As filed with the Securities and Exchange Commission on September 2, 1998
Registration No. ______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
REGIONAL CAPITAL MANAGEMENT CORPORATION
(Name of Small Business Issuer in Its Charter)
FLORIDA 8361 59-3390804
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation Classification Code Number) Identification No.)
or Organization)
1635D ROYAL PALM DRIVE THOMAS H. MINKOFF
GULFPORT, FLORIDA 33707 1635D ROYAL PALM DRIVE
(813) 381-6226 GULFPORT, FLORIDA 33707
(Address and telephone number (813) 381-6226
of Principal Executive Offices (Name, address and telephone
and Principal Place of Business) _______________ number of agent for service)
Copies to:
Robert C. White, Jr., Esq. D. Ronald Surbey, Esq.
Kirkpatrick & Lockhart LLP Holland & Knight LLP
201 S. Biscayne Boulevard, Suite 2000 One East Broward Boulevard
Miami, Florida 33131 Fort Lauderdale, Florida 33301
(305) 539-3300 (954) 525-1000
Telecopier No.: (305) 358-7095 Telecopier No.: (954) 463-2030
Approximate date of commencement of proposed sale to the public: AS SOON
AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate registration
securities to be registered registered per share (1) offering price(1) fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 1,000,000 shares $5.00 $5,000,000 $1,475.00
Warrants to purchase Common Stock 1,000,000 warrants $0.10 $100,000 $29.50
Common Stock, par value $0.001 per share,
to be issued upon exercise of warrants 1,000,000 shares $6.00 $6,000,000 $1,770.00
TOTAL $11,100,000 $3,274.50
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee; based
on a bona fide estimate of the maximum offering price of the securities
being registered in accordance with Rule 457(a).
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 1998
PROSPECTUS
REGIONAL CAPITAL MANAGEMENT CORPORATION [LOGO]
1,000,000 SHARES OF COMMON STOCK AND 1,000,000 COMMON STOCK PURCHASE
WARRANTS
PURCHASABLE SEPARATELY
Regional Capital Management Corporation (the "Company" or "Regional
Capital") is hereby offering (the "Offering") 1,000,000 shares of its $0.001 par
value per share common stock (the "Common Stock") and warrants to purchase an
additional 1,000,000 shares of Common Stock (the "Warrants"). The Common Stock
and the Warrants offered hereby (sometimes collectively referred to herein as
the "Securities") may be purchased separately in this Offering. It is currently
estimated that the initial public offering price will be $5.00 per share of
Common Stock and $0.10 per Warrant. Each Warrant (a) is exercisable for a period
of four years beginning _________, 1999, (b) entitles the registered holder to
purchase one share of Common Stock at an exercise price of $6.00 (subject to
adjustment in certain circumstances), and (c) expires on __________, 2003. Any
outstanding Warrants may be redeemed by the Company upon thirty days written
notice at a redemption price of $0.10 per Warrant, provided that the closing bid
quotations of the Common Stock have averaged at least 150% of the then effective
exercise price of the Warrants for a period of any twenty consecutive trading
days ending on the third day prior to the day on which the Company gives such
notice. Based on the Warrants' current exercise price of $6.00, the minimum bid
price required for this redemption right would be $9.00. See "Description of
Securities."
Prior to this Offering, there has not been any public market for the
Securities, and there can be no assurance that any such market will develop or,
if developed, that it will be sustained. The initial public offering prices of
the Securities were determined by negotiations between the Company and Tarpon
Scurry Investments, Inc. (the "Underwriter"). See "Underwriting." Application
has been made for approval of the Common Stock and Warrants for quotation on the
OTC Bulletin Board under the symbols "RCMC" and "RCMCW", respectively. The
Common Stock and the Warrants will not be listed for trading as units.
-----------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK
FACTORS" AND "DILUTION" BEGINNING ON PAGES 7 AND 19, RESPECTIVELY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE 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>
[REDHERRING LANGUAGE]: 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 NO 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.
UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMPANY (2)
COMMISSIONS(1)
Per Share..........
Per Warrant........
Total..............
(1) Excludes the Underwriter's $51,000 non-accountable expense allowance. The
Company has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $234,000
consisting of the Underwriter's non-accountable expense allowance of $51,000
and other expenses in the aggregate amount of $183,000.
-----------------
The Securities offered hereby are being sold by the Underwriter on a "best
efforts" basis, subject to prior sale, when, as and if accepted by the Company
and the Underwriter and subject to the Company's right to reject any order in
whole or in part. It is expected that delivery of certificates for such shares
will be made through the offices of the Underwriter in Oak Brook, Illinois on or
about __________, 1998.
TARPON SCURRY INVESTMENTS, INC. [LOGO]
The date of this Prospectus is September 2, 1998.
The Company plans to apply for inclusion of the Common Stock and the
Warrants on the OTC Bulletin Board. There can be no assurance, however, that
these Securities will be accepted for quotation or, if accepted, that an active
trading market will develop. See "Risk Factors - Possible Applicability of Rules
Relating to Low-Priced Stocks."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THAT APPEARING UNDER THE CAPTION "RISK FACTORS," AND
CONSOLIDATED FINANCIAL STATEMENTS, InCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION
CONTAINED IN THIS PROSPECTUS ASSUMES tHAT NONE OF THE WARRANTS, THE PRIVATE
PLACEMENT WARRANTS (AS DEFINED HEREIN) oR THE ADDITIONAL WARRANTS (AS DEFINED
HEREIN) HAVE BEEN EXERCISED. REFErENCES HEREIN TO FISCAL YEARS ARE REFERENCES TO
THE FISCAL YEAR OF THE COMPANY ENDED DECEMBER 31 OF THE YEAR SPECIfIED.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), WHICH
REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS CONCERNING FUTURE ACTIVITIES AND
OCCURRENCES. ANY FORWARD-LOOKING STATEMENT SPEAKS ONLY AS OF THE DATE ON WHICH
SUCH STATEMENT IS MADE, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKiNG STATEMENT OR STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER
THE DATE ON WHICH SUCH STATEMENT IS MADE OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS. NEW FACTORS EMERGE FROM TIME TO TIME, AND IT IS NOT
POSSIBLE FOR MANAGEMENT TO PREDICT ALL OF SUCH FACTORS. THESE STATEMENTS BY
THEIR nATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE
BEyOND THE COMPANY'S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDInG
ON A VARIETY OF IMPORTANT FACTORS, INCLUDING THE LEVEL OF DEVELOPMENT
OPPoRTUNITIES AVAILABLE TO THE COMPANY AND THE COMPANY'S ABILITY TO EFFICIENTLY
PRICE AND NEGOTIATE SUCH DEVELOPMENT OPPORTUNITIES ON A FAVORABLE BASIS, THE
FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS, THE FAILURE TO PROPERLY MANAGE
GROWTH, CHANGES IN ECONOMIC CONDITIONS, DEMAND FOR THE SERVICES OFFERED BY THE
COMPANY AND CHANGES IN THE COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY
OPERATES. FURTHER, MANAGEMENT CANNOT ASSESS THE IMPACT OF EACH SUCH FACTOR ON
THE BUSINESS OR THE EXTENT TO WHICH ANY FACTOR, OR COMBINATION OF FACTORS, MAY
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY
FORWARD-LOOKING STATEMENTS.
THE COMPANY
Regional Capital Management Corporation (the "Company" or "Regional
Capital") is a development stage ("start up") company formed on May 22, 1996.
The Company's proposed initial business activities will primarily focus on the
identification and acquisition of properties in non-metropolitan areas which can
be developed or converted into assisted living facilities.
THE INDUSTRY
The Company believes that the assisted living industry is a rapidly
growing component of the non-acute health care delivery system for the elderly.
The assisted living industry serves the needs of the elderly who benefit from
living in a supportive environment and who no longer can or who no longer desire
to maintain an independent lifestyle. These individuals require or prefer
occasional assistance with their daily living activities. The Company believes
that the prospects for the growth of the assisted living industry are supported
by several significant trends, including the following:
1. FAVORABLE DEMOGRAPHICS. The Company recognizes that the 65 and over age
group is one of the fastest growing segment of the United States population.
Persons in the 75 and over age group are the primary consumers of assisted
living services.
2. COST-EFFECTIVENESS. The Company believes that assisted living
facilities provide a cost efficient alternative to skilled care facilities such
as nursing homes. The annual cost per resident for assisted living care is
significantly lower than the annual cost per resident for skilled nursing care.
3. QUALITY OF LIFE. The Company believes that assisted living facilities
present an attractive alternative to skilled nursing facilities. Assisted living
facilities are an ideal choice for seniors whose care needs fall between
independent living and skilled nursing care because of the unique combination of
services offered by these facilities. This is particularly true for prospective
residents who do not require the level of care or the institutional setting of
skilled nursing facilities. Assisted living facilities allow residents to live
in a more independent and home-like environment which allows them to maintain a
level of independence. The Company believes that these factors result in a
better quality of life for assisted living residents than that experienced in
the more clinical or institutional settings maintained by most skilled nursing
facilities.
3
<PAGE>
4. FAMILY DYNAMICS. The Company believes that changes in the dynamics of
American families will result in a greater demand for assisted living services.
The growing number of two income families will be less able to devote time to
caring for elderly parents in their homes, but will be better able to provide
financial support for these parents. The Company believes that other factors,
such as the geographic dispersion of families and the increase in the American
divorce rate, will also contribute to the inability of families to care for
elderly parents or relatives in their homes.
5. REGULATORY PRESSURES. Regulatory pressures at both the federal and
state levels continue to stress the need for cost containment in the provision
of health care services. The Company believes that this trend favors lower cost
alternatives such as assisted living.
6. USAGE BASED ON NEED. The Company believes that the choice of assisted
living facilities by a senior or his or her family is based on a need for
assistance with certain functions. This is different from the discretionary
lifestyle choices that a senior makes to live in an adult congregate living
facility or retirement community. The Company believes that this situation will
be favorably impacted by the combination of the demographic and family dynamics
factors described above.
STRATEGY
The Company believes that the assisted living industry is highly
fragmented and that this fragmentation presents attractive growth opportunities.
Based on its research and experience to date, the Company believes that the
optimum way to benefit from this situation is to develop new assisted living
facilities or convert existing properties into assisted living facilities in
desirable markets in non-metropolitan areas and in locations near metropolitan
areas which possess acceptable characteristics which will be conducive to the
development of the Company's facilities. The Company believes that a population
migration to non-metropolitan areas is occurring and will continue to occur, and
that seniors will comprise a significant portion of this migration. Accordingly,
the Company believes that this migration will increase the demand for assisted
living facility services in these areas. Based on its experience in exploring
acquisition opportunities, the Company has determined that acquisitions of
existing assisted living facilities to date cannot be consummated at acceptable
prices. Accordingly, the Company plans to enter the assisted living industry
through the identification of desirable non-metropolitan markets and acceptable
markets near metropolitan areas and the construction of new assisted living
facilities or the conversion of existing properties into assisted living
facilities in these areas. The Company plans to continue to evaluate potential
acquisitions of existing assisted living facilities, and plans to consummate
acquisitions of existing facilities if they can be purchased at acceptable
prices.
THE OFFERING
Securities Offered........ 1,000,000 shares of Common Stock and 1,000,000
Warrants at an estimated price of $5.00 per share
and $0.10 per Warrant. The Common Stock and the
Warrants may be purchased separately in this
Offering. See "Description of Securities" and
"Underwriting."
Common Stock Outstanding
Before Offering(1).. 750,000 shares
After Offering(1)... 1,750,000 shares
Warrants Offered.......... 1,000,000 Warrants
Exercise Terms...... Each Warrant entitles the holder to purchase one
share of Common Stock for $6.00, subject to
adjustment in certain circumstances. Each Warrant
shall be exercisable for a four year period
beginning on _________, 1999.
Expiration Date..... __________, 2003.
Redemption.......... Subject to redemption at a price of $0.10 per Warrant
on 30 days written notice provided that the average
bid price of the Common Stock equals or
exceeds 150% of the then-effective exercise price of
the Warrants for at least twenty consecutive trading
days ending on the third day prior to the date on
which the Company gives notice of redemption. See
"Description of Securities-Warrants."
4
<PAGE>
Estimated Net Proceeds(2). $4,356,000
Use of Proceeds........... The net proceeds of this Offering will be used (a) to
identify and acquire properties for development into
two assisted living facilities, for the construction
of two assisted living facilities and for the
purchase of associated furniture, fixtures and
equipment; (b) to acquire land for the subsequent
development of assisted living facilities; and (c)
for general corporate and working capital purposes. A
portion of the net proceeds could be used for the
acquisition of existing assisted living facilities if
they can be acquired at acceptable purchase prices.
See "Use of Proceeds."
Risk Factors.............. The Securities offered hereby involve a high degree
of risk and immediate substantial dilution. See "Risk
Factors" and "Dilution."
Proposed OTC Bulletin
Board
Symbols................. Common Stock-"RCMC"
Warrants-"RCMCW"
(1) Excludes shares of Common Stock issuable upon the exercise of (a) the
1,000,000 Warrants offered hereby and (b) the Private Placement Warrants (as
defined herein), and (c) the Additional Warrants (as defined herein).
(2) After deducting underwriting discounts and other expenses of this Offering,
including the Underwriter's non-accountable expense allowance.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected statement of operations and balance sheet data of
the Company as of December 31, 1996 and 1997 and for each of the years from the
Company's inception (May 22, 1996) through December 31, 1997 have been derived
from the Company's audited financial statements and should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus. The Company is a development stage
("start up") company and has not generated any revenues or profits since its
inception. See "Index to Financial Statements."
PERIOD FROM MAY 22,
1996 (INCEPTION) TO
DECEMBER 31, 1996
ACTUAL 1997
--------------------------------------
STATEMENT OF OPERATIONS
DATA
Net loss $ 0 $(96)
Net loss per share $ 0.00 ($2.30)
Weighted average common
shares outstanding 58 41,759
------- ------
PRO
DECEMBER 31, DECEMBER 31, FORMA(1)
1996 1997 AS ADJUSTED
1997
---------------------------------------------------
BALANCE SHEET DATA:
Working capital(2)...... $ 0 $(143) $ 843
Total assets............ $ 0 47 $4,807
Shareholders' equity.... $ 0 $(96) $4,631
- ------------------
(1) Gives effect to the sale by the Company of (a) 250,000 shares of Common
Stock and 250,000 Private Placement Warrants in the Company's private
placement offering (the "Private Offering") which was consummated subsequent
to December 31, 1997, (b) 500,000 Additional Warrants, and (c) 1,000,000
shares of Common Stock and 1,000,000 Warrants in the Offering (at an assumed
initial public offering price of $5.00 per share and $0.10 per Warrant and
after deducting estimated underwriting discounts and commissions and the
expenses of this Offering and the anticipated application of the net
proceeds therefrom). See "Use of Proceeds."
(2) Total current assets less current liabilities.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS HIGHLY SPECULATIVE AND
SUBJECT TO A HIGH DEGREE OF RISK, AND ONLY THOSE POTENTIAL INVESTORS WHO CAN
BEAR THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT SHOULD PARTICIPATE.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE
PURCHASING THE SECURITIES OFFERED HEREBY. THE COMPANY CAUTIONS THAT THE FACTORS
DESCRIBED BELOW COULD CAUSE ACTUAL RESULTS OR OUTCOMES TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF THE
COMPANY.
NO OPERATING HISTORY, LACK OF REVENUES AND EXPECTATION OF FUTURE LOSSES
The Company was organized in the State of Florida on May 22, 1996, and is
a development stage ("start up") company which has had no revenues or profits to
date. The Company anticipates that it will incur losses for the foreseeable
future due, in part, to start-up costs and the costs associated with acquiring
properties which can be developed or converted into assisted living facilities
or if acquisitions of existing assisted living facilities are consummated. There
can be no assurance that the Company will not encounter substantial delays and
unexpected expenses related to the identification or acquisition of development
or conversion opportunities or assisted living facilities or other unforeseen
difficulties, which may cause additional losses.
CURRENT FINANCIAL RESOURCES
The Company anticipates that all of its current financial resources
(including a substantial portion of the net proceeds from this Offering) will be
expended on identifying and pursuing potential acquisitions of properties which
can be developed or converted into assisted living facilities. The Company may
also acquire existing assisted living facilities. There can be no assurance that
the Company will be successful in identifying or consummating any suitable
acquisitions of any kind. Based on its projected capital needs, the Company
anticipates that its current financial resources (including the net proceeds
from this Offering) should be adequate to satisfy its capital and operating
requirements for no more than twelve months. This estimate is based upon certain
assumptions, and there can be no assurance that such resources will satisfy the
Company's capital needs for this period. Because the Company will not have any
operating assets unless the Company develops or acquires such a facility,
insufficient financial resources may prevent or delay the Company from
generating any revenue or profits or otherwise have a material adverse effect on
the Company's business and financial condition. See "Proposed Additional
Transactions" and "Risk Factors-Dilution."
DEPENDENCE ON ADDITIONAL FINANCING
The Company is dependent upon the successful completion of this Offering
to begin its proposed plan of operation, and the Company will need substantial
additional financing to fund its activities after the consummation of this
Offering, without which the Company will be unable to continue as a going
concern. Such financing may come from a variety of sources, including private
placements, public offerings or loans. Any debt financing is likely to be
secured by mortgages or other liens on the Company's facilities or assets. There
can be no assurance that the financial resources of the Company will be adequate
to service such debt financing and, if not, the facilities or assets may be
foreclosed upon to satisfy such indebtedness. No assurance can be given that any
future financing (either equity or debt) will be available or, if available,
that it can be obtained on terms advantageous to the Company. If such financing
is required but is not available, the Company may be forced to significantly
restrict, curtail or abandon its activities. This will have a material adverse
effect on the Company's business and financial condition. Additionally, there
can be no assurance that the Company will survive as a viable commercial
enterprise even if such additional financing is obtained. The issuance of any
additional equity after the consummation of this Offering will dilute the
ownership interests of the shareholders who purchase Securities in this
Offering. See "Proposed Additional Transactions" and "Risk Factors Dilution."
ASSISTED LIVING FACILITY DEVELOPMENT, CONSTRUCTION RISKS AND OCCUPANCY
The Company anticipates attempting to develop its business primarily
through the construction and development of assisted living facilities. In doing
so, it will be subject to various development, construction and occupancy risks.
7
<PAGE>
The successful development of a facility will depend upon a number of factors
(most of which are outside of the Company's control), including the Company's
ability to acquire suitable development sites at acceptable prices, its ability
to obtain adequate financing on acceptable terms, its ability to obtain zoning,
land use, building, occupancy, licensing and other required governmental permits
on a timely basis, construction and renovation costs and project completion
schedules. In addition, numerous factors outside the Company's control will
impact the successful implementation of its development plans, including
competition for site acquisitions, shortages of, or the inability to obtain,
labor or materials, changes in applicable laws or regulations or in the method
of applying such laws and regulations, the failure of general contractors or
subcontractors to perform under their contracts, strikes and adverse weather.
The Company's establishment and survival as an operating company will be
dependent on its ability to identify acceptable properties for development and
development or conversion of assisted living facilities on such properties.
There can be no assurance that the Company will not encounter delays in any
development program that it may undertake, that it will be successful in
developing and constructing planned or additional assisted living facilities or
that any facilities, if completed, will achieve targeted occupancy rates or
otherwise be economically successful. The Company's inability to achieve its
development plans or the delay of those plans could have a material adverse
effect on the Company's business, results of operations and financial condition.
There can be no assurance that the Company will not suffer delays in its
development program, which would slow the Company's growth. The Company relies
and will continue to rely on third party general contractors to construct its
new facilities. There can be no assurance that the Company will not experience
difficulties in working with general contractors and subcontractors, which could
result in increased construction costs and delays. Accordingly, if the Company
is unable to achieve its development plans, its business, financial condition
and results of operations could be materially and adversely affected. See
"Business-Business and Growth Strategy."
ACQUISITIONS OF EXISTING FACILITIES
The Company may also attempt to develop its business through the
acquisition of existing assisted living facilities, although no letters of
intent or similar agreements regarding any acquisition have been entered into.
Additionally, the Company has determined that existing facilities which were
considered for acquisition could not be acquired at acceptable prices. If the
Company is able to identify such acquisitions at acceptable purchase prices and
pursue them, however, its acquisition strategy will entail the risks inherent in
assessing the value, strengths, weaknesses, contingent or other liabilities and
potential profitability of acquisition candidates and in integrating the
operations of acquired businesses. Successful integration of acquired businesses
will depend on the Company's ability to effect any required changes in
operations or personnel, and may require renovation or other capital
expenditures or the funding of unforeseen liabilities. There can be no assurance
that suitable acquisition candidates can be identified, and there can be no
assurance that the Company will be able to consummate any of such acquisitions
or successfully integrate the operations of these facilities or institute
Company-wide systems and procedures to successfully operate the combined
enterprises. The success of the Company's acquisitions will be determined by
numerous factors, including the Company's ability to identify suitable
acquisition candidates, competition for such acquisitions, the purchase price,
financing, financial performance of the facilities after the acquisition and the
ability of the Company to effectively integrate the operations of acquired
facilities. A strategy of growth by acquisition also involves the risk of
assuming unknown or contingent liabilities of the acquired business, which could
be material, individually or in the aggregate. Any failure by the Company to
identify suitable candidates for acquisition, to integrate or operate acquired
facilities effectively or to insulate itself from unwanted liabilities of
acquired businesses may have a material adverse effect on the Company's business
and financial condition. Prospective investors must be aware that the Company
will not be able to consummate any acquisitions unless financing in addition to
the funds raised in this Offering is obtained.
GOVERNMENT REGULATION
The health care industry, in which the Company proposes to operate, is
subject to extensive Federal and state regulation and frequent regulatory
change. Federal, state and local laws and ordinances governing services provided
to seniors address, among other things, adequacy of medical care, distribution
of pharmaceuticals, operating policies, licensing and certificate of need
requirements. Facilities may also be periodically inspected to assure continued
compliance with various standards and licensing requirements under state law.
There are currently no Federal laws or regulations specifically defining or
regulating assisted living facilities. The Company's assisted living facilities
will be subject to state regulation, licensing, certificate of need
8
<PAGE>
requirements, approvals by state and local health and social service agencies
and other regulatory authorities and compliance with building codes and
environmental laws in the states in which it intends to operate. See "Business -
State Licensing Requirements." Certificate of need or similar laws require that
a state agency approve certain acquisitions and determine that a need exists for
certain services, the addition of beds and capital expenditures or other
changes. When the issuance or renewal of certificates of need or other similar
government approvals are required, changes in existing laws or adoption of new
laws could adversely affect the Company's acquisition or development strategy
and/or its operations if it is unable to obtain such certificate of need
approvals or renewals thereof. Also, health care providers have been subjected
to increasing scrutiny under antitrust laws as the integration and consolidation
of the health care industry increases and affects competition. Regulation of the
assisted living industry is evolving. The Company cannot predict the content of
new regulations and their effect on its proposed business. There can be no
assurance that regulatory or other legal developments will not adversely affect
the Company's business, results of operations and financial condition. See "Risk
Factors - State Licensing Requirements" and "Business - Florida Licensing
Requirements."
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements (including employment
or service contracts) between health care providers and others who may be in a
position to refer or recommend patients or services to such providers. These
laws prohibit, among other things, certain direct and indirect payments that are
intended to induce the referral of patients to, the arranging for services by,
or the recommending of a particular provider of health care items or services.
The Medicare/Medicaid anti-kickback law has been broadly interpreted to apply to
certain contractual relationships between health care providers and sources of
patient referral. A number of similar state laws exist which often have not been
interpreted by courts or regulatory agencies. Additionally, Federal "Stark"
legislation prohibits, with limited exceptions, the referral of patients for
certain services, including home health care services, physical therapy and
occupational therapy, by a physician to entities in which they have an ownership
interest. Violation of these laws can result in loss of licensure, civil and
criminal penalties, and exclusion of health care providers or suppliers from
participating in the Medicare and Medicaid programs. Additionally, the Federal
government, private insurers and various state agencies have increased their
scrutiny of providers, business practices and claims in an effort to identify
and prosecute fraudulent and abusive practices and the Federal government has
recently issued certain "fraud alerts" concerning home health services and
provision of medical supplies to nursing homes. Additional such "fraud alerts"
are likely. Furthermore, some states restrict certain business or fee
relationships between physicians and other providers of health care services.
Although the Company believes that it will comply with Federal and state
anti-remuneration statutes at all times to the extent applicable, there can be
no assurance that such laws will be interpreted in a manner consistent with the
practices of the Company. See "Risk Factors Dependence on Private Pay Residents;
Changes in Reimbursement Policy."
The Americans with Disabilities Act of 1990 requires all places of public
accommodation to meet certain federal requirements related to access and use by
disabled persons. A number of additional Federal, state and local laws exist
which may also require modifications to existing and planned properties to
create access to the properties by disabled persons. If required changes involve
significant expenditures or must be made more quickly than anticipated,
additional costs will be incurred by the Company. Further legislation may impose
additional burdens or restrictions relating to access by disabled persons. The
costs of complying with any new legislation could be substantial.
HEALTH CARE REFORM
In addition to extensive existing government health care regulation, there
are many initiatives on the Federal and state levels for comprehensive reforms
affecting the payment for and availability of health care services. It is not
clear what proposals, if any, will be adopted, or what effect such proposals
would have on the Company's proposed business. Various aspects of these health
care proposals, such as reductions in funding of the Medicare and Medicaid
programs, potential changes in reimbursement regulations by the Health Care
Financing Administration, enhanced pressure to contain health care costs by
Medicare, Medicaid and other payors and permitting greater state flexibility in
the administration of Medicaid, could adversely affect the Company's business,
financial condition and results of operations. Changes in certification and
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participation requirements of the Medicare and Medicaid programs have
restricted, and are likely to further restrict, eligibility for reimbursement
under those programs. Although the Company anticipates that its primary method
of payment will be private payments by residents of its facilities and their
families, if third party reimbursement becomes a significant source of payment
for the Company, failure to obtain and maintain Medicare and Medicaid
certification could result in a significant loss of revenue. In addition,
private payors, including managed care payors, increasingly are demanding that
providers accept discounted fees or assume all or a portion of the financial
risk for delivery of health care services, including capitated payments where
the provider is responsible, for a fixed fee, for providing all services needed
by certain patients. Capitated payments can result in significant losses when
patients require expensive treatments not adequately covered by the capitated
rate. Efforts to impose reduced payments, greater discounts and more stringent
cost controls by government and other payors are expected to continue. The
Company cannot predict what reform proposals or reimbursement limitations will
be adopted in the future or the effect any such changes will have on its
operations. There can be no assurance that currently proposed legislation,
future health care legislation, reforms or changes in the administration or
interpretation of governmental health care programs or regulations will not have
a material adverse affect on the Company's business, financial condition and
results of operations. See "Risk Factors - Dependence on Private Pay Residents;
Changes in Reimbursement Policy."
DEPENDENCE ON PRIVATE PAY RESIDENTS; CHANGES IN REIMBURSEMENT POLICY
If the Company is able to construct, develop or acquire any assisted
living facilities and commence operations, it expects to rely primarily on the
ability of residents at its facilities to pay for the Company's services
directly from their own or their family's financial resources instead of managed
care, governmental providers or other third party payors. The Company believes,
however, that certain third party payors (primarily insurance companies) may
become a more substantial source of payment for the Company's services in the
future. If such third party payors become a substantial source of the payment of
such services, the fees received by the Company on behalf of each resident may
be adversely impacted as such providers commonly negotiate or legislate fee caps
below the prevailing market rate and typically negotiate payment arrangements
which are less advantageous than those available from private payors. The
Company also expects that payment by third party payors will be subject to
substantial delays and other problems with receipt of payment. The health care
industry, and particularly the operation of reimbursement procedures, has been
characterized by a great deal of uncertainty, and accordingly there can be no
assurance that third party payors will not become a significant source of
payment for the Company's services, or that such a change in payment policies
will not occur. In addition, inflation or other circumstances beyond the
Company's control could adversely affect the ability of the Company's private
payors to pay for the Company's services. Any of these factors could have a
material adverse effect on the Company's business and financial condition.
STATE LICENSING REQUIREMENTS
Many states require assisted living facilities to be licensed with a
governmental agency of the state in which such facilities are located. Florida,
in which the Company plans to conduct its initial business operations, requires
such licensure prior to beginning operations. Licensing requirements vary from
state to state. Generally, separate licenses are required for each facility,
even if such facilities are operated by the same management. The Company may be
required to license any existing facility prior to its acquisition. No assurance
can be made that the applicable governmental agency will grant any such facility
such a license. Any delays in obtaining such a license or failure to obtain such
a license could have a material adverse effect on the Company's financial
condition, results of operations and viability as a commercial enterprise. See
"Business - State Licensing Requirements."
GEOGRAPHIC CONCENTRATION OF BUSINESS
The Company currently intends to focus its initial business efforts in the
Southeastern region of the United States, beginning with Florida. The Company
will be susceptible to downturns in local and regional economies and changes in
state or local regulation because of a lack of geographic dispersion of its
business activities. As a result of such factors, there can be no assurance that
such geographic concentration will not have a material adverse effect on the
Company's financial condition or results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or, if one does develop, that it will be maintained.
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The initial public offering price, which will be established by negotiations
between the Company and the Underwriter, does not reflect book value per share
or any other quantitative factor and may not be indicative of prices that will
prevail in the trading market for the Securities. The trading price of the
Securities could also be subject to significant fluctuations in response to
variations in periodic operating results, changes in management, future
announcements, legislative or regulatory changes, general trends in the
industry, changes in the level of business opportunities available to the
Company and the Company's ability to efficiently price and negotiate
acquisitions on a favorable basis, and the failure to properly manage growth.
The United States securities markets have also experienced extreme price and
volume fluctuations which have often been unrelated to operating performance.
LIMITED UNDERWRITING HISTORY
The Underwriter has previously participated in only one public offering as
an underwriter. In evaluating an investment in the Company, prospective
investors in the Securities offered hereby should consider the Underwriter's
lack of experience as an underwriter of public offerings. There can be no
assurance that the Underwriter's limited experience will not adversely affect
the development of a trading market for, or liquidity of, the Company's
Securities. Therefore, purchasers of the Securities offered hereby may suffer a
lack of liquidity in their investment or a material decrease in the value of
their investment. See "Underwriting."
BROAD DISCRETION IN USE OF PROCEEDS
The Company presently intends to use the net proceeds of this Offering for
the purposes set forth in "Use of Proceeds." However, the Company's management
has broad discretion to adjust the application and allocation of the net
proceeds of this Offering in order to address different circumstances and
opportunities. As a result, the Company's success will be substantially
dependent upon the discretion and judgment of the management of the Company with
respect to the application and allocation of the net proceeds of this Offering.
UNCERTAIN MARKET ACCEPTANCE
Market acceptance of the Company's facilities and services will depend, in
part, on the Company's ability to provide assisted living services for a
competitive price, the superiority of its facilities and services and on the
effectiveness of the Company's marketing efforts. No assurance can be given that
the Company will gain market acceptance for its facilities and services.
LIABILITY AND INSURANCE
The Company plans to operate in an industry which has experienced a
significant number of lawsuits based on negligence and various other legal
theories. The Company plans to maintain insurance policies in amounts and with
such coverage as its management deems appropriate for its operations. There can
be no assurance, however, that the coverage will be available on acceptable
terms. A successful claim in excess of the Company's coverage or for which
coverage is not available could have a material adverse impact of the Company's
business and financial condition. Claims against the Company, regardless of
their merit or outcome, may involve significant legal costs and may require
management to devote considerable time which would otherwise be utilized in the
operation of the Company.
CASUALTIES, BUSINESS INTERRUPTION AND INSURANCE
The operations of the Company may be adversely impacted by a casualty,
such as a fire, hurricane, or windstorm, occurring at one or more of the
assisted living facilities that it intends to operate. Such a casualty could
materially adversely affect the financial condition and results of operations of
the Company. The Company plans to maintain property and casualty insurance in
amounts and with such coverages as it deems appropriate for its operations.
There can be no assurance, however, that such coverage will be available to
adequately compensate the Company for all losses incurred as the result of a
casualty and there can be no assurance that the Company will be able to find
replacement coverage if such coverage terminates or is otherwise canceled. A
successful claim in excess of the Company's coverage or for which coverage is
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not available could have a material adverse impact of the Company's financial
condition and results of operations. Claims against the Company, regardless of
their merit or outcome, may involve significant legal costs and require
management to devote considerable time which would otherwise be utilized in the
operation of the Company. Moreover, Florida has been and is currently
experiencing a shortage of property and casualty insurance coverage due to the
losses incurred by insurance companies in Hurricane Andrew. As a result, there
can be no assurance that such coverage will be available in Florida at all and,
if available, at affordable rates. Consequently, there is the risk that
facilities may not be insured, in whole or in part, for such casualty or
business interruption.
COMPETITION
The assisted living industry is highly competitive. If the Company is able
to commence operations, it expects to face competition from numerous local,
regional and national providers of assisted living and long-term health care
services. Some of these present and future competitors will be significantly
larger and will have substantially greater financial, business and technological
resources than the Company, and their management will have substantially greater
experience in the assisted living industry. Some of the Company's potential
competitors operate on a not-for-profit basis or as charitable organizations,
and may thus be able to offer more attractive prices to customers, resulting in
a loss of revenue to the Company. The Company believes that the assisted living
industry will become even more competitive in the future. The Company believes
that regulatory barriers to entry into the assisted living industry are
generally not substantial. If the development of new assisted living facilities
surpasses the demand for such facilities in markets in which the Company
operates, such markets may become saturated, which could result in the Company's
inability to sustain its business. The Company also expects to compete for
acquisitions of properties for the construction and development of assisted
living facilities and, if applicable, existing facilities. There can be no
assurance that competition will not limit the Company's ability to attract
residents or develop or expand its business, and such competition could have a
material adverse effect on the Company's business and financial condition.
DEPENDENCE ON KEY PERSONNEL; INEXPERIENCE OF MANAGEMENT
The Company will be dependent upon the services of the executive officers
and principal employees of the Company (particularly Thomas H. Minkoff) for
management of the Company and implementation of its business strategy, none of
which has significant experience in developing or operating assisted living
facilities. The Company has entered into an employment agreement with Mr.
Minkoff, its President and Chief Executive Officer, and the Company intends to
acquire key man life insurance on him. Mr. Minkoff is currently the Company's
sole employee. The loss of the services of Mr. Minkoff could have a material
adverse effect on the Company's business operations, financial condition and
results of operations. If its operations expand, the Company will also be
dependent upon its ability to attract and retain additional qualified employees
and consultants. There can be no assurance that the demands placed on Company
personnel by the growth of the Company's business and the need for close
monitoring of its operations and financial performance through appropriate and
reliable administrative and accounting procedures and controls will be met, or
that the Company will otherwise manage its growth successfully; the failure to
do so could have a material adverse effect on the Company's business, financial
condition and results of operations. There is significant competition for
qualified personnel, and there can be no assurance that the Company will be
successful in recruiting, retaining or training the management personnel it
requires. The Company has designated Mr. Minkoff as its interim principal
financial officer. Mr. Minkoff has no experience in serving as the principal
financial officer of a company similar to the Company or any publicly held
company.
See "Management - Employment Agreements."
NO SHAREHOLDER VOTE ON ACQUISITIONS
If the Company is able to proceed with any acquisitions of construction or
development properties or existing facilities, it is not anticipated that the
Company's shareholders will have any rights to vote on or consent to any such
acquisitions under applicable state corporate law. Accordingly, decisions to
pursue or not pursue acquisitions (if any) will be made by the Company's
management and its Board of Directors (the "Board of Directors").
See "Risk Factors - Acquisition Risks."
NO ANTICIPATION OF DIVIDENDS
The Company anticipates that, following the completion of this Offering
and for the foreseeable future, earnings, if any, will be retained by the
Company to finance the development of its business and will not be distributed
to its shareholders as dividends. The declaration and payment of any dividends
by the Company at some future time, if any, will depend upon the Company's
results of operations, financial condition, cash requirements, future prospects,
limitations imposed by credit arrangements or senior securities and any other
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factors deemed relevant by the Board of Directors. Any declaration and payment
of a dividend by the Company will at all times be in the discretion of the Board
of Directors. See "Dividend Policy."
INVESTMENT RISKS
The Company can make no representation regarding its future operations or
potential profitability or the amount of any future revenues, income or loss of
the Company. The success of the Company will be subject to many factors beyond
the control of the Company, such as general economic conditions, governmental
regulation and legislation, competition, and general conditions in the assisted
living industry. The Company's primary source of cash available for
distribution, if any, will be amounts derived from residents utilizing the
facilities and services of the Company. There can be no assurance that the
Company will generate sufficient cash to meet its obligations as they become
due. Prospective investors should be aware that they could lose their entire
investment in the Company. Even if the Company is successful in its operations,
there can be no assurance that investors will receive any cash dividends or
derive a profit or benefit from their investment. A significant amount of the
financial risk of the Company's proposed activities will be borne by the
investors who purchase Securities in this Offering.
NO PRIVATE OR PUBLIC MARKET
There is currently no private or public market for the Securities offered
in this Offering, and there can be no assurance that any such markets will
develop or, if such markets do develop, that they will be sustained. There can
be no assurance that any subsequent financing transactions will be successfully
consummated by the Company, and, if any such transactions are successfully
consummated, what the terms or timing of such transactions will be. The
successful consummation of any subsequent financings will be dependent on a
significant number of economic, business and other factors, most of which are
outside of the Company's control. Additionally, applicable Federal and state
securities laws may place certain restrictions on transfers of Securities.
Accordingly, investors may not be able to readily sell their Securities and
lenders may not accept any Securities as collateral for loans.
CONTROL BY MANAGEMENT
Following the completion of this Offering and assuming that all 1,000,000
shares of Common Stock offered hereunder are sold, and assuming no exercise of
the Warrants, the Private Placement Warrants, or the Additional Warrants, Thomas
H. Minkoff, the Company's President and Chief Executive Officer, will own 28.6%
of the Company's outstanding Common Stock. Accordingly, Mr. Minkoff will
continue to exert a high degree of influence over the Company and its operations
after the consummation of this Offering. Shareholders of the Company will not
have any rights in connection with their Shares, including, without limitation,
preemptive rights or cumulative voting rights, except as specifically granted in
the Company's Amended and Restated Articles of Incorporation or bylaws or under
applicable state corporate law.
See "Principal Shareholders."
DILUTION
Potential investors in this Offering should be aware that, because the
Company is a development stage ("start up") entity with no significant tangible
net worth, they will experience substantial dilution in the net tangible book
value of their investment at the time of the closing of this Offering. See
"Dilution." The purchase price of the Common Stock in this Offering
substantially exceeds the net tangible book value of the Common Stock.
Purchasers of Common Stock will therefore experience an immediate substantial
dilution in the net tangible book value per share of their Common Stock after
this Offering. Based on a proposed Offering price of $5.00 per share, purchasers
of Common Stock in this offering will experience dilution of $2.42 per share
(48.4%) immediately upon the closing of this Offering. See "Dilution." Investors
who purchase Common Stock in this Offering could experience additional
substantial dilution in the net tangible book value of their Common Stock if any
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additional shares of Common Stock are sold subsequent to this Offering whether
in a private placement or public offering. The Company has no restrictions on
any such future issuance of Common Stock. See "Description of Common Stock" and
"Dilution."
TAX RISKS
An investment in the Securities will not provide tax benefits to an
investor. Each prospective investor should, however, carefully consider the
income tax consequences of his proposed purchase of Securities. It should be
noted that the laws, regulations and administrative rulings regarding Federal
income tax matters are subject to change at any time and from time to time by
Congress, the Treasury Department and the Internal Revenue Service, and that
interpretations of such laws, regulations and rulings now in effect are also
subject to change by court decisions. There may also be foreign, state and local
tax laws, regulations or ordinances that may affect an investor's individual tax
situation. Nothing herein or in any exhibit hereto is or should be construed as
tax advice to an investor or to the Company. Investors must look solely to, and
rely upon, their own advisers with respect to the tax consequences of an
investment in the Company.
RISKS OF INDEBTEDNESS
The Company may incur substantial amounts of indebtedness if it is able to
acquire properties for development or conversion or existing assisted living
facilities. If such indebtedness is incurred, the Company expects to dedicate an
increasing portion of its cash flow to servicing such indebtedness, thereby
exposing the Company to the risks inherent in a highly leveraged company,
including, among other things, interest rate and default risks. An increase in
interest rates charged by lending institutions will increase the cost of
servicing the Company's indebtedness, if any, as well as increase the cost of
financing future acquisitions. Additionally, the Company anticipates that such
indebtedness will be secured by mortgages on the facilities owned and operated
by the Company as well as other liens on the Company's assets, and a default on
such indebtedness may result in the Company's lenders foreclosing upon such
mortgages and enforcing such other liens. The occurrence of any of these things
could have a material adverse affect on the Company's business, financial
condition and results of operations by jeopardizing the Company's ability to
service its indebtedness, make acquisitions or continue as a going concern. Loan
agreements also typically impose substantial restrictions on borrowers and
normally require strict compliance with certain financial ratios and other
criteria, all of which may significantly restrict the Company's business or
financial flexibility and have a material adverse effect on the Company's
business and financial condition.
VARIATIONS OF OPERATING RESULTS
The Company is a development stage ("start up") company which is unlikely
to generate a profit in any period for the foreseeable future, and even if the
Company does generate a profit for a particular period there can be no assurance
that the Company will generate a profit for any future period. The Company
anticipates that for the foreseeable future revenue and profits, if any, or
losses will fluctuate widely, resulting from, among other things, the timing or
costs of any acquisitions or the occupancy levels of any assisted living
facilities to be owned by the Company.
ENVIRONMENTAL RISKS
Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner and operator of real property may be
held liable for the cost of removal or remediation of certain hazardous or toxic
substances that may be located on, in or under the property. These laws and
regulations may impose liability regardless of whether the owner or operator was
responsible for, or knew of, the presence of the hazardous or toxic substances.
The liability of the owner or operator and the cost of any required remediation
or removal of hazardous or toxic substances could exceed the property's value.
In connection with the ownership or operation of its facilities, the Company
could be liable for these costs as either the owner or operator of such
facilities which could have a material adverse effect on the Company's business,
financial condition and results of operations.
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NEED FOR ADDITIONAL FINANCING
To achieve its acquisition and development plans and growth objectives,
the Company will need to obtain significant additional financial resources.
Based on its currently planned programs and estimates, the Company anticipates
that its current financial resources (including the net proceeds of this
Offering) should be adequate to satisfy its capital and operating requirements
for no more than twelve months. This estimate is based on certain assumptions,
and there can be no assurance that such resources will satisfy the Company's
needs for this period. The Company anticipates seeking additional equity capital
in the near future, which will dilute the interest of the investors who purchase
Securities in this Offering. The Company may also from time to time seek debt
financing through a variety of sources, which may include tax-exempt bonds,
conventional mortgage financing and bank financing, leases with third parties or
other similar financing methods, but no commitments for any debt financing are
currently in place. There can be no assurance that future financing, whether
debt or equity, will be available as needed or on terms acceptable to the
Company or at all. A lack of funds may require the Company to delay or eliminate
all or some of its development projects and acquisition plans and could
therefore have a material adverse effect on the Company's growth plans. See "Use
of Proceeds" and "Management's Plan of Operation."
MANAGEMENT OF GROWTH
If the Company is able to successfully implement its proposed business
strategy it may encounter periods of growth. While there can be no assurance
that such growth will occur, such growth periods could require the Company to
make significant additions in personnel and significantly increase its working
capital requirements. Such growth could resulted in new and increased
responsibilities for management personnel and could place a significant strain
upon the Company's management, operating and financial systems and other
resources. There can be no assurance that any such strain placed upon the
Company's management, operating and financial systems and other resources will
not have a material adverse effect on the Company's business, financial
condition and results of operations, nor can there be any assurance that the
Company will be able to attract or retain sufficient competent personnel to
continue the planned expansion of its operations.
To manage the expansion of its operations (if it becomes necessary), the
Company will be forced to continuously evaluate the adequacy of its management
structure and its existing systems and procedures, including, without
limitation, its data processing, financial and internal control systems. When
entering new geographic markets, the Company will be required to implement its
policies and financial reporting procedures, recruit personnel, and adapt its
systems to different situations. There can be no assurance that management will
adequately anticipate all of the changing demands that growth could impose on
the Company's systems, procedures, and structure. In addition, the Company will
be required to react to changes in its industry, and there can be no assurance
that it will be able to do so successfully or at all. Any failure to adequately
anticipate and respond to such changing demands may have a material adverse
effect on the Company's business, financial condition and results of operations.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the completion of this offering, or the prospect of such sales, could
adversely affect the price of the Common Stock. Of the 1,750,000 shares of
Common Stock that will be outstanding following this Offering, the 1,000,000
shares of Common Stock offered hereby will be freely tradable under federal
securities law to the extent that they are not held by affiliates of the
Company. The remaining 750,000 shares of Common Stock which will be outstanding
after the offering will be "restricted securities" for purposes of Rule 144
under the Securities Act. Prospective investors should be aware that
approximately 57.1% of the Company's total outstanding Common Stock will be
freely tradable following the completion of this Offering, and, while it is
impossible to predict the exact effects of these freely tradable shares on the
market price of the Common Stock, sales of large blocks of Common Stock or the
possibility of such sales could cause significant fluctuations in or have a
material adverse effect on the market price of the Common Stock. See "Shares
Eligible for Future Sale."
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Prospective investors should be aware that if any of the Warrants, the
Private Placement Warrants or the Additional Warrants are exercised, a maximum
of 1,750,000 additional shares of Common Stock will be issued. Any shares issued
pursuant to any of these Warrants will be "restricted securities."
The Company intends to file a registration statement on Form S-8 in
connection with all shares of Common Stock issued pursuant to the exercise of
options granted under the Incentive Plan. If this registration statement is
filed and becomes effective, all of these shares (a total of 200,000 shares)
will become freely tradable unless they are held by affiliates of the Company.
The Company has granted options to purchase 10,000 shares of Common Stock
to Mr. Thomas H. Minkoff in connection with his Employment Agreement. Mr.
Minkoff will receive additional options to purchase 10,000 shares on each
anniversary of the effective date of his employment agreement. The Company also
anticipates issuing options to purchase 10,000 shares of Common Stock to each of
the four proposed Director-Designees (as defined herein) when they become
members of the Board of Directors, followed by additional options to purchase
5,000 shares each year. To the extent any of those options are exercised, the
shares of Common Stock received will be restricted securities unless an
effective registration statement regarding such shares is in place. Restricted
securities that have been held for more than two years are freely tradable to
the extent they are not held by affiliates. Restricted securities held for at
least one year, whether held by affiliates or others, may be sold under Rule
144, subject to certain volume and other limitations. No prediction can be made
as to the effect, if any, that future sales of shares, or the availability of
shares for future sales, will have on the market price of the shares of Common
Stock from time to time or the Company's ability to raise capital through an
offering of its equity securities in the future. See "Underwriting", "Management
- - Employment Agreements," and "Management -- Directors and Executive Officers of
the Company."
OTC BULLETIN BOARD LISTING
The Company anticipates that trading, if any, of the Common Stock will be
conducted in the non-Nasdaq over-the-counter markets through the OTC Bulletin
Board. The Company intends to apply for the inclusion of its Common Stock on the
OTC Bulletin Board, although there can be no assurance that the Common Stock
will be accepted for quotation or, if accepted, that an active trading market
will develop or be maintained. Trading of securities on the OTC Bulletin Board
is limited and is effected on a less regular basis than that effected on other
exchanges or quotation systems (such as the Nasdaq Stock Market), and
accordingly investors who produce Securities in this Offering may find that the
liquidity or transferability of their Securities is limited. Additionally, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Securities if they are quoted on the
OTC Bulletin Board. There can be no assurance that the Securities will ever be
included for trading on any stock exchange or through any other quotation system
(including, without limitation, the Nasdaq Stock Market).
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCKS
The Securities and Exchange Commission (the "Commission") has adopted
certain rules which generally define a "penny stock" to be any equity security
that has a market price (as defined therein) less than $5.00 per share or an
exercise price less than $5.00 per share, subject to certain exceptions. The
Common Stock will become subject to these rules if it is classified as a penny
stock. These rules impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5 million or individuals with a net worth exceeding $1 million or annual
income exceeding $200,000 (or $300,000 jointly with their spouse)). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Additionally, for any
transaction involving a penny stock, unless exempt, the applicable rules require
the delivery, prior to the transaction, of a disclosure schedule prepared by the
Commission relating to the penny stock market. The broker-dealer must also
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the security and, if the broker-dealer is
the sole market maker, he must disclose this fact and his presumed control over
the market. Finally, monthly statements must be sent which disclose recent price
information for the penny stock held in the account and information on the
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limited market in penny stocks. The above described rules may adversely affect
the liquidity of the market for the Company's Common Stock and may also
adversely affect the ability of the Company's shareholders to sell the Common
Stock in the secondary market.
PRIVATE PLACEMENT WARRANTS AND ADDITIONAL WARRANTS
In January 1998 the Company consummated the private offering (the "Private
Offering") of 250,000 shares of Common Stock. As part of this Private Offering
the investors were granted Warrants (the "Private Placement Warrants") to
purchase a total of 250,000 shares of Common Stock. Additionally, Mr. Thomas H.
Minkoff was previously granted Additional Warrants which allow him to purchase
an additional 500,000 shares of Common Stock. The exercise of any of the Private
Placement Warrants or the Additional Warrants could cause significant additional
dilution to the equity positions of investors who purchase Common Stock in this
Offering. See "Description of Capital Stock - Private Placement Warrants" and
"-Additional Warrants."
OFFERING NOT CONDUCTED IN ACCORDANCE WITH CERTAIN BLANK CHECK REGULATIONS
The Offering is not being conducted in accordance with the Commission's
Rule 419, which was adopted to strengthen regulation of securities offerings by
"blank check" companies which the United States Congress has found to have been
common vehicles for fraud and manipulation in the penny stock market. Pursuant
to Rule 419, a "blank check" company is defined as (a) a development stage
company that has no specific business plan or has indicated that its business
plan is to engage in a merger or acquisition with an unidentified company or
companies; and (b) a company which issues a "penny stock," meaning any equity
securities that, among other things, (i) are not quoted in the NASDAQ system; or
(ii) in the case of a company which has been in continuous operation for less
than three years, has net tangible assets (i.e., total assets less intangible
assets and liabilities) of less than $5,000,000, as demonstrated by the
company's most recent financial statements that have been audited and reported
on by an independent public accountant. The Company believes that it is not a
"blank check" company and therefore it is not subject to Rule 419 because the
Company's primary intention to build assisted living facilities, rather than to
acquire existing facilities, although the Company has not identified the
specific location of any such construction. Accordingly, investors in this
Offering will not receive the substantive protections provided by Rule 419.
There can be no assurances that the Commission, the United States Congress or
state legislatures will not enact legislation which will prohibit or restrict
the sale of securities of companies such as the Company.
QUALIFIED REPORT OF INDEPENDENT AUDITORS
The Company's independent auditors' report on the Company's financial
statements includes an explanatory paragraph stating that the Company's ability
to commence operations is contingent upon obtaining adequate financial resources
through a contemplated public offering and attaining profitable operations,
which raises substantial doubt about its ability to continue as a going concern.
Additionally, if unsuccessful, the Company may be unable to continue in its
present form. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be unable
to continue as a going concern. See "Business," "Management's Plan of
Operation," and the Financial Statements of the Company included elsewhere in
this Prospectus.
"BEST EFFORTS OFFERING;" ESCROW OF OFFERING PROCEEDS
There is no firm commitment on the part of the Underwriter to purchase any
or all of the Common Stock offered hereby. Rather, the Underwriter has agreed to
sell the Common Stock through licensed dealers on a "best efforts" basis.
Accordingly, there can be no assurance that any or all of the Common Stock being
offered hereby will be sold. Further, pending the closing of the sale of the
Common Stock, the proceeds of the Offering will be deposited in escrow in a
non-interest bearing account at the Chase Manhattan Bank (the "Escrow Agent")
collateralized by direct obligations of the United States government or
short-term U.S. treasury collateralized instruments of the Escrow Agent. This
account is not insured by the Federal Deposit Insurance Corporation or by any
other governmental agency. Unless gross proceeds of $4,500,000 are generated
within a period of 60 days from the date of this Prospectus (the "Offering
Period"), the Offering will terminate and all funds theretofore received from
the sale of the Common Stock will be promptly returned to the subscribers
without deduction therefrom or interest thereon. If this amount of gross
proceeds are generated, these funds will be disbursed to the Company. The
Offering will then be extended for a fifteen day period (the "Extension
Period"). During the Offering Period and the Extension Period, subscribers will
not be entitled to a return of their subscriptions. Therefore, prospective
investors in the Common Stock should consider that any funds used by them to
purchase shares of Common Stock in the Offering could be held in escrow and be
unavailable for the entire duration of the Offering Period and the Extension
Period, and, in the event that gross proceeds of $4,500,000 are not generated
during the Offering Period, such funds could returned to them at the close of
the Offering Period without interest thereon.
17
<PAGE>
STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE COMMON STOCK
The Company has made application to register or has or will seek to obtain
an exemption from registration to offer the Common Stock, and intends to conduct
its selling efforts in ___________, ___________, _________. Purchasers of the
Common Stock in the Offering must be residents of such jurisdictions. In order
to prevent resale transactions in violation of states' securities laws,
shareholders may only engage in resale transactions in the states listed above
and such other jurisdictions in which an applicable exemption is available or a
blue sky application has been filed and accepted. As a matter of notice to the
holders thereof, the Common Stock certificates shall contain information with
respect to resale of the Common Stock. Further, the Company will advise its
market maker, if any, of such restriction on resale. Such restriction on resale
may limit the ability of investors to resell the shares of Common Stock
purchased in this Offering.
Several additional states may permit secondary market sales of the shares
of Common Stock (i) once or after certain financial and other information with
respect to the Company is published in a recognized securities manual such as
Standard & Poor's Corporation Records; (ii) after a certain period has elapsed
from the date hereof; or (iii) pursuant to exemptions applicable to certain
investors.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock and 1,000,000 Warrants offered hereby at the assumed initial public
offering prices of $5.00 per share and $0.10 per Warrant are estimated to be
$4,356,000, after deducting underwriting discounts and commissions of
approximately $510,000 and estimated offering expenses of approximately
$234,000. The Company expects to use such net proceeds (a) for the
identification and acquisition of land for development of two assisted living
facilities (the "Initial Facilities") ($600,000), development and construction
of the Initial Facilities ($1,584,000), purchase of furniture, fixtures and
equipment for the Initial Facilities ($150,000), and payment of start-up costs
associated with the development of the Initial Facilities ($90,000); (b) to
acquire land and perform preliminary work in connection with the proposed
development of additional assisted living facilities (the "Additional
Facilities") ($1,350,000); and (c) for working capital and general corporate
purposes ($582,000), including payment of management salaries. The development
of the Additional Facilities will not be possible without substantial financing
in addition to this Offering. See "Risk Factors - Development on Additional
Financing." Pending utilization of the proceeds of this Offering, the Company
may make temporary investments in bank certificates of deposit, prime commercial
paper, United States Government obligations, money-market funds or other similar
short-term low-risk investments.
Based on currently proposed plans and assumptions relating to its
operations, the Company anticipates that its current financial resources,
including the proceeds of this Offering, will be sufficient to satisfy its
contemplated cash requirements for approximately twelve months following the
consummation of this Offering. If the Company's plans or assumptions change or
prove to be inaccurate or if the proceeds of this Offering or projected cash
flows prove to be insufficient to fund operations (due to unanticipated
expenses, technical problems or difficulties or otherwise), the Company may find
it necessary to seek additional financing. There can be no assurance that any
such additional financing will be available to the Company on commercially
reasonable terms or at all. The Company will also require substantial additional
financing to fund its activities after the consummation of this Offering. See
"Risk Factors - Dependence on Additional Financing." See "Risk Factors - Current
Financial Resources."
The foregoing represents the Company's present intentions with respect to
the allocation of the net proceeds of this Offering based upon its present plans
and business conditions. However, the occurrence of certain unforeseen events or
changes in business conditions could result in the application of the proceeds
of this Offering in a manner other than as described in this Prospectus. See
"Risk Factors-Use of Proceeds."
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently anticipates that it will retain any future earnings for use in the
expansion and operation of its business.
18
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company at
June 30, 1998 and as adjusted to reflect the sale of the Securities offered
hereby (at the assumed initial public offering price set forth on the cover page
of the Prospectus) and the application of the net proceeds from this Offering:
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
Long-term Debt, Less Current Portion $0 $0
Shareholders' equity
Preferred stock, $0.001 par value; authorized 10,000,000
shares; none issued and outstanding........................ 0 0
Common stock, $0.001 par value; authorized 10,000,000
shares; issued and outstanding 750,000 shares (actual)
1,750,000 shares (as adjusted)(1)......................... 750 1,750
Additional paid-in capital.................................... 404,486 4,759,486
Deficit accumulated during the development stage.............. (203,720) (203,720)
--------- ----------
Total shareholders' equity.................................... 201,516 4,557,516
--------- ----------
Total capitalization.......................................... $201,516 $4,557,516
========= ==========
</TABLE>
- ---------------------
(1)Excludes shares of Common Stock issuable upon the exercise of (i) the
Warrants offered hereby, (ii) the Private Placement Warrants, and (iii) the
Additional Warrants.
DILUTION
The net tangible book value of the Company as of June 30, 1998 was
$167,539 or $0.22 per share of Common Stock. Net tangible book value per share
is determined by dividing the tangible book value of the Company (total tangible
assets less total liabilities) by the number of outstanding shares of Common
Stock. After giving effect to the sale by the Company of the 1,000,000 shares of
Common Stock and 1,000,000 Warrants offered hereby (based upon an assumed
initial public offering price of $5.00 per share and $0.10 per Warrant and after
deducting underwriting discounts and commissions and estimated offering
expenses), the Company's net tangible book value at June 30, 1998 would have
been $4,523,539 or $2.58 per share. This represents an immediate increase in net
tangible book value to existing shareholders of $2.36 per share and an immediate
dilution to new investors of $2.42 per share. The following table illustrates
the per share dilution:
Assumed initial public offering price per share................... $5.00
Net tangible book value (deficit) per share before this offering.. 0.22
Increase attributable to new investors............................ 2.36
Net tangible book value per share after this offering............. 2.58
-----
Dilution per share to new investors............................... $2.42
=====
The following table summarizes, as of June 30, 1998, the differences
between existing shareholders and new investors with respect to the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price paid per share (assuming an initial public offering price
of $5.00 per share and $0.10 per Warrant and before deducting the underwriting
discount and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
---------------- ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 750,000 42.9% $500,000 9.1% $0.67
New investors............ 1,000,000 57.1% $5,000,000 90.9% $5.00
Total.............. 1,750,000 100.0% $5,500,000 100.0%
</TABLE>
19
<PAGE>
The foregoing tables assume no exercise of the Warrants, the Private
Placement Warrants or the Additional Warrants. See "Capitalization,"
"Management-Employee Benefit Plans" and Notes to Consolidated Financial
Statements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated quarterly
statement of operations data for each of the four quarters in the periods ended
December 31, 1996 and December 31, 1997. the opinion of management, this
information has been prepared on the same basis as the audited consolidated
financial statements appearing elsewhere in this Prospectus, and includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of this information in accordance with generally accepted
accounting principles. Such quarterly results are not necessarily indicative of
future results of operations and should be read in conjunction with the audited
consolidated financial statements of the Company and the notes thereto.
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED
1996
----
SECOND THIRD FOURTH
QUARTER QUARTER QUARTER
Revenues $0 $0 $0
Cost of Revenues 0 0 0
----- ----- -----
Gross Profit 0 0 0
Selling, General and Administrative 0 0 0
Expenses ----- ----- -----
Income (Loss) from Operations and 0 0 0
before Income Taxes
Provision for Income Taxes 0 0 0
----- ----- -----
Net Income (Loss) $0 $0 $0
===== ===== =====
Net Income (Loss) Per Share Basic and
Diluted $0.00 $0.00 $0.00
Shares Used in Computing Basic Net
Income Per Share 100 100 100
Shares Used in Computing Diluted Net
Income Per Share 100 100 100
1997
----
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
Revenues $0 $0 $0 $0
Cost of Revenues 0 0 0 0
----- ----- ----- -----
Gross Profit 0 0 0 0
Selling, General and
Administrative Expenses 1 23 32 40
----- ----- ----- -----
Income (Loss) from Operations
and Before Income Taxes -1 -23 -32 -40
Provision for Income Taxes 0 0 0 0
----- ----- ----- -----
Net Income (Loss) ($1) ($23) ($32) ($40)
===== ====== ===== =====
20
<PAGE>
Net Income (Loss) Per Share
Basic and Diluted ($10.00) ($230.00) ($320.00) ($0.08)
Shares Used in Computing
Basic Net Income Per Share 100 100 100 500,000
Shares Used in Computing
Diluted Net Income Per 100 100 100 500,000
Share
21
<PAGE>
MANAGEMENT'S PLAN OF OPERATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS.
PLAN OF OPERATION
The Company intends to become an owner and operator of assisted living
facilities primarily through a strategy of the acquisition of real property
which can be developed or converted into operating assisted living facilities.
The Company anticipates that its initial business activities will be focused in
the Southeastern region of the United States, beginning in Florida. The Company
has developed an acquisition strategy which specifies the criteria which the
Company will utilize in the identification and evaluation of potential
development opportunities. The Company also plans to evaluate the acquisition of
existing assisted living facilities, but does not anticipate that this will be a
significant component of its business strategy. The Company's proposed plan of
operation is based on a strategy of developing and operating assisted living
facilities in non-metropolitan areas and in locations near metropolitan areas
which possess characteristics that the Company believes will be conducive to the
development of the Company's facilities. The Company's management believes that
the markets for assisted living facility services in metropolitan areas are
beginning to become saturated, and that the supply of available beds in
metropolitan areas of the Southeastern United States is beginning to exceed the
demand for such available beds. See "Business."
By locating its facilities in these areas the Company intends to provide
residents with an attractive local assisted living alternative. The Company
anticipates providing high quality assisted living facilities in
non-metropolitan areas and acceptable areas close to metropolitan areas which
are comparable in quality and services offered by those facilities located in
metropolitan areas.
The Company believes that it will be able to receive better returns on its
capital investments in these non-metropolitan and outlying areas. The Company
believes that the majority of the capital and operating costs that it will
encounter will be lower in these areas, resulting in greater value. It is
anticipated that this strategy will allow the Company to avoid the highly
competitive metropolitan areas and achieve a greater level of value in its
facilities.
FINANCIAL RESOURCES AND CASH REQUIREMENTS
The Company anticipates that its current financial resources (including
the anticipated net proceeds of this Offering) will be adequate to satisfy its
projected capital and operating requirements for no more than twelve months.
This estimate is based on certain assumptions which the Company believes are
valid, but there can be no assurance that such resources will satisfy the
Company's capital and operating needs for this period. See "Risk Factors-Current
Financial Resources" and "-Dependence on Additional Financing."
RESEARCH AND DEVELOPMENT
Because of the nature of its business the Company does not anticipate that
any significant research and development expenditures will be required during
the twelve months following the Offering.
SIGNIFICANT PLANT OR EQUIPMENT PURCHASES
Based on its development strategy the Company anticipates the development
of two assisted living facilities during the twelve months following the
Offering. The total expenditures associated with the development of these two
facilities are expected to be comprised of real estate purchases ($600,000),
building construction ($1,584,000), equipment ($150,000) and associated start-up
costs ($90,000). The Company also anticipates the purchase of land for the
proposed development of subsequent facilities ($1,200,000), and has allocated an
additional $150,000 to cover any contingencies associated with these land
purchases.
22
<PAGE>
CHANGES IN THE NUMBER OF EMPLOYEES
The Company currently has one employee, who is an executive officer.
During the twelve months following the Offering the Company expects to employ
full-time and part-time employees which will result in the equivalent of
seventeen full-time employees.
BUSINESS
THE COMPANY
The Company intends to become an owner and operator of assisted living
facilities primarily through a strategy of the acquisition of real property
which can be developed or converted into operating assisted living facilities.
The Company is currently a development stage ("start up") company, and has not
performed any operations, owned or operated any assisted living facilities or
generated any revenues from any activities, including, without limitation,
operation of assisted living facilities. Initially, the Company's business
activities will be focused in the Southeastern region of the United States,
beginning in Florida. The Company has developed an acquisition strategy which
specifies the criteria which the Company will seek in potential development
opportunities. The Company also plans to evaluate the acquisition of existing
assisted living facilities, but it does not anticipate that this will be a
significant component of its business strategy. The Company believes that the
assisted living industry in which it intends to operate is currently fragmented
and characterized mostly by small, independent operators. The Company believes
that this industry is ripe for consolidation. See "Risk Factors - No Operating
History, Lack of Revenues and Expectation of Future Losses."
The Company intends to utilize a decentralized management structure under
which the Executive Director of each facility (each an "Executive Director") is
delegated the authority to make daily decisions necessary to satisfy the
particular demands of their respective facilities. The Company believes such a
structure will result in a high level of employee and resident satisfaction and
occupancy rates.
The Company intends to implement an incentive program which will be open
to all of the Company's employees. The program will be designed to foster a
successful and enjoyable work environment, which the Company believes will
result in a low employee turnover rate. It is anticipated that this program will
take into consideration numerous areas of the Company's anticipated business,
including facility profitability, resident satisfaction, occupancy rates and
employee turnover, and that this program will offer employees an opportunity to
earn, among other things, cash and stock bonuses. The Company recognizes that
its long-term success will be dependent on the efforts of its employees, and
accordingly the Company will focus a substantial portion of its management
efforts on the identification, training and motivation of its employees.
The Company plans to develop a centralized marketing plan designed to help
build brand recognition for the Company and its facilities and services. In
addition, the Company plans to assist each facility in developing a marketing
plan for each individual facility. Each Executive Director will also be
responsible for the local marketing of his or her respective facilities. The
Company anticipates that the marketing plans will emphasize educating potential
residents and family members of the benefits of the Company's facilities and
services. The Company's target market is anticipated to be senior citizens who
are able to pay for the Company's services themselves as opposed to managed
care, governmental providers or other third party payors. Such third party
providers have not historically paid for the services intended to be offered by
the Company. See "Risk Factors - Dependence on Private Pay Residents; Changes in
Reimbursement Policy."
The Company intends to focus on the local characteristics of its
individual assisted living facilities. Facilities will be managed by Executive
Directors who the Company expects to be local citizens with appropriate
backgrounds and health care experience. The Company intends to hire Executive
Directors in advance of the opening of their respective facilities so that each
Executive Director can be involved in the preliminary stages of each facility
and can offer their unique local outlooks. The Company anticipates that its
facilities will be located in areas within each target community which are as
close as possible to identified target neighborhoods, thereby further
23
<PAGE>
strengthening each facility's local connections. Executive Directors will be
required to participate in community activities and to become involved in
community affairs.
THE INDUSTRY
The assisted living industry is a rapidly growing component of the
non-acute health care delivery system for the elderly. This industry serves the
needs of the elderly who benefit from living in a supportive environment and who
may require or prefer some form of assistance with certain daily living
activities, and who no longer desire, or cannot maintain, an independent
lifestyle. It is estimated by Jeffries & Company, Inc. ("Jeffries") that between
six to seven million people over age 65 require assistance with daily living
activities, and that 650,000 to one million nursing home residents have
conditions which could be more effectively treated at an assisted living
facility.
An important subset of the over-65 segment is individuals who are 85 years
old or older. According to a Coopers & Lybrand study, this "old-old" group is
expected to experience dramatic growth over the next decade. The Company
believes that this increased number of "old-old" individuals will be significant
users of the services provided by assisted living facilities.
The Company believes that the assisted living industry is emerging as an
increasingly important component of the healthcare delivery system. The Assisted
Living Federation of America has defined assisted living as:
." . . A SPECIAL COMBINATION OF HOUSING, SUPPORTIVE SERVICES, PERSONALIZED
ASSISTANCE AND HEALTHCARE DESIGNED TO RESPOND TO THE INDIVIDUAL NEEDS OF
THOSE WHO NEED HELP WITH THE ACTIVITIES OF DAILY LIVING AND INSTRUMENTAL
ACTIVITIES OF DAILY LIVING. SUPPORTIVE SERVICES ARE AVAILABLE, 24 HOURS A
DAY, TO MEET THE SCHEDULED AND UNSCHEDULED NEEDS, IN A WAY THAT PROMOTES
MAXIMUM DIGNITY AND INDEPENDENCE FOR EACH RESIDENT AND INVOLVES THE
RESIDENT'S FAMILY, NEIGHBORS AND FRIENDS."
Although the levels of service provided vary considerably from operator to
operator, selected providers will be well positioned to serve as an alternative
between the skilled care of a higher-acuity nursing home or hospital and the
relatively unstructured care of a retirement community. An assisted living
facility attempts to provide services at a lower cost than those of most
high-end home health services and intermediate care nursing homes while still
providing a home-like setting.
In contrast to the skilled nursing home industry, the assisted living
industry has developed with limited government regulation although the Company
anticipates that both Federal and state governmental bodies will increase
regulation of the industry in the near future. Providers receive minimal
reimbursement from government programs and, as a result, have grown solely as a
function of demand. The Company believes that the result is a more
consumer-focused environment in which to live than the traditional institutional
setting, where Federal regulations set the standard. See "Risk Factors -
Government Regulation" and "- Health Care Reform."
According to Alex. Brown & Sons, Inc., the assisted living industry is
projected to grow between 15% and 20% annually due to a number of demographic,
social and economic factors, including: (1) significant growth in the senior
population; (2) the need for assistance for such individuals; (3) limited supply
of assisted living facilities; (4) limited supply of long-term care beds; and
(5) the relatively low cost of assisted living facilities' services relative to
those provided by skilled care facilities.
The Company believes that the assisted living industry is poised for
growth based on several significant trends, including the following:
FAVORABLE DEMOGRAPHICS. The primary consumers of assisted living services
are persons over age 75. The Company believes that this group represents one of
the fastest growing segments of the United States population. This segment of
the population, which comprises a significant percentage of residents at
assisted living facilities, is projected by the United States Administration on
Aging to increase from approximately nine million in 1990 to approximately
twelve million in 2000. The Company believes that this trend will contribute to
a continued demand for assisted living services.
24
<PAGE>
QUALITY OF LIFE. The Company believes that assisted living facilities
provide prospective residents and their families with an attractive alternative
to skilled nursing facilities, particularly those prospective residents who do
not require the level of care or institutional setting of skilled nursing
facilities. Assisted living facilities, which are generally furnished by
residents, allow residents to preserve their independence while aging in a more
residential setting. The Company believes these factors result in a higher
quality of life than that experienced in the more institutional or clinical
settings, such as skilled nursing facilities.
COST EFFECTIVENESS. The annual per resident cost for assisted living care
is significantly less than the annual per resident cost for skilled nursing
care. The Company believes that the cost of assisted living care compares
favorably with home health care when the costs associated with housing and meal
preparation are added to the costs of home health care. Competitive and
regulatory pressures are also forcing skilled nursing facilities to shift their
focus toward providing more intense levels of care which enables them to charge
higher fees, thus adding to the shortage of facilities providing less intensive
care. The rapid growth of the elderly population coupled with continuing
constraints on the supply and availability of long term care beds is leading to
a continued shortage of long term care beds for the elderly.
FAMILY DYNAMICS. As a result of the growing number of two-income families,
many children are not able to care for elderly parents in their own homes.
Two-income families are, however, better able to provide financial support for
elderly parents. Other factors, such as the growth in the divorce rate and the
increased number of single-parent households, as well as the increasing
geographic dispersion of families, have contributed to the growing inability of
children to care for aging parents in the home.
USAGE BASED ON NEED. The use of assisted living facilities is based on a
need for assistance with certain functions, as opposed to the discretionary
lifestyle choices made by residents of adult congregate living facilities or
retirement communities.
BUSINESS AND GROWTH STRATEGY
The Company's business and growth strategy is based on the following key
elements:
CONSTRUCTION AND DEVELOPMENT OF ASSISTED LIVING FACILITIES. The Company
anticipates that the primary focus of its business activities will involve the
identification of desirable sites and the subsequent construction, development
and operation of assisted living facilities on these sites. The Company's
primary objective will be to identify sites with desirable demographic and
economic characteristics in non-metropolitan areas and in locations near
metropolitan areas that have characteristics that the Company believes will be
conducive to the development of its facilities. These characteristics include
such things as the pressure of identifiable residential neighborhoods,
acceptable demographics and acceptable competitive conditions. The Company
believes that a migration of a certain segment of the American population to
these areas will occur and that a portion of this anticipated migration will
include seniors. By locating its facilities in these areas the Company intends
to provide residents with an attractive local assisted living alternative. The
Company anticipates providing high quality assisted living facilities in
non-metropolitan areas and acceptable areas close to metropolitan areas which
are comparable in quality and services offered by those facilities located in
metropolitan areas.
LOCALIZED INVOLVEMENT AND MANAGEMENT. The Company plans to focus on and
stress the local characteristics of each of its facilities. A uniform
corporate-level image for all facilities will be avoided. The Company believes
that each target community in which the facilities may be located has its own
specific characteristics, and the identification of these characteristics and
their use as a focus of each facility's operational and marketing efforts will
be critical to the Company's business plan. The Company intends to hire local
residents with appropriate backgrounds, health care experience and community
visibility to serve as Executive Directors of its facilities. In addition to
facility management duties, each Executive Director will be responsible for
local marketing efforts. One of the primary directives given to the Executive
Directors will be the continual identification of and sensitivity to local
trends and characteristics in their management and marketing duties. The Company
also intends to locate its facilities as close as possible to identified
neighborhoods with target communities, further strengthening the local nature of
each such facility.
25
<PAGE>
PROVIDING ACCESS TO A FULL SPECTRUM OF ASSISTED LIVING SERVICES. The
Company proposes to provide access to a full spectrum of assisted living
services. These services will be provided either by the Company or by outside
services or agencies through the Company. It is the Company's strategy to
increase the availability of additional services and to capture the incremental
revenue generated by providing these services through Company employees. In
addition, one of the Company's goals is to establish hospital or health care
network affiliations for each of its facilities. Hospital and health care
network affiliations may provide for on-site physician and nursing services and
facilitate the provision of health care services and wellness programs to the
residents of the Company's facilities. The Company's current management has
experience in establishing these types of affiliations and networks.
MAINTENANCE OF HIGH OCCUPANCY RATES. The Company intends to utilizes its
marketing programs to achieve high occupancy rates in its facilities. The
Company's anticipates that its marketing programs will create community
awareness of the Company, its facilities and its services, and cultivate
relationships with referral sources such as health care providers, physicians,
clergy, pharmacists, elderly agencies, home health agencies and social workers.
In addition, the Company may evaluate the establishment of hospital affiliations
which may provide referrals of prospective residents.
ENHANCEMENT OF PROFITABILITY. The Company plans to develop and implement
sophisticated management and operational procedures which are intended to result
in strong operating margins and high occupancy rates. These procedures are
anticipated to include securing national vendor contracts where feasible to
ensure consistent low pricing, implementing sophisticated budgeting and
financial controls at each facility and establishing standardized training and
operations procedures. The Company believes that the systematic implementation
of its management and operations policies will enable the Company to enhance the
financial performance of its existing and future facilities and continue to
improve the profitability of its facilities.
EXPANSION OF FACILITIES. As a longer term component of its proposed
strategy, the Company believes that certain assisted living facilities with
stabilized occupancies will benefit from additions and expansions offering
increased capacity, as well as additional levels of service for certain
residents. The Company also believes that the expansion of existing facilities
will allow the Company to take advantage of certain economies of scale by
increasing the revenue base at a facility while leveraging such facility's
existing infrastructure.
POSSIBLE ACQUISITION OF EXISTING ASSISTED LIVING FACILITIES. The Company
will continue to evaluate existing assisted living facilities as acquisition
candidates and will pursue any attractive opportunities that arise. Based on the
Company's research and its prior experience, however, the Company does not
believe that such existing facilities can be acquired at acceptable prices.
Accordingly, the Company does not anticipate that such acquisitions will be a
significant factor in its business strategy.
POSSIBLE UTILIZATION OF TAX-EXEMPT BOND FINANCING. The Company may in the
future investigate the potential utilization of long-term tax-exempt bond
financing, if available, to finance the development of new assisted living
facilities and the acquisition and renovation of existing senior and assisted
facilities. The cost benefit of tax-exempt bond financing, which can be a low
cost source of funds in certain circumstances, is partially offset in certain
cases by the potential limit on the Company's ability to increase prices at
facilities subject to such bond financing to the extent such increases affect
the ability of the Company to attract and retain certain residents.
SERVICES
The Company anticipates that the assisted living facilities that it
intends to develop and operate will offer residents personal support services
and assistance with certain activities of daily living in a supportive,
home-like setting. The proposed residents of the Company's facilities will
typically be unable or will choose not to live independently, but will not
require the 24-hour nursing care typically provided in skilled nursing
facilities. The Company's service options are designed to meet residents'
changing needs and to achieve a continuity of care, enabling seniors to age
gracefully and with dignity and thereby maintain their independence and
residency for a longer time period.
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BASIC CARE PROGRAM. The Company anticipates that its basic care services,
which will be available to all residents at its facilities, will include such
items as meal service, medication monitoring and management, housekeeping
services, social and recreational activities, scheduled transportation to
medical centers and shopping, security, emergency call response, access to
on-site medical services and medical education and wellness programs.
SUPPLEMENTAL CARE SERVICES. Residents with cognitive or physical frailties
and higher level service needs will either be accommodated with supplemental
services in their own units or cared for in a more structured and supervised
environment on a separate wing or floor of the facility with a dedicated staff
and with separate dining rooms and activity areas. The Company anticipates that
this supplemental service may provide additional incremental revenue and enable
its residents to remain in its facilities longer. The Company anticipates that
many of its residents will receive supplemental health care services from
outside third parties. The Company's ability to provide certain services depends
on licensure requirements of particular states. However, the Company's proposed
general strategy will to provide assistance with activities of daily living
subject to state licensure limitations.
The Company intends to assist residents in locating qualified providers
for such health care services.
COMPANY OPERATIONS
OVERVIEW
The Company intends to continually review opportunities to expand the
number of services it offers to residents of its assisted living facilities. The
Company will attempt to generate profits through a combination of the
implementation of efficient operating procedures and the economies of scale
associated with the number of its facilities. The Company's proposed operating
procedures include securing national vendor contracts where appropriate to
obtain consistent low pricing, implementing budgeting and financial controls at
each facility and establishing standardized training and operations procedures.
The Company believes that assisted living operators must combine health care,
finance, hospitality, marketing and real estate operations expertise to attain
success.
The Company will implement standards, policies and procedures systems,
including detailed staff manuals, which the Company believes will contribute to
each facility's chance of success. THE COMPANY ANTICIPATES CENTRALIZING ITS
ACCOUNTING, FINANCE AND OTHER OPERATING FUNCTIONS AT ITS CORPORATE HEADQUARTERS
SO THAT, CONSISTENT WITH ITS OPERATING PHILOSOPHY, FACILITY-BASED PERSONNEL WILL
FOCUS ON RESIDENT CARE AND EFFICIENT operations. The Company anticipates that
its headquarters staff will be responsible for the establishment of Company-wide
policies and procedures relating to, among other things, resident care, facility
design and facility operations; billings and collections; accounts payable;
finance and accounting; development of employee training materials and programs;
marketing activities; the hiring and training of management and other
facility-based personnel; compliance with applicable local and state regulatory
requirements; and implementation of the Company's acquisition, development and
leasing plans.
DEVELOPMENT
The Company currently intends to commence the development of two
facilities after the completion of this Offering. The Company anticipates that
this will involve the identification and acquisition of sites, the preparation
of such sites for development into assisted living facilities (including such
things as improvement of the land and acquiring all necessary zoning and
regulatory approvals) and the construction of such facilities. The size of a
particular facility to be developed will depend on site size, zoning and
underlying market and demographic characteristics. In addition to the living
units, it is anticipated that the Company's developed facilities will contain
common areas for residents, including a living room, beauty/barber shop, dining
room and private dining room. The Company anticipates that new developments will
require approximately four months for pre-construction development,
approximately six months for construction and approximately six months after
opening to achieve stabilized occupancy. The total construction costs, including
allocated land purchase costs, for a typical facility are estimated to be
approximately $45,000 to $55,000 per unit.
The Company plans to evaluate markets in which to develop its facilities
based on a number of factors, including demographic profiles of both potential
residents and their adult children, existing competitors and lack of new
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entrants, estimated market demand and zoning prospects. Site selection is
proposed to be based on established criteria relating to land cost and
conditions, visibility, appropriate infrastructure (such as sewage and
utilities), accessibility, immediate adjacencies, community perception and
zoning prospects. Full market feasibility studies, which include evaluations of
all potential competitors, extensive interviews with key community sources and
health care providers and demographic studies, are proposed to be conducted for
each site.
The Company anticipates that it will become aware of potential sites
through independent brokers, developers, health care organizations, financial
institutions and internal site identification. If a site meets the Company's
general market criteria, then the Company plans to order a preliminary market
study. If the market study indicates that the site meets its selection criteria,
the Company then plans to conduct a more in-depth analysis of the market to
ensure there is a demonstrated need for assisted living services and that the
site is appropriate in terms of location, size and zoning. If the market and
site meet all of the Company's selection criteria, the Company will then attempt
to purchase the site for development. See "Risk Factors--Development and
Construction Risks" and "--Need for Additional Financing."
The successful consummation if any of the Company's purchases or ground
leases of development sites is subject to certain customary conditions,
including zoning and other governmental approvals. Although the Company expects
the acquisitions or ground leases of the development sites to be consummated,
there can be no assurance that the conditions to closing such acquisitions or
ground leases will be satisfied in a timely manner, or at all. See "Risk
Factors-Development and Construction Risks."
FACILITY STAFFING AND TRAINING
The Company anticipates that each facility will have an Executive Director
responsible for the day-to-day operations of the facility, including quality of
care, social services and financial performance. The Company feels that once a
site is selected, the choice of an Executive Director for that facility is
critical. Each Executive Director will receive specialized training from the
Company, and will have responsibility for two to three facilities. In addition,
a portion of each Executive Director's compensation will be directly tied to the
operating performance of the facility which he or she operates and to the
maintenance of high occupancy levels. The Company believes that the quality and
size of its facilities, coupled with its competitive compensation philosophy,
will enable it to attract high-quality, professional administrators. Each
Executive Director is supported by other personnel who will be directly
responsible for day-to-day care of the residents and marketing and community
programs.
The Company believes that quality of care and operating efficiency can be
maximized by direct resident and staff contact. Employees involved in resident
care, including the administrative staff, will be trained in the support and
care needs of the facility's residents and emergency response techniques. The
Company plans to adopt training and evaluation procedures to help ensure quality
care for its residents. The Company intends to develop policy and procedure
manuals for each department and to hold ongoing training sessions for management
and staff of each facility.
QUALITY ASSURANCE
The Company plans to maintain quality assurance programs at each of its
facilities through its corporate headquarters staff. The Company anticipates
that its quality assurance programs will be designed to achieve a high degree of
resident and family member satisfaction with the care and services provided by
the Company's facilities. The Company anticipates that its quality control
measures will include, among other things, facility inspections conducted by
corporate staff on at least a monthly basis. These inspections are proposed to
cover such items as the appearance of the facility's exterior and grounds; the
appearance and cleanliness of its interior; the professionalism and friendliness
of staff; resident care plans; the quality of activities and the dining program;
observance of residents in their daily living activities; and compliance with
government regulations.
The Company's proposed quality control measures will also include the
survey of residents and family members on a regular basis to monitor the quality
of services provided to residents. The survey process begins with a visitor's
survey sent one week following a potential resident's visit to a facility to
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ascertain his or her opinions and initial impressions. Detailed annual written
surveys and exit surveys are used to appraise and monitor the level of
satisfaction of residents and their families with facility operations and
services.
In order to foster a sense of community as well as to respond to
residents' desires, at each facility the Company plans to initiate the
establishment of advisory committees elected by the residents, that will meet
periodically with the Executive Director of the facility. These committees will
promote resident involvement and satisfaction and enable facility management to
be more responsive to the residents' needs and desires.
MARKETING AND SALES
The Company's proposed marketing strategy is intended to create awareness
of the Company and its services among potential residents and their family
members and referral sources, such as hospital discharge planners, physicians,
clergy, area agencies for the elderly, pharmacists, skilled nursing facilities,
home health agencies and social workers. The Company intends to develop overall
strategies for promoting the Company and monitoring the success of the Company's
marketing efforts. The Executive Director of each facility will administer that
facility's local marketing and outreach programs, which will stress that
community's local characteristics and aspects. Besides direct contacts with
prospective referral sources, the Company also plans to utilize print
advertising, yellow pages advertising, direct mail, signage and special events,
such as grand openings for new facilities, health fairs and community
receptions. In addition, the Company intends to establish and promote resident
referral programs at each facility.
The Company has also developed a pre-opening strategy which will be
pursued prior to the opening of each facility. This strategy will begin prior to
the opening of a facility. First, an Executive Director will be hired and will
become actively involved in both the finalization of the facility and in its
promotion and marketing. The Company will also actively market and promote the
facility during this pre-opening period through such anticipated methods as
direct mail, print advertisements and telemarketing. The Executive Director and
other Company representatives will visit and make speeches to community groups
and other forums which may serve as sources of referrals of residents. This
concentrated pre-opening marketing and promotion effort will be intended to
develop a strong positive image of the facility within its community prior to
beginning operations.
The Company anticipates that a corporate marketing plan will be developed
with the assistance of each Executive Director. Each Executive Director will
also create and implement marketing plans for their specific facilities which
reflect local attributes and characteristics. The Company believes that this
structure will allow it to utilize its overall corporate image modified to
capture the particular characteristics of each facility.
As an extension of the Company's focus on localization of its marketing
efforts, each Executive Director will be expected to participate in community
activities so that their facilities' images are enhanced and the Company's
visibility is increased. The Company also anticipates that such activities as
volunteer and educational programs will increase the Company's visibility on the
local level. This structure allows the community to be in direct contact with
the decision maker in that facility who is also responsible for resident care.
In addition to its corporate level and local level marketing programs, the
Company intends to stress the concept of internal marketing at each of its
facilities. This concept, which is a logical extension of the Company's focus on
localized operation for each facility, will be a central component of the
Company's philosophy that will be regularly communicated and stressed to each
employee. Each employee will be expected to be aware of the marketing potential
of his or her position and his or her ability to help market the Company's
services in their respective communities. The Company intends to create a
resident council to insure effective and consistent communications between the
residents and the Company.
The Company intends to create a volunteer program which will be similar to
the volunteer auxiliary programs currently seen in hospitals. Volunteers from
the community will assist in programs such as activities, transportation and
holidays. The Company anticipates that these volunteers will become ambassadors
in the community for the facility.
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JOINT VENTURES
The Company intends to evaluate joint ventures and strategic alliances
with hospitals, home health agencies, physician management companies and other
health care providers and agencies. The Company believes that such joint
ventures and strategic alliances could result in economics of scale and enhanced
marketing opportunities. The Company's current management has experience in the
structuring and establishment of health care joint ventures.
ANCILLARY SERVICES
The Company intends to offer ancillary services to the residents of its
facilities as a complement to normal assisted living services. Such ancillary
services could include rehabilitation therapy, pharmacy services and home health
care. The Company believes that its ability to offer such ancillary services
will be enhanced and supplemented by the joint ventures and strategic alliances
described above if any of them are consummated. The Company's current management
has experience in the provision of such ancillary services.
FLEXIBILITY OF OPERATIONS
The Company believes that the health care industry and the assisted living
industry in particular will continue to undergo significant evolutionary
changes. The Company intends to strive to be a flexible entity which can
identify and anticipate such changes and act in a manner which will allow it to
take advantage of these changes. The proposed joint ventures, strategic
alliances and ancillary services described above are indicative of this desired
flexibility.
HOSPITAL AND HEALTH CARE NETWORK AFFILIATIONS
A potentially important element of the Company's proposed business
strategy is the establishment of affiliations between its facilities and
hospitals and health care networks. Hospital and health care network
affiliations might provide for on-site physician and nursing services and
facilitate the provision of health care services and wellness programs to the
Company's residents, and might also provide the Company with a referral source.
The Company's current management has experience in the establishment of health
care affiliations and networks.
ACQUISITIONS OF EXISTING FACILITIES
The Company may acquire existing facilities as a means of entry to new
markets and may also seek to acquire facilities within its existing markets to
gain further market share and leverage its existing market awareness. Based on
its research and its experience to date, however, the Company does not believe
that these existing facilities can be acquired at acceptable prices.
Accordingly, the Company does not currently anticipate that the acquisition of
existing facilities will be a significant component of its business strategy
unless acquisition candidates can be located at acceptable prices. In reviewing
acquisition opportunities, the Company intends to consider, among other things,
underlying demographics, location, the current reputation of the facility in the
marketplace and the ability of the Company to improve or enhance a facility's
available services and amenities. Further, the Company evaluates the opportunity
to improve or enhance services and operating results through the implementation
of the Company's standard operating procedures.
COMPETITION
The assisted living industry is highly competitive and the Company expects
that it will become more competitive in the future. The Company will continue to
face competition from numerous local, regional and national providers of senior
and assisted living services. The Company will compete with such providers
primarily on the basis of cost, quality of care and the number of services
provided. The Company anticipates that it will also compete with companies
providing home based health care based on those factors as well as the
reputation, geographic location and physical appearance of facilities and family
preferences. Some of the Company's competitors may operate on a not-for-profit
basis or as charitable organizations or have, or may obtain, greater financial
resources than those of the Company.
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The Company anticipates establishing its operations in non-metropolitan
areas and in locations near metropolitan areas which have characteristics that
the Company feels will be conducive to the establishment and operation of its
facilities. Such characteristics include the presence of identifiable
neighborhoods, acceptable demographic profiles, and acceptable competitive
conditions. The Company believes that competition in these areas will largely
come from local previously established assisted living facilities. Because of
the localized nature of these anticipated competitors the Company is unable to
specifically identify any potential competitors at this time.
Moreover, in the implementation of the Company's business and growth
strategy, the Company expects to face competition for the development or
acquisition of assisted living facilities. Consequently, there can be no
assurance that the Company will not encounter increased competition in the
future which could limit its ability to attract residents or expand its business
and could have a material adverse effect on the Company's financial condition,
results of operations and prospects. See "Risk Factors--Competition."
GOVERNMENTAL REGULATION
Assisted living facilities are subject to varying degrees of federal,
state and local regulation and licensing by local and state health and social
service agencies and other regulatory authorities. While regulations and
licensing requirements often vary significantly from state to state, they
typically address, among other things, personnel education, training and
records, facility services, physical plant specifications, furnishing of
resident units, food and housekeeping services, emergency evacuation plans, and
resident rights and responsibilities. In most states, assisted living facilities
also are subject to state or local building codes, fire codes and food service
licensure or certification requirements. Assisted living facilities may be
subject to periodic survey or inspection by governmental authorities. In certain
states where the Company may operate in the future, the Company may be unable to
provide certain higher levels of assisted living services without obtaining the
appropriate licenses, if applicable. The Company's success will depend in part
on its ability to satisfy such regulations and requirements and to acquire and
maintain required licenses. The Company's operations could also be adversely
affected by, among other things, regulatory developments such as revisions in
licensing and certification standards.
Some states have adopted certificate of need or similar laws applicable to
assisted living and nursing facilities which generally require that the
appropriate state agency approve certain acquisitions or capital expenditures
and determine whether a need exists for certain new bed additions or new
services. Certain states have placed a moratorium on granting certificates of
need or have otherwise stated their intent not to grant approval for such
expenditures. To the extent certificates of need or other similar approvals are
required for expansion of Company operations, such expansion could be adversely
affected by the failure or inability to obtain the necessary approvals or
possible delays in obtaining such approvals.
The Company does not currently participate in the federal Medicare or
Medicaid programs. Essentially all of the Company's proposed residents, however,
will be eligible for Medicare benefits. Therefore, certain aspects of the
Company's business may be subject to federal and state laws and regulations
which govern financial and other arrangements between and among health care
providers, suppliers and vendors. These laws generally prohibit certain direct
and indirect payments and fee-splitting arrangements designed to induce or
encourage the referral of patients to, or the recommendation of, a particular
provider or other entity or person for medical products and services. These laws
include, but are not limited to, the federal "anti-kickback law" which
prohibits, among other things, the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of Medicare and Medicaid
patients. The Office of the Inspector General of the Department of Health and
Human Services, the Department of Justice and other federal agencies interpret
these statutes liberally and enforce them aggressively. Members of Congress have
proposed legislation that would significantly expand the federal government's
involvement in curtailing fraud and abuse and increase the monetary penalties
for violation of these provisions. Violation of these laws can result in, among
other things, loss of licensure, civil and criminal penalties for individuals
and entities and exclusion of health care providers or suppliers from
participation in the Medicare and/or Medicaid programs.
In addition, although the Company is not a Medicare or Medicaid provider
or supplier, it may become subject to these laws because some of the Company's
assisted living facilities may maintain contracts with hospitals, who in turn
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maintain contracts with certain health care providers and practitioners,
including pharmacies, home health agencies and hospices, through which the
health care providers make their health care items or services (some of which
may be covered by Medicare or Medicaid) available to facility residents. There
can be no assurance that such laws will be interpreted in a manner consistent
with the practices of the Company.
Under the Americans with Disabilities Act of 1990, all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. A number of additional federal, state and
local laws exist which also may require modifications to existing and planned
properties to create access to the properties by disabled persons. While the
Company believes that its facilities will be substantially in compliance with
present requirements or will be exempt therefrom, if required changes involve a
greater expenditure than anticipated or must be made on a more accelerated basis
than anticipated, additional costs would be incurred by the Company. Further
legislation may impose additional burdens or restrictions with respect to access
by disabled persons, the costs of compliance with which could be substantial.
The Company and its activities are subject to zoning and other state and
local government regulations. Zoning variances or use permits are often required
for construction. Severely restrictive regulations could impair the ability of
the Company to open additional facilities at desired locations or could result
in costly delays, which could adversely affect the Company's business and growth
strategy and results of operations. See "Risk Factors--Development and
Construction Risks" and "--Governmental Regulation."
EMPLOYEES
As of September 2, 1998, the Company had one employee, who was an
executive officer.
INSURANCE
The provision of personal and health care services entails an inherent
risk of liability. Compared to more institutional long-term care facilities,
assisted living facilities offer residents a greater degree of independence in
their daily lives. This increased level of independence, however, may subject
the resident and the Company to certain risks that would be reduced in more
institutionalized settings. The Company plans to maintain liability insurance
which it believes will be adequate based on the nature of the risks and industry
standards. See "Risk Factors--Liability and Insurance."
EXECUTIVE OFFICES
The Company's executive offices are currently located at 1635D Royal Palm
Drive, Gulfport, Florida 33707. The Company anticipates that it will move its
offices to another location in the near future.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings.
STATE LICENSING REQUIREMENTS
The operation of assisted living facilities is governed by applicable
state statutes. Prospective investors are urged to review each state's statutes
in detail prior to making an investment decision regarding the Securities
offered hereby. The Company anticipates that its initial business activities
will be conducted in the Southeastern United States, beginning in Florida. A
brief summary of the licensing requirements for assisted living facilities in
Florida is provided below. If the Company elects to conduct business in any
other states it will be required to comply with the licensure requirements of
those states.
In Florida, each assisted living facility must be licensed by the state.
The level of services which such facility may provide to its residents is
determined by the type of license obtained from the state. With a standard
license (which the Company intends to utilize at its facilities), a facility may
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provide activities of daily living such as ambulation, bathing, dressing,
eating, grooming and toileting. Before the Company can purchase or develop any
operating facility located in Florida, the Company will be required to apply for
a new license to operate such facility at least 60 days before the date of
transfer of ownership. See "Risk Factors - State Licensing Requirements."
MANAGEMENT
The following table sets forth certain information regarding the Company's
director and officer:
NAME AGE POSITION
Thomas H. Minkoff 48 Chairman of the Board of Directors, President,
Chief Executive Officer and Treasurer
The following is a brief description of the background of the officer and
director of the Company.
THOMAS H. MINKOFF is the founder of the Company. From 1994 to the present,
he served as President of Complex Properties Development Corp., a real estate
development company. From 1993 to the present he also served as President and
principal owner of Royal Palm Community Development Corporation, a developer for
residential single-family and multi-family homes. From 1987 to 1993, Mr. Minkoff
served as Vice President of Kimberly Quality Care, the nation's largest home
health company after Kimberly acquired Gulf Coast Home Health Services. From
1977 to 1987, Mr. Minkoff served as President and owner of Gulf Coast Home
Health Services, one of Florida's largest privately held home health companies.
In 1987, he sold this company to Kimberly Quality Care and continued to serve as
Gulf Coast Home Health Services' president until 1993. Mr. Minkoff has served as
a Director and as Vice Chairman of Governmental Affairs of the Florida
Association of Home Health Agencies, and is a licensed real estate salesperson
in Florida. Mr. Minkoff holds a Bachelor of Arts degree in Business
Administration from Rutgers College and a Juris Doctorate degree from St. Mary's
University School of Law. He is member of the bars of the States of Texas and
Florida.
DIRECTOR-DESIGNEES
The Company's Board of Directors has designated John B. Gallagher, Donald
Behnke, M.D., Marc S. Kallins, M.D. and William F. Nowak (collectively, the
"Director-Designees") to become members of the Board of Directors. The Company
expects that the Director-Designees will become members of the Board of
Directors prior to the effective date of the Registration Statement of which
this Prospectus is a part. Information regarding each Director-Designee is
provided below.
JOHN B. GALLAGHER is a co-founder of European Micro Holdings, Inc. and
European Micro UK and has served as Co-Chairman, Co-President and as a Director
of European Micro Holdings, Inc., a reseller of computer hardware (Nasdaq:
EMCC), since it was formed in December 1997. Mr. Gallagher is 43 years old. Mr.
Gallagher has also served as Co-Chairman and as a Director of European Micro UK
since it was formed in 1991. He was a Director and President of Ameritech
Exports Miami from 1992 to 1997, and has served as President of American Micro
Computer Center since 1989. Mr. Gallagher is a non-practicing attorney with a
Bachelor of Arts and a Juris Doctorate both from the University of Florida.
DONALD BEHNKE, M.D. is engaged in the private practice of internal
medicine in Sun City, Florida. Dr. Behnke is 47 years old. He has practiced
medicine in this capacity since 1983. Dr. Behnke has also served as a
Clinical Associate Professor at the University of South Florida School of
Medicine since 1981, and he has been board certified in Geriatric Medicine
since 1989. Dr. Behnke received a B.A. from Indiana University and an M.D.
from the University of South Florida School of Medicine.
MARC S. KALLINS, M.D. is a practicing physician who has served as Chief
Executive Officer of Pinnacle Medical Group since 1997. Dr. Kallins is 48 years
old. Prior to that position Dr. Kallins was President of Peninsula Medical
Associates from 1991 to 1997. He has been the Medical Director of the Blake
Medical Center Rehabilitation Center since 1982, and has been the Chief of
Medicine at Blake Medical Center since 1995. Dr. Kallins has been board
certified in Physical Medicine and Rehabilitation since 1983, and is a Surveyor
for the Commission on the Accreditation of Rehabilitation Facilities. Dr.
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Kallins serves on numerous charitable and professional boards and committees. He
received his B.A. degree from St. Joseph's University and his M.D. degree from
the UAG.
WILLIAM F. NOWAK has been a private investor since September 1995.
Prior to that date he served as President and Chief Executive Officer of L.W.
Blake Hospital, a hospital owned by Hospital Corporation of America, from
February 1988 to September 1995. Dr. Nowak previously served as a hospital
administrator at Bascom Palmer Eye Institute, King Fahad Hospital (Saudi
Arabia), Brownwood Regional Hospital and Mary Immaculate Hospital. He
received a B.B.A. from the University of Notre Dame, an M.B.A. from the
University of Florida, and a D.B.A. from the University of Sarasota. Dr.
Nowak is 48 years old.
PROPOSED MERGER WITH F. MICHAEL ROBERTS & ASSOCIATES, INC.
The Company is currently negotiating with F. Michael Roberts regarding the
acquisition of F. Michael Roberts & Associates, Inc., a health care consulting
company. Mr. Roberts has substantial experience in the health care industry.
While the terms of this transaction have not yet been finalized, the Company
anticipates that it will occur prior to the effective date of the Registration
Statement of which this Prospectus is a part. If this transaction is finalized,
the Company anticipates that Mr. Roberts will become the Company's Chief
Operating Officer.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Pursuant to authority conferred by applicable Florida law, the Company's
Amended and Restated Articles of Incorporation and By-laws provide that the
Company's directors, officers, and employees be indemnified to the fullest
extent permitted by Florida law. Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act") may
be permitted for directors and officers and controlling persons pursuant to the
foregoing provisions, the Company has been advised 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.
INSURANCE
The Company is evaluating the purchase of an insurance policy which will
cover directors and officers under which the insurer agrees to pay, subject to
certain exclusions, for any claim made against the Company's directors and
officers of for a wrongful act for which they may become legally obligated to
pay or for which the Company is required to indemnify its directors and
officers. No such policies have yet been obtained.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company anticipates that an Audit Committee will be formed. The
proposed functions of the Audit Committee will be to: (1) recommend annually to
the Board of Directors the appointment of the Company's independent auditors,
(2) discuss and review, in advance, the scope and the fees of the annual audit
and review the results thereof with the independent auditors, (3) review and
approve non-audit services of the independent auditors, (4) review compliance
with the Company's existing major accounting and financial reporting policies,
(5) review the adequacy of the Company's financial organization, and (6) review
management's procedures and policies relating to the adequacy of the Company's
internal accounting controls and compliance with applicable laws relating to
accounting practices.
The Company also anticipates the formation of a Compensation and Stock
Option Committee (the "Compensation Committee") which is expected to be
responsible for making recommendations to the Board of Directors regarding
compensation arrangements for the Company's officers and for making
recommendations to the Board of Directors regarding the adoption of any employee
benefit plans and the grant of stock options or other benefits under such plans.
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DIRECTOR COMPENSATION
Non-employee directors will receive $1,000 (if their residence is located
outside of Florida) or $500 (if their residence is located within Florida) for
attendance at Board of Director meetings in person, or $250 if they participate
in a Board of Directors meeting by telephone. Directors will also be reimbursed
for all out-of-pocket expenses incurred in attending meetings of the Board of
Directors and committees thereof.
The Company's 1998 Stock Incentive Plan (the "Incentive Plan") provides
that directors who are not employees of the Company will automatically be
granted options to purchase (i) 10,000 shares of Common Stock in connection with
their appointment to the Company's Board of Directors and (ii) 5,000 shares of
Common Stock each year thereafter that such non-employee director serves on the
Company's Board of Directors. See "Management - 1998 Stock Incentive Plan." Such
options will vest after one year of service on the Board of Directors. The
options granted to Regional Capital's initial non-employee directors will have
an exercise price of 100% of the offering price in this Offering. Options
granted after completion of this Offering will be priced no less than 100% of
the fair market value on the date of the grant. Options granted to non-employee
directors will be non-statutory options and will become exercisable after one
year of service on the Board of Directors and will be exercisable for ten years
from the date of the grant, except that options exercisable at the time of a
director's death may be exercised for twelve months thereafter. Under the terms
of the Incentive Plan, neither the Board of Directors nor any committee thereof
will have any discretion with respect to options granted to directors.
1998 STOCK INCENTIVE PLAN
The Board has adopted the Incentive Plan, which it believes will provide a
means to attract, motivate, retain and reward directors and key employees of the
Company and other selected persons and promote the Company's success. A maximum
of 200,000 shares of Common Stock (subject to certain anti-dilutive adjustments)
may be issued pursuant to grants and awards under the Incentive Plan.
ADMINISTRATION AND ELIGIBILITY. It is anticipated that the Incentive Plan
will be administered by the Compensation Committee (the "Administrator"). The
Incentive Plan empowers the Administrator to, among other things, interpret the
Incentive Plan, to make all determinations deemed necessary or advisable for the
administration of the Incentive Plan and to award to officers, and other key
employees of Regional Capital and certain other eligible persons ("Eligible
Employees"), as selected by the Administrator, options, including incentive
stock options ("ISOs") as defined in the Internal Revenue Code (the "Code"),
stock appreciation rights ("SARs"), shares of restricted stock, performance
shares and other awards valued by reference to Common Stock, based on the
performance of the participant, the performance of Regional Capital or its
Common Stock or such other factors as the Administrator deems appropriate. The
various types of awards under the Incentive Plan are collectively referred to as
"Awards."
TRANSFERABILITY. Generally, Awards under the Incentive Plan are not
transferable other than by will or the laws of descent and distribution, are
exercisable only by the participant and may be paid only to the participant or
the participant's beneficiary or representatives. However, the Administrator may
establish conditions and procedures under which exercise by and transfers and
payments to certain third parties are permitted, to the extent permitted by law.
OPTIONS. An option is the right to purchase shares of Common Stock at a
future date at a specified price. The option price is generally the closing
price for a share of Common Stock as reported on a national securities exchange,
as quoted on OTC Bulletin Board, or the closing bid price as reported by the OTC
Bulletin Board, whichever is applicable (the "Fair Market Value"), on the date
of grant, but may be a lesser amount if authorized by the Administrator. The
Incentive Plan authorizes the Administrator to award options to purchase Common
Stock at an exercise price which may be less than 100% of the Fair Market Value
of such stock at the time the option is granted, except in the case of ISOs.
An option may be granted as an incentive stock option, as defined in
Section 422 of the Code, or a non-qualified stock option. An ISO may not be
granted to a person who, at the time the ISO is granted, owns more than 10% of
the total combined voting power of all classes of stock of the Company unless
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<PAGE>
the exercise price is at least 110% of the Fair Market Value of shares of Common
Stock subject to the option and such option by its terms is not exercisable
after the expiration of five years from the date such option is granted. The
aggregate Fair Market Value of shares of Common Stock (determined at the time
the option is granted) for which ISOs may be first exercisable by an option
holder during any calendar year under the Incentive Plan or any other plan of
the Company may not exceed $100,000. A non-qualified stock option is not subject
to any of these limitations.
The Incentive Plan permits optionees, with certain exceptions, to pay the
exercise price of options in cash, Common Stock (valued at its Fair Market Value
on the date of exercise), a combination thereof or, if an option award so
provides, by delivering irrevocable instructions to a stockbroker to promptly
deliver the exercise price to Regional Capital upon exercise (i.e. a so-called
"cashless exercise"). Cash received by Regional Capital upon exercise will
constitute general funds of Regional Capital and shares of Common Stock received
by Regional Capital upon exercise will return to the status of authorized but
unissued shares.
CONSIDERATION FOR AWARDS. Typically, the only consideration received by
Regional Capital for the grant of an Award under the Incentive Plan will be the
future services by the optionee (as contemplated by the vesting schedule or
required by agreement), past services or a combination thereof.
SARS. The Incentive Plan authorizes the Administrator to grant SARs
independent of any other Award or concurrently (and in tandem) with the grant of
options. An SAR granted in tandem with an option is only exercisable when and to
the extent that the related option is exercisable. An SAR entitles the holder to
receive upon exercise the excess of the Fair Market Value of a specified number
of shares of Common Stock at the time of exercise over the option price. This
amount may be paid in Common Stock (valued at its Fair Market Value on the date
of exercise), cash or a combination thereof, as the Administrator may determine.
Unless the agreement awarding such option in connection with the SAR provides
otherwise, the option granted concurrently with the SAR must be canceled to the
extent that the appreciation right is exercised and the SAR must be canceled to
the extent the option is exercised. SARs limited to certain periods of time
around a major event, such as a reorganization or change of control, may also be
granted under the Incentive Plan.
RESTRICTED STOCK. The Incentive Plan authorizes the Administrator to grant
restricted stock to Eligible Employees on such conditions and with such
restricted periods as the Administrator may designate. During the restricted
period, stock certificates evidencing the restricted shares may be held by
Regional Capital or a third party designated by the Administrator and the
restricted shares may not be sold, assigned, transferred, pledged or otherwise
encumbered.
PERFORMANCE SHARE AWARDS. The Administrator may, in its discretion, grant
Performance Share Awards to Eligible Employees based upon such factors as the
Administrator deems relevant in light of the specific type and terms of the
Awards. The amount of cash or shares or other property that may be deliverable
pursuant to these Awards will be based upon the degree of attainment over a
specified period of not more than ten years (a "Performance Cycle") as may be
established by the Administrator of such measures of the performance of Regional
Capital, the Subsidiaries or any part thereof or the participant as may be
established by the Administrator. The Administrator may provide for full or
partial credit, prior to completion of a Performance Cycle or the attainment of
the performance achievement specified in the Award, in the event of the
participant's death, retirement, or disability, a Change of Control (as defined
in the Incentive Plan) or in such other circumstances as the Administrator may
determine.
SPECIAL PERFORMANCE-BASED SHARE AWARDS. In addition to awards granted
under other provisions of the Incentive Plan, performance-based awards within
the meaning of Section 162(m) of the Code and awards based on operating income,
return on investment, return on shareholders' equity, earnings before interest,
taxes, depreciation and amortization or earning per share or other business
criteria ("Other Performance-Based Awards") relative to preestablished
performance goals, may be granted under the Incentive Plan. The specific
performance goals relative to these business criteria must be approved by the
Administrator in advance of applicable deadlines under the Code and while the
performance relating to the goals remains substantially uncertain. The
applicable performance measurement period may not be less than one nor more than
ten years.
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<PAGE>
TERM AND EXERCISE PERIOD OF AWARDS. The Incentive Plan provides that
awards may be granted for such terms as the Administrator may determine but not
greater than ten years after the date of the Award. The Incentive Plan does not
impose any minimum vesting period, post-termination exercise period or pricing
requirement, although in the ordinary course, customary restrictions will likely
be imposed. Options and SARs will generally be exercisable during the holder's
employment by Regional Capital or by a related company and unearned restricted
stock and other Awards will generally be forfeited upon the termination of the
holder's employment prior to the end of the restricted or performance period.
Generally, options which have become exercisable prior to termination of
employment will terminate on the date of such termination of employment, unless
extended by the Administrator. Such periods, however, cannot exceed the
expiration dates of the Options. SARs have the same post-termination provisions
as the Options to which they relate. The Administrator has the authority to
accelerate the exercisability of Awards or (within the maximum ten-year term)
extend the exercisability periods.
TERMINATION, AMENDMENT AND ADJUSTMENT. The Incentive Plan may be
terminated by the Board of Directors at any time. In addition, the Board of
Directors may amend the Incentive Plan from time to time, without the
authorization or approval of Regional Capital's shareholders, unless the
amendment (i) materially increases the benefits accruing to participants under
the Incentive Plan, (ii) materially increases the aggregate number of securities
that may be issued under the Incentive Plan or (iii) materially modifies the
requirements as to eligibility for participation in the Incentive Plan, but in
each case only to the extent then required by the Code or applicable law, or
deemed necessary or advisable by the Board of Directors.
Upon the occurrence of a change of control, all options become
immediately exercisable and all restrictions on restricted shares lapse. A
change of control includes:
(1) approval of the Company's shareholders of a consolidation or merger of
the Company with any third party, unless the Company is the entity surviving
such merger or consolidation;
(2) approval of the Company's shareholders of a transfer of all or
substantially all of the assets of the Company to a third party or a complete
liquidation or dissolution of the Company;
(3) a third party, directly or indirectly, through one or more
subsidiaries or transactions or acting in concert with one or more persons or
entities: (a) acquires any combination of beneficial ownership of the Company's
voting stock and irrevocable proxies representing more than 20% of the Company's
voting stock; (b) acquires the ability to control in any manner the election of
a majority of the directors of the Company; or (c) acquires the ability to
directly or indirectly exercise a controlling influence over the management or
policies of the Company;
(4) any election has occurred of persons to the Company's Board of
Directors that causes a majority of such Board to consist of persons other than
(a) persons who were members of the Board of Directors on _____________, 1998
(the "Effective Date") or (b) persons who were nominated for election as members
of the Board of Directors by the Board of Directors (or a committee of the Board
of Directors) at a time when the majority of the Board of Directors (or of such
committee) consisted of persons who were members of the Board of Directors on
the Effective Date; or
(5) A determination is made by the Commission or any similar agency having
regulatory control over the Company that a change in control, as defined in the
securities laws or regulations then applicable to the Company, has occurred.
NON-EMPLOYEE DIRECTOR OPTIONS. The Incentive Plan provides that directors
who are not employees of Regional Capital will automatically be granted options
to purchase (i) 10,000 shares of Regional Capital's Common Stock in connection
with their appointment to Regional Capital's Board of Directors and (ii) 5,000
shares of the Common Stock each year thereafter that such non-employee director
serves on Regional Capital's Board of Directors. The option price is the Fair
Market Value of a share of Common Stock on the date of grant of such option.
Options granted to non-employee directors will become exercisable after one year
of service on the Board of Directors and will be exercisable for ten years from
the date of grant.
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If a non-employee director's service with the Company terminates by reason
of death, his or her option may be exercised for a period of one year from the
date of death or until the expiration of the option, which ever is shorter. If a
non-employee director's service with the Company terminates other than by reason
of death, his or her option may be exercised for a period of three months from
the date of such termination or until the expiration of the state term of the
option, whichever is shorter. See "Management - Director Compensation."
ANTIDILUTION PROVISIONS. The number of shares of Common Stock authorized
to be issued under the Incentive Plan and subject to outstanding awards (and the
purchase or exercise price thereof) will be adjusted to prevent dilution or
enlargement of rights in the event of any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Incentive Plan or the
awards.
NON-EXCLUSIVITY. The Incentive Plan is not exclusive and does not limit
the authority of the Board of Directors or the Administrator to grant other
awards, in stock or cash, or to authorize other compensation, under any other
plan or authority.
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid by the Company,
as well as certain other compensation paid or accrued, during the fiscal years
ended December 31, 1997 and 1996 (the year of the Company's inception) to Thomas
H. Minkoff, President and Chief Executive Officer of the Company. No restricted
stock awards, long-term incentive plan payouts or other types of compensation
other than the compensation identified in the chart below were paid to Mr.
Minkoff during fiscal years 1997 and 1996. No other executive officer of the
Company earned a total annual salary and bonus for any of these years in excess
of $100,000. This table includes all payments to Mr. Minkoff for 1997 and 1996.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas H. Minkoff,
President and
Chief Executive
Officer (1),(2) 1997 $43,286 -0- -0- -0- -0- -0- -0-
1996 $ 0 -0- -0- -0- -0- -0- -0-
</TABLE>
- -----------------
(1) $43,286 was accrued by the Company as salary for Mr. Minkoff for the period
from May 1997 to December 1997 and was subsequently paid to him.
(2) Mr. Minkoff's current annual salary is $91,200.
EMPLOYMENT AGREEMENTS
The Company has entered into a three-year employment agreement with Thomas
H. Minkoff, its President and Chief Executive Officer. This agreement was
effective on August 25, 1998, and it provides for an initial annual base salary
of $91,200 which will increase to $115,000 upon the consummation of this
Offering. Thereafter, Mr. Minkoff's annual base salary will increase by the
annual increase in the Consumer Price Index (as published by the United States
Department of Labor) plus 2.0% on each anniversary date during the term of this
agreement. In addition, Mr. Minkoff is entitled to annual incentive bonus
compensation in an amount to be determined by the Board of Directors or the
Compensation Committee. This Employment Agreement also granted Mr. Minkoff
options to purchase 10,000 shares of Common Stock at an exercise price equal to
the final Offering price, followed by annual grants of options to purchase
10,000 additional shares of Common Stock at the then prevailing market price.
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<PAGE>
This agreement provides that Mr. Minkoff will devote a significant amount
of his working time and efforts to the business and affairs of Regional Capital;
provided, however, that he may devote a reasonable amount of time and effort to
certain other business affairs. Any such other activities will be fully
disclosed to the Board of Directors.
Mr. Minkoff's employment agreement provides that upon termination of
employment without "cause" or termination by the executive for "good reason"
(which includes a change of control of the Company), he is entitled to receive,
in addition to all accrued or earned but unpaid salary, bonus or benefits, an
amount equal to three times the compensation he would be entitled to receive in
the current fiscal year, including base salary and incentive bonus compensation.
For the purposes hereof, the amount of incentive bonus compensation he would be
entitled to receive in the current fiscal year is equal to the largest amount
accrued for any of the two most recently completed fiscal years. In addition,
the Company will pay certain relocation expenses incurred by the executive in
change of principal residence and will indemnify him for any loss sustained in
the sale of his principal residence. The agreements also provide that the
executive will not compete with the Company during his employment (except for
such other activities disclosed to the Board of Directors) and for one year
thereafter unless the Company terminates the executive without "cause" or the
executive terminates his employment for "good reason."
This agreement also grants to Mr. Minkoff demand and participatory
("piggyback") registration rights with respect to the shares of Common Stock
held by him. He may require the Company to file a registration statement with
respect to these shares on an annual basis. The piggyback registration rights
allow him to include these shares in certain other offerings made by Regional
Capital. See "Description of Capital Stock - Registration Rights."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the date of this Prospectus the Company had no Compensation
Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADDITIONAL WARRANTS
In ___________, 1997 the Company issued Additional Warrants to Thomas H.
Minkoff, its President and Chief Executive Officer, to purchase 500,000 shares
of Common Stock. The Additional Warrants have terms and conditions identical to
the Warrants issued in this Offering.
PROPOSED MERGER WITH F. MICHAEL ROBERTS & ASSOCIATES, INC.
The Company is currently negotiating with F. Michael Roberts regarding the
acquisition of F. Michael Roberts & Associates, Inc., a health care consulting
company. Mr. Roberts has substantial experience in the health care industry.
While the terms of this transaction have not yet been finalized the Company
anticipates that it will occur prior to the effective date of the Registration
Statement of which this Prospectus is a part. If this transaction is finalized,
the Company anticipates that Mr. Roberts will become the Company's Chief
Operating Officer.
POTENTIAL FUTURE TRANSACTIONS
All future transactions, including any loans from the Company to its
officers, directors, principal shareholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested shareholders, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of September 2, 1998 and as adjusted to
reflect the sale of the Common Stock in the Offering by (i) each person who is
known by the Company to beneficially own more than five percent of outstanding
Common Stock, (ii) each of the Company's directors, (iii) each named executive
officer, and (iv) all directors and officers of the Company as a group. Unless
otherwise indicated, the person or persons named have sole voting and investment
power.
Ownership of Common Ownership of Common
Shares Prior to the Shares after the
Offering(1)(3)(4) Offering(1)(2)(3)(4)
----------------- --------------------
BENEFICIAL OWNER Number Percentage Number Percentage
- ---------------- ------ ---------- ------ ----------
Thomas H. Minkoff
1635D Royal Palm Drive
Gulfport, Florida 33707 500,000 66.7% 500,000 28.6%
All officers and
directors
as a group(5) 500,000 66.7% 500,000 28.6%
- -----------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by the that
person that are currently exercisable or exercisable within 60 days of the
date set forth above are deemed outstanding. Except as indicated in the
footnotes to this table and as provided pursuant to applicable community
property laws, the stockholders named in the table have sole voting and
investment power with respect to the shares set forth opposite such
stockholder's name.
(2) Assumes that a total of 1,000,000 shares of Common Stock will be sold in
the Offering.
(3) Assumes no exercise of the Warrants, the Private Placement Warrants or the
Additional Warrants.
(4) Percentage of beneficial ownership is based on 750,000 shares of Common
Stock outstanding prior to the Offering and 1,750,000 shares of Common Stock
outstanding after completion of this Offering.
(5) One person.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock. Upon the closing of
this Offering, the Company expects to have 2,000,000 shares of Common Stock
outstanding. The following description is a summary of the capital stock of the
Company and is subject to and qualified in its entirety by reference to the
provisions of the Amended and Restated Articles of Incorporation (the "Articles
of Incorporation") and the Bylaws (the "Bylaws") of the Company, which are
included as exhibits to the Registration Statement of which this Prospectus
forms a part.
COMMON STOCK
Each share of Common Stock entitles the holder to one vote on each matter
submitted to a vote of the Company's shareholders, including the election of
directors. There is no cumulative voting. See "Risk Factors Control by Current
Shareholders." Subject to preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. Holders of Common Stock have
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<PAGE>
no preemptive, conversion or other subscription rights. There are no redemption
or sinking fund provisions available to the Common Stock. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding.
COMMON STOCK PURCHASE WARRANTS
In connection with this Offering the Company plans to issue 1,000,000
Warrants. The following description of the Warrants is qualified in all respects
by the Form of Warrant, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The shares of the Company's
Common Stock underlying the Warrants, when issued upon exercise thereof and
payment of the purchase price, will be fully paid and nonassessable.
Each Warrant entitles the holder to purchase one share of Common Stock
during the period beginning ____________, 1999 and ending ____________, 2003 for
$6.00, subject to adjustment in certain circumstances unless earlier redeemed,
at which time the Warrants will expire. The Warrants are redeemable in whole and
not in part by the Company upon 30 days notice at a price of $0.10 per Warrant,
provided that the closing bid prices of the Common Stock have averaged at least
150% of the then effective exercise price of the Warrants for a period of any
twenty consecutive trading days ending on the third day prior to the day on
which the Company mails the notice of redemption to the Warrant holders. Based
on the Warrants' current exercise price of $6.00, the required bid price for
this redemption right would be $9.00. In the event the Company gives notice of
its intention to redeem the Warrants, a holder would be forced to either
exercise his Warrant within 30 days of the notice of redemption or accept the
redemption price. The holders of the Warrants will have exercise rights until
the close of business on the date fixed for the redemption thereof. The number
and kind of securities or other property for which the Warrants are exercisable
are subject to adjustment upon the occurrence of certain events, including
mergers, stock dividends, stock splits, and reclassifications. Holders of
Warrants have no voting, dividend, or other rights as shareholders of the
Company with respect to the shares underlying the Warrant, unless and until the
Warrants are exercised. Chase Mellon Shareholder Services, L.L.C. has agreed to
serve the warrant agent (the "Warrant Agent") for the Warrants.
The Warrants may be exercised by filling out and signing the appropriate
form on the Warrants and mailing or delivering the Warrants to the Warrant Agent
in time to reach the Warrant Agent by the expiration date, accompanied by
payment in full of the exercise price for the Warrants being exercised in United
States funds (in cash or by certified check or bank draft payable to the Warrant
Agent). Common Stock certificates will be issued as soon as practicable after
exercise and payment of the exercise price as described above.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by applicable law, or the rules of any quotation system or national
securities exchange on which stock of the Company may be quoted or listed, to
provide for the issuance of shares of Preferred Stock in one or more series; to
establish from time to time the number of shares to be included in each such
series; to fix the rights, powers, preferences, and privileges of the shares of
such series, without any further vote or action by the shareholders. Depending
upon the terms of the Preferred Stock established by the Board of Directors, any
or all series of Preferred Stock could have preference over the Common Stock
with respect to dividends and other distributions and upon liquidation of the
Company or could have voting or conversion rights that could adversely affect
the holders of the outstanding Common Stock. No preferred stock is currently
outstanding, and the Company has no present plans to issue any shares of
Preferred Stock.
PRIVATE PLACEMENT WARRANTS
The Company issued the Private Placement Warrants in connection with its
January, 1998 private placement offering. Private Placement Warrants to purchase
a total of 250,000 shares of Common Stock were issued. The Private Placement
Warrants contain terms and conditions (including exercise price, date of
exercisability and redemption rights) identical to those of the Warrants issued
in this Offering.
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<PAGE>
ADDITIONAL WARRANTS
In ___________, 1997 the Company issued Additional Warrants to Thomas H.
Minkoff, its President and Chief Executive Officer, to purchase 500,000 shares
of Common Stock. The Additional Warrants have terms and conditions identical to
the Warrants issued in this Offering.
LIMITATION OF LIABILITY; INDEMNIFICATION
The Company anticipates that each of its directors and officers will enter
into Indemnification Agreements in which the Company will agree to indemnify
each director and officer, to the fullest extent permitted by law, from and
against any and all claims of any type arising from or related to his past or
future acts or omissions as a director or officer of the Company and any of its
subsidiaries. In addition, the Company will agree to advance all expenses of
each director and officer as they are incurred and in advance of the final
disposition of any claim upon the submission of appropriate undertakings. Thomas
H. Minkoff, the Company's President and Chief Executive Officer, has entered
into an Indemnification Agreement with the Company.
REGISTRATION RIGHTS
In his Employment Agreement, Mr. Minkoff was granted the right, subject to
various restrictions and limitations, at any time following consummation of the
Offering to individually request that the Company file with the Commission a
registration statement for the proposed sale of any shares of Common Stock
(including Common Stock to be issued upon the exercise of options) held by him,
subject only to the lock-up period in the Underwriting Agreement to be entered
into between the Company and the Underwriter (the "Underwriting Agreement"). See
"Shares Eligible for Future Sale." Mr. Minkoff may exercise such rights once
each per calendar year. Mr. Minkoff was also granted an unlimited number of
piggyback registration rights in respect to any shares of Common Stock
(including Common Stock issued upon the exercise of options). The piggyback
registration rights will allow Mr. Minkoff to include his shares of Common Stock
in any registration statement filed by the Company, subject to certain
limitations.
The Company will pay all expenses (other than underwriting discounts and
commissions) in connection with up to two requested registrations, as well as
any registrations pursuant to the exercise of piggyback rights. The Company also
will agree to indemnify Mr. Minkoff against certain liabilities, including
liabilities arising under the Securities Act.
No other registration rights are currently outstanding.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS
AND FLORIDA LAW
AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans.
BLANK CHECK PREFERRED STOCK. The existence of authorized but unissued and
unreserved shares of Preferred Stock may enable the Board of Directors to issue
shares to persons friendly to current management which would render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of the Company's management.
CERTAIN LIMITATIONS ON SHAREHOLDERS' ACTIONS
NOTICE PROCEDURES FOR SHAREHOLDER PROPOSALS AT ANNUAL MEETINGS. The Bylaws
of the Company establish advance notice procedures with respect to shareholder
proposals to be brought before an annual meeting of shareholders. These
procedures, which are in addition to any other applicable requirements of law,
require that a shareholder must give notice to the Company not less than 120
days nor more than 180 days prior to the first anniversary of the date of the
notice of annual meeting provided with respect to the previous year's annual
meeting.
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<PAGE>
SHAREHOLDER VOTES ON CERTAIN MATTERS. The holders of the Company's Common
Stock and Preferred Stock vote as a single group on all matters except the
following, which require the affirmative vote of a majority of the holders of
the Company's Common Stock and a majority of the holders of the Company's
Preferred Stock: (a) any merger or consolidation of the Company with or into any
other corporation except in the case of a merger into the Company of a
subsidiary of the Company 90% or more of which is owned by the Company and which
does not require a vote of shareholders under Florida law; (b) any share
exchange in which a corporation, person or entity acquires the issued or
outstanding shares of stock of the Company pursuant to a vote of shareholders of
the Company; (c) any, sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Company to any other corporation, person
or entity; or (d) any amendment to the Articles of Incorporation of the Company.
If shares of Preferred Stock are issued and outstanding, this provision would
render more difficult or discourage an attempt to obtain control of the Company
by means of a proxy contest, tender offer, merger or otherwise, and thereby
protect the continuity of management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and the Warrant
Agent for the Warrants is Chase Mellon Shareholder Services, L.L.C. Its address
is 4 Station Square, Third Floor, Pittsburgh, Pennsylvania 15219-1173.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has not been any public market for the
Common Stock of the Company. No prediction can be made as to the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions described below lapse, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock.
Upon completion of this Offering, the Company will have 1,750,000 shares
of Common Stock outstanding (assuming no exercise of the Warrants, the Private
Placement Warrants or the Additional Warrants). Of these shares, all of the
1,000,000 shares offered by the Company in this Offering will be freely
transferable without restriction under the Securities Act, unless they are held
by "affiliates" of the Company, as that term is used under the Securities Act
and the rules and regulations promulgated thereunder. The remaining 1,000,000
shares of outstanding Common Stock which are held by the Company's current
shareholders are "restricted" securities within the meaning of Rule 144 ("Rule
144") promulgated under the Securities Act. These shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under the Act. Certain exemptions may be available under Rule 144
are summarized below. See "Risk Factors - Shares Eligible for Future Sale."
Prospective investors should be aware that if the Warrants offered
hereunder are exercised, a maximum of 1,000,000 additional shares of Common
Stock will be issued, all of which will be freely tradable unless held by an
affiliate of the Company. The Warrants can be exercised during the four year
period beginning __________, 1999 and ending _________, 2003. Additionally, if
the Private Placement Warrants and the Additional Warrants are exercised, a
maximum of 750,000 additional shares of Common Stock will be issued. All of the
shares issued pursuant to the Private Placement Warrants and the Additional
Warrants will be "restricted securities" as defined in Rule 144, and there are
no registration rights associated with any of such shares.
Each of the officers, directors and current shareholders of the Company
have agreed not to offer, sell or otherwise dispose of any Common Stock for a
period of one year after the closing date of the Offering without the prior
written consent of the Underwriter. Mr. Minkoff has been granted certain
participatory ("piggyback") rights to participate in certain subsequent
registrations of the Common Stock by the Company for sale to the public. See
"Description of Capital Stock."
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least one year (including the
holding period of any prior owner other than an affiliate) is entitled to sell
in a broker's transaction or to a market maker, within any three-month period, a
number of shares that does not exceed the greater of (i) one percent (1%) of the
then outstanding shares of Common Stock (approximately 17,500 shares based on
the number of shares to be outstanding after this Offering), assuming no
exercise of any of the Warrants, the Private Placement Warrants or the
Additional Warrants or (ii) the average weekly trading volume in the public
market during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner and notice of sale and the availability of public
information concerning the Company. Persons who are not affiliates of the
Company whose shares have been held for at least two years would be entitled to
sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, notice or public information requirements described
above.
The Company has reserved 200,000 shares for issuance under the Company's
Incentive Plan. To date no shares have been issued pursuant to the Incentive
Plan. The Company intends to file a registration statement on Form S-8 under the
Securities Act in connection with all shares of Common Stock issued pursuant to
options granted under the Incentive Plan (a total of _________ shares if all
current options and options expected to be granted are exercised). These options
are subject to various provisions regarding their vesting and exercisability.
After the Form S-8 is declared effective, shares issued under the Incentive Plan
are expected to be freely tradable to the extent that they are not held by
affiliates of the Company, in which case transferability will be subject to the
volume limitations of Rule 144.
44
<PAGE>
UNDERWRITING
Pursuant to the Underwriting Agreement (the "Underwriting Agreement")
between the Company and the Underwriter, the Company has engaged the Underwriter
to use its best efforts to offer the Common Stock to the public, subject to the
terms and conditions of the Underwriting Agreement. The Underwriter has agreed
to sell the Common Stock through licensed dealers on a "best efforts" basis, at
an estimated purchase price of $5.00 per share. The Underwriter has made no
commitment to purchase all or any part of the Common Stock offered hereby, and
there can be no assurance that any of the Common Stock will be sold. The
Underwriter has agreed to use its best efforts to find purchasers for the Common
Stock within a period of sixty days from the date of this Prospectus (the
"Offering Period"), subject to a fifteen day extension if gross proceeds of at
least $4,500,000 (the "Minimum Gross Proceeds Amount") are generated by the end
of the Offering Period.
Payment by check for the Shares offered hereby must be made payable to the
Escrow Agent for the account of the Company. All funds received by the
Underwriter or any broker-dealer acting on behalf of the Underwriter as
subscriptions for the shares of Common Stock will be deposited no later than
12:00 p.m. on the business day following receipt thereof in a non-interest
bearing account with the Escrow Agent pursuant to an Escrow Agreement entered
into among the Company, the Underwriter and the Escrow Agent. If the Minimum
Gross Proceeds Amount has been reached by the end of the Offering Period, the
funds held by the Escrow Agent will be released to the Company, and the Company
will deliver the subscribed for shares of Common Stock to subscribers. If the
Minimum Gross Proceeds Amount is not reached by the end of the Offering Period,
the Escrow Agent will return payments for subscriptions to subscribers without
interest thereof and the Offering will terminate. If the Minimum Gross Proceeds
Amount is reached by the end of the Offering Period, the Offering will be
extended for a fifteen day period with the same terms and conditions as in
effect during the Offering Period.
During the period of escrow, subscribers will not be entitled to a refund
of their subscriptions. The shares of Common Stock offered hereby will be sold
fully paid only. Common Stock certificates will be issued to purchasers only if
the proceeds from the sale of shares of Common Stock are released to the Company
as described above. Until such time as the funds have been released by the
Escrow Agent, such purchasers, if any, will be deemed subscribers and not
shareholders. The funds in escrow will not bear interest, will be held for the
benefit of those subscribers until released to the Company and will not be
subject to creditors of the Company or the expenses of this Offering.
The Underwriter is to receive a cash commission of ten percent (10%) of
the gross offering price per share sold, which will be $510,000 assuming an
offering price of $5.00 per share and $0.10 per Warrant. In addition, the
Company has agreed to pay from the proceeds of the Offering a non-accountable
expense allowance of $51,000 and the additional fees incurred by the Underwriter
in connection with the Offering. The Company has advanced to date an amount of
$25,000 against the Underwriter's expenses. The Underwriter's expenses in excess
of the expenses paid by the Company will be paid by the Underwriter. The
Underwriter may elect not to proceed with the Offering at any time, without
penalty, if it believes that no favorable public market exists for the sale of
the Common Stock.
The Underwriter initially proposes to offer the Common Stock offered
hereby to the public at the public offering price set forth on the cover of this
Prospectus, and the Underwriter may allow certain dealers, who are members of
the National Association of Securities Dealers, Inc. ("NASD"), concessions of
not in excess of $______ per share of Common Stock.
Officers and directors of the Company may introduce the Underwriter to
persons to consider this Offering and subscribe for shares of Common Stock
either through the Underwriter or through participating dealers. In this
connection, officers and directors will not receive any commissions or any other
compensation.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.
45
<PAGE>
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Underwriter, the Company and the Commission.
The public offering price of the Common Stock has been determined by arms'
length negotiation between the Company and the Underwriter and do not
necessarily bear any direct relationship to the Company's assets, earnings, book
value per share or other generally accepted criteria of value. Factors
considered in determining the offering price of the Common Stock included the
business in which the Company is engaged, estimates of the business potential of
the Company, the present state of the Company's development, the Company's
financial condition, an assessment of the Company's management, the general
condition of the securities markets and the demand for similar securities of
comparable companies, and other factors that the Underwriter and the Company
deemed relevant.
The Underwriter was incorporated on March 26, 1993, as Winthrop
Financial Services, Inc. Its corporate name was changed to Tarpon Scurry
Investments, Inc. on September 27, 1997. Since its incorporation, the
Underwriter has participated in one initial public offering of equity
securities as a lead underwriter. Prospective purchasers of Common Stock
should consider the lack of experience of the Underwriter in evaluating an
investment in the Company. See "Risk Factors--Limited Underwriting History."
EXPERTS
The consolidated financial statements of the Company as of June 30, 1998
and December 31, 1997 and 1996 (the year of the Company's inception) and for the
six month period ended June 30, 1998 and for each of the years in the two-year
period ended December 31, 1997 appearing in this Prospectus and elsewhere in the
Registration Statement have been audited by Hurd, Hawkins, Meyers, Radosevich &
Stevenson, P.A., independent auditors, as stated in their report herein and
elsewhere in the Registration Statement, and are included herein in reliance
upon the report of such firm given their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kirkpatrick & Lockhart LLP, Miami, Florida. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriter by Holland & Knight LLP, Fort Lauderdale, Florida.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form SB-2 (the
"Registration Statement") with the Commission under the Securities Act with
respect to the Securities offered hereby. For purposes of this Prospectus, the
term "Registration Statement" means the initial Registration Statement and any
and all amendments thereto. This Prospectus omits certain information contained
in the Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements herein concerning the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to such contract or other document filed with the Commission
as an exhibit to the Registration Statement, or otherwise, each such statement,
being qualified by and subject to such reference in all respects.
As a result of this Offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith will
file reports, proxy and information statements, and other information with the
Commission. Reports, registration statements, proxy and information statements,
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of these materials may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The Commission maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, registration statements, proxy and
information statements and other information.
46
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
TABLE OF CONTENTS PAGE
BASIC FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT F-2
BALANCE SHEETS F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO THE FINANCIAL STATEMENTS F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Regional Capital Management Corporation
(A Development Stage Company)
Gulfport, Florida
We have audited the accompanying balance sheets of Regional Capital Management
Corporation (a development stage company) as of December 31, 1996, December 31,
1997 and June 30, 1998, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the period May 22, 1996 (inception) to
December 31, 1996, the year ended December 31, 1997 and the six months ended
June 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Regional Capital Management
Corporation (a development stage company) as of December 31, 1996, December 31,
1997 and June 30, 1998, and the results of its operations and cash flows for the
periods then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company's ability to continue as a going concern is
dependent upon a successful public stock offering and the Company attaining
profitable operations. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 8. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ HURD, HAWKINS, MEYERS, RADOSEVICH & STEVENSON, P.A.
HURD, HAWKINS, MEYERS, RADOSEVICH & STEVENSON, P.A.
Largo, Florida
August 14, 1998
F-2
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1996 1997 1998
<S> <C> <C> <C>
CASH $-0- $-0- $ 181
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation -0- 1 1
OTHER ASSETS
Organization Costs, net of accumulated
amortization -0- 1 1
Deferred Charges -0- 45 33
----- ----- -----
TOTAL ASSETS $-0- $ 47 $ 216
===== ===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank Advance $-0- $ 14 $-0-
Accounts Payable -0- 59 1
Due to Shareholder -0- 50 14
Notes Payable Shareholder -0- 20 -0-
----- ----- -----
TOTAL CURRENT LIABILITIES -0- 143 15
LONG-TERM LIABILITIES -0- -0- -0-
TOTAL LIABILITIES -0- 143 15
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $.001 par value;
10,000,000 shares authorized,
at December 31, 1997 and June 30,
1998, no shares issued and outstanding; -- -0- -0-
Common Stock, $.001 par value;
7,500, 10,000,000 and 10,000,000
shares authorized, 100,
500,000 and 750,000 shares issued
and outstanding at December 31, 1996,
1997 and June 30,1998, respectively -0- 1 1
Additional Paid In Capital -0- -0- 404
Deficit Accumulated During
the Development Stage -0- (97) (204)
----- ----- -----
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) -0- (96) 201
----- ----- -----
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $-0- $ 47 $ 216
===== ===== =====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-3
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
December 31, December 31, June 30,
1996 1997 1998
REVENUES $ -0- $ -0- $ -0-
COST OF REVENUES -0- -0- -0-
GROSS PROFIT -0- -0- -0-
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES -0- 96 107
---------- ------------ ----------
(LOSS) FROM OPERATIONS AND
BEFORE INCOME TAXES -0- (96) (107)
PROVISION FOR INCOME TAXES -0- -0- -0-
NET (LOSS) $ -0- $ (96) $ (107)
========= ============ ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-4
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
PREFERRED STOCK COMMON STOCK ACCUMULATED
ADDITIONAL DURING THE TOTAL
PAID IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE EQUITY
------ ------- ------ ------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE
MAY 22, 1996
(INCEPTION) -0- $ -0- -0- $ -0- $ -0- $ -0- $-0-
STOCK ISSUANCE -0- -0- 100 -0- -0- -0- -0-
--------- -------- --------- -------- ------ ---------- ----------
BALANCE
DECEMBER 31, 1996 -0- -0- 100 -0- -0- -0- -0-
STOCK DIVIDEND -0- -0- 499,900 1 -0- (1) -0-
NET (LOSS) -0- -0- -0- -0- -0- (96) (96)
--------- --------- ---------- --------- -------- ----------- -----------
BALANCE
DECEMBER 31, 1997 -0- -0- 500,000 1 -0- (97) (96)
SALES OF SHARES
IN PRIVATE
OFFERING -0- -0- 250,000 -0- 500 -0- 500
COST OF
PRIVATE OFFERING -0- -0- -0- -0- (96) -0- (96)
NET (LOSS) -0- -0- -0- -0- -0- (107) (107)
--------- --------- ---------- --------- -------- --------- ----------
BALANCE
JUNE 30, 1998 -0- $ -0- 750,000 $ 1 $ 404 $ (204) $ 201
======== ======== ======= ========= ========= ========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-5
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1996 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET (LOSS) $ -0- $ (96) $ (107)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
CASH (USED) IN OPERATING ACTIVITIES
Increase in Organization Costs -0- (1) -0-
(Increase) Decrease in Deferred Charges -0- (45) 12
Increase (Decrease) in Accounts Payable -0- 59 (58)
Increase (Decrease) in Due to Shareholder -0- 50 (36)
------------------ ---------------- ---------------
NET CASH (USED) IN OPERATING ACTIVITIES -0- (33) (189)
CASH FLOWS (USED) IN INVESTING ACTIVITIES
Acquisition of Property and Equipment -0- (1) -0-
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Shareholder Notes Payable -0- -0- (20)
Net Proceeds from Private Offering -0- -0- 404
Shareholder Notes Payable -0- 20 -0-
NET CASH PROVIDED BY
FINANCING ACTIVITIES -0- 20 384
------------------ ---------------- ---------------
NET (DECREASE) INCREASE IN CASH -0- (14) 195
BALANCE, BEGINNING OF PERIOD -0- -0- (14)
------------------ ----------------- ---------------
BALANCE, END OF PERIOD $ -0- $ (14) $ 181
================== =============== =============
Supplemental disclosures of cash flow information:
Interest (net of
amount capitalized) $ -0- $ -0- $ 1
Income Taxes $ -0- $ -0- $ -0-
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-6
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Regional Capital Management Corporation (the "Company") was incorporated
May 22, 1996 under the laws of the State of Florida. The Company intends to
become an owner and operator of assisted living facilities through a strategy of
acquisitions of operating facilities or the acquisition of real property which
can be developed or converted into operating facilities. The Company is
currently a development stage ("start up") company as defined in Financial
Accounting Standards Board Statement No. 7. It has not performed any operations,
owned or operated any assisted living facilities or generated any revenue from
any activities. The Company's business activities will be focused in the
Southeast Region of the United States.
PROPERTY AND EQUIPMENT
Fixed assets are stated at cost. Maintenance and repairs are charged to
expense as incurred, and renewals and betterments are capitalized. When items of
equipment are sold or retired, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is included in income.
Depreciation is computed using accelerated depreciation methods over the
estimated useful lives of seven years.
ORGANIZATIONAL COSTS
Costs incurred in organizing the Company are being amortized over a
sixty-month period.
DEFERRED CHARGES
Costs in connection with the private and public offering will be charged
against the proceeds of the respective offerings.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash flow is expressed in
terms of "cash and cash equivalents". Cash equivalents include short-term,
highly liquid investments such as bank and money market accounts.
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>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2 - RELATED PARTY TRANSACTIONS
Amounts due to Thomas Minkoff include the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
<S> <C> <C>
Accrued compensation to Thomas Minkoff $ 43 $ 4
Reimbursable expenses paid by the Thomas Minkoff 7 10
------------- ----------
$ 50 $ 14
========== ==========
</TABLE>
The notes payable to Thomas Minkoff are due one year from the note date,
accrue interest at 8% and are unsecured.
NOTE 3 - INCOME TAXES
On May 22, 1996 the Company, with the consent of its stockholder, elected
to be taxed under the provisions of Subchapter S of the Internal Revenue Code.
Under those provisions, the Company generally does not pay federal corporate
income taxes on its taxable income, as the stockholder is liable for federal
income taxes of the Company's taxable income on his individual income tax
return.
NOTE 4 - STOCK DIVIDEND
In November 1997, the Company declared a stock dividend on the Company's
common stock. Each holder of common stock as of the Record Date received 4,999
shares of common stock for each share of common stock owned.
NOTE 5 - CONTINGENCIES
In conjunction with the private offering in February 1998, the Company sold
ten (10) units to qualified investors. Each unit consists of (a) 25,000 shares
of the $0.001 par value per share common stock of the Company and (b) warrants
to purchase 25,000 additional shares. Each warrant will have an exercise price
and contain other terms and conditions to be determined in the future and shall
only become exercisable upon the expiration of a one year period following the
successful consummation by the Company of an initial public offering of its
common stock. If this occurs, the warrants will then remain exercisable for a
four (4) year period. Furthermore, Thomas Minkoff was granted 500,000 warrants
in conjunction with the consummation of the private offering.
NOTE 6 - CONCENTRATION OF CREDIT RISK
At June 30, 1998 the Company had a bank account at a financial institution
which exceeds the FDIC coverage in the amount of $81,236.
NOTE 7 - SUBSEQUENT EVENT
In August 1998, the Company entered into a three (3) year employment
agreement with Thomas Minkoff providing for annual compensation of $91,200
increasing to $115,000 upon the consummation of the Company's public offering.
F-8
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8 - GOING CONCERN
The Company is dependent upon the successful completion of the public
offering to begin its proposed plan of operation, and the Company will need
substantial additional financing to fund its activities after the consummation
of the offering, without which the Company will be unable to continue as a going
concern. Such financing may come from a variety of sources, including private
placements, additional public offerings or loans. Any debt financing is likely
to be secured by mortgages or other liens on the Company's facilities or assets.
There can be no assurance that the financial resources of the Company will be
adequate to service such debt financing and, if not, the facilities or assets
may be foreclosed upon to satisfy such indebtedness. No assurance can be given
that any future financing (either equity or debt) will be available or, if
available, that it can be obtained on terms advantageous to the Company. If such
financing, is required but is not available, the Company may be forced to
significantly restrict, curtail or abandon its activities.
F-9
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY
OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE REGIONAL CAPITAL MANAGEMENT
CONTAINED IN THIS PROSPECTUS, AND, IF CORPORATION
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED 1,000,000 SHARES OF
UPON AS HAVING BEEN AUTHORIZED BY THE COMMON STOCK
COMPANY OR THE UNDERWRITER. THIS AND
PROSPECTUS DOES NOT CONSTITUTE AN 1,000,000 COMMON STOCK
OFFER TO SELL, OR A SOLICITATION oF AN PURCHASE WARRANTS
OFFER TO BUY, ANY SECURITIES OTHER
THAN THE REGISTERED SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY,
TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION
WOULD BE UNLAWFUL. 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
CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
Summary................................
Risk Factors...........................
Use of Proceeds........................
Dividend Policy........................
Capitalization.........................
Dilution...............................
Selected Consolidated Financial Data...
Management's Plan of Operation.........
Business............................... ----------------------
Management.............................
Certain Relationships and related PROSPECTUS
Transactions.........................
Principal Shareholders................. ---------------------
Description of Capital Stock...........
Shares Eligible For Future Sale........
Underwriting...........................
Experts................................
Legal Matters..........................
Available Information..................
Index to Financial Statements..........
UNTIL ________, 1998, ALL DEALERS
EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS AN
ADDITION TO THE OBLIGATIONS OF DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD SUBSCRIPTIONS. SEPTEMBER 2, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act ("FBCA") provides that in certain
cases, each officer and director of the Company shall be indemnified by the
Company against certain costs, expenses and liabilities which he or she may
incur in his or her capacity as such. FBCA ss. 607.0850 ("Indemnification oF
officers, directors, employees and agents") provides:
(1) A corporation shall have power to indemnify any person who was or is a
party to any proceeding (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, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, 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 proceeding by
judgment, order, settlement, or 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 or, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or is
a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person 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, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person 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, except that no indemnification shall be made under
this subsection in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such proceeding was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination 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
has met the applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By independent legal counsel;
II-1
<PAGE>
1. Selected by the board of directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for
paragraph (a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant to
this section are not exclusive, and a corporation may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees, or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were
material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his or her conduct was lawful
or had no reasonable cause to believe his or her conduct was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Unless the corporation's articles of incorporation provide otherwise,
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction. On receipt of an application, the
court, after giving any notice that it considers necessary, may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses, if it
determines that:
II-2
<PAGE>
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, is in the same position
under 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.
(11) For purposes of this section;
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to any
employee benefit plan), and expenses actually and reasonably incurred with
respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the corporation that
imposes duties on such persons, including duties relating to an employee benefit
plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner he
reasonably believes to be in the best interests of the participants and
beneficiaries of an employee benefit plan.
(12) A corporation shall have power to 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, joint
venture, trust or other enterprise against any liability asserted against the
person and incurred by him or her 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 the person against such liability under the provisions of this
section.
The Company has entered into an Indemnification Agreement with Thomas H.
Minkoff, its President and Chief Executive Officer.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimated expenses expected to be incurred
in connection with the issuance and distribution of the securities being
registered.
II-3
<PAGE>
Securities and Exchange Commission Registration Fee....... $ 3,274.50
NASD Filing Fee........................................... $ ________
Underwriter's Commission.................................. $ 510,000
Printing and Engraving Expenses........................... $ 35,000
Accounting Fees and Expenses.............................. $ ________
Legal Fees and Expenses................................... $ ________
Blue Sky Qualification Fees and Expenses.................. $ 35,000
Transfer Agent Fees and Expenses.......................... $ ________
Non-Accountable Expense Allowance......................... $ 51,000
Miscellaneous............................................. $ ________
--------
Total................................................. $ _________
=========
All amounts except the Securities and Exchange Commission Registration Fee
are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In January 1998 the Company consummated the sale of ten units at a price
of $50,000 per unit. Each unit consisted of 25,000 shares of Common Stock and a
Private Placement Warrant to purchase an additional 25,000 shares of Common
Stock. The securities issued in this transaction were intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
pursuant to Rule 506 of Regulation D promulgated thereunder and Section 4(2) of
the Securities Act.
In January 1998 the Company issued warrants to purchase 500,000 shares of
Common Stock to Mr. Thomas H. Minkoff. The securities issued in this transaction
were intended to be exempt from registration pursuant to Section 4(2) of the
Securities Act.
For all of the transactions listed in this Item other exemptions from
registration under the Securities Act may also have been available.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
Exhibit
No. Title
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
4.1 Form of Stock Certificate*
4.2 1998 Stock Incentive Plan*
5.1 Form of Opinion of Kirkpatrick & Lockhart LLP regarding the
validity of the securities offered*
10.1 Executive Employment Agreement between the Company and Thomas
H. Minkoff
10.2 Indemnification Agreement between the Company and Thomas H.
Minkoff
10.3 Form of Warrant*
10.4 Form of Private Placement Warrant*
II-4
<PAGE>
10.5 Form of Additional Warrant*
10.6 Form of Escrow Agreement*
10.7 Form of Transfer Agent Agreement*
10.8 Form of Warrant Agent Agreement*
23.1 Consent of Kirkpatrick & Lockhart LLP*
23.2 Consent of Hurd, Hawkins, Meyer, Radosevich & Stevenson, P.A.
27 Financial Data Schedules
99.1 Consent of Director-Designee (William F. Nowak)
99.2 Consent of Director-Designee (Marc S. Kallins, M.D.)
99.3 Consent of Director-Designee (Donald Behnke, M.D.)
99.4 Consent of Director-Designee (John B. Gallagher)
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby 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 this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Company pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it
was declared effective.
(2)For the purpose of determining any liability under the Securities
Act of 1933, 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.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gulfport, Florida, on September 2, 1998.
REGIONAL CAPITAL MANAGEMENT CORPORATION
By: /s/ Thomas H. Minkoff
--------------------------------------
Thomas H. Minkoff,
President
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 stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman of the Board of Directors,
/s/ Thomas H. Minkoff President, Treasurer (Principal September 2, 1998
- ----------------------- Executive Officer; Principal Financial Officer;
Principal Accounting Officer); Director
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Title Page
- --- ----- ----
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
4.1 Form of Stock Certificate*
4.2 1998 Stock Incentive Plan*
5.1 Form of Opinion of Kirkpatrick & Lockhart LLP regarding the validity
of the securities offered*
10.1 Executive Employment Agreement between the Company and Thomas H.
Minkoff
10.2 Indemnification Agreement between the Company and Thomas H. Minkoff
10.3 Form of Warrant*
10.4 Form of Private Placement Warrant*
10.5 Form of Additional Warrant*
10.6 Form of Escrow Agreement*
10.7 Form of Transfer Agent Agreement*
10.8 Form of Warrant Agent Agreement*
23.1 Consent of Kirkpatrick & Lockhart LLP*
23.2 Consent of Hurd, Hawkins, Meyer, Radosevich & Stevenson, P.A.
27 Financial Data Schedules
99.1 Consent of Director-Designee (William F. Nowak)
99.2 Consent of Director-Designee (Marc S. Kallins, M.D.)
99.3 Consent of Director-Designee (Donald Behnke, M.D.)
99.4 Consent of Director-Designee (John B. Gallagher)
* To be filed by amendment.
II-7
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
REGIONAL CAPITAL MANAGEMENT CORPORATION
Pursuant to Section 607.1007 of the Florida Business Corporation Act, the
undersigned officer of REGIONAL CAPITAL MANAGEMENT CORPORATION, under the
Florida Business Corporation Act, adopts the following Amended and Restated
Articles of Incorporation:
ARTICLE I
NAME
The name of the corporation (the "Corporation") is REGIONAL CAPITAL
MANAGEMENT CORPORATION.
ARTICLE II
ADDRESS
The street address of this Corporation shall be 1635 D Royal Palm Drive
South, Gulfport, Florida 33707.
ARTICLE III
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE IV
PURPOSE
The purpose of this Corporation shall be to engage in any activities or
business permitted under the laws of the United States and the State of Florida.
<PAGE>
ARTICLE V
CAPITAL STOCK
The maximum number of shares of stock which this Corporation is authorized
to issue is 10,000,000 shares of Common Stock having a par value of $.001 per
share, and 10,000,000 shares of Preferred Stock having a par value of $.001 per
share. The designations, rights and preferences of the Preferred Stock shall be
as designated from time to time by the Board of Directors of the Corporation.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the Corporation's registered office shall be c/o
Kirkpatrick & Lockhart LLP, 201 South Biscayne Boulevard, 20th Floor, Miami,
Florida 33131 and the registered agent for the Corporation at that address shall
be Robert C. White, Jr.
ARTICLE VII
INDEMNIFICATION
The officers and directors of the Corporation shall be indemnified by the
Corporation to the fullest extent allowed under applicable Florida law.
The foregoing Amended and Restated Articles of Incorporation were adopted
by means of Unanimous Written Consent of the Sole Shareholder and Director of
the Corporation dated November 14, 1997, pursuant to Section 607.1003 of the
Florida Business Corporation Act, and therefore, the number of shares cast in
favor of approval of the Amended and Restated Articles was sufficient for
passage thereof.
IN WITNESS WHEREOF, the undersigned has executed these Amended and
Restated Articles of Incorporation this 14th day of November, 1997.
/s/ Thomas H. Minkoff
----------------------------------
Thomas H. Minkoff,
President
<PAGE>
CERTIFICATE OF REGISTERED AGENT
OF
REGIONAL CAPITAL MANAGEMENT CORPORATION
Having been named to accept service of process for Regional Capital
Management Corporation at the place designated in the foregoing Articles of
Incorporation, Robert C. White, Jr. agrees to act in this capacity and is
familiar with and accepts the obligations provided in Section 607.0505 of the
Florida Business Corporation Act.
Date: November 14, 1997 /s/ Robert C. White, Jr.
---------------------------------
Robert C. White, Jr.
EXHIBIT 3.2
BY-LAWS
OF
REGIONAL CAPITAL MANAGEMENT CORPORATION
ARTICLE I.
OFFICES
In addition to the office of the corporation registered with the Secretary of
State of Florida, the corporation may also have offices at such places both
within and without the State of Florida as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II.
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. A meeting of shareholders shall be held
annually between January 1st and December 31st, inclusive, each year for the
purpose of electing directors, and for transacting any other business coming
before the meeting. If the day designated pursuant to Section 4 of this Article
for the annual meeting is a legal holiday in the State of Florida, such meeting
shall be held on the next business day. If the election of directors is not held
on the day so determined for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by law or by the Articles of
Incorporation, may be called by the Chairman of the Board, if any, President or
by the Board of Directors, and shall be called by the President or Secretary at
the written request of a majority of the Board of Directors then in office, or
at the written request of shareholders owning not less than one-tenth of all
shares entitled to vote thereat. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting
shall be limited to the purposes stated in the notice thereof.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Florida unless otherwise prescribed
by law or by the Articles of Incorporation, as the place of meeting for any
annual meeting or for any special meeting of the shareholders. If no designation
is made, or if a special meeting is otherwise called, the place of meeting shall
be the principal business office of the corporation.
SECTION 4. NOTICE OF MEETING. Written or printed notice stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered to each
shareholder of record entitled to vote at such meeting not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, either
personally or by first class mail, by or at the direction of the President, the
Secretary, or the officer or persons calling the meeting. If mailed, such notice
<PAGE>
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. WAIVER OF NOTICE OF MEETING. Whenever any notice is required to
be given to any shareholder of the corporation under the provisions of law or
under the provisions of the Articles of Incorporation or under these By-Laws, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, 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 shareholders need be specified in any written
waiver of notice.
SECTION 6. VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number and class and series, if any, of shares held by each. Such list
shall be kept on file at the registered office of the corporation, at the
principal place of business of the corporation, or at the office of the transfer
agent or registrar of the corporation, for a period of ten (10) days prior to
such meeting and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder at any time during the meeting. The original stock transfer books
shall be prima facie evidence as to who are the shareholders entitled to examine
such list or transfer books or to vote at any meeting of shareholders.
SECTION 7. QUORUM OF SHAREHOLDERS.
(a) Unless otherwise provided in the Articles of Incorporation, a majority
of the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders, but in no event shall a quorum
consist of less than one-third (1/3) of the shares entitled to vote at the
meeting. When a specified item of business is required to be voted on by a class
or series of stock, a majority of the shares of such class or series shall
constitute a quorum for the transaction of such items of business by that class
or series.
(b) If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by law or by the Articles of Incorporation or by
these By-Laws.
(c) After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
SECTION 8. VOTING OF SHARES.
(a) Each outstanding share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders, except as
2
<PAGE>
may be otherwise provided in the Articles of Incorporation. If the Articles of
Incorporation provide for more or less than one vote for any share, on any
matter, each reference in these By-Laws to a majority or other proportion of
shares shall refer to such majority or other proportion of votes entitled to be
cast.
(b) Treasury shares, shares of this corporation's own stock owned by
another corporation the majority of the voting stock of which is owned or
controlled by it, and shares of its own stock held by the corporation in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
SECTION 9. PROXIES.
(a) A shareholder may vote either in person or by proxy executed in
writing by the shareholder or his duly authorized attorney-in-fact.
(b) At each election for directors, every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
SECTION 10. INFORMAL ACTION BY SHAREHOLDERS.
(a) Unless otherwise provided in the Articles of Incorporation, any action
required by law to be taken at any annual or special meeting of shareholders of
the corporation, or any action which may be taken at any annual or special
meeting of such shareholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, 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 at which all shares entitled to vote thereon were present
and voted. If any class of shares is entitled to vote thereon as a class, such
written consent shall be required of the holders of a majority of the shares of
each class of shares entitled to vote as a class thereon and of the total shares
entitled to vote thereon.
(b) Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action is a merger, consolidation or sale or
exchange of assets for which dissenter's rights are provided by law, the notice
shall contain a clear statement of the right of dissenting shareholders to be
paid the fair value of their shares upon compliance with further provisions of
law regarding the rights of dissenting shareholders.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors except as may be
otherwise provided by law or in the Articles of Incorporation.
3
<PAGE>
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be not less than one (1), as determined from time to time
by the Board of Directors. Each director shall hold office until the next annual
meeting of shareholders and until his successor has been qualified, unless
removed by the shareholders at any general or special meeting. All directors
shall be at least eighteen years old.
SECTION 3. ANNUAL MEETING. The Board of Directors may hold an annual
meeting at the same place as and following each annual meeting of shareholders
for the purpose of electing officers and the transaction of such other business
as may come before the meeting. If a majority of the directors is present at
such place and time, no prior notice of such meeting shall be required to be
given to the directors. The place and time of such meeting may also be fixed by
written consent of the directors.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall be determined
from time to time by the Board of Directors.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if any, the President, the sole
director or, if the Board consists of more than one (1) director, by any two (2)
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meetings of the
Board of Directors called by them.
SECTION 6. NOTICE. Notice of any special meeting shall be given at least
two (2) days prior thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram, cablegram, or telex or
overnight mail service. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail so addressed with first class postage
prepaid. If notice be given by telegram, cablegram or telex, such notice shall
be deemed to be delivered when the telegram or cablegram is delivered to the
telegraph or cablegraph company or when the telex is acknowledged as having been
received. Any director may waive notice of any meeting, either before, at or
after such meeting. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director states at the
beginning of the meeting any objection to the transaction of business because
the meeting is not lawfully called or convened.
SECTION 7. QUORUM. A majority of the number of directors fixed by or in
the manner provided in these By-laws or in the absence of a By-law fixing or
providing for the number of directors, a majority of the number stated in the
Articles of Incorporation, shall constitute a quorum for the transaction of
business unless a greater number is required by the Articles of Incorporation.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the Articles of
Incorporation or these By-Laws.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
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elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 10. COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, or a stated salary as directors. No payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
any asserted conflict of interest. To evidence his vote against any action, a
director may file his written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof, or forward such
dissent by registered or certified mail, return receipt requested, to the
Secretary of the corporation immediately following the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
SECTION 12. INFORMAL ACTION BY THE BOARD. Unless otherwise provided by the
Articles of Incorporation, any action required by law or these By-Laws to be
taken at a meeting of the directors of the corporation, or any action which may
be taken at a meeting of the directors or a committee thereof, may be taken
without a meeting, if a consent in writing, setting forth the action so to be
taken, signed by all of the directors, or all the members of the committee, as
the case may be, is filed in the minutes of the proceedings of the board or of
the committee. Such consent shall have the same effect as a unanimous vote.
SECTION 13. TELEPHONE MEETINGS. Except as may be otherwise restricted by
the Articles of Incorporation, members of the Board of Directors may participate
in a meeting of the Board by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
SECTION 14. REMOVAL OF DIRECTORS. Unless the Articles of Incorporation
otherwise provide, at a meeting of shareholders called expressly for that
purpose, directors may be removed in the manner provided in this section. Any
director or the entire Board of Directors may be removed, with or without cause,
by a vote of the holders of a majority of the shares then entitled to vote at an
election of directors. No such removal shall prejudice the contract rights, if
any, of the person removed.
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ARTICLE IV.
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a President, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may elect a Chairman of the Board, one or more
Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers and
such other officers, as the Board of Directors shall deem appropriate. Two or
more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at its first meeting after
each annual meeting of the shareholders. If the election of officers is not held
at such meeting, such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his successor is duly elected and
qualified, or until his death, or resignation or removal.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board whenever in its judgment the best
interests of the corporation will be served thereby. Any such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 4. VACANCIES. Any vacancy, however occurring, in any office
may be filled by the Board of Directors.
SECTION 5. DUTIES OF OFFICERS. The Chairman of the Board of the
corporation, or if there shall not be a Chairman of the Board, the President,
shall preside at all meetings of the Board of Directors and of the shareholders.
The Chairman of the Board, or if there shall not be a Chairman of the Board, the
President, shall be the chief executive officer of the corporation. Subject to
the foregoing, the officers of the corporation shall have such powers and duties
as usually pertain to their respective offices and such additional powers and
duties specifically conferred by law, by the Articles of Incorporation, by these
By-Laws, or as may be assigned to them from time to time by the Board of
Directors.
SECTION 6. SALARIES. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
SECTION 7. DELEGATION OF DUTIES. In the absence of or disability of any
officer of the corporation or for any other reason deemed sufficient by the
Board of Directors, the Board may delegate such officer's powers or duties to
any other officer or to any other director.
ARTICLE V.
EXECUTIVE AND OTHER COMMITTEES
SECTION 1. CREATION OF COMMITTEES. The Board of Directors, by resolution
passed by a majority of the full Board, may designate an Executive Committee and
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one or more other committees. One or more of the directors of the corporation
shall serve at their election.
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee, if there shall be
one, shall consult with and advise the officers of the corporation in the
management of its business and shall have and may exercise to the extent
provided in the resolution of the Board of Directors creating such Executive
Committee such powers of the Board of Directors as can be lawfully delegated by
the Board.
SECTION 3. OTHER COMMITTEES. Such other committees shall have such
functions as can be lawfully delegated and may exercise the powers of the Board
of Directors to the extent provided in the resolution or resolutions creating
such committee or committees.
SECTION 4. MEETINGS OF COMMITTEES. Regular meetings of the Executive
Committee and other committees may be held without notice at such time and at
such place as shall from time to time be determined by the Executive Committee
or such other committees, and special meetings of the Executive Committee or
such other committees may be called by any member thereof upon five (5) days
notice to each of the other members of such committee, or on such shorter notice
as may be agreed to in writing by each of the other members of such committee,
given either personally or in the manner provided in Section 6 of Article III of
these By-Laws (pertaining to notice for directors' meetings). Members of the
Executive Committee shall be deemed present at a meeting of such Committee if a
conference telephone or similar communications equipment, by means of which all
persons participating in the meeting can hear each other is used.
SECTION 5. VACANCIES ON COMMITTEES. Vacancies on the Executive
Committee or on such other committees shall be filled by the Board of
Directors at any regular or special meeting.
SECTION 6. QUORUM OF COMMITTEES. At all meetings of the Executive
Committee or such other committees, a majority of the committee's members then
in office shall constitute a quorum for the transaction of business.
SECTION 7. MANNER OF ACTING OF COMMITTEES. The acts of a majority of the
members of the Executive Committee or such other committees, present at any
meeting at which there is a quorum, shall be the act of such committee.
SECTION 8. MINUTES OF COMMITTEES. The Executive Committee, if there shall
be one, and such other committees shall keep regular minutes of their
proceedings and report to the Board of Directors when required.
SECTION 9. COMPENSATION. Members of the Executive Committee and such
other committees may be paid compensation in accordance with the provisions of
Section 10 of Article III.
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ARTICLE VI.
INDEMNIFICATION OF OFFICERS
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. INDEMNIFICATION. The corporation shall, and does hereby,
indemnify any person who was, is, or becomes a party, or is threatened to be
made a party to any threatened, pending, or completed action, suit or
proceeding:
(a) 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
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, or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit, or
proceeding, including any appeal thereof, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. 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 the manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) By or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he 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, or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit, including any appeal thereof, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, 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 for negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that, 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 circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(c) To the extent that such director, officer, employee or agent of the
corporation has been, in whole or in part, successful on the merits or otherwise
in defense of any action, suit, or proceeding referred to in Section 1(a) or
1(b) of this Article, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
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(d) Any indemnification under Section 1(a) or 1(b) of this Article, unless
pursuant to a determination 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
has met the applicable standard of conduct set forth in Section 1(a) or 1(b) of
this Article. Such determination shall be made 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 by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action, suit, or
proceedings or, if such quorum of directors or shareholders is not obtainable
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion or regardless of whether such
quorum of directors is obtainable, the directors, by majority vote, may submit
the determination to the American Arbitration Association.
SECTION 2. INTERIM EXPENSES. The corporation may, after a preliminary
determination following one of the procedures set forth in Section 1(d) of this
Article, pay expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding, in advance of the final disposition of
such action, suit or proceeding, provided that such preliminary determination is
to the effect that the director, officer, employee or agent has met the
applicable standard of conduct set forth in Section 1(a) and 1(b) of this
Article, and, upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it be ultimately
determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
SECTION 3. ADDITIONAL INDEMNIFICATION. The corporation shall have the
power to make any other or further indemnification of an officer, director,
employee or agent, both as to action in his official capacity and as to action
in another capacity while holding such office except an indemnification against
gross negligence or willful misconduct, under the following circumstances:
(a) Pursuant to an agreement between the corporation and such officer,
director, employee or agent; or
(b) Pursuant to the vote of shareholders; or
(c) Pursuant to the vote of disinterested directors; or
(d) Pursuant to the written recommendation of independent legal counsel
when the Board of Directors submits determination to such counsel; or
(e) Pursuant to the written award of the American Arbitration Association
when the Board of Directors and person seeking indemnification submit the
determination to the American Arbitration Association.
SECTION 4. SURVIVAL OF INDEMNIFICATION. The corporation shall and does
hereby, indemnify any person, if the requirements of this Article have been met,
without affecting any other rights to which those indemnified may be entitled
under any By-Law, agreement, vote of shareholders or disinterested directors or
recommendation of counsel or otherwise, both as to actions in such person's
official capacity and as to actions in another capacity while holding such
office, and such indemnity shall continue as to a person who has ceased to be a
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director, officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 5. INSURANCE. The corporation may, if approved by the Board of
Directors or Executive Committee, 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 or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article or the provisions of Section 607.0850 of the Florida
Statutes.
SECTION 6. NOTIFICATION OF SHAREHOLDERS. If any expenses or other amounts
are paid by way of indemnification, otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall, not later than the time of delivery to
shareholders of written notice of the next annual meeting of shareholders,
unless such meeting is held within three months from the date of such payment,
and, in any event, within fifteen months from the date of such payment, deliver
either personally or by mail to each shareholder of record at the time entitled
to vote for the election of directors a statement specifying the persons paid,
the amounts paid, and the nature and status at the time of such payment of the
litigation or threatened litigation. Such written notice may be contained in any
document distributed to shareholders generally and need not be mailed
separately.
ARTICLE VII.
CERTIFICATES REPRESENTING SHARES
SECTION 1. CERTIFICATES. Every holder of shares in the corporation shall
be entitled to have a certificate or certificates, representing all shares to
which he is entitled. Such certificate or certificates shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary of the
corporation and may be sealed with the seal of the corporation or a facsimile
thereof. The certificates shall be numbered and entered into the books of the
corporation as they are issued.
SECTION 2. FACSIMILE SIGNATURES. The signatures of the President or Vice
President and the Secretary or Assistant Secretary may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or an employee of the corporation. In the case
that any officer who signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issuance.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of the corporation
shall be made upon its books by the holder of the shares in person or by his
lawfully constituted representative, upon surrender of the certificate
representing shares in person or by his lawfully constituted representative,
upon surrender of the certificate representing shares for cancellation. The
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Florida.
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ARTICLE VIII.
TRANSFER BOOKS
SECTION 1. CLOSING OF TRANSFER BOOKS. To determine shareholders for any
purpose, the Board of Directors of the corporation may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, sixty (60) days. If the stock transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders such books shall be closed for at least ten (10) days immediately
preceding such meeting.
SECTION 2. FIXING RECORD DATE. In lieu of closing the stock transfer
books, the Board of Directors may fix a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days and, in the case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
SECTION 3. NO RECORD DATE FIXED. If the stock transfer books are not
closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders.
SECTION 4. ADJOURNMENTS. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Article,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date under this Article for the adjourned meeting.
ARTICLE IX.
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares of capital stock in the manner and
upon the terms and conditions provided by law and by the Articles of
Incorporation and these By-Laws. Dividends may be paid in cash, in property, or
in the corporation's own shares, subject to the provisions of the Articles of
Incorporation and to law.
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ARTICLE X.
FISCAL YEAR
The fiscal year of the corporation shall be the twelve month period
selected by the Board of Directors which shall be the taxable year of the
corporation for federal income tax purposes.
ARTICLE XI.
SEAL
The corporate seal shall bear the name of the Corporation which shall be
set forth between two concentric circles, and inside of the inner circle the
words "SEAL" and the year of incorporation shall be set forth. An impression of
this seal appears on the margin hereof.
ARTICLE XII.
SHARES IN OTHER CORPORATIONS
Shares in other corporations held by this corporation shall be voted by
such officer or officers of this corporation as the Board of Directors shall
from time to time designate for the purpose or by a proxy thereunto duly
authorized by the Board.
ARTICLE XIII.
AMENDMENTS
The power to adopt, alter, amend or repeal these By-Laws shall be vested
in the Board of Directors unless reserved to the shareholders by the Articles of
Incorporation. By-Laws adopted by the Board of Directors or by the shareholders
may be repealed or changed, new By-Laws may be adopted by the shareholders, and
the shareholders may prescribe in any By-Law made by them that such By-Law shall
not be altered, amended, or repealed by the Board of Directors.
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EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("the AGREEMENT") is made and entered
into on August 25, 1998, by and between REGIONAL CAPITAL MANAGEMENT CORPORATION,
a Florida corporation (the "COMPANY"), and THOMAS H. MINKOFF, an individual
residing in Gulfport, Florida (the "EXECUTIVE"), who hereby agree as hereinafter
provided.
Section 1. DEFINITIONS. As used herein, the following terms shall
have the meanings set forth below.
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"BASE COMPENSATION" shall have the meaning set forth in Section 5(a).
"BOARD OF DIRECTORS" means the incumbent directors of the Company as of
the point in time reference thereto is made in this Agreement.
"CAUSE" shall have the meaning set forth in Section 10(b).
"COLA ADJUSTMENT" means the cost of living adjustment, which shall be
equal to (i) two percent, plus (ii) the percent rise in prices for the preceding
year as measured by the Consumer Price Index for all Urban Consumers (CPI-UC),
All City Average, all Items (base year 1982-1984 = 100) published by the United
States Department of Labor, Bureau of Labor Statistics (the "INDEX"). The COLA
Adjustment shall be determined by multiplying the amount or figure to be
adjusted by the sum of (i) two percent, plus (ii) a fraction, the numerator of
which is the Index published for the month in which occurs the date of
adjustment and the denominator of which is the Index published for the same
month of the preceding year.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $.001 per share, of
the Company.
"COMPANY" shall have the meaning set forth in the introductory paragraph
of this Agreement, and shall include Subsidiaries if appropriate.
"COMPETITIVE BUSINESS" shall have the meaning set forth in Section 9(a).
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 9(c).
"DISABILITY" of the Executive means that, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties on a full time basis for six consecutive months, or for
an aggregate of nine months in any consecutive 12-month period, and a physician
selected by the Executive is of the opinion that (a) he is suffering from "total
disability" as defined in the Company's disability insurance program or policy
and (b) he will qualify for Social Security Disability Payments and (c) within
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thirty (30) days after written notice thereof is given by the Company to the
Executive (which notice may be given at any time after the end of such six (6)
or twelve (12) month periods) the Executive shall not have returned to the
performance of his duties on a full-time basis. (If the Executive is prevented
from performing his duties because of Disability, upon request by the Company,
the Executive shall submit to an examination by a physician selected by the
Company, at the Company's expense, and the Executive shall also authorize his
personal physician to disclose to the selected physician all of the Executive's
medical records).
"EMPLOYMENT COMMENCEMENT DATE" means the date set forth in the
introductory paragraph of this Agreement.
"EMPLOYMENT PERIOD" means that period commencing on the Employment
Commencement Date and ending on the Employment Termination Date.
"EMPLOYMENT TERMINATION DATE" means the date the Employment Period
terminates as provided in Section 10.
FISCAL YEAR" means the fiscal year of the Company ending December 31 or as
such fiscal year as may be amended by the Board of Directors.
"FMV" means, as of any applicable date: (i) if the Common Stock is listed
on a national securities exchange or is authorized for quotation on The Nasdaq
National Market ("NMS"), the closing price of the Common Stock on such exchange
or NMS, as the case may be, on such date or if no sale of the Common Stock shall
have occurred on such date, on the next preceding date on which there was such a
reported sale; or (ii) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation on NMS, the closing bid
price as reported by The Nasdaq SmallCap Market on such date, of if no such
price shall have been reported for such date, on the next preceding date for
which such price was so reported; or (iii) if the Common Stock is not listed for
trading on a national securities exchange or authorized for quotation on NMS or
The Nasdaq SmallCap Market (if applicable), the last reported bid price
published in the "pink sheets" or displayed on the National Association of
Securities Dealers, Inc. ("NASD") Electronic Bulletin Board, as the case may be;
or (iv) if the Common Stock is not listed for trading on a national securities
exchange, is not authorized for quotation on NMS or The Nasdaq SmallCap Market
and is not published in the "pink sheets" or displayed on the NASD Electronic
Bulletin Board, the fair market value of the Common Stock as determined in good
faith by the Committee.
"INCENTIVE BONUS COMPENSATION" shall have the meaning set forth in
Section 5(b).
"IPO CLOSING DATE" means the closing date of the Company's initial public
offering ("IPO") of securities pursuant to a registration statement declared
effective by the Commission.
"IPO PRICE" means the price of the Company's Common Stock in an IPO.
"NOTICE OF TERMINATION" shall have the meaning set forth in Section
10(a)(1).
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"OFFERING" means any public offering of shares of Common Stock by the
Company or any holder thereof in accordance with the registration requirements
of the Act.
"REGISTRABLE SECURITIES" means any shares of Common Stock now or hereafter
held by the Executive other than Unrestricted Securities.
"REGISTRATION," "REGISTER" and like words mean compliance with all of the
laws, rules and regulations (federal, state and local), and provisions of
agreements and corporate documents pertaining to the public offering of
securities, including registration of any public offering of securities on any
form under the Act.
"RESTRICTED PERIOD" shall have the meaning set forth in Section 9(a).
"SCHEDULED EMPLOYMENT TERMINATION DATE" means the later of (a) the day
immediately preceding the third anniversary of the Employment Commencement Date
or (b) such date as is specified by either the Company or the Executive in a
Notice of Termination delivered for the purpose of fixing the Scheduled
Employment Termination Date, provided the date so specified shall be at least
three (3) years after the date such Notice of Termination is so delivered.
"SUBSIDIARIES" means wholly owned subsidiaries of the Company.
"UNRESTRICTED SECURITIES" means Common Stock beneficially owned by the
Executive, if any, that can be transferred by the Executive without registration
under the Act.
Section 2. EMPLOYMENT AND TERM. The Company hereby employs the Executive,
and the Executive hereby accepts such employment by the Company, for the
purposes and upon the terms and conditions contained in this Agreement. The term
of such employment shall be for the Employment Period.
Section 3. EMPLOYMENT CAPACITY AND DUTIES. The Executive shall be employed
throughout the Employment Period as the President and Chief Executive Officer of
the Company. The Executive shall have the duties and responsibilities incumbent
with these positions. Accordingly, and not by way of limitation, as President
and Chief Executive Officer, the Executive shall superintend and manage the
business of the Company and coordinate and supervise the work of its other
officers and employ, direct, fix the compensation of, discipline and discharge
its personnel, employ agents, professional advisors and consultants and perform
all functions of a general manager of the Company's business. The Company agrees
that it will not, without the Executive's written consent, require the Executive
to be based anywhere other than Pinellas County, Florida except for required
travel on the Company's business.
Section 4. EXECUTIVE PERFORMANCE COVENANTS. The Executive accepts the
employment described in Section 3 and agrees to devote a substantial amount of
his working time and efforts (except for absences due to illness and appropriate
vacations) to the business and affairs of the Company and the performance of the
aforesaid duties and responsibilities. However, nothing in this Agreement shall
preclude the Executive from devoting a reasonable amount of his time and efforts
to the business of Complex Property Development Corp. ("COMPLEX PROPERTY"),
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civic, community, charitable, professional and trade association affairs and
matters and such other activities as may be disclosed to the Board of Directors.
Section 5. COMPENSATION. The Company shall pay to the Executive for
his services hereunder, the compensation hereinafter provided in this Section
5. Such compensation shall be paid to the Executive at the time and in the
manner as provided below.
(a) BASE COMPENSATION. The Executive shall be paid "BASE
COMPENSATION" for each Fiscal Year at an annual rate of $91,200 in 26 bi-weekly
equal installments or such other basis as may be mutually agreed upon. The Base
Compensation (i) may be increased (but may not be decreased) at any time or from
time to time by action of the Board of Directors or any committee thereof, (ii)
shall be increased to an annual rate of $115,000 upon the IPO Closing Date, and
(iii) shall be increased by the COLA Adjustment on each anniversary of the
Employment Commencement Date. The Base Compensation shall be pro-rated for any
Fiscal Year hereunder which is less than a full Fiscal Year.
(b) INCENTIVE BONUS COMPENSATION. The Executive shall be eligible
for incentive bonus compensation for each Fiscal Year in an amount to be
determined by the Board of Directors or any committee thereof ("INCENTIVE BONUS
COMPENSATION").
(c) OPTIONS. The Executive shall be granted non-qualified options
to purchase shares of Common Stock from the Company as follows: (i) options to
purchase up to 10,000 shares of Common Stock on the IPO Closing Date at the IPO
Price and (ii) options to purchase up to 10,000 shares of Common Stock from the
Company on each anniversary of the Employment Commencement Date at a price equal
to the FMV of such shares of Common Stock on the date on which such options are
to be granted to the Executive.
Section 6. PAYMENT OF EXPENSES. The Company shall pay the Executive's
reasonable expenses incurred in providing services to the Company, including
expenses for travel, entertainment and similar items, in accordance with the
Company's expense policies as determined from time to time by the Board of
Directors. If there is a dispute as to the eligibility of an expense for payment
in accordance with the Company's expense policies, then such expense shall be
determined to be payable by the Company if approved by a majority of the Board
of Directors.
Section 7. EMPLOYEE BENEFITS, VACATIONS. During the Employment
Period, the Executive shall receive the benefits and enjoy the perquisites
described below:
(a) BENEFIT PLANS. The Executive shall be entitled to participate
in any perquisite, benefit or compensation plan (in addition to the compensation
provided for in Section 5) including any profit sharing plan and 401(k) plan,
medical insurance plan (which medical insurance shall be provided for all of the
Executive's dependents, at the Company's expense), life insurance plan, health
and accident plan and disability plan which are generally applicable to all
salaried employees of the Company (collectively referred to as the "BENEFIT
PLANS"). All such Benefit Plans shall be maintained by the Company, or the
Company shall maintain plans providing substantially similar benefits; provided,
however, that the Company may make modifications in the Benefit Plans so long as
such modifications (i) are generally applicable to all salaried employees of the
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Company and (ii) do not discriminate against the Executive or other
highly-compensated employees of the Company.
(b) VACATIONS. The Executive shall be entitled in each Fiscal Year
to a vacation of four weeks (20 working days), during which time his
compensation shall be paid in full, and such holidays and other nonworking days
as are consistent with the policies of the Company for executives generally.
(c) AUTOMOBILE ALLOWANCE. The Executive shall be entitled to a
monthly automobile allowance of $1,000 per month which shall be paid to the
Executive on the first day of each month during the Employment Period,
commencing on the first day of the first month after the Employment Commencement
Date.
(d) CELLULAR PHONE. The Executive shall be entitled to the use of a
cellular telephone provided by the Company, at the Company's expense. All costs
incurred for the use of such cellular telephone shall be paid by the Company.
Section 8. COMPANY LIFE INSURANCE; MEDICAL EXAMINATIONS. At any time
during the Employment Period, the Company may, in its discretion, apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may
determine. The Executive shall have no right to any interest in any such policy
or policies, but he shall, at the request of the Company, submit to such medical
examinations, supply such information and execute such applications, instruments
and other documents as reasonably may be required by the insurance company or
companies to whom the Company has applied for such insurance.
If requested by the Company, the Executive shall submit to at least one
medical examination during each Fiscal Year at such reasonable time and place
and by a physician or physicians determined and selected by the Company. All the
costs and expenses of said medical examination, including transportation of the
Executive to the place of examination and return, shall be paid by the Company.
The Executive shall be entitled to a copy of all reports and other
information provided to the Company in connection with any examination referred
to in this Section 8. Any failure to pass any such medical examination or to
meet any health criteria or medical standard shall not of itself be cause for
termination of the Employment Period by the Company.
Section 9. CERTAIN COMPANY PROTECTION PROVISIONS. The below
provisions apply for the protection of the Company.
(a) NONCOMPETITION. During the Restricted Period, the Executive
shall not directly or indirectly compete with the Company by owning, managing,
controlling or participating in the ownership, management or control of, or be
employed or engaged by or otherwise affiliated or associated with, any
Competitive Business which is within a five-mile radius of any assisted living
facility owned or managed by the Company as of the Employment Termination Date.
As used herein, the term "RESTRICTED PERIOD" means the Employment Period and a
period of one year thereafter and means the Employment Period if the Company
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terminates the Executive without "cause" (as defined in Section 10(b)) or the
Executive terminates his employment for "good reason" (as defined in Section
10(e)). As used herein, a "COMPETITIVE BUSINESS" is any other corporation,
partnership, proprietorship, firm, association or other business entity which
owns, manages, controls or participates in the ownership, management or control
of an assisted living facility; provided, however, that ownership of not more
than five percent (5%) of the stock of any publicly traded company shall not be
deemed a violation of this provision.
(b) NON-INTERFERENCE. During the Restricted Period, the Executive
shall not induce or solicit any employee of the Company or any person doing
business with the Company to terminate his or her employment or business
relationship with the Company or otherwise interfere with any such relationship.
(c) CONFIDENTIALITY. The Executive agrees and acknowledges that, by
reason of the nature of his duties as an officer and employee, he will have or
may have access to and become informed of confidential and secret information
which is a competitive asset of the Company ("CONFIDENTIAL INFORMATION"),
including without limitation any lists of customers or suppliers, financial
statistics, research data or any other statistics and plans contained in profit
plans, capital plans, critical issue plans, strategic plans or marketing or
operation plans or other trade secrets of the Company and any of the foregoing
which belong to any person or company but to which the Executive has had access
by reason of his employment relationship with the Company. The Executive agrees
faithfully to keep in strict confidence, and not, either directly or indirectly,
to make known, divulge, reveal, furnish, make available or use (except for use
in the regular course of his employment duties) any such Confidential
Information. The Executive acknowledges that all manuals, instruction books,
price lists, information and records and other information and aids relating to
the Company's business, and any and all other documents containing Confidential
Information furnished to the Executive by the Company or otherwise acquired or
developed by the Executive, shall at all times be the property of the Company.
Upon termination of the Employment Period, the Executive shall return to the
Company any such property or documents which are in his possession, custody or
control, but his obligation of confidentiality shall survive such termination of
the Employment Period until and unless any such Confidential Information shall
have become, through no fault of the Executive, generally known to the trade.
The obligations of the Executive under this subsection are in addition to, and
not in limitation or preemption of, all other obligations of confidentiality
which the Executive may have to the Company under general legal or equitable
principles.
(d) REMEDIES. It is expressly agreed by the Executive and the
Company that these provisions are reasonable for purposes of preserving for the
Company its business, goodwill and proprietary information. It is also agreed
that if any provision is found by a court having jurisdiction to be unreasonable
because of scope, area or time, then that provision shall be amended to
correspond in scope, area and time to that considered reasonable by a court and
as amended shall be enforced and the remaining provisions shall remain
effective. In the event of any breach of these provisions by the Executive, the
parties recognize and acknowledge that a remedy at law will be inadequate and
the Company may suffer irreparable injury. The Executive acknowledges that the
services to be rendered by him are of a character giving them peculiar value,
the loss of which cannot be adequately compensated for in damages; accordingly
the Executive consents to injunctive and other appropriate equitable relief upon
the institution of proceedings therefor by the Company in order to protect the
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Company's rights. Such relief shall be in addition to any other relief to which
the Company may be entitled at law or in equity.
Section 10. TERMINATION OF EMPLOYMENT.
(a) NOTICE OF TERMINATION; EMPLOYMENT TERMINATION DATE.
(1) Any termination of the Executive's employment by the
Company or the Executive shall be communicated by written Notice of Termination
to the other party thereto. For purposes of this Agreement, a "NOTICE OF
TERMINATION" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination under the
provision so indicated. Furthermore, either the Executive or the Company may
give a Notice of Termination to the other party for the purpose of terminating
this Agreement on the Scheduled Employment Termination Date. Such Notice of
Termination shall have the effect of terminating this Agreement on the Scheduled
Employment Termination Date.
(2) "EMPLOYMENT TERMINATION DATE" shall mean the date on
which the Employment Period and the Executive's right and obligation to perform
employment services for the Company shall terminate effective upon the first to
occur of the following, it being understood that in no event may the Employment
Period be terminated other than as the result of one of the following events:
(A) If the Executive's employment is terminated for
Disability, the date which is thirty (30) days after
Notice of Termination is given (provided that the
Executive shall not have returned to the performance of
his duties on a full-time basis during such thirty (30)
days period);
(B) If the Executive's employment is terminated by the
Executive for Good Reason or otherwise by voluntary
action of the Executive (see Section 10(e)), the date
specified in the Notice of Termination, which date
(except with the written consent of the Company to the
contrary) shall not be more than sixty (60) days after
the date that the Notice of Termination is given;
(C) The death of the Executive;
(D) The Scheduled Employment Termination Date;
(E) If the Executive's employment is terminated by the
Company for Cause (see Section 10(b)(1)), the date on
which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination
is given the party receiving such Notice of Termination
notifies the other party that a dispute exists
concerning the termination, the Employment Termination
Date shall be the date on which the dispute is finally
determined, either by mutual written agreement of the
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parties, by a binding and final arbitration award or by
a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected); and
(F) If the Executive's employment is terminated by the
Company other than for Cause, Disability or death of the
Executive (see Section 10(f)), the date specified in the
Notice of Termination which date (except with the
written consent of the Executive to the contrary) shall
not be more than sixty (60) days after the date that the
Notice of Termination is given.
(b) TERMINATION FOR CAUSE:
(1) The Company may terminate the Executive's employment and
the Employment Period for Cause. For the purposes of this Agreement, the Company
shall have "CAUSE" to terminate employment hereunder only (A) if termination
shall have been the result of an act or acts of willful misconduct materially
injurious to the Company, monetarily or otherwise, or (B) upon the willful and
continued failure by the Executive substantially to perform his duties with the
Company (other than any such failure resulting from incapacity due to mental or
physical illness) after a demand in writing for substantial performance is
delivered by the Board of Directors, which demand specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed his duties, and such failure results in demonstrably material injury
to the Company. The Executive's employment shall in no event be considered to
have been terminated by the Company for Cause if such termination took place as
the result of (i) bad judgment or negligence, or (ii) any act or omission
without intent of gaining therefrom directly or indirectly a profit to which the
Executive was not legally entitled, or (iii) any act or omission believed in
good faith to have been in or not opposed to the interest of the Company, or
(iv) any act or omission in respect of which a determination is made that the
Executive met the applicable standard of conduct prescribed for indemnification
or reimbursement or payment of expenses under the Articles of Incorporation of
the Company or the laws of the State of Florida, in each case as in effect at
the time of such act or omission. The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors at a meeting
of the Board of Directors called and held for the purpose (after not less than
thirty (30) days' written notice to the Executive and an opportunity for him
together with his counsel, to be heard before the Board of Directors, such
notice of meeting to indicate the specific termination provision of this
Agreement relied upon and specify in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated), finding that in the good faith opinion of the Board of Directors the
Executive was guilty of conduct set forth above in clauses (A) or (B) of the
second sentence of this paragraph and specifying the particulars thereof in
detail.
(2) If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive within ten (10) days of such
termination, his unpaid Base Compensation through the Employment Termination
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Date at the rate in effect at the time Notice of Termination is given, plus any
expenses incurred in accordance with Section 6 hereof.
(c) TERMINATION FOR DISABILITY. The Company may terminate the
Executive's employment because of the Disability of the Executive and thereafter
shall pay to the Executive (or his successors) (1) his unpaid Base Compensation
through the sixth full month following the Employment Termination Date at his
then effective Base Compensation rate; plus (2) any accrued but unpaid Incentive
Compensation plus (3) any expenses incurred in accordance with Section 6 hereof.
(d) TERMINATION UPON EXECUTIVE'S DEATH. In the event of the
Executive's death, the Company shall pay to the Executive's estate (1) any
unpaid amount of Base Compensation through the date of death at the then
effective Base Compensation rate, plus (2) any accrued but unpaid Incentive
Compensation, plus (3) any expenses incurred in accordance with Section 6
hereof. All previously granted stock options, rights, warrants and awards shall
fully vest on the death of the Executive.
(e) TERMINATION OF EMPLOYMENT BY THE EXECUTIVE.
(1) The Executive may terminate his employment for Good
Reason and receive the payments and benefits specified in Section 10(f) in the
same manner as if the Company had terminated his employment. For purposes of
this Agreement, "GOOD REASON" will exist if any one or more of the following
occur:
(A) Failure by the Company to honor any of its obligations
under this Agreement, including, without limitation, its
obligations under Section 3 (EMPLOYMENT CAPACITY AND
DUTIES). Section 4 (EXECUTIVE PERFORMANCE COVENANTS).
Section 5 (COMPENSATION). Section 6 (PAYMENT OF
EXPENSES). Section 7 (EMPLOYEE BENEFITS, VACATIONS).
Section 13 (INDEMNIFICATION) and Section 15 (SUCCESSORS
AND ASSIGNS); or
(B) Any purported termination by the Company of the
Executive's employment that is not effected pursuant to
a Notice of Termination satisfying the requirements of
Section 10(a) above and, for purposes of this Agreement,
no such purported termination shall be effective.
(C) If there is a Change in Control of the Company (as
defined below) and the employment of the Executive is
concurrently or subsequently terminated (i) by the
Company without Cause, (ii) by service of a Notice of
Termination or (iii) by the resignation of the
Employee because he has reasonably determined in good
faith that his titles, authorities, responsibilities,
salary, bonus opportunities or benefits have been
materially diminished, or that a material adverse
change in his working conditions has occurred or the
Company has breached this Agreement. For the purpose
of this Agreement, a "CHANGE IN CONTROL" of the
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Company has occurred when: (x) any person (defined
for the purposes of this Section 10 to mean any
person within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 (the "EXCHANGE
Act")), other than the Company, or an employee
benefit plan established by the Board of Directors of
the Company, acquires, directly or indirectly, the
beneficial ownership (determined under Rule 13d-3 of
the regulations promulgated by the Securities and
Exchange Commission under Section 13(d) of the
Exchange Act) of securities issued by the Company
having twenty percent (20%) or more of the voting
power of all of the voting securities issued by the
Company in the election of directors at the meeting
of the holders of voting securities to be held for
such purpose; or (y) a majority of the directors
elected at any meeting of the holders of voting
securities of the Company are persons who were not
nominated for such election by the Board of Directors
of the Company or a duly constituted committee of the
Board of Directors of the Company having authority in
such matters; or (z) the Company merges or
consolidates with or transfers substantially all of
its assets to another person.
(2) The Executive shall have the right voluntarily to
terminate his employment other than for Good Reason prior to the Scheduled
Employment Termination Date, and if the Executive shall so terminate his
employment, he shall be entitled only to payment of the amounts which would be
payable under Section 10(b)(2) had he been terminated for Cause.
(f) COMPENSATION UPON TERMINATION OTHER THAN FOR CAUSE.
(1) If the Company shall terminate the Executive's employment
other than for Cause pursuant to Section 10(c) or (d), or if the Executive shall
terminate his employment for Good Reason pursuant to Section 10(e)(1) (but not a
termination voluntarily by the Executive other than for Good Reason under
Section 10(e)(2)), then the Company shall pay to the Executive the following
amounts:
(A) (1) His unpaid Base Compensation through the Employment
Termination Date at his then effective Base Compensation
Rate, plus (2) any accrued but unpaid Incentive Bonus
Compensation, plus (3) any expenses incurred in
accordance with Section 6 hereof.
(B) In addition to the amounts specified in Section
10(f)(1)(A), the Company shall pay to the Executive
promptly in a single lump sum in cash an amount equal to
the product of three (3), multiplied by one hundred
percent (100%) of the aggregate total amount which would
have been payable to Executive under Section 5 for the
entire Fiscal Year in which occurs the Employment
Termination Date as if his employment had not been
terminated (and without deduction or offset for any
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amounts actually paid for such Fiscal Year on account of
Base Compensation or Incentive Bonus Compensation, under
Section 5, this Section 10 or otherwise), and assuming
for purposes of calculating (x) the Base Compensation,
one hundred percent (100%) of the amount thereof at the
annual rate payable for such Fiscal Year pursuant to
Section 5(a) and (y) the Incentive Bonus Compensation,
the largest amount thereof accrued for any of the two
most recently completed Fiscal Years.
(C) The Company shall also pay all legal fees and expenses
incurred as a result of such termination (including all
such fees and expenses, if any, incurred in contesting
or disputing any such termination, in seeking to obtain
or enforce any right or benefit provided by this
Agreement, or in interpreting this Agreement). The
Company agrees, in the event the Executive desires to
relocate within one year after the Employment
Termination Date, to pay for (or reimburse) all
reasonable moving expenses incurred relating to a change
of principal residence in connection with such
relocation and to indemnify the Executive in connection
with any loss he may sustain in the sale of his primary
residence.
(D) The Executive shall be under no obligation to seek other
employment and there shall be no offset against any
amounts due the Executive under this Agreement on
account of any remuneration attributable to any
subsequent employment that the Executive may obtain (any
amounts due under Section 10(f) are in the nature of
severance payments, or liquidated damages, or both, and
are not in the nature of a penalty).
(2) Unless Executive is terminated for Cause, the Company
shall maintain in full force and effect, for the Executive's continued benefit
through the Scheduled Employment Terminate Date, all active and retired Benefit
Plans and other benefit programs or arrangements in which he was entitled to
participate immediately prior to the Scheduled Employment Terminate Date (except
as specified in Section 7(a) of this Agreement), provided that continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that participation in any such plan or program is
barred, the Company shall arrange to provide him with benefits substantially
similar to those which he is entitled to receive under such plans and programs.
(g) COMPENSATION UPON DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness, he shall continue to receive his full Base
Compensation at the rate then in effect and his full Incentive Bonus
Compensation until this Agreement is terminated pursuant to Section 10(c)
hereof. Thereafter, his benefits shall be determined in accordance with the
Company's Benefit Plans.
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Section 11. CERTAIN TAX MATTERS
(a) OPTIONAL RIGHT OF PARTIAL DISCLAIMER.
It is recognized that under certain circumstances:
(1) Payments or benefits provided to the Executive under this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement (including without limitation any stock option
plan) might give rise to an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, or any successor provision
thereof.
(2) It might be beneficial to the Executive to disclaim some
portion of the payment or benefit in order to avoid such "excess parachute
payment" and thereby avoid the imposition of an excise tax resulting therefrom.
(3) Under such circumstances it would not be to the
disadvantage of the Company to permit the Executive to disclaim any such payment
or benefit in order to avoid the "excess parachute payment" and the excise tax
resulting therefrom.
Accordingly, the Executive may, at the Executive's option, exercisable at
any time or from time to time, disclaim any entitlement to any portion of the
payment or benefits arising under this Agreement or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or arrangement (including
without limitation any stock option plan) which would constitute "excess
parachute payments" and it shall be the Executive's choice as to which payments
or benefits shall be so surrendered, if and to the extent that the Executive
exercises such option, so as to avoid "excess parachute payments."
(b) ADDITIONAL PAYMENTS.
(1) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined (as hereafter provided)
that any payment or distribution to or for the Executive's benefit, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement (including without limitation any stock option
plan), or similar right (a "PAYMENT"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (or any successor
provision thereto), or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereafter
collectively referred to as the "EXCISE TAX"), then the Executive shall be
entitled to receive an additional payment or payments (a "GROSS-UP PAYMENT") in
an amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the lesser of (A) the Excise Tax imposed upon the
Payments or (B) the Excise Tax that would be imposed upon all payments or
benefits provided under this Agreement (including any stock option agreement) if
such payments or benefits (but only such payments or benefits) constituted in
their entirety "excess parachute payments" as such term is defined in section
280G and 4999 of the Internal Revenue Code of 1986 (or any successor provisions
thereto).
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(2) Subject to the provisions of Section 11(b)(5), all
determinations required to be made under this Section 11(b), including whether
an Excise Tax is payable by the Executive, the amount of such Excise Tax,
whether a Gross-Up Payment is required, and the amount of such Gross-Up Payment,
shall be made by a nationally-recognized legal or accounting firm (the "FIRM")
selected by the Executive in the Executive's sole discretion. The Executive
agrees to direct the Firm to submit its determination and detailed supporting
calculations to both the Executive and the Company as promptly as practicable.
If the Firm determines that any Excise Tax is payable by the Executive and that
a Gross-Up Payment is required, the Company shall pay the Executive the required
Gross-Up Payment within ten business days after receipt of such determination
and calculations. If the Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such determination, furnish
the Executive with an opinion that the Executive has substantial authority not
to report any Excise Tax on the Executive's federal income tax return. Any
determination by the Firm as to the amount of the Gross-Up Payment shall be
binding upon the Executive and the Company. As a result of the uncertainty in
the application of Section 4999 of the Internal Revenue Code of 1986 (or any
successor provision thereto) at the time of the initial determination by the
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (an "UNDERPAYMENT"). In the event that
the Company exhausts its remedies pursuant to Section 11(b)(5) hereof and the
Executive thereafter is required to make a payment of any Excise Tax, the
Executive may direct the Firm to determine the amount of the Underpayment (if
any) that has occurred and to submit its determination and detailed supporting
calculations to both the Executive and the Company as promptly as possible. Any
such Underpayment shall be promptly paid by the Company to the Executive, or for
the Executive's benefit, within ten business days after receipt of such
determination and calculations.
(3) The Executive and the Company shall each provide the Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Firm, and otherwise cooperate with the Firm in connection with the preparation
and issuance of the determination contemplated by Section 11(b)(2) hereof.
(4) The fees and expenses of the Firm for its services in
connection with the determinations and calculations contemplated by Section
11(b)(2) hereof shall be borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within ten business days after receipt
from the Executive of a statement therefor and reasonable evidence of the
Executive's payment thereof.
(5) The Executive agrees to notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as promptly as practicable but no later than 10 business days after the
Executive actually receives notice of such claim. The Executive agrees to
further apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known by the
Executive). The Executive agrees not to pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company and (b) the date that any payment
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with respect to such claim is due. If the Company notifies the Executive in
writing at least five business days prior to the expiration of such period that
it desires to contest such claim, the Executive agrees to:
a) provide the Company with any written records or
documents in the Executive's possession relating to
such claim reasonably requested by the Company;
b) Company shall reasonably request in writing from time to
time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and
reasonably selected by the Company;
c) cooperate with the Company in good faith in order to
effectively contest such claim; and
d) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, from and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 11(b)(5), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 11(b)(5) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at the
Executive's own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
the tax claimed and sue for a refund, the Company shall advance the amount of
such payment to the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
the statute of limitations relating to payment of taxes for the Executive's
taxable year with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(6) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 11(b)(5) hereof, the Executive
receives any refund with respect to such claim, the Executive agrees (subject to
the Company's complying with the requirements of Section 11(b)(5) hereof) to
promptly pay to the Company the amount of such refund (together with any
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interest paid or credited thereon after any taxes applicable thereto). If, after
the Executive's receipt of an amount advanced by the Company pursuant to Section
11(b)(5) hereof, a determination is made that the Executive is not entitled to
any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid pursuant to this Section 11(b).
SECTION 12. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION.
(1) At any time after the Employment Commencement Date, and
subject to the other provisions of this Section 12, the Executive shall have the
right, exercisable by making a written request to the Company, to demand that
the Company effect the Registration of any Registrable Securities in accordance
with the provisions of the Act. The Company shall then comply with Section
12(a)(2) hereof. Any provision herein to the contrary notwithstanding, the right
to demand Registration pursuant to this Section 12 shall be limited to one
Registration demand per calendar year. A right to demand Registration hereunder
shall be deemed to have been exercised and all of the Company's demand
Registration obligations hereunder for such calendar year shall be deemed to be
fully satisfied when the registration statement filed on account of such
exercise has been declared effective by the Commission. If any other executive
of the Company exercises his or her right, if any, to demand that the Company
effect the Registration of any Registrable Securities, then the Executive shall
have the right to Register an equivalent number of Registrable Securities
without reducing the number demand Registrations the Executive shall have in any
calendar year.
(2) Following receipt of a request pursuant to Section
12(a)(1) hereof, the Company shall (i) file within ninety (90) days thereafter a
registration statement on the appropriate form under the Act for the shares of
Common Stock that the Company has been requested to Register; (ii) if the
applicable Offering is pursuant to an underwriting agreement, enter into an
underwriting agreement in such form as said managing or sole underwriter shall
require (which must only contain terms and conditions customary for offerings of
equity securities of entities with market capitalizations that are approximately
equal to the Company's then current market capitalization and may contain
customary provisions requiring the Company and the Executive to indemnify and
provide contribution to the underwriter or underwriters of such Offering); and
(iii) use its reasonable best efforts to have such registration statement
declared effective as promptly as practicable and to remain effective for at
least one hundred eighty (180) days. Notwithstanding any other provision hereof,
the Executive acknowledges and agrees that there can be no guarantee or warranty
from or by the Company that any such registration statement will ever be
declared effective by the Commission, and that the Company makes no such
guarantee or warranty in this Agreement.
(b) PIGGY-BACK REGISTRATION. If the Company at any time proposes to
register any of its securities under the Act or pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), collectively referred to as
-15-
<PAGE>
the "SECURITIES ACTS," whether or not for sale for its own account, it will each
such time give prompt written notice to the Executive of its intention to do so
(the "REGISTRATION NOTICE"). Upon the written request of the Executive, made
within fifteen (15) business days after the receipt of the Registration Notice,
the Company shall use its best efforts to effect the registration under the
Securities Acts of such amount of the Executive's Common Stock as the Executive
requests, by inclusion of the Executive's Common Stock in the registration
statement that relates to the securities which the Company proposes to register,
PROVIDED that if, at any time after giving the Registration Notice and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to the Executive (the "REFUSAL
NOTICE") and, thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register the Executive's Common Stock in
connection with such terminated registration (but not from its obligation to pay
the Registration Expenses in connection therewith), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering the
Executive's Common Stock, for the same period as the delay in registering such
other securities.
(c) REGISTRATION EXPENSES. The Company shall pay all Registration
Expenses (as defined herein) in connection with each registration of the
Executive's Common Stock pursuant to this Section 12. For the purposes hereof,
the phrase "REGISTRATION EXPENSES" shall include all expenses incident to the
Company's performance of, or compliance with, this Section 12, including,
without limitation, (i) all registration, filing and NASD fees, (ii) all fees
and expenses of complying with securities or blue sky laws, (iii) all printing
expenses, (iv) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, (v) the fees and disbursements of any one counsel and any one
accountant retained by the Executive, (vi) premiums and other costs of policies
of insurance against liabilities arising out of the public offering of the
Executive's Common Stock being registered if the Company desires such insurance,
and (vii) any fees and disbursements of underwriters customarily paid by issuers
or sellers of securities, but excluding underwriting discounts and commissions
and transfer taxes, if any.
(d) SURVIVAL. Notwithstanding anything to the contrary contained
herein, the provisions of this Section 12 shall survive the Employment
Termination Date for a period of two (2) years.
Section 13. INDEMNIFICATION. As an employee, officer and director of the
Company, the Executive shall be indemnified against all liabilities, damages,
fines, costs and expenses by the Company in accordance with the indemnification
provisions of the Company's Articles of Incorporation as in effect on the date
hereof, and otherwise to the fullest extent to which employees, officers and
directors of a corporation organized under the laws of Florida may be
indemnified pursuant to Florida Business Corporation Act, as the same may be
amended from time to time (or any subsequent statute of similar tenor and
effect), subject to the terms and conditions of such statute.
-16-
<PAGE>
Section 14. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Pinellas County Florida in accordance with the rules of the American Arbitration
Association then in effect; provided that all arbitration expenses shall be
borne by the Company. Notwithstanding the pendency of any dispute or controversy
concerning termination or the effects thereof, the Company will continue to pay
the Executive his full compensation in effect immediately before any Notice of
Termination giving rise to the dispute was given (including, but not limited to,
Base Salary and Incentive Compensation) and continue him as a participant in all
compensation, benefit and insurance plans in which he was then participating,
until the dispute is finally resolved. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Employment Termination Date during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
Section 15. SUCCESSORS AND ASSIGNS. Except as hereinafter expressly
provided, the agreements, covenants, terms and provisions of this Agreement
shall bind the respective heirs, executors, administrators, successors and
assigns of the parties. Specifically, and not by way of limitation of the
foregoing, the Executive shall be bound by the terms and conditions of this
Agreement to any successor assignee of the Company's rights and obligations
hereunder as a result of any merger, consolidation or sale or lease of all or
substantially all of the Company's business and assets. If any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company fails,
concurrently with the effectiveness of any such succession, to agree in writing
in form and substance reasonably satisfactory to the Executive expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place, then the Executive shall have the right, effected by notice to such
successor not later than ninety (90) days after the effectiveness of such
succession, to terminate the Employment Period under Section 10(e) as though
such failure was an uncured breach by the Company of a material covenant or
agreement of the Company contained in this Agreement.
If the Executive should die while any amounts are payable to him
hereunder, or if by reason of his death payments are to be made to him
hereunder, then this Agreement shall inure to the benefit of and be enforceable
by the Executive's executors, administrators, heirs, distributees, devisees and
legatees and all amounts payable hereunder shall then be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there is no such designee, to this estate.
This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder, except as hereinbefore provided in this
Section 15. Without limiting the foregoing, the Executive's right to receive
payments hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by his will
or by the laws of descent or distribution, and in the event of any attempted
assignment or transfer contrary to this paragraph the Company shall have no
liability to pay to the purported assignee or transferee any amount so attempted
to be assigned or transferred.
-17-
<PAGE>
As used in this Agreement, the "COMPANY" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in the first
paragraph of this Section 15 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
Section 16. NOTICES. Any notice or other communication required or desired
to be given hereunder shall be in writing and shall be deemed sufficiently given
when personally delivered or delivered by recognized overnight delivery service,
addressed to the parties at their respective addressed set forth under their
respective signatures below or such other person or addresses as shall be given
by notice of any party. Such notice shall be deemed to be given on the date of
delivery.
Section 17. WAIVER; REMEDIES CUMULATIVE. No waiver of any right or option
hereunder by any party shall operate as a waiver of any other right or option,
or the same right or option as respects any subsequent occasion for its
exercise, or of any legal remedy. No waiver by any party of any breach of this
Agreement or of any agreement or covenant contained herein shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies by
it or the law provided.
Section 18. GOVERNING LAW; SEVERABILITY. This Agreement is made and is
expected to be performed in Florida, and the various terms, provisions,
covenants and agreements, and the performance thereof, shall be construed,
interpreted and enforced under and with reference to the laws of the State of
Florida, unless otherwise indicated herein. It is the intention of the Company
and the Executive to comply fully with all laws and matters of public policy
relating to employment agreements and restrictive covenants, and this Agreement
shall be construed consistently with such laws and public policy to the extent
possible. If and to the extent any one or more covenants, agreements, terms and
provisions of this Agreement or any portion or portions thereof shall be held
invalid or unenforceable by a court of competent jurisdiction, then such
covenants, agreements, terms and provisions (or portions thereof) shall be
deemed separable from the remaining covenants, agreements, terms and provisions
of this Agreement and such holding shall in no way affect the validity or
enforceability of any of the other covenants, agreements, terms and provisions
hereof.
Section 19. MISCELLANEOUS. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
This Agreement may not be modified, changed or amended except in a writing
signed by each of the parties hereto. This Agreement may be signed in multiple
counterparts, each of which shall be deemed an original hereof. The captions of
the several sections and subsections of this Agreement are not a part of the
context hereof, are inserted only for convenience in locating such sections and
subsections and shall be ignored in construing this Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
Company: Executive:
REGIONAL CAPITAL MANAGEMENT CORPORATION
By: /s/ Thomas H. Minkoff
------------------------------------- /s/ Thomas H. Minkoff
Name: Thomas H. Minkoff ----------------------------------
Title: President Name: Thomas H. Minkoff
Address: 1635 D Royal Palm Drive South Address: 1635 D Royal Palm Drive South
Gulfport, Florida 33707 Gulfport, Florida 33707
-19-
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "AGREEMENT") is made on August 25,
1998 by and between REGIONAL CAPITAL MANAGEMENT CORPORATION, a Florida
corporation (the "COMPANY"), and THOMAS H. MINKOFF (the "INDEMNITEE").
In consideration of the Indemnitee's past and future services to or on
behalf of the Company and to benefit the Company, the Company and the Indemnitee
hereby agree as follows:
1. DEFINITIONS. For the purposes of this Agreement:
a) "CLAIM" means any threatened, pending or completed action,
suit or proceeding, liability, claim, damage, judgment, cost or expense
(including attorneys' fees, expenses, bonds and costs of investigation) or any
inquiry or investigation that the Indemnitee in good faith believes might lead
to the institution of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or other.
b) "INDEPENDENT COUNSEL" means a law firm or member of a law firm
that has not within the last five years represented the Company or the
Indemnitee in a matter material to either or in a matter material to any other
party to the action, suit or proceeding giving rise to the Indemnitee's claim
for indemnification under this Agreement. Independent Counsel shall not include
any member of a law firm who would have a conflict of interest under applicable
standards of professional conduct in representing the Company or the Indemnitee
in an action hereunder. Such Independent Counsel shall be chosen by the
Indemnitee and approved by the Board of Directors of the Company (the "BOARD OF
DIRECTORS") which approval shall not be unreasonably withheld.
<PAGE>
c) "REVIEWING PARTY" means (1) the Board of Directors of the
Company by a majority vote of a quorum consisting of directors who were not
parties to the 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 Counsel in a written opinion, or (3) by the shareholders
of the Company.
2. INDEMNITY. Subject to Sections 8 and 9 hereof, the Company agrees to
indemnify and hold the Indemnitee harmless, to the fullest extent permitted by
law, including, but not limited to, the extent and in the manner herein
provided, from and against any and all Claims of any type arising from or
related to his past or future acts or omissions as a director or officer of the
Company and/or its subsidiaries (which term shall mean any entities of which the
Company owns directly, or through any such subsidiaries, at least 50% of the
voting stock (hereinafter referred to as "SUBSIDIARIES")), as applicable. This
indemnity shall extend to all matters except to the extent applicable law
prohibits indemnification.
3. JUDGMENTS. Subject to Sections 8 and 9 hereof, the Company agrees to
promptly pay on behalf of the Indemnitee any and all judgments against the
Indemnitee for damages arising from acts or omissions as a director or officer
of the Company and/or its Subsidiaries when any such judgment becomes final and
subject to execution against the Indemnitee, to the full extent allowable under
applicable law.
4. APPEAL BONDS. Subject to Sections 8 and 9 hereof, the Company shall
pay the cost of, provide collateral for and cause to be timely and duly filed in
Court, appellate bonds to prevent execution of judgment against the Indemnitee
during the pendency of appeals as the Indemnitee may reasonably initiate, to the
full extent allowable under applicable law.
2
<PAGE>
5. COST OF DEFENSE. Subject to Sections 8 and 9 hereof, the Company shall
promptly pay the reasonable cost of the defense of the Indemnitee against any
and all Claims against him arising from the Indemnitee's past or future acts or
omissions as a director or officer of the Company and/or its Subsidiaries when
statements for legal services are delivered to the Company or the Indemnitee
(including any required retainer amounts), to the full extent allowable under
applicable law.
6. FINES, COSTS, FEES. Subject to Sections 8 and 9 hereof, the Company
shall promptly pay on the Indemnitee's behalf any fines, court costs, legal fees
or other charges assessed against him related to any Claim where allegations
against the Indemnitee arise from his acts or omissions as a director or officer
of the Company and/or its Subsidiaries, to the full extent allowable under
applicable law.
7. ADVANCE PAYMENT OF EXPENSES. Expenses incurred by the Indemnitee in
connection with defending a Claim shall be paid by the Company as they are
incurred and in advance of the final disposition of such Claim within twenty
(20) days of receipt of an undertaking by the Indemnitee, in substantially the
same form as Exhibit "A" hereto, to repay such amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the Company. If the Company fails to advance any amounts required
to be advanced under this Section 7 within twenty (20) days after receipt of an
undertaking by the Indemnitee, the Indemnity may at any time thereafter bring
suit against the Company for specific performance or to recover the unpaid
amount. If successful in whole or in part, the Indemnitee shall also be entitled
to be paid the expense of prosecuting such claim.
8. GENERAL RIGHT TO INDEMNIFICATION. Upon written demand by the
Indemnitee for indemnification under the terms of this Agreement (unless
otherwise ordered by a court or advanced pursuant to Section 7 hereof or
3
<PAGE>
advanced pursuant to applicable law, as the same may be amended from time to
time (but, in the case of any such amendment with reference to events occurring
prior to the effective date thereof, only to the extent that such amendment
permits the Company to provide broader indemnification rights than such law
permitted the Company to provide prior to such amendment)), the Indemnitee shall
be entitled to such indemnification unless the Reviewing Party determines within
thirty (30) days of receiving Indemnitee's written demand that the Indemnitee
would not be permitted to be indemnified under applicable law. The Indemnitee
and its counsel shall be given an opportunity to be heard and to present
evidence on the Indemnitee's behalf before the Reviewing Party. If the Reviewing
Party determines that the Indemnitee is not entitled to indemnification, the
Reviewing Party shall provide the Indemnitee, concurrently with its
determination, a detailed written explanation setting forth its reasons. The
failure to provide the Indemnitee with a detailed written explanation shall
entitle the Indemnitee to a presumption that the Indemnitee has met the
applicable standard of conduct and that the unfavorable determination was
wrongful in any subsequent suit brought by either the Indemnity or the Company
to determine whether the Indemnitee is entitled to indemnification.
9. RIGHT OF INDEMNITEE TO BRING SUIT.
a) If there has been no determination by the Reviewing Party or if
the Reviewing Party determines that the Indemnitee substantively would not be
permitted to be indemnified in whole or in part under applicable law, the
Indemnitee shall have the right to bring suit seeking an initial determination
by the court or challenging any such determination by the Reviewing Party or any
aspect thereof (and the Indemnitee shall be entitled to any presumption
specified in Section 8 hereof), and the Company hereby consents to service of
process and to appear in any such proceeding. Any determination by the Reviewing
4
<PAGE>
Party otherwise shall be conclusive and binding on the Company and the
Indemnitee.
b) In any action brought by the Indemnitee to enforce a right to
indemnification hereunder, or by the Company to recover payments by the Company
of expenses incurred by the Indemnitee in connection with a Claim in advance of
its final disposition, the burden of proving that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise shall be on the Company.
Neither the failure of the Company or the Reviewing Party to have made a
determination prior to the commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth under applicable law, nor an actual
determination by the Company or the Reviewing Party that the Indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
Indemnitee has not met the applicable standard of conduct or, in the case of
such an action brought by the Indemnitee, be a defense to the Claim.
c) The Company shall pay all expenses (including attorneys' fees)
actually and reasonably incurred by the Indemnitee in connection with such
judicial determination, whether or not the Indemnitee prevails in such
proceeding.
10. INSURANCE. If a loss, payment or expense contemplated by this
Agreement is paid by the Company and is also covered by collectible insurance,
the Indemnitee shall cooperate with the Company to effect collection of all
available insurance and through assignment, reimbursement to the Company or
otherwise exercise all reasonable efforts to cause applicable insurance benefits
to be paid to or on behalf of the Company, thus reducing the Company's payments
under this Agreement.
5
<PAGE>
11. LAW, CONSTRUCTION, ARBITRATION. This Agreement is to be liberally
construed to provide the Indemnitee with the broadest indemnity permitted by
applicable law and ambiguities in the terms of this Agreement, if any, choice of
law, or construction of laws are to be resolved in the Indemnitee's favor. The
Indemnitee shall be entitled to the benefits of all changes in law, whether
effected by statute, regulation, rule, judicial decision or otherwise, which in
any way expand his right to be indemnified by the Company or to have the Company
advance his expenses. The laws of the State of Florida shall apply.
12. OTHER MEANS OF INDEMNITY. The Company acknowledges that the benefits
to the Indemnitee of this Agreement are not exclusive and that the Indemnitee
retains all rights of indemnity or repayment from the Company that are available
to him by applicable law, other agreements, the Articles of Incorporation and
By-Laws of the Company and/or its Subsidiaries or by vote of the Board of
Directors or shareholders of the Company.
13. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company to bring suit to
enforce such rights.
14. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against the
Indemnitee to the extent the Indemnitee has otherwise actually received payment
(under any insurance policy or otherwise).
15. TERM. This Agreement shall remain in full force and effect until
terminated by the mutual consent of the parties in writing. Termination of the
Indemnitee's status as a director or officer of the Company and/or its
6
<PAGE>
Subsidiaries does not terminate this Agreement. This Agreement shall inure to
the benefit of the Indemnitee, his estate, heirs, and the personal
representative (executor/administrator) of his estate.
16. GOOD FAITH. If any dispute arises under this Agreement or any attack
is made by any party related to the enforcement of this Agreement, it shall be
conclusively presumed that the Indemnitee acted in good faith in executing this
Agreement and for the best interest of the Company. The Company acknowledges
that it is fully informed of all decisions and votes made by the Indemnitee in
the past, if any, and recognizes its right to keep itself informed in the
future.
17. DEFENSE. If any claim is threatened or commenced against the
Indemnitee other than by or on behalf of the Company, he shall notify the
Company in writing. His failure to do so or to do so promptly, however, shall
not diminish his rights under this Agreement except to the extent the Company
demonstrates by clear and convincing evidence that his failure caused it actual
damage. The Company may assume the defense of the claim, but only if it pays all
costs and expenses of defense, acknowledges to the Indemnitee in writing that it
is obligated to indemnify him with respect to the claim, and permits him to
select defense counsel. Any counsel the Indemnitee selects shall be reasonably
satisfactory to the Company. If the Company assumes the defense, the Indemnitee
shall cooperate with the Company in that defense if it pays his costs and
expenses of doing so. The Company shall not settle any claim in any manner which
would impose a penalty, liability or limitation on the Indemnitee unless the
Indemnitee first consents to the settlement in writing. He shall not withhold
his consent unreasonably.
18. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions (including portions of any paragraph of this Agreement
containing an invalid, illegal or unenforceable provision) shall not be
7
<PAGE>
impaired. To the extent practicable, any invalid, illegal or unenforceable
provision of this Agreement shall be deemed modified as necessary to comply with
all applicable laws.
19. AMENDMENTS AND WAIVERS. No amendment of this Agreement shall be
binding unless the amendment is written and executed by both parties. Any waiver
of a provision of this Agreement shall not constitute a waiver of any other
provision.
20. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be duly executed as of the date first above written.
REGIONAL CAPITAL MANAGEMENT CORPORATION
By: /s/ Thomas H. Minkoff
---------------------------------------
Its: CEO
/s/ Thomas H. Minkoff
-------------------------------------------
THOMAS H. MINKOFF
8
<PAGE>
EXHIBIT "A"
UNDERTAKING
WHEREAS, the undersigned is a defendant in an action brought in
(insert name and location of court) entitled (insert name and number
of action) (the "ACTION"); and
WHEREAS, the Board of Directors of Regional Capital Management
Corporation, a Florida corporation (the "CORPORATION"), has
authorized, subject to receipt by the Corporation of an appropriate
undertaking, the payment by the Corporation in advance of the final
disposition of the Action of expenses (including, without
limitation, attorneys' fees) reasonably incurred by the undersigned
in defending the Action; and
WHEREAS, any amounts paid to or on behalf of the undersigned in
advance of the final disposition of the Action by the Corporation
for expenses (including, without limitation, attorneys' fees)
reasonably incurred in defending the Action shall be paid without
prejudice to any rights to which the Corporation or the undersigned
may otherwise be entitled;
NOW, THEREFORE, the undersigned does hereby undertake to repay to
the Corporation any amounts heretofore or hereafter paid by the
Corporation to or on behalf of the undersigned in advance of the
final disposition of the Action for expenses (including, without
limitation, attorneys' fees) actually and reasonably incurred in
defending the Action, if it shall ultimately be determined that the
undersigned is not entitled to be indemnified by the Corporation
pursuant to applicable law or the Corporation's By-Laws.
Dated:
-------------------------------------------
THOMAS H. MINKOFF
9
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Regional Capital Management Corporation
1635D Royal Palm Drive
Gulfport, Florida 33707
Gentlemen:
We hereby consent to the use in the Prospectus constituting a part of
this Registration Statement of our report dated August 14, 1998, relating to the
consolidated financial statements of Regional Capital Management Corporation,
which is contained in that Prospectus. We also consent to the reference to our
firm under the caption "Experts" in that Prospectus.
/s/ Hurd, Hawkins, Meyers, Radosevich & Stevenson, P.A.
-------------------------------------------------------
Hurd, Hawkins, Meyers, Radosevich & Stevenson, P.A.
Largo, Florida
August 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 0 181
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 181
<PP&E> 1 1
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 47 216
<CURRENT-LIABILITIES> 143 15
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (97) 200
<TOTAL-LIABILITY-AND-EQUITY> (96) 216
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 96 107
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (96) (107)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (96) (107)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (96) (107)
<EPS-PRIMARY> (2.30) (0.16)
<EPS-DILUTED> (2.30) (0.16)
</TABLE>
EXHIBIT 99.1
CONSENT OF DIRECTOR - DESIGNEE
The undersigned has been designated to become a member of the Board
of Directors of Regional Capital Management Corporation, a Florida corporation
(the "Company"). In connection therewith the undersigned hereby consents to (a)
being nominated for the position of director of the Company and to serve as such
if elected, and (b) being named as a director-designee in the Company's
Registration Statement on Form SB-2 relating to the Company's initial public
offering of its common stock, and in the Prospectus contained therein proposed
to be circulated in connection with such offering, and all amendments thereto.
Date: August 25, 1998
/s/ William F. Nowak
--------------------------------------
Name: William F. Nowak
EXHIBIT 99.2
CONSENT OF DIRECTOR - DESIGNEE
The undersigned has been designated to become a member of the Board
of Directors of Regional Capital Management Corporation, a Florida corporation
(the "Company"). In connection therewith the undersigned hereby consents to (a)
being nominated for the position of director of the Company and to serve as such
if elected, and (b) being named as a director-designee in the Company's
Registration Statement on Form SB-2 relating to the Company's initial public
offering of its common stock, and in the Prospectus contained therein proposed
to be circulated in connection with such offering, and all amendments thereto.
Date: August 26, 1998
/s/ Marc S. Kallins, M.D.
--------------------------------------
Name: Marc S. Kallins, M.D.
EXHIBIT 99.3
CONSENT OF DIRECTOR - DESIGNEE
The undersigned has been designated to become a member of the Board
of Directors of Regional Capital Management Corporation, a Florida corporation
(the "Company"). In connection therewith the undersigned hereby consents to (a)
being nominated for the position of director of the Company and to serve as such
if elected, and (b) being named as a director-designee in the Company's
Registration Statement on Form SB-2 relating to the Company's initial public
offering of its common stock, and in the Prospectus contained therein proposed
to be circulated in connection with such offering, and all amendments thereto.
Date: August 26, 1998
/s/ Donald Behnke, M.D.
--------------------------------------
Name: Donald Behnke, M.D.
EXHIBIT 99.4
CONSENT OF DIRECTOR - DESIGNEE
The undersigned has been designated to become a member of the Board
of Directors of Regional Capital Management Corporation, a Florida corporation
(the "Company"). In connection therewith the undersigned hereby consents to (a)
being nominated for the position of director of the Company and to serve as such
if elected, and (b) being named as a director-designee in the Company's
Registration Statement on Form SB-2 relating to the Company's initial public
offering of its common stock, and in the Prospectus contained therein proposed
to be circulated in connection with such offering, and all amendments thereto.
Date: August 28, 1998
/s/ John B. Gallagher
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Name: John B. Gallagher
