<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998
REGISTRATION NO. 333-52327
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO.2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
LOGISTICARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4729 13-3765416
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
ONE CROWN CENTER
SUITE 306
1895 PHOENIX BOULEVARD
COLLEGE PARK, GEORGIA 30349
(770) 907-7596
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN L. SHERMYEN
ONE CROWN CENTER
SUITE 306
1895 PHOENIX BOULEVARD
COLLEGE PARK, GEORGIA 30349
(770) 907-7596
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------
COPIES OF COMMUNICATIONS TO:
ROBERT A. CANTONE, ESQ. JEFFREY R. PATT, ESQ.
PROSKAUER ROSE LLP KATTEN MUCHIN & ZAVIS
1585 BROADWAY 525 WEST MONROE STREET
NEW YORK, NEW YORK 10036-8299 CHICAGO, ILLINOIS 60661
(212) 969-3000 (312) 902-5604
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register Additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration 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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........ 3,795,000 shares $12.00 $45,540,000 $13,434.30(3)
</TABLE>
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(1) Includes 495,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(3) Includes $9,363.30 previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 21, 1998
PROSPECTUS
3,300,000 SHARES
[LOGO] LOGISTICARE
COMMON STOCK
Of the 3,300,000 shares of Common Stock offered hereby, 2,300,000 shares are
being offered by the Company and 1,000,000 shares are being offered by the
Selling Stockholder. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholder. See "Principal and Selling
Stockholders."
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied for the Common Stock to be quoted and
traded on the Nasdaq Stock Market under the symbol LGTC.
--------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDER
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<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
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Total(3)............... $ $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Over-allotment Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to an aggregate of 495,000
additional shares of Common Stock (195,000 from the Company and 300,000
from the Over-allotment Selling Stockholders) solely to cover over-
allotments, if any. If all such shares are purchased, the total Price to
Public, Underwriting Discount, Proceeds to Company, Proceeds to Selling
Stockholder and Proceeds to the Over-allotment Selling Stockholders will be
$ , $ , $ , $ and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1998, at the office of the agent of Hambrecht &
Quist LLC in New York, New York.
HAMBRECHT & QUIST EVEREN SECURITIES, INC.
, 1998
<PAGE>
PAYOR
PHOTO
Provide government
agencies, managed care
organizations and
other payors a
transportation
outsourcing alternative
TRANSPORTATION
CARRIER RECIPIENT
[PHOTO] [LOGO] LOGISTICARE [PHOTO]
Establish Provide on-time, quality
networks of qualified transportation to
transportation carriers. eligible recipients
LOGISTICARE SEEKS TO ESTABLISH ITSELF AS THE CENTRAL POINT OF
CONTACT FOR THREE CONSTITUENCIES: THIRD-PARTY PAYORS,
TRANSPORTATION CARRIERS AND ELIGIBLE RECIPIENTS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
LogistiCare(TM), the LogistiCare(TM) logo and RealTime(TM) are trademarks of
the Company.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. The Common Stock offered hereby involves a high degree of
risk. See "Risk Factors." Unless otherwise indicated, all information in this
Prospectus (i) gives effect to the five-for-one stock split of the Common Stock
effected as of March 30, 1998, (ii) gives effect to the two-for-one stock split
of the Common Stock effected as of June 11, 1998, (iii) gives effect to the
conversion of each outstanding share of the Company's preferred stock, par
value $.01 per share (the "Preferred Stock"), into 10 shares of Common Stock
which will occur upon the effectiveness of the Registration Statement and (iv)
assumes no exercise of the Underwriters' over-allotment option. See
"Description of Capital Stock," "Underwriting" and Notes to Financial
Statements.
THE COMPANY
LogistiCare, Inc. ("LogistiCare" or the "Company") manages non-emergency
transportation services for government health and human service agencies and
for managed care organizations ("MCOs"). The Company seeks to establish itself
as the central contact for three constituencies: third-party payors,
transportation carriers and individuals eligible for transportation benefits
("Recipients"). The Company believes that its management expertise and
RealTime(TM) software system ("RealTime") enable it to provide sophisticated
and efficient transportation management services. The Company currently
conducts its business through centralized operations centers ("Operations
Centers") in Georgia, Florida and Connecticut, and intends to expand into
selected new regional markets.
The Company's brokerage logistics services, contracted under both capitated
and, to a lesser extent, fee-for-service arrangements, provide third-party
payors with an outsourcing alternative for their transportation requirements.
These services include: processing requests for transportation from Recipients,
determining their eligibility for such services, coordinating and purchasing
transportation, reporting encounter data and performing other logistical and
quality-assurance activities associated with non-emergency transportation. The
Company does not own or operate any vehicles for the transportation of
individuals. Instead, the Company establishes cost-effective networks of
carriers by selecting, negotiating and contracting with qualified
transportation carriers within each region. Such independent transportation
carriers are assisted and evaluated by the Company on an ongoing basis to
ensure conformity with the Company's quality standards.
Currently, in geographic markets in which the Company does not operate, non-
emergency transportation is provided in large measure through a fragmented
delivery system consisting primarily of small transportation companies that
frequently provide only one class of service (i.e., ambulatory, wheelchair or
ambulance). In a typical transaction, an individual schedules a trip with a
transportation carrier who subsequently submits a receipt for the cost of the
trip to a third-party payor for reimbursement. The Company believes that this
system is highly inefficient and provides no incentive to manage utilization or
contain costs, while at the same time it provides an opportunity for abuses by
passengers and transportation carriers that the Company believes are difficult
for third-party payors to effectively identify and prevent.
The Company believes that the growing demand for non-emergency
transportation, combined with third-party payors' increasing dissatisfaction
with the fragmented delivery system, has created the need for a more
sophisticated alternative to manage utilization and contain costs while
providing transportation services at or above existing levels of quality. The
Company believes that government agencies, MCOs and other third-party payors
will increasingly turn to third parties, such as the Company, that are not
affiliated with transportation carriers to coordinate and manage all classes of
non-emergency transportation services.
The Company was incorporated in Delaware in March 1994. In January 1996, the
Company acquired all of the outstanding shares of Automated Dispatch Systems,
Inc. ("Systems") and subsequently merged Systems into itself. The Company's
executive offices are located at 1895 Phoenix Boulevard, Suite 306, College
Park, Georgia 30349, and its telephone number is (770) 907-7596.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.... 2,300,000 shares
Common Stocks offered by the Selling
Stockholder........................... 1,000,000
Common Stock to be outstanding after
the Offering.......................... 11,321,510 shares(1) (2)
Use of proceeds........................ For internal software development
expansion of existing Operations
Centers and working capital and general
corporate purposes, including
marketing, sales force expansion,
formation of new Operations Centers,
acquisitions and providing collateral
security for performance bonds in
connection with new contracts. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol. LGTC
</TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED
ENDED DECEMBER 31, MARCH 31,
----------------------- ---------------
1995 1996 1997 1997 1998
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $ 392 $3,636 $11,502 $1,362 $11,715
Operating expenses.................. 501 3,722 15,714 1,586 11,494
Income (loss) from operations....... (109) (86) (4,212) (224) 221
Other income (expense), net......... (18) (33) (2) (2) 7
Net income (loss)................... $ (127) $ (119) $(4,214) $ (226) $ 228
Basic net income (loss) per share... $(0.03) $(0.02) $ (0.59) $(0.04) $ 0.03
Weighted average shares outstanding. 5,000 5,550 7,189 5,797 8,047
Diluted net income (loss) per share. $(0.03) $(0.02) $ (0.59) $(0.04) $ 0.02
Weighted average shares and
potentially dilutive shares
outstanding........................ 5,000 5,550 7,189 5,797 10,256
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 3,681 $26,460
Working capital...................................... (3,367) 19,412
Total assets......................................... 6,875 29,654
Short-term debt including current portion of long-
term debt........................................... 149 149
Long-term debt, less current maturities.............. 242 242
Total stockholders' equity (deficit)................. (2,450) 20,329
</TABLE>
- --------------------
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
(i) 1,000,000 shares of Common Stock reserved for issuance under the
Company's 1998 Stock Option Plan and (ii) 1,533,330 shares of Common Stock
reserved for issuance under the Company's 1995 Stock Option Plan and
subject to outstanding options as of March 31, 1998 at a weighted average
exercise price of $0.93 per share. See "Capitalization," "Management--Stock
Option Plans" and Note 7 of Notes to Financial Statements.
(2) As adjusted to reflect the sale of shares of Common Stock offered hereby at
an assumed initial public offering price of $11.00 per share and the
receipt of the estimated proceeds therefrom as if such transactions had
occurred on March 31, 1998. See "Use of Proceeds" and "Capitalization."
4
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the securities offered hereby. This Prospectus contains
forward-looking statements. Discussions containing such forward-looking
statements may be found in the material set forth below and under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in the Prospectus generally.
Prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors set forth below and the matters set forth in this
Prospectus generally.
Limited Operating History; History of Operating Losses. The Company was
formed in 1994 and, therefore, has had a limited operating history upon which
an evaluation of the Company and its prospects can be based. From its
inception to July 1997, the Company executed five contracts with MCOs and
three contracts with transportation carriers. Since July 1997, the Company has
also executed four contracts with government agencies. The Company has had
limited experience in managing these contracts. The Company's prospects must
be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and evolving markets. There can be no assurance that the
Company will be successful in addressing such risks. The Company has incurred
net losses since inception, including losses of $4.2 million in the year ended
December 31, 1997. Although the Company has experienced revenue growth in
recent periods, such growth rates may not be sustainable and are not
indicative of future operating results.
Dependence on Limited Number of Contracts. In July 1997, the Company
executed three contracts with the Georgia Department of Administrative
Services (on behalf of the Georgia Department of Medical Assistance) ("GDMA"),
pursuant to which the Company manages, on a capitated basis, non-emergency
transportation services to Medicaid beneficiaries in certain regions of
Georgia. In February 1998, the Company began providing services under a
written memorandum of understanding with the Connecticut Department of Social
Services ("CDSS") and executed a final contract with the CDSS for such
services in May 1998. Under this contract, the Company manages, on a capitated
basis, non-emergency transportation services to Medicaid beneficiaries in
certain regions of Connecticut. The GDMA contracts accounted for approximately
48.4% of the Company's revenues in 1997 and approximately 78.8% of the
Company's revenues in the first quarter of 1998. The CDSS contract accounted
for 12.0% of the Company's revenues in the first quarter of 1998. The Company
anticipates that these contracts will continue to represent a significant
portion of its revenues in the remainder of 1998 and for the foreseeable
future. However, the capitation rates in effect under the GDMA contracts for
service periods subsequent to June 30, 1998 are 23% to 26% lower than rates
that were in effect for the period from February 1, 1998 through June 30,
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview." Each of the GDMA contracts was originally
scheduled to expire on June 30, 1998, subject to two successive one year
options to renew, exercisable solely in the discretion of the GDMA. In May
1998, the GDMA exercised the first option to renew with respect to each of the
GDMA contracts. The GDMA contracts are terminable by the GDMA upon notice to
the Company in certain circumstances, including if the GDMA determines that
such termination is in the best interest of the State of Georgia or that
sufficient funds no longer exist to pay its obligations under such contracts.
The CDSS contract expires on January 31, 1999 and is subject to two successive
one year options to renew, exercisable solely in the discretion of the CDSS.
The CDSS contract is terminable by the CDSS upon 90-days notice to the Company
for any reason, and upon lesser notice to the Company in certain
circumstances, and the CDSS may terminate the contract or reduce the
contracted amount of compensation at any time in the event that sufficient
funds no longer exist to pay its obligations. There can be no assurance that
any of these contracts will be retained, renewed or not terminated. The loss
of any of these contracts would have a material adverse effect on the
Company's business, financial condition and results of operations.
5
<PAGE>
Capitated Nature of Revenue. Approximately 80.4% of the Company's revenues
in 1997 and approximately 97.6% of the Company's revenues in the first quarter
of 1998 relate to capitated contracts, and the Company anticipates that the
revenues received under capitated contracts will continue to represent a
substantial majority of the Company's total revenues as it expands and
implements its business strategies. The Company believes that government
agencies, MCOs and other third-party payors will continue to seek discounted
fee structures and the assumption by providers, through capitation
arrangements, of all or a portion of the financial risks relating to health
care related services, including transportation services. In a capitation
arrangement, the Company makes certain demographic, statistical and other
assumptions concerning anticipated utilization, carrier services and cost
incurred per trip. Such assumptions are based upon the Company's limited
experience in providing services under other capitated arrangements, publicly-
available information and information furnished by the party requesting a bid
or proposal from the Company. If the Company secures a capitated contract, the
Company typically agrees, in advance and often for multi-year periods, to
accept a fixed monthly fee for services based upon the number of eligible
Recipients and various transportation-related criteria. The failure of the
Company to make accurate assumptions with respect to a contract could have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, if MCO enrollees covered by such contracts
require more frequent transportation than anticipated by the Company upon
entering into such a contract, there could be a material adverse effect on the
Company. Fees negotiated under such capitated contracts could be insufficient
to cover the costs of the services provided.
The Company's acceptance of risk contracts may entail the business of
insurance, to which state licensure laws apply. If the Company's activities
are deemed to require licensure, the Company may not be able to qualify for
such licensure and may be subject to penalties for its failure to obtain
licensure. If the Company were required to and did obtain licensure, it would
be subject to potentially onerous regulatory requirements. To the extent the
Company accepts capitation and is not regulated as an insurer, regulatory
provisions that might mitigate losses by insurers will not apply to reduce the
Company's risk. See "Business--Government Regulation and Supervision--
Insurance Laws."
Risks Associated with Proposed Growth Strategy. The Company's business
strategy is to expand into new and existing markets either through entering
into new contracts and forming new Operations Centers or acquiring existing
businesses. The Company does not anticipate opening a new Operations Center in
a geographic region unless and until it has one or more contracts in such
region sufficient to support a new Operations Center. There can be no
assurance that the Company will be successful in obtaining new contracts
sufficient to form new Operations Centers. Upon the execution of a contract
requiring the formation of a new Operations Center, it may be necessary for
the Company within a brief time period to lease office space, purchase office
equipment, hire and train sufficient qualified personnel, and negotiate and
execute contracts with transportation carriers in geographic regions in which
the Company has no prior experience. The Company may also be required to
modify its software system to integrate new Operations Centers. There can be
no assurance that the Company will be able to complete such activities within
the time period necessary to perform under the applicable contract. These
activities may also occur prior to the Company's receipt of any payments under
a new contract and the Company may experience a several month lag in the
collection of its accounts receivables. Integrating newly-formed and acquired
business units with the Company's operations, identifying and pursuing
opportunities for expansion, funding the formation of new Operations Centers
and managing growth will require a significant amount of management time and
skill and financial resources. There can be no assurance that the Company will
be successful in achieving and managing growth. The Company currently has no
pending agreements or understandings regarding the acquisition of any business
or the formation of new Operations Centers.
Termination of Significant Contracts. The Company's contracts typically
contain provisions that permit the third-party payor to terminate its contract
with the Company on little or no notice, with or without cause. Termination of
a significant contract between the Company and a third-party payor, whether by
expiration or otherwise, will not only cause a loss of revenue to the Company,
but may also cause the Company to expend significant resources in closing the
applicable Operations Center. Actions necessary to close an Operations
6
<PAGE>
Center may include buying-out office leases, terminating or reassigning
personnel and selling or re-deploying office equipment. Both the loss of
revenue resulting from the termination of a significant contract and the
related costs of closing an Operations Center could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Risks Associated with RFPs. A high percentage of the Company's prospective
clients are state or local government authorities. Effective marketing of the
Company's services to government clients requires the ability to respond to
government requests for proposals ("RFPs"). To succeed in the RFP process, the
Company must estimate its costs for servicing the proposed contract, the time
required to establish operations and the likely terms of the proposals
submitted by competitors. The Company's ability to successfully respond in the
RFP process in the future depends in large measure upon the availability of
sufficient financial and management resources, and will have an important
impact on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will have sufficient
financial and management resources to successfully respond in the RFP process
in the future or that it will secure profitable contracts pursuant to RFPs .
Risks Associated With Government Contracting. In order to establish and
maintain relationships with government agencies, the Company occasionally
engages marketing consultants, including lobbyists. In the event of a
significant political change, such consultants may lose their ability to
effectively assist the Company. The failure of the Company to manage its
relationships effectively with political consultants may have a material
adverse effect on its business, financial condition and results of operations.
No assurance can be given that the Company will be successful in managing such
relationships.
Government contracts generally are subject to audits and investigations by
appropriate government agencies. These audits and investigations involve a
review of the government contractor's performance of its contracts as well as
its compliance with applicable laws, regulations and standards. If improper or
illegal activities are discovered in the course of any audits or
investigations, the contractor may be subject to various civil, criminal and
administrative sanctions, including termination of contracts, forfeiture of
profits, suspension of payments, fines and suspension or disqualification from
doing business with the government. If the Company becomes subject to
sanctions, such sanctions could have a material adverse effect on the
Company's business, financial condition and results of operations.
Risks Associated with the Company's Inability or Failure to Perform Under
Contracts. The Company's inability or failure to satisfy its contractual
obligations in a manner consistent with the terms of a contract could have a
material adverse effect on the Company's business, financial condition and
operating results because the Company is often required to indemnify third-
party payors for its failure to meet performance standards. For example, the
Company's contracts with the GDMA contain liquidated damages provisions and
financial penalties related to performance failures. In addition, in order for
the Company to bid for certain government contracts, the Company has been, and
may continue to be, required to secure its obligations by obtaining a
performance bond from an insurer, posting a cash performance bond or obtaining
a letter of credit from a suitable financial institution. In the event that a
government agency makes a claim against such performance bond or letter of
credit, the premiums demanded by the insurers for such bonds could increase,
thereby limiting the Company's ability to bid for contracts in the future. In
addition, the Company's failure to meet a third-party payor's expectations in
the performance of its contractual obligations could have a material adverse
effect on the Company's reputation, thereby adversely affecting its business,
financial condition and results of operations.
Legislative Change and Political Development. The market for the Company's
services is largely dependent on federal and state legislative programs, any
of which may be modified or terminated by acts of the legislative or executive
branches of federal and state governments. There can be no assurance that such
legislative change will not occur or that the Company will be able to
anticipate and respond in a timely manner to any such legislative change. The
Company's failure to effectively manage its business in light of anticipated
7
<PAGE>
or unanticipated legislative change could have a material adverse effect on
the Company's business, financial condition and results of operations.
Government Regulation. The federal government and all states in which the
Company operates regulate various aspects of the businesses with which the
Company contracts, such as MCOs and transportation carriers, by establishing
licensing requirements and operating standards. Although these regulations do
not currently have a direct impact on the Company's business, changes in these
regulations or their interpretation could affect the Company's business, by,
for example, increasing the cost of transportation carrier services.
Additionally, existing and future federal and state regulation of health care
could have a material adverse effect on the Company's financial condition and
results of operations. While the Company believes that its operations are
conducted in material compliance with applicable laws, the laws applicable to
the Company are subject to evolving interpretations, and therefore there can
be no assurance that a review of the Company's operations by federal or state
judicial or regulatory authorities would not result in a determination that
the Company has violated one or more provisions of federal or state law. Any
such determination could have a material adverse effect on the Company.
Expansion of the Company into, or the continuation of the Company's operations
within, certain jurisdictions may depend on the Company's ability to modify
its operational structure to conform to such jurisdictions' regulatory
framework. Any limitation on the Company's ability to expand could have a
material adverse effect on the Company. See "Business--Government Regulation
and Supervision."
Fraud and Abuse. The anti-kickback provisions of the Social Security Act
prohibit the solicitation, payment, receipt or offering of any direct or
indirect remuneration in return for, or as an inducement for, certain
referrals of patients for items, services or equipment covered by health
benefits programs, including Medicare and Medicaid. In addition to federal
law, anti-kickback laws have been adopted by many states, including the states
in which the Company conducts business. For example, the State of Florida
prohibits kickbacks and states that "[i]t is unlawful for any health care
provider or any provider of health care services to offer, pay, solicit, or
receive a kickback, directly or indirectly, overtly or covertly, in cash or in
kind, for referring or soliciting patients." In addition, federal law and some
state laws impose significant penalties for false and improper billings. These
anti-kickback and false claims laws are commonly referred to as the fraud and
abuse laws. Violations of any of these laws may result in substantial civil or
criminal penalties, and, in the case of violations of federal laws, exclusion
from participation in the Medicare and Medicaid programs. Such exclusion and
penalties, if applied to the Company, would have a material adverse effect on
the Company. Further, the application of these laws is subject to modification
by statutory amendment or promulgation of regulations and any such change
could have a material adverse effect on the Company.
Non-emergency transportation is one of many services identified by states
and the Office of Inspector General ("OIG") of the Department of Health and
Human Services as being a source of fraud and abuse activity in the Medicaid
program. Such allegations of fraud and abuse and the resulting increasing
costs have led members of Congress to consider eliminating non-emergency
transportation as a covered Medicaid service. The elimination of non-emergency
transportation as a covered Medicaid service would have a material adverse
effect on the Company. See "Business--Government Regulation and Supervision--
False and Improper Claims."
Health Care Reform. As a result of the continued escalation of health care
costs and the inability of many individuals to obtain insurance, numerous
proposals have been or may be introduced in Congress and state legislatures
relating to health care reform. There can be no assurance as to the ultimate
content, timing or effect of any health care reform legislation, nor is it
possible at this time to estimate the impact of potential legislation, which
may be material, on the Company. Aspects of certain of these proposals, such
as reduction in funding of Medicaid programs, changes in reimbursement
regulations, and increased pressure by Medicaid and other third-party payors
to contain health care costs, could eliminate or limit the use of
transportation carriers and consequently reduce both the demand for the
Company's services and the amount of funds available for such use. In the
recently enacted Balanced Budget Act of 1997 (the "1997 Budget Bill") and
8
<PAGE>
Health Insurance Portability and Accountability Act of 1996 ("HIPAA"),
Congress has responded to perceived fraud and abuse in health care programs.
This legislation has fortified the government's enforcement authority with
increased resources and greater civil and criminal penalties for offenses. The
Company anticipates that there will be further restrictive legislative and
regulatory measures to reduce fraud, waste and abuse in the health care
programs. There can be no assurance that any such legislation will not have a
material adverse effect on the Company. See "Business--Government Regulations
and Supervision--Federal and State Initiatives."
Dependence on Software System. The successful operation of the Company's
software system, RealTime, is critical to its ability to manage transportation
services and to secure, and operate profitably under, capitated contracts. The
software industry is characterized by rapid technological changes and advances
which can result in relatively short product lifecycles. The Company's future
success may depend, in large part, on its ability to enhance RealTime and
develop new software that keeps pace with technological developments in the
marketplace. Over the next year, the Company intends to expand RealTime's data
management and interface capabilities. There can be no assurance that the
Company will be successful in developing new software products or product
enhancements, including the proposed enhancements, or that such new products
or enhancements will keep pace with competitive innovations.
Dependence on Third-Party Carriers for Transportation. The Company does not
own or operate vehicles and is therefore dependent upon third-party
transportation carriers to fulfill the Company's obligations under its
transportation management contracts. There can be no assurance that the
Company will be able to execute and maintain contracts with third-party
carriers to provide transportation services on behalf of the Company in
accordance with the Company's standards at acceptable prices. The inability of
the Company to enter into satisfactory relationships with third-party carriers
or the failure of such carriers to furnish transportation services according
to the Company's standards at acceptable prices could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Variability of Quarterly Operating Results. Variations in the Company's
revenues and operating results occur from quarter to quarter as a result of a
number of factors, including the progress of contracts, levels of revenues
earned on contracts (including any adjustments in expectations of revenue
recognition on fixed price contracts), the commencement, completion or
termination of contracts during any particular quarter, the schedule of
government agencies for awarding contracts and general economic conditions.
Because a significant portion of the Company's expenses are relatively fixed,
successful contract performance and variation in the volume of activity, as
well as in the number of contracts commenced or completed during any quarter,
may cause significant variations in operating results from quarter to quarter.
Furthermore, the Company has experienced, and anticipates that it may in the
future experience, a pattern in its results of operation in which it incurs
greater operating expenses during the start-up and early stages of significant
contracts.
Competition. The market for transportation management services is new,
highly competitive and rapidly evolving. Increased outsourcing of
transportation services, low barriers to entry and other factors may attract
new entrants into the transportation management industry and result in
increased competition for the Company. Potential competitors include
independent transportation carriers, logistics companies and other companies
who currently provide unrelated services to government agencies and other
third-party payors. Many of the Company's competitors and potential
competitors have significantly greater financial, technological and marketing
resources than the Company. There can be no assurance that the Company will be
able to compete successfully against current and future sources of competition
or that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
Reliance on Key Personnel. The success of the Company is highly dependent
upon the efforts, abilities, business generation and project execution
capabilities of certain of its executive officers and other senior employees,
most of whom have worked together for only a short period of time. The loss of
the services of
9
<PAGE>
any of its executive officers or other key employees could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company maintains a key-man life insurance policy on John L.
Shermyen in the amount of $2,000,000, with the proceeds payable to the
Company.
The Company's future success also depends on its continuing ability to
identify, hire, train and retain other highly qualified technical and
managerial personnel. Competition for such personnel is significant and there
can be no assurance that the Company will be able to attract, assimilate or
retain other highly qualified technical and managerial personnel in the
future. The inability to attract and retain the necessary personnel could have
a material adverse effect upon the Company's business, financial condition and
results of operations.
Adverse Publicity. The Company has received, and expects to continue to
receive, media attention as a result of its contracts with state and local
government authorities. There can be no assurance that the Company will not
receive adverse media attention as the result of the types of services
provided by the Company or the activities of displaced transportation
carriers. Negative coverage relating to the Company could influence government
officials, slow the issuance of RFPs or cause the termination of existing
contracts. In addition, there can be no assurance that media attention focused
on the Company will be accurate or that the Company will be able to anticipate
and respond in a timely manner to all media contacts. Adverse media coverage
or the Company's failure to manage such coverage could have a material adverse
effect on the Company's reputation or the transportation management industry,
thereby adversely affecting the Company's business, financial condition and
results of operations.
Dependence Upon Third-Party Reimbursement. A substantial majority of the
Company's revenues are attributable to reimbursement by third-party payors,
particularly government agencies who administer state Medicaid programs and
MCOs. During the year ended December 31, 1997 and the three months ended March
31, 1998, the Company derived approximately 48.4% and 90.8%, respectively, of
its total revenues from government agencies who administer state Medicaid
programs, and approximately 51.6% and 9.2%, respectively, of its total
revenues from MCOs and other non-governmental third-party payors. The
revenues, cash flows and profitability of the Company, like those of other
companies in the health care industry, are affected by the continuing efforts
of third-party payors to control expenditures for health care. In addition,
reimbursement can be influenced by the financial instability of private third-
party payors and by budget pressures and cost shifting by governmental payors.
Furthermore, any change in reimbursement regulations, policies,
interpretations or statutes could adversely affect the operations of the
Company. The health care industry is experiencing a trend toward cost
containment as third party payors, such as governmental programs (e.g.,
Medicare and Medicaid), private insurance plans and managed care plans, seek
to impose lower reimbursement and utilizations rates and to negotiate reduced
capitated payment schedules with service providers. Further reductions in
payments to health care providers or other changes in reimbursement for health
care services could have a material adverse effect on the Company. These
reductions could result from changes in current reimbursement rates. There can
be no assurance that the effect of any or all of these changes in third-party
reimbursement could be offset by the Company through cost reductions,
increased volume, introduction of new services and systems or otherwise.
Risk of Liability Claims. The Company is subject to liability claims in the
event a Recipient fails to receive, or suffers harm in connection with,
transportation arranged through the Company. Even unsuccessful claims could
result in expenditure of funds in litigation, diversion of management time and
resources or damage to the Company's reputation and the marketability of the
Company's services and systems. Although the Company takes contractual steps
to obtain indemnification for certain liabilities and maintains general
commercial liability insurance, there can be no assurance that a successful
claim could not be made against the Company, that the amount of
indemnification payments or insurance would be adequate to cover the costs of
defending against or paying such a claim or that the costs of defending
against such a claim or the payment of damages by the Company would not have a
material adverse effect on the Company.
10
<PAGE>
Broad Discretion Over Use of Proceeds. The principal purposes of the
Offering by the Company are to obtain additional capital to support
anticipated growth, expand the public market for the Common Stock, facilitate
future access for the Company to public equity markets and enhance the
Company's ability to use its Common Stock as consideration for potential
acquisitions and as a means of attracting and retaining key employees. The
Company expects to use the net proceeds to the Company from the Offering
primarily for working capital and general corporate purposes, including
marketing, sales force expansion, formation of new Operations Centers,
acquisitions and providing collateral security for performance bonds in
connection with new contracts. The cost, timing and amount of funds required
for such uses by the Company cannot be precisely determined and will be based
upon, among other things, market conditions and other factors beyond the
control of the Company. Accordingly, management will retain discretion over
the use of the proceeds. See "Use of Proceeds."
No Prior Market; 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 public market for the Common Stock will develop or
continue after the Offering. The initial public offering price of the Common
Stock will be determined by negotiation between the Company and the
Underwriters and may not be indicative of the market price for the Common
Stock after the Offering. See "Underwriting" for factors considered in
determining the initial public offering price. From time to time after the
Offering, there may be significant volatility in the market price of the
Common Stock. Deviations in results of operations from estimates of securities
analysts, changes in general conditions in the economy or the health care
industry or other developments affecting the Company or its competitors could
cause the market price of the Common Stock to fluctuate substantially. The
equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies'
securities and have often been unrelated to the operating performance of these
companies. Concerns about the potential effects of health care reform measures
have contributed to the volatility of stock prices of companies in health care
and related industries and may similarly affect the price of the Common Stock
following the Offering. Any such fluctuations that occur following the
completion of the Offering may adversely affect the market price of the Common
Stock.
Shares Eligible for Future Sale. Immediately after completion of the
Offering, the Company will have 11,321,510 shares of Common Stock outstanding,
of which the 3,300,000 shares sold pursuant to the Offering will be freely
tradeable without restriction or further registration under the Securities
Act, except those shares acquired by affiliates of the Company. Holders of the
remaining shares will be eligible to sell such shares pursuant to Rule 144
under the Securities Act at prescribed times and subject to the manner of
sale, volume, notice and information restrictions of Rule 144. In addition,
1,743,330 shares of Common Stock are issuable upon the exercise of outstanding
stock options, the issuance of which shares is expected to be registered by
the Company under the Securities Act and become freely tradeable without
restriction. The Company and its current stockholders (holding an aggregate of
8,021,510 shares of Common Stock upon the closing of the Offering) have agreed
not to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, until 180 days after
the effective date of the Registration Statement, without the prior consent of
Hambrecht & Quist LLC. Sales of substantial amounts of these shares in the
public market or the availability of such shares for future sale could
adversely affect the market price of the shares of Common Stock and the
Company's ability to raise additional capital at a price favorable to the
Company. See "Shares Eligible for Future Sale" and "Underwriting."
Potential Anti-Takeover Effects of Charter and By-laws Provisions. Certain
provisions of the Restated Certificate of Incorporation (the "Certificate of
Incorporation") and the Amended and Restated By-laws (the "By-laws") of the
Company may be deemed to have anti-takeover effects and may delay, deter or
prevent a change in control of the Company that a stockholder might consider
in his/her best interest. These provisions (i) provide that only the Board of
Directors or certain members thereof or officers of the Company may call
special meetings of the stockholders and (ii) authorize the issuance of "blank
check" preferred stock having such designations, rights and preferences as may
be determined from time to time by the Board of Directors. See "Description of
Capital Stock."
11
<PAGE>
Control by Existing Stockholders. Following the completion of the Offering,
the officers and directors of the Company will beneficially own approximately
50.4% of the outstanding shares of Common Stock. Following the offering, such
persons may effectively be able to control the affairs of the Company,
including the ability to delay or prevent a change of control of the Company.
See "Principal and Selling Stockholders."
Immediate and Substantial Dilution. Purchasers of the Common Stock in the
Offering will incur immediate and substantial dilution in the net tangible
book value per share of Common Stock of $9.21 per share. See "Dilution."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $11.00 per share, and after deducting the underwriting
discounts and estimated offering expenses, are estimated to be $22,779,000.
The Company intends to use the net proceeds it receives from the Offering
approximately as follows:
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS AMOUNT PERCENT
----------------------- ----------- -------
<S> <C> <C>
Internal software development........................ $ 2,500,000 11%
Expansion of existing Operations Centers............. 1,000,000 4%
Working capital and general corporate purposes,
including marketing, sales force expansion,
formation of new Operations Centers, acquisitions
and providing collateral security for performance
bonds in connection with new contracts.............. 19,279,000 85%
</TABLE>
The cost, timing and amount of funds required for such uses by the Company
cannot be precisely determined and will be based upon, among other things,
market conditions and other factors beyond the control of the Company.
The Company may use a portion of such net proceeds to acquire businesses,
but the Company does not have any commitments or agreements with respect to
any such transaction. Pending such uses, the net proceeds to the Company of
the Offering will be invested in short-term, interest-bearing, investment-
grade securities.
The Company and certain stockholders of the Company (the "Over-allotment
Selling Stockholders") have granted the Underwriters a 30-day option to
purchase up to an aggregate of 495,000 additional shares of Common Stock
(195,000 from the Company and 300,000 from the Over-allotment Selling
Stockholders) to cover over-allotments, if any. If the over-allotment option
is exercised, the Company will not receive any proceeds from the sale of
Common Stock by the Over-allotment Selling Stockholders. See "Principal and
Selling Stockholders."
DIVIDEND POLICY
To date, the Company has neither declared nor paid any cash dividends on
shares of its Common Stock. The Company currently intends to retain its
earnings for future growth and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 (i) on an actual basis, (ii) the pro forma capitalization of the
Company at March 31, 1998 assuming the conversion of the Preferred Stock, and
(iii) as adjusted to give effect to the sale of 2,300,000 shares of Common
Stock offered by the Company hereby at an assumed offering price of $11.00 per
share and the application of the net proceeds therefrom. This table should be
read in conjunction with the Financial Statements of the Company and Notes
thereto included elsewhere in this Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
------- ------------ --------------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
Short-term obligations, including current
maturities of long-term obligations...... $ 149 $ 149 $ 149
------- ------- -------
Long-term obligations, less current
maturities............................... $ 242 $ 242 $ 242
------- ------- -------
Stockholders' equity (deficit):
Preferred stock, $.01 par value,
1,000,000 shares authorized; 97,415
issued and outstanding(4).............. 1 -- --
Common stock, $.01 par value, 30,000,000
shares authorized; 8,047,360 shares
issued and outstanding actual;
11,321,510 shares issued and
outstanding as adjusted(1)(4).......... 80 90 113
Additional paid-in capital................ 2,285 2,276 25,032
Deferred option plan compensation......... (450) (450) (450)
Retained deficit.......................... (4,366) (4,366) (4,366)
------- ------- -------
Total stockholders' equity (deficit).. (2,450) (2,450) 20,329
------- ------- -------
Total capitalization................ $(2,059) $(2,059) $20,720
======= ======= =======
</TABLE>
- ---------------------
(1) Excludes (i) 1,000,000 shares of Common Stock reserved for issuance under
the Company's 1998 Stock Option Plan and (ii) 1,533,330 shares of Common
Stock reserved for issuance under the Company's 1995 Stock Option Plan and
subject to outstanding options as of March 31, 1998 at a weighted average
exercise price of $0.93 per share. See "Management--Stock Option Plans"
and Note 7 of Notes to Financial Statements.
(2) Gives effect to the conversion of the issued and outstanding shares of
Preferred Stock into 974,150 shares of Common Stock, in the aggregate.
(3) Gives effect to the sale of 2,300,000 shares of Common Stock and the
application of the estimated net proceeds of $22,779,000 (after deducting
underwriting discounts and estimated offering expenses) as set forth in
"Use of Proceeds."
(4) Give effect to the increase in the Company's authorized capital stock
effected in June 1998.
14
<PAGE>
DILUTION
As of March 31, 1998, the Company had pro forma net tangible book value
(deficit) of approximately $(2,513,000), or $(0.28) per share of Common Stock.
Pro forma net tangible book value (deficit) represents the amount of total
tangible assets less total liabilities divided by the number of shares of
Common Stock outstanding. Without taking into account any other changes in the
net tangible book value after March 31, 1998, other than to give effect to the
receipt by the Company of the net proceeds from the sale of the 2,300,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $11.00 per share (after deducting underwriting
discounts and estimated offering expenses), the pro forma net tangible book
value of the Company as of March 31, 1998 would have been approximately
$20,266,000, or $1.79 per share. This represents an immediate increase in net
tangible book value of $2.07 per share to existing stockholders and an
immediate dilution of $9.21 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $11.00
Net tangible book value (deficit) per share before the Of-
fering.................................................... $(0.28)
Increase per share attributable to new investors........... 2.07
------
Pro forma net tangible book value per share after the Offer-
ing......................................................... 1.79
------
Dilution per share to new investors.......................... $ 9.21
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockhold-
ers(1)................. 8,021,510 70.85% $ 1,851,443 4.85% $ 0.23
New investors(1)........ 3,300,000 29.15% $36,300,000 95.15% $11.00
---------- ------ ----------- ------
Total............... 11,321,510 100.00% $38,160,648 100.00%
========== ====== =========== ======
</TABLE>
---------------------
(1)Includes 1,000,000 shares of Common Stock to be purchased by new investors
from the Selling Stockholder, which represents 8.83% of the shares which will
be outstanding following "The Offering." See "Principal and Selling
Stockholders."
Other than as noted above, the foregoing computations assume no exercise of
stock options under the Company's 1998 Stock Option Plan and 1995 Stock Option
Plan after March 31, 1998. As of March 31, 1998, there were no options
outstanding under the 1998 Stock Option Plan and there were options
outstanding to purchase 1,533,330 shares of Common Stock under the 1995 Stock
Option Plan at a weighted average exercise price of $0.93 per share. To the
extent options granted under the Company's 1995 Stock Option Plan are
exercised, there will be further dilution to new investors. See "Management--
Stock Option Plans" and Note 7 of Notes to Financial Statements.
15
<PAGE>
SELECTED FINANCIAL INFORMATION
The following data has been derived from financial statements audited by
Price Waterhouse LLP, independent certified public accountants. Balance sheets
at December 31, 1996 and 1997 and the related statements of operations and of
cash flows for the three years ended December 31, 1997 and Notes thereto
appear elsewhere in this Prospectus. The financial data at March 31, 1998 and
for the three months ended March 31, 1997 and 1998 has been derived from
unaudited financial statements also appearing elsewhere herein and which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for the unaudited interim periods. The
historical results are not necessarily indicative of results of any future
period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ---------------
1994 1995 1996 1997 1997 1998
------ ------ ------ ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Transportation management
services .................. $ -- $ -- $1,530 $10,768 $ 988 $11,715
Related party............... -- -- 1,668 603 374 --
Other....................... -- 392 438 131 -- --
------ ------ ------ ------- ------ -------
Total revenues............ -- 392 3,636 11,502 1,362 11,715
------ ------ ------ ------- ------ -------
Operating expenses:
Purchased transportation.... -- -- 1,296 11,213 899 9,503
Direct labor................ -- -- 1,178 1,836 369 902
Selling, general and admin-
istrative.................. 126 311 1,043 2,665 318 1,089
Other....................... -- 190 205 -- -- --
------ ------ ------ ------- ------ -------
Total operating expenses.. 126 501 3,722 15,714 1,586 11,494
------ ------ ------ ------- ------ -------
Income (loss) from opera-
tions....................... (126) (109) (86) (4,212) (224) 221
Other income (expense) net... (8) (18) (33) (2) (2) 7
------ ------ ------ ------- ------ -------
Net income (loss)............ $ (134) $ (127) $ (119) $(4,214) $ (226) $ 228
====== ====== ====== ======= ====== =======
Basic net income (loss) per
share...................... $(0.03) $(0.03) $(0.02) $ (0.59) $(0.04) $ 0.03
Weighted average shares out-
standing................... 5,000 5,000 5,550 7,189 5,797 8,047
Diluted net income (loss)
per share.................. $(0.03) $(0.03) $(0.02) $ (0.59) $(0.04) $ 0.02
Weighted average shares and
potentially dilutive shares
outstanding................ 5,000 5,000 5,550 7,189 5,797 10,256
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31
-------------- --------
1996 1997 1998
----- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 71 $ 640 $ 3,681
Working capital..................................... (427) (3,519) (3,367)
Total assets........................................ 968 2,258 6,875
Long-term debt, less current maturities............. 32 239 242
Total stockholders' deficit......................... (298) (2,678) (2,450)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Information" and the Company's Financial Statements and
Notes thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussion in this Prospectus contains
certain forward-looking statements that involve risks and uncertainties such
as statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements where they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors" as well as those discussed elsewhere
herein.
OVERVIEW
LogistiCare provides non-emergency transportation management services to
government health and human service agencies and MCOs. The Company seeks to
establish itself as the central contact for three constituencies: third-party
payors, transportation carriers and individuals eligible for transportation
benefits ("Recipients"). The Company does not own any transportation carriers
or operate any vehicles for the transportation of individuals. The Company
provides services in which the Company coordinates, and through contracts with
unaffiliated transportation carriers provides, non-emergency transportation
for Recipients who are eligible to receive such transportation pursuant to
agreements with, or plans of, government health and human service agencies and
MCOs ("Brokerage Logistics"). In addition, a small percentage of the Company's
current revenues are generated from services in which the Company manages the
internal logistics requirements of independent transportation carriers and
carrier networks ("Service Bureau Logistics").
The Company was incorporated in March 1994 in Delaware. In April 1994, the
Company acquired for $150,000 from Automated Dispatch Services, Inc.
("Services"), the owner of RealTime, royalty-free rights to use, and exclusive
rights to modify and sublicense, RealTime, a computer-aided dispatch and
transportation logistics software system, for general transportation dispatch
purposes. RealTime was first conceptualized by, and designed and developed
under the supervision of, John L. Shermyen, the President of Services at such
time and the current Chairman of the Board, President and Chief Executive
Officer of the Company. During 1995, the Company realized its first revenues
through the performance of transportation management consulting services and
the resale of two-way land mobile radio equipment. In January 1996, the
Company purchased all of the outstanding shares of Automated Dispatch Systems,
Inc. ("Systems") for a combination of cash, stock and debt and subsequently
merged Systems into itself. Systems' previous operations have become the
Company's Florida Operations Center. In May 1996, the Company established its
Connecticut Operations Center through which it provides non-emergency
transportation management services to various MCOs. In October 1997, the
Company established its Georgia Operations Center through which it provides
non-emergency transportation management services under three contracts with
the Georgia Department of Medical Assistance ("GDMA") with respect to
approximately 500,000 Medicaid beneficiaries in certain regions of Georgia.
These contracts were awarded in July 1997 pursuant to a competitive bidding
process. In November 1997, the Company was awarded the right, pursuant to a
competitive bidding process, to negotiate with the Connecticut Department of
Social Services ("CDSS") to provide non-emergency transportation management
services with respect to approximately 40,000 beneficiaries in certain regions
of Connecticut. The Company began providing such services under a written
memorandum of understanding with the CDSS in February 1998 through the
Connecticut Operations Center and executed a final contract with the CDSS for
such services in May 1998.
The Company's revenues are generated principally from transportation
management services. The majority of these revenues are generated from
Brokerage Logistics contracts which are structured as capitated arrangements
under which the Company receives a fixed fee per eligible Recipient and, to a
lesser extent, fee-for-service arrangements under which the Company is paid a
predetermined amount per trip which
17
<PAGE>
includes the total cost of transportation. The Company also generates revenues
from Service Bureau Logistics contracts under which the Company is compensated
on a fee-for-transaction basis in which the Company receives a payment for
every transportation event processed. The Company does not earn revenues or
incur costs with respect to purchased transportation in connection with the
provision of Service Bureau Logistics. However, the Company does earn revenues
and incur costs with respect to purchased transportation in connection with
the provision of Brokerage Logistics. Revenues from transportation management
services accounted for 100% of total revenues in the quarter ended March 31,
1998 and approximately 93.6% of total revenues in the year ended December 31,
1997. Revenues under capitated contracts are recognized over the capitation
period, generally one month. Revenues earned under fee-for-service and fee-
for-transaction arrangements are recognized when the service is provided.
The Company's operations for the three month period ended December 31, 1997
resulted in losses of $3,546,000 on total revenues of $6,789,000. This loss
was primarily the result of costs associated with the contracts between the
Company and the GDMA under which the Company began providing transportation
management services on October 1, 1997. Shortly after the Company began
performing under the GDMA contracts, management realized that the
transportation utilization requirements under these contracts were materially
greater than indicated by the utilization data that was provided to the
Company by the GDMA as part of the competitive bidding process. To address
this issue, the Company conducted a series of negotiations with the GDMA from
October 1997 through February 1998 that resulted in amendments to the original
contracts. The amendments provide for substantial price increases in the
capitated rates received by the Company for the period from February 1, 1998
to June 30, 1998, substantial price increases for each of the two one-year
contract renewal periods, and the modification of certain operating
requirements in favor of the Company. In May 1998, the GDMA exercised the
first option to renew with respect to each of the GDMA contracts.
The capitation rates during the two one-year contract renewal periods, while
substantially higher than the rates in effect from October 1997 through
January 1998, are 23% to 26% lower than the rates that were in effect for the
five-month period beginning February 1, 1998. As a result, management
anticipates that revenues under the contracts between the Company and the GDMA
will be substantially greater during the three-month periods ended March 31
and June 30, 1998 than any other quarter of the current contract period or the
two subsequent one-year contract renewal periods. The pricing structure
negotiated as part of the amendments to the original contracts was developed
with a higher capitation rate in the initial months to allow, among other
things, Company management the opportunity to implement operational changes to
more aggressively control utilization and negotiate lower prices with
transportation carriers. If the capitation rates which went into effect under
the GDMA contracts as of July 1, 1998 were in effect as of January 1, 1998,
revenues for the three month period ended March 31, 1998 would have been
approximately $700,000 less than actual revenues for such period.
The Company's most significant expenses are purchased transportation and
direct labor. Purchased transportation expenses are paid under capitated and
fee-for-service contracts. The Company either purchases transportation on a
per trip basis, or subcontracts with transportation carriers to gain access to
a certain number of vehicles for a fixed fee. The price of purchased
transportation is negotiated between the Company and the transportation
carrier and is based upon (among other things) labor, gasoline and vehicle
costs. Contemporaneous with the renegotiation of the GDMA contracts, the
Company renegotiated the prices it would pay to most transportation carriers
at substantially lower rates than under the original arrangements.
Direct labor costs consist of wages paid by the Company to customer service
representatives and other individuals servicing contracts. The Company's
ability to control costs associated with purchased transportation and direct
labor will have the most direct impact on profitability under current and
future capitated and fee-for-service contracts. The Company is subject to
potential cost overruns and there can be no assurance that the Company will
maintain profitability under its current or future contracts.
18
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statement of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------- ---------------
1995 1996 1997 1997 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Transportation management
services .................. -- 42.1% 93.6% 72.5% 100.0%
Related Party............... -- 45.9 5.3 27.5 --
Other....................... 100.0% 12.0 1.1 -- --
----- ----- ----- ------ ------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ------ ------
Operating expenses:
Purchased transportation.... -- 35.7 97.4 66.0 81.1
Direct labor................ -- 32.4 16.0 27.1 7.7
Selling, general and
administrative............. 79.4 28.7 23.2 23.3 9.3
Other....................... 48.5 5.6 -- -- --
----- ----- ----- ------ ------
Total operating expenses.. 127.9 102.4 136.6 116.4 98.1
----- ----- ----- ------ ------
Income (loss) from
operations................. (27.9) (2.4) (36.6) (16.4) 1.9
Other income (expense):
Interest income............. -- -- 0.2 -- 0.2
Interest expense............ (4.5) (0.9) (0.2) (0.2) (0.2)
----- ----- ----- ------ ------
Net income (loss)............. (32.4)% (3.3)% (36.6)% (16.6)% 1.9%
===== ===== ===== ====== ======
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Revenues. Total revenues increased 760.0% to $11,715,000 for the three month
period ended March 31, 1998 as compared to $1,362,000 for the same period for
1997. This increase was primarily a result of (i) revenues of $9,230,000 from
the contracts between the Company and the GDMA, and (ii) revenues of
$1,400,000 from the contract between the Company and the CDSS. Operations
under these contracts began producing revenues for the Company on October 1,
1997 and February 1, 1998, respectively. Total revenues from transportation
management services for the three months ended March 31, 1998 also reflect an
increase in the capitation rates under the GDMA contracts, effective February
1, 1998. The capitation rates in effect under the GDMA contracts subsequent to
July 1, 1998 are 23% to 26% lower than rates that were in effect for the
period prior to July 1, 1998.
As of March 31, 1998, the Company had $4,229,406 of deferred revenue.
Deferred revenue relates to funds received from the GDMA in November 1997 and
March 1998 in the amounts of $1,250,000 and $5,236,000, respectively. The
Company received the $1,250,000 payment pursuant to a written memorandum of
understanding entered into in November 1997 between the Company and the GDMA
in connection with the Company's claim that the data provided by the GDMA
under the original contracts between the parties understated the number of
passengers to be transported under the contracts. The $5,236,000 payment was
received from the GDMA for similar reasons. Based on the increased capitation
rates, effective February 1, 1998, included in the amended contract with the
GDMA, which superseded the prior memorandum of understanding, the Company
recognized as revenue $2,257,000 of amounts previously deferred in the first
quarter of 1998, and the balance of deferred revenue as revenue in the second
quarter of 1998.
Purchased Transportation. The cost of purchased transportation increased
957.7% to $9,503,000 for the three month period ended March 31, 1998 as
compared to $899,000 for the same period for 1997. This increase was primarily
a result of the purchase by the Company of additional transportation services
as required to meet the Company's obligations under the GDMA and CDSS
contracts. As a percentage of revenues, purchased transportation increased to
81.1% for the three month period ended March 31, 1998 from 66.0% for the same
period in 1997 due, in large part, to the Company's increase in Brokerage
Logistics contracts.
19
<PAGE>
Direct Labor. The cost of direct labor increased 144.1% to $902,000 for the
three months ended March 31, 1998 as compared to $369,000 for the same period
for 1997. This increase was primarily a result of the additional direct labor
required to meet the Company's obligations under the GDMA and CDSS contracts.
As a percentage of revenues, direct labor decreased to 7.7% for the three
month period ended March 31, 1998 from 27.1% for the same period in 1997. This
is due in large part to a change in the Company's product mix from primarily
Service Bureau Logistics, pursuant to which the Company does not earn revenues
or incur costs with respect to purchased transportation, to primarily
Brokerage Logistics, pursuant to which the Company earns revenues and incurs
costs with respect to purchased transportation.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 242.1% to $1,089,000 for the three months
ended March 31, 1998 as compared to $318,000 for the same period for 1997.
This increase was primarily a result of the additional selling, general and
administrative expenses required to meet the Company's obligations under the
GDMA and CDSS contracts and increased marketing efforts. As a percentage of
revenues, selling, general and administrative expenses decreased to 9.3% for
the three month period ended March 31, 1998 from 23.3% for the same period in
1997. This is due in large part to a change in the Company's product mix from
primarily Service Bureau Logistics, pursuant to which the Company does not
earn revenues or incur costs with respect to purchased transportation, to
primarily Brokerage Logistics, pursuant to which the Company earns revenues
and incurs costs with respect to purchased transportation.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues. Total revenues increased 216.3% to $11,502,000 for the year ended
December 31, 1997 as compared to $3,636,000 for the same period for 1996. This
increase was primarily a result of revenues of $5,572,000 from the contracts
between the Company and the GDMA. Operations under the GDMA contracts began
producing revenues for the Company in October 1997. Total revenues from the
sale of communications equipment decreased 100% for the year ended December
31, 1997 as compared to $226,000 for the same period for 1996. This decrease
resulted from the Company's decision in June 1997 to no longer engage in the
sale of communications equipment.
Purchased Transportation. The cost of purchased transportation increased
765.0% to $11,213,000 for the year ended December 31, 1997 as compared to
$1,296,000 for the same period for 1996. This increase was primarily a result
of the purchase by the Company of additional transportation services as
required to meet the Company's obligations under the GDMA contract. As a
percentage of revenues, purchased transportation increased to 97.5% for the
year ended December 31, 1997 from 35.7% for the same period in 1996 due, in
large part, to a change in product mix. Further, the purchased transportation
required under the contracts between the Company and the GDMA was
significantly greater than indicated by the statistical data used to develop
the contract pricing. The Company conducted a series of negotiations with the
GDMA from October 1997 through February 1998 which resulted in an increase in
the pricing under the contracts beginning February 1, 1998 which more closely
reflects the demographic makeup of the Recipient population.
Direct Labor. The cost of direct labor increased 55.8% to $1,836,000 for the
year ended December 31, 1997 as compared to $1,178,000 for the same period for
1996. This increase was primarily a result of the additional direct labor
required to meet the Company's obligations under the GDMA contracts. As a
percentage of revenues, direct labor decreased to 16.0% for the year ended
December 31, 1997 from 32.4% for the same period in 1996. This is due in large
part to a change in the Company's product mix from primarily Service Bureau
Logistics, pursuant to which the Company does not earn revenues or incur costs
with respect to purchased transportation, to primarily Brokerage Logistics,
pursuant to which the Company earns revenues and incurs costs with respect to
purchased transportation.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 155.6% to $2,665,000 for the year ended
December 31, 1997 as compared to $1,043,000 for the same period for 1996. This
increase was primarily a result of the additional selling, general and
administrative expenses, such as hiring additional employees, required to meet
the Company's obligations under the GDMA contracts
20
<PAGE>
and increased marketing efforts. As a percentage of revenues, selling, general
and administrative expenses decreased to 23.1% for 1997 from 28.7% for the
same period in 1996. This is due in large part to a change in the Company's
product mix from primarily Service Bureau Logistics, pursuant to which the
Company does not earn revenues or incur costs with respect to purchased
transportation, to primarily Brokerage Logistics, pursuant to which the
Company earns revenues and incurs costs with respect to purchased
transportation.
SELECTED QUARTERLY RESULTS OF OPERATIONS
Set forth below are selected quarterly statement of operations data for the
five fiscal quarters ended March 31, 1998. This information is derived from
unaudited quarterly financial data which include, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of operating results for such periods. This
information should be read in conjunction with the Financial Statements and
related Notes thereto contained elsewhere in this Prospectus. Results of
operations for any quarter are not necessarily indicative of results for any
future period.
Selling, general and administrative expenses decreased 20.2% to $1,089,000
for the three month period ended March 31, 1998 from $1,364,000 for the three
month period ended December 31, 1997 primarily as a result of costs incurred
to start operations under the GDMA contracts in the fourth quarter of 1997.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998
--------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Transportation
management services.. $ 987,519 $1,250,896 $1,740,561 $ 6,789,264 $11,714,962
Related Party......... 374,744 227,991 -- -- --
Other................. -- 131,000 -- -- --
--------- ---------- ---------- ----------- -----------
Total revenues....... 1,362,263 1,609,887 1,740,561 6,789,264 11,714,962
--------- ---------- ---------- ----------- -----------
Operating expenses:
Purchased
transportation....... 898,526 1,051,528 969,972 8,293,379 9,503,377
Direct labor.......... 369,471 374,879 413,322 677,833 901,837
Selling, general and
administrative....... 318,339 372,204 611,164 1,363,740 1,088,916
--------- ---------- ---------- ----------- -----------
Total operating
expenses............ 1,586,336 1,798,611 1,994,458 10,334,952 11,494,130
--------- ---------- ---------- ----------- -----------
Income (loss) from
operations.......... (224,073) (188,724) (253,897) (3,545,688) 220,832
Other income (expense):
Interest income....... -- 268 7,242 18,419 26,822
Interest expense...... (1,493) (5,540) (1,198) (19,306) (20,113)
--------- ---------- ---------- ----------- -----------
Net income (loss) ...... $(225,566) $ (193,996) $ (247,853) $(3,546,575) $ 227,541
========= ========== ========== =========== ===========
Revenues:
Transportation
management services.. 72.5% 77.7% 100.0% 100.0% 100.0%
Related Party......... 27.5 14.2 -- -- --
Other................. -- 8.1 -- -- --
--------- ---------- ---------- ----------- -----------
Total revenues....... 100.0 100.0 100.0 100.0 100.0
--------- ---------- ---------- ----------- -----------
Operating expenses:
Purchased
transportation....... 66.0 65.3 55.7 122.1 81.1
Direct labor.......... 27.1 23.3 23.7 10.0 7.7
Selling, general and
administrative....... 23.3 23.1 35.2 20.1 9.3
--------- ---------- ---------- ----------- -----------
Total operating
expenses............ 116.4 111.7 114.6 152.2 98.1
--------- ---------- ---------- ----------- -----------
Income (loss) from
operations (16.4) (11.7) (14.6) (52.2) 1.9
Other income (expense):
Interest income....... -- -- 0.4 0.3 0.2
Interest expense...... (0.2) (0.4) -- (0.3) (0.2)
--------- ---------- ---------- ----------- -----------
Net income (loss) ...... (16.6)% (12.1)% (14.2)% (52.2)% 1.9%
========= ========== ========== =========== ===========
</TABLE>
21
<PAGE>
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the commencement and completion of contracts during any particular quarter,
schedules of the customers awarding the contracts, and period to period
changes in contract pricing. See "Risk Factors."
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, and the years ended December 31, 1997 and 1996 the
Company had $3,681,000, $640,000 and $71,000 respectively, in cash and cash
equivalents. The Company's principal sources of liquidity as of March 31,
1998, and the years ended December 31, 1997 and 1996 consisted of cash and
cash equivalents and net accounts receivable of $5,686,000, $1,155,000 and
$536,000, respectively.
The Company's working capital deficit as of March 31, 1998 and December 31,
1997 was $3,367,000 and $3,519,000, respectively, and the ratio of current
assets to current liabilities was 0.63:1 and 0.25:1 on such dates,
respectively. The working capital deficit at both dates related to the
Company's contracts to provide Brokerage Logistics services to the GDMA. As of
March 31, 1998 and December 31, 1997, the Company had $4,229,000 and
$1,250,000, respectively, of deferred revenue in respect of such contracts.
The Company recognized $2,257,000 as revenue in respect of such amounts in the
first quarter of 1998 and expects to recognize the balance thereof in the
second quarter of 1998. The working capital deficit as of December 31, 1997
was also due to expenses incurred in the quarter then ended as the Company
commenced the performance of services under the GDMA contracts.
Accounts receivable increased for the three months ended March 31, 1998
primarily as a result of amounts due to the Company under its contract with
the CDSS. Although the Company has been providing services to the CDSS under a
written memorandum of understanding since February 1998, payments to the
Company for such services were delayed by the CDSS until the final contract
was executed in May 1998. As of June 30, 1998, the total accounts receivable
due to the Company under its contract with the CDSS was approximately
$652,000.
Cash provided by operating activities for the three months ended March 31,
1998 was $3,148,000 which primarily reflects net income for the quarter and
deferred revenue of $3,209,000. Cash used in operating activities of $424,000
for the year end December 31, 1997 was affected by increased deferred revenue
of $1,119,000, a net loss, and non-cash items.
The Company has financed its growth, capital expenditures and working
capital needs since inception through a series of private placements of
capital stock (approximately 76% of financing since inception), borrowings
from stockholders on a short-term basis from time to time, all of which
borrowings have been repaid (approximately 5% of financing since inception)
and capital leases (approximately 18% of financing since inception). In May
1998, the Company entered into a $1 million revolving line of credit with
NationsBank, N.A., which bears interest at a floating rate of prime plus 1%,
to provide funds for working capital and general corporate purposes. As of
July 20, 1998, the Company had not borrowed any funds under such line of
credit.
The Company's principal commitments as of March 31, 1998 were leases on its
facilities. The Company's principal capital needs are for working capital and
the expansion of its business. The Company believes that the net proceeds from
the sale of Common Stock offered hereby, together with funds generated by
operations, will provide adequate cash to fund its operations for at least the
next 18 months, which may include start-up costs associated with new contract
awards, obtaining additional office space, establishing new offices, expanding
marketing efforts, purchasing computer and telephone equipment, developing
software enhancements and providing collateral security for performance bonds
in connection with new contracts.
REIMBURSEMENT RATES
The health care industry is experiencing a trend toward cost containment as
third-party payors seek to obtain lower reimbursement and utilization rates
with health care providers. Further reductions in payments
22
<PAGE>
to health care providers or other changes in reimbursement for health care
services could adversely affect the Company's business and results of
operations.
YEAR 2000 COMPLIANCE
The Company believes that its computer systems are currently Year 2000
compliant. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be in compliance. The
Company does not have any information concerning the Year 2000 compliance
status of its clients or the transportation carriers with whom it contracts.
23
<PAGE>
BUSINESS
LogistiCare manages non-emergency transportation services for government
health and human service agencies and managed care organizations ("MCOs"). The
Company seeks to establish itself as the central contact for three
constituencies: third-party payors, transportation carriers and individuals
eligible for transportation benefits ("Recipients"). The Company believes that
its management expertise and RealTime software system enable it to provide
sophisticated and efficient transportation management services. The Company
currently conducts its business through centralized Operations Centers in
Georgia, Florida and Connecticut, and intends to expand into selected new
regional markets.
The Company's Brokerage Logistics services, contracted under both capitated
and, to a lesser extent, fee-for-service arrangements, provide third-party
payors with an outsourcing alternative for their transportation requirements.
These services include: processing requests for transportation from
Recipients, determining their eligibility for such services, coordinating and
purchasing transportation, reporting encounter data and performing other
logistical and quality-assurance activities associated with non-emergency
transportation. The Company does not own or operate any vehicles for the
transportation of individuals. Instead, the Company establishes cost-effective
networks of carriers by selecting and negotiating with qualified
transportation carriers within each region under contract. Such independent
transportation carriers are assisted and evaluated by the Company on an
ongoing basis to ensure conformity with the Company's quality standards.
The Company was incorporated in Delaware in March 1994 as RadioSoft, Inc. In
January 1996, the Company acquired all of the outstanding shares of Automated
Dispatch Systems, Inc., a Florida corporation ("Systems"). Systems had
previously acquired certain assets of Automated Dispatch Services, Inc., a
Delaware corporation. In September 1996, the Company changed its name to
Automated Dispatch Solutions, Inc. and subsequently merged Systems into itself
in January 1997. In October 1997, the Company changed its name to LogistiCare,
Inc.
INDUSTRY OVERVIEW
The provision of non-emergency transportation to the poor, elderly,
handicapped and other Recipients among residences, nursing homes, hospitals,
workplaces, retail outlets and other sites is subsidized by third-party payors
in certain circumstances. Third-party payors include both government entities,
such as state agencies that administer Medicaid programs, programs that
provide transportation mandated by the Americans with Disabilities Act,
programs that implement welfare-to-work initiatives and private payors, such
as MCOs, that provide non-emergency transportation benefits to commercial and
Medicare beneficiaries.
Currently, in geographic markets in which the Company does not operate, non-
emergency transportation is provided in large measure through a fragmented
delivery system consisting primarily of small transportation companies that
frequently provide only one class of service (e.g., ambulatory, wheelchair or
ambulance) to local markets. In a typical transaction, an individual schedules
a trip with a transportation carrier who subsequently submits a receipt for
the cost of the trip to a third-party payor for reimbursement. The Company
believes that this system is highly inefficient and provides no incentive to
manage utilization or contain costs, while at the same time it provides an
opportunity for abuses by passengers and transportation carriers that the
Company believes are difficult for third-party payors to effectively identify
and prevent.
The Company believes that the growing demand for non-emergency
transportation, combined with third-party payors' increasing dissatisfaction
with the current system, has created the need for a more sophisticated
alternative to manage utilization and contain costs while providing
transportation services at or above existing levels of quality. The Company
believes that government agencies, MCOs and other third-party payors will
increasingly turn to third parties, such as the Company, that are independent
of transportation carriers to coordinate and manage all classes of non-
emergency transportation services.
STRATEGY
The Company's goal is to become the nation's leading provider of non-
emergency transportation management services to government agencies, MCOs and
other third-party payors by establishing itself as the
24
<PAGE>
central contact for three constituencies: third-party payors, transportation
carriers and Recipients. Key components of the Company's strategy for
achieving these objectives include:
Build Recurring Revenue. The Company seeks to generate recurring revenue by
entering into long-term arrangements with third-party payors, including
government agencies and MCOs, to provide transportation management services.
The Company believes that the quality of its services and advanced software
system will enable it to attract such payors, and that opportunities may exist
to acquire from transportation carriers existing management service contracts
with other payors. Once the Company has entered into such arrangements or
acquired such contracts, these factors, combined with the inherent costs of
switching to another organization, will enable it to retain these clients.
Expand Within New and Existing Regional Markets. Through the establishment
of additional Operations Centers, the Company can efficiently expand its
capabilities within existing markets as well as enter new regional markets.
The Company has developed an implementation program that allows it to quickly
and inexpensively establish Operations Centers. As a result, the Company is
able to negotiate and execute a contract in a new market before it begins
incurring the costs of operating a center in that market. The Company has
demonstrated the ability to open new Operations Centers in less than 45 days
for a cost of under $400,000 per center.
Pursue Long-Term Capitated Contracts. The Company believes that government
agencies, MCOs and other third-party payors are increasingly looking to
outsource transportation management services on a capitated basis to third
parties, such as the Company, who are independent of transportation carriers.
The Company believes that its advanced software system, management expertise
and access to a substantial Recipient database enable it to accurately assess
and profitably manage these contracts.
Create Networks of Transportation Carriers. The Company coordinates and
manages transportation services through a network of unaffiliated
transportation carriers. The Company's contracts with government agencies and
MCOs enable it to gain financial control over purchasing transportation
services from local transportation carriers. As a result, the Company can
negotiate favorable long-term arrangements with the carriers it selects and
establish cost-effective networks of carriers in each region. This also
enables the Company to more effectively manage the quality and cost of
services provided to Recipients.
Realize Operational Efficiencies. As part of opening each new Operations
Center, the Company undergoes an extensive training program with its customer
service representatives and transportation carriers, which allows the Company
to recognize operational efficiencies over time. Similarly, the Company is
able to use the initial results from an Operations Center to refine its
Recipient utilization database and provide more cost-effective services. The
Company believes that these efforts allow it to provide high-quality services,
to better leverage its personnel, transportation carrier network and database
resources and to improve profitability.
TRANSPORTATION MANAGEMENT SERVICES
The Company believes that it has been a pioneer in offering government
agencies and MCOs an outsourcing alternative for managing transportation
services on a capitated basis. The Company believes that its current clients
benefit from, and its prospective clients will be attracted by, the following
strengths and differentiating characteristics:
. Capitation Contracts. The Company believes that by offering services on
a capitated basis, it allows clients to contain costs and minimize risks
associated with fluctuation in volume of transportation requests.
. Centralized Function. The Company serves as a central contact for third-
party payors, transportation carriers and Recipients. The Company
contracts with both third-party payors that have transportation-related
needs and with a selected network of transportation carriers that will
25
<PAGE>
service such needs. The geographic area covered by the third-party payor
contract is generally larger than most transportation carriers could
service individually. The Company coordinates the provision of such
services to the Recipients in a cost-effective and efficient manner.
. Quality Assurance Services. The Company provides services such as driver
and attendant training, vehicle mechanical and safety maintenance
monitoring, utilization reporting for program assessment, and federal
and state reporting compliance assessment to ensure that the highest
quality of service is furnished by transportation carriers and that
third-party payors receive the maximum benefit.
. Enhanced Perception of Health Care Services. The Company believes that a
Recipient's perception of the health care services that he or she
receives is enhanced by the Company's provision of reliable, courteous
and appropriate transportation to and from medical appointments, which
reduces defections by Recipients to other MCO plans and contributes to
an MCO's ability to attract enrollees.
. Technical Resources and Expertise. The Company believes it has the
technical resources and expertise necessary to manage large and complex
transportation programs efficiently while controlling costs. In
addition, the Company believes that its software system, RealTime,
allows it to more efficiently process and effectively analyze data and,
therefore, to provide more sophisticated transportation management
services than independent transportation carriers.
The Company provides two principal types of transportation management
services: (i) Brokerage Logistics and (ii) Service Bureau Logistics.
Brokerage Logistics
The Company principally offers non-emergency transportation management
services to government agencies, MCOs and other third-party payors in which the
Company coordinates and purchases transportation for Recipients. The Company's
broad range of services includes: processing requests for transportation from
Recipients, determining their eligibility for such services, coordinating and
purchasing transportation, reporting encounter data and performing other
logistical and quality assurance services associated with non-emergency
transportation. Transportation is furnished to Recipients pursuant to contracts
between the Company and independent transportation carriers that are selected,
assisted and evaluated on an ongoing basis. The Company does not own any
transportation carriers or operate any vehicles itself. The Company is
compensated for these services primarily on a capitated basis and, to a lesser
extent, on a fee-for-service basis.
The Company uses RealTime to monitor and analyze Recipient usage within the
service limitation parameters, which allows the Company to quickly identify and
prevent unauthorized travel. The Company's projection of the costs to be
incurred in servicing a contract is based upon, among other considerations,
relevant demographic information relating to the covered population, including
number of potential Recipients, age, residence distance from medical facilities
and information derived from their collective medical histories, as well as the
contractual conditions that restrict actual travel. Through use of its
proprietary database and independent research of publicly-available resources,
the Company believes that it can properly analyze the cost implications of the
various demographic considerations and contractual conditions applicable to
capitated contracts. Certain demographic information relating to the covered
population and used by the Company in its analysis of projected costs generally
is made available to the Company by the government agency or MCO that is
soliciting proposals.
Currently, the Company has eight contracts to provide Brokerage Logistics for
government agencies and MCOs covering approximately 700,000 persons who are
eligible under certain circumstances for some type of transportation benefits.
Three of the Company's largest contracts by revenue are with the Georgia
Department of Medical Assistance ("GDMA"). Under these contracts, the Company
coordinates and administers non-emergency transportation services with respect
to approximately 500,000 individuals in the Central, Southwest and East
26
<PAGE>
regions of Georgia who are eligible for such services under the Georgia
Medical Assistance Program (Medicaid). To ensure that transportation resources
are used in conformance with Medicaid guidelines, each contract contains
specific service parameters and Recipient eligibility criteria. The Company is
compensated for these services on a monthly basis based on negotiated
capitated rates. Each of these contracts was originally scheduled to expire on
June 30, 1998, subject to two successive one year options to renew,
exercisable solely by the GDMA in its discretion. In May 1998, the GDMA
exercised the first option to renew with respect to each of the GDMA
contracts. Since July 1, 1998, capitation rates under the GDMA contracts have
been 23% to 26% lower than the rates that were in effect from February 1, 1998
through June 30, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Overview." The GDMA may terminate these
contracts in certain circumstances, including if it determines that such
termination is in the State of Georgia's best interest or that sufficient
funds no longer exist to pay its obligations under such contracts.
In February 1998, the Company began providing services to the Connecticut
Department of Social Services ("CDSS"), under a written memorandum of
understanding with the CDSS and executed a final contract for such services in
May 1998. Under this contract, the Company coordinates and administers non-
emergency transportation services with respect to approximately 40,000
individuals in the South West and South Central regions of Connecticut who are
eligible for such services under the Connecticut Medicaid and General
Assistance Programs and who are not enrolled in a Medicaid Managed Care plan.
To ensure that transportation resources are used in conformance with Medicaid
guidelines, this contract contains specific service parameters and Recipient
eligibility criteria. The Company is compensated for these services on a
monthly basis based on capitated rates resulting from the RFP bidding process
and the CDSS' estimate of monthly enrollment and transportation costs that
would otherwise be incurred on a fee-for-service basis. The CDSS contract
expires on January 31, 1999 and is subject to two successive one year options
to renew, exercisable solely in the discretion of the CDSS. The CDSS contract
is terminable by the CDSS upon 90-days notice to the Company for any reason,
and upon lesser notice to the Company in certain circumstances, and the CDSS
may terminate the contract or reduce the contracted amount of compensation at
any time in the event that sufficient funds no longer exist to pay its
obligations.
Service Bureau Logistics
The Company also offers transportation management services directly to
independent transportation carriers and carrier networks where the Company
manages the internal logistics requirements of the carrier or carrier network.
The Company is compensated for these services on a fee-for- transaction basis
(i.e., based on a fixed fee for each trip administered by the Company).
Currently, the Company provides Service Bureau Logistics only through its
Florida Operations Center. The Company has three contracts under which it
manages and administers the order entry, radio dispatching, routing,
accounting, billing and other internal logistics and quality-assurance
activities for local transportation carriers that furnish non-emergency
transportation to Medicaid beneficiaries and MCO members. During 1997, the
Company managed approximately 1,000,000 trips for these clients, which
generated approximately $12,000,000 in revenues for such clients.
INFORMATION TECHNOLOGY
The Company uses a proprietary software system, RealTime, in each of its
Operations Centers to assist in the management of transportation services.
RealTime contains the program modules necessary for the Company to integrate,
and provide the services associated with, each element of its transportation
management services. These modules are as follows: order entry, dispatch,
routing, operations control and analysis, graphical mapping, mobile data
control and external interface facility.
Currently, RealTime processes approximately 16,000 calls from Recipients per
day through the Company's three Operations Centers. RealTime performs all of
the operation functions associated with the delivery of non-emergency
transportation services on a demand basis and, in the past, has been used by
the
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<PAGE>
Florida Operations Center to manage ambulance services. However, the Company
intends to limit its application primarily to services relating to the
transportation of individuals in connection with their receipt of non-
emergency medical care. The Company believes that RealTime's sophistication
and focus on services relating to the transportation of Recipients gives the
Company a competitive advantage in this market.
The Company intends to expand RealTime's capability to (i) establish
telephonic interface, thereby improving customer service representative
efficiency, (ii) enhance internet integration, better enabling transportation
providers and Recipients to access scheduling and other information, and
better enabling client payors to access the Company's utilization and customer
service data regarding relevant Recipients, and (iii) enlarge its database
capacity to provide greater data management and analysis capabilities.
RealTime was developed by Automated Dispatch Services, Inc. ("Services")
under the supervision of John Shermyen, the President of Services at such time
and the current President and Chief Executive Officer of the Company. In 1994,
the Company entered into a license agreement with Services pursuant to which
it acquired for a lump sum payment of $150,000 royalty-free rights to use, and
exclusive rights to modify and sublicense the use of, RealTime for general
transportation dispatch purposes and for private ambulance dispatch purposes
after April 1, 1997. However, such license excludes the right to use, or
sublicense the use of, RealTime for general transportation dispatch purposes
in the counties of Monroe, Dade, Broward and Palm Beach, Florida. Such license
also excludes the right to use, or sublicense the use of, RealTime for private
ambulance dispatch purposes other than single-site usages subject to certain
limitations. In January 1996, in connection with its acquisition of Automated
Dispatch Systems, Inc., the Company acquired, for a lump sum payment of
$80,000, exclusive and royalty-free rights to use RealTime for general
transportation dispatch purposes in the counties of Monroe, Dade, Broward and
Palm Beach, Florida. Each of these licenses will terminate automatically upon
the expiration of the RealTime patent, which is scheduled to expire in 2012.
Services has no right to further license RealTime other than for private
ambulance dispatch purposes.
In March 1995, the Company entered into an agreement with E.F. Johnson
Company, a former affiliate of TGIS Partners and a manufacturer of mobile
radio equipment ("E.F. Johnson"), pursuant to which (i) the Company agreed to
assist E.F. Johnson in obtaining leads for the sale by E.F. Johnson of mobile
radio equipment and provided E.F. Johnson with 15 end-user licenses of
RealTime, with the right to resell such licenses to third parties, and (ii)
E.F. Johnson paid the Company a prepayment fee of $150,000 (the "Prepayment
Fee") for potential fees which could be earned by the Company upon the
consummation of such sales of mobile radio equipment. In June 1997, the
Company and E.F. Johnson terminated the agreement in accordance with its
terms. In connection with such termination, the Company provided E.F. Johnson
with an additional 13 end-user licenses of RealTime in lieu of returning the
unearned portion of the Prepayment Fee, bringing the total number of end-user
licenses of RealTime provided to E.F. Johnson to 28. In February 1996, the
Company entered into a license agreement with a transportation carrier,
Curtain Motor Livery Service, Inc., pursuant to which the Company granted to
the carrier for $39,000 a perpetual, non-exclusive and royalty-free license to
use RealTime at a single site in Connecticut for its internal business
purposes, without rights of modification or sublicense. Under the agreement,
the Company agreed to provide the carrier with technical support services for
an annual fee of $6,413, training services for a fee of $5,000 and
installation services. See "Certain Transactions" and Note 3 of Notes to
Financial Statements.
PRINCIPAL MARKETS SERVED
Medicaid
Medicaid, which is jointly funded by federal and state governments and
administered by state governments, represents the largest program providing
health care related services to poor residents of the United States. Most
state Medicaid programs provide beneficiaries with transportation to and from
medically necessary appointments. The Health Care Financing Administration
("HCFA") reported that the Medicaid beneficiary population in 1995 was 36.3
million. The Community Transportation Association of America estimated that
Medicaid outlays by the Federal and state governments in 1995 totaled $176
billion, of which approximately 1%, or $1.2 billion, was expended for non-
emergency transportation.
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<PAGE>
MCOs
MCOs are managed health care companies that typically provide a
comprehensive range of health care services to individuals, employers and
association groups. Many MCO plans include some level of non-emergency
transportation services to medical facilities as a benefit for its enrolled
members. The Company believes that MCOs increasingly view transportation as an
attractive enrollment incentive for Medicare beneficiaries who are not
otherwise entitled to receive such services under Medicare. To control the
increasing costs of Medicare, the Federal government has encouraged, but not
required, Medicare beneficiaries to enroll in MCO plans. The MCOs compete for
Medicare enrollees on the basis of many factors, including their reputation
for quality services, reduced co-payments and availability of greater
benefits, such as transportation to and from medical facilities. The Company
believes that, by offering transportation management services on a capitated
basis, it is well-positioned to support the marketing efforts of MCOs and
provide a cost-effective outsourcing alternative for the management of
transportation services.
Carrier and Carrier Networks
The Company believes that its management expertise, advanced software system
and its ability to leverage these resources presents a cost-effective
alternative to transportation carriers and carrier networks to outsource
transportation management services. Once the Company has established an
Operations Center in a regional market, local carriers and carrier networks
may elect to utilize the Company's Service Bureau Logistics to manage their
internal logistics requirements. This represents an attractive opportunity for
the Company to expand its Service Bureau Logistics business into these
established markets and generate additional revenues without incurring
significant additional overhead.
Carrier and carrier networks who are potential clients of the Company's
Service Bureau Logistics business include taxi, limousine, ambulance,
ambulette and coach operators. The International Taxi Livery Association
estimated that the U.S. market for taxi and limousine services is
approximately $10 billion annually. The American Ambulance Association
estimates that the U.S. market for ambulance and ambulette services is
approximately $7 billion annually. The Company believes that transportation
logistics accounts for approximately 10% (or $1.7 billion) of the combined
U.S. markets for taxi, limousine, ambulance and ambulette services, annually.
SALES AND MARKETING
Government Agencies
The Company pursues contracts from state and local authorities by responding
to RFPs issued by such authorities. Whenever possible, prior to the issuance
of an RFP, the Company's senior executives meet with senior government
representatives, such as heads of health and human service agencies, to
encourage them to outsource their transportation-related service requirements.
When an RFP is issued by a government agency, the agency ordinarily seeks
comments on the RFP from potential service providers. The Company usually
participates in the comment process, taking the opportunity to demonstrate its
knowledge and understanding of the market to help shape the RFP. Following the
comment period, the RFP is reissued in modified form. In all cases in which
the Company has responded to an RFP, the contracting government agencies have
advised the Company that they gave greater weight to factors, such as the
experience and technical qualifications of the proposed service providers,
than to comparative costs.
MCOs
The Company pursues contracts with MCOs through direct contact by senior
executives of the Company with the marketing and member services personnel of
such organizations. Prospective client MCOs are identified by the Company on
the basis of total number and concentration of enrolled members in a
geographic area. The Company obtains from prospective client MCOs data that
helps it to make a detailed proposal directed to the cost-savings and
marketing opportunities represented by the Company's Brokerage Logistics
Services and capitated contract approach.
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<PAGE>
OPERATIONS CENTERS
The Company's centralized Operations Centers are designed to maximize
efficiency, reliability and effectiveness. In each Operations Center, incoming
calls from Recipients requesting transportation services are routed through an
automatic call director that optimizes call queuing and records all
communications with digital taping equipment to create a verbal record for the
purposes of accountability and message verification. Customer service
representatives convert requests for transportation into orders that they
enter, through a computer keyboard at each work station, into the RealTime
system to maintain a computerized record of all transportation-related
activities managed by the Operations Center. Requests requiring immediate
attention are automatically routed to the dispatch area or to mobile data
terminals, as appropriate. Reservations for next-day or later transportation
are analyzed for optimal routing, stored, and electronically transferred to
transportation carriers daily to create vehicle manifests for the following
day.
The following table sets forth the location of the Company's primary
Operations Centers and the type of services provided by the Company, the basis
for compensation for such services, the approximate number of eligible
Recipients serviced and the approximate number of trips processed per month
through each Operations Center.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
NUMBER OF NUMBER OF
TYPE OF SERVICE COMPENSATION ELIGIBLE TRIPS PROCESSED
OPERATIONS CENTER PROVIDED BASIS RECIPIENTS PER MONTH
----------------- ------------------------ ------------------- ----------- ---------------
<S> <C> <C> <C> <C>
College Park, Georgia Brokerage Logistics Capitation 500,000 165,000
Yalesville, Connecticut Brokerage Logistics Capitation, 200,000 50,000
Fee-for-Service
Miami, Florida Service Bureau Logistics Fee-per-Transaction N/A 35,000
</TABLE>
POTENTIAL NEW MARKETS
In addition to its current markets, the Company believes that there is
significant potential presented by the Americans with Disabilities Act (the
"ADA") and recent "welfare-to-work" initiatives.
Americans with Disabilities Act. The ADA requires municipalities to give
disabled persons equal access to public transportation or provide
complementary paratransit services. Under the ADA, those communities that
offer public transportation must furnish handicapped-accessible transportation
to all individuals who are eligible under ADA guidelines and who live within
3/4 mile of a public transit route. The Company believes that a number of
municipalities will comply with this law by contracting with the private
sector for carrier service and related transportation logistics. The
President's Committee on Employment of People with Disabilities estimates
that, in 1996, there were approximately 49 million people with disabilities in
the United States. The Company estimates that expenditures in that year for
ADA-related transportation totaled $1.1 billion and will increase
substantially as additional municipalities come into compliance. The Company
intends to capitalize on this market by contracting with municipalities to
provide Brokerage Logistics and Service Bureau Logistics for the
transportation of ADA eligible individuals.
Welfare-to-Work Initiatives. Legislation also has been adopted or is
proposed in a number of states to compel welfare recipients to work as a
condition of their receiving continuing benefits. Government furnished or
subsidized transportation to and from the workplace is an element of some of
this legislation. The Company intends to capitalize on this market by
contracting with states to provide services as contemplated by such
legislation on a fee-for-service basis.
GOVERNMENT REGULATION AND SUPERVISION
The delivery of health care services is regulated at both the federal and
state levels. As a participant in the health care industry and as a result of
its involvement with Medicare, Medicaid and other third party payors, the
Company's operations and relationships are subject to extensive and increasing
regulation by a number of governmental entities at the federal, state and
local levels. The laws applicable to the Company
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<PAGE>
are subject to evolving interpretations, and therefore there can be no
assurance that a review of the Company's operations by federal or state
judicial or regulatory authorities would not result in a determination that
the Company has violated one or more provisions of federal or state law. Any
such determination could have a material adverse effect on the Company.
False and Improper Claims. Under numerous federal laws, including the
Federal False Claims Act (the "False Claims Act"), the federal government is
authorized to impose criminal, civil and administrative penalties on any
health care provider that files a false claim for reimbursement from a federal
health care program. A "federal health care program" is any plan or program
that provides health benefits, whether directly, through insurance, or
otherwise, which is funded directly, in whole or in part, by the United States
Government (e.g., Medicare, Medicaid, and CHAMPUS). Excluded from the
definition of federal health care program is the Federal Employee Health
Benefits Program. The False Claims Act provides for a civil penalty of not
less than $5,000 and not more than $10,000 per false claim and between two or
three times the amount of damages depending on the facts and circumstances.
Recently enacted federal legislation also imposes federal criminal penalties
on persons who file false or fraudulent claims with private insurers. While
the criminal statutes are generally reserved for instances of fraud, the civil
and administrative penalty statutes are being applied by the government in an
increasingly broad range of circumstances. Civil sanctions may be imposed if
the claimant knew or should have known that billing was improper. The
government also has taken the position that claiming reimbursement for
services that are substandard is a violation of these false claims statutes if
the claimant knew or should have known that the care was substandard or
rendered under improper circumstances. Private persons may also bring civil
actions to enforce the False Claims Act under a qui tam or "whistle-blower"
action. If successful, the qui tam plaintiff may receive a percentage of the
government's recovery thereby increasing the incentive for such suits. Under
certain lower court decisions, claims derived from a violation of the Anti-
Kickback Statute (as defined herein) have been deemed to be, or may under
certain circumstances be construed to be, false claims.
The risk of exposure to civil actions under the False Claims Act exists
whether the contractual arrangement is fee-for-service or capitated. In a fee-
for-service system, the government has and continues to prosecute health care
providers alleging that health care providers overutilized the services and
committed fraudulent activities which include, but are not limited to, billing
for services never rendered, fictitious enrollment and illegal solicitations
and remunerations. While utilizing a managed care capitated payment system may
reduce the risks of overutilization and certain fraudulent activities, the
government is similarly active in prosecuting providers who are providing
services through a capitated arrangement and alleging claims of
underutilization and other types of fraudulent activities, including
fraudulent subcontracts and kickbacks. Furthermore, under federal law, an
entity which is found to submit requests for payment for claims which involve
excessive charges or unnecessary services or which fails to furnish medically
necessary services may be excluded from participating in a federal health care
program.
Non-emergency transportation is one of many services identified by states
and the Office of Inspector General ("OIG") as being a source of fraud and
abuse activity in the Medicaid program. Several states have reported a variety
of fraudulent activities which include billing Medicaid for more miles than
actually provided, billing Medicaid for trips never provided, and billing for
Medicaid covered transportation when the beneficiaries had other means of
transportation. Because these states concluded that such activities result in
increasing non-emergency transportation costs, HCFA created a Medicaid
Transportation Technical Advisory Group to study how such services can be
provided more efficiently and the states themselves are intensifying their
scrutiny of non-emergency transportation claims. Such allegations of fraud and
abuse and the resulting increasing costs have led members of Congress to
consider eliminating non-emergency transportation as a covered Medicaid
service. The OIG has recommended that states use brokers, such as the Company,
where appropriate to help manage non-emergency transportation.
Federal Anti-Kickback Statute. A federal law commonly known as the "Anti-
Kickback Statute" prohibits the offer, solicitation, payment or receipt of
anything of value (direct or indirect, overt or covert, in cash or in
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<PAGE>
kind) which is intended to induce business for which payment may be made under
a federal health care program. The type of remuneration covered by the Anti-
Kickback Statute is very broad. It includes not only kickbacks, bribes and
rebates, but also proscribes any such remuneration, whether made directly or
indirectly, overtly or covertly, in cash or in kind. Moreover, prohibited
conduct includes not only remuneration intended to induce referrals, but also
remuneration intended to induce the purchasing, leasing, arranging or ordering
of any goods, facilities, services, or items paid for by a federal health care
program. The Anti-Kickback Statute has been interpreted broadly by a number of
courts to prohibit remuneration that is offered or paid for otherwise
legitimate purposes if one purpose of the payment is to induce referrals.
Payments in return for participating in a network may, under certain
circumstances, be deemed to violate the Anti-Kickback Statute. Many states,
including those in which the Company does business, have adopted similar
prohibitions against payments intended to induce referrals of Medicaid and
other third-party payor patients.
In part to address concerns regarding the implementation of the Anti-
Kickback Statute, the federal government has published regulations that
provide exceptions or "safe harbors" for certain transactions that are deemed
not to violate the Anti-Kickback Statute. Among the safe harbors included in
the regulations are transactions involving discounts offered to health plans
by providers, such as ambulance companies. Congress recently added a
significant new statutory exception related to "remuneration between an
organization and an individual or entity" if the organization is a Medicare
risk contracting organization or if the remuneration is provided pursuant to a
written agreement that places the individual or entity at substantial
financial risk for the cost or utilization of services. Regulations
implementing the foregoing statute have not yet been adopted, but are expected
to be enacted soon. Based on the Company's relationship with providers, the
Company may not satisfy all the requirements necessary to qualify for
protection under the safe harbor regulations described above. The failure of
an activity to qualify under a safe harbor provision, while potentially
leading to greater regulatory scrutiny, does not render the activity
automatically illegal under the Anti-Kickback Statute. Conduct falling outside
the safe harbors will be judged by government regulators on a case-by-case
basis based on the specific facts and circumstances.
To the extent the Company is deemed to be a referral source, the financial
arrangements under such agreements could be subject to scrutiny and
prosecution under the Anti-Kickback Statute. Each offense under the Anti-
Kickback Statute is classified as a felony and is punishable by a criminal
fine of up to twenty-five thousand dollars ($25,000) and/or imprisonment of up
to five (5) years; a civil money penalty of fifty thousand dollars ($50,000)
for each violation and/or civil damages of not more than three times the total
amount of remuneration offered, paid, solicited or received may be imposed
without regard to whether any portion of such remuneration was for a lawful
purpose. Both the offeror and the recipient of the illegal remuneration are
potentially liable. In addition, violators are subject to exclusion from
participation in the federal health care programs, regardless of whether they
also have been convicted under the criminal penalty provisions or have been
found liable under the civil monetary penalty provisions of the Anti-Kickback
Statute. Also, there is a risk that, in a civil lawsuit to enforce a contract
that contains a structure in violation of the Anti-Kickback Statute, a court
might conclude that the contract is unenforceable as against public policy.
There are several aspects of the Company's arrangements to which the Anti-
Kickback Statute may be relevant. For example, the government may construe
some of the Company's managed care contracting activities as arranging for the
referral of patients to the entities with whom the Company is providing non-
emergency transportation management services.
As a component of the recently enacted HIPAA, Congress directed the
Secretary of the U.S. Department of Health and Human Services to issue
advisory opinions regarding compliance with the Anti-Kickback Statute. The
advisory opinion mechanism is authorized for a trial period, beginning six
months after the date of enactment, August 21, 1996. Advisory opinions are
available concerning what constitutes prohibited remuneration within the
meaning of the Anti-Kickback Statute, whether an arrangement satisfies the
statutory exceptions to the Anti-Kickback Statute, whether an arrangement
meets a safe harbor, what constitutes an illegal inducement to reduce or limit
services to individuals entitled to benefits covered by the Anti-Kickback
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<PAGE>
Statute, and whether an activity constitutes grounds for the imposition of a
civil or criminal penalty under the applicable exclusion, civil money penalty
and criminal provisions. Advisory opinions, however, will not assess fair
market value for any goods, services or property or determine whether an
individual is a bona fide employee within the meaning of the Internal Revenue
Code. The statutory language makes clear that advisory opinions are available
for both proposed and existing arrangements. The failure of a party to seek an
advisory opinion, however, may not be introduced into evidence to prove that
the party intended to violate the Anti-Kickback Statute. The Company has not
sought, and has no present intention to seek, an advisory opinion regarding
any aspect of its current operations or arrangements and physicians.
State Fraud and Abuse Laws. Numerous states have adopted laws that are
substantially similar to the federal Anti-Kickback Statute, and a few have
enacted laws similar to the False Claims Act. Virtually all states prohibit
false claims and fraudulent billing practices connected with insurance
payments, and impose substantial penalties for such insurance fraud.
Insurance Laws. Laws in all states regulate the business of insurance and
the operation of MCOs. Many states also regulate the establishment and
operation of networks of health care providers as well as utilization review
and claims adjudication activities. While these laws do not generally apply to
companies that provide management services to government agencies, MCOs and
transportation carriers, they have been construed in some states to apply to
companies which provide management services to physician networks,
particularly if there is an assumption of risk for the provision of services,
and there can be no assurance that regulatory authorities of the states in
which the Company operates would not apply these laws to require licensure of
the Company's operations as an insurer, as an MCO, as a provider network or
other regulated entity. The Company believes that its current operations are
in compliance with these laws in the states which it currently does business,
but there can be no assurance that future interpretations of insurance and
health care network laws by regulatory authorities in these states or in the
states into which the Company may expand will not require licensure or a
restructuring of some or all of the Company's operations.
The National Association of Insurance Commissioners ("NAIC"), a non-binding
advisory group, in 1995 endorsed a policy proposing the state regulation of
risk assumption by providers and opined that certain risk-transferring
arrangements may entail the business of insurance, to which state licensure
laws apply, but that licensure laws should not apply where an unlicensed
entity contracts to assume "downstream risk" from a duly licensed health
insurer or MCO for health care provided to that carrier's enrollees. The
policy proposes prohibiting providers from entering into capitated payment or
other risk sharing contracts except through MCOs, insurance companies or other
regulated entities. Several states have adopted legislation or regulations
implementing the NAIC policy in some form. In some states where such
legislation or regulations have been adopted, health care providers are
precluded from entering into capitated contracts directly with employers,
individuals and benefit plans unless they qualify to do business as MCOs or
insurance companies. The Company may not be deemed a health care provider, in
which case it may still be subject to licensure as an insurance company but
may be able to accept downstream risk from other entities, such as state
government agencies.
FEDERAL AND STATE INITIATIVES
Fraud and Abuse. In the recently enacted 1997 Budget Bill and HIPAA,
Congress has responded to perceived fraud and abuse in the Medicare and
Medicaid programs. Such legislation has fortified the government's enforcement
authority with increased resources and greater civil and criminal penalties
for offenses. The Company anticipates that there will be further restrictive
legislative and regulatory measures to reduce fraud, waste and abuse in the
Medicare and Medicaid programs. Due to uncertainties regarding the ultimate
features of reform initiatives and their enactment and implementation, the
Company cannot predict which, if any, of such reform proposals will be
adopted, when they may be adopted or what impact they may have on the Company.
Numerous Reform Initiatives. The Company anticipates that Congress and state
legislatures will continue to review and assess alternative health care
delivery and payment systems. In addition to extensive
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<PAGE>
government health care regulations, there are numerous initiatives on the
federal and state levels for comprehensive reforms affecting the payment for,
and availability of, health care services. These initiatives include
reductions in Medicare and Medicaid payments, trends in adopting managed care
for Medicare, Medicaid and workers' compensation patients, and regulation of
entities that provide managed care.
FACILITIES
The Company's headquarters are located in College Park, Georgia in a 2,075
square foot suite leased by the Company in an office building. The Company
conducts its operations from three leased Operations Centers in College Park,
Georgia, Yalesville, Connecticut and Miami, Florida, totaling 11,545 square
feet. The Company also utilizes two leased field offices in Savannah and
Albany, Georgia to support the Georgia Operations Center, totaling 3,700
square feet. The lease terms vary from 1 to 5 years, with options to renew,
and are at market rates. The Company intends to lease an additional space in
College Park, Georgia for its operations. The Company believes that its
facilities are well-maintained and in good operating condition and, together
with such additional space in College Park, Georgia, are adequate for their
present level of operations.
EMPLOYEES
As of March 31, 1998, the Company had 155 full-time employees. None of the
Company's employees are represented by a union. The Company considers its
employee relations to be good.
LEGAL PROCEEDINGS
The Company is a defendant in three pending legal proceedings which
management believes are incidental to the Company's business. The Company does
not believe that either of these actions will have a material adverse effect
on the Company's financial position or results of operations.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
Executive officers, directors and key employees of the Company and their
ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John L. Shermyen.................... 44 Chairman of the Board of Directors,
President and Chief Executive Officer
Vice President, Chief Financial
Michael E. Weksel................... 34 Officer and Director
Chief Operating Officer, Vice
John M. Whitcomb.................... 48 President of Operations
Gerald E. Souza..................... 39 Vice President of Marketing
Albert Cortina...................... 34 Corporate Controller
William C. Walter, Jr............... 37 Implementation Director
Andrew Winner....................... 38 Senior Software Engineer
John Pappajohn (1)(2)............... 69 Director
Derace L. Schaffer, M.D. (1)(2)..... 50 Director
William Weksel (1).................. 61 Director
</TABLE>
- ----------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
John L. Shermyen is one of the founders of the Company's business, has been
the President and Chief Executive Officer of the Company since 1994 and was
elected Chairman of the Board of Directors of the Company in July 1998. From
1987 to 1995, he was President and Chief Executive Officer of Automated
Dispatch Services, Inc. He conceptualized, and managed the design and
development of, RealTime prior to his employment with the Company. Mr.
Shermyen received a B.A. and a Master of Science degree in geography and
geographic information systems from the University of Florida.
Michael E. Weksel is one of the founders of the Company and has been its
Vice President and Chief Financial Officer since 1994. From 1993 to 1994, he
was Vice President of Viking Mobile Communications, Inc., a radio spectrum
development and trading company. From 1992 to 1993, he provided consulting
services to E.F. Johnson Company, directing the implementation of a closed
loop MRII enterprise computing system. From 1991 to 1992, he worked as a self-
employed financial and computer consultant. Mr. Weksel received a B.S. in
computer science from the State University of New York in Albany and an M.B.A.
from Columbia University Business School.
John M. Whitcomb will be the Chief Operating Officer and Vice President of
Operations of the Company as of August 1998. From 1994 to 1998, he served as
Vice President of Operations, Senior Vice President and then President of
Value Health Inc., a customer service call center and insurance claims
operation. From 1988 to 1994 he served as President of Arraytek, Inc., a
start-up software company which he founded. Mr. Whitcomb received a B.S. from
Rensselaer Polytechnic Institute and an M.B.A. from the University of
Wisconsin.
Gerald E. Souza, R.N. has been the Vice President of Marketing of the
Company since July 15, 1998. Prior to joining the Company, he worked for six
years in various executive positions at American Medical Response, a
transportation service company, where he negotiated and implemented the first
at-risk medical transportation contract and developed a national advice/demand
management program. He received a B.S.E. in computer and information sciences
and an M.E. in computer software engineering from the University of Florida.
John Pappajohn has been a Director of the Company since March 1997. Since
1969, Mr. Pappajohn has been the sole owner of Pappajohn Capital Resources, a
venture capital firm, and the President of Equity Dynamics, Inc., a financial
consulting firm, both based in Des Moines, Iowa. Mr. Pappajohn currently
serves as a director of the following public companies: American Physican
Partners, Inc., The Care Group, Inc., Core, Inc., HealthDesk Corporation, PACE
Health Systems, Inc. and Patient Infosystems, Inc.. Mr. Pappajohn received a
B.A. from the University of Iowa.
35
<PAGE>
Albert Cortina has been the Corporate Controller of the Company since
November 1997. Prior to joining the Company, he worked for five years in
various executive positions at Premier Practice Management, a physician
practice management organization, and its successor, Caremark/MedPartners
Physicians Services, Inc. He received his B.S. from Florida State University
and is a certified public accountant.
William C. Walter, Jr. has been the Implementation Director of the Company
since September 1997. Prior to joining the Company, he served for five years
as Director of Communications at AMR West, a transportation services company,
where he developed and implemented a regional call center for emergency and
non-emergency transportation services and managed multiple operational units
in California.
Andrew Winner has been the Senior Software Engineer of the Company since
1996. From 1994 to 1996, he worked as a computer programmer at The Arbitrage
Group, L.P. Prior to 1994, he worked for five years as a software engineer at
Automated Dispatch Services, Inc., where he assisted in the design and
development
Derace L. Schaffer, M.D. has been a Director of the Company since March
1997. He is also President of The Lan Group, a venture capital firm
specializing in health care investments, and The Ide Imaging Group, P.C., a
large multispecialty medical practice. Dr. Schaffer presently serves on the
board of directors of American Physician Partners, Inc., The Care Group, Inc.
and Oncor, Inc., and he is the Chairman of Patient InfoSystems, Inc. He
received his postgraduate radiology training at the Harvard Medical School and
Massachusetts General Hospital, where he was Chief Resident. Dr. Schaffer is a
member of Alpha Omega Alpha, the national medical honor society, and is
Clinical Professor of Radiology at the University of Rochester School of
Medicine.
William Weksel is one of the founders of the Company and has been a Director
of the Company since 1994. Mr. Weksel resigned as Chairman of the Board of
Directors of the Company in July 1998 in connection with the Company's
application for approval for quotation on the Nasdaq Stock Market. From 1992
to 1997, he was Chairman and Chief Executive Officer of E.F. Johnson Company,
a manufacturer of mobile radio communications equipment. Mr. Weksel received a
B.A. from Queens College and a Ph.D. in communications from the University of
Illinois, and was a National Science Foundation Post Doctoral Fellow at the
Massachusetts Institute of Technology. From 1987 to 1990, Mr. Weksel was
President of Brooke Group, Inc., a holding company, which in turn held
controlling interests in Western Union Corp., Liggett Group, Inc., and MAI
Basic Four, Inc. In addition, during that period, Mr. Weksel, at varying times
was Chairman of Liggett, Vice Chairman of Western Union and Chairman and Chief
Executive Officer of MAI Basic Four, each of which companies was listed on the
New York Stock Exchange. Between 1975 and 1984, Mr. Weksel was the Chairman of
the Board of Directors, President and Chief Executive Officer of Information
Displays, Inc. ("IDI"), a manufacturer of computer assisted design and
manufacturing systems. In 1986, the Securities and Exchange Commission
commenced an action against Mr. Weksel alleging certain violations of Federal
securities laws in connection with IDI and concurrently, and solely for the
purposes of settlement and without admitting or denying the allegations of the
complaint, Mr. Weksel consented to entry of a judgment enjoining him from
violating certain provisions of the Federal securities laws. Messrs. Michael
Weksel and William Weksel are son and father.
The Company intends to add two additional non-employee directors to the
Board within the next six to twelve months.
DIRECTORS COMPENSATION AND COMMITTEES
The Board of Directors currently has five directors, two of whom--John L.
Shermyen and Michael E. Weksel--are also officers of the Company and three of
whom--William Weksel, John Pappajohn and Derace L. Schaffer--are not officers
of the Company. Each director serves a one-year term that expires at each
annual meeting of stockholders.
The directors currently receive no annual compensation for their service on
the Board of Directors. Following completion of the Offering, the Company will
pay its directors $500 for each directors' meeting
36
<PAGE>
attended (plus reimbursement for out-of-pocket expenses). Under the Company's
1998 Stock Option Plan, future non-employee directors will automatically be
granted options to purchase 10,000 shares of Common Stock at the commencement
of their service on the Board of Directors and options to purchase 7,500
shares of Common Stock on the first and second anniversaries of the
commencement of their service on the Board of Directors, subject to certain
terms regarding vesting, exercisability and other material terms. Future non-
employee directors are not eligible to receive any awards under the 1998 Stock
Option Plan other than the automatic grants of stock options. Current non-
employee directors are not eligible to receive any awards under the Company's
1998 Stock Option Plan. In 1997, the Company granted options under the 1995
Stock Option Plan (i) to John L. Shermyen to purchase 200,000 shares of Common
Stock at an exercise price of $0.26 per share, (ii) to Michael E. Weksel to
purchase 93,330 shares of Common Stock at an exercise price of $0.26 per
share, (iii) to John Pappajohn to purchase 80,000 shares of Common Stock at an
exercise price of $2.50 per share, (iv) to Derace L. Schaffer to purchase
80,000 shares of Common Stock at an exercise price of $2.50 per share and (v)
to William Weksel to purchase 80,000 shares of Common Stock at an exercise
price of $2.50 per share. See "--Stock Option Plans."
The Board of Directors currently includes a Compensation Committee and an
Audit Committee. The Compensation Committee is composed of three directors,
Messrs. William Weksel, Pappajohn and Schaffer, and it determines compensation
for executive officers of the Company and administers the Company's Stock
Option Plans. The Audit Committee is composed of two directors, Messrs.
Pappajohn and Schaffer, and it reviews the scope and results of audits and
internal accounting controls and all other tasks performed by independent
public accountants of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid to the Company's President and Chief Executive Officer and
the Company's Vice-President and Chief Financial Officer during the fiscal
years ended December 31, 1995, 1996 and 1997. No other executive officer
received a salary exceeding $100,000 in any such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
1997 ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------------ ---------- -------
NAME AND OTHER ANNUAL SECURITIES LTIP ALL OTHER
PRINCIPAL FISCAL COMPENSATION UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($)(3) ($) OPTIONS ($) ($)
--------- ------ ---------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John L. Shermyen........ 1997 155,630 -- -- 200,000 -- --
President and Chief 1996 140,000 -- -- -- -- --
Executive Officer 1995 128,000 -- -- 1,000,000 -- --
Michael E. Weksel (2)... 1997 140,000 -- -- 93,330 -- --
Vice-President and 1996 110,000 -- -- -- -- --
Chief Financial Officer 1995 110,000 -- -- 200,000 -- --
</TABLE>
- ---------------------
(1) The compensation described in this table does not include medical, dental
or other benefits generally available to all salaried employees of the
Company, as well as certain perquisites and other personal benefits, the
value of which does not exceed the lesser of $50,000 or 10% of the named
executive officers total salary and bonus reported in this table.
(2) During fiscal 1995 and 1996 and the period from January 1, 1997 to June
15, 1997, the salary for Mr. Weksel was paid by an affiliate of the
Company's controlling stockholder.
(3) This does not include bonuses of $50,000 and $45,000 granted by the
Company to Messrs. Shermyen and Weksel, respectively, in March 1998, which
are payable by the Company in December 1998. These bonuses were granted by
the Company's Board of Directors in its discretion and were not formula-
based.
37
<PAGE>
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED 1997 PER SHARE DATE
- ---- --------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
John L. Shermyen..... 200,000 27.6% $0.26 2007
Michael E. Weksel.... 93,330 12.9% $0.26 2007
</TABLE>
1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE ---------------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Shermyen........ 400,000 $999,200 200,000 600,000 $499,600 $1,447,800
Michael E. Weksel....... 80,000 $199,840 40,000 173,330 $ 99,920 $ 409,179
</TABLE>
- --------
(1) Based upon a value of $2.50 per share, the fair market value determined by
the Company's Board of Directors with respect to the exercise price of
employee stock options granted in November 1997.
STOCK OPTION PLANS
1998 Stock Option Plan. In June 1998, the Board of Directors and the
stockholders of the Company approved the establishment of the Company's 1998
Stock Option Plan. Under the 1998 Stock Option Plan, the Company provides for
the granting of options to key employees, non-employee directors, consultants
and independent contractors who provide services to the Company to purchase
not more than an aggregate of 1,000,000 shares of Common Stock, subject to
adjustment under certain circumstances. The 1998 Stock Option Plan is divided
into two components: (i) a discretionary option grant program and (ii) an
automatic option grant program.
Under the discretionary option grant program, both "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986 and
non-qualified stock options to purchase shares of the Common Stock may be
granted to employees, consultants and independent contractors, although
"incentive stock options" may only be granted to employees. The Compensation
Committee will, with regard to each option, determine the number of shares
subject to the option, the term of the option (which shall not exceed ten
years), the exercise price per share of Common Stock subject to the option,
the vesting schedule and other material terms of the option. The vesting
period for an option will automatically accelerate upon the acquisition of the
Company as a result of a stockholder-approved merger or asset sale, subject to
certain conditions. In addition, the 1998 Stock Option Plan authorizes the
Compensation Committee to automatically accelerate the vesting of an option in
connection with a change in control of the Company or the optionholder's
grant. The 1998 Stock Option Plan authorizes the Compensation Committee to
grant to eligible officers limited stock appreciation rights which allow them
to surrender outstanding options, to the extent those options are exercisable
for vested shares of Common Stock, in the event of a hostile takeover. For
each option surrendered, such officer will receive a payment in cash in an
amount equal to the excess of the take-over price of the vested shares subject
to the surrendered option over the aggregate exercise price payable for such
vested shares.
Under the automatic grant program, future non-employee directors will
automatically be granted options to purchase 10,000 shares of Common Stock at
the commencement of the term of their service on the Board of Directors and
options to purchase 7,500 shares of Common Stock on the first and second
anniversaries of the commencement of their service on the Board of Directors.
The exercise price shall be the fair market value of the Common Stock on the
date that the option is granted and each option fully vests on the first
38
<PAGE>
anniversary of the date of its grant. Future non-employee directors are not
eligible to receive any awards under the 1998 Stock Option Plan other than the
automatic grants of stock options. Current non-employee directors are not
eligible to receive any awards under the 1998 Stock Option Plan. The shares
subject to each option will vest immediately during the non-employee
director's service on the Board of Directors of the Company upon the
acquisition of the Company as a result of a stockholder-approved merger or
asset sale or a change in control. Each option has a maximum term of ten years
from the date of its grant. Upon cessation of a non-employee director's
service on the Board of Directors for any reason, the option granted to such
non-employee director will remain exercisable for a twelve-month period and,
during such period, such option may only be exercised for the number of shares
vested at the time of the non-employee's cessation of service. Under the 1998
Stock Option Plan, each non-employee director has limited stock appreciation
rights pursuant to which such non-employee director has a thirty-day period
upon the successful completion of a hostile tender offer for more than 50% of
the outstanding voting securities of the Company in which to surrender such
non-employee director's option. For each option surrendered, such non-employee
director will receive a payment in cash in an amount equal to the excess of
the tender offer price of the shares subject to the surrendered option over
the aggregate exercise price payable for such vested shares.
1995 Incentive Stock Option Plan. The Company's 1995 Incentive Stock Option
Plan, as amended (the "1995 Stock Option Plan" and, together with the 1998
Stock Option Plan, the "Stock Option Plans"), provides for the granting of
options to key employees and non-employee directors to purchase not more than
an aggregate of 2,166,670 shares of Common Stock, subject to adjustment under
certain circumstances. Some or all of the options granted to key employees
under the 1995 Stock Option Plan are "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, and the options
granted to non-employee directors are non-qualified stock options. No option
is exercisable until the first to occur of (i) any Sale Transaction (as
defined in the 1995 Stock Option Plan) and (ii) the first date on or after
which the Company becomes subject to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended. Notwithstanding the
foregoing, options vested prior to June 2, 1997 are exercisable at any time
after June 2, 1997 and prior to the tenth anniversary of the date of their
grant. Each option expires ten years after the date of its grant or, if
granted to a Substantial Stockholder (as defined in the 1995 Stock Option
Plan), 5 years after the date of its grant.
Grants of options under the Stock Option Plans and all questions of
interpretation with respect to the Stock Option Plans are determined by the
Board of Directors of the Company. The Board of Directors has appointed the
Compensation Committee to administer matters under the 1998 Stock Option Plan
and the 1995 Stock Option Plan relating to key employees. As of the date of
this Prospectus, no options to purchase shares of Common Stock have been
granted under the 1998 Stock Option Plan, and options to purchase 2,013,330
shares of Common Stock have been granted under the 1995 Stock Option Plan and
options to purchase 210,000 shares of Common Stock have been granted under the
1998 Stocks Option Plan. Although options under the 1995 Stock Option Plan to
purchase 153,340 shares of Common Stock are still available, no further grants
will be made pursuant to the 1995 Stock Option Plan.
EMPLOYMENT AGREEMENTS
In July 1998, the Company entered into employment agreements (each, an
"Agreement"), with John L. Shermyen, Michael E. Weksel, John Whitcomb and
Gerald Souza (the "Executives"), pursuant to which Mr. Shermyen, Chairman of
the Board of Directors, serves as President and Chief Executive Officer, Mr.
Weksel serves as Vice President and Chief Financial Officer, Mr. Whitcomb
serves as Chief Operating Officer and Vice President of Operations and Mr.
Souza serves as Vice President of Marketing. Under the Agreements, Mr.
Shermyen receives $200,000, Mr. Weksel receives $185,000, Mr. Whitcomb
receives $150,000 and Mr. Souza receives $135,000, as their respective annual
base salaries, subject to periodic increases (if any) by amounts as determined
by the Company's Board of Directors in its sole discretion. The Executives are
also entitled to participate in all benefit, pension, retirement, savings,
welfare and other employee benefit plans and policies in which members of the
Company's senior management are entitled to participate.
39
<PAGE>
Messrs. Shermyen and Weksel are entitled to incentive compensation in the
form of bonuses and stock option grants pursuant to the terms of the Company's
1998 Stock Option Plan and any other plans adopted by the Company, as
determined by the Board of Directors in its sole discretion. Messrs. Whitcomb
and Souza are entitled to receive guaranteed bonuses of $37,500 and $33,750,
respectively, at the end of their first year of employment with the Company.
Messrs. Whitcomb and Souza may also receive annual bonuses based on certain
performance criteria. With respect to their first year of employment with the
Company, such bonus may be up to $22,500 and $6,750, respectively, and with
respect to each year thereafter, such bonuses may be up to 40% and 30%,
respectively, of their then current annual base salaries. Mr. Whitcomb also
has received options to purchase 150,000 shares of Common Stock and Mr. Souza
has received options to purchase 60,000 shares of Common Stock under the
Company's 1998 Stock Option Plan at an average price of $10 per share. These
options become exercisable in five equal installments commencing on the first
anniversary of the date of their grant.
The initial term of each Agreement is three years, commencing in July 1998
and terminating in July 2001. Such initial term is automatically renewed for
successive one-year terms unless notice of non-renewal is given by the Company
or the Executive at least three months prior to the end of the then current
term. Each Agreement provides for a severance payment in an amount equal to
the Executive's annual base salary at the time of termination, payable in
equal monthly installments for twelve months, in the event the Executive is
terminated by the Company without Cause (as defined in the Agreement) or he
resigns for Good Reason (as defined in the Agreement) or following a Change of
Control (as defined in the Agreement). In the event that the Executive is
terminated for Cause or he dies, becomes disabled or voluntarily terminates
his employment (without Good Reason), he is not entitled to any severance
payment. In addition, each Agreement prohibits the Executive from competing
with the Company or soliciting any employees of the Company during his
employment and for a period of one year thereafter or disclosing any of the
Company's confidential information acquired during his employment at any time.
Each Agreement also provides that all designs, inventions and improvements
that the Executive develops during his employment and which relate to the
Company's business belong solely to the Company. No assurance can be given
that the restrictive covenants contained in the Agreements would be
enforceable by the Company, in whole or in part, under applicable state law.
40
<PAGE>
CERTAIN TRANSACTIONS
From March 1994 to August 1995, TGIS Partners, a New York partnership of
which William Weksel and Robert Davies were partners prior to its dissolution
in June 1998, loaned the Company an aggregate amount of $270,000, evidenced by
a promissory note bearing interest at a rate of 7% per annum and maturing on
January 31, 2002. In March 1997, TGIS Partners canceled the note and
contributed the remaining principal balance consisting of $270,000 and accrued
interest consisting of $46,000 to the Company.
In March 1995, the Company entered into an agreement with E.F. Johnson
Company, a company of which William Weksel was Chairman and Chief Executive
Officer and a manufacturer of mobile radio equipment ("E.F. Johnson"),
pursuant to which (i) the Company agreed to assist E.F. Johnson in obtaining
leads for the sale by E.F. Johnson of mobile radio equipment and provided E.F.
Johnson with 15 end-user licenses of RealTime, with the right to resell such
licenses to third parties, and (ii) E.F. Johnson paid the Company a prepayment
fee of $150,000 (the "Prepayment Fee") for potential fees which could be
earned by the Company upon the consummation of such sales of mobile radio
equipment. In June 1997, the Company and E.F. Johnson terminated the agreement
in accordance with its terms. In connection with such termination, the Company
provided E.F. Johnson with an additional 13 end-user licenses of RealTime in
lieu of returning the unearned portion of the Prepayment Fee, bringing the
total number of end-user licenses of RealTime provided to E.F. Johnson to 28.
To raise additional working capital, the Company entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") in March 1997 with John
Pappajohn and Derace L. Schaffer, M.D. (the "Purchasers") pursuant to which
the Company sold an aggregate of 1,948,300 shares of Common Stock to six
investors, including Messrs. Pappajohn and Schaffer. Such investors paid an
aggregate purchase price of $500,000 for the shares. Under the Stock Purchase
Agreement, the Purchasers also agreed to purchase an aggregate of 97,415
shares of Preferred Stock or designate substitute purchasers for some or all
of such shares of Preferred Stock. In June 1997, Mr. Pappajohn and certain
other investors designated by the Purchasers and the Company, including Mr.
Shermyen, purchased the 97,415 shares of Preferred Stock. Such investors paid
an aggregate purchase price of $1,000,000 for the shares of Preferred Stock.
Upon the effectiveness of the Registration Statement, such shares of Preferred
Stock shall convert into 974,150 shares of Common Stock.
In March 1997, the Company issued 16,250 shares of Common Stock to Mr.
Shermyen for a purchase price of $4,170.
The Company provides dispatch services to an entity (the "Client") which was
controlled by certain of the Company's minority stockholders until May 1997.
Dispatch services are provided pursuant to an agreement with the Client in
connection with a transportation contract between the Client and a
municipality in South Florida (the "Florida Contract"). Under the terms of the
agreement, the Company earned $2.65 per trip processed on behalf of the Client
under the Florida Contract. In a related agreement, the Company paid to the
principal stockholders of the Client a fee of $1.00 for each trip processed by
the Company under the Florida Contract. Effective May 31, 1997, the Company,
the Client and the principal stockholders of the Client agreed to amend the
terms of the previously described agreements. Under the revised terms
beginning in June 1997, the Company earns $1.65 per trip processed on behalf
of the Client and pays no fees to the Client or the principal stockholders of
the Client. Under the agreements, the Company recorded gross revenues from the
Client of approximately $1,925,000 and $553,000 in 1996 and 1997,
respectively, and paid fees to the principal stockholders of the Client of
approximately $726,000 and $211,000 in 1996 and 1997, respectively. Such fees
have been recorded as a reduction of revenues under the Florida Contract.
The Company provides dispatch services to another entity ("Health Trans")
which was controlled by certain of the minority stockholders until May 1997.
The agreement with Health Trans expires in December 2025. Under the terms of
the agreement, the Company earns $125 per week for each of Health Trans'
vehicles for which the Company provides dispatch services. During 1996 and
1997, the Company recorded revenues of approximately $200,000 and $271,000,
respectively in connection with this agreement.
The Company has adopted a policy providing that all future material
transactions between the Company and its officers, directors and other
affiliates must (i) be approved by a majority of the members of the Company's
Board of Directors and by a majority of the disinterested members of the
Company's Board of Directors and (ii) be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties.
41
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1998 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby with
respect to (i) each person known by the Company to own beneficially more than
5% of the outstanding shares of Common Stock, (ii) each of the Company's
directors, (iii) each Selling Stockholder, and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR OWNERSHIP AFTER
TO OFFERING(2)(3) NUMBER OF OFFERING(2)(4)(5)
----------------- SHARES -----------------
BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
William Weksel (6)............... 3,710,774 40.6% 1,000,000 2,710,774 23.8%
John Pappajohn (7)............... 1,030,360 11.3 -- 1,030,360 9.0
Derace L. Schaffer, M.D. (8)..... 1,004,150 11.0 -- 1,004,150 8.8
John L. Shermyen (9)............. 723,370 7.8 -- 723,370 6.3
Michael E. Weksel (10)........... 514,706 5.6 -- 514,706 4.5
Directors and Executive Officers
as Group (five persons)......... 6,983,360 72.8 -- 5,983,360 50.4
Robert H. Davies................. 752,556 8.3 -- 752,556 6.6
Edgewater Private Equity Fund II,
L.P. (11)....................... 705,910 7.8 -- 705,910 6.2
Deanna Weksel and Warren
Firstenberg, as Trustee under
Trust made April 2, 1998........ 496,150 5.5 -- 496,150 4.4
Edward Steinberg (12)............ 245,960 2.7 -- 245,960 2.2
Martin Zilber.................... 232,880 2.6 -- 232,880 2.1
Ann Pappajohn Inter Vivos Trust
1989............................ 100,000 1.1 -- 100,000 *
Halkis, Ltd. (13)................ 100,000 1.1 -- 100,000 *
Thebes, Ltd. (14)................ 100,000 1.1 -- 100,000 *
Goldfield Partners............... 50,000 * -- 50,000 *
Matthew P. Kinley................ 50,000 * -- 50,000 *
Steven B. Pilavin (15)........... 48,710 * -- 48,710 *
Scott J. Weinstein (16).......... 48,710 * -- 48,710 *
David Weksel (17)................ 32,000 * -- 32,000 *
Robert S. Hirsch (18)............ 28,350 * -- 28,350 *
James W. Manzari (19)............ 13,740 * -- 13,740 *
Kari Steinberg (20).............. 8,000 * -- 8,000 *
Dana Steinberg (21).............. 8,000 * -- 8,000 *
Bertrand H. Weidberg............. 7,000 * -- 7,000 *
Leonard Levine................... 6,000 * -- 6,000 *
Joseph Handy..................... 4,000 * -- 4,000 *
Charles P. Krokel................ 4,000 * -- 4,000 *
Deanna G. Weksel (22)............ 4,000 * -- 4,000 *
Gregory A. Weksel (23)........... 4,000 * -- 4,000 *
Francis M. Sassano............... 4,000 * -- 4,000 *
William B. McLiverty............. 4,000 * -- 4,000 *
Joseph Rubino.................... 2,000 * -- 2,000 *
Eliot Abbot...................... 2,000 * -- 2,000 *
</TABLE>
- ---------------------
* Less than 1%.
(1) Unless otherwise indicated, the address for each stockholder is c/o
LogistiCare, Inc., One Crown Center, 1895 Phoenix Boulevard, Suite 306,
College Park, Georgia 30349.
(2) The persons and entities named in the table have sole voting and
investment powers with respect to all of the Common Stock shown as
beneficially owned by them, except as noted below.
42
<PAGE>
(3) The 9,620,176 shares of Common Stock deemed outstanding prior to the
Offering include:
(a) 8,047,360 shares of Common Stock outstanding;
(b) 974,150 shares of Common Stock issuable upon completion of the
Offering pursuant to the conversion of 97,415 issued and outstanding
shares of Preferred Stock; and
(c) 598,666 shares of Common Stock issuable pursuant to the exercise of
options held by the respective person or group, which may be exercised
within 60 days after the date of this Prospectus.
(4) The 11,890,176 shares of Common Stock deemed outstanding after the
Offering include:
(a) an additional 2,300,000 shares of Common Stock which are being offered
for sale by the Company in the Offering and assumes no exercise of the
over-allotment option;
(b) 974,150 shares of Common Stock issued upon completion of the Offering
pursuant to the conversion of 97,415 issued and outstanding shares of
Preferred Stock; and
(c) 598,666 shares of Common Stock issuable pursuant to the exercise of
options held by the respective person or group, which may be exercised
within 60 days after the date of this Prospectus.
(5) This assumes that the Underwriters do not exercise the over-allotment
option. If the Underwriters do exercise the over-allotment option in
full, up to an additional 300,000 shares of Common Stock may be sold as
follows: Edgewater Private Equity Fund II, L.P.--36,145 shares; John L.
Shermyen--24,750 shares; Michael E. Weksel--23,351 shares; John
Pappajohn--38,421 shares; Derace L. Schaffer, M.D.--47,319 shares; Robert
H. Davies--38,533 shares Robert S. Hirsch--1,452 shares; James W.
Manzari--1,000 shares; Steven B. Pilavin--2,494 shares; Edward
Steinberg--12,595 shares; Scott J. Weinstein--2,494 shares; Martin
Zilber--11,924 shares; Ann Pappajohn Inter Vivos Trust 1989 --5,120
shares; Halkis, Ltd.--5,120 shares; Thebes, Ltd.--5,120 shares; Goldfield
Partners--2,560 shares; Matthew P. Kinley--2,560 shares; Joseph Handy--
1,000 shares; Charles P. Krokel--1,000 shares; David Weksel--1,638
shares; Deanna G. Weksel--1,000 shares; Gregory A. Weksel--1,000 shares;
Bertrand H. Weidberg--1,000 shares; Leonard Levine--1,000 shares; Francis
M. Sassano--1,000 shares; William B. McLiverty--1,000 shares; Deanna
Weksel and Warren Firstenberg, as Trustees under Trust made April 2,
1998--25,404 shares; Kari Steinberg--1,000 shares; Dana Steinberg--1,000
shares; Joseph Rubino--1,000 shares; and Eliot Abbot--1,000 shares.
(6) William Weksel is a director of the Company and the father of Michael
Weksel. This includes 2,134,624 shares held under a Voting Trust
Agreement entered into by William Weksel in connection with the Company's
application for approval for quotation on the Nasdaq Stock Market. Under
the terms of the Voting Trust Agreement, the shares are to be voted in
the same proportion as the total votes cast by the holders of all other
outstanding shares of Common Stock voting on any matter submitted to
stockholders of the Company. Also includes 496,150 shares held by Deanna
Weksel and Warren Firstenberg, as Trustees under Trust made April 2,
1998, of which Mr. Weksel is one of the beneficiaries. Also includes
80,000 shares issuable pursuant to stock options held by Mr. Weksel.
(7) Includes:
(a) 624,150 shares for which Mr. Pappajohn is the direct beneficial owner;
(b) 80,000 shares issuable pursuant to the exercise of stock options held
by Mr. Pappajohn;
(c) 126,210 shares issuable upon completion of the Offering pursuant to
the conversion of 12,621 shares of Preferred Stock owned by Mr.
Pappajohn; and
(d) 100,000 shares of Common Stock held by Halkis, Ltd., of which Mr.
Pappajohn is the sole stockholder, and Thebes, Ltd., of which Mr.
Pappajohn's wife is the sole stockholder. Mr. Pappajohn disclaims
beneficial ownership of these shares.
(8) Includes 80,000 shares issuable pursuant to the exercise of stock options
held by Dr. Schaffer.
(9) Includes:
(a) 240,000 shares issuable upon the exercise of stock options held by Mr.
Shermyen; and
(b) 8,120 shares issuable upon completion of the Offering pursuant to the
conversion of 812 shares of Preferred Stock owned by Mr. Shermyen.
(10) Includes 58,666 shares issuable pursuant to the exercise of stock options
held by Mr. Weksel. Mr. Weksel is the Vice President, Chief Financial
Officer and a director of the Company, and the son of William Weksel, a
director.
43
<PAGE>
(11) Includes 681,910 shares issuable upon completion of the Offering pursuant
to the conversion of 68,191 shares of Preferred Stock owned by Edgewater
Private Equity Fund II, L.P.
(12) Includes 26,400 shares issuable upon completion of the Offering pursuant
to the conversion of 2,640 shares of Preferred Stock owned by Mr.
Steinberg. Mr. Steinberg is the father of Dana and Kari Steinberg.
(13) Halkis, Ltd. is wholly-owned by Mr. Pappajohn, a director of the Company.
(14) Thebes, Ltd. is wholly-owned by the wife of Mr. Pappajohn, a director of
the Company.
(15) These shares are issuable upon completion of the Offering pursuant to the
conversion of 4,871 shares of Preferred Stock owned by Mr. Pilavan.
(16) These shares are issuable upon completion of the Offering pursuant to the
conversion of 4,871 shares of Preferred Stock owned by Mr. Weinstein.
(17) David Weksel is the son of William Weksel, a director, and the brother of
Michael Weksel, the Vice President, Chief Financial Officer and a
director of the Company.
(18) Includes 24,350 shares issuable upon completion of the Offering pursuant
to the conversion of 2,435 shares of Preferred Stock owned by Mr. Hirsch.
(19) Includes 9,740 shares issuable upon completion of the Offering pursuant
to the conversion of 974 shares of Preferred Stock owned by Mr. Manzari.
(20) Kari Steinberg is the daughter of Edward Steinberg and sister of Dana
Steinberg.
(21) Dana Steinberg is the daughter of Edward Steinberg and sister of Kari
Steinberg.
(22) Deanna G. Weksel is the wife of William Weksel, a director, and step-
mother of Michael Weksel, the Vice President, Chief Financial Officer and
a director of the Company.
(23) Gregory A. Weksel is the son of William Weksel, a director, and the
brother of Michael Weksel, the Vice President, Chief Financial Officer
and a director of the Company.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the Company's authorized capital stock
will consist of 30,000,000 shares of Common Stock, par value $.01 per share,
and 1,000,000 shares of Preferred Stock, par value $.01 per share, which are
subject to future issuance as determined by the Board of Directors of the
Company.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. Upon liquidation or
dissolution of the Company, the holders of Common Stock are entitled to
receive all assets available for distribution, subject to any preferential or
other rights of holders of Preferred Stock. The Common Stock has no preemptive
or other subscription rights, except as set forth below in "Certain Provisions
Affecting Stockholders," and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. The holders of Common
Stock do not have cumulative voting rights in the election of directors, which
means that the holders of more than 50% of the shares of Common Stock voting
for the election of directors can elect all of the directors of the Company if
they choose to do so. All shares of Common Stock are, and the shares of Common
Stock in the Offering will be, when issued, validly issued, fully paid and
non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock. Upon the effectiveness of the Registration Statement, the 97,415 shares
of Preferred Stock outstanding will be converted into 974,150 shares of Common
Stock. The Board of Directors may, without future action of the stockholders
of the Company, issue the remaining 902,585 shares of the Preferred Stock in
one or more classes or series and fix the rights and preferences thereof,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any class or series, and the designations of such class or series.
The voting and other rights of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of Preferred Stock that may be
issued in the future. Issuances of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, a majority of the
outstanding voting stock of the Company. The Company has no present plans to
reissue shares of Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW
Section 203 of the Delaware General Corporation Law ("DGCL") prohibits a
Delaware corporation from engaging in a wide range of specified transactions
with any interested stockholder, which is defined to include, among others,
any person or entity who in the last three years obtained 15% or more of any
class or series of stock entitled to vote in the election of directors,
unless, among other exceptions, the transaction is approved by (i) the Board
of Directors prior to the date the interested stockholder obtained such status
or (ii) the holders of two-thirds of the outstanding shares of each class or
series of stock entitled to vote generally in the election of directors, not
including those shares owned by the interested stockholder. Because the
Company did not elect out of the statute's provisions, this statute applies to
the Company.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BYLAWS
Upon completion of the Offering, the Company's Amended and Restated Bylaws
will provide that special meetings of stockholders of the Company may be
called only by the Board of Directors or the Chairman of the Board of
Directors. This provision could have the effect of delaying, until the next
annual stockholders meeting, holder actions that are favored by the holders of
a majority of the outstanding voting securities of the Company.
45
<PAGE>
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
control of the Company.
LIMITATION OF LIABILITY
The Restated Certificate of Incorporation contains provisions that eliminate
the personal liability of its directors for monetary damages resulting from
breaches of their fiduciary duty other than liability for breaches of the duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
DGCL or any transaction from which the director derived an improper personal
benefit. The Company's Amended and Restated Bylaws contain provisions
requiring the indemnification of the Company's directors and officers to the
fullest extent permitted by Section 145 of the DGCL.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After giving effect to the shares of Common Stock offered hereby, the
Company will have outstanding 11,321,510 shares of Common Stock. Of these
shares, all of the shares of Common Stock sold in the Offering will be freely
tradeable without restriction under the Securities Act, except for any shares
purchased by "affiliates," as that term is defined under the Securities Act,
of the Company. Upon the expiration of the lock-up agreements described below,
the remaining 8,021,510 shares of Common Stock will be eligible for sale,
subject to compliance with Rule 144 promulgated pursuant to the Securities Act
("Rule 144").
The Company and certain existing stockholders of the Company, including the
Company's directors and executive officers, have agreed that it/he/she will
not, subject to certain specified exceptions, without the prior written
consent of Hambrecht & Quist LLC, for a period of 180 days from the effective
date of the Registration Statement, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. Hambrecht & Quist LLC
may, in its sole discretion, release any of the shares subject to lock-up
agreements at any time, without prior notice.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including any person who may be deemed to be an
"affiliate" of the Company, is entitled to sell within any three-month period
"restricted" shares beneficially owned by him or her in an amount that does
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock or (ii) the average weekly trading volume in shares of Common Stock
during the four calendar weeks preceding such sale, provided that at least one
year has elapsed since such shares were acquired from the Company or an
affiliate of the Company. Sales are also subject to certain requirements as to
the manner of sale, notice and the availability of current public information
regarding the Company. However, a person who has not been an "affiliate" of
the Company at any time within three months prior to the sale is entitled to
sell his or her shares without regard to the volume limitations or other
requirements of Rule 144, provided that at least two years have elapsed since
such shares were acquired from the Company or an affiliate of the Company.
In general, under Rule 701 as currently in effect, any employee, officer,
director, consultant or advisor of the Company who purchased shares from the
Company pursuant to a written compensatory benefit plan or written contract
relating to compensation is eligible to resell such shares 90 days after the
effective date of the Offering. Shares of Common Stock obtained pursuant to
Rule 701 may be sold by non-affiliates without regard to the holding period,
volume limitations, or information or notice requirements of Rule 144, and by
affiliates without regard to the holding period requirements.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under its Stock
Option Plans, as well as certain of the shares of Common Stock previously
issued under its Stock Option Plans. This registration statement is expected
to be filed as soon as practicable after the date of this Prospectus and is
expected to become effective immediately upon filing. Shares of Common Stock
covered by this registration statement will be eligible for sale in the public
market after the effective date of such registration statement, subject to
Rule 144 limitations applicable to affiliates of the Company. See
"Management--Stock Option Plans."
Prior to the Offering, there has been no public market for the Common Stock
and it is impossible to predict with certainty the effect, if any, that market
sales of shares or the availability of such shares for sale will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of Common Stock in the public market may have an adverse impact on such market
price and could impair the Company's ability to raise capital through the sale
of its equity securities.
47
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") through their representatives
Hambrecht & Quist LLC and EVEREN Securities, Inc. (the "Representatives"),
have severally agreed to purchase from the Company the following respective
numbers of shares of Common Stock set forth opposite the name of each such
Underwriter below at the initial public offering price less the underwriting
discounts set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Hambrecht & Quist LLC............................................
EVEREN Securities, Inc...........................................
---
Total............................................................
===
</TABLE>
The following summaries of certain provisions of the Underwriting Agreement
are subject to, and qualified in their entirety by reference to, all of the
provisions of the Underwriting Agreement, including definitions of certain
terms. The form of Underwriting Agreement has been filed with the Commission
as an exhibit to the Registration Statement. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent, including the absence of any material adverse change in
the Company's business and the receipt of certain certificates, opinions and
letters from the Company, its counsel and the Company's independent auditors.
The nature of the Underwriters' obligation is such that they are committed to
purchase all shares of Common Stock offered hereby if any such shares are
purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other dealers.
The Representatives have advised the Company that the Underwriters do not
intend to confirm discretionary sales in excess of 5% of the shares of Common
Stock offered hereby. After the initial public offering of the shares, the
offering price and other selling terms may be changed by the Representatives
of the Underwriters.
The Company and the Over-allotment Selling Stockholders have granted to the
Underwriters an option, exercisable no later than 30 days after the date of
this Prospectus, to purchase up to 495,000 additional shares of Common Stock
at the initial public offering price, (195,000 from the Company and 300,000
from the Over-allotment Selling Stockholders) less the underwriting discounts
set forth on the cover page of this Prospectus. To the extent the Underwriters
exercise this option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares
of Common Stock to be purchased by it shown in the above table bears to the
total number of shares of Common Stock offered hereby. The Company and the
Over-allotment Selling Stockholders will be obligated, pursuant to the option,
to sell shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
48
<PAGE>
The Company, the Selling Stockholder and the Over-allotment Selling
Stockholders have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company and certain existing stockholders of the Company, including the
Company's directors and executive officers, have agreed that it/he/she will
not, subject to certain specified exceptions, without the prior written
consent of Hambrecht & Quist LLC, for a period of 180 days from the effective
date of the Registration Statement, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. Hambrecht & Quist LLC
may, in its sole discretion, release any of the shares subject to lock-up
agreements at any time, without prior notice.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiation among the Company and the Representatives. Among the factors
considered in determining the initial public offering price were prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to those of the
Company, estimates of the business potential and prospects of the Company, the
present state of the Company's business operations, the Company's management
and other factors deemed relevant.
Certain persons participating in the Offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means
placing of any bid or effecting of any purchase, for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with the Offering. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with the Offering when shares of Common Stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transaction may be effected on the Nasdaq Stock Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
Hambrecht & Quist California, a wholly-owned subsidiary of Hambrecht & Quist
LLC ("H&Q California"), and certain employees and spouses of employees of the
Representatives own an aggregate of 190,000 shares of Common Stock, which
shares were purchased on April 22, 1998 from a general partner of an affiliate
of the Company in a privately-negotiated arm's-length transaction. None of the
shares of Common Stock held by H&Q California or the employees and spouses of
employees of the Representatives are being offered hereby.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon by
Proskauer Rose LLP, New York, New York. Certain legal matters will be passed
upon for the Underwriters by Katten Muchin & Zavis, Chicago, Illinois.
EXPERTS
The financial statements as of December 31, 1996 and 1997 and for each of
the three years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance upon the report of Price
Waterhouse LLP, independent certified public accountants, given on the
authority of such firm as experts in auditing and accounting.
49
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2 under the Securities Act of 1933, as
amended (the "Securities Act"), including amendments thereto, relating to the
Common Stock offered hereby has been filed by the Company with the Securities
and Exchange Commission (the "Commission"). This Prospectus does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement and exhibits and schedules filed as a part thereof. A
copy of the Registration Statement may be inspected by anyone without charge
at the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the
Registration Statement may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment
of prescribed fees. The Commission maintains a WorldWide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy and information statements and other information may be found
on the Commission's site address, http://www.sec.gov. Copies of such material
also can be obtained from the Company upon request.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
As a result of the Offering, the Company will become subject to the
information and periodic reporting requirements of the Securities Exchange
Act, as amended, and, in accordance therewith, will file periodic reports,
proxy statements and other information with the Commission. Such periodic
reports, proxy statements and other information will be available for
inspection and copying at the public reference facilities, regional offices
and Web site referred to above.
50
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants......................... F-2
Balance Sheets as of December 31, 1996, 1997 and March 31, 1998 (Unau-
dited).................................................................... F-3
Statements of Operations for each of the years ended December 31, 1995,
1996, and 1997, and the three month periods ended March 31, 1997 and 1998
(Unaudited)............................................................... F-4
Statement of Changes in Stockholders' Deficit for the three years ended De-
cember 31, 1997, and the three month period ended March 31, 1998 (Unau-
dited).................................................................... F-5
Statements of Cash Flows for each of the years ended December 31, 1995,
1996 and 1997, and the three month periods ended March 31, 1997 and 1998
(Unaudited)............................................................... F-6
Notes to Financial Statements.............................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of LogistiCare, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of LogistiCare, Inc.
(formerly Automated Dispatch Solutions, Inc.) at December 31, 1996 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Ft. Lauderdale, Florida
May 7, 1998, except as to Notes 1,
7 and 10 which are as of June 11, 1998
F-2
<PAGE>
LOGISTICARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
----------------------- ------------------------
1996 1997 HISTORICAL PRO FORMA
---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. $ 70,704 $ 639,598 $ 3,680,573 $ 3,680,573
Accounts receivable, net
of allowance of $17,000
and $95,000 at December
31, 1996 and 1997,
respectively............. 464,811 515,495 2,005,649 2,005,649
Prepaid expenses and other
current assets........... 2,300 22,282 30,003 30,003
---------- ----------- ----------- -----------
Total current assets.... 537,815 1,177,375 5,716,225 5,716,225
Property and equipment, net. 301,883 849,732 933,396 933,396
Proprietary software, net of
accumulated amortization of
$140,000 and $176,666 at
December 31, 1996 and 1997,
respectively............... 110,472 73,806 63,249 63,249
Other assets................ 18,154 156,593 161,935 161,935
---------- ----------- ----------- -----------
$ 968,324 $ 2,257,506 $ 6,874,805 $ 6,874,805
========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......... $ 584,433 $ 3,216,819 $ 4,459,430 $ 4,459,430
Accrued expenses.......... 92,040 94,554 245,084 245,084
Notes payable............. 50,524 -- -- --
Notes payable to stock-
holders and officers..... 100,000 -- -- --
Current portion of
obligations under capital
leases................... 6,350 134,927 149,340 149,340
Deferred revenue.......... 131,000 1,250,000 4,229,406 4,229,406
---------- ----------- ----------- -----------
Total current liabili-
ties................... 964,347 4,696,300 9,083,260 9,083,260
Long term note payable to
principal stockholder...... 270,000 -- -- --
Obligations under capital
leases, net of current
portion.................... 32,369 238,880 241,678 241,678
---------- ----------- ----------- -----------
Total liabilities....... 1,266,716 4,935,180 9,324,938 9,324,938
---------- ----------- ----------- -----------
Commitments and contingen-
cies (Note 10)
Stockholders' deficit:
Series A preferred stock,
$.01 par value, 1,000,000
shares authorized; 97,415
shares issued and
outstanding at December
31, 1997................. -- 974 974 --
Common stock, $.01 par
value, 30,000,000 shares
authorized; 5,550,000 and
8,047,360 shares issued
and outstanding at
December 31, 1996 and
1997, respectively....... 55,500 80,474 80,474 90,215
Additional paid in capi-
tal...................... 25,440 1,834,200 2,284,200 2,275,433
Deferred option plan com-
pensation................ -- -- (450,000) (450,000)
Retained deficit.......... (379,332) (4,593,322) (4,365,781) (4,365,781)
---------- ----------- ----------- -----------
Total stockholders' def-
icit................... (298,392) (2,677,674) (2,450,133) (2,450,133)
---------- ----------- ----------- -----------
$ 968,324 $ 2,257,506 $ 6,874,805 $ 6,874,805
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
LOGISTICARE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Transportation manage-
ment services........ -- $1,529,817 $10,768,239 $987,519 $11,714,962
Related party......... -- 1,667,683 602,735 374,744 --
Other................. $391,702 438,602 131,000 -- --
---------- ---------- ----------- --------- -----------
391,702 3,636,102 11,501,975 1,362,263 11,714,962
---------- ---------- ----------- --------- -----------
Operating expenses:
Purchased transporta-
tion................. -- 1,296,334 11,213,405 898,526 9,503,377
Direct labor.......... -- 1,177,805 1,835,505 369,471 901,837
Selling, general and
administrative....... 311,061 1,042,670 2,665,447 318,339 1,088,916
Other................. 189,814 205,379 -- -- --
---------- ---------- ----------- --------- -----------
500,875 3,722,188 15,714,357 1,586,336 11,494,130
---------- ---------- ----------- --------- -----------
Income (loss) from op-
erations............. (109,173) (86,086) (4,212,382) (224,073) 220,832
Other income (expense):
Interest income....... -- 585 25,929 -- 26,822
Interest expense...... (17,735) (33,289) (27,537) (1,493) (20,113)
---------- ---------- ----------- --------- -----------
Net income (loss)..... $ (126,908) $ (118,790) $(4,213,990) $(225,566) $ 227,541
========== ========== =========== ========= ===========
Basic net income
(loss) per share..... $ (0.03) $ (0.02) $ (0.59) $ (0.04) $ 0.03
========== ========== =========== ========= ===========
Weighted average
shares outstanding... 5,000,000 5,550,000 7,188,589 5,796,566 8,047,360
========== ========== =========== ========= ===========
Diluted net income
(loss) per share..... $ (0.03) $ (0.02) $ (0.59) $ (0.04) $ 0.02
========== ========== =========== ========= ===========
Weighted average
shares and
potentially dilutive
shares outstanding... 5,000,000 5,550,000 7,188,589 5,796,566 10,256,459
========== ========== =========== ========= ===========
Unaudited pro forma
basic net income per
share................ $ 0.03
===========
Unaudited pro forma
weighted average
shares outstanding... 9,021,510
===========
Unaudited pro forma
diluted net income
per share............ $ 0.02
===========
Unaudited pro forma
weighted average
shares and
potentially dilutive
shares outstanding... 10,256,459
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LOGISTICARE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
---------------- ----------------- PAID OPTION PLAN RETAINED
SHARES AMOUNT SHARES AMOUNT IN CAPITAL COMPENSATION DEFICIT TOTAL
-------- ------- --------- ------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995................... -- -- 5,000,000 $50,000 $ (45,000) -- $ (133,634) $ (128,634)
Net loss................ -- -- -- -- -- -- (126,908) (126,908)
-------- ------ --------- ------- ---------- --------- ----------- -----------
Balance December 31,
1995................... -- -- 5,000,000 50,000 (45,000) -- (260,542) (255,542)
Acquisition of Automated
Dispatch Systems, Inc.. -- -- 550,000 5,500 18,440 -- -- 23,940
Management services
contributed by
principal stockholder.. -- -- -- -- 52,000 -- -- 52,000
Net loss................ -- -- -- -- -- -- (118,790) (118,790)
-------- ------ --------- ------- ---------- --------- ----------- -----------
Balance, December 31,
1996................... -- -- 5,550,000 55,500 25,440 -- (379,332) (298,392)
Issuance of common
stock.................. -- -- 2,017,360 20,174 497,550 -- -- 517,724
Note contributed by
stockholder............ -- -- -- -- 316,024 -- -- 316,024
Issuance of preferred
stock.................. 97,415 $ 974 -- -- 999,026 -- -- 1,000,000
Issuance of common stock
under option plan...... -- -- 480,000 4,800 (3,840) -- -- 960
Net loss................ -- -- -- -- -- -- (4,213,990) (4,213,990)
-------- ------ --------- ------- ---------- --------- ----------- -----------
Balance, December 31,
1997................... 97,415 974 8,047,360 80,474 1,834,200 -- (4,593,322) (2,677,674)
Options granted under
stock option plan...... -- -- -- -- 450,000 (450,000) -- --
Net income.............. -- -- -- -- -- -- 227,541 227,541
-------- ------ --------- ------- ---------- --------- ----------- -----------
Balance, March 31, 1998
(unaudited)............ 97,415 $ 974 8,047,360 $80,474 $2,284,200 $(450,000) $(4,365,781) $(2,450,133)
======== ====== ========= ======= ========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
LOGISTICARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31
--------------------------------- ----------------------
1995 1996 1997 1997 1998
--------- --------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)..... $(126,908) $(118,790) $(4,213,990) $(225,566) $ 227,541
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization......... 51,154 96,958 154,126 29,367 51,231
Loss on disposal of
property and
equipment............ -- -- 45,088 -- --
Management services
contributed by
principal
shareholder.......... -- 52,000 -- -- --
Changes in assets and
liabilities:
Increase in accounts
receivable.......... -- (433,164) (50,684) (113,883) (1,490,154)
(Increase) decrease
in prepaid expenses
and other current
assets.............. (17,000) 11,700 (19,982) -- (7,721)
Increase in other
assets.............. -- (3,279) (138,438) -- (5,342)
Increase in accounts
payable............. 13,386 556,196 2,632,386 83,539 1,012,587
Increase (decrease)
in accrued expenses. 26,198 (4,231) 48,537 13,118 150,530
Decrease in due to
affiliate........... (34,000) -- -- -- --
Increase (decrease)
in deferred revenue. 140,000 (9,000) 1,119,000 -- 3,209,430
--------- --------- ----------- --------- -----------
Net cash provided by
(used in) operating
activities......... 52,830 148,390 (423,957) (213,425) 3,148,102
--------- --------- ----------- --------- -----------
Cash flows from
investing activities:
Purchases of property
and equipment........ (5,769) (111,190) (329,141) (48,516) (80,939)
Purchase of Automated
Dispatch Systems,
Inc., net of cash
acquired............. -- 5,148 -- -- --
--------- --------- ----------- --------- -----------
Net cash used in
investing
activities......... (5,769) (106,042) (329,141) (48,516) (80,939)
--------- --------- ----------- --------- -----------
Cash flows from
financing activities:
Repayments on notes
payable.............. -- (161,222) (145,524) (25,524) --
Repayment of
obligations under
capital leases....... -- (2,112) (46,168) (2,882) (26,188)
Proceeds from line of
credit............... -- 25,000 -- -- --
Proceeds from issuance
of notes payable to
officer.............. -- 50,000 -- -- --
Proceeds from issuance
of note payable to
principal
stockholder.......... 25,000 -- -- -- --
Proceeds from sale of
common stock......... -- -- 517,724 517,724 --
Proceeds from sale of
preferred stock...... -- -- 1,000,000 -- --
Proceeds from exercise
of stock options..... -- -- 960 -- --
--------- --------- ----------- --------- -----------
Net cash (used in)
provided by
financing
activities......... 25,000 (88,334) 1,321,992 489,318 (26,188)
--------- --------- ----------- --------- -----------
Net (decrease) increase
in cash............... 72,061 (45,986) 568,894 227,377 3,040,975
Cash and cash
equivalents, beginning
of period............. 44,629 116,690 70,704 70,704 639,598
--------- --------- ----------- --------- -----------
Cash and cash
equivalents, end of
period................ $ 116,690 $ 70,704 $ 639,598 $ 298,081 $ 3,680,573
========= ========= =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
LOGISTICARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31
------------------------ -------------------
1995 1996 1997 1997 1998
------- ------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosure of cash
flow information:
Cash paid during the year for
interest.......................... $ -- $14,389 $ 69,183 $ 1,548 $ 20,113
======= ======= ======== ========= ========
Supplemental disclosure of noncash
investing and financing
activities:
Note payable issued in connection
with acquisition of Automated
Dispatch Systems, Inc............. $ -- $50,000 $ -- $ -- $ --
======= ======= ======== ========= ========
Common stock issued in connection
with acquisition of Automated
Dispatch Systems, Inc............. $ -- $23,940 $ -- $ -- $ --
======= ======= ======== ========= ========
Contribution of note payable and
accrued interest to additional
paid in capital................... $ -- $ -- $316,024 $ 316,024 $ --
======= ======= ======== ========= ========
Property and equipment acquired un-
der capital leases................ $ -- $40,831 $385,803 $ 33,376 $ 43,399
======= ======= ======== ========= ========
Exchange of note payable for common
stock............................. $ -- $ -- $ 5,000 $ -- $ --
======= ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LogistiCare, Inc. (the "Company" or "LogistiCare," formerly known as
Automated Dispatch Solutions, Inc.) was organized in March 1994 as a Delaware
corporation. On January 1, 1996, LogistiCare acquired 100% of the outstanding
common stock of Automated Dispatch Systems, Inc. ("Systems"). LogistiCare and
Systems were merged into a single legal entity on December 31, 1996. The
financial statements presented for 1996 are consolidated to include the
accounts of LogistiCare and Systems. All significant intercompany transactions
and balances have been eliminated in the consolidated financial statements for
1996.
The Company provides transportation management services: brokerage logistics
and service bureau logistics. Brokerage logistics consists of non-emergency
transportation management services to government agencies and managed health
care organizations ("MCOs") where the Company coordinates and, through
contracts with unaffiliated transportation carriers provides, non-emergency
transportation for individuals eligible for transportation benefits
("Recipients"). Transportation of Recipients is furnished pursuant to
contracts between the Company and independent transportation carriers. The
Company is compensated for these services primarily on a capitated basis and,
to a lesser extent, on a fee-for-service basis. Service bureau logistics are
offered directly to independent transportation carriers and carrier networks
where the Company manages the carrier's or the network's internal logistics
requirements. The Company is compensated for these services on a fee-for-
transaction basis.
A summary of the significant accounting policies followed in the preparation
of the accompanying financial statements is presented below.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The interim financial data as of March 31, 1998 and for the three months
ended March 31, 1997 and March 31, 1998 is unaudited; however, in the opinion
of the Company, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
for the interim periods. The results of operations for the three month periods
are not necessarily indicative of the results for the full year.
REVENUE RECOGNITION
Revenues under capitation contracts are recognized over the capitation
period, generally one month. Revenues earned under fee-for-service and fee-
for-transaction contracts are recognized when the related service is provided.
STARTUP COSTS FOR OPERATIONS CENTERS
The Company recognizes costs associated with the startup of its operations
centers as such costs are incurred. The Company generally negotiates fees to
enable it to open new operations centers when such centers are required by the
terms of contracts with its customers. The Company recognizes the fees as
earned in accordance with contract terms. The Company recognized $600,000 of
fees in 1997 which are included in brokerage logistics revenues.
CASH AND CASH EQUIVALENTS
The Company considers those short term, highly liquid investments with
original maturities of three months or less as cash and cash equivalents.
F-8
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Expenditures for replacements and betterment are capitalized while maintenance
and repairs are charged to expense as incurred. Depreciation is provided using
the straight line and declining balance methods over estimated useful lives of
five to seven years. Equipment held under capital lease obligations is
amortized using the straight-line method over the shorter of the lease term or
estimated life of the asset.
PROPRIETARY SOFTWARE
Proprietary software represents the purchase of RealTime(TM) ("RealTime"), a
computer aided vehicle dispatch system, for non-emergency transportation
management services. The software is stated at cost less accumulated
amortization. Amortization is provided using the straight line method over an
estimated useful life of 68 months. During 1996, the Company changed its
estimate of the remaining useful life of the software from 36 months to 68
months. As a result, the Company prospectively adjusted its amortization
expense in connection with the software. The effect was to reduce the
amortization from $50,000 in 1995 to $36,666 in 1996 and 1997.
In connection with its acquisition of Systems in January 1996 (see Note 2),
the Company allocated approximately $80,000 of its acquisition price to
proprietary software related to the rights obtained in the acquisition to use
RealTime in Dade, Broward, Palm Beach and Monroe counties in Florida.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation using the intrinsic value
method and discloses certain fair market value information with respect to its
stock option activity in the notes to the financial statements (see Note 7).
In cases where the exercise price of stock options issued to employees is less
than the estimated fair market value of the underlying shares at the date of
grant, compensation expense is recognized over the vesting period.
PER SHARE DATA
Basic net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of shares of common stock outstanding during
each period. Diluted net income per share is computed by dividing net income
by the weighted average number of shares of common stock and potentially
dilutive securities outstanding during each period. All per share data have
been adjusted to reflect the Company's 5-for-1 and 2-for-1 common stock splits
(see Note 10).
Potentially dilutive shares in the amount of 500,000, 1,153,846, and
1,641,789 for the years ended December 31, 1995, 1996 and 1997, respectively,
have been excluded from the computation of diluted earnings per share as the
effect of their inclusion is antidilutive. For the three months ended March
31, 1998, 1,234,949 and 974,150 potentially dilutive shares, representing
stock options and convertible preferred stock, respectively, have been added
to the weighted average shares outstanding to compute diluted net income per
share.
F-9
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
INCOME TAXES
The Company provides income taxes using the liability method under which
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial statement and
income tax bases of the Company's assets and liabilities. An allowance is
recorded, based upon currently available information, when it is more likely
than not that any or all of a deferred tax asset will not be realized. The
provision for income taxes includes taxes currently payable, if any, plus the
net change during the year in deferred tax assets and liabilities recorded by
the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and notes payable approximated fair value because of the short maturity of
these instruments. Accounts receivable result from contracts with a limited
number of customers in Georgia, Connecticut and Florida. At December 31, 1996
and 1997, contracts with two customers accounted for approximately 29.0% and
40.1%, respectively, of accounts receivable, and approximately 54.2% and
20.8%, respectively, of consolidated revenues. Additionally, a third customer
accounted for approximately 48.4% of consolidated revenues in 1997. The
Company routinely assesses the financial strength of its customers and records
an allowance for doubtful accounts when it determines that collection of a
particular amount is unlikely.
UNAUDITED PRO FORMA BALANCE SHEET AT MARCH 31, 1998
Upon completion of the offering, the Company will convert its preferred
stock into 974,150 shares of common stock. The unaudited pro forma balance
sheet information is presented as if such conversions had occurred as of March
31, 1998.
UNAUDITED PRO FORMA NET INCOME PER SHARE FOR THE THREE MONTHS ENDED MARCH 31,
1998
Unaudited pro forma basic net income per share for the three months ended
March 31, 1998 is computed by dividing net income by the weighted average
number of shares of common stock outstanding plus 974,150 shares of common
stock which, on a pro forma basis, are assumed to have been converted from
preferred stock during the period. Unaudited pro forma diluted net income per
share for the three months ended March 31, 1998, is computed by dividing net
income by the weighted average number of shares of common stock plus 974,150
shares of common stock which, on a pro forma basis, are assumed to have been
converted from preferred stock during the period plus 1,234,949 potentially
dilutive shares representing common stock options.
RECAPITALIZATION AND COMMON STOCK SPLIT
In connection with the contemplated initial public offering of the Company's
common stock as described in Note 10, in June 1998, the Company's Board of
Directors and stockholders approved an increase in authorized common shares to
30,000,000 and authorized a 2-for-1 common stock split, effected as of June
11, 1998. All share and per share data have been adjusted to reflect the
common stock split.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued FAS
("Financial Accounting Standard") No. 130, "Reporting Comprehensive Income,"
("FAS 130") and FAS No. 131 "Disclosures About Segments of an Enterprise and
Related Information," ("FAS 131"). FAS 130 requires an additional statement
presenting certain adjustments to equity. FAS 131 established standards for
related disclosures about products and services, geographic locations and
major customers. The Company will adopt FAS 130 and FAS 131, effective
F-10
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
December 31, 1998. The Company believes that the adoption of these standards
will not have a material impact on the disclosure of net income (loss) per
share or on the disclosures in the Company's financial statements.
2. PURCHASE OF SUBSIDIARY
On January 1, 1996, LogistiCare acquired 100% of the outstanding common
stock of Systems in exchange for $50,000 in cash, promissory notes totaling
$50,000 and 55,000 shares of the Company's common stock. The acquisition was
accounted for as a purchase and, accordingly, the results of operations of
Systems are included in the accompanying statements of operations from January
1, 1996. The following unaudited pro forma statement of operations data for
the year ended December 31, 1995 gives effect to the acquisition as if it had
occurred on January 1, 1995:
<TABLE>
<S> <C>
Revenues.......................................................... $1,822,081
Loss from operations.............................................. $ (12,089)
Net loss.......................................................... $ (45,648)
Loss per share.................................................... $ (0.01)
</TABLE>
3. RELATED PARTY TRANSACTIONS
The Company provides dispatch services to an entity (the "Client") which was
controlled by certain of the Company's minority stockholders until such
minority stockholders sold their entire interest in the Client to an unrelated
entity in May 1997. Dispatch services are provided pursuant to an agreement
with the Client in connection with a transportation contract between the
Client and a municipality in South Florida (the "Florida Contract"). Under the
terms of the agreement, the Company earned $2.65 per trip processed on behalf
of the Client under the Florida Contract. In a related agreement, the Company
paid to the principal stockholders of the Client a fee of $1.00 for each trip
processed by the Company under the Florida Contract. Effective May 31, 1997,
the Company, the Client and the principal stockholders of the Client agreed to
amend the terms of the previously described agreements. Under the revised
terms beginning in June 1997, the Company earns $1.65 per trip processed on
behalf of the Client and pays no fees to the Client or the principal
stockholders of the Client. Under the agreements the Company recorded gross
revenues from the Client of approximately $1,925,000 and $553,000 in 1996 and
1997, respectively, and paid fees to the principal stockholders of the Client
of approximately $726,000 and $211,000 in 1996 and 1997, respectively. Such
fees have been recorded as a reduction of revenues under the Florida Contract.
The Company provides dispatch services to another entity ("Health Trans")
which was controlled by certain of the minority stockholders until such
minority stockholders sold their entire interest in Health Trans to an
unrelated entity in May 1997. The agreement with Health Trans expires in
December 2025. Under the terms of the agreement, the Company earns $125 per
week for each of Health Trans' vehicles for which the Company provides
dispatch services. During 1996 and 1997, the Company recorded revenues of
approximately $200,000 and $271,000, respectively in connection with this
agreement.
During 1995, the Company entered into an agreement (the "Sales and Software
Agreement") with an affiliate of the Company's principal stockholder under
which the Company received $150,000 for 15 end-user licenses to the Company's
RealTime software, and future sales and marketing services to be provided by
the Company. In June 1997, the Company and its affiliate terminated all
commitments under the Sales and Software Agreement in accordance with its
terms. In connection with the termination, the Company made available to its
affiliate rights to an additional 13 end-user licenses of RealTime and
recognized approximately $131,000 in income during 1997 which had been
recorded as deferred revenue in the Company's balance sheet at December 31,
1996.
F-11
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
During 1995, 1996 and 1997, the Company recorded administrative charges of
$44,000, $66,000 and $0, respectively, for services provided by an affiliate
of the Company's principal stockholder. Such services were primarily
management services provided by the Company's current Chief Financial Officer
whose salary was paid by such affiliate during those years. Of the total
administrative charge of $144,000, including $34,000 in administrative charges
recorded in 1994, the Company paid $92,000 while the remainder was recorded as
a capital contribution during 1996.
During 1995, the Company paid Systems $42,000 for the rental of certain
office facilities.
During the period from March 1994 to August 1995, the Company's principal
stockholder loaned the Company a total of $270,000, evidenced by a promissory
note with interest at 7%, principal and interest due on January 31, 2002. In
March 1997, the shareholder canceled the note and contributed the principal
balance and accrued interest of $46,024 to the Company. The Company recorded
the contribution of the note as additional paid in capital.
4. PROPERTY AND EQUIPMENT, NET
At December 31, the Company's property and equipment consists of the
following:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Computer equipment...................................... $298,086 $ 450,771
Office furniture and fixtures........................... 7,654 43,212
Leasehold improvements.................................. 16,471 32,181
Equipment under capital lease (see Note 9).............. 40,831 426,635
-------- ---------
363,042 952,799
Less accumulated depreciation........................... (61,159) (103,067)
-------- ---------
$301,883 $ 849,732
======== =========
</TABLE>
During 1995, 1996 and 1997, the Company recorded depreciation expense
related to its property and equipment of $1,154, $60,292 and $117,458,
respectively.
5. DEFERRED REVENUE
At December 31, 1997, the $1,250,000 deferred revenue represents an interim
payment from a customer under a memorandum of understanding in connection with
the Company's claims that the data provided by such customer relating to a
transportation brokerage contract understated the number of passengers to be
transported under such contract. The payment is to be reconciled after a
reevaluation by the customer of the data provided. In event it is determined
that the payment was not due the Company, the payment will be deducted from
future amounts due under the contract.
In March 1998, the Company received an additional payment from the customer
of $5,236,333. Based on the increased capitation rates, effective February 1,
1998, included in the amended contracts with the customer which superseded the
prior written memorandum of understanding (see Note 10), the Company
recognized $2,256,927 of the payment from the customer as revenue in the first
quarter of 1998.
F-12
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
6. NOTES PAYABLE
At December 31, 1996 notes payable were as follows:
<TABLE>
<CAPTION>
NON-
AFFILIATED STOCKHOLDERS
ENTITIES AND OFFICERS
---------- ------------
<S> <C> <C>
Unsecured notes payable to officer of $25,000 each,
interest at 10% and 15%, no stated repayment terms. $ -- $ 50,000
Unsecured notes payable to minority shareholders
(former shareholders of Systems), interest at 9%
per annum, repayable in five equal monthly
installments beginning January 1, 1997............. -- 50,000
Revolving credit facility with bank, maximum amount
of $50,000 payable on demand, interest at the
bank's prime lending rate plus 2 1/2% per annum due
monthly, secured by substantially all assets of the
Company............................................ 25,000 --
Other unsecured note payable, interest at 9% per
annum, repayable in monthly installments of $12,889
including interest through February 1997........... 25,524 --
------- --------
$50,524 $100,000
======= ========
</TABLE>
During 1997, the Company paid $145,524 of notes payable outstanding at
December 31, 1996 which included $95,000 paid to stockholders and officers.
Also during 1997 a stockholder exchanged a $5,000 note payable for common
stock.
7. CAPITAL STOCK
Series A Preferred Stock
In March 1997, the Company's Board of Directors authorized the issuance of
100,000 shares of Series A Preferred Stock, $.01 par value (the "Preferred
Stock"). As of June 1998, the Company increased the number of authorized
shares of Preferred Stock from 100,000 to 1,000,000 (see Note 10). The
Preferred Stock has no stated rate; however, the Board may declare dividends
on the Preferred Stock and, if declared, no dividends or redemptions on common
or other stock that is ranking junior to the Preferred Stock may be made until
the declared dividends on the Preferred Stock are paid.
The Preferred Stock shall convert to common stock upon the effectiveness of
a registration statement filed by the Company in connection with an initial
public offering. The conversion rate is the greater of one share of common
stock per share of Preferred Stock or a rate based on various formulae
depending on the timing and offering price of the initial public offering and
subject to adjustments for stock splits. The preferred shareholders may also
elect to convert their shares into common stock at the conversion price, as
defined.
The preferred stockholders have voting rights equal to one vote for each
share of common stock into which the Preferred Stock would be convertible on
the record date of the stockholder vote. In addition, a majority of the
preferred stockholders must approve certain corporate actions such as the
authorization of any class of stock that would be on a par or senior to the
Preferred Stock as to dividends, any increase in authorized shares of the
Preferred Stock, or any amendment of the Certificate of Incorporation that
would adversely affect the rights of the preferred stockholders.
F-13
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
Common Stock
In March 1997, the Company increased the number of authorized shares of
common stock from 1,000,000 to 1,500,000. In March 1998, the Company increased
the number of authorized shares of common stock from 1,500,000 to 7,500,000
(see Note 10). As of June 11, 1998, the Company increased the number of
authorized shares of common stock from 7,500,000 to 30,000,000 (see Note 10).
Stock Option Plan
The 1995 Incentive Stock Option Plan (the "Plan") provides for the granting
of incentive and nonqualified stock options to key employee and nonemployee
directors, respectively, to purchase shares of the Company's common stock. The
Plan authorizes the issuance of options to purchase up to an aggregate of
2,166,670 shares. Incentive stock options generally vest at an annual rate of
20% starting at the grant date or one year thereafter. Nonqualified options
are fully vested at the grant date. At December 31, 1997, 243,340 shares of
common stock were reserved and available for future grants under the Plan.
Stock option activity and information about stock options is summarized in
the following tables:
<TABLE>
<CAPTION>
FAIR MARKET
AVERAGE EXERCISE VALUE AT GRANT
SHARES PRICE DATE
--------- ---------------- --------------
<S> <C> <C> <C>
Balance, January 1, 1995............. --
Granted.............................. 1,200,000 $0.01 $0.01
Exercised............................ --
---------
Balance, December 31, 1995........... 1,200,000 0.01
Granted.............................. --
Exercised............................ --
---------
Balance, December 31, 1996........... 1,200,000 0.01
Granted.............................. 723,330 1.59 1.59
Exercised............................ (480,000) 0.01
---------
Balance, December 31, 1997........... 1,443,330 $0.80
=========
</TABLE>
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------- ----------------
AVERAGE AVERAGE
EXERCISE EXERCISE
EXERCISE PRICE RANGE SHARES AVERAGE LIFE PRICE SHARES PRICE
-------------------- --------- ------------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
$0.01--$0.26................ 1,013,330 5.3 years $0.08 -- --
$2.50 and above............. 430,000 9.6 years 2.50 270,000 $2.50
--------- -------
1,443,330 270,000
========= =======
</TABLE>
F-14
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
The Company uses the intrinsic value method of accounting for stock-based
compensation. Had the fair value based method been used to account for such
compensation, the effect would not have been significant in 1995 and 1996. The
net loss per share for 1997 would have been increased to the pro forma amounts
indicated below:
<TABLE>
<S> <C>
Net loss:
As reported.................................................. $(4,213,990)
Pro forma.................................................... (4,387,385)
Net loss per share (basic and diluted):
As reported.................................................. $ (1.17)
Pro forma.................................................... (1.22)
</TABLE>
Fair market value information for the Company's stock options for 1995, 1996
and 1997 was estimated using the Black-Scholes option pricing model assuming
risk free rates of 5.75% to 6.10%, no dividend yield, and expected terms of 2
to 4 years.
8. INCOME TAXES
During 1997, the Company changed its basis of accounting for income tax
purposes from a modified cash basis to the accrual basis. As a result, the
Company reversed approximately $173,000 of net deductible temporary
differences through its 1997 current income tax provision.
Additionally, during 1997 the Company changed its estimated tax rate from
approximately 19% to 38% as a result of the use of graduated tax rates in
1996. The effect of such change was an increase in net deferred tax assets of
approximately $51,000, prior to a corresponding increase in the valuation
allowance.
At December 31, 1996 and 1997, the Company had temporary differences between
the financial statement bases and the income tax bases of certain of its
assets and liabilities, resulting primarily from the use of the modified cash
basis of accounting for income tax purposes. Additionally, at December 31,
1996 and 1997, the Company had net operating loss carryforwards of
approximately $168,000 and $3,181,000, respectively, to offset future taxable
income. The significant components of the Company's deferred tax assets
(liabilities) are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- -----------
<S> <C> <C>
Loss carryforwards................................... $ 28,926 $ 1,208,598
Effect of use of modified cash basis of accounting
for income tax purposes............................. 33,242 --
Depreciation and amortization........................ (9,666) (45,119)
Allowance for doubtful accounts...................... -- 36,100
Deferred revenue..................................... -- 475,000
Other................................................ -- 16,745
-------- -----------
Net deferred tax assets............................ 52,502 1,691,324
Valuation allowance.................................. (52,502) (1,691,324)
-------- -----------
$ -- $ --
======== ===========
</TABLE>
The Company's net operating losses at December 31, 1997 expire through 2017.
F-15
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
Presented below is a reconciliation between the Company's income tax
provision and the income tax provision which would result from applying the
federal statutory tax rate to the Company's loss before income taxes:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- -----------
<S> <C> <C> <C>
Statutory tax benefit...................... $(19,036) $(17,818) $(1,432,757)
State and local income tax benefit......... (5,394) (5,049) (168,559)
Non-deductible contributed services........ -- 10,010 --
Other non-deductible expenses.............. 4,216 4,767 13,632
Change in valuation allowance.............. 20,214 8,090 1,587,684
-------- -------- -----------
Provision for income taxes................. $ -- $ -- $ --
======== ======== ===========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under noncancellable operating
leases with terms of two to five years. Rent expense for the years ended
December 31, 1995, 1996, and 1997 totaled $44,000, $167,000, and $287,000.
The Company leases computer and office equipment and a telephone system
under noncancellable leases classified as capital leases. The fair value of
the equipment was $40,831 and $385,803 for leases starting in 1996 and 1997,
respectively. The economic useful life of the equipment is five years.
<TABLE>
<CAPTION>
OPERATING CAPITAL
--------- --------
<S> <C> <C>
1998..................................................... $331,088 $164,280
1999..................................................... 342,932 161,072
2000..................................................... 276,233 123,999
2001..................................................... -- 6,776
-------- --------
Total minimum lease obligations.......................... 950,253 456,127
Less: imputed interest................................. -- (82,320)
-------- --------
Present value of net minimum lease obligations........... 950,253 373,807
Less: current maturities............................... -- 134,927
-------- --------
Capital lease obligations, net........................... $950,253 $238,880
======== ========
</TABLE>
The Company is a defendant in three pending legal proceedings which
management believes are incidental to the Company's business. The Company does
not believe that either of these actions will have a material adverse effect
on the Company's financial position or results of operations.
10. SUBSEQUENT EVENTS
In February 1998, the Company began operations under a written memorandum of
understanding with the Connecticut Department of Social Services (the "CDSS")
to provide transportation logistics and brokerage services for approximately
40,000 Medicaid recipients. In May 1998, the Company executed a final contract
with the CDSS for such services.
In March 1998, the Company amended its contracts with the Georgia Department
of Medical Assistance ( the "GDMA") for the provision of transportation
logistics and brokerage services. The amendments included provisions which
increased the capitation rate paid and modified certain operational
requirements. The amended capitation rates are effective as of February 1,
1998 and cover specific contract service periods.
F-16
<PAGE>
LOGISTICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1996 AND 1997
Capitation rates in effect for the contract service period from February 1,
1998 through March 31, 1998 resulted in an increase in revenues for the first
quarter of 1998 of approximately $4,200,000 compared to the revenues which
would have been recognized based on the rates in effect immediately prior to
February 1, 1998. Under the amended contract which is subject to renewal by
GDMA, capitation rates in effect for the contract service periods subsequent
to June 30, 1998 are 23% to 26% lower than the rates in effect for the period
before July 1, 1998.
In March 1998, the Company increased the number of authorized shares of
common stock from 1,500,000 to 7,500,000 and simultaneously effected a 5-for-1
stock split. In addition, in connection with the contemplated initial public
offering of the Company's common stock, in June 1998, the Company's Board of
Directors and stockholders approved an additional increase in the authorized
number of shares of common stock from 7,500,000 to 30,000,000 and an
additional increase in the authorized number of shares of Preferred Stock from
100,000 to 1,000,000 and authorized a 2-for-1 stock split, effected as of June
11, 1998. The effect of the 5-for-1 stock split and the effect of the 2-for-1
stock split have been reflected for all periods presented. All references to
the number of common shares and per share amounts elsewhere in the financial
statements and the notes thereto have been restated to reflect the effect of
the 5-for-1 and 2-for-1 stock splits for all periods presented.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICI-
TATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................... 3
Risk Factors........................................................... 5
Use of Proceeds........................................................ 13
Dividend Policy........................................................ 13
Capitalization......................................................... 14
Dilution............................................................... 15
Selected Financial Information......................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 17
Business............................................................... 24
Management............................................................. 35
Certain Transactions................................................... 41
Principal and Selling Stockholders..................................... 42
Description of Capital Stock........................................... 45
Shares Eligible for Future Sale........................................ 47
Underwriting........................................................... 48
Legal Matters.......................................................... 49
Experts................................................................ 49
Additional Information................................................. 50
Index to Consolidated Financial Statements............................. F-1
</TABLE>
-----------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,300,000 SHARES
LOGO
COMMON STOCK
--------------
PROSPECTUS
--------------
HAMBRECHT & QUIST
EVEREN SECURITIES, INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred by the Company
in connection with the issuance and distribution of the securities being
registered under this registration statement. Except for the SEC and NASD
filing fees, all expenses have been estimated and are subject to future
contingencies.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 13,434
NASD fee........................................................... 3,674
Nasdaq Entry Fee...................................................
Federal and State taxes............................................
Legal fees and expenses............................................
Printing and engraving expenses....................................
Accounting fees and expenses.......................................
Blue sky fees and expenses.........................................
Transfer agent and registrar fees and expenses.....................
Miscellaneous......................................................
--------
Total............................................................ $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of the Company's Restated Certificate of Incorporation
provides that the Company shall indemnify and hold harmless, to the fullest
extent authorized by the Delaware General Corporation Law, its officers and
directors against all expenses, liability and loss actually and reasonably
incurred in connection with any civil, criminal, administrative or
investigative action, suit or proceeding. The Restated Certificate of
Incorporation also extends indemnification to those serving at the request of
the Company as directors, officers, employees or agents of other enterprises.
In addition, Article Seventh of the Company's Restated Certificate of
Incorporation provides that no director shall be personally liable for any
breach of fiduciary duty. Article Seventh does not eliminate a director's
liability (i) for a breach of his or her duty of loyalty to the Company or its
stockholders, (ii) for acts of intentional misconduct or knowing violations of
law, (iii) under Section 174 of the Delaware General Corporation Law for
unlawful declarations of dividends or unlawful stock purchases or redemptions,
or (iv) for any transactions from which the director derived an improper
personal benefit.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify its directors and officers against expenses
(including attorney's fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection with any action, suit
or proceeding brought by third parties, if such directors or officers acted in
good faith and in a manner they 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 reason to believe their conduct was unlawful. In a
derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors and officers in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
officers or directors are reasonably entitled to indemnity for such expenses
despite such adjudication of liability.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its
II-1
<PAGE>
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. No
such provision shall eliminate or limit the liability of a director for any
act or omission occurring prior to the date when such provision becomes
effective.
The Underwriting Agreement provides for indemnification of directors and
officers of the Company by the Underwriters against certain liabilities.
Pursuant to Section 145 of the DGCL and the Restated Certificate of
Incorporation and the Amended and Restated By-laws of the Company, the Company
maintains directors' and officers' liability insurance coverage.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1995, the Company has issued unregistered securities in the
transactions described below, all of which were deemed to be exempt from
registration under the Securities Act. All discussions of transactions
occurring after March 30, 1998 in this Item 15 give effect to a 5-for-1 stock
split of Common Stock that was effected in at such time (the "Stock Split").
All references to "Common Shares" refer to shares of the Company's Common
Stock, $.01 par value per share. All references to "Preferred Shares" refer to
shares of the Company's Series A Preferred Stock, $.01 par value per share.
(1) On or about January 1, 1996, in connection with the purchase of all of
the outstanding shares of Automated Dispatch Systems, Inc. ("Systems"),
the Company issued a total of 275,000 Common Shares to John L.
Shermyen, Edward Steinberg, Sigmund Zilber and Martin Zilber. The
Company relied upon the representations by Messrs. Steinberg, Zilber
and Zilber concerning their knowledge and experience in financial and
business markets and net worth.
(2) On or about March 21, 1997, the Company issued a total of 974,150
Common Shares to Derace L. Schaffer, John Pappajohn and four investors
designated by Mr. Pappajohn pursuant to the terms of a Stock Purchase
Agreement dated March 21, 1997 (the "Purchase Agreement") for an
aggregate purchase price of $500,000. Messrs. Schaffer and Pappajohn
and such investors are Accredited Investors (as defined in Rule 501
under the Securities Act of 1933, as amended ("Rule 501")). The Company
provided Messrs. Schaffer and Pappajohn with a private placement
memorandum and afforded them access to senior management of the
Company.
(3) Between March 21, 1997 and June 6, 1997, the Company issued 16,250
Common Shares to John L. Shermyen, Chairman of the Board of Directors,
President and Chief Executive Officer of the Company, for an aggregate
purchase price of $4,170 upon the exercise of certain contractual
preemptive rights in connection with the issuance of Common Shares
referred to in paragraph (2) above.
(4) On or about March 21, 1997, the Company issued 52,810 Common Shares to
Edward Steinberg for an aggregate purchase price of $13,553 upon the
exercise of certain contractual preemptive rights in connection with
the issuance of Common Shares referred to in paragraph (2) above. The
Company relied upon representations made by Mr. Steinberg in connection
with the issuance of Common Shares referred to in paragraph (1) above.
(5) On or about June 6, 1997, the Company issued a total of 974,150
Preferred Shares to Pappajohn and seven investors designated by Messrs.
Schaffer and Pappajohn and the Company pursuant to the terms of the
Purchase Agreement for an aggregate purchase price of approximately
$1,000,000. Messrs. Schaffer and Pappajohn and such investors are
Accredited Investors (as defined in Rule 501). The Company provided
Messrs. Schaffer and Pappajohn with a private placement memorandum and
afforded them access to senior management of the Company.
(6) On or about November 18, 1997, the Company issued 80,000 Common Shares
to John L. Shermyen, Chairman of the Board of Directors, President and
Chief Executive Officer of the Company, for an aggregate purchase price
of $800 as a result of his exercise of certain stock options.
(7) On or about November 18, 1997, the Company issued 80,000 Common Shares
to Michael E. Weksel, Vice President and Chief Financial Officer of the
Company, for an aggregate purchase price of $160 as a result of his
exercise of certain stock options.
II-2
<PAGE>
No underwriters were involved in the foregoing transactions and no
underwriting discounts or commissions were paid in connection therewith. The
issuances of securities sold in the transactions reference above were not
registered under the 1933 Act in reliance on the exemption in Section 4(2) of
the 1933 Act. The Company believes that Common Shares that were issued to
existing shareholders in connection with the Stock Split were, to the extent
that the Securities Act was applicable to such transaction, exempt from
registration under the Securities Act because they involved no "sales" within
the meaning of Section 2(3) of the Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1* Revised Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Company (including all amendments)
3.2 By-Laws of the Company
3.3 Restated Certificate of Incorporation of the Company, adopted by the
Company on June 10, 1998
3.4 Amended and Restated By-Laws of the Company, adopted by the Company on
June 10, 1998
4.1 Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of the Company, dated June 6, 1997
5+ Opinion of Proskauer Rose LLP re: validity of securities
9.1 Agreement between TGIS Partners, as nominee, and William B. McLiverty,
dated February 16, 1998
9.2 Agreement between TGIS Partners, as nominee, and Joseph Handy, dated
February 16, 1998
9.3 Agreement between TGIS Partners, as nominee, and Charles P. Krokel,
dated February 16, 1998
9.4 Agreement between TGIS Partners, as nominee, and Gregory Weksel, dated
February 16, 1998
9.5 Agreement between TGIS Partners, as nominee, and Leonard Levine, dated
February 16, 1998
9.6 Agreement between TGIS Partners, as nominee, and Bertrand H. Weidberg,
Esq., dated February 16, 1998
9.7 Agreement between TGIS Partners, as nominee, and Francis M. Sassano,
dated February 16, 1998
9.8 Agreement between TGIS Partners, as nominee, and David Weksel, dated
February 16, 1998
9.9 Agreement between TGIS Partners, as nominee, and Deanna Weksel, dated
February 16, 1998
9.10 Agreement between TGIS Partners, as nominee, and Leonor Firstenberg,
dated February 16, 1998
10.1* Employment Agreement, dated July 14, 1998, between the Company and
John L. Shermyen
10.2 1995 Incentive Stock Option Plan of the Company (including all
amendments)
10.3 Agreement, dated June 20, 1996, between Automated Dispatch Systems, Inc.
and Health Trans, Inc.
10.4 Agreement, dated June 20, 1996, between Automated Dispatch Systems, Inc.
and Health Trans of South Florida, Inc.
10.5 Dispatch Services Agreement, dated June 20, 1996, between Automated
Dispatch Systems, Inc. and Comprehensive Paratransit Services
10.6 Management and Advisory Agreement, dated June 20, 1996, between
Automated Dispatch Systems, Inc. and SEM, Inc.
10.7 Agreement, dated June 20, 1996, among Automated Dispatch Systems, Inc.
Comprehensive Paratransit Services and SEM, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.8 Agreement, dated May 29, 1998, between the Company and the Connecticut
Department of Social Services
10.9 Contract, dated July 17, 1997, between the Company and the Georgia
Department of Administrative Services with respect to the Central
region of Georgia (including all amendments and renewals)
10.10 Contract, dated July 17, 1997, between the Company and the Georgia
Department of Administrative Services with respect to the East region
of Georgia (including all amendments and renewals)
10.11 Contract, dated July 17, 1997, between the Company and the Georgia
Department of Administrative Services with respect to the Southwest
region of Georgia (including all amendments and renewals)
10.12 Lease Agreement, dated August 27, 1997, between the Company and
Principal Mutual Life Insurance Company (including all amendments)
10.13 Lease Agreement, dated August 7, 1997, between the Company and New
World Partners Joint Venture
10.14 Lease Agreement, dated October 8, 1996, between the Company and Gerald
A. Chase
10.15 License Agreement between Automated Dispatch Systems, Inc. and
Automated Dispatch Services, Inc., dated January 1, 1995
10.16 License Agreement between Automated Dispatch Services, Inc. and
RadioSoft, Inc. dated April 26, 1994 (including all amendments)
10.17 Agreement between E.F Johnson and RadioSoft, Inc. dated March 3, 1995
10.18 1998 Stock Option Plan of the Company
10.19* Employment Agreement, dated July 14, 1998, between the Company and
Michael E. Weksel
10.20* Credit facility and related agreements with respect to NationsBank N.A.
line of credit
10.21* Employment Agreement, dated July 13, 1998, between the Company and John
M. Whitcomb
10.22* Employment Agreement, dated July 14, 1998, between the Company and
Gerald F. Souza
23.1 Consent of PricewaterhouseCoopers LLP
23.2+ Consent of Proskauer Rose LLP (contained in opinion to be filed as
Exhibit 5)
24.1 Power of Attorney (set forth on page II-22)
27.1 Financial Data Schedule
</TABLE>
- ---------------------
* Filed herewith
+ To be filed by amendment
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
The 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 registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement (filed herewith as Exhibit
1.1) certificates in such denominations and registered in such names as
required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
REGISTRANT CERTIFIES THAT IT HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 21ST DAY OF
JULY, 1998.
LogistiCare, Inc.
/s/ John L. Shermyen
By: _________________________________
John L. Shermyen
Chairman of the Board, President
and Chief Executive Officer
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ John L. Shermyen July , 1998
Chairman of the Board,
_________________________ President and Chief
JOHN L. SHERMYEN Executive Officer
/s/ Michael E. Weksel
_________________________ Vice President, Chief July , 1998
MICHAEL E. WEKSEL Financial Officer and
Director (Principal
Financial Officer)
_________________________ Director July , 1998
JOHN PAPPAJOHN
Director July , 1998
_________________________
DERACE L. SCHAFFER
/s/ William Weksel* Director July , 1998
_____________________
WILLIAM WEKSEL
/s/ Albert Cortina* Corporate Controller
_________________________ (Controller or Principal July , 1998
ALBERT CORTINA Accounting Officer)
/s/ Michael E. Weksel
*By: ____________________
MICHAEL E. WEKSEL
ATTORNEY-IN-FACT
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1.1* Revised Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Company (including all
amendments)
3.2 By-Laws of the Company
3.3 Restated Certificate of Incorporation of the Company, adopted
by the Company on June 10, 1998
3.4 Amended and Restated By-Laws of the Company, adopted by the
Company on June 10, 1998
4.1 Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of the Company, dated June 6, 1997
5+ Opinion of Proskauer Rose LLP re: validity of securities
9.1 Agreement between TGIS Partners, as nominee, and William B.
McLiverty, dated February 16, 1998
9.2 Agreement between TGIS Partners, as nominee, and Joseph Handy,
dated February 16, 1998
9.3 Agreement between TGIS Partners, as nominee, and Charles P.
Krokel, dated February 16, 1998
9.4 Agreement between TGIS Partners, as nominee, and Gregory
Weksel, dated February 16, 1998
9.5 Agreement between TGIS Partners, as nominee, and Leonard
Levine, dated February 16, 1998
9.6 Agreement between TGIS Partners, as nominee, and Bertrand H.
Weidberg, Esq., dated February 16, 1998
9.7 Agreement between TGIS Partners, as nominee, and Francis M.
Sassano, dated February 16, 1998
9.8 Agreement between TGIS Partners, as nominee, and David Weksel,
dated February 16, 1998
9.9 Agreement between TGIS Partners, as nominee, and Deanna Weksel,
dated February 16, 1998
9.10 Agreement between TGIS Partners, as nominee, and Leonor
Firstenberg, dated February 16, 1998
10.1* Employment Agreement, dated July 14, 1998, between the Company
and John L. Shermyen
10.2 1995 Incentive Stock Option Plan of the Company (including all
amendments)
10.3 Agreement, dated June 20, 1996, between Automated Dispatch
Systems, Inc. and Health Trans, Inc.
10.4 Agreement, dated June 20, 1996, between Automated Dispatch
Systems, Inc. and Health Trans of South Florida, Inc.
10.5 Dispatch Services Agreement, dated June 20, 1996, between
Automated Dispatch Systems, Inc. and Comprehensive Paratransit
Services
10.6 Management and Advisory Agreement, dated June 20, 1996, between
Automated Dispatch Systems, Inc. and SEM, Inc.
10.7 Agreement, dated June 20, 1996, among Automated Dispatch
Systems, Inc. Comprehensive Paratransit Services and SEM, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.8 Agreement, dated May 29, 1998, between the Company and the
Connecticut Department of Social Services
10.9 Contract, dated July 17, 1997, between the Company and the
Georgia Department of Administrative Services with respect to
the Central region of Georgia (including all amendments and
renewals)
10.10 Contract, dated July 17, 1997, between the Company and the
Georgia Department of Administrative Services with respect to
the East region of Georgia (including all amendments and
renewals)
10.11 Contract, dated July 17, 1997, between the Company and the
Georgia Department of Administrative Services with respect to
the Southwest region of Georgia (including all amendments and
renewals)
10.12 Lease Agreement, dated August 27, 1997, between the Company and
Principal Mutual Life Insurance Company (including all
amendments)
10.13 Lease Agreement, dated August 7, 1997, between the Company and
New World Partners Joint Venture
10.14 Lease Agreement, dated October 8, 1996, between the Company and
Gerald A. Chase
10.15 License Agreement between Automated Dispatch Systems, Inc. and
Automated Dispatch Services, Inc., dated January 1, 1995
10.16 License Agreement between Automated Dispatch Services, Inc. and
RadioSoft, Inc., dated April 26, 1994 (including all
amendments)
10.17 Agreement between E.F Johnson and RadioSoft, Inc. dated March
3, 1995.
10.18 1998 Stock Option Plan of the Company
10.19* Employment Agreement, dated July 14, 1998, between the Company
and
Michael E. Weksel
10.20* Credit facility and related agreements with respect to
NationsBank N.A. line of credit
10.21* Employment Agreement, dated July 13, 1998, between the Company
and John M. Whitcomb
10.22* Employment Agreement, dated July 14, 1998, between the Company
and Gerald F. Souza
23.1 Consent of PricewaterhouseCoopers LLP
23.2+ Consent of Proskauer Rose LLP (contained in opinion to be filed
as Exhibit 5)
24.1 Power of Attorney (set forth on page II-22)
27.1 Financial Data Schedule
</TABLE>
- ---------------------
* Filed herewith
+ To be filed by amendment
<PAGE>
KMZ DRAFT
JULY 21, 1998
==
LOGISTICARE, INC.
3,300,000 SHARES/1/
=========
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
July ___, 1998
HAMBRECHT & QUIST LLC
EVEREN SECURITIES, INC.
c/o Hambrecht & Quist LLC
230 Park Avenue, 21st Floor
New York, New York 10169
Ladies and Gentlemen:
LogistiCare, Inc., a Delaware corporation (herein called the "Company"),
proposes to issue and sell 2,300,000 shares (herein called the "Company
========
Underwritten Stock") of its authorized but unissued common stock, $0.01 par
value (herein called the "Common Stock"), to the Underwriters (as hereinafter
=
defined), and William Weksel ("Weksel") proposes to sell 1,000,000 shares
=================================================================
(herein called the "Weksel Underwritten Stock", and with the Company
====================================================================
Underwritten Stock, herein collectively called the "Underwritten Stock") to the
===============================================================================
Underwriters. The shareholders of the Company named in Schedule II hereto
============
(herein collectively called the "Option Selling Securityholders", and together
==============================================
with Weksel, herein collectively called the "Selling Securityholders") propose
===========================================
to grant to the Underwriters an option to purchase up to an aggregate of
300,000 additional shares of Common Stock , and the Company proposes to grant to
======= =======================================
the Underwriters an option to purchase up to an aggregate of 195,000 additional
===============================================================================
shares of Common Stock (the "Option Stock", and together with the Underwritten
====================== ========
Stock, herein collectively called the "Stock"). The Common Stock is more fully
=
described in the Registration Statement and the Prospectus hereinafter
mentioned.
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the "Underwriters", which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
______________________
/1/ Plus options to purchase from the Option Selling Securityholders and the
Company up to an aggregate of 495,000 additional shares to cover over-
allotments.
<PAGE>
and warrant that you have been authorized by each of the other
Underwriters to enter into this Agreement on its behalf and to act for it in the
manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the "Commission") a registration statement on
Form SB-2 (No. 333-52327), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
"Securities Act"), of the Stock. Copies of such registration statement and of
each amendment thereto, including the related preliminary prospectus
(meeting the requirements of Rule 430A of the rules and regulations of the
Commission) heretofore filed by the Company with the Commission, have been
delivered to you.
The term "Registration Statement" as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a "Rule
462(b) registration statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
"Effective Date"), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule 462(b)
registration statement). The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from and
after the filing with the Commission of such supplement or the effectiveness of
such amendment) such prospectus as so supplemented or amended. The term
"Preliminary Prospectus" as used in this Agreement shall mean each preliminary
prospectus included in such registration statement prior to the time it becomes
effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) The Company and each of Weksel, John Shermyen and Michael Weksel
========================================
(herein collectively called the "Affiliated Selling Securityholders
=========================== =
hereby represent and warrant as follows:
============================
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified
as a foreign corporation and in good standing in all jurisdictions in
which
2
<PAGE>
the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company).
(ii) The Company has good and marketable title to all material
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except those, if any,
reflected in such financial statements (or elsewhere in the Prospectus) or
which are not material to the Company. The Company holds its leased
properties that are material to the Company under valid and binding leases.
(iii) The Company now holds and on the Closing Date and any later
date on which Option Stock is to be purchased, will hold, all material
licenses, certificates, permits, franchises, authorizations, clearances and
other approvals from any federal, state, local or other governmental or
regulatory authorities ("Licenses") which are necessary to own its
properties and conduct its business in the manner described in the
Prospectus; to the Company's knowledge, there are no current facts about
the Company that could reasonably be expected to cause any existing License
to be revoked, withdrawn, cancelled, suspended or restricted in a manner
that would restrict the Company carrying out its business in any material
respect as described in the Prospectus.
(iv) The Company owns and possesses all right, title and interest in
and to, or has duly licensed from third parties, all patents, trademarks,
copyrights and other proprietary rights (herein called "Trade Rights")
material to the business of the Company and, except as set forth on
SCHEDULE 2(A)(IV), the Company has not granted any lien or encumbrance on,
or granted any right of license (other than in the ordinary course of its
business) with respect to, any such Trade Rights. To the knowledge of the
Company and each of the Affiliated Selling Securityholders, except as set
====== ===============
forth on SCHEDULE 2(A)(IV), no third party has infringed, misappropriated
or otherwise conflicted with Trade Rights of the Company, which
infringement, misappropriation or conflict could have a material adverse
effect on the condition (financial or otherwise), business, assets,
operations or prospects of the Company. The Company has not received any
notice of infringement, misappropriation or conflict from any third party
as to such Trade Rights that has not been resolved or disposed of and, to
the knowledge of the Company and each of the Affiliated Selling
======
Securityholders, the Company has not infringed, misappropriated or
===============
otherwise conflicted with Trade Rights of any third parties, which
infringement, misappropriation or conflict would have a material adverse
effect upon the condition (financial or otherwise), business, assets or
operations of the Company.
(v) The conduct of the business of the Company is in compliance in all
respects with applicable federal, state, local and foreign laws and
regulations, except where the failure to be in compliance would not have a
material adverse effect upon the condition (financial or otherwise),
business, assets or operations of the Company.
3
<PAGE>
(vi) The Company is not in violation of its charter or by-laws or in
default under any consent decree, or in default with respect to any
provision of any lease, loan agreement, franchise, license, permit or other
contract obligation to which it is a party except for violations which
individually or in the aggregate are not material to the Company; and to
the knowledge of the Company and each of the Affiliated Selling
=================================================
Securityholders, there does not exist any state of facts that constitutes
===============
an event of default as defined in such documents or which, with notice or
lapse of time or both, would constitute such an event of default, in each
case, except for defaults which neither singly nor in the aggregate are
material to the Company.
(vii) The making and performance by the Company of this Agreement has
been duly authorized by all necessary corporate action and will not violate
any provision of the Company's charter or bylaws and will not result in the
breach, or be in contravention, of any provision of any agreement,
franchise, license, indenture, mortgage, deed of trust, or other instrument
to which the Company is a party or by which the Company or its property may
be bound or affected, or any order, rule or regulation applicable to the
Company of any court or regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its
properties, or any order of or qualification with any court or governmental
agency or authority entered in any proceeding to which the Company was or
is now a party or by which it is bound, except in any case for violations,
breaches and contraventions which neither singly or in the aggregate are
material to the Company. No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated herein,
except for compliance with the Securities Act and blue sky laws applicable
to the public offering of the Stock by the several Underwriters and
clearance of such offering with the National Association of Securities
Dealers, Inc. (herein called the "NASD"). This Agreement has been duly
executed and delivered by the Company and constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or principles
of public policy and subject to the qualification that the enforceability
of the Company's obligations hereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and by general
equitable principles.
(viii) There are no material legal or governmental proceedings
pending, or to the Company's or any of the Affiliated Selling
======
Securityholders' knowledge, threatened to which the Company is or may be a
================
party or of which material property owned or leased by the Company is or
may be the subject, or related to environmental or discrimination matters
that are not disclosed in the Prospectus, or which would materially
adversely affect the Company's ability to perform its obligations under
this Agreement or any action taken or to be taken pursuant hereto.
(ix) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
materially adverse
4
<PAGE>
change in the business, properties, financial condition or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, the Company has not entered into any material
transaction not referred to in the Registration Statement and the
Prospectus.
(x) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option
Stock is to be purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act and the Securities
Exchange Act of 1934, as amended (herein called the "Exchange Act"), and
the rules and regulations of the Commission thereunder; on the Effective
Date, the Registration Statement did not contain any untrue statement of a
material fact and did not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on the
date hereof does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and
warranties in this subparagraph (vii) shall apply to statements in, or
omissions from, the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of the Underwriters for inclusion in the
Registration Statement or the Prospectus.
(xi) The Stock is duly and validly authorized, is (or, in the case of
shares of the Stock to be sold by the Company, will be, when issued and
sold to the Underwriters as provided herein) duly and validly issued, fully
paid and nonassessable and conforms to the description thereof in the
Prospectus. No further approval or authority of the shareholders or the
Board of Directors of the Company will be required for the transfer and
sale of the Stock to be sold by the Selling Securityholders or the issuance
and sale of the Stock by the Company as contemplated herein. Except as set
forth on SCHEDULE 2(A)(XI); (A) the Company is not a party to any agreement
or understanding, and none of the Company or any of the Affiliated Selling
======
Securityholders has knowledge of any agreement or understanding, granting
================
any person or entity a right to acquire Stock or participate in the sale of
Stock pursuant to the Registration Statement; (B) no person or entity has
the right to require registration under the Securities Act of any
securities of the Company at any time; and (C) the Company is not a party
to any agreement or understanding, and none of the Company or any of the
======
Affiliated Selling Securityholders has knowledge of any agreement or
===============
understanding, granting any person or entity a right to acquire Common
Stock or any other security of the Company at any time, upon any conditions
or upon the occurrence of any events.
(xii) There is no material document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
5
<PAGE>
(xiii) PriceWaterhouseCoopers LLP, who have expressed their opinion
======================
with respect to certain of the financial statements and schedules included
in the Registration Statement, are independent accountants as required by
the Securities Act.
(xiv) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization;
(B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, and (C) access to
assets is permitted only in accordance with management's general or
specific authorization.
(xv) The combined financial statements and schedules of the Company
included in the Registration Statement present fairly, in all material
respects, the financial position of the Company as of the respective dates
of such financial statements, and the results of operations and cash flows
of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved; the supporting schedules included
in the Registration Statement present fairly, in all material respects, the
information required to be stated therein. The financial information set
forth in the Prospectus under the captions "Summary Financial Information"
and "Selected Financial Information" presents fairly, in all material
respects, on the basis stated in the Prospectus, the information set forth
therein; and the pro forma information included in the Prospectus presents
fairly, in all material respects, the information shown therein, has been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma information, has been properly compiled on the pro
forma basis described therein, and, in the opinion of the Company and each
of the Affiliated Selling Securityholders, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.
(xvi) All offers and sales of the Company's capital stock prior to
the date hereof were at all relevant times exempt from the registration
requirements of the Securities Act and were duly registered with or the
subject of an available exemption from the registration of the applicable
state securities or blue sky laws.
(xvii) None of the Company or any of its employees, directors,
shareholders, partners or affiliates (within the meaning of Rule 405 under
the Security Act) has taken, directly or indirectly, any action designed to
or that has constituted or that might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company, whether to
facilitate the sale or resale of the Stock or otherwise.
(xviii) Except as set forth in the Prospectus, there are no
agreements, claims, payment, issuances, arrangements or understandings,
whether oral or written, for services in the nature of finder's, consulting
or origination fees with respect to the sale of Stock hereunder or any
other arrangements, agreements, understandings, payments or issuances with
respect to the Company or, to the knowledge of the Company and each of the
=======
6
<PAGE>
Affiliated Selling Securityholders, any of its officers, directors,
partners, employees or affiliates that may affect the Underwriters'
compensation, as determined by the NASD.
(xix) The Company has filed all federal, state and foreign income tax
returns which have been required to be filed (or has filed extensions
therefor or obtained any required extensions in connection therewith), and
has paid all taxes indicated by said returns to the extent that such taxes
have become due and are not being contested in good faith.
(xx) The Company is not involved in any material labor dispute nor, to
the knowledge of the Company, is any such dispute threatened.
(xxi) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Stock under the Exchange
Act, has filed an application to list the Stock on the Nasdaq National
Market, and has received notification that the listing has been approved,
subject to notice of issuance of the Stock.
(xxii) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee welfare benefit plan," "employee pension benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(1), 3(2) and
3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended (herein called ERISA) (herein collectively called the
ERISA Plans). The Company does not maintain or contribute, now or at any
time previously, to a defined benefit plan, as defined in Section 3(35) of
ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the United States Internal Revenue Code of 1986, as amended
(herein called the Code), which could subject the Company to any tax
penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to
any such ERISA Plan. Determination letters have been received from the
Internal Revenue Service with respect to each ERISA Plan which is intended
to comply with Code Section 401(a), stating that such ERISA Plan and the
attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
(xxiii) Except as set forth in the Prospectus, no officer, director
(to the extent required to be disclosed by applicable Commission
regulations) or shareholder (to the extent in excess of $25,000) of the
Company or any "affiliate" or "associate" (as these terms are defined in
Rule 405 under the Securities Act) of any of the foregoing persons or
entities has or has had, either directly or indirectly (A) an interest in
any person or entity that (x) furnishes or sells services or products which
are furnished or sold or that are proposed to be furnished or sold by the
Company, or (y) purchases from or sells or furnishes to the Company any
goods or services, or (B) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under the captions
"Certain Transactions" and "Management" there are no existing or proposed
agreements, arrangements,
7
<PAGE>
understandings or transactions, between the Company and any officer,
director, principal shareholder of the Company or any partner, affiliate or
associate of any of the foregoing persons or entities.
(xxiv) The minute books of the Company have been made available to
the Underwriters and contain an accurate summary of all meetings with
respect to which minutes exist and contain all actions taken by the
directors and shareholders of the Company during such meetings since the
time of its incorporation, and reflect accurately and fairly in all
respects all transactions referred to in such minutes. No material actions
that would materially adversely affect the Company have been taken by the
directors and/or shareholders of the Company at a meeting for which minutes
do not exist.
(xxv) The Company is not now, and upon consummation of the
transactions contemplated by this Agreement and application of the net
proceeds from the sale of the Stock as described in the Prospectus under
the caption "Use of Proceeds" will not be, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xxvi) There is no material Medicare, Medicaid or other managed care
recoupment or recoupments of any third-party payor being sought, requested
or claimed, or to the Company's knowledge, threatened, against the Company.
(xxvii) None of the Company nor any employee or agent of the Company
has made any payment of funds or received or retained any funds that
constituted or constitutes a material violation of any healthcare law, rule
or regulation, including, without limitation, those regarding for the
referral of patients.
(xxviii) Subject to such qualifications set forth in the Prospectus,
the business of the Company does not violate in a material respect any
healthcare statute, administrative or governmental rule or regulation of
the United States of America applicable to the Company, including, without
limitation, 18 U.S.C. (S)669; 18 U.S.C. (S)1035; 18 U.S.C. (S)1347; 42
U.S.C. (S) 1395nn; 42 U.S.C. (S) 1396b(s); 42 U.S.C. (S)1320a-7a; 42 U.S.C.
(S) 1320a-7b; 31 U.S.C. (S)3729, or any healthcare judgment, injunction,
order or decree of any court or government entity or instrumentality of the
United States of America having jurisdiction over the Company.
(xxix) The statements in the Registration Statement and Prospectus
under the captions "Risk Factors -- Fraud and Abuse" and "Business --
Government Regulation and Supervision," insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein.
(xxx) The Company is not presently doing business with the government
of Cuba or with any person or affiliate located in Cuba and will notify the
Florida Department of Banking and Finance, Division of Securities and
Investor Protection, if the Company or
8
<PAGE>
any subsidiary commences doing business with the government of Cuba or any
person or affiliate located in Cuba.
(b) Each of the Selling Securityholders hereby represents and warrants as
follows:
(i) Such Selling Securityholder has good and marketable title to all the
shares of Stock to be sold by such Selling Securityholder hereunder, free
and clear of all liens, encumbrances, equities, security interests and
claims whatsoever, with full right and authority to deliver the same
hereunder, subject, in the case of each Selling Securityholder, to the
rights of John Shermyen and Michael Weksel, as Custodians (herein called
the "Custodians"), and that upon the delivery of and payment for such
shares of the Stock hereunder, the several Underwriters will receive good
and marketable title thereto, free and clear of all liens, encumbrances,
equities, security interests and claims whatsoever.
(ii) Certificates in negotiable form for the shares of the Stock to be
sold by such Selling Securityholder have been placed in custody under a
Custody Agreement for delivery under this Agreement with the Custodians;
such Selling Securityholder specifically agrees that the shares of the
Stock represented by the certificates so held in custody for such Selling
Securityholder are subject to the interests of the several Underwriters and
the Company, that the arrangements made by such Selling Securityholder for
such custody, including the Power of Attorney provided for in such Custody
Agreement, are irrevocable, and that the obligations of such Selling
Securityholder shall not be terminated by any act of such Selling
Securityholder or by operation of law, whether by the death or incapacity
of such Selling Securityholder (or, in the case of a Selling Securityholder
that is not an individual, the dissolution or liquidation of such Selling
Securityholder) or the occurrence of any other event; if any such death,
incapacity, dissolution, liquidation or other such event should occur
before the delivery of such shares of the Stock hereunder, certificates for
such shares of the Stock shall be delivered by the Custodians in accordance
with the terms and conditions of this Agreement as if such death,
incapacity, dissolution, liquidation or other event had not occurred,
regardless of whether the Custodians shall have received notice of such
death, incapacity, dissolution, liquidation or other event.
(iii) This Agreement, the Power of Attorney and the Custody Agreement
have been duly authorized, executed and delivered by or on behalf of such
Selling Securityholder and constitute the valid and binding obligation and
agreements of such Selling Securityholder in accordance with their
respective terms and are enforceable against such Selling Securityholder in
accordance with their terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or principles
or public policy and subject to the qualifications that the enforceability
of such Selling Securityholder's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights generally and by
general equitable principles.
(iv) The execution and delivery by such Selling Securityholder of, and
the performance by such Selling Securityholder of its obligations under,
this Agreement, the
9
<PAGE>
Power of Attorney and the Custody Agreement will not contravene any
provision of applicable law, the Company's charter or by-laws or any
agreement or other instrument binding upon such Selling Securityholder, or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Securityholder or the property of
such Selling Securityholder, and no consent, approval, authorization or
other order of or qualification with any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement, the Power of Attorney and the
Custody Agreement by such Selling Securityholder or the consummation of the
transactions contemplated herein or therein involving such Selling
Securityholder, except for compliance with the Securities Act and blue sky
laws applicable to the public offering of the Stock by the several
Underwriters and clearance of such offering with the NASD such as may be
required by the securities or blue sky laws of the various states in
connection with the offer and the sale of the Stock.
(v) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action which has constituted, or which is designed to or
might reasonably be expected to cause or result in, stabilization or
manipulation of the price of sale or resale of the Stock.
(vi) The information pertaining to such Selling Stockholder under the
caption "Principal and Selling Stockholders" in the Prospectus is complete
and accurate in all material respects.
(vii) Such Selling Securityholder has no knowledge of any material
fact, condition or information not disclosed in the Registration Statement
which has adversely affected or may adversely affect the business of the
Company and the sale of the Stock by such Selling Securityholder pursuant
to this agreement is not prompted by any information concerning the Company
which is not set forth in the Registration Statement.
(c) Each of the Selling Securityholders (other than the Affiliated Selling
=
Securityholders) hereby represents and warrants as follows:
=
(i) Such Selling Securityholder has reviewed the Registration
Statement and Prospectus and, although such Selling Securityholder has not
independently verified the accuracy or completeness of all the information
contained therein, nothing has come to the attention of such Selling
Securityholder that would lead such Selling Securityholder to believe that
on the Effective Date, the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading; and, on the Effective Date the Prospectus contained and, on
the Closing Date and any later date on which Option Stock is to be
purchased, contains any untrue statement of a material fact or omitted or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(ii) Such Selling Securityholder does not know of any respect in which
the representation and warranties of the Company and the Affiliated Selling
10
<PAGE>
Securityholders contained in Section 2(a) hereof are not true and correct
================
in all material respects.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
2,300,000 shares of the Underwritten Stock and Weksel agrees to sell 1,000,000
===================================
shares of the Underwritten Stock, respectively, to the several Underwriters, and
===============================================
each of the Underwriters agrees to purchase from the Company and Weksel that
===========
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and Weksel and purchased by the several Underwriters shall be $_______
==========
per share. In making this Agreement, each Underwriter is contracting severally
and not jointly; except as provided in paragraphs (b) and (c) of this Section 3,
the agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of the shares of the Stock which such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to said Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all
11
<PAGE>
the shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall be terminated without further
act or deed and without any liability on the part of the Company or the Selling
Securityholders to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company or the Selling
Securityholders. Nothing in this paragraph (b), and no action taken hereunder,
shall relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
===========
and each of the Option Selling Securityholders grants an option to the several
=== ============= ===============
Underwriters to purchase, severally and not jointly, up to that number of shares
in the aggregate of the Option Stock set forth in Schedule II opposite the
===
name of the Company and such Option Selling Securityholder, all at the same
=============== =======
price per share as the Underwriters shall pay for the Underwritten Stock. Said
option may be exercised only to cover over-allotments in the sale of the
Underwritten Stock by the Underwriters and may be exercised in whole or in part
at any time (but not more than once) on or before the thirtieth day after the
date of this Agreement upon written or telegraphic notice by you to the Company
=======
and the Custodian setting forth the aggregate number of shares of the Option
=======
Stock as to which the several Underwriters are exercising the option. Delivery
of certificates for the shares of Option Stock, and payment therefor, shall be
made as provided in Section 5 hereof. The number of shares of the Option Stock
========================================
to be purchased by each Underwriter shall be the same percentage of the total
================================================================================
number of shares of the Option Stock to be purchased by the several Underwriters
================================================================================
as such Underwriter is purchasing of the Underwritten Stock, as adjusted by you
================================================================================
in such manner as you deem advisable to avoid fractional shares. In the event
================================================================================
that said option is exercised in part, it shall first be exercised with respect
================================================================================
to the Option Stock to be sold by the Option Selling Securityholders and then
================================================================================
with respect to the Option Stock to be sold by the Company. In addition, in the
================================================================================
event that said option is exercised with respect to less than all of the Option
================================================================================
Stock held by the Option Selling Securityholders, it shall be exercised on a pro
================================================================================
rata basis based on the number of shares of Option Stock held by each Option
================================================================================
Selling Securityholder, as adjusted by you in such manner as you deem advisable
================================================================================
to avoid fractional shares.
===========================
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
12
<PAGE>
(b) The information set forth in the last paragraph on the front cover page
and in the first, third and ninth paragraphs under "Underwriting" in the
Registration Statement, any Preliminary Prospectus and the Prospectus relating
to the Stock filed by the Company (insofar as such information relates to the
Underwriters) constitutes the only information furnished by the Underwriters to
the Company for inclusion in the Registration Statement, any Preliminary
Prospectus, and the Prospectus, and you on behalf of the respective Underwriters
represent and warrant to the Company that the statements made therein are
correct.
(c) Reference is made to the Lock-Up Agreements, each dated ___________,
1998, among the Underwriters and the Selling Securityholders (each, a "Lock-Up
Agreement"). Pursuant to each Lock-Up Agreement, Hambrecht & Quist, LLC, on
behalf of the Underwriters, hereby consents to the sale of Option Stock by those
Selling Securityholders who executed a Lock-Up Agreement, it being understood
and agreed that this consent relates solely to the sale of Option Stock to the
Underwriters upon the exercise of the option granted to the Underwriters
pursuant to Section 3(c) hereof, contemplated by this Underwriting Agreement.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 A.M., New York time, on the date two business days
preceding the Closing Date), and payment therefor, shall be made at the office
of Proskauer Rose LLP, 1585 Broadway, New York, New York 10036, at 7:00 a.m.,
New York time, on the fourth business day after the date of this Agreement, or
at such time on such other day, not later than seven full business days after
such fourth business day, as shall be agreed upon in writing by the Company, the
Selling Securityholders and you. The date and hour of such delivery and payment
(which may be postponed as provided in Section 3(b) hereof are herein called the
"Closing Date").
(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., New York time, on the date two business days preceding the Closing
Date, delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made at the office of Proskauer Rose LLP, 1585 Broadway, New
York, New York 10036, at 7:00 a.m., New York time, on the third business day
after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to the
Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by one or more certified or official bank check or
checks in same day funds or by a wire transfer of immediately available funds,
as the parties may agree. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and shall be in
such denominations as you may request at least one business day before the
Closing Date, in the case of Underwritten Stock, and at least one business day
prior to the purchase thereof, in the case of the Option Stock. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Proskauer Rose LLP, 1585 Broadway, New York, New
York 10036, on the business day prior to the Closing Date or,
13
<PAGE>
in the case of the Option Stock, by 3:00 p.m., New York time, on the business
day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDERS.
The Company covenants and agrees, and each Selling Securityholder covenants and
agrees to the matters set forth in the last sentence of paragraph (i) and in
==================== === ==
paragraphs (k), (l) and (m) of this Section 6, as follows:
=============== =======
(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) a Prospectus containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A and (ii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of (i)
the request by the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you a
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any
14
<PAGE>
amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time
to time, prepare and file such statements, reports, and other documents as are
or may be required to continue such qualifications in effect for so long a
period as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to shareholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its
15
<PAGE>
securityholders an earnings statement in accordance with Section 11 (a)
===============
of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the NASD of the Registration Statement, any Preliminary
Prospectus and the Prospectus, (ii) the furnishing to the Underwriters
of copies of any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished, (iii) the printing of this
Agreement and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to the
Prospectus referred to in paragraph (d) of this Section 6, (v) the furnishing to
you and the Underwriters of the reports and information referred to in paragraph
(g) of this Section 6 and (vi) the printing and issuance of stock certificates,
including the transfer agent's fees. The Selling Securityholders will pay any
transfer taxes incident to the transfer to the Underwriters of the shares of
Stock being sold by the Selling Securityholders.
(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including reasonable
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and in the review
of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are intended
to relieve the Underwriters from the payment of the expenses and costs which the
Company hereby agrees to pay and shall not affect any agreement which the
Company and the Selling Securityholders may make, or may have made, for the
sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders hereby agrees that,
without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, the Company or such Selling Securityholder, as the case may be,
will not, for a period of 180 days following the effective date of the
Registration Statement, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares
of Common Stock issued by the Company upon the exercise of options granted under
stock option plans of the Company (the "Option Plans") prior to the date hereof,
and (C) the issuance under the Option Plans of up to __________ options to
purchase Common Stock having an exercise price of not less than the greater of
the public offering price and the then fair market value of the Common Stock
granted under the Option Plans.
16
<PAGE>
(m) Notwithstanding the foregoing, if the Selling Securityholder is an
individual, he or she, may (i) pledge any shares of Common Stock of securities
=
convertible into or exchangeable or exercisable for the Company's Common Stock
("Convertible Securities") to third parties and may (ii) transfer any Common
Stock and/or Convertible Securities either during his or her lifetime or on
death by will or intestacy to his or her immediate family or to a trust the
beneficiaries of which are exclusively such Selling Securityholder and/or a
member or members of his or her immediate family; provided, however, that prior
to any such pledge or transfer described in (i) or (ii) above, each pledgee or
transferee, as applicable, shall execute an agreement, satisfactory to Hambrecht
& Quist LLC, pursuant to which such pledgee or transferee shall agree to receive
and hold such shares of Common Stock and/or Convertible Securities, as the case
may be, subject to the provisions hereof, and there shall be no further pledge
or transfer except in accordance with the provisions of this Section 6(m). For
the purposes hereof, "immediate family" shall mean spouse, lineal descendant,
father, mother, brother or sister of the transferor.
(n) The Company shall not take, nor shall it authorize any employee,
director, shareholder, partner, affiliate (within the meaning of Rule 405 under
the Security Act), agent or other person to take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result under
the Exchange Act or otherwise, in stabilization or manipulation of the price of
any security of the Company, whether to facilitate the sale or resale of the
Stock or otherwise.
(o) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(p) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and each of the Affiliated Selling Securityholders
=======
severally and not jointly agree to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act and all
employees, attorneys and agents of each Underwriter (herein collectively called,
the "Underwriter Indemnified Parties") from and against any and all losses,
claims, damages or liabilities, joint or several (herein collectively called
"Losses"), to which such Underwriter Indemnified Parties or any of them may
become subject under the Securities Act, the Exchange Act or the common law or
otherwise, and the Company and the Affiliated Selling
17
<PAGE>
Securityholders severally and not jointly agree to reimburse each such
Underwriter Indemnified Party for any legal or other expenses (including, except
as otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective Underwriter Indemnified Parties in connection with
defending against any such Losses or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
Underwriter Indemnified Parties, in each case arising out of or based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (including the Prospectus as part thereof and any
Rule 462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (iii) any inaccuracy
in the representations and warranties set forth in Section 2(a) hereof or in any
schedule, certificate or other document or agreement delivered in connection
herewith or (iv) the failure by the Company to perform any of its covenants or
obligations set forth in this Agreement or in any schedule, certificate or other
document or agreement delivered in connection herewith; provided, however, that
(1) the indemnity agreements of the Company and each of the Affiliated Selling
=======
Securityholders contained in this paragraph (a) shall not apply to the extent
that any such Loss, or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus or the Registration Statement or the Prospectus or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by any Underwriter for inclusion in
the Prospectus as amended or supplemented, and (2) the indemnity agreement
contained in this paragraph (a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such Losses, or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof.
(b) Each Selling Securityholder agrees to indemnify and hold harmless each
Underwriter Indemnified Party from and against any Losses to which such
Underwriter Indemnified Party may become subject under the Securities Act, the
Exchange Act or the common law or otherwise, and each Selling Securityholder
agrees to reimburse each such Underwriter Indemnified Party for any legal and
other expenses (including except as otherwise hereinafter provided, reasonable
fees and disbursements of counsel) incurred by the respective Underwriter
Indemnified Party in connection with defending against any such Losses or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against the respective Underwriter Indemnified Party, in each case
arising out of or based upon (i) any inaccuracy in the representations and
warranties made by such Selling Securityholder in Section 2(b) or in any
schedule, certificate or other document or agreement delivered in connection
herewith or, with
18
<PAGE>
respect solely to Selling Securityholders other than the Affiliated Selling
===
Securityholders, in Section 2(c) or (ii) the failure by such Selling
Securityholder to perform any of his, her or its covenants or obligations set
===========
forth in this Agreement or in any schedule, certificate or other document or
agreement delivered in connection herewith.
(c) Notwithstanding anything to the contrary set forth herein, the total
liability of any Option Selling Securityholder under Section 7(a), 7(b) and 7(h)
====== ====
shall not exceed the aggregate net proceeds received by such Option Selling
======
Securityholder, any member or members of such Option Selling Securityholder's
======
immediate family and any trust, the beneficiaries of which are such Option
===========
Selling Securityholder , and any member or members of such Option Selling
== ======
Securityholder's immediate family, in connection with the exercise, if any, by
the Underwriters, of the overallotment option set forth in Section 3(c).
(d) Notwithstanding anything to the contrary set forth herein, the total
=== ====================================================================
liability of Weksel under Section 7(a), 7(b) and 7(h) shall not exceed the
==========================================================================
aggregate net proceeds received by Weksel, any member or members of Weksel's
============================================================================
immediate family and any trust, the beneficiaries of which are Weksel and any
=============================================================================
member or members of Weksel's immediate family, from the sale of the Weksel
===========================================================================
Underwritten Stock.
===================
(e) The indemnity agreement of the Company and the Selling
===
Securityholders contained in Sections 7(a) through (d) hereof and the
===
representations and warranties of the Company and the Selling Securityholders
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
Indemnified Party and shall survive the delivery of and payment for the Stock.
(f) Each Underwriter severally and not jointly agrees to indemnify and
===
hold harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of its
directors, each other Underwriter and each person (including each partner or
officer thereof) who controls the Company or any such other Underwriter within
the meaning of Section 15 of the Securities Act, the Selling Securityholders and
each of their employees, attorneys and agents from and against any and all
Losses, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise and
to reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or the
omission
19
<PAGE>
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (as amended or as supplemented,if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that an Underwriter
shall be so liable under this paragraph (f) only if such statement or
===
omission was made in reliance upon and in conformity with information furnished
in writing by the Underwriter to the Company for inclusion in the Registration
Statement, any Preliminary Prospectus and the Prospectus or any such amendment
thereof or supplement thereto. The indemnity agreement of each Underwriter
contained in this paragraph (f) shall remain operative and in full force
===
and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Stock.
(g) Each party indemnified under the provision of paragraphs (a) through
===
(f) of this Section 7 agrees that, upon the service of a summons or other
===
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the "Notice") of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its
own expense to participate in the defense of any action, suit or proceeding
against, or investigation or inquiry of, an indemnified party. Any indemnifying
party shall be entitled, if it so elects within a reasonable time after receipt
of the Notice by giving written notice (herein called the "Notice of Defense")
to the indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (f) of this Section 7 for any legal or
===
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and
20
<PAGE>
other expenses incurred in connection with the conduct of the defense as
referred to in clause (i) of the proviso to the preceding sentence and (B) the
indemnifying party or parties shall bear such other expenses as it or they have
authorized to be incurred by the indemnified party or parties. If, within a
reasonable time after receipt of the Notice, no Notice of Defense has been
given, the indemnifying party or parties shall be responsible for any legal or
other expenses incurred by the indemnified party or parties in connection with
the defense of the action, suit, investigation, inquiry or proceeding.
(h) If the indemnification provided for in this Section 7 is unavailable
===
or insufficient to hold harmless an indemnified party under paragraphs (a)
through (f) of this Section 7, then each indemnifying party, in lieu of
===
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the Losses, referred to in
paragraphs (a) through (f) of this Section 7, (i) in such proportion as is
===
appropriate to reflect the relative benefits received by each indemnifying party
from the offering of the Stock or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of each indemnifying party in connection with the
statements or omissions that resulted in such Losses, or actions in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Securityholders on the one hand
and the Underwriters on the other shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Stock received by
the Company and the Selling Securityholders and the total underwriting discount
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Stock. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (h) were to be determined by pro rata allocation
===
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (h). The
===
amount paid by an indemnified party as a result of the Losses, or actions in
respect thereof, referred to in the first sentence of this paragraph (h)
===
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigation, preparing to defend or
defending against any action or claim which is the subject of this paragraph
(h). Notwithstanding the provisions of this paragraph (h), no Underwriter
=== ===
shall be required to contribute any amount in excess of the underwriting
discount applicable to the Stock purchased by such Underwriter. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
in this paragraph (h) to contribute are several in proportion to their
===
respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may
21
<PAGE>
be sought, it will promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in paragraph (g) of this Section
===
7).
(i) Neither the Company nor the Selling Securityholders will, without the
===
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such Underwriter and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the-
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iii) suspension of trading in securities generally or a material
adverse decline in value of securities generally on the New York Stock Exchange,
the American Stock Exchange, or The Nasdaq Stock Market, or the imposition or
effectiveness of limitations on prices (other than limitations on hours or
numbers of days of trading) for securities on either such exchange or system,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company or the
Selling Securityholders to the Underwriters and no liability of the Underwriters
to the Company or the Selling Securityholders; provided, however, that in the
event of any such termination the Company agrees to indemnify and hold harmless
the Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholders under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed
22
<PAGE>
hereunder at or prior to the Closing Date or any later date on which Option
Stock is to be purchased, as the case may be, and to the following further
conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued; no
proceedings therefor shall be pending or threatened by the Commission; the
Prospectus as amended or supplemented shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Securities Act and all requests
for additional information on the part of the Commission shall have been
complied with to the Representative's reasonable satisfaction.
(b) The legality and sufficiency of the sale of the Stock hereunder and the
validity and form of the certificates representing the Stock, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Katten Muchin & Zavis, counsel for the Underwriters.
(c) You shall have received from Proskauer Rose LLP, counsel to the Company
and Weksel an opinion, addressed to the Underwriters and dated the Closing Date,
==========
covering the matters set forth in ANNEX A hereto and, if Option Stock is
purchased at any date after the Closing Date, an additional opinion from such
counsel, addressed to the Underwriters and dated such later date, confirming
that the statement expressed as of the Closing Date in such opinion remains
valid as of such date.
(d) If the option granted by Section 3(c) is exercised, you shall have
received from Proskauer Rose LLP, counsel to the Selling Securityholders, an
opinion, addressed to the Underwriters and dated the Closing Date or, if Option
Stock is purchased at any date after the Closing Date, an opinion addressed to
the Underwriters and dated such later date, covering the matters set forth in
ANNEX B hereto.
(e) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition, results or prospects of operations of the Company, whether or not
arising from transactions in the ordinary course of business, and, since such
dates, except in the ordinary course of business, the Company has not entered
into any material transaction not referred to in the Registration Statement in
the form in which it originally became effective and the Prospectus contained
therein, (iv) the Company does not have any material contingent obligations
which are not disclosed in the Registration Statement and the Prospectus, (v)
there are not any pending or known threatened legal proceedings to which
23
<PAGE>
the Company is or may be a party or of which property of the Company is or may
be the subject which are material and which are not disclosed in the
Registration Statement and the Prospectus, (vi) there are not any franchises,
contracts, leases or other documents which are required to be filed as exhibits
to the Registration Statement which have not been filed as required, (vii) the
representations and warranties of the Company herein are true and correct in all
material respects as of the Closing Date or any later date on which Option Stock
is to be purchased, as the case may be, and (viii) there has not been any
material change in the market for securities in general or in political,
financial or economic conditions from those reasonably foreseeable as to render
it impracticable in your reasonable judgment to make a public offering of the
Stock, or a material adverse change in market levels for securities in general
(or those of companies in particular) or financial or economic conditions which
render it inadvisable to proceed.
(f) You shall have received on the Closing Date and on any later date on
which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.
(g) You shall have received on the Closing Date or such later date on which
Option Stock is purchased a certificate, dated the Closing Date on such later
date, and signed by the Secretary of the Company: (i) attaching and certifying
as to (A) the Certificate of Incorporation of the Company as certified by the
Secretary of State of the State of Delaware not less than five (5) business days
prior to the Closing Date or such later date, (B) the By-Laws of the Company,
(C) the resolution of the Company's Board of Directors and, if necessary,
shareholders authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, (D) a specimen stock
certificate and (E) a true and complete list of all correspondence between the
Company, its representatives, accountants and counsel and the Commission and
copies of such correspondence, and (ii) certifying that (A) all comments
received by the Company or its representatives, accountants or counsel from the
Commission relating to the Registration Statement (whether written or oral) have
been communicated to counsel for the Underwriters and (B) the minute books of
the Company that have been made available to counsel for the Underwriters are
the original minute books of the Company and are true and complete through the
date of such certificates.
(h) You shall have received from each Option Selling Securityholder a
======
certificate dated the date on which Option Stock is purchased to the effect that
the representations and warranties of such Option Selling Securityholder set
======
forth in this Agreement are true and correct as of such date and each Option
======
Selling Securityholder has complied with all the agreements and satisfied all
the conditions on the part of such Option Selling Securityholder to be
======
performed or satisfied at or prior to such date.
(i) You shall have received from PriceWaterhouseCoopers LLP, a letter or
======================
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with
24
<PAGE>
respect to the Company within the meaning of the Securities Act and the
applicable published rules and regulations thereunder and based upon the
procedures described in their letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date, as the case may be, and (ii) setting forth any revisions and additions to
the statements and conclusions set forth in the Original Letter which are
necessary to reflect any changes in the facts described in the Original Letter
since the date of the Original Letter or to reflect the availability of more
recent financial statements, data or information. The letters shall not disclose
any change, or any development involving a prospective change, in or affecting
the business or properties of the Company which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the Stock or
the purchase of the Option Stock as contemplated by the Prospectus.
(j) You shall have received from PriceWaterhouseCoopers LLP a letter
======================
stating that its review of the Company's system of internal accounting controls,
to the extent it deemed necessary in establishing the scope of its examination
of the Company's financial statements as of March 31, 1998, did not disclose any
weakness in internal controls that it considered to be a material weakness.
(k) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualification referred to in paragraph (f)
of Section 6 hereof.
(l) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of Common Stock, lock up agreements
in the form of EXHIBIT A.
(m) None of the contracts between the Company and either the State of
Georgia on behalf of the Georgia Department of Medical Assistance or the
Connecticut Department of Social Services shall have been terminated or not
renewed and the Company shall not have received with respect to any such
contracts, any notice of default, termination or nonrenewal or notice of intent
to terminate or not renew.
(n) You shall have received certificates, stating that the Company is in
good standing, issued not more than five (5) business days prior to the Closing
Date or such later date on which Option Stock is purchased by the Secretaries of
State of the states in which the character of the property owned or leased by
the Company on the nature of the business transacted by it makes qualification
necessary.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Katten Muchin & Zavis, counsel for the Underwriters,
shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling
25
<PAGE>
Securityholders to the Underwriters and without liability of the Underwriters to
the Company or the Selling Securityholders; provided, however, that (i) in the
event of such termination, the Company agrees to indemnify and hold harmless the
Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholders under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company or the Selling
Securityholders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
-------- -------
the Company agrees to indemnify and hold harmless the Underwriters from all
costs or expenses incident to the performance of the obligations of the Company
and the Selling Securityholders under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES.
(a) In addition to their other obligations under Section 7 of this
Agreement, the Company and each of the Affiliated Selling Securityholders hereby
=======
severally and not jointly (subject to the limitation on Securityholder
liability set forth in Section 7(c) and to the limitation on Weksel liability
=========================================
set forth in Section 7(d) agree to reimburse on a quarterly basis the
=========================
Underwriters for all reasonable legal and other expenses incurred in connection
with investigating or defending any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 7 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; provided,
---------
however, that (i) to the extent any such payment is ultimately held to be
- -------
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the Company, upon request, reasonable
assurances of their ability to effect any refund, when and if due.
26
<PAGE>
(b) In addition to their other obligations under Section 7 of this
Agreement, the Selling Securityholders hereby severally and not jointly (subject
to the limitation of Selling Securityholder liability set forth in Section
7(c), and the limitation on Weksel liability set forth in Section 7(d) agree to
==================================================================
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (b) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
-----------------
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed,
facsimilied or delivered to Hambrecht & Quist LLC, One Bush Street, San
Francisco, California 94104, Attention: Legal Department and if to the Company,
shall be mailed, facsimilied or delivered to it at its office, One Crown Center,
Suite 306, 1895 Phoenix Boulevard, College Park, Georgia 30349, facsimile number
(770)907-7598, Attention: John L. Shermyen, President and Chief Executive
Officer; and if to the Selling Securityholders, shall be mailed, telegraphed or
delivered to the Selling Securityholders in care of the Custodian at
________________.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
- -----------------
Date, the provisions of paragraphs (l), (m) and (n),of Section 6 hereof shall be
of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
27
<PAGE>
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
[SIGNATURE PAGE FOLLOWS]
28
<PAGE>
Please sign and return to the Company and to the Selling Securityholders in
care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.
Very truly yours,
LOGISTICARE, INC.
By__________________________________________
John L. Shermyen
President and Chief Executive Officer
WEKSEL:
=======
================================================================================
William Weksel
=========================================================
SELLING SECURITYHOLDERS:
[LIST NAMES]
By__________________________________________
__________________________________________
ATTORNEY-IN-FACT
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
EVEREN SECURITIES, INC.,
by Hambrecht & Quist LLC
By_________________________________________
Managing Director
Acting on behalf of the several Underwriters,
29
<PAGE>
including themselves, named in Schedule I hereto.
30
<PAGE>
SCHEDULE I
UNDERWRITERS
NUMBER OF SHARES
OF UNDERWRITTEN STOCK
UNDERWRITERS TO BE PURCHASED
------------ ---------------
Hambrecht & Quist LLC
EVEREN Securities, Inc.
TOTAL ..................................... 3,300,000
=========
==========
31
<PAGE>
SCHEDULE II
OPTION STOCK
NAME AND ADDRESS NUMBER OF SHARES
OF OPTION STOCK OFFEREES OF OPTION STOCK
- -----------------------------------------------------------------------
TOTAL ....................................... 495,000
=======
==============
32
<PAGE>
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF PROSKAUER ROSE LLP
COUNSEL FOR THE COMPANY AND WEKSEL
==========
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, is duly
qualified as a foreign corporation and in good standing in each state of the
United States of America in which its ownership or leasing of property requires
such qualification, (except where the failure to be so qualified would not have
a material adverse effect on the business, properties, financial condition or
results of operations of the Company, taken as a whole) and has full corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement.
(ii) The authorized capital stock of the Company consists of 1,000,000
=========
shares of Preferred Stock, of which there are no shares outstanding and
30,000,000 shares of Common Stock, $0.01 par value, of which there are
==========
outstanding [11,321,510] shares (including the Underwritten Stock); proper
============
corporate proceedings have been taken to validly authorize such authorized
capital stock; and the authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the designation thereof contained
in the Prospectus. All of the outstanding shares of capital stock of the Company
(including the Stock) have been validly issued and are fully paid and
nonassessable. No further approval or authority of the shareholders or the Board
of Directors of the Company will be required for the transfer and sale of the
Stock as contemplated herein.
(iii) No preemptive rights, rights of refusal, rights of co-sale or
similar rights in favor of any person, entity or holder of any security issued
by the Company exist with respect to the Common Stock (including the
Underwritten Stock), or the issue and sale thereof, pursuant to the Certificate
of Incorporation or Bylaws of the Company and, to such counsel's knowledge,
there are no contractual preemptive rights, rights of first refusal rights of
co-sale or similar rights which exist with respect to the Common Stock.
(iv) No rights with respect to the registration of shares exist pursuant to
the Certificate of Incorporation or the By-laws of the Company and, to such
counsel's knowledge, no contractual rights exist with respect to the
registration of shares of Common Stock or any other security issued by the
Company.
(v) The Registration Statement has become effective under the Securities
Act and no stop order suspending the effectiveness of the Registration Statement
or suspending or preventing the use of the Prospectus is in effect and, to such
counsel's knowledge, no proceedings for that purpose have been instituted or are
pending or contemplated by the Commission.
(vi) The Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act, the Exchange Act
and with the rules and regulations of the Commission thereunder.
A-1
<PAGE>
(vii) Such counsel has no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial data contained or incorporated by reference therein, as to which such
counsel need not express any opinion or belief) at the Effective Date contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus (except as to the financial statements and
schedules and other financial data contained or incorporated by reference
therein, as to which such counsel need not express any opinion or belief) as of
the date hereof, contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(viii) The information required to be set forth in the Registration
Statement in answer to Item 12, Item 13 (insofar as it relates to such counsel)
and Item 9 of Form SB-2 is, to such counsel's knowledge, accurately and
adequately set forth in the Registration Statement and Prospectus in all
material respects or no response is required with respect to such Items, and, to
the best of such counsel's knowledge, the description of the Company's stock
option plans and the options granted and which may be granted thereunder set
forth in the Prospectus accurately and fairly presents the information required
to be shown with respect to said plans and options to the extent required by the
Securities Act and the rules and regulations of the Commission thereunder.
(ix) Such counsel does not know of any franchises, contracts, leases,
documents or legal or governmental proceedings, pending or threatened, which in
the opinion of such counsel are of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described and filed as required.
(x) To such counsel's knowledge after due inquiry, the Company is not in
breach of, or in default under (nor has any event occurred which with notice,
lapse of time, or both would constitute a breach of, or default under), the
Certificate of Incorporation or By-Laws of the Company or any contract,
indenture, mortgage, deed of trust, credit agreement, joint venture or other
agreement or instrument to which the Company is a party or by which the Company
or its properties may be bound or affected, where such breach or default could
have a material adverse effect on the condition (financial or otherwise),
business, assets or operations or prospects of the Company.
(xi) to such counsel's knowledge, after due inquiry, and subject to such
qualification set forth in the Prospectus, the Company is not in violation of
any law, order, rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign which violations
could have a material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company taken as a whole.
(xii) The Company has the corporate power and authority to enter into the
Underwriting Agreement and to issue, sell and deliver the Stock to be sold by
=============
the Company under the Underwriting Agreement. The Underwriting Agreement and the
============================================
performance of the Company's obligations thereunder have been duly authorized,
executed and delivered by the Company. The Underwriting Agreement constitutes
the valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as rights to
A-2
<PAGE>
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(xiii) The issue and sale by the Company of the shares of Stock sold by
the Company as contemplated by the Underwriting Agreement, the execution,
delivery and performance of and compliance with the Underwriting Agreement and
the consummation of the transaction contemplated by the Underwriting Agreement
will not conflict with, or result in a breach or violation of, or constitute a
default or event of default under, the Certificate of Incorporation or Bylaws of
the Company or any contract, indenture, mortgage, credit agreement or other
agreement or instrument known to such counsel to which the Company is a party or
by which the property of the Company is bound or any applicable law or
regulation, or so far as is known to us, any order, writ, injunction or decree,
of any jurisdiction, court or governmental instrumentality.
(xiv) To the best of such counsel's knowledge, after due inquiry, the
Company holds all material licenses, certificates, permits, franchises,
authorizations, clearances and other approvals from any federal, state or other
regulatory authorities (herein called Licenses) which are necessary to own its
properties and to conduct its business in the manner described in the
Prospectus, including, without limitation, such Licenses as are required (x)
under such federal and state healthcare laws, statutes and regulations as are
applicable to the Company, (y) to receive reimbursement under Medicare/Medicaid
and (z) under such insurance laws and regulations as are applicable to the
Company, subject to such qualifications as may be set forth in the Prospectus.
(xv) Each approval, consent, order, authorization, designation, declaration
or filing by or with any United States regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of the Underwriting Agreement and the consummation by the Company of the
transactions therein contemplated (except as may be necessary to qualify the
Stock for public offering by the Underwriters under state securities laws) has
been obtained or made and is in full force and effect.
(xvi) The Stock issued and sold by the Company has been duly listed for
quotation by the Nasdaq National Market.
(xvii) The certificates for the Stock to be delivered hereunder are in due
and proper form, and when duly countersigned by the Company's transfer agent and
delivered to you or upon your order against payment of the agreed consideration
therefor in accordance with the provisions of this Agreement, the Stock
represented thereby will be duly authorized and validity issued, fully paid and
nonassessable and will be free of any pledge, lien, encumbrance, claim,
statutory preemptive rights or rights of first refusal.
(xviii) The statements in the Registration Statement and the Prospectus of
laws, regulations and rules, of legal and government proceedings and of
contracts, agreements, leases and other documents including, without limitation,
under the headings "Management -- Directors Compensation and Committees, --
Stock Option Plans, and -- Severance and Non-Competition
A-3
<PAGE>
Agreements," "Certain Transactions," "Description of Capital Stock" and "Shares
Eligible for Future Sale" have been reviewed by such counsel and, to such
counsel's knowledge, are accurate in all material respects present fairly the
information required to be shown, and comply as to form in all material respects
with the applicable requirements of the Securities Act and the rules and
regulations thereunder.
(xix) The Company is not and upon receipt and pending application of the
net proceeds from the sale of the Stock to be sold by the Company in the manner
described in the Prospectus will not be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(xx) The Underwriting Agreement and the Custody Agreement (and the Power of
===========================================================================
Attorney referred to in such agreement) have each been duly executed and
========================================================================
delivered by or on behalf of Weksel and constitutes valid and binding
=====================================================================
obligations and agreements of Weksel in accordance with their respective terms,
===============================================================================
except as enforcement of rights to indemnity and contribution under the
=======================================================================
Underwriting Agreement may be limited by federal and state securities laws or
=============================================================================
principles of public policy and subject to the qualification that the
=====================================================================
enforceability of Weksel's obligations thereunder may be limited by bankruptcy,
===============================================================================
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
============================================================================
relating to or affecting creditors' rights generally and by general equitable
=============================================================================
principles.
===========
(xxi) To the knowledge of such counsel, after due inquiry, Weksel has full
===========================================================================
legal right, power and authority, and any approval required by law (other than
==============================================================================
any approval imposed by applicable state securities laws) to sell, assign,
==========================================================================
transfer and deliver the Weksel Underwritten Stock to be sold by Weksel under
=============================================================================
the Underwriting Agreement.
===========================
(xxii) Weksel has good and marketable title to all the shares of Weksel
========================================================================
Underwritten Stock to be sold by Weksel under the Underwriting Agreement, free
==============================================================================
and clear of all liens, encumbrances, equities, security interests and claims
=============================================================================
whatsoever, and upon delivery of such Weksel Underwritten Stock pursuant to the
===============================================================================
Underwriting Agreement and payment therefor as contemplated by the Underwriting
===============================================================================
Agreement, the several Underwriters will receive good and marketable title
==========================================================================
thereto, free and clear of all liens, encumbrances, equities, security interests
================================================================================
and claims whatsoever, assuming for purposes of this opinion that the
=====================================================================
Underwriters purchased such shares in good faith without notice of any adverse
==============================================================================
claims.
=======
(xxiii) To the knowledge of such counsel, the execution, delivery and
======================================================================
performance of the Underwriting Agreement and the Custody Agreement by Weksel
=============================================================================
and the consummation of the transactions contemplated therein will not result in
================================================================================
a breach or violation of any of the terms or provisions of, or constitute a
===========================================================================
default under, (A) any indenture, mortgage, deed of trust, loan agreement or
============================================================================
other agreement or instrument to which Weksel is a party or by which Weksel is
==============================================================================
bound, or (B) (assuming the due qualification of the Weksel Underwritten Stock
==============================================================================
for public offering by the Underwriters under state securities laws) any statute
================================================================================
or any order, rule or regulation of any court or governmental agency or body
============================================================================
having jurisdiction over Weksel or the property of Weksel.
=========================================================
(xxiv) To the knowledge of such counsel, all consents, approvals,
==================================================================
authorizations and orders necessary for the execution and delivery by Weksel of
===============================================================================
the Underwriting Agreement,
===========================
A-4
<PAGE>
Weksel's Power of Attorney and the Custody Agreement, and (assuming the due
===========================================================================
qualification of the Weksel Underwritten Stock of public offering by the
========================================================================
Underwriters under state securities laws) for the sale and delivery of the
==========================================================================
Weksel Underwritten Stock to be sold by Weksel hereunder, have been
===================================================================
obtained.
=========
-------------------------------------------------
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of Delaware, the United States or of the State of upon
opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
A-5
<PAGE>
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF
PROSKAUER ROSE LLP
COUNSEL FOR THE SELLING SECURITYHOLDERS
(i) The Underwriting Agreement and the Custody Agreement (and the Power of
Attorney referred to in such agreement) have each been duly executed and
delivered by or on behalf of each Selling Securityholder and constitute valid
and binding obligations and agreements of such Selling Securityholder in
accordance with their respective terms, except as enforcement of rights to
indemnity and contribution under the Underwriting Agreement may be limited be
federal and state securities laws or principles of public policy and subject to
the qualification that the enforceability of such Selling Securityholder's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
(ii) To the knowledge of such counsel, after due inquiry, each Selling
Securityholder has full legal right, power and authority, and any approval
required by law (other than any approval imposed by applicable state securities
laws) to sell, assign, transfer and deliver the Stock to be sold by such Selling
Securityholder under the Underwriting Agreement.
(iii) Each Selling Securityholder has good and marketable title to all the
shares of Stock to be sold by such Selling Securityholder under the Underwriting
Agreement, free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever, and upon delivery of such Stock pursuant to the
Underwriting Agreement and payment therefor as contemplated by the Underwriting
Agreement, the several Underwriters will receive good and marketable title
thereto, free and clear of all liens, encumbrances, equities, security interests
and claims whatsoever, assuming for purposes of this opinion that the
Underwriters purchased such shares in good faith without notice of any adverse
claims.
(iv) To the knowledge of such counsel, the execution, delivery and
performance of the Underwriting Agreement and the Custody Agreement by each
Selling Securityholder and the consummation of the transactions contemplated
therein will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, (A) any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which such Selling
Securityholder is a party or by which Selling Securityholder is bound, or (B)
(assuming the due qualification of the Stock for public offering by the
Underwriters under state securities laws) any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
such Selling Securityholder or the property of such Selling Securityholder.
(v) To the knowledge of such counsel, all consents, approvals,
authorizations and orders necessary for the execution and delivery by each
Selling Securityholder of the Underwriting Agreement, the Selling
Securityholder's Power of Attorney and the Custody Agreement, and (assuming the
due qualification of the Stock of public offering by the Underwriters under
state
B-1
<PAGE>
securities laws) for the sale and delivery of the Stock to be sold by such
Selling Securityholder hereunder, have been obtained.
B-2
<PAGE>
- ------------------ COMPARISON OF FOOTNOTES ------------------
- -FOOTNOTE 1-
Plus options to purchase from the Option Selling Securityholders and the
====== =======
Company up to an aggregate of 495,000 additional shares to cover over-
======= =======
allotments.
- ------------------ COMPARISON OF FOOTERS ------------------
- -FOOTER 1-
DOCUMENT #=786709.09; AUTHOR=BRICHARD
=========
B-3
<PAGE>
This redlined draft, generated by CompareRite - The Instant Redliner, shows the
differences between -
original document : I:\DATA\CH02\BRICHARD\37044\GV1108!.WPD
and revised document: I:\DATA\CH02\BRICHARD\37044\GV1109!.WPD
CompareRite found 109 change(s) in the text
CompareRite found 4 change(s) in the notes
Deletions appear as struck-through text
Additions appear as double underlined text
B-4
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of July, 1998 by
and between LOGISTICARE, INC., a Delaware corporation with its principal
corporate offices at 1895 Phoenix Boulevard, Suite 306, College Park, Georgia
30349 (the "Company"), and John L. Shermyen, residing at 11715 N.W. 122 Terrace,
Alachua, Florida 32615 ("Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to continue to employ Executive as its
President and Chief Executive Officer and Executive is willing to continue to be
employed with the Company in such capacities; and
WHEREAS, the Company and Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the Company and Executive
agree as follows:
1. Definitions. For purposes of this Agreement, the following
-----------
capitalized terms shall have the meanings set forth below and shall include the
plural as well as the singular:
(a) "Affiliate" shall mean any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, any other Person.
(b) "Annual Base Salary" shall mean Executive's annual base salary, as
determined from time to time in accordance with Section 5(a) hereof.
(c) "Cause" shall mean the termination of Executive's employment with
the Company for any of the reasons or causes set forth below:
(i) gross misconduct, dishonesty, misappropriation, willful
breach of fiduciary duty or fraud by Executive with regard to the
Company or any of its assets or businesses;
(ii) conviction of Executive or the pleading of nolo contendere
---- ----------
with regard to any felony or crime involving moral turpitude (for the
purpose hereof, traffic violations and misdemeanors shall not be
deemed to be a crime); or
(iii) willful refusal by Executive to perform any material
duties reasonably required to be performed in the course of
Executive's employment with the Company.
<PAGE>
(d) "Change of Control" shall mean the occurrence of any of the
following:
(i) 50% or more of the outstanding voting stock of the Company is
acquired or beneficially acquired (as defined in Rule 13d-3 under the
Securities Exchange Act, as amended, or any successor rule thereto) by
any Person (other than the Company or its Affiliates), in a
transaction other than a public offering of the voting stock of the
Company;
(ii) the Company is merged or consolidated with another
corporation (other than in a merger or consolidation with or into an
Affiliate of the Company) and the holders of all outstanding voting
stock of the Company immediately prior to the merger or consolidation
hold less than a majority of the voting stock of the surviving entity
or its parent corporation immediately after the merger or
consolidation; or
(iii) all or substantially all of the assets of the Company are
sold or otherwise transferred to any person or entity other than an
Affiliate of the Company (in one transactions or a series of
transactions).
(e) "Disability" shall mean the inability to perform substantially all
of Executive's duties in the capacity hereinafter set forth for a period of not
less than 60 consecutive days or any 90 days in any six-month period.
(f) "Ending Compensation" shall mean Executive's Annual Base Salary
(excluding Incentive Compensation, stock option grants and bonuses, if any) in
effect immediately prior to the date of termination of Executive's employment
with the Company.
(g) "Good Reason" shall mean, without Executive's written consent, the
occurrence of any of the following circumstances that continues for 20 days
after written notice thereof from Executive to the Company:
(i) any material demotion of Executive, any material reduction
in Executive's authority or responsibility or any other material
change in the terms of Executive's employment which is inconsistent
with this Agreement, including a reduction in his Annual Base Salary
other than as part of a general reduction in the annual base salaries
of senior management of the Company pursuant to which Executive's
Annual Base Salary is reduced proportionately with such general
reduction;
(ii) a failure of any successor entity to assume the obligations
of the Company hereunder with Section 16 hereof;
(iii) any purported termination of Executive's employment other
than validly for Cause or as otherwise permitted under this Agreement;
or
2
<PAGE>
(iv) any material breach by the Company other than those set
forth above.
(h) "Person" shall mean any individual, partnership, firm, trust,
corporation or other similar entity. When two or more Persons act as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company, such syndicate or
group shall be deemed a "Person" for purposes of this Agreement.
2. Employment. The Company hereby agrees to employ Executive in
----------
the capacity hereinafter set forth, and Executive agrees to accept such
employment, upon the terms and conditions herein set forth.
3. Term. This Agreement shall be for an initial three-year term (the
----
"Term") commencing on the date hereof and, unless this Agreement is sooner
terminated under the provisions hereof, the Term shall be automatically renewed
for successive one-year terms unless the Company or Executive shall give to the
other written notice of non-renewal at least three months prior to the end of
the then current term.
4. Duties and Responsibilities. During the Term, Executive shall serve
---------------------------
as and have the titles of President and Chief Executive Officer. In serving in
such capacities, he shall continue to be a senior executive of the Company with
responsibility and status substantially equivalent to his responsibility and
status immediately prior to the execution hereof. Executive shall perform his
duties hereunder at the Company's facilities located in Georgia, Connecticut and
Florida and he shall be available to travel, from time to time, as may be
required in connection with the performance of his duties hereunder. In no
event will Executive be required to undertake any duties or perform any tasks
which are inconsistent with his status as President and Chief Executive Officer
of the Company. Executive's employment with the Company shall be full-time and
exclusive and, during the Term, Executive agrees that he will (i) devote
substantially all of his business time, attention, skill and efforts to the
performance of his duties hereunder and (ii) generally promote the interests of
the Company and its clients; provided, however, that Executive may serve as a
director of other companies if such service does not conflict in any material
respect with his duties hereunder or his fiduciary duty to the Company, and
provided that Executive shall give the Company prior written notice of such
service.
5. Compensation.
------------
(a) Base Compensation. As compensation for services hereunder and in
-----------------
consideration of the covenants contained herein, during the Term, the Company
shall pay Executive, in accordance with the Company's normal payroll practices
and subject to required withholding, an Annual Base Salary which shall be at the
rate per annum of $200,000. The Company's Board of Directors may, in its sole
discretion, increase the Annual Base Salary. Once increased, the Annual Base
Salary shall not be decreased, except as part of a general reduction in the
annual base salaries of senior management of the Company pursuant to which
Executive's Annual Base Salary is reduced proportionately with such general
reduction.
3
<PAGE>
(b) Incentive Compensation. In addition to the Annual Base Salary,
----------------------
during the Term, Executive shall be entitled to receive incentive compensation
("Incentive Compensation") in the form of bonuses, stock option grants pursuant
to the terms of the Company's 1998 Stock Option Plan, and/or any other annual or
long-term incentive awards pursuant to existing plans of the Company or plans
hereafter adopted by the Company, each as determined by the Company's Board of
Directors in its sole discretion.
6. Other Compensation and Benefits. In addition to the compensation
-------------------------------
provided for under Section 5, during the Term, Executive shall be entitled to:
(a) participate in all benefit, pension, retirement, savings, welfare
and other employee benefit plans and policies in which members of the Company's
senior management generally are entitled to participate, in accordance with
their respective terms as in effect from time to time;
(b) receive all fringe benefits and perquisites generally maintained
by the Company from time to time for members of senior management, including,
without limitation, reimbursement for all reasonable, ordinary and necessary
business and entertainment expenses incurred in the performance of his services
hereunder, in accordance with the Company's policies as in effect from time to
time;
(c) vacation each year in accordance with the Company's policies for
members of senior management as in effect from time to time, but in no event
less than 20 days paid vacation for each calendar year and 25 days after ten
years of employment with the Company;
(d) the costs of fuel, maintenance, repairs, leasing and insurance
associated with an automobile pursuant to the terms of the Company's policy
concerning senior management's automobiles as in effect from time to time; and
(e) such other benefits as Executive is entitled in accordance with
the Company's policies for members of senior management as in effect from time
to time.
7. Termination by the Company.
--------------------------
(a) Subject to the provisions of this Agreement, the Company may
immediately terminate Executive's employment hereunder for Cause upon written
notice of such termination, in which case the Company shall have no other
liability or obligation to Executive hereunder except to pay to Executive, when
otherwise due, all accrued and unpaid Annual Base Salary and Incentive
Compensation to the date of termination and all other accrued benefits due to
Executive hereunder.
(b) In the event of Executive's Disability, the Company may terminate
Executive's employment hereunder upon 30 days prior written notice, in which
case the Company shall have no other liability or obligation to Executive
hereunder except to pay to Executive, when
4
<PAGE>
otherwise due, all accrued and unpaid Annual Base Salary and Incentive
Compensation to the date of termination and all other accrued benefits due to
Executive hereunder.
(c) If the Company terminates Executive's employment for Cause or
Disability and Executive disputes such finding of Cause or Disability, the issue
of the validity of the Company's finding of Cause or Disability shall be
submitted to the American Arbitration Association ("AAA") for arbitration in
Atlanta, Georgia in accordance with the then effective rules of the AAA, and
judgment on the award rendered pursuant to such arbitration may be entered by
any court having jurisdiction over the parties and the subject matter hereof.
The costs of such arbitration shall be paid equally by the Company and
Executive, and each party shall be solely responsible for its own costs and
expenses, including attorneys' fees and expenses, incurred in connection with
such arbitration.
8. Death of Executive. In the event of Executive's death, the Term
------------------
of this Agreement shall terminate and the Company shall have no other liability
or obligation to Executive hereunder other than to pay to Executive's estate,
when otherwise due, all accrued and unpaid Annual Base Salary and Incentive
Compensation to the date of termination and all other accrued benefits due to
Executive hereunder.
9. Other Termination. Notwithstanding anything herein to the
-----------------
contrary, Executive may at any time resign for Good Reason or following a
Change of Control upon 30 days prior written notice to the Company. However, if
Executive desires to resign effective within six months following the date on
which a Change of Control occurs, Executive shall:
(a) first ask the Board of Directors of the Company whether he wishes
Executive to remain employed with the Company in Executive's then current
position; and
(b) if the Board of Directors of the Company responds in the
affirmative, then Executive shall continue to dutifully execute his
responsibilities as a senior executive of the Company for a period of three
months following the date on which the Change of Control occurred (the
"Transition Period"). If Executive fails to perform his material
responsibilities as a senior executive of the Company for the Transition Period,
then Executive shall not be entitled to receive any severance compensation under
Section 10 hereof.
10. Severance Compensation. In the event (i) the Company terminates
----------------------
Executive's employment hereunder other than for Cause or Disability or (ii)
Executive resigns for Good Reason or following a Change of Control in accordance
with Section 9 hereof, then Executive shall be entitled, subject to Section 14
hereof, to receive from the Company severance compensation in an amount equal to
100% of Executive's Ending Compensation (less appropriate payroll deductions, if
any). Such amount shall be paid in installments during the twelve-month period
following termination of employment in accordance with the Company's normal
payroll practices. Executive acknowledges and agrees that the severance
compensation provided herein shall be in lieu of any other cash severance
benefits provided by the Company to which Executive may otherwise be entitled.
5
<PAGE>
11. Non-Competition; Confidential Information.
-----------------------------------------
(a) Executive agrees that his services hereunder are of a special and
unique nature and his position with the Company places him in a position of
confidence and trust with clients and employees of the Company. Executive
agrees that he will not at any time during his employment with the Company and
for a period of one year thereafter (the "Restrictive Period"), directly or
indirectly, compete (as an owner, joint venturer, partner, stockholder,
director, officer, consultant, agent or otherwise) with the Company in the
United States. Ownership of less than 5% of the securities of any class of a
corporation registered under section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, shall not be considered a violation of the provisions
of this paragraph.
(b) Executive further agrees that he will not at any time, directly or
indirectly, without the Company's prior written consent, disclose to any third
party or use (except as authorized in the regular course of the Company's
business) any confidential, proprietary or trade secret information acquired by
him during his employment with the Company and thereafter, including, without
limitation, sales and marketing information, information relating to existing or
prospective customers and markets, information relating to the RealTime software
technology and enhancements thereto or other software technology, business
opportunities, and financial, technical and other data (collectively, the
"Confidential Information"). After termination of Executive's employment with
the Company for any reason and upon the written request of the Company,
Executive shall promptly return to the Company all originals and/or copies of
written or recorded material (regardless of the medium) containing or reflecting
any Confidential Information and shall promptly confirm in writing to the
Company that such action has been taken.
(c) Executive agrees that he will not, during the Restrictive Period,
employ or retain, solicit the employment or retention of, or cause or encourage
any entity to retain or solicit the employment or retention of, any person who
was any employee of the Company at any time during the two year period
commencing 12 months prior to the termination of Executive's employment with the
Company and ending on year after such termination. After termination of
Executive's employment with the Company, (i) Executive will refrain from
disparaging, whether orally, in writing or in other media, the Company, its
Affiliates, the officers, directors and employees of each of them, and the
products and services of each of them, and (ii) the Company will not comment
upon the employment performance of Executive other than as may be required by
law or as requested by Executive.
(d) Any discovery, design, invention or improvement (whether or not
patentable) that Executive develops during his employment with the Company
(whether or not during his regular working hours or on the Company's premises)
and that is related to the Company's business or operations as then conducted or
contemplated, shall belong solely to the Company and shall be promptly disclosed
to the Company. During the period of his employment with the Company and
thereafter, Executive shall, without additional compensation, execute and
deliver to the Company any instruments of transfer and take any other action
that the Company
6
<PAGE>
may reasonably request to carry out the provisions of this paragraph, including
executing and filing, a the Company's expense, patent and/or copyright
applications and assignments of such applications to the Company.
12. Specific Performance. Executive acknowledges that, in view of the
--------------------
nature of the Company's business, the restrictions contained in this Agreement
are reasonably necessary to protect the legitimate business interests of the
Company and that any violation of such restrictions will result in irreparable
injury to the Company for which money damages will not be an adequate remedy.
Accordingly, Executive agrees that, in addition to such money damages, he may be
restrained and enjoined from any continuing breach of such covenants without any
bond or other security being required by any court. If any restriction
contained in this Agreement shall be deemed to be invalid, illegal or
unenforceable by reason of the extent, duration or geographical scope, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provisions hereof, and
in its reduced form such restriction shall then be enforceable in the manner
contemplated thereby.
13. No Mitigation; No Set-Off. The Company agrees that if Executive's
-------------------------
employment with the Company is terminated for any reason whatsoever, Executive
is not required to seek other employment or to attempt in any way to reduce any
amounts payable to Executive by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by Executive or benefit provided
to Executive as the result of employment by another employer or otherwise. The
Company's obligations to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against
Executive.
14. General Release of the Company. In consideration of the payments
------------------------------
and other undertakings set forth herein, Executive agrees to execute a release
of the Company in substantially the form attached hereto as Exhibit A upon the
---------
termination of his employment with the Company. Executive acknowledges that the
execution of such release is an express condition to his right to receive
severance compensation pursuant to Section 10 hereof in the event such section
is applicable.
15. Notice. Any notice or other communication required or permitted
------
hereunder shall be in writing and shall be delivered personally, or sent by
certified mail, return receipt requested, by Federal Express, Express Mail or
similar overnight delivery or courier service, or by telecopy. Notice to
Executive shall be delivered to his address set forth at the head of this
Agreement, and notice to the Company shall be sent as follows:
7
<PAGE>
LogistiCare, Inc.
One Crown Center
1895 Phoenix Boulevard, Suite 306
College Park, Georgia 30349
Fax: (770) 907-7598
Attention: Chief Financial Officer
Any notice given by certified mail shall be deemed given five days after
the time of certification thereof. Any notice given by other means permitted
hereby will be deemed given at the time of receipt thereof. Either party may by
notice given in accordance herewith to the other party, designate another
address or person for receipt of notices hereunder.
16. Successors; Binding Agreement. Neither party may assign this
-----------------------------
Agreement; provided, however, that it is expressly acknowledged that this
-------- -------
Agreement and the rights of the Company hereunder may be assigned, without the
consent of Executive, to any purchaser or other transferee of all or
substantially all of the business and/or assets of the Company or any division
of the Company for which Executive is then acting as general manager. The
Company shall require any such successor to expressly assume and agree, in a
written instrument in form and substance satisfactory to Executive and his
counsel, to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, permitted assigns, heirs and
representatives.
17. Separability. If any provisions of this Agreement shall be declared
------------
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
18. Waiver. The rights of each party hereunder may be waived only by a
------
writing signed by the waiving party giving such waiver expressly setting forth
the rights so waived and the matters as to which they are so waived, and any
such waiver shall be limited to the matters expressly set forth in such writing.
No failure or delay of any party hereto in enforcing any of its rights hereunder
at any time shall constitute or evidence any waiver of such rights.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which together will constitute one
document.
20. Headings. The headings used in this Agreement are for convenience of
--------
reference only and shall not be deemed to be of any substance.
21. Entire Agreement; Modification. This Agreement contains the entire
------------------------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters. This Agreement may not be amended, modified, or
supplemented in any respect except by a subsequent written agreement entered
into by both parties.
8
<PAGE>
22. Governing Law. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of Georgia, without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LOGISTICARE, INC.
By: /s/ Michael Weksel
-----------------------------------------
Name: Michael Weksel
Title: Vice President and Chief Financial
Officer
EXECUTIVE
/s/ John L. Shermyen
-------------------------------------------
John L. Shermyen
9
<PAGE>
EXHIBIT A
GENERAL RELEASE
---------------
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, I, for myself and my successors, assigns, heirs and
representatives (each, a "Releasing Party"), hereby release and forever
discharge LogistiCare, Inc. (the "Company"), its stockholders, officers,
directors, employees, agents and attorneys, and their respective successors,
assigns, heirs and representatives (each, a "Released Party"), individually and
collectively, from any and all claims, demands, causes of action, liabilities or
obligations, known or unknown, pending or not pending, liquidated or not
liquidated, of every kind and nature whatsoever (collectively, the "Released
Claims") which the Releasing Party has, has had or may have against any one or
more of the Released Parties arising out of, based upon or in any way, directly
or indirectly, related to the Company's business, my employment with the Company
or the termination of such employment; provided, however, that this General
-------- -------
Release shall have no effect whatsoever upon the Company's obligations, if any,
to pay severance compensation pursuant to the Employment Agreement between the
undersigned and the Company, dated July 14, 1998.
The Released Claims include, without limitation, (a) all claims arising out
of or relating to breach of contract, the Fair Labor Standards Act, the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the National Labor Relations Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act and/or any other
federal, state or local statute, law, ordinance, regulation or order as the same
may be amended or supplemented from time to time, (b) all claims for back pay,
lost benefits, reinstatement, liquidated damages, punitive damages, and damages
on account of any alleged personal, physical or emotional injury, and (c) all
claims for attorneys' fees and costs.
I understand and acknowledge that I am hereby being advised to consult with
an attorney prior to signing this General Release. My decision to sign this
General Release is my own voluntary decision made with full knowledge that I
have been advised to consult with an attorney and I intend to be bound by this
General Release in accordance with its terms.
Dated: _____________ _______________________________
John L. Shermyen
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of July, 1998 by
and between LOGISTICARE, INC., a Delaware corporation with its principal
corporate offices at 1895 Phoenix Boulevard, Suite 306, College Park, Georgia
30349 (the "Company"), and Michael E. Weksel, residing at 2158 Cumberland
Parkway, Apt. 7104, Atlanta, Georgia 30339 ("Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to continue to employ Executive as its Vice
President and Chief Financial Officer and Executive is willing to continue to be
employed with the Company in such capacities; and
WHEREAS, the Company and Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the Company and Executive
agree as follows:
1. Definitions. For purposes of this Agreement, the following
-----------
capitalized terms shall have the meanings set forth below and shall include the
plural as well as the singular:
(a) "Affiliate" shall mean any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, any other Person.
(b) "Annual Base Salary" shall mean Executive's annual base salary, as
determined from time to time in accordance with Section 5(a) hereof.
(c) "Cause" shall mean the termination of Executive's employment with
the Company for any of the reasons or causes set forth below:
(i) gross misconduct, dishonesty, misappropriation, willful
breach of fiduciary duty or fraud by Executive with regard to the
Company or any of its assets or businesses;
(ii) conviction of Executive or the pleading of nolo contendere
---- ----------
with regard to any felony or crime involving moral turpitude (for the
purpose hereof, traffic violations and misdemeanors shall not be
deemed to be a crime); or
<PAGE>
(iii) willful refusal by Executive to perform any material
duties reasonably required to be performed in the course of
Executive's employment with the Company.
(d) "Change of Control" shall mean the occurrence of any of the
following:
(i) 50% or more of the outstanding voting stock of the Company is
acquired or beneficially acquired (as defined in Rule 13d-3 under the
Securities Exchange Act, as amended, or any successor rule thereto) by
any Person (other than the Company or its Affiliates), in a
transaction other than a public offering of the voting stock of the
Company;
(ii) the Company is merged or consolidated with another
corporation (other than in a merger or consolidation with or into an
Affiliate of the Company) and the holders of all outstanding voting
stock of the Company immediately prior to the merger or consolidation
hold less than a majority of the voting stock of the surviving entity
or its parent corporation immediately after the merger or
consolidation; or
(iii) all or substantially all of the assets of the Company are
sold or otherwise transferred to any person or entity other than an
Affiliate of the Company (in one transactions or a series of
transactions).
(e) "Disability" shall mean the inability to perform substantially all
of Executive's duties in the capacity hereinafter set forth for a period of not
less than 60 consecutive days or any 90 days in any six-month period.
(f) "Ending Compensation" shall mean Executive's Annual Base Salary
(excluding Incentive Compensation, stock option grants and bonuses, if any) in
effect immediately prior to the date of termination of Executive's employment
with the Company.
(g) "Good Reason" shall mean, without Executive's written consent, the
occurrence of any of the following circumstances that continues for 20 days
after written notice thereof from Executive to the Company:
(i) any material demotion of Executive, any material reduction
in Executive's authority or responsibility or any other material
change in the terms of Executive's employment which is inconsistent
with this Agreement, including a reduction in his Annual Base Salary
other than as part of a general reduction in the annual base salaries
of senior management of the Company pursuant to which Executive's
Annual Base Salary is reduced proportionately with such general
reduction;
2
<PAGE>
(ii) a failure of any successor entity to assume the obligations
of the Company hereunder with Section 16 hereof;
(iii) any purported termination of Executive's employment other
than validly for Cause or as otherwise permitted under this Agreement;
or
(iv) any material breach by the Company other than those set
forth above.
(h) "Person" shall mean any individual, partnership, firm, trust,
corporation or other similar entity. When two or more Persons act as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company, such syndicate or
group shall be deemed a "Person" for purposes of this Agreement.
2. Employment. The Company hereby agrees to employ Executive in
----------
the capacity hereinafter set forth, and Executive agrees to accept such
employment, upon the terms and conditions herein set forth.
3. Term. This Agreement shall be for an initial three-year term (the
----
"Term") commencing on the date hereof and, unless this Agreement is sooner
terminated under the provisions hereof, the Term shall be automatically renewed
for successive one-year terms unless the Company or Executive shall give to the
other written notice of non-renewal at least three months prior to the end of
the then current term.
4. Duties and Responsibilities. During the Term, Executive shall serve
---------------------------
as and have the titles of Vice President and Chief Financial Officer of the
Company. In serving in such capacities, he shall continue to be a senior
executive of the Company with responsibility and status substantially equivalent
to his responsibility and status immediately prior to the execution hereof.
Executive shall perform his duties hereunder at the Company's facilities located
in Georgia, Connecticut and Florida and he shall be available to travel, from
time to time, as may be required in connection with the performance of his
duties hereunder. In no event will Executive be required to undertake any
duties or perform any tasks which are inconsistent with his status as Vice
President and Chief Financial Officer of the Company. Executive's employment
with the Company shall be full-time and exclusive and, during the Term,
Executive agrees that he will (i) devote substantially all of his business time,
attention, skill and efforts to the performance of his duties hereunder and (ii)
generally promote the interests of the Company and its clients; provided,
however, that Executive may serve as a director of other companies if such
service does not conflict in any material respect with his duties hereunder or
his fiduciary duty to the Company, and provided that Executive shall give the
Company prior written notice of such service.
5. Compensation.
------------
(a) Base Compensation. As compensation for services hereunder and in
-----------------
consideration of the covenants contained herein, during the Term, the Company
shall pay Executive, in accordance with the Company's normal payroll practices
and subject to required
3
<PAGE>
withholding, an Annual Base Salary which shall be at the rate per annum of
$185,000. The Company's Board of Directors may, in its sole discretion, increase
the Annual Base Salary. Once increased, the Annual Base Salary shall not be
decreased, except as part of a general reduction in the annual base salaries of
senior management of the Company pursuant to which Executive's Annual Base
Salary is reduced proportionately with such general reduction.
(b) Incentive Compensation. In addition to the Annual Base Salary,
----------------------
during the Term, Executive shall be entitled to receive incentive compensation
("Incentive Compensation") in the form of bonuses, stock option grants pursuant
to the terms of the Company's 1998 Stock Option Plan, and/or any other annual or
long-term incentive awards pursuant to existing plans of the Company or plans
hereafter adopted by the Company, each as determined by the Company's Board of
Directors in its sole discretion.
6. Other Compensation and Benefits. In addition to the compensation
-------------------------------
provided for under Section 5, during the Term, Executive shall be entitled to:
(a) participate in all benefit, pension, retirement, savings, welfare
and other employee benefit plans and policies in which members of the Company's
senior management generally are entitled to participate, in accordance with
their respective terms as in effect from time to time;
(b) receive all fringe benefits and perquisites generally maintained
by the Company from time to time for members of senior management, including,
without limitation, reimbursement for all reasonable, ordinary and necessary
business and entertainment expenses incurred in the performance of his services
hereunder, in accordance with the Company's policies as in effect from time to
time;
(c) vacation each year in accordance with the Company's policies for
members of senior management as in effect from time to time, but in no event
less than 20 days paid vacation for each calendar year and 25 days after ten
years of employment with the Company;
(d) the costs of fuel, maintenance, repairs, leasing and insurance
associated with an automobile pursuant to the terms of the Company's policy
concerning senior management's automobiles as in effect from time to time; and
(e) such other benefits as Executive is entitled in accordance with
the Company's policies for members of senior management as in effect from time
to time.
7. Termination by the Company.
--------------------------
(a) Subject to the provisions of this Agreement, the Company may
immediately terminate Executive's employment hereunder for Cause upon written
notice of such termination, in which case the Company shall have no other
liability or obligation to Executive hereunder except to pay to Executive, when
otherwise due, all accrued and unpaid Annual Base Salary and
4
<PAGE>
Incentive Compensation to the date of termination and all other accrued benefits
due to Executive hereunder.
(b) In the event of Executive's Disability, the Company may terminate
Executive's employment hereunder upon 30 days prior written notice, in which
case the Company shall have no other liability or obligation to Executive
hereunder except to pay to Executive, when otherwise due, all accrued and unpaid
Annual Base Salary and Incentive Compensation to the date of termination and all
other accrued benefits due to Executive hereunder.
(c) If the Company terminates Executive's employment for Cause or
Disability and Executive disputes such finding of Cause or Disability, the issue
of the validity of the Company's finding of Cause or Disability shall be
submitted to the American Arbitration Association ("AAA") for arbitration in
Atlanta, Georgia in accordance with the then effective rules of the AAA, and
judgment on the award rendered pursuant to such arbitration may be entered by
any court having jurisdiction over the parties and the subject matter hereof.
The costs of such arbitration shall be paid equally by the Company and
Executive, and each party shall be solely responsible for its own costs and
expenses, including attorneys' fees and expenses, incurred in connection with
such arbitration.
8. Death of Executive. In the event of Executive's death, the Term
------------------
of this Agreement shall terminate and the Company shall have no other liability
or obligation to Executive hereunder other than to pay to Executive's estate,
when otherwise due, all accrued and unpaid Annual Base Salary and Incentive
Compensation to the date of termination and all other accrued benefits due to
Executive hereunder.
9. Other Termination. Notwithstanding anything herein to the
-----------------
contrary, Executive may at any time resign for Good Reason or following a
Change of Control upon 30 days prior written notice to the Company. However, if
Executive desires to resign effective within six months following the date on
which a Change of Control occurs, Executive shall:
(a) first ask the Chief Executive Officer of the Company whether he
wishes Executive to remain employed with the Company in Executive's then current
position; and
(b) if the Chief Executive Officer of the Company responds in the
affirmative, then Executive shall continue to dutifully execute his
responsibilities as a senior executive of the Company for a period of three
months following the date on which the Change of Control occurred (the
"Transition Period"). If Executive fails to perform his material
responsibilities as a senior executive of the Company for the Transition Period,
then Executive shall not be entitled to receive any severance compensation under
Section 10 hereof.
10. Severance Compensation. In the event (i) the Company terminates
----------------------
Executive's employment hereunder other than for Cause or Disability or (ii)
Executive resigns for Good Reason or following a Change of Control in accordance
with Section 9 hereof, then Executive shall be entitled, subject to Section 14
hereof, to receive from the Company severance
5
<PAGE>
compensation in an amount equal to 100% of Executive's Ending Compensation (less
appropriate payroll deductions, if any). Such amount shall be paid in
installments during the twelve-month period following termination of employment
in accordance with the Company's normal payroll practices. Executive
acknowledges and agrees that the severance compensation provided herein shall be
in lieu of any other cash severance benefits provided by the Company to which
Executive may otherwise be entitled.
11. Non-Competition; Confidential Information.
-----------------------------------------
(a) Executive agrees that his services hereunder are of a special and
unique nature and his position with the Company places him in a position of
confidence and trust with clients and employees of the Company. Executive
agrees that he will not at any time during his employment with the Company and
for a period of one year thereafter (the "Restrictive Period"), directly or
indirectly, compete (as an owner, joint venturer, partner, stockholder,
director, officer, consultant, agent or otherwise) with the Company in the
United States. Ownership of less than 5% of the securities of any class of a
corporation registered under section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, shall not be considered a violation of the provisions
of this paragraph.
(b) Executive further agrees that he will not at any time, directly or
indirectly, without the Company's prior written consent, disclose to any third
party or use (except as authorized in the regular course of the Company's
business) any confidential, proprietary or trade secret information acquired by
him during his employment with the Company and thereafter, including, without
limitation, sales and marketing information, information relating to existing or
prospective customers and markets, information relating to the RealTime software
technology and enhancements thereto or other software technology, business
opportunities, and financial, technical and other data (collectively, the
"Confidential Information"). After termination of Executive's employment with
the Company for any reason and upon the written request of the Company,
Executive shall promptly return to the Company all originals and/or copies of
written or recorded material (regardless of the medium) containing or reflecting
any Confidential Information and shall promptly confirm in writing to the
Company that such action has been taken.
(c) Executive agrees that he will not, during the Restrictive Period,
employ or retain, solicit the employment or retention of, or cause or encourage
any entity to retain or solicit the employment or retention of, any person who
was any employee of the Company at any time during the two year period
commencing 12 months prior to the termination of Executive's employment with the
Company and ending on year after such termination. After termination of
Executive's employment with the Company, (i) Executive will refrain from
disparaging, whether orally, in writing or in other media, the Company, its
Affiliates, the officers, directors and employees of each of them, and the
products and services of each of them, and (ii) the Company will not comment
upon the employment performance of Executive other than as may be required by
law or as requested by Executive.
6
<PAGE>
(d) Any discovery, design, invention or improvement (whether or not
patentable) that Executive develops during his employment with the Company
(whether or not during his regular working hours or on the Company's premises)
and that is related to the Company's business or operations as then conducted or
contemplated, shall belong solely to the Company and shall be promptly disclosed
to the Company. During the period of his employment with the Company and
thereafter, Executive shall, without additional compensation, execute and
deliver to the Company any instruments of transfer and take any other action
that the Company may reasonably request to carry out the provisions of this
paragraph, including executing and filing, a the Company's expense, patent
and/or copyright applications and assignments of such applications to the
Company.
12. Specific Performance. Executive acknowledges that, in view of the
--------------------
nature of the Company's business, the restrictions contained in this Agreement
are reasonably necessary to protect the legitimate business interests of the
Company and that any violation of such restrictions will result in irreparable
injury to the Company for which money damages will not be an adequate remedy.
Accordingly, Executive agrees that, in addition to such money damages, he may be
restrained and enjoined from any continuing breach of such covenants without any
bond or other security being required by any court. If any restriction
contained in this Agreement shall be deemed to be invalid, illegal or
unenforceable by reason of the extent, duration or geographical scope, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provisions hereof, and
in its reduced form such restriction shall then be enforceable in the manner
contemplated thereby.
13. No Mitigation; No Set-Off. The Company agrees that if Executive's
-------------------------
employment with the Company is terminated for any reason whatsoever, Executive
is not required to seek other employment or to attempt in any way to reduce any
amounts payable to Executive by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by Executive or benefit provided
to Executive as the result of employment by another employer or otherwise. The
Company's obligations to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against
Executive.
14. General Release of the Company. In consideration of the payments
------------------------------
and other undertakings set forth herein, Executive agrees to execute a release
of the Company in substantially the form attached hereto as Exhibit A upon the
---------
termination of his employment with the Company. Executive acknowledges that the
execution of such release is an express condition to his right to receive
severance compensation pursuant to Section 10 hereof in the event such section
is applicable.
15. Notice. Any notice or other communication required or permitted
------
hereunder shall be in writing and shall be delivered personally, or sent by
certified mail, return receipt requested, by Federal Express, Express Mail or
similar overnight delivery or courier service, or by telecopy.
7
<PAGE>
Notice to Executive shall be delivered to his address set forth at the head of
this Agreement, and notice to the Company shall be sent as follows:
LogistiCare, Inc.
One Crown Center
1895 Phoenix Boulevard, Suite 306
College Park, Georgia 30349
Fax: (770) 907-7598
Attention: Chief Executive Officer
Any notice given by certified mail shall be deemed given five days after
the time of certification thereof. Any notice given by other means permitted
hereby will be deemed given at the time of receipt thereof. Either party may by
notice given in accordance herewith to the other party, designate another
address or person for receipt of notices hereunder.
16. Successors; Binding Agreement. Neither party may assign this
-----------------------------
Agreement; provided, however, that it is expressly acknowledged that this
-------- -------
Agreement and the rights of the Company hereunder may be assigned, without the
consent of Executive, to any purchaser or other transferee of all or
substantially all of the business and/or assets of the Company or any division
of the Company for which Executive is then acting as general manager. The
Company shall require any such successor to expressly assume and agree, in a
written instrument in form and substance satisfactory to Executive and his
counsel, to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, permitted assigns, heirs and
representatives.
17. Separability. If any provisions of this Agreement shall be declared
------------
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
18. Waiver. The rights of each party hereunder may be waived only by a
------
writing signed by the waiving party giving such waiver expressly setting forth
the rights so waived and the matters as to which they are so waived, and any
such waiver shall be limited to the matters expressly set forth in such writing.
No failure or delay of any party hereto in enforcing any of its rights hereunder
at any time shall constitute or evidence any waiver of such rights.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which together will constitute one
document.
20. Headings. The headings used in this Agreement are for convenience of
--------
reference only and shall not be deemed to be of any substance.
21. Entire Agreement; Modification. This Agreement contains the entire
------------------------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior
8
<PAGE>
agreements and understandings, oral or written, with respect to such matters.
This Agreement may not be amended, modified, or supplemented in any respect
except by a subsequent written agreement entered into by both parties.
22. Governing Law. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of Georgia, without regard to its conflict
of law principles.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LOGISTICARE, INC.
By: /s/ John L. Shermyen
----------------------------------------
Name: John L. Shermyen
Title: President and Chief Executive Officer
EXECUTIVE
/s/ Michael E. Weksel
-------------------------------------------
Michael E. Weksel
10
<PAGE>
EXHIBIT A
GENERAL RELEASE
---------------
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, I, for myself and my successors, assigns, heirs and
representatives (each, a "Releasing Party"), hereby release and forever
discharge LogistiCare, Inc. (the "Company"), its stockholders, officers,
directors, employees, agents and attorneys, and their respective successors,
assigns, heirs and representatives (each, a "Released Party"), individually and
collectively, from any and all claims, demands, causes of action, liabilities or
obligations, known or unknown, pending or not pending, liquidated or not
liquidated, of every kind and nature whatsoever (collectively, the "Released
Claims") which the Releasing Party has, has had or may have against any one or
more of the Released Parties arising out of, based upon or in any way, directly
or indirectly, related to the Company's business, my employment with the Company
or the termination of such employment; provided, however, that this General
-------- -------
Release shall have no effect whatsoever upon the Company's obligations, if any,
to pay severance compensation pursuant to the Employment Agreement between the
undersigned and the Company, dated July 14, 1998.
The Released Claims include, without limitation, (a) all claims arising out
of or relating to breach of contract, the Fair Labor Standards Act, the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the National Labor Relations Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act and/or any other
federal, state or local statute, law, ordinance, regulation or order as the same
may be amended or supplemented from time to time, (b) all claims for back pay,
lost benefits, reinstatement, liquidated damages, punitive damages, and damages
on account of any alleged personal, physical or emotional injury, and (c) all
claims for attorneys' fees and costs.
I understand and acknowledge that I am hereby being advised to consult with
an attorney prior to signing this General Release. My decision to sign this
General Release is my own voluntary decision made with full knowledge that I
have been advised to consult with an attorney and I intend to be bound by this
General Release in accordance with its terms.
Dated: _______________ ______________________________________
<PAGE>
Exhibit 10.20
NATIONSBANK, N.A. New
Georgia 46779
M982675-001-001
am
PROMISSORY NOTE
Date: APRIL 2, 1998 NEW
------------- ---
Amount: $1,000,000.00 Maturity Date: APRIL 30, 1999
--------------
================================================================================
Bank: Borrower:
NationsBank, N.A.
Banking Center: LogistiCare, Inc. d/b/a Automated Dispatch
South Atlanta Commercial Center Solutions, Inc.
3000 Corporate Center 1895 Phoenix Blvd., Suite 306
Morrow, GA 30260 College Park, GA 30349
Clayton County Fulton County
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of ONE MILLION DOLLARS AND NO CENTS ($1,000,000.00), or so much
-------------------------------- ---------------
thereof as may be advanced from time to time in immediately available funds,
together with interest computed daily on the outstanding principal balance
hereunder, at an annual interest rate, and in accordance with the payment
schedule, indicated below.
1. RATE. [See Attached Letter Agreement. In the case of Rate, the Letter
Agreement, which is incorporated herein by reference, shall control.
/s/ M.E.W.]
PRIME RATE. The Rate shall be the Prime Rate, PLUS 1.00 percent, per
---------- ---------
annum. The "Prime Rate" is the fluctuating rate of interest established by Bank
from time to time, at its discretion, whether or not such rate shall be
otherwise published. The Prime Rate is established by Bank as an index and may
or may not at any time be the best or lowest rate charged by Bank on any loan.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of THE STATE OF GEORGIA;
--------------------
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.
2. ACCRUAL METHOD. Interest at the Rate set forth above will be calculated by
the ACTUAL/360 day method (a daily amount of interest is computed for a
----------
hypothetical year of 360 days; that amount is multiplied by the actual number of
---
days for which any principal is outstanding hereunder).
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rite changes. In the event any index is discontinued, Bank shall
substitute an index determined by Bank to be comparable, at its sole discretion.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
SINGLE PRINCIPAL PAYMENT. Principal shall be paid in full in a single
------------------------
payment on APRIL 30, 1999. Interest thereon shall be paid MONTHLY, commencing
-------------- -------
on MAY 5, 1998, and continuing on the SAME day of each successive MONTH
----------- ---- -----
thereafter, with a final payment of all unpaid interest at the stated maturity
of this Note.
5. REVOLVING FEATURE. Borrower may borrow, repay and reborrow hereunder at
any time, up to a maximum aggregate amount outstanding at any one time equal to
the principal amount of this Note, provided, that Borrower is not in default
under any provision of this Note, any other documents executed in connection
with this Note, or any other note or other loan documents now or hereafter
executed in connection with any other obligation of Borrower to Bank, and
provided that the borrowings hereunder do not exceed any borrowing base or other
limitation on borrowings by Borrower. Bank shall incur no liability for its
refusal to advance funds based upon its determination that any conditions of
such further advances have not been met. Bank, records of the amounts borrowed
from time to time shall be conclusive proof thereof.
6. AUTOMATIC PAYMENT. If an account appears at the end of this sentence,
Borrower has elected to authorize Bank to effect payment of sums due under this
Note by means of debiting Borrower's account number
<PAGE>
______________________. This authorization shall not affect the obligation of
Borrower to pay such sums when due, without notice, if there are insufficient
funds in such account to make such payment in full on the due date thereof, or
if Bank fails to debit the account.
7. WAIVERS, CONSENT AND COVENANTS. Borrower, any indorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
honor, and any other notice required to be given under the law to any Obligor in
connection with the deliver, acceptance, performance, default or enforcement of
this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to at on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise, affect, any of Bank's rights under this Note,
under any endorsement or guaranty hereof and/or the enforcement or defense of
Bank's rights with respect to, or the administration, supervision, preservation,
or protection of, or realization upon, any property securing payment hereof,
including, without limitation, reasonable attorney's fees, including fees
related to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceeding or other proceeding, in such
amount as may be determined reasonable b any arbitrator or court, whichever is
applicable.
8. "INTEREST" LIMITED. As used in this Note and for the purposes of Section
7-4-2 of the Official Code of Georgia Annotated, or any successor thereto, the
term "interest" does not include any fees or other charges imposed on Borrower
in connection with the indebtedness evidenced by this Note, other than the
Interest described above.
9. PREPAYMENTS. Prepayments may be made in whole or in part at any time on
any loan for which the Rate is based on the Prime Rate or on any other
fluctuating Rate or Index which may change daily. All prepayments of principal
shall be applied in the inverse order of maturity, or in such other order as
Bank shall determine in its sole discretion. No prepayment of any other loan
shall be permitted without the prior written consent of Bank. Notwithstanding
such prohibition, if there is a prepayment of any such loan, whether by consent
of Bank, or because of acceleration or otherwise, Borrower shall, within 15 days
of any request by Bank, pay to Bank any loss or expense which Bank may incur or
sustain as a result of such prepayment. For the purposes of calculating the
amounts owed only, it shall be assumed that Bank actually funded or committed to
fund the loan through the purchase of an underlying deposit in an amount and for
a term comparable to the loan, and such determination by Bank shall be
conclusive, absent a manifest error in computation.
10. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment that
is more than fifteen days late.
11. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a proceeding
against any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obligor with or into another entity; (f) the insolvency of, the business failure
of, the appointment of a custodian, trustee, liquidator or receiver for or for
any of the property of, the assignment for the benefit of creditors by, or the
filing of a petition under bankruptcy, insolvency or debtor's relief law or the
filing of a petition for any adjustment of indebtedness, composition or
extension by or against any Obligor; (g) the determination by Bank that any
representation or warranty made to Bank by any Obligor in any Loan Documents or
otherwise is or was, when it was made, untrue or materially misleading; (h) the
failure of any Obligor to timely deliver such financial statements, including
tax returns, other statements of condition or other information, as Bank shall
request from time to time; (I) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (j) the
seizure or forfeiture of, or the issuance of any writ of possession, garnishment
or attachment, or any turnover order for any property of any Obligor; (k) the
determination by Bank that it is insecure for any reason; (l) the determination
by Bank that a material adverse change has occurred in the financial condition
of any Obligor; or (m) the failure of Borrower's business to comply with any law
or regulation controlling its operation.
12. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder
and all other obligations of any Obligor to Bank (however acquired or evidence)
shall, at the option of Bank, become immediately due and payable and any
obligation of Bank to permit further borrowing under this Note shall immediately
cease and terminate, and/or (b) to the extent permitted by law, the Rate of
interest on the unpaid principal shall be increased at Bank's discretion up to
the maximum rate allowed by-law, or if none, 25% per annum (the "Default Rate").
The provisions herein for a Default Rate shall not be deemed to extend the time
for any payment hereunder or to constitute a "grace period" giving Obligors a
right to cure any default. At Bank's option, any accrued and unpaid interest,
fees or charges may, for purposes of computing and accruing interest on a daily
basis after the due date of the Note or any installment thereof, be deemed to be
a part of the principal balance, and interest shall accrue on a daily compounded
basis after such date at the Default Rate provided in this Note until the entire
outstanding balance of principal and interest is paid in full. Upon a default
under this Note, Bank is hereby authorized at any time, at its option and
without notice or demand, to set off and charge against any deposit accounts of
any Obligor, (as well as any money, instruments, securities, documents , chattel
paper, credits, claims, demands, income and any other property,
Page 2
<PAGE>
rights and interests of any Obligor), which at any time shall come into the
possession or custody or under the control of Bank or any of its agents,
affiliates or correspondents, any and all obligations due hereunder.
Additionally, Bank shall have all rights and remedies available under each of
the Loan Documents, as well as all rights and remedies available at law or in
equity.
13. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date.
All rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to Bank
in any other respect at any other time.
14. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Georgia. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of Georgia or the
United States located within the State of Georgia and expressly waive any
objections as to venue in any such courts. Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising any rights within
any other state or jurisdiction or from obtaining personal jurisdiction by any
other means available under applicable law.
15. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
16. BINDING EFFECT. This Note shall be binding upon and inure to the benefit
of Borrower, Obligors and Bank and their respective successors, assigns, heirs
and personal representatives, provided, however, that no obligations of Borrower
or Obligors hereunder can be assigned without prior written consent of Bank.
17. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
18. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE.
AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE
OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW.
IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT
UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
-------------
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
B COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEAR IN FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
---------------------
DEEMED TO (1) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR IC) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
Page 3
<PAGE>
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.
Borrower:
LogistiCare, Inc. d/b/a Automated Dispatch Solutions, Inc.
(a Delaware Corporation)
By: /s/ Michael E. Weksel (Seal)
------------------------------------------------
Name: Michael E. Weksel
-----------------------------------------
Title: VP & CFO
--------------------------------------
By: --------------------------------------------- (Seal)
Name:
--------------------------------------
Title:
--------------------------------------
(Corporate Seal)
Page 4
<PAGE>
May 20, 1998
Mr. Michael E. Weksel, VP & CFO
LogistiCare, Inc. d/b/a/ Automated Dispatch Solutions, Inc.
1895 Phoenix Blvd, Suite 306
College Park, GA 30349
Re: Letter Agreement
Dear Michael:
Thank you for the opportunity to make the following commitment to you.
NationsBank, N.A. (the "Bank") is pleased to have approved for LogistiCare, Inc.
d/b/a/ Automated Dispatch Solutions, Inc. (the "Borrower") a credit facility
consisting of a Revolving Line of Credit in an amount not to exceed $1,000,000
(the "Loan").
This commitment is subject to the execution and delivery to the Bank of legal
documents yet to be prepared, including, without limitation, loan agreements,
promissory notes, guaranties, and collateral and security documents. All such
documents must be satisfactory in form and substance to the Bank.
The making and funding of any loans under this commitment (in addition to any
other conditions which may be required in the documents referred to in the
preceding paragraph) is expressly subject to the terms and conditions set forth
in the attached Terms and Conditions.
If you find the terms and conditions of this commitment to be acceptable to you,
please execute the enclosed copy of this letter and return it to the
undersigned. This Letter Agreement shall become null and void if not accepted
within ten (10) working days of the date hereof, and the Loan dosed within
thirty (30) working days of the date hereof.
We appreciate the opportunity to provide you with the financial services of
NationsBank, N.A.
Sincerely,
Thomas J. Nelis
Vice President
Page 5
<PAGE>
TERMS AND CONDITIONS
BORROWER: LogistiCare, Inc. d/b/a/ Automated Dispatch Solutions, Inc.
- --------
GUARANTOR: The obligation will be jointly and severally guaranteed by the
- --------- following individuals with their guaranty being limited to
$1,000,000 each.
John G. Pappajohn
Derace Schaffer
William Weksel
LOAN AMOUNT: $1,000,000
- -----------
TERMS: Interest monthly with principal due at maturity.
- -----
INTEREST RATE: NationsBank Prime Rate plus 1% adjusted daily.
- -------------
The rate will reduce to NationsBank Prime Rate plus 1/2%
adjusted daily once the Company attains a positive net worth
of $3MM for two consecutive month ends.
COLLATERAL: A blanket lien on all assets of the company.
- ----------
FEES: A commitment fee of 3/4% of the loan amount will be due at
- ---- closing.
PREPAYMENT: During the term of this commitment, Borrower may borrow,
- ---------- prepay and reborrow under this Loan so long as the maximum
principal amount outstanding does not exceed the maximum
amount of this loan and no default has occurred.
USE OF PROCEEDS: Working Capital.
- ---------------
REPORTING
- ---------
REQUIREMENTS:
------------
Requirements: 1) Annual company financials, within 120 days of FYE.
2) Annual updated personal financial, within 120 days of
calendar year end.
3) Annual tax returns on the Guarantors, within 30 days of
filing.
4) Monthly internally prepared company financials, within
50 days of month end.
5) Other information as reasonably requested.
FINANCIAL COVENANTS:
- ----------------------
1. Maintain monthly profitability
2. Attain a positive Net worth by 8/31/98
2. At the end of fiscal year 1998 have a tangible net worth
no less than $1,000,000.
3. Debt to Tangible Net Worth: - Maintain a ratio of debt to
tangible net worth of not greater than 2.3 to 1.0 as of
the end of the Borrower's fiscal year end.
DOCUMENTS: The obligation of the Borrower hereunder shall be evidenced by
- ---------
a Promissory Note Security Agreement, UCC Financing Statement and such other
documents and assurances as the Bank may request from Borrower and its officers
in order to make the Loan in a form satisfactory to the Bank and its counsel.
COUNTERPARTS: This Letter Agreement may be executed simultaneously in two or
- ------------
more counterparts, each of which shall be deemed an original for evidentiary
purposes, but all of which together shall constitute one and the same
instrument.
SUCCESSORS AND ASSIGNS: This Letter Agreement shall be binding on all parties
- ----------------------
thereto, their successors, assigns and representatives.
DEFAULT: Borrower shall be in default under this Utter Agreement and under any
- -------
and all promissory notes executed by Borrower in favor of Bank and any and all
other documents, instruments, deeds of trust, deed to secure debt, mortgages,
security agreements, guarantees executed and/or delivered by Borrower in
connection with the Loan (collectively, the "Loan Documents"), if it shall
default in the payment of any amounts due and owing under the Loan or any other
obligation of Borrower to Bank or to some other party or should it fail to
timely and properly
Page 6
<PAGE>
perform, keep and observe any term, covenant, agreement or condition in this
Letter Agreement or any of the Loan Documents.
MATERIAL ADVERSE CHANGE: This Letter Agreement is conditioned upon there having
- -----------------------
occurred no act, omission or undertaking which would, singly or in the
aggregate, have a materially adverse effect upon the business, assets,
liabilities, financial condition, results of operations or business prospects of
the Borrower, any of its subsidiaries, or of any guarantor, or upon the ability
of the Borrower to perform any material obligations arising under the Loan
Documents.
ACCEPTANCE AND SURVIVAL: The terms and provisions of this Letter Agreement shall
- -----------------------
survive the closing of the Loan, the delivery of all documents necessary to
carry out the provision of this Letter Agreement, and the funding and making of
advances and disbursements hereunder. If the terms and conditions of the Letter
Agreement meet with your approval, please indicate your acceptance by signing
and returning the original to us. This Letter Agreement shall become null and
void if not accepted within ten (10) working days of the date hereof, and the
Loan closed within thirty (30) working days of the- date hereof.
ARBITRATION: Any controversy or claim between or among the parties hereto
- -----------
including but not limited to those arising out of or relating to this Agreement
or any related instruments, agreements or documents including any claim based on
or arising from an alleged tort, shall be determined by binding arbitration in
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), and the rules of practice and procedure for the
arbitration of commercial disputes of J.A.M.S./Endispute, or any successor
thereto, as supplemented by any special rules set forth in any of the Loan
Documents. Judgment upon any arbitration award may be entered in any court
having jurisdiction. Any party to this Agreement may bring an action, including
a summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement applies in any court having jurisdiction over such
action.
ENTIRE AGREEMENT: This Agreement, together with Loan Documents, supersede all
- ----------------
prior written or oral understandings or agreements between Borrower and Bank
with respect to the matters addressed in the Loan Documents.
Acknowledged and agreed to this 20 day of May 1998.
LogistiCare, Inc. d/b/a/ Automated Dispatch Solutions, Inc.
By: /s/ Michael E. Weksel
---------------------
Title: VP & CFO
---------------------
Page 7
<PAGE>
Exhibit 10.20A
NationsBank, N.A. Customer #
Date: April 2, 1998
-------------
LIMITED GUARANTY
================================================================================
Bank: Guarantor:
NationsBank, N.A. John Pappajohn
Banking Center: South Atlanta Commercial Center 24 Foster Drive
3000 Corporate Center Des Moines, IA 50312
Morrow, Georgia 30260
County: Clayton County: Polk County
================================================================================
"BORROWER": LOGISTICARE. INC.
----------------
1. GUARANTY. FOR VALUE RECEIVED, and to induce NationsBank, N.A. (Attn:
Commercial Banking) ("Bank") to make loans or advances or to extend credit or
- -------------------
other financial accommodations or benefits, with or without security, to or for
the account of Borrower, the undersigned "Guarantor", if more than one, then
each of them jointly and severally, hereby becomes surety for and irrevocably
and unconditionally guarantees to Bank prompt payment in an amount as provided
herein, when due, whether by acceleration or otherwise, of any Liabilities of
Borrower to Bank. This Guaranty is cumulative to and does not supersede any
other guaranties.
This Guaranty is continuing and limited to the amount of $1,000,000.00 dollars
-------------
principal plus interest owing at any time, plus attorney's fees, cost of
expenses of collection incurred and/or the cost of the enforcement of rights in
enforcing this Guaranty (including, without limitation, any liability arising
from failure to comply with any state or federal laws, rules and regulations
concerning the control of hazardous waste or substances at or with respect to
any real estate securing any loan guaranteed hereby), plus interest on such
attorney's fees and cost of collection.
Except to the extent limited above, Guarantor unconditionally guarantees the
faithful, prompt and complete compliance by Borrower with all Obligations (as
hereinafter defined). The undertakings of Guarantor hereunder are independent
of the Liabilities and Obligations of Borrower and a separate action or actions
for payment, damages or performance may be brought or prosecuted against
Guarantor, whether or not an action is brought against Borrower or to realize
upon the security for the Liabilities and/or Obligations, whether or not
Borrower is joined in any such action or actions, and whether or not notice is
given or demand is made upon Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person or entity, whether primarily or secondarily liable, or against any
collateral held by it, before resorting to Guarantor for payment, and Guarantor
shall not be entitled to assert as a defense to the enforceability of the
Guaranty any defense of Borrower with respect to any Liabilities or Obligations.
2. PARAGRAPH HEADINGS, GOVERNING LAW AND BINDING EFFECT. Guarantor agrees that
the paragraph headings in this Guaranty are for convenience only and that they
will not limit any of the provisions of this Guaranty. Guarantor further agrees
that this Guaranty shall be governed by and construed in accordance with the
laws of the State of Georgia and applicable United States federal law.
Guarantor further agrees that this Guaranty shall be deemed to have been made in
the State of Georgia at Bank's address indicated above, and shall be governed
by, and construed in accordance with, the laws of the State of Georgia, or the
United States courts located within the State of Georgia, and is performable in
the State of Georgia. This Guaranty is binding upon Guarantor, his, their or
its executors, administrators, successors or assigns, and shall inure to the
benefit of Bank, its successors, indorsees or assigns. Anyone executing this
Guaranty shall be bound by the terms hereof without regard to execution by
anyone else.
3. DEFINITIONS.
A. "Guarantor" shall mean Guarantor or any one or more of them.
B. "Liability" or "Liabilities" shall mean without limitation, all
liabilities, overdrafts, Indebtedness, and obligations of Borrower and/or
Guarantor to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including reasonable attorney's fees and cost of collection) incurred in the
collection thereof or the enforcement of rights thereunder (including without
limitation, any liability arising from failure to comply with state or federal
laws, rules and regulations concerning the control of hazardous waste or
substances at or with respect to any real estate securing any loan guaranteed
hereby), whether arising in the ordinary course of business or otherwise. If
Borrower is a partnership, corporation or other entity the term "Liability" or
"Liabilities" as used herein shall include all Liabilities to Bank of any
successor entity or entities.
Page 1
<PAGE>
C. "Loan Documents" shall mean all deeds to secure debt, deeds of trust,
mortgages, security agreements and other documents, securing payment of the
Liabilities and all notes and other agreements, document, and instruments
evidencing or relating to the Liabilities and Obligations.
D. "Obligation" or "Obligations" shall mean all terms, conditions,
covenants, agreements and undertakings of Borrower and/or Guarantor under all
notes and other documents evidencing the Liabilities, and under all deeds to
secure debt, deeds of trust, mortgages, security agreements and other
agreements, documents and instruments executed in connection with the
Liabilities or related thereto.
4. WAIVERS BY GUARANTOR. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liabilities or Obligations to which it may apply,
presentment, demand for payment, protest, notice of dishonor or nonpayment of
any Liabilities, notice of intent to accelerate, notice of acceleration, and
notice of any suit or the taking of other action by Bank against Borrower,
Guarantor or any other person, any applicable statute of limitations and any
other notice to any party liable on any Loan Document (including Guarantor).
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any other Guarantor hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Bank against Borrower or against any security
which Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise.
Guarantor also waives the benefits of any provision of law requiring that Bank
exhaust any right or remedy, or take any action, against Borrower, any
Guarantor, any other person and/or property including but not limited to the
provisions of the Official Code of Georgia (S)10-7-24 and the Official Code of
Georgia (S)11-3-601, inclusive, as amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing or otherwise affecting the Obligations of Guarantor, in whole or in
part, and without the indorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment,
or change or extend the time of or renew, or change any interest rate or alter
any Liability or Obligation or installment thereof, or any security therefor;
(b) loan additional monies or extend additional credit to Borrower, with or
without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall apply to the Liabilities and Obligations as so changed, extended,
surrendered, realized upon or otherwise altered; (c) sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner and in any order
any property at any time pledged or mortgaged to secure the Liabilities or
Obligations and any offset there against; (d) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner; (e) settle or compromise any Liability
or Obligation or any security therefor and subordinate the payment of all or any
part thereof to the payment of any Liability or Obligation of any other parties
primarily or secondarily liable on any of the Liabilities or Obligations; (f)
release or compromise any Liability of Guarantor hereunder or any Liability or
Obligation of any other parties primarily or secondarily liable on any of the
Liabilities or Obligations; or (g) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
5. SUBORDINATION. Upon demand of Bank, Guarantor agrees that it will not
demand, take or receive from Borrower, by set-off or in any other manner,
payment of any debt, now and at any time or times hereafter owing by Borrower to
Guarantor unless and until all the Liabilities and Obligations shall have been
fully paid and performed, and any security interest, liens or encumbrances which
Guarantor now has and from time to time hereafter may have upon any of the
assets of Borrower shall be made subordinate, junior and inferior and postponed
in priority, operation and effect to any security interest of Bank in such
assets.
6. WAIVERS BY BANK. No delay on the part of Bank in exercising any of its
options, powers or rights, and no partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. TERMINATION. This Guaranty shall be binding on each Guarantor until written
notice of revocation signed by such Guarantor or written notice of the death of
such Guarantor shall have been received by Bank, notwithstanding change in name,
location, composition or structure of, or the dissolution, termination or
increase, decrease or change in personnel, owners or partners of Borrower, or
any one or more of Guarantors. No notice of revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
Liabilities or Obligations that shall have been committed, created, contracted,
assumed or incurred prior to receipt of such written notice pursuant to any
agreement entered into by Bank prior to receipt of such notice. The sole effect
of such notice of revocation or termination hereof shall be to exclude from this
Guaranty, Liabilities or Obligations thereafter arising that are unconnected
with Liabilities or Obligations theretofore arising or transactions entered into
theretofore.
In the event of the death of a Guarantor, the liability of the estate of tile
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower after
the date of the death of the deceased Guarantor pursuant to a commitment made by
Bank to Borrower prior to the date of such death. As to all surviving
Guarantors, this Guaranty
Page 2
<PAGE>
shall continue in full force and effect after the death of a Guarantor, not only
as to the Liabilities existing at that time, but also as to Liabilities
thereafter incurred by Borrower to Bank.
8. PARTIAL INVALIDITY AND/OR ENFORCEABILITY OF GUARANTY. The unenforceability
or invalidity of any provision of this Guaranty shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document as It may apply to any
person or circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
9. CHANGE OF STATUS. Guarantor will not become a party to a merger or
consolidation with any other company, except where Guarantor is the surviving
corporation or entity, and all covenants under this Guaranty are assumed by the
surviving entity. Further, Guarantor may not change its legal structure,
without the written consent of Bank and all covenants under this Guaranty are
assumed by the new or surviving entity. Guarantor further agrees that this
Guaranty shall be binding, legal and enforceable against Guarantor in the event
Borrower changes its name, status or type of entity.
10. FINANCIAL AND OTHER INFORMATION. Guarantor agrees to furnish to Bank any
and all financial information and any other information regarding Guarantor
and/or collateral requested in writing by Bank within ten (10) days of the date
of the request. Guarantor has made an independent investigation of the
financial condition and affairs of Borrower prior to entering into this
Guaranty, and Guarantor will continue to make such investigation; and in
entering into this Guaranty Guarantor has not relied upon any representation of
Bank as to the financial condition, operation or creditworthiness of Borrower.
Guarantor further agrees that Bank shall have no duty or responsibility now or
hereafter to make any investigation or appraisal of Borrower on behalf of
Guarantor or to provide Guarantor with any credit or other information which may
come to its attention now or hereafter.
11. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action to the address of Guarantor or
Bank, at their respective addresses indicated at the beginning of this Guaranty,
or to such other address as any party may designate by written notice to the
other party. Each notice, request and demand shall be deemed given or made, if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, or if sent by any other
means, upon delivery.
12. GUARANTOR DUTIES. Guarantor shall upon notice or demand by Bank promptly
and with due diligence pay all Liabilities and perform and satisfy all
Obligations for the benefit of Bank in the event of (a) the occurrence of any
default under any Loan Documents; (b) the failure of any Borrower or Guarantor
to perform any obligation or pay any liability or indebtedness of any Borrower
or Guarantor to Bank, or to any affiliate of Bank, whether under any Note,
Guaranty, or any other agreement, now or hereafter existing, as and when due
(whether upon demand, at maturity or by acceleration); (c) tile failure of any
Borrower or Guarantor to pay or perform any other liability, obligation or
indebtedness of any Borrower or Guarantor to any other party; (d) the death of
any Borrower or Guarantor (if an individual); (e) the resignation or withdrawal
of any partner or a material owner/Guarantor of Borrower, as determined by Bank
in its sole discretion; (f) the commencement of a proceeding against any
Borrower or Guarantor for dissolution or liquidation, the voluntary or
involuntary termination or dissolution of any Borrower or Guarantor or the
merger or consolidation of any Borrower or Guarantor with or into another
entity; (g) the insolvency, or the business failure of, or the appointment of a
custodian, trustee, liquidator or receiver for or of any of the property of, or
the assignment for the benefit of creditors by, or the filing of a petition
under bankruptcy, insolvency or debtor's relief law or the filing of a petition
for any adjustment of indebtedness, composition or extension by or against any
Borrower or Guarantor; (h) the sole determination by Bank that any
representation or warranty to Bank in any Loan Document or otherwise to Bank was
untrue or materially misleading when made; (i) the failure of Guarantor or
Borrower to timely deliver such financial statements including tax returns and
all schedules, or other statements of condition or other information, as Bank
shall request from time to time; (j) the entry of a judgment against Borrower or
Guarantor which Bank deems to be of a material nature in the sole discretion of
Bank; (k) the seizure or forfeiture of any of Borrower or Guarantor's property,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order; (i) the sole determination by Bank that Guarantor or Borrower
jointly or severally, has suffered a material adverse change in its financial
condition; (m) the determination by Bank that for any reason it is insecure; (n)
any lien or additional security interest being placed upon any collateral which
is security for any Loan Document; or (o) the failure of Borrower's business to
comply with any law or regulation controlling the operation of Borrower's
business.
13. REMEDIES. Upon the failure of Guarantor to fulfill its duty to pay all
Liabilities and perform and satisfy all Obligations as required hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice or demand: (a) declare
any Liability due and payable at once; (b) take possession of any collateral
pledged by Borrower or Guarantor wherever located, and sell, resell, assign,
transfer and deliver all or any part of said collateral of Borrower or Guarantor
at any public or private sale or otherwise dispose of any or all of the
collateral in its then condition, for cash or on credit or for future delivery,
and in connection therewith Bank may impose reasonable conditions upon any such
sale, and Bank, unless prohibited by law the provisions of which cannot be
waived, may purchase all or any part of said collateral to be sold, free from
and discharged of all trusts, claims, rights or redemption and equities of
Borrower or Guarantor whatsoever; Guarantor acknowledges and agrees that the
sale of any collateral through any nationally recognized broker-dealer,
Investment banker or any other method common in the securities industry shall be
deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof
except as provided herein; and (c) set-off against any or all liabilities of
Guarantor all money owed by Bank or any of its agents or affiliates in any
capacity to Guarantor whether or not due, and also set-off against all other
Liabilities of Guarantor to Bank all money owed by Bank in any capacity to
Guarantor, and if exercised by Bank, Bank shall be deemed to have exercised such
right of set-off and to have made a charge against any such money immediately
upon the occurrence of such default although made or entered on the books
subsequent thereto.
Page 3
<PAGE>
Bank shall have a properly perfected security interest In all of Guarantor's
funds on deposit with Bank to secure the balance of any Liabilities and/or
Obligations that Guarantor may now or in the future owe Bank. Bank is granted a
contractual right of set-off and will not be liable for dishonoring checks or
withdrawals where the exercise of Bank's contractual right of set-off or
security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in the possession of Bank, including but not limited to any joint account,
special account, account by the entiretie, tenancy in common, and all, dividends
and distributions now or hereafter in the possession or control of Bank.
14. ATTORNEY FEES, COST AND EXPENSES. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of Court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or defending this
agreement.
15. COLLATERAL. Bank at all times and from time to time shall have the right
to require Guarantor to deliver to Bank collateral satisfactory to Bank to
secure Guarantor's undertakings hereunder and/or the Liabilities of Guarantor
hereunder.
[ ] In addition to the provisions stated above, Guarantor hereby pledges,
assigns and grants to Bank a security interest in and title to the collateral
described in the security agreement, deed of trust, deed to secure debt,
mortgage or other collateral instrument dated which
-------------------
collateral, except for any margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System), shall secure this Guaranty, whether
currently existing or arising in the future. Guarantor agrees to execute such
security agreements, financing statements and other documents as Bank may
reasonably require or request to obtain and perfect its security interest in
said collateral.
16. PRESERVATION OF PROPERTY. Bank shall not be bound to take any steps
necessary to preserve any rights in any property pledged as collateral to Bank
to secure Borrower and/or Guarantor's Liabilities and Obligations as against
prior parties who may be liable in connection therewith, and Borrower and
Guarantor hereby agree to take any such steps. Bank, nevertheless, at any time,
may (a) take any action It deems appropriate for the care or preservation of
such property or of any rights of Borrower and/or Guarantor or Bank therein; (b)
demand, sue for, collect or receive any money or property at any time due,
payable or receivable on account of or in exchange for any property pledged as
collateral to Bank to secure Borrower and/or Guarantor's Liabilities to Bank;
(c) compromise and settle with any person liable on such property; or (d) extend
the time of payment or otherwise change the terms of the Loan Documents as to
any party liable on the Loan Documents, all without notice to, without incurring
responsibility to, and without affecting any of the Obligations or Liabilities
of Guarantor.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF
-------------
ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
---------------------
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
18. CONTROLLING DOCUMENT. To the extent that this Limited Guaranty conflicts
with or is in any way incompatible with any other Loan Document concerning this
Obligation, any promissory note shall control over any other document, and if
such promissory note does not address an issue, then each other document shall
control to the extent that it deals most specifically with an issue.
Page 4
<PAGE>
19. EXECUTION UNDER SEAL. This Guaranty Is being executed under seal by
Guarantor.
20. NOTICE OF FINAL AGREEMENT. THIS WRITTEN LIMITED GUARANTY REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on this ____ day of May, 1998.
WITNESSED BY: GUARANTOR
/s/ Tom Nelis /s/ John Pappajohn
- ---------------------------- ----------------------------
Tom Nelis, Vice President John Pappajohn
INDIVIDUAL ACKNOWLEDGMENT
State of New York
County of New York
This instrument was acknowledged before me on May 6, 1998, by
/s/ John Pappajohn . (Guarantor)
- --------------------------------------------
/s/ Olga M. Rodriguez (Seal)
- -------------------------------------------------
Notary Public in and for the State of New York
- -------------------------------------------------
Print Name of Notary
- -------------------------------------------------
My Commission Expires
Page 5
<PAGE>
Exhibit 10.20B
NationsBank, N.A. Customer #New
Date: April 2, 1998
SECURITY AGREEMENT
================================================================================
BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
NationsBank, N.A. LogistiCare, Inc. dba Automated
Banking Center: South Atlanta Commercial Dispatch Solutions Inc.
3000 Corporate Center 1895 Phoenix Blvd., Suite 306
Morrow, Georgia 30260 College Park, Georgia 30349
County: Clayton County: Polk County
================================================================================
Debtor/Pledgor is: Corporation
Address is Debtor's: Place of Business
Collateral (hereinafter defined) is located at: 1895 Phoenix Blvd., Suite 306,
College Park, GA. 30349
================================================================================
1. SECURITY INTEREST. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor (hereinafter referred
to as "Debtor") assigns and grants to Bank (also known as "Secured Party"), A
security interest and lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter defined).
2. COLLATERAL. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral"):
A. TYPE(S) OF COLLATERAL
ACCOUNTS:
Any and all accounts and other rights of Debtor to the payment for goods sold
or leased or for services rendered whether or not earned by performance,
including, without limitation, contract rights, book debts, checks, notes,
drafts, instruments, chattel paper, acceptances, and any and all amounts due to
Debtor from a factor or other forms of obligations and receivables, now existing
or hereafter arising.
INVENTORY:
Blanket Lien: Any and all of Debtor's goods held as inventory, whether now
owned or hereafter acquired, including without limitation, any and all such
goods held for sale or lease or being processed for sale or lease in Debtor's
business, as now or hereafter conducted, including all materials, goods and work
in process, finished goods and other tangible property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
Debtor's business, along with all documents (including documents of title)
covering such inventory including the following (attach schedule if necessary):
EQUIPMENT:
Blanket Lien: Any and all of Debtor's goods held as equipment, including,
without limitation, all machinery, tools, dies, furnishings, or fixtures,
wherever located, whether now owned or hereafter acquired, together with all
increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith including
the following (attach schedule if necessary):
B. SUBSTITUTIONS, PROCEEDS AND RELATED ITEMS. Any and all substitutes and
replacements for, accessions, attachments and other additions to, tools, parts
and equipment now or hereafter added to or used in connection with, and all cash
or non-cash proceeds and products of, the Collateral (including, without
limitation, all income, benefits and property receivable, received or
distributed which results from any of the Collateral, such as dividends payable
or distributable in cash, property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation, returned premiums,
interest, premium and principal payments; redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any securities
in the Collateral); any and all choses in action and causes of action of Debtor,
whether now existing or hereafter arising, relating directly or indirectly to
the Collateral (whether arising In contract, tort or otherwise and whether or
not currently In litigation); all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper, whether now
existing or hereafter arising directly or indirectly from or related to the
Collateral; all warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to the Collateral;
all of Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer systems, computer disks, computer programs, source
codes and object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data and other
information pertaining directly or indirectly to the Collateral from third
parties, whether now existing or hereafter arising; and all returned, refused,
stopped in transit, or repossessed Collateral, any of which, if received by
Debtor, upon request shall be delivered immediately to Bank.
Page 1
<PAGE>
C. BALANCES AND OTHER PROPERTY. The balance of every deposit account of
Debtor maintained with Bank and any other claim of Debtor against Bank, now or
hereafter existing, liquidated or unliquidated, and all money, instruments,
securities, documents, chattel paper, credits, claims, demands, income, and any
other property, rights and interests of Debtor which at any time shall come into
the possession or custody or under the contract of Bank or any of its agents or
affiliates for any purpose, and the proceeds of any thereof. Bank shall be
deemed to have possession of any of the Collateral in transit to or set apart
for it or any of its agents or affiliates.
3. DESCRIPTION OF OBLIGATIONS(S). The following obligations ("Obligation" or
"Obligations") are secured by this Agreement: (a) All debts, obligations,
liabilities and agreements of Debtor to Bank, now or thereafter existing,
arising directly or indirectly between Debtor and Bank whether absolute or
contingent, joint or several, secured or unsecured, due or not due, contractual
or tortious, liquidated or unliquidated, arising by operation of law or
otherwise, and all renewals, extensions or rearrangement of any of the above;
(b) All costs incurred by Bank to obtain, preserve, perfect and enforce this
Agreement and maintain, preserve, collect and realize upon the Collateral; (c)
All debt, obligations and liabilities of LOGISTICARE, INC. D/B/A AUTOMATED
---------------------------------
DISPATCH SOLUTIONS, INC. to Bank of the kinds described in this Item 3., now
- ------------------------
existing or hereafter arising; (d) All other costs and attorney's fees incurred
by Bank, for which Debtor is obligated to reimburse Bank in accordance with the
terms of the Loan Documents (hereinafter defined), together with interest at the
maximum rate allowed by law, or if none, 25% per annum; and (e) All amounts
which may be owed to Bank pursuant to all other Loan Documents executed between
Bank and any other Debtor. If Debtor is not the obligor of the Obligation, and
in the event any amount paid to Bank on any Obligation is subsequently recovered
from Bank in or as a result of any bankruptcy, insolvency or fraudulent
conveyance proceeding, Debtor shall be liable to Bank for the amounts so
recovered up to the fair market value of the Collateral whether or not the
Collateral has been released or the security interest terminated. In the event
the Collateral has been released or the security interest terminated, the fair
market value of the Collateral shall be determined, at Bank's option, as of the
date the Collateral was released, the security interest terminated, or said
amounts were recovered.
4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Bank as
follows:
A. FINANCING STATEMENTS. Except as noted in Bank UCC searches and as may be
noted by schedule attached hereto and incorporated herein by reference, no
financing statement covering the Collateral is or will be on file in any public
office, except the financing statements relating to this security interest, and
no security interest, other than the one herein created, has attached or been
perfected in the Collateral or any part thereof.
B. OWNERSHIP. Debtor owns, or will use the proceeds of any loans by Bank to
become the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
C. FIXTURES AND ACCESSIONS. None of the Collateral is affixed to real estate
or is an accession to any goods, or will become a fixture or accession, except
as expressly set out herein.
D. CLAIMS OF DEBTORS ON THE COLLATERAL. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
E. ENVIRONMENTAL COMPLIANCE. The conduct of Debtor's business operations and
the condition of Debtor's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or any materials defined as hazardous
materials or substances under any local, state or federal environmental laws,
rules or regulations, and petroleum, petroleum products, oil and asbestos
("Hazardous Materials").
F. POWER AND AUTHORITY. Debtor has full power and authority to make this
Agreement, and all necessary consents and approvals of any persons, entities,
governmental or regulatory authorities and securities exchanges have been
obtained to effectuate the validity of this Agreement.
5. DEBTOR'S COVENANTS. Until full payment and performance of all of the
Obligation and termination or expiration of any obligation or commitment of Bank
to make advances or loans to Debtor, unless Bank otherwise consents in writing:
A. OBLIGATION AND THIS AGREEMENT. Debtor shall perform all of its agreements
herein and in any other agreements between it and Bank.
B. OWNERSHIP AND MAINTENANCE OF THE COLLATERAL. Debtor shall keep all
tangible Collateral in good condition. Debtor shall defend the Collateral
against all claims and demands of all persons at any time claiming any interest
therein adverse to Bank. Debtor shall keep the Collateral free from all liens
and security interests except those for taxes not yet due and the security
interest hereby created.
C. INSURANCE. Debtor shall insure the Collateral with companies acceptable to
Bank. Such insurance shall be in an amount not less than the fair market value
of the Collateral and shall be against such casualties, with such deductible
amounts as Bank shall approve. All insurance policies shall be written for the
benefit of Debtor and Bank as their interests may appear, payable to Bank as
loss payee, or in other form satisfactory to Bank, and such policies or
certificates evidencing the same shall be furnished to Bank. All policies of
insurance shall provide for written notice to Bank at least thirty (30) days
prior to cancellation. Risk of loss or damage is Debtor's to the extent of any
deficiency in any effective insurance coverage.
D. BANK'S COSTS. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce the security interest created by this Agreement,
collect the Obligation, and preserve, defend, enforce and collect the
Collateral,
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including but not limited to taxes, assessments, insurance premiums, repairs,
rent, storage costs and expenses of sales, legal expenses, reasonable attorney's
fees and other fees or expenses for which Debtor is obligated to reimburse Bank
in accordance with the terms of the Loan Documents. Whether the Collateral is or
is not in Bank's possession, and without any obligation to do so and without
waiving Debtor's default for failure to make any such payment, Bank at its
option may pay any such costs and expenses, discharge encumbrances on the
Collateral, and pay for insurance of the Collateral, and such payments shall be
a part of the Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. INFORMATION AND INSPECTION. Debtor shall (i) promptly furnish Bank any
information with respect to the Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever located,
and to inspect and copy, or furnish Bank or its representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) promptly
furnish Bank or its representatives such information as Bank may request to
identify the Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
the Collateral.
F. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver any papers deemed
necessary or desirable in the judgment of Bank to obtain, maintain, and perfect
the security interest hereunder and to enable Bank to comply with any federal or
state law in order to obtain or perfect Bank's interest in the Collateral or to
obtain proceeds of the Collateral.
G. PARTIES LIABLE ON THE COLLATERAL. Debtor shall preserve the liability of
all obligors on any Collateral, shall preserve the priority of all security
therefor, and shall deliver to Bank the original certificates of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
H. RECORDS OF THE COLLATERAL. Debtor at all times shall maintain accurate
books and records covering the Collateral. Debtor immediately will mark all
books and records with an entry showing the absolute assignment of all
Collateral to Bank, and Bank is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
I. DISPOSITION OF THE COLLATERAL. If disposition of any Collateral gives rise
to an account, chattel paper or instrument, Debtor immediately shall notify
Bank, and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed of
by Debtor in any manner without the prior written consent of Bank, except the
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
J. ACCOUNTS. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties and shall not be evidenced by
any instrument or chattel paper.
K. NOTICE/LOCATION OF THE COLLATERAL. Debtor shall give Bank written notice
of each office of Debtor in which records of Debtor pertaining to accounts held
as Collateral are kept, and each location at which the Collateral is or will be
kept, and of any change of any such location. If no such notice is given, all
records of Debtor pertaining to the Collateral and all Collateral of Debtor are
and shall be kept at the address marked by Debtor above.
L. CHANGE OF NAME/STATUS AND NOTICE OF CHANGES. Without the written consent
of Bank, Debtor shall not change its name, change its corporate status, use any
trade name or engage in any business not reasonably related to its business as
presently conducted. Debtor shall notify Bank immediately of (i) any material
change in the Collateral, (ii) a change in Debtor's residence or location, (iii)
a change in any matter warranted or represented by Debtor in this Agreement, or
in any of the Loan Documents or furnished to Bank pursuant to this Agreement,
and (iv) the occurrence of an Event of Default (hereinafter defined).
M. USE AND REMOVAL OF THE COLLATERAL. Debtor shall not use the Collateral
illegally. Debtor shall not, unless previously indicated as a fixture, permit
the Collateral to be affixed to real or personal property without the prior
written consent of Bank. Debtor shall not permit any of the Collateral to be
removed from the locations specified herein without the prior written consent of
Bank, except for the sale of inventory in the ordinary course of business.
N. POSSESSION OF THE COLLATERAL. Debtor shall deliver all investment
securities and other instruments, documents and chattel paper which are part of
the Collateral and in Debtor's possession to Bank immediately, or if hereafter
acquired, immediately following acquisition, appropriately indorsed to Bank's
order, or with appropriate, duly executed powers. Debtor waives presentment,
notice of acceleration, demand, notice of dishonor, protest, and all other
notices with respect thereto.
O. CONSUMER CREDIT. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this covenant.
P. POWER OF ATTORNEY. Debtor appoints Bank and any officer thereof as
Debtor's attorney-in-fact with full power in Debtor's name and behalf to do
every act which Debtor is obligated to do or may be required to do hereunder;
however, nothing in this paragraph shall be construed to obligate Bank to take
any action hereunder nor shall Bank be liable to Debtor for failure to take any
action hereunder. This appointment shall be deemed A power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor.
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Q. WAIVERS BY DEBTOR. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligation; waives presentment, demand, notice of dishonor, and protest;
waives notice of the amount of the Obligation outstanding at any time, notice of
any change in financial condition of any person liable for the Obligation or any
part thereof, notice of any Event of Default, and all other notices respecting
the Obligation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, extended or renewed one or more times by Bank in its
discretion, without notice to Debtor. Debtor waives any right to require that
any action be brought against any other person or to require that resort be had
to any other security or to any balance of any deposit account. Debtor further
waives any right of subrogation or to enforce any right of action against any
other Debtor until the Obligation is paid in full.
R. WAIVER OF NOTICE FOR IMMEDIATE WRIT OF POSSESSION. Debtor hereby
acknowledges that the indebtedness arises out of a "commercial transaction" as
that term is defined in O.C.G.A. Sec. 44-14-260(1) concerning foreclosure of
mortgages on personalty, and agrees that if a default has occurred and is
continuing, Bank shall have the right to an immediate writ of possession without
notice of hearing, and Debtor hereby knowingly and intelligently waives any and
all rights it may have to any notice and posting of a bond prior to seizure by
Bank, its transferees, assigns or successors in interest of the Collateral or
any portion thereof. The foregoing is intended by Debtor as a "waiver" as that
term is defined in O.C.G.A. Sec. 44-14-260(3) relating to foreclosure of
mortgages on personalty.
S. OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liability on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this Agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or against any person for any part
of the Obligation or seek to realize upon any other security for the Obligation,
before foreclosing or otherwise realizing upon the Collateral. Debtor waives
any right to the benefit of or to require or control application of any other
security or proceeds thereof, and agrees that Bank shall have no duty or
obligation to Debtor to apply to the Obligation any such other security or
proceeds thereof.
T. COLLECTION AND SEGREGATION OF ACCOUNTS AND RIGHT TO NOTIFY. Bank hereby
authorizes Debtor to collect the Collateral, subject to the direction and
control of Bank, but Bank may, without cause or notice, curtail or terminate
said authority at any time. Upon notice by Bank, whether oral or in writing, to
Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and
other remittances in payment of or on account of the Collateral, deposit the
same IN one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon an
express trust for Bank until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are secured
hereby as Bank may in its sole discretion elect. At the sole election of Bank,
any portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to Debtor. At
any time, whether Debtor is or is not in default hereunder, Bank may notify
persons obligated on any Collateral to make payments directly to Bank and Bank
may take control of all proceeds of any Collateral. Until Bank elects to
exercise such rights, Debtor, as agent of Bank, shall collect and enforce all
payments owed on the Collateral.
U. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor will maintain its
existence, good standing and qualification to do business, where required, and
comply with all laws, regulations and governmental requirements, including
without limitation, environmental laws applicable to it or any of its property,
business operations and transactions.
V. ENVIRONMENTAL COVENANTS. Debtor shall immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Debtor's business operations; and
(ii) all claims made or threatened by any third party against Debtor relating to
damages, contributions, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials. Debtor shall immediately notify Bank of any
remedial action taken by Debtor with respect to Debtor's business operations.
Debtor will not use or permit any other party to use any Hazardous Materials at
any of Debtor's places of business or at any other property owned by Debtor
except such materials as are incidental to Debtor's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Debtor agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Debtor's places of business or any other
property of Debtor at any reasonable times upon three (3) days prior notice for
the purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that Debtor is complying with this covenant
and Debtor shall reimburse Bank on demand for the costs of any such
environmental investigation and audit. Debtor shall provide Bank, its agents,
contractors, employees and representatives with access to and copies of any and
all data and documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by Debtor's business operations
within five (5) days of the request therefor.
6. RIGHTS AND POWERS OF BANK.
A. GENERAL. Bank, before or after default, without liability to Debtor may:
obtain from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
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require Debtor to give possession or control of any Collateral to Bank; indorse
as Debtor's agent any instruments, documents or chattel paper in the Collateral
or representing proceeds of the Collateral; contact account debtors directly to
verify information furnished by Debtor; take control of proceeds, including
stock received as dividends or by reason of stock splits; release the Collateral
in its possession to any Debtor, temporarily or otherwise; require additional
Collateral; reject as unsatisfactory any property hereafter offered by Debtor as
Collateral; set standards from time to time to govern what may be used as after
acquired Collateral; designate, from time to time, a certain percent of the
Collateral as the loan value and require Debtor to maintain the Obligation at or
below such figure; take control of funds generated by the Collateral, such as
cash dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligation and exercise all other rights which an owner
of such Collateral may exercise, except the right to vote or dispose of the
Collateral before an Event of Default; at any time transfer any of the
Collateral or evidence thereof into its own name or that of Its nominee; and
demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Bank may determine. Bank shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of Bank, its
officers, agents or employees, except for its or their own willful misconduct or
gross negligence. The foregoing rights and powers of Bank will be in addition
to, and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Bank's option (i) protect only Bank and not provide any
remuneration or protection for Debtor directly and (ii) provide coverage only
after the Obligation has been declared due as herein provided. The premiums for
any such insurance purchased by Bank shall be a part of the Obligation and shall
bear interest as provided in 3(d) hereof.
B. CONVERTIBLE COLLATERAL. Bank may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
7. DEFAULT.
A. EVENT OF DEFAULT. An event of default (" Event of Default") shall occur
if: (i) there is a loss, theft, damage or destruction of any material portion of
the Collateral for which there is no insurance coverage or for which, in the
opinion of Bank, there is insufficient insurance coverage; (ii) Debtor or any
other obligor on all or part of the Obligation shall fail to timely and properly
pay or observe, keep or perform any term, covenant, agreement or condition in
this Agreement or in any other agreement between Debtor and Bank or between Bank
and any other obligor on the Obligation, including, but not limited to, any
other note or instrument, loan agreement, security agreement, deed of trust,
mortgage, promissory note, guaranty, certificate, assignment, instrument,
document or other agreement concerning or related to the Obligation
(collectively, the "Loan Documents"); (iii) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any agreement between such party and any affiliate or
subsidiary of NationsBank Corporation; (iv) Debtor or such other obligor shall
fail to timely and properly pay or observe, keep or perform any term, covenant,
agreement or condition in any lease agreement between such party and any lessor
pertaining to premises at which any Collateral is located or stored; or (v)
Debtor or such other obligor abandons any leased premises at which any
Collateral is located or stored and the Collateral is either moved without the
prior written consent of Bank or the Collateral remains at the abandoned
premises.
B. RIGHTS AND REMEDIES. If any Event of Default shall occur, then, in each
and every such case, Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment, or protest; notice of intent to
accelerate all or any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives (except for any notice required under this Agreement,
any other Loan Document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies at Bank's option:
i. ACCELERATION. The Obligation shall, at Bank's option, become
immediately due and payable, and the obligation, if any, of Bank to permit
further borrowings under the Obligation shall at Bank's option immediately cease
and terminate.
ii. POSSESSION AND COLLECTION OF THE COLLATERAL. At its option: (a) take
possession or control of, store, lease, operate, manage, sell, or instruct any
Agent or Broker to sell or otherwise dispose of, all or any part of the
Collateral; (b) notify all parties under any account or contract right forming
all or any part of the Collateral to make any payments otherwise due to Debtor
directly to Bank; (c) in Bank's own name, or in the name of Debtor, demand,
collect, receive, sue for, and give receipts and releases for, any and all
amounts due under such accounts and contract rights; (d) indorse as the agent of
Debtor any check, note, chattel paper, documents, or instruments forming all or
any part of the Collateral; (e) make formal application for transfer, to Bank
(or to any assignee of Bank or to any purchaser of any of the Collateral) of all
of Debtor's permits, licenses, approvals, agreements, and the like relating to
the Collateral or to Debtor's business; (f) take any other action which Bank
deems necessary or desirable to protect and realize upon its security interest
in the Collateral; and (g) in addition to the foregoing, and not in substitution
thereof, exercise any one or more of the rights and remedies exercisable by Bank
under any other provision of this Agreement, under any of the other Loan
Documents, or as provided by applicable law (including, without limitation, the
Uniform Commercial Code as in effect in Georgia (hereinafter referred to as the
"UCC")). In taking possession of the Collateral Bank may enter Debtor's
premises and otherwise proceed without legal process, if this can be done
without breach of the peace. Debtor shall, upon Bank's demand, promptly make
the Collateral or other security available to Bank at a place designated by
Bank, which place shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Bank's willful and malicious
act. Bank shall have no duty to take any action to preserve or collect the
Collateral.
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iii. RECEIVER. Obtain the appointment of a receiver for all or any of the
Collateral, Debtor hereby consenting to the appointment of such a receiver and
agreeing not to oppose any such appointment.
iv. RIGHT OF SET OFF. Without notice or demand to Debtor, set off and
apply against any and all of the Obligation any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by Bank or any of Bank's agents or affiliates to or for
the credit of the account of Debtor or any guarantor or indorser of Debtor's
Obligation.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Bank for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligation shall be applied to the Obligation in such order and in such manner
as Bank in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any and all
obligations and liabilities arising out of or related to the timing or manner of
any such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities law,
Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. GENERAL.
A. PARTIES BOUND. Bank's rights hereunder shall inure to the benefit of its
successors and assigns. In the event of any assignment or transfer by Bank of
any of the Obligation or the Collateral, Bank thereafter shall be fully
discharged from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. WAIVER. No delay of Bank in exercising any power or right shall operate as
a waiver thereof; nor shall any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power or
right. No waiver by Bank of any right hereunder or of any default by Debtor
shall be binding upon Bank unless in writing, and no failure by Bank to exercise
any power or right hereunder or waiver of any default by Debtor shall operate as
a waiver of any other or further exercise of such right or power or of any
further default. Each right, power and remedy of Bank as provided for herein or
in any of the Loan Documents, or which shall now or hereafter exist at law or in
equity or by statute or otherwise, shall be cumulative and concurrent and shall
be in addition to every other such right, power or remedy. The exercise or
beginning of the exercise by Bank of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by Bank of any or
all other such rights, powers or remedies.
C. AGREEMENT CONTINUING. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this Agreement.
D. DEFINITIONS. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Agreement; if UCC definitions conflict,
Article 9 definitions apply.
E. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action (or if the UCC elsewhere specifies
a longer period, such longer period) to the address of Debtor given above, or to
such other address as any party may designate by written notice to the other
party. Each notice, request and demand shall be deemed given or made, if sent
by mail, upon the earlier of the date of receipt or five (5) days after deposit
in the U.S. Mail, first class postage prepaid, or if sent by any other means,
upon delivery.
F. MODIFICATIONS. No provision hereof shall be modified or limited except by
a written agreement expressly referring hereto and to the provisions so modified
imited and signed by Debtor and Bank. The provisions of the Agreement shall not
be modified or limited by course of conduct or usage of trade.
G. APPLICABLE LAW AND PARTIAL INVALIDITY. This Agreement has been delivered
in the State of Georgia and shall be construed in accordance with the laws of
that State. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement. The invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
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H. FINANCING STATEMENT. To the extent permitted by applicable law, a carbon,
photographic or other reproduction
of this Agreement or any financing statement covering the Collateral shall be
sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
i. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTRY OF ANY
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BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATION SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
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DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
J. CONTROLLING DOCUMENT. To the extent that this Security Agreement conflicts
with or is in any way incompatible with any other Loan Document concerning the
Obligation, any promissory note shall control over any other document, and if
such note does not address an issue, then each other document shall control to
the extent that it deals most specifically with an issue.
K. EXECUTION UNDER SEAL. This Agreement is being executed under seal by
Debtor(s).
L. ADDITIONAL PROVISIONS. See Schedule "N/A" attached hereto and incorporated
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hereunder for all purposes.
M. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
NATIONSBANK, N.A. CORPORATE OR PARTNERSHIP DEBTOR/PLEDGOR
LOGISTICARE, INC. DBA AUTOMATED DISPATCH
SOLUTION, INC.
By: /s/ Tom Nelis By: /s/ Michael E. Weksel
--------------------------- ---------------------------
Name: Tom Nelis Name: Michael E. Weksel
Title: Vice President Title: VP & CFO
By:
---------------------------
Name:
Title:
By:
---------------------------
Attest (if Applicable)
[Corporate Seal]
[Corporate Seal]
Page 7
<PAGE>
Exhibit 10.20C
NationsBank, N.A. Customer #
Date: April 2, 1998
-------------
Limited Guaranty
================================================================================
BANK: GUARANTOR:
NationsBank, N.A. John Pappajohn
Banking Center: South Atlanta Commercial Center 24 Foster Drive
3000 Corporate Center Des Moines, IA 50312
Morrow, Georgia 30260
County: Clayton County: Polk County
================================================================================
"BORROWER": LOGISTICARE, INC.
1. GUARANTY. FOR VALUE RECEIVED, and to induce NationsBank, N.A. (Attn:
Commercial Banking) ("Bank") to make loans or advances or to extend credit or
- ------------------
other financial accommodations or benefits, with or without security, to or for
the account of Borrower, the undersigned "Guarantor", if more than one, then
each of them jointly and severally, hereby becomes surety for and irrevocably
and unconditionally guarantees to Bank prompt payment in an amount as provided
herein, when due, whether by acceleration or otherwise, of any Liabilities of
Borrower to Bank. This Guaranty is cumulative to and does not supersede any
other guaranties.
This Guaranty is continuing and limited to the amount of $1,000,000.00 dollars
-------------
principal plus interest owing at any time, plus attorney's fees, cost of
expenses of collection incurred and/or the cost of the enforcement of rights in
enforcing this Guaranty (including, without limitation, any liability arising
from failure to comply with any state or federal laws, rules and regulations
concerning the control of hazardous waste or substances at or with respect to
any real estate securing any loan guaranteed hereby), plus interest on such
attorney's fees and cost of collection.
Except to the extent limited above, Guarantor unconditionally guarantees the
faithful, prompt and complete compliance by Borrower with all Obligations (as
hereinafter defined). The undertakings of Guarantor hereunder are independent
of the Liabilities and Obligations of Borrower and a separate action or actions
for payment, damages or performance may be brought or prosecuted against
Guarantor, whether or not an action is brought against Borrower or to realize
upon the security for the Liabilities and/or Obligations, whether or not
Borrower is joined in any such action or actions, and whether or not notice is
given or demand is made upon Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person or entity, whether primarily or secondarily liable, or against any
collateral held by it, before resorting to Guarantor for payment, and Guarantor
shall not be entitled to assert as a defense to the enforceability of the
Guaranty any defense of Borrower with respect to any Liabilities or Obligations.
2. PARAGRAPH HEADINGS, GOVERNING LAW AND BINDING EFFECT. Guarantor agrees that
the paragraph headings in this Guaranty are for convenience only and that they
will not limit any of the provisions of this Guaranty. Guarantor further agrees
that this Guaranty shall be governed by and construed in accordance with the
laws of the State of Georgia and applicable United States federal law.
Guarantor further agrees that this Guaranty shall be deemed to have been made in
the State of Georgia at Bank's address indicated above, and shall be governed
by, and construed in accordance with, the laws of the State of Georgia, or the
United States courts located within the State of Georgia, and is performable in
the State of Georgia. This Guaranty is binding upon Guarantor, his, their or
its executors, administrators, successors or assigns, and shall inure to the
benefit of Bank, its successors, indorsees or assigns. Anyone executing this
Guaranty shall be bound by the terms hereof without regard to execution by
anyone else.
3. DEFINITIONS
A. "Guarantor" shall mean Guarantor or any one or more of them.
B. "Liability" or "Liabilities" shall mean without limitation, all
liabilities, overdrafts, indebtedness, and obligations of Borrower and/or
Guarantor to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including reasonably attorney's fees and cost of collection) incurred in the
collection thereof or the enforcement of rights thereunder (including without
limitation, any liability arising from failure to comply with state or federal
laws, rules and regulations concerning the control of hazardous waste or
substances at or with respect to any real estate securing any loan guaranteed
hereby), whether arising in the ordinary course of business or otherwise
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<PAGE>
If Borrower is a partnership, corporation or other entity the term "Liability"
or "Liabilities" as used herein shall include all Liabilities to Bank of any
successor entity to entities.
C. "Loan Documents" shall mean all deeds to secure debt, deeds of trust,
mortgages, security agreements and other documents securing payment of the
Liabilities and all note and other agreements, documents, and instruments
evidencing or relating to the Liabilities and Obligations.
D. "Obligation" or "Obligations" shall mean all terms, conditions, covenants,
agreements and undertakings of Borrower and/or Guarantor under all notes and
other documents evidencing the Liabilities, and under all deeds to secure debt,
deeds of trust, mortgages, security agreements and other agreements, documents
and instruments executed in connection with the Liabilities or related thereto.
4. WAIVERS BY GUARANTOR. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liabilities or Obligations to which it may apply,
presentment, demand for payment, protest, notice of dishonor or nonpayment of
any Liabilities, notice of intent to accelerate, notice of acceleration, and
notice of any suit or the taking of other action by Bank against Borrower,
Guarantor or any other person, any applicable statute of limitations and any
other notice to any party liable on any Loan Document including Guarantor).
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any other Guarantor hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Bank against Borrower or against any security
which Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise.
Guarantor also waives the benefits of any provision of law requiring that Bank
exhaust any right or remedy, or take any action, against Borrower, any
Guarantor, any other person and/or property including but not limited to the
provisions of the Official Code of Georgia (S)10-7-24 and the Official Code of
Georgia (S) 11-3-601, inclusive, as amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing or otherwise affecting the Obligations of Guarantor, in whole or in
part, and without the indorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment,
or change or extend the time of or renew, or change any interest rate or alter
any Liability or Obligation or installment thereof, or any security therefor;
(b) loan additional monies or extend additional credit to Borrower, with or
without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall apply to the Liabilities and Obligations as so changed, extended,
surrendered, realized upon or otherwise altered; (c) sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner and in any order
any property at any time pledged or mortgaged to secure the Liabilities or
Obligations and any offset there against; (d) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner; (e) settle or compromise any Liability
or Obligation or any security therefor and subordinate the payment of all or any
part thereof to the payment of any Liability or Obligation of any other parties
primarily or secondarily liable on any of the Liabilities or Obligations; (f)
release or compromise any Liability of Guarantor hereunder or any Liability or
Obligation of any other parties primarily or secondarily liable on any of the
Liabilities or Obligations; or (g) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
5. SUBORDINATION. Upon demand of Bank, Guarantor agrees that it will not
demand, take or receive from Borrower, by set-off or in any other manner,
payment of any debt, now and at any time or times hereafter owing by Borrower to
Guarantor unless and until all the Liabilities and Obligations shall have been
fully paid and performed, and any security interest, liens or encumbrances which
Guarantor now has and from time to time hereafter may have upon any of the
assets of Borrower shall be made subordinate, junior and inferior and postponed
in priority, operation and effect to any security interest of Bank in such
assets.
6. WAIVERS BY BANK. No delay on the part of Bank in exercising any of its
options, powers or rights, and no partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. TERMINATION. This Guaranty shall be binding on each Guarantor until written
notice of revocation signed by such Guarantor or written notice of the death of
such Guarantor shall have been received by Bank, notwithstanding change in name,
location, composition or structure of, or the dissolution, termination or
increase, decrease or change in personnel, owners or partners of Borrower, or
any one or more of Guarantors. No notice of revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
Liabilities or Obligations that shall have been committed, created, contracted,
assumed or incurred prior to receipt of such written notice pursuant to any
agreement entered into by Bank prior to receipt of such notice. The sole effect
of such notice of revocation or termination hereof shall be to exclude from this
Guaranty, Liabilities or Obligations thereafter arising that are unconnected
with Liabilities or Obligations theretofore arising or transactions entered into
theretofore.
In the event of the death of a Guarantor, the liability of the estate of the
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower after
the date of the death of the deceased Guarantor pursuant to
Page 2
<PAGE>
a commitment made by Bank to Borrower prior to the date of such death. As to all
surviving Guarantors, this Guaranty shall continue in full force and effect
after the death of a Guarantor, not only as to the Liabilities existing at that
time, but also as to Liabilities thereafter incurred by Borrower to Bank.
8. PARTIAL INVALIDITY AND/OR ENFORCEABILITY OF GUARANTY. The unenforceability
or invalidity of any provision of this Guaranty shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document as it may apply to any
person or circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
collateral or the proceeds thereof, in whole or in part, which has been
previously applied to or retained for application against any Liability, by
reason of a proceeding arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release effected by Bank.
9. CHANGE OF STATUS. Guarantor will not become a party to a merger or
consolidation with any other company, except where Guarantor is the surviving
corporation or entity, and all covenants under this Guaranty are assumed by the
surviving entity. Further, Guarantor may not change its legal structure, with
the written consent of Bank and all covenants under this Guaranty are assumed by
the new or surviving entity. Guarantor further agrees that this Guaranty shall
be binding, legal and enforceable against Guarantor in the event Borrower
changes its name, status or type of entity.
10. FINANCIAL AND OTHER INFORMATION. Guarantor agrees to furnish to Bank any
and all financial information and any other information regarding Guarantor
and/or collateral requested in writing by Bank within ten (10) days of the date
of the request. Guarantor has made an independent investigation of the
financial condition and affairs of Borrower prior to entering into this
Guaranty, and Guarantor will continue to make such investigation; and in
entering into this Guaranty Guarantor has not relied upon any representation of
Bank as to the financial condition, operation or creditworthiness of Borrower.
Guarantor further agrees that Bank shall have no duty or responsibility now or
hereafter to make any investigation or appraisal of Borrower on behalf of
Guarantor or to provide Guarantor with any credit or other information which may
come to its attention now or hereafter.
11. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action to the address of Guarantor or
Bank, at their respective addresses indicated at the beginning of this Guaranty,
or to such other address as any party may designate by written notice to the
other party. Each notice, request and demand shall be deemed given or made, if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, or if sent by any other
means, upon delivery.
12. GUARANTOR DUTIES. Guarantor shall upon notice or demand by Bank promptly
and with due diligence pay all Liabilities and perform and satisfy all
Obligations for the benefit of Bank in the event of (a) the occurrence of any
default under any Loan Documents; (b) the failure of any Borrower or Guarantor
to perform any obligation or pay any liability or indebtedness of any Borrower
or Guarantor to Bank, or to any affiliate of Bank, whether under any Note,
Guaranty, or any other agreement, now or hereafter existing, as and when due
(whether upon demand, at maturity or by acceleration); (c) the failure of any
Borrower or Guarantor to pay or perform any other liability, obligation or
indebtedness of any Borrower or Guarantor to any other party; (d) the death of
any Borrower or Guarantor (if an individual); (e) the resignation or withdrawal
of any partner or a material owner/Guarantor of Borrower, as determined by Bank
in its sole discretion; (f) the commencement of a proceeding against any
Borrower or Guarantor for dissolution or liquidation, the voluntary or
involuntary termination or dissolution of any Borrower or Guarantor or the
merger or consolidation of any Borrower or Guarantor with or into another
entity; (g) the insolvency, or the business failure of, or the appointment of a
custodian, trustee, liquidator or receiver for or of any of the property of, or
the assignment for the benefit of creditors by, or the filing of a petition
under bankruptcy, insolvency or debtor's relief law or the filing of a petition
for any adjustment of indebtedness, composition or extension by or against any
Borrower or Guarantor; (h) the sole determination by Bank that any
representation or warranty to Bank in any Loan Document or otherwise to Bank was
untrue or materially misleading when made; (i) the failure of Guarantor or
Borrower to timely deliver such financial statements including tax returns and
all schedules, or other statements of condition or other information, as Bank
shall request from time to time; (j) the entry of a judgment against Borrower or
Guarantor which Bank deems to be of a material nature in the sole discretion of
Bank; (k) the seizure or forfeiture of any of Borrower or Guarantor's property,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order; (l) the sole determination by Bank that Guarantor or Borrower
jointly or severally, has suffered a material adverse change in its financial
condition; (m) the determination by Bank that for any reason it is insecure; (n)
any lien or additional security interest being placed upon any collateral which
is security for any Loan Document; or (o) the failure of Borrower's business to
comply with any law or regulation controlling the operation of Borrower's
business.
13. REMEDIES. Upon the failure of Guarantor to fulfill its duty to pay all
Liabilities and perform and satisfy all Obligations as required hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice or demand: (a) declare
any Liability due and payable at once; (b) take possession of any collateral
pledged by Borrower or Guarantor wherever located, and sell, resell, assign,
transfer and deliver all or any part of said collateral of Borrower or Guarantor
at any public or private sale or otherwise dispose of any or all of the
collateral in its then condition, for cash or on credit or for future delivery,
and in connection therewith Bank may impose reasonable conditions upon any such
sale, and Bank, unless prohibited by law the provisions of which cannot be
waived, may purchase all or any part of said collateral to be sold, free from
and discharged of all trusts, claims, rights or redemption and equities of
Borrower or Guarantor whatsoever; Guarantor acknowledges and agrees that the
sale of any collateral through any nationally recognized broker-dealer,
investment banker or any other method common in the securities industry shall be
deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof
except as provided herein; and (c) set-off against any or all
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<PAGE>
liabilities of Guarantor all money owed by Bank or any of its agents or
affiliates in any capacity to Guarantor whether or not due, and also set-off
against all other Liabilities of Guarantor to Bank all money owed by Bank in any
capacity to Guarantor, and if exercised by Bank, Bank shall be deemed to have
exercised such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto.
Bank shall have a properly perfected security interest in all of Guarantor's
funds on deposit with Bank to secure the balance of any Liabilities and/or
Obligations that Guarantor may now or in the future owe Bank. Bank is granted a
contractual right of set-off and will not be liable for dishonoring checks or
withdrawals where the exercise of Bank's contractual right of set-off or
security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in the possession of Bank, including but not limited to any joint account,
special account, account by the entireties, tenancy in common, and all dividends
and distributions now or hereafter in the possession or control of Bank.
14. ATTORNEY FEES, COST AND EXPENSES. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of Court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or defending this
agreement.
15. COLLATERAL. Bank at all times and from time to time shall have the right
to require Guarantor to deliver to Bank collateral satisfactory to Bank to
secure Guarantor's undertaking hereunder and/or the Liabilities of Guarantor
hereunder.
[ ] In addition to the provisions stated above, Guarantor hereby pledges,
assigns and grants to Bank a security interest in and title to the collateral
described in the security agreement, deed of trust, dated to secure debt,
mortgage or other collateral instrument dated ___________________ which
collateral, except for any margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System), shall secure this Guaranty, whether
currently existing in the future. Guarantor agrees to execute such security
agreement, financing statements and other documents as Bank may reasonably
require to obtain and perfect its security interest in said collateral.
16. PRESERVATION OF PROPERTY. Bank shall not be bound to take any steps
necessary to preserve any rights in any property pledged as collateral to Bank
to secure Borrower and/or Guarantor's Liabilities and Obligations as against
prior parties who may be liable in connection therewith, and Borrower and
Guarantor hereby agree to take any such steps. Bank, nevertheless, at any time,
may (a) take any action it deems appropriate for the care or preservation of
such property or of any rights of Borrower and/or Guarantor or Bank therein; (b)
demand, sue for, collect or receive any money or property at any time due,
payable or receivable on account of or in exchange for any property pledged as
collateral to Bank to secure Borrower and/or Guarantor's Liabilities to Bank;
(c) compromise and settle with any person liable on such property; or (d) extend
the time of payment or otherwise change the terms of the Loan Documents as to
any party liable on the Loan Documents, all without notice to, without incurring
responsibility to, and without affecting any of the Obligations or Liabilities
of Guarantor.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
-------------
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
---------------------
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL
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<PAGE>
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
18. CONTROLLING DOCUMENT. To the extent that this Limited Guaranty conflicts
with or is in any way incompatible with any other Loan Document concerning this
Obligation, any promissory note shall control over any other document, and if
such promissory note does not address an issue, then each other document shall
control to the extent that it deals most specifically with an issue.
19. EXECUTION UNDER SEAL. This Guaranty is being executed under seal by
Guarantor.
20. NOTICE OF FINAL AGREEMENT. THIS WRITTEN LIMITED GUARANTY REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on this ____ day of __________, 19__.
WITNESSSED BY: GUARANTOR:
/s/ Tom Nelis /s/ John Pappajohn
- ------------------------------- ----------------------------
Tom Nelis, Vice President John Pappajohn
INDIVIDUAL ACKNOWLEDGMENT
State of ------------------ )
)
County of ----------------- )
This instrument was acknowledged before me on ---------------------, 19 --, by
- -------------------------. (Guarantor)
/s/ Olga M. Rodriguez
- ------------------------------------------------------------ (Seal)
Notary Public in and for the State of ----------------------
- ------------------------------------------------------------
Print Name of Notary
- ------------------------------------------------------------
My Commission Expires
Page 5
<PAGE>
Exhibit 10.20D
NationsBank, N.A. Customer
Date: April 2, 1998
-------------
Limited Guaranty
================================================================================
BANK: GUARANTOR:
NationsBank, N.A. Derace Schaffer
Banking Center: South Atlanta commercial Center 3489 Elmwood Avenue
3000 Corporate Center Rochester, NY 14610
Morrow, Georgia 30260
County: Clayton County: Monroe
================================================================================
"BORROWER": LOGISTICARE, INC.
----------------
1. GUARANTY. FOR VALUE RECEIVED, and to induce NationsBank, N.A. (Attn:
Commercial Banking) ("Bank") to make loans or advances or to extend credit or
- ------------------
other financial accommodations or benefits, with or without security, to or for
the account of Borrower, the undersigned "Guarantor", if more than one, then
each of them jointly and severally, hereby becomes surety for and irrevocably
and unconditionally guarantees to Bank prompt payment in an amount as provided
herein, when due, whether by acceleration or otherwise, of any Liabilities of
Borrower to Bank. This Guaranty is cumulative to and does not supersede any
other guaranties.
This Guaranty is continuing and limited to the amount of $1,000,000.00 dollars
-------------
principal plus interest owing at any time, plus attorney's fees, cost of
expenses of collection incurred and/or the cost of the enforcement of rights in
enforcing this Guaranty (including, without limitation, any liability arising
from failure to comply with any state or federal laws, rules and regulations
concerning the control of hazardous waste or substances at or with respect to
any real estate securing any loan guaranteed hereby), plus interest on such
attorney's fees and cost of collection.
Except to the extent limited above, Guarantor unconditionally guarantees the
faithful, prompt and complete compliance by Borrower with all Obligations (as
hereinafter defined). The undertakings of Guarantor hereunder are independent
of the Liabilities and Obligations of Borrower and a separate action or actions
for payment, damages or performance may be brought or prosecuted against
Guarantor, whether or not an action is brought against Borrower or to realize
upon the security for the Liabilities and/or Obligations, whether or not
Borrower is joined in any such action or actions, and whether or not notice is
given or demand is made upon Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person or entity, whether primarily or secondarily liable, or against any
collateral held by it, before resorting to Guarantor for payment, and Guarantor
shall not be entitled to assert as a defense to the enforceability of the
Guaranty any defense of Borrower with respect to any Liabilities or Obligations.
2. PARAGRAPH HEADINGS, GOVERNING LAW AND BINDING EFFECT. Guarantor agrees that
the paragraph headings in this Guaranty are for convenience only and that they
will not limit any of the provisions of this Guaranty. Guarantor further agrees
that this Guaranty shall be governed by and construed in accordance with the
laws of the State of Georgia and applicable United States federal law.
Guarantor further agrees that this Guaranty shall be deemed to have been made in
the State of Georgia at Bank's address indicated above, and shall be governed
by, and construed in accordance with, the laws of the State of Georgia, or the
United States courts located within the State of Georgia, and is performable in
the State of Georgia. This Guaranty is binding upon Guarantor, his, their or
its executors, administrators, successors or assigns, and shall inure to the
benefit of Bank, its successors, indorsees or assigns. Anyone executing this
Guaranty shall be bound by the terms hereof without regard to execution by
anyone else.
3. DEFINITIONS
A. "Guarantor" shall mean Guarantor or any one or more of them.
B. "Liability" or "Liabilities" shall mean without limitation, all
liabilities, overdrafts, indebtedness, and obligations of Borrower and/or
Guarantor to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation all amounts of principal and interest, all interest, all
expenses (including reasonably attorney's fees and cost of collection) incurred
in the collection thereof or the enforcement of rights thereunder (including
without limitation, any liability arising from failure to comply with state or
federal laws, rules and regulations concerning the control of hazardous waste or
substances at or with respect to any real estate securing any loan guaranteed
hereby), whether arising in the ordinary course of
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<PAGE>
business or otherwise. If Borrower is a partnership, corporation or other entity
the term "Liability" or "Liabilities" as used herein shall include all
Liabilities to Bank of any successor entity to entities.
C. "Loan Documents" shall mean all deeds to secure debt, deeds of trust,
mortgages, security agreements and other documents securing payment of the
Liabilities and all note and other agreements, documents, and instruments
evidencing or relating to the Liabilities and Obligations.
D. "Obligation" or "Obligations" shall mean all terms, conditions, covenants,
agreements and undertakings of Borrower and/or Guarantor under all notes and
other documents evidencing the Liabilities, and under all deeds to secure debt,
deeds of trust, mortgages, security agreements and other agreements, documents
and instruments executed in connection with the Liabilities or related thereto.
4. WAIVERS BY GUARANTOR. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liabilities or Obligations to which it may apply,
presentment, demand for payment, protest, notice of dishonor or nonpayment of
any Liabilities, notice of intent to accelerate, notice of acceleration, and
notice of any suit or the taking of other action by Bank against Borrower,
Guarantor or any other person, any applicable statute of limitations and any
other notice to any party liable on any Loan Document including Guarantor).
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against Borrower that arises
hereunder and/or from the performance by any other Guarantor hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Bank against Borrower or against any security
which Bank now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise.
Guarantor also waives the benefits of any provision of law requiring that Bank
exhaust any right or remedy, or take any action, against Borrower, any
Guarantor, any other person and/or property including but not limited to the
provisions of the Official Code of Georgia (S)10-7-24 and the Official Code of
Georgia (S)11-3-601, inclusive, as amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing or otherwise affecting the Obligations of Guarantor, in whole or in
part, and without the indorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment,
or change or extend the time of or renew, or change any interest rate or alter
any Liability or Obligation or installment thereof, or any security therefor;
(b) loan additional monies or extend additional credit to Borrower, with or
without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall apply to the Liabilities and Obligations as so changed, extended,
surrendered, realized upon or otherwise altered; (c) sell, exchange, release,
surrender, realize upon or otherwise deal with in any manner and in any order
any property at any time pledged or mortgaged to secure the Liabilities or
Obligations and any offset there against; (d) exercise or refrain from
exercising any rights against Borrower or others (including Guarantor) or act or
refrain from acting in any other manner; (e) settle or compromise any Liability
or Obligation or any security therefor and subordinate the payment of all or any
part thereof to the payment of any Liability or Obligation of any other parties
primarily or secondarily liable on any of the Liabilities or Obligations; (f)
release or compromise any Liability of Guarantor hereunder or any Liability or
Obligation of any other parties primarily or secondarily liable on any of the
Liabilities or Obligations; or (g) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
5. SUBORDINATION. Upon demand of Bank, Guarantor agrees that it will not
demand, take or receive from Borrower, by set-off or in any other manner,
payment of any debt, now and at any time or times hereafter owing by Borrower to
Guarantor unless and until all the Liabilities and Obligations shall have been
fully paid and performed, and any security interest, liens or encumbrances which
Guarantor now has and from time to time hereafter may have upon any of the
assets of Borrower shall be made subordinate, junior and inferior and postponed
in priority, operation and effect to any security interest of Bank in such
assets.
6. WAIVERS BY BANK. No delay on the part of Bank in exercising any of its
options, powers or rights, and no partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. TERMINATION. This Guaranty shall be binding on each Guarantor until written
notice of revocation signed by such Guarantor or written notice of the death of
such Guarantor shall have been received by Bank, notwithstanding change in name,
location, composition or structure of, or the dissolution, termination or
increase, decrease or change in personnel, owners or partners of Borrower, or
any one or more of Guarantors. No notice of revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
Liabilities or Obligations that shall have been committed, created, contracted,
assumed or incurred prior to receipt of such written notice pursuant to any
agreement entered into by Bank prior to receipt of such notice. The sole effect
of such notice of revocation or termination hereof shall be to exclude from this
Guaranty, Liabilities or Obligations thereafter arising that are unconnected
with Liabilities or Obligations theretofore arising or transactions entered into
theretofore.
In the event of the death of a Guarantor, the liability of the estate of the
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower after
the date of the death of the deceased Guarantor pursuant to
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<PAGE>
a commitment made by Bank to Borrower prior to the date of such death. As to all
surviving Guarantors, this Guaranty shall continue in full force and effect
after the death of a Guarantor, not only as to the Liabilities existing at that
time, but also as to Liabilities thereafter incurred by Borrower to Bank.
8. PARTIAL INVALIDITY AND/OR ENFORCEABILITY OF GUARANTY. The unenforceability
or invalidity of any provision of this Guaranty shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document as it may apply to any
person or circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
collateral or the proceeds thereof, in whole or in part, which has been
previously applied to or retained for application against any Liability, by
reason of a proceeding arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release effected by Bank.
9. CHANGE OF STATUS. Guarantor will not become a party to a merger or
consolidation with any other company, except where Guarantor is the surviving
corporation or entity, and all covenants under this Guaranty are assumed by the
surviving entity. Further, Guarantor may not change its legal structure,
without the written consent of Bank and all covenants under this Guaranty are
assumed by the new or surviving entity. Guarantor further agrees that this
Guaranty shall be binding, legal and enforceable against Guarantor in the event
Borrower changes its name, status or type of entity.
10. FINANCIAL AND OTHER INFORMATION. Guarantor agrees to furnish to Bank any
and all financial information and any other information regarding Guarantor
and/or collateral requested in writing by Bank within ten (10) days of the date
of the request. Guarantor has made an independent investigation of the
financial condition and affairs of Borrower prior to entering into this
Guaranty, and Guarantor will continue to make such investigation; and in
entering into this Guaranty Guarantor has not relied upon any representation of
Bank as to the financial condition, operation or creditworthiness of Borrower.
Guarantor further agrees that Bank shall have no duty or responsibility now or
hereafter to make any investigation or appraisal of Borrower on behalf of
Guarantor or to provide Guarantor with any credit or other information which may
come to its attention now or hereafter.
11. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action to the address of Guarantor or
Bank, at their respective addresses indicated at the beginning of this Guaranty,
or to such other address as any party may designate by written notice to the
other party. Each notice, request and demand shall be deemed given or made, if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, or if sent by any other
means, upon delivery.
12. GUARANTOR DUTIES. Guarantor shall upon notice or demand by Bank promptly
and with due diligence pay all Liabilities and perform and satisfy all
Obligations for the benefit of Bank in the event of (a) the occurrence of any
default under any Loan Documents; (b) the failure of any Borrower or Guarantor
to perform any obligation or pay any liability or indebtedness of any Borrower
or Guarantor to Bank, or to any affiliate of Bank, whether under any Note,
Guaranty, or any other agreement, now or hereafter existing, as and when due
(whether upon demand, at maturity or by acceleration); (c) the failure of any
Borrower or Guarantor to pay or perform any other liability, obligation or
indebtedness of any Borrower or Guarantor to any other party; (d) the death of
any Borrower or Guarantor (if an individual); (e) the resignation or withdrawal
of any partner or a material owner/Guarantor of Borrower, as determined by Bank
in its sole discretion; (f) the commencement of a proceeding against any
Borrower or Guarantor for dissolution or liquidation, the voluntary or
involuntary termination or dissolution of any Borrower or Guarantor or the
merger or consolidation of any Borrower or Guarantor with or into another
entity; (g) the insolvency, or the business failure of, or the appointment of a
custodian, trustee, liquidator or receiver for or of any of the property of, or
the assignment for the benefit of creditors by, or the filing of a petition
under bankruptcy, insolvency or debtor's relief law or the filing of a petition
for any adjustment of indebtedness, composition or extension by or against any
Borrower or Guarantor; (h) the sole determination by Bank that any
representation or warranty to Bank in any Loan Document or otherwise to Bank was
untrue or materially misleading when made; (i) the failure of Guarantor or
Borrower to timely deliver such financial statements including tax returns and
all schedules, or other statements of condition or other information, as Bank
shall request from time to time; (j) the entry of a judgment against Borrower or
Guarantor which Bank deems to be of a material nature in the sole discretion of
Bank; (k) the seizure or forfeiture of any of Borrower or Guarantor's property,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order; (l) the sole determination by Bank that Guarantor or Borrower
jointly or severally, has suffered a material adverse change in its financial
condition; (m) the determination by Bank that for any reason it is insecure; (n)
any lien or additional security interest being placed upon any collateral which
is security for any Loan Document; or (o) the failure of Borrower's business to
comply with any law or regulation controlling the operation of Borrower's
business.
13. REMEDIES. Upon the failure of Guarantor to fulfill its duty to pay all
Liabilities and perform and satisfy all Obligations as required hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice or demand: (a) declare
any Liability due and payable at once; lb) take possession of any collateral
pledged by Borrower or Guarantor wherever located, and sell, resell, assign,
transfer and deliver all or any part of said collateral of Borrower or Guarantor
at any public or private sale or otherwise dispose of any or all of the
collateral in its then condition, for cash or on credit or for future delivery,
and in connection therewith Bank may impose reasonable conditions upon any such
sale, and Bank, unless prohibited by law the provisions of which cannot be
waived, may purchase all or any part of said collateral to be sold, free from
and discharged of all trusts, claims, rights or redemption and equities of
Borrower or Guarantor whatsoever; Guarantor acknowledges and agrees that the
sale of any collateral through any nationally recognized broker- dealer,
investment banker or any other method common in the securities industry shall be
deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof
except as provided herein; and (c) set-off against any or all
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<PAGE>
liabilities of Guarantor all money owed by Bank or any of its agents or
affiliates in any capacity to Guarantor whether or not due, and also set-off
against all other Liabilities of Guarantor to Bank all money owed by Bank in any
capacity to Guarantor, and if exercised by Bank, Bank shall be deemed to have
exercised such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto.
Bank shall have a properly perfected security interest in all of Guarantor's
funds on deposit with Bank to secure the balance of any Liabilities and/or
Obligations that Guarantor may now or in the future owe Bank. Bank is granted a
contractual right of set-off and will not be liable for dishonoring checks or
withdrawals where the exercise of Bank's contractual right of set-off or
security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in the possession of Bank, including but not limited to any joint account,
special account, account by the entireties, tenancy in common, and all dividends
and distributions now or hereafter in the possession or control of Bank.
14. ATTORNEY FEES, COST AND EXPENSES. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of Court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or defending this
agreement.
15. COLLATERAL. Bank at all times and from time to time shall have the right
to require Guarantor to deliver to Bank collateral satisfactory to Bank to
secure Guarantor's undertaking hereunder and/or the Liabilities of Guarantor
hereunder.
[ ] In addition to the provisions stated above, Guarantor hereby pledges,
assigns and grants to Bank a security interest in and title to the collateral
described in the security agreement, deed of trust, dated to secure debt,
mortgage or other collateral instrument dated ___________________ which
collateral, except for any margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System), shall secure this Guaranty, whether
currently existing or arising in the future. Guarantor agrees to execute such
security agreements, financing statements and other documents as Bank may
reasonably require to obtain and perfect its security interest in said
collateral.
16. PRESERVATION OF PROPERTY. Bank shall not be bound to take any steps
necessary to preserve any rights in any property pledged as collateral to Bank
to secure Borrower and/or Guarantor's Liabilities and Obligations as against
prior parties who may be liable in connection therewith, and Borrower and
Guarantor hereby agree to take any such steps. Bank, nevertheless, at any time,
may (a) take any action it deems appropriate for the care or preservation of
such property or of any rights of Borrower and/or Guarantor or Bank therein; (b)
demand, sue for, collect or receive any money or property at any time due,
payable or receivable on account of or in exchange for any property pledged as
collateral to Bank to secure Borrower and/or Guarantor's Liabilities to Bank;
(c) compromise and settle with any person liable on such property; or (d) extend
the time of payment or otherwise change the terms of the Loan Documents as to
any party liable on the Loan Documents, all without notice to, without incurring
responsibility to, and without affecting any of the Obligations or Liabilities
of Guarantor.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
-------------
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
---------------------
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL
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<PAGE>
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
18. CONTROLLING DOCUMENT. To the extent that this Limited Guaranty conflicts
with or is in any way incompatible with any other Loan Document concerning this
Obligation, any promissory note shall control over any other document, and if
such promissory note does not address an issue, then each other document shall
control to the extent that it deals most specifically with an issue.
19. EXECUTION UNDER SEAL. This Guaranty is being executed under seal by
Guarantor.
20. NOTICE OF FINAL AGREEMENT. THIS WRITTEN LIMITED GUARANTY REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on this ---- day of ----------, 19--.
WITNESSSED BY: GUARANTOR:
/s/ Tom Nelis /s/ Derace Schaffer
- --------------------------------- ------------------------
Tom Nelis, Vice President Derace Schaffer
INDIVIDUAL ACKNOWLEDGMENT
State of ------------------ )
)
County of ----------------- )
This instrument was acknowledged before me on ----------------------, 19 --,
by ------------------------------------. (Guarantor)
- ----------------------------------------------------------- (Seal)
Notary Public in and for the State of ----------------------------
- ------------------------------------------------------------------
Print Name of Notary
- ------------------------------------------------------------------
My Commission Expires
Page 5
<PAGE>
<TABLE>
<CAPTION>
FORM MUST BE TYPED. READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM.
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
THIS FINANCING STATEMENT IS PRESENTED TO A FILING OFFICER FOR FILING PURSUANT TO THE UNIFORM
COMMERCIAL CODE, STATE OF GEORGIA
- -------------------------------------------------------------------------------------------------------------------------------
1A. Debtor Name and Mailing Address: [ ] Individual (Last, First, Middle Name)
[ ] Business (Legal Business Name)
1B. Enter Social Security/Tax ID # 1C. [ ] Check if exempt under Item 6
- --------------------------------------------------------------------------------------------------------------------------------
2A. Debtor Name and Mailing Address: [ ] Individual (Last, First, Middle Name)
[ ] Business (Legal Business Name)
2B. Enter Social Security/Tax ID # 2C. [ ] Check if exempt under Item 6
- ---------------------------------------------------------------------------------------------------------------------------------
3A. Debtor Name and Mailing Address: [ ] Individual (Last, First, Middle Name)
[ ] Business (Legal Business Name)
3B. Enter Social Security/Tax ID # 3C. [ ] Check if exempt under Item 6
- ----------------------------------------------------------------------------------------------------------------------------------
4. Secured Party Name and Mailing [ ] Individual (Last, First, Middle Name)
Address [ ] Business (Legal Business Name)
- -----------------------------------------------------------------------------------------------------------------------------------
ABOVE SPACE FOR RECORDING INFORMATION ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
5. Assignee Name and Mailing Address [ ] Individual (Last, First, Middle Name)
[ ]Business (Legal Business Name) [ ] Business (Legal Business Name)
- -----------------------------------------------------------------------------------------------------------------------------------
6. Exceptions for Social Security/Tax ID -- O.C.G.A. 11-9-402(9): Financing Statement filed to perfect a security interest in
collateral already subject to a security interest in another jurisdiction when it is brought into the state or when the debtor's
location is changed to this state, or the debtor is not required to have such a number.
- -----------------------------------------------------------------------------------------------------------------------------------
7. [ ] Check ONLY if applicable.
A. [ ] Collateral on Consignment.
B. [ ] Collateral on Lease
- ------------------------------------------------------------------------------------------------------------------------------------
9A. This financing statement covers the following types or items of collateral: 9C. Enter collateral code(s) from
back of form that best
describes collateral covered
by this filing:
9D. Number of additional sheets
9B. [ ] Products of collateral are also covered. presented:
- ------------------------------------------------------------------------------------------------------------------------------------
10. Check if applicable and include reasonable description of the real estate in item 9A:
A. [ ] Crops growing or to be grown. B. [ ] Minerals or the like (including oil and gas) C. [ ] Fixture filing pursuant to
or accounts subject to O.C.G.A. 11-9-103(5). O.C.G.A. 11-9-313.
- ------------------------------------------------------------------------------------------------------------------------------------
11. Name of the Record Owner(s) or Record Lessee(s) if debtor does not have an interest of record in the real estate):
- -----------------------------------------------------------------------------------------------------------------------------------
12. County or Counties in which the affected real estate is located (Must be identified if filing covers crops, mineral or
fixtures):
--------------- ---------- ------------ -------------- ----------- --------- --------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------
13. This statement is filed without the debtor's signature to perfect a security interest in collateral (check only if applicable):
A. [ ] already subject to a security interest in another jurisdiction when it was brought into this state or debtor's location
changed to this state:
B. [ ] which is proceeds of the original collateral described above in which a security interest was perfected;
C. [ ] as to which the filing has lapsed;
D. [ ] acquired after a change of debtor's name, identity or corporate structure; or
E. [ ] described in a security agreement/real estate mortgage attached hereto in accordance with O.C.G.A. 11-9-402(1).
- -----------------------------------------------------------------------------------------------------------------------------------
14. Signature(s) of Debtor(s) 15. Signature(s) of Secured Party(ies)
- ----------------------------------------------------------------------------------------------------------------------------------
16. Return Copy To: Name and Address
[ ]
[ ]
==================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT "A"
UCC - 1 Attachment
ACCOUNTS. Any and all accounts, accounts receivables, contract rights, book
debts, checks, notes, drafts, instruments, chattel paper, acceptances, choses in
action, any and all amounts due to Debtor from a factor or other forms of
obligations and receivables now existing or hereafter arising out of the
business of the Debtor, as well as any and all returned, refused and repossessed
goods, and the cash or non-cash proceeds resulting therefrom.
INVENTORY. Any and all of Debtor's inventory, including without limitation any
and all goods held for sale or lease or being processed for sale or lease in
Debtor's business as now or hereafter conducted, whether now owned or
hereinafter acquired, including all materials, goods and work in process,
finished goods, and other tangible property held for sale or lease or furnished
or to be furnished under contracts of service or used or consumed in Debtor's
business, along with all documents (including documents of title) covering
inventory, all cash and non-cash proceeds from the sale of inventory including
proceeds from insurance.
EQUIPMENT. Any and all of Debtor's furnishings, fixtures and equipment,
wherever located, whether now owned or hereafter acquired, together with all
increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith, and all
products, additions, substitutions, accessions, and all cash and non-cash
proceeds, including proceeds from insurance thereof and thereto.
<PAGE>
NATIONSBANK CERTIFICATE OF
NATIONSBANK, N.A. CORPORATE RESOLUTIONS
BORROWING
<TABLE>
<S> <C> <C>
===========================================================================================================================
RESOLUTIONS OF THE BOARD OF DIRECTORS OF: AUTHORIZING BORROWING FROM: TYPE OF COMPANY
- ---------------------------------------------------------------------------------------------------------------------------
Name and Address of Company Name and Address of Bank
[ ] Corporation
NationsBank, N.A.
[ ] Professional Corporation
[ ] Non-Profit Corporation
[ ] Professional Association
(hereinafter "Company") (hereinafter "Bank") [ ] Incorporated Association
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] Supplemental
I certify that I am the keeper of the records and minutes of meetings of the
Board of Directors of Company, a corporation chartered under the laws of the
State of Delaware, whose correct corporate name and address are stated above,
and that on May 6th, 1998, a meeting of the Board of Directors of Company was
held in accordance with law and the by-laws of Company, that a quorum of
directors was present, or (if the date was not completed above pursuant to a
written consent signed by all the members of the Board Directors), the following
resolutions were duly and legally passed and have not been revoked, altered or
amended:
"Resolved that Company is authorized to borrow from and to incur other
obligations to Bank of every kind, without limit as to the amount and at such
rates of interest and upon such other terms and conditions as Company and Bank
shall agree to, including but not limited to the execution of applications for
letters of credit, currency exchange contracts, and interest rate exchange
agreements, which shall include all such acts, transactions or agreements
undertaken by any officer of Company prior to the date of these Resolutions
("Obligations"), including any and all renewals, modifications or extensions of
indebtedness owed by Company to Bank; and to secure the same by creation of
liens, security interests, or other encumbrances on all or any real or personal
property of Company; and in connection therewith to issue notes and other
evidences of Obligations and to make and execute agreements with bank securing
or otherwise pertaining to Obligations, including security agreements, deeds of
trust or mortgages, pledge agreements, assignments and any other agreement
securing or pertaining to Obligations; to assign or discount to Bank commercial
paper, chattel paper, rents, leases, accounts, and other assets of Company upon
such terms and with such agreement as Bank and Company shall agree to; to make
indorsements or guaranties in connection with all of the foregoing; and to renew
and extend all of the foregoing; and that any one of the following persons are
authorized to act in the name and behalf of Company in connection with any
matters under this Resolution:
- --------------------------------------------------------------------------------
NAMES OF PEOPLE AUTHORIZED TO BORROW
- --------------------------------------------------------------------------------
John L. Shermyen
- --------------------------------------------------------------------------------
Michael E. Weksel
- --------------------------------------------------------------------------------
"Resolved, that Bank is authorized and directed, without limitation or inquiry,
irrespective of the circumstances, to honor and carry out all orders, directions
or instructions of the above named persons as to the disposition of any amounts
borrowed or credit obtained on behalf of Company hereunder, and Bank shall be
under no obligation or liability for the use or disposition of any amounts
borrowed or credit obtained, and further that Company shall indemnify and hold
harmless Bank from any claim, loss, cost, damage, liability or expense arising
out of its acting on these Resolutions;"
"Resolved, that the authority herein given to all of said persons shall remain
irrevocable as far as Bank is concerned until Bank is notified in writing of the
revocation of such authority; and shall have acknowledged in writing receipt of
such notifications."
I further certify that the signatures below are the signatures of the designated
officers of Company and of the persons authorized to borrow money by the
foregoing resolutions:
- ----------------------------------------------------------------------------
SIGNATURES/TITLES OF PEOPLE AUTHORIZED TO BORROW
- ----------------------------------------------------------------------------
Title:-----------------
President Treasurer:
- ----------------------------------------------------------------------------
Title:--------------------------- Title:-----------------
Vice President
- ----------------------------------------------------------------------------
Title:--------------------------- Title:-----------------
Secretary
- ----------------------------------------------------------------------------
"Corporate Title" as "Authorized Signer" if no other title.
In Witness Whereof, I have set my hand as Secretary of Company, this 19 day of
May, 1998.
(CORPORATE SEAL)
----------------------------
Secretary
<PAGE>
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 13th day of July, 1998 by
and between LOGISTICARE, INC., a Delaware corporation with its principal
corporate offices at 1895 Phoenix Boulevard, Suite 306, College Park, Georgia
30349 (the "Company"), and John M. Whitcomb, residing at 156 Farm Road, New
Canaan, Connecticut 06840 ("Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to employ Executive as its Chief Operating
Officer and Vice President of Operations and Executive desires to accept such
employment; and
WHEREAS, the Company and Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the Company and Executive
agree as follows:
1. Definitions. For purposes of this Agreement, the following
-----------
capitalized terms shall have the meanings set forth below and shall include the
plural as well as the singular:
(a) "Affiliate" shall mean any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, any other Person.
(b) "Annual Base Salary" shall mean Executive's annual base salary, as
determined from time to time in accordance with Section 5(a) hereof.
(c) "Cause" shall mean the termination of Executive's employment with
the Company for any of the reasons or causes set forth below:
(i) gross misconduct, dishonesty, misappropriation, willful
breach of fiduciary duty or fraud by Executive with regard to the
Company or any of its assets or businesses;
(ii) conviction of Executive or the pleading of nolo contendere
---- ----------
with regard to any felony or crime involving moral turpitude (for the
purpose hereof, traffic violations and misdemeanors shall not be
deemed to be a crime); or
(iii) willful refusal by Executive to perform any material
duties reasonably required to be performed in the course of
Executive's employment with the Company.
<PAGE>
(d) "Change of Control" shall mean the occurrence of any of the
following:
(i) 50% or more of the outstanding voting stock of the Company is
acquired or beneficially acquired (as defined in Rule 13d-3 under the
Securities Exchange Act, as amended, or any successor rule thereto) by
any Person (other than the Company or its Affiliates), in a
transaction other than a public offering of the voting stock of the
Company;
(ii) the Company is merged or consolidated with another
corporation (other than in a merger or consolidation with or into an
Affiliate of the Company) and the holders of all outstanding voting
stock of the Company immediately prior to the merger or consolidation
hold less than a majority of the voting stock of the surviving entity
or its parent corporation immediately after the merger or
consolidation; or
(iii) all or substantially all of the assets of the Company are
sold or otherwise transferred to any person or entity other than an
Affiliate of the Company (in one transactions or a series of
transactions).
(e) "Disability" shall mean the inability to perform substantially all
of Executive's duties in the capacity hereinafter set forth for a period of not
less than 60 consecutive days or any 90 days in any six-month period.
(f) "Ending Compensation" shall mean Executive's Annual Base Salary
(excluding incentive compensation, stock option grants and bonuses, if any) in
effect immediately prior to the date of termination of Executive's employment
with the Company.
(g) "Good Reason" shall mean, without Executive's written consent, the
occurrence of any of the following circumstances that continues for 20 days
after written notice thereof from Executive to the Company:
(i) any material demotion of Executive, any material reduction
in Executive's authority or responsibility or any other material
change in the terms of Executive's employment which is inconsistent
with this Agreement, including a reduction in his Annual Base Salary
other than as part of a general reduction in the annual base salaries
of senior management of the Company pursuant to which Executive's
Annual Base Salary is reduced proportionately with such general
reduction;
(ii) a failure of any successor entity to assume the obligations
of the Company hereunder with Section 16 hereof;
(iii) any purported termination of Executive's employment other
than validly for Cause or as otherwise permitted under this Agreement;
or
2
<PAGE>
(iv) any material breach by the Company other than those set
forth above.
(h) "Person" shall mean any individual, partnership, firm, trust,
corporation or other similar entity. When two or more Persons act as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company, such syndicate or
group shall be deemed a "Person" for purposes of this Agreement.
2. Employment. The Company hereby agrees to employ Executive in
----------
the capacity hereinafter set forth, and Executive agrees to accept such
employment, upon the terms and conditions herein set forth.
3. Term. This Agreement shall be for an initial three-year term (the
----
"Term") commencing on July 15, 1998 (the "Employment Date") and, unless this
Agreement is sooner terminated under the provisions hereof, the Term shall be
automatically renewed for successive one-year terms unless the Company or
Executive shall give to the other written notice of non-renewal at least three
months prior to the end of the then current term.
4. Duties and Responsibilities. During the Term, Executive shall serve
---------------------------
as and have the titles of Chief Operating Officer and Vice President of
Operations. In serving in such capacities, he shall perform such duties and
have such responsibilities as the Board of Directors of the Company and/or the
Chief Executive Officer of the Company may from time to time determine and
assign to Executive, including, without limitation, the development and
implementation of effective operational systems and processes, and the
development and implementation of strategies to drive Company growth and market
share. As soon as practicable after the date hereof, Executive shall move his
residence to Georgia and the Company shall reimburse Executive for reasonable
moving expenses incurred in connection with such move. Executive shall perform
his duties hereunder at the Company's facilities located in Georgia and he shall
be obligated to travel, from time to time, as may be required in connection with
the performance of his duties hereunder. In no event will Executive be required
to undertake any duties or perform any tasks which are inconsistent with his
status as Chief Operating Officer and Vice President of Operations. Executive's
employment with the Company shall be full-time and exclusive and, during the
Term, Executive agrees that he will (i) devote substantially all of his business
time, attention, skill and efforts to the performance of his duties hereunder
and (ii) generally promote the interests of the Company and its clients;
provided, however, that Executive may serve as a director of other companies if
such service does not conflict in any material respect with his duties hereunder
or his fiduciary duty to the Company, and provided that Executive shall give the
Company prior written notice of such service.
5. Compensation. As compensation for services hereunder and in
------------
consideration of the covenants contained herein, during the Term, Executive
shall receive be entitled to receive the following compensation:
(a) Base Compensation. The Company shall pay Executive, in accordance
-----------------
with the Company's normal payroll practices and subject to required withholding,
an Annual Base
3
<PAGE>
Salary which shall be at the rate per annum of $150,000. The Company's Board of
Directors may, in its sole discretion, increase the Annual Base Salary. Once
increased, the Annual Base Salary shall not be decreased, except as part of a
general reduction in the annual base salaries of senior management of the
Company pursuant to which Executive's Annual Base Salary is decreased
proportionately with such general reduction.
(b) Guaranteed Bonus. The Company shall also pay Executive a
----------------
guaranteed cash bonus of $37,500 (or 25% of his Annual Base Salary) at the end
of his first year of employment hereunder in accordance with the Company's
normal payroll practices and subject to required withholding.
(c) Performance Bonus. The Company shall also pay Executive an annual
-----------------
performance-based bonus ("Performance Bonus") based on certain performance
criteria (the "Criteria") to be established in writing by the Company after
consultation with Executive as soon as practicable after the date hereof. With
respect to Executive's first year of employment hereunder, the Performance Bonus
shall be an amount up to $22,500 (or 15% of his Annual Base Salary) based upon
Executive's fulfillment of the Criteria. With respect to each year thereafter,
the Performance Bonus shall be an amount up to 40% of his then current Annual
Base Salary based upon Executive's fulfillment of the Criteria. The Performance
Bonus shall be payable in cash by the Company in accordance with the Company's
normal payroll practices and subject to required withholding.
(d) Stock Options. At or promptly after the Employment Date, the
-------------
Company shall cause to be granted to Executive options to purchase 150,000
shares of common stock, par value $.01 per share, of the Company (the "Options")
under the Company's 1998 Stock Option Plan (the "Option Plan"). The exercise
price per share shall be the Fair Market Value, as such term is defined in the
Option Plan. The Options shall become exercisable in five equal installments of
30,000 Options (each, an "Installment"), commencing on the first anniversary of
the date of their grant. In the event (i) the Company terminates Executive's
employment hereunder other than for Cause or Disability or (ii) Executive
resigns for Good Reason or following a Change of Control in accordance with
Section 9 hereof, a pro rata portion of the next Installment shall immediately
become exercisable at the time of termination of employment (e.g., one-third of
the next Installment would become exercisable if termination of employment
occurred four months after any anniversary of the date of grant of the Options).
Notwithstanding the foregoing, no Options shall became exercisable in the event
that Executive's employment hereunder is terminated for any reason within the
first three months of his employment.
6. Other Compensation and Benefits. In addition to the compensation
-------------------------------
provided for under Section 5, during the Term, Executive shall be entitled to:
(a) participate in all benefit, pension, retirement, savings, welfare
and other employee benefit plans and policies in which members of the Company's
senior management generally are entitled to participate, in accordance with
their respective terms as in effect from time to time;
4
<PAGE>
(b) receive all fringe benefits and perquisites generally maintained
by the Company from time to time for members of senior management, including,
without limitation, reimbursement for all reasonable, ordinary and necessary
business and entertainment expenses incurred in the performance of his services
hereunder, in accordance with the Company's policies as in effect from time to
time;
(c) vacation each year in accordance with the Company's policies for
members of senior management as in effect from time to time, but in no event
less than 20 days paid vacation for each calendar year and 25 days after ten
years of employment with the Company; and
(d) such other benefits as Executive is entitled in accordance with
the Company's policies for members of senior management as in effect from time
to time.
7. Termination by the Company.
--------------------------
(a) Subject to the provisions of this Agreement, the Company may
immediately terminate Executive's employment hereunder for Cause upon written
notice of such termination, in which case the Company shall have no other
liability or obligation to Executive hereunder except to pay to Executive, when
otherwise due, all accrued and unpaid Annual Base Salary to the date of
termination and all other accrued benefits due to Executive hereunder.
(b) In the event of Executive's Disability, the Company may terminate
Executive's employment hereunder upon 30 days prior written notice, in which
case the Company shall have no other liability or obligation to Executive
hereunder except to pay to Executive, when otherwise due, all accrued and unpaid
Annual Base Salary to the date of termination and all other accrued benefits due
to Executive hereunder.
(c) If the Company terminates Executive's employment for Cause or
Disability and Executive disputes such finding of Cause or Disability, the issue
of the validity of the Company's finding of Cause or Disability shall be
submitted to the American Arbitration Association ("AAA") for arbitration in
Atlanta, Georgia in accordance with the then effective rules of the AAA, and
judgment on the award rendered pursuant to such arbitration may be entered by
any court having jurisdiction over the parties and the subject matter hereof.
The costs of such arbitration shall be paid equally by the Company and
Executive, and each party shall be solely responsible for its own costs and
expenses, including attorneys' fees and expenses, incurred in connection with
such arbitration.
8. Death of Executive. In the event of Executive's death, the Term
------------------
of this Agreement shall terminate and the Company shall have no other liability
or obligation to Executive hereunder other than to pay to Executive's estate,
when otherwise due, all accrued and unpaid Annual Base Salary to the date of
termination and all other accrued benefits due to Executive hereunder.
5
<PAGE>
9. Other Termination. Notwithstanding anything herein to the
-----------------
contrary, Executive may at any time resign for Good Reason or following a
Change of Control upon 30 days prior written notice to the Company. However, if
Executive desires to resign effective within six months following the date on
which a Change of Control occurs, Executive shall:
(a) first ask the Chief Executive Officer of the Company whether he
wishes Executive to remain employed with the Company in Executive's then current
position; and
(b) if the Chief Executive Officer of the Company responds in the
affirmative, then Executive shall continue to dutifully execute his
responsibilities as a senior executive of the Company for a period of three
months following the date on which the Change of Control occurred (the
"Transition Period"). If Executive fails to perform his material
responsibilities as a senior executive of the Company for the Transition Period,
then Executive shall not be entitled to receive any severance compensation under
Section 10 hereof.
10. Severance Compensation. In the event (i) the Company terminates
----------------------
Executive's employment hereunder other than for Cause or Disability or (ii)
Executive resigns for Good Reason or following a Change of Control in accordance
with Section 9 hereof, then Executive shall be entitled, subject to Section 14
hereof, to receive from the Company severance compensation in an amount equal to
100% of Executive's Ending Compensation (less appropriate payroll deductions, if
any). Such amount shall be paid in installments during the twelve-month period
following termination of employment in accordance with the Company's normal
payroll practices. Executive acknowledges and agrees that the severance
compensation provided herein shall be in lieu of any other cash severance
benefits provided by the Company to which Executive may otherwise be entitled.
11. Non-Competition; Confidential Information.
-----------------------------------------
(a) Executive agrees that his services hereunder are of a special and
unique nature and his position with the Company places him in a position of
confidence and trust with clients and employees of the Company. Executive
agrees that he will not at any time during his employment with the Company and
for a period of one year thereafter (the "Restrictive Period"), directly or
indirectly, compete (as an owner, joint venturer, partner, stockholder,
director, officer, consultant, agent or otherwise) with the Company in the
United States. Ownership of less than 5% of the securities of any class of a
corporation registered under section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, shall not be considered a violation of the provisions
of this paragraph.
(b) Executive further agrees that he will not at any time, directly or
indirectly, without the Company's prior written consent, disclose to any third
party or use (except as authorized in the regular course of the Company's
business) any confidential, proprietary or trade secret information acquired by
him during his employment with the Company and thereafter, including, without
limitation, sales and marketing information, information relating to existing or
prospective customers and markets, information relating to the RealTime software
technology
6
<PAGE>
and enhancements thereto or other software technology, business opportunities,
and financial, technical and other data (collectively, the "Confidential
Information"). After termination of Executive's employment with the Company for
any reason and upon the written request of the Company, Executive shall promptly
return to the Company all originals and/or copies of written or recorded
material (regardless of the medium) containing or reflecting any Confidential
Information and shall promptly confirm in writing to the Company that such
action has been taken.
(c) Executive agrees that he will not, during the Restrictive Period,
employ or retain, solicit the employment or retention of, or cause or encourage
any entity to retain or solicit the employment or retention of, any person who
was any employee of the Company at any time during the two year period
commencing 12 months prior to the termination of Executive's employment with the
Company and ending on year after such termination. After termination of
Executive's employment with the Company, (i) Executive will refrain from
disparaging, whether orally, in writing or in other media, the Company, its
Affiliates, the officers, directors and employees of each of them, and the
products and services of each of them, and (ii) the Company will not comment
upon the employment performance of Executive other than as may be required by
law or as requested by Executive.
(d) Any discovery, design, invention or improvement (whether or not
patentable) that Executive develops during his employment with the Company
(whether or not during his regular working hours or on the Company's premises)
and that is related to the Company's business or operations as then conducted or
contemplated, shall belong solely to the Company and shall be promptly disclosed
to the Company. During the period of his employment with the Company and
thereafter, Executive shall, without additional compensation, execute and
deliver to the Company any instruments of transfer and take any other action
that the Company may reasonably request to carry out the provisions of this
paragraph, including executing and filing, a the Company's expense, patent
and/or copyright applications and assignments of such applications to the
Company.
12. Specific Performance. Executive acknowledges that, in view of the
--------------------
nature of the Company's business, the restrictions contained in this Agreement
are reasonably necessary to protect the legitimate business interests of the
Company and that any violation of such restrictions will result in irreparable
injury to the Company for which money damages will not be an adequate remedy.
Accordingly, Executive agrees that, in addition to such money damages, he may be
restrained and enjoined from any continuing breach of such covenants without any
bond or other security being required by any court. If any restriction
contained in this Agreement shall be deemed to be invalid, illegal or
unenforceable by reason of the extent, duration or geographical scope, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provisions hereof, and
in its reduced form such restriction shall then be enforceable in the manner
contemplated thereby.
13. No Mitigation; No Set-Off. The Company agrees that if Executive's
-------------------------
employment with the Company is terminated for any reason whatsoever, Executive
is not required to seek
7
<PAGE>
other employment or to attempt in any way to reduce any amounts payable to
Executive by the Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned by Executive or benefit provided to Executive as the result
of employment by another employer or otherwise. The Company's obligations to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against Executive.
14. General Release of the Company. In consideration of the payments
------------------------------
and other undertakings set forth herein, Executive agrees to execute a release
of the Company in substantially the form attached hereto as Exhibit A upon the
---------
termination of his employment with the Company. Executive acknowledges that the
execution of such release is an express condition to his right to receive
severance compensation pursuant to Section 10 hereof in the event such section
is applicable.
15. Notice. Any notice or other communication required or permitted
------
hereunder shall be in writing and shall be delivered personally, or sent by
certified mail, return receipt requested, by Federal Express, Express Mail or
similar overnight delivery or courier service, or by telecopy. Notice to
Executive shall be delivered to his address set forth at the head of this
Agreement, and notice to the Company shall be sent as follows:
LogistiCare, Inc.
One Crown Center
1895 Phoenix Boulevard, Suite 306
College Park, Georgia 30349
Fax: (770) 907-7598
Attention: Chief Executive Officer
Any notice given by certified mail shall be deemed given five days after
the time of certification thereof. Any notice given by other means permitted
hereby will be deemed given at the time of receipt thereof. Either party may by
notice given in accordance herewith to the other party, designate another
address or person for receipt of notices hereunder.
16. Successors; Binding Agreement. Neither party may assign this
-----------------------------
Agreement; provided, however, that it is expressly acknowledged that this
-------- -------
Agreement and the rights of the Company hereunder may be assigned, without the
consent of Executive, to any purchaser or other transferee of all or
substantially all of the business and/or assets of the Company or any division
of the Company for which Executive is then acting as general manager. The
Company shall require any such successor to expressly assume and agree, in a
written instrument in form and substance satisfactory to Executive and his
counsel, to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, permitted assigns, heirs and
representatives.
8
<PAGE>
17. Separability. If any provisions of this Agreement shall be declared
------------
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
18. Waiver. The rights of each party hereunder may be waived only by a
------
writing signed by the waiving party giving such waiver expressly setting forth
the rights so waived and the matters as to which they are so waived, and any
such waiver shall be limited to the matters expressly set forth in such writing.
No failure or delay of any party hereto in enforcing any of its rights hereunder
at any time shall constitute or evidence any waiver of such rights.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which together will constitute one
document.
20. Headings. The headings used in this Agreement are for convenience of
--------
reference only and shall not be deemed to be of any substance.
21. Entire Agreement; Modification. This Agreement contains the entire
------------------------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters. This Agreement may not be amended, modified, or
supplemented in any respect except by a subsequent written agreement entered
into by both parties.
22. Governing Law. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of Georgia, without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LOGISTICARE, INC.
By: /s/ John L. Shermyen
----------------------------------------
Name: John L. Shermyen
Title: President
EXECUTIVE
/s/ John M. Whitcomb
-------------------------------------------
John M. Whitcomb
9
<PAGE>
EXHIBIT A
GENERAL RELEASE
---------------
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, I, for myself and my successors, assigns, heirs and
representatives (each, a "Releasing Party"), hereby release and forever
discharge LogistiCare, Inc. (the "Company"), its stockholders, officers,
directors, employees, agents and attorneys, and their respective successors,
assigns, heirs and representatives (each, a "Released Party"), individually and
collectively, from any and all claims, demands, causes of action, liabilities or
obligations, known or unknown, pending or not pending, liquidated or not
liquidated, of every kind and nature whatsoever (collectively, the "Released
Claims") which the Releasing Party has, has had or may have against any one or
more of the Released Parties arising out of, based upon or in any way, directly
or indirectly, related to the Company's business, my employment with the Company
or the termination of such employment; provided, however, that this General
-------- -------
Release shall have no effect whatsoever upon the Company's obligations, if any,
to pay severance compensation pursuant to the Employment Agreement between the
undersigned and the Company, dated July 13, 1998.
The Released Claims include, without limitation, (a) all claims arising out
of or relating to breach of contract, the Fair Labor Standards Act, the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the National Labor Relations Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act and/or any other
federal, state or local statute, law, ordinance, regulation or order as the same
may be amended or supplemented from time to time, (b) all claims for back pay,
lost benefits, reinstatement, liquidated damages, punitive damages, and damages
on account of any alleged personal, physical or emotional injury, and (c) all
claims for attorneys' fees and costs.
I understand and acknowledge that I am hereby being advised to consult with
an attorney prior to signing this General Release. My decision to sign this
General Release is my own voluntary decision made with full knowledge that I
have been advised to consult with an attorney and I intend to be bound by this
General Release in accordance with its terms.
Dated: _____________ _______________________________________
John M. Whitcomb
<PAGE>
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of July, 1998 by
and between LOGISTICARE, INC., a Delaware corporation with its principal
corporate offices at 1895 Phoenix Boulevard, Suite 306, College Park, Georgia
30349 (the "Company"), and Gerald E. Souza, residing at 111 Berry Street, Santa
Cruz, California 95060 ("Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to employ Executive as its Vice President of
Marketing and Executive desires to accept such employment; and
WHEREAS, the Company and Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the Company and Executive
agree as follows:
1. Definitions. For purposes of this Agreement, the following
-----------
capitalized terms shall have the meanings set forth below and shall include the
plural as well as the singular:
(a) "Affiliate" shall mean any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, any other Person.
(b) "Annual Base Salary" shall mean Executive's annual base salary, as
determined from time to time in accordance with Section 5(a) hereof.
(c) "Cause" shall mean the termination of Executive's employment with
the Company for any of the reasons or causes set forth below:
(i) gross misconduct, dishonesty, misappropriation, willful
breach of fiduciary duty or fraud by Executive with regard to the
Company or any of its assets or businesses;
(ii) conviction of Executive or the pleading of nolo contendere
---- ----------
with regard to any felony or crime involving moral turpitude (for the
purpose hereof, traffic violations and misdemeanors shall not be
deemed to be a crime); or
(iii) willful refusal by Executive to perform any material
duties reasonably required to be performed in the course of
Executive's employment with the Company.
<PAGE>
(d) "Change of Control" shall mean the occurrence of any of the
following:
(i) 50% or more of the outstanding voting stock of the Company is
acquired or beneficially acquired (as defined in Rule 13d-3 under the
Securities Exchange Act, as amended, or any successor rule thereto) by
any Person (other than the Company or its Affiliates), in a
transaction other than a public offering of the voting stock of the
Company;
(ii) the Company is merged or consolidated with another
corporation (other than in a merger or consolidation with or into an
Affiliate of the Company) and the holders of all outstanding voting
stock of the Company immediately prior to the merger or consolidation
hold less than a majority of the voting stock of the surviving entity
or its parent corporation immediately after the merger or
consolidation; or
(iii) all or substantially all of the assets of the Company are
sold or otherwise transferred to any person or entity other than an
Affiliate of the Company (in one transactions or a series of
transactions).
(e) "Disability" shall mean the inability to perform substantially all
of Executive's duties in the capacity hereinafter set forth for a period of not
less than 60 consecutive days or any 90 days in any six-month period.
(f) "Ending Compensation" shall mean Executive's Annual Base Salary
(excluding incentive compensation, stock option grants and bonuses, if any) in
effect immediately prior to the date of termination of Executive's employment
with the Company.
(g) "Good Reason" shall mean, without Executive's written consent, the
occurrence of any of the following circumstances that continues for 20 days
after written notice thereof from Executive to the Company:
(i) any material demotion of Executive, any material reduction
in Executive's authority or responsibility or any other material
change in the terms of Executive's employment which is inconsistent
with this Agreement, including a reduction in his Annual Base Salary
other than as part of a general reduction in the annual base salaries
of senior management of the Company pursuant to which Executive's
Annual Base Salary is reduced proportionately with such general
reduction;
(ii) a failure of any successor entity to assume the obligations
of the Company hereunder with Section 16 hereof;
(iii) any purported termination of Executive's employment other
than validly for Cause or as otherwise permitted under this Agreement;
or
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(iv) any material breach by the Company other than those set
forth above.
(h) "Person" shall mean any individual, partnership, firm, trust,
corporation or other similar entity. When two or more Persons act as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company, such syndicate or
group shall be deemed a "Person" for purposes of this Agreement.
2. Employment. The Company hereby agrees to employ Executive in
----------
the capacity hereinafter set forth, and Executive agrees to accept such
employment, upon the terms and conditions herein set forth.
3. Term. This Agreement shall be for an initial three-year term (the
----
"Term") commencing on August 1, 1998 (the "Employment Date") and, unless this
Agreement is sooner terminated under the provisions hereof, the Term shall be
automatically renewed for successive one-year terms unless the Company or
Executive shall give to the other written notice of non-renewal at least three
months prior to the end of the then current term.
4. Duties and Responsibilities. During the Term, Executive shall serve
---------------------------
as and have the title of Vice President of Marketing. In serving in such
capacity, he shall perform such duties and have such responsibilities as the
Board of Directors of the Company and/or the Chief Executive Officer of the
Company may from time to time determine and assign to Executive, including,
without limitation, establishing relationships with potential clients,
maintaining relationships with existing clients and developing and implementing
strategic marketing plans on behalf of the Company. Executive may perform his
duties hereunder at his place of residence located in Santa Cruz, California;
provided, however, that he shall be obligated to travel to the Company's
- -------- -------
facilities located in Georgia, Connecticut and Florida and elsewhere as may be
required from time to time in connection with the performance of his duties
hereunder. In no event will Executive be required to undertake any duties or
perform any tasks which are inconsistent with his status as Vice President of
Marketing of the Company. Executive's employment with the Company shall be
full-time and exclusive and, during the Term, Executive agrees that he will (i)
devote substantially all of his business time, attention, skill and efforts to
the performance of his duties hereunder and (ii) generally promote the interests
of the Company and its clients; provided, however, that Executive may serve as a
director of other companies if such service does not conflict in any material
respect with his duties hereunder or his fiduciary duty to the Company, and
provided that Executive shall give the Company prior written notice of such
service.
5. Compensation. As compensation for services hereunder and in
------------
consideration of the covenants contained herein, during the Term, Executive
shall receive be entitled to receive the following compensation:
(a) Base Compensation. The Company shall pay Executive, in accordance
-----------------
with the Company's normal payroll practices and subject to required withholding,
an Annual Base Salary which shall be at the rate per annum of $135,000. The
Company's Board of Directors
3
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may, in its sole discretion, increase the Annual Base Salary. Once increased,
the Annual Base Salary shall not be decreased, except as part of a general
reduction in the annual base salaries of senior management of the Company
pursuant to which Executive's Annual Base Salary is decreased proportionately
with such general reduction.
(b) Guaranteed Bonus. The Company shall also pay Executive a
----------------
guaranteed cash bonus of $33,750 (or 25% of his Annual Base Salary) at the end
of his first year of employment hereunder in accordance with the Company's
normal payroll practices and subject to required withholding.
(c) Performance Bonus. The Company shall also pay Executive an annual
-----------------
performance-based bonus ("Performance Bonus") based on certain performance
criteria (the "Criteria") to be established in writing by the Company after
consultation with Executive as soon as practicable after the date hereof. With
respect to Executive's first year of employment hereunder, the Performance Bonus
shall be an amount up to $6,750 (or 5% of his Annual Base Salary) based upon
Executive's fulfillment of the Criteria. With respect to each year thereafter,
the Performance Bonus shall be an amount up to 30% of his then current Annual
Base Salary based upon Executive's fulfillment of the Criteria. The Performance
Bonus shall be payable in cash by the Company in accordance with the Company's
normal payroll practices and subject to required withholding.
(d) Stock Options. At or promptly after the Employment Date, the
-------------
Company shall cause to be granted to Executive options to purchase 60,000 shares
of common stock, par value $.01 per share, of the Company (the "Options") under
the Company's 1998 Stock Option Plan (the "Option Plan"). The exercise price
per share shall be the Fair Market Value, as such term is defined in the Option
Plan. The Options shall become exercisable in five equal installments of 12,000
Options (each, an "Installment"), commencing on the first anniversary of the
date of their grant. In the event (i) the Company terminates Executive's
employment hereunder other than for Cause or Disability or (ii) Executive
resigns for Good Reason or following a Change of Control in accordance with
Section 9 hereof, a pro rata portion of the next Installment shall immediately
become exercisable at the time of termination of employment (e.g., one-third of
the next Installment would become exercisable if termination of employment
occurred four months after any anniversary of the date of grant of the Options).
Notwithstanding the foregoing, no Options shall became exercisable in the event
that Executive's employment hereunder is terminated for any reason within the
first three months of his employment.
6. Other Compensation and Benefits. In addition to the compensation
-------------------------------
provided for under Section 5, during the Term, Executive shall be entitled to:
(a) participate in all benefit, pension, retirement, savings, welfare
and other employee benefit plans and policies in which members of the Company's
senior management generally are entitled to participate, in accordance with
their respective terms as in effect from time to time;
4
<PAGE>
(b) receive all fringe benefits and perquisites generally maintained
by the Company from time to time for members of senior management, including,
without limitation, reimbursement for all reasonable, ordinary and necessary
business and entertainment expenses incurred in the performance of his services
hereunder, in accordance with the Company's policies as in effect from time to
time;
(c) vacation each year in accordance with the Company's policies for
members of senior management as in effect from time to time, but in no event
less than 20 days paid vacation for each calendar year and 25 days after ten
years of employment with the Company; and
(d) such other benefits as Executive is entitled in accordance with
the Company's policies for members of senior management as in effect from time
to time.
7. Termination by the Company.
--------------------------
(a) Subject to the provisions of this Agreement, the Company may
immediately terminate Executive's employment hereunder for Cause upon written
notice of such termination, in which case the Company shall have no other
liability or obligation to Executive hereunder except to pay to Executive, when
otherwise due, all accrued and unpaid Annual Base Salary to the date of
termination and all other accrued benefits due to Executive hereunder.
(b) In the event of Executive's Disability, the Company may terminate
Executive's employment hereunder upon 30 days prior written notice, in which
case the Company shall have no other liability or obligation to Executive
hereunder except to pay to Executive, when otherwise due, all accrued and unpaid
Annual Base Salary to the date of termination and all other accrued benefits due
to Executive hereunder.
(c) If the Company terminates Executive's employment for Cause or
Disability and Executive disputes such finding of Cause or Disability, the issue
of the validity of the Company's finding of Cause or Disability shall be
submitted to the American Arbitration Association ("AAA") for arbitration in San
Jose, California in accordance with the then effective rules of the AAA, and
judgment on the award rendered pursuant to such arbitration may be entered by
any court having jurisdiction over the parties and the subject matter hereof.
The costs of such arbitration shall be paid equally by the Company and
Executive, and each party shall be solely responsible for its own costs and
expenses, including attorneys' fees and expenses, incurred in connection with
such arbitration.
8. Death of Executive. In the event of Executive's death, the Term
------------------
of this Agreement shall terminate and the Company shall have no other liability
or obligation to Executive hereunder other than to pay to Executive's estate,
when otherwise due, all accrued and unpaid Annual Base Salary to the date of
termination and all other accrued benefits due to Executive hereunder.
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<PAGE>
9. Other Termination. Notwithstanding anything herein to the
-----------------
contrary, Executive may at any time resign for Good Reason or following a
Change of Control upon 30 days prior written notice to the Company. However, if
Executive desires to resign effective within six months following the date on
which a Change of Control occurs, Executive shall:
(a) first ask the Chief Executive Officer of the Company whether he
wishes Executive to remain employed with the Company in Executive's then current
position; and
(b) if the Chief Executive Officer of the Company responds in the
affirmative, then Executive shall continue to dutifully execute his
responsibilities as a senior executive of the Company for a period of three
months following the date on which the Change of Control occurred (the
"Transition Period"). If Executive fails to perform his material
responsibilities as a senior executive of the Company for the Transition Period,
then Executive shall not be entitled to receive any severance compensation under
Section 10 hereof.
10. Severance Compensation. In the event (i) the Company terminates
----------------------
Executive's employment hereunder other than for Cause or Disability or (ii)
Executive resigns for Good Reason or following a Change of Control in accordance
with Section 9 hereof, then Executive shall be entitled, subject to Section 14
hereof, to receive from the Company severance compensation in an amount equal to
100% of Executive's Ending Compensation (less appropriate payroll deductions, if
any). Such amount shall be paid in installments during the twelve-month period
following termination of employment in accordance with the Company's normal
payroll practices. Executive acknowledges and agrees that the severance
compensation provided herein shall be in lieu of any other cash severance
benefits provided by the Company to which Executive may otherwise be entitled.
11. Non-Competition; Confidential Information.
-----------------------------------------
(a) Executive agrees that his services hereunder are of a special and
unique nature and his position with the Company places him in a position of
confidence and trust with clients and employees of the Company. Executive
agrees that he will not at any time during his employment with the Company and
for a period of one year thereafter (the "Restrictive Period"), directly or
indirectly, compete (as an owner, joint venturer, partner, stockholder,
director, officer, consultant, agent or otherwise) with the Company in the
United States. Ownership of less than 5% of the securities of any class of a
corporation registered under section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, shall not be considered a violation of the provisions
of this paragraph.
(b) Executive further agrees that he will not at any time, directly or
indirectly, without the Company's prior written consent, disclose to any third
party or use (except as authorized in the regular course of the Company's
business) any confidential, proprietary or trade secret information acquired by
him during his employment with the Company and thereafter, including, without
limitation, sales and marketing information, information relating to existing or
prospective customers and markets, information relating to the RealTime software
technology
6
<PAGE>
and enhancements thereto or other software technology, business opportunities,
and financial, technical and other data (collectively, the "Confidential
Information"). After termination of Executive's employment with the Company for
any reason and upon the written request of the Company, Executive shall promptly
return to the Company all originals and/or copies of written or recorded
material (regardless of the medium) containing or reflecting any Confidential
Information and shall promptly confirm in writing to the Company that such
action has been taken.
(c) Executive agrees that he will not, during the Restrictive Period,
employ or retain, solicit the employment or retention of, or cause or encourage
any entity to retain or solicit the employment or retention of, any person who
was any employee of the Company at any time during the two year period
commencing 12 months prior to the termination of Executive's employment with the
Company and ending on year after such termination. After termination of
Executive's employment with the Company, (i) Executive will refrain from
disparaging, whether orally, in writing or in other media, the Company, its
Affiliates, the officers, directors and employees of each of them, and the
products and services of each of them, and (ii) the Company will not comment
upon the employment performance of Executive other than as may be required by
law or as requested by Executive.
(d) Any discovery, design, invention or improvement (whether or not
patentable) that Executive develops during his employment with the Company
(whether or not during his regular working hours or on the Company's premises)
and that is related to the Company's business or operations as then conducted or
contemplated, shall belong solely to the Company and shall be promptly disclosed
to the Company. During the period of his employment with the Company and
thereafter, Executive shall, without additional compensation, execute and
deliver to the Company any instruments of transfer and take any other action
that the Company may reasonably request to carry out the provisions of this
paragraph, including executing and filing, a the Company's expense, patent
and/or copyright applications and assignments of such applications to the
Company.
12. Specific Performance. Executive acknowledges that, in view of the
--------------------
nature of the Company's business, the restrictions contained in this Agreement
are reasonably necessary to protect the legitimate business interests of the
Company and that any violation of such restrictions will result in irreparable
injury to the Company for which money damages will not be an adequate remedy.
Accordingly, Executive agrees that, in addition to such money damages, he may be
restrained and enjoined from any continuing breach of such covenants without any
bond or other security being required by any court. If any restriction
contained in this Agreement shall be deemed to be invalid, illegal or
unenforceable by reason of the extent, duration or geographical scope, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope or other provisions hereof, and
in its reduced form such restriction shall then be enforceable in the manner
contemplated thereby.
13. No Mitigation; No Set-Off. The Company agrees that if Executive's
-------------------------
employment with the Company is terminated for any reason whatsoever, Executive
is not required to seek
7
<PAGE>
other employment or to attempt in any way to reduce any amounts payable to
Executive by the Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned by Executive or benefit provided to Executive as the result
of employment by another employer or otherwise. The Company's obligations to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against Executive.
14. General Release of the Company. In consideration of the payments
------------------------------
and other undertakings set forth herein, Executive agrees to execute a release
of the Company in substantially the form attached hereto as Exhibit A upon the
---------
termination of his employment with the Company. Executive acknowledges that the
execution of such release is an express condition to his right to receive
severance compensation pursuant to Section 10 hereof in the event such section
is applicable.
15. Notice. Any notice or other communication required or permitted
------
hereunder shall be in writing and shall be delivered personally, or sent by
certified mail, return receipt requested, by Federal Express, Express Mail or
similar overnight delivery or courier service, or by telecopy. Notice to
Executive shall be delivered to his address set forth at the head of this
Agreement, and notice to the Company shall be sent as follows:
LogistiCare, Inc.
One Crown Center
1895 Phoenix Boulevard, Suite 306
College Park, Georgia 30349
Fax: (770) 907-7598
Attention: Chief Executive Officer
Any notice given by certified mail shall be deemed given five days after
the time of certification thereof. Any notice given by other means permitted
hereby will be deemed given at the time of receipt thereof. Either party may by
notice given in accordance herewith to the other party, designate another
address or person for receipt of notices hereunder.
16. Successors; Binding Agreement. Neither party may assign this
-----------------------------
Agreement; provided, however, that it is expressly acknowledged that this
-------- -------
Agreement and the rights of the Company hereunder may be assigned, without the
consent of Executive, to any purchaser or other transferee of all or
substantially all of the business and/or assets of the Company or any division
of the Company for which Executive is then acting as general manager. The
Company shall require any such successor to expressly assume and agree, in a
written instrument in form and substance satisfactory to Executive and his
counsel, to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, permitted assigns, heirs and
representatives.
8
<PAGE>
17. Separability. If any provisions of this Agreement shall be declared
------------
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
18. Waiver. The rights of each party hereunder may be waived only by a
------
writing signed by the waiving party giving such waiver expressly setting forth
the rights so waived and the matters as to which they are so waived, and any
such waiver shall be limited to the matters expressly set forth in such writing.
No failure or delay of any party hereto in enforcing any of its rights hereunder
at any time shall constitute or evidence any waiver of such rights.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which together will constitute one
document.
20. Headings. The headings used in this Agreement are for convenience of
--------
reference only and shall not be deemed to be of any substance.
21. Entire Agreement; Modification. This Agreement contains the entire
------------------------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters. This Agreement may not be amended, modified, or
supplemented in any respect except by a subsequent written agreement entered
into by both parties.
22. Governing Law. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of California, without regard to its
conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LOGISTICARE, INC.
By: /s/ John L. Shermyen
---------------------------------------
Name: John L. Shermyen
Title: President
EXECUTIVE
/s/ Gerald E. Souza
---------------------------------------
Gerald E. Souza
9
<PAGE>
EXHIBIT A
GENERAL RELEASE
---------------
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, I, for myself and my successors, assigns, heirs and
representatives (each, a "Releasing Party"), hereby release and forever
discharge LogistiCare, Inc. (the "Company"), its stockholders, officers,
directors, employees, agents and attorneys, and their respective successors,
assigns, heirs and representatives (each, a "Released Party"), individually and
collectively, from any and all claims, demands, causes of action, liabilities or
obligations, known or unknown, pending or not pending, liquidated or not
liquidated, of every kind and nature whatsoever (collectively, the "Released
Claims") which the Releasing Party has, has had or may have against any one or
more of the Released Parties arising out of, based upon or in any way, directly
or indirectly, related to the Company's business, my employment with the Company
or the termination of such employment; provided, however, that this General
-------- -------
Release shall have no effect whatsoever upon the Company's obligations, if any,
to pay severance compensation pursuant to the Employment Agreement between the
undersigned and the Company, dated July 14, 1998.
The Released Claims include, without limitation, (a) all claims arising out
of or relating to breach of contract, the Fair Labor Standards Act, the Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the National Labor Relations Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act and/or any other
federal, state or local statute, law, ordinance, regulation or order as the same
may be amended or supplemented from time to time, (b) all claims for back pay,
lost benefits, reinstatement, liquidated damages, punitive damages, and damages
on account of any alleged personal, physical or emotional injury, and (c) all
claims for attorneys' fees and costs.
I understand and acknowledge that I am hereby being advised to consult with
an attorney prior to signing this General Release. My decision to sign this
General Release is my own voluntary decision made with full knowledge that I
have been advised to consult with an attorney and I intend to be bound by this
General Release in accordance with its terms.
Dated: ______________ ______________________________________
Gerald E. Souza
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Pre-Effective Amendment No. 2 to the Registration Statement on Form SB-2 of
our report dated May 7, 1998, except as to Notes 1, 7 and 10 which are as of
June 11, 1998 relating to the financial statements of LogistiCare, Inc., which
appear in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Prospectus. However,
it should be noted that PricewaterhouseCoopers LLP has not prepared or
certified such "Selected Financial Data."
PRICEWATERHOUSECOOPERS LLP
Ft. Lauderdale, FL
July 21, 1998
