As filed with the Securities and Exchange Commission on December 7, 1998
Registration No. 333-62749
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------
REGIONAL CAPITAL MANAGEMENT CORPORATION
(Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Florida 8361 59-3390804
(State or Other Jurisdiction of Incorporation (Primary Standard Industrial (I.R.S. Employer Identification No.)
or Organization) Classification Code Number)
1635D Royal Palm Drive Thomas H. Minkoff
Gulfport, Florida 33707 1635D Royal Palm Drive
(727) 347-7442 Gulfport, Florida 33707
(Address and telephone number of Principal (727) 347-7442
Executive Offices and Principal Place of Business) ___________ (Name, address and telephone 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
</TABLE>
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
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<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 DECEMBER 7, 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 a development stage ("start up") company with no operations and
limited capital. The Company 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.
These Securities are being offered on a "best efforts" basis by Tarpon
Scurry Investments, Inc. (the "Underwriter"). This Offering will terminate sixty
days after the date of this Prospectus (the "Offering Period"), subject to a
fifteen day extension (which will require the mutual consent of the Company and
the Underwriter) if gross proceeds of at least $4,500,00 are generated by the
end of the Offering Period. All proceeds from the purchase of Securities will be
held in an interest bearing escrow account by the Chase Manhattan Bank (the
"Escrow Agent") during the Offering Period. If at least $4,500,000 of gross
proceeds are not generated by the end of the Offering Period, the Escrow Agent
will return payments for subscriptions to subscribers with interest thereon and
the Offering will terminate. If gross proceeds of at least $4,500,000 are
reached by the end of the Offering Period and both the Company and the
Underwriter consent, the Offering will be extended for a fifteen day period.
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 the
Underwriter. See "Underwriting." 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 5 AND 18, 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>
[RED HERRING 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 NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS(1) TO
COMPANY (2)
- --------------------------------------------------------------------------------
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 Chicago, Illinois on or
about __________, 1998.
TARPON SCURRY INVESTMENTS, INC. [LOGO]
The date of this Prospectus is December ___, 1998.
The Company plans to apply for inclusion of the Common Stock and the
Warrants on the OTC Bulletin Board, but no application has yet been made. 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 - No Private or Public Market" and "Risk Factors - Possible
Applicability of Rules Relating to Low-Priced Stocks."
<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 EXCEPT AS OTHERWISE REQUIRED BY THE SECURITIES ACT. 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 with no operations and
limited capital 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 Company anticipates that the price range for
properties sought will be from 15% to 20% of the total project cost, but the
Company may purchase properties with prices either higher or lower than this
range if it deems such purchases to be advantageous. The Company will also
evaluate the use of debt financing as part of its business strategy and will
utilize debt financing if it is the most advantageous form of financing
available.
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. According to a report issued by the United
States Administration on Aging, the 65 and over age group is one of the fastest
growing segments of the United States population. According to a Jeffries &
Company, Inc. report, 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
1
<PAGE>
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.
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 does not currently plan to acquire
existing assisted living facilities, but will evaluate potential acquisitions as
part of its business strategy.
2
<PAGE>
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) 1,000,000 shares
After Offering(1) 2,000,000 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."
ESTIMATED NET PROCEEDS $4,356,000
(2), (3)
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 Common Stock-"RCMC"
BULLETIN BOARD SYMBOLS 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). If
exercised, the Private Placement Warrants will result in 250,000 shares of
Common Stock being issued, and the Additional Warrants will result in 500,000
shares of Common Stock being issued. The Private Placement Warrants and
Additional Warrants will be exercisable for a four-year period beginning one
year after the closing of this Offering and will be exercisable at a price
equal to 120% of the final price per share of the Common Stock sold in this
Offering.
(2)After deducting underwriting discounts and other expenses of this Offering,
including the Underwriter's non-accountable expense allowance.
(3)Assumes that Company will receive the maximum gross Offering proceeds of
$5,100,000. If the Company receives the minimum gross proceeds of $4,500,000,
it anticipates receiving net proceeds of $3,816,000.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
($ 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."
<TABLE>
<CAPTION>
January 1, May 22, 1996
May 22, 1996 January 1, 1998 to (inception) to
(inception) to 1997 to September 30, September 30,
December 31, December 31, 1998 1998
1996 1997 (Unaudited) (Unaudited)
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<S> <C> <C> <C> <C>
Statement of Operations Data
Net loss $0.00 $(96) $(166) $(262)
Net loss per share $0.00 $(2.30) $(0.25) $(1.09)
Weighted average common shares
outstanding 58 41,759 666,667 241,136
December 31, December 31, September 30, 1998
1996 1997 (Unaudited)
--------------------------------------------------------------------------
Balance Sheet Data:
Working capital(1) $0.00 $(143) $61
Total assets $0.00 $47 $155
Shareholders' equity $0.00 $(96) $143
</TABLE>
(1) Total current assets less current liabilities.
4
<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.
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.
INADEQUACY OF 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 include both loans or the issuance of stock of the
Company. Any debt financing is likely to be secured by mortgages or other liens
on the Company's facilities or assets. See "Risk Factors - Risks of
Indebtedness." 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
5
<PAGE>
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.
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," "Management's Plan of Operation," "Proposed Additional
Transactions" and "Risk Factors Dilution" and "-Risks of Indebtedness."
RISKS OF INDEBTEDNESS
The Company may incur substantial amounts of indebtedness if it is able to
acquire properties for development or conversion of 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.
ASSISTED LIVING FACILITY DEVELOPMENT, CONSTRUCTION AND OCCUPANCY RISKS
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.
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
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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."
RISKS RELATED TO ACQUISITIONS OF EXISTING FACILITIES
The Company may 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. 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
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
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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
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
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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
Most 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 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.
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
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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
not available could have a material adverse impact on 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.
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DEPENDENCE ON KEY PERSONNEL; INEXPERIENCE OF MANAGEMENT
The Company will be dependent upon the services of its executive officers
and principal employees (particularly Thomas H. Minkoff and F. Michael Roberts)
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 employment agreements with Mr. Minkoff,
its President and Chief Executive Officer, and Mr. Roberts, its Chief Operating
Officer, and the Company has obtained key man life insurance on both of them.
The loss of the services of either of these individuals 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
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
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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.
RISKS ASSOCIATED WITH THE EXERCISE OF THE WARRANTS.
The Company will be able to issue shares of its Common Stock upon the
exercise of the Warrants only if (i) there is a current prospectus relating to
the Common Stock issuable upon exercise of the Warrants under an effective
registration statement filed with the Commission and (ii) such Common Stock is
then qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdiction in which the various holders of Warrants
reside. Although the Company intends to use its best efforts to maintain the
effectiveness of a current prospectus covering the Common Stock subject to the
Warrants offered hereby, there can be no assurance that the Company will be
successful in doing so. After a registration statement becomes effective, it may
require continuous updating by the filing of post-effect amendments. A
post-effective amendment is required (i) when, for a prospectus that is used
more than nine months after the effective date of the registration statement the
information contained therein (including the certified financial statements) is
as of a date more than sixteen months prior to the use of the prospectus, (ii)
when facts or events have occurred which represent a fundamental change in the
information contained in the registration statement, or (iii) when any material
change occurs in the information relating to the plan of distribution of the
securities registered by such registration statement. The Company anticipates
that the Registration Statement covering the securities offered hereby will
remain effective for at least nine months following the date of this Prospectus,
assuming a post-effective amendment is not filed by the Company. The Company
intends to qualify the sale of the securities in a limited number of states,
although certain exemptions under certain state securities laws may permit the
Warrants to be transferred to purchasers in states other than those in which the
Warrants were initially qualified. The Company will be prevented, however, from
issuing Common Stock upon exercise of the Warrants in those states where
exemptions are unavailable and the Company has failed to qualify the Common
Stock issuable upon exercise of the Warrants. The Company may decide not to
seek, or may not be able to obtain qualification of the issuance of such Common
Stock in all of the states in which the ultimate purchasers of the Warrants
reside. In such cases, the Warrants of those purchasers will expire and have no
value if such Warrants cannot be exercised or sold. Accordingly, the market for
the Warrants may be limited because of the foregoing requirements. See
"Description of Securities - Common Stock Purchase Warrants."
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 25.0%
of the Company's outstanding Common Stock, and F. Michael Roberts, the Company's
Chief Operating Officer, will own 12.5% of the Company's outstanding Common
Stock. Together these officers will own 37.5% of the Company's outstanding
Common Stock after the Offering. Mr. Minkoff also holds the Additional Warrants,
which entitle him to purchase up to 500,000 additional shares of Common Stock.
If Mr. Minkoff exercises all of the Additional Warrants, he would own a total of
1,000,000 shares, or 40.0% of the outstanding Common Stock, and he and Mr.
Roberts together would own 1,250,000 shares, or 50.0% of the outstanding Common
Stock. Accordingly, Mr. Minkoff and Mr. Roberts 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 $2.79 per share
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(55.8%) 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
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.
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.
MANAGEMENT OF GROWTH
If the Company is able to successfully implement its proposed business
strategy it anticipates encountering 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 result 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
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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 2,000,000 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 1,000,000 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 50.0% 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. Prospective
investors should also 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. See "Shares Eligible
for Future Sale."
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 (a) options to purchase 10,000 shares of Common
Stock to Mr. Thomas H. Minkoff and (b) options to purchase 5,000 shares of
Common Stock to Mr. F. Michael Roberts in connection with their employment
agreements. Mr. Minkoff and Mr. Roberts will receive additional options to
purchase 10,000 shares and 5,000 shares, respectively, on each anniversary of
the effective date of their employment agreements. 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 purchase 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).
14
<PAGE>
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
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 Securities - 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 is 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.
"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 an
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
15
<PAGE>
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, upon the mutual consent of the Company
and the Underwriter, be disbursed to the Company. The Offering can then be
extended for a fifteen day period (the "Extension Period") upon the mutual
consent of the Company and the Underwriter. 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 be returned to them at the close of the Offering Period with interest
thereon.
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.
ANTI-TAKEOVER CONSIDERATIONS
The Company's Board of Directors has the authority to issue shares of
Preferred Stock in one or more series and to fix the powers, designations,
preferences and relative rights thereof without any further vote or action by
the Company's shareholders. The issuance of Preferred Stock could dilute the
voting power of holders of Common Stock and could have the effect of delaying,
deferring or presenting a change in control of the Company. See "Description of
Securities - Preferred Stock" and "Description of Securities - Anti-Takeover
Effects of Provisions of the Articles of Incorporation, Bylaws and Florida Law."
USE OF PROCEEDS
The maximum 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. This is based on the maximum gross proceeds amount of
$5,100,000. If the minimum gross proceeds amount ($4,500,000) is raised, the net
proceeds to the Company, after deducting underwriting discounts and commissions
of approximately $450,000 and estimated offering expenses of $234,000, will be
approximately $3,816,000. The Company anticipates that it will utilize the net
proceeds of this Offering in the amounts and in the order of priority indicated
in the following chart:
16
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM PROCEEDS(1) MINIMUM PROCEEDS(2)
------------------- -------------------
Approximate Percent of Approximate Percent of
Allocation of Net Proceeds Dollar Amount Net Proceeds Dollar Amount Net Proceeds
- -------------------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Identification and acquisitions of
land for development of two
assisted living facilities
(the "Initial Facilities") $ 600,000 13.8% $ 600,000 15.7%
Development and construction of the
Initial Facilities $ 1,584,000 36.4% $ 1,584,000 41.5%
Purchase of furniture, fixtures
and equipment for the Initial
Facilities $ 150,000 3.4% $ 150,000 3.9%
Payment of start-up costs
associated with the
development of the Initial
Facilities $ 90,000 2.0% $ 90,000 2.4%
Acquire land and preliminary work
in connection with the
proposed development of
additional assisted living
facilities (the "Additional
Facilities") $ 1,350,000 31.0% $ 810,000 21.2%
Working capital and general
corporate purposes(3) $ 582,000 13.4% $ 582,000 15.3%
Total $ 4,356,000 100% $ 3,816,000 100%
</TABLE>
- ---------------------
(1) Assumes net proceeds of $4,356,000 based on gross proceeds of $5,100,000.
(2) Assumes net proceeds of $3,816,000 based on gross proceeds of $4,500,000.
(3) This includes wages, employee benefits, telephone lines, copy machines and
other overhead costs expected to be incurred by the Company.
The development of the Additional Facilities will not be possible without
substantial financing in addition to this Offering. See "Risk Factors -
Dependence on Additional Financing."
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."
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.
17
<PAGE>
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.
DETERMINATION OF OFFERING PRICE
The public offering price of the Common Stock and the public offering
price and exercise price of the Warrants have 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 and the public offering price and
exercise price of the Warrants 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.
CAPITALIZATION
The following table sets forth the total capitalization of the Company at
September 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>
September 30, 1998
As
Actual 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
1,000,000 shares (actual) 2,000,000 shares (as adjusted)(1) 1,000 2,000
Additional paid-in capital 404,486 4,759,486
Deficit accumulated during the development stage (262,684) (262,684)
Total shareholders' equity 142,802 4,498,802
Total capitalization $142,802 $4,498,802
</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 September 30, 1998 was
$61,277 or $0.06 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 September 30, 1998 would
have been $4,417,277 or $2.21 per share. This represents an immediate increase
in net tangible book value to existing shareholders of $2.15 per share and an
immediate dilution to new investors of $2.79 per share, or 55.8%. The following
table illustrates the per share dilution:
Assumed initial public offering price per share $5.00
Net tangible book value per share before this offering 0.06
Increase attributable to new investors 2.15
Net tangible book value per share after this offering 2.21
Dilution per share to new investors $2.79
The following table summarizes, as of September 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):
18
<PAGE>
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders 1,000,000 50.0% $ 500,000 9.1% $0.67
New investors 1,000,000 50.0% $5,000,000 90.0% $5.00
Total 2,000,000 100.0% $5,500,000 100.0%
</TABLE>
The foregoing tables assume no exercise of the Warrants, the Private
Placement Warrants or the Additional Warrants. See "Capitalization,"
"Management-Employee Benefit Plans" and Notes to Consolidated Financial
Statements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated quarterly
statement of operations data for each of the quarters in the periods May 22,
1996 (inception) through December 31, 1996, January 1, 1997 through December 31,
1997 and January 1, 1998 through September 30, 1998. In the opinion of
management, this information has been prepared on the same basis as the audited
consolidated financial statements appearing elsewhere in this Prospectus, and
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of this information in accordance with
generally accepted accounting principles. Such quarterly results are not
necessarily indicative of future results of operations and should be read in
conjunction with the audited consolidated financial statements of the Company
and the notes thereto.
<TABLE>
<CAPTION>
($ in thousands, except per share data)
Quarter ended
1996
----------------------------------------------
June 30 September 30 December 31
------- ------------ -----------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Cost of Revenues 0 0 0
Gross Profit 0 0 0
Selling, General and Administrative Expenses 0 0 0
Income (Loss) from Operations and before Income Taxes 0 0 0
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
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
1997
----
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
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)
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 Share 100 100 100 500,000
</TABLE>
<TABLE>
<CAPTION>
1998
----
March 31 June 30 September 30
-------- ------- ------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Cost of Revenues 0 0 0
Gross Profit 0 0 0
Selling, General and Administrative 51 56 59
Expenses
Income (Loss) from Operations and before (51) (56) (59)
Income Taxes
Provision for Income Taxes 0 0 0
Net Income (Loss) $ (51) $ (56) $ (59)
Net Income (Loss) Per Share Basic and $(0.07) $(0.07) $(0.06)
Diluted
Shares Used in Computing Basic Net 750,000 750,000 1,000,000
Income Per Share
Shares Used in Computing Diluted Net 750,000 750,000 1,000,000
Income Per Share
</TABLE>
20
<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-Inadequacy of 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). Assuming that the Company receives the maximum net proceeds
from this Offering ($4,356,000), the Company 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. If the Company receives the minimum net proceeds from this
Offering ($3,816,000), it anticipates spending $810,000 (including an additional
$150,000 to cover contingencies) for the purchase of land for the development of
subsequent facilities.
21
<PAGE>
CHANGES IN THE NUMBER OF EMPLOYEES
The Company currently has two employees, both of whom are executive
officers. During the twelve months following the Offering the Company expects to
employ full-time and part-time employees which will result in a total of 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
strengthening each facility's local connections. Executive Directors will be
required to participate in community activities and to become involved in
community affairs.
22
<PAGE>
THE INDUSTRY
The assisted living industry is a 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 nationally 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.
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
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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 presence 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.
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
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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
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,
if any are built or acquired, 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.
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
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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 (based on a facility which contains
from twenty to twenty-four units).
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
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
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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 "--Dependence on 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 is expected to receive specialized training
from the Company, and is expected to 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. The Company anticipates that each Executive
Director will be 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, are expected to 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
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,
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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.
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.
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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 continually
face competition from numerous local, regional and national providers of senior
and assisted living services. The Company expects to 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.
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."
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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
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
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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."
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. 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."
EMPLOYEES
As of December 4, 1998, the Company had two employees, both of whom were
executive officers.
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.
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
F. Michael Roberts 48 Chief Operating Officer
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<PAGE>
The following is a brief description of the background of the officers and
directors 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 1998, 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.
F. MICHAEL ROBERTS has worked in the health care industry since 1976. From
October 1996 to September 1998, Mr. Roberts worked as a health care consultant
with a primary focus on the assisted living industry. He formed F. Michael
Roberts and Associates, Inc. in March 1998 to serve as a health care consulting
company, and this company was merged into the Company in September 1998. Mr.
Roberts has served as a Chief Operating Officer of the Company from September
15, 1998 to the present. Between October 1995 and October 1996, Mr. Roberts was
Executive Director of Integrated Health Services, a nursing home company, for
Georgia and Alabama. At Integrated Health Services, Mr. Roberts managed five
nursing homes with a total of 765 beds and operating budgets in excess of $40
million. From 1989 to 1994 Mr. Roberts was Vice President of Corporate
Development at Cape Coral Hospital developing new business and product lines. He
also was active in the regulatory and legislative areas as well as the marketing
and community relations areas. From 1985 to 1989, Mr. Roberts was the President
of Health Resources Corporation, where he was responsible for five subsidiary
corporations focusing on health care services outside the hospital. Prior to
Health Resources, from 1976 to 1985, Mr. Roberts was the President of Florida
Home Health Services, Inc./Florida Home Health Care, where he was one of three
principals in five home health agencies located on the West Coast of Florida.
Mr. Roberts served as Chairman of Statewide Health Council of Florida and
President of Florida Association of Home Health Agencies, and was the Founding
President of the Association of Home Health Industry of Florida as well as
Chairman of Leadership Florida. Mr. Roberts has a Bachelor of Science Degree
from East Tennessee State University.
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
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<PAGE>
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.
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.
MERGER WITH F. MICHAEL ROBERTS & ASSOCIATES, INC.
On September 18, 1998, the Company merged (the "Merger") with F. Michael
Roberts & Associates, Inc. ("Associates"), a health care consulting company. The
Company was the surviving entity in the Merger. In the Merger, F. Michael
Roberts, as sole shareholder of Associates, received 250,000 shares of Common
Stock and a cash payment of $10,000. Mr. Roberts also became the Company's Chief
Operating Officer effective September 15, 1998.
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 policy has 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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<PAGE>
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
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
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<PAGE>
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.
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
35
<PAGE>
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.
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."
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<PAGE>
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 $100,000. This table includes all payments to Mr. Minkoff for 1997 and 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Restricted Options/
Annual Stock SARs LTIP All Other
Name and Salary Bonus Compensation Award(s) (#) Payouts Compensation
Principal Position Year ($) ($) ($) ($) ($) ($)
- ------------------ ---- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas H. Minkoff,
President and Chief
Executive Officer 1997 $43,286 -0- -0- -0- -0- -0- -0-
(1),(2)
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.
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.
The Company has entered into a three-year employment agreement with F.
Michael Roberts, its Chief Operating Officer. This agreement was effective on
September 15, 1998, and it provides for an initial annual base salary of $84,000
which will increase to $96,000 upon the consummation of this Offering.
Thereafter, Mr. Roberts' 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. Roberts is entitled to annual incentive bonus compensation in an
37
<PAGE>
amount to be determined by the Board of Directors or the Compensation Committee.
This Employment Agreement also granted Mr. Roberts options to purchase 5,000
shares of Common Stock at an exercise price equal to the final Offering Price,
followed by annual grants of options to purchase 5,000 additional shares of
Common Stock at the then prevailing market price.
Mr. Minkoff's and Mr. Robert's employment agreements provide that upon
termination of employment without "cause" or termination by the executive for
"good reason" (which includes a change of control of the Company), each of them
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. 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 and Mr. Roberts demand and
participatory ("piggyback") registration rights with respect to the shares of
Common Stock held by them. They may require the Company to file a registration
statement with respect to these shares on an annual basis. The piggyback
registration rights allow these individuals to include these shares in certain
other offerings made by Regional Capital. See "Description of Securities -
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 February 1998 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.
MERGER WITH F. MICHAEL ROBERTS & ASSOCIATES, INC.
On September 18, 1998, the Company merged with F. Michael Roberts &
Associates, Inc., a health care consulting company. The Company was the
surviving entity in this Merger. In this Merger, F. Michael Roberts, as sole
shareholder of Associates, received 250,000 shares of Common Stock and a cash
payment of $10,000. Mr. Roberts also became the Company's Chief Operating
Officer effective September 15, 1998.
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 December ___, 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.
<TABLE>
<CAPTION>
Ownership of Common Shares Prior Ownership of Common Shares After
to the Offering(1)(3)(4) the Offering(1)(2)(3)(4)
------------------------ ------------------------
Beneficial Owner Number Percentage Number Percentage
- ---------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Thomas H. Minkoff 500,000 50.0% 500,000 25.0%
1635D Royal Palm Drive
Gulfport, Florida 33707
F. Michael Roberts 250,000 25.0% 250,000 12.5%
4230 Fairgreen Terrace
Marietta, Georgia 30068
All officers and directors as a group(5) 750,000 75.0% 750,000 37.5%
</TABLE>
- -----------------
(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 1,000,000 shares of Common
Stock outstanding prior to the Offering and 2,000,000 shares of Common Stock
outstanding after completion of this Offering.
(5) Two persons.
DESCRIPTION OF SECURITIES
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
39
<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.
40
<PAGE>
ADDITIONAL WARRANTS
In February 1998 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, and F. Michael
Roberts, the Company's Chief Operating Officer, have entered into
Indemnification Agreements with the Company.
REGISTRATION RIGHTS
In their Employment Agreements Mr. Minkoff and Mr. Roberts were each
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
and Mr. Roberts may each exercise such rights once each per calendar year. Mr.
Minkoff and Mr. Roberts were 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 each of Mr. Minkoff and Mr. Roberts 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 for each
individual, as well as any registrations pursuant to the exercise of piggyback
rights. The Company also will agree to indemnify Mr. Minkoff and Mr. Roberts
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.
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.
41
<PAGE>
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.
42
<PAGE>
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 2,000,000 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.
Mr. Minkoff and Mr. Roberts have been granted rights to demand
registration of their Common Stock, as well as participatory ("piggyback")
rights to participate in certain subsequent registrations of the Common Stock by
the Company for sale to the public. See "Description of Securities- Registration
Rights" and "Management - Employment Agreements."
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.
43
<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 which price shall remain in
effect for the duration of the offering. 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 (upon the mutual consent of the Company and
the Underwriter) 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 (as
extended, if appropriate), and subject to the mutual consent of the Company and
the Underwriter, the funds held by the Escrow Agent will be released to the
Company, less underwriter's commissions and the expenses of the Offering, 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 with interest thereon and the Offering will terminate. If the
Minimum Gross Proceeds Amount is reached by the end of the Offering Period, and
subject to the mutual consent of the Company and the Underwriter, 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 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 $50,000 and the additional fees incurred by the Underwriter
in connection with the Offering. The Company has advanced to date an amount of $
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.
44
<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 and the public offering
price and exercise price of the Warrants 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 and the public offering price and
exercise price of the Warrants 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
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.
45
<PAGE>
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>
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, CORPORATION
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE 1,000,000 SHARES OF
RELIED UPON AS HAVING BEEN COMMON STOCK
AUTHORIZED BY THE COMPANY OR THE AND
UNDERWRITER. THIS PROSPECTUS DOES 1,000,000 COMMON STOCK
NOT CONSTITUTE AN OFFER TO SELL, OR PURCHASE WARRANTS
A SOLICITATION OF AN 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 Securities............
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 DECEMBER ___, 1998
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD SUBSCRIPTIONS.
<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-5
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) F-6
STATEMENTS OF CASH FLOWS F-7
NOTES TO THE FINANCIAL STATEMENTS F-9 to F-11
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.
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
- --------------------------------------------------------------------------------
DECEMBER DECEMBER JUNE 30, SEPT. 30,
31, 1996 31, 1997 1998 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
CASH $0 $0 $181 $72
PROPERTY AND EQUIPMENT, 0 1 1 1
at cost less accumulated
depreciation
OTHER ASSETS
Organization Costs, net of 0 1 1 1
accumulated amortization
Deferred Charges 0 45 33 70
Goodwill 0 0 0 10
TOTAL ASSETS $0 $47 $216 $154
==========================================
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
Bank Advance $0 $14 $0 $0
Accounts Payable 0 59 1 0
Due to Shareholder 0 50 14 12
Notes Payable Shareholder 0 20 0 0
------------------------------------------
TOTAL CURRENT LIABILITIES 0 143 15 12
LONG-TERM LIABILITIES 0 0 0 0
------------------------------------------
TOTAL LIABILITIES $0 $143 $15 $12
STOCKHOLDERS' EQUITY (DEFICIT)
o Preferred Stock, $.001 par 0 0 0 0
value; 10,000,000 shares
authorized at December 31,
1996, 1997 June 30, 1998, and
September 30, 1998, no shares
issued and outstanding
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-3
<PAGE>
- --------------------------------------------------------------------------------
DECEMBER DECEMBER JUNE 30, SEPT. 30,
31, 1996 31, 1997 1998 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
o Common Stock, $1.00, $.001, 0 1 1 1
$.001 and $.001 par value;
7,500, 10,000,000,
10,000,000 and 10,000,000
shares authorized, 100,
500,000, 750,000 and
1,000,000 shares issued and
outstanding at December 31,
1996, 1997, June 30,1998,
and September 30, 1998
respectively
o Additional Paid In Capital 0 0 404 404
o Deficit Accumulated During 0 (97) (204) (263)
the Development Stage
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) 0 (96) 201 142
---------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
$0 $47 $216 $154
=============================================
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-4
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
INCEPTION
MAY 22, 1996
SEPTEMBER TO
DECEMBER DECEMBER 31, JUNE 30, SEPTEMBER 30,
31, 1997 30, 1998 1998
1996 1998 (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------
REVENUES $0 $0 $0 $0 $0
COST OF REVENUES 0 0 0 0 0
------------------------------------------------------------
GROSS PROFIT 0 0 0 0 0
SELLING, GENERAL 0 96 107 59 262
AND
ADMINISTRATIVE
EXPENSES
------------------------------------------------------------
(LOSS) FROM 0 (96) (107) (59) (262)
OPERATIONS AND
BEFORE INCOME
TAXES
PROVISION FOR 0 0 0 0 0
INCOME TAXES
------------------------------------------------------------
NET (LOSS) $0 ($96) ($107) ($59) ($262)
============================================================
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-5
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DEFICIT
ACCUMU-
PREFERRED STOCK COMMON STOCK ADDI- LATED TOTAL
TIONAL DURING THE STOCK-
PAR PAR PAID IN DEVELOPMENT HOLDERS'
SHARES VALUE SHARES VALUE CAPITAL STAGE EQUITY
- --------------------------------------------------------------------------------
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
SHARES ISSUED IN 0 0 250,000 0 0 0 0
CONNECTION WITH
MERGER (UNAUDITED)
NET (LOSS)
(UNAUDITED) 0 0 0 0 0 (59) (59)
-------------------------------------------------------------
BALANCE
SEPTEMBER 30, 1998
(UNAUDITED) 0 $0 1,000,000 $1 $404 ($263) $142
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-6
<PAGE>
REGIONAL CAPITAL MANAGEMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER INCEPTION
DECEMBER 31, DECEMBER JUNE 30, 30, 05/22/96
31, 1998 TO 9/30/98
1996 1997 1998 (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
NET (LOSS) $0 ($96) ($107) ($59) ($262)
ADJUSTMENTS TO
RECONCILE NET (LOSS)
TO CASH (USED) IN
OPERATING ACTIVITIES
Increase in 0 (1) 0 0 (1)
Organization Costs
(Increase)Decrease 0 (45) 12 (37) (70)
in Deferred Charges
Increase(Decrease) 0 59 (58) (1) 0
in Accounts Payable
Increase(Decrease) 0 50 (36) (2) 12
in Due to Shareholder
Increase to Goodwill 0 0 0 (10) (10)
----------------------------------------------------------
NET CASH (USED) IN 0 (33) (189) (109) (331)
OPERATING ACTIVITIES
CASH FLOWS (USED) IN
INVESTING ACTIVITIES
Acquisition of 0 (1) 0 0 (1)
Property and
Equipment
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of 0 0 (20) 0 (20)
Shareholder Notes
Payable
Net Proceeds from 0 0 404 0 404
Private Offering
Shareholder Notes 0 20 0 0 20
Payable
----------------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES
0 20 384 0 404
----------------------------------------------------------
NET (DECREASE) 0 (14) 195 (109) 72
INCREASE IN CASH
BALANCE, BEGINNING
OF PERIOD
0 0 (14) 181 0
----------------------------------------------------------
BALANCE, END OF
PERIOD $0 ($14) $181 $72 $72
==========================================================
Supplemental disclosures of cash paid during the period for the following items
were:
Interest $0 $0 $1 $0 $1
Income Taxes $0 $0 $0 $0 $0
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-7
<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 offering have been charged against the
proceeds of the offering. Costs in connection with the public offering will be
charged against the proceeds of the offering.
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.
F-8
<PAGE>
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.
NOTE 2 - RELATED PARTY TRANSACTIONS
Amounts due to Thomas Minkoff include the following (in thousands):
================================================================================
DECEMBER 31, 1997 JUNE 30, 1998 SEPTEMBER 30,
1998
(UNAUDITED)
- --------------------------------------------------------------------------------
Accrued compensation to $43 $4 $0
Thomas Minkoff
Reimbursable expenses 7 10 12
paid by Thomas Minkoff
-------------------------------------------------------
$50 $14 $12
=======================================================
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
The Company has a net operating loss carryforward of $96,627 at December 31,
1997 to apply against future Federal and State taxable income that will expire
in the year 2012.
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 shall receive 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.
In February 1998, Thomas Minkoff was granted 500,000 warrants in conjunction
with the consummation of the private offering. These warrants contain the same
terms and conditions as the warrants issued in the private offering.
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F-9
<PAGE>
NOTE 6 - CONCENTRATION OF CREDIT RISK
At June 30, 1998 the Company has 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.
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.
NOTE 9 - MERGER (UNAUDITED)
On September 18, 1998 the Company acquired F. Michael Roberts & Associates, Inc.
in a business combination accounted for as a purchase. F. Michael Roberts &
Associates, Inc. is engaged primarily in the area of health care consulting. The
results of operations of F. Michael Roberts & Associates, Inc. is included in
the accompanying financial statements since date of acquisition. The total cost
of the acquisition was $10,250, which exceeded the fair value of the net assets
of F. Michael Roberts & Associates, Inc. by $10,250. The excess of cost over
fair value is being amortized on the straight-line method over 40 years.
NOTE 10 - UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information as of September 30, 1998 has been prepared
from the unaudited financial records of Regional Capital Management Corporation
and in the opinion of management reflects all adjustments, consisting only of
normal recurring items, necessary for a fair presentation of the financial
position and results of operations and cash flows for the interim period.
F-10
<PAGE>
<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;
II-1
<PAGE>
(c) By independent legal counsel:
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 or her 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
II-2
<PAGE>
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses, if it
determines that:
(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 Indemnification Agreements with Thomas H.
Minkoff, its President and Chief Executive Officer, and F. Michael Roberts,
its Chief Operating Officer.
II-3
<PAGE>
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.
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 .......... $__________
Transfer Agent Fees and Expenses .................. $__________
Non-Accountable Expense Allowance ................. $__________
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 aggregate gross proceeds of this Offering were $500,000. 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 ("Regulation D") promulgated thereunder and
Section 4(2) of the Securities Act. All purchasers of securities in this
Offering were "Accredited Investors" (as defined in Rule 501 of Regulation D).
Based on the size of this Offering, the "Accredited Investor" status of the
purchaser and the limited nature of the offering, the Company was able to claim
the Rule 506 exemption. The terms of the warrants issued in this private
offering, including the exercise price, will be identical to the terms of the
Warrants issued in this Offering.
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. The exercise price of these warrants, as well as the other terms
of these warrants, will be identical to the price and terms of the Warrants
issued in this Offering. The Company was able to claim the Section 4(2)
exemption because of the very limited nature of this issuance of securities and
the fact that Mr. Minkoff is an "Accredited Investor," under Rule 501 of
Regulation D, as well as the Chief Executive Officer of the Company.
On September 18, 1998, the Company issued 250,000 shares of Common Stock
to F. Michael Roberts as part of the consideration paid in the merger (the
"Merger") between the Company and F. Michael Roberts & Associates, Inc.
("Associates"). The securities issued in the Merger were intended to be exempt
from registration pursuant to Section 4(2) of the Securities Act. Mr. Roberts is
the Chief Operating Officer of the Company. The aggregate consideration received
by the Company in this transaction was 100 shares of the Common Stock of
Associates, which represented all of Associates' outstanding Common Stock. The
Company was able to claim the Section 4(2) exemption for this transaction
because of the very limited nature of this issuance of securities.
For all of the transactions listed in this Item other exemptions from
registration under the Securities Act may also have been available.
II-4
<PAGE>
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
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**
10.9 Executive Employment Agreement between the Company and F. Michael Roberts
10.10 Indemnification Agreement between the Company and F. Michael Roberts
23.1 Consent of Kirkpatrick & Lockhart LLP**
23.2 Consent of Hurd, Hawkins, Meyer, Radosevich & Stevenson, P.A.
27 Financial Data Schedule
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)*
* Previously filed
** To be filed by amendment.
II-5
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1)To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of the
Securities Act;
(ii)To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2)That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3)To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)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.
II-6
<PAGE>
(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-7
<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 December 7, 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.
SIGNATURE TITLE DATE
/s/ Thomas H. Minkoff Chairman of the Board of Directors, December 7, 1998
Thomas H. Minkoff President, Treasurer (Principal
Executive Officer; Principal
Financial Officer;
Principal Accounting Officer);
Director
II-8
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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**
10.9 Executive Employment Agreement between the Company and F. Michael Roberts
10.10 Indemnification Agreement between the Company and F. Michael Roberts
23.1 Consent of Kirkpatrick & Lockhart LLP**
23.2 Consent of Hurd, Hawkins, Meyer, Radosevich & Stevenson, P.A.
27 Financial Data Schedule
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)*
* Previously filed
** To be filed by amendment.
EXHIBIT 10.4
THESE WARRANTS AND THE SHARES OF COMMON STOCK WHICH MAY BE ISSUED UPON THEIR
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD IN
CONTRAVENTION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR THE RESTRICTIONS CONTAINED IN THESE WARRANTS.
WARRANTS TO SUBSCRIBE FOR AND PURCHASE
25,000 SHARES OF COMMON STOCK OF
REGIONAL CAPITAL MANAGEMENT CORPORATION
For value received, REGIONAL CAPITAL MANAGEMENT CORPORATION, a Florida
corporation (the "COMPANY"), hereby grants to ______________ (the "HOLDER"),
upon the terms and conditions contained herein, warrants (each, a "WARRANT") to
subscribe for and purchase from the Company a total of Twenty Five Thousand
(25,000) fully paid and non-assessable shares (collectively, the "SHARES") of
the $0.001 par value per share common stock (the "COMMON STOCK") of the Company.
Any and all capitalized terms used but not otherwise defined herein shall have
the meaning ascribed thereto in that certain Private Placement Memorandum (the
"MEMORANDUM") of the Company dated November 26, 1997.
1. METHOD OF EXERCISE; PAYMENT; PRICE; ISSUANCE OF NEW WARRANT;
TRANSFER AND EXCHANGE. The Warrants may only be exercised by the Holder after
the expiration of a one year period following the successful consummation of an
initial public offering (the "OFFERING") under the Securities Act of 1933, as
amended (the "SECURITIES ACT") by the Company of its Common Stock and prior to
the Termination Date (as defined herein). The successful consummation of the
Offering shall be deemed to occur when a closing (the "CLOSING") of such
Offering is effected. The period beginning after the expiration of this one year
period and ending on the Termination Date is called the "EXERCISE PERIOD." No
assurances can be given that the Company will ever conduct or consummate such an
initial public offering of Common Stock and therefore no assurances can be given
that these Warrants will ever be exercisable. The exercise price of each Warrant
(the "WARRANT PRICE") shall be equal to 120% of the final price per share at
which the Common Stock is sold in the Offering. These Warrants may only be
exercised in whole or in any parts by the surrender of this document, together
with the exercise form attached hereto as Exhibit "A" (the "EXERCISE FORM") duly
completed and signed, at the principal office of the Company, and by payment to
the Company by certified or cashier's check or wire transfer of the Warrant
Price. The Company agrees that any Shares so purchased shall be deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which the applicable Warrant or Warrants shall have been
surrendered and payment made for such Shares shall have been made in accordance
with the terms of this Section. In the event of any partial exercise of these
Warrants, certificates for the Shares of Common Stock so purchased shall be
delivered to the Holder within a reasonable time after exercise, and a
replacement document shall be issued which shall reflect any Warrants then
unexercised. None of these Warrants shall be transferable or assignable except
as specifically provided herein.
<PAGE>
2. TERMINATION DATE. The Termination Date (the "TERMINATION DATE") for all
unexercised Warrants shall be the fifth anniversary of the Closing. Any Warrants
not exercised as of the close of business on the Termination Date shall expire
and be terminated, and the holders of any such Warrants shall not have any
remaining rights in connection with any Warrants, any Shares or the Company.
3. STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all Shares shall, upon issuance pursuant to the exercise of any
Warrants and payment of the Warrant Price, be fully paid and nonassessable and
free from all liens and encumbrances. The Company further covenants and agrees
that during the period within which any Warrant may be exercised, the Company
shall at all times have authorized and reserved, for the purpose of the issuance
upon exercise of any such Warrants, at least the maximum number of Shares as are
issuable upon the exercise of all unexercised Warrants.
4. CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidated, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
5. ADJUSTMENTS TO WARRANT PRICE AND NUMBER OF SHARES. The Warrant Price
and the number of Shares shall be subject to adjustment from time to time as
provided in this Section 5.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the record date for effecting such
subdivision, the Warrant Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Warrant Price in effect immediately
prior to such combination will be proportionately increased.
(b) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant. The Company
2
<PAGE>
will not effect any consolidation, merger or sale or conveyance unless prior to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Section 5 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.
(c) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Warrant Price pursuant to the provisions of this Section 5, the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted by
multiplying a number equal to the Warrant Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issued upon exercise of
this Warrant and dividing the product so obtained by the adjusted Warrant Price.
(d) MINIMUM ADJUSTMENT OF WARRANT PRICE. No adjustment of the Warrant
Price shall be made in an amount of less than 1% of the Warrant Price in effect
at the time such adjustment is otherwise required to be made, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such Warrant
Price.
(e) FRACTIONAL WARRANT PRICE. In the event that any adjustment of the
Warrant Price required herein results in a fraction of a cent, then the Warrant
Price shall be rounded up to the nearest cent.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the fair market value of a share of
Common Stock on the date of such exercise.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Warrant Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Warrant Price resulting form such adjustment and the increase or
decrease in the number of Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(h) OTHER NOTICES. If at any time during the Exercise Period:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all of its assets to, another
corporation or entity; or
(iii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
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<PAGE>
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) (iii)
and (iv) above.
6. ISSUE TAX. The issuance of certificates for Shares upon the exercise of
any Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, PROVIDED that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of a Warrant.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the Shares issued upon
its exercise are transferable, in whole or in part, upon surrender of this
Warrant. Until due presentment for registration of transfer on the books of the
Company, the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding any other provision hereof, any
transfers of any Warrants must be made in compliance with all applicable state
and Federal laws and regulations, including, without limitation, securities laws
and regulations.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office of
the Company referred to in Section 10 below, for new Warrants of like tenor of
different denominations representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder. Each of such
new Warrants shall represent the right to purchase such number of shares as
shall be designated by the holder hereof at the time of such surrender.
(c) REDEMPTION OF WARRANTS. The Company may, but shall not be required
to, redeem any of the outstanding Warrants upon thirty (30) days prior written
notice to the Holder provided that the closing bid quotations of the Common
Stock shall have averaged at least 150% of the then effective Warrant Price for
a period of any twenty (20) consecutive trading days ending on the third day
4
<PAGE>
prior to the day on which the Company gives notice to the Holder of its intent
to effect any such redemption. The Company may, in its sole discretion, redeem
any percentage of the outstanding Warrants in any such redemption. The
redemption price for any such redemption shall be $0.10 per Warrant redeemed.
(d) REPLACEMENT OF WARRANTS. The Holder may elect, by written notice
to the Company, to exchange this Warrant for a warrant (the "REPLACEMENT
WARRANT") in a form substantially similar to the warrants issued in the
Offering. Any such Replacement Warrant shall contain terms and conditions which
are substantially similar to those contained in this Warrant.
8. NO SHAREHOLDER RIGHTS. The Warrants shall not entitle the Holder to any
rights as a shareholder of the Company, including, without limitation, any
voting rights or the right to receive any dividends.
9. GENDER AND NUMBER. As used herein, the use of any of the masculine,
feminine, or neuter gender and the use of singular or plural numbers shall
include any of all of the other, wherever and whenever appropriate in the
context.
10. NOTICES. Except as otherwise provided herein, any notice pursuant to
the Warrants by the Company or the Holder shall be in writing and shall be given
by hand delivery or recognized overnight delivery service (a) if to the Company,
to 1635 D Royal Palm Drive, Gulfport, Florida 33707, Attention: Thomas H.
Minkoff, and (b) if to the Holder, to the address specified below, or to such
other address as may be changed from time to time on the books of the Company by
written notice. Any such notice shall be effective when delivered. Each party
hereto may from time to time change the address to which notices to it are to be
delivered hereunder by notice in writing to the other party.
11. BENEFITS. Nothing herein shall be construed to give to any person or
entity other than the Company and the Holder any legal or equitable right,
remedy, or claim hereunder, and all Warrants shall be for the sole and exclusive
benefit of the Company and the Holder.
12. APPLICABLE LAW; VENUE. This Warrant shall for all purposes be
construed and interpreted in accordance with the laws of the State of Florida,
without regard to any conflict of law rule or principle that would give effect
to the laws of another jurisdiction. Any suit, action or other proceeding
brought in connection with this Warrant shall be brought in the applicable state
or Federal courts in Hillsborough County, Florida, and the Holder by its
execution hereof hereby waives any objection that it may have to such venue,
including, without limitation, an assertion that such venue is an inconvenient
forum.
13. NO REGISTRATION RIGHTS. By its execution hereof the Holder hereby
agrees and acknowledges that the Company has no obligation of any kind to
register this Warrant or the Shares to be issued pursuant to an exercise of this
Warrant under the Securities Act, the Securities Exchange Act of 1934, as
amended, or any state securities laws or regulations.
5
<PAGE>
14. ACCREDITED INVESTOR STATUS. The Holder hereby confirms, restates and
ratifies (a) its accredited investor status as set forth in the Subscription
Agreement executed by the Holder in connection with the private placement
offering in which this Warrant was purchased, and (b) any and all
representations and warranties made to the Company in that Subscription
Agreement.
Date: March 1, 1998
REGIONAL CAPITAL MANAGEMENT CORPORATION
By: ______________________________________
Thomas H. Minkoff, President
AGREED TO AND ACCEPTED:
By:____________________________
Print Holder's
Name(s):_________________________
Print Holder's
Address:_________________________
Date:____________________________
6
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be Executed by the Holder
to Exercise the Rights to Purchase
Common Shares Evidenced by the Warrant)
Regional Capital Management Corporation
1635D Royal Palm Drive
Gulfport, Florida 33707
The undersigned hereby irrevocably subscribes for __________ shares of
Common Stock pursuant to and in accordance with the terms and conditions of that
certain Warrant dated ___________, 1998, and herewith makes payment of
$__________ therefor, and requests that (a) a certificate for such shares and
(b) if applicable, a replacement Warrant document reflecting any unexercised
Warrants, be issued in the name(s) of the undersigned and be delivered to the
undersigned at the address stated below.
------------------------------------
Name(s):_____________________________
Dated: ______________________
EXHIBIT 10.5
THESE WARRANTS AND THE SHARES OF COMMON STOCK WHICH MAY BE ISSUED UPON THEIR
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD IN
CONTRAVENTION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR THE RESTRICTIONS CONTAINED IN THESE WARRANTS.
WARRANTS TO SUBSCRIBE FOR AND PURCHASE
25,000 SHARES OF COMMON STOCK OF
REGIONAL CAPITAL MANAGEMENT CORPORATION
For value received, REGIONAL CAPITAL MANAGEMENT CORPORATION, a Florida
corporation (the "COMPANY"), hereby grants to ______________ (the "HOLDER"),
upon the terms and conditions contained herein, warrants (each, a "WARRANT") to
subscribe for and purchase from the Company a total of Twenty Five Thousand
(25,000) fully paid and non-assessable shares (collectively, the "SHARES") of
the $0.001 par value per share common stock (the "COMMON STOCK") of the Company.
Any and all capitalized terms used but not otherwise defined herein shall have
the meaning ascribed thereto in that certain Private Placement Memorandum (the
"MEMORANDUM") of the Company dated November 26, 1997.
1. METHOD OF EXERCISE; PAYMENT; PRICE; ISSUANCE OF NEW WARRANT;
TRANSFER AND EXCHANGE. The Warrants may only be exercised by the Holder after
the expiration of a one year period following the successful consummation of an
initial public offering (the "OFFERING") under the Securities Act of 1933, as
amended (the "SECURITIES ACT") by the Company of its Common Stock and prior to
the Termination Date (as defined herein). The successful consummation of the
Offering shall be deemed to occur when a closing (the "CLOSING") of such
Offering is effected. The period beginning after the expiration of this one year
period and ending on the Termination Date is called the "EXERCISE PERIOD." No
assurances can be given that the Company will ever conduct or consummate such an
initial public offering of Common Stock and therefore no assurances can be given
that these Warrants will ever be exercisable. The exercise price of each Warrant
(the "WARRANT PRICE") shall be equal to 120% of the final price per share at
which the Common Stock is sold in the Offering. These Warrants may only be
exercised in whole or in any parts by the surrender of this document, together
with the exercise form attached hereto as Exhibit "A" (the "EXERCISE FORM") duly
completed and signed, at the principal office of the Company, and by payment to
the Company by certified or cashier's check or wire transfer of the Warrant
Price. The Company agrees that any Shares so purchased shall be deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which the applicable Warrant or Warrants shall have been
surrendered and payment made for such Shares shall have been made in accordance
with the terms of this Section. In the event of any partial exercise of these
Warrants, certificates for the Shares of Common Stock so purchased shall be
delivered to the Holder within a reasonable time after exercise, and a
replacement document shall be issued which shall reflect any Warrants then
unexercised. None of these Warrants shall be transferable or assignable except
as specifically provided herein.
<PAGE>
2. TERMINATION DATE. The Termination Date (the "TERMINATION DATE") for all
unexercised Warrants shall be the fifth anniversary of the Closing. Any Warrants
not exercised as of the close of business on the Termination Date shall expire
and be terminated, and the holders of any such Warrants shall not have any
remaining rights in connection with any Warrants, any Shares or the Company.
3. STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all Shares shall, upon issuance pursuant to the exercise of any
Warrants and payment of the Warrant Price, be fully paid and nonassessable and
free from all liens and encumbrances. The Company further covenants and agrees
that during the period within which any Warrant may be exercised, the Company
shall at all times have authorized and reserved, for the purpose of the issuance
upon exercise of any such Warrants, at least the maximum number of Shares as are
issuable upon the exercise of all unexercised Warrants.
4. CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidated, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
5. ADJUSTMENTS TO WARRANT PRICE AND NUMBER OF SHARES. The Warrant Price
and the number of Shares shall be subject to adjustment from time to time as
provided in this Section 5.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the record date for effecting such
subdivision, the Warrant Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Warrant Price in effect immediately
prior to such combination will be proportionately increased.
(b) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant. The Company
2
<PAGE>
will not effect any consolidation, merger or sale or conveyance unless prior to
the consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Section 5 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.
(c) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Warrant Price pursuant to the provisions of this Section 5, the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted by
multiplying a number equal to the Warrant Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issued upon exercise of
this Warrant and dividing the product so obtained by the adjusted Warrant Price.
(d) MINIMUM ADJUSTMENT OF WARRANT PRICE. No adjustment of the Warrant
Price shall be made in an amount of less than 1% of the Warrant Price in effect
at the time such adjustment is otherwise required to be made, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such Warrant
Price.
(e) FRACTIONAL WARRANT PRICE. In the event that any adjustment of the
Warrant Price required herein results in a fraction of a cent, then the Warrant
Price shall be rounded up to the nearest cent.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the fair market value of a share of
Common Stock on the date of such exercise.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Warrant Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Warrant Price resulting form such adjustment and the increase or
decrease in the number of Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(h) OTHER NOTICES. If at any time during the Exercise Period:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all of its assets to, another
corporation or entity; or
(iii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
3
<PAGE>
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) (iii)
and (iv) above.
6. ISSUE TAX. The issuance of certificates for Shares upon the exercise of
any Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, PROVIDED that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of a Warrant.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the Shares issued upon
its exercise are transferable, in whole or in part, upon surrender of this
Warrant. Until due presentment for registration of transfer on the books of the
Company, the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding any other provision hereof, any
transfers of any Warrants must be made in compliance with all applicable state
and Federal laws and regulations, including, without limitation, securities laws
and regulations.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office of
the Company referred to in Section 10 below, for new Warrants of like tenor of
different denominations representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder. Each of such
new Warrants shall represent the right to purchase such number of shares as
shall be designated by the holder hereof at the time of such surrender.
(c) REDEMPTION OF WARRANTS. The Company may, but shall not be required
to, redeem any of the outstanding Warrants upon thirty (30) days prior written
notice to the Holder provided that the closing bid quotations of the Common
Stock shall have averaged at least 150% of the then effective Warrant Price for
a period of any twenty (20) consecutive trading days ending on the third day
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<PAGE>
prior to the day on which the Company gives notice to the Holder of its intent
to effect any such redemption. The Company may, in its sole discretion, redeem
any percentage of the outstanding Warrants in any such redemption. The
redemption price for any such redemption shall be $0.10 per Warrant redeemed.
(d) REPLACEMENT OF WARRANTS. The Holder may elect, by written notice
to the Company, to exchange this Warrant for a warrant (the "REPLACEMENT
WARRANT") in a form substantially similar to the warrants issued in the
Offering. Any such Replacement Warrant shall contain terms and conditions which
are substantially similar to those contained in this Warrant.
8. NO SHAREHOLDER RIGHTS. The Warrants shall not entitle the Holder to any
rights as a shareholder of the Company, including, without limitation, any
voting rights or the right to receive any dividends.
9. GENDER AND NUMBER. As used herein, the use of any of the masculine,
feminine, or neuter gender and the use of singular or plural numbers shall
include any of all of the other, wherever and whenever appropriate in the
context.
10. NOTICES. Except as otherwise provided herein, any notice pursuant to
the Warrants by the Company or the Holder shall be in writing and shall be given
by hand delivery or recognized overnight delivery service (a) if to the Company,
to 1635 D Royal Palm Drive, Gulfport, Florida 33707, Attention: Thomas H.
Minkoff, and (b) if to the Holder, to the address specified below, or to such
other address as may be changed from time to time on the books of the Company by
written notice. Any such notice shall be effective when delivered. Each party
hereto may from time to time change the address to which notices to it are to be
delivered hereunder by notice in writing to the other party.
11. BENEFITS. Nothing herein shall be construed to give to any person or
entity other than the Company and the Holder any legal or equitable right,
remedy, or claim hereunder, and all Warrants shall be for the sole and exclusive
benefit of the Company and the Holder.
12. APPLICABLE LAW; VENUE. This Warrant shall for all purposes be
construed and interpreted in accordance with the laws of the State of Florida,
without regard to any conflict of law rule or principle that would give effect
to the laws of another jurisdiction. Any suit, action or other proceeding
brought in connection with this Warrant shall be brought in the applicable state
or Federal courts in Hillsborough County, Florida, and the Holder by its
execution hereof hereby waives any objection that it may have to such venue,
including, without limitation, an assertion that such venue is an inconvenient
forum.
13. NO REGISTRATION RIGHTS. By its execution hereof the Holder hereby
agrees and acknowledges that the Company has no obligation of any kind to
register this Warrant or the Shares to be issued pursuant to an exercise of this
Warrant under the Securities Act, the Securities Exchange Act of 1934, as
amended, or any state securities laws or regulations.
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14. ACCREDITED INVESTOR STATUS. The Holder hereby confirms, restates and
ratifies (a) its accredited investor status as set forth in the Subscription
Agreement executed by the Holder in connection with the private placement
offering in which this Warrant was purchased, and (b) any and all
representations and warranties made to the Company in that Subscription
Agreement.
Date: March 1, 1998
REGIONAL CAPITAL MANAGEMENT CORPORATION
By: ______________________________________
Thomas H. Minkoff, President
AGREED TO AND ACCEPTED:
By:____________________________
Print Holder's
Name(s):_________________________
Print Holder's
Address:_________________________
Date:____________________________
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EXHIBIT A
EXERCISE FORM
(To be Executed by the Holder
to Exercise the Rights to Purchase
Common Shares Evidenced by the Warrant)
Regional Capital Management Corporation
1635D Royal Palm Drive
Gulfport, Florida 33707
The undersigned hereby irrevocably subscribes for __________ shares of
Common Stock pursuant to and in accordance with the terms and conditions of that
certain Warrant dated ___________, 1998, and herewith makes payment of
$__________ therefor, and requests that (a) a certificate for such shares and
(b) if applicable, a replacement Warrant document reflecting any unexercised
Warrants, be issued in the name(s) of the undersigned and be delivered to the
undersigned at the address stated below.
------------------------------------
Name(s):_____________________________
Dated: ______________________
EXHIBIT 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("the AGREEMENT") is made and entered
into on September 15, 1998, by and between REGIONAL CAPITAL MANAGEMENT
CORPORATION, a Florida corporation (the "COMPANY"), and F. MICHAEL ROBERTS, an
individual residing in Marietta, Georgia (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
<PAGE>
and (b) he will qualify for Social Security Disability Payments and (c) within
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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<PAGE>
"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 Chief Operating Officer of the Company.
The Executive shall have the duties and responsibilities incumbent with this
position. Accordingly, and not by way of limitation, as Chief Operating Officer,
the Executive shall superintend and manage the business operations of the
Company and coordinate and supervise the work of its other officers and employ,
direct, discipline and discharge its personnel, employ agents, professional
advisors and consultants and perform all functions of a general operating
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 Cobb County, Georgia 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 substantially all 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.
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<PAGE>
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 $84,000 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 $96,000 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 5,000 shares of Common Stock on the IPO Closing Date
at the IPO Price and (ii) options to purchase up to 5,000 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 Company and (ii) do not discriminate against the Executive or
other highly-compensated employees of the Company.
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<PAGE>
(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 $600 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 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
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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
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.
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<PAGE>
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
parties, by a binding and final arbitration award or by
a final judgment, order or decree of a court of
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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
Date at the rate in effect at the time Notice of Termination is given, plus any
expenses incurred in accordance with Section 6 hereof.
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(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 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
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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 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
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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.
Section 11. CERTAIN TAX MATTERS
(a) OPTIONAL RIGHT OF PARTIAL DISCLAIMER.
It is recognized that under certain circumstances:
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(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).
(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")
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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
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:
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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
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
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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 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
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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.
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
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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.
As used in this Agreement, the "COMPANY" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
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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.
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
---------------------
Name: Thomas H. Minkoff /s/ F. Michael Roberts
Title: President ----------------------
Address: 1635 D Royal Palm Drive South Name: F. Michael Roberts
Gulfport, Florida 33707 Address: 4230 Fairgreen Terrace
Marietta, Georgia 30068
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EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "AGREEMENT") is made on October 15,
1998 by and between REGIONAL CAPITAL MANAGEMENT CORPORATION, a Florida
corporation (the "COMPANY"), and F. MICHAEL ROBERTS (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.
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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
3
<PAGE>
by a court or advanced pursuant to Section 7 hereof or 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
6
<PAGE>
Indemnitee's status as a director or officer of the Company and/or its
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: C.E.O.
---------------------
/s/ F. Michael Roberts
-------------------------
F. MICHAEL ROBERTS
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: _______________
------------------------------
F. MICHAEL ROBERTS
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
December 7, 1998
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