend itself, and could incur significant legal and other expenses in
connection therewith, and no assurance can be given as to the ultimate
resolution of any such claim.
Shares Eligible for Future Sale; Possible Adverse Effect on Future Market
Prices
Upon completion of the Offering, Peter J. Fiscina, Albert R. Ayala and
Myron M. Blumenthal, all of whom are directors and officers of the Company,
will hold, in the aggregate, approximately 53.2% of the Company's outstanding
Common Stock (52.9% if the Underwriters' over-allotment option is exercised in
full). In addition, upon completion of the Offering, approximately 25 other
persons (the "Other Initial Stockholders") will hold an aggregate of
approximately 24.7% of the Company's outstanding Common Stock (24.6% if the
Underwriters' over-allotment option is exercised in full). See "Principal
Stockholders."
Messrs. Fiscina, Ayala and Blumenthal, who hold, in the aggregate,
6,025,000 of the 11,325,000 shares to be outstanding immediately after the
closing of the Offering (the shares held by Messrs. Fiscina, Ayala and
Blumenthal referred to as the "Previously Issued Affiliate Shares") have
entered into agreements under which they have agreed, other than with the
consent of the Representative, not to sell such shares for a 12 month period
following the completion of the Offering, except that such agreements not to
sell shall expire with respect to 200,000 of such shares six months following
the completion of the Offering, and shall expire with respect to an additional
200,000 shares nine months following the completion of the Offering. At the
expiration of such 12 month period, the balance of the Previously Issued
Affiliate Shares will be eligible for sale, subject to the volume and other
limitations of Rule 144 under the Act.
Furthermore, the Other Initial Stockholders, all of whom the Company
believes are non-affiliates, hold, in the aggregate, 2,800,000 of the
11,325,000 shares to be outstanding immediately after the closing of the
Offering, and, as of the closing of the Offering, will have held such shares
for more than two years. From and after
13
<PAGE>
the completion of the Offering, such shares will be eligible for sale, without
regard to the volume and other limitations of Rule 144. The Company has also
granted certain demand and "piggy-back" registration rights to the
Representative with respect to the shares of Common Stock issuable upon
exercise of the Representative's Warrants. See "Shares Eligible for Future
Sales" and "Underwriting."
Messrs. Fiscina, Ayala and Blumenthal presently hold options to purchase
an aggregate of 6,100,000 shares of Common Stock, which options vest and become
exercisable at various prices ranging from $1.00 to $8.75 per share between
2003 and 2005, provided, however, that all of such options shall vest and
become immediately exercisable upon determination by the Company's Board of
Directors that the Company has, in any year, achieved certain revenue and
earnings targets. Should such options vest and become immediately exercisable,
Messrs. Fiscina, Ayala and Blumenthal could exercise such options in whole or
in part and could seek to register and sell in the public market any shares of
Common Stock issued upon such exercise. See "Management -- Benefit Plans" and
"Principal Stockholders."
Sales of substantial amounts of Common Stock in the public market, and
knowledge of the possibility that substantial amounts of Common Stock may be
sold in the public market, may adversely affect the market price of the Common
Stock and could adversely affect the Company's ability to raise capital through
the sale of its equity securities.
No Assurance of Public Market; Arbitrary Determination of Offering Price;
Possible Volatility of Market Price of Common Stock
Although shares of Common Stock have been traded through, and the price
thereafter has been quoted on, the "OTC Electronic Bulletin Board" of the NASD
prior to this Offering, there can be no assurance that a regular trading market
for the Common Stock will develop after this Offering or that, if developed,
will be sustained. Moreover, the initial public offering price of the Common
Stock has been determined by negotiations between the Company and the
Representative and, as such, is arbitrary in that it does not necessarily bear
any relationship to the assets, book value or potential earnings of the Company
or any other recognized criteria of value and may not be indicative of the
prices that may prevail in the public market. The market price of the Common
Stock following this Offering may be highly volatile, as has been the case with
the securities of other emerging companies. Factors such as the Company's
operating results, announcements by the Company or its competitors and various
factors affecting the healthcare and medical equipment industries generally may
have a significant impact on the market price of the Common Stock. In addition,
in recent years, the stock market has experienced a high level of price and
volume volatility and market prices for the stock of many companies have
experienced wide price fluctuations which have not necessarily been related to
the operating performance of such companies. See "Underwriting".
Eligibility for Listing
In order to qualify for initial listing on NASDAQ SmallCap, a company
must, among other requirements, have at least $4,000,000 in net tangible assets
or a market capitalization of $50,000,000 and a minimum bid price for its
common stock of $4.00 per share. While it is presently expected that the
Company's Common Stock will be listed on NASDAQ SmallCap upon the completion of
this Offering, there can be no assurance that this will actually occur. In
addition, even if the Company is listed on NASDAQ SmallCap, there can be no
assurance that the Company will meet the criteria for continued listing of
securities on NASDAQ SmallCap. These continued listing criteria include a
minimum of $2,000,000 in net tangible assets and a minimum bid price of $1.00
per share of common stock. If an issuer does not meet the $1.00 minimum bid
price standard, it may, however, remain on NASDAQ SmallCap if the market value
of its public float is at least $1,000,000 and the issuer has capital and
surplus of at least $2,000,000. If the Company became unable to meet the
continued listing criteria of NASDAQ SmallCap, because of continued operating
losses or otherwise, and became delisted therefrom, trading, if any, in the
Common Stock would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets", or, if available, the NASD's "OTC Electronic
Bulletin Board". As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the value of, the Company's
securities.
Risk of Low-Priced Stocks, "Penny Stock" Regulations
If the Common Stock were to become delisted from trading on NASDAQ
SmallCap and the trading price of the Common Stock were to fall below $5.00 per
share on the date the Company's securities were delisted,
14
<PAGE>
trading in such securities would also be subject to the requirements of certain
rules promulgated under the Exchange Act, which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any equity security that is not listed on a national
security exchange or the NASDAQ National Market System or NASDAQ SmallCap and
has a market price of less than $5.00 per share, subject to certain
exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established
customers and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers
by such requirements may discourage broker-dealers from effecting transactions
in the Company's securities, which could severely limit the market price and
liquidity of such securities and the ability of purchasers in this Offering to
sell their securities of the Company in the secondary market.
Continuing Influence of the Representative on the Company
It is anticipated that a significant number of the shares of Common Stock
will be sold to customers of the Representative. Although the Representative
has advised the Company that it intends to make a market in the securities, it
will have no legal obligation to do so. Such market making activity may be
discontinued at any time. Moreover, under certain circumstances, including if
the Representative sells the securities issuable upon exercise of the
Representative's Warrants, it may be required under the Exchange Act to suspend
temporarily its market making activities. The prices and the liquidity of the
Common Stock may be significantly affected by the degree, if any, of the
Representative's participation in the market. No assurance can be given that
any market making activities of the Representative, if commenced, will be
continued. See "Underwriting."
The Company has agreed that, if it is requested to do so by the
Representative, it will use its best efforts, for a period of three years from
the date of this Prospectus, to elect a designee of the Representative, as a
director of the Company, or, at the Representative's option, as a non-voting
observer to the Company's Board of Directors. Additionally, the Company will
have certain other ongoing contractual obligations to the Representative
following the consummation of this Offering and the Company has granted to the
Representative the Representative's Warrants to purchase up to 50,000 shares of
Common Stock. As a result, the Representative may have a continuing influence
on the Company. See "Underwriting".
Repayment of Debt
The Company will use $300,000 of the proceeds of the Offering to repay
certain sums drawn on a line of credit obtained by the Company from First
National Bank of Naples. See "Use of Proceeds."
Representative's Warrants; Future Financings
The holders of the Representative's Warrants will have the opportunity to
profit from a rise in the price of the Common Stock. The existence of these
warrants may adversely affect the terms on which the Company can obtain
additional equity financing in the future and the holders can be expected to
exercise them when the Company would, in all likelihood, be able to obtain
additional capital by offering additional shares of its unissued Common Stock
on terms more favorable to the Company than the terms provided by these
warrants.
Forward-Looking Information May Prove Inaccurate
This Prospectus contains various forward-looking statements and
information that are based on management's beliefs, as well as assumptions
based upon information currently available to management. When used in the
Prospectus, the words "expect," "anticipate," "estimate," and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions
including those identified above. Should one or more of these risks or
circumstances materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 500,000 shares of
Common Stock offered hereby are estimated to be approximately $2,210,000
($2,602,000 if the Underwriters' over-allotment option is exercised in full),
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company intends to apply these
net proceeds over the 12 month period following completion of the Offering as
follows:
<TABLE>
<CAPTION>
Approximate
Amount of Net Percentage of
Proceeds Net Proceeds
--------------- --------------
<S> <C> <C>
Repayment of Line of Credit Indebtedness (1) ...... $ 300,000 13.57%
Working Capital and Operating Expenses (2) ......... $1,910,000 86.43%
----------- -------
$2,210,000 100.00%
=========== =======
</TABLE>
- ------------
(1) The Company has borrowed $400,000 of a $1,000,000 revolving line of credit
(the "Line of Credit") provided by First National Bank of Naples ("FNB").
Borrowings under the agreement bear interest at 3/4% over FNB's index rate
(9 1/4% at July 31, 1997). The Line of Credit is secured by a lien on all
of the Company's business assets. The Company has agreed to utilize the
first $300,000 of net proceeds from the Offering to repay a portion of the
amounts borrowed under the Line of Credit.
(2) Includes funds to be used to purchase inventory, to purchase television and
radio advertising time, to cover payroll and related costs of new
employees to be hired by the Company in connection with the expansion of
its business (see "Business - Employees"), to complete the renovation of
the Company's new facility (see "Business - Properties"), to purchase and
install telecommunications, information and other operating and
administrative systems, and for other general corporate purposes.
The above represents the Company's best estimate based upon its present
plans and certain assumptions regarding general economic conditions and the
Company's future revenues and expenditures. The Company, therefore, reserves
the right to reallocate the net proceeds of this Offering among the various
categories set forth above as it, in its sole discretion, deems necessary or
advisable.
The Company believes, based on its current plan of operations, that the
net proceeds of this Offering, together with cash on hand and cash expected to
be generated from operations, will be adequate to satisfy its capital
requirements for a period of at least 12 months from the date of this
Prospectus. However, if the Company's plans relating to the implementation of
its business strategy change, or the Company's assumptions regarding the
implementation of its business strategy prove to be inaccurate or the proceeds
of the Offering prove to be insufficient to fund the implementation of the
Company's business strategy and working capital requirements, the Company could
be forced to seek additional financing. There can be no assurance that
additional financing could be obtained on acceptable terms, if at all. If such
additional financing were not available, the Company's business would be
materially and adversely affected. Also, if the Company expands its business or
seeks acquisitions or new product lines, it may be necessary to seek additional
financing. Such additional financing, if any, may be either debt, equity or a
combination of debt and equity. An equity financing could result in dilution in
the Company's net tangible book value per share of Common Stock. There can be
no assurance that the Company will be able to secure additional debt or equity
financing or that such financing will be available on favorable terms. See
"Risk Factors -- Need for Additional Financing", "Risk Factors -- Immediate and
Substantial Dilution" and "Dilution".
Pending application by the Company of the net proceeds of this Offering,
such net proceeds will be invested in short-term, investment grade,
interest-bearing instruments.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
July 31, 1997 and on a pro forma basis to give effect to the pro forma
adjustments relating to the receipt of proceeds from the Line of Credit of
$400,000 and as adjusted to give effect to the sale of the shares of Common
Stock offered hereby and the application of the estimated net proceeds
therefrom. This table should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of July 31, 1997
------------------------------------------
Actual Pro Forma As Adjusted
------------ ------------ ------------
<S> <C> <C> <C>
Total short-term debt .............................. $ 5,000 $ 405,000 $ 105,000
Total long-term debt .............................. 240,000 240,000 240,000
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, no shares issued and outstanding ...... -- -- --
Common stock, $.01 par value, 25,000,000 shares
authorized, 10,825,000 shares issued and outstand-
ing, actual, and pro forma, 11,325,000 shares
issued and outstanding, as adjusted ............... 108,000 108,000 113,000
Additional paid in capital ........................ 1,017,000 1,017,000 3,222,000
Retained earnings ................................. 637,000 637,000 637,000
----------- ----------- -----------
Total stockholders' equity ..................... 1,762,000 1,762,000 3,972,000
----------- ----------- -----------
Total capitalization ........................... $2,007,000 $2,407,000 $4,317,000
=========== =========== ===========
</TABLE>
DIVIDEND POLICY
The Company has not paid any cash dividends and does not anticipate that
it will do so in the foreseeable future. The Company currently intends to
retain future earnings, if any, to provide funds for the growth and development
of the Company's business.
17
<PAGE>
DILUTION
The difference between the Public Offering price per share of the
Company's Common Stock and the net tangible book value per share after the
Offering constitutes the dilution to investors in this Offering. Net tangible
book value is determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of outstanding
shares of Common Stock.
At July 31, 1997, the net tangible book value of the Company was
$1,141,000, or approximately $0.11 per share of Common Stock. After giving
effect to the sale of the shares of Common Stock being offered hereby (less
underwriting discounts and commissions and estimated expenses of the Offering)
and the application of the estimated net proceeds therefrom, the net tangible
book value of the Company at July 31, 1997 would have been $3,520,000, or
approximately $0.31 per share, representing an immediate increase in net
tangible book value of $0.20 per share to existing stockholders and an
immediate dilution of $5.69 per share to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C> <C>
Public offering price .................................... $ 6.00
Net tangible book value before the Offering ............ $0.11
Increase attributable to new investors .................. 0.20
-------
Net tangible book value after the Offering ............... 0.31
-------
Net tangible book value dilution per share to new investors $ 5.69
=======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the net
tangible book value after the Offering would be approximately $0.34 per share,
resulting in dilution to new investors of $5.66.
The following table sets forth, with respect to existing stockholders and
new investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------------ ------------------------ Price Per
Number Percent Amount Percent Share
------------ --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders ...... 10,825,000 96 $1,125,000 27 $0.10
New Investors ............... 500,000 4 3,000,000 73 $6.00
----------- ---- ----------- ----
Total ..................... 11,325,000 100 $4,125,000 100
=========== ==== =========== ====
</TABLE>
The above table assumes no exercise of the Underwriters' over-allotment
option or outstanding options. If the Underwriters' over-allotment option is
exercised in full, the new investors will have paid $3,450,000 for 575,000
shares of Common Stock, representing 75.4% of the total consideration for 5.0%
of the total number of shares of Common Stock outstanding. See "Underwriting."
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data at and for the nine-month period
ended July 31, 1997, at and for the period from September 28, 1995 (inception)
to July 31, 1996, and at and for the period from September 28, 1995 (inception)
to October 31, 1996 has been derived from the Company's financial statements
included elsewhere in this Prospectus and should be read in conjunction with
the financial statements and the notes thereto.
<TABLE>
<CAPTION>
For The
Nine-Month Period from For the Period from
Period September 28, 1995 September 28, 1995
Ended (Inception) to (Inception) to
July 31, 1997 July 31, 1996 October 31, 1996
--------------- -------------------- --------------------
(Unaudited)
-------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Income Data:
Net sales ................................. $ 4,523 $ 1,622 $ 2,588
Cost of sales .............................. 1,575 541 814
-------- -------- --------
Gross profit .............................. 2,948 1,081 1,774
Operating expenses ........................ 1,978 1,022 1,679
-------- -------- --------
Income from operations ..................... 970 59 95
Interest expense ........................... 37 13 21
-------- -------- --------
Income before provision for income taxes ... 933 46 74
Provision for income taxes ............... 358 10 12
-------- -------- --------
NET INCOME ................................. $ 575 $ 36 $ 62
======== ======== ========
Net income per share
Primary ................................. $ 0.04 $ 0.00 $ 0.01
======== ======== ========
Fully diluted ........................... $ 0.04
========
Weighted average number of common shares out-
standing
Primary ................................. 13,665 10,554 10,554
======== ======== ========
Fully diluted ........................... 14,182
========
Balance Sheet Data:
</TABLE>
<TABLE>
<CAPTION>
July 31, 1997 July 31, 1996 October 31, 1996
--------------- --------------- -----------------
(Unaudited)
---------------------------------
(in thousands)
<S> <C> <C> <C>
Cash .............................. $ 354 $ 84 $ 167
Working capital (deficiency) ...... 896 (41) 39
Total assets ..................... 2,858 876 1,196
Total liabilities .................. 1,096 800 1,023
Total stockholders' equity ......... 1,762(1) 76 173
</TABLE>
(1) Gives effect to the exchange of 10,825,000 shares of Common Stock, par value
$.01 per share for 10,825,000 shares of Common Stock par value $.01 per
share of Certified Diabetic Supplies Inc., a Florida corporation which was
the predecessor to the Company, such exchange being made in connection with
the reorganization of the Company. See "The Company".
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto. The discussion of
results, causes and trends should not be construed to imply any conclusion that
such results or trends will necessarily continue in the future.
Results of Operations
Nine months Ended July 31, 1997 ("1997 period") Compared to the Period from
September 28, 1995 (Inception) to July 31, 1996 ("1996 period")
Net sales increased by approximately $2,901,000 or 179% to $4,523,000 for
the 1997 period from $1,622,000 for the 1996 period. This increase was
primarily due to an aggressive advertising and marketing campaign to increase
the Company's customer base. Management expects further significant increases
in its customer base as a result of entering into two provider contracts with,
respectively, a PPO and a TPA.
Cost of net sales increased by approximately $1,034,000 to $1,575,000 for
the 1997 period from $541,000 for the 1996 period. Cost of net sales increased
as a percentage of net sales to 34.8% for the 1997 period from 33.4% for the
1996 period (gross profit percentage of 65.2% and 66.6%, respectively). The
increase in the cost of sales was due to increases in costs of test products
purchased from various manufacturers. Management believes the cost of sales
will stabilize as a result of the execution of purchase agreements with its
major suppliers.
Selling and shipping expenses increased by approximately $176,000 to
$353,000 for the 1997 period from $177,000 for the 1996 period but decreased as
a percent of net sales to 7.8% from 10.9%. The decrease in selling expenses as
a percentage of net sales is primarily due to management's implementation, in
November 1996, of a new policy by which the Company capitalizes direct-response
advertising costs and amortizes such costs on a declining balance basis over a
period which matches the expected future stream of revenues generated from new
customers obtained as a result of the Company's various media advertising
campaigns. The Company's business strategy includes the continued increase of
direct-response advertising expenditures over the next 12 months as a means of
attracting new customers.
General and administrative expenses increased by $747,000 to $1,585,000 in
the 1997 period from $838,000 in the 1996 period but decreased as a percent of
net sales to 35.0% from 51.7%. The decrease in general and administrative
expenses as a percentage of net sales was primarily due to fixed expenses
remaining constant as net sales increased. This increase in dollar amounts was
a result of hiring personnel to support the growth of the Company's sales, in
addition to the increase in officers' compensation. While management expects
such expenses to continue to increase in connection with the anticipated
increase in sales volume, management believes that these expenses as a
percentage of net sales will not vary significantly due to management's
implementation of computer automation and other cost saving measures.
Income from operations before interest and income taxes increased by
$911,000 to $970,000 in the 1997 period from $59,000 in the 1996 period. This
is mainly attributable to the Company's significant increase in sales without a
corresponding increase in certain operating costs.
Interest expense increased by $24,000 to $37,000 for the 1997 period from
$13,000 for the 1996 period. This was due to an increase in outstanding
indebtedness.
The Company's effective income tax rate was approximately 38.4% for the
1997 period and 21.7% for the 1996 period.
For the Period from September 28, 1995 (Inception) to October 31, 1996 ("Year
1996")
The Company recorded sales revenues of $2,588,000 and realized a gross
profit of $1,774,000 (gross profit percentage of 68.5%) for the Year 1996.
Expenses for the Year 1996 totaled $1,679,000; expenses consisted of officers'
salaries and bonuses of $769,000, selling and shipping expenses of $381,000
(consisting primarily of
20
<PAGE>
shipping and marketing salaries and advertising expenses), depreciation expense
of $14,000, other corporate general and administrative expenses of $515,000,
and interest expense of $21,000. The Company had net income in Year 1996 of
$62,000 after a provision for income taxes of $12,000.
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund increased levels
of inventories and accounts receivable. The Company has funded its operations
and capital expenditures primarily through capital contributions, stockholders'
loans, income from operations and to a lesser extent, by utilizing vendor
credit and third party borrowing. At July 31, 1997, the Company had working
capital of approximately $896,000 compared to a working capital deficiency of
approximately ($41,000) at July 31, 1996.
Net cash used in operating activities was approximately $163,000 for the
nine months ended July 31, 1997, as compared to net cash provided by operating
activities of approximately $109,000 for the period from September 28, 1995
(inception) to July 31, 1996. The decrease in cash provided by operating
activities was primarily attributable to the increased levels of inventory,
accounts receivable, prepaid expenses and deposits, reduction in the balance of
accrued officers' compensation, and expenditures related to direct-response
advertising activities, offset by the increase in accounts payable and accrued
expenses, income tax payable and deferred income tax liability. The Company
generally pays its vendors within 30 days and has been able to purchase
inventory as required. Net cash used in investing activities was approximately
$97,000 for the nine months ended July 31, 1997, as compared to net cash used
in investing activities of approximately $369,000 for the period from September
28, 1995 (inception) to July 31, 1996. The cash used in investing activities
was attributable to the acquisition of furniture and computer equipment. Net
cash provided by financing activities was approximately $447,000 for the nine
months ended July 31, 1997 as compared to approximately $344,000 for the period
from September 28, 1995 (inception) to July 31, 1996. The increase was
attributable to the proceeds of advances from officers/stockholders partially
offset by the payment of notes payable and expenditures related to the planned
initial public offering of the Company's Common Stock. At July 31, 1997, the
Company had cash on hand of approximately $354,000.
On May 31, 1996, in connection with the acquisition of the land and
building owned by the Company and housing its offices and inventory to October
1997, the Company obtained a mortgage loan from a bank, payable in thirty
monthly installments of $2,000, including interest at 9.75% per annum, with a
principal payment of $240,000 at maturity on December 30, 1998. This mortgage
is collateralized by the land, building and substantially all the assets of the
Company.
In July 1997, the Company entered into the Line of Credit agreement with
FNB which expires in July 1998 and provides for borrowings up to a maximum of
$1,000,000. During August 1997, the Company drew down $400,000 under the Line
of Credit.
The Company intends to use a portion of the Line of Credit to fund its
planned expansion. Certain borrowings under the Line of Credit will be repaid
through a portion of the proceeds from the Offering.
The loan is evidenced by the Company's promissory note and secured by
UCC-1 filings giving FNB a first lien position covering all accounts
receivable, inventory, and equipment. In addition, the Company is prohibited
from pledging or encumbering the business assets or personal property securing
this loan in any manner whatsoever without the prior written consent of FNB,
except for trade indebtedness. Such indebtedness could, under certain
circumstances, limit the Company's ability to expand its operations.
Peter J. Fiscina, President and Principal Executive Officer and Albert R.
Ayala, Vice President of the Company have personally guaranteed the Line of
Credit indebtedness to FNB. Such guarantees will be released upon the Company's
registration statement becoming effective in connection with the Offering and
the Company's Common Stock being approved for listing and commencing to trade
on NASDAQ SmallCap. There can be no assurance that any such guarantee will be
available to the Company in the future or that the Company's securities will be
listed on NASDAQ SmallCap.
The Company's accounts receivable at July 31, 1997 were approximately
$963,000 as compared to approximately $488,000 at October 31, 1996. The
Company's present customer base is composed of approximately 60%
21
<PAGE>
of customers with Medicare coverage and approximately 40% of customers with
private insurance. Medicare usually makes reimbursement payments within 30 days
while private insurance companies make reimbursement payments 30-45 days.
However, in certain cases if the invoice is not reimbursed upon initial
submission, reimbursement payments may take 120 days.
A key component of the Company's business strategy is to expand its
customer base by entering into provider contracts with PPOs, TPAs, self-insured
plans, managed care programs and other similar Groups. In order to support this
expanding customer base, the Company expects to hire more personnel and will
require a larger facility to accommodate this increase, in addition to
increasing its inventory level. The Company has installed computer hardware and
software upgrades which are designed to be more efficient and which management
believes will permit accelerated collections of accounts receivable and thus
maintain collections within 90 days or less. The Company expects a shift in its
customer base from a concentration of customers with Medicare coverage to a
customer base including a greater proportion of customers with private
insurance.
The Company has entered into a contract to purchase a 35,000 square foot
building for $2,800,000. The new facility will provide space necessary to house
additional employees, store additional inventory and expand all operations
required to enable management to accommodate the Company's anticipated growth
for the foreseeable future.
The Company will utilize the proceeds of the Offering, estimated to be
approximately $2,210,000 ($2,602,000 if the Underwriters' over-allotment option
is exercised in full), to aid in purchasing the larger facility, relocating its
operations, repaying drawings under the Line of Credit, funding increases in
its inventory and accounts receivable, expanding marketing, advertising and
public relations activities aimed at attracting potential customers, and for
other working capital and general corporate purposes.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the proceeds of this Offering, together with
projected cash flows from operations and available capital resources, including
the Line of Credit, will be sufficient to satisfy its contemplated cash
requirements for at least 12 months following the consummation of this
Offering. However, if the Company's plans relating to the implementation of its
business strategy change, or the Company's assumptions regarding the
implementation of its business strategy prove to be inaccurate or the proceeds
of the Offering prove to be insufficient to fund the implementation of the
Company's business strategy and working capital requirements, the Company could
be forced to seek additional financing. There can be no assurance that
additional financing could be obtained on acceptable terms, if at all.
Inflation
The Company does not anticipate that inflation will have a material effect
on the Company's operations.
22
<PAGE>
BUSINESS
Overview
The Company markets and sells by mail order products and services for
diabetic retail customers throughout the United States. These products include
home blood glucose monitors, test strips, control solution, lancets and lancing
devices used for testing the blood sugar levels of diabetics, as well as
insulin and syringes. The Company's sales revenues are primarily generated from
reimbursements by Medicare and private insurance carriers on behalf of the
diabetic retail customers. As of September 17, 1997, the Company estimates that
it had in excess of 7,500 active customers (a customer generally being
considered active if he or she has placed and paid for orders in the last 90
days).
Persons suffering from diabetes, a chronic disease for which no cure
presently exists, must manage their disease by maintaining their blood sugar
levels as close to normal as possible. Blood testing permits diabetics to
monitor their blood sugar levels on a regular basis so that other treatment
steps, particularly the use of insulin and/or other medication, can be
administered effectively, in the appropriate dosages and at the appropriate
time intervals. Diabetics generally test their blood one to three times per
day, every day, from the time of diagnosis for the duration of their lives. The
CDC estimates that, as of 1995, 16,000,000 Americans had diabetes, of whom
approximately 8,000,000 had actually been diagnosed as suffering from the
disease. The CDC estimates that of these diagnosed diabetics, up to 10%, or
800,000 Americans, suffer from Type I insulin dependent diabetes ("IDDM") and
require daily injections of insulin. The remaining number of diabetics suffer
from Type II non-insulin dependent diabetes ("NIDDM"). Current estimates are
that more than 600,000 new cases of diabetes are diagnosed annually in the
United States.
The Company is developing its business in order to capitalize on the
continuing regulatory and marketplace changes occurring in the healthcare
industry and the opportunities presented thereby. Since inception, the Company
has primarily focused on obtaining individual IDDM customers, covered by
Medicare and private insurance. These customers have been generated through a
nationwide targeted advertising and marketing program. Presently the Company
receives approximately 60% of its sales revenues from Medicare reimbursement
and substantially all of its remaining sales revenues from private insurance
reimbursement.
The Company has recently adopted a new business strategy which emphasizes
capturing large numbers of additional customers by negotiating contracts with
Groups to provide diabetic test products to their participants. In addition to
increasing substantially its active customer base through such provider
contracts, the sale of products to Group participants is more profitable
because the Groups are self-insured or employ private insurance carriers which
provide higher reimbursement rates for test products than that provided by
Medicare. In order to promote its efforts to enter into provider contracts with
Groups, the Company has engaged two senior executives with extensive experience
and relationships in the healthcare industry. These executives will direct and
coordinate the Company's efforts to enter into such provider contracts,
pursuant to which the Company would be listed as a provider of test products
and supplies for diabetics, and participants in the contracting Groups would be
informed of, or have access to information about, the Company's products and
services. Recently, the Company has entered into provider contracts with a
leading PPO and a large TPA. Participants in these Groups are not yet customers
of the Company.
The Company is also modifying its advertising and marketing program
targeted at individuals, and positioning itself to capture substantial numbers
of additional customers who are non-insulin dependent. Effective July 1, 1998,
sales of test products to such NIDDMs become eligible for Medicare
reimbursement, in accordance with the NIDDM Provision of the Balanced Budget
Act which was recently signed into law by President Clinton. Whereas,
previously, Medicare only provided reimbursement for IDDM customers, the NIDDM
Provision expands coverage to all diabetics.
In order to increase the number of customers and to service the
anticipated growth in customers from contracting with Groups and the impact of
the NIDDM Provision, the Company is expanding its facilities and its staff. It
is anticipated that the proceeds of the Offering will help support this
expansion.
Diabetes
Diabetes is a chronic disease in which persons suffer from either a
deficiency of insulin, a hormone normally produced by the pancreas, or a
decreased ability to use insulin. Insulin allows glucose (sugar) to enter into
23
<PAGE>
body cells and be converted to energy. Insulin is also needed to synthesize
protein and store fats. In uncontrolled diabetes, glucose and lipids (fats)
remain in the bloodstream and, with time, can damage the body's vital organs,
including eyes, kidneys and blood vessels, can lead to heart disease, stroke,
kidney failure, blindness and nerve damage, and can necessitate the amputation
of the feet and legs. The American Diabetes Association estimates that diabetes
leads, annually, to 54,000 amputations, 12,000-24,000 cases of blindness and
well over 100,000 deaths. The CDC estimates that in 1992, total direct medical
costs associated with diabetes in the United States were $45 billion.
Diabetes is classified into two types: Type I insulin dependent diabetes
or IDDM which is more severe and usually develops in childhood or adolescence,
and Type II non-insulin dependent diabetes or NIDDM which tends to develop
after age 40. Persons suffering from IDDM generally produce little or no
insulin naturally and require daily doses of insulin by injection. Persons
suffering from NIDDM generally produce, but are unable effectively to use,
natural insulin. These persons are more likely than Type I diabetics to be
over-weight and to have high blood pressure and other risk factors linked to
heart disease. Type II diabetics generally are treated with oral medication
which permits more effective use of the naturally produced insulin, insulin
injection, or a combination of both, as well as diet management and exercise
plans. While diabetes is a chronic disease for which no cure exists, the
disease can be controlled and managed.
In June 1997 the American Diabetes Association issued, and federal health
agencies, including the CDC and the National Institute of Diabetes and
Digestive and Kidney Diseases endorsed, new guidelines defining the blood sugar
levels deemed to indicate diabetes and calling for substantially increased
efforts to diagnose and detect diabetes. Under the new guidelines, a blood
sugar level of 126 milligrams per deciliter (rather than 140 milligrams) will
be the basis for a diagnosis of diabetes. The new guidelines are expected to
lead to increased detection and diagnosis of diabetes in the United States.
Both Type I and Type II diabetics must manage their diseases by
maintaining their blood sugar levels as close to normal as possible.
Furthermore, both Type I and Type II diabetics must regularly test their blood.
Blood testing permits diabetics to determine their blood sugar levels on a
regular basis so that the effectiveness of behavioral treatment (e.g., diet
management, exercise and weight loss) can be assessed, and other treatment
steps, particularly required insulin doses or medication, can be administered
effectively, in the appropriate dosages and at the appropriate time intervals.
Diabetics generally test their blood one to three times per day, every day,
from the time of diagnosis for the duration of their lives.
Business Strategy and Plan
The Company is seeking to establish a multi-faceted business offering a
variety of products specifically targeted to, and desired by, the substantial
market comprised of persons suffering from diabetes. Management believes that
diabetics have a series of unique needs including the types of medical
equipment and products currently being sold by the Company and other items.
Many of the items required by diabetics are available from a variety of
sources. The Company believes, however, that most diabetics currently purchase
products on an item by item basis, from multiple vendors. By positioning itself
as a single convenient source for, and vendor of, a variety of high quality
products, available via telephone order and for reliable, timely home delivery
by mail, the Company believes that it will induce a significant number of
diabetics to become customers, and furthermore, that such customers will, on a
repetitive basis, purchase products offered by the Company.
To accomplish its goals, the Company, which has been operating for
approximately two years, has adopted a business strategy (which also
constitutes the Company's plan of operations for the remainder of the current
fiscal year (ending October 31, 1998) and for the first six months of the 1999
fiscal year), the key elements of which are described below:
o Developing additional sources of customers and increasing the number of
active customers primarily by seeking to enter into additional provider
contracts with PPOs, TPAs, and other Groups. This will serve the dual
purpose of adding customers and adjusting the overall profile of the
Company's customer list to include an increasing percentage of private
insurance customers, sales to whom tend to be more profitable, relatively
speaking, for the Company than sales to customers with Medicare coverage.
The Company will also seek to add customers by means of continued targeted
television and radio advertising.
24
<PAGE>
o Intensifying efforts to penetrate the portion of the diabetic market made up
of persons suffering from NIDDM. These persons represent an estimated 90%
or more of the overall diabetic market. The Company will continue its
efforts -- through its advertising campaigns and provider contracts -- to
add non-insulin dependent customers, particularly those with private
insurance.
o Positioning the Company to add as new customers non-insulin dependent
diabetics with Medicare coverage, commencing July 1, 1998, the date
Medicare begins to reimburse such persons for the purchase of test products
under the NIDDM Provision of the Balanced Budget Act.
o Completing the renovation, expansion and equipping of the Company's new
facility in order to accommodate the increase in sales volume already
achieved and anticipated in the future as the Company implements the
various other elements of its business strategy.
o Accommodating the demands of the increased levels of business already
achieved by the Company, and which management anticipates may be achieved
over the next 12 to 18 months, by hiring additional personnel. The Company
presently estimates that over such period, approximately 60 new employees
will be engaged, including 10 in sales and marketing, five in customer
service, three in shipping and receiving and 42 in accounting, operations,
administration and management, bringing the total number of employees to
approximately 100.
o Investigating the feasibility of developing and offering new product lines to
its customers.
Customers
Customers purchasing the Company's products pay for them by assigning to
the Company their rights to reimbursement, by Medicare and/or private insurers,
for the cost of such products. Such reimbursements represent the source of
substantially all payments to the Company for the goods it sells (and,
correspondingly, substantially all of the Company's sales revenues). See "Risk
Factors - Dependence on Reimbursement by Third Party Payors." The Company will
not accept an order for its products from, or ship products to, a customer,
unless and until the customer has established, to the Company's satisfaction,
that he or she is covered by Medicare or qualifying private insurance and
assigned to the Company his or her right to direct reimbursement by Medicare
and/or the customer's private insurer.
Under currently effective regulations, Medicare reimburses for the cost of
test products purchased by diabetics with IDDM only. Medicare, historically,
has not reimbursed, and currently does not reimburse, for the cost of test
products purchased by diabetics suffering from NIDDM.
As Medicare does not reimburse for the cost of test products purchased by
non-insulin dependent diabetics, the Company, since its inception, has marketed
its products to the estimated 800,000 diabetics suffering from IDDM and has
neither sought, nor attracted customers from the much larger number of
non-insulin dependent diabetics. Initially, the Company emphasized attracting
insulin dependent diabetics with Medicare coverage. Over time, the Company also
began to seek and accept orders from insulin dependent diabetics with private
insurance.
Commencing July 1, 1998, non-insulin dependent diabetics with Medicare
coverage will qualify for Medicare reimbursement for the purchase of diabetes
test products. See "Business-Overview" and "Business-Business Strategy and
Plan."
During the nine months ended July 31, 1997, the Company received
approximately 30% of its sales revenues from customers with Medicare coverage
only, approximately 37% of its sales revenues from customers with Medicare and
supplemental insurance coverage and approximately 33% of its sales revenues
from customers with private insurance coverage only. The Company's business
strategy is designed to increase the percentage of sales revenues received from
customers with private insurance.
Products--Diabetic Testing Products, Insulin and Syringes
The Company's core business, generating nearly all of the Company's sales
revenues to date, is the sale of products required by diabetics to conduct and
evaluate testing of their blood sugar levels. The blood sugar testing products
consist of a "lancet," used to prick the finger and obtain drops of blood for
analysis, a "lancing
25
<PAGE>
device," which houses and fires the lancet into the finger, a "strip," on which
an extracted drop of blood is placed, a "control solution," placed on the strip
to test the meter's accuracy, and a blood glucose monitor or "meter," which
reads the drop of blood on the strip and provides a blood-sugar level result.
All five of these test products are marketed and sold by the Company. In
addition, the Company also markets and sells insulin and syringes required by
diabetics with IDDM. Revenues from the sale of insulin and syringes, however,
represent an insignificant portion of the Company's total sales revenues.
The Company offers a variety of meters purchased from four major
manufacturers of such devices. Meters generally have a useful life of one to
five years, and some first time customers of the Company who have been
purchasing test products from other vendors choose to continue using the meter
they already own. In many cases, customers requiring new meters purchase a
model recommended by their physicians. In other cases, the Company's telephone
representatives discuss with a customer the available models of meters and help
the customer determine which to purchase.
Each model of meter requires use of a particular "model-unique" test
strip. Manufacturers of meters also manufacture the test strips to be used with
their meters. Test strips and lancets are used only once, and, therefore, are
ordered by customers on a continuing and repetitive basis. The Company sells
test strips and lancets in boxes of 100 each (or, for diabetics requiring less
frequent testing, 50 each).
Customers generally order control solution on an "as needed" basis.
Lancing devices typically have a useful life of approximately six months, and
customers generally replace their lancing devices accordingly.
Order and Purchase Procedures
Prospective customers of the Company, responding to television or radio
advertisements or learning of the Company's products through their Group, are
directed to call a toll-free "800" phone number for information about the
Company's products and to place orders.
Callers speak to trained Company telephone representatives who complete an
information sheet which commences the Company's internal qualification process.
This process must be completed before the customer is accepted by the Company
and test products and/or insulin and syringes can be shipped. Elements of this
process include (i) verification of Medicare and/or private insurance coverage,
including any supplementary coverage, (ii) verification of the customer's
physician's professional identification number, (iii) receipt from the
physician of a certificate of medical necessity and "doctor's order," and (iv)
receipt from the customer of an assignment of payment form. The "doctor's
order" confirms the customer's insulin dependency (in the cases of customers
with Medicare or certain types of private insurance), ability to use the test
products, type and quantity of insulin used (where applicable) and amount of
daily testing required.
The Company's customer list, which as of September 17, 1997 included in
excess of 7,500 active customers, is currently composed almost entirely of
insulin dependent diabetics with Medicare and/or qualifying private insurance.
Under current regulations, non-insulin dependent diabetics with Medicare
coverage are not entitled to Medicare reimbursement for diabetes test products.
For this reason, the Company generally has not sold products to persons
suffering from NIDDM (although the Company has sold products, on a very limited
basis, to persons with NIDDM who maintain qualifying private insurance).
Additionally, the Company does not presently and has no plans to sell products
to the portion of the population enrolled in HMOs. Under the NIDDM Provision of
the Balanced Budget Act, effective July 1, 1998, all Medicare recipients
diagnosed with diabetes, whether or not insulin dependent, will qualify for
Medicare reimbursements for diabetes test products. At that time, the Company
expects to commence sales of test products to all diabetics with Medicare
coverage.
Once the Company has received the certificate of medical necessity and/or
doctor's order, has verified the customer's insurance coverage, and has
received from the customer a signed assignment of payment form, the Company
will accept the customer's order and ship test products and/or insulin and
syringes. Typically, the time frame from first call by a new customer to
shipment of and billing for such customer's first order is between 14 and 21
days. Generally, all test products are included in the first order (although
some first time customers who have been purchasing test products from other
vendors do not order meters, choosing instead to continue using the meters they
already own). Thereafter, replacement supplies are automatically shipped
periodically, based upon the customer's testing needs.
26
<PAGE>
The Company, at its facility, maintains product inventory in quantities it
believes to be sufficient to meet customer demand. The Company's desire to
maintain sufficient inventory as its customer list expands and sales increase
represents one factor motivating the Company's physical expansion and
relocation. See "Business--Properties." See also "Risk Factors -- Dependence on
Suppliers of the Company's Products." Orders are filled at and shipped from the
Company's facility. All telephone representatives, marketing and customer
service personnel, shipping and receiving personnel, and accounting, billing,
management and other personnel are located at the Company's facility (see
"Business--Employees").
Shipping, Billing and Payment Procedures
Upon completion of a customer's file and approval of the customer's order,
the Company ships the products ordered to the customer by U.S. mail. Payment
for supplies shipped to customers covered by Medicare or private insurance is
made pursuant to the customer's assignment to the Company of the customer's
right to Medicare or other insurance reimbursement.
Upon shipment of products to a customer, the charges therefor are entered
into the Company's billing system. Invoices are generated and delivered
promptly upon acceptance of the order and shipment of products. Most invoices
for payment, whether by Medicare or private insurers, are transmitted
electronically. Accepted Medicare invoices are generally paid within 15 to 30
days of the invoice date, and most approved private insurance invoices are paid
within 30 to 45 days of the invoice date. Invoices not paid upon initial
submission typically require up to 120 days for collection. A small amount of
accounts receivable prove to be uncollectible for a variety of reasons.
During May and June 1997, the Company entered into provider contracts with
a PPO and a TPA. See "Business -- Provider Contracts." Because the first
shipments of test products to participants in such Groups were made only in
October 1997, the Company cannot, as of the date of this Prospectus, determine
the typical period for collections of accounts receivable generated by sales to
such participants.
Reimbursement
Under current regulations, Medicare will reimburse 80% of the "allowable
amount" for the purchase of test products once the customer's annual deductible
has been met. The "allowable amount" is the lower of the submitted charge or
the state fee schedule based upon the beneficiary's state of residence. Under
present rules, the state fee schedules are updated annually by HCFA. Those
Medicare beneficiaries also holding supplementary private insurance pay all or
a portion of the remaining 20% of the "allowable amount" through such
supplementary coverage. Those Medicare beneficiaries without supplementary
coverage are personally responsible for the remaining 20%. Because Medicare
will not reimburse for the cost of insulin and syringes, diabetics purchasing
insulin and syringes from the Company are responsible for payment for these
items, either directly or through private insurance. Sales of insulin and
syringes account for an insignificant portion of the Company's total sales
revenues.
The terms of private insurance policies vary widely, with differences
existing in such areas as products covered, reimbursement rates and
deductibles. For this reason, the Company carefully examines (using its own
qualification standards) the terms of policies held by prospective customers
for whom private insurance provides the primary reimbursement source. Among
other qualification standards which customers must meet, the Company will only
sell products to persons whose primary source of reimbursement is private
insurance if their deductible is less than a specified amount set from time to
time by Company management (currently $300). Typically, however, qualifying
private insurance reimburses for test products at a rate of 80% of the "usual
and customary" price for the products as determined by such private insurers
pursuant to their own fee schedules. These prices have generally been higher
than the "allowable amount" established by the HCFA fee schedule. Accordingly,
private insurance reimbursements for products sold to private insurance
customers are generally higher than Medicare reimbursements for the same
products, making sales to private insurance customers generally more profitable
to the Company than sales to Medicare customers. For this reason, one component
of the Company's business strategy (see "Business--Business Strategy and Plan")
is to increase the percentage of the Company's total customer list made up of
non-Medicare customers.
27
<PAGE>
Sales and Marketing
The Company, historically, has generated sales of test products and
insulin and syringes by advertising for its products on television and radio
(and, to a much lesser extent, in print media). The advertising, aimed at
individual insulin dependent diabetics with Medicare or qualifying private
insurance, promote the safety and reliability of the products distributed by
the Company, the available automatic re-ordering and shipping of the test
products, the convenient and reliable delivery by mail of the products, and the
Company's services in processing and obtaining insurance reimbursements (thus
relieving customers of this administrative burden). Interested prospective
customers are directed to call a toll-free "800" phone number for more
information. The phone number is staffed with eight trained Company telephone
representatives who discuss with callers the callers' needs, commence the order
and sale process and/or answer callers' questions, including questions about
the use of purchased products. See "Business--Products--Diabetes Testing
Products, Insulin and Syringes" and "Business--Order and Purchase Procedures."
The Company's advertising campaigns are designed to reach and attract the
interest of audiences likely to include higher concentrations of diabetics. The
campaigns are designed and placed by Coastline Media, Inc., a company 90% owned
by Peter J. Fiscina and Myron M. Blumenthal, both of whom are officers,
directors and principal shareholders of the Company. See "Certain Relationships
and Related Transactions." See also "Risk Factors--Competition." The Company
also produces and makes available to current and prospective customers flyers,
brochures and other literature concerning diabetes in general and the specific
products sold by the Company.
The Company has entered into two provider contracts with a PPO and a TPA,
respectively, and seeks additional contracts to provide test products and
insulin and syringes to participants in PPOs, TPAs and other Groups. See
"Business--Provider Contracts." Upon entry into such contracts, the Company is
listed as a provider of diabetic supplies and participants are informed of such
status. Additionally, the Company will seek to promote, and will encourage the
Groups with which it enters into provider contracts to promote, to Group
participants, the Company's goods and services.
The Company's telephone representatives discuss with callers their
diabetes testing needs, answer their questions about insurance reimbursement,
describe the Company's products and services, and direct callers through the
process of ordering supplies, verifying insurance coverage and obtaining
necessary certificates of medical necessity. Additionally, three trained
customer service representatives are available to discuss with customers the
manufacturer's recommended use of products.
The Company does not depend on any one or a limited number of customers
for a material portion of its sales.
Provider Contracts
The continuing growth in the size and purchasing power of Groups, leads
the Company's management to believe that provider contracts with such Groups
will increasingly represent an important source of new customers to the
Company. Accordingly, as part of its business strategy, the Company seeks to
enter into provider contracts with Groups, pursuant to which the Company would
be listed as a provider of test products and supplies for diabetics, and
participants in the contracting Groups would be informed of, or have access to
information about the Company's products and services.
In May 1997, the Company entered into a non-exclusive, two year provider
contract (the "Provider Contract") with a leading, nationally recognized PPO
(the "Contracting PPO"). The Contracting PPO provides a network of providers of
medical services and products to its member Groups (which include a large
number of TPAs, self-insured plans, managed care programs and other similar
groups). Pursuant to the Provider Contract, the Company is listed by the
Contracting PPO as a provider of supplies for diabetics, and the Contracting
PPO informs its member Groups that supplies for diabetic participants in such
Groups are available from the Company. Interested member Group participants are
directed to call the Company's toll-free "800" number and, subject to the same
verification and qualification procedures applicable to all customers of the
Company, may order supplies from the Company and pay for them through
reimbursement by, and in accordance with the terms of, such participants'
Medicare and/or private insurance coverage.
28
<PAGE>
The Provider Contract provides the Company with a new and potentially
important source of Medicare and non-Medicare customers suffering from either
IDDM or NIDDM. Although the Company cannot predict with certainty the number of
new customers which may be generated through the Company being included in the
Contracting PPO's network of providers, management believes that the Provider
Contract could provide a significant number of new customers. See "Risk
Factors--The Company May Not Be Successful in Contracting with Managed Care
Programs." The Company endeavors to encourage representatives of the
Contracting PPO and of its member Groups to publicize the Company's goods and
services to member Group participants. These efforts include entering into
separate provider contracts with Groups who are members of the Contracting PPO.
However, the Contracting PPO and its member Groups have the legal right to, and
may, enter into provider contracts with other vendors of products for
diabetics, and there can be no assurance that the Contracting PPO or its member
Groups will effectively promote the Company's goods and services to their
participants. Furthermore, participants in Groups who are members of the
Contracting PPO will continue to have the option of purchasing products from
pharmacies included in the Contracting PPO's network of providers. See "Risk
Factors--The Company May Not Be Successful in Contracting with Managed Care
Programs."
In June 1997, the Company entered into a five year provider contract with
a TPA affiliated with the Contracting PPO. The Company estimates that this TPA
administers health plans covering the approximately 500,000 participants of
whom, based on national statistics, up to 25,000 might be expected to suffer
from diabetes. Although this TPA retains the legal right to enter into provider
contracts with other providers of diabetic products, and although this TPA's
participants continue to have the option of purchasing diabetic products from
pharmacies, the Company believes (although there can be no assurance) that a
significant number of this TPA's diabetic participants could become customers.
See "Risk Factors--The Company May Not Be Successful in Contracting with
Managed Care Programs."
Suppliers
The Company purchases its diabetic supplies from third party manufacturers
and distributors. Two manufacturers accounted for 62% and 16%, of the Company's
purchases during the year ended October 31, 1996. Two manufacturers accounted
for 62% and 11%, of the Company's purchases during the nine months ended July
31, 1997.
The Company has entered into supply contracts with three major
manufacturers of diabetic test products. Management believes that these
contracts will provide the Company with a reliable source of inventory at
predictable and stable costs.
The Company has never experienced an availability shortage in the medical
equipment and products it sells or an inability to fill customers' orders,
although there can be no assurance that such products will not become
unavailable or more costly in the future. See "Risk Factors--Dependence on
Suppliers of the Company's Products." The Company intends to use a portion of
the proceeds from this Offering to enable it to increase its inventory on hand
to an eight week supply, in part to protect the Company against potential
temporary supply disruptions.
Competition
Numerous vendors sell products and services to diabetics on a national,
regional and local basis, and the market for the sale of medical products for
diabetics is highly fragmented. Sales are conducted by many different methods,
the nature of the Company's competitors is varied, and the barriers to entry
into the business are low. See "Risk Factors - Competition."
The test products and insulin and syringes sold by the Company to
diabetics are available for purchase from national retail chain stores and
pharmacies, such as Price Club, K-Mart, Wal-Mart, CVS/Revco and RiteAid, as
well as from regional chains and local pharmacies. Many of the national and
regional chains are, and some of the local pharmacies may be, more
well-established, larger and better financed than the Company, and are able to
use their visibility and substantial marketing resources to attract customers
with diabetes. However, these retail outlets generally do not offer customers
personalized attention in determining their needs. Furthermore, the
29
<PAGE>
Company, unlike most of these retail outlets, accepts assignments of customers'
rights to insurance reimbursement, and processes insurance claims, relieving
customers of the burden of preparing and confirming the documentation needed to
obtain reimbursement. For the same reason, customers of the Company are not
required to make payments out of pocket in order to receive products (other
than certain co-insurance and deductible amounts), unlike customers of retail
outlets. Additionally, because the Company accepts orders for products over the
telephone and delivers them (on an automatic repetitive basis where requested),
by mail, directly to the customer, management believes that the Company also
has important advantages over retail stores in terms of convenience of use by
customers.
The Company also faces competition from other mail order companies and
from home healthcare companies who provide similar products and services to
customers. The Company, as of September 17, 1997, serviced in excess of 7,500
active customers (a customer generally being considered active if he or she has
placed and paid for orders in the last 90 days). Management believes that a
number of companies serve significantly larger numbers of customers than does
the Company, a greater number of companies serve a similar number of customers,
and a sizable number of companies serve a small number of customers. Certain of
the Company's mail order competitors may be better established, larger and
better financed than the Company. Key competitors providing mail order, home
delivery and/or insurance claim processing services include Liberty Medical,
Diabetes Support Services, Ideal Diabetic, Diabetes Control Center, Universal
Self-Care and Transworld Home Healthcare.
Furthermore, a much larger number of vendors engage in the sale,
distribution, and delivery of medical products and equipment and other consumer
goods. Many of these vendors may already possess the facilities, supplier
relationships, administrative and management ability, distribution networks,
financial and human resources, and experience to enter the business of mail
order delivery of diabetic test products. Management believes that competition
could become even more vigorous in coming months.
Part of the Company's business strategy focuses on the establishment of
contractual relationships with PPOs, TPAs and other Groups. See
"Business--Business Strategy and Plan", and "Business--Provider Contracts". The
Company is aware that competitors in the industry also are seeking to enter
into such contractual relationships. In many cases, competitors for such
contracts may have far greater management, human, and financial resources than
the Company for entering into such contracts. See "Risk Factors--The Company
May Not Be Successful in Contracting With Managed Care Programs" and "Risk
Factors--Competition."
As a general matter, the Company and its competitors have access to and
market the same or similar diabetic test products. Furthermore, since customers
pay for products through insurance reimbursement, and the amounts of such
reimbursements are determined by HCFA and private insurers, the Company and its
competitors sell products at substantially similar prices. Accordingly, the
Company and its competitors do not generally compete with each other based on
the quality of the goods they sell or the prices for which they sell such
goods.
The key competitive factors for the Company and other suppliers of
diabetes products are the quality of service to customers, the scope and
effectiveness of marketing efforts, including media advertising campaigns and,
increasingly, the ability to develop new sources of customers through such
means as obtaining and servicing provider contracts with Groups. See "Risk
Factors -- Competition."
Employees
At September 15, 1997, the Company employed 37 people. All such employees
are engaged by the Company through an independent contractor providing employee
leasing services to businesses. Of these persons, eight are in sales and
marketing, three are in customer service, five are in shipping and receiving
and 21 are in accounting, operations, administration and management. The
Company's personnel are not governed by any collective bargaining agreement and
the Company believes that its relationship with its personnel is good. The
Company believes that its wages and benefits, which reflect local conditions,
are competitive with those provided by major area employers. All of the
Company's hourly staff is currently paid wages on a basis that exceeds the
current, and federally mandated increases in, the minimum wage. The Company
believes it would not be materially impacted by future increases in the minimum
wage.
30
<PAGE>
Properties
The Company presently occupies a 35,000 square foot facility (the
"Facility") located at 2373 N. Horseshoe Drive, Naples, Florida 34104. The
Facility houses the Company's executive offices as well as all of the Company's
operations and inventory. The Company relocated to the Facility on October 10,
1997, and presently occupies the Facility pursuant to a short-term lease (the
"Facility Lease") expiring December 15, 1997, and providing for a rental
payment of $10,000 per month. The Facility is adequate to meet the Company's
needs.
In July 1997, the Company entered into an agreement to purchase the
Facility for a price of $2,800,000. The Company has delivered to the seller of
the Facility a non-refundable deposit in the amount of $280,000. The closing of
the purchase and sale of the Facility is scheduled for December 15, 1997, the
date of the expiration of the Facility Lease.
On or about September 1, 1997, the Company entered into an agreement for
the first phase of renovations at the Facility. The first phase of renovations
including installation of telecommunications and information systems, commenced
in September 1997, and was completed on October 10, 1997. The cost of such
renovations was approximately $700,000. Management anticipates that an
additional phase of renovations will commence in January 1998.
Should the purchase and sale of the Facility not be completed by December
15, 1997, and should the seller of the Facility not extend the date for the
closing of the purchase and sale and not extend the lease of the Facility, the
Company could lose its entire investment in the Facility including the purchase
price deposit and the amounts paid for renovation, and, further, could lose its
right to occupy the Facility. See "Use of Proceeds" and "Risk
Factors--Inability to Complete the Purchase of New Facility."
Prior to occupying the Facility, the Company operated from a 7,000 square
foot building (the "Former Premises") located at 1951 J&C Boulevard, Naples,
Florida 34109-6215. The Company purchased the Former Premises from Two Oaks
Realty ("Two Oaks"), a partnership owned by Peter J. Fiscina and Albert R.
Ayala, both officers, directors and principal stockholders of the Company. See
"Certain Relationships and Related Transactions." The Company acquired the
Former Premises from Two Oaks in May 1996 for $320,000, the amount of the
original purchase price paid by Two Oaks plus the costs of renovations of the
Former Premises incurred by Two Oaks.
In connection with the purchase of the Former Premises, the Company
obtained a mortgage loan in the amount of $250,000, secured by a lien on the
Former Premises and other assets of the Company. The loan is payable in monthly
installments of $2,000, including interest at 9.75% per annum with a principal
payment of $240,000 at maturity on December 30, 1998. The Company intends to
sell the Former Premises prior to the maturity of such mortgage loan.
Tradenames
The Company has applied for federal trademark protection for the name
Certified Diabetic Supplies and for its logo.
Government Regulatory Matters
The healthcare industry, including the sale of diabetes products and
services, is subject to governmental regulation on both federal and state
levels. See "Risk Factors--Changes in Government Regulation May Have an Adverse
Effect on Operations."
Third-Party Reimbursement. Medicare is a government funded health
insurance program which provides federally-funded health insurance coverage for
persons age 65 or older and for certain disabled persons. Medicare Part B
provides reimbursement for certain of the services, supplies and items provided
by the Company, with such reimbursement for the cost of the services and
supplies which the Company provides being subject to extensive regulation. The
levels of reimbursement paid or payments made by such programs are often lower
than the levels of reimbursement paid by other third-party payors, such as
traditional indemnity insurance companies. See "Risk Factors--Dependence on
Reimbursement by Third Party Payors."
31
<PAGE>
The Company accepts assignment of Medicare claims, as well as claims with
respect to other third-party payors, on behalf of its customers whenever the
reimbursement coverage is adequate to ensure payment of the customer's
obligations. The Company processes its customers' claims, accepts payment at
scheduled rates, and assumes the risks of delay or nonpayment for inadequately
documented sales or services which are determined by the third-party payor as
being medically unnecessary. The Company employs the administrative personnel
necessary to transmit claims for product cost reimbursements directly to
private health insurance carriers, and seeks payment for any unreimbursed costs
directly from customers. No assurance can be given that a significant number of
future requests for reimbursement will not be denied, although the Company
believes that its policies, procedures, and prices currently minimize this
risk.
Like other healthcare companies, the Company's sales revenues and
profitability are adversely affected by the continuing efforts of third-party
payors (including Medicare and managed care companies) to contain or reduce the
costs of healthcare by lowering reimbursement rates, increasing case management
review of bills for services and negotiating reduced contract pricing. As
expenditures in the home healthcare market continue to grow, initiatives aimed
at reducing the costs of product and service delivery in that market are
increasing. See "Risk Factors--Changes in Governmental Regulation May Have an
Effect on Operations" and "Risk Factors--Dependence on Reimbursement by Third
Party Payors."
Medicare Program. The Company is a registered Medicare Part B supplier. As
a Medicare supplier, the Company can provide equipment and supplies to Medicare
beneficiaries, and obtain reimbursement directly from the Medicare durable
medical equipment regional carriers. HCFA sets guidelines for the types and
quantities of equipment and supplies, the costs of which are reimbursable under
the Medicare program. In the event that full reimbursement is not obtained
through Medicare, customers are personally responsible for full payment either
through supplementary private insurance coverage or otherwise.
State Licensing and Regulation. Certain operations of the Company may be
subject to state and local regulation. Management believes that all of the
Company's present operations are substantially in compliance with such state
and local laws and regulations. To the extent the Company engages in new
activities, the cost of compliance with applicable state and local regulations
and licensing requirements cannot be determined with any certainty at this
time.
Product Liability and Insurance
The Company maintains insurance coverage which it generally believes to be
adequate. However, the nature of the Company's business may subject it to
product liability lawsuits. The Company maintains product liability insurance
in the amount of $1,000,000. To the extent that the Company is subject to
claims which exceed its liability insurance coverage, such suits could have a
material adverse effect on the Company. No such lawsuits are pending or, to the
Company's knowledge, threatened against the Company and the Company has not
experienced any material losses from such lawsuits in the past. See "Risk
Factors--Product Liability; Adequacy of Insurance."
Legal Proceedings
The Company is not a party to any material pending legal proceedings and
is not aware of any threatened material legal proceeding.
32
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- ----- --------
<S> <C> <C>
Peter J. Fiscina ......... 62 President, Principal Executive Officer, Director
Albert R. Ayala ......... 55 Vice President, Director
Myron M. Blumenthal ...... 65 Treasurer, Principal Financial Officer, Director
Joseph L. Marotta ......... 64 President of Medicalco
Ronald G. Hersch ......... 52 President of Healthco
Stanley Bloom, M.D. ...... 59 Director
Ronald L. Rucker ......... 55 Director
</TABLE>
- ------------
Peter J. Fiscina. Mr. Fiscina is a co-founder of the Company and has served as
its President, Principal Executive Officer, Secretary and as a director since
its inception in September 1995. From July 1994 to September 1995 Mr. Fiscina
served as President of PF Development of Collier, Inc., a diabetic supply
business similar to that of the Company. From February 1992 to December 1994,
Mr. Fiscina served as the President of PF Development of Southwest Florida,
Inc., a sub-franchisor for Country Kitchen Restaurants in Southwest Florida.
From 1965 to 1990 Mr. Fiscina was the President and sole stockholder of Peters
Best Beef Products Ltd., of Farmingdale, New York, a company engaged in the
manufacture and wholesaling of meat products. In August 1989, Peters Best Beef
Products Ltd. filed for protection under Chapter XI of the federal bankruptcy
laws, and in June 1990, it filed for liquidation under Chapter VII of the
federal bankruptcy laws. Mr. Fiscina is also a principal shareholder in and the
President of Coastline Media, Inc. See "Risk Factors--Prior Activities of Peter
Fiscina" and "Certain Relationships and Related Transactions."
Albert R. Ayala. Mr. Ayala is a co-founder of the Company and has served as its
Vice President and as a director since its inception in September 1995. From
July 1994 to September 1995, Mr. Ayala served as Vice President in charge of
sales and shipping for PF Development of Collier, Inc. From 1985 to July 1994,
Mr. Ayala was the owner, and served as President of Ayala Companies, Inc. d/b/a
Electro-Bake Auto Painting, Inc., custom auto paint shops located in Southwest
Florida.
Myron M. Blumenthal. Mr. Blumenthal has served as the Company's Treasurer,
Principal Financial Officer, and as a director since October 1995. Mr.
Blumenthal is a Certified Public Accountant and was engaged in private practice
from 1965 through 1995. Since 1986, Mr. Blumenthal has served as Chairman of
the Board of Select Resources, PLC, a British company that, between 1988 and
1992, sought to invest in oil and gas properties in the United States. Conduct
of such activities was contingent upon raising sufficient capital pursuant to a
securities offering. The offering was never completed, and the Company has been
inactive since 1992. Mr. Blumenthal is also a principal shareholder in and
officer of Coastline Media, Inc. See "Certain Relationships and Related
Transactions."
Joseph L. Marotta. Mr. Marotta has served as the President and a director of
CDS Medical Supplies, Inc., a subsidiary of the Company, since it commenced
activities in May 1997. Mr. Marotta has, for more than 20 years, been the
President of and a principal in Marotta Associates, an insurance agency. On
October 17, 1996 Mr. Marotta filed a petition for bankruptcy protection, which
petition was discharged on February 11, 1997.
Ronald G. Hersch. Mr. Hersch has served as President of the Company's Healthco
subsidiary since September 15, 1997. From November 1996 through September 1997,
Mr. Hersch served as Executive Vice President and Chief Marketing Officer of
Multiplan, Inc., a preferred provider organization located in New York City,
with responsibility for product development, sales and client services. During
this period, Mr. Hersch also served as President and Chief Operating Officer of
Everest Healthcare Management, Inc., an affiliate of Multiplan, Inc. From
August 1994 to November 1996, Mr. Hersch was Vice President of the Managed Care
Division of Comprehensive Care Corporation, Tampa, Florida (as well as
President of a subsidiary thereof). From 1991 through 1993, Mr. Hersch was
first Clinical Director, and then Director of Mental Health Product Development
for Private Healthcare Systems, Inc. of Waltham, Massachusetts.
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<PAGE>
Stanley Bloom, M.D. Dr. Bloom, a medical doctor, has been a director of the
Company since October, 1997. Dr. Bloom is a partner in Physicians in Urology,
P.A. of Livingston, New Jersey and has been engaged in private practice in the
field of urology since 1970. He is currently affiliated with the University of
Medicine and Dentistry, Newark, New Jersey, St. Barnabus Medical Center,
Livingston, New Jersey, and Overlook Hospital, Summit, New Jersey. Dr. Bloom
is, among numerous certifications, a member of the American Association of
Diabetic Educators, and has lectured extensively, particularly in the area of
diabetes and sexual dysfunction. Dr. Bloom is married to Mr. Fiscina's
sister-in-law.
Ronald L. Rucker. Mr. Rucker has served as a director of the Company since
October 1997. Mr. Rucker, since 1994, has been Senior Vice President,
Commercial Lending, for First National Bank of Naples. From 1989 through 1994,
Mr. Rucker was Vice President, Commercial Lending, for the same bank.
Audit Committee
The Board of Directors has established an audit committee to be comprised
of three members to be designated as of the consummation of the Offering, two
of whom will be independent. The audit committee is to be responsible for
making recommendations concerning the engagement of the independent public
accountants, approving professional services provided by the independent public
accountants and reviewing the adequacy of the Company's internal accounting
controls.
Executive Compensation
The following table sets forth the compensation paid to the Principal
Executive Officer and the two other executive officers whose annual salary and
bonus exceeded $100,000 for services rendered in all capacities to the Company
for the fiscal years ended October 31, 1996 and October 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------------------------- -------------
Other Annual Securities All Other
Name and Fiscal Compensation Underlying Compensation
Principal Position Year Salary($) Bonus($) $(1) Options(#) ($)
- ------------------------------- -------- ----------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Fiscina 1997 150,000 (2) -- 1,000,000 --
President, Principal Executive
Officer 1996 150,000 207,000 -- 2,000,000 --
Albert R. Ayala 1997 100,000 (2) -- 100,000 --
Vice President 1996 100,000 106,000 -- 1,000,000 --
Myron M. Blumenthal 1997 100,000 (2) -- 1,000,000 --
Treasurer, Principal Financial
Officer 1996 100,000 106,000 -- 1,000,000 --
</TABLE>
- ------------
(1) Other annual compensation in the form of perquisites and other personal
benefits has been omitted because the value of such perquisites and other
personal benefits provided by the Company did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus for the named
executive officer for such year.
(2) Pursuant to the terms of their employment agreements with the Company,
Messrs. Fiscina, Ayala and Blumenthal are entitled to receive bonuses in
accordance with a formula based on the Company's annual sales and earnings
before interest, taxes, depreciation and amortization ("EBITDA") for any
fiscal year. The total amount of such bonus payable to Messrs. Fiscina,
Ayala and Blumenthal in respect of the fiscal year ended October 31, 1997
is not calculable as of the date hereof. The Company pays portions of such
bonuses in respect of each quarter during the fiscal year based on results
for the quarter. However, the final determination of the aggregate amount
of the bonus for the fiscal year is not made until after completion of the
independent audit of the Company's financial statements as of the end of
the fiscal year. Messrs. Fiscina, Ayala
34
<PAGE>
and Blumenthal have received bonuses in respect of the first three quarters
of fiscal year 1997 in the respective aggregate amounts of $225,000,
$150,000 and $150,000. The employment agreements also specify that the
Company's Board of Directors may award other cash bonuses from time to time
based upon the Company's growth and success. As of July 31, 1997, no such
discretionary bonuses had been awarded to Messrs. Fiscina, Ayala and
Blumenthal in respect of the fiscal year ended October 31, 1997. It cannot
be determined as of the date hereof whether the Board of Directors will
award any discretionary bonuses in respect of the fiscal year ended October
31, 1997.
Employment Contracts and Termination of Employment
Messrs. Fiscina, Ayala and Blumenthal
Peter J. Fiscina, Albert R. Ayala and Myron M. Blumenthal (each of Mr.
Fiscina, Mr. Ayala and Mr. Blumenthal are herein referred to as "Executive")
are employed under five-year employment agreements with the Company, each
terminating on October 31, 2000.
The employment agreements require the Executives to devote their entire
time, energy and skill to the Company, while acknowledging that the Executives
have other business interests and serve as directors of other businesses, and
confirming that such activities shall be permitted. Each of the Executives also
agrees, while an employee of the Company and for two years thereafter, not to
compete with the Company, not to solicit customers and clients of and other
persons with relationships with the Company, and not to solicit any employees,
agents or representatives of the Company in an effort to cause such persons to
become employees, agents or representatives of any competitor of the Company.
There can be no assurance that a court would enforce such restrictive
covenants.
The employment agreements provide for the payment to Messrs. Fiscina,
Ayala and Blumenthal of annual base salaries of $150,000, $100,000 and
$100,000, respectively. Each executive is also entitled to annual incentive
bonus compensation based upon minimum annual sales and EBITDA targets. See Note
2 to "Summary Compensation Table."
If, at the conclusion of the five-year terms, the agreements are not
extended or replaced with new agreements solely because the Company has failed
to negotiate to do so in good faith, the Executive is entitled, for a period of
one year following termination, to receive an amount equal to his highest
annual compensation (including all bonus compensation), payable in the same
manner his salary was paid to him while he was employed.
In the event of Executive's death, Executive's heirs, personal
representatives or estate are entitled to receive his salary for a period of
one year after death, accrued benefits and bonuses up to the date of
termination, and any benefits which, in accordance with the terms of the
corresponding benefit plans, would continue to be paid following termination.
Upon Executive's continuing disability (for more than three consecutive
months or for periods aggregating four months during any six month period), the
Company may terminate the employment agreement, and Executive will be entitled
to receive, for one year following the onset of the disability, base salary
less any disability insurance proceeds received from any disability plan
provided by the Company, as well as any accrued benefits and bonuses up to the
date of termination, and any benefits which, in accordance with the terms of
the corresponding benefit plans, would continue to be paid following
termination. If the Company terminates the agreement with Executive for cause,
Executive will be entitled to receive two weeks' salary as severance.
If the Company terminates Executive for reasons other than death,
disability or cause, Executive is entitled to receive the balance of the
compensation otherwise due under the employment agreement, but in no event less
than an amount equal to two years' compensation as provided in the employment
agreement, plus one year of severance pay in an amount equal to his highest
annual compensation, including all bonus compensation.
Ronald G. Hersch
The Company has entered into a three year employment agreement with Ronald
G. Hersch. The agreement, which terminates September 14, 2000, requires Mr.
Hersch to devote his entire time, energy and skill to the
35
<PAGE>
Company, while acknowledging that Mr. Hersch is serving as a consultant to a
large PPO and confirming that such consulting activities shall be permitted.
Mr. Hersch is expected to lead, in coordination with Joseph L. Marotta, the
Company's efforts to obtain additional provider contracts with Groups, and to
manage, together with the Company's other senior executives, the business
arising out of such provider contracts.
Mr. Hersch also agrees, while an employee of the Company and for two years
thereafter, not to compete with the Company, not to solicit customers of the
Company, and not to solicit any employees, agents or representatives of the
Company to become employees, agents or representatives of others, or otherwise
interfere with such persons' relationships with the Company. There can be no
assurance that a court would enforce such restrictive covenants.
The employment agreement provides that Mr. Hersch will receive an annual
base salary of $250,000 per year. Mr. Hersch will also be entitled to receive
annual incentive bonus compensation based upon certain targets for new
customers attracted through the provider contracts arranged by or with the
participation of Mr. Hersch.
Simultaneously with entry into the employment agreement, the Company
granted Mr. Hersch options to purchase 150,000 shares of Common Stock. The
options, which are exercisable at the price of $9.00 per share, vest five years
after the date of grant provided, however, that the options are subject to
earlier vesting, in specified increments, based on certain targets for new
customers attracted through provider contracts obtained by or with the
participation of Mr. Hersch. Pursuant to the terms of the stock option
agreement between the Company and Mr. Hersch, Mr. Hersch's rights to the
options, to the extent not exercised, terminate on the tenth anniversary of the
date of grant or, if sooner, three months after Mr. Hersch's termination as an
employee of the Company for any reason (but one year following termination by
reason of death or disability).
At the conclusion of the initial three year term of employment, the
Company and Mr. Hersch are to negotiate a new contract or an extension of the
existing agreement. If they fail to reach such an agreement, Mr. Hersch will be
entitled to one-half his annual base compensation (excluding bonus or any other
benefits) for a period of six months following termination of the initial three
year term. Furthermore, if the Company terminates Mr. Hersch other than for
cause or by reason of disability or death, Mr. Hersch will be entitled to the
balance of the compensation which would have been payable under the terms of
the agreement, but in no event less than six months' compensation (including
bonuses and benefits).
If Mr. Hersch dies after the first year of the term and prior to the
term's conclusion, the agreement shall terminate, and the Company shall pay to
Mr. Hersch's estate or heirs base salary for a period of one year following
death, accrued benefits and bonuses through the date of death, and certain
other benefits. If Mr. Hersch becomes disabled after the first year of the term
and prior to the term's conclusion, and such disability continues for three
consecutive months or for an aggregate of four out of any six months, the
Company may terminate the agreement, and Mr. Hersch will be entitled to receive
his base salary, less the amount of any disability insurance proceeds received
from any Company funded disability policy, for a period of one year from the
date of the disability's onset, plus any accrued benefits and bonuses through
the date of termination, and certain other benefits.
Joseph L. Marotta
The Company has entered into a one year employment agreement dated
February 14, 1997 with Joseph L. Marotta pursuant to which Mr. Marotta has
agreed to devote his business time and attention to the Company. Mr. Marotta
(together with Ronald G. Hersch) is responsible for the Company's efforts to
obtain and enter into provider contracts with Groups. The Company acknowledges
that Mr. Marotta is a principal in Marotta Associates, an insurance services
firm, and confirms that his activities relating to such position are permitted.
The initial term of his agreement is automatically renewable for successive
one-year periods unless either party to the contract elects not to so renew the
term. Under the agreement, the Company has agreed to pay to Mr. Marotta a base
salary of $65,000 per annum plus monthly commissions equal to $0.50 for each
customer of the Company (a) who is a participant in a Group with which the
Company has entered into a provider contract through, or with the assistance
of, Mr. Marotta and (b) who purchases products from the Company, payment for
which is collected by the Company in the month with respect to which the
commission is paid.
Pursuant to the agreement, Mr. Marotta has agreed during his employment
term and for 12 months thereafter, not to compete with the Company's business,
not to solicit customers, vendors or suppliers of the Company or interfere with
the Company's relationships with its customers, and not to solicit employees of
the Company or interfere with the Company's relationships with its employees.
36
<PAGE>
Upon termination of the agreement, Mr. Marotta is entitled to continue to
receive the monthly commissions described above during the initial term of the
relevant provider contract (but not any extension or renewal term).
Benefit Plans
The Company adopted the 1997 Stock Option Plan (the "Plan") in June 1997.
(The Plan, when adopted, was identical in all respects to the 1995 Stock Option
Plan (the "Florida Supplies Plan") adopted by Florida Supplies, the predecessor
to the Company, in November 1995. In connection with the reorganization of the
Company completed in August 1997, pursuant to which the Company changed its
state of incorporation from Florida to Delaware and adopted its present holding
company structure, optionees under the Florida Supplies Plan received, in
substitution for their options thereunder, an identical number of options, with
identical terms, under the Plan. See "Business--Business Background"). The Plan
was amended in September 1997, after completion of the reorganization, to
increase the number of shares of Common Stock reserved for issuance thereunder
from 5,000,000 to 8,000,000.
Under the Plan, as amended, 8,000,000 shares of Common Stock are reserved
for issuance to employees, officers, key executives, directors, consultants or
advisors of the Company. The Plan is administered by the Compensation Committee
of the Board of Directors of Certified.
As of October 31, 1997, options for an aggregate of 4,000,000 shares at
$1.00 per share, 300,000 shares at $5.00 per share, 2,100,000 shares at $8.75
per share, and 150,000 shares at $9.00 per share were outstanding. Options held
by the principal executive officer and each of the other executive officers
named in the Summary Compensation Table are as follows: Mr. Fiscina - 2,000,000
shares at $1.00, 1,000,000 shares at $8.75; Mr. Blumenthal - 1,000,000 shares
at $1.00, 1,000,000 shares at $8.75; Mr. Ayala - 1,000,000 shares at $1.00,
100,000 shares at $8.75.
The following table sets forth certain information concerning stock
options granted to the Principal Executive Officer and each of the other named
executive officers during fiscal year 1997. The exercise price for all of the
grants to such named persons was the fair market value of the shares of Common
Stock on the date of the grant, determined by reference to the closing price as
quoted on the OTC Electronic Bulletin Board on such date.
37
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value of Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term (1)
--------------------------------------------------------- ----------------------------------------
Number of
Securities Percent of Total
Underlying Options Options Granted
Granted to Employees in Exercise Price Expiration 5% 10%
Name (#) Fiscal Year ($/sh) Date (2) ($) ($)
- ---------------------------- -------------------- ----------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Fiscina ......... 1,000,000 39.2 % $8.75 9/2/05 $5,510,000 $13,950,000
Myron M. Blumenthal ...... 1,000,000 39.2 % $8.75 9/2/05 $5,510,000 $13,950,000
Albert R. Ayala ......... 100,000 3.92% $8.75 9/2/05 $ 510,000 $ 1,395,000
</TABLE>
- ------------
(1) The dollar amounts under the 5% and 10% columns are the result of
calculations required by the rules of the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the Common Stock price. The amounts shown reflect
the difference between the appreciation and the exercise price, at the
assumed annual rates of appreciation through the tenth anniversary of the
dates of grant.
(2) The options vest in their entirety on the earlier to occur of (a) the
eighth anniversary of the date of grant, or (b) the date, if any, that the
Board of Directors, in consultation with the Company's independent
auditors, determines that, with respect to the Company's fiscal year then
ended, the Company has achieved gross revenues of not less than
$10,000,000 and adjusted earnings before income taxes, depreciation and
amortization of not less than $3,000,000, provided the optionee is then
employed by the Company. The rights of the optionee in the options, to the
extent not exercised, terminate on the tenth anniversary of the date of
grant or, if sooner, three months after optionee's termination as an
employee of the Company for any reason (but one year following termination
by reason of death or disability).
The following table sets forth certain information with respect to the
Principal Executive Officer and the other named executive officers regarding
the value of their unexercised options held as of October 31, 1997. No options
were exercised (or exercisable) during fiscal year 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options at
October 31, 1997 October 31, 1997(1)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Peter J. Fiscina ......... -0- 3,000,000 -0- $12,000,000
Myron M. Blumenthal ...... -0- 2,000,000 -0- $ 6,000,000
Albert R. Ayala ......... -0- 1,100,000 -0- $ 6,000,000
</TABLE>
- ------------
(1) Reflects the difference between the exercise price and $7.00 per share (the
closing market price of the Common Stock, as reported on the OTC
Electronic Bulletin Board on October 1, 1997).
Compensation Committee Interlocks and Insider Participation
The Company did not have a compensation committee or other board committee
performing equivalent functions during the fiscal year ended October 31, 1997.
The Board of Directors of the Company, consisting of Messrs. Fiscina,
Blumenthal and Ayala, made all decisions relating to executive officer
compensation during fiscal year 1997.
Messrs. Fiscina and Blumenthal are the sole directors and the executive
officers, as well as the owners, in the aggregate, of 90% of the outstanding
capital stock of Coastline Media, Inc. ("Coastline"). The Company engages
Coastline to design and implement its television and radio advertising
campaigns, including the purchase of advertising time and the placement of
television and radio advertisements. The Company pays Coastline a gross fee for
its services out of which Coastline must pay its expenses, including the costs
of time purchased on behalf of the Company. During the nine months ended July
31, 1997, the Company paid Coastline
38
<PAGE>
approximately $539,000 for its services. Management believes that the cost of
the time purchased by Coastline on behalf of the Company during such period was
approximately $460,000. (See "Certain Relationships and Related
Transactions--Coastline Media Inc.")
The Board of Directors has established a compensation committee to be
comprised of members to be identified as of the consummation of this Offering,
two of whom will be independent. The compensation committee is to be
responsible for all decisions relating to compensation for officers, directors
and employees of the Company, as well as for administration of the Company's
benefit plans.
Indemnification of Officers and Directors
The Certificate of Incorporation and By-Laws of the Registrant provide
that the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law (the "GCL"). Section 145 of the GCL, relating
to indemnification, is hereby incorporated herein by reference.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to Directors, officers or controlling persons of the Company pursuant
to the Company's By-laws and the Delaware General Corporation Law, the Company
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to Delaware law whereby officers and Directors of the
Company are to be indemnified against certain liabilities. The Company's
Certificate of Incorporation limits, to the fullest extent permitted by
Delaware law, a director's liability for monetary damages for breach of
fiduciary duty, including gross negligence, except liability for (i) breach of
the director's duty of loyalty, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
the unlawful payment of a dividend or unlawful stock purchase or redemption and
(iv) any transaction from which the director derives an improper personal
benefit. Delaware law does not eliminate a director's duty of care and this
provision has no effect on the availability of equitable remedies such as
injunction or rescission based upon a director's breach of the duty of care. In
addition, the Company has obtained an insurance policy providing coverage for
certain liabilities of its officers and Directors.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director with certain limited exceptions set forth in Section
102(a)(7).
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's outstanding Common Stock as of September
15, 1997, as adjusted to reflect the sale of shares offered hereby, for (i)
each person known to the Company to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) the Company's directors and named
executive officers, and (iii) all of the Company's directors and executive
officers as a group. Except as otherwise noted in the footnotes to this table,
the named beneficial owner has sole voting and investment power.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned (1)
Name and Address of Number of Shares -----------------------------------
Beneficial Owners Beneficially Owned Before Offering After Offering
- -------------------------------- -------------------- ----------------- ---------------
<S> <C> <C> <C>
Peter J. Fiscina(2) 2,512,500 23.2% 22.2%
2373 N. Horseshoe Drive
Naples, Florida 34104
Albert R. Ayala(3) 2,306,250 21.3% 20.4%
2373 N. Horseshoe Drive
Naples, Florida 34104
Myron M. Blumenthal(4) 1,206,250 11.1% 10.7%
2373 N. Horseshoe Drive
Naples, Florida 34104
Stanley Bloom, M.D.(5) 4,500 * *
16 Dominick Court
Short Hills, New Jersey 07078
Ronald L. Rucker(6) 2,500 * *
72 Cypress Point Drive
Naples, Florida 34105
All directors and executive 6,032,000 55.7% 53.3%
officers as a group (5 persons)
</TABLE>
- ------------
*Less than 1%.
(1) Assumes 10,825,000 shares of Common Stock outstanding prior to this
Offering, and 11,325,000 shares of Common Stock outstanding immediately
after this Offering. Assumes no exercise of Underwriters' over-allotment
option.
(2) Does not include options to purchase 3,000,000 shares of Common Stock not
exercisable within 60 days of the date hereof. Mr. Fiscina is the
President, Principal Executive Officer and a director of the Company.
(3) Does not include options to purchase 1,100,000 shares of Common Stock not
exercisable within 60 days of the date hereof. Mr. Ayala is Vice President
and a director of the Company.
(4) Does not include options to purchase 2,000,000 shares of Common Stock not
exercisable within 60 days of the date hereof. Mr. Blumenthal is the
Treasurer, Principal Financial Officer and a director of the Company.
(5) Dr. Bloom is a director of the Company. Represents 4,000 shares of Common
Stock owned by Dr. Bloom's wife. Also includes 500 shares of Common Stock
owned by a pension plan administered by Dr. Bloom for his benefit.
(6) Mr. Rucker is a director of the Company.
40
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Coastline Media, Inc.
Peter J. Fiscina and Myron M. Blumenthal, both officers, directors and
principal stockholders of the Company, own an aggregate of 90% of the
outstanding common stock of Coastline. Coastline, which commenced operations in
July 1996, is engaged in the business of designing and implementing advertising
campaigns on television and radio and in other media. Coastline, on behalf of
the Company and other third party clients, purchases advertising time and
places advertisements.
The Company, which since inception has conducted television and radio
advertising campaigns for its products and services (See "Business --
Overview"), engages Coastline to design and implement its television and radio
advertising campaigns, including purchasing time and placing advertisements, as
well as overseeing production of advertisements. Coastline charges its clients,
including the Company, a gross fee for its services and is responsible for
purchasing time and placing advertising. The Company's management believes that
the cost of advertising placed by Coastline averages approximately 85% of the
gross fees paid by the Company, and that such a 15% gross margin is in
accordance with industry standards.
During the nine months ended July 31, 1997, CDS paid Coastline aggregate
gross fees of approximately $539,000 for services rendered. Based on the
foregoing assumption as to the cost of advertising, the Company's management
believes that the costs of the advertising time purchased by Coastline for the
Company were approximately $460,000.
The Company and Coastline are not parties to a formal agreement. The
Company engages Coastline to perform services for the Company and Coastline
charges the Company for such services on a project by project basis. The
Company expects to continue to use the services of Coastline, exclusively, for
the design and implementation of the Company's advertising campaign.
Coastline employs one person (who is the holder of the 10% of Coastline's
capital stock not owned by Mr. Fiscina or Mr. Blumenthal) and occupies and
operates from and maintains a limited amount of office space at the Company's
facilities. The Company does not currently charge Coastline for the space
occupied. However, commencing in early 1998, upon completion of the second
phase of renovations, the Company anticipates that Coastline will occupy
additional space at the Facility on terms no less favorable than could be
obtained by the Company from unrelated parties on an arm's-length basis.
Two Oaks Realty
Through October 10, 1997, the Company occupied the Former Premises owned
by it located at 1951 J&C Boulevard, Naples, Florida 34109-6215. Two Oaks, a
partnership owned by Peter J. Fiscina and Albert R. Ayala, both officers,
directors and principal stockholders of the Company, acquired the Former
Premises in a foreclosure sale. Two Oaks subsequently financed the costs of
certain renovations at the Former Premises. In May 1996, the Company acquired
the Former Premises from Two Oaks for $320,000 which amount represented the
original purchase price paid by Two Oaks for the Former Premises plus the costs
of the renovations of the Former Premises incurred by Two Oaks. Two Oaks does
not retain any interest in the Former Premises. The Company intends to sell the
Former Premises. See "Business--Properties."
Share Issuances
At its inception, in September 1995, the Company issued to Peter J.
Fiscina and Albert R. Ayala, both officers, directors and principal
stockholders of the Company, an aggregate of 200 shares of common stock for
$100 per share (which shares, following a 20,000 for 1 stock split effected in
July 1996, represented 4,000,000 shares of Common Stock). In October 1995, the
Company also issued to Messrs. Fiscina and Ayala, and to Myron M. Blumenthal,
also an officer, director and stockholder of the Company, an aggregate of 60
shares of Common Stock in full payment for services rendered valued, in the
aggregate, at $6,000 ($100 per share) (which shares, following the stock split,
represented 1,200,000 shares of Commmon Stock).
41
<PAGE>
In November 1995, the Company issued an aggregate of 70 shares of Common
Stock to Messrs. Fiscina and Blumenthal (which shares, following the stock
split, represented 1,400,000 shares of Common Stock) in payment for consulting
services rendered to the Company and valued, in the aggregate, at $7,000.
The Board of Directors of the Company awarded bonuses to Messrs. Fiscina,
Ayala and Blumenthal, in accordance with their employment agreements, in the
aggregate amount of $419,000 in respect of the fiscal year ended October 31,
1996, and in the additional aggregate amount of $200,000 in respect of the
quarter ended January 31, 1997. Such bonus amounts, together with accrued
salaries in the aggregate amount of $181,000, were simultaneously lent to the
Company by the three officers. On February 20, 1997, these loans were converted
into shares of Common Stock at the price of $1.00 per share. Based on the
foregoing, the Company issued to the three officers an aggregate of 800,000
shares of Common Stock on February 20, 1997.
In May 1997, the Board of Directors awarded bonuses to Messrs. Fiscina,
Ayala and Blumenthal, in accordance with their employment agreements, in the
aggregate amount of $200,000 in respect of the quarter ended April 30, 1997.
The Board further authorized the payment of such bonuses, the simultaneous loan
of such bonus amounts by the three officers back to the Company, and the
simultaneous conversion of such loans into shares of Common Stock at the price
of $8.00 per share, which price represented the share price quoted on the "OTC
Electronic Bulletin Board" of the NASD on the date of the award. Based on the
foregoing, the Company issued to the three officers an aggregate of 25,000
shares of Common Stock on May 16, 1997.
Ronald L. Rucker
Ronald L. Rucker, a director of the Company, is an officer of FNB. The
Company has borrowed $400,000 of a $1,000,000 Line of Credit provided by FNB,
and will apply $300,000 of the proceeds from this Offering to repay a portion
of the Line of Credit. See "Use of Proceeds." FNB is also the mortgagee of the
Company's mortgage on the Former Premises. See "Business--Properties."
On-going and future transactions between the Company and its officers,
directors, principal stockholders or other affiliates will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
on an arm's-length basis, and will be approved by a majority of the Company's
independent and disinterested directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering and assuming no exercise of outstanding
options, the Company will have outstanding 11,325,000 shares of Common Stock
(11,400,000 shares if the Underwriters' over-allotment option is exercised in
full). Of these shares, the 500,000 shares sold in the Offering (575,000 shares
if the over-allotment option is exercised in full) will be immediately eligible
for resale in the public market without restriction under the Securities Act,
except for any shares purchased by an "Affiliate" (as that term is defined
under the Securities Act) of the Company, which will be subject to the resale
limitations of Rule 144 under the Securities Act. Additionally, the 2,000,000
Unrestricted Shares issued by the predecessor to the Company (see "The
Company"), in December 1996 in connection with an offering exempt from the
requirements of the Act pursuant to Rule 504 of Regulation D promulgated under
the Securities Act, are deemed to be "free trading" shares which have been, and
will continue to be, eligible for resale in the public market without
restriction under the Securities Act, except for any shares purchased by an
Affiliate of the Company, which will be subject to the resale limitations of
Rule 144.
The remaining 8,825,000 shares outstanding following this Offering (the
"Previously Issued Shares") were issued by the Company in private transactions
not involving a public offering and are thus treated as "restricted securities"
within the meaning of Rule 144 under the Securities Act.
Holders of 6,025,000 of the Previously Issued Shares have agreed to enter
into agreements with the Company ("Lock-Up Agreements") pursuant to which they
will agree that, during the 12 month period after the closing of this Offering,
they will not, except with the prior consent of the Representative, offer,
sell, contract to sell, grant an option to purchase or otherwise dispose of any
of such Previously Issued Shares, other than an aggregate of 200,000 of such
shares six months after the closing of the Offering, and an aggregate of an
additional 200,000 of such shares nine months after the closing of the
Offering. In addition, the Company has agreed that
42
<PAGE>
during such period it will not, without the prior consent of the
Representative, offer, issue, sell, contract to sell, grant an option to
purchase or otherwise dispose of any of the Company's securities, other than
the issuance of shares of Common Stock upon exercise of currently outstanding
options or warrants. Without limiting the foregoing, the Company has further
agreed that during such period, it will not, without the prior consent of the
Representative, file a registration statement relating to the offer or sale of
any of the Company's securities, or effect any sale of its securities, pursuant
to Regulation S under the Securities Act. At the expiration of such lock-up
period all of the 6,025,000 Previously Issued Shares held by the persons
entering into Lock-Up Agreements will be eligible for sale, subject to the
volume and other limitations of Rule 144.
Furthermore, the remaining 2,800,000 of the Previously Issued Shares are
held by persons not required to enter into Lock-Up Agreements. Any of these
shares held by non-Affiliates for more than one year will be eligible for sale
without regard to the volume and other limitations of Rule 144. The Company
believes that all of the 2,800,000 Previously Issued Shares are held by
non-Affiliates and have been so held for more than one year. Accordingly, the
Company believes all of these shares will, from and after the closing of the
Offering, be eligible for resale without restriction.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company or other person (or
persons whose shares are aggregated) who has beneficially owned Previously
Issued Shares for at least one year, will be entitled to sell in any
three-month period a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of the Company's Common Stock (approximately
114,000 shares immediately after the Offering, if the Underwriters'
over-allotment option is exercised in full) or (ii) the average weekly trading
volume of the Company's Common Stock on NASDAQ SmallCap during the four
calendar weeks immediately preceding the date on which notice of the sale is
filed with the Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an Affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has beneficially
owned Restricted Shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
Previously Issued Shares may also be resold (i) to a person whom the
seller reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A and (ii) in an off-shore transaction complying with
Rules 903 or 904 of Regulation S under the Securities Act.
An employee of the Company who purchased shares or was awarded options to
purchase shares pursuant to a written compensatory plan or contract meeting the
requirements of Rule 701 under the Securities Act is entitled to rely on the
resale provisions of Rule 701 under the Securities Act which permits Affiliates
and non-Affiliates to sell their Rule 701 shares without having to comply with
the holding period restrictions of Rule 144, in each case commencing 90 days
after the date of this Prospectus. In addition, non-Affiliates may sell Rule
701 shares without complying with the public information, volume and notice
provisions of Rule 144.
See "Risk Factors--Shares Eligible for Future Sale; Possible Adverse
Effect on Future Market Prices."
DESCRIPTION OF CAPITAL STOCK
Authorized Capital Stock
The Company's Articles of Incorporation (the "Articles") provide for
authorized capital stock to consist of 25,000,000 shares of common stock $.01
par value (the "Common Stock") and 5,000,000 shares of preferred stock $.01 par
value (the "Preferred Stock"). The Company will have outstanding, immediately
prior to the issuance and sale of shares of Common Stock pursuant to the
Offering 10,825,000 shares of Common Stock. Upon the closing of this Offering,
assuming no exercise of the Underwriters' over-allotment option and no exercise
of outstanding stock options, the Company will have outstanding 11,325,000
shares of Common Stock and no shares of Preferred Stock.
Common Stock
Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted upon by the shareholders, including the election of
directors. Holders of Common Stock do not have cumulative voting
43
<PAGE>
rights in the election of directors or preemptive rights to purchase or
subscribe for any stock or other securities. Subject to the prior rights of the
holders of any shares of Preferred Stock, if any, which subsequently may be
issued and outstanding, holders of Common Stock are entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available for the purpose. Such dividends shall not be cumulative. The holders
of Common Stock shall share ratably in all assets remaining after payment of
liabilities. Additional shares of authorized Common Stock may be issued without
shareholder approval. All of the shares of Common Stock are, and the shares to
be sold in the Offering will be, upon issuance and payment therefor, fully paid
and non-assessable.
Preferred Stock
Following the closing of this Offering, the Board will have the authority
to issue up to an aggregate of 5,000,000 shares of Preferred Stock from time to
time in one or more series, without stockholder approval. The Board of
Directors has the authority to establish from time to time the number of shares
to be included in each such series, dividend rate, redemption and liquidation
rights and terms, sinking fund provisions, if any, for the redemption or
purchase of shares, conversion terms and conditions, if any, voting rights, if
any, and to set the designation of the series and to fix and determine the
relative rights and preferences of the shares of each such series and any
qualifications, limitations or restrictions thereof. Depending upon the rights
of such Preferred Stock, the issuance of Preferred Stock could have an adverse
effect on the holders of Common Stock by delaying or preventing a change of
control of the Company, making removal of the present management of the Company
more difficult, or resulting in restrictions upon the payment of dividends and
other distributions to the holders of Common Stock. The Company has no current
plans to issue any preferred stock.
Certain Effects of Authorized but Unissued Stock
Upon the completion of this Offering, and assuming exercise in full of the
over-allotment option, there will be 5,550,000 shares of Common Stock and
5,000,000 shares of Preferred Stock available for future issuance without
shareholder approval, taking into consideration the 8,000,000 shares of Common
Stock reserved for issuance upon exercise of outstanding options and the 50,000
shares of Common Stock reserved for issuance upon exercise of the
Representative's Warrant (see "Underwriting"). These additional shares may be
issued for a variety of proper corporate purposes, including raising additional
capital, corporate acquisitions, and employee benefit plans. Except as
contemplated by the 1997 Stock Option Plan and other possible employee benefit
or stock purchase plans, the Company does not currently have any plans to issue
additional shares of Common Stock or Preferred Stock.
One of the effects of the existence of unissued and unreserved Common
Stock and Preferred Stock may be to enable the Board of Directors to issue
shares to persons friendly to current management, which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest, or otherwise, and thereby protect the
continuity of the Company's management and possibly deprive the shareholders of
opportunities to sell their shares of Common Stock at prices higher than the
prevailing market prices. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company
pursuant to the operation of the 1997 Stock Option Plan, or otherwise.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common Stock is
American Stock Transfer & Trust Co., Inc.
44
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement") between the Company and Jesup & Lamont Securities
Corporation (the "Representative"), the underwriters listed below (the
"Underwriters") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company, and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the aggregate
number of shares of the Company's Common Stock set forth opposite their
respective names below:
Underwriter Number of Shares
----------- -----------------
Jesup & Lamont Securities Corporation ......
----------
Total. .............................. [500,000]
==========
The Underwriters are committed to purchase all of the Common Stock offered
hereby, if any of the Common Stock is purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to
conditions precedent specified therein.
The Company has been advised by the Representative that it proposes
initially to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such prices less concessions not in excess of $ per share
of Common Stock. Such dealers may re-allow a concession not in excess of $
per share of Common Stock to certain other dealers. After the initial public
offering, the public offering prices, concession and reallowance may be changed
by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make. The Company has
agreed to pay the Representative a nonaccountable expense allowance of 3% of
the gross proceeds from the sale of the Common Stock offered hereby, of which
$50,000 has been paid as of the date of the Prospectus.
The Company has granted to the Underwriters an over-allotment option,
exercisable within 30 days of the date of this Prospectus, to purchase up to
75,000 additional shares at the public offering price less the underwriting
discounts and commissions shown on the cover page of this Prospectus (the
"Over-Allotment Option"). The Underwriters may exercise such option only to
cover over-allotments of shares made in connection with the sale of the shares
offered hereby. To the extent the Underwriters exercise such option, each of
the Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of shares of Common Stock as the
percentage it was obligated to purchase pursuant to the Underwriting Agreement,
and the Company will be obligated, pursuant to the option, to sell such shares
to the Underwriters.
In connection with this Offering, the Company has agreed to sell to the
Representative and its designees, for nominal consideration, warrants to
purchase from the Company up to 50,000 shares of Common Stock (the
"Representative's Warrants"). The Representative's Warrants are exercisable at
a price of $____ per share (120% of the initial public offering price per
share), expire five years after the effective date of the Offering, and are not
exercisable for a period of one year after the effective date of the Offering.
The Representative's Warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this Prospectus, except
to officers of the Representative. The Representative's Warrants provide for
adjustments in the number of shares of Common Stock issuable upon the exercise
thereof and in the exercise price of the Representative's Warrants as a result
of certain events, including subdivisions and combinations of the shares of
Common Stock. The Representative's Warrants grant to the holders thereof
certain demand and "piggy-back" rights of registration for the Common Stock
issuable upon exercise of the Representative's Warrants.
The Company, its officers and directors, and the holders of 6,025,000 of
the 8,825,000 Previously Issued Shares have agreed, as of the date of this
Prospectus, not to, directly or indirectly, offer, issue, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of any of the
Company's securities for a period of
45
<PAGE>
12 months following the effective date of the Registration Statement, without
the prior written consent of the Representative, except for the Common Stock
issued pursuant to the Over-Allotment Option, the issuance of shares of Common
Stock upon exercise of currently outstanding options, and the grant of options
under the Option Plan which have an exercise price no less than the market
price of the Common Stock on the date of grant. In addition, the sale of an
aggregate of 200,000 shares by certain officers of the Company six months after
the Offering is completed, and the sale of an aggregate of an additional
200,000 shares by certain officers of the Company nine months after the
Offering are excluded from the provisions of the Lock-Up Agreements.
Furthermore, the holders of Previously Issued Shares who have agreed to enter
into Lock-Up Agreements will grant to the Representative a right of first
refusal to effect the public sale of any shares so locked up pursuant to Rule
144 for a period of 24 months following the expiration of the lock-up period.
The Company has agreed to grant the Representative a right of first
refusal to act as managing underwriter in connection with any financing of the
Company, except bank financing or industrial revenue bond financing, whether
through senior or subordinated debt or equity, (with certain specified
exceptions) within 18 months after the closing of this Offering. Furthermore,
the Company has agreed that it will not, for a period of 12 months following
the closing of this Offering, without the prior consent of the Representative,
either file any registration statement relating to the offer and sale of any of
the Company's securities or effect any sale of its securities pursuant to
Regulation S under the Securities Act.
The Company has agreed, as of the completion of the Offering, to enter
into a two year financial consulting agreement with the Representative pursuant
to which the Representative will provide the Company with certain investment
banking and financial consulting services for a monthly fee of $2,000 per
month, payable in advance at the completion of the Offering.
The Company has agreed, for a period of three years from the date of this
Prospectus, if so requested by the Representative, to nominate and use its best
efforts to elect a designee of the Representative as a director of the Company,
or, at the Representative's option, as a non-voting observer to meetings of the
Company's Board of Directors. Such person shall be entitled to attend all such
meetings and to receive all notices and other correspondence and communications
sent by the Company to members of its Board of Directors. The Representative
has not yet exercised its right to designate such a person. The Company has
agreed to reimburse the designee of the Representative for such designee's
out-of-pocket expenses incurred in connection with such designee's attendance
of meetings of the Board of Directors.
Prior to the Offering, the Company's Unrestricted Shares have been traded
through, and the price of such shares has been quoted on, NASD's "OTC
Electronic Bulletin Board." Following the Offering, a substantially greater
number of shares will be available to trade publicly, the Company's shares will
begin to be traded on NASDAQ SmallCap, and the Company will, for the first
time, become a reporting company under the Securities Act and the Exchange Act.
For all of these reasons, the price of the Company's Common Stock, as
heretofore quoted on the "OTC Electronic Bulletin Board," may not be indicative
of the market price of the Company's Common Stock in connection with and
following the closing of the Offering. Consequently, while the price of the
Company's Common Stock heretofore quoted on the "OTC Electronic Bulletin Board"
will be one factor in determining the initial public offering price of the
shares of Common Stock offered hereby, such initial public offering price will
be negotiated by the Company and the Representative and does not necessarily
bear any relationship to the Company's asset value, net worth or other
established criteria of value. In addition to the historical "OTC Electronic
Bulletin Board" price and prevailing market conditions, the factors that may be
considered in determining the initial public offering price of the shares of
Common Stock may include, but not be limited to, the Company's historical
financial performance, estimates of the business potential and earning
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to the market valuations of
companies in similar business.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the
46
<PAGE>
Company, and in such case may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position by exercising the Over-Allotment Option. In addition, the
Representative, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of the
other Underwriters, the selling concession with respect to the shares of Common
Stock that are distributed in the Offering but subsequently purchased for the
account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock of the Company at a level above that which might otherwise prevail
in the open market. None of the transactions described in this paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
The foregoing is a summary of the agreements described above and does not
purport to be complete. Reference is made to copies of each such agreement
which are filed as exhibits to the Registration Statement. See "Additional
Information."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Bryan Cave LLP, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Camhy Karlinsky & Stein
LLP, New York, New York.
EXPERTS
The Financial Statements of the Company at October 31, 1996, and for the
period from September 28, 1995 (inception) to October 31, 1996, included in
this Prospectus and elsewhere in the Registration Statement have been audited
by Richard A. Eisner & Company, LLP, independent auditors, as indicated in
their report with respect thereto, and are included herein in reliance upon
their report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a Registration Statement (the
"Registration Statement") on Form S-1 under the Securities Act, with respects
to the Common Stock offered hereby. This Prospectus, which constitutes part of
the Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with the
Commission pursuant to the Act and the rules and regulations of the Commission
thereunder. The Registration Statement, including exhibits and schedules
thereto, may be inspected at the principal offices of the Commission at 450
Fifth Street, N.W., Washington, D.C., 20549, and at its regional offices at
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661,
and at Seven World Trade Center, Suite 1300, New York,, New York 10048, and
copies may be obtained at the prescribed rates from the Public Reference
Section of the Commission at its principal office in Washington, D.C. The
Commission maintains an Internet Web site (http://www.sec.gov.) that contains
such documents filed electronically by the Company with the Commission through
its Electronic Gathering, Analysis and Retrieval System (EDGAR) filing system.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete and
in each instance reference is made to the copy of such contract, agreement or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
47
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Index to Financial Statements
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report ............................................................ F-2
Balance Sheets as of October 31, 1996 (audited) and July 31, 1997 (unaudited) ............ F-3
Statements of Income for the period from September 28, 1995 (Inception) to October 31,
1996 (audited) and for the period from September 28, 1995 (Inception) to July 31, 1996
(unaudited) and the nine months ended July 31, 1997 (unaudited) ...................... F-4
Statements of Changes in Stockholders' Equity for the period from September 28, 1995
(Inception) to October 31, 1996 (audited) and for the nine months ended July 31,
1997 (unaudited)....................................................................... F-5
Statements of Cash Flows for the period from September 28, 1995 (Inception) to October
31, 1996 (audited) and for the period from September 28, 1995 (Inception) to
July 31, 1996 (unaudited) and the nine months ended July 31, 1997 (unaudited)........... F-6
Notes to Financial Statements ............................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Certified Diabetic Services, Inc.
We have audited the accompanying balance sheet of Certified Diabetic Services,
Inc., formerly Certified Diabetic Supplies Inc. (see Note A), as of October 31,
1996 and the related statements of income, changes in stockholders' equity and
cash flows for the period from September 28, 1995 (inception) to October 31,
1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Certified Diabetic Services,
Inc. as of October 31, 1996 and the results of its operations and its cash
flows for the period from September 28, 1995 (inception) to October 31, 1996 in
conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
November 15, 1996
With respect to Note H[1]
December 5, 1996
With respect to Note A
August 12, 1997
With respect to Note H[2]
September 15, 1997
F-2
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Balance Sheets
<TABLE>
<CAPTION>
October 31, July 31,
1996 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS (Notes D and E)
Current assets:
Cash (Note H[1]) ...................................................... $ 167,000 $ 354,000
Accounts receivable ................................................... 488,000 963,000
Inventories (Note B[4]) ............................................. 160,000 295,000
Prepaid expenses and other current assets ........................... 3,000 140,000
----------- -----------
Total current assets ................................................ 818,000 1,752,000
Property and equipment, net (Notes B[5] and C) ........................ 378,000 435,000
Deposit (Note I[3]) ................................................... 50,000
Capitalized direct-response advertising costs (Notes B[6] and K) ...... 452,000
Deferred offering costs (Note L[1]) .................................... 169,000
----------- -----------
$1,196,000 $2,858,000
=========== ===========
LIABILITIES
Current liabilities:
Current portion of mortgage payable (Note D) ........................ $ 4,000 $ 5,000
Note payable - bank (Note E) .......................................... 75,000
Accounts payable and accrued expenses ................................. 76,000 421,000
Income tax payable ................................................... 165,000
Deferred income tax liability (Notes B[7] and F) ..................... 4,000 182,000
Due to officers - stockholders (Note G) .............................. 620,000 83,000
----------- -----------
Total current liabilities .......................................... 779,000 856,000
Mortgage payable (Note D) ............................................. 244,000 240,000
----------- -----------
Total liabilities ................................................... 1,023,000 1,096,000
----------- -----------
Commitments and contingencies (Notes H[2], I and J)
STOCKHOLDERS' EQUITY (Note A)
Preferred stock - authorized 5,000,000 shares; par value $.01 per share;
no shares issued and outstanding ....................................
Common stock - authorized 25,000,000 shares; par value -
October 31, 1996, $.001 per share, July 31, 1997, $.01 per share;
issued and outstanding - October 31, 1996, 8,000,000 shares, July
31, 1997, 10,825,000 shares (Notes G and H) ........................... 8,000 108,000
Additional paid-in capital (Note H[1]) ................................. 17,000 1,017,000
Subscribed capital stock ............................................. 86,000
Retained earnings ...................................................... 62,000 637,000
----------- -----------
Total stockholders' equity .......................................... 173,000 1,762,000
----------- -----------
$1,196,000 $2,858,000
=========== ===========
</TABLE>
See notes to financial statements
F-3
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Statements of Income
<TABLE>
<CAPTION>
For the For the
Period From Nine Period From
September 28, 1995 Months September 28, 1995
(Inception) to Ended (Inception) to
October 31, 1996 July 31, 1997 July 31, 1996
-------------------- --------------- -------------------
(Unaudited)
<S> <C> <C> <C>
Net sales ....................................... $ 2,588,000 $ 4,523,000 $ 1,622,000
Cost of sales .................................... 814,000 1,575,000 541,000
------------ ------------ ------------
Gross profit .................................... 1,774,000 2,948,000 1,081,000
------------ ------------ ------------
Operating expenses:
Selling and shipping (Note K) .................. 381,000 353,000 177,000
General and administrative ..................... 1,284,000 1,585,000 838,000
Depreciation .................................... 14,000 40,000 7,000
------------ ------------ ------------
1,679,000 1,978,000 1,022,000
------------ ------------ ------------
Income from operations before interest expense and
income taxes .................................... 95,000 970,000 59,000
Interest expense ................................. 21,000 37,000 13,000
------------ ------------ ------------
Income from operations before income taxes ...... 74,000 933,000 46,000
------------ ------------ ------------
Provision for income taxes (Notes B[7] and F):
Current ....................................... 8,000 180,000 6,000
Deferred ....................................... 4,000 178,000 4,000
------------ ------------ ------------
12,000 358,000 10,000
------------ ------------ ------------
Net income ....................................... $ 62,000 $ 575,000 $ 36,000
============ ============ ============
Net income per share of common stock
Primary ....................................... $ 0.01 $ 0.04 $ -0-
============ ============ ============
Fully diluted ................................. $ 0.04
============
Weighted average shares outstanding ............
Primary ....................................... 10,554,247 13,664,706 10,554,247
============ ============ ============
Fully diluted ................................. 14,182,461
============
</TABLE>
See notes to financial statements
F-4
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Subscribed
------------------------ Paid-in Common Retained
Shares Amount Capital Stock Earnings Total
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued; $1.00 per
share ........................... 200 $ 20,000 $ 20,000
Shares issued for compensation and
consulting service ............... 200 20,000 20,000
20,000 for 1 stock split ......... 7,999,600 $ 8,000 (8,000) -0-
Private placement offering
subscriptions received ......... $ 86,000 86,000
Private placement offering costs (15,000) (15,000)
Net income ........................ $ 62,000 62,000
----------- --------- ---------- ---------- --------- ----------
Balance at October 31, 1996 ...... 8,000,000 8,000 17,000 86,000 62,000 173,000
Private placement offering
subscriptions received ......... 14,000 14,000
Common stock issued; $0.05 per
share ........................... 2,000,000 2,000 98,000 (100,000) -0-
Conversion of debt to common
stock ........................... 825,000 1,000 999,000 1,000,000
Reorganization with $.01 par value
(Note A) ........................ 97,000 (97,000) -0-
Net income ........................ 575,000 575,000
----------- --------- ---------- ---------- --------- ----------
Balance at July 31, 1997
(unaudited) ..................... 10,825,000 $108,000 $1,017,000 $ -0- $637,000 $1,762,000
=========== ========= ========== ========== ========= ==========
</TABLE>
See notes to financial statements
F-5
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the For the
Period From Nine Period From
September 28, 1995 Months September 28, 1995
(Inception) to Ended (Inception) to
October 31, 1996 July 31, 1997 July 31, 1996
-------------------- --------------- -------------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 62,000 $ 575,000 $ 36,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization .............................. 14,000 83,000 7,000
Noncash compensation and consulting fees .................. 20,000 20,000
Changes in operating assets and liabilities:
Accounts receivable .................................... (488,000) (475,000) (341,000)
Inventories ............................................. (160,000) (135,000) (74,000)
Prepaid expenses ....................................... (3,000) (137,000) (15,000)
Deposit ................................................ (50,000)
Direct-response advertising .............................. (495,000)
Accounts payable and accrued expenses ..................... 76,000 345,000 65,000
Income tax payable ....................................... 165,000 6,000
Deferred income tax liability ........................... 4,000 178,000 4,000
Accrued officers' compensation ........................... 600,000 (217,000) 401,000
----------- ------------ -----------
Net cash provided by (used in) operating activities ...... 125,000 (163,000) 109,000
----------- ------------ -----------
Cash flows from investing activities:
Acquisition of fixed assets ................................. (392,000) (97,000) (369,000)
----------- ------------ -----------
Cash flows from financing activities:
Proceeds from note payable .................................... 75,000 75,000
Payment of note payable ....................................... (75,000)
Proceeds from mortgages payable .............................. 250,000 250,000
Payment of mortgage payable ................................. (2,000) (3,000) (1,000)
Proceeds from issuance of common stock ........................ 20,000 20,000
Advances from officer -- stockholders ........................ 20,000 700,000
Payment to officers .......................................... (20,000)
Proceeds from subscriptions of common stock .................. 86,000 14,000
Private placement offering costs .............................. (15,000)
Deferred offering costs ....................................... (169,000)
----------- ------------ -----------
Net cash provided by financing activities ............... 434,000 447,000 344,000
----------- ------------ -----------
Net increase in cash .......................................... 167,000 187,000 84,000
Cash -- beginning of period .................................... - 0 - 167,000 - 0 -
----------- ------------ -----------
Cash -- end of period .......................................... $ 167,000 $ 354,000 $ 84,000
=========== ============ ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ................................................... $ 18,000 $ 46,000 $ 13,000
Income Taxes ................................................ $ 23,000
Supplemental disclosure of noncash financing activities:
Conversion of debt to common stock ........................... $ 1,000,000
</TABLE>
See notes to financial statements
F-6
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE A--THE COMPANY
In August 1997, a corporate reorganization was consummated whereby Certified
Diabetic Supplies Inc. ("Florida Supplies") was merged with and into Certified
Diabetic Supplies, Inc. ("Delaware Supplies"), a Delaware corporation
incorporated in May 1997 and a wholly-owned subsidiary of Certified Diabetic
Services, Inc. ("Certified" or the "Company"), also a Delaware corporation
incorporated in May 1997. As part of its general reorganization, the Company
changed its state of incorporation from Florida to Delaware and adopted its
current holding company/operating subsidiary structure. Existing shareholders
of Florida Supplies received an equivalent number of shares in Certified. The
merger did not change the ownership of the Company or the conduct of its
business, with Delaware Supplies, as a Registered Supplier (and as a subsidiary
of Certified), continuing to conduct the business previously conducted by
Florida Supplies.
The accompanying balance sheet reflects the reorganization as if it had
occurred on July 31, 1997.
Florida Supplies was incorporated under the laws of the State of Florida on
September 28, 1995 (inception) under the name Diabetic Supplies of Collier,
Inc., adopted its name on October 12, 1995, and commenced operations in
November 1995. No significant activities occurred prior to November 1, 1995.
Since November 1995 Florida Supplies was engaged in the marketing and mail
order sale of durable medical equipment, primarily diabetic supplies. As a
Registered Supplier, Florida Supplies is permitted to invoice Medicare directly
for diabetic supplies shipped to Medicare patients. Florida Supplies also
accepts Medicaid and private insurance payments. For the nine-month period
ended July 31, 1997, reimbursements for goods purchased by customers were
derived from the following sources: a) 30%, Medicare only; b) 37% Medicare and
supplementary insurance; and c) 33% primary coverage by private insurers.
The Company has three other wholly-owned subsidiaries namely; (1) CDS Medical
Supplies, Inc. ("Medicalco"), a Delaware corporation formed in April 1997; (2)
CDS Health Management, Inc. ("Healthco") a Delaware corporation formed in April
1997; and (3) CDS Insurance Products, Inc. ("Insuranceco"), a Delaware
corporation formed in April 1997. Medicalco was formed for the purpose of
entering into contracts with preferred provider organizations, third party
health plan administrator, self-insured plans, managed care programs and other
similar groups, pursuant to which Medicalco would receive either the right to
supply (in some cases on an exclusive or preferred basis) medical equipment and
products of the types sold by the Company to participants in such programs or
groups. Healthco was formed for the purpose of supplying customers covered by
health insurance with Blue Cross and Blue Shield with medical supplies.
Insuranceco is inactive. Medicalco and Healthco have not commenced significant
operating activities as of July 31, 1997. During August 1997 Healthco commenced
operations.
References herein to the Company, with respect to information subsequent to
July 31, 1997, refer to Certified and its subsidiaries as constituted after the
reorganization.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Basis of presentation:
The financial statements represent the financial position, results of
operations and cash flows of Florida Supplies.
[2] Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities 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 results could differ from those estimates.
F-7
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
[3] Revenue recognition:
Revenue is recognized at the time the products are shipped. Medicare and
Medicaid reimbursements ("Third Party") are based on allowable charges. The
difference between the Company's established billing rates and contracted or
anticipated reimbursement rates is recorded as a contractual allowance and
offset against net sales.
[4] Inventories:
Inventories consisting of durable medical equipment, primarily diabetic
supplies are stated at the lower of cost (first-in, first-out) or market.
[5] 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.
[6] Direct-response advertising costs:
Direct-response advertising costs beginning November 1, 1996 are being
capitalized and amortized on a declining balance basis over a period which
matches the expected future stream of revenues generated from new customers as
a result of this advertising. Prior to November 1, 1996, such costs were
expensed as incurred since criteria for capitalization had not been met.
Currently, the Company's period of amortization is three years since its
operating history cannot presently demonstrate that future benefits are
expected over a longer period. However, industry information indicates an
amortization period of greater than three years.
Management assesses its estimate of amounts of future revenues and the
amortization period at each reporting date.
[7] Income taxes:
Deferred income taxes arise from temporary differences resulting primarily from
the capitalization of direct-response advertising costs for financial reporting
purposes and depreciation expense being reported differently for financial
accounting and tax purposes.
[8] Net income per share of common stock:
Net income per common share of common stock is based on the weighted average
number of common and dilutive common equivalent shares outstanding during the
period using the modified treasury stock method including fully paid stock
subscriptions, after adjusting retroactively for a 20,000 to 1 stock split.
Pursuant to the Securities and Exchange Staff Accounting Bulletins, common and
common equivalent shares issued at prices below the proposed initial public
offering ("IPO") price during the twelve months immediately preceding the
initial filing date have been included in the calculation as if they were
outstanding for all periods presented using the treasury stock method and the
anticipated IPO price. Common equivalent shares consist of stock options.
(Continued) F-8
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
[9] Concentration of risks:
The Company is dependent on reimbursements from Medicare and the rules and
regulations governing Medicare Providers. Management believes that it is in
full compliance with these regulations. The Company maintains substantially all
of its cash in one commercial bank.
[10] Fair values of financial instruments:
The estimated fair value of financial instruments has been determined based on
available market information and appropriate valuation methodologies. The
carrying amounts of cash, accounts receivable, accounts payable, accrued
expenses, and due to officers approximate fair value at October 31, 1996 and
July 31, 1997 because of the short maturity of these financial instruments. The
estimated carrying value of the note payable and the mortgage payable for
financial statement purposes at October 31, 1996 and July 31, 1997 approximate
fair value because the interest rates on these instruments approximate the
market rates at October 31, 1996 and July 31, 1997. The fair value estimates
were based on information available to management as of October 31, 1996 and
July 31, 1997.
[11] Long-lived assets:
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of", the Company records impairment losses on long-lived assets
used in operations, including capitalized direct-response advertising costs,
when events and circumstances indicate that the assets might be impaired and
the undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts of those assets. No such losses have been recorded.
[12] Stock-based compensation:
The Company accounts for employee stock option grants under the basis of
Accounting Principles Board Opinion No. 25. In fiscal 1997 the Company adopted
the "disclosures only" alternative available under Financial Accounting
Standards Board No. 123 ("FAS 123") for its employee stock option grants. The
pro forma net income and net income per share disclosure required by FAS 123
are not materially different from the amounts reported on the financial
statements at October 31, 1996 and July 31, 1997. The fair value of options at
date of grant was estimated using the Black-Scholes option-pricing model with
the following weighted average assumptions: a) for grants in 1996; dividend
yield of 0%; expected volatility of 0.1%; risk-free interest rate of 5.53%; and
expected lives of 5 years; and b) for grants in 1997; dividend yield of 0%;
expected volatility of 0.1%; risk-free interest rate of 6.43%; and expected
lives of 5 years.
[13] Unaudited interim financial statements:
In the opinion of management, the unaudited financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the Company's financial position at July 31, 1997 and results
of operations and cash flows for the nine-month period ended July 31, 1997 and
the period from September 28, 1995 (inception) to July 31, 1996. The financial
statements as of July 31, 1997 and for the nine months ended July 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending October 31, 1997.
(Continued) F-9
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
[14] New accounting pronouncement:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per Share". FAS
128 establishes new standards for computing and presenting earnings per share.
FAS 128 is effective for periods ending after December 15, 1997. Management
believes that the adoption of FAS 128 will not have a significant effect on net
income per share of common stock for the periods.
[15] Reclassifications:
Certain income statement account balances for the period from September 28,
1995 (inception) to October 31, 1996 have been reclassified to conform to the
July 31, 1997 presentation.
NOTE C--PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
October 31, July 31,
1996 1997
------------- ---------
<S> <C> <C>
Land .......................................... $ 63,000 $ 63,000
Building ....................................... 157,000 157,000
Building improvements ........................... 120,000 120,000
Office and computer equipment .................. 52,000 110,000
Computer software .............................. 39,000
--------- ---------
392,000 489,000
Accumulated depreciation and amortization ...... 14,000 54,000
--------- ---------
$378,000 $435,000
========= =========
</TABLE>
NOTE D--MORTGAGE PAYABLE
On May 31, 1996, in connection with the acquisition of the land and building,
the Company obtained a mortgage loan from a bank, payable in thirty monthly
installments of $2,000 including interest at 9.75% per annum with a balloon
payment of $240,000 payable on December 30, 1998. This mortgage is
collateralized by the land, building and substantially all the assets of the
Company.
Maturities of the mortgage through December 30, 1998 are: during the twelve
month period ending July 31, 1998 - $5,000; during the five months ending
December 30, 1998 - $240,000.
NOTE E--NOTE PAYABLE - BANK
The note bears interest at 9.25% per annum and was paid in December 1996. This
note was collateralized by all of the Company's business assets.
In July 1997, the Company entered into a revolving line of credit agreement
with a bank, which expires on July 31, 1998 and provides for borrowings of up
to a maximum of $1,000,000. Borrowings under the agreement bear interest at
3/4% over the bank's index rate (9 1/4% at July 31, 1997). The line of credit
is collateralized by all of the Company's business assets. The revolving line
of credit is guaranteed by two principal stockholders of the Company.
In August 1997, the Company drew down $400,000 from the line of credit.
(Continued) F-10
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE F--INCOME TAXES
The Company accounts for income taxes under the provision of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the Company to recognize deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
The difference between income taxes at the statutory Federal income tax rate
and income taxes reported in the statement of operations is as follows:
<TABLE>
<CAPTION>
October 31, July 31, July 31,
1996 1997 1996
------------- ---------- ---------
<S> <C> <C> <C>
Income taxes at the federal statutory rate ......... $11,000 $318,000 $ 9,000
State income taxes, net of federal tax benefit ...... 37,000
Tax effect of nondeductible expenses ............... 1,000 3,000 1,000
-------- --------- --------
$12,000 $358,000 $10,000
======== ========= ========
</TABLE>
The deferred income tax liability at July 31, 1997 is attributable primarily to
the capitalization of direct-response advertising costs for financial reporting
purposes.
The deferred income tax liability at October 31, 1996 is attributable primarily
to the excess of depreciation expense for income tax purposes over the
corresponding depreciation expense for financial reporting purposes.
NOTE G--DUE TO OFFICERS - STOCKHOLDERS
This consists of the following:
<TABLE>
<CAPTION>
October 31, July 31,
1996 1997
------------- ---------
<S> <C> <C>
Accrued officers' salaries and bonuses for the period ...... $600,000 $83,000
Notes payable ............................................. 20,000
--------- --------
$620,000 $83,000
========= ========
</TABLE>
The outstanding balance of accrued officers' salaries and bonuses as of October
31, 1996 was paid by the Company in January 1997. The entire amount was loaned
back to the Company and converted to demand notes which bear interest at 10%
per annum. During February 1997, $600,000 of the notes payable were converted
into 600,000 shares of common stock and bonuses payable of $200,000 were
converted into 200,000 shares of common stock. Management believes that the
conversion price represented the estimated fair value of the common stock.
In May 1997, additional bonuses payable of $200,000 were converted into 25,000
shares of common stock. The conversion rate was based on the then current
market price.
NOTE H--STOCKHOLDERS' EQUITY
[1] Common stock:
At its inception in September 1995, the Company issued an aggregate of 200
shares of its common stock to its two principal stockholders and co-founders
for $100 per share. The Company also issued an aggregate of 60 shares to its
three officers in full payment for services rendered valued at $6,000 ($100 per
share) and an aggregate of 140 shares of its common stock to various
consultants for services rendered to the Company valued at $14,000.
(Continued) F-11
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE H--STOCKHOLDERS' EQUITY -- (Continued)
In July 1996, the Company effected a 20,000 for 1 stock split.
In August 1996, the Company conducted a private placement offering of 2,000,000
common shares at an offering price of $.05 per share pursuant to Rule 504 of
the Securities Act of 1933. As of October 31, 1996, the Company received
proceeds of $86,000 for subscriptions to 1,720,000 shares of its common stock.
In November 1996, the Company received proceeds of $14,000 for subscriptions to
280,000 shares of its common stock. Such proceeds were held in a segregated
cash account until December 1996.
In December 1996, the 2,000,000 shares of common stock subscribed were issued.
See Note A for details of the Company's restructuring.
[2] Stock Option Plan:
The Company adopted its 1995 Incentive Program (the "Program") which, upon
completion of the Company's 20,000 to 1 stock split effected in June 1996
provided for grants of up to 5,000,000 shares of common stock to employees,
officers, directors and consultants. The grants may consist of incentive stock
options ("ISOs"), nonqualified stock options, stock appreciation rights and
restrictive stock grants. Incentive and nonqualified stock options may not be
granted at prices less than fair market value at the date of grant as
determined by the Board of Directors. On November 2, 1995 the Company granted
nonqualified stock options which are expressed in post split numbers for the
purchase of 4,000,000 shares of common stock at $1.00 per share which vest in
their entirety upon the earlier of the achievement of gross revenues of not
less than $10,000,000 within a fiscal year and net income before income taxes
of not less than $3,000,000, computed without regard to (a) depreciation or
amortization expense, (b) direct or indirect compensation to officers or
directors of the Company, or (c) write-offs and adjustments to accounts
receivable, (the "benchmarks") or November 2003, provided the optionee is still
employed by the Company.
On February 14, 1997 the Company granted nonqualified stock options for the
purchase of 300,000 shares of common stock at $5.00 per share. Options granted
are exercisable as to 20% of the total number of shares of stock covered
thereby on every anniversary of the grant of such option, provided that the
optionee is still employed by the Company. On July 15, 1997 an employee who was
granted 150,000 stock options resigned from the Company.
On September 15, 1997 Certified granted nonqualified stock options to the
President of Healthco for the purchase of 150,000 shares of common stock at
$9.00 per share. The options vest in their entirety in 2002 or over three years
if certain customer thresholds are achieved.
On June 25, 1997 Certified adopted the 1997 Stock Option Plan (the "Plan")
which was identical in all respects to the 1995 Incentive Program of Florida
Supplies. In connection with the reorganization of Certified, completed in
August 1997, the optionees under the Florida Supplies Plan received, in
substitution for their options thereunder, an identical number of options, with
identical terms under the Plan. The Plan was amended September 2, 1997 to
increase the number of shares of common stock reserved for issuance thereunder
from 5,000,000 to 8,000,000.
On September 2, 1997, Certified granted nonqualified stock options for the
purchase of 2,100,000 shares of common stock at $8.75 per share which vest in
their entirety upon the earlier of the achievement of the benchmarks or
November 2005, provided the optionee is still employed.
(Continued) F-12
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE I--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
[1] Employment agreements and officers' salaries:
During the period from September 28, 1995 (inception) to October 31, 1996, the
nine months ended July 31, 1997, and the period from September 28, 1995
(inception) to July 31, 1996, officers' salaries and bonuses based on operating
results amounted to $769,000, $788,000, and $505,000, respectively.
The Company has employment agreements with its three officers for a five-year
term commencing in November 1995, providing for minimum annual aggregate
compensation of $700,000 and the granting of options to purchase 4,000,000
shares of common stock (see Note H[2]).
The Company also has employment agreements with two employees for one-year
terms effective February 14, 1997 which terms are renewable to successive
additional periods of one year unless either party shall have delivered to the
other notice of its intention not to renew. The agreements provide for an
aggregate minimum annual compensation of $130,000 plus commissions based on
customers obtained by the Company arising from provider contracts procured by
the employees. As of July 31, 1997, no commissions have been earned arising
from this agreement. On July 15, 1997 an employee with an annual compensation
of $65,000 resigned from the Company. These employees have options to purchase
300,000 shares of common stock (see Note H[2]).
During September 1997 the Company signed an agreement with the President of
Healthco for a three year term. The agreement provides for a minimum annual
compensation of $250,000 plus annual incentive bonus compensation based upon
certain targets for procurement of new customers. The employee has options to
purchase 150,000 shares of common stock (See Note H[2]).
[2] Concentration of suppliers:
The Company is dependent on third-party manufacturers and distributors for all
of its diabetic supplies. Two suppliers accounted for 62% and 16%, of the
Company's purchases during the period ended October 31, 1996. Two suppliers
accounted for 62% and 11%, of the Company's purchases during the nine months
ended July 31, 1997.
[3] Agreement to acquire land and building:
In July 1997, the Company entered into an agreement ("purchase agreement") to
purchase land and building located in Naples, Florida at a price of $2,800,000.
In connection with the purchase agreement the Company paid a $50,000 deposit.
Currently, the Company is seeking financing sources to fund this acquisition.
In August 1997, the purchase agreement was amended to extend the date of the
closing ("closing date") to December 15, 1997. Pursuant to the amended purchase
agreement, the Company paid an additional deposit of $230,000. The total
deposit of $280,000 is nonrefundable. The Company also entered into a lease
agreement to occupy the property prior to the closing date. The term of the
lease is for a period commencing on August 26, 1997 and ending on December 15,
1997 with an aggregate rent of $35,000.
In addition, the Company has entered into agreements to renovate the property
amounting to $700,000 and as of September 12, 1997, the Company has already
spent $174,000. In the event that the purchase agreement is not consummated,
all repairs, alterations and/or improvements to the property shall remain in or
upon the premises and be surrendered with the property at the termination of
the lease.
(Continued) F-13
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
(formerly Certified Diabetic Supplies Inc.)
Notes to Financial Statements
(Unaudited with respect to data as of July 31, 1997
and for the nine months ended July 31, 1997 and for the period
from September 28, 1995 (inception) to July 31, 1996)
NOTE I--COMMITMENTS, CONTINGENCIES AND OTHER MATTERS -- (Continued)
[4] Vendor agreements:
The Company has entered into agreements with various manufacturers for the
purchase of diabetic supplies.
NOTE J--RELATED PARTY TRANSACTIONS
[1] On May 1996, the Company purchased the land and building it now occupies
for $320,000 from a partnership owned by the two principal stockholders of the
Company. The Company paid $50,000 cash, obtained a $250,000 first mortgage from
a bank and a $20,000 loan from the seller. An independent appraisal was
performed at the time of purchase which appraised the land and building at a
market value in excess of the purchase price.
[2] The Company's advertising function is handled by a corporation 90% owned by
two principal stockholders of the Company. Disbursements to this corporation
amounted to $131,000 and $539,000 which accounts for 71% and 100%,
respectively, of the Company's advertising activities during the periods ended
October 31, 1996 and July 31, 1997.
NOTE K--ADVERTISING COSTS
During the period from September 28, 1995 (inception) to October 31, 1996, the
nine months ended July 31, 1997, and the period from September 28, 1995
(inception) to July 31, 1996, advertising costs, including direct-response
advertising costs, charged to expense and reported under selling and shipping
expenses in the statements of income amounted to $185,000, $76,000 and $75,000,
respectively.
NOTE L--SUBSEQUENT EVENTS
[1] The Company has signed a letter of intent with an underwriter with respect
to a proposed initial public offering of the Company's securities. There is no
assurance that such offering will be consummated. In connection therewith,
substantial costs will be incurred, which, if the offering is not consummated,
will be charged to expense.
F-14
<PAGE>
==============================================================================
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company, or by any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the Common Stock referred to herein, nor
does it constitute an offer to sell or a solicitation of an offer to buy such
securities in any jurisdiction where, or to any person to whom, it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information herein is correct as of any date subsequent to
the date hereof.
TABLE OF CONTENTS
Page
---------
Prospectus Summary ........................... 3
Summary Financial Information ............... 5
The Company ................................. 6
Risk Factors ................................. 7
Use of Proceeds .............................. 16
Capitalization .............................. 17
Dividend Policy .............................. 17
Dilution .................................... 18
Selected Financial Data .................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 20
Business .................................... 23
Management ................................. 33
Principal Stockholders ..................... 40
Certain Relationships and Related Transactions 41
Shares Eligible for Future Sale ............ 42
Description of Capital Stock ............... 43
Underwriting ................................. 45
Legal Matters .............................. 47
Experts .................................... 47
Additional Information ..................... 47
Index to Financial Statements ............... F-1
Until , 1997 (25 days after the date of this Prospectus) all dealers
effecting transactions in the Common Stock, whether or not participating in
this distribution, may be required to deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
===============================================================================
<PAGE>
===============================================================================
500,000 Shares
[GRAPHIC OMITTED]
CERTIFIED DIABETIC
SERVICES, INC.
Common Stock
-----------------------------------
PROSPECTUS
-----------------------------------
Jesup & Lamont Securities
Corporation
-------------------------- , 1997
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
Securities and Exchange Commission Registration Fee ......... $1,250.63
NASD Filing Fee ............................................. 873.75
NASDAQ Filing Fee .......................................... 10,000
Blue Sky Fees and Expenses (including attorneys' fees) ...... 40,000
Printing and Engraving Expenses .............................. *
Legal Fees and Expenses .................................... *
Accounting Fees and Expenses ................................. *
Transfer Agent and Registrar Fees and Expenses ............ *
Miscellaneous ................................................ *
-----------
Total ...................................................... *
===========
- ------------
* To be filed by amendment. All expenses listed above are estimates, except for
the Commission and NASD fees.
Item 14. Indemnification of Officers and Directors
The Certificate of Incorporation and By-Laws of the Registrant provides
that the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law (the "GCL"). Section 145 of the GCL, relating
to indemnification, and is hereby incorporated herein by reference.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to Directors, officers or controlling persons of the Company pursuant
to the Company's By-laws and the Delaware General Corporation Law, the Company
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to Delaware law whereby officers and Directors of the
Company are to be indemnified against certain liabilities. The Company's
Certificate of Incorporation limits, to the fullest extent permitted by
Delaware law, a director's liability for monetary damages for breach of
fiduciary duty, including gross negligence, except liability for (i) breach of
the director's duty of loyalty, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
the unlawful payment of a dividend or unlawful stock purchase or redemption and
(iv) any transaction from which the director derives an improper personal
benefit. Delaware law does not eliminate a director's duty of care and this
provision has no effect on the availability of equitable remedies such as
injunction or rescission based upon a director's breach of the duty of care. In
addition, the Company has obtained an insurance policy providing coverage for
certain liabilities of its officers and Directors.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director with certain limited exceptions set forth in Section
102(a)(7).
Item 15. Recent Sales of Unregistered Securities
The Board of Directors of the Company awarded bonuses to Messrs. Peter J.
Fiscina, Albert R. Ayala and Myron M. Blumenthal, in accordance with their
employment agreements, in the aggregate amount of $419,000 in respect of the
fiscal year ended October 31, 1996, and in the additional aggregate amount of
$200,000 in respect of the quarter ended January 31, 1997. Such bonus amounts,
together with accrued salaries in the aggregate amount of $181,000, were
simultaneously lent to the Company by the three officers. On February 20, 1997,
these loans were converted into shares of Common Stock at the price of $1.00
per share. Based on the foregoing, the Company issued to the three officers an
aggregate of 800,000 shares of Common Stock on February 20, 1997.
II-1
<PAGE>
In May 1997, the Board of Directors awarded bonuses to Messrs. Fiscina,
Ayala and Blumenthal, in accordance with their employment agreements, in the
aggregate amount of $200,000 in respect of the quarter ended April 30, 1997.
The Board further authorized the payment of such bonuses, the simultaneous loan
of such bonus amounts by the three officers back to the Company, and the
simultaneous conversion of such loans into shares of Common Stock at the price
of $8.00 per share, which price represented the share price quoted on the "OTC
Electronic Bulletin Board of the NASD" on the date of the award. Based on the
foregoing, the Company issued to the three officers an aggregate of 25,000
shares of Common Stock on May 16, 1997.
In December 1996, the Company completed the private placement of 2,000,000
shares of its Common Stock, for an aggregate purchase price of $100,000, to
subscribers in an offering exempt from the registration requirements of the
Securities Act of 1933, as amended. The shares of Common Stock were sold
directly through the Company's officers and directors without payment to them
of commissions or any form of remuneration. Since April 1997, certain
broker-dealers have, pursuant to Rule 15c2-11 under the Exchange Act, made a
market for such shares and traded such shares through, and quoted the price
therefor on, the "OTC Bulletin Board" of NASD.
In November 1995, the Company issued an aggregate of 70 shares of its
Common Stock to Messrs. Fiscina and Blumenthal, and an aggregate of an
additional 70 shares of its Common Stock to two other persons (which shares,
following a 20,000 for 1 stock split effected in July 1996, represented, in the
aggregate, 2,800,000 shares of Common Stock) in payment for consulting services
rendered to the Company and valued, in the aggregate, at $14,000.
At its inception, in September 1995, the Company issued to Messrs. Fiscina
and Ayala an aggregate of 200 shares of common stock for $100 per share (which
shares, following a 20,000 for 1 stock split effected in July 1996, represented
4,000,000 shares of Common Stock). In October 1995, the Company also issued to
Messrs. Fiscina, Ayala and Blumenthal an aggregate of 60 shares of Common Stock
in full payment for services rendered valued in the aggregate at $6,000 ($100
per share).
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<S> <C>
(a) Exhibit Index
1. Form of Underwriting Agreement between Certified Diabetic Services, Inc. and the Representative.*
3.1 Certificate of Incorporation, filed May 29, 1997.
3.2 Certificate of Amendment of Certificate of Incorporation, filed September 17, 1997.
3.3 By-Laws.
4.1 Form of Certificate of Common Stock.
4.2 Form of Representative's Warrant.*
5.1 Opinion of Bryan Cave LLP.*
10.1 Certified Diabetic Services, Inc. 1997 Incentive Program, as amended.
10.2 Form of Certified Diabetic Services, Inc. Stock Option Agreement.
10.3 Form of Certified Diabetic Services, Inc. Stock Option Agreement.
10.4 Employment Agreement between Certified Diabetic Supplies Inc. and Peter J. Fiscina, dated
November 2, 1995.
10.5 Employment Agreement between Certified Diabetic Supplies Inc. and Myron M. Blumenthal, dated
November 2, 1995.
10.6 Employment Agreement between Certified Diabetic Supplies Inc. and Albert R. Ayala, dated
November 2, 1995.
(See footnotes on next page)
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.7 Employment Agreement between Certified Diabetic Supplies Inc. and Joseph L. Marotta, dated as of
February 14, 1997.
10.8 Employment Agreement between CDS Health Management, Inc. and Ronald G. Hersch, Ph.D., dated
September 5, 1997.*
10.9 Mortgage and Security Agreement between First National Bank of Naples and Certified Diabetic
Supplies Inc., dated May 31, 1996.
10.10 Commercial Guaranty between First National Bank of Naples and Certified Diabetic Supplies Inc.,
dated July 31, 1997, guaranteed by Peter J. Fiscina.
10.11 Promissory Note issued by First National Bank of Naples to Certified Diabetic Supplies Inc., dated July
31, 1997.
10.12 Commercial Guaranty between First National Bank of Naples and Certified Diabetic Supplies Inc.,
dated July 31, 1997, guaranteed by Albert R. Ayala.
10.13 Promissory Note issued by First National Bank of Naples to Certified Diabetic Supplies Inc., dated
January 9, 1997.
10.14 Commitment Letter between First National Bank of Naples and Certified Diabetic Supplies Inc., dated
June 26, 1997.
10.15 Lease Agreement between Barnett Bank, N.A. and Certified Diabetics Supplies Inc., dated August 26,
1997.
10.16 1997 Medicare/Medicaid Reagent Purchasing Agreement Contract A between Bayer Corporation and
Certified Diabetic Supplies Inc., dated June 25, 1997.**
10.17 Purchasing Agreement Contract for Medicare Distributors Pilot Program between Lifescan Inc. and
Certified Diabetic Supplies Inc., dated June 2, 1997.**
10.18 Participating Facility Agreement between MultiPlan, Inc. and Certified Diabetic Supplies Inc., dated
May 20, 1997.**
10.19 Purchase and Sale Agreement between Barnett Bank, N.A. and Certified Diabetic Services, Inc., as
amended on July 31, 1997, August 15, 1997 and August 18, 1997.
10.20 Medicare/Medicaid Strip Rebate Credit Purchasing Agreement between Boehringer Mannheim Corpo-
ration and Certified Diabetic Supplies Inc., dated May 22, 1997.**
10.21 Supply Agreement between Bayer Corporation and Certified Diabetic Supply, dated June 17, 1997.**
10.22 Diabetic Supplies Agreement between Certified Medical Supplies, Inc., Certified Diabetic Supplies Inc.,
and Benefit Plan Administrator, Inc., dated July 2, 1997.**
10.23 Agreement for Services between Professional Employee Management, Inc. and Certified Diabetic
Supplies Inc., dated June 9, 1997.
10.24 Financial Consulting Agreement with the Representative.*
21.1 List of Subsidiaries
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Bryan Cave, LLP (appears in Exhibit 5.1).*
24 Power of Attorney (included on signature page).
</TABLE>
- ------------
* To be filed by amendment.
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
II-3
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
above in Item 15, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby also undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Include any additional or changed material information on the plan
of distribution.
(4) To file, a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of the offering.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person
whom the prospectus, to deliver, or cause to be delivered to each person whom
the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in this prospectus to provide such
interim financial information.
The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Naples, State of
Florida, on October 6, 1997.
CERTIFIED DIABETIC SERVICES, INC.
By: /s/ PETER J. FISCINA
---------------------------------
Name: Peter J. Fiscina
Title: President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Peter J. Fiscina and Myron M. Blumenthal and any of them (with full power to
each of them to act alone) the true and lawful attorneys-in-fact and agents of
the undersigned, with full power of substitution and resubstitution, for and in
the name, place and stead of the undersigned, in any and all capacities, to
sign any and all amendments (including post-effective amendments) to this
Registration Statement, including any filings pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission (or any other government or regulatory authority), and
hereby grants to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute, or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PETER J. FISCINA President, Principal Executive October 6, 1997
- --------------------------- Officer, Director
Peter J. Fiscina
/s/ ALBERT R. AYALA Vice President, Director October 6, 1997
- ---------------------------
Albert R. Ayala
/s/ MYRON M. BLUMENTHAL Treasurer, Principal Financial October 6, 1997
- --------------------------- Officer, Director
Myron M. Blumenthal
/s/ STANLEY BLOOM Director October 6, 1997
- ---------------------------
Stanley Bloom, M.D.
/s/ RONALD RUCKER Director October 6, 1997
- ---------------------------
Ronald L. Rucker
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
1. Form of Underwriting Agreement between Certified Diabetic Services, Inc. and the Representative.*
3.1 Certificate of Incorporation, filed May 29, 1997.
3.2 Certificate of Amendment of Certificate of Incorporation, filed September 17, 1997.
3.3 By-Laws.
4.1 Form of Certificate of Common Stock.
4.2 Form of Representative's Warrant.*
5.1 Opinion of Bryan Cave LLP.*
10.1 Certified Diabetic Services, Inc. 1997 Incentive Program, as amended.
10.2 Form of Certified Diabetic Services, Inc. Stock Option Agreement.
10.3 Form of Certified Diabetic Services, Inc. Stock Option Agreement.
10.4 Employment Agreement between Certified Diabetic Supplies Inc. and Peter J. Fiscina, dated
November 2, 1995.
10.5 Employment Agreement between Certified Diabetic Supplies Inc. and Myron M. Blumenthal, dated
November 2, 1995.
10.6 Employment Agreement between Certified Diabetic Supplies Inc. and Albert R. Ayala, dated
November 2, 1995.
10.7 Employment Agreement between Certified Diabetic Supplies Inc. and Joseph L. Marotta, dated as of
February 14, 1997.
10.8 Employment Agreement between CDS Health Management, Inc. and Ronald G. Hersch, Ph.D., dated
September 5, 1997.*
10.9 Mortgage and Security Agreement between First National Bank of Naples and Certified Diabetic
Supplies Inc., dated May 31, 1996.
10.10 Commercial Guaranty between First National Bank of Naples and Certified Diabetic Supplies Inc.,
dated July 31, 1997, guaranteed by Peter J. Fiscina.
10.11 Promissory Note issued by First National Bank of Naples to Certified Diabetic Supplies Inc., dated July
31, 1997.
10.12 Commercial Guaranty between First National Bank of Naples and Certified Diabetic Supplies Inc.,
dated July 31, 1997, guaranteed by Albert R. Ayala.
10.13 Promissory Note issued by First National Bank of Naples to Certified Diabetic Supplies Inc., dated
January 9, 1997.
10.14 Commitment Letter between First National Bank of Naples and Certified Diabetic Supplies Inc., dated
June 26, 1997.
10.15 Lease Agreement between Barnett Bank, N.A. and Certified Diabetics Supplies Inc., dated August 26,
1997.
10.16 1997 Medicare/Medicaid Reagent Purchasing Agreement Contract A between Bayer Corporation and
Certified Diabetic Supplies Inc., dated June 25, 1997.**
10.17 Purchasing Agreement Contract for Medicare Distributors Pilot Program between Lifescan Inc. and
Certified Diabetic Supplies Inc., dated June 2, 1997.**
10.18 Participating Facility Agreement between MultiPlan, Inc. and Certified Diabetic Supplies Inc., dated
May 20, 1997.**
10.19 Purchase and Sale Agreement between Barnett Bank, N.A. and Certified Diabetic Services, Inc., as
amended on July 31, 1997, August 15, 1997 and August 18, 1997.
(See footnotes on next page)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
10.20 Medicare/Medicaid Strip Rebate Credit Purchasing Agreement between Boehringer Mannheim
Corporation and Certified Diabetic Supplies Inc., dated May 22, 1997.**
10.21 Supply Agreement between Bayer Corporation and Certified Diabetic Supply, dated June 17, 1997.**
10.22 Diabetic Supplies Agreement between Certified Medical Supplies, Inc., Certified Diabetic Supplies Inc.,
and Benefit Plan Administrator, Inc., dated July 2, 1997.**
10.23 Agreement for Services between Professional Employee Management, Inc. and Certified Diabetic
Supplies Inc., dated June 9, 1997.
10.24 Financial Consulting Agreement with the Representative.*
21.1 List of Subsidiaries
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Bryan Cave, LLP (appears in Exhibit 5.1).*
24 Power of Attorney (included on signature page).
</TABLE>
- ------------
* To be filed by amendment.
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CERTIFIED DIABETIC SERVICES, INC.
THE UNDERSIGNED, in order to form a corporation for the
purposes herein stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, hereby certifies as follows:
FIRST: The name of this Corporation shall be:
CERTIFIED DIABETIC SERVICES, INC.
SECOND: The registered office of the Corporation is to be
located at 9 East Loockerman Street, in the City of Dover, in the County of
Kent, in the State of Delaware 19901. The name of its registered agent at that
address is National Corporate Research, Ltd.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares which the Corporation shall
have authority to issue is Twenty-Five Million (25,000,000) shares of common
stock, par value $.01 per share, which shall be documented fully paid and
non-assessable.
FIFTH: The name and mailing address of the incorporator is:
Thomas P. Orfanos, c/o Bryan Cave LLP, 245 Park Avenue, New York 10167-0034.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The power to adopt, alter, amend or repeal by-laws
shall be vested in the Board of Directors and Stockholders.
EIGHTH: This Corporation reserves the right to amend or repeal
any provisions contained in this Certificate of Incorporation, or any amendment
to it.
I, the undersigned, being the sole incorporator, for the
purpose of forming a corporation under the laws of the State of Delaware do
make, file and record this Certificate of Incorporation, do certify that the
facts herein stated are true, and accordingly, have hereto set my hand and seal
this 29th day of May, 1997.
/s/ Thomas P. Orfanos
-------------------------------
Thomas P. Orfanos, Incorporator
c/o Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CERTIFIED DIABETIC SERVICES, INC.
Certified Diabetic Services, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the
unanimous written consent of its members, filed with the minutes of the Board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:
RESOLVED, that subject to the approval of the
stockholders of the Corporation, Article Fourth of the
Certificate of Incorporation be amended to read in its
entirety as follows:
"FOURTH: The aggregate number of shares of
capital stock which the Corporation shall be
authorized to issue shall be Thirty Million
(30,000,000) shares of which Twenty-Five Million
(25,000,000) shares are Common Stock, $.01 par value
per share (the "Common Stock"), and Five Million
(5,000,000) shares are Preferred Stock, par value
$.01 per share (the "Preferred Stock"). The Board of
Directors of the Corporation is expressly authorized
at any time, and from time to time, to provide for
the issuance of shares of Preferred Stock in one or
more series, with such designations, preferences and
relative, participating, optional or other special
rights, and qualifications, limitations, or
restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing
for the issue thereof adopted by the Board of
Directors."; and further
RESOLVED, that subject to the approval of the
stockholders of the Corporation, the Certificate of
Incorporation be amended to include the following provisions:
<PAGE>
"NINTH: The election of directors need not
be by written ballot unless the by-laws so provide.
TENTH: Whenever a compromise or arrangement
is proposed between this Corporation and its
creditors or any class of them and/or between this
Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any
receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section
279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors and/or the
stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority
in number representing three-fourths in value of the
creditors or class of creditors and/or of the
stockholders or class of stockholders of this
Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization
of the Corporation as a consequence of such
compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if
sanctioned by the court to which the said application
has been made, be binding on all the creditors or
class of creditors and/or on all the stockholders or
class of stockholders of this Corporation, as the
case may be, and also on this Corporation.
ELEVENTH: Anything to the contrary in this
Certificate of Incorporation notwithstanding, no
director shall be liable personally to the
Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided
however, that nothing in this paragraph shall
eliminate or limit the liability of a director (i)
for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or
2
<PAGE>
omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any
transaction from which such director derived an
improper personal benefit. The modification or repeal
of this Article Eleventh shall not affect the
restriction hereunder of a director's personal
liability for any act or omission occurring prior to
such modification or repeal."
SECOND: That in lieu of a meeting and vote of stockholders,
the stockholders have given their written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware and written notice of the adoption of the amendment has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware to every stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Certified Diabetic Services, Inc. has
caused this Certificate to be signed by Myron M. Blumenthal, its Treasurer, this
3rd day of September, 1997.
CERTIFIED DIABETIC SERVICES, INC.
By: /s/ Myron M. Blumenthal
-------------------------
Name: Myron M. Blumenthal
Title: Treasurer
<PAGE>
BY-LAWS
OF
CERTIFIED DIABETIC SERVICES, INC.
ARTICLE I
OFFICES
-------
SECTION 1. Principal Office. The registered office of the
Corporation shall be located in such place as may be provided from time to time
in the Certificate of Incorporation.
SECTION 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
------------
SECTION 1. Annual Meetings. The annual meeting of the
stockholders of the Corporation shall be held at such place, within or without
the State of Delaware, on such date and at such time as may be determined by the
Board of Directors and as shall be designated in the notice of said meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Certificate of Incorporation, may be held at any place, within or
without the State of Delaware, and may be called by resolution of the Board of
Directors, or by the Chairman or the President, or by the holders of not less
than one-quarter of all of the shares entitled to vote at the meeting.
SECTION 3. Notice and Purpose of Meetings. Written or printed
notice of the meeting stating the place, day and hour of the meeting and, in
case of a special meeting, stating the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than sixty days before
the date of the meeting, either personally or by mail, by or at the direction of
the Chairman or the President, the Secretary, or the persons calling the
meeting, to each stockholder of record entitled to vote at such meeting.
SECTION 4. Quorum. The holders of a majority of the shares of
capital stock issued and outstanding and entitled to vote, represented in person
or by proxy, shall constitute a quorum
<PAGE>
at all meetings of the stockholders for the transaction of business, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 5. Voting Process. If a quorum is present or
represented, the affirmative vote of a majority of the shares of stock present
or represented at the meeting shall be the act of the stockholders unless the
vote of a greater number of shares of stock is required by law, by the
Certificate of Incorporation or by these By-Laws. Each outstanding share of
stock having voting power, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. A stockholder may vote either
in person or by proxy executed in writing by the stockholder or by his or her
duly authorized attorney-in-fact. The term, validity and enforceability of any
proxy shall be determined in accordance with the General Corporation Law of the
State of Delaware.
SECTION 6. Written Consent of Stockholders Without a Meeting.
Whenever the stockholders are required or permitted to take any action by vote,
such action may be taken without a meeting, without prior notice and without a
vote, if a written consent, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
called for such purpose.
ARTICLE III
DIRECTORS
---------
SECTION 1. Powers. The business affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these By-Laws directed or required
to be exercised or done by the stockholders. The Board of Directors may adopt
such rules and regulations, not inconsistent with the Certificate of
Incorporation or these By-Laws or applicable laws, as it may deem proper for the
conduct of its meetings and the management of the Corporation.
SECTION 2. Number, Qualifications, Term. The Board of
Directors shall consist of three or more members. The number of directors shall
be fixed initially by the Incorporator and may thereafter be changed from time
to time by resolution of the Board of Directors or of the stockholders.
Directors need not be
2
<PAGE>
residents of the State of Delaware nor stockholders of the Corporation. The
directors shall be elected at the annual meeting of the stockholders, and each
director elected shall serve until the next succeeding annual meeting and until
his or her successor shall have been elected and qualified.
SECTION 3. Vacancies. Vacancies and newly created
directorships resulting from any increase in the number of directors may be
filled by a majority of the directors then in office, though less than a quorum,
and the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify. A vacancy created by
the removal of a director by the stockholders may be filled by the stockholders.
SECTION 4. Place of Meetings. Meetings of the Board of
Directors, regular or special, may be held either within or without the State of
Delaware.
SECTION 5. First Meeting. The first meeting of each newly
elected Board of Directors shall be held immediately following and at the place
of the annual meeting of stockholders and no other notice of such meeting shall
be necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice, or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman or the President or by the number of
directors who then legally constitute a quorum. Notice of each special meeting
shall, if mailed, be addressed to each director at or his or her last known
address at least four (4) days prior to the date on which the meeting is to be
held; or such notice shall be sent to each director at such address by telegram,
telex, or facsimile, or be delivered to him or her personally, not later than
one full day before the date on which such meeting is to be held.
SECTION 8. Notice; Waiver. Attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3
<PAGE>
SECTION 9. Quorum. A majority of the directors then in office
shall constitute a quorum for the transaction of business unless a greater
number is required by law, by the Certificate of Incorporation or by these
By-Laws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 10. Action Without A Meeting. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. In addition, meetings of the Board may be held by means of
conference telephone as permitted by the General Corporation Law of the State of
Delaware.
SECTION 11. Action. Except as otherwise provided by law or in
the Certificate of Incorporation or these By-Laws, if a quorum is present, the
affirmative vote of a majority of the members of the Board of Directors will be
required for any action.
SECTION 12. Removal of Directors. Subject to any provisions of
applicable law, any or all of the directors may be removed (a) for cause, by
action of stockholders or by action of the remaining members of the Board, and
(b) without cause, by vote of the stockholders.
ARTICLE IV
COMMITTEES
----------
SECTION 1. Executive Committee. The Board may, by resolution
adopted by a majority of the Board, designate one or more of its members to
constitute members or alternate members of an Executive Committee.
SECTION 2. Powers and Authority of Executive Committee. The
Executive Committee shall have and may exercise, between meetings of the Board,
all the powers and authority of the Board in the management of the business and
affairs of the Corporation, including, the right to authorize the purchase of
stock, except that the Executive Committee shall not have such power or
authority in reference to amending the Certificate of Incorporation; adopting an
agreement of merger or consolidation; recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets; recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation or
authorizing the declaration of a dividend.
SECTION 3. Other Committees. The Board may, by resolution
adopted by a majority of the Board, designate one or
4
<PAGE>
more other committees, each of which shall, except as otherwise prescribed by
law, have such authority of the Board as shall be specified in the resolution of
the Board designating such committee. A majority of all the members of such
committee may determine its action and fix the time and place of its meeting,
unless the Board shall otherwise provide. The Board shall have the power at any
time to change the membership of, to fill all vacancies in and to discharge any
such committee, either with or without cause.
SECTION 4. Procedure; Meetings; Quorum. Regular meetings of
the Executive Committee or any other committee of the Board, of which no notice
shall be necessary, may be held at such times and places as shall be fixed by
resolution adopted by a majority of the members thereof. Special meetings of the
Executive Committee or any other committee of the Board shall be called at the
request of any member thereof. So far as applicable, the provisions of Article
III of these By-Laws relating to notice, quorum and voting requirements
applicable to meetings of the Board shall govern meetings of the Executive
Committee or any other committee of the Board. The Executive Committee and each
other committee of the Board shall keep written minutes of its proceedings and
circulate summaries of such written minutes to the Board before or at the next
meeting of the Board.
ARTICLE V
OFFICERS
--------
SECTION 1. Number. The Board of Directors at its first meeting
after each annual meeting of stockholders shall choose a President, a Secretary
and a Treasurer, none of whom need be a member of the Board. The Board of
Directors may also choose a Chairman from among the directors, one or more
Executive Vice Presidents, one or more vice presidents, assistant secretaries
and assistant treasurers. The Board of Directors may appoint such other officers
and agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors. More than two offices
may be held by the same person.
SECTION 2. Compensation. The salaries or other compensation of
all officers of the Corporation shall be fixed by the Board of Directors. No
officer shall be prevented from receiving a salary or other compensation by
reason of the fact that he or she is also a director.
SECTION 3. Term; Removal; Vacancy. The officers of the
Corporation shall hold office until their successors are chosen and qualify. Any
officer may be removed at any time, with or without cause, by the affirmative
vote of a majority of the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors.
5
<PAGE>
SECTION 4. Chairman. The Chairman shall, if one be elected,
preside at all meetings of the Board of Directors.
SECTION 5. President. The President shall be the chief
executive officer of the Corporation, shall preside at all meetings of the
stockholders and the Board of Directors in the absence of the Chairman, shall
have general supervision over the business of the Corporation and shall see that
all directions and resolutions of the Board of Directors are carried into
effect.
SECTION 6. Vice President. The Executive Vice Presidents
shall, if there shall be one or more, in the absence or disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe. If there shall be more than one Executive Vice
President, the Executive Vice Presidents shall perform such duties and exercise
such powers in the absence or disability of the President, in the order
determined by the Board of Directors. The vice presidents shall, if there shall
be one or more, in the absence or disability of the President and of the
Executive Vice Presidents, perform the duties and exercise the powers of the
President and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe. If there shall be more than
one vice president, the vice presidents shall perform such duties and exercise
such powers in the absence or disability of the President and of the Executive
Vice President, in the order determined by the Board of Directors.
SECTION 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose. He or she shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision he or she shall be.
He or she shall have custody of the corporate seal of the Corporation and he or
she, or an assistant secretary, shall have the authority to affix the same to an
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
SECTION 8. Assistant Secretary. The assistant secretary, if
there shall be one, or if there shall be more than one, the assistant
secretaries in the order determined by the Board of Directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such powers
as the Board of Directors may from time to time prescribe.
6
<PAGE>
SECTION 9. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman, the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all of his or her transactions as Treasurer and of the financial
condition of the Corporation.
SECTION 10. Assistant Treasurer. The assistant treasurer, if
there shall be one, or, if there shall be more than one, the assistant
treasurers in the order determined by the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CAPITAL STOCK
-------------
SECTION 1. Form. The shares of the capital stock of the
Corporation shall be represented by certificates in such form as shall be
approved by the Board of Directors and shall be signed by the Chairman, the
President, an Executive Vice President or a vice president, and by the Treasurer
or an assistant treasurer or the Secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof.
SECTION 2. Lost and Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost or destroyed.
When authorizing such issue of a new certificate, the Board of Directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the Corporation from any claim that
may be made against it with respect to any such certificate alleged to have been
lost or destroyed.
SECTION 3. Transfer of Shares. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto, and the old certificate cancelled and the
transaction recorded upon the books of the Corporation.
7
<PAGE>
ARTICLE VII
INDEMNIFICATION
---------------
SECTION 1. (a) The Corporation shall indemnify, subject to the
requirements of subsection (d) of this Section, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
limited liability company, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
(b) The Corporation shall indemnify, subject to the
requirements of subsection (d) of this Section, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to
8
<PAGE>
indemnity for such expenses which the Court of Chancery of the State of Delaware
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify him or her against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in subsections (a)
and (b) of this Section. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by a director, officer, employee or
agent in defending a civil or criminal action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Section. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Section shall not
limit the Corporation from providing any other indemnification or advancement of
expenses permitted by law nor shall they be deemed exclusive of any other rights
to which a person seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.
(g) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
limited liability company, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her
9
<PAGE>
in any such capacity, or arising out of his or her status as such, whether or
not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Section.
(h) For the purposes of this Section, references to "the
Corporation" shall include, in addition to the resulting Corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified by the Board of Directors, continue as to a person who
has ceased to be a director, officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs executors and administrators of such a
person.
ARTICLE VIII
GENERAL PROVISIONS
-------------------
SECTION 1. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
10
<PAGE>
SECTION 2. Fiscal Year. The fiscal year of the Corporation
shall be determined, and may be changed, by resolution of the Board of
Directors.
SECTION 3. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
ARTICLE IX
AMENDMENTS
----------
SECTION 1. These By-Laws may be altered, amended, supplemented
or repealed or new By-Laws may be adopted (a) at any regular or special meeting
of stockholders at which a quorum is present or represented, by the affirmative
vote of the holders of a majority of the shares entitled to vote, provided
notice of the proposed alteration, amendment or repeal be contained in the
notice of such meeting, or (b) by a resolution adopted by a majority of the
entire Board of Directors at any regular or special meeting of the Board. The
stockholders shall have authority to change or repeal any By-Laws adopted by the
directors.
<PAGE>
[STOCK CERTIFICATE - FRONT]
COMMON STOCK COMMON STOCK
NUMBER SHARES
____________ ____________
CERTIFIED DIABETIC SERVICES, INC.
INCORPORATED UNDER THE LAWS CUSIP 157012 10 5
OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN
ABBREVIATIONS
This Certifies that
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.01, OF
CERTIFIED DIABETIC SERVICES, INC.
(herein referred to as the "Corporation"), transferable on the books of the
Corporation by the holder hereof in person or by his duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the terms,
conditions and limitations of the Certificate of Incorporation and Bylaws of the
Corporation, including all amendments heretofore or hereafter made to such
Certificate of Incorporation or Bylaws, to all of which reference is made hereby
and to all of which the holder asserts by acceptance hereof.
This Certificate is not valid unless countersigned by the transfer
agent and registered by the registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused facsimile signatures of
its duly authorized officers and its facsimile seal to be hereunto affixed.
Dated:
[Corporate Seal]
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
Transfer Agent and Registrar
By
Authorized Officer
Peter J. Fiscinia
- ----------------------------------- --------------------------
President and Secretary
Principal Executive Officer
<PAGE>
[STOCK CERTIFICATE - BACK]
CERTIFIED DIABETIC SERVICES, INC.
The Corporation will furnish without charge to each stockholder who so
requests a full statement of the powers, designations, preferences, limitations
and relative rights of each class of stock or series thereof of the Corporation,
and the qualifications, limitations or restrictions of such preferences and/or
rights. Such requests may be made to the Corporation or to the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ____________________________
TEN ENT - as tenants by the (Cust) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN - as joint tenants with Act __________________________
right of survivorship (State)
and not as tenants in common UNIF TRF MIN ACT - __________ Custodian
(Cust) (Minor)
(until age ____) under Uniform
Transfers to Minors Act
______________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------- ________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE
________________________________________________________________________________
_______________________________________________________________________Shares of
the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________________
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated_____________________________
________________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED:
___________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
1997 INCENTIVE PROGRAM
The 1997 Incentive Program (the "Program") provides for the grant to
officers, directors and employees of Certified Diabetic Services, Inc. and its
direct and indirect subsidiaries (collectively, the "Company"), and certain
consultants to the Company, certain rights to acquire shares of the Company's
common stock, par value $.01 per share (the "Common Stock"). The Company
believes that this Program will cause those persons to contribute materially to
the growth and success of the Company, thereby benefiting its stockholders.
1. Administration.
--------------
The Program shall be administered and interpreted by the Board of
Directors of the Company or by one or more Committees appointed by the Board of
Directors of the Company from among its members (the "Plan Administrator"). The
Board of Directors may appoint different Committees to handle different duties
under the Program. The Plan Administrator's decisions shall be final and
conclusive with respect to the interpretation and administration of the Program
and any Grant made under it.
2. Grants.
------
Incentives under the Program shall consist of incentive stock options,
non-qualified stock options, stock appreciation rights in tandem with stock
options or freestanding, and restricted stock grants (any of the foregoing, in
any combination, collectively, "Grants"). All Grants shall be subject to the
terms and conditions set out herein and to such other terms and conditions
consistent with this Program as the Plan Administrator deems appropriate. The
Plan Administrator shall approve the form and provisions of each Grant. Grants
under a particular section of the Program need not be uniform, and Grants under
two or more sections may be combined in one instrument.
3. Eligibility for Grants.
----------------------
Grants may be made to any employee, officer, key executive, director,
professional or administrative employee, consultant or advisor to the Company or
any subsidiary of the Company selected by the Plan Administrator to receive
Grants under the Program (persons so selected, the "Grantees").
4. Shares Available for Grant.
--------------------------
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(b), the aggregate number of shares of Common Stock (the
"Shares") that may be issued or transferred under the Program is 5,000,000
Shares plus, (i) any Shares which are forfeited under the Program after the
Program becomes effective; plus (ii) any Shares surrendered to the Company in
payment of the exercise price of options issued under the Program. The Shares
may be authorized but unissued Shares or Treasury Shares. The number of Shares
available for Grants at any given time shall be reduced by the aggregate of all
Shares previously issued or transferred pursuant to the Program plus the
aggregate of all Shares which may become subject to issuance or transfer under
then-outstanding and then-currently exercisable Grants.
<PAGE>
(b) Adjustments Upon Changes in Capitalization or Other Events. Upon
changes in the Common Stock of the Company by reason of a stock dividend, stock
split, reverse split, recapitalization, merger, consolidation, combination or
exchange of shares, separation, reorganization or liquidation, the number and
class of Shares available under the Program as to which Grants may be made (both
in the aggregate and to any one Grantee), the number and class of Shares under
each then-outstanding Stock Option and the Option Price per share of such
options, and the terms of stock appreciation rights shall be correspondingly
adjusted by the Plan Administrator, such adjustments to be made in the case of
outstanding Stock Options without change in the total price applicable to such
options. In the event of a merger, consolidation, combination, reorganization or
other transaction in which the Company will not be the surviving corporation, or
in which the Company becomes a wholly-owned subsidiary of the new corporation, a
Grantee of Stock Options under the Program shall be entitled to options on that
number of shares of stock in the new corporation which the Grantee would have
received had the Grantee exercised all of the unexercised options available to
the Grantee under the Program, whether or not then exercisable, at the instant
immediately prior to the effective date of such transaction, and, if such
unexercised options had related stock appreciation rights, the Grantee also will
receive new stock appreciation rights related to the new options. Thereafter,
adjustments as provided above shall relate to the options or stock appreciation
rights of the new corporation. Except as otherwise specifically provided in the
instrument of Grant, in the event of a Change in Control (as defined below),
merger, consolidation, combination, reorganization or other transaction in which
the shareowners of the Company will receive cash or securities (other than
Common Stock) or in the event that an offer is made to the holders of Common
Stock of the Company to sell or exchange such Common Stock for cash, securities
or stock of another corporation and such offer, if accepted, would result in the
offeror becoming the owner of (a) at least 50% of the outstanding Common Stock
of the Company or (b) such lesser percentage of the outstanding Common Stock
which the Plan Administrator in its sole discretion determines will materially
adversely affect the market value of the Common Stock after the tender or
exchange offer, the Plan Administrator shall have the right, but not the
obligation, in the exercise of its business judgment, prior to the shareowners'
vote on such transaction or prior to the expiration date (without extensions) of
the tender or exchange offer, (i) to accelerate the time of exercise so that all
Stock Options and stock appreciation rights which are outstanding shall become
immediately exercisable in full, and all Restricted Stock Grants shall
immediately vest in full, without regard to any limitations of time, performance
or amount otherwise contained in the Program or in the instruments of Grant
and/or (ii) to determine that the options and stock appreciation rights shall be
adjusted and make such adjustments by substituting for Common Stock of the
Company subject to options and stock appreciation rights, common stock of the
surviving corporation or offeror if such stock of such corporation is publicly
traded or, if such stock is not publicly traded, by substituting common stock of
a parent of the surviving corporation or offeror if the stock of such parent is
publicly traded, in which event the aggregate option price shall remain the same
and the number of shares subject to outstanding grants shall be the number of
shares which could have been purchased on the closing day of such transaction or
the expiration date of the offer with the proceeds which would have been
received by the Grantee if the option had been exercised in full prior to such
transaction or expiration date and the Grantee had exchanged all of such shares
in the transaction or sold or exchanged all of such shares pursuant to the
tender or exchange offer, and if any such option has related stock appreciation
rights, the stock appreciation rights shall likewise be adjusted. For purposes
of this Section 4(b), "Change in Control" means (i) any "person", as such term
is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or
any corporation owned, directly or indirectly, by the shareowners of the Company
in substantially the same proportion as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of
2
<PAGE>
the Company's then outstanding securities without the approval of the Board of
Directors of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause (i),
(iii), or (iv) of this sentence) whose election by the Board or nomination for
election by the Company's shareowners was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute at least a majority
thereof; (iii) the shareowners of the Company approve a merger or consolidation
of the Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or (iv) the shareowners of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets and properties.
5. Stock Options.
-------------
The Plan Administrator may grant options qualifying as incentive stock
options under the Internal Revenue Code of 1986, as amended ("Incentive Stock
Options"), or non-qualified options not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986 (the "Code"), as amended
(collectively, "Stock Options"). The following provisions of this Section 5 are
applicable to Stock Options:
(a) Exercise of Option. A Grantee may exercise a Stock Option by
delivering a notice of exercise to the Company, either with or without
accompanying payment of the option price (the "Option Price"). The notice of
exercise, once delivered, shall be irrevocable.
(b) Satisfaction of Option Price. The Grantee shall pay the Option
Price in cash or by delivering shares of Common Stock which have been owned by
the Grantee for a minimum of six (6) months and which have a Fair Market Value
on the date of exercise equal to the Option Price, or a combination of cash and
Shares. The Grantee shall pay the Option Price not later than thirty (30) days
after the date of a statement from the Company following exercise setting forth
the Option Price, Fair Market Value of Common Stock on the exercise date, the
number of shares of Common Stock that may be delivered in payment of the Option
Price, and the amount of withholding tax due, if any. If the Grantee fails to
pay the Option Price within the thirty (30) day period, the Plan Administrator
shall have the right to take whatever action it deems appropriate, including
voiding the option exercise. The Company shall not issue or transfer shares of
Common Stock upon exercise of a Stock Option until the Option Price is fully
paid.
(c) Share Withholding. With respect to any non-qualified option or SAR
(as defined below), the Plan Administrator may, in its discretion and subject to
such rules as the Plan Administrator may adopt (including, without limitation,
rules relating to minimum holding periods for Common Stock), permit the Grantee
to satisfy, in whole or in part, any withholding tax obligation which may arise
in connection with the exercise of the non-qualified option or SAR by electing
to have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of the withholding tax. Notwithstanding the foregoing, as a
condition of the Grant of any Stock Option or
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SAR to any officer or director of the Company subject to the reporting
requirements (a "Reporting Person") of Section 16 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan
Administrator shall require, upon the exercise of any Stock Option or SAR by any
Reporting Person, at a time when the Company shall be required to file periodic
reports under Section 13 of the Exchange Act, that the number of shares of
Common Stock otherwise issuable upon the exercise of such Stock Option or SAR
shall be reduced by the number of shares of Common Stock having an aggregate
Fair Market Value equal to the amount of the Reporting Person's liability for
any and all taxes required by law to be withheld.
(d) Price and Term. The Option Price per share, term and other
provisions of Stock Options granted under the Program shall be specified by the
Grant, as limited, in the case of Incentive Stock Options, by the provisions of
Section 5(e) below, if granted pursuant to such Section. In addition, the Plan
Administrator may prescribe such other conditions as it may deem appropriate,
which conditions shall be specified in the instrument of Grant.
(e) Limits on Incentive Stock Options. The aggregate fair market value
of the stock covered by Incentive Stock Options granted under the Program or any
other stock option plan of the Company or any subsidiary or parent of the
Company that become exercisable for the first time by any employee in any
calendar year shall not exceed $100,000. The aggregate Fair Market Value will be
determined at the time of grant. The period for exercise of an Incentive Stock
Option shall not exceed ten (10) years from the date of the Grant (or five years
if the Grantee is also a 10% stockholder). The Option Price at which Common
Stock may be purchased by the Grantee under an Incentive Stock Option shall be
the Fair Market Value (or 110% of the Fair Market Value if the Grantee is a 10%
stockholder) of the Common Stock on the date of the Grant. Incentive Stock
Options may only be granted to employees of the Company or any subsidiary or
parent of the Company. Incentive Stock Options by their terms shall not be
transferable by the Grantee other than by the laws of descent and distribution,
and shall be exercisable, during the lifetime of the Grantee, only by the
Grantee.
(f) Restored Options. Stock Options granted under the Program may, with
the Plan Administrator's permission, include the right to acquire a restored
option (a "Restored Option"). If a Stock Option grant contains a Restored Option
feature and if a Grantee pays all or part of the Option Price of such Stock
Option with shares of Common Stock held by the Grantee, then upon exercise of
such Stock Option the Grantee shall be granted a Restored Option to purchase, at
the Fair Market Value of the Common Stock as of the date of the grant of the
Restored Option, the number of shares of Common Stock of the Company equal to
the sum of the number of whole shares used by the Grantee in payment of the
Option Price and the number of whole shares, if any, withheld by the Company as
payment for withholding taxes. A Restored Option may be exercised between the
date of grant and the date of expiration, which will be the same as the date of
expiration of the Stock Option to which such Restored Option is related.
6. Stock Appreciation Right.
------------------------
The Plan Administrator may grant a Stock Appreciation Right ("SAR")
either independently or in conjunction with any Stock Option granted under the
Program. The following provisions are applicable to each SAR:
(a) Options to Which Right Relates. Each SAR which is issued in
conjunction with a Stock Option shall specify the Stock Option to which the SAR
is related, together with the Option Price and number of option shares subject
to the SAR at the time of its grant.
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(b) Requirement of Employment. An SAR may be exercised only while the
Grantee is in the employment of the Company, except that the Plan Administrator
may provide for partial or complete exceptions to this requirement as it deems
equitable.
(c) Exercise. A Grantee may exercise an SAR in whole or in part by
delivering a notice of exercise to the Company, except that the Plan
Administrator may provide for partial or complete exceptions to this requirement
as it deems equitable.
(d) Payment and Form of Settlement. If a Grantee exercises an SAR which
is issued in conjunction with a Stock Option, he shall receive the aggregate of
the excess of the fair market value of each share of Common Stock with respect
to which the SAR is being exercised over the Option Price of each such share.
Payment, in any event, may be made in cash, Common Stock which has been held by
the Grantee for at least six (6) months or a combination of the two, in the
discretion of the Plan Administrator. Fair Market Value shall be determined as
of the date of exercise.
(e) Expiration and Termination. Each SAR shall expire on a date
determined by the Plan Administrator at the time of grant. If a Stock Option is
exercised in whole or in part, any SAR related to the Shares purchased in
connection with such exercise shall terminate immediately.
7. Restricted Stock Grants.
-----------------------
The Plan Administrator may issue or transfer shares of Common Stock
("Restricted Stock") to a Grantee under a Restricted Stock Grant. Shares of
Restricted Stock are subject to forfeiture unless and until specified employment
vesting and/or performance vesting conditions are met, as determined by the Plan
Administrator. Until the shares vest or are forfeited, as the case may be, the
Grantee shall be entitled to vote the shares and to receive any dividends paid.
The following provisions are applicable to Restricted Stock Grants:
(a) Requirement of Employment. If the Grantee's employment terminates
prior to the fulfillment of the conditions for vesting of the Restricted Stock,
as set forth in the specific instrument of Grant, all shares of Restricted Stock
held by him or her and still subject to restriction will be forfeited and must
be returned immediately to the Company. However, the Plan Administrator may
provide for partial or complete exceptions to this requirement as it deems
equitable.
(b) Restrictions of Transfer and Legend on Stock Certificate. Prior to
the fulfillment of the conditions for vesting, a Grantee may not sell, assign,
transfer, pledge, or otherwise dispose of the shares of Common Stock except to a
Successor Grantee under Section 9(a). Each certificate for shares issued or
transferred under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the restrictions applicable to the Grant. The Plan
Administrator may, in its sole discretion, require that such certificates be
placed into escrow with the Company until vesting.
(c) Lapse of Restrictions. All restrictions imposed under a Restricted
Stock Grant shall lapse upon the fulfillment of the conditions for vesting set
forth in the instrument of Grant provided that all of the conditions stated in
Sections 7(a) and (b) have been met as of the date of such lapse. The Grantee
shall then be entitled to have the legend removed from the certificate.
8. Amendment and Termination of the Program.
----------------------------------------
(a) Amendment. The Board of Directors of the Company may from time to
time amend, alter, suspend or discontinue the Program, subject to any
requirement of stockholder approval required by applicable law, rule or
regulation, including Section 162(m) of the Code or, if the Common Stock is
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<PAGE>
then listed or admitted for trading on any United States securities exchange or
on the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ"), any requirement for stockholder approval required under the
rules of such exchange or NASDAQ, as the case may be; provided, however, that no
amendment shall be made without stockholder approval if such amendment would (1)
increase the maximum number of shares of Common Stock available for issuance
under this Program (subject to Section 4(b)), (2) reduce the minimum Option
Price in the case of an option or the base price in the case of an SAR, (3)
effect any change inconsistent with Section 422 of the Code or (4) extend the
term of this Program
(b) Termination of the Program. The Program shall terminate on the
tenth anniversary of its effective date unless terminated earlier by the Board
or unless extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Program that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the Grantee consents or unless
the Plan Administrator acts under Section 9(d). The termination of the Program
shall not impair the power and authority of the Plan Administrator with respect
to outstanding Grants. Whether or not the Program has terminated, an outstanding
Grant may be terminated or amended under Section 9(d) or may be amended by
agreement of the Company and the Grantee on terms consistent with the Program.
9. General Provisions.
------------------
(a) Prohibitions Against Transfer. Only a Grantee or his or her
authorized representative may exercise rights under a Grant. Such persons may
not transfer those rights, except upon the express written consent of the
Company, which may be granted or denied in the Company's discretion. Except as
otherwise expressly provided herein or in the instrument of grant, when a
Grantee dies, the personal representative or other person entitled under a Grant
under the Program to succeed to the rights of the Grantee ("Successor Grantee")
may exercise the rights. A Successor Grantee must furnish proof satisfactory to
the Plan Administrator of his or her right to receive the Grant under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Suitable Grants. The Plan Administrator may make a Grant to an
employee of another corporation who becomes an Eligible Grantee by reason of a
corporate merger, consolidation, acquisition of stock or property, share
exchange, reorganization or liquidation involving the Company in substitution
for a stock option, stock appreciation right, performance award, or restricted
stock grant previously granted by such corporation (the "Original Incentives").
The terms and conditions of the substitute Grant may vary from the terms and
conditions required by the Program and from those of the Original Incentives.
The Plan Administrator shall prescribe the exact provisions of the substitute
Grants, preserving where possible the provisions of the Original Incentives.
(c) Subsidiaries. The term "subsidiary" means a corporation in which
the Company owns directly or indirectly 50% or more of the voting power.
(d) Compliance with Law. The Program, the exercise of Grants, and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Plan Administrator may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Plan
Administrator may also adopt rules regarding the withholding of taxes on payment
to Grantees.
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<PAGE>
(e) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder of the Company with respect to any Shares covered by a
Grant until the Shares are issued or transferred to the Grantee or Successor
Grantee on the Company's books.
(f) No Right to Employment. The Program and the Grants under it shall
not confer upon any Grantee the right to continue in the employment of the
Company or affect in any way the right of the Company to terminate the
employment of a Grantee at any time.
(g) Effective Date of the Program. The Program shall become effective
upon its approval by the Company's stockholders.
(h) Fair Market Value. For the purposes of the Program, the term "Fair
Market Value" means, as of any date, the closing price of a share of Common
Stock of the Company on such date. The closing price shall be (i) if the Common
Stock is then listed or admitted for trading on any national securities
exchange, or if not so listed or admitted for trading, is listed or admitted for
trading on NASDAQ, the last sale price of the Common Stock, regular way, or the
mean of the bid and asked prices thereof for any trading day on which no such
sale occurred, in each case as officially reported on the principal securities
exchange on which the Common Stock is listed or admitted for trading or on
NASDAQ, as the case may be, or (ii) if not so listed or admitted for trading on
a national securities exchange or NASDAQ, the mean between the closing high bid
and low asked quotations for the Common Stock in the over-the-counter market as
reported by NASDAQ, or any similar system for the automated dissemination of
securities prices then in common use, if so quoted, as reported by any member
firm of the New York Stock Exchange selected by the Company; provided, however,
that if, by reason of extended or continuous trading hours on any exchange or in
any market or for any other reason, the time, with respect to any trading day,
of the close of trading for the purpose of determining the "last sale price" or
the "closing" bid and asked prices is not objectively determinable, the time on
such trading day used for the purpose of reporting any compilation of last sale
prices or closing bid and asked prices in The Wall Street Journal shall be the
time on such trading day as of which the "last sale price" or "closing" bid and
asked prices are determined for purposes of this definition. If the Common Stock
is quoted on a national securities or central market system in lieu of a market
or quotation system described above, the closing price shall be determined in
the manner set forth in clause (i) of the preceding sentence if actual
transaction are reported, and in the manner set forth in clause (ii) of the
preceding sentence if bid and asked quotations are reported but actual
transactions are not. If on the date in question, there is no exchange or
over-the-counter market for the Common Stock, the "fair market value" of such
Common Stock shall be determined by the Plan Administrator acting in good faith.
(i) Application of Funds. The proceeds received by the Company from the
issuance of Grants pursuant to the Program will be used for general corporate
purposes.
(j) No Obligation to Exercise Option. The granting of an option to any
Grantee under the Program shall impose no obligation upon such Grantee to
exercise such option.
(k) Severability. If any provision of the Program, or any term or
condition of any Grant granted or form executed or to be executed thereunder, or
any application thereof to any person or circumstances is invalid, such
provision, term, condition or application shall to that extent be void (or, in
the discretion of the Plan Administrator, such provision, term or condition may
be amended so as to avoid such invalidity or failure), and shall not affect
other provisions, terms or conditions or applications thereof, and to this
extent such provisions, terms and conditions are severable.
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<PAGE>
(l) Instrument of Grant. Each Grant under this Program shall be
evidenced by an agreement (i.e., an instrument of Grant) setting forth the terms
and conditions applicable to such Grant. No Grant shall be valid until an
agreement is executed by the Company and the recipient of such award and, upon
execution by each party and delivery of the agreement to the Company, such award
shall be effective as of the effective date set forth in the Agreement.
(m) Restricted Shares. Each award made hereunder shall be subject to
the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
(n) Program Controls. In the case of any conflict or inconsistency
between the terms of this Program and the terms of any instrument of Grant, the
terms of this Program will control, unless the instrument of grant expressly
provides that the terms of such instrument of grant will control.
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
1997 INCENTIVE PROGRAM
AMENDMENT NO. 1
September 2, 1997
The 1997 Incentive Program (the "Program") of Certified Diabetic
Services, Inc., a Delaware corporation, is hereby amended to increase the
aggregate number of shares of Common Stock (the "Shares") that may be issued or
transferred under the Program from 5,000,000 to 8,000,000 Shares effective as of
September 2, 1997.
In connection therewith; Section 4(a) of the Program is amended to read
in its entirety as follows:
"(a) Shares Subject to Issuance or Transfer. Subject to adjustment
as provided in Section 4(b), the aggregate number of shares of
Common Stock (the "Share") that may be issued or transferred under
the Program is 5,000,000 Shares plus, (i) any Shares which are
forfeited under the Program after the Program becomes effective;
plus (ii) any Shares surrendered to the Company in payment of the
exercise price of options issued under the Program. The Shares may
be authorized but unissued Shares or Treasury Shares. The number of
Shares available for Grants at any given time shall be reduced by
the aggregate of all Shares previously issued or transferred
pursuant to the Program plus the aggregate of all Shares which may
become subject to issuance or transfer under then-outstanding and
then-currently exerciseable Grants."
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
Optionee Name: _____________________________
Optionee Address: _______________________________________________________
Number of Shares of Exercise Price
Common Stock: _______________ per Share: _______________
Date of Grant: _______________
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT (this "Agreement") made as of the Date of Grant
set forth above, between CERTIFIED DIABETIC SERVICES, INC., a Delaware
corporation (collectively, with any wholly-owned subsidiaries, the "Company"),
and the Optionee identified above ("Optionee"), residing at the address set
forth above.
WHEREAS, Certified Diabetic Supplies Inc., a Florida corporation
("CDS-Florida"), has, on the Date of Grant, merged with and into Certified
Diabetic Supplies, Inc., a Delaware corporation and subsidiary of the Company
(the "Merger");
WHEREAS, in connection with the Merger, each holder of stock options
granted by CDS-Florida pursuant to its 1995 Incentive Program (the "1995
Options") is to receive from the Company, among other things, in substitution
for each stock option held, one stock option of the Company under its 1997
Incentive Program, bearing terms substantially identical to the stock options
granted by CDS-Florida pursuant to the 1995 Incentive Program.
WHEREAS, pursuant to the Company's 1997 Incentive Program (as amended,
the "Program"), the Company desires to grant stock options to Optionee, in
substitution for the 1995 Options held by Optionee, to purchase certain shares
of its Common Stock, par value $.01 per share (the "Common Stock") upon the
occurrence of certain conditions;
WHEREAS, the stock options being granted by the Company hereunder and
the shares of Common Stock issuable upon the exercise of such Options, if any,
have not been registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on an exemption from registration contained in the Act;
WHEREAS, this Agreement consists of this document and the Program
attached hereto as Exhibit A;
<PAGE>
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
W I T N E S S E T H:
1. Definitions. In this Agreement, except where the context otherwise
indicates, the following definitions apply:
1.1 Terms defined in the Program shall have the same meanings when
used herein as defined therein.
1.2 The term "Optionee" when used herein shall include the
Optionee's legal representative when the context requires.
2. Representations, Warranties and Acknowledgments of the Optionee.
2.1 The Optionee's address set forth above is his or her true and
correct residence.
2.2 The Optionee has had an opportunity to ask questions and receive
answers from the officers and directors of the Company, or a person or persons
acting on its behalf, concerning the terms and conditions of this Agreement and
the business and affairs of the Company. The Optionee has a sufficient business
and personal relationship with one or more of the officers and directors of the
Company, and has sufficient business or financial experience, so as to be able
to protect his or her own interests in connection with the issuance of the
Options (as hereinafter defined) and the issuance of any Common Stock upon any
exercise of the Options.
2.3 The Optionee acknowledges that the Options and the Common Stock
to be issued upon the exercise of the Options, if any, are speculative
investments and involve a substantial degree of risk of loss by the Optionee.
The Optionee represents and warrants to the Company that he or she is acquiring
the Options and the Common Stock to be issued upon the exercise of the Options
(if the Options are exercisable and exercised) solely for investment purposes
and not with a view towards distribution or transfer. The Optionee acknowledges
that the Options may or may not become exercisable, and accordingly may or may
not be of any value, based on numerous circumstances and conditions, many of
which may be beyond the control of Optionee.
2.4 The Optionee acknowledges that the Options and the Common Stock
to be issued upon the exercise of the Options constitute a part of the
Optionee's compensation arrangement with the Company.
2.5 The Optionee confirms that neither the Company nor any officer,
director or representative thereof has made any representation, prediction, or
forecast as to the value or possible future value of the Options or the Common
Stock. The Optionee has not been induced to accept the Options by any
representation or promise by or on behalf of the Company.
2.6 The Optionee has had an opportunity to consult with his legal,
tax and investment advisors, to the extent the Optionee deems necessary,
concerning the Options.
2.7 This Agreement consists of this document and the terms and
provisions contained in the Program, as it may be amended from time to time,
which are hereby incorporated by reference herein and made a part hereof. Unless
otherwise expressly stated herein, in the case of any conflict or inconsistency
between the terms of this document and the terms of the Program, the terms of
the Program shall control.
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3. Grant of Options. The Company, subject to the terms of the Program,
hereby grants to the Optionee as of the date hereof, as a matter of separate
inducement and agreement and not in lieu of salary or other compensation for
services, incentive stock options (the "Incentive Options" or the "Options") to
purchase the number of shares of the Common Stock of the Company set forth in
the box on the first page hereof (the "Incentive Shares" or the "Shares").
4. Exercise Price. The exercise price (the "Exercise Price") of the
Options is the amount per share set forth in the box on the front page hereof,
subject to adjustment as provided in Section 4(b) of the Program.
5. Tax Treatment. Optionee understands that the Incentive Options
granted under this Agreement are not expected to qualify for special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended to
date and as may be amended from time to time (the "Code"). The Company makes no
representation to Optionee regarding the tax treatment of the Incentive Options
or of the effect of any exercise of the Incentive Options.
6. Options Non-Transferable. The Options shall not be transferable by
the Optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the Optionee only by the Optionee.
Neither the Options nor any interest therein may be transferred, sold, assigned,
pledged or hypothecated by the Optionee during the Optionee's lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
7. Vesting Date of Options. The Options shall be and become exercisable
upon the earlier to occur of (a) November 2, 2003, at which time the Options
shall become exercisable in their entirety, provided that on such date the
Optionee is then employed by the Company, or (b) on such date, if at all, as it
shall have been determined by the Board of Directors of the Company, in
consultation with the independent auditors of the Company, that with respect to
the fiscal year of the Company then ended, the Company shall have achieved Gross
Revenues of not less than $10 Million and Adjusted EBITDA (as defined below) of
not less than $3 Million, at which time the Options shall become exercisable in
their entirety, provided that at such date the Optionee is then employed by the
Company. For purposes hereof "Adjusted EBITDA" shall mean the Net Income of the
Company before income taxes, computed without regard to (a) depreciation or
amortization expense, (b) direct or indirect compensation to officers or
directors of the Company, or (c) such write-offs and adjustments to accounts
receivable as are consistent with industry practices with regard to third party
payment, insurance reimbursement, and state and federal health and welfare
programs.
8. Exercise of Options. The Options may be exercised only in accordance
with the provisions of the Program. The Options may be exercised before or after
the exercise of any other options granted to the Optionee under the Program or
any of the Company's other stock option programs or compensation plans.
9. Termination of Options. Subject to the terms hereof, all rights of
the Optionee in and to the Options, to the extent that they have not been
exercised, shall terminate on the date which is the tenth annual anniversary of
the Date of Grant set forth above, or, if sooner, three (3) months after the
Optionee's termination as an employee of the Company for any reason, including
voluntary resignation. Notwithstanding the foregoing, in the event of the death
of Optionee or the termination of his employment by the Company by reason of
disability (within the meaning of Section 22(e)(3) of the Code), the three (3)
month period referenced in the preceding sentence shall be one (1) year. The
Optionee acknowledges that, notwithstanding the provisions of this paragraph
authorizing the Options to be exercised within one (1) year after death, under
applicable laws, regulations and rules now in effect, the Options shall not
qualify for special tax treatment under Section 422 of the Code if they are
exercised later than three (3) months after the termination of Optionee's
employment on account of death.
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10. Death of Optionee. Options granted hereunder and outstanding on the
date of Optionee's death may be exercised, to the extent otherwise exercisable
pursuant to Section 7, by Optionee's personal representative or his or her
transferees by will or intestate distribution at any time prior to the
termination of such Options pursuant to Section 9 above. The Plan Administrator
may require an indemnity and/or such evidence or other assurances as it may deem
necessary in connection with an exercise by a legal representative, guardian, or
beneficiary.
11. Fraud, Dishonesty, or Similar Acts. Notwithstanding anything
contained herein to the contrary, if Optionee's employment by the Company is
terminated for cause or it is determined by the Plan Administrator that fraud,
dishonesty, or similar acts were committed by Optionee at any time while in the
employ of the Company, or that an Optionee has at any time disclosed to any
person, firm, corporation or other entity any of the Company's "proprietary
information" (defined below) without the express written consent of the Board of
Directors or except as such disclosure may have been required in connection with
the Optionee's service as an employee of the Company, all option and other
rights with respect to all Options granted to Optionee hereunder shall
immediately terminate and be null and void. For the purposes of this Section 10,
the term "proprietary information" shall mean all confidential or secret
customer lists, prospective customer lists, trade secrets, processes, computer
programs, object codes, source codes, inventions, improvements, manufacturing or
systems techniques, formulas, development or experimental work, work in process,
business, data disclosed to the Company by or for the benefit of the Company's
customers, information relating to the Company's business contracts (including
without limitation contracts with service providers, medical insurers and claims
administrators), marketing and competitive strategies, and any other secret or
confidential matter relating or pertaining to the products, services, sales or
other business of the Company.
12. Restriction on Exercise After Termination. Notwithstanding anything
herein to the contrary, the exercise of the Options after termination of
employment by Optionee shall be subject to satisfaction of the conditions
precedent that the Optionee neither (1) takes other employment with or renders
services to any business in contravention of any then-applicable Non-Competition
Agreement with the Company or any Affiliate of the Company, nor (2) conducts
himself in a manner adversely affecting the Company.
13. Reserve. The Company shall at all times during the term of the
Options reserve such number of shares of its Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
14. Withholding Taxes. The Optionee acknowledges that it is a condition
to the obligation of the Company to deliver the Shares, upon the exercise of the
Options, to pay the Company such amount, if any, as may be requested by the
Company for the purpose of satisfying any liability for any federal, state or
local income, or other taxes required by law to be withheld with respect to such
delivery; provided that the Optionee may elect, in accordance with applicable
law, to pay a portion or all of such withholding taxes in shares of Common Stock
held by the Optionee for at least six (6) months and the Optionee hereby
authorizes the Company to withhold and agrees to surrender back to the Company,
on or about the date such withholding tax is determinable, shares previously
owned by the Optionee or a portion of the shares that were or otherwise would be
distributed to the Optionee pursuant hereto so qualifying and having a fair
market value equal to the amount of such withholding taxes to be paid in shares.
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<PAGE>
15. No Right to Continued Employment. Nothing contained herein shall be
construed to require the Company to continue to employ the Optionee for any
particular period of time and the Optionee shall not be deemed to have any right
to continued employment or to employment for any particular period of time by
virtue hereof.
16. Governing Law. The Program, this Agreement and all action taken
under each shall be governed, as to construction and administration, by the laws
of the State of Delaware.
17. Restricted Shares. The Optionee acknowledges that the Options and
Shares have not been registered in accordance with the Act or applicable state
Blue Sky laws, and that the Options and Shares may not be sold or transferred
and must be held indefinitely, unless they are subsequently registered under the
Act or an exemption from registration is available. The Optionee understands and
acknowledges that the Company is under no obligation to register the Options and
Shares or to comply with any exemption under the Act or to supply or file any
information which would facilitate sales of the Shares. The Optionee
acknowledges that stop transfer instructions will be given to the Company's
transfer agent(s) with respect to the Shares and that there will be affixed to
the certificates evidencing ownership of the Shares, or any substitutions
therefor, appropriate restrictive legends.
IN WITNESS WHEREOF, the Company and the Optionee have duly executed
this Agreement as of the day and year first above written.
ATTEST: CERTIFIED DIABETIC SERVICES, INC.
____________________________ By:______________________________________
Secretary Name:
Title:
ACCEPTED AND AGREED:
_________________________________________
Name:
5
<PAGE>
EXHIBIT A
1997 INCENTIVE PROGRAM
See Exhibit 10.1
<PAGE>
CERTIFIED DIABETIC SERVICES, INC.
STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
Optionee Name: _____________________________
Optionee Address: _______________________________________________________
_______________________________________________________
Number of Shares of Exercise Price per
Common Stock: ____________________ Share: ____________
Date of Grant: ____________________
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT (this "Agreement") made as of the Date of Grant
set forth above, between CERTIFIED DIABETIC SERVICES, INC., a Delaware
corporation (collectively, with any wholly-owned subsidiaries, the "Company"),
and the Optionee identified above ("Optionee"), residing at the address set
forth above.
WHEREAS, Certified Diabetic Supplies Inc., a Florida corporation
("CDS-Florida"), has, on the Date of Grant, merged with and into Certified
Diabetic Supplies, Inc., a Delaware corporation and subsidiary of the Company
(the "Merger");
WHEREAS, in connection with the Merger, each holder of stock options
granted by CDS-Florida pursuant to its 1995 Incentive Program (the "1995
Options") is to receive from the Company, among other things, in substitution
for each stock option held, one stock option of the Company under its 1997
Incentive Program, bearing terms substantially identical to the stock options
granted by CDS-Florida pursuant to the 1995 Incentive Program.
WHEREAS, pursuant to the Company's 1997 Incentive Program (as amended,
the "Program"), the Company desires to grant stock options to Optionee, in
substitution for the 1995 Options held by Optionee, to purchase certain shares
of its Common Stock, par value $.01 per share (the "Common Stock") upon the
occurrence of certain conditions;
WHEREAS, the stock options being granted by the Company hereunder and
the shares of Common Stock issuable upon the exercise of such Options, if any,
have not been registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on an exemption from registration contained in the Act;
<PAGE>
WHEREAS, this Agreement consists of this document and the Program
attached hereto as Exhibit A;
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
W I T N E S S E T H:
1. Definitions. In this Agreement, except where the context otherwise
indicates, the following definitions apply:
1.1 Terms defined in the Program shall have the same meanings
when used herein as defined therein.
1.2 The term "Optionee" when used herein shall include the
Optionee's legal representative when the context requires.
2. Representations, Warranties and Acknowledgments of the Optionee.
2.1 The Optionee's address set forth above is his or her true
and correct residence.
2.2 The Optionee has had an opportunity to ask questions and
receive answers from the officers and directors of the Company, or a person or
persons acting on its behalf, concerning the terms and conditions of this
Agreement and the business and affairs of the Company. The Optionee has a
sufficient business and personal relationship with one or more of the officers
and directors of the Company, and has sufficient business or financial
experience, so as to be able to protect his or her own interests in connection
with the issuance of the Options (as hereinafter defined) and the issuance of
any Common Stock upon any exercise of the Options.
2.3 The Optionee acknowledges that the Options and the Common
Stock to be issued upon the exercise of the Options, if any, are speculative
investments and involve a substantial degree of risk of loss by the Optionee.
The Optionee represents and warrants to the Company that he or she is acquiring
the Options and the Common Stock to be issued upon the exercise of the Options
(if the Options are exercisable and exercised) solely for investment purposes
and not with a view towards distribution or transfer. The Optionee acknowledges
that the Options may or may not become exercisable, and accordingly may or may
not be of any value, based on numerous circumstances and conditions, many of
which may be beyond the control of Optionee.
2.4 The Optionee acknowledges that the Options and the Common
Stock to be issued upon the exercise of the Options constitute a part of the
Optionee's compensation arrangement with the Company.
2.5 The Optionee confirms that neither the Company nor any
officer, director or representative thereof has made any representation,
prediction, or forecast as to the value or possible future value of the Options
or the Common Stock. The Optionee has not been induced to accept the Options by
any representation or promise by or on behalf of the Company.
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<PAGE>
2.6 The Optionee has had an opportunity to consult with his
legal, tax and investment advisors, to the extent the Optionee deems necessary,
concerning the Options.
2.7 This Agreement consists of this document and the terms and
provisions contained in the Program, as it may be amended from time to time,
which are hereby incorporated by reference herein and made a part hereof. Unless
otherwise expressly stated herein, in the case of any conflict or inconsistency
between the terms of this document and the terms of the Program, the terms of
the Program shall control.
3. Grant of Options. The Company, subject to the terms of the Program,
hereby grants to the Optionee as of the date hereof, as a matter of separate
inducement and agreement and not in lieu of salary or other compensation for
services, incentive stock options (the "Incentive Options" or the "Options") to
purchase the number of shares of the Common Stock of the Company set forth in
the box on the first page hereof (the "Incentive Shares" or the "Shares").
4. Exercise Price. The exercise price (the "Exercise Price") of the
Options is the amount per share set forth in the box on the front page hereof,
subject to adjustment as provided in Section 4(b) of the Program.
5. Tax Treatment. Optionee understands that the Incentive Options
granted under this Agreement are not expected to qualify for special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended to
date and as may be amended from time to time (the "Code"). The Company makes no
representation to Optionee regarding the tax treatment of the Incentive Options
or of the effect of any exercise of the Incentive Options.
6. Options Non-Transferable. The Options shall not be transferable by
the Optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the Optionee only by the Optionee.
Neither the Options nor any interest therein may be transferred, sold, assigned,
pledged or hypothecated by the Optionee during the Optionee's lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
7. Vesting Date of Options. The Options shall be and become exercisable
in 20% increments, commencing on the first anniversary of the Date of Grant and
annually thereafter until all _______ options are exercisable, provided that on
each such anniversary, the Optionee is then employed by the Company.
8. Exercise of Options. The Options may be exercised only in accordance
with the provisions of the Program. The Options may be exercised before or after
the exercise of any other options granted to the Optionee under the Program or
any of the Company's other stock option programs or compensation plans.
9. Termination of Options. Subject to the terms hereof, all rights of
the Optionee in and to the Options, to the extent that they have not been
exercised, shall terminate on the date which is the tenth annual anniversary of
the Date of Grant set forth above, or, if sooner, three (3) months after the
Optionee's termination as an employee of the Company for any reason, including
voluntary resignation. Notwithstanding the foregoing, in the event of the death
of Optionee or the
3
<PAGE>
termination of his employment by the Company by reason of disability (within the
meaning of Section 22(e)(3) of the Code), the three (3) month period referenced
in the preceding sentence shall be one (1) year. The Optionee acknowledges that,
notwithstanding the provisions of this paragraph authorizing the Options to be
exercised within one (1) year after death, under applicable laws, regulations
and rules now in effect, the Options shall not qualify for special tax treatment
under Section 422 of the Code if they are exercised later than three (3) months
after the termination of Optionee's employment on account of death.
10. Death of Optionee. Options granted hereunder and outstanding on the
date of Optionee's death may be exercised, to the extent otherwise exercisable
pursuant to Section 7, by Optionee's personal representative or his or her
transferees by will or intestate distribution at any time prior to the
termination of such Options pursuant to Section 9 above. The Plan Administrator
may require an indemnity and/or such evidence or other assurances as it may deem
necessary in connection with an exercise by a legal representative, guardian, or
beneficiary.
11. Fraud, Dishonesty, or Similar Acts. Notwithstanding anything
contained herein to the contrary, if Optionee's employment by the Company is
terminated for cause or it is determined by the Plan Administrator that fraud,
dishonesty, or similar acts were committed by Optionee at any time while in the
employ of the Company, or that an Optionee has at any time disclosed to any
person, firm, corporation or other entity any of the Company's "proprietary
information" (defined below) without the express written consent of the Board of
Directors or except as such disclosure may have been required in connection with
the Optionee's service as an employee of the Company, all option and other
rights with respect to all Options granted to Optionee hereunder shall
immediately terminate and be null and void. For the purposes of this Section 10,
the term "proprietary information" shall mean all confidential or secret
customer lists, prospective customer lists, trade secrets, processes, computer
programs, object codes, source codes, inventions, improvements, manufacturing or
systems techniques, formulas, development or experimental work, work in process,
business, data disclosed to the Company by or for the benefit of the Company's
customers, information relating to the Company's business contracts (including
without limitation contracts with service providers, medical insurers and claims
administrators), marketing and competitive strategies, and any other secret or
confidential matter relating or pertaining to the products, services, sales or
other business of the Company.
12. Restriction on Exercise After Termination. Notwithstanding anything
herein to the contrary, the exercise of the Options after termination of
employment by Optionee shall be subject to satisfaction of the conditions
precedent that the Optionee neither (1) takes other employment with or renders
services to any business in contravention of any then-applicable Non-Competition
Agreement with the Company or any Affiliate of the Company, nor (2) conducts
himself in a manner adversely affecting the Company.
13. Reserve. The Company shall at all times during the term of the
Options reserve such number of shares of its Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
14. Withholding Taxes. The Optionee acknowledges that it is a condition
to the obligation of the Company to deliver the Shares, upon the exercise of the
Options, to pay the Company such amount, if any, as may be requested by the
Company for the purpose of satisfying
4
<PAGE>
any liability for any federal, state or local income, or other taxes required by
law to be withheld with respect to such delivery; provided that the Optionee may
elect, in accordance with applicable law, to pay a portion or all of such
withholding taxes in shares of Common Stock held by the Optionee for at least
six (6) months and the Optionee hereby authorizes the Company to withhold and
agrees to surrender back to the Company, on or about the date such withholding
tax is determinable, shares previously owned by the Optionee or a portion of the
shares that were or otherwise would be distributed to the Optionee pursuant
hereto so qualifying and having a fair market value equal to the amount of such
withholding taxes to be paid in shares.
15. No Right to Continued Employment. Nothing contained herein shall be
construed to require the Company to continue to employ the Optionee for any
particular period of time and the Optionee shall not be deemed to have any right
to continued employment or to employment for any particular period of time by
virtue hereof.
16. Governing Law. The Program, this Agreement and all action taken
under each shall be governed, as to construction and administration, by the laws
of the State of Delaware.
17. Restricted Shares. The Optionee acknowledges that the Options and
Shares have not been registered in accordance with the Act or applicable state
Blue Sky laws, and that the Options and Shares may not be sold or transferred
and must be held indefinitely, unless they are subsequently registered under the
Act or an exemption from registration is available. The Optionee understands and
acknowledges that the Company is under no obligation to register the Options and
Shares or to comply with any exemption under the Act or to supply or file any
information which would facilitate sales of the Shares. The Optionee
acknowledges that stop transfer instructions will be given to the Company's
transfer agent(s) with respect to the Shares and that there will be affixed to
the certificates evidencing ownership of the Shares, or any substitutions
therefor, appropriate restrictive legends.
IN WITNESS WHEREOF, the Company and the Optionee have duly executed
this Agreement as of the day and year first above written.
ATTEST: CERTIFIED DIABETIC SERVICES, INC.
____________________________ By:_____________________________________
Secretary Name:
Title:
ACCEPTED AND AGREED:
______________________________________
Name:
5
<PAGE>
EXHIBIT A
1997 INCENTIVE PROGRAM
See Exhibit 10.1
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
Agreement made the 2nd day of November, 1995, by and between a
Corporation: Certified Diabetic Supplies, Inc.
(a Florida Corporation) 1951 J & C Boulevard
Naples, Florida 33942
and
Executive: Peter J. Fiscina
15084 Royal Fern Court L-200
Naples, Florida 33963
Effective Date: November 2, 1995
BACKGROUND
It is in the best interest of the Corporation and its Shareholders
to secure Executive's services for the Corporation with an employment agreement.
The Corporation, as an incentive to Executive to become employed and to continue
employment with the Corporation grants compensation, present and future stock
interest and other incentives as more fully set forth in this Agreement and the
attached Schedules. Executive and the Corporation desire to enter into an
Employment Agreement under the terms and conditions set forth below.
NOW THEREFORE, in consideration of the promises and mutual
agreements set forth in this Agreement and for other good and valuable
consideration, the parties agree as follows:
1. EMPLOYMENT
The Executive shall be employed by the Corporation in the
capacity of President and Chief Operating Officer of the Company
2. DUTIES
Executive shall serve the Corporation faithfully and to best of
his ability, under the direction of the Board of Directors. He shall devote his
entire time, energy and skill during the regular business hours and such other
hours as are reasonably necessary and shall perform from time to time such
services and act in such office or capacity as the Board of Directors may
direct. Company acknowledges, however, that Employee has other business
interests and is a director of other businesses and that such activity shall not
constitute a breach of this Agreement as long as it does not normally interfere
with the performance by Employee of his duties hereunder.
<PAGE>
3. COMPENSATION
The Corporation shall pay or cause to pay the Executive during
the term of his employment salary and bonuses as more particularly set forth in
Schedule "A" which is attached to this Agreement and made part hereof.
4. STOCK
Executive shall be entitled to certain capital stock in the
Corporation as set forth in Schedule "B" which is attached to this Agreement and
made a part hereof.
5. ADDITIONAL BENEFITS
Executive shall also be entitled to any fringe benefits which
may from time to time be made available to officers, directors and other
Executives of the Corporation and as set forth in the personal policies of the
Corporation, or as determined by the Board including but not limited to any
employee benefit plan which is qualified and exempt under Section 401(a) and
501(a) of the Internal Revenue Code. Executive shall also be entitled to any
group medical, dental, hospitalization insurance, long-term disability insurance
equal to ($4,000/month) Four Thousand Dollars per month and a life insurance
policy of not less than ($1,000,000) One Million dollars payable in the event of
death of the Executive and the Executive shall select the beneficiary. It is
understood that, with the exception of the life insurance policy, employment is
not a requirement for the Corporation to be responsible for continued coverage
for the executive and his wife for group medical, dental and hospitalization
insurance. This insurance will be a continuing cost to the Corporation until
death of the Executive and his wife, Elizabeth A. Fiscina.
6. EXPENSES
The Corporation shall reimburse Executive for out-of-pocket
expenditures for transportation, fuel, entertainment, travel, meals, hotel
accommodations and the like incurred by him in the interest of the Corporation
("out-of-pocket expenses"). Executive shall each month submit vouchers, receipts
or other documentation together with appropriate written explanation required by
Corporation to verify out-of-pocket expenses and shall be reimbursed for the
actual expenses incurred. Corporation shall provide Executive a reasonable
monthly allowance for automobile expense, including cost of the vehicle, gas,
maintenance, repairs and insurance or, in the alternative, may provide a
suitable motor vehicle for use by the Executive for conduct of business on
behalf of the Corporation.
7. WORKING FACILITIES
The Corporation shall furnish Executive with such office space
and such other facilities and services as in the discretion of the Board of
Directors is appropriate for such an executive position and necessary for
performance of his duties.
8. AUTHORITY TO BIND THE CORPORATION
Executive shall have authority to enter into contracts binding
upon the Corporation and to create any obligations on the part of the
Corporation in the normal course of business and as would be expected of an
Executive of a similar Corporation. Notwithstanding the foregoing, Executive
shall not have the authority to enter into contracts binding the Corporation,
without prior approval with the Board of Directors, for purchases of
transactions equal to or exceeding ($500,000) Five Hundred Thousand Dollars.
2
<PAGE>
9. VACATIONS
Executive shall be entitled each year to six (6) weeks vacation
in accord with company policy for officers, directors senior management
personnel.
Vacations shall be coordinated with other employees of the
Corporation, shall be consistent with Executive's duties (as more fully set
forth in Section 2 of this Agreement) and the needs of the Corporation and shall
be scheduled at such times so as not to interfere with the effective operation
of the Corporation.
10. TERM AND TERMINATION OF EMPLOYMENT
10.a. Term
The term of employment shall be for a period of five (5) years
commencing on the Effective Date of this Agreement November 2, 1995 until
October 31, 2000. At the end of the initial five (5) year term, Corporation and
Executive agree to negotiate in good faith a new contract or extension of the
current contract. In the event the Corporation and Executive fail to reach an
Agreement due solely to the failure of the Corporation to negotiate in good
faith, Executive shall be entitled upon his termination to his highest annual
compensation (to include all bonus compensation) payable for one (1) year from
the date of termination in the same manner his salary was paid while employed
("Severance Pay"). Executive shall have no duty to mitigate damages and should
he accept other employment, severance pay shall not be reduced or deducted from
any other of his earned income.
Further, in the event the Corporation terminates Executive
other than pursuant to the provisions set forth in Section 10b below, the
Executive shall be entitled to (i) the balance of his compensation due under
this Employment Agreement, but in no event Executive shall be paid no less than
an amount equal to two year's compensation as provided in Sections 3, 4, 5, 6,
and 7 (ii) Severance pay for the year following termination and (iii) release of
all stock from any escrow and forfeited provisions set forth in Schedule B.
10.b. Termination
10.b.1 Termination by Death. If Executive dies, then this
Agreement shall terminate immediately, except that Executive's heirs, personal
representatives or estate shall be entitled to receive (a) his salary for a
period of one (1) year after his death payable as his salary was paid during
Executive's lifetime; (b) any accrued benefits up to the date of termination;
(c) bonuses that have accrued but not paid; (d) shares of stock pledged, held in
escrow, stock options, warrants or other rights to own or purchase stock in the
Corporation; and
3
<PAGE>
(e) any benefits which are to be continued or paid after the date of termination
in accordance with the terms of the corresponding benefit plans. Specifically,
medical insurance is to continue for the lifetime of the Executive and his wife,
Elizabeth A. Fiscina.
10.b.2 Termination by Disability. If Executive becomes
disabled, and such disability continues for more than three (3) consecutive
months after the onset of Disability (as defined below) or for periods
aggregating more than four(4) months during any sixth month period, then
Corporation shall have the right to terminate this Agreement immediately, except
that Executive shall be entitled to receive (a) the difference in his Base
Salary above any disability insurance proceeds received from the disability
policy or plan paid for or provided by Corporation for a period of one (1)
calendar year beginning on the date of the Onset of the disability; (b) any
accrued benefits up to the date of the termination; (c) bonuses that have
accrued but not paid; (d) all shares of stock in the Corporation including
without limitation all stock pledge, held in escrow, stock options, warrants or
other rights to own or purchase stock in the Corporation; and (e) any benefits
which are to be continued or paid after the date of termination in accordance
with the terms of the corresponding benefit plans. "Onset of Disability" means
the first day on which Executive shall be unable to perform any of his duties
under this Agreement a full time basis by reason of physical or mental
incapacity, sickness or infirmity.
In the event of a partial disability, Executive shall be
entitled to work for such time and in such capacity as his disability permits
and his salary shall be adjusted accordingly.
10.b.3 For Cause. This Agreement may be terminated for cause
as defined below, upon five (5) days prior written notice from the Corporation
to the Executive upon the occurrence or act by the Executive of any one of more
of the following events:
(a) fraud,
(b) dishonesty, or
(c) other material and willful misconduct by the Executive
If the Executive's employment is terminated for cause pursuant to
this Section, Executive shall be entitled to receive (a) his accrued Base Salary
through the date of termination, (b) any accrued benefits up to the date of
termination, (c) all shares of stock released from any forfeiture provision set
forth in Schedule B and (d) any benefits which are to be continued or paid after
the date of termination in accordance with the terms of corresponding benefit
plans.
10.b.4 Mutual Agreement. This Agreement may be terminated at
any time upon mutual agreement of the parties.
11. PROCEDURE UPON TERMINATION
Upon termination of his employment, Executive shall promptly
return to Corporation all documents (including copies) and other materials and
property of Corporation, pertaining to its business, including without
limitation customer and prospect lists, contracts, files, manuals, letters,
reports and records in his possession or control, no matter from whom or in what
manner required.
4
<PAGE>
12. DISCOVERIES
Except as set forth in this Section, Executive shall
communicate to Corporation, in writing when requested, and preserve as
confidential information of Corporation, all customer lists, trade secrets,
estimating techniques, bidding practices, non-public client information, client
contacts, vendors, business concepts and other ideas, relating to the business
for the Corporation which are conceived, developed or made by Executive, whether
alone or jointly with others, at any time (during or after business hours)
during the term of Executive's employment with Corporation (such concepts,
practices, ideas and lists are referred to "Executive Discoveries") or have been
made heretofore by the Executive in relation to business of the Corporation. All
of Executive's Discoveries shall be Corporation's exclusive property, and
Executive shall, at Corporation's expenses, sign all documents and take such
other actions as they may reasonably request to confirm their ownership of
Executive's Discoveries.
13. NONDISCLOSURE
At all times after the date of this Agreement, except with
Corporation's express prior written consent or in connection with the proper
performance of services under this Agreement, Executive shall not, directly or
indirectly, communicate, disclose or divulge to any Person (as defined in
Section 22 below) or use for the benefit of any Person, any confidential or
proprietary knowledge or information, no matter when or how acquired, concerning
the business of Corporation including, but not limited to, (a) names of
customers, locations, prospects and suppliers, (b) details of contracts,
proposals or other business arrangements with clients, prospects and suppliers,
(c) marketing methods, trade secrets, financial condition, and (d) software,
source code, technical documentation and other information. For purposes of this
Section 13, confidential information shall not include any information which is
known by the general public, or which becomes known by the general public other
than as a result of any improper act or omission of Executive.
14. RESTRICTIVE COVENANT
a. Covenant Not to Compete or Solicit
The Corporation was founded for the purpose of being a
Registered Provider under Medicare to sell durable medical equipment, primarily
diabetic supplies throughout the United States. As a material inducement to
entering this Agreement, Executive agrees and covenants that while he is an
employee of the Corporation and for a period of two (2) years thereafter, he:
(1) shall be restricted from competing with the
Corporation, directly or indirectly on his own behalf or through third parties,
in any manner whatsoever as a shareholder, director, officer, joint venturer,
partner, sole proprietor, investor or, in any other ownership capacity
whatsoever, or as an employee, consultant, agent, or representative of or for a
competing business within the fifty (50) states of the United States all
territories of the United States and Canada;
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<PAGE>
(2) shall not either directly or indirectly on his own
behalf or through third parties solicit or attempt to solicit advertisers,
agencies, developers, operators, owners, clients or customers (collectively
"Customers") of the Corporation who are or were customers of the Corporation at
any time during the preceding two (2) years prior to his termination of
employment with respect to any of the Corporation's business or businesses of
its subsidiaries or affiliates for a competing business; and
(3) shall not communicate with or solicit any person or
entity, who is, or during a six (6) month period prior to his termination of
employment an employee, salesman, contractor, agent or representative
(hereinafter collectively "Employee or Contractor"), or Contractor's
relationship with the Corporation or in an effort to obtain such Person as an
employee, salesman, contractor, agent or representative of an entity or business
which competes with the Corporation's business.
b. Convenient Not to Violate Corporate Confidences
The parties agree and acknowledge that the Executive will
have access to and will become aware of confidential information and trade
secrets including Customer data, files, and business techniques, (collectively,
"Confidential Information") and that this confidential information (1) is not
generally available to the public, (2) has been compiled at the Corporation's
expense and over a substantial amount of time, (3) is critical to the
Corporation's ability to compete in the industry in which it does business, and
(4) if disclosed or released will be greatly and irreparably damage the
Corporation's business. Therefore, as a material inducement to entering into
this Agreement, Executive agrees and covenants that he will not, while he is an
Executive or during a two (2) year period beginning on the date of the
termination of his employment, either disclose or divulge this confidential
information to anyone or use this confidential information in any manner to
compete with the Corporation.
c. Enforcement
The Corporation may enforce the provisions of this Section
by suit for damages, injunction, or both, as provided below:
(1) The parties agree and acknowledge that the Corporation
will be irreparably injured by the breach of any provision of this Section, and
that money damages alone will not be an appropriate measure of the harm the
Corporation will suffer from such continuing breach. Therefore, the parties
agree that the equitable relief, including specific performance of these
provisions by injunction, is an appropriate remedy for breach of these
provisions.
(2) The parties also agree and acknowledge, however, that
money damages will be appropriate with respect to any past breach of any
provision of this Section. Therefore, in case of any breach of this Section, the
breaching party shall render a full
6
<PAGE>
and complete accounting of the gross receipts, expenses, and net profits which
have resulted from such breach and shall be liable for money equal to the
greater of (1) the actual profits recognized by such breaching party from all
transactions in breach of this Section, or (2) profits that the Corporation
could realize from the transactions in breach of this Section.
(3) Notwithstanding anything to the contrary contained in
this Agreement neither the Corporation nor other Shareholders shall be obligated
to make any payments to the Executive under this or any other Agreement between
the parties if the Executive is deemed to have violated any provision of this
Section of this Agreement. Further, breach of this Section shall be a complete
defense to the non-payment by the Corporation of any payments due Executive
under the terms of this Agreement.
(4) The Corporation shall, in addition to the damages
described in this Section be entitled to be reimbursed for all reasonable legal
fees and costs necessary to prosecute any claim or action under this Section as
part of any award by a Court Arbitrator. The term "costs" shall include all the
filing and court costs, investigation, witness and expert witness fees,
deposition costs, travel, long-distance telephone, photocopying and printing and
any and all other costs necessary to prosecute the claim.
(5) If any portion of the provisions of this Section or its
application is construed to be invalid, illegal, or unenforceable, then the
other portions and their application shall not be affected thereby and shall be
enforceable without regard thereto. If any of the Covenants are determined to be
unenforceable because of their scope, duration, geographic area or similar
factor, then the Court or arbitrator making such determination shall have the
power to reduce or limit such scope, duration, area or other factor, and such
Covenant shall then be enforceable in its reduced or limited form.
15. RELATIONSHIP OF PARTIES
The relationship between the partners is that of employer
and employee. The employee shall be eligible to participate in any plans or
arrangements or distributions by the Corporation pertaining to any person,
profit-sharing bonus or similar benefits provided for regular employees and
officers, directors and senior executives except to the extent that such plans,
arrangements, or distributions are superseded by more liberal provisions in the
Agreement.
16. MANAGEMENT RESPONSIBILITY
The parties recognize that the business affairs of the
Corporation shall be managed by the Board of Directors of the Corporation in
accordance with the laws of the State of Florida governing the organization and
administration of business corporations.
17. WAIVER OF BREACH
The waiver by either party hereto of a breach of any
provisions of this Agreement shall not operate to be construed as a waiver of
subsequent breach of the same or any other provision of this Agreement.
7
<PAGE>
18. NOTICES
All notices, consents or other communication required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three (3)
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid, or (c) one (1) business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective address stated on the first page of this
Agreement. Notices may also be given by prepaid telegram or facsimile and be
effective on the date transmitted if confirmed within twenty-four (24) hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Notice to Corporation, addressed to the attention of the Chairman of
the Board, shall suffice as notice to the Corporation, provided that a copy
thereof is simultaneously sent to the Corporate Attorney of record. Notice to
Executive addressed to the address set forth at the beginning of this Agreement
and shall suffice. Any party may change its address for notice and the address
to which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 18, except that any such change of
address notice shall not be effective unless and until received.
19. PRIOR AGREEMENTS
Executive represents to Corporation (a) that there are no
restrictions, agreements or undertakings whatsoever to which Executive is a part
which would prevent to make unlawful his execution of this Agreement or his
employment hereunder, (b) that his execution of this Agreement or his employment
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written to which he is a party of which he is bound and
(c) that he is free and able to execute this Agreement and to enter into
employment by Executive.
20. ASSIGNMENT
Corporation may assign its rights and duties under this
Agreement to any party without the consent of Executive. This Agreement, being
for the personal services of Executive, shall not be assignable by him.
21. OTHER PROVISIONS
This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous, oral or written, express or implied, agreements and
understandings. This Agreement shall not be modified or terminated except in
writing. No action taken by Corporation under this Agreement, including without
limitation any waiver, consent or approval, shall be effective unless approved
by Corporation's Board of Directors. This Agreement shall inure to the benefit
of and bind each of the parties hereto and the successors and assigns of
Corporation and the personal representatives, estate and heirs of Executive.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same of any other right,
remedy, power or privilege with
8
<PAGE>
respect to any occurrence or be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver. Any headings preceding the text of any of the Sections or
Subsections of this Agreement are inserted for convenience of reference only,
and shall neither constitute a part of this Agreement nor affect its
construction, meaning, or effect.
22. DEFINITION
22.1 Person. "Person" means any individual,
corporation, partnership, sole proprietorship, joint venture, association,
cooperative, trust, estate, governmental body, administrative agency, regulatory
authority or other entity of an nature.
WITNESS the due execution and delivery hereof on the date
first above written.
CORPORATION: EXECUTIVE:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ MYRON M. BLUMENTHAL /s/ PETER J. FISCINA
- -------------------------- -----------------------
Name: Myron M. Blumenthal Name: Peter J. Fiscina
Title: Treasurer
9
<PAGE>
SCHEDULE A
COMPENSATION
1. MINIMUM BASE COMPENSATION
Subject to the termination provisions of the Agreement, Executive
shall be paid an annual minimum base salary of $150,000 per year for all
services rendered to the Corporation for the term of this Agreement ("Minimum
Base Compensation") in equal weekly or bi-weekly installments with a deduction
of all taxes and other amounts required to be withheld or deducted by law.
2. INCENTIVE BONUS COMPENSATION
In addition to his Base Compensation, Executive shall be entitled to
Incentive Bonus Compensation ("Incentive Bonus Compensation") as determined as
follows:
Starting from a base of $2,500,000 in sales and an EBITDA of
$750,000 and not taking into consideration the adjustment for (1) accounts
receivable and (2) officer's salaries. See Schedule Below.
Annual Sales EBITDA Compensation
------------ --------- ------------
$2,500,000 $750,000 $150,000
4,000,000 1,200,000 250,000
6,000,000 1,800,000 300,000
8,000,000 2,400,000 400,000
10,000,000 3,000,000 500,000
Each Incentive Bonus shall be paid not more than thirty (30) days
after a determination that the applicable performance goal has been met. EBITDA
means, for any period, the Company's consolidated earnings from continuing
operations before interest, taxes, depreciation and amortization for such
period.
The Executive shall be entitled to such other cash bonuses as
determined from time to time at the discretion of the Board of Directors based
upon the growth and success of the Corporation.
10
<PAGE>
SCHEDULE B
STOCK
-----
NONE
11
<PAGE>
EMPLOYMENT AGREEMENT
Agreement made the 2nd day of November, 1995, by and between a
Corporation: Certified Diabetic Supplies, Inc.
(a Florida Corporation) 1951 J & C Boulevard
Naples, Florida 33942
and
Executive: Myron M. Blumenthal
105 West Shore Drive
Massapequa, New York 11758
Effective Date: November 2, 1995
BACKGROUND
It is in the best interest of the Corporation and its Shareholders
to secure Executive's services for the Corporation with an employment agreement.
The Corporation, as an incentive to Executive to become employed and to continue
employment with the Corporation grants compensation, present and future stock
interest and other incentives as more fully set forth in this Agreement and the
attached Schedules. Executive and the Corporation desire to enter into an
Employment Agreement under the terms and conditions set forth below.
NOW THEREFORE, in consideration of the promises and mutual
agreements set forth in this Agreement and for other good and valuable
consideration, the parties agree as follows:
1. EMPLOYMENT
The Executive shall be employed by the Corporation in the
capacity of Treasurer and Chief Financial Officer of the Company.
2. DUTIES
Executive shall serve the Corporation faithfully and to best of
his ability, under the direction of the Board of Directors. He shall devote his
entire time, energy and skill during the regular business hours and such other
hours as are reasonably necessary and shall perform from time to time such
services and act in such office or capacity as the Board of Directors may
direct. Company acknowledges, however, that Employee has other business
interests and is a director of other businesses and that such activity shall not
constitute a breach of this Agreement as long as it does not normally interfere
with the performance by Employee of his duties hereunder.
<PAGE>
3. COMPENSATION
The Corporation shall pay or cause to pay the Executive during
the term of his employment salary and bonuses as more particularly set forth in
Schedule "A" which is attached to this Agreement and made part hereof.
4. STOCK
Executive shall be entitled to certain capital stock in the
Corporation as set forth in Schedule "B" which is attached to this Agreement and
made a part hereof.
5. ADDITIONAL BENEFITS
Executive shall also be entitled to any fringe benefits which
may from time to time be made available to officers, directors and other
Executives of the Corporation and as set forth in the personal policies of the
Corporation, or as determined by the Board including but not limited to any
employee benefit plan which is qualified and exempt under Section 401(a) and
501(a) of the Internal Revenue Code. Executive shall also be entitled to any
group medical, dental, hospitalization insurance, long-term disability insurance
equal to ($4,000/month) Four Thousand Dollars per month and a life insurance
policy of not less than ($1,000,000) One Million dollars payable in the event of
death of the Executive and the Executive shall select the beneficiary. If, for
any reason, the insurance cannot be placed, then the Executive is entitled to
the cash equivalent.
6. EXPENSES
The Corporation shall reimburse Executive for out-of-pocket
expenditures for transportation, fuel, entertainment, travel, meals, hotel
accommodations and the like incurred by him, in the interest of the Corporation
("out-of-pocket expenses"). Executive shall each month submit vouchers, receipts
or other documentation together with appropriate written explanation required by
Corporation to verify out-of-pocket expenses and shall be reimbursed for the
actual expenses incurred. Corporation shall provide Executive a reasonable
monthly allowance for automobile expense, including cost of the vehicle, gas,
maintenance, repairs and insurance or, in the alternative, may provide a
suitable motor vehicle for use by the Executive for conduct of business on
behalf of the Corporation.
7. WORKING FACILITIES
The Corporation shall furnish Executive with such office space
and such other facilities and services as in the discretion of the Board of
Directors is appropriate for such an executive position and necessary for
performance of his duties.
8. AUTHORITY TO BIND THE CORPORATION
Executive shall have authority to enter into contracts binding
upon the Corporation and to create any obligations on the part of the
Corporation in the normal course of business and as would be expected of an
Executive of a similar Corporation. Notwithstanding the foregoing, Executive
shall not have the authority to enter into contracts binding the Corporation,
without prior approval with the Board of Directors, for purchases of
transactions equal to or exceeding ($500,000) Five Hundred Thousand Dollars.
2
<PAGE>
9. VACATIONS
Executive shall be entitled each year to six (6) weeks vacation
in accord with company policy for officers, directors senior management
personnel.
Vacations shall be coordinated with other employees of the
Corporation, shall be consistent with Executive's duties (as more fully set
forth in Section 2 of this Agreement) and the needs of the Corporation and shall
be scheduled at such times so as not to interfere with the effective operation
of the Corporation.
10. TERM AND TERMINATION OF EMPLOYMENT
10.a. Term
The term of employment shall be for a period of five (5) years
commencing on the Effective Date of this Agreement November 2, 1995 until
October 31, 2000. At the end of the initial five (5) year term, Corporation and
Executive agree to negotiate in good faith a new contract or extension of the
current contract. In the event the Corporation and Executive fail to reach an
Agreement due solely to the failure of the Corporation to negotiate in good
faith, Executive shall be entitled upon his termination to his highest annual
compensation (to include all bonus compensation) payable for one (1) year from
the date of termination in the same manner his salary was paid while employed
("Severance Pay"). Executive shall have no duty to mitigate damages and should
he accept other employment, severance pay shall not be reduced or deducted from
any other of his earned income.
Further, in the event the Corporation terminates Executive
other than pursuant to the provisions set forth in Section 10b below, the
Executive shall be entitled to (i) the balance of his compensation due under
this Employment Agreement, but in no event Executive shall be paid no less than
an amount equal to two year's compensation as provided in Sections 3, 4, 5, 6,
and 7 (ii) Severance pay for the year following termination and (iii) release of
all stock from any escrow and forfeited provisions set forth in Schedule B.
10.b. Termination
10.b.1 Termination by Death. If Executive dies, then
this Agreement shall terminate immediately, except that Executive's heirs,
personal representatives or estate shall be entitled to receive (a) his salary
for a period of one (1) year after his death payable as his salary was paid
during Executive's lifetime; (b) any accrued benefits up to the date of
termination; (c) bonuses that have accrued but not paid; (d) shares of stock
pledged, held in escrow, stock options, warrants or other rights to own or
purchase stock in the Corporation; and (e) any benefits which are to be
continued or paid after the date of termination in accordance with the terms of
the corresponding benefit plans.
3
<PAGE>
10.b.2 Termination by Disability. If Executive becomes
disabled, and such disability continues for more than three (3) consecutive
months after the onset of Disability (as defined below) or for periods
aggregating more than four(4) months during any sixth month period, then
Corporation shall have the right to terminate this Agreement immediately, except
that Executive shall be entitled to receive (a) the difference in his Base
Salary above any disability insurance proceeds received from the disability
policy or plan paid for or provided by Corporation for a period of one (1)
calendar year beginning on the date of the Onset of the disability; (b) any
accrued benefits up to the date of the termination; (c) bonuses that have
accrued but not paid; (d) all shares of stock in the Corporation including
without limitation all stock pledge, held in escrow, stock options, warrants or
other rights to own or purchase stock in the Corporation; and (e) any benefits
which are to be continued or paid after the date of termination in accordance
with the terms of the corresponding benefit plans. "Onset of Disability" means
the first day on which Executive shall be unable to perform any of his duties
under this Agreement on a full time basis by reason of physical or mental
incapacity, sickness or infirmity.
In the event of a partial disability, Executive shall be
entitled to work for such time and in such capacity as his disability permits
and his salary shall be adjusted accordingly.
10.b.3 For Cause. This Agreement may be terminated for
caused as defined below, upon five (5) days prior written notice from the
Corporation to the Executive upon the occurrence or act by the Executive of
any one of more of the following events:
(a) fraud,
(b) dishonesty, or
(c) other material and willful misconduct by the
Executive
If the Executive's employment is terminated for cause pursuant
to this Section, Executive shall be entitled to receive (a) his accrued Base
Salary through the date of termination, (b) any accrued benefits up to the date
of termination, (c) all shares of stock released from any forfeiture provision
set forth in Schedule B and (d) any benefits which are to be continued or paid
after the date of termination in accordance with the terms of corresponding
benefit plans.
10.b.4 Mutual Agreement. This Agreement may be
terminated at any time upon mutual agreement of the parties.
11. PROCEDURE UPON TERMINATION
Upon termination of his employment, Executive shall promptly
return to Corporation all documents (including copies) and other materials and
property of Corporation, pertaining to its business, including without
limitation customer and prospect lists, contracts, files, manuals, letters,
reports and records in his possession or control, no matter from whom or in what
manner required.
12. DISCOVERIES
Except as set forth in this Section, Executive shall
communicate to
4
<PAGE>
Corporation, in writing when requested, and preserve as confidential information
of Corporation, all customer lists, trade secrets, estimating techniques,
bidding practices, non-public client information, client contacts, vendors,
business concepts and other ideas, relating to the business for the Corporation
which are conceived, developed or made by Executive, whether alone or jointly
with others, at any time (during or after business hours) during the term of
Executive's employment with Corporation (such concepts, practices, ideas and
lists are referred to "Executive Discoveries") or have been made heretofore by
the Executive in relation to business of the Corporation. All of Executive's
Discoveries shall be Corporation's exclusive property, and Executive shall, at
Corporation's expenses, sign all documents and take such other actions as they
may reasonably request to confirm their ownership of Executive's Discoveries.
13. NONDISCLOSURE
At all times after the date of this Agreement, except with
Corporation's express prior written consent or in connection with the proper
performance of services under this Agreement, Executive shall not, directly or
indirectly, communicate, disclose or divulge to any Person (as defined in
Section 22 below) or use for the benefit of any Person, any confidential or
proprietary knowledge or information, no matter when or how acquired, concerning
the business of Corporation including, but not limited to, (a) names of
customers, locations, prospects and suppliers, (b) details of contracts,
proposals or other business arrangements with clients, prospects and suppliers,
(c) marketing methods, trade secrets, financial condition, and (d) software,
source code, technical documentation and other information. For purposes of this
Section 13, confidential information shall not include any information which is
known by the general public, or which becomes know by the general public other
than as a result of any improper act or omission of Executive.
14. RESTRICTIVE COVENANT
a. Covenant Not to Compete or Solicit
The Corporation was founded for the purpose of being a
Registered Provider under Medicare to sell durable medical equipment, primarily
diabetic supplies throughout the United States. As a material inducement to
entering this Agreement, Executive agrees and covenants that while he is an
employee of the Corporation and for a period of two (2) years thereafter, he:
(1) shall be restricted from competing with the
Corporation, directly or indirectly on his own behalf or through third parties,
in any manner whatsoever as a shareholder, director, officer, joint venturer,
partner, sole proprietor, investor or, in any other ownership capacity
whatsoever, or as an employee, consultant, agent, or representatives of or for a
competing business within the fifty (50) states of the United States all
territories of the United States and Canada;
(2) shall not either directly or indirectly on his own
behalf or through third parties solicit or attempt to solicit advertisers,
agencies, developers, operators,
5
<PAGE>
owners, clients or customers (collectively "Customers") of the Corporation who
are or were customers of the Corporation at any time during the preceding two
(2) years prior to his termination of employment with respect to any of the
Corporation's business or businesses of its subsidiaries or affiliates for a
competing business; and
(3) shall not communicate with or solicit any person or
entity, who is, or during a six (6) month period prior to his termination of
employment an employee, salesman, contractor, agent or representative
(hereinafter collectively "Employee or Contractor"), or Contractor's
relationship with the Corporation or in an effort to obtain such Person as an
employee, salesman, contractor, agent or representative of an entity or business
which competes with the Corporation's business.
b. Convenient Not to Violate Corporate Confidences
The parties agree and acknowledge that the Executive will
have access to and will become aware of confidential information and trade
secrets including Customer data, files, and business techniques, (collectively,
"Confidential Information") and that this confidential information (1) is not
generally available to the public, (2) has been compiled at the Corporation's
expense and over a substantial amount of time, (3) is critical to the
Corporation's ability to compete in the industry in which it does business, and
(4) if disclosed or released will be greatly and irreparably damage the
Corporation's business. Therefore, as a material inducement to entering into
this Agreement, Executive agrees and covenants that he will not, while he is an
Executive or during a two (2) year period beginning on the date of the
termination of his employment, either disclose or divulge this confidential
information to anyone or use this confidential information in any manner to
compete with the Corporation.
c. Enforcement
The Corporation may enforce the provisions of this Section
by suit for damages, injunction, or both, as provided below:
(1) The parties agree and acknowledge that the Corporation
will be irreparably injured by the breach of any provision of this Section, and
that money damages alone will not be an appropriate measure of the harm the
Corporation will suffer from such continuing breach. Therefore, the parties
agree that the equitable relief, including specific performance of these
provisions by injunction, is an appropriate remedy for breach of these
provisions.
(2) The parties also agree and acknowledge, however, that
money damages will be appropriate with respect to any past breach of any
provision of this Section. Therefore, in case of any breach of this Section, the
breaching party shall render a full and complete accounting of the gross
receipts, expenses, and net profits which have resulted from such breach and
shall be liable for money equal to the greater of (1) the actual profits
recognized by such breaching party from all transactions in breach of this
Section, or (2) profits that the Corporation could realize from the transactions
in breach of this Section.
6
<PAGE>
(3) Notwithstanding anything to the contrary contained in
this Agreement neither the Corporation nor other Shareholders shall be obligated
to make any payments to the Executive under this or any other Agreement between
the parties if the Executive is deemed to have violated any provision of this
Section of this Agreement. Further, breach of this Section shall be a complete
defense to the non-payment by the Corporation of any payments due Executive
under the terms of this Agreement.
(4) The Corporation shall, in addition to the damages
described in this Section be entitled to be reimbursed for all reasonable legal
fees and costs necessary to prosecute any claim or action under this Section as
part of any award by a Court Arbitrator. The term "costs" shall include all the
filing and court costs, investigation, witness and expert witness fees,
deposition costs, travel, long-distance telephone, photocopying and printing and
any and all other costs necessary to prosecute the claim.
(5) If any portion of the provisions of this Section or its
application is construed to be invalid, illegal, or unenforceable, then the
other portions and their application shall not be affected thereby and shall be
enforceable without regard thereto. If any of the Covenants are determined to be
unenforceable because of their scope, duration, geographic area or similar
factor, then the Court or arbitrator making such determination shall have the
power to reduce or limit such scope, duration, area or other factor, and such
Covenant shall then be enforceable in its reduced or limited form.
15. RELATIONSHIP OF PARTIES
The relationship between the partners is that of employer and
employee. The employee shall be eligible to participate in any plans or
arrangements or distributions by the Corporation pertaining to any person,
profit-sharing bonus or similar benefits provided for regular employees and
officers, directors and senior executives except to the extent that such plans,
arrangements, or distributions are superseded by more liberal provisions in this
Agreement.
16. MANAGEMENT RESPONSIBILITY
The parties recognize that the business affairs of the
Corporation shall be managed by the Board of Directors of the Corporation in
accordance with the laws of the State of Florida governing the organization and
administration of business corporations.
17. WAIVER OF BREACH
The waiver by either party hereto of a breach of any
provision of this Agreement shall not operate to be construed as a waiver of
subsequent breach of the same or any other provision of this Agreement.
18. NOTICES
All notices, consents or other communication required or
permitted to be
7
<PAGE>
given under this Agreement shall be in writing and shall be deemed to have been
duly given (a) when delivered personally, (b) three (3) business days after
being mailed by first class certified mail, return receipt requested, postage
prepaid, or (c) one (1) business day after being sent by a reputable overnight
delivery service, postage or delivery charges prepaid, to the parties at their
respective addresses stated on the first page of this Agreement. Notices may
also be given by prepaid telegram or facsimile and be effective on the date
transmitted if confirmed within twenty-four (24) hours thereafter by a signed
original sent in the manner provided in the preceding sentence. Notice to
Corporation, addressed to the attention of the Chairman of the Board, shall
suffice as notice to the Corporation, provided that a copy thereof is
simultaneously sent to the Corporate Attorney of record. Notice to Executive
addressed to the address set forth at the beginning of this Agreement and shall
suffice. Any party may change its address for notice and the address to which
copies must be sent by giving notice of the new addresses to the other parties
in accordance with this Section 18, except that any such change of address
notice shall not be effective unless and until received.
19. PRIOR AGREEMENTS
Executive represents to Corporation (a) that there are no
restrictions, agreements or undertakings whatsoever to which Executive is a part
which would prevent to make unlawful his execution of this Agreement or his
employment hereunder, (b) that his execution of this Agreement or his employment
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written to which he is a party of which he is bound and
(c) that he is free and able to execute this Agreement and to enter into
employment by Executive.
20. ASSIGNMENT
Corporation may assign its rights and duties under this
Agreement to any party without the consent of Executive. This Agreement, being
for the personal services of Executive, shall not be assignable by him.
21. OTHER PROVISIONS
This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous, oral or written, express or implied, agreements and
understandings. This Agreement shall not be modified or terminated except in
writing. No action taken by Corporation under this Agreement, including without
limitation any waiver, consent or approval, shall be effective unless approved
by Corporation's Board of Directors. This Agreement shall inure to the benefit
of and bind each of the parties hereto and the successors and assigns of
Corporation and the personal representatives, estate and heirs of Executive.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same of any other right,
remedy, power or privilege with respect to any occurrence or be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver. Any headings preceding the
text of any of the Sections or Subsections of this Agreement are inserted for
convenience of reference only, and shall neither constitute a part of this
Agreement nor affect its construction, meaning, or effect.
8
<PAGE>
22. DEFINITION
22.1 Person. "Person" means any individual, corporation,
partnership, sole proprietorship, joint venture, association, cooperative,
trust, estate, governmental body, administrative agency, regulatory authority or
other entity of an nature.
WITNESS the due execution and delivery hereof on the date
first above written.
CORPORATION: EXECUTIVE:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ PETER J. FISCINA /s/ MYRON M. BLUMENTHAL
- ----------------------- ------------------------------
Name: Peter J. Fiscina Name: Myron M. Blumenthal
Title: President
9
<PAGE>
SCHEDULE A
COMPENSATION
------------
1. MINIMUM BASE COMPENSATION
Subject to the termination provisions of the Agreement, Executive
shall be paid an annual minimum base salary of $100,000 per year for all
services rendered to the Corporation for the term of this Agreement ("Minimum
Base Compensation") in equal weekly or bi-weekly installments with a deduction
of all taxes and other amounts required to be withheld or deducted by law.
2. INCENTIVE BONUS COMPENSATION
In addition to his Base Compensation, Executive shall be entitled to
Incentive Bonus Compensation ("Incentive Bonus Compensation") as determined as
follows:
Starting from a base of $2,500,000 in sales and an EBITDA of
$750,000 and not taking into consideration the adjustment for (1) accounts
receivable and (2) officer's salaries. See Schedule Below.
Annual Sales EBITDA Compensation
------------ ------ ------------
$ 2,500,000 $ 750,000 $100,000
4,000,000 1,200,000 150,000
6,000,000 1,800,000 200,000
8,000,000 2,400,000 250,000
10,000,000 3,000,000 300,000
Each Incentive Bonus shall be paid not more than thirty (30) days
after a determination that the applicable performance goal has been met. EBITDA
means, for any period, the Company's consolidated earnings from continuing
operations before interest, taxes, depreciation and amortization for such
period.
The Executive shall be entitled to such other cash bonuses as
determined from time to time at the discretion of the Board of Directors based
upon the growth and success of the Corporation.
10
<PAGE>
SCHEDULE B
STOCK
-----
NONE
11
<PAGE>
EMPLOYMENT AGREEMENT
Agreement made the 2nd day of November, 1995, by and between a
Corporation: Certified Diabetic Supplies, Inc.
(a Florida Corporation) 1951 J & C Boulevard
Naples, Florida 33942
and
Executive: Albert R. Ayala
22 Lancashire Place
Naples, Florida 33963
Effective Date: November 2, 1995
BACKGROUND
It is in the best interest of the Corporation and its
Shareholders to secure Executive's services for the Corporation with an
employment agreement. The Corporation, as an incentive to Executive to become
employed and to continue employment with the Corporation grants compensation,
present and future stock interest and other incentives as more fully set forth
in this Agreement and the attached Schedules. Executive and the Corporation
desire to enter into an Employment Agreement under the terms and conditions set
forth below.
NOW THEREFORE, in consideration of the promises and mutual
agreements set forth in this Agreement and for other good and valuable
consideration, the parties agree as follows:
1. EMPLOYMENT
The Executive shall be employed by the Corporation in the
capacity of Vice President of the Company.
2. DUTIES
Executive shall serve the Corporation faithfully and to best
of his ability, under the direction of the Board of Directors. He shall devote
his entire time, energy and skill during the regular business hours and such
other hours as are reasonably necessary and shall perform from time to time such
services and act in such office or capacity as the Board of Directors may
direct. Company acknowledges, however, that Employee has other business
interests and is a director of other businesses and that such activity shall not
constitute a breach of this Agreement as long as it does not normally interfere
with the performance by Employee of his duties hereunder.
<PAGE>
3. COMPENSATION
The Corporation shall pay or cause to pay the Executive during
the term of his employment salary and bonuses as more particularly set forth in
Schedule "A" which is attached to this Agreement and made part hereof.
4. STOCK
Executive shall be entitled to certain capital stock in the
Corporation as set forth in Schedule "B" which is attached to this Agreement and
made a part hereof.
5. ADDITIONAL BENEFITS
Executive shall also be entitled to any fringe benefits which
may from time to time be made available to officers, directors and other
Executives of the Corporation and as set forth in the personal policies of the
Corporation, or as determined by the Board including but not limited to any
employee benefit plan which is qualified and exempt under Section 401(a) and
501(a) of the Internal Revenue Code. Executive shall also be entitled to any
group medical, dental, hospitalization insurance, long-term disability insurance
equal to ($4,000/month) Four Thousand Dollars per month and a life insurance
policy of not less than ($1,000,000) One Million dollars payable in the event of
death of the Executive and the Executive shall select the beneficiary.
6. EXPENSES
The Corporation shall reimburse Executive for out-of-pocket
expenditures for transportation, fuel, entertainment, travel, meals, hotel
accommodations and the like incurred by him, in the amount of ($100) One Hundred
Dollars per week, in the interest of the Corporation ("out-of-pocket expenses").
Executive shall each month submit vouchers, receipts or other documentation
together with appropriate written explanation required by Corporation to verify
out-of-pocket expenses and shall be reimbursed for the actual expenses incurred.
Corporation shall provide Executive a reasonable monthly allowance for
automobile expense, including cost of the vehicle, gas, maintenance, repairs and
insurance or, in the alternative, may provide a suitable motor vehicle for use
by the Executive for conduct of business on behalf of the Corporation.
7. WORKING FACILITIES
The Corporation shall furnish Executive with such office space
and such other facilities and services as in the discretion of the Board of
Directors is appropriate for such an executive position and necessary for
performance of his duties.
8. AUTHORITY TO BIND THE CORPORATION
Executive shall have authority to enter into contracts binding
upon the Corporation and to create any obligations on the part of the
Corporation in the normal course of business and as would be expected of an
Executive of a similar Corporation. Notwithstanding the foregoing, Executive
shall not have the authority to enter into contracts binding the Corporation,
without prior approval with the Board of Directors, for purchases of
transactions equal to or exceeding ($10,000) Ten Thousand Dollars.
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9. VACATIONS
Executive shall be entitled each year to two (2) weeks
vacation in accord with company policy for officers, directors senior management
personnel.
Vacations shall be coordinated with other employees of the
Corporation, shall be consistent with Executive's duties (as more fully set
forth in Section 2 of this Agreement) and the needs of the Corporation and shall
be scheduled at such times so as not to interfere with the effective operation
of the Corporation.
10. TERM AND TERMINATION OF EMPLOYMENT
10.a. Term
The term of employment shall be for a period of five (5) years
commencing on the Effective Date of this Agreement November 2, 1995 until
October 31, 2000. At the end of the initial five (5) year term, Corporation and
Executive agree to negotiate in good faith a new contract or extension of the
current contract. In the event the Corporation and Executive fail to reach an
Agreement due solely to the failure of the Corporation to negotiate in good
faith, Executive shall be entitled upon his termination to his highest annual
compensation (to include all bonus compensation) payable for one (1) year from
the date of termination in the same manner his salary was paid while employed
("Severance Pay"). Executive shall have no duty to mitigate damages and should
he accept other employment, severance pay shall not be reduced or deducted from
any other of his earned income.
Further, in the event the Corporation terminates Executive
other than pursuant to the provisions set forth in Section 10b below, the
Executive shall be entitled to (i) the balance of his compensation due under
this Employment Agreement, but in no event Executive shall be paid no less than
an amount equal to two year's compensation as provided in Sections 3, 4, 5, 6,
and 7 (ii) Severance pay for the year following termination and (iii) release of
all stock from any escrow and forfeited provisions set forth in Schedule B.
10.b. Termination
10.b.1 Termination by Death. If Executive dies, then this
Agreement shall terminate immediately, except that Executive's heirs, personal
representatives or estate shall be entitled to receive (a) his salary for a
period of one (1) year after his death payable as his salary was paid during
Executive's lifetime; (b) any accrued benefits up to the date of termination;
(c) bonuses that have accrued but not paid; (d) shares of stock pledged, held in
escrow, stock options, warrants or other rights to own or purchase stock in the
Corporation; and (e) any benefits which are to be continued or paid after the
date of termination in accordance with the terms of the corresponding benefit
plans.
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10.b.2 Termination by Disability. If Executive becomes
disabled, and such disability continues for more than three (3) consecutive
months after the onset of Disability (as defined below) or for periods
aggregating more than four(4) months during any sixth month period, then
Corporation shall have the right to terminate this Agreement immediately, except
that Executive shall be entitled to receive (a) the difference in his Base
Salary above any disability insurance proceeds received from the disability
policy or plan paid for or provided by Corporation for a period of one (1)
calendar year beginning on the date of the Onset of the disability; (b) any
accrued benefits up to the date of the termination; (c) bonuses that have
accrued but not paid; (d) all shares of stock in the Corporation including
without limitation all stock pledge, held in escrow, stock options, warrants or
other rights to own or purchase stock in the Corporation; and (e) any benefits
which are to be continued or paid after the date of termination in accordance
with the terms of the corresponding benefit plans. "Onset of Disability" means
the first day on which Executive shall be unable to perform any of his duties
under this Agreement a full time basis by reason of physical or mental
incapacity, sickness or infirmity.
In the event of a partial disability, Executive shall be
entitled to work for such time and in such capacity as his disability permits
and his salary shall be adjusted accordingly.
10.b.3 For Cause. This Agreement may be terminated for cause
as defined below, upon five (5) days prior written notice from the Corporation
to the Executive upon the occurrence or act by the Executive of any one of more
of the following events:
(a) fraud,
(b) dishonesty, or
(c) other material and willful misconduct by the Executive
If the Executive's employment is terminated for cause pursuant
to this Section, Executive shall be entitled to receive (a) his accrued Base
Salary through the date of termination, (b) any accrued benefits up to the date
of termination, (c) all shares of stock released from any forfeiture provision
set forth in Schedule B and (d) any benefits which are to be continued or paid
after the date of termination in accordance with the terms of corresponding
benefit plans.
10.b.4 Mutual Agreement. This Agreement may be terminated at
any time upon mutual agreement of the parties.
11. PROCEDURE UPON TERMINATION
Upon termination of his employment, Executive shall promptly
return to Corporation all documents (including copies) and other materials and
property of Corporation, pertaining to its business, including without
limitation customer and prospect lists, contracts, files, manuals, letters,
reports and records in his possession or control, no matter from whom or in what
manner required.
12. DISCOVERIES
Except as set forth in this Section, Executive shall
communicate to Corporation, in writing when requested, and preserve as
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confidential information of Corporation, all customer lists, trade secrets,
estimating techniques, bidding practices, non-public client information, client
contacts, vendors, business concepts and other ideas, relating to the business
for the Corporation which are conceived, developed or made by Executive, whether
alone or jointly with others, at any time (during or after business hours)
during the term of Executive's employment with Corporation (such concepts,
practices, ideas and lists are referred to "Executive Discoveries") or have been
made heretofore by the Executive in relation to business of the Corporation. All
of Executive's Discoveries shall be Corporation's exclusive property, and
Executive shall, at Corporation's expenses, sign all documents and take such
other actions as they may reasonably request to confirm their ownership of
Executive's Discoveries.
13. NONDISCLOSURE
At all times after the date of this Agreement, except with
Corporation's express prior written consent or in connection with the proper
performance of services under this Agreement, Executive shall not, directly or
indirectly, communicate, disclose or divulge to any Person (as defined in
Section 22 below) or use for the benefit of any Person, any confidential or
proprietary knowledge or information, no matter when or how acquired, concerning
the business of Corporation including, but not limited to, (a) names of
customers, locations, prospects and suppliers, (b) details of contracts,
proposals or other business arrangements with clients, prospects and suppliers,
(c) marketing methods, trade secrets, financial condition, and (d) software,
source code, technical documentation and other information. For purposes of this
Section 13, confidential information shall not include any information which is
known by the general public, or which becomes known by the general public other
than as a result of any improper act or omission of Executive.
14. RESTRICTIVE COVENANT
a. Covenant Not to Compete or Solicit
The Corporation was founded for the purpose of being a
Registered Provider under Medicare to sell durable medical equipment, primarily
diabetic supplies throughout the United States. As a material inducement to
entering this Agreement, Executive agrees and covenants that while he is an
employee of the Corporation and for a period of two (2) years thereafter, he:
(1) shall be restricted from competing with the Corporation,
directly or indirectly on his own behalf or through third parties, in any manner
whatsoever as a shareholder, director, officer, joint venturer, partner, sole
proprietor, investor or, in any other ownership capacity whatsoever, or as an
employee, consultant, agent, or representative of or for a competing business
within the fifty (50) states of the United States all territories of the United
States and Canada;
(2) shall not either directly or indirectly on his own behalf
or through third parties solicit or attempt to solicit advertisers, agencies,
developers, operators, owners, clients or customers (collectively "Customers")
of the Corporation who are or were customers of the Corporation at any time
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during the preceding two (2) years prior to his termination of employment with
respect to any of the Corporation's business or businesses of its subsidiaries
or affiliates for a competing business; and
(3) shall not communicate with or solicit any person or
entity, who is, or during a six (6) month period prior to his termination of
employment an employee, salesman, contractor, agent or representative
(hereinafter collectively "Employee or Contractor"), or Contractor's
relationship with the Corporation or in an effort to obtain such Person as an
employee, salesman, contractor, agent or representative of an entity or business
which competes with the Corporation's business.
b. Convenient Not to Violate Corporate Confidences
The parties agree and acknowledge that the Executive will have
access to and will become aware of confidential information and trade secrets
including Customer data, files, and business techniques, (collectively,
"Confidential Information") and that this confidential information (1) is not
generally available to the public, (2) has been compiled at the Corporation's
expense and over a substantial amount of time, (3) is critical to the
Corporation's ability to compete in the industry in which it does business, and
(4) if disclosed or released will be greatly and irreparably damage the
Corporation's business. Therefore, as a material inducement to entering into
this Agreement, Executive agrees and covenants that he will not, while he is an
Executive or during a two (2) year period beginning on the date of the
termination of his employment, either disclose or divulge this confidential
information to anyone or use this confidential information in any manner to
compete with the Corporation.
c. Enforcement
The Corporation may enforce the provisions of this Section by
suit for damages, injunction, or both, as provided below:
(1) The parties agree and acknowledge that the Corporation
will be irreparably injured by the breach of any provision of this Section, and
that money damages alone will not be an appropriate measure of the harm the
Corporation will suffer from such continuing breach. Therefore, the parties
agree that the equitable relief, including specific performance of these
provisions by injunction, is an appropriate remedy for breach of these
provisions.
(2) The parties also agree and acknowledge, however, that
money damages will be appropriate with respect to any past breach of any
provision of this Section. Therefore, in case of any breach of this Section, the
breaching party shall render a full and complete accounting of the gross
receipts, expenses, and net profits which have resulted from such breach and
shall be liable for money equal to the greater of (1) the actual profits
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recognized by such breaching party from all transactions in breach of this
Section, or (2) profits that the Corporation could realize from the transactions
in breach of this Section.
(3) Notwithstanding anything to the contrary contained in this
Agreement neither the Corporation nor other Shareholders shall be obligated to
make any payments to the Executive under this or any other Agreement between the
parties if the Executive is deemed to have violated any provision of this
Section of this Agreement. Further, breach of this Section shall be a complete
defense to the non-payment by the Corporation of any payments due Executive
under the terms of this Agreement.
(4) The Corporation shall, in addition to the damages
described in this Section be entitled to be reimbursed for all reasonable legal
fees and costs necessary to prosecute any claim or action under this Section as
part of any award by a Court Arbitrator. The term "costs" shall include all the
filing and court costs, investigation, witness and expert witness fees,
deposition costs, travel, long-distance telephone, photocopying and printing and
any and all other costs necessary to prosecute the claim.
(5) If any portion of the provisions of this Section or its
application is construed to be invalid, illegal, or unenforceable, then the
other portions and their application shall not be affected thereby and shall be
enforceable without regard thereto. If any of the Covenants are determined to be
unenforceable because of their scope, duration, geographic area or similar
factor, then the Court or arbitrator making such determination shall have the
power to reduce or limit such scope, duration, area or other factor, and such
Covenant shall then be enforceable in its reduced or limited form.
15. RELATIONSHIP OF PARTIES
The relationship between the partners is that of employer and
employee. The employee shall be eligible to participate in any plans or
arrangements or distributions by the Corporation pertaining to any person,
profit-sharing bonus or similar benefits provided for regular employees and
officers, directors and senior executives except to the extent that such plans,
arrangements, or distributions are superseded by more liberal provisions in the
Agreement.
16. MANAGEMENT RESPONSIBILITY
The parties recognize that the business affairs of the
Corporation shall be managed by the Board of Directors of the Corporation in
accordance with the laws of the State of Florida governing the organization and
administration of business corporations.
17. WAIVER OF BREACH
The waiver by either party hereto of a breach of any
provisions of this Agreement shall not operate to be construed as a waiver of
subsequent breach of the same or any other provision of this Agreement.
18. NOTICES
All notices, consents or other communication required or
permitted to be given under this Agreement shall be in writing and shall be
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deemed to have been duly given (a) when delivered personally, (b) three (3)
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid, or (c) one (1) business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective address stated on the first page of this
Agreement. Notices may also be given by prepaid telegram or facsimile and be
effective on the date transmitted if confirmed within twenty-four (24) hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Notice to Corporation, addressed to the attention of the Chairman of
the Board, shall suffice as notice to the Corporation, provided that a copy
thereof is simultaneously sent to the Corporate Attorney of record. Notice to
Executive addressed to the address set forth at the beginning of this Agreement
and shall suffice. Any party may change its address for notice and the address
to which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 18, except that any such change of
address notice shall not be effective unless and until received.
19. PRIOR AGREEMENTS
Executive represents to Corporation (a) that there are no
restrictions, agreements or undertakings whatsoever to which Executive is a part
which would prevent to make unlawful his execution of this Agreement or his
employment hereunder, (b) that his execution of this Agreement or his employment
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written to which he is a party of which he is bound and
(c) that he is free and able to execute this Agreement and to enter into
employment by Executive.
20. ASSIGNMENT
Corporation may assign its rights and duties under this
Agreement to any party without the consent of Executive. This Agreement, being
for the personal services of Executive, shall not be assignable by him.
21. OTHER PROVISIONS
This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous, oral or written, express or implied, agreements and
understandings. This Agreement shall not be modified or terminated except in
writing. No action taken by Corporation under this Agreement, including without
limitation any waiver, consent or approval, shall be effective unless approved
by Corporation's Board of Directors. This Agreement shall inure to the benefit
of and bind each of the parties hereto and the successors and assigns of
Corporation and the personal representatives, estate and heirs of Executive.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same of any other right,
remedy, power or privilege with respect to any occurrence or be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver. Any headings preceding the
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text of any of the Sections or Subsections of this Agreement are inserted for
convenience of reference only, and shall neither constitute a part of this
Agreement nor affect its construction, meaning, or effect.
22. DEFINITION
22.1 Person. "Person" means any individual, corporation,
partnership, sole proprietorship, joint venture, association, cooperative,
trust, estate, governmental body, administrative agency, regulatory authority or
other entity of an nature.
WITNESS the due execution and delivery hereof on the date
first above written.
CORPORATION: EXECUTIVE:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ PETER J. FISCINA /S/ ALBERT R. AYALA
- --------------------------- -------------------------
Name: Peter J. Fiscina Name: Albert R. Ayala
Title: President
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SCHEDULE A
COMPENSATION
1. MINIMUM BASE COMPENSATION
Subject to the termination provisions of the Agreement,
Executive shall be paid an annual minimum base salary of $100,000 per year for
all services rendered to the Corporation for the term of this Agreement
("Minimum Base Compensation") in equal weekly or bi-weekly installments with a
deduction of all taxes and other amounts required to be withheld or deducted by
law.
2. INCENTIVE BONUS COMPENSATION
In addition to his Base Compensation, Executive shall be
entitled to Incentive Bonus Compensation ("Incentive Bonus Compensation") as
determined as follows:
Starting from a base of $2,500,000 in sales and an EBITDA of
$750,000 and not taking into consideration the adjustment for (1) accounts
receivable and (2) officer's salaries. See Schedule Below.
Annual Sales EBITDA Compensation
------------ ------ ------------
$2,500,000 $ 750,000 $100,000
4,000,000 1,200,000 150,000
6,000,000 1,800,000 200,000
8,000,000 2,400,000 250,000
10,000,000 3,000,000 300,000
Each Incentive Bonus shall be paid not more than thirty (30)
days after a determination that the applicable performance goal has been met.
EBITDA means, for any period, the Company's consolidated earnings from
continuing operations before interest, taxes, depreciation and amortization for
such period.
The Executive shall be entitled to such other cash bonuses as
determined from time to time at the discretion of the Board of Directors based
upon the growth and success of the Corporation.
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SCHEDULE B
STOCK
NONE
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EMPLOYMENT AGREEMENT
AGREEMENT made as of the 14th day of February, 1997, by and between
Joseph L. Marotta, an individual with a mailing address at
________________________________________ (hereinafter referred to as
"Executive"), and Certified Diabetic Supplies Inc., a Florida corporation, with
a principal place of business located at 1951 J&C Boulevard, Naples, Florida
33942 (hereinafter referred to as the "Company");
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of marketing
and selling diabetes testing products and related services to diabetics and is
contemplating offering additional products and services to its customers;
WHEREAS, the Company desires to retain Executive to render
services to the Company on the terms and conditions hereinafter set forth; and
WHEREAS, Executive is agreeable to rendering such services to
the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
Section 1. Employment Term, Duties and Acceptance.
(a) The Company hereby retains Executive to serve as an executive of the
Company on the terms and conditions set forth herein. Executive shall be
responsible for formulating and overseeing the Company's efforts to enter into
provider contracts (referred to herein as "Provider Contracts"), on a preferred
or exclusive basis, with preferred provider organizations, third party health
plan administrators, self-insured plans, managed care programs and other similar
groups (any of which is referred to herein as a "Plan"), pursuant to which the
Company (or one or more subsidiaries or affiliates to be formed) would provide
diabetic products to participants in such Plans. Executive acknowledges that the
Company may engage one or more other senior executives to participate or,
possibly, direct such efforts and that Executive's activities hereunder will be
conducted in cooperation and coordination with such other senior executive(s).
Executive shall report and be responsible to the Company's Board of Directors
(the "Board"), Principal Executive Officer and Principal Financial Officer (the
"Senior Officers") and shall conduct his activities hereunder in consultation
with and under the direction and control of the Board and the Senior Officers.
The parties agree and acknowledge that the activities described herein may be
conducted through or for the Company or, at the direction of the Board, through
or for one or more subsidiaries or affiliates of the Company to be formed.
Executive acknowledges that the Company may assign this Agreement to such a
subsidiary or affiliate.
(b) Executive and the Company agree that Executive may be appointed an
officer of one or more subsidiaries or affiliates of the Company to be formed.
(c) Executive hereby accepts the foregoing employment and agrees to
devote his business time and attention to the performance of his duties
hereunder and to perform such duties faithfully,
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competently, diligently, and in such a manner as to reflect his best efforts.
Notwithstanding the foregoing, the Company acknowledges that Executive is
currently, and during the term of this Agreement may continue to be a principal
in Marotta Associates and that he may during the term hereof, devote a portion
of his business time to the activities of such entity (provided the same does
not interfere with the discharge of his duties hereunder), and that such
activities shall not be deemed to be inconsistent with or a breach of his
obligations to the Company under this Agreement.
Section 2. Compensation; Benefits.
(a) As compensation for the services to be rendered pursuant to this
Agreement, the Company agrees to pay and Executive agrees to accept a base
salary at the rate of Sixty-Five Thousand Dollars ($65,000) per annum, payable
in accordance with the payroll practices of the Company as from time to time in
effect (the "Salary").
(b) (i) In addition to the Salary, Executive shall be entitled to
receive a monthly commission (the "Commission") equal to $0.50 per "Current
Contract Customer" (as hereinafter defined). As used herein, "Current Contract
Customer" means any customer of the Company (or any subsidiary of affiliate of
the Company) who (A) is a participant in a Plan with which the Company (or any
subsidiary or affiliate of the Company) has a Provider Contract obtained through
or with the assistance of Executive, which Provider Contract is designated by
the Company and Executive as a "Commission Contract", provided that such
Provider Contract is in the initial term (and not any extension or renewal term)
specified therein, and is not a renewal of a Provider Contract previously
entered into by such parties, and (B) purchases products from the Company (or
any subsidiary or affiliate thereof), payment for which is collected by the
Company (or any subsidiary or affiliate) in the month with respect to which the
Commission is to be paid.
(ii) Calculation of the Commission shall be made by the Company and
such calculation shall be deemed conclusive absent manifest error. The
Commission in respect of any month shall be paid by the Company not later than
the last day of the following month.
(iii) The obligation to pay Commissions in accordance with this
Section 2(b) shall terminate upon the termination, for any reason, of
Executive's employment hereunder.
(c) The Company shall pay or reimburse Executive for reasonable expenses
incurred in the performance of his services under this Agreement during the
Employment Period (as hereinafter defined), upon presentation of satisfactory
expense statements, vouchers or such other supporting documentation as may
reasonably be required.
(d) Executive shall be entitled to receive all rights, privileges and
fringe benefits afforded to other executives of the Company, including without
limitation, the right to participate in any pension, retirement, group health,
insurance, vacation and other employee benefit programs made generally
available, from time to time, by the Company.
Section 3. Duration and Termination of Employment.
(a) Subject to the early termination provisions set forth in Section
3(b), this Agreement shall have an initial term of one (1) year commencing on
the date hereof, and shall renew automatically
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for successive additional one (1) year periods unless either party shall have
delivered to the other written notice of its intention not to renew at least
thirty (30) days prior to the expiration of the then current term.
(b) Notwithstanding the provisions of Section 3(a), Executive's
employment hereunder shall terminate upon the earliest of the following:
(i) automatically upon Executive's death;
(ii) at any time by mutual agreement of the parties;
(iii) upon fifteen (15) days prior written notice given by the
Company to Executive; or
(iv) Upon fifteen (15) days prior written notice given by Executive
to the Company of a material breach of this Agreement by the Company which
breach is not cured within such fifteen (15) day period.
(c) Upon termination of Executive's employment hereunder, the Company
shall be obligated to pay to Executive, and Executive shall be entitled to
receive (i) any unpaid Salary through the date of termination, (ii)
reimbursement for expenses incurred by Executive through the date of
termination, subject to the provisions of Section 2(c), (iii) Commissions on a
continuing basis in accordance with Section 2(b), and (iv) any other amounts or
benefits thereafter payable to Executive or his beneficiaries pursuant to any
employee benefit program or plan then in effect to the extent Executive remains
eligible to participate therein under the terms of the applicable program or
plan. Except for the compensation and benefits specified in this Section 3(c),
the Company shall have no obligation to provide Executive any compensation or
benefits from and after the date of termination. Executive agrees, upon any such
termination, to resign as an officer and director of the Company and any of its
subsidiaries and affiliates effective as of the date of termination.
Section 4. Trade Secrets.
(a) Executive acknowledges that his employment by the Company will
provide him access to confidential information concerning the Company and its
subsidiaries and affiliates, their products, services, concepts, businesses,
trade secrets, employees, customers, suppliers, vendors, venture partners, and
strategic allies (collectively, the "Confidential Information"), and that the
Confidential Information is of great value to the Company and its subsidiaries
and affiliates. Accordingly, Executive agrees that he shall not knowingly
divulge any of the Confidential Information to anyone outside of the Company
except as expressly authorized by the Board of Directors of the Company, or as
is necessary to permit Executive to discharge his duties hereunder in good faith
and in the best interests of the Company, or as is required by law.
(b) Executive's covenants contained herein shall survive the termination
or expiration of this Agreement.
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Section 5. Return of Company Material.
Executive shall promptly, even without any request thereto, deliver to
the Company, on termination of the Executive's employment with the Company, for
whatever the reason, or at any time the Company may so request, all memoranda,
notes, records, reports, manuals, drawings, computer software, and computer
hardware of the Company, its subsidiaries and affiliates, and all documents
containing Confidential Information belonging to the Company and its
subsidiaries or affiliates, including all copies of such materials which the
Executive may then possess or have under Executive's control.
Section 6. Non-Competition.
(a) During the term of Executive's employment and for twelve (12) months
after the date of termination of Executive's employment (the "Non-Compete
Period"), the Executive will not directly or indirectly, in any geographical
area where the Company, or any of its subsidiaries and/or affiliates, conducts
business:
(i) own, manage, operate, join, control, or participate in or be
connected with, as an officer, employee, partner, stockholder, director,
advisor, consultant, or agent (whether paid or unpaid), any business engaged in
the marketing and sale of insurance products of the types sold by the Company
(or a subsidiary or affiliate thereof) to diabetics (as a target group) (it
being acknowledged and agreed that the incidental or occasional sale of such
policies to diabetics through Deavers & Deavers Financial Services, Inc. shall
not be deemed a violation hereof);
(ii) induce or attempt to induce any employees of the Company, or of
any of its subsidiaries or affiliates, to terminate their employment with same,
interfere with or disrupt the Company's, or its subsidiaries' or affiliates'
relationship with its respective employees, or solicit, entice, take away or
employ any person employed by the Company or its subsidiaries or affiliates;
(iii) induce or attempt to induce any customer of the Company, or of
any of its subsidiaries or affiliates, to terminate his or her relationship with
same, or to interfere with or disrupt any such relationship, or to solicit,
entice or take away any such customer; or
(iv) interfere with or disrupt the relationship between the Company
or any of its subsidiaries or affiliates and any insurance companies whose
products are distributed by the Company, its subsidiaries or affiliates.
(b) Executive agrees and acknowledges that the duration, scope, and
geographic areas applicable to the covenant not to compete described in this
Section 6 are fair, reasonable and necessary, and that these obligations do not
prevent Executive from engaging in profitable business activities. If, however,
for any reason, any court determines that the restrictions in this Section 6 are
not reasonable, or that Executive has been prevented from engaging in profitable
business activities, such restrictions shall be interpreted, modified or
rewritten to include as much of the duration, scope, and geographic area
identified in this Section 6 as will render such restrictions valid and
enforceable.
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Section 7. Right to Injunctive and Equitable Relief.
Executive's obligations not to disclose or use Confidential Information
and to refrain from the activities described in Sections 4 and 6 are of a
special and unique character which gives them a particular value, and which is
supported by valuable consideration. The Company, its subsidiaries and
affiliates, cannot be reasonably or adequately compensated in damages in an
action at law in the event Executive breaches such obligations. Therefore,
Executive expressly agrees that the Company, its subsidiaries and affiliates,
shall be entitled to injunctive and other equitable relief without bond or other
security in the event of such breach in addition to any other rights or remedies
which they may possess. Furthermore, the obligations of Executive and the rights
and remedies of the Company, its subsidiaries or affiliates, under this Section
are cumulative and in addition to, and not in lieu of, any obligations, rights,
or remedies created by applicable law relating to misappropriation or theft of
trade secrets or Confidential Information.
Section 8. Sole Benefit.
It is the intent of the parties hereto that the obligations and
covenants of Executive contained in Sections 4, 5, 6 and 7 run to the benefit of
the Company and its subsidiaries and affiliates; that said obligations and
covenants be enforceable by the Company and each of its subsidiaries and
affiliates, as if it was a party hereto; and that the Company, its subsidiaries
and affiliates, may exercise all of the rights and remedies available hereunder
or otherwise in the event of any breach or threatened breach by Executive of all
or any of said obligations and covenants. Additionally, the Company may, without
the prior consent of Executive, assign its rights hereunder to any affiliate or
subsidiary, and may assign its rights hereunder to any other party in connection
with a merger or consolidation of the Company with or into such party or a sale
of all or substantially all of the Company's assets to such party.
Section 9. Waiver.
No course of dealing nor any delay on the part of the Company or
Executive in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
Section 10. Severability.
If any of the provisions of this Agreement are held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11. Survival.
All covenants, representations and warranties made in this Agreement,
and all other documents provided for herein, shall survive the execution,
delivery and performance of this Agreement.
Section 12. Consent to Jurisdiction and Service of Process.
Any legal action, suit or proceeding arising out of or relating to this
Agreement may be instituted in any court of the State of Florida located in the
district of the Company's principal place of business, and each party agrees not
to assert, by way of motion, as a defense, or otherwise, in any such
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action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court, that its property is exempt or immune from the
attachment or execution, that the action suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each party further irrevocably submits to the non-exclusive
jurisdiction of any such court in any such action, suit or proceeding.
Section 13. Executors, Administrators, Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors, heirs, executors, administrators, legal
representatives and assigns. This Agreement may not be assigned or transferred
to any third person, firm or corporation without the written consent of the
other party hereto, except that the Company may assign this Agreement to any of
its subsidiaries or affiliates.
Section 14. Complete Agreement.
This Agreement constitutes the entire agreement of the parties hereto
and supersedes all prior agreements and proposals, oral and written, and all
other communications between the parties relating to the subject matter
contained herein.
Section 15. Modification.
This Agreement may only be amended, varied or modified by a written
document executed by the parties hereto.
Section 16. Notices.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed, postage prepaid, registered or certified mail, return receipt requested
to the parties at the addresses (or at such other address for a party as shall
be specified by like notice) specified on the first page of this Agreement.
Section 17. Governing Law.
This Agreement shall be governed by the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CERTIFIED DIABETIC SUPPLIES INC.
By: /s/ Myron M. Blumenthal
---------------------------
Name: Myron M. Blumenthal
Title: Treasurer
/s/ Joseph L. Marotta
----------------------------
JOSEPH L. MAROTTA
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THIS INSTRUMENT PREPARED BY
AND RETURN TO:
David N. Morrison, Esq.
MORRISON & CONROY, P.A.
975 Sixth Avenue South
Naples, Florida 33940
FIRST NATIONAL BANK OF NAPLES
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT is made this 31st day of May,
1996, by CERTIFIED DIABETIC SUPPLIES INC., a Florida corporation, whose address
is 1951 J & C Boulevard, Naples, Florida 33942 ("Mortgagor"), in favor of FIRST
NATIONAL BANK OF NAPLES, a national banking association, whose address is 900
Goodlette Road, North, Naples, Florida 33940 ("Mortgagee").
WITNESSETH:
WHEREAS, Mortgagee has made a loan of even date herewith to Mortgagor
in the original principal amount of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00), and in consideration therefor, Mortgagor has agreed to
pay the same, with interest thereon, according to the terms of that certain
Promissory Note made by Mortgagor to the order of Mortgagee in the original
principal amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00),
bearing even date herewith, with final payment being due on December 28, 1998
(such Promissory Note being hereinafter referred to as the "Note").
NOW, THEREFORE, to secure the performance and observance by Mortgagor
of all covenants and conditions in the Note and the indebtedness evidenced
thereby and in this instrument and in all other instruments securing the Note
and in order to charge the properties, interests and rights hereinafter
described with such payment, performance or observance, and for and in
consideration of the sum of Ten and 00/100 Dollars ($10.00) this date paid by
Mortgagee to Mortgagor, and for such other valuable consideration, the receipt
of which is acknowledged, Mortgagor does hereby grant, bargain, sell, alienate,
remise, release, convey, assign, transfer, mortgage, hypothecate, pledge,
deliver, set over, warrant and confirm unto Mortgagee, its successors and
assigns forever, a security interest in and fee simple title to the following
properties:
THE MORTGAGED PROPERTY
The term "Mortgaged Property" as used herein shall be as hereinafter
defined.
(A) The Land. All those parcels and tracts of land located in the
County of Collier, State of Florida (collectively, the "Land"), described in
Exhibit "A" attached hereto and made a part hereof;
(B) The Improvements. Together with all buildings, structures and
improvements of every nature whatsoever now or hereafter situated on the Land,
and all fixtures, machinery, appliances, equipment, and personal property of
every nature whatsoever now or hereafter owned by
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Mortgagor and located in or on, or attached to, or used or intended to be used
in connection with or with the operation of, the Land, buildings, structures or
other improvements, including all extensions, additions, improvements,
betterments, renewals and replacements to any of the foregoing and all of the
right, title and interest of Mortgagor in and to any such personal property or
fixtures together with the benefit of any deposits or payments now or hereafter
made by Mortgagor or on its behalf (the "Improvements");
(C) Easements or Other Interests. Together with all easements, zoning
variances and exceptions, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers, and all
estates, rights, titles, interests, privileges, liberties, tenements,
hereditaments and appurtenances whatsoever, in any way belonging, relating or
appertaining to any of the property hereinabove described, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Mortgagor, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof, and all the estate, right, title,
interest, property, possession, claim and demand whatsoever, at law as well as
in equity, of Mortgagor of, in and to the same, including but not limited to all
judgments, awards of damages and settlements hereafter made resulting from
condemnation proceedings or the taking of the property described in paragraphs
(A), (B) and (C) hereof or any party thereof under the power of eminent domain,
or for any damage (whether caused by such taking or otherwise) to the property
described in paragraphs (A), (B) and (C) hereof or any part thereof, or to any
rights appurtenant thereto, and all proceeds of any sales or other dispositions
of the property described in paragraphs (A), (B) and (C) hereof or any part
thereof.
(D) Assignment of Rents. Together with all rents, royalties, issues,
profits, revenue, income and other benefits from any property described in
paragraphs (A), (B) and (C) hereof to be applied against the indebtedness and
other sums secured hereby, provided, however, that permission is hereby given to
Mortgagor so long as no default has occurred hereunder, to collect, receive,
take, use and enjoy such rents, royalties, issues, profits, revenue, income and
other benefits as they become due and payable, but not in advance thereof. The
foregoing assignment shall be fully operative without any further action on the
part of either party and specifically Mortgagee shall be entitled, at its option
upon the occurrence of a default hereunder, to all rents, royalties, issues,
profits, revenue, income and other benefits from any property described in
paragraphs (A), (B) and (C) hereof whether or not Mortgagee takes possession of
such property described in paragraphs (A), (B) and (C) hereof. Upon any such
default hereunder, the permission hereby given to Mortgagor to collect such
rents, royalties, issues, profits, revenue, income and other benefits from the
property described in paragraphs (A), (B) and (C) hereof shall terminate and
such permission shall not be reinstated upon a cure of the default without the
specific consent of Mortgagee. Neither the exercise of any rights under this
paragraph by Mortgagee nor the application of any such rents, royalties, issues,
profits, revenue, income or other benefits to the indebtedness and other sums
secured hereby, shall cure or waive any default or notice of default hereunder
or invalidate any act done pursuant hereto or to any such notice, but shall be
cumulative of all other rights and remedies.
(E) Assignment of Leases. Together with all right, title, and interest
of Mortgagor in and to any and all leases now or hereafter on or affecting any
property described in paragraphs (A), (B) and (C) hereof, together with all
security therefor and all monies payable thereunder, subject, however, to the
conditional permission hereinabove given to Mortgagor to collect the rentals
under any such lease. The foregoing assignment of any lease shall not be deemed
to impose upon Mortgagee any of the obligations or duties of Mortgagor provided
in any such lease, and Mortgagor agrees to fully perform all obligations of the
lessor under all such leases. Upon Mortgagee's request, Mortgagor agrees to send
to Mortgagee a list of all leases covered by the foregoing
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assignment and as any such lease shall expire or terminate or as any new lease
shall be made, Mortgagor shall so notify Mortgagee in order that at all times
Mortgagee shall have a current list of all leases affecting the property
described in paragraphs (A), (B) and (C) hereof. Mortgagee shall have the right,
at any time and from time to time, to notify any lessee of the rights of
Mortgagee as provided by this paragraph. From time to time, upon request of
Mortgagee, Mortgagor shall specifically assign to Mortgagee as additional
security hereunder, by an instrument in writing in such form as may be approved
by Mortgagee, all right, title and interest of Mortgagor in and to any and all
leases now or hereafter on or affecting the Mortgaged Property, together with
all security therefor and all monies payable thereunder, subject to the
conditional permission hereinabove given to Mortgagor to collect the rentals
under any such lease. Mortgagor shall also execute and deliver to Mortgagee any
notification, financing statement or other document reasonable required by
Mortgagee to perfect the foregoing assignment as to any such lease.
This instrument constitutes an absolute and present
assignment of the rents, royalties, issues, profits, revenue, income and other
benefits from the Mortgaged Property, Mortgagor to collect, receive, take, use
and enjoy the same as provided hereinabove; provided, further, that the
existence or exercise of such right of Mortgagor shall not operate to
subordinate this assignment to any subsequent assignment, in whole or in part,
by Mortgagor, and any such subsequent assignment by Mortgagor shall be subject
to the rights of Mortgagee hereunder.
(F) Fixtures and Personal Property. Together with a security interest
in all fixtures, fittings, furnishings, appliances, apparatus, equipment,
machinery and other personal property, including, without limitation, all gas an
electric fixtures, radiators, heaters, engines and machinery, boilers, ranges,
ovens, elevators and motors, bathtubs, sinks, water closets, basins, pipes,
faucets and other air conditioning, plumbing, and heating fixtures, mirrors,
mantles, refrigerating plant, refrigerators, iceboxes, dishwashers, carpeting,
furniture, laundry equipment, cooking apparatus and appurtenances, and all
building material, supplies and equipment now located on or hereafter delivered
to the Land and intended to be installed therein; all other fixtures and
personal property of whatever kind and nature at present contained in or
hereafter placed in any building standing on the Land; and all renewals or
replacements thereof or articles in substitution thereof; and all proceeds and
profits thereof and all of the estate, right, title and interest of Mortgagor in
and to all property of any nature whatsoever, now or hereafter situated on the
Land or intended to be used in connection with the operation thereof; all leases
and use agreements of machinery, equipment and other personal property of
Mortgagor in the categories hereinabove set forth, under which Mortgagor is the
lessee of, or entitled to use, such items, and all deposits made therefor; and
Mortgagor (Debtor) hereby grants to Mortgagee (Creditor) a security interest in
all fixtures, rights and personal property described herein. This Mortgage is a
self operative security agreement with respect to such property, but Mortgagor
agrees to execute and deliver on demand such other security agreements,
financing statements, continuation statements and other instruments as Mortgagee
may request in order to perfect its security interest or to impose the lien
hereof more specifically upon any of such property and Mortgagor hereby
constitutes and appoints Mortgagee as Agent and attorney-in-fact to make,
execute, deliver and record any instruments for the purpose of effecting the
lien and security interests of this Mortgage and continuing the effect thereof.
The foregoing power of attorney is irrevocable and coupled with an interest.
Mortgagee shall have all the rights and remedies in addition to those specified
herein of a secured party under the Uniform Commercial Code.
Everything referred to in paragraphs (A), (B), (C), (D), (E),
and (F) hereof and nay additional property hereafter acquired by Mortgagor and
subject to the lien of this mortgage or intended to be so is herein referred to
as the "Mortgaged Property".
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To have and to hold the Mortgaged Property and all parts
thereof unto Mortgagee, its successors and assigns, for enforcing the payment of
the Note when due and payable according to the true interest and meaning of the
stipulations and provisions of the Note, and the payment and performance of all
other obligations of Mortgagor hereunder and under the Note. The foregoing
amounts evidenced by the Note, or due and payable by Mortgagor under the Note,
or under the provisions hereof including advances by Mortgagee for the purpose
of paying taxes or premiums on insurance on the Mortgaged Property or to repair,
maintain, or improve the Mortgaged Property and all renewal or renewals and
extension or extensions of the Note are secured hereby and collectively referred
to herein as "Secured Indebtedness"; provided, however, that upon the express
conditions that if Mortgagor, its successors and assigns shall well and truly
pay or cause to be paid unto the holder of the Note and Secured Indebtedness and
shall well and truly keep, observe and perform all and singular the covenants
and provisions in the Note and any other instrument securing the Note, this
instrument shall be canceled to its own proper use and benefit forever, subject,
however, to the terms and conditions herein.
ARTICLE ONE
COVENANTS
1.01 Performance of Note, Mortgage, etc. Mortgagor shall perform,
observe and comply with all provisions hereof, of the Mortgage and every other
applicable instrument securing the Note, and will promptly pay all sums required
to be paid by Mortgagor pursuant to the provisions of this Mortgage and of every
other instrument securing the Note when payment shall become due, all without
deduction or credit for taxes or other similar charges paid by Mortgagor.
1.02 Warranty of Title. Mortgagor covenants and warrants that it is
seized of an indefeasible estate in fee simple in the Land and any other real
property hereby mortgaged, has good and absolute title to all existing personal
property hereby mortgaged or made subject to the security interest hereby
created and has good right, full power and lawful authority to convey, mortgage
and encumber the same as provided herein; that Mortgagee may at all times
peaceably and quietly enter upon, hold, occupy and enjoy the Land and any other
real property hereby mortgaged and every part thereof; that the Land, real
property and all existing personal property hereby mortgaged or made subject to
the security interest hereby created are free and clear of all liens, security
interests, charges and encumbrances whatsoever, except for those certain matters
set forth in Exhibit "B" attached hereto and made a part hereof ("Permitted
Exceptions"). Mortgagor shall and will make such further assurances to perfect
Mortgagor's fee simple title to the Land and the real property hereby mortgaged,
and the title to the personal property hereby mortgaged or made subject to the
security interest hereby created as may reasonably be required. Mortgagor fully
warrants the title to the Land, real property and all existing personal property
hereby mortgaged or made subject to the security interest hereby created and
every part thereof, and will forever defend the same against the claims of all
persons whomsoever. Mortgagor hereby warrants and represents that the Mortgaged
Property shall be utilized only as a commercial premises and is not now nor has
the Mortgaged Property every been designated as Mortgagor's homestead.
1.03 Transfer of Property. Mortgagor shall not sell, convey, transfer,
lease or further encumber any interest in or any part of the Mortgaged Property,
without the prior written consent of Mortgagee.
1.04 Further Assurances. At any time and from time to time, upon
Mortgagee's request, Mortgagor shall make, execute and deliver or cause to be
made, executed and delivered to Mortgagee and, where appropriate, shall cause to
be recorded or filed, from time to time, in such
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offices and places as shall be deemed desirable by Mortgagee any and all such
further mortgages, instruments of further assurance, certificates and other
documents as Mortgagee may consider necessary or desirable in order to
effectuate, complete, enlarge or perfect, or to continue and preserve the
obligations of Mortgagor under this Mortgage, and the lien of this Mortgage as a
first and prior lien upon all of the Mortgaged Property (subject to the
Permitted Exceptions), whether now owned or hereafter acquired by Mortgagor.
1.05 After Acquired Property. The lien of this Mortgage will
automatically attach, without further act, to all after acquired real or
personal property located in or on, appurtenant to or attached to, or used or
intended to be used in connection with or with the operation of, the Mortgaged
Property or any part thereof.
1.06 Taxes. Mortgagor shall pay, when due and payable, (a) all taxes,
assessments, general or special, and other charges levied on, or addressed,
placed or made against the Mortgaged Property, this instrument or the Secured
Indebtedness or any interest of Mortgagee in the Mortgaged Property or the
obligations secured hereby; (b) all premiums on policies of fire and other
hazard insurance covering the Mortgaged Property, as required herein. Mortgagor
shall promptly deliver to Mortgagee receipts showing payment in full of all of
the above items. Upon demand by Mortgagee, Mortgagor shall pay to Mortgagee,
together with and in addition to the payment of principal and interest payable
under the terms of the Note, on the installment-paying dates of the Note, until
the Secured Indebtedness is paid in full or until notification from Mortgagee to
the contrary, an amount reasonably sufficient (as estimated by Mortgagee) to
provide Mortgagee with funds to pay said taxes, assessments, insurance premiums,
rents and other charges next due so that Mortgagee will have sufficient funds on
hand to pay same thirty (30) days before the date of which they become past due.
In no event shall Mortgagee be liable for any interest on any amount paid to it
as herein required, and the money so received may be held and commingled with
its own funds, pending payment or application thereof as herein provided.
Mortgagor shall furnish to Mortgagee, at least thirty (30) days before the date
on which the same will become past due, an official statement of the amount of
said taxes, assessments, insurance premiums and rents next due, and Mortgagee
shall pay said charges to the amount of the then unused credit therefor as and
when they become severally due and payable. An official receipt therefor shall
be conclusive evidence of such payment and of the validity of such charges.
Mortgagee may, at its option, pay any of these charges when
payable, either before or after they become past due, without notice, or make
advances therefor in excess of the then amount of credit for said charges. The
excess amount advanced shall become part of the Secured Indebtedness and bear
interest at the rate provided in the Note from date of advancement. Mortgagee
may apply credits held by it for the above charges or any part thereof on
account of any delinquent installments of principal or interest or any other
payments maturing or due under this instrument, and the amount of credit
existing at any time shall be reduced by the amount thereof paid or applied as
herein provided. The amount of the existing credit hereunder at the time of any
transfer of the Land shall, without assignment thereof, inure to the benefit of
the successor-owner of the Land and shall be applied under and subject to all of
the provisions hereof. Upon payment in full of the Secured Indebtedness, the
amount of any unused credit shall be paid over to the person entitled to receive
it.
1.07 Insurance.
(a) Mortgagor shall keep the Mortgaged Property insured for
the benefit of Mortgagee against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, riot attending a
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strike, civil commotion, aircraft, vehicles and smoke and such other hazards as
Mortgagee may from time to time require, and rental or business interruption
insurance against any abatement of rent or other casualty in surplus by a
standard fire and extended coverage insurance company, all in amounts approved
by Mortgagee not exceeding 100% of full replacement cost; all insurance herein
provided for shall be in a form and issued by companies approved by Mortgagee;
and regardless of the types or amounts of insurance required and approved by
Mortgagee, Mortgagor shall assign and deliver to Mortgagee, as collateral and
further security for the payment of the Secured Indebtedness, all policies of
insurance which insure against any loss or damage to the Mortgaged Property,
with loss payable to Mortgagee, without contribution by Mortgagee, pursuant to
the New York Standard or other mortgagee clause satisfactory to Mortgagee. If
Mortgagee, by reason of such insurance, receives any money for loss or damage,
such amount may, at the option of Mortgagee, be retained and applied by
Mortgagee toward payment of the Secured Indebtedness, or be paid over, wholly or
in part, to Mortgagor for the repair or replacement of the Mortgaged Property or
any part thereof, or for any other purpose or object satisfactory to Mortgagee,
but Mortgagee shall not be obligated to see to the proper application of any
amount paid over to Mortgagor.
(b) Not less than thirty (30) days prior to the expiration
date of each policy of insurance required of Mortgagor pursuant to this Article,
and of each policy of insurance held as additional collateral to secure the
Secured Indebtedness, Mortgagor shall deliver to Mortgagee a renewal policy or
policies marked "premium paid" or accompanied by other evidence of payment
satisfactory to Mortgage.
(c) In the event of a foreclosure of this Mortgage, the
purchaser of the Mortgaged Property shall succeed to all the rights of
Mortgagor, including any right to unearned premiums, in and to all policies of
insurance assigned and delivered to Mortgagee, with respect to all property
conveyed and to be conveyed by this Mortgage, pursuant to the provisions of this
Article.
(d) Any prepayment of the indebtedness evidenced by the Note,
whether in whole or in part resulting from the application of insurance
proceeds, shall be without any premium, charge or expense whatsoever.
1.08 Care of Mortgaged Property. Mortgagor shall maintain the Mortgaged
Property in good condition and repair, shall not commit or suffer any waste to
the Mortgaged Property, and shall comply with, or cause to be complied with, all
restrictive covenants, statutes, ordinances and requirements of any governmental
authority relating to the Mortgaged Property and the use thereof or any part
thereof. Mortgagor shall promptly repair, restore, replace or rebuild any part
of the Mortgaged Property, now or hereafter encumbered by this Mortgage, which
may be affected by any proceeding of the character referred to in Article 1.09
herein. No part of the Mortgaged Property, including, but not limited to, any
building, structure, parking lot, driveway, landscape scheme, timber or other
ground improvement, equipment or other property, now or hereafter conveyed as
security by or pursuant to this Mortgage, shall be removed, demolished or
materially altered without the prior written consent of Mortgagee. Mortgage
shall complete, within a reasonable time, and pay for any building, structure or
other improvement at any time in the process of construction on the property
herein conveyed. Mortgagor shall not initiate, join in or consent to any change
in any private restrictive covenant, zoning ordinance or other public or private
restrictions limiting or defining the uses which may be made of the Mortgaged
Property or any part thereof without the prior written consent of Mortgagee.
Mortgagee and any persons authorized by Mortgagee shall have the right to enter
and inspect the Mortgaged Property at all reasonable times and access thereto
shall be permitted for that purpose.
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1.09 Condemnation. Notwithstanding any taking of any property, herein
conveyed and agreed to be conveyed, by eminent domain, alteration of the grade
of any street or other injury to, or decrease in value of, the Mortgaged
Property by any public or quasi-public authority or corporation, Mortgagor shall
continue to pay principal and interest on the Secured Indebtedness, and any
reduction in the Secured Indebtedness resulting from the application by
Mortgagee of any award or payment for such taking, alterations, injury or
decrease in value of the Mortgaged Property, as hereinafter set forth, shall be
deemed to take effect only on the date of such receipt; and said award or
payment may, at the option of Mortgagee, be retained and applied by Mortgagee
toward payment of the Secured Indebtedness or be paid over, wholly or in part,
to Mortgagor for the purpose of altering, restoring or rebuilding any part of
the Mortgaged Property which may have been altered, damaged or destroyed as a
result of any such taking, alteration of grade, or other injury to the Mortgaged
Property, or for any other purpose or object satisfactory to Mortgagee, but
Mortgagee shall not be obligated to see to the application of any amount paid
over to Mortgagor. If, prior to the receipt by Mortgagee of such award or
payment, the Mortgaged Property shall have been sold on foreclosure of this
Mortgage, Mortgagee shall have the right to receive said award or payment to the
extent of any deficiency found to be due upon such sale, with legal interest
thereon, whether or not a deficiency judgment on this Mortgage shall have been
sought or recovered or denied, and of the reasonable counsel fees, costs and
disbursements incurred by Mortgagee in connection with the collection of such
award or payment.
1.10 Statements and Other Information. Mortgagor shall deliver to
Mortgagee, at any time within thirty (30) days after notice and demand by
Mortgagee but not more frequently than once per month, a statement in such
reasonable detail as Mortgagee may request, certified by Mortgagor or an
executive officer or treasurer of a corporate Mortgagor, or, at the option of
Mortgagee, by a certified public accountant, of the income from and expenses of
any one or more of the following: (a) the conduct of any business on the
Mortgaged Property, (b) the operation of the Mortgaged Property, or (c) the sale
or leasing of the Mortgaged Property or any part hereof, for the last twelve
(12) months calendar period prior to the giving of such notice, and, on demand,
Mortgagor shall furnish to Mortgagee executed counterparts of any such leases
and convenient facilities for the audit and verification of any such statement.
ARTICLE TWO
DEFAULTS
2.01 Event of Default. The term Event of Default, wherever used in this
Mortgage, shall mean any one or more of the following events and each of the
following events shall constitute an event of default hereunder:
(a) Failure by Mortgagor to pay, within ten (10) days of the
due date specified in the Note, any installment of principal or interest due
under the Note; or
(b) Failure by Mortgage or pay, within thirty (30) days of
when due and payable, the Secured Indebtedness; or
(c) Failure by Mortgagor to perform or observe any of the
covenants, agreements or conditions on the part of the Mortgagor in this
instrument or in any other instrument securing all or any part of the Secured
Indebtedness; or
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(d) Without limiting the foregoing, should Mortgagor violate
any provision of any Lease as defined in that certain Assignment of Rents and
Leases by Mortgagor in favor of Mortgagee of even date with respect to the
Mortgaged Property; or
(e) Without limiting the foregoing, should any event of
default occur under any term or condition of the Construction Loan Agreement of
even date given by Borrower in favor of Mortgagee; or
(f) Should Mortgagor, or any guarantor of the Secured
Indebtedness or any portion thereof (all of such parties being hereinafter
referred to as "Obligors") make any assignment for the benefit of creditors, or
should a receiver, liquidator or trustee of any of the Obligors or of any of the
property of any of the Obligors be appointed, or should any petition for the
bankruptcy, reorganization or arrangement of any of the Obligors, pursuant to
the Federal Bankruptcy Act or any similar statute, be filed by any of the
Obligors, or should any such proceeding be filed against any of the Obligors and
remain undismissed for a period of thirty (30) days, or should any of the
Obligors in any proceeding admit its insolvency or inability to pay its debts as
they fall due or should any of the Obligors be liquidated or dissolved or its
articles of incorporation expire or be revoked; or
(g) Should Mortgagor sell, encumber, convey or otherwise
transfer any interest in the Mortgaged Property or any portion thereof, whether
or not such interest is subject or subordinate to the interest of Mortgagee,
without prior written consent of Mortgagee; or
(h) Failure by Mortgagor or any guarantor of the Secured
Indebtedness to pay, as and when due and payable, any installment of principal
and interest due under any other obligation of Mortgagor to Mortgagee, whether
such obligation shall currently exist or shall arise at any time during the term
of this Mortgage; or
(i) The sale or other disposition of any interest in Mortgagor
to any third party, without the prior written consent of Mortgagee; or
(j) Failure by Mortgagor to pay, as and when due and payable,
any installment of principal and/or interest due under any other obligation of
Mortgagor to any other party, whether such obligation shall currently exist or
shall arrive at anytime during the term of this Mortgage.
2.02 Acceleration of Maturity. If an Event of Default shall have
occurred, Mortgagee may declare the outstanding principal amount of the Note and
the interest accrued thereon, and all other sums secured hereby, to be due and
payable immediately and upon such declaration such principal and interest and
other sums shall immediately become and be due and payable without demand or
notice.
2.03 Power of Enforcement. If an Event of Default shall have occurred,
Mortgagee may, either with or without entry or taking possession as hereinabove
provided or otherwise, proceed by suit or suits at law or in equity or by any
other appropriate proceeding or remedy: (a) to enforce payment of the Note or
the performance of any term hereof or any other right; (b) to foreclose this
Mortgage and to sell, in its entirety separate lots or parcels, the Mortgaged
Property under the judgment or decree of a court or courts of competent
jurisdiction; and (c) to pursue any other remedy available to it. Mortgagee
shall take action either by such proceedings or by the exercise of its powers
with respect to entry or taking possession, or both, as Mortgagee may determine.
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2.04 Proceeds of Foreclosure. In the event the Mortgaged Property or
any portion thereof shall be sold in foreclosure proceedings or other
proceedings that may be authorized by law, the proceeds of such sale shall be
applied as follows: first, to the payment of all expenses incurred hereunder,
including reasonable payment of all expenses or in incurred hereunder, including
reasonable attorney's fees, as may be necessary for the collection of the
Secured Indebtedness or any part thereof and the foreclosure of this Mortgage;
second, to the payment, with interest as provided herein, of whatever sum or
sums Mortgagee may have paid or become liable to pay in carrying out the
objects, terms and stipulations of this Mortgage, including specifically,
without limitation, sums paid for taxes and insurance; third, to the payment and
satisfaction of the Secured Indebtedness and the balance, if any, being payable
to Mortgagor or to such other person or entity who shall be law be entitled to
such balance.
2.05 Leases. Mortgagee, at its option, is authorized to foreclose this
Mortgage, subject to the rights of any tenants of the Mortgaged Property, if
any, and the failure to make any such tenants parties defendant to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted by Mortgagor to be, a defense to any proceedings instituted by
Mortgagee to collect the Secured Indebtedness or to collect any deficiency
remaining unpaid after the foreclosure sale of the Mortgaged Property.
2.06 Purchase by Mortgagee. Upon any such foreclosure sale, Mortgagee
may bid for and purchase the Mortgaged Property and, upon compliance with the
terms of sale and applicable law, may hold, retain and possess and dispose of
such property in its own absolute right without further accountability to
Mortgagor.
2.07 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws. Mortgagor agrees to the full extent permitted by law that in case of a
default on its part hereunder, neither Mortgagor nor anyone claiming through or
under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption laws as now or hereafter
in force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage, or the absolute sale of the Mortgaged Property or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchasers thereat, and Mortgagor, for itself and all who may at any time claim
through or under it, hereby waives, to the full extent that it may lawfully so
do, the benefit of all such laws, and any and all right to have the assets
comprising the Mortgaged Property marshalled upon any foreclosure of the lien
hereof and agrees that Mortgagee or any court having jurisdiction to foreclose
such lien may sell the Mortgaged Property in part or as an entirety.
2.08 Receiver. If an Event of Default shall have occurred, Mortgagee,
to the extent permitted by law and without regard to the value or occupancy of
the Mortgaged Property, shall be entitled as a matter of right if it so elects
to the appointment of a receiver to enter upon and take possession of the
Mortgaged Property and to collect all rents, revenues, issues, income, products
and profits thereof and apply the same as the court may direct. The receiver
shall have all rights and powers permitted under the laws of the state where the
Land is located and such other powers as the court making such appointment shall
confer. The expenses, including the receiver's fees, attorney's fees, costs and
agent's compensation, incurred pursuant to the powers herein contained shall be
secured by this Mortgage and become part of the Secured Indebtedness, bear
interest at the rate provided in the Note and be immediately due and payable.
The right to enter and take possession of and to manage and operate the
Mortgaged Property, and to collect the rents, issues and profits thereof,
whether by a receiver or otherwise, shall be cumulative to any other right or
remedy hereunder or afforded by law, and may be exercised concurrently therewith
or independently thereof. Mortgagee shall be liable to account only for such
rents, issues and profits actually received
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by Mortgagee. Notwithstanding the appointment of any receiver or other
custodian, Mortgagee shall be entitled as pledgee to the possession and control
of any cash, deposits, or instruments at this time held by, or payable or
deliverable under the terms of this Mortgage, to Mortgagee.
2.09 Suits to Protect the Mortgaged Property. Mortgagee shall have the
power and authority to institute and maintain any suits and proceedings as
Mortgagee may deem advisable (a) to prevent any impairment of the Mortgaged
Property by any acts which may be unlawful or any violation of this Mortgage,
(b) to preserve or protect its interest in the Mortgaged Property, and (c) to
restrain the enforcement of or compliance with any legislation or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule or order
might impair the security hereunder or be prejudicial to Mortgagee.
2.10 Delay or Omission No Waiver. No delay or omission of Mortgagee or
of any holder of the Note to exercise any right, power or remedy accruing upon
any Event of Default shall exhaust or impair any such right, power or remedy or
shall be construed to waive any such Event of Default or to constitute
acquiescence therein. Every right, power and remedy given to Mortgagee may be
exercised from time to time and as often as may be deemed expedient by
Mortgagee.
2.11 No Waiver of One Default to Affect Another. No waiver of any Event
of Default hereunder shall extend to or affect any subsequent or any other Event
of Default then existing, or impair any subsequent or any other Event of Default
then existing, or impair any rights, powers or remedies consequent thereon. If
Mortgagee (a) grants forbearance or an extension of time for the payment of any
of the Secured Indebtedness; (b) takes other or additional security for the
payment thereof; (c) waives or does not exercise any right granted in the Note,
this instrument or any other instrument securing the Note; (d) releases any part
of the Mortgaged Property from the lien of this instrument, or any other
instrument securing the Note; (e) consents to the filing of any map, plat or
replat of the Land; (f) consents to the granting of any easement on the Land; or
(g) makes or consents to any agreement changing the terms of this instrument or
subordinating the lien or any charge hereof, no such act or omission shall
release, discharge, modify, change or affect the original liability under the
Note, this Mortgage or otherwise of any party liable thereunder or hereunder or
any subsequent purchaser of the Mortgaged Property or any part thereof or any
maker, co-signer, endorser, surety or guarantor. No such act or omission shall
preclude Mortgagee from exercising any right, power or privilege herein granted
or intended to be granted in case of any Event of Default then existing or of
any subsequent Event of Default. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Mortgaged Property,
Mortgagee, without notice to any person, firm or corporation, is hereby
authorized and empowered to deal with any such vendee or transferee with
reference to the Mortgaged Property or the Secured Indebtedness, or with
reference to any of the terms or conditions hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any of the liabilities or undertakings hereunder.
2.12 Discontinue Proceedings; Position of Parties Restored. If
Mortgagee shall have proceeded to enforce any right or remedy under this
Mortgage by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to Mortgagee, then and in every such case Mortgagor and Mortgagee
shall be restored to their former positions and rights hereunder, and all
rights, powers and remedies of Mortgagee shall continue as if no such proceeding
had occurred or had been taken.
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2.13 Remedies Cumulative. No right, power or remedy conferred upon or
reserved to Mortgagee by the Note, this Mortgage or any other instrument
securing the Note is exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder or under the
Note or any other instrument securing the Note, now or hereafter existing at
law, in equity or by statute.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
3.01 Heirs, Successors, and Assigns Included in Parties. Whenever one
of the parties hereto is named or referred to herein, the heirs, successors and
assigns of such party shall be included and all covenants and agreements
contained in this Mortgage, by or on behalf of Mortgagor or Mortgagee, shall
bind and inure to the benefit of their respective heirs, successor and assigns,
whether so expressed or not.
3.02 Addresses for Notices, etc.
(a) Any notice, report, demand or other instrument authorized
or required to be given or furnished under this Mortgage to Mortgagor or
Mortgagee shall be deemed given or furnished when addressed to the party
intended to receive the same, at the address of such party on the first page
hereof, and delivered at such address or deposited in the United States mail as
first class certified mail, return receipt requested, postage paid, whether or
not the same is actually received by such party.
(b) Either party may change the address to which any such
notice, report, demand or other instrument is to be delivered or mailed, by
furnishing written notice of such change to the other party, but no such notice
of change shall be effective unless and until received by such other party.
3.03 Headings. The headings of the articles, sections, paragraphs and
subdivisions of this Mortgage are for convenience of reference only, are not to
be considered a part hereof, and shall not limit or expand or otherwise affect
any of the terms hereof.
3.04 Invalid Provisions to Affect No Others. In the event any of the
covenants, agreements, terms or provisions contained in the Note, this Mortgage
or any other instrument securing the Note shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein and in the Note and any other
instrument securing the Note shall be in no way affected, prejudiced or
disturbed thereby.
3.05 Changes, etc. Neither this Mortgage nor any term hereof may be
changed, waived, discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by the party against which
enforcement of the change, waive, discharge or termination is sought. Any
agreement hereafter made by Mortgagor and Mortgagee relating to this Mortgage
shall be superior to the rights of the holder of any intervening lien or
encumbrance.
3.06 Governing Law. The performance required by this instrument shall,
insofar as is possible, be rendered to Mortgagee at its office in Naples,
Florida. Mortgagor and Mortgagee intend that the validity and construction of
the obligations secured by this instrument and the enforcement of this Mortgage
shall be governed by the laws of the State of Florida. Should any obligation or
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remedy under this instrument be invalid or unenforceable under the laws provided
herein to govern, then the laws of another state whose laws can validate and
apply to this instrument shall apply.
3.07 Default Rate. The Default Rate shall be the rate of interest
provided in the Note, on the amount of the Secured Indebtedness, as of the date
of an Event of Default.
3.08 Remedies. Mortgagee shall have the right from time to time to sue
for any sums, whether interest, principal or any installment of either or both,
taxes, penalties, or any other sums required to be paid under the terms of this
Mortgage, as the same become due, without regard to whether or not all of the
Secured Indebtedness shall be due on demand, and without prejudice to the right
of Mortgagee thereafter to enforce any appropriate remedy against the Mortgagor,
including an action of foreclosure, or any other action, for a default or
defaults by Mortgagor existing at the time such earlier action was commenced.
3.09 Rights of Mortgagee. The rights of Mortgagee, granted and arising
under the clauses and covenants contained in this Mortgage and the Note, shall
be separate, distinct and cumulative of other powers and rights herein granted
and all other rights which Mortgagee may have in law or equity, and non of them
shall be in exclusion of the others; and all of them are cumulative to the
remedies for collection of indebtedness, enforcement of rights under mortgages,
and preservation of security as provided at law. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein or under the
Note to the exclusion of any other provision, or an election of remedies to the
bar of any other remedy allowed at law or in equity, anything herein or
otherwise to the contrary notwithstanding.
3.10 Covenants of Mortgagor. The covenants of Mortgagor herein are
covenants running with the land and the title to the Mortgaged Property and
touch and concern the Mortgaged Property.
ARTICLE FOUR
LENDING PROVISIONS
4.01. Future Advances. The total amount of indebtedness that may be so
secured may decrease or increase from time to time during a period not to exceed
twenty (20) years from the date of this Mortgage, but the total unpaid balance
so secured at one time shall not exceed One Million and 00/100 Dollars
($1,000,000.00) plus interest thereon, and nay disbursements made for the
payment of taxes, levies or insurance on the Mortgaged Property, with interest
on such disbursements at the Default Rate.
4.02. Performance of Labor or Furnishing of Material. Nothing in this
instrument shall: (i) constitute any consent or request by Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
material or other property in respect of the Mortgaged property or any part
thereof, or (ii) give Mortgagor any right, power or authority to contract for or
permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Mortgagee, or the holder of the Note in respect thereof or any
claim that any claim of lien based on the performance of such labor or services
or the furnishing of any such materials or other property is prior to the lien
of this instrument.
4.03. Interest Rate. Mortgagor and Mortgagee acknowledge and agree that
Mortgagee is a national banking association, chartered under the laws of the
United States of America, located in
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the State of Florida, and that under Section 85 of Title 12 of the United States
Code, the maximum rate of interest which Mortgagee may take, receive, reserve
and charge on the Secured Indebtedness shall be determined in accordance with
the laws of the State of Florida. In no event shall the amount of interest
(including any prepaid interest or other charges or fees held to be interest by
a court of competent jurisdiction) accrue to be payable under the Note exceed
the highest contract rate of interest allowed by applicable law for the time
such indebtedness shall be outstanding and unpaid, and if by reason of the
acceleration of maturity of the Secured Indebtedness, or for any other reason,
interest in excess of such highest legal rate shall be due and paid, any such
excess shall constitute and be treated as a payment on the principal evidenced
by the Note and shall operate to reduce such principal by the amount of such
excess, or if in excess of the principal indebtedness, such excess shall be
waived or refunded to the undersigned. It is the express intent hereof that the
undersigned not pay and Holder of the Note not receive, directly or indirectly
in any manner whatsoever, interest in excess of that which may be legally paid
by the Mortgagor under applicable law.
4.04. Hazardous or Toxic Materials. Mortgagor expressly represents to
Mortgagee that to the best of its knowledge the Mortgaged Property has not in
the past been used, is not presently being used, and will not in the future be
used for the handling, storage, transportation, or disposal of hazardous or
toxic materials except as permitted by law and approved in advance by Mortgagee
and that no spillage or leakage of such substances has occurred on the Mortgaged
Property. Mortgagor agrees to indemnify, defend and hold Mortgagee harmless from
and against any loss, liability, or damages to Mortgagee, including without
limitation attorneys' fees, incurred by Mortgagee as a result of such past,
present or future use, handling, storage, transportation, disposal, spillage or
leakage of hazardous or toxic materials.
Mortgagee, at Mortgagee's sole option at any time that Loan
proceeds remain outstanding, may obtain, at Mortgagor's expense, a satisfactory
report from a reputable environmental consultant of Mortgagee's choice as to
whether the Mortgaged Property has been or presently is being used for the
handling, storage, transportation, or disposal of hazardous or toxic materials
and that no spillage or leakage of such materials has occurred on the Mortgaged
Property.
In the event Mortgagee requests such a report and said report
indicates such past or present use, handling, storage, transportation, disposal,
spillage or leakage, Mortgagee may require that all violations of law with
respect to hazardous or toxic materials be corrected and/or that Mortgagor
obtain all necessary environmental permits within thirty (30) days of
Mortgagee's notice to Mortgagor or Mortgagor's discovery of a violation(s),
whichever occurs sooner, provided, however, if such violation(s) cannot be
corrected or such permit obtained within such thirty (30) day period, and
provided Mortgagor commences the necessary corrective action within such thirty
(30) day period and diligently pursues compliance or work necessary to obtain
necessary permits, Mortgagor shall have a reasonable time, not to exceed ninety
(90) days, to correct such condition or to obtain required permits within such
time periods shall constitute a default hereunder entitling Mortgagee to the
remedies provided herein.
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IN WITNESS WHEREOF, the undersigned has caused this instrument
to be signed and sealed the day and year first above written.
WITNESSES: CERTIFIED DIABETIC SUPPLIES INC., a
Florida corporation
/s/ DAVID N. MORRISON By: /s/ PETER J. FISCINA
- ----------------------------- ---------------------------------
Witness #1 Peter J. Fiscina
Its: President
David N. Morrison
- -----------------------------
(Type or Print Name)
/s/ TRACY L. GONSALVES
- -----------------------------
Witness #2
Tracy L. Gonsalves
- -----------------------------
(Type or Print Name)
STATE OF FLA
----------------
COUNTY OF COLLIER
---------------
The foregoing instrument was acknowledged before me this 31st
day of May, 1996 by Peter J. Fiscina, as President of CERTIFIED DIABETIC
SUPPLIES INC., a Florida corporation, on behalf of the corporation. He is
personally known to me or has produced
____________________________________________________________ (type of
identification) as identification and did (did not) take an oath. NOTE: If a
type of identification is not inserted in the blank provided, then the person
executing this instrument was personally known to me. If the words in the
parenthetical "did not" are not circled, then the person executing this
instrument did take an oath.
/s/ DAVID N. MORRISON
---------------------------------
Signature
/s/ David N. Morrison
---------------------------------
(Type or Print Name of Acknowledger)
---------------------------------
(Title or Rank)
---------------------------------
(Serial Number, if any)
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EXHIBIT "A"
Lots 62 and 63, J & C INDUSTRIAL PARK, an unrecorded plat in Section 11,
Township 49 South, Range 25 East, Collier County, Florida, more particularly
described as follows:
Parcel 62
Commencing at the West 1/4 corner of Section 11, Township 49 South, Range 25
East, Collier County, Florida; thence along the West line of said Section 11, N
0(Degree) 10' 36" W, 1864.95 feet to the Northerly right-of-way line of a road;
thence along said right-of-way line N 89(Degree) 28' 18" E, 1680.26 feet for a
Place of Beginning: thence N 0(Degree) 31' 42" W, 150.09 feet; thence N
89(Degree) 25' 20" E, 100.00 feet; thence S 0(Degree) 31' 42" E 150.18 feet to
said right-of-way line; thence S 89(Degree) 28' 18" W, 100.00 feet to the Place
of Beginning; being part of the North 1/2 of Section 11, Township 49 South,
Range 25 East, Collier County, Florida.
Parcel 63
Commencing at the West 1/4 corner of Section 11, Township 49 South, Range 25
East, Collier County, Florida; thence along the West line of said Section 11, N
0(Degree) 10' 36" W, 1829.95 feet to the centerline of a road; thence along said
centerline, N 89(Degree) 28' 18" E, 1580.47 feet for a Place of Beginning;
thence N 0(Degree) 31' 42" W, 185.01 feet; thence N 89(Degree) 25' 20" E, 100.00
feet; thence S 0(Degree) 31' 42" E, 185.00 feet to said centerline; thence S
89(Degree) 28' 18" W, 100.00 feet to the Place of Beginning, being part of the
North 1/2 of Section 11, Township 49 South, Range 25 East, Collier County,
Florida.
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EXHIBIT "B"
PERMITTED EXCEPTIONS
--------------------
1. Restriction regarding ingress and egress as contained in Warranty Deed
recorded in O.R. Book 1365, Page 943.
2. Restrictions contained in O.R. Book 472, Page 794.
3. Road Easement over the Southerly 35 feet, as evidenced in O.R. Book 578,
Page 222.
4. Drainage Easement along the North 15 feet to Collier County, as recorded in
O.R. Book 1419, Page 1876.
5. Terms, conditions and rights contained in Grant of Easement recorded in O.R.
Book 1691, Page 119.
6. Resolution creating the Pine Ridge Industrial Park Area Improvement
Assessment District recorded in O.R. Book 1153, Page 431.
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COMMERCIAL GUARANTY
- --------------------------------------------------------------------------------
[illegible]
- --------------------------------------------------------------------------------
Borrower: CERTIFIED DIABETIC SUPPLIES INC. Lender: FIRST NATIONAL BANK OF NAPLES
1954 J & C BLVD. MAIN OFFICE
NAPLES, FL 34109 900 GOODLETTE ROAD NORTH
P.O. BOX 413043
NAPLES, FL 34101-3043
Guarantor: PETER J. FISCINA
5760 SHIRLEY ST.
NAPLES, FL 34109
================================================================================
AMOUNT OF GUARANTY. This is guaranty of payment of 100.000% of the Note,
including without limitation the principal Note amount of One Million & 00/100
Dollars ($1,000,000.00).
GUARANTY. For good and valuable consideration, PETER J. FISCINA ("Guarantor")
absolutely and unconditionally guarantees and promises to pay to FIRST NATIONAL
BANK OF NAPLES ("Lender") or its order, in legal tender of the United States of
America, 100.000% of the Indebtedness (as that term is defined below) of
CERTIFIED DIABETIC SUPPLIES INC. ("Borrower") to Lender on the terms and
conditions set forth in this Guaranty. Guarantor agrees that Lender, in its sole
discretion, may determine which portion of Borrower's Indebtedness to Lender is
covered by Guarantor's percentage guaranty.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means CERTIFIED DIABETIC SUPPLIES INC.
Guarantor. The word "Guarantor" means PETER J. FISCINA.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated July 31, 1997.
Indebtedness. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and
loan charges, and (e) all collection costs and expenses relating to the
Note or to any collateral for the Note. Collection costs and expenses
include without limitation all of Lender's reasonable attorney's fees and
Lender's legal expenses, whether or not suit is instituted, and reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services.
Lender. The word "Lender" means FIRST NATIONAL BANK OF NAPLES, its
successors and assigns.
Note. The word "Note" means the promissory note or credit agreement dated
July 31, 1997, in the original principal amount of $1,000,000.00 from
Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for
the promissory note or agreement. Notice to Guarantor: The Note evidences a
revolving line of credit from Lender to Borrower.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
<PAGE>
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time 100.000% of the amount of the Indebtedness described
above, plus all costs and expenses of (a) enforcement of this Guaranty and (b)
collection and sale of any collateral securing this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such guaranties. The liability of
Guarantor will be the aggregate liability of Guarantor under the terms of this
Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty. This Guaranty covers a revolving line of
credit and guarantor understands and agrees that this guarantee shall be open
and continuous until the line of credit is terminated and the indebtedness is
paid in full, as provided below.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. This Guaranty covers a revolving line
of credit and it is specifically anticipated that fluctuations will occur in the
aggregate amount of Indebtedness owing from Borrower to Lender. Guarantor
specifically acknowledges and agrees that fluctuations in the amount of
Indebtedness, even to zero dollars ($0.00), shall not constitute a termination
of this Guaranty. Guarantor's liability under this Guaranty shall terminate only
upon (a) termination in writing by Borrower and Lender of the line of credit,
(b) payment of the indebtedness in full in legal tender, and (c) payment in full
in legal tender of all other obligations of Guarantor under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening Guarantor's liability under this Guaranty, from
time to time: (a) to make one or more additional secured or unsecured loans to
Borrower, to lease equipment or other goods to Borrower, or otherwise to extend
additional credit to Borrower, (b) to alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (c) to take and hold
security for the payment of this Guaranty or the Indebtedness, and exchange,
enforce, waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (d) to release,
substitute, agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; (e) to determine how, when and what application of payments and
credits shall be made on the Indebtedness; (f) to apply such security and direct
the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security agreement or
deed of trust, as Lender in its discretion may determine; (g) to sell, transfer,
assign, or grant participations in all or any part of the Indebtedness; and (h)
to assign or transfer this Guaranty in whole or part.
<PAGE>
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (e) to pursue
any other remedy within Lender's power, or (f) to commit any act or omission of
any kind, or at any time, with respect to any matter whatsoever.
<PAGE>
COMMERCIAL GUARANTY
Loan No. 11788704 (Continued)
================================================================================
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action: or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b) any
election of remedies by Lender which destroys or otherwise adversely affects
Guarantor's subrogation rights or Guarantor's right to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantor
may suffer by reason of any law binding, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; (e) any
statute of limitations, if at any time any action or suit brought by Lender
against Guarantor is commenced there is outstanding Indebtedness of Borrower to
Lender which is not barred by any applicable statute of limitations; or (f) any
defenses given to guarantors at law or in equity other than actual payment and
performance of the Indebtedness. If payment is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower's
trustee in bankruptcy or to any similar person under any federal or state
bankruptcy law or law for the relief of debtors, the Indebtedness shall be
considered unpaid for the purpose of enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
<PAGE>
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
GARNISHMENT. Guarantor consents to the issuance of a continuing writ of
garnishment or attachment against Guarantor's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in part,
any money judgment entered in favor of Lender.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Guaranty. No alteration of or amendment to this Guaranty
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Florida. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
COLLIER County, State of Florida. Lender and Guarantor hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought
by either Lender or Guarantor against the other. This Guaranty shall be
governed by and construed in accordance with the laws of the State of
Florida.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Guaranty. Lender may pay someone else to help enforce this Guaranty,
and Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's reasonable attorneys' fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (and including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court costs
and such additional fees as may be directed by the court.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier,
or when deposited in the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to the
other in writing. If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
<PAGE>
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one or
more of them. The words "Guarantor," "Borrower," and "Lender" include the
heirs, successors, assigns, and transferees or each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower
or Guarantor are corporations or partnerships, it is not necessary for
Lender to inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Guaranty. No prior waiver by Lender, nor any
course of dealing between Lender and Guarantor, shall constitute a waiver
of any of Lender's rights or of any of Guarantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Guaranty, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
<PAGE>
COMMERCIAL GUARANTY
Loan No. 11788704 (Continued)
================================================================================
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JULY 31, 1997.
GUARANTOR:
/s/ Peter J. Fiscina
- ------------------------
PETER J. FISCINA
- --------------------------------------------------------------------------------
INDIVIDUAL ACKNOWLEDGMENT
STATE OF FLORIDA )
) SS
COUNTY OF COLLIER )
The foregoing instrument was acknowledged before me this 31st day of July, 1997
by PETER J. FISCINA, who is personally known to me or who has produced as
identification and who did/did not take an oath.
/s/ Beckey J. Bauser
----------------------------------------------
(Signature of Person Taking Acknowledgment)
----------------------------------------------
(Name of Acknowledge Typed, Printed or Stamped)
----------------------------------------------
(Title or Rank)
----------------------------------------------
(Serial Number, if any)
- --------------------------------------
[logo] BECKEY J. BAUSER
MY COMMISSION # [ILLEGIBLE]
EXPIRES: January 2, 2000
Bonded Thru Notary Public Underwriters
- --------------------------------------
================================================================================
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Amount Account Officer Initials
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1,000,000 07-31-1997 07-31-1998 11788704 C4A 35 [illegible] [illegible] RLR
- ----------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: CERTIFIED DIABETIC SUPPLIES INC. Lender: FIRST NATIONAL BANK OF NAPLES
1954 J & C BLVD MAIN OFFICE
NAPLES, FL 34109 900 GOODLETTE ROAD NORTH
P.O. BOX 413043
NAPLES, FL 34101-3043
================================================================================
Principal Amount: $1,000,000.00 Initial Rate: 9.250%
Date of Note: July 31, 1997
PROMISE TO PAY. CERTIFIED DIABETIC SUPPLIES INC. ("BORROWER") promises to pay
to FIRST NATIONAL BANK OF NAPLES ("Lender"), on order, in lawful money of the
United States of America, the principal amount of One Million & 00/100 Dollars
($1,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance. The
interest rate will not increase above 18.000%.
PAYMENT. Borrower will pay the loan in one payment of all outstanding principal
plus all accrued unpaid interest on July 31, 1998. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning August 30,
1997, and all subsequent interest payments are due on the same day of each month
after that. The annual interest rate for the Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year
of 360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to any unpaid collection costs and any late charges, then to any
unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Bankers Trust
Prime Rate (the "Index"). The Index is not necessarily the lowest rate charged
by Lender on its loans. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute Index after notice to Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently is 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 0.750% percentage points
over the Index, adjusted if necessary for the minimum and maximum rate
limitations described below, resulting in an initial rate of 9.250% per annum.
Notwithstanding any other provision of this Note, the variable interest rate or
rates provided for in this Note will be subject to the following minimum and
maximum rates. NOTICE: Under no circumstances will the effective rate of
interest on this Note be less than 4.000% per annum or more than (except for any
higher default rate shown below) the lesser of 18.000% per annum or the maximum
rate allowable by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $10.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $5.00, whichever is greater.
<PAGE>
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due, (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note or in any other agreement related to this
Note, or in any other agreement or loan Borrower has with Lender, (c) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished, (d) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws, (e) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender,
(f) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note, (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired, (h) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 18.000% per
annum, if and to the extent that the increase does not cause the interest rate
to exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender the amount of these costs and expenses, which includes, subject
to any limits under applicable law, Lender's reasonable attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services. If
not prohibited by applicable law, Borrower will pay any court costs, in addition
to all other sums provided by law. This Note has been delivered to Lender and
accepted by Lender in the State of Florida. If there is a lawsuit, Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts of
COLLIER County, the State of Florida. Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. This Note shall be governed by and
construed in accordance with the laws of the State of Florida.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by Business assets.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address shown
above written notice of revocation of their authority: PETER J. FISCINA,
PRESIDENT. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligaiton to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
<PAGE>
FINANCIAL STATEMENT COVENANT. The Borrower and any guarantors agree that, unless
the Lender shall otherwise consent in writing, they shall deliver to the Lender
1) as soon as available and in any event with 60 days after the end of each
calendar and/or fiscal year, an updated detailed financial statement in a format
acceptable to the Lender; and 2) a copy of Corporate and/or personal income tax
returns, as applicable, within 20 days of submission to the Internal Revenue
Service annually during the term of this obligation.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause
Lender to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Florida
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
<PAGE>
07-31-1997 PROMISSORY NOTE
Loan No 51788704 (continued)
================================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF COMPLETED COPY OF THE NOTE.
BORROWER:
CERTIFIED DIABETIC SUPPLIES INC.
By: /s/ Peter J. Piscina
------------------------------
Peter J. Piscina, President
================================================================================
Variable Rate. Line of Credit. [illegible]
FLORIDA DOCUMENTARY STAMP TAX
REQUIRED BY LAW IN THE AMOUNT OF
$3500.00 HAS BEEN PAID OR WILL
BE PAID DIRECTLY TO THE DEPT. OF
REVENUE. CERTIFICATE OF REGISTRATION
65-0083472-21-01
<PAGE>
COMMERCIAL GUARANTY
- --------------------------------------------------------------------------------
[illegible]
- --------------------------------------------------------------------------------
Borrower: CERTIFIED DIABETIC SUPPLIES INC. Lender: FIRST NATIONAL BANK OF NAPLES
1954 J & C BLVD. MAIN OFFICE
NAPLES, FL 34109 900 GOODLETTE ROAD NORTH
P.O. BOX 413043
NAPLES, FL 34101-3043
Guarantor: ALBERT R AYALA
5760 SHIRLEY ST.
NAPLES, FL 34109
================================================================================
AMOUNT OF GUARANTY. This is guaranty of payment of the Note, including without
limitation the principal Note amount of One Million & 00/100 Dollars
($1,000,000.00).
GUARANTY. For good and valuable consideration, ALBERT R AYALA ("Guarantor")
absolutely and unconditionally guarantees and promises to pay to FIRST NATIONAL
BANK OF NAPLES ("Lender") or its order, in legal tender of the United States of
America, the Indebtedness (as that term is defined below) of
CERTIFIED DIABETIC SUPPLIES INC. ("Borrower") to Lender on the terms and
conditions set forth in this Guaranty.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means CERTIFIED DIABETIC SUPPLIES INC.
Guarantor. The word "Guarantor" means ALBERT R AYALA.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated July 31, 1997.
Indebtedness. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and
loan charges, and (e) all collection costs and expenses relating to the
Note or to any collateral for the Note. Collection costs and expenses
include without limitation all of Lender's reasonable attorney's fees and
Lender's legal expenses, whether or not suit is instituted, and reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services.
Lender. The word "Lender" means FIRST NATIONAL BANK OF NAPLES, its
successors and assigns.
Note. The word "Note" means the promissory note or credit agreement dated
July 31, 1997, in the original principal amount of $1,000,000.00 from
Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for
the promissory note or agreement. Notice to Guarantor: The Note evidences a
revolving line of credit from Lender to Borrower.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the amount of the Indebtedness described above, plus
all costs and expenses of (a) enforcement of this Guaranty and (b) collection
and sale of any collateral securing this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
<PAGE>
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty. This Guaranty covers a revolving line of
credit and guarantor understands and agrees that this guarantee shall be open
and continuous until the line of credit is terminated and the indebtedness is
paid in full, as provided below.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. This Guaranty covers a revolving line
of credit and it is specifically anticipated that fluctuations will occur in the
aggregate amount of Indebtedness owing from Borrower to Lender. Guarantor
specifically acknowledges and agrees that fluctuations in the amount of
Indebtedness, even to zero dollars ($0.00), shall not constitute a termination
of this Guaranty. Guarantor's liability under this Guaranty shall terminate only
upon (a) termination in writing by Borrower and Lender of the line of credit,
(b) payment of the indebtedness in full in legal tender, and (c) payment in full
in legal tender of all other obligations of Guarantor under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening Guarantor's liability under this Guaranty, from
time to time: (a) to make one or more additional secured or unsecured loans to
Borrower, to lease equipment or other goods to Borrower, or otherwise to extend
additional credit to Borrower, (b) to alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (c) to take and hold
security for the payment of this Guaranty or the Indebtedness, and exchange,
enforce, waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (d) to release,
substitute, agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; (e) to determine how, when and what application of payments and
credits shall be made on the Indebtedness; (f) to apply such security and direct
the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security agreement or
deed of trust, as Lender in its discretion may determine; (g) to sell, transfer,
assign, or grant participations in all or any part of the Indebtedness; and (h)
to assign or transfer this Guaranty in whole or part.
<PAGE>
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (e) to pursue
any other remedy within Lender's power, or (f) to commit any act or omission of
any kind, or at any time, with respect to any matter whatsoever.
<PAGE>
COMMERCIAL GUARANTY
Loan No. 11788704 (Continued)
================================================================================
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b) any
election of remedies by Lender which destroys or otherwise adversely affects
Guarantor's subrogation rights or Guarantor's right to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantor
may suffer by reason of any law binding, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; (e) any
statute of limitations, if at any time any action or suit brought by Lender
against Guarantor is commenced there is outstanding Indebtedness of Borrower to
Lender which is not barred by any applicable statute of limitations; or (f) any
defenses given to guarantors at law or in equity other than actual payment and
performance of the Indebtedness. If payment is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower's
trustee in bankruptcy or to any similar person under any federal or state
bankruptcy law or law for the relief of debtors, the Indebtedness shall be
considered unpaid for the purpose of enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security Interest is specifically
waived or released by an instrument in writing executed by Lender.
<PAGE>
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
GARNISHMENT. Guarantor consents to the issuance of a continuing writ of
garnishment or attachment against Guarantor's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in part,
any money judgment entered in favor of Lender.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Guaranty. No alteration of or amendment to this Guaranty
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Florida. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
COLLIER County, State of Florida. Lender and Guarantor hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought
by either Lender or Guarantor against the other. This Guaranty shall be
governed by and construed in accordance with the laws of the State of
Florida.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Guaranty. Lender may pay someone else to help enforce this Guaranty,
and Guarantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's reasonable attorneys' fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (and including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court costs
and such additional fees as may be directed by the court.
<PAGE>
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile
(unless otherwise required by law), and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier,
or when deposited in the United States mail, first class postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above or to such other addresses as either party may designate to the
other in writing. If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one or
more of them. The words "Guarantor," "Borrower," and "Lender" include the
heirs, successors, assigns, and transferees or each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower
or Guarantor are corporations or partnerships, it is not necessary for
Lender to inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Guaranty. No prior waiver by Lender, nor any
course of dealing between Lender and Guarantor, shall constitute a waiver
of any of Lender's rights or of any of Guarantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Guaranty, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
<PAGE>
COMMERCIAL GUARANTY
Loan No. 11788704 (Continued)
================================================================================
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JULY 31, 1997.
GUARANTOR:
/s/ Albert R Ayala
- ------------------------
ALBERT R AYALA
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INDIVIDUAL ACKNOWLEDGMENT
STATE OF FLORIDA )
) SS
COUNTY OF COLLIER )
The foregoing instrument was acknowledged before me this 31st day of July, 1997
by ALBERT R AYALA, who is personally known to me or who has produced as
identification and who did/did not take an oath.
/s/ Beckey J. Bauser
----------------------------------------------
(Signature of Person Taking Acknowledgment)
----------------------------------------------
(Name of Acknowledge Typed, Printed or Stamped)
----------------------------------------------
(Title or Rank)
----------------------------------------------
(Serial Number, if any)
- --------------------------------------
[logo] BECKEY J. BAUSER
MY COMMISSION # [ILLEGIBLE]
EXPIRES: January 2, 2000
Bonded Thru Notary Public Underwriters
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================================================================================
<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$300,000.00 01-09-1997 01-09-1998 11788703 C4A 35 RLR
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References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Borrower: CERTIFIED DIABETIC SUPPLIES, INC. Lender: FIRST NATIONAL BANK OF NAPLES
1951 J&C BLVD MAIN OFFICE
NAPLES, FL 34109 900 GOODLETTE ROAD NORTH
PO BOX 413043
NAPLES, FL 33941-3043
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Amount: $300,000.00 Initial Rate: 9.500% Date of Note: January 9, 1997
</TABLE>
PROMISE TO PAY, CERTIFIED DIABETIC SUPPLIES, INC. ("Borrower")
promises to pay to FIRST NATIONAL BANK OF NAPLES ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Three Hundred
Thousand & 00/100 Dollars ($300,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance. The interest rate will not increase above 18.000%.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on January 9, 1998. In
addition, Borrower will pay regular monthly payments of accrued unpaid interest
beginning February 9, 1997, and all subsequent interest payments are due on the
same day of each month after that. Interest on this Note is computed on a
365/360 simple interest basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid
collection costs and any late charges, then to any unpaid interest, and any
remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is
subject to change from time to time based on changes in an independent index
which is the Bankers Trust Prime Rate (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index becomes
unavailable during the term of this loan, Lender may designate a substitute
Index after notice to Borrower. Lender will tell Borrower the current Index rate
upon Borrower's request. Borrower understands that Lender may make loans based
on other rates as well. The interest rate change will not occur more often than
each day. The Index currently is 8.250% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.250
percentage points over the Index, adjusted if necessary for the minimum and
maximum rate limitations descried below, resulting in an initial rate of 9.500%
per annum. Notwithstanding any other provision of this Note, the variable
interest rate or rates provided for in this Note will be subject to the
following minimum and maximum rates. NOTICE: Under no circumstances will the
effective rate of interest on this Note be less than 4.000% per annum or more
than (except for any higher default rate shown below) the lesser of 18.000% per
annum or the maximum rate allowed by applicable law.
<PAGE>
1-09-1997 PROMISSORY NOTE Page 2
Loan No. 11788703 (continued)
================================================================================
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all
loan fees and other prepaid finance charges are earned fully as of the date of
the loan and will not be subject to refund upon early payment (whether voluntary
or as a result of default), except as otherwise required by law. In any event,
even upon full prepayment of this Note, Borrower understands that Lender is
entitled to a minimum interest charge of $10.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due. Early payments will
not, unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower
will be charged 5.000% of the regularly scheduled payment or $5.00, whichever is
greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained in
this Note or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (f) Any guarantor dies or
any of the other events described in this default section occurs with respect to
any guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the indebtedness is impaired. (h) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that amount. Upon
default, including failure to pay upon final maturity, Lender, at its option,
may also, if permitted under applicable law, increase the variable interest rate
on this Note to 18.000% per annum, if and to the extent that the increase does
not cause the interest rate to exceed the maximum rate permitted by applicable
law. Lender may hire or pay someone else to help collect this Note if Borrower
does not pay. Borrower also will pay Lender the amount of these costs and
expenses, which includes, subject to any limits under applicable law, Lender's
<PAGE>
1-09-1997 PROMISSORY NOTE Page 3
Loan No. 11788703 (continued)
================================================================================
reasonable attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services. If
not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Florida. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of COLLIER County, the State of Florida. Lender and Borrower hereby waive
the right to any jury trial in any action, proceeding, or counterclaim brought
by either lender or Borrower against the other. This Note shall be governed by
and construed in accordance with the laws of the State of Florida.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in and to,
Borrower's accounts with Lender (whether checking, savings, or some other
account), including without limitation all accounts held jointly with someone
else and all accounts Borrower may open in the future, excluding however all IRA
and Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
COLLATERAL. This Note is secured by Business Assets.
LINE OF CREDIT. This Note evidences a revolving line of
credit. Advances under this Note may be requested either orally or in writing by
Borrower or by an authorized person. Lender may, but need not, require that all
oral requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
Peter J. Fiscina and Albert R. Ayala. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an authorized person
or (b) credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (a) Borrower
or any guarantor is in default under the terms of this Note or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
<PAGE>
1-09-1997 PROMISSORY NOTE Page 4
Loan No. 11788703 (continued)
================================================================================
FINANCIAL STATEMENT COVENANT. The Borrower and any guarantors
agree that, unless the Bank shall otherwise consent in writing, they shall
deliver to the Bank 1) as soon as available and in any event within 60 days
after the end of each calendar and/or fiscal year, an updated detailed financial
statement in a format acceptable to the Lender; and 2) a copy of Corporate
and/or personal income tax returns, as applicable, within 20 days of submission
to the Internal Revenue Service annually during the term of this obligation.
CLEAN UP PROVISION. This loan shall be cleaned-up (i.e.,
maintained at a zero balance) for thirty consecutive days during the term of the
loan.
LIMITATION OF ADVANCES. Advances will be limited to a maximum
of 65% of Accounts Receivable 90 days old or less.
AGING SCHEDULES. Monthly Aging Schedules on Accounts
Receivable will be required.
GENERAL PROVISIONS. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
""charge or collect"", any amount in the nature of interest or in the nature of
a fee for this loan, which would in any way or event (including demand,
prepayment, or acceleration) cause Lender to charge or collect more for this
loan than the maximum Lender would be permitted to charge or collect by federal
law or the law of the State of Florida (as applicable). Any such excess interest
or unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this Note,
to the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOT AND ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THE NOTE.
<PAGE>
1-09-1997 PROMISSORY NOTE Page 5
Loan No. 11788703 (continued)
================================================================================
BORROWER:
CERTIFIED DIABETIC SUPPLIES, INC.
By: Copy
----------------------------------(SEAL)
Peter J. Fiscina, President
================================================================================
Variable Rate. Line of Credit. Laser Pro, Reg. U.S. Pat. &
T.M. Off., Ver. 3.22b(c)
1997 CFI ProServices,Inc.
All rights reserved.
[FL-D20 F3.22a PF DERLRI.LN]
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$300,000.00 01-09-1997 01-09-1998 11788703 C4A 35 RLR PF
- -----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Borrower: CERTIFIED DIABETIC SUPPLIES, INC. Lender: FIRST NATIONAL BANK OF NAPLES
1951 J&C BLVD MAIN OFFICE
NAPLES, FL 34109 900 GOODLETTE ROAD NORTH
PO BOX 413043
NAPLES, FL 33941-3043
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.000% over Bankers Trust Prime Rate, with
an interest rate floor of 4.000%, and with an interest rate ceiling of 18.000%,
making an initial rate of 9.5%), Revolving Line of Credit Loan to a Corporation
for $300,000.00 due on January 9, 1998.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] Personal, Family, or Household Purposes or Personal Investment.
[x] Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital Pending Receivables Collection.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $300,000.00 as follows:
Undisbursed Funds: $300,000.00
Other Charges Financed: $0.00
-----------
Note Principal: $300,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $1,500.00
$1,500.00 Points
Other Charges Paid in Cash: $1,050.00
$1,050.00 Documentary Stamps
-----------
Total Charges Paid in Cash: $2,550.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JANUARY 9, 1997.
BORROWER:
CERTIFIED DIABETIC SUPPLIES, INC.
By:______________________________________ (SEAL)
Peter J Fiscina, President
================================================================================
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.22b(c) 1997 CFI ProServices, Inc. All rights reserved. (FL-120 PFDERLR1.LN)
<PAGE>
[LOGO]
FIRST NATIONAL BANK
OF NAPLES
P.O. Box 413043
Naples, Florida 34101-3043
Phone: (941) 262-7600
Fax: (941) 262-6267
June 26, 1997
Mr. Peter J. Fiscina, President
Certified Diabetic Supplies, Inc.
1954 J & C Blvd.
Naples, FL 34109
Dear Mr. Fiscina:
FIRST NATIONAL BANK OF NAPLES,("Lender") is pleased to inform you that
is has approved your request for a loan (the "Loan") in an amount up to One
Million and no/100 Dollars ($1,000,000.00) under terms as further outlined in
this commitment letter, for the purpose of a working capital line of credit. The
Loan shall be evidenced by Borrower's promissory note in the amount of
$1,000,000.00 (the "Note") and secured by UCC-1 filings, giving the bank a first
lien position, covering all accounts, accounts receivable, inventory, and
equipment now owned or hereafter acquired.
Borrower
Certified Diabetic Supplies, Inc., a Delaware corporation.
Loan Amount:
The total amount of the Loan shall be a maximum of $1,000,000.00.
Interest Rate:
Interest on all amounts which shall, from time to time, remain
outstanding under the loan shall accrue at the rate of Prime plus three quarters
of one percent (.75%) per annum. Interest shall be calculated on the basis of
the actual number of days elapsed over a 360 day year. Prime rate is the "Prime
Rate" charged by Banker's Trust of New York, NY.
1
/S/ILLEGIBLE
"Where little things make a BIG difference."
<PAGE>
Payments:
Payments of interest on the outstanding balance shall be due and
payable monthly, and continuing on the same date of each and every month
thereafter. Principal due on maturity of note.
Loan Advance:
Funds shall be advanced based on a formula of 65% percent of current
accounts receivables, 50% of inventory and $300,000.00 to be advanced after
receipt of a letter from Jesup & Lamont Securities, Inc. of New York, New York
authorizing payment of Three Hundred Thousand and NO/100 Dollars ($300,000.00)
from the first proceeds of sale of stock offering.
Loan Term:
The loan shall be a Revolving Line of Credit for a term of one year.
Each advance shall have a maturity date not to exceed the term of the line.
Deposits:
Certified Diabetic Supplies, Inc. and related companies shall maintain
its depository relationship at First National Bank of Naples.
Guaranty:
The loan shall be guaranteed by Peter J. Fiscina and Albert R. Ayala.
Lender Agree's to review Borrower's financial condition at such time as
Certified Diabetic Supplies, Inc. becomes a publicly traded company on the
Nasdaq Stock Exchange. Lender may elect to release Peter J. Fiscina and Albert
R. Ayala from their respective guarantees. However, the election to do so is at
the sole discretion of the Lender.
Closing Date:
The loan shall be closed upon five (5) days notice to Lender by
Borrower but not later than August 29, 1997.
Miscellaneous:
1. Borrower shall obtain and maintain satisfactory liability insurance
coverage on all collateral listed on the loan. The initial policy shall be
prepaid and delivered to Lender prior to closing and all renewal policies shall
be deposited with Lender as evidence of such insurance.
2
/S/ILLEGIBLE
<PAGE>
2. The Note will provide that in the event payment of any monthly
interest is not made within ten (10) days of its due date, a late charge of five
percent (5%) of such payment may be assessed, or that in the event of any
default in the terms of the Loan, the Borrower shall pay, during the period of
default, interest on the unpaid balance of the Loan at the maximum rate
allowable by law. The Note shall further provide that if all or any part of any
installment payment remains unpaid more than ten (10) days after the date due
and payable, or if any other sums required to be paid under the Note are not
paid when due, or if Borrower should default in the observance of any of the
covenants, terms and conditions of the Note or any other Loan Document then the
entire principal amount of the Loan, together with all accrued interest thereon,
shall, at the option of Lender, become immediately due and payable forthwith
without further notice to Borrower. The Loan may be prepaid in whole or part, at
anytime and from time to time, while not in default. All payments under the Note
shall be applied first to accrued and unpaid interest and the balance, if any to
principal.
3. Lender will require of Borrower and Peter J. Fiscina and Albert R.
Ayala to furnish Lender, within 90 days following the end of each fiscal year
during the term of the Loan, and at such other times as Lender may require, a
copy of the Borrower's current financial statement (balance sheet and profit and
loss statements) and federal income tax return (or other income verification
satisfactory to Lender).
4. The Note will contain a provision that on sale or transfer of (a)
the subject property and assets or any legal or equitable interest therein, or
(b) beneficial interest in Borrower (if Borrower is a corporation, partnership,
or fiduciary), without Lender's prior written approval, then Lender may, at
Lender's option, declare the indebtedness secured by the Note immediately due
and payable without forfeiture of any prepayment penalty agreed to in the Note.
5. Borrower will deliver to Lender a "Receivables Aging Schedule" and
"Inventory Listing" on a monthly basis and quarterly interim financial
statements on Certified Diabetic Supplies, Inc.
6. The Note will contain a provision prohibiting Borrower form pledging
or encumbering the business assets or personal property securing this Loan in
any manner whatsoever without the prior written consent of Lender.
/S/ILLEGIBLE
3
<PAGE>
7. All Loan documents, guarantees, and security agreements used in this
transaction shall be on forms prescribed or approved by Lender and Lender's
legal counsel.
8. This commitment is subject to all provisions imposed on Lender by
regulatory authorities, provided, however, if it should be determined that any
such regulatory provisions would prevent the closing of the loan as contemplated
herein, then, unless Borrower agrees in writing to such changes in this
commitment as may be required to conform the Loan to such regulations, the
commitment fee will be refunded and this commitment will be canceled and
considered null and void.
9. This commitment is conditioned upon the initial and continuing
accuracy and applicability of all information, data, representations, exhibits,
financial statements, and other material submitted to Lender in connection with
the application for, and the consummation of, the subject Loan. Any material
misinformation or withholding of material information incident thereto shall, at
the option of Lender, void all of Lender's obligations hereunder. Should any
material adverse change take place in Borrower's business or financial condition
or in the subject property, Lender shall have the option of canceling this
commitment. It is agreed that in such event all fees paid by Borrower will be
retained by Lender as liquidated damages. By acceptance of this commitment,
Borrower agrees to promptly notify Lender in writing of any material changes in
information submitted to Lender.
10. All terms and conditions of this commitment are basic to the
proposed Loan transaction. All instruments executed and delivered in connection
with said transaction shall, to the extent the provisions thereof are consistent
with the terms hereof, be construed merely as implementing this commitment. To
the extent the terms of this commitment are not contradicted by the provisions
of instruments later executed, the terms hereof shall survive the execution and
delivery of all documents connected with the subject Loan transaction.
11. This commitment letter sets forth the entire agreement between
Borrower and Lender and supersedes any and all statements, agreements or
representations, whether oral or written, made by Lender or anyone acting on
Lender's behalf. Any modification or wiaver of any provisions of this commitment
must be in writing and must be signed by Borrower and Lender.
/S/ILLEGIBLE
4
<PAGE>
12. Borrower's acceptance of this commitment shall constitute its
unconditional agreement to pay all costs, expenses in connection with this
commitment letter and the making of the Loan, whether or not the Loan closes,
including but not limited to, the cost of obtaining, preparing and furnishing
all documents required herein including hazard insurance; recording and filing
fees; any outside legal counsel retained by Lender.
13. Lender reserves the right at such times as lender may reasonably
request to make a physical inspection of the inventory.
14. Borrower shall provide Certification of Good Standing from the
State of Delaware, showing the Corporation is in good standing and authorized to
do business in the State of Florida.
Commitment Fee:
No Fee - Shall be due upon acceptance of this commitment letter. Lender
and Borrower agree that a $500.00 commitment fee was previously paid on loan
number CLA 117-87703. Loan number CLA 117-87703 is replaced by this commitment
and no fees will be due unless renewed at maturity.
Representations:
This commitment has been issued to Borrower on the basis of all
information provided by Borrower and all representations, exhibits, data and
other materials submitted with or in support of Borrower's Loan Application. Any
material misinformation or withholding of material information hereto shall, at
the option of Lender, void all of Lender's obligations hereunder.
This commitment shall only be effective upon receipt by Lender on or
before July 30, 1997, of an accepted copy of this commitment executed by
Borrower. If an accepted commitment, is not received by Lender as hereinabove
set forth, this commitment shall terminate.
Borrower and Lender agree that this commitment letter shall survive the
closing of the Loan contemplated herein and that each and every one of the
obligations and undertakings of the Borrower set forth herein shall be
continuing obligations and undertakings and shall not cease or terminate until
the Loan, including any renewals or extensions, together with all principal and
interest have been paid in full.
/S/ILLEGIBLE
5
<PAGE>
Very truly yours,
/s/ RONALD L. RUCKER SVP
Ronald L. Rucker
Senior Vice Preisdent
The undersigned hereby accept the terms and conditions of the foregoing
loan commitment of FIRST NATIONAL BANK OF NAPLES on this 22 day of July, 1997.
BORROWER:
Certified Diabetic Supplies, Inc.
By: /s/ PETER J. FISCINA Submitted with $ N/A.
---------------------------------- -----
Peter J. Fiscina, President
GUARANTOR:
By: /s/ PETER J. FISCINA
----------------------------------
Peter J. Fiscina, Individually
By: /s/ ALBERT R. AYALA
----------------------------------
Albert R. Ayala, Individually
/S/ILLEGIBLE
6
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), is entered into and made effective as
of the 26 day of August, 1997 ("Effective Date"), by and between BARNETT BANK,
N.A. ("Landlord"), whose address is 9000 Southside Boulevard, Building 200,
Jacksonville, Florida 32256 Attention: Property Management and CERTIFIED
DIABETICS, a Delaware corporation ("Tenant"), whose address is 1951 J&C
Boulevard, Naples, Florida 34109.
ARTICLE 1.
Premises and Possession
1.1. Premises. In consideration of the covenants, conditions,
agreements and stipulations contained in this lease agreement ("Lease"),
Landlord does hereby lease unto Tenant, and Tenant does hereby take and hire
from Landlord, that certain interior space consisting of approximately 12,539
square feet of rentable area ("Premises") *comprising a part of that certain
building located at 2373 West Horseshoe Drive, Naples, Florida 33942, more
particularly depicted on the sketch attached hereto as Exhibit A and
incorporated herein by reference ("Building").
1.2. Use of Additional Areas. The use and occupation by Tenant of the
Premises shall include a license for the non-exclusive use, in common with
others entitled thereto, of the Common Areas of the Building (as defined in
paragraph 1.3 hereof), and such other facilities as may be designated from time
to time by Landlord inclusive of the cafeteria area, subject, however, to the
terms and conditions of this Lease, and to the rules and regulations for the use
of the Common Areas, as prescribed from time to time by Landlord.
1.3. Common Areas Defined. All areas within the boundaries of the
Building which are not now or hereafter held for lease or occupation by
Landlord, or used by other persons entitled to occupy floor space in the
Building, including (without limiting the generality of the foregoing) all
customer and employee parking areas, and the driveways, entrances, and exits
thereto; truck ways; loading docks or facilities; package pick-up stations;
service roads, pedestrian sidewalks; ramps; landscaped areas; retaining walls;
exterior stairways; first-aid stations; comfort stations; bus stops; open and
enclosed courts and malls; cafeteria area; and other areas and improvements (as
such areas and improvements now exist, as shown on Exhibit A hereto, or as they
may hereafter be constructed or redesigned) which are provided by Landlord in or
near the Building for the general use, in common, by tenants, their officers,
agents, employees and customers, are referred to herein collectively as the
"Common Areas." The Common Areas shall at all times be subject to the exclusive
control and management of Landlord, and Landlord shall have the right, but not
the duty to police the Common Areas and to construct, maintain, repair and
operate the Common Areas. Landlord shall have the right, authority, duty and
obligation to employ all personnel to make all reasonable rules and regulations
pertaining to the proper operation and maintenance of the Common Areas.
* Personal property is identified in Exhibit E.
1
<PAGE>
1.4. Permitted Use. It is understood that the Premises are to be used
for the purpose of conducting and operating a diabetic supply distribution
company and for no other purpose. Tenant shall continuously occupy and use the
Premises for such purposes during the term hereof. At no time shall Tenant
abandon or leave vacant the Premises. All uses not specifically granted herein
are reserved to Landlord.
1.5. Landlord's Right To Inspect And Enter. Landlord shall have the
right, during normal business hours and other reasonable times during the term
of this Lease, to enter the Premises for the purpose of examining or inspecting
same and of making such repairs or alterations therein as Landlord shall deem
necessary.
1.6. Quiet Enjoyment. Landlord covenants and agrees that Tenant, on
promptly paying all rent and performing all covenants herein, shall and may
peaceably and quietly hold and enjoy the said Premises for the term aforesaid,
subject to the terms of this Lease.
1.7. Acceptance of Premises. Tenant agrees to accept the Premises
"AS-IS". Tenant shall acknowledge, and the taking of possession shall be
conclusive evidence, that the Premises are in good repair, tenantable condition,
in all respects satisfactory and acceptable to Tenant, and in the condition in
which they were represented to Tenant to be and/or agreed to be put in by
Landlord; and Tenant hereby releases Landlord from any and all claims arising
from any defect in the condition of the Premises, or from any defects in the
equipment, machinery or fixtures in or serving the Premises.
ARTICLE II.
Lease Term
2.1. Primary Term. Tenant shall have and hold the Premises for a term
commencing on the Effective Date and ending on the 15th day of December 1997, on
the terms and conditions as set forth herein.
2.2. Holdover. Any holding over by Tenant after the expiration of this
Lease shall be construed as a Tenancy at Sufferance, unless such occupancy is
with the written consent of Landlord, in which event Tenant will be a tenant
from month to month, upon the same terms and conditions of this Lease, except at
an agreed upon lease rate for such holdover period of twice the monthly rent per
month plus Additional Rent as set forth in Article III hereof. Acceptance by
Landlord of rent after such termination shall not constitute a renewal.
ARTICLE III.
Rents
3.1. Base Rent. Tenant shall pay to Landlord, on the first day of each
month (commencing September 1, 1997), in advance and at the address set forth
for notices under this Lease, or at such other address as Landlord shall, from
2
<PAGE>
time to time, designate by notice given to Tenant as hereinafter provided, as
rental for the Premises, in lawful money of the United States of America, a
rental of Thirty-five Thousand and No/100 Dollars ($35,000.00) payable in three
(3) equal monthly installments of Ten Thousand and No/100 Dollars ($10,000.00)
for the months of September, October, and November, and one (1) installment of
Five Thousand and No/100 Dollars ($5,000.00) for the month of December. In
addition to Rent, Tenant shall also pay to Landlord all sales tax, if any,
payable by Landlord as a result of the receipt of the Rent. Tenant agrees to pay
all Rent and all other charges under this Lease promptly as and when due. If any
payment of Rent due for a given month has not been paid in full prior to the
11th day of such month, then Landlord shall be entitled to a late charge for
loss of the money due, equal to the lesser of One Hundred Dollars ($100.00) or
five percent (5%) of the amount of the payment due for that month.
3.2. Sales and Use Tax. Any sales, use or other tax, excluding State
and/or Federal Income Taxes, now or hereafter imposed by the United States of
America, the State of Florida, or any political subdivision thereof, shall be
paid monthly or annually, as required, as Additional Rent by Tenant
notwithstanding the fact that such statute, ordinance or enactment imposing the
same may endeavor to impose the tax on Landlord, and Tenant's Base Rent shall be
increased by an amount sufficient to pay any such tax or taxes.
3.3. Expiration of Term. Tenant, at the expiration of the term hereof
shall deliver up the Premises in good repair and condition, reasonable use,
ordinary decay, wear and tear excepted.
3.4. Security Deposit. Landlord shall not require a security deposit of
Tenant so long as Tenant is not in default hereunder.
3.5. Insurance Premiums. In the event that Tenant's use of the Premises
or the Building increases the premium rate for insurance carried by Landlord,
Tenant shall pay Landlord as additional Rent, upon demand, the amount of such
premium increase.
3.6. Additional Rent. In addition to Base Rent, all other payments
required to be paid by Tenant under the provisions of this Lease shall be deemed
to be and become additional rent, whether or not the same be designated as such;
provided, however, all provisions dealing with abatement of rent shall be
construed to permit the abatement of Base Rent only, and not any other sums due
from Tenant to Landlord or third parties hereunder.
ARTICLE IV.
Condition of Premises/
Improvements and Tenant's Acceptance of Premises
4.1. Delivery of Premises (AS IS) by Landlord. Tenant shall receive
possession of the Premises on the commencement of the Term.
3
<PAGE>
4.2. Tenant Improvements. Tenant may commence to make those
improvements to the premises which are more particularly referenced on Exhibit B
("Tenant Improvements") on the Effective Date, subject to the provisions set
forth in the Lease. Tenant warrants and represents that such Tenant Improvements
as it shall make or cause to be made to the Premises as agreed between Landlord
and Tenant shall be made in a good and workmanlike manner in accordance with
applicable governmental requirements and without interference to any other
tenants located within the Building.
4.3. Alterations and Improvements After Initial Construction. Tenant,
at its cost and expense, may during the Term hereof make such repairs,
alterations and/or improvements in and to the Premises at it may determine to be
desirable for its use thereof; provided, that the prior written approval of
Landlord shall be obtained, on each occasion, before such work is commenced.
When so requested by Landlord, Tenant shall furnish detailed plans and
specifications to Landlord, prior to commencement of construction.
Notwithstanding the foregoing, Tenant shall not make or suffer to be
made any structural alterations, additions or improvements to or of the Premises
or any part thereof and may make non-structural alterations or improvements only
with the prior written consent of Landlord, which shall not be unreasonably
withheld. In the event Landlord consents to the proposed alterations, additions
or improvements, the same shall be at Tenant's cost and expense and Tenant shall
hold Landlord harmless on account of the cost thereof. Any such alterations
shall be made at such times and in such manner as not to unreasonably interfere
with the occupation, use and enjoyment of the remainder of the Building by the
other tenants thereof.
4.4. General Conditions. Landlord may require such insurance and such
protection against mechanics or similar liens as Landlord, in its sole judgment,
shall determine to be adequate and/or necessary. All such repairs, alterations
and/or improvement shall remain in or upon and be surrendered with the Premises
at the termination of this Lease.
Tenant acknowledges hereby that all partitions erected in the Premises;
all improvements affixed to the Premises; floor and wall coverings, and all
fixtures, machinery and equipment, including, but not limited to, heating and
air conditioning equipment, plumbing and electrical pipes, wiring connection and
fittings, which are necessary to the general operation and maintenance of the
Premises, shall become immediately and remain the property of Landlord without
compensation to Tenant whether owned by Landlord at the commencement of the
term, subsequently purchased or constructed by Landlord, or purchased or
constructed by Tenant in accordance with any of Tenants obligations under the
terms of this Lease. Specifically excluded from the foregoing are customarily
removable professional trade or business fixtures and equipment which are not
necessary for the general operation and maintenance of the Premises and which
are put in at the expense of Tenant, as well as movable furniture and other
movable personal property put in at the expense of Tenant, and such items shall
4
<PAGE>
be and remain the property of Tenant and may be removed by Tenant at termination
of this Lease. All the property removable pursuant to this paragraph shall be
removed on or before the last day of the term hereof or any extension thereof or
upon the earlier termination of such term, and all property not so removed shall
be deemed abandoned by Tenant to Landlord.
Tenant, prior to commencement of Tenant Improvements within the
Premises, shall secure all necessary permits, licenses, and governmental
approvals, copies of which shall be forwarded to Landlord's construction
coordinator immediately upon receipt thereof, and thereafter, Tenant shall, at
its expense, provide or cause to be provided, all materials and cause to be
performed all work necessary to finish the premises in accordance with Tenant's
plans and specifications as approved by Landlord.
Upon completion of Tenant Improvements, Tenant shall secure its
Certificate of Occupancy from the governmental authorities, a copy of which
shall be forwarded to Landlord immediately upon receipt thereof.
4.5. Mechanics Liens. TENANT HAS NO AUTHORITY TO CREATE ANY MECHANIC'S
LIEN FOR LABOR OR MATERIAL AGAINST THE BUILDING OR THE PREMISES (OR ANY PORTION
OF ANY OF THE FOREGOING). ALL PERSONS CONTRACTING WITH TENANT WHO FURNISH ANY
MATERIALS OR SERVICES TO THE PREMISES, AND ALL MATERIALMEN, CONTRACTORS AND
LABORERS, ARE HEREBY CHARGED WITH NOTICE THAT THEY MUST LOOK TO TENANT
PERSONALLY FOR PAYMENT FOR ANY SUCH WORK DONE OR MATERIAL FURNISHED DURING THE
TERM OF THIS LEASE AND TENANT COVENANTS TO DISCLOSE THE PROVISIONS HEREOF TO
SUCH PERSONS AS PROVIDED BY THE PROVISIONS OF FLA. STATS. ss.713.10 ("STATUTE").
Tenant agrees to execute a memorandum of this lease in recordable form such that
same may be recorded among the public records of the county in which the
Premises are located to effectively place the public on notice of the provision
herein contained as contemplated by the Statute.
Tenant shall not permit any mechanics or similar liens to remain upon
the Premises for labor or material furnished to Tenant or claimed to have been
furnished to Tenant in connection with work of any character performed or
claimed to have been performed on the Premises, at the direction or with the
consent of Tenant, whether such work was performed or materials furnished before
or after the commencement of the term of this Lease. Tenant may, however,
contest the validity of such lien or claim; provided, Tenant shall give to
Landlord reasonable security to insure payment and to prevent any sale,
foreclosure or forfeiture of the Premises by reason of such non-payment, if
required by Landlord. Upon a final determination of the validity of any such
lien or claim, Tenant shall immediately pay any judgment or decree rendered
against Tenant or Landlord, including but not limited to, all proper costs and
charges, including reasonable attorneys' fees, and shall cause such lien to be
released of record without costs to Landlord.
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ARTICLE V.
Common Areas; Common Area Maintenance
5.1. Common Areas; Control. "Common Areas" shall consist of all parts
of the (Center) (Building) not under lease exclusively to Tenant hereunder or to
other tenants, including, but not limited to, parking areas, access roads and
facilities, driveways, sidewalks, and other walkways, stairways, loading areas,
mall (if any), landscaped areas, utilities, and such other areas and
improvements provided for common use and benefit. Landlord and Tenant, and their
customers, invitees, officers, employees, agents, tenants, sublessees,
licensees, concessionaires and contractors shall have common and non-exclusive
rights to the use of said common areas, subject, however, to Landlord's
exclusive right to establish, modify, and enforce reasonable rules and
regulations with respect to all common areas and facilities; to construct,
maintain and operate lighting facilities on all said areas and improvements; to
police same; from time to time to change the area, level, location and
arrangement of parking areas and other facilities; to restrict parking by
tenants, their officers, employees, agents, sublessees, licensees,
concessionaires and contractors to employee parking areas; to close all or any
portion of said areas or facilities to such extent as may, in the opinion of
Landlord's counsel, be legally sufficient to prevent a dedication thereof or the
accrual of any rights to any person or the public therein; to close temporarily
all or any portion of the parking areas or facilities; to discourage
non-customer parking; and to do and perform such other acts in and to said areas
and improvements as, in the use of good business judgment, Landlord shall
determine to be advisable with a view to the improvement of the convenience and
use thereof by tenants, their officers, agents, employees and customers.
Landlord will operate and maintain the common facilities referred to above in
such manner as Landlord, in its sole discretion, shall determine from time to
time. Without limiting the scope of such discretion, Landlord shall have the
full right and authority to employ all personnel and to make all rules and
regulations pertaining to and necessary for the proper operation and maintenance
of the common facilities.
5.2. Common Area Maintenance. Landlord shall be responsible for the
lighting of the common areas, and for the maintenance of the common areas.
ARTICLE VI.
Damage by Fire or Other Casualty
6.1. Notice. Tenant shall give immediate written notice to Landlord of
any damage caused to the Premises or the Building by fire or other casualty.
If the Premises are damaged by fire or other casualty, Landlord will
promptly repair the damage and restore the Premises to its condition as of the
date possession is delivered to Tenant, but only to the extent that the cost of
such repairs is within available insurance proceeds. If the reasonable time for
completing any such restoration or repair is ninety (90) days or longer, either
party shall have the option to terminate this Lease Agreement by giving notice
of termination to the other party. That notice shall be given within fifteen
(15) days after the date of the casualty. If the damage or destruction to the
Premises or the Building is so substantial that it has effectively destroyed the
Premises totally, Landlord may, at its sole option, terminate the Lease by
giving written notice to Tenant within fifteen (15) days after the date of the
casualty. If the Premises are damaged by fire or other casualty, the rent shall
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abate until the Premises are restored or until the Lease is terminated in
accordance with this paragraph. The abatement shall be in proportion to the
impairment of the use that Tenant can reasonably make the Premises. Landlord
shall not be liable for any inconvenience or interruption of business of Tenant
occasioned by fire or other casualty.
6.2. Tenant's Improvements And Property. Tenant shall be responsible
for securing such insurance as it deems appropriate to indemnify it for any
casualty or fire damage to improvements made by it to the Premises or to any
personal property located within the Premises.
ARTICLE VII.
Eminent Domain
If any part of the Premises is taken by eminent domain, Landlord may,
at its sole option, terminate the Lease by giving written notice to Tenant
within forty-five (45) days after the taking, or if by reason of any such
taking, Tenant's operation on the Premises is prohibited or commercially
impractical, Tenant shall have the option to terminate this Lease Agreement by
giving written notice to Landlord within forty-five (45) days after the taking,
and the rent will be adjusted as of the date of the notice. If the Premises are
damaged or if access to the Premises is materially impaired by reason of such
taking and neither Landlord nor Tenant elects to terminate this Lease Agreement,
Landlord will promptly rebuild or repair the damage to the extent possible
within the limitations of the available condemnation awards. All condemnation
awards belong to Landlord, except that specifically awarded to Tenant for its
separate property and fixtures.
Tenant shall not be entitled to claim, or have paid to Tenant, any
compensation or damages whatsoever for or on account of any loss, injury, damage
or taking of any right, interest, or estate of Tenant, and Tenant hereby
relinquishes and hereby assigns to Landlord any rights to any damages, but
Landlord shall be entitled to claim and have paid to it for the use and benefit
of Landlord all compensation and damages for and on account of or arising out of
such taking or condemnation without deduction from the amount thereof for and on
account of any right, title, interest, or estate of Tenant in or to said
property, and Tenant, upon request of Landlord, shall execute any and all
releases or other documents as shall be required by such public or quasi-public
authority; provided, however, Tenant shall have the right to make its claim for
its fixtures and moving expenses to the extent such damages are allowable, and
may secure such other redress and benefits from the condemning authorities as it
is entitled to so long as the same does not lessen or in any way diminish
Landlord's awards.
ARTICLE VIII.
Indemnity and Insurance
8.1. Indemnity. Tenant will save Landlord harmless and indemnify
Landlord from and against any and all claims, actions, damages, liability and
expenses in connection with loss of life, personal injury or loss or damage of
whatever nature including property damage (i) caused by or resulting from, or
claimed to have been caused by or to have resulted from, wholly or in part, any
act,
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omission or negligence of Tenant or anyone claiming under Tenant (including, but
without limitation, subtenants, concessionaires, agents, employees, servants and
contractors of Tenant or its subtenants or concessionaires), no matter where
occurring, or (ii) occurring in, upon, or at the Leases Premises, no matter how
caused or (iii) arising out of the occupancy or use by Tenant of the Premises or
any part thereof. This indemnity and hold harmless agreement shall include
indemnity against all costs, expenses and liabilities incurred in connection
with any such injury, loss or damage or any such claim, or any proceeding
brought thereon or the defense thereof. If Tenant or anyone claiming under
Tenant or the whole or any part of the property of Tenant shall be injured, lost
or damaged by theft, fire, water or steam or in any other way or manner whether
similar or dissimilar to the foregoing, no part of said injury, loss or damage
is to be borne by Landlord or its agents. Tenant agrees that Landlord shall not
be liable to Tenant or anyone claiming under Tenant for any injury, loss or
damage that may be caused by or result from the act, omission, default or
negligence of any persons occupying adjoining premises or any other part of the
Building. In case Landlord shall, without fault on its part, be made a part to
any litigation commenced by or against Tenant, Tenant shall protect and hold
Landlord harmless and shall pay all costs, expenses and reasonable attorney's
fees incurred or paid by Landlord in connection with such litigation. Tenant
shall also pay all costs, expenses and reasonable attorney's fees that may be
incurred or paid by Landlord in enforcing the covenants and agreements in this
Lease. Tenant shall not be required to indemnify Landlord for Landlord's own
acts of negligence or willful misconduct.
8.2. Release of Landlord. All property of any kind that may be in, on,
or at the Premises shall be at the sole risk of Tenant, or those claiming
through or under Tenant. Unless caused by the intentional acts or negligence of
Landlord, its employees, or contractors, Landlord shall not be liable to Tenant,
or to any other person or entity, for damage, loss or injury, either to person
or persons or property; or for the loss of property sustained by Tenant, or by
any other person, persons or entities in or upon the Premises; or due to the
equipment, fixtures, appliances or machinery in or upon the Premises, or the
halls, passageways, areas, area-ways, sidewalks or streets adjoining or
appurtenant to the Premises being or becoming out of repair or defective; or due
to the happening of any accident, however occurring; or due to any act or
neglect of Tenant, of any other tenant or occupant of the Center, or of any
other person, persons or entities; or due to water, snow, rain, backing up of
water mains or sewers, frost, steam, sewage, illuminating gas, sewer gas, odors,
electricity or electric current, bursting, stoppage or leaking of pipes,
radiators, plumbing, sinks and fixtures in or about the Premises or the Center;
or due to the use or misuse of any instrumentality or agency in or connected
with the Premises or the center; or due to any nuisance made or suffered thereon
or therein.
8.3. Insurance. Tenant will maintain public liability insurance with
respect to the Premises, naming Landlord and Tenant as insured, with a combined
single limit of not less than One Million Dollars ($1,000,000) on an occurrence
basis with respect to both bodily injury and property damage. Tenant shall
deliver to Landlord a Certificate of Insurance at least fifteen (15) days prior
to the commencement of the term of this Lease and a renewal Certificate at least
fifteen (15) days prior to the expiration of the Certificate it renews. Said
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Certificate must provide for thirty (30) days notice to Landlord in event of
material change or cancellation. Tenant also agrees to maintain during the term
hereof, broad form coverage on Tenant's personal business property and
improvements and betterment.
8.4. Waiver of Subrogation. Neither party shall be liable to the other
for loss or damage caused by fire or any other peril insured against under
standard extended coverage insurance even though the loss of or damage is caused
by the party's negligence. Each insurance policy carried by Landlord and Tenant
in accordance with this paragraph shall contain a provision by which the
insurance company shall waive all right of recovery by subrogation against the
other party for loss or damage to the insured property.
ARTICLE IX.
Default
9.1. Events of Default. The happening of any one or more of the
following listed events shall constitute a breach of this Lease Agreement on the
part of Tenant:
(a) The failure of Tenant to pay any rent payable under this
Lease Agreement by the due date thereof;
(b) Tenant fails to perform any other duty or obligation
imposed by this Lease or of the Rules and Regulations and the default
continues for a period of fifteen (15) days after written notice is
given to Tenant by Landlord; provided, however that if performance or
compliance cannot reasonably be accomplished within that fifteen (15)
day period, this condition of default shall not become an Event of
Default if Tenant shall have commenced a good-faith curing of such
condition of default within that fifteen (15) day period and diligently
proceeds to cure the condition of default within, but in no event later
than sixty (60) days after the above written notice is given;
(c) The filing by or on behalf of Tenant or any guarantor of
this lease of any petition or pleading to declare any such party a
bankrupt or the adjudication in bankruptcy of Tenant or any guarantor
of this lease under any bankruptcy law or act;
(d) The appointment by any court or under any law of a
receiver, trustee, or other custodian of the property, assets, or
business of Tenant or any guarantor of this lease;
(e) The assignment by Tenant or any guarantor of this lease of
all or any part of its property or assets for the benefit of its
creditors; or
(f) The levy, execution, attachment or other taking of
property, assets or of the leasehold interest of Tenant by process of
law or otherwise in satisfaction of any judgment, debt or claim or the
abandonment of the Premises by Tenant.
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9.2. Remedies. Upon the happening of any event of default, Landlord, if
it shall so elect, may pursue any one or more of the following remedies,
successively or concurrently: (i) collect each installment of rental when the
same matures; (ii) accelerate rents for the remainder of the term of this Lease;
(iii) enter the Premises without process of law and terminate Tenant's
possession without being liable for any prosecution therefor, and re-lease the
Premises to any person, firm, or corporation, and upon such terms and conditions
as Landlord may deem advisable, as agent of Tenant or otherwise, for whatever
rent it can obtain; or (iv) pursue any other remedy provided at law or in
equity. Tenant shall remain liable for the rent reserved herein, and all other
obligations hereunder. Landlord shall apply the proceeds of such re-leasing (i)
first to the payment of expenses that Landlord may incur in the entering and
re-leasing, and (ii) then to the payment of the rent due by Tenant and the
fulfillment of Tenant's covenants and obligations hereunder. In the case of any
deficiency, Tenant shall remain liable. Tenant hereby waives service of any
demand for payment of rent or notice to terminate or demand for possession of
the Premises, including any and all other forms of demand and notice described
by laws.
9.3. Additional Security. [Section deleted in entirety.]
9.4. No Waiver by Landlord. Nothing herein contained shall be deemed to
be a waiver by Landlord of its statutory lien to rent, and the remedies, rights
and privileges of Landlord in the case of default of Tenant as set forth above
shall not be exclusive, and in addition thereto Landlord may also exercise and
enforce all its rights at law or in equity which it may otherwise have as a
result of Tenant's default hereunder.
ARTICLE X.
Miscellaneous
10.1 Successors and Assigns. This Lease shall bind and inure to the
benefit of the successors, heirs and assigns of the parties hereto.
10.2. Construction of Language. Words of any gender used in this Lease
shall be held to include any other gender, and words in singular number shall be
held to include the plural when the sense requires. The paragraph headings and
titles are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
10.3. Assignment and Sublease. Tenant shall not, voluntarily or by
operation of law, encumber, hypothecate, mortgage, or assign this Lease
Agreement or sublet the Premises without the prior written consent of Landlord,
which consent shall not be arbitrarily withheld, although Landlord shall have
the unconditional right to terminate this Lease rather accept any assignment or
sublease. No assignment or subletting to any banking, brokerage, trust company
or financial services company will be permitted under any circumstances. No
assignment shall relieve Tenant of its obligations under this Lease Agreement.
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Any sale of Tenant's business, or if Tenant is a corporation or
partnership, then any transfer of this Lease by merger, consolidation or
liquidation, or any change in ownership of the shares of voting stock or
interest in Tenant so as to result in a change of the present effective voting
control of Tenant by the person, person and/or entity owning a majority of said
interest on the date of this Lease, shall constitute an assignment of this
Lease, and, as such, shall require the prior written consent of Landlord, which
consent shall not be unreasonably withheld provided that Tenant uses its best
efforts to give Landlord timely and adequate notice prior to the closing of said
transfer or change in ownership. Notwithstanding the above, the anticipated
public stock offering shall not constitute a change in ownership as identified
in this paragraph.
10.4. Subordination. This Lease shall be subject and subordinated at
all times to the terms of any ground or underlying leases which now exist or may
hereafter be executed affecting the Premises under which Landlord shall claim,
and to the liens of any mortgages or deeds of trust in any amount or amounts
whatsoever now existing or hereafter encumbering the Premises, without the
necessity of having further instruments executed by Tenant to effect such
subordination. Notwithstanding the foregoing, Tenant covenants and agrees to
execute and deliver upon demand such further instruments evidencing such
subordination of this Lease to such ground or underlying leases and to the lien
of any such mortgages or deeds of trust as may be requested by Landlord and if
Tenant shall fail to do so within ten (10) business days of Landlord's request,
Landlord is hereby granted an irrevocable power of attorney to execute such
instruments in the name of Tenant as the act and deed of Tenant, and this
authorization is hereby declared to be coupled with an interest and not
revocable. In the event of termination for any reason whatsoever of any
underlying lease or in the event any holder of a mortgage or deed of trust
acquires title to the Premises, whether by foreclosure, deed in lieu thereof or
otherwise, Tenant shall automatically be and become Tenant of such underlying
Landlord and shall attorn to such underlying Landlord at his request or at the
option of any first mortgagee or deed of trust holder. Notwithstanding the
foregoing, so long as Tenant hereunder shall pay the rent reserved and comply
with, abide by and discharge the terms, conditions, covenants, and obligations
on its part to be kept and performed hereunder and shall attorn to the successor
in title, the peaceable possession of Tenant in and to the Premises for the term
of this Lease shall not be disturbed.
10.5. Notices. For purpose of notice or demand, the respective parties
shall be served by certified or registered mail, addressed to Tenant at the
Premises with a copy to Gudron Maria Nickel, Esq., 350 Fifth Avenue, Naples,
Florida 33410, or, if addressed to Landlord as shown on page one hereof with a
copy sent to Leonardo J. Maiman, Esquire, Brant, Moore, Macdonald & Wells, P.A.,
Suite 3100 - Barnett Center, 50 North Laura Street, Jacksonville, FL 32202.
10.6. Ordinances and Regulations. Tenant hereby covenants and agrees to
comply with all the rules and regulations of the Board of Fire Underwriters,
Officers or Boards of the City, County or State having jurisdiction over the
Premises, and with all ordinances and regulations or governmental authorities
applicable to, including without limitation, the Americans with Disabilities
Act, the Premises, at Tenant's sole cost and expense.
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10.7. Americans With Disabilities Act Compliance. Responsibility for
compliance with the requirements of Americans With Disabilities Act ("ADA") and
its Florida counterparts are to be allocated, for the purposes of this Lease, as
follows: Landlord shall be responsible for compliance in the parking areas, in
those areas of the Building occupied by those tenants which are Barnett
affiliates, and within the Leased premises only to the extent of the actual
construction of improvements by it. Tenant shall be responsible for compliance
with the ADA in its occupation, use, and operation of the Leased Premises and
additionally to the extent of any improvements, alterations, or remodeling
constructed by Tenant within the Leased Premises. Landlord and Tenant covenant
with each other that their occupation, use, and operation of the areas of the
Building which they occupy shall be in compliance with the requirements of the
ADA.
10.8. Hazardous Waste. Tenant convenants and agrees with Landlord that,
throughout the term of the Lease: (a) all hazardous or toxic substances, within
the definition of any applicable statute or regulation, which may be used by any
person for any purpose upon the Premises or the Building, shall be used or
stored thereon only in a safe and approved manner, in accordance with all
industrial standards and all laws, regulations and requirements for such storage
promulgated by any applicable governmental agency or authority; (b) neither the
Premises nor the Building will be used for the purpose of storing such
substances; and (c) no such storage or use will otherwise be allowed on the
Premises or the Building which will cause, or which will increase the likelihood
of causing, the release of such hazardous or toxic substances onto the Premises
or the Building. Tenant hereby agrees to indemnify and save and hold Landlord
harmless of and from all loss, cost (including reasonable attorneys' fees),
liability and damage whatsoever incurred by Landlord arising out of or by reason
of any violation of any applicable statute or regulation for the protection of
the environment which occurs upon the Premises or the Building, or by reason of
the imposition of any governmental lien for the recovery of environmental
clean-up costs expended by reason of such violation; provided, however, that to
the extent that Landlord is strictly liable under any such statute or
regulation, Tenant's obligation to Landlord under this indemnity shall likewise
be without regard to fault on the part of Tenant with respect to the violation
of law which results in liability to Landlord. A default under this paragraph
shall constitute an event of default under this Lease.
Alternate: Tenant shall provide, at its expense, during the full term
of this Lease and any extension or renewal thereof, a sign or signs, the form,
size, and placement of which shall be agreed to in writing by Landlord and
Tenant, prior to installation by Tenant, and signage shall be harmonious to the
general exterior architectural building treatment of the Building. Tenant shall
submit for Landlord's approval, detailed drawings including measurements,
colors, size of letters, type style, illumination, etc., of Tenant's proposed
signage. Tenant shall not erect, install, place or cause to be erected,
installed, or placed, any additional signs, temporary signs, banners, awnings,
canopies, pennants, lettering, placards, decorations or advertising media of any
type on the exterior of the Premises without obtaining, on each occasion, the
prior written consent of Landlord. Tenant shall have no right to erect any sign
of any kind or nature which advertises a business or product other than
Tenant's. Tenant shall not erect, install, place or cause to be erected,
installed or placed any lettering, placards, decorations, or advertising media
of any type in the windows of the Premises which Landlord, in its sole opinion,
considers to be distasteful or defacing, and Tenant, if so requested by
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Landlord, shall remove forthwith such material from the windows of the Premises.
All signs, and all materials placed in the windows of the Premises, shall be
maintained in such a manner so as to be sightly and in good condition and
repair. Notwithstanding the above, Tenant shall be allowed to place a sign
exhibited in Exhibit A attached.
10.9. Utilities and Services.
(a) Utilities. So long as Tenant is not in default under any
of the covenants of this Lease Agreement, Landlord shall furnish and
maintain (i) heat and air conditioning, Monday through Friday, during
normal business hours (8:00 a.m. to 6:00 p.m.) and at such other times
as Landlord in its sole discretion deems necessary for normal office
occupancy; (ii) in common areas, water for drinking fountain and toilet
and lavatory purposes only; (iii) fluorescent ceiling lighting fixtures
which will make available to Tenant light at desk levels similar to
that furnished other lessees in the Building; and (iv) electricity for
light and ordinary office purposes.
(b) Use of Utilities by Tenant. Tenant agrees to exercise due
care and prudence in the use of utilities at all times, and to comply
with all Federal, State and local guidelines concerning same. Landlord
in furnishing the foregoing services does not contemplate occupancy
involving extraordinary consumption of electricity or generation of
heat affecting temperatures otherwise normally maintained by the air
conditioning system. Landlord reserves the right to discontinue
temporarily any of the aforesaid services where necessary by reason of
accident, need for repairs, strikes, labor disputes, or the necessity
for alterations or improvements requested by Tenant or causes beyond
Landlord's control. Landlord shall not be liable for damages for such
discontinuance and there shall be no abatement or reduction in rent
unless Landlord fails to take reasonable action to restore such
services.
10.10. Parking Spaces. Usage of any parking areas shall be in
accordance with the Rules and Regulations attached as Exhibit C, as amended from
time to time. Invitees of Tenant will have the right to use the visitors parking
areas as established by Landlord from time to time.
10.11. Relationship of the Parties. Nothing herein contained shall be
deemed or constituted as creating the relationship of principal and agent or of
partnership or joint venture between the parties hereto; it being understood and
agreed that neither the method of computing rent nor a provision contained
herein nor any acts of the parties hereto shall be deemed to create any
relationship between the parties other than that of Landlord and Tenant.
10.12. Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent nor shall any
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endorsement or statement on any check or letter accompanying any check or
payment of Rent be deemed in accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy provided for in this Lease or
available at law or in equity.
10.13. Limitation on Liability of Landlord. It is specifically
understood and agreed that there shall be no personal liability on Landlord with
respect to any other convenants, conditions, or provisions of this Lease and in
the event of a breach or default by Landlord or any of its obligations under
this Lease, Tenant shall look solely to the equity of Landlord in the Building
and Premises for the satisfaction of Tenant's remedies.
10.14. Entire Agreement. It is agreed between the parties that neither
Landlord nor Tenant nor any of their agents have made any statement, promises or
agreements verbally or in writing in conflict with the terms of this Lease
Agreement. Any and all representations by either of the parties or their agents
made during negotiations prior to the execution of this Lease Agreement and
which representations are not contained in the provisions hereof shall not be
binding upon either of the parties hereto. It is further agreed that this Lease
Agreement contains the entire agreement between the parties and no rights are to
be conferred upon either party until this Lease Agreement has been executed by
Tenant and Landlord.
10.15. Modification. No modification, alteration or amendment to this
Lease Agreement shall be binding unless in writing and executed by the parties
hereto, their heirs, successors or assigns.
10.16. Provisions Severable. If any term or provision of this Lease
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease Agreement or
the application of such term or provision to persons or circumstances other
than those to which it is held invalid or unenforceable shall not be affected
thereby and each term and provision of this Lease Agreement shall be valid and
be enforced to the fullest extent permitted by law.
10.17. No Recording. This Lease Agreement shall not be recorded in the
public records without Landlord's prior written consent.
10.18. Law and Venue. This Lease Agreement shall be enforced in
accordance with the laws of the State of Florida. The agreed upon venue is
Collier County, Florida.
10.19. Waiver. The receipt of rent by Landlord with knowledge of any
breach of this Lease by Tenant or of any default on the part of Tenant in the
observance or performance of any of the obligations or convenants of this Lease,
shall not be deemed to be a waiver of any provisions of this Lease. No failure
on the part of Landlord to enforce any obligation or convenant herein contained,
nor any waiver of any right hereunder by Landlord, unless in writing, shall
discharge or invalidate such obligation or convenant or affect the right of
Landlord to enforce the same in the event of any subsequent breach of default.
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The receipt by Landlord of any rent or other sums of money or other
consideration hereunder paid by Tenant after the termination, in any manner, of
Tenant's right of occupancy or of the term herein demised, or after giving by
Landlord of any notice hereunder to effect such termination, shall not
reinstate, continue or extend the term hereof, or Tenant's right of occupancy,
or in any manner impair the efficacy of any such notice of termination as may
have been given hereunder by Landlord to Tenant prior to the receipt of any such
sum of money or other consideration, unless so agreed to in writing and signed
by Landlord. Neither the acceptance of keys nor any similar act or thing done by
Landlord, during the term hereof, shall be deemed to be a release of Tenant from
its obligations hereunder, excepting only an agreement, in writing, signed by
Landlord.
10.20. Rules and Regulations. The Rules and Regulations pertaining to
the Building, attached hereto as Exhibit C, and all Rules and Regulations which
Landlord may hereafter from time to time adopt and promulgate for the management
of the Property, are hereby made a part of this Lease Agreement and shall,
during the term of this Agreement be in all respects observed and performed by
Tenant and Tenant's employees, servants, agents, invitees and guests. Tenant
agrees to abide by, uphold and fully comply with the Rules and Regulations as
shown on Exhibit C and with such reasonable modifications thereof and additions
thereto as Landlord may make. Insofar as the attached Standard Rules and
Regulations conflict with any of the terms and provisions of this Lease
Agreement, the terms and provisions of this Lease shall control. Tenant further
agrees that Landlord shall have the right to waive any or all such rules in the
case of any one or more tenants in the Property without affecting Tenant's
obligations under this Lease and the Rules and Regulations and that Landlord
shall not be responsible to Tenant for the failure of any other tenant to comply
with the Rules and Regulations. Any written waiver given by Landlord to any
Building tenants other than those occupying ground-floor space shall also apply
to Tenant.
10.21. Certain Rights Reserved to Landlord. Landlord reserves the
following rights:
(a) To [Deleted]
(b) [Deleted]
(c) To designate all sources furnishings sign painting and
lettering, ice, drinking water, towels, toilet supplies, shoe shining,
vending machines, mobile vending service, catering, and like services
used in or on the Building.
(d) To constantly have pass keys to the Premises.
(e) [Deleted]
(f) At any time in the event of an emergency, and otherwise at
reasonable time, to take any and all measures, including inspections,
repairs, alterations, additions and improvements to the Premises or to
15
<PAGE>
the Building, a may be necessary or desirable for the safety,
protection or preservation of the Premises or the Building or
Landlord's interests, or as may be necessary or desirable in the
operation or improvement of the Building in order to comply with all
laws, orders and requirements of governmental or other authority.
(g) To install vending machines of all kinds in the Premises,
and to provide mobile vending service therefore, and to receive all of
the revenue derived therefrom, provided, however, that no vending
machines shall be installed by Landlord in the Premises nor shall any
mobile vending service be provided therefor, unless Tenant so requests.
It is understood that Landlord shall have the right but not the
obligation to so install vending machines.
(h) [Deleted]
10.22. Estoppel Certificate by Tenant. Tenant agrees that from time to
time upon not less than ten (10) days prior request by Landlord, Tenant will
deliver to Landlord a statement in writing certifying (i) that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same are in full force and effect as modified and identifying the
modifications); (ii) the dates to which the rent and other charges have been
paid; and (iii) that, so far as the person making the certificate knows,
Landlord is not in default under any provision of this Lease; and, if Landlord
is in default, specifying each such default of which the person making the
certificate may have knowledge; and (iv) such other information as Landlord may
request, it being understood that any such statement so delivered may be relied
upon by any Landlord under any ground or underlying lease, or any prospective
purchaser, mortgagee, or any assignee of any mortgage on the property.
10.23. Radon Gas Disclosure. Radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county health unit.
10.24. Waiver of Jury Trial. BY ACCEPTANCE HEREOF, TENANT AND LANDLORD
AGREE THAT NEITHER LANDLORD NOR TENANT, NOR ANY OF GUARANTORS OR ANY ASSIGNEE,
SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF TENANT (ALL OF WHOM ARE HEREINAFTER
REFERRED TO AS THE "PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDINGS, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR
ARISING OUT OF THIS LEASE OR ANY INSTRUMENT EVIDENCING, SECURING, OR RELATING TO
THIS LEASE ANY RELATED AGREEMENT OR INSTRUMENT, OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM. NONE OF THE PARTIES
16
<PAGE>
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN
WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES WITH
LANDLORD, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. LANDLORD HAS
IN NO WAY AGREED WITH OR REPRESENTED TO ANY OF THE PARTIES THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
17
<PAGE>
IN WITNESS WHEREOF, Tenant and Landlord have caused this Lease to be
duly executed as of the date of this Lease, by their respective officers or
parties thereunto duly authorized.
Signed, sealed and delivered
in the presence of: BARNETT BANK, N.A.
/s/ Xenia L. Ames By: Barnett Banks, Inc., attorney in fact
- --------------------------------- for Barnett Bank, N.A. pursuant to
Print Name: Xenia L. Ames that certain Power of Attorney dated
as of March 1, 1992
/s/ Randy Ayala
- ---------------------------------
Print Name: Randy Ayala
Witnesses
By: /s/ Illegible
------------------------------
Print Name: Illegible
---------------------
Its: Transaction Officer
---------------------------------
"Landlord"
/s/ Illegible
- --------------------------------- CERTIFIED DIABETICS, a Delaware
Print Name: Illegible corporation
/s/ Xenia L. Ames
- --------------------------------- By:______________________________________
Print Name: Xenia L. Ames Print Name: Randy Ayala
Its: V.P.
-----------------------------------------
"Tenant"
18
<PAGE>
EXHIBIT A
Legal Description
(To be verified with Title Commitment and Survey, if any)
Lots 14 and 15, East Naples Industrial Park, recorded in Plat Book 10,
page 114, of the public records of Collier County, Florida.
19
<PAGE>
EXHIBIT B
DESCRIPTION OF TENANT IMPROVEMENTS APPROVED BY LANDLORD
20
<PAGE>
EXHIBIT C
RULES AND REGULATIONS (TYPICAL)
1. Tenant shall not operate any machinery or apparatus other than usual small
business machines. No article deemed hazardous because of flammability and
no explosive or other articles of an intrinsically hazardous nature shall
be brought into the Building. A business machine such as a computer may be
used in Premises only if Tenant agrees to bear the cost of installation and
possible modification to Premises required to accommodate such computer.
2. No additional locks or similar devices shall be placed upon doors of
Premises and no locks shall be changed except with written consent of
Landlord. Upon the termination of Lease, Tenant shall surrender to Landlord
all keys to Premises.
3. Tenant shall be permitted to move furniture and office furnishings into or
out of Building only at such times, and in such a manner designated by
Landlord so as to cause the lease inconvenience to other Tenants.
Sales, furniture, boxes or other bulky articles shall be brought into
and placed in Building. Any damage done to Building. Tenants, or other
persons by moving a safe or other bulky articles in or out of Premises, or
by overloading the floor, shall be paid for by Tenant causing such damage.
4. No person shall be employed by Tenant to do janitorial work in Premises,
and no persons other than the janitors for Building shall clean Premises,
unless Landlord shall first give its written consent. Any person employed
by Tenant with Landlord's consent to do janitorial work, shall, while in
Building, be subject to and under the control and direction of the Building
Superintendent, but shall not be considered the agent or servant of the
Building Superintendent or of Landlord.
5. Window coverings other than building standard, either inside or outside the
windows, may only be installed with Landlord's prior written consent and
must be furnished, installed and maintained at the expense of Tenant and at
Tenant's risk.
6. Tenant shall not install or erect any antennae, aerial wires or other
equipment outside the Building without in every instance obtaining prior
written approval from Landlord, except for a less than 2' satellite dish on
the roof.
7. The sidewalks, entrances, passages, courts, corridors, vestibules, halls,
in or about the Building shall not be obstructed or used for storage or for
any purpose other than ingress and egress by Tenant.
8. Tenant shall not create or maintain a nuisance in the Premises nor make or
permit any noise or odor or use or operate any electrical or electronic
devices that emit loud sounds, air waves, or odors, that are objectionable
to other occupants or Tenants of this or any adjoining building or
premises; nor shall the Premises be used for lodging or sleeping nor for
any immoral or illegal purpose that will damage the Premises, or injure the
reputation of the Building.
21
<PAGE>
9. Tenant and occupants shall observe and obey all parking and traffic
regulations imposed by Landlord on the Premises. Landlord in all cases
reserves the right to designate "no parking" zones, traffic right-of-ways
and general parking area procedures. Failure of Tenant to comply with
parking regulations will constitute a violation of the Lease. Landlord may
institute such measures for proper parking as are necessitated by
conditions existing at a particular time, including but not limited to
towing, impounding and/or tagging or improperly parked vehicles.
10. Landlord reserves the right at all times to exclude newsboys, loiterers,
vendors, solicitors and peddlers from the Building and to require
registration, satisfactory identification and credentials from all persons
seeking access to any part of the Building, at times other than during
ordinary business hours. Landlord shall exercise its best judgment in
executing such control but shall not be held liable for granting or
refusing such access.
11. Any sign, lettering, picture, notice or advertisement installed within the
Premises which is visible from the public corridors within the Building
shall be installed in such manner and be of such character and style.
12. No animals or pets or bicycles or skateboards or other vehicles shall be
brought or permitted to be in the Building or the Premises.
13. Tenant shall not make any room-to-room canvass to solicit business from
other Tenants of the Building.
14. Tenant shall not waste electricity, water or air-conditioning, and shall
cooperate fully with Landlord to assure the most effective operation of the
building's heating and air-conditioning. Tenant shall not adjust any
controls other than room thermostats installed Tenant's use. Tenant shall
not tie, wedge, or otherwise fasten open any water faucet or outlet. Tenant
shall keep all corridor doors closed.
15. Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage. Except during Tenant's normal business hours, Tenant
shall keep all doors to the Premises locked and other means of entry to the
Premises closed and secured, and be liable for any loss caused by
negligence thereto.
16. Tenant shall not overload any floor and shall not install any heavy
objects, safes, business machines, files or other equipment without having
received lessor's prior written consent as to size, maximum weight, routing
and location thereof. Sales, furniture, equipment, machines and other large
or bulky articles shall be brought through the Building and into and out of
the Premises at such times and in such manner as Landlord shall direct and
at Tenant's sole risk and responsibility. Prior to Tenant's removal of any
such articles from the Building, Tenant shall obtain written authorization
thereof at Landlord's office and shall present such writing to a designated
employee of Landlord.
22
<PAGE>
17. Tenant shall not in any manner deface or damage the Building.
18. Tenant shall not use more electrical current from individual or collective
circuits as is designated by the amperage rating or said circuits at the
circuit breaker panels for Tenant's suite. Should Tenant exceed the safe
capacity as stated on the circuit breakers for said circuits then Tenant
shall bear the entire expense of modifications to the electrical system
shall not relieve Tenant from the obligation to use more electricity than
such safe capacity.
19. Landlord reserves the right to make such further reasonable rules and
regulations as in its judgment may from time to time be necessary for the
safety, care and cleanliness of the Premises and for the preservation of
good order therein. Any additional rules and regulations promulgated by
Landlord shall be biding upon the parties hereto with the same force and
effect as if they had been inserted herein at the time of execution hereof.
Tenant shall be responsible for the observance of all of the foregoing
rules and regulations by Tenant's employees, agents, clients, customers,
invitees and guests. Landlord shall not be responsible for any violation of
the foregoing rules and regulations by other Tenants of the Building and
shall have no obligation to enforce the same against other Tenants.
20. SMOKING: All tenants shall comply with the provisions of the FLORIDA CLEAN
INDOOR AIR ACT as revised in Chapter 386.201-209, Florida Statutes. This
building falls into the category of a "place of employment". All common
areas, including hallways, lobbies, bathrooms, stairwells, elevators, etc.,
are designated as non-smoking areas. Individual tenants must ensure that
they are in compliance with this statute as it relates to tenants' spaces.
23
<PAGE>
EXHIBIT D
[LOGO]
THIS SIGN WILL BE APPROXIMATELY THE SAME SIZE AS THE CURRENT BARNETT BANK SIGN.
24
<PAGE>
Exhibit E
FILES-STORAGE-SHELVING
ITEM #: QUANTITY: MANUFACTURER DESCRIPTION:
- ------- --------- ------------ ------------
1 2 EA. METAL STORAGE CABINETS: 36W X 18D X 72H
2 1 EA MOBILE FILE CABINET 14"X 16"
3 2 EA 5-DRAWER LETTER VERTICLE FILE - NO LOCK
4 2 EA 2-DRAWER VERTICLE FILE - NO LOCK
5 2 EA 3 DRAWER LATERAL FILE W/LOCK
6 4 EA 4-DRAWER LEGAL VERTICLE FILE W/LOCK
7 4 EA 4-DRAWER LETTER VERTICLE FILE NO LOCK
8 4 EA 4-DRAWER LETTER VERTICLE FILE W/LOCK
9 1 EA 2 DRAWER LEGAL FILE W/LOCK
10 1 EA 3 DRAWER LATERAL FILE W/LOCK
2 DRAWER LATERAL FILE W/SLIM LINE
11 1 EA STORAGE DRAWER
12 6 EA 2 DRAWER LATERAL FILE 36"
13 1 EA 2-DRAWER VERTICLE FILE - BLACK
14 1 EA 2-DRAWER LATERAL FILE WOOD GRAIN FINISH
15 1 EA 5-DRAWER LATERAL FILE - BROWN
16 15 EA 5-DRAWER LATERAL FILE- BUFF
17 5 EA 5 DRAWER LATERAL FILE -CREAM
18 1 EA 2-SHELF WOOD BOOKCASE
18 1 EA 3-SHELF WOOD BOOKCASE
19 1 EA LAMINATE DOOR STORAGE UNIT 103" W X 24"
DEEP
20 1 EA WOOD BOOKSHELF 32W X 20 X 29 (LOBBY)
MISC:
1 1 WOOD FINISH PRESENTATION BOARD 48 X 48
2 1 TACK/MARKER BOARD 42H X 46W
<PAGE>
DESK/CREDENZA/TABLES
ITEM #: QUANTITY: MANUFACTURER: DESCRIPTION:
- ------- --------- ------------- ------------
1 1 DESK 30 X 60
2 1 STEELCASE DESK 30 X 66
3 1 CREDENZA W/HUTCH 72 X 24
4 1 2-DRAWER LATERAL FILE 36" WOOD
5 1 KIMBALL 38" 2 DR. LATERAL FILE
5 1 36" 2 DR. LATERAL FILE/LAMINATE
6 1 BOOKCASE - 4 SHELF WOOD 36 X 14 X 48H
7 1 KIMBALL DESK W/LEFT RETURN 30 X 66; 20 X 40
7 1 KIMBALL CREDENZA W/KNEE SPACE 20 X 60
8 1 KIMBALL DESK 72 X 36
8 1 KIMBALL CREDENZA 66 X 20
8 1 KIMBALL BOOKCASE 30 X 14 X 50
9 1 DESK 30 X 66
10 1 KIMBALL DESK 36 X 72
11 1 DESK W/RIGHT RETURN 36 X 66; 20 X 42
12 1 KIMBALL CREDENZA 20 x 66
13 2 JOFFCO DOOR UNIT/BOOKCASE 30 X 19
14 1 JOFFCO CREDENZA
15 1 JOFFCO DESK 72 X 36
16 1 BOOKCASE 36 X 12
17 1 KIMBALL LATERAL FILE: WOOD 2 DRAWER
18 1 CREDENZA 20 X 72
19 1 KIMBALL DESK W/LEFT RETURN 30 X 66; 20 X 40
20 1 KIMBALL DESK W/RIGHT RETURN 36 X 66; 20 X 42
20 2 KIMBALL 32" LATERAL FILE: WOOD 2 DRAWER
21 1 DESK 30 X 66
21 1 CREDENZA 60 X 20
22 1 CREDENZA 60 X 20
23 4 LAMINATE TABLE W/WOOD EDGE 60 X 30
24 1 HERMAN MILLER WORK TABLE 72 X 30
25 1 36" ROUND PEDESTAL LEG TABLE
26 1 26 X 26 TABLE
27 3 96 X 32 TABLE
28 1 BAKER END TABLE
29 1 BAKER END TABLE 32 X 32
30 2 KIMBALL END TABLE 26 X 20 (LOBBY)
31 1 SEMI-CIRCLE LAMINATE DESK (LOBBY)
<PAGE>
CHAIRS
ITEM #: QUANTITY: MANUFACTURER: DESCRIPTION:
- ------- --------- ------------- ------------
1 20 NATIONAL WOOD ARM CHAIR
2 1 STEELCASE EXECUTIVE CHAIR
3 1 NATIONAL WOOD SLED BASE ARM CHAIR
4 1 JASPER EXECUTIVE CHAIR
5 1 WOOD BASE STENO W/ARMS
6 1 HIGH BACK EXECUTIVE CHAIR
7 1 HIGH BACK EXECUTIVE CHAIR
8 2 LIFELINE ARM CHAIR
9 1 STEELCASE METAL SLED BASE CHAIR
10 1 KIMBALL UPHOLSTERED ARM/STENO
11 7 HAWORTH DARK PINK STENO W/ARMS
12 6 HAWORTH BLUE STENO W/ARMS
13 1 HAWORTH DARK PINK STENO W/ARMS - HIGH BACK
14 2 HERMAN MILLER SLED BASE ARM CHAIR - TEAL
15 2 JASPER WOOD ARM CHAIR
16 1 KIMBALL WOOD ARM CHAIR- ROSE
17 3 KIMBALL WOOD ARM CHAIR-BURGANDY
18 2 KIMBALL WOOD ARM CHAIR - BLUE
19 3 HAWORTH LIGHT PINK STENO W/ARMS
20 8 HERMAN MILLER BURGANDY ARMLESS STENO
21 4 HERMAN MILLER TEAL STENO W/ARMS
22 12 HERMAN MILLER RED ARMLESS STENO
23 2 JASPER TRADITIONAL ARM CHAIR
24 3 SCHAFFER WOOD ARM CHAIR/BEIGE FABRIC
24 1 STEELCASE BURNT ORANGE MID-BACK STENO W/ARMS
25 2 WOOD ARM CHAIR
26 1 JASPER MID-BACK TRAD. EXECUTIVE CHAIR
27 3 UPHOLSTERED GREE ARM CHAIRS (LOBBY)
28 4 SOFA WEDGE PIECES (LOBBY)
<PAGE>
HAWORTH SYSTEMS FURNITURE
QUANTITY: DESCRIPTION:
- --------- ------------
3 EA. PANEL 60 W X 67 H
13 EA. PANEL 48 W X 67 H
31 EA. PANEL 36 W X 67 H
9 EA. PANEL 30 W X 67 H
11 EA. PANEL 24 W X 67 H
2 EA. PANEL 12 W X 67 H
1 EA. CORNER END BRACKET 67"H
1 EA. END PANEL-RIGHT 28" H X 23"D
1 EA. END PANEL- LEFT 28" H X 23"D
1 EA. WORKSURFACE 72"W X 30"D
11 EA. WORKSURFACE 72"W X 24"D
3 EA. WORKSURFACE 60" X 30"D
10 EA. WORKSURFACE 48"W X 30"D
3 EA. WORKSURFACE 48"W X 24"D
2 EA. WORKSURFACE 36"W X 24"D
6 EA. PENCIL/BOX/FILE PEDESTAL (ATTACHED)
7 EA. FILE/FILE PEDESTAL (ATTACHED)
3 EA. PENCIL/BOX PEDESTAL (ATTACHED)
1 EA. PENCIL/FILE PEDESTAL (ATTACHED)
3 EA. MOBILE BOX/FILE PEDESTAL
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 60"W
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 48"W
21 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 36"W
1 EA. TACK BOARD - BLUE 42" W X 15"H
1 EA. TACK BOARD - 48"W X 15"H
2 EA. TACK BOARD 60" W X 15"H
13 EA. TACK BOARD 36" X 15"H
6 EA. KEYBOARD DRAWER 32"W
2 EA POWER POLES
<PAGE>
STEELCASE SYSTEMS FURNITURE
QUANTITY: DESCRIPTION:
- --------- ------------
5 EA. PANEL 60 W X 65 H - BEIGE
11 EA. PANEL 48 W X 65 H - BEIGE
53 EA. PANEL 36 W X 65 H - BEIGE
40 EA. PANEL 24 W X 67 H - BEIGE
1 EA. PANEL 24 W X 34 H - BEIGE
3 EA. PANEL 30 W X 65 H - BROWN
7 EA. PANEL 24 W X 65 H - BROWN
3 EA. PANEL 48 W X 34 H - BROWN
6 EA. PANEL 24 W X 34 H - BROWN
40 EA END BRACKET - RIGHT
42 EA. END BRACKET - LEFT
6 EA. END LEG - RIGHT
6 EA. END LEG - LEFT
5 EA. END PANEL-RIGHT 28" H X 23"D
6 EA. END PANEL- LEFT 26" H X 23"D
19 EA. WORKSURFACE 72"W X 24"D
7 EA. WORKSURFACE 60" X 24"D
4 EA. WORKSURFACE 48" W X 24"D
17 EA. WORKSURFACE 36"W X 24"D
27 EA. PENCIL/BOX/FILE PEDESTAL (ATTACHED)
4 EA. MOBILE BOX/FILE PEDESTAL 22"DEEP
1 EA. MOBILE BOX/FILE PEDESTAL 30"DEEP
4 EA. 36" LATERAL FILE HANGING
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 72"W
4 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 60"W
9 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 48"W
8 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 36"W
6 EA. KEYBOARD DRAWER
7 EA. POWER POLES
2 EA. WORK TABLE 90" W X 30" D
1 EA. WORK TABLE 30" W X 30" D
<PAGE>
1997 MEDICARE/MEDICAID REAGENT PURCHASING AGREEMENT
CONTRACT A
This agreement made and effective this 25 day of June, 1997 by and between Bayer
Corporation, acting through its Diagnostics Division at 511 Benedict Avenue,
Tarrytown, New York, 10591 (hereinafter "Bayer"), and__________________________
____________________________________________________ located at
_________________________________________________________________ (hereinafter
"Participant").
In consideration of the mutual promises and covenants contained herein, the
parties agree as follows:
1. Introduction
1.1 Pursuant to this Agreement, Bayer agrees to sell and Participant agrees
to purchase GLUCOMETER ENCORE(R) Blood Glucose Test Strips ("Products")
and/or GLUCOMETER ELITE(R) Blood Glucose Test Strips ("Products") for
resale exclusively to end-users who are Medicare/Medicaid recipients
("End-users").
1.2 Participant is currently a Bayer Authorized Distributor (Drug
Wholesaler, Physician and Hospital Distributors, Direct Retail Account,
Scientific Supply) which currently accepts Medicare/Medicaid assignment
or a Diabetes Care Center which is currently an authorized distributor
of Bayer's Products pursuant to a separate agreement between Bayer and
Participant the terms of which are incorporated herein by reference.
1.3 Bayer will issue a credit to the Participant for the rebate amount set
forth on Exhibit A and/or Exhibit B, attached hereto and made a part
hereof, for sales made to End-users for which Participant accepts
assignment of Medicare/Medicaid claims.
Accounts must refrain from debiting on current or past due statements
for proper issuance of credit by Bayer Corporation, Diagnostics
Division.
2. Credits
2.1 Participant agrees to purchase Products in the quantities and at the
prices designated in subparagraph 2.1.1. Bayer has no control over the
prices the prices for which the Products are sold by the Participant to
the End-users.
<TABLE>
<CAPTION>
2.1.1 Product
Product Number Unit Price Effective Date*
------- ------- ---------- ---------------
<S> <C> <C> <C>
GLUCOMETER ENCORE **per box 1/1/97- 1/31/97
Test Strip 50's 2250 **per box 2/1/97-12/31/97
GLUCOMETER ELITE **per box 1/1/97- 1/31/97
Test Strip 50's 3918 **per box 2/1/97-12/31/97
Minimum case quantities
</TABLE>
*Price may change with 30 day written notice. LIT. PART #0450969
January 1997
- -------------
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
2.2 In consideration of the Participant's acceptance of the
Medicare/Medicaid reimbursement and co-payment as payment in full and
the submission of documentation which is acceptable to Bayer, Bayer will
credit the Participant's account in the amount of * for each box of
Glucometer Encore 50's; (#2250), and /or * for each box of Glucometer
Elite 50's (#3918) sold by the Participant to an End-user.
2.3 Participant shall claim credits on a monthly basis by submitting a
completed copy of Exhibit A and/or Exhibit B to the Bayer Customer Order
Services Department not later than the tenth day of the month following
the month for which the credits are being claimed. If the information
submitted by Participant is satisfactory, Bayer will issue a credit to
the Participant's account within twenty-one working days of receipt.
Claims will not be honored if submitted to Bayer 90 days after
Participant sale.
2.4 If the documentation submitted by Participant is insufficient to prove
the claimed credits for sales to End-users, Bayer will so notify the
Participant who will have ten (10) days from the date of such
notification to provide the necessary documentation. If Bayer does not
receive the documentation within this period, the credit will not be
granted.
2.5 Participant agrees that Bayer has the right to perform an audit of
Participant's records and/or the records of patients submitted to
participant at any time, upon reasonable prior notice, to determine that
rebates have been paid in accordance with the provisions of this
Agreement. Participant shall reimburse Bayer for any amounts that the
audit determines have been paid incorrectly, plus the costs of the audit
if the amount is incorrect by $1,000 or more.
2.6 Any credits or other price reductions issued by Bayer to Participant
under this Agreement may constitute a discount under Section 1128B (b)
(3) (A) of the Social Security Act [42 USC 1320a-7b (b) (3) (A)].
Accordingly, Participant agrees to disclose such credit or other price
reductions under any state or federal program which provides cost or
charge based reimbursement to the Participant for the goods provided
under this Agreement.
2.7 Products are for distribution in the U.S. only.
3. Term
3.1 This agreement will commence on 6/25/97 and shall terminate on December
31, 1997. It may be extended or modified only upon execution of a
writing by authorized representatives of both parties.
3.2 Bayer may terminate this Agreement immediately upon written notice to
the Participant if Bayer, in its sole judgment, determines that the
Participant has:
3.2.1 Knowingly claimed rebates for sales that were not made to
Medicare/Medicaid End-users; or
- ----------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
-2-
<PAGE>
3.2.2 Collected or attempted to collect from Medicare/Medicaid
recipients in an amount in excess of the Medicare/Medicaid
reimbursement rate and co-payment rate and the participant has
submitted rebate claims to Bayer for such uses.
3.2.3 Sold the Products provided to Participant under this Agreement
to parties other than Medicare/Medicaid End-users and the
participant has submitted rebate claims to Bayer for such uses.
3.2.4 Participant has acquired product at a price other than listed
in 2.1.1.
3.3 Bayer may terminate this Agreement for any reason upon sixty (60) days
prior written notice to Participant.
3.4 Either party may terminate this Agreement upon thirty (30) days prior
written notice upon the happening of any of the following events.
3.4.1 the adjudication of either party to be bankrupt or insolvent;
3.4.2 the filing by either party of a petition in bankruptcy or
insolvency;
3.4.3 the filing by either party of a petition or answer seeking
reorganization or readjustment under any law relating to
insolvency or bankruptcy;
3.4.4 the appointment of a receiver with respect to all or
substantially all of the property or either party;
3.4.5 any assignment by either party of its assets for the benefit of
creditors;
3.4.6 the institution by either party of any proceedings for
liquidation or the winding up of its business other than for
purposes of reorganization, consolidation or merger.
4. Warranty
4.1 Bayer's standard warranty terms shall apply to Products provided under
this Agreement.
5. General
5.1 Governing Law: This Agreement will be governed by the laws of the State
of New York.
5.2 Assignment: This Agreement shall not be assigned by Participant without
the prior written consent of Bayer.
5.3 Modification: This Agreement contains all the agreements and conditions
applicable to this undertaking. All prior oral and written agreements of
any kind are excluded. The terms and conditions of this Agreement shall
not be added to, modified, superseded or otherwise altered except by a
written modification signed by authorized representatives of both
parties.
-3-
<PAGE>
5.4 No Waiver of Conditions: Failure of Bayer to insist on strict
performance shall not constitute a waiver of any of the provisions of
this Agreement or waiver or any other default of the Participant.
5.5 Independent Contractor and Indemnification
5.5.1 This Agreement does not create a special or fiduciary
relationship between the parties; Participant is an independent
contractor, and nothing in this Agreement is intended to
constitute either party an agent, legal representative,
subsidiary, joint venturer, partner, employee or servant of the
other for any purpose whatsoever.
5.5.2 Nothing in this Agreement authorizes Participant to make any
contract, warranty, or representation on Bayer's behalf or to
incur any debt or other obligation in Bayer's name. Participant
shall indemnify and hold Bayer, and Bayer's affiliates and
parent company's officers, directors, shareholders, employees
and representatives, harmless against any and all claims,
losses, costs, expenses, liabilities, and damages arising
directly or indirectly from, as a result of, or in connection
with Participant's performance of its obligations under this
Agreement including the costs, including attorney's fees, of
defending against them.
6. All notices to the respective parties shall be in writing and shall be
sent via certified mail return receipt requested to the following addresses:
To Bayer Corporation:
Bayer Corporation, Diagnostics Division
511 Benedict Avenue
Tarrytown, New York 10591
Attn.: Douglas P. Kuzyk
To: CERTIFIED DIABETIC SUPPLIES, INC.
-------------------------------------------
Name of Participant
1951 J & C BLVD.
- -------------------------------------
NAPLES, FL 34109
- -------------------------------------
Attn: Peter J. Fiscina
--------------------------------
Bayer Corporation CERTIFIED DIABETIC SUPPLIES, INC.
(Authorized Representative in Tarrytown ---------------------------------
Office) Name of Participant
By: By: /s/ PETER J. FISCINA
----------------------------------- ---------------------------------
Authorized Signature Authorized Signature
Peter J. Fiscina Pres/CEO
- -------------------------------------- ---------------------------------
Print Name and Title Print Name and Title
6/25/97
- -------------------------------------- ---------------------------------
Date Date
- --------------------------------------
Bayer Corporation Representative
-4-
<PAGE>
Exhibit A
BAYER CORPORATION, DIAGNOSTICS DIVISION PROPOSAL TO
CERTIFIED DIABETIC SUPPLY
CONTRACT PERIOD: Date of Acceptance through June 30, 2002
<TABLE>
<CAPTION>
Rebate
NDC Product Basis
Number Code Product Name Price Rebate
------ ---- ------------ ----- ------
<S> <C> <C> <C>
0193-3918-50 3918 GLUCOMETER ELITE(R) Test Strips, 50's * *
0193-2250-50 2250 GLUCOMETER ENCORE(R) Test Strips, 50's * *
</TABLE>
- -------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
Exhibit B
Bayer Corporation, Diagnostics Division
Participating Plans List
<TABLE>
<CAPTION>
================================================================================================
Number of Model
Participating Plan Name Address City ST Zip Covered Lives Type*
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
*HMO, IPA, PPO, employer
Missing information (i.e. address, city, state, zip, model type) to be provided
by Certified Diabetic Supply before execution of this Agreement.
<PAGE>
LIFESCAN INC
a Johnson & Johnson company
Purchasing Agreement Contract
for Medicare Distributors Pilot Program
Date: June 2, 1997
Distributor's Name: Certified Diabetic Supplies, Inc.
Distributor's Address: 1951 J & C Blvd.
Naples, FL 34109-6215
Distributor's Phone (800) 445-4313 FAX: (800) 529-0543
Key Contacts: Peter J. Fascina Title: President
Signatures:
/s/ PETER J. FISCINA /s/ GLENN JOHNSON
- ---------------------------- ----------------------------
Signature Signature
Peter J. Fiscina Glenn Johnson
- ---------------------------- ----------------------------
Name (Please Print) Name (Please Print)
6/25/97 June 2, 1997
- ---------------------------- ----------------------------
Date Date
I. INTRODUCTION
A. Pursuant to this agreement, LifeScan agrees to sell and Certified
Diabetic Supplies, Inc. (hereafter, "Customer") agrees to buy Medicare
ONE TOUCH and SureStep Test Strips for sale exclusively to Medicare
end-users according to the terms set forth below.
<PAGE>
PAGE 2
B. This contract supersedes any existing agreement between LifeScan and
Customer covering the same subject matter.
II. TERM
A. This agreement shall commence on the date executed by both parties and
be effective with shipments beginning May 15, 1997 (hereinafter, the
effective date), and shall remain in effect until December 31, 1997.
B. This Agreement will be automatically renewed for successive annual
periods unless either party delivers, by December 1 of the current
year, written notice stating it does not intend to renew.
III. DEFINITIONS
A. Medicare Distributor - 1) An entity in the business of selling blood
glucose self-monitoring devices, such as ONE TOUCH meters and test
strips, 2) At least 70% of the entity's customer base for these blood
glucose meters and test strips are enrolled in Medicare or Medicaid, 3)
The entity has signed an agreement to accept assignment as a "preferred
supplier" for Medicare, and 4) The entity provides an enhanced product
consisting of test strips and patient services that promote tight
control of glucose levels, frequent testing and an improved quality of
life for people with diabetes.
B. Product Discounts - As an incentive for achieving the volumes and
providing services to the Medicare/Medicaid community, discounts are
available according to the following schedule:
<TABLE>
<CAPTION>
Product Qtrly 50's Rqmt Net Price* Patient Services
------- --------------- ---------- ----------------
<S> <C> <C> <C>
1. ** ** 800# for Patient Training
2. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
3. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
In-Home Patient Assistance
4. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
In-Home Assistance
CDE Hot-Line Assistance
</TABLE>
- ---------------------
*Note: Net Price as of 7/1/96, if a price increase is announced after this date,
the Medicare Net Price increase will be proportionate.
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
PAGE 3
C. Quarterly Volume Objectives (QVO) - quarterly volume requirements
established by the schedule above.
D. Medicare ONE TOUCH Test Strips - 50's - Genuine ONE TOUCH and
SureStep(TM) Test Strips, containing 2 vials of 25 strips for a total
of 50, specially packaged with a label marked "For Medicare Only",
LifeScan part # 010-391, and NDC # 53885-391-50, for ONE TOUCH; part
# 010-442 and NDC # 53885-442-50, for SureStep.
E. Medicare Assignment End-User - a qualified Medicare recipient for whom
the Customer has agreed to process the Medicare paperwork and accept
80% of the authorized Medicare reimbursement rate directly from
Medicare, plus the remaining 20% directly from the end-user or a
supplementary insurance provider.
F. 50-strip vial - one carton of Medicare ONE TOUCH or SureStep Test
Strips - 50's containing 2 vials of 25 strips for a total of 50.
G. Unit - one carton of Medicare ONE TOUCH or SureStep Test Strips - 50's
containing 2 vials of 25 strips for a total of 50 and the basis for
measuring sales volume.
H. Original Invoice Price - *
I. Credit Certificate - a document completed by a LifeScan representative
at the time of the on-site quarterly audit that verifies compliance to
the terms of the Agreement and calculates the Product Discounts earned
on each invoice. The Credit Certificate can be attached to an
outstanding LifeScan invoice. *
IV. PRICING AND QUANTITY LIMITATIONS
A. LifeScan will sell Medicare ONE TOUCH or SureStep Test Strips to
Customer at * (hereinafter, the "Original Invoice Price").
B. *
- -----------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
PAGE 4
C. Customer agrees to permit a quarterly on-site audit by LifeScan. This
will confirm shipments to Medicare customers, reconcile Credit
Certificates and verify that the Consumer Service Requirements are
being met.
D. Customer agrees that orders exceeding * are subject to LifeScan
approval. Customer agrees to provide complete and adequate
documentation of increased Medicare assignment end-user demand, if
necessary.
E. Customer agrees to maintain a good credit status within its previously
approved limits and consistent with its current business conditions. If
the Customer exceeds its limit, LifeScan reserves the right to refuse
or hold additional shipments. Resolving a credit hold may require
advance payments on outstanding invoices that exceed the credit limit.
F. LifeScan has no control over the Customer's price to the end-user.
V. CUSTOMERS REPRESENTATIONS AND OBLIGATIONS
A. Customer represents that it is a Medicare Distributor, as defined
above. Customer further represents that at least 70% of the sales
(measured by unit sales) of such test strips made in the 12 months
preceding the Effective Date of this Agreement, were made to Medicare
Assignment end-users, and that Customer accepted 80% of the authorized
Medicare reimbursement ceiling price, plus the 20% co-payment from
either the end-user or a supplementary insurance carrier, as full
payment.
B. During the term of the Agreement, following the Effective Date,
Customer will only accept 80% of the authorized Medicare reimbursement
ceiling for LifeScan blood glucose products, plus the 20% co-payment
from either the end-user or a supplementary insurance carrier, as
payment in full. Customer agrees to sell Medicare ONE TOUCH or SureStep
Test Strips (measured by unit sales) to Medicare assignment end-users
only. Failure by Customer to sell Medicare ONE TOUCH or SureStep Test
Strips exclusively to Medicare assignment end-users during the one-year
term renders this Agreement immediately voidable by LifeScan.
C. Customer agrees to buy from LifeScan at least the minimum number of
units of 50-strip vials required for its QVO for each quarter of the
contract term, commencing on the Effective Date.
D. Customer agrees to sell Medicare ONE TOUCH or SureStep Test Strips to
Medicare assignment end-users only. If LifeScan, at its sole
discretion, believes that Customer has made a knowing sale of Medicare
ONE TOUCH or SureStep Test Strips to a person or entity other than a
Medicare assignment end-user, LifeScan may terminate this Agreement
immediately.
- ----------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application of
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
PAGE 5
E. Customer agrees not to advertise Medicare ONE TOUCH or SureStep Test
Strip prices. Customer agrees that advertising price is not essential
element of making sales to the Medicare assignment end-user since
Customer is accepting the Medicare reimbursement ceiling, including the
patient co-pay, as full payment. Failure to comply with the terms of
this paragraph renders the Agreement immediately voidable by LifeScan.
F. Customer agrees that, consistent with good professional practices, it
will not recommend that any Medicare assignment end-user requesting ONE
TOUCH or SureStep Test Strips consider accepting a substitute reagent
strip. Failure to comply with the terms of this paragraph renders the
Agreement immediately voidable by LifeScan.
Customer agrees to provide LifeScan with complete and adequate
documentation on sales and inventories, no later than 15 days after
each invoice becomes due, confirming sales of Medicare ONE TOUCH or
SureStep Test Strips to Medicare assignment end-users only. Failure to
comply with the terms of this paragraph renders the Agreement
immediately voidable by LifeScan. Customer's obligations and LifeScan's
rights under this paragraph survive termination of the Agreement.
VI. PRODUCT RETURNS
Product returns will be covered by the terms of the existing agreement
between the Customer and LifeScan. Customer agrees that all product
returns will be deducted from the volume calculations used for Volume
Discounts.
VII. DELAYS
Customer will not be penalized in volume calculations for Volume
Discounts if LifeScan was unable to fill legitimate orders or the
product was backordered.
VIII. WARRANTIES
LifeScan warrants to Customer that each product will be free from
defects in materials and workmanship and complies with LifeScan
specifications. Customer acknowledges and agrees that LifeScan's sole
responsibility in case of breach of the foregoing warranty shall be for
LifeScan to comply with LifeScan's policy for the return of defective
products in effect at the time of such breach, and LifeScan shall not
be liable to Customer for any other damages, including but not limited
to consequential for punitive damages arising out of breech of this
warranty. The foregoing warranty shall not apply to and LifeScan is not
responsible for any defects or damage caused by improper storage,
misuse, abuse, neglect or accident caused by persons not employed by
LifeScan.
<PAGE>
PAGE 6
IX. INDEMNIFICATION
Customer shall hold harmless and indemnify LifeScan, its agents and
employees, from any third party claims, suits, losses and expenses,
including attorney fees, provided that any such claim, suit, loss or
expense is attributable to bodily injury sickness, disease, or death,
or injury to property which is caused by negligence or intentional acts
of Customer, its agents, employees, subcontractors or suppliers, or
failure to comply with federal, state or local law including but not
limited to statutes, regulations and ordinances prohibiting illegal
discrimination or retaliation. And, LifeScan shall hold harmless and
indemnify Customer, its agents and employees, from any third party
claims, suits, losses and expenses, including attorney fees, provided
that any such claim, suit, loss or expenses is attributable to bodily
injury, sickness, disease, or death, or injury to property which is
caused by negligence or intentional acts of LifeScan, its agents,
employees, subcontractors or supplies, or failure to comply with
federal, state or local law including but not limited to statutes,
regulations and ordinances prohibiting illegal discrimination or
retaliation.
X. CONFIDENTIALITY
A. The pricing terms and conditions of this Agreement are considered
proprietary and confidential. Within Customer, such pricing terms and
conditions will be restricted to Customer's management directly
involved with administering the Agreement.
B. Customer agrees not to divulge the pricing, terms or conditions of
this Agreement to an outside party. If LifeScan, at its sole
discretion, believes Customer has breached the provisions of this
section IX, it may terminate Agreement immediately.
C. Customer's obligations and LifeScan's rights under this paragraph
survive termination of this Agreement.
XI. ARBITRATION
Any and all unresolved disputes between the parties relating to this
agreement shall be settled by binding arbitration at a location within
San Jose, California. Such arbitration shall be conducted in accordance
with the then current rules of the American Arbitration Association
("AAA") with a panel of three arbitrators to be selected from the
National Panel or Arbitrators of AAA pursuant to the AAA rules.
Reasonable discovery as determined by the arbitrators shall apply to
the arbitration proceeding and California law shall govern. Judgment
upon award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Each party shall bear its own costs. No
punitive damages shall be awarded.
<PAGE>
PAGE 7
XII. RELATIONSHIP OF THE PARTIES
The relationship between LifeScan and the Customer is that of supplier
and purchaser. Customer is an independent contractor and is not the
legal representative, agent, joint venturer, partner, or employee of
LifeScan for any purpose whatsoever and has no right or authority to
assume or create any obligations of any kind or to make any
representations or warranties, whether express or implied, on behalf of
LifeScan, or to bind LifeScan in any respect whatsoever.
XIII. TERMINATION
The intent of this contract is to establish an on-going business
relationship that provides efficient distribution to Medicare patients,
delivers services to those consumers, encourages increased blood
glucose monitoring compliance and reduces the associated medical costs.
Except as otherwise specified in the Agreement, this Agreement may be
terminated by either party in the event of a breach of any material
term after 6 month notice to the breaching party and an opportunity to
cure.
<PAGE>
MULTIPLAN, INC.
PARTICIPATING FACILITY AGREEMENT
THIS AGREEMENT, effective May 20, 1997 is entered into between MultiPlan, Inc.,
115 Fifth Avenue, New York, NY 10003-1004 (MultiPlan) and Certified Diabetic
Supplies, Inc. with principal offices located at 1951 J & C Boulevard, Naples,
FL 34109 (Provider).
WHEREAS, MultiPlan represents and is authorized by various organizations and
institutions, including employers, third party administrators and other similar
entities (Clients), who provide or administer health care insurance pursuant to
a benefit plan, Workers' compensation programs, automobile liability coverage,
or other programs (Benefit Programs) for covered individuals (Participants) to
establish a preferred provider relationship with Provider as described herein;
and
WHEREAS, Provider wants to provide health care services in accordance with the
terms of this Agreement;
THEREFORE, in consideration of the foregoing and of the mutual covenants,
promises and undertakings herein and intending to be legally bound hereby, the
parties agree as follows:
A. RESPONSIBILITIES OF MULTIPLAN
1. Notification. MultiPlan agrees to notify its participating Clients of
that Provider is participating in the MultiPlan network, and to
distribute to its Clients material made available to MultiPlan by
Provider about Provider's services.
2. Limitations. MultiPlan does not determine benefits eligibility or
availability for Clients' Participants and does not exercise any
discretion or control as to Clients' Benefit Program assets, with
respect to policy, payment, interpretation, practices, or procedures.
MultiPlan is not the administrator, insurer, underwriter, or guarantor
of Clients' Benefit Programs, and MultiPlan is not liable for the
payment of services under Clients' Benefit Programs. Nothing in this
Agreement shall be construed as interfering with the freedom of choice
of eligible Participants.
3. Referrals. MultiPlan shall maintain a twenty-four hour-a-day toll-free
telephone referral system for the purpose of advising Clients and
Participants of providers in MultiPlan's Network. Provider shall be
included in this referral system.
B. RESPONSIBILITIES OF PROVIDER
1. Provision of Health Care Services. Provider solely shall be responsible
for the provision of health care advice and treatment rendered,
ordered, or authorized by Provider, its employees and/or agents, with
respect to Participants. Such services shall be
America's Managed Care Partner
115 Fifth Avenue
New York NY 10003-1004
Tel: (212) 780-2000
Tel: (212) 780-0402
<PAGE>
provided to Participants, including those covered by Workers'
Compensation and auto liability coverage, in accordance with community
standards, in the manner in which Provider renders services to other
patients, and without discrimination based on sex, race, color,
religion, marital status, sexual orientation, age, ancestry, or
national origin.
2. Licensure and Certification. Provider shall comply with all laws
relating to furnishing health care services to Participants and
maintain in effect all permits, licenses and governmental approvals
which may from time to time be necessary for that purpose. Provider
shall maintain Medicare certification. Provider agrees to notify
MultiPlan within thirty days of any change in compliance with any of
these requirements. Provider shall notify MPI of any pending
investigation, action, or sanction against it, any agent and/or any
employee, which may materially affect Provider's ability to perform an
obligation under this Agreement, or would otherwise bear on a
requirement of this paragraph.
3. Utilization. Provider shall cooperate with all reasonable utilization
management programs administered by Clients or their designees to the
extent that such programs are consistent with community standards.
4. Insurance. Provider shall maintain professional liability insurance
covering Provider against claims arising out of the services to be
performed hereunder in the minimum amounts required by law or, in the
absence of statutory requirements, no less than the amounts shown on
Appendix A. If the form of insurance is "claims made," Provider shall
purchase appropriate tail coverage for claims, demands, or actions made
after termination of this Agreement in relation to acts or omissions
occurring during the term of this Agreement. Provider shall provide
MultiPlan with a copy of its certificate(s) of insurance. Provider
shall notify MultiPlan in writing within thirty days of cancellation,
non-renewal, and/or any material change in such coverage.
5. Grievance Procedures Relating to Patient Care. Provider shall maintain
procedures for resolving grievances relating to patient care, and shall
cooperate with any grievance procedures or programs sponsored by MPI,
Clients, or their designees. Provider shall notify MPI promptly upon
knowledge of any dispute, complaint, or grievance relating to patient
care or other disputes involving MPI, its Clients, their designees, or
Participants.
6. Directory. Provider agrees that MultiPlan and/or Clients may use
Provider's name, address, telephone number and type of services or
facilities in any printed directory or other roster of participating
Providers.
C. FINANCIAL
1. Compensation.
a. Provider agrees to accept as payment-in-full for covered
services rendered to participants, the amounts due according to
Appendix A. Negotiated rates offered to MultiPlan shall be above any
prompt pay discounts offered to the general public or
2
<PAGE>
required by law. If, during the term of this Agreement, Provider enters
into any other contract, agreement, or other arrangement under which
Provider provides substantially the same services at a negotiated
rate(s) less than that set forth in Appendix A, the lower negotiated
rate shall apply to covered services rendered under this Agreement.
b. Notwithstanding the foregoing, with respect to services
rendered and if fee negotiation is permitted by law and/or regulation
in the applicable state, Provider shall accept * of the fee schedule
amount as payment in full for each covered service rendered to a
Participant.
2. Payment. Provider shall submit claims to Clients on completed HCFA 1500
other standard billing form providing the same information, and Clients
must make payment to Provider within thirty business days of receipt of
a such claim in order to obtain the benefit of the negotiated rate.
Upon request, Provider shall furnish to Client or MultiPlan, all
information reasonably required to verify Provider's health care
services and the charges for such services.
3. Adjustments To Clients' Payments. Clients' payments due under this
Agreement shall be reduced by any applicable deductibles, co-payments,
coinsurance. Provider shall notify Client and MultiPlan of any
erroneous claim sent to a Client within sixty days of the date the
claim was issued, and of any erroneous payment received within sixty
days of the date Client's payment was received.
4. Disputed Claims. In the event of a dispute between Provider and a
Client regarding billed amounts, payment due, or utilization review
issues, Client shall have the right, upon written notification of MPI
about the dispute within sixty days of the date payment was due, to
withhold payment pending resolution of the dispute. MPI shall make its
best efforts to assist the parties in resolving the dispute. Until the
dispute is resolved shipments will cease.
5. Participant Billings. Provider agrees to bill the Participant for
appropriate co-payments, deductibles, and coinsurance only in the
amount of the difference between the amount due for covered services
based on Appendix A, and the sum of the amounts paid by the Clients and
any other payors. Provider shall not balance bill or attempt to collect
compensation from Participants in connection with services covered by
Workers' Compensation programs, except as expressly permitted by law.
6. Coordination of Benefits. Provider shall cooperate with Clients for
purposes of coordinating benefits. When a Client is a primary payor,
Provider shall accept from Client as payment in full for covered
services the amounts established in Appendix A, less the appropriate
deductibles, co-payments and coinsurance. When a Client is a secondary
payor, Provider shall accept from Client as payment for covered
services the difference between the amount set forth in Appendix A,
less the sum of the amount paid by the primary payor(s) and the
appropriate deductibles, co-payments and coinsurance.
7. Audit. Upon fifteen business days' written notice, and during
MultiPlan's regular
- ---------------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
3
<PAGE>
business hours, each party shall have the right to audit the other's
records pertaining to compensation under this Agreement for a period of
six months prior to the date of the notice of audit.
8. Survival. The rights and obligations set forth in this section C shall
survive the termination of this Agreement.
D. TERM AND TERMINATION
1. Term. This Agreement shall be effective for an initial term of two
years from the Effective Date indicated above. Thereafter, this
Agreement shall automatically renew for successive one year terms.
2. Termination.
a. After the expiration of the initial term, either party may
terminate this Agreement by giving no less than ninety days'
advance written notice to the other party prior to the
expiration of the term then in progress.
b. Either party may terminate this Agreement for cause due to a
material breach by giving thirty days' advance written notice
during which the breach may be cured. The notice of
termination for cause will not be effective if the breaching
party cures the breach to the reasonable satisfaction of the
other party within the thirty-day notice period.
c. MPI shall have the right to terminate this Agreement
immediately if it determines, in its reasonable discretion,
that the health or welfare of Participants is jeopardized by
the continuation of the Agreement. Under such circumstances,
MPI shall provide written notice to Provider specifying the
basis for termination.
3. Effect of Termination. If any Participant remains under Provider's care
on the termination date, whether in- or outpatient, Provider shall
continue to render appropriate care to such Participant until Provider
can arrange for transfer of such care to another Provider. Provider
shall make best efforts to transfer such Participants to other
MultiPlan providers. Provider shall accept payment from Clients for
such post-termination care as if the Agreement had not been terminated.
The rights and obligations set forth in this Section D(3) shall survive
the termination of this Agreement.
E. MISCELLANEOUS
1. Independent Contractors. Each party, including its officers, directors,
employees and agents, acts as an independent contractor. Neither party
has express or implied authority to assume or create any obligation on
behalf of the other. The parties shall maintain a cooperative
relationship in order to effectuate this Agreement.
2. Indemnification. Each party solely is responsible for its own actions
or omissions, and
4
<PAGE>
those of its officers, directors, employees and agents, arising in
connection with obligations created under this Agreement, including
Provider's rendering professional advice and/or treatment. Each party
shall hold the other, including its officers, directors, employees,
agents, successors and assigns, harmless from and against all claims,
liability, damages, and expenses, including reasonable attorneys' fees,
which may be alleged against or incurred by the other party and are the
result of any act or omission in connection with this Agreement.
3. Severability and Waiver. The waiver by either party of any breach of
any provision of this Agreement shall not be construed as a waiver of
any subsequent breach of the same or any other provision. The failure
to exercise any right hereunder shall not operate as a waiver of such
right. The finding by a court of competent jurisdiction that any
provision herein is void shall not void any other valid provision of
this Agreement.
4. Confidentiality and Disclosure.
a. The parties shall comply with all applicable laws and regulations
regarding maintenance and disclosure of Particpants' medical
records. The names of MultiPlan's Clients shall be kept confidential
and shall not be used except as necessary to implement this
Agreement.
b. Neither party shall disclose the negotiated rates and/or the
compensation payable to Provider pursuant to the terms of this
Agreement, except as may be required in order to comply with this
Agreement, or to the extent required by applicable law. In addition,
MPI, in its discretion, may release such information to Clients and
potential clients as MPI may reasonably determine is required in
connection with marketing its products.
c. MPI and Clients may include Provider's name, address, telephone
number, in its directories of participating Providers.
5. Notices. Any notice required to be given pursuant to this Agreement
shall be in writing and delivered by hand, by certified mail/return
receipt requested, or by facsimile confirmed with overnight delivery,
to the signatories, or their successors if any, at the addresses set
forth below.
6. Modification. This Agreement, together with Appendix A and Exhibit 1,
constitute the entire agreement between the parties with respect to the
subject matter hereof, and as of the date this Agreement is executed by
both parties, shall supersede any previous agreements or
understandings, written or oral, between the parties. Any modifications
to the Agreement shall be in writing and signed by both parties.
7. Assignment. This Agreement may not be assigned by either party without
the prior written approval of both parties. Any other attempt at
assignment shall be void.
8. Governing Law. This Agreement shall be governed by the laws of the
state in which Provider is licensed to operate.
5
<PAGE>
IN WITNESS HEREOF, the parties have executed this Agreement.
MultiPlan, Inc. Certified Diabetic Supplies, Inc.
115 Fifth Avenue
New York, New York 10003-1004
By: /S/ PETER J. FISCINA 5/20/97
-------------------------------------
By: /S/ DONALD RUBIN 5/21/97 Signature date
-------------------------------
Donald Rubin date
Chairman Peter J. Fiscina
-------------------------------
Print Name
1951 J & C Boulevard
Naples, FL 34109
Tax I.D. # 65-0613873
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6
<PAGE>
MULTIPLAN, INC.
PPO PARTICIPATING FACILITY AGREEMENT
APPENDIX A
A. Fee Schedule
For covered inpatient and outpatient services rendered to Participants
including those covered by Workers' Compensation and No Fault
Automobile Liability coverage, Provider agrees to accept as payment in
full the amounts set forth below.
As per Exhibit A
B. Licensure
Provider is licensed in the state of _______________
C. Accreditation
Provider is accredited by: N/A
JCAHO _____________________ accreditation period ending __________
Other (specify) Medicare accreditation period ending __________
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(Certificate attached as Exhibit 1)
D. Insurance
Provider shall maintain product liability insurance no less than the
following amounts:
$ * per occurrence; $ annual aggregate.
--------------- --------------------
Carrier NATIONWIDE INS.
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* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
7
<PAGE>
PPO PARTICIPATING FACILITY AGREEMENT
Exhibit 1
CERTIFICATE OF ACCREDITATION
(cover sheet)
8
<PAGE>
NY01 83317
Certified Diabetic Supplies, Inc.
EXHIBIT A
PRODUCTS AND PRICE LIST
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
80%
U & C of
CPT CODE Description Quantity Price U & C
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A4206 Syringes 100's * *
- -------------------------------------------------------------------------------------------------------------
A4253 Strips 50's * *
100's * *
- -------------------------------------------------------------------------------------------------------------
A4254 Battery Each * *
- -------------------------------------------------------------------------------------------------------------
A4256 Control Solution Each * *
- -------------------------------------------------------------------------------------------------------------
A4258 Lancing Devise Each * *
- -------------------------------------------------------------------------------------------------------------
A4259 Lancets 100's * *
- -------------------------------------------------------------------------------------------------------------
E0607 Glucose Meter Each * *
- -------------------------------------------------------------------------------------------------------------
J1820 Insulin Each * *
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is by and
between Barnett Bank, N.A., or its affiliate holding title to the Property (as
hereafter defined) ("Seller"), and Certified Diabetic Services, Inc., a Delaware
corporation ("Purchaser"), and is dated as of the date the Escrow Agent (as
hereafter defined) executes this Agreement (the "Effective Date").
1. Sale of Property. Seller agrees to sell and convey to
Purchaser and Purchaser agrees to purchase and acquire from Seller upon the
terms and conditions set forth herein the property located in Collier County,
Florida consisting of the real property described on Exhibit A attached hereto
and all improvements and personal property owned by Seller and located thereon
as described in Exhibit A-1 (all of the foregoing is sometimes collectively
called the "Property").
2. Appurtenant Rights. Included in the purchase price and the
sale hereunder is all of Seller's right, title and interest (if any) in and to
the following (subject, however, to the "Permitted Encumbrances" as hereinafter
defined):
(a) all of the improvements, if any, located on the
Property;
(b) transferable licenses and permits utilized in
connection with the Property;
(c) all easements, right-of-way, streets and other
appurtenances incidental to the operation of the Property; and
(d) all of the Occupancy Leases (as hereinafter defined).
3. Purchase Price and Deposit.
(a) The purchase price (the "Purchase Price") is Two
Million Eight Hundred Thousand and 00/100 Dollars ($2,800,000), which is
allocated as $2,600,000 for the real property and $200,000.00 for the personal
property, and subject to the specified adjustments and prorations hereinafter
provided. The Purchase Price shall be paid as follows:
Payment Due Date Amount
------- -------- ------
(i) First Deposit to be held Due upon the Effective $ 50,000
in Escrow by Mahoney Date
Adams & Criser, P.A.
(Escrow Agent)
(ii) Second Deposit to be Due on or before $ 50,000
held in Escrow by Termination Date (as
Escrow Agent defined in
Section 15.(a))
(iii) Cash to Close (adjusted Closing $2,700,000
for closing
prorations)
TOTAL PURCHASE PRICE $2,800,000
(b) The timely delivery to Escrow Agent of the First
Deposit and, to the extent applicable, the Second Deposit (collectively, the
"Deposit") is a condition precedent to the performance of Seller's obligations
hereunder. The balance of the cash to close shall be paid to Seller by Federal
wire transfer to such bank account as shall be directed by Seller or by such
other manner of payment as shall be directed by Seller.
(c) PURCHASER'S OBLIGATIONS HEREUNDER ARE CONTINGENT UPON
PURCHASER OBTAINING A COMMITMENT FOR MORTGAGE FINANCING ON BEFORE THE
TERMINATION DATE (AS HEREINAFTER DEFINED). NOTWITHSTANDING THE FOREGOING, SELLER
HAS PROVIDED NO ASSURANCES TO PURCHASER THAT SELLER OR ANY AFFILIATE THEREOF
WILL PROVIDE ANY FINANCING TO PURCHASER AND PURCHASER'S OBLIGATIONS HEREUNDER
ARE NOT CONTINGENT UPON SELLER OR ANY AFFILIATE THEREOF PROVIDING ANY FINANCING
TO PURCHASER.
<PAGE>
4. Title Evidence.
(a) Within 15 days from the Effective Date, Seller shall
deliver to Purchaser or Purchaser's attorneys, a title insurance commitment (the
"Commitment") for an owner's marketability policy of title insurance in the
amount of the Purchase Price, insuring Purchaser's title to the real property
included in this sale (the "Real Property") subject only to the following (the
"Permitted Encumbrances"):
(i) zoning, restrictions, prohibitions, regulations,
ordinances and other requirements of any applicable
governmental authority;
(ii) the lien of taxes and assessments for the calendar
year of the Closing and all subsequent years;
(iii) public utility easements (if any);
(iv) any lien, encumbrance or other matter as to which
the title company shall commit to affirmatively "insure
over" at the minimum risk rate;
(v) the rights of the tenants under the Occupancy
Leases;
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<PAGE>
(vi) matters revealed by the Prior Survey, as
hereinafter defined.
(b) Purchaser or its counsel shall notify Seller in writing
("Title Notice") within 10 days after Purchaser's receipt of the Commitment and
copies of all title exceptions if the Commitment discloses any defects in the
title to the Real Property, other than the Permitted Encumbrances, which may
render title unmarketable. Any such defects appearing in the Commitment not
noted by Purchaser in the Title Notice, or any defects noted in a Title Notice
not delivered within the period specified above, shall be deemed to have been
waived by Purchaser. In the event the Commitment discloses any defect which
renders the title to the Real Property other than marketable and insurable
(other than the Permitted Encumbrances), and such defect is noted in a Title
Notice given by Purchaser to Seller within the time period required hereunder,
Seller, at Seller's sole option, shall have 60 days from the date it receives
the Title Notice within which to make Seller's title marketable and insurable.
If after the expiration of such 60-day period, Seller is unable to make Seller's
title marketable and insurable, or if having received the Title Notice, Seller,
in its sole discretion, shall have elected not to cure (or shall have elected to
discontinue any attempted cure of) any such defects appearing, in the Commitment
noted in the Title Notice, then in any such event, Purchaser's remedies shall be
limited solely to either (x) accepting, such title to the Real Property as
Seller shall be willing, and able to convey, without adjustment to or diminution
of the Purchase Price, or (y) terminating, this Agreement and receiving a return
of the Deposit. Any other provision of this Agreement to the contrary
notwithstanding, it shall not be objectionable if the Commitment discloses the
existence of any liens or encumbrances provided the same are discharged,
canceled of record and terminated by Seller at or prior to the Closing.
5. Obligation of Escrow Agent. If there is any dispute as to
whether Escrow Agent is obligated to deliver the Deposit, or any other monies or
documents which it holds or as to whom such Deposit, monies or documents are to
be delivered, Escrow Agent shall not be obligated to make any delivery, but, in
such event, may hold same until receipt by Escrow Agent of an authorization, in
writing, signed by all of the parties having an interest in such dispute
directing the disposition of same, or, in the absence of such authorization,
Escrow Agent may hold such Deposit, monies or documents until the final
determination of the rights of the parties in an appropriate proceeding. If such
written authorization not given or proceeding for such determination is not
begun and diligently continued, Escrow Agent may, but is not required to, bring
an appropriate action or proceeding for leave to deposit such Deposit, monies or
documents in court, pending such determination. Escrow Agent shall not be
responsible for any acts or omissions unless the same constitutes gross
negligence or willful misconduct and upon making delivery of the Deposit, monies
or documents which Escrow Agent holds in accordance with the terms of this
Agreement, Escrow Agent shall have absolutely no further liability hereunder. In
the event Escrow Agent places the Deposit, monies or documents that have
actually been delivered to Escrow Agent in the Registry of the Circuit Court in
and for the County in which the Real Property is located and files an action of
interpleader, naming the parties hereto, Escrow Agent shall be released and
relieved from any and all further obligation and liability hereunder or in
connection herewith. Seller and Purchaser shall and do hereby, jointly and
severally, agree to indemnify and hold Escrow Agent harmless from any and all
damages, losses, liabilities, claims, costs and expenses arising hereunder or in
connection therewith, including but not limited to, all costs and expenses
incurred by Escrow Agent in connection with the filing of such action including,
but not limited to, reasonable attorney and paralegal fees and expenses for
Escrow Agent's attorneys through all trial and appellate levels. IT IS
ACKNOWLEDGED THAT ESCROW AGENT MAY ACT AS THE COUNSEL FOR SELLER. IT IS AGREED
THAT ESCROW AGENT SHALL NOT BE DISABLED OR DISQUALIFIED FROM REPRESENTING SELLER
IN CONNECTION WITH ANY LITIGATION WHICH MIGHT ARISE OUT OF OR IN CONNECTION WITH
THIS AGREEMENT BY VIRTUE OF THE FACT THAT ESCROW AGENT HAS AGREED TO ACT AS
ESCROW AGENT HEREUNDER, AND PURCHASER DOES HEREBY WAIVE ANY CLAIM ARISING OUT OF
OR IN CONNECTION WITH THE FOREGOING.
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<PAGE>
Purchaser's federal tax identification number is 65-0613873.
The provisions of this Section 5 shall survive the Closing or the termination of
this Agreement.
6. Closing. Unless extended by the terms of Section 4, the
closing of the sale of the Property ("Closing") shall take place at offices of
Mahoney Adams & Criser, P.A., 50 North Laura Street, Suite 3300, Jacksonville,
Florida 32202, commencing at 10:00 A.M. via mail-away closing on that certain
date fourteen (14) days after the Termination Date (the "Closing Date"), TIME
BEING OF THE ESSENCE.
7. Prorations and Adjustments.
(a) Municipal improvement liens where the work has been
completed or has physically commenced as of the Effective Date (certified liens)
shall be paid by Seller or a credit shall be provided to Buyer on the closing
statements at Closing; and municipal improvement liens which have been
authorized but where the work has not commenced as of the Effective Date
(pending liens) shall be assumed by Purchaser.
(b) The following items as applicable shall be apportioned
between the Seller and Purchaser as of midnight on the day immediately preceding
the Closing Date.
(i) Real property taxes shall be prorated on the basis
of the current year's taxes, if known, at the highest
allowable discount. If the Closing shall occur before the
amount of current taxes shall have been determined, such
taxes shall be apportioned upon the basis of the taxes for
the most recent calendar year available.
(ii) Fees for licenses and permits which are
transferable to the Purchaser, if any.
(iii) Fees for service and maintenance contracts
assumed by Purchaser, if any.
(iv) All current rent, common area maintenance charges
("CAM Charges"), operating expenses and real estate tax
pass through (the "Operating Expense Charges") and prepaid
rents shall be prorated and adjusted as of Midnight of the
date prior to the Closing Date, provided, however, all
rents, CAM Charges and Operating Expense Charges which are
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<PAGE>
delinquent more than fifteen (15) days (the "Delinquent
Rents") as of the Closing Date shall not be prorated.
Purchaser agrees to use its best efforts, for a reasonable
period of time after closing, to collect Delinquent Rents
after the Closing Date and any amounts received by
Purchaser from any party owing Delinquent rents shall first
be applied to all Purchaser's costs of collection incurred,
second, to rents and other charges due for the months in
which such payment is received by Purchaser, third, to
rents and to the charges attributable to any period after
closing, which are past due on the date of receipt, and
then to Delinquent Rents, which amounts, if any, shall be
paid to Seller. Purchaser shall not be obligated to file
suit to collect Delinquent rents, if after good faith
effort to collect, it determines, in its sole discretion,
that said suit will either be unsuccessful or any judgment
obtained therefrom will be uncollectible. Seller shall be
entitled to continue to prosecute any and all legal actions
commenced by Seller prior to the date of closing but not
against any tenant which remain in possession as tenant
after closing. Purchaser and Seller acknowledge that CAM
Charges and Operating Expense Charges are estimated.
Nevertheless, Purchaser and Seller agree not to readjust
the CAM Charges and the Operating Expense Charges for the
year 1997 when the actual charges are determined.
(v) All security and other deposits of existing
tenants, together with all interests accrued thereon, if
any, as of the date of Closing, shall be transferred and
assigned to Purchaser or Purchaser shall receive a credit
at closing, for the amount of said deposits and Purchaser
shall indemnify and hold Seller harmless from any claims
for damages by tenants in regard to said deposits paid to
Purchaser.
(vi) At the option of the parties, the premiums on any
transferable insurance policies relating to the Property.
(vii) Water and garbage collection charges and all
other similar charges.
(viii) Seller shall pay for, or cause to be paid for,
all utilities furnished to the Property through the date
immediately preceding the Closing Date: Purchaser shall
assume payment of such utilities from the Closing Date.
Seller shall withdraw all utility deposits made by it, and
Purchaser shall make its own deposits for utilities.
(c) After Closing, Purchaser will assume full
responsibility for all unapplied security deposits and advance rental deposits
currently held by Seller, if any, and transferred and paid over to Purchaser at
closing.
(d) The provisions of this Section 7 shall survive the
Closing.
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<PAGE>
8. Seller's Representations. Seller represents to Purchaser as
follows:
(a) Seller has full right and authority to execute this
Agreement and consummate the transactions contemplated hereby subject to the
terms, provisions and conditions hereof.
(b) To the best of Seller's knowledge, Seller has furnished
to Purchaser true and correct copies of all of the Occupancy Leases regarding
the Property as disclosed in the attached Exhibit B.
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9. Closing Procedure and Documents.
(a) At the Closing, simultaneously with the payment of the
Purchaser Price by Purchaser, Seller shall deliver or cause to be delivered to
Purchaser the following:
(i) a special warranty deed (the "Deed") conveying the
fee simple title to the Real Property, subject to the
Permitted Encumbrances and the matters referred to in the
Commitment;
(ii) an assignment, without recourse to or warranty by,
Seller, of any transferable licenses and permits respecting
the Property;
(iii) a FIRPTA affidavit;
(iv) an affidavit in the form required by the Title
Company to delete the standard printed exception relating
to the "gap" and to remove the standard printed exceptions
for mechanics' liens and parties in possession other than
Occupancy Tenants (except to the extent the same constitute
Permitted Encumbrances); and
(v) a quit-claim bill of sale conveying all personal
property, if any, owned by Seller and comprising a portion
of the Property, in their "as is" condition;
(vi) an assignment of Seller's interest in all
outstanding Occupancy Leases relating to the Property and
an assumption effective as of the Closing Date by Purchaser
of same;
(vii) an executed written assignment of (1) the
maintenance and service contracts assumed by Purchaser at
Closing, and the assumption by Purchaser of same, which
assumption shall be effective as of the Closing Date; and
(2) any and all transferable warranties, guaranties or
similar contract rights in favor of Seller pertaining in
any manner to the Property; and
(viii) that certain Post Closing occupancy Agreement
(as hereafter defined).
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<PAGE>
(b) At the Closing, Escrow Agent shall deliver the Deposit
and Purchaser shall deliver the cash to close, to Seller, in accordance with
Section 3. Purchaser can deliver to Seller such consents and authorization as
Seller may reasonably deem necessary to evidence authority of Purchaser to
purchase the Property and to consummate all other actions required to be taken
by Purchaser under this Agreement.
(c) At the Closing, Seller and Purchaser shall mutually
execute and deliver to each other a closing statement in customary form.
(d) At or prior to the Closing, Purchaser shall deliver to
the Seller a corporate resolution signed by all of the directors of the
Purchaser approving this Agreement and the transaction contemplated herein.
10. Closing Expenses. State documentary stamps required to be
affixed to the Deed and the cost of the title search and the owner's title
policy issued pursuant to the commitment shall be shared equally by Purchaser
and Seller. The cost of recording the Deed, the cost of any state sales or
similar tax attributable to the transfer of the personal property, the cost of
obtaining an updated survey, all of the expenses and fees in connection with any
mortgage financing obtained by Purchaser in connection with the Property,
including, without limitation, any Florida documentary and intangible taxes and
recording fees due with respect to ancillary documents thereto, shall be borne
by Purchaser. Each party hereto shall bear the expense of its legal counsel.
11. Broker. Seller and Purchaser acknowledge that Mike Carr of
Coldwell Banker Commercial/McFadden & Sprowls and Albert R. Ayala of Kersey
Quade, Inc. (collectively, the "Broker") has been the procuring cause of this
Agreement and the transactions contemplated hereby. As a condition precedent to
the obligations of Seller hereunder, Seller shall execute an agreement with the
Broker in form and content satisfactory to Seller respecting the payment of any
brokerage commissions due to the Broker in the amount of six percent (6%) of the
Purchaser Price, which commission shall be payable as 3% percent* to Coldwell
Banker and 3% percent to Ayala. If for any reason the transaction contemplated
under this Agreement does not close, the Broker shall not be entitled to any
portion of the Deposit or any fee, commission or compensation and Broker shall
make no claim with respect thereto. Purchaser represents and warrants to Seller
that Purchaser has not dealt with any real estate broker, firm or person other
than the Broker in connection with the transactions contemplated under this
Agreement nor has Purchaser been introduced to the Property or to Seller by any
real estate broker firm or person other than the Broker and Purchaser does
hereby agree to indemnify and save Seller harmless from and against any and all
claims, suits, demands or liabilities of any kind of nature whatsoever
(including, but not limited to, all attorneys' and paralegals' fees and expenses
and all court costs, including any appellate proceedings and appeals) arising
out of or in connection with the claim (whether meritorious or not) of any other
person, firm or corporation for real estate commissions or finder's fees as a
result of having dealt with Purchaser or as a result of having introduced
Purchaser to Seller or to the Property.
* Of the commission paid to Coldwell banker, it shall be based on a purchase
price of $2,716,000 or a total of $81,480.
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<PAGE>
12. Survey. If prior to the execution of this Agreement by
Purchaser, Seller has delivered to Purchaser a Survey of the Real Property (a
"Prior Survey"), all matters reflected on such Prior Survey shall constitute a
Permitted encumbrance and shall not serve as the basis of any alleged title
defect. Purchaser, at Purchaser's expense, prior to the "Termination Date" (as
hereinafter defined), may have the real property surveyed and certified by a
registered Florida Surveyor. Purchaser or its counsel shall provide written
notice (the "Survey Notice") to Seller within 10 days after Purchaser's receipt
of any such new survey (the "Survey") if the survey discloses any encroachments
or any other title defects affecting the property (other than Permitted
Encumbrances). All such encroachments or defects so noted in the Survey Notice,
provided they adversely affect the marketability of title to the Property, are
to be regarded for all purposes under this Agreement as title defects and, as
such, are to be treated in the manner provided in Section 4. Any such title
defects shown on the Survey and not noted in the Survey Notice to Seller shall
be deemed to have been waived by Purchaser.
13. Risk of Loss.
(a) If, prior to the Closing, the Property or any portion
thereof shall be taken pursuant to an exercise of the power of eminent domain or
condemnation or shall be damaged by fire, wind or other casualty and the cost of
repairing or restoring same reasonably estimated by Seller exceeds 10% of the
Purchaser Price, Purchaser may elect to terminate this Agreement and receive the
return of the Deposit, or to proceed with the Closing, and receive an assignment
of Seller's right to any condemnation or insurance proceeds. If Purchaser shall
elect to proceed with the Closing, or if the estimated cost of repair or
restoration of any such damage shall be less than 10% of the Purchaser Price in
which event Purchaser shall have no right to terminate this Agreement), there
shall be no abatement of the Purchaser Price and the adjustment of the loss or
award and the repair or restoration of the Property shall proceed at the joint
direction of Seller and Purchaser until the Closing; thereafter adjustment and
restoration shall proceed at the sole direction of Purchaser without obligation
in connection therewith on the part of Seller. At Closing, Seller shall pay to
Purchaser all proceeds of condemnation or insurance then held by Seller and
Seller shall assign to Purchaser Seller's right to receive any unpaid proceeds,
after receipt from Purchaser of any expenses of collection of such proceeds or
of the restoration of the Property.
(b) Notwithstanding anything contained in subsection (a)
above to the contrary, if the portion of the Property taken results in a partial
or total loss of access to the Property, Purchaser may elect to terminate this
Agreement and receive a refund of the Deposit.
14. Property Information. Seller shall make a best effort to
deliver or cause to be delivered to Purchaser within 5 days after the Effective
Date, to the extent Seller shall have same in its possession, all of the
following: (i) photocopies of all permits, certificates of occupancy and
licenses pertaining to the Property; (ii) letters from the applicable utility
companies respecting the availability and capacity of all applicable utility
services; (iii) photocopies of all service and maintenance contracts affecting
the Property; (iv) copies of any and all documents relating to the development
and/or use of the Property; and (v) such other documents regarding the Property
as Seller shall be willing to provide to Purchaser at no expense to Seller (all
of the foregoing is sometimes collectively herein referred to as the "Property
Information"), provided, however, that the delivery of such Property Information
to Purchaser shall not constitute any representation or warranty by Seller
regarding the truth or accuracy of such Property Information except to the
extent that Seller may otherwise specifically represent or warrant in this
Agreement, it being understood and agreed that Seller is providing such Property
Information solely to facilitate and assist Purchaser's inspection as set forth
in Section 15. Seller shall not be responsible in the event it fails to deliver
every document in its possession.
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<PAGE>
15. Inspection and Option to Terminate.
(a) Promptly following the execution of this Agreement and
until thirty (30) days from the Effective Date (the "Termination Date"),
Purchaser shall have the right to inspect the Property and the Property
Information. Purchaser and its representatives shall take reasonable precautions
so that its inspection of the Property and Property Information shall cause
minimum disruption to any parties in possession of the Property and Seller's or
tenant's employees located on the Property. Any entry made on the Property by
Purchaser or its representatives shall be upon reasonable notice to Seller and
at reasonable times and at the sole risk of Purchaser; Purchaser hereby
indemnifies and exonerates Seller (in addition to the liquidated damages
provided in Section 18) from all losses, claims, liabilities, actions, demands,
costs and expenses, including reasonable attorney and paralegal fees and
expenses, arising therefrom or connected therewith, including any entry upon the
Property by any agents or contractors of Purchaser or their sub-agents or
sub-contractors. Purchaser shall pay for all work and inspections performed on
or in connection with the Property and shall not permit the creation of any lien
in favor of any contractor, materialman, mechanic, surveyor, architect or
laborer.
(b) If following the execution of this Agreement, but
prior to the Termination Date, Purchaser determines in its sole discretion that
the Property or any of the Property Information is not satisfactory to
Purchaser, Purchaser shall have the right to give written notice to Seller in
the manner specified in Section 29 and elect to terminate this Agreement
provided such notice is postmarked or delivered to Seller on or before the
Termination Date. In the event that such notice is given by Purchaser in
accordance with the foregoing, then in that event, the Deposit shall be promptly
returned to Purchaser, and upon such repayments, this Agreement shall terminate
and Purchaser shall promptly deliver and return to Seller (at no cost or expense
to Seller) all Property information and any plans, correspondence, surveys,
drawings, and other materials obtained by or on behalf of Purchaser with respect
to the Property. TIME SHALL BE DEEMED OF THE ESSENCE FOR THE PURPOSES OF THIS
SECTION WITH RESPECT TO THE EXERCISE OF THE RIGHT TO TERMINATE BY PURCHASER
HEREUNDER. If, for any reason, Purchaser shall not timely exercise its right to
terminate prior to the Termination Date in accordance with the terms and
conditions of this Section 15, Purchaser shall conclusively be deemed to have
approved all aspects of the Property and the Property Information, and have
agreed to purchase the Property in its "as is" condition, "without fault" of
Seller as of the Closing Date, and the right of Purchaser to terminate under
this Section shall be deemed to have been waived by Purchaser for all purposes
hereof.
(c) Escrow Agent acknowledges and agrees that in the event
Purchaser timely exercises its right to terminate this Agreement prior to the
Termination Date, Escrow Agent shall refund the Deposit to Purchaser within five
(5) business days of the date Escrow Agent received the notice of termination.
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<PAGE>
(d) Purchaser's obligations under this Section 15 shall
survive the Closing or the termination of this Agreement.
16. Condition of Property. PURCHASER HAS OR WILL INSPECT THE
PROPERTY AND IS FAMILIAR OR WILL BECOME FAMILIAR WITH THE PHYSICAL CONDITION
THEREOF. ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT NOTWITHSTANDING,
SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES AS TO
THE PHYSICAL CONDITION, QUALITY OF CONSTRUCTION OF ANY IMPROVEMENTS, TIMELINESS
OF COMPLETION OF ANY IMPROVEMENTS, QUALITY OF MATERIALS TO BE INCORPORATED INTO
ANY IMPROVEMENTS, EXPENSES, OPERATION, MAINTENANCE, PROFIT, RENTS, LOSS OR USE
TO WHICH THE PROPERTY OR ANY PART THEREOF MAY BE PUT, OR ANY OTHER MATTER OR
THING AFFECTING OR PERTAINING TO THE PROPERTY, EXCEPT TO THE EXTENT SPECIFICALLY
PROVIDED OTHERWISE IN THIS AGREEMENT, AND THE PURCHASER HEREIN EXPRESSLY
ACKNOWLEDGES AND AGREES AT CLOSING TO TAKE THE SAME "AS IS" AS OF THE CLOSING
DATE. IT IS UNDERSTOOD AND AGREED THAT ALL UNDERSTANDINGS AND AGREEMENTS HERETO
HAD BETWEEN THE PARTIES ARE MERGED INTO THIS AGREEMENT AND THAT THE SAME IS
ENTERED INTO AFTER FULL INVESTIGATION, NEITHER PARTY RELYING UPON ANY STATEMENTS
OR REPRESENTATIONS NOT EMBODIED IN THIS AGREEMENT, MADE BY THE OTHER. SELLER
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN AGREEMENTS
OR STATEMENTS, REPRESENTATIONS, "SETUPS," FINANCIAL STATEMENTS, OR INFORMATION
PERTAINING TO THE OPERATION, LAYOUT, EXPENSES, CONDITION, INCOME PROFITS, OR
LOSS FURNISHED BY ANY AGENT, EMPLOYEE, REAL ESTATE BROKER, SALESMAN OR SERVANT
OF THE SELLER OR ANY OTHER PERSON OR ENTITY (INCLUDING THE SELLER), UNLESS THE
SAME ARE SPECIFICALLY SET FORTH HEREIN. FURTHER, SELLER IS NOT LIABLE OR BOUND
IN ANY MANNER FOR ANY INFORMATION WHICH THE SELLER MAY HERETOFORE HAVE SUPPLIED
TO PURCHASER WITH RESPECT TO T HE PROPERTY. PURCHASER HAVING THE RIGHT TO
CONDUCT ITS OWN INVESTIGATION UPON ALL SUCH MATTERS PURSUANT TO THE PROVISIONS
OF SECTION 15, AND PURCHASER HEREBY EXPRESSLY ACKNOWLEDGES THAT IT HAS NOT
RELIED UPON ANY PRO FORMA STATEMENTS, FINANCIAL STATEMENTS OR FINANCIAL
INFORMATION OR OTHER STATEMENTS OR REPRESENTATIONS WITH RESPECT TO THE PROPERTY
HERETOFORE SUPPLIED BY SELLER TO PURCHASER. ANY SUCH PRO FORMA STATEMENTS,
FINANCIAL INFORMATION OR OTHER COMMUNICATIONS BETWEEN THE SELLER AND PURCHASER
WITH RESPECT TO THE PROPERTY WHICH IS THE SUBJECT MATTER HEREOF HAVE BEEN
RECEIVED BY PURCHASER SOLELY FOR ITS OWN CONVENIENCE AND PURCHASER ACKNOWLEDGES
THAT IT HAS NOT AND WILL NOT RELY THEREON. PURCHASER ACKNOWLEDGES THAT SELLER
HAS AFFORDED OR WILL AFFORD PURCHASER THE OPPORTUNITY FOR A FULL AND COMPLETE
INVESTIGATION, EXAMINATION AND INSPECTION OF THE PROPERTY AND ALL MATTERS AND
-10-
<PAGE>
ITEMS RELATING THERETO OR CONNECTED THEREWITH. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES GIVEN TO PURCHASER IN CONNECTION WITH THE PROPERTY OR IN CONNECTION
WITH THE CONDITION OR QUALITY OF THE CONSTRUCTION OF ANY IMPROVEMENTS COMPRISING
THE PROPERTY EXCEPT AS HEREIN SPECIFICALLY SET FORTH. SELLER DOES HEREBY
DISCLAIM ANY AND ALL WARRANTIES OF MERCHANTABILITY AND FITNESS THAT MAY BE DUE
FROM SELLER TO PURCHASER, WHETHER IN REGARD TO THE IMPROVEMENTS, BUILDINGS, OR
PERSONAL PROPERTY CONTAINED THEREIN AND INCLUDED IN THIS SALE. PURCHASER
EXPRESSLY RELEASE AND RELIEVES SELLER FROM ANY LIABILITY, WARRANTY, OR
OBLIGATION RELATING TO THE CONDITION OF THE PROPERTY, SPECIFICALLY INCLUDING:
LATENT AND PATENT CONDITIONS; THE PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC
WASTES, SUBSTANCE AND MATERIALS ON OR FROM THE PROPERTY OR ANY ADJOINING
PROPERTY; ZONING REQUIREMENTS; SUBSOIL CONDITIONS; STORM WATER DRAINAGE
CONDITIONS; THE EXISTENCE OR CONDITION OF UTILITIES, IF ANY, AT THE PROPERTY;
AND ANY AND ALL OTHER MATTERS RELATING TO THE PHYSICAL CONDITION OF THIS
PROPERTY. THE PROVISIONS OF THIS SECTION 16 SHALL SURVIVE THE CLOSING.
17. Prohibition of Recording. If any attempt to record this
Agreement or any memorandum thereof or any reference hereto in the public
records is made by Purchaser or any agent or representative of Purchaser, Seller
shall have the right to terminate this Agreement, in which event, Escrow Agent
shall deliver the Deposit to Seller and the parties shall be relieved of any
further liability or obligation hereunder (except as otherwise specifically
provided herein).
18. Default.
(a) If Purchaser shall default in the payment of the
Purchaser Price (including, but not limited to, any portion of the Deposit) or
otherwise default in the performance of any of the terms, covenants, and
conditions under this Agreement on the part of the Purchaser to be performed,
Seller may retain and be entitled to receive as full and agreed upon liquidated
damages, consideration for the execution of this Agreement and in full
settlement of Seller's claims against Purchaser, the Deposit, whereupon
Purchaser and Seller shall be relieved, each as to the other, of all obligations
hereunder, or Seller, at Seller's option, may proceed in equity to enforce
Seller's rights under this Agreement. Any indemnification provisions or
covenants on the part of Purchaser under this Agreement shall continue in full
force and effect and shall not be affected or limited by Seller's election to
enforce the liquidated damages provisions of this subsection.
(b) In the event of a wrongful failure or refusal by
Seller to perform its obligations under this Agreement, Purchaser's sole
remedies (Purchaser hereby waiving all other remedies) shall be (i) an action to
specifically enforce the terms of this Agreement, or (ii) the termination of
this Agreement by notifying Seller of such election in writing, whereupon
Purchaser shall be entitled to a refund of the Deposit then being held by Escrow
Agent and the parties relieved of all further liability each to the other
hereunder.
-11-
<PAGE>
19. Survival. All covenants, terms, provisions,
representations and warranties set forth in this Agreement, except as
specifically provided otherwise herein, shall at the Closing, be merged into the
Deed.
20. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
21. TIME OF ESSENCE. TIME SHALL BE DEEMED OF THE ESSENCE ON
THE PART OF PURCHASER IN PERFORMING ALL OF THE TERMS AND CONDITIONS ON THE PART
OF PURCHASER TO BE PERFORMED HEREUNDER.
22. Modification Must Be In Writing. No modification or
termination of this Agreement shall be valid unless executed in writing and
signed by the applicable duly authorized representatives of Seller and
Purchaser.
23. No Waiver. No waiver of any provision of this Agreement
shall be effective unless it is in writing and signed by the party against whom
it is asserted, and any such written waiver shall only be applicable to the
specific instance to which it relates and shall not be deemed to be a continuing
or future waiver.
24. Captions and Section Headings. Captions and Section
Headings contained in this Agreement are for convenience and reference only and
in no way define, describe, extend, or limit the scope or intent of this
Agreement, nor the intent of any provision thereof.
25. Acceptance of the Deed. The acceptance of the Deed by
Purchaser shall be deemed to be the full performance and discharge of every
agreement, obligation, and covenant, guaranty, representation or warranty on the
part of Seller to be performed. Pursuant to the provisions of this Agreement in
respect of the Property, except for those Sections or sub-sections specifically
stated to survive the Closing.
26. Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or privileges conferred upon Purchaser hereunder, may be
assigned by Purchaser without the prior written consent of Seller, which consent
may be withheld by Seller in Seller's sole and absolute discretion. Subject to
the foregoing limitation as to assignability, this Agreement shall inure to the
benefit of and shall be binding upon the parties thereto and their respective
heirs, personal representatives, successors and assigns.
27. Attorneys' Fees. In the event of any litigation arising
out of or connected in any manner with this Agreement, the non-prevailing party
shall pay the costs of the prevailing party, including its reasonable attorney
and paralegal fees and expenses incurred in connection therewith through and
including the costs of any appeals and appellate costs relating thereto. This
Section 27 shall survive the Closing or the termination of this Agreement.
28. Summary Proceedings. The right and privilege Seller to
institute summary proceedings against any Occupancy Tenant on account of default
prior to Closing Date, and it is agreed that no representations have been made
and no responsibilities assumed by Seller with respect to the continued
occupancy of any of the Property by any Occupancy Tenant.
-12-
<PAGE>
29. Notices. All notices, offers, acceptances, rejections,
consents, requests and other communications hereunder shall be in writing and
shall all be deemed to have been given (i) when delivered in person, or (ii)
when sent by telecopier (with receipt confirmed), or (iii) when sent by first
class mail or registered mail, postage prepaid, return receipt requested, or
(iv) on receipt after being sent by express mail or a responsible delivery
service guaranteeing overnight delivery provided that in the case of notice
given by the methods described in (i) or (ii) above, a copy is immediately
mailed by first class, registered or certified mail, postage prepaid, return
receipt requested, in each case addressed as follows:
If to Seller: Barnett Bank, N.A.
c/o Barnett Banks, Inc., Special Assets
Attention: Alan Blankstein
Transactions Officer
Real Estate Transactions Group
Barnett Banks, Inc.
2850 North Federal Highway
2nd Floor
Lighthouse Point, FL 33064
(954) 786-3323
with a copy to: Karen M. Chastain, Esquire
Mahoney Adams & Criser, P.A.
50 North Laura Street, Suite 3300
Jacksonville, Florida 32202
(904) 354-1100
Fax: (904) 798-2697
If to Purchaser: Certified Diabetic Services, Inc.
Attn: Peter Fiscina, President
1951 J&C Boulevard
Naples, Florida 34109
(800) 445-4313
with a copy to: Gudrun Maria Nickel, Esquire
350 Fifth Avenue, Suite 350
Naples, Florida 34102
(941) 262-7748
Fax: (941) 262-7144
If to Escrow Agent: Karen M. Chastain, Esquire
Mahoney Adams & Criser, P.A.
50 North Laura Street, Suite 3300
Jacksonville, Florida 32202
-13-
<PAGE>
30. Waiver of Strict Construction Against Drafting Party.
Should any provision of this Agreement be subject to judicial interpretation, it
is agreed that the court interpreting or considering such provision not apply
the presumption or rule of construction that the terms of this Agreement be more
strictly construed against the party which itself or through its counsel or
other agent prepared the same, as all parties thereto have participated in the
preparation of the final form of this Agreement through review by their
respective counsel and the negotiation or changes in language in any provision
deemed unsuitable or inadequate as initially written, and, therefore, the
application of such presumption or rule of construction would be inappropriate
and contrary to the intent of the parties.
31. Exhibits. All of the exhibits attached hereto are
incorporated herein by reference and form part of this Agreement for all
purposes. For convenient reference, the following list briefly describes the
exhibits to this Agreement:
Exhibit A - Legal description of the property;
---------
Exhibit A-1 - Inventory of personal property;
-----------
Exhibit B - Tenant list.
---------
32. Interpretations. In case any one or more or the provisions
of this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity of the remaining provisions shall be in no way affected, prejudiced or
disturbed thereby. The use of any gender shall include all other genders. The
singular shall include the plural and vice versa. Use of the words "herein,"
"hereof," "hereunder" and any other words of similar import refer to this
Agreement as a whole and not to any particular article, section or sub-section
of this Agreement unless specifically noted otherwise in this Agreement.
33. Governing Law and Jurisdiction. This Agreement shall be
deemed to be governed by, construed and enforced in accordance with the laws of
the State of Florida.
34. Third Parties. This Agreement shall not be deemed to
confer in favor of any third parties any rights whatsoever as third-party
beneficiaries, the parties hereto intending by the provisions hereof to confer
no such benefits or status.
35. Effect of Termination of Agreement. If for any reason
whatsoever the transactions contemplated under this Agreement are not closed or
this Agreement is terminated in accordance with the terms hereof, Purchaser
shall promptly return or turn over to Seller (at no cost or expense to Seller)
all Property Information and any plans, correspondence, surveys, drawings and
other materials obtained by or on behalf of Purchaser with respect to the
Property or any portion thereof.
36. Calculation of Time Periods. Whenever this Agreement calls
for or contemplated a period of time for the performance of any term, provision
or condition of this Agreement, all of the days in such period of time shall be
calculated consecutively without regard to whether any of the days falling in
such period of time shall be a Saturday, Sunday or other non-business day
provided, however, if the last day of any such time period shall happen to fall
on a Saturday, Sunday or other non-business day, the last day shall be extended
to the next succeeding business day immediately thereafter occurring.
-14-
<PAGE>
37. Contract Not An Offer; Time For. This Agreement shall not
be binding upon Seller nor shall Seller have any obligation to Purchaser unless
and until such time as Seller shall have executed a copy of this Agreement and
thereafter unconditionally delivered it to Purchaser. If this Agreement is not
fully executed by Seller, Purchaser and Escrow Agent and an executed copy
hereof, (together with the First Deposit) is not delivered to Seller on or
before June 30, 1997, by 5:00 P.M., this Agreement shall be null, and neither
party shall have any obligation hereunder. SELLER RESERVES ITS RIGHTS TO
NEGOTIATE AND ACCEPT COMPETING OFFERS UNTIL THIS CONTRACT HAS BEEN EXECUTED BY
BOTH SELLER AND PURCHASER, AND THE DEPOSIT HAS BEEN RECEIVED BY THE ESCROW AGENT
AND CASHED.
38. Radon Gas Notification. In accordance with the
requirements of Section 404.056(8), Florida Statutes the following notice is
hereby given:
RADON GAS: Radon is a naturally occurring radioactive gas
that, when it is accumulated in a building in sufficient
quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may
be obtained from the local County Public Health Center.
39. Seller's Post-Closing Occupancy. Prior to the Termination
Date, Purchaser and Seller shall negotiate the terms of Seller's continued
occupancy of the Property for a time certain and for certain location within the
Property, and any consideration to be paid in connection therewith. The specific
terms shall be determined by the parties prior to the Termination Date, and the
parties shall execute a written agreement at Closing evidencing said agreement
(the "Post Closing Occupancy Agreement"). The Post Closing Occupancy Agreement
shall permit the Seller to remove any personal property located on the Property
which is not included on Exhibit A-1. The parties agree to negotiate the terms
of the Post Closing Occupancy Agreement in good faith.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of the Effective date.
WITNESS: PURCHASER:
CERTIFIED DIABETIC SERVICES, INC.
/s/ illegible Hawkins
- ---------------------
Name:
By:/s/ Myron M. Blumenthal
--------------------------
/s/ Tammy Navans Name: Myron M. Blumenthal
- --------------------- Title: Treasurer
Name:
SELLER:
BARNETT BANK, N.A.
By: Barnett Banks, Inc., as
attorney-in-fact for Barnett
Bank, N.A., pursuant to Power
of Attorney dated March 1,
1992
By:/s/ Alan Blankstein
______________________________ --------------------
Name: Name: Alan Blankstein
Title: Authorized Designee
______________________________
Name:
First Deposit received by Mahoney Adams & Criser, P.A. which
the Escrow Agent agrees to retain in accordance with the terms and conditions of
the within Agreement.
Escrow Agent:
By: ____________________________
Karen M. Chastain
Date:____________________________
(the "Effective Date")
All changes must be initialed by Purchaser by July 3, 1997, or
this Contract shall be void.
-16-
<PAGE>
JOINDER
The undersigned brokers hereby join in execution of this
Agreement for the purpose of confirming the terms and conditions set forth in
Section 11 of this Agreement. If a claim for brokerage in connection with this
transaction is made by any broker, salesman or finder claiming to have dealt
through or on behalf of the undersigned, then the undersigned shall indemnify,
defend and hold Seller and Purchaser and their officers, directors, agents and
representatives harmless from all liabilities, damages, claims, costs, fees and
expenses whatsoever (including reasonable attorney's fees and court costs) with
respect to said claim for brokerage.
Coldwell Banker Commercial/
McFadden & Sprowls
By:/s/ illegible By:/s/ Albert R. Ayala
-------------- --------------------
Name: illegible Name: Albert R. Ayala
---------
Date: 6/27/97
-------
-17-
<PAGE>
EXHIBIT A
---------
Legal Description
(To be verified with Title Commitment and Survey, if any)
Lots 14 and 15, East Naples Industrial Park, recorded in Plat
Book 10, page 114, of the public records of Collier County, Florida.
-18-
<PAGE>
Exhibit A-1
FILES-STORAGE-SHELVING
ITEM #: QUANTITY: MANUFACTURER DESCRIPTION:
- ------- --------- ------------ ------------
1 2 EA. METAL STORAGE CABINETS: 36W X 18D X 72H
2 1 EA MOBILE FILE CABINET 14"X 16"
3 2 EA 5-DRAWER LETTER VERTICLE FILE - NO LOCK
4 2 EA 2-DRAWER VERTICLE FILE - NO LOCK
5 2 EA 3 DRAWER LATERAL FILE W/LOCK
6 4 EA 4-DRAWER LEGAL VERTICLE FILE W/LOCK
7 4 EA 4-DRAWER LETTER VERTICLE FILE NO LOCK
8 4 EA 4-DRAWER LETTER VERTICLE FILE W/LOCK
9 1 EA 2 DRAWER LEGAL FILE W/LOCK
10 1 EA 3 DRAWER LATERAL FILE W/LOCK
2 DRAWER LATERAL FILE W/SLIM LINE
11 1 EA STORAGE DRAWER
12 6 EA 2 DRAWER LATERAL FILE 36"
13 1 EA 2-DRAWER VERTICLE FILE - BLACK
14 1 EA 2-DRAWER LATERAL FILE WOOD GRAIN FINISH
15 1 EA 5-DRAWER LATERAL FILE - BROWN
16 15 EA 5-DRAWER LATERAL FILE- BUFF
17 5 EA 5 DRAWER LATERAL FILE -CREAM
18 1 EA 2-SHELF WOOD BOOKCASE
18 1 EA 3-SHELF WOOD BOOKCASE
19 1 EA LAMINATE DOOR STORAGE UNIT 103" W X 24"
DEEP
20 1 EA WOOD BOOKSHELF 32W X 20 X 29 (LOBBY)
MISC:
1 1 WOOD FINISH PRESENTATION BOARD 48 X 48
2 1 TACK/MARKER BOARD 42H X 46W
<PAGE>
DESK/CREDENZA/TABLES
ITEM #: QUANTITY: MANUFACTURER: DESCRIPTION:
- ------- --------- ------------- ------------
1 1 DESK 30 X 60
2 1 STEELCASE DESK 30 X 66
3 1 CREDENZA W/HUTCH 72 X 24
4 1 2-DRAWER LATERAL FILE 36" WOOD
5 1 KIMBALL 38" 2 DR. LATERAL FILE
5 1 36" 2 DR. LATERAL FILE/LAMINATE
6 1 BOOKCASE - 4 SHELF WOOD 36 X 14 X 48H
7 1 KIMBALL DESK W/LEFT RETURN 30 X 66; 20 X 40
7 1 KIMBALL CREDENZA W/KNEE SPACE 20 X 60
8 1 KIMBALL DESK 72 X 36
8 1 KIMBALL CREDENZA 66 X 20
8 1 KIMBALL BOOKCASE 30 X 14 X 50
9 1 DESK 30 X 66
10 1 KIMBALL DESK 36 X 72
11 1 DESK W/RIGHT RETURN 36 X 66; 20 X 42
12 1 KIMBALL CREDENZA 20 x 66
13 2 JOFFCO DOOR UNIT/BOOKCASE 30 X 19
14 1 JOFFCO CREDENZA
15 1 JOFFCO DESK 72 X 36
16 1 BOOKCASE 36 X 12
17 1 KIMBALL LATERAL FILE: WOOD 2 DRAWER
18 1 CREDENZA 20 X 72
19 1 KIMBALL DESK W/LEFT RETURN 30 X 66; 20 X 40
20 1 KIMBALL DESK W/RIGHT RETURN 36 X 66; 20 X 42
20 2 KIMBALL 32" LATERAL FILE: WOOD 2 DRAWER
21 1 DESK 30 X 66
21 1 CREDENZA 60 X 20
22 1 CREDENZA 60 X 20
23 4 LAMINATE TABLE W/WOOD EDGE 60 X 30
24 1 HERMAN MILLER WORK TABLE 72 X 30
25 1 36" ROUND PEDESTAL LEG TABLE
26 1 26 X 26 TABLE
27 3 96 X 32 TABLE
28 1 BAKER END TABLE
29 1 BAKER END TABLE 32 X 32
30 2 KIMBALL END TABLE 26 X 20 (LOBBY)
31 1 SEMI-CIRCLE LAMINATE DESK (LOBBY)
<PAGE>
CHAIRS
ITEM #: QUANTITY: MANUFACTURER: DESCRIPTION:
- ------- --------- ------------- ------------
1 20 NATIONAL WOOD ARM CHAIR
2 1 STEELCASE EXECUTIVE CHAIR
3 1 NATIONAL WOOD SLED BASE ARM CHAIR
4 1 JASPER EXECUTIVE CHAIR
5 1 WOOD BASE STENO W/ARMS
6 1 HIGH BACK EXECUTIVE CHAIR
7 1 HIGH BACK EXECUTIVE CHAIR
8 2 LIFELINE ARM CHAIR
9 1 STEELCASE METAL SLED BASE CHAIR
10 1 KIMBALL UPHOLSTERED ARM/STENO
11 7 HAWORTH DARK PINK STENO W/ARMS
12 6 HAWORTH BLUE STENO W/ARMS
13 1 HAWORTH DARK PINK STENO W/ARMS - HIGH BACK
14 2 HERMAN MILLER SLED BASE ARM CHAIR - TEAL
15 2 JASPER WOOD ARM CHAIR
16 1 KIMBALL WOOD ARM CHAIR- ROSE
17 3 KIMBALL WOOD ARM CHAIR-BURGANDY
18 2 KIMBALL WOOD ARM CHAIR - BLUE
19 3 HAWORTH LIGHT PINK STENO W/ARMS
20 8 HERMAN MILLER BURGANDY ARMLESS STENO
21 4 HERMAN MILLER TEAL STENO W/ARMS
22 12 HERMAN MILLER RED ARMLESS STENO
23 2 JASPER TRADITIONAL ARM CHAIR
24 3 SCHAFFER WOOD ARM CHAIR/BEIGE FABRIC
24 1 STEELCASE BURNT ORANGE MID-BACK STENO W/ARMS
25 2 WOOD ARM CHAIR
26 1 JASPER MID-BACK TRAD. EXECUTIVE CHAIR
27 3 UPHOLSTERED GREE ARM CHAIRS (LOBBY)
28 4 SOFA WEDGE PIECES (LOBBY)
<PAGE>
HAWORTH SYSTEMS FURNITURE
QUANTITY: DESCRIPTION:
- --------- ------------
3 EA. PANEL 60 W X 67 H
13 EA. PANEL 48 W X 67 H
31 EA. PANEL 36 W X 67 H
9 EA. PANEL 30 W X 67 H
11 EA. PANEL 24 W X 67 H
2 EA. PANEL 12 W X 67 H
1 EA. CORNER END BRACKET 67"H
1 EA. END PANEL-RIGHT 28" H X 23"D
1 EA. END PANEL- LEFT 28" H X 23"D
1 EA. WORKSURFACE 72"W X 30"D
11 EA. WORKSURFACE 72"W X 24"D
3 EA. WORKSURFACE 60" X 30"D
10 EA. WORKSURFACE 48"W X 30"D
3 EA. WORKSURFACE 48"W X 24"D
2 EA. WORKSURFACE 36"W X 24"D
6 EA. PENCIL/BOX/FILE PEDESTAL (ATTACHED)
7 EA. FILE/FILE PEDESTAL (ATTACHED)
3 EA. PENCIL/BOX PEDESTAL (ATTACHED)
1 EA. PENCIL/FILE PEDESTAL (ATTACHED)
3 EA. MOBILE BOX/FILE PEDESTAL
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 60"W
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 48"W
21 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 36"W
1 EA. TACK BOARD - BLUE 42" W X 15"H
1 EA. TACK BOARD - 48"W X 15"H
2 EA. TACK BOARD 60" W X 15"H
13 EA. TACK BOARD 36" X 15"H
6 EA. KEYBOARD DRAWER 32"W
2 EA POWER POLES
<PAGE>
STEELCASE SYSTEMS FURNITURE
QUANTITY: DESCRIPTION:
- --------- ------------
5 EA. PANEL 60 W X 65 H - BEIGE
11 EA. PANEL 48 W X 65 H - BEIGE
53 EA. PANEL 36 W X 65 H - BEIGE
40 EA. PANEL 24 W X 67 H - BEIGE
1 EA. PANEL 24 W X 34 H - BEIGE
3 EA. PANEL 30 W X 65 H - BROWN
7 EA. PANEL 24 W X 65 H - BROWN
3 EA. PANEL 48 W X 34 H - BROWN
6 EA. PANEL 24 W X 34 H - BROWN
40 EA END BRACKET - RIGHT
42 EA. END BRACKET - LEFT
6 EA. END LEG - RIGHT
6 EA. END LEG - LEFT
5 EA. END PANEL-RIGHT 28" H X 23"D
6 EA. END PANEL- LEFT 26" H X 23"D
19 EA. WORKSURFACE 72"W X 24"D
7 EA. WORKSURFACE 60" X 24"D
4 EA. WORKSURFACE 48" W X 24"D
17 EA. WORKSURFACE 36"W X 24"D
27 EA. PENCIL/BOX/FILE PEDESTAL (ATTACHED)
4 EA. MOBILE BOX/FILE PEDESTAL 22"DEEP
1 EA. MOBILE BOX/FILE PEDESTAL 30"DEEP
4 EA. 36" LATERAL FILE HANGING
1 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 72"W
4 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 60"W
9 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 48"W
8 EA. OVERHEAD STORAGE BIN W/FLIPPER DOOR AND TASK LIGHT 36"W
6 EA. KEYBOARD DRAWER
7 EA. POWER POLES
2 EA. WORK TABLE 90" W X 30" D
1 EA. WORK TABLE 30" W X 30" D
<PAGE>
EXHIBIT B
---------
Occupancy Tenants
-----------------
1. Lease Agreement dated 1992, with Allen Systems Group
as tenant, as amended from time to time.
-19-
<PAGE>
AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------
This Amendment to Purchase and Sale Agreement (the
"Amendment") is made effective the 31st day of July, 1997 between BARNETT BANK,
N.A., as Seller, and CERTIFIED DIABETIC SUPPLIES, INC., as Purchaser.
Whereas, Seller and Purchaser signed that certain Purchase and
Sale Agreement with an Effective Date on or about July 2, 1997 (the "Contract")
for the Purchaser's purchase of certain real property and improvements located
in Collier County, Florida (the "Property").
Whereas, the parties desire to set forth certain additional
understandings regarding the transactions contemplated in the Contract, as more
fully set forth herein.
NOW, THEREFORE, in consideration of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged by the parties, the Seller and Purchaser agree as follows:
1. Recitals. The recitals set forth above are true and correct
and are incorporated herein by this reference.
2. Termination Date and Closing Date. Paragraph 15 of the
Contract is amended so that the Termination Date is extended to be on or before
5:00 p.m., EDT, August 8, 1997 for the sole purpose of Purchaser obtaining a
commitment for financing for the subject transaction. Notwithstanding the
foregoing, it is understood and agreed that the Closing Date shall remain August
15, 1997.
3. Governing Law and Jurisdiction. This Amendment shall be
deemed to be governed by, construed and enforced in accordance with the laws of
the State of Florida.
4. Facsimile and Counterpart Signatures. This Amendment may be
executed in counterpart and facsimile signatures, the counterparts and
facsimiles of which, when taken together, shall constitute an entire and
original Amendment.
5. Effect of Amendment. This Amendment shall control over all
provisions of the Contract. To the extent that provisions of the Contract are
not amended by this Amendment, then such provisions shall remain in full force
and effect.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ ILLEGIBLE By: /s/ RANDY AYALA
- ------------------------- ---------------------------
Witness Name: Randy Ayala
-------------------------
Title: V. Pres.
------------------------
/s/ ILLEGIBLE
- -------------------------
Witness
SELLER:
BARNETT BANK, N.A.
/s/ XENIA L. AMES By: /s/ ALAN BLANKSTEIN
- ------------------------- ---------------------------
Witness Xenia L. Ames Name: Alan Blankstein
Title: Authorized Designee
/s/ CAROL L. JOHNSON COOTE
- ---------------------------
Witness Carol L. Johnson Coote
-21-
<PAGE>
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
-----------------------------------------------
This Second Amendment to Purchase and Sale Agreement (the
"Amendment") is made effective the 15th day of August, 1997 between BARNETT
BANK, N.A., as Seller, and CERTIFIED DIABETIC SUPPLIES, INC., as Purchaser.
Whereas, Seller and Purchaser signed that certain Purchase and
Sale Agreement with an Effective Date on or about July 2, 1997, and that certain
Amendment to Purchase and Sale Agreement dated on or about July 31, 1997
(collectively, the "Contract") for the Purchaser's purchase of certain real
property and improvements located in Collier County, Florida (the "Property").
Whereas, the parties desire to set forth certain additional
understandings regarding the transactions contemplated in the Contract, as more
fully set forth herein.
NOW, THEREFORE, in consideration of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged by the parties, the Seller and Purchaser agree as follows:
6. Recitals. The recitals set forth above are true and correct
and are incorporated herein by this reference.
7. Termination Date and Closing Date. Paragraph 15 of the
Contract is amended so that the Termination Date is extended to be on or before
5:00 p.m., EDT, August 22, 1997 for the sole purpose of Purchaser obtaining a
commitment for financing for the subject transaction. Paragraph 6 of the
Contract is amended so that the Closing Date is extended to be on or before
10:00 a.m., EDT, August 29, 1997.
8. Governing Law and Jurisdiction. This Amendment shall be
deemed to be governed by, construed and enforced in accordance with the laws of
the State of Florida.
9. Facsimile and Counterpart Signatures. This Amendment may be
executed in counterpart and facsimile signatures, the counterparts and
facsimiles of which, when taken together, shall constitute an entire and
original Amendment.
10. Effect of Amendment. This Amendment shall control over all
provisions of the Contract. To the extent that provisions of the Contract are
not amended by this Amendment, then such provisions shall remain in full force
and effect.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ ILLEGIBLE By: /s/ Myron M. Blumenthal
- ----------------------- -----------------------------
Witness Name: Myron M. Blumenthal
---------------------------
Title: CFO
/s/ NANCY FEELEY --------------------------
- -----------------------
Witness
SELLER:
BARNETT BANK, N.A.
/s/ XENIA L. AMES By: /s/ ALAN BLANKSTEIN
- ----------------------- ------------------------------
Witness Name: Alan Blankstein
Title: Authorized Designee
/s/ PATRICIA WILLIAMS
- -----------------------
Witness
-23-
<PAGE>
THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------------
This Third Amendment to Purchase and Sale Agreement (the
"Amendment") is made effective the 18th day of August, 1997 between BARNETT
BANK, N.A., as Seller, and CERTIFIED DIABETIC SUPPLIES, INC., as Purchaser.
Whereas, Seller and Purchaser signed that certain Purchase and
Sale Agreement with an Effective Date on or about July 2, 1997, and that certain
Amendment to Purchase and Sale Agreement dated on or about July 31, 1997, and
that certain Second Amendment to Purchase and Sale Agreement dated on or about
August 15, 1997 (collectively, the "Contract") for the Purchaser's purchase of
certain real property and improvements located in Collier County, Florida (the
"Property").
Whereas, the parties desire to set forth certain additional
understandings regarding the transactions contemplated in the Contract, as more
fully set forth herein.
NOW, THEREFORE, in consideration of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged by the parties, the Seller and Purchaser agrees as follows:
11. Recitals. The recitals set forth above are true and
correct and are incorporated herein by this reference.
12. Termination Date. Paragraph 15 of the Contract is amended
so that the Termination Date is extended to be on or before 5:00 p.m., EDT,
August 25, 1997 for the sole purpose of Purchaser obtaining a commitment for
financing for the subject transaction. The Purchaser otherwise accepts all other
aspects of the Property, including (but not limited to) its physical condition,
status of title as reflected in the Title Commitment delivered to Purchaser, and
any matters that would be disclosed by a current survey.
13. Closing Date. Paragraph 6 of the Contract is amended so
that the Closing Date is extended to be on or before 10:00 a.m., EST, December
15, 1997.
14. Second Deposit. The amount of the Second Deposit to be
delivered to Escrow Agent on or before the Termination Date is amended to be
$230,000.00, which shall become part of the Deposit. The Purchaser understands
and agrees that the Deposit in its entirety shall be non-refundable to Purchaser
after the Termination Date.
15. Occupancy of the Property. Purchaser has advised that it
may desire to occupy the Property prior to the Closing. Seller and Purchaser
agree to discuss terms for a lease agreement for Purchaser's pre-Closing
occupancy of the Property. In the event the parties can agree on mutually
acceptable terms, then the parties may execute a lease agreement providing for
Purchaser's occupancy of the Property prior to the Closing.
<PAGE>
16. Governing Law and Jurisdiction. This Amendment shall be
deemed to be governed by, construed and enforced in accordance with the laws of
the State of Florida.
17. Facsimile and Counterpart Signatures. This Amendment may
be executed in counterpart and facsimile signatures, the counterparts and
facsimiles of which, when taken together, shall constitute an entire and
original Amendment.
18. Effect of Amendment. This Amendment shall control over all
provisions of the Contract. To the extent that provisions of the Contract are
not amended by this Amendment, then such provisions shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER:
CERTIFIED DIABETIC SUPPLIES, INC.
/s/ NANCY FEELEY By: /s/ MYRON M. BLUMENTHAL
- ----------------------- ------------------------------
Witness Nancy Feeley Name: Myron M. Blumenthal
----------------------------
Title: CFO
/s/ ILLEGIBLE ---------------------------
- -----------------------
Witness
SELLER:
BARNETT BANK, N.A.
/s/ XENIA L. AMES By: /s/ ALAN BLANKSTEIN
- ----------------------- ------------------------------
Witness Xenia L. Ames Name: Alan Blankstein
Title: Authorized Designee
/s/ CAROL J. JOHNSON COOTE
- -------------------------------
Witness Carol J. Johnson Coote
-25-
<PAGE>
Acct # 2952
BOEHRINGER MANNHEIM CORPORATION
MEDICARE STRIP REBATE CREDIT PROGRAM
Contract # M103
-------
MEDICARE/MEDICAID STRIP REBATE CREDIT
PURCHASING AGREEMENT
This Agreement is made this 22 day of May, 1997, by and between Boehringer
Mannheim Corporation ("BMC") and Certified Diabetic Supplies Inc.
("Distributor").
The parties hereto agree as follows:
1. Products and Price
A. BMC will sell to Distributor the products set forth on Exhibit A, attached
hereto and incorporated by reference, at the prices set forth on such exhibit.
Distributor agrees to purchase such products direct from BMC in case quantities
through the use of a separate purchase order than for other BMC products. BMC
agrees to ship products within five days of BMC's receipt of Distributor's
purchase order. Distributor agrees to resell such products only to Medicare or
Medicaid Customers (defined below). In addition, Distributor agrees to abide by
BMC's established direct account return goods policy.
B. The prices of Exhibit A products may be adjusted with thirty days' notice by
BMC if BMC adjusts its distributor pricing.
C. BMC reserves the right to add products to or delete products from Exhibit A
upon ninety (90) days notice to Distributor.
D. Distributor agrees to the volume and share commitments set forth on Exhibit
D. If Distributor does not meet the commitments, BMC may terminate this
Agreement by written notice to Distributor.
2. Rebates
A. Distributor represents and warrants to BMC that it is a party to a Medicare
and/or state(s) Medicaid participation agreement.
B. BMC will issue a credit to the Distributor for rebate amounts set forth on
Exhibit B for sales made to customers for which Distributor accepts assignment
of Medicare and/or Medicaid claims (hereinafter referred to as Customers).
The rebates on Exhibit B for Advantage and Instant strips are available
only if the total BMC strip share is equal to or greater than * of all blood
glucose monitoring strips sold to Medicare/Medicaid patients during the previous
calendar *. BMC strip share is defined as the * of all BMC strips sold to
Medicare/Medicaid patients during the previous * divided by the * of all strips
sold to Medicare/Medicaid patients during the previous *.
C. BMC will issue a credit to the Distributor for Medicaid Customers if the
state's Medicaid Programs (see Exhibit E for approved states) reimbursement for
strips is equal to or less than the Medicare strip reimbursement national
ceiling (e.g. Medicare's national ceiling for a vial of 50 strips in 1997 is
* ).
D. Distributor may claim rebates no more often than *. Distributor shall
provide BMC with a summary of sales made to Medicare and/or Medicaid Customers,
broken down by product by the 10th day of the month. The information provided to
BMC shall be in the form set forth on Exhibit C. The minimum rebate amount that
may be claimed is *. If Distributor's sales are insufficient to allow
Distributor to claim the minimum amount in any *, Distributor may claim a
rebate in a subsequent
- -----------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
PAGE 1
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE STRIP REBATE CREDIT PROGRAM
* by aggregating sales from *. Rebates for Advantage and Instant strips based on
attainment of at least * share as indicated in 2.B. may only be requested *.
E. BMC agrees to issue a credit to the Distributor for any rebate due within 10
days of receipt of rebate claim and information as specified in C.
F. Distributor has provided BMC with its Medicare and/or Medicaid supplier
number and hereby authorizes BMC to request information from Medicare and/or
Medicaid relating to sales of BMC products to Customers. Distributor will either
provide customer information (product, date sold and customer Medicare and/or
Medicaid number) with its rebate request form or allow a monthly on-site audit
by a BMC representative. Distributor also agrees that BMC may audit , at any
time upon reasonable notice, Distributor's records to determine that rebates
have been paid correctly. Distributor shall promptly reimburse BMC for any
amounts that the audit determines have been paid incorrectly.
3. Term/Termination
A. The term of this Agreement shall be for a period of one year from the date
hereof. Upon agreement by BMC and Distributor to revisions in the volume and
share commitments set forth in Exhibit D, this Agreement shall automatically
renew for additional one-year periods unless either party gives the other party
sixty (60) days notice that it does not desire to renew the Agreement.
B. Either party may terminate this Agreement upon sixty (60) days written notice
to the other in the event that (i) the other party becomes unable to pay its
debts as they occur in the ordinary course of business or commits any act of
bankruptcy; or (ii) the other party breaches this Agreement and fails to cure
said breach within thirty (30) days from its receipt of written notice from the
other party specifying such breach.
C. BMC may terminate this Agreement immediately upon written notice from BMC to
Distributor in the event that BMC has reason to believe that Distributor is
offering for sale any of the products purchased under this Agreement to
customers who are not Medicare and/or Medicaid Customers or that Distributor is
claiming rebates for sales that were not made to Medicare and/or Medicaid
Customers. In the event Distributor offers for sale any of the products
purchased under this Agreement to customers who are not Medicare and/or Medicaid
Customers or claims rebates for sales that were not made to Medicare and/or
Medicaid Customers, Distributor agrees to pay to BMC an amount equal to the
total rebate received for such products, plus a twenty-five percent (25%)
handling fee to compensate BMC for the costs of processing such rebates.
4. General
A. Assignment: This Agreement shall not be assigned by either party without the
prior and express written consent of the other.
B. Entire Agreement: This Agreement constitutes the entire agreement between the
parties, and no other agreements, whether written or oral, shall be used to
construe, alter, or modify the terms of this Agreement. This Agreement may be
amended only by a written document signed by both of the parties hereto.
C. Independent Contractors: The relationship between the parties to this
Agreement shall be that of independent contractors and neither party shall be
considered the agent of the other party or to have an authority to act for or on
behalf of the other party.
D. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
- ---------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
PAGE 2
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE AND/STRIP REBATE CREDIT PROGRAM
- -------------------------------------------------------------------------------
Distributor: BMC
Name CERTIFIED DIABETIC SUPPLIES INC. BOEHRINGER MANNHEIM CORPORATION
---------------------------------
Acct No. 2452-0 By: /s/ JUDY A. PHIPPS
----------------------- ------------------------------
Address 1951 JC Boulevard Title: CONTRACTS
----------------------- ---------------------------
(To be signed by BMC Contract
Administrator only)
City/State/Zip NAPLES, FLORIDA 34109
----------------------
By: /S/ ILLEGIBLE Account Manager: /S/ ROBERT MEGNIN
------------------------ --------------------
Title: PRES/CEO Acct Mgr Territory 4164
--------------------- --------------
Medicare Supplier Number: Acct Mgr ASPEN 5123
--------------
0925330001
- ------------------------
Medicaid Supplier Number:
N/A
- ------------------------
States with sales to Medicaid beneficiary:
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Standing P.O. #
261026
- ---------------------------------
- -------------------------------------------------------------------------------
Mail contract and first order (allow 30 days for delivery)
Boehringer Mannheim Corporation
Diabetes Care Contract Administration
9115 Hague Road
Indianapolis, Indiana 46250
PAGE 3
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE/MEDICAID STRIP REBATE CREDIT PROGRAM
EXHIBT A
(LIST OF PRODUCT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRODUCT NDC. NO CATALOG NUMBER QUANTITY UNIT COST
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chemstrip(R)bG 50924-502-50 00502 50/vial **
- ------------------------------------------------------------------------------------------------------------
Tracer(R)Strips 50924-535-50 00535 50/vial **
- ------------------------------------------------------------------------------------------------------------
Accu-Chek(R) 50924-336-50 336 50/vial **
Advantage(TM) Strips
- ------------------------------------------------------------------------------------------------------------
Accu-Chek(R)Easy(TM) 50924-560-50 00560 50/vial **
Test Strips *
- ------------------------------------------------------------------------------------------------------------
Accu-Chek(R)Instant(TM) 50924-337-50 337 50/vial **
Strips *
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Note: The discounted price of these two products is reflected in the purchase
price and honored if BMC strip volume is equal to or greater than **.
Account Signature /S/ ILLEGIBLE Date 6/24/97
------------------------- --------------------
- -------------------
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE/MEDICAID STRIP REBATE CREDIT PROGRAM
EXHIBIT B
(REBATE AMOUNTS PER PRODUCTS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRODUCT CATALOG NUMBER REBATE
(BMC share of business must be maintained)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Chemstrip(R)bG 00502 *
- --------------------------------------------------------------------------------------------
Tracer(R)Strips 00535 *
- --------------------------------------------------------------------------------------------
Accu-Chek(R)Easy(TM) 00560 *
Test Strips *
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
PRODUCT CATALOG NUMBER REBATE
(BMC previous quarterly share of business
must be equal to or greater than *)
- --------------------------------------------------------------------------------------------
Accu-Chek(R) 336 *
Advantage(TM) Strips
- --------------------------------------------------------------------------------------------
Accu-Chek(R) 337 *
Instant(TM) Strips
- --------------------------------------------------------------------------------------------
</TABLE>
Account Signature /S/ ILLEGIBLE Date 6/24/97
---------------------------- ---------------------
- -------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
CONTRACT M103 BOEHRINGER [LOGO]
MANNHEIM
CORPORATION
Exhibit C
MEDICARE STRIP REBATE REQUEST FORM
NAME Certified Diabetic Supplies Inc. CUST DEBIT MEMO__________________________________ REQUEST DATE____________________________
ACCT #/SHIP TO__________________________________ CONTRACT #______________________________
MEDICARE SUPPLIER #_____________________________
- -------------------------------------------------------------------------------------------------------------------------------
BEGINNING ENDING CATALOG BILLED CONTRACTED REBATE AMOUNT NUMBER OF TOTAL
DATE DATE NUMBER PRICE PRICE VIALS SOLD REBATE
SOLD SOLD PER VIAL PER VIAL
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
502 * * *
- -------------------------------------------------------------------------------------------------------------------------------
535 * * *
- -------------------------------------------------------------------------------------------------------------------------------
560 * * *
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------
Mail to:
Boehringer Mannheim Corporation
Attention: Rebate Administration
Medicare - H
9115 Hague Road
Indianapolis, IN 46256
- ---------------------------------
NOTE: THE FOLLOWING CUSTOMER INFORMATION MUST BE ATTACHED:
PRODUCT, DATE SOLD, AND CUSTOMER MEDICARE NUMBER
[ ] (Check here) Data will be provided during BMC monthly on-site audit.
PRODUCT CLASS 850701 SUPPLIER AUTHORIZED SIGNATURE /S/ ILLEGIBLE
-------------------
RR#________________________________________________
BMC USE ONLY
The name of the Medicare Customer and the Customer's Medicare number shall be
treated as confidential information by BMC and shall not be disclosed to third
parties or used except in connection with the administration of the Medicare
Strip Rebate Purchasing Agreement, or as may be required by law.
- -------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE/MEDICAID STRIP REBATE CREDIT PROGRAM
EXHIBIT D
(ANNUAL VOLUME AND SHARE COMMITMENTS)
ANNUAL STRIP SALES VOLUME COMMITMENT
-----------
PRIOR 12 MONTH BMD STRIP SALES GOAL **
-----------
-----------
NEXT 12 MONTH BMD STRIP SALES GOAL **
From June 1, 1997 TO May 31, 1998
-----------
o 1st quarter interim goal **
-----------
o 2nd quarter interim goal **
-----------
o 3rd quarter interim goal **
-----------
ANNUAL SHARE OF BUSINESS COMMITMENT
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------- -----------------------------
COMPANY PRIOR 12 MONTH ACTUAL SHARE OF BUSINESS COMMITMENT
- -------------------------------------------------------------------------------------- -----------------------------
$ % %
- -------------------------------------------------------------------------------------- -----------------------------
BMD* ** ** **
- -------------------------------------------------------------------------------------- -----------------------------
Lifescan -- **
- --------------------------------------------------------------------------------------
Miles
- --------------------------------------------------------------------------------------
Medisense
- --------------------------------------------------------------------------------------
Polymer
- --------------------------------------------------------------------------------------
Can Am
- --------------------------------------------------------------------------------------
Other:
-- **
- --------------------------------------------------------------------------------------
TOTAL * Bayer -- **
- --------------------------------------------------------------------------------------
</TABLE>
* Required fields
BMC Account Manager Signature_________________________ Date___________________
Account Signature /S/ ILLEGIBLE Date 6/24/97
------------------------------------ -------------------
- -----------------
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
BOEHRINGER MANNHEIM CORPORATION
MEDICARE/MEDICAID STRIP REBATE CREDIT PROGRAM
EXHIBIT E
State Medicaid Programs with strip reimbursement below the Medicare national
ceiling (e.g. vial of 50 strips *)
---------------------------------------------------------
State Effective
---------------------------------------------------------
Arizona 1/1/97
---------------------------------------------------------
Colorado 1/1/97
---------------------------------------------------------
Delaware 1/1/97
---------------------------------------------------------
Georgia 1/1/97
---------------------------------------------------------
Idaho 1/1/97
---------------------------------------------------------
Indiana 1/1/97
---------------------------------------------------------
Kansas 1/1/97
---------------------------------------------------------
Kentucky 1/1/97
---------------------------------------------------------
Minnesota 1/1/97
---------------------------------------------------------
Missouri 1/1/97
---------------------------------------------------------
Montana 1/1/97
---------------------------------------------------------
Nebraska 1/1/97
---------------------------------------------------------
Nevada 1/1/97
---------------------------------------------------------
New Mexico 1/1/97
---------------------------------------------------------
North Carolina 1/1/97
---------------------------------------------------------
North Dakota 1/1/97
---------------------------------------------------------
Ohio 1/1/97
---------------------------------------------------------
Oklahoma 1/1/97
---------------------------------------------------------
Rhode Island 1/1/97
---------------------------------------------------------
South Dakota 1/1/97
---------------------------------------------------------
Texas 1/1/97
---------------------------------------------------------
Washington 1/1/97
---------------------------------------------------------
Wisconsin 1/1/97
---------------------------------------------------------
Wyoming 1/1/97
---------------------------------------------------------
- ----------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
FEDERAL EXPRESS [LOGO]
Diagnostics Division
Bayer Corporation
P.O. Box 2009
Mishawaka, IN 46546-2009
Phone: 800 445-5901
Fax: 219 257-3717
June 17, 1997
Mr. Peter Fiscina
President and CEO
Certified Diabetic Supply
1951 J&C Boulevard
Naples, FL 34109
Dear Mr. Fiscina:
We appreciate the opportunity to respond to your request for a managed care
competitive offer. This offer applies to the Participating Plans serviced by
your PBM's mail order service and set forth in Exhibit B. The proposed Agreement
would be effective from your date of acceptance through June 30, 2002.
This proposal supersedes our proposal of June 4, 1997.
Bayer Corporation, Diagnostics Division will provide Certified Diabetic Supply's
Participating Plans up to 100,000 new blood glucose meters annually (GLUCOMETER
ELITE(R), GLUCOMETER ENCORE(R), and/or GLUCOMETER(R) DEX(TM) when it is
commercially available) over the term of this Agreement for its members with
diabetes *.
The Bayer Corporation, Diagnostics Division program is based on a meter
distribution system which enables Certified Diabetic Supply or its Participating
Plans to better implement and control provision of the blood glucose monitor
benefit to eligible members.
Certified Diabetic Supply or its Participating Plan certifies that the member is
eligible to receive a blood glucose monitor. As an option, Certified Diabetic
Supply or its Participating Plan notifies Bayer via a dedicated managed care fax
line that the member is authorized to receive a meter.
- --------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
Mr. Peter Fiscina
Certified Diabetic Supply
June 17, 1997
Page 2
Bayer, at Certified Diabetic Supply's discretion, ships directly to the member,
either the GLUCOMETER ELITE(R) or GLUCOMETER ENCORE(R) meter (as directed by
Certified Diabetic Supply or its Participating Plan). The package received by
the patient includes the following:
Blood Glucose Meter
Check Strip
Carrying Case
Test Strips
Normal Control
Lancing Device
User Guide
Patient Record Diary
Instructional Video Tape
Meter Trade-In Mail Packaging
Managed Care Letter of Introduction
The warranty on the meter is effective immediately upon shipment.
The member obtains the test strips for use in the meter as is currently the
policy of the Participating Plan. This is generally through a pharmacy provider,
and often is concurrent with refill of prescribed therapeutic agents for
treatment of diabetes.
- --------------------------------------------------------------------------------
The proposed Agreement will cover the GLUCOMETER ELITE(R) and GLUCOMETER
ENCORE(R) Diabetes Care System meters and GLUCOMETER ELITE(R) and GLUCOMETER
ENCORE(R) Test Strips. The GLUCOMETER ELITE(R) and GLUCOMETER ENCORE(R) meters
will be the preferred and only meters provided by Participating Plans for their
members.
- --------------------------------------------------------------------------------
If any orders are placed for blood glucose meters after *, Bayer Corporation,
Diagnostics Division will offer to Certified Diabetic Supply or its
Participating Plans the following:
<TABLE>
<CAPTION>
NDC NUMBER CODE PRODUCT PRICE
- ---------- ---- ------- -----
<S> <C> <C> <C>
0193-3901-01 3901 GLUCOMETER ELITE(R)Diabetes Care System *
0193-5885-01 5885 GLUCOMETER ENCORE(R)Diabetes Care System *
</TABLE>
The Participating Plans will be invoiced monthly for meters dispensed to their
patients. Payment terms will be Net 30 days.
When meters are purchased by Certified Diabetic Supply or its Participating
Plans at the above pricing this is in lieu of a consumer rebate program.
- ------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
Mr. Peter Fiscina
Certified Diabetic Supply
June 17, 1997
Page 3
Bayer Corporation, Diagnostics Division will also allow Certified Diabetic
Supply or its Participating Plans to file for competitive meter trade-ins. When
trade-ins are returned to Bayer Corporation, Diagnostics Division, Participating
Plans will be credited * for each meter traded in for a GLUCOMETER ELITE(R) and
* for each meter traded in for a GLUCOMETER ENCORE(R) through June 30, 2002. *
In 1997, Bayer Corporation, Diagnostics Division received FDA approval to market
the GLUCOMETER(R) DEX(TM) Diabetes Care System. When GLUCOMETER(R) DEX(TM)
becomes commercially available, Certified Diabetic Supply will have the option
to substitute the GLUCOMETER(R) DEX(TM) for the GLUCOMETER ELITE(R) or add it to
the existing contract. Pricing for the product will be negotiated and determined
once it is commercially available.
Bayer Corporation, Diagnostics Division agrees to provide training for the
healthcare staff on the GLUCOMETER ELITE(R) and GLUCOMETER ENCORE(R) Diabetes
Care Systems. This training will be provided *. Bayer Corporation, Diagnostics
Division will provide literature for use in educating the patients with diabetes
on the use of these products. As Bayer introduces new generation meters, we will
work directly with Certified Diabetic Supply or its Participating Plans to
implement appropriate upgrade programs to meet your needs.
In addition to the foregoing, products listed on Exhibit A will be available to
Certified Diabetic Supply under the terms of this Agreement. *
Pricing consideration for the test strips associated with the GLUCOMETER
ELITE(R) and GLUCOMETER ENCORE(R) will be structured as a rebate to Certified
Diabetic Supply, will be payable monthly, and will be based on Participating
Plans' utilization verification provided to Bayer. Such utilization ("Data")
monthly reports should be substantially similar to that set forth in Exhibit C.
PLEASE BE ADVISED THAT CERTIFIED DIABETIC SUPPLY AND/OR ANY OF ITS PARTICIPATING
PLANS MAY BE OBLIGATED TO REPORT THE DISCOUNT OR OTHER REDUCTION APPLICABLE TO
ANY PRODUCTS PURCHASED IN PRICE CLAIMS FOR PAYMENTS SUBMITTED TO FEDERAL OR
STATE MEDICARE OR MEDICAID PROGRAMS OR OTHER PROGRAMS REQUIRING SUCH DISCLOSURE.
- -------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
Mr. Peter Fiscina
Certified Diabetic Supply
June 17, 1997
Page 4
The products being offered as part of this proposal are intended solely for use
by Certified Diabetic Supply's Participating Plans. The resale, by Certified
Diabetic Supply or its Participating Plans, of product purchased at the contract
price shall be grounds for termination of the Agreement. Certified Diabetic
Supply agrees to inform appropriate members of its staff that the Diagnostics
Division products purchased at the contract price are not for resale. The
Diagnostics Division reserves the right to conduct audits, at reasonable times,
of the purchasing records pertaining to this contract.
This Agreement is conditional upon Certified Diabetic Supply providing to Bayer
an acceptable list of Participating Plans ("Participating Plans List"- Exhibit
B). The Participating Plans List can be submitted on a 3 1/2" floppy disk in a
mutually agreeable format. If Certified Diabetic Supply requires a Participating
Plan to be added to this Agreement after the date of acceptance, such requests
must be made in writing thirty (30) days prior to the beginning of the next
consecutive month. Upon written approval from Bayer, the Participating Plan will
then be eligible for rebates.
Multiple discounts/rebates: Certified Diabetic Supply shall notify Bayer
Diagnostics immediately in writing if any Participating Plan(s) has and/or
enters into an agreement for pharmacy/durable medical equipment benefit
management services with any affiliate or third party, including without
limitation, any mail order distribution service, prescription drug program or
formulary administrator, management company, or group buying organization.
Certified Diabetic Supply warrants that there are no such agreements. Bayer
reserves the right to terminate this Agreement, in part or in whole, upon thirty
(30) days prior written notice if Bayer discovers a breach of the warranty or
any of the Participating Plans enter into an agreement with any entity other
than Certified Diabetic Supply for the products subject to this Agreement. Bayer
also reserves the right, at its sole option, for any reason or no reason at all,
to terminate this Agreement at any time upon not less than ninety (90) days
prior written notice.
We appreciate your support and promotion of Bayer Corporation, Diagnostics
Division products. We look forward to receiving your signed acceptance by the
close of business June 30, 1997, after which time this offer will be considered
null and void. Please sign one copy of this Proposal and return it to my
attention; the second copy may be retained for your files.
<PAGE>
Mr. Peter Fiscina
Certified Diabetic Supply
June 17, 1997
Page 5
If you need additional information, please contact your Managed Care Manager,
Rene Sager, at AC 407-830-7455.
Sincerely,
/s/ MARY L. BISHOP
Mary L. Bishop
Manager, Contract Administration
MLB/sr
Enclosure
ACCEPTANCE:
/s/ ILLEGIBLE
- --------------------------
Authorized Signature
Certified Diabetic Supply
6/24/97
- --------------------------
Date
<PAGE>
Exhibit A
BAYER CORPORATION, DIAGNOSTICS DIVISION PROPOSAL TO
CERTIFIED DIABETIC SUPPLY
CONTRACT PERIOD: Date of Acceptance through June 30, 2002
<TABLE>
<CAPTION>
NDC Product Rebate
Number Code Product Name Basis Price Rebate
------ ---- ------------ ----------- ------
<S> <C> <C> <C> <C>
0193-3918-50 3918 GLUCOMETER ELITE(R)Test Strips, 50's * *
0193-2250-50 2250 GLUCOMETER ENCORE(R)Test Strips, 50's * *
</TABLE>
- ---------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
Exhibit B
Bayer Corporation, Diagnostics Division
Participating Plans List
<TABLE>
<CAPTION>
====================================================================================================================================
Participating Plan Name Address City ST Zip Number of Model Type*
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*HMO, IPA, PPO, employer
Missing information (i.e. address, city, state, zip, model type) to be provided
by Certified Diabetic Supply before execution of this Agreement.
<PAGE>
Exhibit C
Bayer Corporation, Diagnostics Division
"Data"
Quarterly Report(s) Format
PBM Name:
Period ___________ to ___________
<TABLE>
<CAPTION>
Total PBM Summary
============================================================================================================
Product Code Product Description Package Size Total # Of Packages
<S> <C> <C> <C>
============================================================================================================
3918 Elite Test Strips 50's
- ------------------------------------------------------------------------------------------------------------
2250 Encore Test Strips 50's
- ------------------------------------------------------------------------------------------------------------
DEX 50's
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Individual Participating Plan Summary Report
============================================================================================================
Product Code Product Description Package Size Total # Of Packages
<S> <C> <C> <C>
============================================================================================================
3918 Elite Test Strips 50's
- ------------------------------------------------------------------------------------------------------------
2250 Encore Test Strips 50's
- ------------------------------------------------------------------------------------------------------------
DEX 50's
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TERMS AND CONDITIONS OF SALE
Acceptance by Seller is expressly limited to Buyer's assent to these terms and
conditions. Except to the extent expressly stated on the face side hereof, the
terms and conditions stated herein constitute the entire contract between the
parties and supersede in their entirety all prior written and oral agreements,
understandings and representations. No additional or different terms and
conditions of any prior or subsequent purchase order, acknowledgement, or other
notification from the Buyer to the Seller shall be of any effect regardless of
any provision to the contrary appearing thereon, and no subsequent modifications
or changes shall be effective unless in writing signed by both Seller and Buyer.
Title to all products will pass to Buyer on delivery to carrier at Seller's
plant regardless of any provisions for payments of freight or insurance by
Seller, or of the form of shipping documents. If shipment is consigned to
Seller, it shall be for the purpose of securing Buyer's obligation under this
order. Risk of damage or loss following such delivery to carrier shall be on
Buyer notwithstanding selection of carrier by Seller. Seller shall be in no way
and to no extent liable or responsible for safe or prompt arrival of any
shipments.
Seller makes the following warranties and only the following warranties:
A. The products conform to the standard of identity and quality, if any, stated
on the face side hereof.
B. The products are free from defects in materials and workmanship.
C. The products as furnished to the Buyer do not infringe any unexpired United
States Letters Patent covering the product itself. Seller agrees to defend and
save the Buyer harmless from any liability resulting from any suit alleging such
infringement: provided however, that if Buyer gives Seller prompt written notice
of any patent infringement suits threatened or filed against the Buyer and shall
permit the Seller, if it so elects, to defend, settle, or otherwise terminate
such suit. Without liability to the Buyer, the Seller shall have the option
whenever the Seller deems it necessary or expedient for the protection of its
patent rights or for the avoidance of litigation to discontinue shipment of the
product to the Buyer. Notwithstanding the preceding, any patent infringement
arising out of the Buyer's utilization and/or embodiment of the product
furnished by the Seller in combination with other products is the sole liability
of the Buyer. In the event such combination is charged with infringing or is
found to infringe a patent, the Buyer agrees to defend and save the Seller
harmless from any liability or expense resulting therefrom. The Buyer shall give
the Seller prompt written notice of any patent infringement suits threatened or
filed with respect to such combination of products.
D. The Seller certifies that the products were produced in compliance with all
applicable requirements of Section 5, 7 and 12 of the Fair Labor Standards Act
of 1938, as amended, and of regulations and orders of the Administrator of the
Wage and Hour Division issued under Section 14 thereof.
<PAGE>
E. For the purpose of Section 333(c) of the Federal Food, Drug and Cosmetic Act,
no product listed herein which falls within the scope of the Act is adulterated
or misbranded, within the meaning thereof or is an article which may not, under
the provisions of Section 344 or 355 of the Act, be introduced into interstate
commerce.
EXCEPT AS SPECIFICALLY STATED IN THE IMMEDIATELY PRECEDING PARAGRAPH 03, SELLER
MAKES NO WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED.
In the event of delivery by Seller to Buyer of any of the products listed herein
in damaged or defective condition or in the event of a breach of any of the
warranties made by Seller hereunder, Seller's only liability to Buyer or to
anyone else shall be limited to the replacement, or at its option, payment of
the cost of such replacement of such damage, defective, or nonconforming
product. In no event shall liability of the Seller to the Buyer or to anyone
else for any bodily or property injury, loss or damage exceed Seller's net
invoice price of such damaged or defective or nonconforming products. Seller
shall not be liable for any indirect, special incidental or consequential
damages of any nature whatsoever. Buyer agrees to indemnify Seller and hold
Seller harmless against all claims, actions, proceedings, expenses, costs and
liabilities asserted against the Seller by any person with respect to the sale
or use of any products sold hereunder, and all loss, injury or damages resulting
therefrom, expressly including, but not limited to, any claim, action,
proceeding, expense, cost of liability arising out of the negligence of the
Seller.
Each product shall be inspected by Buyer within five days after receipt of such
product. Failure to so inspect shall constitute a waiver of Buyer's rights of
inspection and shall be equivalent to acceptance of such product. If the Buyer
after such inspection rejects any such product shipped pursuant to this
contract, he shall fully specify all claimed defects and non-conformity in a
notice of rejection sent to Seller within fifteen days after receipt of the
product. The failure to specify any defect or non-conformity shall constitute a
waiver of that defect or non-conformity. Materials shall not be returned to
Seller without Seller's express permission.
Seller does not report, pay or collect any use tax, or similar tax which may be
imposed upon the customer under the laws of the state to which shipment is to be
made unless Seller shall separately state such charge to Buyer on this order and
the invoice for such items. Buyer shall report and pay any sales or use taxes or
similar taxes which may be imposed upon customer by reason or such order and
shall hold the Seller harmless therefrom.
Orders are not assignable or transferable, in whole or in part, except with the
written consent of Seller.
Stenographical, clerical, or computer errors on the face side hereof are subject
to correction.
Seller shall not be liable for failure or delay in shipment of any accepted
order or any part thereof by reason of shortage of materials, labor
difficulties, floods, fires, government priorities, actions taken or threatened
by any governmental agencies, acts of God, or other contingencies or acts not
within the sole control of Seller. Seller reserves the right during the period
of any shortage to allocate its available supplies among any or all of its
purchasers on such basis as it may determine equitable without any liability
therefore to Buyer.
<PAGE>
Seller shall have the right to deliver any products ordered by a Buyer in
separate shipments and on different dates. In the event of Seller's default in
connection with any such installment delivery, Seller shall be deemed to be in
default only as to the products delivered or to be delivered in such
installment, and such default shall not constitute a total breach of the order
as a whole nor shall it substantially impair the value of the order as a whole.
Packaging and packing is in accordance with Seller's standard practices, unless
otherwise stated.
The Buyer represents and warrants to the Seller that Buyer will comply to the
Export Administration Act of 1969 and the Export Control Regulations issued
pursuant to said Act.
This document may or may not include a discount (or discounts) or other
reduction in price to the Buyer under section 11288(b)(3)(A) of the Social
Security Act 142 U.S.C. 1320a-7b(b)(3)(A). Accordingly, Buyer shall disclose
this discount or other reduction in price under any state or federal program
which provides cost or charged based reimbursement to the Buyer for the goods
and/or services provided under this contract.
<PAGE>
DIABETIC SUPPLIES AGREEMENT
THIS AGREEMENT is entered into by and between Certified Medical Supplies, Inc.,
a Delaware corporation, Certified Diabetic Supplies, Inc. (both referred to
herein as "CDS"), a Delaware corporation, and, Benefit Plan Administrator, Inc.
(BPA), a New York corporation.
Whereas, BPA desires to engage CDS to provide diabetic supplies to Participants
in Plans, and CDS agrees to accept the engagement and provide diabetic supplies
to Participants.
Both parties agree as follows:
I. DEFINITIONS
1.1. Co-insurance or Co-payment means an amount a Participant is required to
pay to a Participating Provider for Covered Diabetic Supplies under a
Participant's Plan. Co-insurance is calculated as a percentage of the
contracted Reimbursement Rate of such services.
1.2. Covered Diabetic Supplies means those Medically Necessary diabetic
supplies as described by a Plan which CDS will provide to Participants in
accordance with the terms and conditions set forth in this Agreement.
Except as may otherwise be provided in this Agreement, diabetic supplies
which are not Medically Necessary are not Covered Diabetic Supplies.
1.3. Deductible means the amount a Participant must pay before a Client will
make any payments under the terms of a Plan.
1.4. Insurer means an insurance company providing health insurance or an
employer providing health benefits through an employee benefit plan which
has contracted with BPA to use the managed care network provided by BPA.
1.5. Medically Necessary means necessary as certified or prescribed by a
physician to treat and/or monitor diabetes.
1.6. Participant means an enrolled employee, beneficiary or insured or the
enrolled eligible spouse or dependent of the employees who is entitled to
receive benefits provided under a Plan.
1.7. Participating Provider means any physician, hospital, vendor or other
health care provider who has entered or will enter into a contractual
agreement, either directly or indirectly, to participate in the BPA
network.
1.8. Plan means the written health benefit plan, service or product which is
either insured, administered, underwritten, provided by, associated with
or offered by a Client. The Medical Plan includes the terms and
provisions of the health benefit plan and any schedule of benefits or
riders or other official attachments to it.
1
<PAGE>
1.9. Reimbursement Rate means the rate for medical services negotiated between
CDS and BPA and incorporated into this Agreement as Exhibit A.
1.10. Utilization Review means the written procedures and criteria used to
determine whether the medical care, goods and services ordered for or
provided to Participants are Medically Necessary.
II. CDS OBLIGATIONS
CDS shall:
2.1. Comply with the Utilization Review requirements communicated by BPA and
accept as payment in full from BPA for all Covered Diabetic Supplies
rendered pursuant to this Agreement the Reimbursement Rate.
2.2. Provide services for Participants even though there may be liability to
another party; shall bill the appropriate responsible party; shall
provide information to BPA to enable BPA to pursue other responsible
parties; and shall provide to BPA, upon request, a summary of all
co-payments, all Coordination of Benefit revenues and any other revenues
CDS receives from Participants or on behalf of Participants from any
person or party other than BPA; and
2.3. Be properly certified as a durable medical equipment supplier for the
Medicare program. Furthermore, CDS shall at all times abide by and
conform to all applicable laws, statutes, rules, regulations, orders, of
whatever nature.
III. PRICING
3.1. [Section deleted in entirety.]
3.2. Reimbursement Rate. The Reimbursement Rate as set forth in Exhibit A is
based upon the Health Care Financing Administration's ("HCFA")
periodically published list of acceptable prices. If, during the term
of this Agreement, HCFA's published rate for diabetic supplies changes,
then Exhibit A will be amended to reflect those new rates.
IV. ADMINISTRATION
4.1. Participant Status.
a. CDS is responsible for verifying a person's status as a
Participant under a Plan in accordance with BPA procedures
communicated to CDS by BPA. BPA shall maintain updated
Participant status files and shall verify Participant status
by telephone during regular business hours.
2
<PAGE>
b. If an individual is no longer a Participant, it is BPA's
responsibility to inform CDS of such individual's change in
status not less than 30 days prior to the effective date of
such a change.
4.2. Billings.
a. The Plan is solely responsible for all payments due to CDS for
Covered Diabetic Supplies. Any Co-payments, Co-insurance
and/or Deductibles, as specified in the Plan, shall be paid by
Participants directly to CDS.
b. CDS will not bill, charge, collect a deposit from, seek
compensation from, seek remuneration from, surcharge or have
recourse against Participants, except for expenses which are
not for Covered Diabetic Supplies and except for Co-insurance,
Co-payments and/or Deductibles as specified in the Plan or as
otherwise permitted for Coordination of Benefits. This Section
shall survive termination of this Agreement, regardless of the
cause of termination, and shall be construed to be for the
benefit of the Participants. This provision supersedes any
oral or written agreement, hereinafter entered into between
CDS and Participant or persons acting on Participant's behalf,
insofar as such agreement related to payment for services
provided under the terms and conditions of this Agreement.
c. CDS shall bill BPA for Covered Diabetic Supplies supplied to
Participants on a UB-92/HCFA 1500 billing form, or CDS shall
bill BPA electronically using a system agreed upon by the
parties. CDS shall provide such information as BPA may
reasonably require and communicate to CDS from time to time
for the processing of claims. BPA shall make payment for
Covered Diabetic Supplies to CDS within thirty (30) days of
receipt of a complete and accurate claim.
d. CDS agrees to submit claims to BPA for Covered Diabetic
Supplies provided to Participants no later than ninety (90)
days following the delivery of such diabetic supplies. In the
event CDS is unable to submit claims within the time specified
herein because of circumstances beyond CDS's control or due to
BPA's status as a secondary payor, the time for submission of
such claims shall be extended as is reasonably necessary.
e. When Client, under the applicable Plan, is the primary payor
under the appropriate Coordination of Benefit rules, BPA shall
pay the amounts due under this Agreement reduced by
Co-payments, Co-insurance and/or Deductibles. When Client is
not the primary payor under the appropriate Coordination of
Benefit rules, CDS shall submit its bill to the primary payor,
and BPA shall pay only those amounts which, when added to
amounts received by CDS from other sources pursuant to the
appropriate Coordination of Benefit rules, equal one hundred
(100%) of the amount CDS is due in accordance with the
Reimbursement Rates established by this Agreement.
3
<PAGE>
f. CDS shall submit bills to BPA at the address set forth in
Section 8.8 hereof.
4.3. Record Keeping
a. CDS shall maintain complete and accurate books and records of
all transactions subject to this Agreement. These books and
records shall be maintained in accordance with prudent
standards of record keeping and with all applicable
professional rules and state and federal laws and regulations.
b. BPA and its employees or authorized representatives shall have
continuing access to audit and copy all such files and records
of its Participants or pertaining to this Agreement. The right
to have access to CDS's records shall be subject to all
applicable laws and regulations concerning confidentiality of
records. Such audits and copying shall be conducted during
regular business hours and at BPA's expense, after reasonable
notice to CDS.
c. CDS and BPA agree that the data and information collected with
respect to the CDS, a Plan and/or a Participant shall be kept
in confidence and will not be disclosed in an identifiable
form except to parties authorized through function of
law or through specific release by the Participant and CDS.
4.4. Use of Name. BPA may use CDS's name and list the supplies offered by
CDS in publications to inform current and potential Participants of
CDS's participation. CDS may publicize its association with BPA.
Neither CDS nor BPA shall use any advertisement and/or other printed
materials which includes the other's name or which described or
referred to the other's products, unless such advertisement has been
approved in writing by the other party in advance of its use or
distribution.
V. UTILIZATION REVIEW
BPA and CDS acknowledge that Utilization Review and patient management services
are integral parts of some of the Plans and agree as follows:
5.1. BPA or its designee shall perform Utilization Review for services
provided by Participating Providers.
5.2. Utilization Review certification and/or identification of benefits does
not guarantee or confirm benefits. Benefits are subject to Participant
eligibility at the time charges are actually incurred, and other terms,
provisions, and exclusions of the Plan. BPA or its designee is
responsible for the final determination of benefit payments to be made
under a Plan.
5.3. BPA has no control over the provider-patient relationship and any final
decisions regarding treatment or confinement remains with the provider
and the patient.
5.4. BPA reserves the right to change, upon sixty (60) days advance written
notice, the entity performing Utilization Review.
4
<PAGE>
VI. COMPLAINTS, LITIGATION AND CONTRACTUAL DISPUTES
6.1. Arbitration. All disputes and differences between the parties on which
an agreement cannot be reached will be decided by the process of
binding arbitration under the rules of the American Arbitration
Association, regardless of the insolvency of either party, unless the
conservator, receiver, liquidator, or statutory successor is
specifically exempted from an arbitration proceeding by applicable
state or federal law.
6.2. Notice of Lawsuits. Immediately upon receipt, CDS shall forward to BPA
any legal process to which BPA or CDS have been named as a party or
which arises out of any activities subject to this Agreement. BPA is
the only party to this Agreement which is authorized to defend BPA
against any legal process.
6.3. Indemnification. BPA shall protect, indemnify, and hold CDS and the
directors, officers, and employees of CDS harmless from and against any
and all liability and expense of any kind arising from injuries or
damages to persons or property in connection with this Agreement unless
such liability resulted from the negligence or willful misconduct of
CDS or its respective employees or agents, in the services performed by
such party pursuant to this Agreement, except to the extent such
damages are covered by and paid by insurance. CDS shall protect,
indemnify, and hold BPA harmless from and against any and all liability
and expense of any kind, arising from injuries or damages to persons or
property in connection with activities undertaken pursuant to this
Agreement as a result of the negligence or willful misconduct of CDS,
its employees or agents, except to the extent such damages are covered
by and paid by insurance.
VII. TERM AND TERMINATION
7.1. Term. The term of this Agreement shall end five years from the
Effective Date and shall be automatically renewed for a two-year
period.
7.2. Events of Default. This Agreement shall terminate immediately upon the
occurrence of any of the following events:
a. The revocation of any license or certification required to be
maintained by either party under applicable federal, state or
local law.
b. The revocation of CDS's certification as a supplier under
title XVII (Medicare) of the Social Security Act.
c. Upon filing, by either party, of a petition or declaration in
bankruptcy, receivership or assignment for the benefit of
creditors. This paragraph shall also apply if such disability
is the result of an involuntary petition or other third party
suit. This paragraph may be temporarily abrogated by specific
amendment to this Agreement, created and duly executed as
provided for herein.
5
<PAGE>
7.3. Termination for Breach. This Agreement may be terminated in the event
of a material breach by either party, provided, however, that the
breaching party shall be given thirty (30) days to cure the breach
after receipt of written notice. Any written notice of termination for
cause must specify the reasons and causes justifying the termination.
Correction or cure of any and all potential breaches within the
specified time period shall, for the purpose of this Agreement,
abrogate the potential breach. The failure by either party to perform,
keep or fulfill any material covenant, undertaking, obligation or
condition set forth in this Agreement and the continuance of any such
potential reach for a period of thirty (30) days after written notice
of such failure to cure shall constitute a breach of this Agreement.
7.4. Available Remedies. Except as provided in Section 6.1, the rights
granted under this Agreement shall not be in substitution of, but shall
be in addition to, any and all other rights and remedies for breach of
contract available to the non-breaching party under applicable law.
7.5. Rights upon Termination. Upon termination of this Agreement, the rights
of each party hereunder shall terminate. However, the termination of
this Agreement shall not relieve either BPA or CDS of the obligations
imposed with respect to services furnished prior to the date of
termination.
VIII. GENERAL PROVISIONS
8.1. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties, relating to the subject matter of this Agreement,
and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection with the subject matter of
this Agreement.
8.2. Amendment. No supplement, modification or amendment of this Agreement
will be binding unless executed in writing by the parties to this
Agreement.
8.3. Severability. If any part, term, or provision of this Agreement is held
void, illegal, or unenforceable, the validity of the remaining portions
or provisions will remain in full force and effect.
8.4. Mutuality of Agreement. The terms and conditions of this Agreement are
mutually agreed upon and may not be construed against any party upon
the ground that such party was responsible for the preparation of this
Agreement or of any provision of this Agreement.
8.5. Independent Contractors. The relationship of the parties to this
Agreement is that of independent contractors. Nothing herein is
intended or may be construed to establish any agency, employment,
partnership, or joint venture relationship between the parties. Each
party shall be solely responsible for the direction, control and
management of its agents and employees.
6
<PAGE>
8.6. No Authority to Bind Other Party. Except as provided in this Agreement,
neither party may act on behalf of the other party nor may either party
bind or execute a release on behalf of the other party, except as
authorized in writing by the other party.
8.7. Cooperation. BPA and the CDS agree to work together to market products
together during the course of this Agreement.
8.8. Notice. Any notice, demand or other communication required or permitted
under this Agreement shall be in writing and personally delivered or
deposited in the United States Mail, first class, registered or
certified mail, with postal prepaid, and addressed as follows:
Benefit Plan Administrators, Inc.
One Huntington Quadrangle
Melville, NY 11747
If to CDS, addressed to: If to BPA, addressed to:
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
_____________________________ ______________________________
or to such other persons or addresses as any party request by written
notice as aforesaid. Notices shall be deemed given at the time of
personal delivery or three (3) days after the date mailed in the manner
set forth above.
8.9. Choice of Laws. The validity of this Agreement and of any of its terms
or provisions, as well as the rights and duties of the parties
hereunder, shall be interpreted and construed pursuant to and in
accordance with the laws of the State of Missouri.
8.10. Waiver. Waiver by either party of any rights under the terms of this
Agreement shall not be construed to operate as a waiver of any other or
further rights, either under the same terms, conditions or covenants
contained in this Agreement or in its Attachments.
7
<PAGE>
8.11. No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties to this Agreement and shall not confer any benefit upon
any other legal entities or persons.
8.12. Section Headings. The section headings contained in this Agreement and
the attached Exhibits are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Agreement.
All capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.
8.13. Effective Date. The effective date of this Agreement is July 1, 1997.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures as of the
date first written above.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
CERTIFIED DIABETIC SUPPLIES, INC. BENEFIT PLAN ADMINISTRATORS
By: /s/ ILLEGIBLE By: /S/ ILLEGIBLE
--------------------- ---------------------------
Title: PRES/CEO Title: EXECUTIVE VICE PRESIDENT
--------------------- ---------------------------
Date: 7/2/97 Date: 7/1/97
--------------------- ---------------------------
8
<PAGE>
BPA:
Exhibit A Reimbursement Rate Schedule
*
- --------------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
<PAGE>
LOGO
AGREEMENT FOR SERVICES
This is an Employee Lease Agreement (hereinafter referred to as the
"Agreement"), dated 6/9/97 between Certified Diabetic Supplies, Inc.
(hereinafter referred to as "Client"), located at 1951 J&C Blvd, Naples, FL
34109, and Professional Employee Management, Inc., its successors and assigns
(hereinafter referred to as "PEM.") of Sarasota, Florida.
BACKGROUND
Client desires to lease employees from PEM. Such employees shall remain
employees of PEM, unless this Agreement is terminated, in which case the
employees will automatically become employees of Client. Client recognizes that
it will receive significant advantages from such an arrangement. Accordingly, in
consideration of the mutual covenants and agreements contained in this
Agreement, the parties agree as follows:
1. Term.
A. This Agreement shall remain in force for the term of thirty (30)
days (the "Initial Term"). Following the Initial Term, this Agreement shall
remain in force from month to month until one party gives written notice to the
other party as specified in Paragraph 17 below, at least seven (7) days prior to
the expiration of any monthly extension of the Initial Term. PEM may terminate
this Agreement upon seven (7) days written notice should Client breach any of
the provisions of this Agreement.
B. PEM shall have the right to terminate this Agreement immediately in
the event of non-payment or late payment by the Client occurring at any time
after the date of this Agreement. The failure by Client to call in a payroll
shall work an immediate revocation of this Agreement.
2. Effective Date.
This Agreement shall become effective only when both parties have
signed this document, the initial payroll has been processed, paid for and
received by Client.
MARKETING REPRESENTATIVES OF PEM ARE NOT AUTHORIZED TO BIND PEM WITHOUT THE
SIGNATURES OF A LICENSED CONTROLLING PERSON, IN ACCORDANCE WITH FLORIDA
STATUTES, AND A CORPORATE OFFICER.
1
<PAGE>
3. The Employees.
PEM will lease the employees listed on Exhibit B to Client. Client
shall fill out Exhibit B, either in type or print. PEM shall be fully
responsible for notifying all leased employees of their leased employee status.
Each employee shall be identified according to workers' compensation
classification by proper code. Client's signature shall be affixed to Exhibit B
to indicate proper classification. No other employees shall become leased to
Client unless specifically agreed by PEM. Client is obligated to notify PEM
immediately of any new applicants to ensure that all new hires receive the
appropriate benefits and that all customary payroll obligations are met. Client
must transmit to PEM a workers' compensation classification, in type or print,
for each and every new hire. Client's signature must be affixed to this
transmission which should become a permanent addendum to Exhibit B when
processed and signed for by PEM. PEM shall not be considered an employer for any
employee who does not complete a PEM employment application and who is not
accepted by PEM as a leased employee. Failure by Client to timely notify PEM of
new hires shall constitute grounds for immediate termination of this Agreement.
Client agrees to notify PEM immediately upon the release, termination or
cessation of employment of any employee. Client agrees to cooperate with PEM in
all employment and unemployment matters. Client recognizes that these are
essential conditions of this agreement. PEM will provide workers' compensation
insurance for leased employees when they are performing work in accordance with
this Agreement. Should any individual perform services for Client and should
Client not report those hours to PEM, PEM shall not be obligated to said
individual in any way either with regard to paying such individual for such
hours or with regard to providing any benefit including workers' compensation,
or in any other manner be obligated to said individual.
4. Services Provided To Client.
PEM shall be fully responsible for payment of all payroll, payroll
taxes, collection of taxes, unemployment insurance and other administrative
functions customarily performed by an Employer for its employees with regard to
leased employees while they are performing work for PEM. PEM shall, without
regard to payments by Client, assume such responsibilities as are required by
applicable federal Wage and Hour law for payment of wages to leased employees
until such employees are terminated from employment with PEM. PEM shall properly
secure coverage for workers' compensation for employees covered under this
Agreement and shall offer an optional Employee benefit package to all qualifying
employees on an equal basis. Client shall be responsible for ensuring that all
applications and insurance enrollment forms are fully completed and returned to
PEM. PEM shall cooperate with and assist Client in this important endeavor.
2
<PAGE>
5. Reservation of Rights.
In compliance with State law and Federal guidelines, PEM shall, after
consultation with Client, through Client's Corporate Personnel Department or its
on-site Supervisor;
A. Have a right to recruit, hire, direct and control employees,
B. Have a right to discipline, replace, and terminate the employment
of such employees and designate the date of separation from employment,
C. Have a right to reward, promote, reassign, evaluate and determine
the wages, hours, terms and conditions of employment,
D. Have the right to resolve and decide employee grievances and
disputes,
E. Supervise and direct such employees in a reasonable manner
consistent with the practices of similar businesses and enterprises. Client's
on-site supervisor is Peter Fiscina.
F. Client may retain such sufficient direction and control over the
leased employees as is necessary to conduct the client's business and without
which the client would be unable to conduct its business, discharge any
fiduciary responsibility that it may have, or comply with any applicable
licensure, regulatory, or statutory requirement of Client.
6. Safety and Training.
It shall be the responsibility of Client to implement a safety and
training program which meets the standards of regulations issued by the Florida
Division of Safety, including the responsibility to implement a safety
committee. PEM shall provide Client assistance in fulfilling these obligations.
PEM shall retain such responsibilities as are required by Chapter 468, Florida
Statutes.
7. Safe Work Environment.
A. Client agrees that it will comply with all health and safety laws,
right-to-know laws, regulations, ordinances, directives and rules imposed by
controlling federal, state, and local government, and that it will immediately
report all accident and injuries to PEM. Client agrees to make "light duty work"
available in the event of light duty release. PEM reserves the right to locate a
light duty release employee at another location within a 100-mile radius of the
employee's residence. Failure by Client to adhere to this provision of the
Florida Workers' Compensation Act could cause a fine to be assessed against
Client in an amount not to exceed $2,000,000 per violation.
B. PEM retains a right of direction and control over management of
safety, risk and hazard control at the work-site or sites affecting its leased
employees. Environmental factors, equipment, machinery and all other matters
which affect employee health and safety shall be maintained in compliance with
OSHA standards. Client represents that its working environment, equipment and
machinery currently meet all OSHA standards and that they will be maintained in
compliance with such standards for the duration of this Agreement. Client agrees
that it shall be responsible for any OSHA violations.
3
<PAGE>
C. Client shall provide or ensure use of all personal protection gear
and/or equipment, as required by federal, state, or local law, regulation,
ordinance, directive, or rule as deemed necessary by PEM or PEM's workers'
compensation carrier. PEM will perform safety inspections of Client's equipment
and premises to insure safe working conditions.
D. PEM and PEM's workers' compensation carrier shall have the right to
inspect Client's premises during normal business hours and to make
recommendations pertaining to job safety. It is agreed that PEM, by inspecting
said premises or by not inspecting said premises, assumes neither liability nor
responsibility for any unsafe working condition which may exist. Failure by
Client to comply with its obligations pertaining to job safety shall constitute
grounds for immediate termination of this Agreement. PEM is responsible for the
promulgation and administration of employment and safety policies, managing
workers' compensation claims, claims filing and related procedures.
8. Employee Benefits.
The client shall select the Group Benefit Plan options desired under
this Agreement. Client shall sign in all appropriate places. By its signature
Client acknowledges that it has delivered all required data to the Marketing
Representative of PEM.
Benefit Options and Elections.
1. In an effort to furnish the best possible service, PEM offers a
Group Benefit Plan. The coverages are funded through a Group
Insurance Policy issued to the Sponsor by AETNA.
2. Client must select one of the following options:
a. Client chooses not to participate in the Group Benefit Plan
sponsored by PEM.
______________________________ (Signature of Client); or,
b. Client chooses to participate in the Group Benefit Plan sponsored
by PEM.
Illegible signature
_______________________________________ (Signature of Client).
4
<PAGE>
c. If Client chooses not to participate in the Group Benefit Plan
sponsored by PEM, Client hereby certifies that it has its own
Health Benefit Program which covers its employees.
d. If Client chooses to participate in the Group Benefit Plan
sponsored by PEM, Client selects the following coverage:
(1) Client elects to participate in the Group Benefit Plan which
includes a transitional period of coverage based upon written
acceptance by ______________________________
___________________________ (Signature of Client); or,
(a) Client must deliver to PEM's service representative the
following:
(a.1) A complete copy of Client's Health Benefit Insurance
Policy;
(a.2) A copy of the last statement from the Client's Health
Benefit Carrier marked paid in full and a copy of the
canceled check, front and back:
(a.3) A copy from the health Benefit carrier showing each
employee's effective date of coverage for the current
policy.
(2) Client elects to participate in the Group Benefit Plan as a new
Regular Enrollment, subject to all written terms and conditions of
the Group Insurance Policy.
Illegible signature_______________ (Signature of Client)
9. Indemnification and Attorney's Fees
A. Client agrees to indemnify, defend and hold harmless PEM, its
officers shareholders, non-leased employees, directors and agents from and
against any and all losses, liabilities, expenses (including court costs and
attorneys' fees) and claims for damage of any nature whatsoever, whether known
or unknown as though expressly set forth and described herein, which PEM may
incur, suffer, become liable for, or which may be asserted or claimed against
PEM as a result of the actual or alleged acts, errors or omissions of Client or
any leased employee, including without limitation any violation or breach of
paragraph 5 above by Client, or any claims whatsoever arising out of actual or
alleged violations of Wage and Hour laws, EEOC laws, tort law, The Family and
Medical Leave Act, American's with Disabilities Act, Title VII of the Civil
Rights Act or the National labor Relations Act by the Client and any leased
employee.
5
<PAGE>
B. Client agrees to indemnify, defend and hold harmless PEM from real
or asserted liability, including cost of defense, connected with or resulting
from the ownership, custody, maintenance, use or operation of any Client's
machinery, facilities, equipment and/or automobiles whether leased, rented,
borrowed or owned, where liabilities are not covered by the insurance provided
by Client, or if covered, are in excess of the policy limits required pursuant
to INSURANCE hereinafter expressed.
C. Client agrees to indemnify, defend and hold PEM harmless for any
and all liabilities whatsoever arising out of Client's hiring of Independent
Contractors and/or Employees outside of this Agreement.
D. In the event that PEM is required to defend against any claim to
which PEM reasonably believes it is entitled to indemnification under this
Section, Client shall advance to PEM any attorneys' fees and litigation expenses
related to the defense of such action that have not yet been previously
reimbursed by Client.
E. In the event that PEM is required to defend against any claim
occasioned by the breach or default in any provision of this Agreement to
enforce the terms of this Agreement, PEM shall be awarded all reasonable cost
pertaining thereto, including reasonable attorneys' fees and costs in addition
to any other relief to which PEM may be entitled.
F. Client agrees that, notwithstanding any other provision of this
Agreement, that access to any property whether real, appurtenant, or personal,
as well as the accommodation of said property to any person who may be
handicapped or disabled, or perceived as being handicapped or disabled, over
which real or personal property the Client has ownership, administration,
maintenance or some other control, shall be the sole and exclusive
responsibility of the Client. Client agrees to indemnify, hold harmless and
defend PEM(R), its officers, shareholders, non-leased employees, directors and
agents, from any and all losses, liabilities, expenses (including court costs
and attorneys' fees) and claims for damage of any nature, or other consequences
of any sort out of the client's obligations set forth herein.
10. Fees.
A. For services under this Agreement, PEM shall be entitled to a fee
as specified on Exhibit A attached to this Agreement. Exhibit A shall be signed
by Client after it is filled in by PEM's Representative. The signature by Client
shall indicate Client's acceptance for the rates and classifications thereon.
Upon acceptance by PEM of the Agreement, a duly authorized representative (i.e.
a corporate officer) shall sign Exhibit A indicating acceptance by PEM of the
rates and classifications. Both parties shall retain a copy of Exhibit A. A
portion of said fee shall be applied by PEM toward the Workers' Compensation
Policy covering employees working pursuant to this Agreement. The fee is payable
when PEM issues checks each pay period. Should Client require additional
services not included in this Agreement, the fee for any such additional
services shall be negotiated separately. While the preparation fee charged by
PEM is guaranteed for the Initial Term of this Agreement, the fee set forth on
Exhibit A is subject to adjustment by PEM based upon changes in local State
and/or Federal employment law or changes in insurance requirements or costs.
6
<PAGE>
B. If, for any reason whatsoever, payment is not timely submitted to
PEM for its services in accordance with this Agreement, or the payment received
is unable to be immediately negotiated, it will be considered a breach of
contract and PEM shall have the sole right to immediately terminate this
Agreement and/or charge Client a special service fee of up to $100 per day. This
special service fee shall be imposed to reimburse PEM for all expenses including
additional labor costs, incurred as a result of any Client's failure to timely
meet financial obligations under this Agreement.
C. Should payment of any amounts due PEM not be made when due, and
should PEM agree to continue to provide services to the Client, the Client shall
pay a monthly service charge of one and one-half percent (1 1/2%) per month on
the unpaid balance, however, in no event shall this amount exceed the lawful
rate of interest.
D. PEM shall have the right to adjust the negotiated fee should it be
determined that Client has misrepresented or understated the amount of its
payroll. Likewise PEM shall have the right to adjust the negotiated fee should
Client fail to cooperate in unemployment matters resulting in additional costs
to PEM. The adjustment shall be in compliance with PEM's Administrative Cost
Guidelines. A copy of the Administrative Cost Guideline is available upon
request.
E. The owner or owners of the Client business must make an election to
become a payroll employee of PEM at the time of the initial enrollment. If any
owner (be that an owner, self-proprietor, partner, or stockholder) declines to
be an employee of PEM at the time of the initial enrollment, then that owner
must wait until the one-year anniversary date to become enrolled as a salaried
employee. No benefits shall be available to any owner not properly enrolled as
an employee of PEM. This provision may be amended only upon written agreement by
PEM and Client.
11. Insurance.
A. PEM shall furnish and keep in full force and effect at all times
during the term of this Agreement, workers' compensation insurance covering all
PEM employees under the terms of this Agreement. Upon request, PEM shall produce
a Certificate of Insurance to be issued naming Client the certificate holder.
B. If Client transfers professionals engaged to act in their
professional capacity, Client shall furnish malpractice insurance which shall
cover any and all acts, errors and/or omissions, including but not limited to
negligence of PEM transferors and/or employees. Client shall cause its insurance
carrier to name PEM as an additional named insured and issue a certificate of
insurance to PEM, allowing not less than thirty (30) days advance notice of
cancellation or material changes. This insurance coverage shall have limits of
liability of no less than $1,000,000.00
7
<PAGE>
C. Client shall secure and maintain General Liability insurance
coverage with Limits of Liability no less than $1,000,000.00 combined single
limit. The policy shall also provide for the coverage of auto and non-owned
auto. PEM shall be provided with a certificate of such insurance.
D. Client and PEM agree to keep in full force and effect at all times
during the term of this Agreement all insurance required under this Agreement.
E. Misrepresentation of workers' compensation classification or
inaccurate reporting of employee payroll hours is cause for immediate
termination of this contract. Client is obligated to pay to PEM any additional
monies due as a result of workers' compensation audits, only as it applies to a
client location for the duration of this Agreement, or up to the statutory limit
of 2 years after termination of services.
12. Representation of Client.
Before the commencement of the Initial Term, Client shall warrant and
represent to PEM as follows:
A. That all wages and compensation due prior to the date of this
Agreement have been paid to Client's employees.
B. That no separate agreements or arrangements exist that would
obligate PEM except as set forth herein.
C. That in the opinion of counsel for Client all existing pension and
profit sharing plans are current and in compliance with applicable law and this
Agreement shall not be deemed a breach under the terms of such plans.
D. That no Client shut-down, lay-offs, or cessation of business is
contemplated by Client. That Client recognizes that Federal and State
regulations govern employers with great numbers of employees. That potential
liabilities in the event of "plant closings", "shut-downs", or "lay-offs" could
have a disastrous impact on PEM as well as the Client. That Client will notify
PEM at least sixty (60) days in advance of any "plant closings", "shut-downs",
or "lay-offs", "employee discharges" or other cessation of business.
E. That Client will cooperate and work with PEM with a stated goal of
seeking adequate job placement or relocation for any displaced employee.
F. Knowing that State Law requires that any checks which remain
unclaimed after a period of one year be remitted to the State's unclaimed
property fund. Client agrees to assist PEM in the compliance with this statute
by submitting any such checks back to PEM on a periodic basis. Client will
indemnify and hold harmless PEM from any and all liabilities whatsoever arising
out of Client's failure to comply and PEM has the right to inform the State's
unclaimed property fund of such failure so that they can initiate collection
procedures from the Client.
8
<PAGE>
13. Invalidity of a Provision.
If any provision of this Agreement (or any portion thereof) shall be
held to be invalid, illegal, or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any way be
affected or impaired thereby.
14. No Waiver.
The failure by either PEM or Client to insist upon strict performance
of any of the provisions contained in this Agreement shall in no way constitute
a waiver of any of its rights set forth herein, at law or equity.
15. Termination.
This Agreement may be terminated by PEM if, at any time, Client
breaches any material term of this Agreement. PEM may also terminate this
Agreement if, at any time, PEM, in its sole discretion, determines that a
material adverse change has occurred in the financial condition, the business,
or the business prospects of Client, or that Client is unable to pay its debts
as they become due in the ordinary course of business. This Agreement may also
be terminated, upon five days notice by PEM, in the event of any federal or
state legislation, regulatory action, or judicial decision which, in the sole
discretion of PEM, materially adversely affects its ability to perform under
this Agreement. This section is cumulative to all other incidents of termination
recited in this Agreement. Upon termination by either party of this Agreement
only standard information in standard form and format will be supplied to Client
by PEM. Client agrees that PEM has no obligation to supply information outside
of its standard services as set forth in this Agreement. Should Client desire
such information as an additional service, fees for these services must be
negotiated outside of this Agreement as set forth in Paragraph 10A. of this
Agreement.
16. Venue and Jurisdiction.
Any action or counterclaim arising out of or related to this
Agreement, must be brought by Client only in Sarasota County, Florida. Any
action may be brought by PEM in any jurisdiction where venue is proper. Client
hereby irrevocably consents to be subject to the jurisdiction of the courts of
Florida concerning any case or controversy arising out of or related to the
Agreement.
9
<PAGE>
17. Notices.
To be effective, any notice given under this Agreement must be in
writing, shall be effective when received, and will be delivered, by hand or by
overnight delivery service, to the following addresses:
IF TO PROFESSIONAL EMPLOYEE MANAGEMENT, INC.:
Professional Employee Management, Inc.
1819 Main Street, 8th Floor
Sarasota, Florida 34236
Attn: Corporate Officer
IF TO CLIENT:
Certified Diabetic Supplies, Inc.
---------------------------------
Business Name (Print or Type)
Peter Fiscina, President
---------------------------------
Officer Carter (Print or Type)
1951 J&C Blvd.
---------------------------------
Mailing Address (Print or Type)
Naples, Florida 34109
---------------------------------
City, State, Zip (Print or Type
or to such other address as either party may, in writing, from time to time,
give notice to the other party.
In no event will PEM be liable for any direct or consequential damages
to Client as a result of a breach of this Agreement, nor for any loss of
profits, business, or goodwill.
18. Waiver of Jury Trial.
Client hereby waives any right to a jury trial in any action against
PEM arising out of, or related to this Agreement.
19. Headings.
The headings in the Agreement are intended for convenience or
reference and shall not affect its interpretation.
20. Amendments.
This Agreement constitutes the entire Agreement between the parties
with regard to the subject matter and no other agreement, statement, promise or
practice between the parties relating to the subject matter shall be binding on
the parties. This Agreement may be changed pursuant to the terms hereof or by
written amendment signed by both parties.
10
<PAGE>
21. No Third Party Beneficiaries.
No rights of any third party are created by this Agreement and no
person not a party to this Agreement may rely on any aspect of this Agreement
notwithstanding any representation, written or oral, to the contrary.
22. Governing Law.
This Agreement shall be governed by and construed under the laws of
Florida, regardless of any choice of law provisions of any jurisdiction to the
contrary.
23. Oral Representations.
Oral amendments to this Agreement are not allowed. No oral promise
shall be enforceable. Agents and Sales Representatives of PEM have no authority
to alter or amend any provision of this Agreement. No promise by any Agent or
Sales Representative of PEM is enforceable unless in writing, attached to this
Agreement and approved by a LICENSED CONTROLLING PERSON, IN ACCORDANCE WITH
FLORIDA STATUES, AND A CORPORATE OFFICER.
WITNESS CLIENT
/s/ Illegible By: /s/ Illegible
- ------------------------------ -------------------------------
Date: 6/10/97
- ------------------------------ -------------------------------
PROFESSIONAL EMPLOYEE MANAGEMENT, INC.
WITNESS:
By:
- ------------------------------ ---------------------------------
Title:
- ------------------------------ ------------------------------
Date:
------------------------------
11
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Exhibit A (Fees) to Client Agreement For Services Dated: June 9, 1997
The following fee schedule is set forth for: Certified Diabetic Supplies, Inc.
---------------------------------
Client
Job Description Rate
--------------- ----
Office 12.16
Executive Officers 10.76
METHOD OF PAYMENT
PLAN A Cashier's Check or other _________________________________
certified funds CLIENT SIGNATURE
- --------------------------------------------------------------------------------
PLAN B Maintain prepaid payroll
period in advance enabling
PEM to accept your company
check upon delivery of
the payroll _________________________________
CLIENT SIGNATURE
- --------------------------------------------------------------------------------
PLAN C Wire transfer (must be
made at least two business
days prior to payroll date) ____________________________
CLIENT SIGNATURE
- --------------------------------------------------------------------------------
PLAN D Company check or ACH
Direct Debit upon approval /s/ Illegible
By PEM Corporate ONLY -----------------------------
CLIENT SIGNATURE
- --------------------------------------------------------------------------------
/s/ Illegible /s/ Illegible
- ------------------------------ ---------------------------------
Witness
6/10/97
---------------------------------
Date:
- ------------------------------ ---------------------------------
Witness Professional Employee Management
---------------------------------
Date:
FL PEM Agreement for Services
Revised 2/10/97
12
<PAGE>
PROFESSIONAL EMPLOYEE MANAGEMENT, INC.
EXHIBIT B
Date: 6/9/97 Sales Representative Felicia Phillips
- --------------------------- ---------------------------------------------
CLIENT NAME: Certified Diabetic Supplies, Inc.
- --------------------------------------------------------------------------------
CLIENT ADDRESS: 1951 J. & C. Blvd., Naples, FL 34109
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
EMPLOYEE NAME SOCIAL SECURITY NUMBER COMP. CODE APP W-4 I-9 HEALTH HISTORY INS Y XXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
WITNESS: CLIENT:
/s/ Illegible By: /s/ Illegible
- ----------------------------------- -----------------------------------------
Date: 6/10/97
- ----------------------------------- -----------------------------------------
</TABLE>
FL PEM Agreement for Services
Revised 2/10/97
13
<PAGE>
Employee
Work Group Name Count
- ---------- ---- ---------
Officers:
Peter Fiscina 1
Randy Ayala 2
Administration:
Kathy Hankins 3
Nancy Feeley 4
Betty Borsukoff 5
Subtotal
Data Processing:
Jeff Krueger 6
New Patient Input/Billing
Derdre Bowe 7
Kim Schneider 8
Mario Alvarez 9
Debra Borowski 10
Margaret Waters 11
Subtotal
Insurance Verification/Collections 12
Beverly Carver 13
Ruby Palacios 14
Brenda Piper 15
Charlotte Bremer 16
Kristine Abbott 17
Norma Navarro 18
Subtotal
Posting/Collections
Patti Creely 19
Jeanne D'Elia 20
Peggy Johnson 21
Roseann Manzoni 22
Abby Phipps 23
Susan Bloom 24
Lydia Camacho 25
Kim Erickson 26
Subtotal
Shipping
Ron West 27
Jamie Bolen 28
Brian Bolen 29
Chris Highman 30
Subtotal
Marketing
Liz Fiscina 31
Linda West 32
Donna Bolen 33
Lisa Smith 34
Kathie Gillespie 35
Shirley Yoakam 36
Subtotal
C.D.S. Total C.D.S. 37
Coastline Randy Carlton 38
CDS Health Mgmt. Ron Hersch 39
CFO
GRANT TOTAL
* Includes employers share of workers compensation, FICA, federal and state
unemployment and PEM administrative costs.
A. Elected not to take insurance
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF CERTIFIED DIABETIC SERVICES, INC.
NAME STATE/JURISDICTION OF INCORPORATION
- ---- -----------------------------------
Certified Diabetic Supplies Inc. Delaware
CDS Insurance Products, Inc. Delaware
CDS Medical Supplies, Inc. Delaware
CDS Health Management, Inc. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated November 15, 1996 (with respect to
Note H[l], December 5, 1996, Note A, August 12, 1997 and Note H[2], September
15, 1997) relating to the financial statements of Certified Diabetic Services,
Inc., formerly Certified Diabetic Supplies Inc., included in this Registration
Statement on Form S-1 and related Prospectus.
We also consent to the reference to our firm under the caption "Experts" in the
Prospectus.
Richard A. Eisner & Company, LLP
New York, New York
October 3, 1997
