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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
MEDIQUIK SERVICES, INC.
(Name of Small Business Issuer in its charter)
Delaware 74-2876711
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4295 San Felipe, Suite 200, Houston, Texas 77027
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713)888-1919
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class is to be registered
none
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains statements relating to future
results of the Company (including certain projections and business trends)
that are "forward-looking statements" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and the Securities Exchange
Act of 1934, as amended. All statements, other than statements of historical
fact, included in this Registration Statement regarding the Company's
financial position, future net revenues, net income, potential evaluations,
business strategy and plans and objectives for future operations are
"forward-looking statements." Although the Company believes that the
assumptions upon which such forward-looking statements are based are
reasonable, it can give no assurance that such assumptions will prove to be
correct. Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including, but not limited to,
changes in political and economic conditions, regulatory conditions,
government health care spending and competitive pricing pressures. Important
factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed elsewhere in
this Registration Statement. All forward-looking statements in this
Registration Statement are expressly qualified by the Cautionary Statements
and by reference to the underlying assumptions that may prove to be incorrect.
These forward-looking statements are commonly identified by the use
of such terms and phrases as "intends," "estimates," "expects," "projects,"
"anticipates," "foreseeable future," "seeks," "believes" and "scheduled" and,
in many cases, are followed by a cross-reference to "Risk Factors." Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Company does not undertake any obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
MediQuik Services, Inc. (the "Company" or "MediQuik") was organized to
take advantage of an identified niche market related to the delivery of health
care, medical and pharmaceutical supplies. This market is the management of
chronic disease patients for managed care payors by providing home delivery of
pharmaceuticals and supplies, educational materials, and patient monitoring and
consultations. These payors include self-insured, self-administered employers of
all sizes, small to moderate sized health insurance companies and small to
moderate sized health maintenance organizations, preferred provider
organizations, and third-party administrators. The Company's first product is
diabetes management and diabetes pharmaceutical supplies. As this product
matures, the Company intends to offer other chronic disease management products,
such as respiratory management and congestive heart failure management services.
Historically, as a cost saving and time saving strategy, MediQuik has contracted
with other entities to receive, bundle and deliver goods and services rather
than develop the necessary resources in-house.
The Company's predecessor, also chartered under the name "MediQuik
Services, Inc.," was organized in Delaware on April 7, 1998 ("Old MediQuik").
Effective December 31, 1998, Old MediQuik was merged with and into Cash Flow
Marketing, Inc., a Delaware corporation ("Cash Flow"), which, as the
surviving corporation, subsequently changed its name to MediQuik Services,
Inc. Cash Flow was originally organized in Colorado on July 9, 1997, and
changed its domicile to Delaware effective December 31, 1998. At the time of
the merger, Cash Flow was a "shell" corporation with substantially no assets,
business or operations.
Pursuant to the terms of the merger, each stockholder of Old
MediQuik received one share of common stock of the Company, $.001 par value
per share ("Common Stock"), for each .9327 shares of common stock of Old
MediQuik held by such stockholder. Each stockholder of Cash Flow received one
share of Company Common Stock for each 2 shares of Cash Flow common stock
held by such stockholders.
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BUSINESS OF THE ISSUER
In recent years, the demand for higher quality health care with
reduced cost has prompted dramatic changes in the United States health care
system. The industry response has been the emergence of managed care, whose
primary mission is to control costs. Today, more than two-thirds of all
Americans with private health insurance are enrolled in these plans.
MediQuik was organized to take advantage of these changes in the
delivery of health care. The Company provides chronic disease management
services to patients pursuant to contracts with managed care payors. MediQuik's
services include home delivery of pharmaceuticals, supplies and educational
materials, as well as patient monitoring and consultation services. MediQuik's
customers include self-insured, self-administered employers of all sizes, small
to moderate sized health maintenance organizations, third-party administrators
and preferred provider organizations. By entering into agreements with the
managed care payors, rather than individual patients, the Company believes that
it will be able to rapidly obtain a larger patient base. When MediQuik enters
into a contract with a managed care payor it typically becomes an approved
provider for thousands of patients who may select MediQuik's products and
services, ordinarily at a nominal cost to the patient (co-pay charges to the
patient typically represent less than 20% of price of MediQuik's products and
services). Other providers generally sell directly to patients. For them, one
sale ordinarily results in one patient.
Generally, the Company enters into agreements with managed care
payors which provide that, in consideration of being designated as a plan
provider, the Company will provide services to plan participants at a
discounted rate. The Company also offers capitated service contracts pursuant
to which the managed care payor reimburses the Company based on the total
number of participants in the plan rather than based on the amount of
products and services actually consumed by the participants. Under capitated
service contracts, MediQuik would share a portion of the risk related to
program costs with the managed care payor. MediQuik is currently offering
capitated services contracts to managed care payors but has not entered into
any such contracts to date.
The Company's first product is diabetes management, the major profit
component of which is the delivery of self testing supplies (test strips,
lancets and alcohol prep pads) directly to the home of the patient. Diabetes
mellitus is the most common and most costly chronic disease in the United
States. In a release dated November 1, 1998, the National Center for Chronic
Disease Prevention and Health Promotion of the Centers for Disease Control
and Prevention (the "CDC") estimated that 15.7 million people in the United
States, or 5.9% of the population, have diabetes, although only about 10.3
million have been diagnosed. According to the American Diabetes Association,
in 1997 the per capita costs of health care for people with diabetes was
$10,071 per annum.
There is no cure for diabetes. The disease can be controlled, but
only if the patient is willing to actively participate in that control. In
order to control diabetes, the patient must regularly determine personal
blood sugar levels. This is normally done at home by the patient and is a
simple and relatively painless process. Patients use a lancet to prick a
finger and draw a drop of blood which is deposited upon a test strip. The
test strip is then introduced into a glucometer and a few seconds later the
patient's blood sugar level is displayed.
The Company believes that it can provide pharmaceuticals for the
treatment of diabetes to patients covered by managed care providers and to
other MediQuik customers at substantial cost savings when compared with
alternative delivery systems because MediQuik has focused on preventive
diabetes care products and services and has successfully negotiated supply
contracts which permit the Company to purchase large quantities at favorable
prices. In addition, by providing educational materials and patient
monitoring and consultation services, the Company believes that it will
provide better patient management, which reduces a patient's need for
hospitalization and prevents the development of other chronic diabetic health
related problems. After the MediQuik product is authorized by a payor and a
patient is enrolled in the program, the Company will ship supplies to the
patient's home bimonthly or quarterly. Because of the chronic nature of the
disease, the Company expects its medical and financial relationship with a
patient to continue for many years. As of October 18, 1999, the Company had
entered into the following major provider agreements:
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Major Providers Est. No. of Lives
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National HealthCare Alliance, Inc. 732,000
MultiPlan, Inc. 21,000,000
USA Managed Care Organization, Inc. 6,000,000
Cooperative Health Services of Colorado 1,700,000
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TOTAL LIVES 29,432,000
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The Estimated Number of Lives described above represent the total
number of participants in the plans as determined by the managed care payor.
Based on the CDC's estimate that 5.9% of the population in the United States
suffers from diabetes, the Company estimates that approximately 1,736,500 of
the plan participants are potential users of its products. The provider
agreements generally provide that, in consideration of being designated as a
plan provider, the Company will provide products and services to plan
participants at a discounted rate. The provider agreements typically have a
term of one to two years with provisions for automatic renewal unless
terminated at the election of either party.
Although the Company believes that its revenues for the foreseeable
future will be generated principally by sales under the provider agreements
described above, the Company estimates that for the nine months ended
September 30, 1999, its revenue has been derived as follows:
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Sales under the Global Medical Solutions, Inc., ancillary provider agreement 62%
Sales to Hanna Medical Corporation, a health care facility 12%
Sales under the National HealthCare Alliance, Inc. provider contract 10%
Sales under the Advantage Care Network, Inc. provider contract 5%
Other sales 11%
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The Company anticipates that the revenue sources described above
(other than National HealthCare Alliance) will be replaced by the major
provider agreements described in the preceding paragraphs.
To support its business activity, MediQuik has formed a strategic
alliance with Bayer Corporation, a worldwide leader in the manufacturing and
supply of diabetes related products ("Bayer"). The company has entered into
(i) a Mail Order and Mail Order Health Plan Patient Testing Compliance
Agreement and (ii) a Nursing Home/Long Term Care/Home Health Care Distributor
Agreement with Bayer (collectively, the "Bayer Agreements"). Pursuant to each
agreement, the Company has committed to purchase a certain volume of products
from Bayer at a set price. In consideration of the Company's agreement to
provide certain customer information to Bayer, Bayer has agreed to credit the
Company's account based on the amount of the Company's purchase commitment.
If the Company does not meet its purchase commitment, Bayer will charge the
Company the difference between the credit given for its purchase commitment
and the credit given for the amount actually purchased. As a result of the
Bayer Agreements, Bayer products are available to the Company at deeply
discounted prices. The Bayer Agreements allow MediQuik to sell Bayer products
to managed care payors as well as long-term care facilities, including
nursing homes, assisted living centers and home health care agencies. With
the aging population and its increased risk of diabetes, this opens up a
significant growth market for supply to the elderly. The Company purchases
approximately 90% of its products from Bayer. The Bayer Agreements expire
upon 120 days notice and on December 31, 2000, respectively.
After MediQuik achieves meaningful market penetration with the
diabetes management product, the Company intends to develop and offer
respiratory management and congestive heart failure management services.
In May 1999, MediQuik formed a subsidiary known as ChronicRx.com to
provide Internet-based pharmacy services. ChronicRx.com will focus on the
chronic care niche and will specialize in prescription and non-prescription
medicines and management products used to treat chronic diseases of all
kinds. ChronicRx.com will provide 24-hour access to pharmacists, educational
material regarding the diagnosis, symptoms and treatment of chronic
illnesses, prescription and over-the-counter drugs, and personal care
products for chronic disease patients. The Company believes that a number of
factors poise ChronicRx.com for rapid growth: its access to discounted
pharmaceuticals through its
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relationship with MediQuik; the availability of cost efficient mail-order
distribution and the low cost, wide market reach of the Internet. The Company
believes that ChronicRx.com will be the first pharmacy on the Internet
focused primarily on the management of chronic diseases. ChronicRx.com began
offering limited services in November 1999.
As a cost saving and time saving strategy, management has historically
elected to out source major components of the business, such as order
fulfillment, billing and collecting, utilization reporting, legal and
accounting and a portion of sales. However, during the third and fourth
quarters of 1999, the Company has developed and implemented an in-house
enrollment and customer service department and shall finish implementation of
an in-house billing and collection department by the end of 1999. The Company
intends to hire a chief financial officer with experience in working for
public companies during the first quarter of 2000.
COMPETITION
The business of providing blood sugar monitoring supplies by mail
order is an immature industry characterized by high growth rates, low
barriers to enter the business, and many small competitors. Of the many
companies that are mail order providers of blood glucose monitoring supplies,
most do not directly compete with MediQuik because they generally concentrate
on Medicare patients by direct solicitation, rather than focusing on health
care payors. To the knowledge of the Company, each sells to patients rather
than payors under distribution agreements with the major manufacturers that
provide for relatively small price discounts. The Company believes that these
companies have little or no impact on the business of MediQuik. For them, one
sale results in one patient. For MediQuik, one sale will likely produce
hundreds or thousands of patients.
Several companies do compete with MediQuik in the traditional fee
for service market. MediQuik is aware of two companies that have exclusive
marketing agreements with certain manufacturers which target payors as
clients rather than individual patients. One is National Diabetic Pharmacies,
Inc. ("NDP"), based in Roanoke, Virginia. NDP works primarily with diabetic
managed care patients and has approximately $18,000,000 in annual sales. NDP
distributes products manufactured by Boehringer Mannheim. Another competitor
of the Company is TM Supply, Inc. doing business as Total Medical Supply,
located in Dothan, Alabama. It has a distribution agreement with Home
Diagnostics, Inc., a manufacturer of health care products. The Company
believes that Total Medical Supply has historically concentrated on Medicare
business but has begun to shift into the managed care private sector.
MediQuik believes that neither NDP nor Total Medical Supply is currently
soliciting capitated agreements.
MediQuik has developed a program that shares cost containment
directly with the payor, which makes MediQuik effective as both a capitated
fee and a fee for service provider. MediQuik believes that it is the first
company in its industry to offer capitated fee contracts. Under such an
arrangement, a managed care payor would make payments to the Company based on
the total number of participants in its plan rather than the amount of
products and services actually consumed by its participants. Although under
capitated fee contracts there is a risk that the cost of products and
services provided by the Company will exceed the payor's fee, the Company
believes that such contracts will create a financial commonality of interest
with its potential clients and that competitors will adopt this strategy as
well so it is important for MediQuik to acquire market share as quickly as
possible. MediQuik is currently offering capitated service contracts to
managed care payors but has not entered into any such contracts to date.
THE MARKET
The U.S. demand for diabetes monitoring and maintenance, supplies,
pharmaceuticals and equipment is expected to be $4.692 billion by 2000 and
$6.545 billion by 2005, as both the U.S. population and the incidence of
diabetes appear to be increasing, according to a March 1996 report of the
Genesis Group Associates, Inc. entitled "The Diabetes Dilemma Managing
Markets and Technology" (the "Genesis Report"). The Genesis Report also
indicates that on a worldwide basis, Johnson & Johnson, Boehringer Mannheim,
Bayer and MediSense, Inc. are the major manufacturers in the field. Effective
July 1, 1998, Medicare coverage was extended pursuant to the Balanced Budget
Act of 1997 to permit the reimbursement of diabetes self-testing supplies, as
well as educational and training services for diabetes. Management of the
Company believes that managed care payors will view Medicare's reimbursement
guidelines as the baseline for pricing these products and services.
MARKET SEGMENTATION. The Company believes that there are five
segments to the market for diabetes testing supplies, pharmaceuticals and
equipment:
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1. Retail pharmacies typically offer a range of manufacturers products
which are available without prescription to the general public.
Patients may be reimbursed directly by their insurance carrier. A large
portion of the retail purchasers are Medicare qualified and file their
own claims for Medicare reimbursement. Most payors, including Medicare,
reimburse for the cost of the supplies less annual deductible and
copayment amounts. Rules for qualification and reimbursement for
Medicaid patients vary from state to state.
2. Managed care payors may distribute products directly to patients
covered by their plan.
3. Mail order suppliers may enroll patients directly rather than through
managed care payor referrals. These suppliers tend to concentrate on
Medicare patients and typically have distribution agreements with each
of the major manufacturers. These suppliers take care of billing and
collecting from third-party payors for the patient and the patient is
responsible to the supplier for deductible and copay amounts.
4. MediQuik is aware of at least three companies that interface directly
with payors for patient referrals. MediQuik believes that each of these
companies has an exclusive agreement with a manufacturer which provides
a pricing advantage over other supply sources. MediQuik and at least
one of its competitors offer significant price discounts to the payors
and encourage the payors to waive deductible and co-pay amounts for
their patients.
5. MediQuik has developed and offers capitated fee arrangements under
which the Company will agree to provide certain diabetes related
services for a group of patients for a fixed fee. MediQuik believes
that it is the only company prepared to enter into agreements with
payors to share in the financial risk of patient treatment.
CHARACTERISTICS OF DIABETES. Diabetes is a disease characterized by
high levels of blood glucose. During the normal digestion process, the body
converts food into glucose (sugar) to be used by the body's cells as a source of
energy. Insulin, a hormone produced by the pancreas gland, is necessary for
normal utilization of glucose by most cells in the body. In people with
diabetes, insulin is either absent or lacking, or the body does not respond to
the insulin that is produced. As a result, the body cannot use glucose for
energy and it begins to build up in the blood, creating high sugar levels in the
body. Diabetes is categorized into four types:
1. Type 1 diabetes was previously called insulin-dependent diabetes
mellitus ("IDDM") or juvenile-onset diabetes. According to the CDC,
type 1 diabetes may account for 5% to 10% of all diagnosed cases of
diabetes. Risk factors contributing to the development of the disease
are less well defined for type 1 diabetes than for type 2 diabetes, but
autoimmune, genetic, and environmental factors are involved in the
development of this type of diabetes.
2. Type 2 diabetes was previously called non-insulin-dependent diabetes
mellitus ("NIDDM") or adult-onset diabetes. The CDC estimates that type
2 diabetes may account for about 90% to 95% of all diagnosed cases of
diabetes. Factors associated with type 2 diabetes include age, obesity,
family history of diabetes, prior history of gestational diabetes,
impaired glucose tolerance, physical inactivity, and race/ethnicity.
According to the CDC, African Americans, Hispanic/Latino Americans,
American Indians, and some Asian Americans and Pacific Islanders are at
particularly high risk for type 2 diabetes.
3. Gestational diabetes develops in 2% to 5% of all pregnancies, according
to the CDC, but disappears when a pregnancy is over. The CDC also
reports that gestational diabetes occurs more frequently in African
Americans, Hispanic/Latino Americans, American Indians, and persons
with a family history of diabetes. Obesity is also associated with
higher risk. Women who have had gestational diabetes are at increased
risk for later developing type 2 diabetes. According to the CDC, some
studies have found that nearly 40% of women with a history of
gestational diabetes developed diabetes in the future.
4. "Other specific types" of diabetes result from specific genetic
syndromes, surgery, drugs, malnutrition, infections, and other
illnesses. The CDC reports that such types of diabetes may account for
1% to 2% of all diagnosed cases of diabetes.
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PREVALENCE OF DIABETES IN THE UNITED STATES. In a release dated
November 1, 1998, the CDC estimated that 15.7 million people in the United
States, or 5.9% of the population, had diabetes and that approximately
798,000 new cases of diabetes are diagnosed each year. The cases were
segmented as follows:
Total (diagnosed and undiagnosed): 15.7 million
Diagnosed: 10.3 million
Undiagnosed: 5.4 million
Type 1 diabetes: 1 million
Type 2 diabetes: 14.9 million
Women: 8.1 million (8.2% of all adult women)
Men: 7.5 million (8.2% of all adult men)
Children age 19 years or younger: 123,000 (.16% of all people
in this age group)
Adults age 65 years or older: 6.3 million (18.4% of all people in
this age group)
The distribution of diabetes among adults, reported by race and
ethnicity (diagnosed and undiagnosed), is as follows: African Americans,
10.8%; Mexican Americans, 10.6%; White Americans, 7.8%; American Indians and
Alaska Natives, 9%.
According to the American Diabetes Association, the total cost of
diabetes in 1997 was estimated to be $98 billion. Direct costs, estimated to
be $44.1 billion in 1997, include costs attributable to medical treatment.
Indirect costs, estimated to be $54 billion in 1997, include costs
attributable to disability and mortality.
Based on death certificate data, the CDC reported that diabetes
contributed to the deaths of 193,140 persons in 1996. According to the CDC,
however, it is believed that death certificate data under-represents deaths
for which diabetes is the cause or a contributing factor. Diabetes was the
seventh leading cause of death listed on U.S. death certificates in 1996,
according to CDC's National Center for Health Statistics and is the sixth
leading cause of death by disease.
Treatment emphasizes control of blood glucose through blood glucose
monitoring, regular physical activity, meal planning, and attention to
relevant medical and psychosocial factors. In many patients, oral medications
and/or insulin injections are also required for appropriate glucose control.
Treatment of diabetes is an ongoing process that is planned and regularly
reassessed by the health care team, the person with diabetes, and his or her
family. Patient and family education are important parts of the process. IDDM
can only be treated with insulin injections. About 40% of NIDDM patients use
insulin.
Diabetes can lead to significant long-term complications especially
where the disease has not received proper treatment for long periods. The
following table identifies some of the long-term complications and contains
certain statistical data evidencing the relationship to diabetes:
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HEART DISEASE The American Diabetes Association reports
that heart disease is 2 to 4 times more
common in adults with diabetes and is
present in 75% of diabetes-related deaths.
STROKE According to the American Diabetes
Association, the risk of stroke is 2 to 4
times higher in people with diabetes.
HIGH BLOOD PRESSURE The CDC estimates that 60 to 65% of people
with diabetes have high blood pressure.
BLINDNESS Diabetes is the leading cause of new cases of
blindness among people 20 to 74 years of age,
according to the CDC, and 12,000 to 24,000
new cases of blindness each year are caused
by diabetic retinopathy.
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NERVE DISEASE The CDC reports that about 60 to 70% of
people with diabetes have mild to severe
forms of diabetic nerve damage (with such
manifestations as impaired sensation or pain
in the feet or hands, delayed digestion of
food in the stomach, carpal tunnel syndrome,
and other nerve problems). Severe forms of
diabetic nerve disease are a major
contributing cause of lower extremity
amputations.
AMPUTATIONS More than half of lower limb amputations in
the United States occur among people with
diabetes according to reports by the CDC.
From 1993 to 1995, the average number of
amputations performed each year among people
with diabetes was 67,000.
DENTAL DISEASE According to the CDC, periodontal disease, a
gum disease that can lead to tooth loss,
occurs with greater frequency and severity
in people with diabetes. They report one
study which found that 30% of type 1
diabetes patients age 19 years or older had
periodontal disease.
COMPLICATIONS OF PREGNANCY The rate of major congenital malformations
in babies born to women with pre-existing
diabetes varies from 0 to 5% in women who
receive preconception care to 10% in women
who do not receive preconception care,
according to the CDC. Three to 5% of
pregnancies among women with diabetes result
in death of the newborn; this compares to a
rate of 1.5% for women who do not have
diabetes.
KIDNEY DISEASE The American Diabetes Association reports
that diabetes is the leading cause of kidney
disease, accounting for 40% of new cases.
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ACQUISITION STRATEGY
In addition to the internal growth of the Company described above,
the Company intends to grow by acquiring additional chronic disease
management companies. Through such acquisitions, the Company intends to
develop internally the capability to conduct order fulfillment, billing and
collecting, sales, utilization, reporting and other operations for the home
delivery of prescription drugs and disease management products and supplies
to patients nationwide.
DEPENDENCE ON MAJOR CUSTOMERS
The Company is dependant on the managed care payors with which it
has provider agreements. If any of National HealthCare Alliance, Inc.,
MultiPlan, Inc., USA Managed Care Organization, Inc. or Cooperative Health
Services of Colorado terminate its respective agreement with the Company and
the Company is not successful in generating sales to replace the lost
business, the Company's future business and operating results could be
materially adversely affected. In addition, the managed care industry is
undergoing substantial consolidation. In the event payors which currently
have provider agreements with the Company are acquired by payors not
associated with the Company, the acquired payor may elect to terminate its
agreement with the Company. For a discussion of the Company's sources of
revenue through September 30, 1999, see "BUSINESS OF THE ISSUER."
INTELLECTUAL PROPERTY
The Company is in the process of applying for registration of the
service mark "MediQuik" with the United States Patent and Trademark Office.
In an Office Action dated August 30, 1999, the United States Trademark and
Patent Office indicated that they had performed a search and found no similar
registered or pending mark which would bar registration. The Company believes
there will be no material adverse effect on its business, however, if it is
unable to successfully register such service mark. In such event, it is
possible that a company engaged in a similar business as MediQuik will be
able to successfully register this trademark. If that happens, MediQuik could
lose customers to such other company due to confusion caused by the similar
name. Moreover, there is a risk that such entity will bring
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an infringement action against the Company and, if successful, require the
Company to change its name or pay a license fee for the use of the name.
GOVERNMENTAL REGULATIONS
Numerous state and federal laws and regulations affect the Company's
business and operations, including, but not limited to those discussed below.
The Company believes that it is operating its business in substantial
compliance with all existing legal requirements material to the operation of
the business. There are, however, significant uncertainties regarding the
application of many of these legal requirements, and the Company cannot
provide an assurance that a regulatory agency charged with enforcement of any
of these laws or regulations will not interpret them differently or, if there
is an enforcement action brought against the Company, that the Company's
interpretation would prevail. In addition, there are numerous proposed
healthcare laws and regulations at the federal and state levels, many of
which could materially affect the Company's ability to conduct its business
or adversely affect the Company's results of operation.
The Company is unable to predict what additional federal or state
legislation or regulatory initiatives may be enacted in the future relating
to the Company's business or the healthcare industry in general, or what
effect such legislation or regulations may have on the Company. The Company
cannot provide any assurance that federal or state governments will not
impose additional restrictions or adopt interpretations of existing laws that
could have a material adverse effect on the Company's business or results of
operation. The Company believes that its operations are currently subject to
these laws only to a limited extent, however, because the Company's current
customers are managed care payors whose revenue is primarily derived from
private rather than government sources.
ANTI-REMUNERATION LAWS. The Company is subject to federal and state
anti-remuneration laws, such as the Medicare/Medicaid anti-kickback laws,
which govern certain financial arrangements among health care providers and
others who may be in a position to refer or recommend patients to such
providers. These laws prohibit, among other things, direct and indirect
payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
health care items or services. The Medicare/Medicaid anti-kickback law has
been broadly interpreted to apply to certain contractual relationships
between health care providers and sources of patient referral. State laws
vary from state to state, are sometimes vague and seldom have been
interpreted by courts or regulatory agencies. Violation of these laws can
result in civil and criminal penalties, and exclusion of health care
providers or suppliers from participation in (i.e., furnishing covered items
or services to beneficiaries of) the Medicare and Medicaid programs.
BILLING REGULATION. Certain provisions in the Social Security Act
authorize penalties, including exclusion from participation in Medicare and
Medicaid, for various billing-related offenses. The Department of Health and
Human Services can also initiate permissive exclusion actions for improper
billing practices such as submitting claims "substantially in excess" of the
provider's usual costs or charges, failure to disclose ownership and
officers, or failure to disclose subcontractors and suppliers.
FEDERAL AND STATE ASSISTANCE PROGRAMS. Funds received by the
healthcare providers under Medicare and Medicaid are subject to audit with
respect to the proper application of various payment formulas. Such audits
can result in retroactive adjustments of revenue from these programs,
resulting in either amounts due to the government agency from the provider or
amounts due the provider from the government agency. The Company does not
currently receive payments under any Medicare or Medicaid program, but it may
elect to engage in such business in the future.
ENVIRONMENTAL LAWS
Certain federal and state laws govern the handling and disposal of
medical, infectious and hazardous waste. Although MediQuik sells and supplies
products which, after use by the patient could be deemed medical, infectious
or hazardous waste, the Company is not involved in the handling or disposal
of such materials after use by patients. Further, the Company does not
manufacture products; own real property; or engage in activities which
involve hazardous materials, result in the discharge of pollutants into the
environment or are likely to result in the violation of any existing
environmental rules and/or regulations. Consequently, the Company believes it
is in compliance with
9
<PAGE>
federal, state and local laws and regulations regarding environmental matters
which may be applicable to it, if any. To date, the Company has not incurred
any material costs in complying with such laws and regulations and does not
anticipate that costs of compliance with such regulations will have a
material affect on its future expenditures, earnings or competitive position.
EMPLOYEES
As of August 1, 1999, the Company and its subsidiaries had
approximately 7 full-time employees. The employees of the Company are not
subject to collective bargaining agreements and management believes relations
with employees are good.
RISK FACTORS
In addition to the other information contained herein, the following
factors should be considered carefully by any interested party before investing
in the Company.
LIMITED OPERATING HISTORY/HISTORY OF OPERATING LOSSES. The business of
the Company was organized in April 1998. As a result, the Company has very
little operating history. In addition, the Company has experienced net losses
since inception. There can be no assurance that the recently assembled
management group will be able to successfully exploit the combined assets of the
Company and effectively implement the Company's operating strategies. Further,
the Company is subject to the general business risk factors that similar young
companies experience with the responsibilities and complexities attendant to a
new organization, including (i) the ability to attract and maintain competent
and experienced management and operating personnel, (ii) the ability to secure
appropriate debt and equity capital to finance desired growth, and (iii) the
efficient management and performance of the Company's everyday operations.
NEED FOR ADDITIONAL CAPITAL. The Company's acquisition strategy will
require substantial capital. In addition to requiring funding for acquisitions,
the Company may need additional funds to implement its internal growth and
operating strategies or to finance other aspects of its operations. No assurance
can be given that the Company will be able to obtain the necessary capital to
finance a successful acquisition program or its other cash needs. If the Company
is unable to obtain additional capital on acceptable terms, it may be required
to reduce the scope of its presently anticipated expansion. Reliance on
internally generated cash or debt to complete acquisitions could substantially
limit the Company's operational and financial flexibility. The extent to which
the Company will be able or willing to use shares of Common Stock to consummate
acquisitions will depend on its market value from time to time and the
willingness of potential sellers to accept it as full or partial payment. Using
shares of Common Stock for this purpose may result in significant dilution to
then existing stockholders. If the Company is unable to obtain additional
capital on acceptable terms, or if the use of internally generated cash or debt
to complete acquisitions significantly limits the Company's operational or
financial flexibility, or if the Company is unable to use shares of Common Stock
to make future acquisitions, there could be a material adverse effect on the
Company.
DIVIDENDS. The Company does not currently intend to pay cash dividends
on its Common Stock and does not anticipate paying such dividends at any time in
the foreseeable future. The Company will follow a policy of retaining all of its
earnings, if any, to finance development and expansion of its business.
LIMITED LIABILITY OF OFFICERS AND DIRECTORS. The Company has adopted
provisions to its Certificate of Incorporation and By-laws which limit the
liability of its officers and directors and provide for indemnification by
the Company of its officers and directors to the full extent permitted by the
Delaware General Corporation Law. The Company's Certificate of Incorporation
generally provides that its officers and directors shall have no personal
liability to the Company or its stockholders for monetary damages for
breaches of their fiduciary duties as directors, except for breaches of their
duties of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, acts involving unlawful
payment of dividends or unlawful stock purchases or redemptions, acts
specified in the Delaware General Corporation Law, or any transaction from
which a director derives an improper personal benefit. Such provisions
substantially limit the stockholders' ability to hold officers and directors
liable for breaches of fiduciary duty, and may require the Company to
indemnify its officers and directors.
10
<PAGE>
UNCERTAIN MARKET ACCEPTANCE. The business of the Company is chronic
disease management for managed care payors, managed care provider networks
and third-party administrators, based on discounted fee for service
agreements. In addition, the Company has recently developed and now offers
capitated service contracts. Although the Company has had early success in
signing customers to service contracts, there can be no assurance of market
acceptance of the Company's marketing strategy to the extent required for
long-term profitability of the Company. The Company is subject to all the
risks associated with introducing a new marketing concept. The Company has
not undertaken any independent market studies to determine the feasibility of
this concept.
COMPETITION. The business of providing blood sugar monitoring
supplies by mail order is an immature industry characterized by high growth
rates and low barriers to enter the business. The Company is aware of a
number of competitors that will compete directly with the Company's products
and marketing concept. Many of the Company's current and potential
competitors are larger and have significantly greater financial and marketing
resources than those of the Company. There can be no assurance that such
competition will not limit the Company's ability to maintain or to increase
its market share and will not adversely affect the Company's business.
DEPENDENCE ON THE EFFORTS OF MANAGEMENT. The success of the Company
will depend to a significant degree upon the involvement of its management,
who will be in charge of the Company's strategic planning and operations.
Certain officers and directors have significant experience in the health care
industry which will be important to the Company's success. However, the
Company will need to attract and retain additional individuals in order to
carry out its business objectives. The competition for qualified executives
is great and there are no assurances that these individuals will be available
to the Company.
RELIANCE ON SERVICE AGREEMENTS WITH INDEPENDENT CONTRACTORS. The
Company relies on independent contractors working pursuant to relatively
short term agreements to provide many of the services incidental to the
Company's performance of its obligations under its contracts with managed
care payors. Such services include order fulfillment, billing and collecting,
utilization reporting and sales. Many of these services are provided by small
companies and independent contractors. The success of the Company will depend
on its ability to continue to procure satisfactory services from providers of
such services at a reasonable cost.
UNCERTAIN PUBLIC MARKET FOR SHARES. Although previously listed on the
NASD Over-the-Counter Bulletin Board ("OTCBB"), at present the Company's Common
Stock is listed publicly on the National Quotation Bureau's Pink Sheets under
the symbol "MDQK". However, the Company has been advised by NASD representatives
that listing will resume on the OTCBB upon the satisfactory completion of this
amended registration statement. To date only limited public trading of the
Company's shares has occurred and there is no assurance the market will develop
sufficiently to create significant liquidity for the securities. There is also
no assurance as to the depth or liquidity of any such market or the prices at
which holders may be able to sell the Company's Common Stock. An investment in
the Common Stock may be highly illiquid. Investors may not be able to sell their
shares readily or at all when the investor needs or desires to sell.
Furthermore, under current provisions of Regulation T adopted by the Board of
Governors of the Federal Reserve System, so long as the market price of MediQuik
Common Stock is less than $5.00 per share and the Common Stock is traded in the
over-the-counter market, the Common Stock is not marginable and it is unlikely
that a lending institution would accept the Company's Common Stock as collateral
for a loan. See "MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."
VOLATILITY OF STOCK PRICE. If the public market develops for the
Common Stock, many factors will influence the market prices. The Common Stock
will be subject to significant fluctuation in response to variations in
operating results of the Company, investor perceptions of the Company, supply
and demand, interest rates, general economic conditions and those specific to
the industry, developments with regard to the Company's activities, future
financial condition and management.
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company's Certificate of
Incorporation provides for a classified Board of Directors. This provision
may inhibit a change in control of the Company. In addition, the Certificate
provides for "blank check" preferred stock, which may be issued without
stockholder approval. The ability of the Company to issue shares of preferred
stock, without further stockholder approval, may also inhibit a change in
control of the Company. See "DESCRIPTION OF SECURITIES."
11
<PAGE>
POTENTIAL ISSUANCE OF ADDITIONAL COMMON STOCK AND PREFERRED STOCK.
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
of which 5,944,803 shares are outstanding as of the date of this Registration
Period, excluding 250,000 shares issuable pursuant to warrants held by
financial, management and business advisors previously engaged by the
Company. See "SHARES ELIGIBLE FOR FUTURE SALES." To the extent it is
authorized, the Board of Directors of the Company will have the ability,
without seeking stockholder approval, to issue additional shares of Common
Stock in the future for such consideration as the Board of Directors may
consider sufficient. The issuance of additional Common Stock in the future
will reduce the proportionate ownership and voting power of the existing
stockholders. The Company is also authorized to issue up to 1,000,000 shares
of preferred stock, the rights and preferences of which may be designated in
series by the Board of Directors. To the extent of such authorization, such
designations may be made without stockholder approval. The designation and
issuance of series of preferred stock in the future would create additional
securities which may have dividend and liquidation preferences over the
Common Stock. The Company does not currently have any preferred stock issued
and outstanding.
CUMULATIVE VOTING AND PRE-EMPTIVE RIGHTS. There are no pre-emptive
rights in connection with the Company's Common Stock. Cumulative voting in
the election of directors is not permitted. Accordingly, the holders of a
majority of the shares of Common Stock, present in person or by proxy at a
duly called meeting, will be able to elect each member of the Company's Board
of Directors. See "DESCRIPTION OF SECURITIES."
APPLICABILITY OF LOW PRICED STOCK RISK DISCLOSURE REQUIREMENTS. Based
on recent trading prices reported on the National Quotation Bureau's Pink
Sheets, MediQuik Common Stock is considered a low priced security under rules
promulgated under the Exchange Act as currently in effect. Under these rules,
broker-dealers participating in transactions in low priced securities must
first deliver a risk disclosure document which describes the risks associated
with such stocks, the broker-dealer's duties, the customer's rights and
remedies, and certain market and other information, and make a suitability
determination approving the customer for low priced stock transactions based
on the customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the
customer, and obtain specific written consent of the customer, and provide
monthly account statements to the customer. So long as MediQuik Common Stock
is trading below or near the threshold for low priced securities, the likely
effect of these restrictions will be a decrease in the willingness of
broker-dealers to make a market in the Common Stock, decreased liquidity of
the Common Stock and increased transaction costs for sales and purchases of
the Common Stock as compared to other securities. Generally, a low priced
security is an equity security other than a security that is (i) priced at
$5.00 or more, (ii) registered, or approved for registration, and traded on a
national securities exchange approved by the Securities and Exchange
Commission ("SEC"), (iii) authorized for quotation on an automated quotation
system sponsored by a registered securities association and approved by the
SEC, (iv) issued by an investment company registered under the Investment
Company Act of 1940, or (v) a security whose issuer has either net tangible
assets in excess of $2.0 million (or $5.0 million if the issuer has not been
in continuous operation for at least three years) or average revenues of at
least $6.0 million for the last three years.
YEAR 2000 READINESS.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in
the year 2000, these date code fields will need to accept four digit entries
in order to distinguish dates beginning "20" from dates beginning "19". As a
result, computer systems and/or software used by many companies will need to
be upgraded to comply with "Year 2000" requirements. This is commonly known
as the "Year 2000 Issue." The Company is presently evaluating the impact of
the Year 2000 Issue as it affects its business operations and interfaces with
customers and vendors. The Company believes that its greatest Year 2000 risk
is related to reimbursement from managed care payors. Risk also exists
relative to the flow of inventory from vendors, including strips, monitors,
lancets and nurse triage, and relative to the fulfillment of orders. Minimal
risks are associated with the Company's information technologies, financial
systems and internal communications.
The Company has developed an internal team, consisting of Grant
Gables, Dale Toney and Larry Wedekind, (the "Team") to assess the Company's
Year 2000 readiness. The Team has completed a detailed inventory and risk
assessment of all systems and business operations and has confirmed the Year
2000 readiness of most of the Company's suppliers, including Bayer, the
Company's primary supplier of products. The Team is continuing to evaluate
the Year 2000 readiness of the Company's smaller suppliers and will increase
the inventory of products from any supplier that does not confirm its Year
2000 readiness. The Team engaged outside systems consultants to evaluate the
Company's
12
<PAGE>
internal computer systems. After performing an upgrade on the Company's
software, the consultants approved the Company's hardware and software
systems as Year 2000 compliant.
The Team has surveyed all of its managed care payors in an effort to
assess their Year 2000 readiness. All have responded that they are Year 2000
compliant. Nonetheless, as the Company deems the risk of non-payment by these
payors to be its greatest Year 2000 risk, the Company is attempting to
increase its cash reserves to cover any delay in its receipt of payment from
these managed care payors.
The Company believes that the Year 2000 project compliance will cost
approximately $5,000, of which it had spent $1,000 as of October 11, 1999.
The Company is committed to providing the necessary resources for Year 2000
compliance.
Prior to year end 1999, the Company plans to develop Year 2000
contingency plans for continuing operations in the event of disruptions due to
the Year 2000 Issue. There can be no assurance, however, that all instances of
noncompliance which could have a material adverse effect on the Company's
operations or financial condition have been identified. Additionally, there can
be no assurance that the systems of other companies with which the Company
transacts business will be corrected on a timely basis, or that such failure, or
a correction which is incompatible with the Company's information systems, would
not have a material adverse effect on the Company's operations or financial
condition. See "Management's Discussion and Analysis or Plan of Operation."
REPORTS TO SECURITY HOLDERS
Prior to the filing of this Registration Statement, the Company had
not been subject to the reporting requirements of the Securities Exchange Act
of 1934 and had not filed any reports with the SEC. The public may read and
copy any materials the Company files in the future with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the Company intends to
file all required reports with the SEC electronically. The SEC maintains an
Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
This site is available at http:/www.sec.gov. The Company also maintains an
Internet site which contains information about the Company. This site is
available at http:/www.mediquik.net. If the Company is not required to
deliver an annual report to security holders, the Company intends to
voluntarily send an annual report to its security holders, which report will
include audited financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This management discussion contains certain forward-looking
statements as identified by the use of words like "expects", "believes", and
"anticipates" and other similar phrases. Such statements reflect management's
current view of future financial performance based on certain assumptions,
risks and uncertainties. If any assumptions, risk or uncertainty factors
change, such changes may have a material impact on actual financial results.
The Company is under no obligation to revise any forward-looking statements
contained herein, which are as of the date hereof. Readers are cautioned to
not place undue reliance on any forward-looking statements contained in this
discussion.
OVERVIEW
MediQuik is an early stage healthcare services company specializing
in the delivery of medical supplies and chronic disease management programs to
chronically ill patients on behalf of managed care payors.
The Company's business was organized on April 7, 1998, and began
full-time operations in July 1998 as Old MediQuik. Effective December 31,
1998, Old MediQuik merged with and into Cash Flow Marketing, Inc., with Cash
Flow as the surviving corporation. Cash Flow changed its name to MediQuik
Services, Inc. immediately following the merger. This transaction has been
treated as a capital transaction in substance rather than a business
combination; thus, the accounting is similar to a reverse acquisition but no
goodwill and/or intangibles have been recorded. As a result Old MediQuik is
considered the accounting acquiror for financial statement purposes.
Therefore, the financial statements of the Company for periods prior to
January 1, 1999 are the financial statements of Old MediQuik, not Cash Flow.
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<PAGE>
MediQuik is seeking to rapidly expand through internal sales growth
and strategic acquisition. During 1998 and the first half of 1999, the
Company established: (i) corporate marketing and fulfillment operations; (ii)
contractual relationships with product manufacturers; (iii) contractual
relationships with specialty service providers; (iv) contractual relationships
with insurance payors and provider networks; (v) a joint venture with a
pharmacy products distribution company; and (vi) initial patient enrollment
and fulfillment operations.
The Company offers comprehensive disease monitoring and maintenance
solutions by providing pharmacy and diagnostic products, disease education,
compliance review and reporting, and personal health resources via the U.S.
Mail, telecommunications and the Internet. MediQuik is focused on delivering
high quality products and services to chronic disease patients for insurance
organizations that bear the primary financial risk for healthcare treatment.
MediQuik also works directly with health maintenance organizations, preferred
provider organizations, self-insured companies and other third-party payors in
an effort to enhance the quality of life for chronically ill patients and
improve the financial outcomes for managed care payors.
The Company seeks to provide disease management products and services
to patients who: (i) require disease treatment and maintenance for long
periods of time; (ii) require medical testing products and prescription
medications; and (iii) require extensive disease education and self-management
tools.
The Company is currently serving patients with diabetes and is
developing new disease management programs for other high cost, chronic
diseases, such as respiratory disease and congestive heart failure. MediQuik
is focusing on certain diseases with large afflicted patient populations where
clinical research indicates that active management will improve the health
condition of the patient and reduce the financial burden for managed care
payors. Currently, the Company is in the process of conducting research
regarding the new disease management programs.
MediQuik offers patients and managed care plans a single source for
disease management products, mail-order medications, personalized education,
24 hour nurse assistance, and quarterly patient counseling. The Company
provides a complete line of blood glucose monitoring systems, testing strips,
lancets, swabs, insulin pumps, compliance and wound care products for diabetes
patients, and the Company is adding new products and services to complement
the existing disease management programs. The Company also provides billing
and collection activities on behalf of the patient to the healthcare plan.
Research indicates that patients who actively manage certain chronic
disease factors experience reduced disease complications and an enhanced
quality of life. The Company believes that a coordinated disease management
program, including convenient product delivery and billing, personalized
patient education, routine disease counseling, immediate access to healthcare
professionals, and ongoing compliance testing will improve clinical and
financial outcomes for patients and managed care payors.
Although initial Company revenues were derived primarily through
product sales, the Company has expanded beyond product delivery and has become
a full disease management provider working to improve patient care and reduce
costs to managed care payors. The Company currently offers managed care
agreements based on fee-for-service and capitated fee arrangements.
MediQuik receives patients primarily through agreements with managed
care plans and provider networks. Management believes that enrollment in
managed care plans has increased in recent years and, as a result, patient
referrals generated through the managed care plans should increase.
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<PAGE>
REVENUE FROM OPERATIONS
Subsequent to the issuance of the Company's financial statements,
management determined that certain issuances of common stock and warrants to
third parties in exchange for services provided were not appropriately
recorded; that the weighted average number of shares were calculated
incorrectly; that certain interest expense was misclassified; the repurchase
of certain unexercised equity instruments had not been recorded; and that the
inventory and related payable balances originally reported were in error. As
a result, the accompanying financial information has been restated to give
effect to the correction of these errors. See Note 11 to the financial
statements included herein.
The Company commenced operations in July 1998 and received its initial
revenue in August 1998. For the period from April 7, 1998 to December 31,
1998, the Company reported revenue of $372,226. Total revenue increased to
$720,854 for the six months ended June 30, 1999.
Revenue growth was primarily derived from diagnostic product sales to
managed care plans, providers and patients. The Company expects increased
revenue from direct sales to managed care plans and decreased revenue from
sales to other managed care providers. The Company expects to realize
significant improvement in gross margin percentages with increased direct
managed care plan revenues. Cash flow from operations has not been sufficient
to fund all of the Company's initial operating activities to date. See
"LIQUIDITY AND CAPITAL RESOURCES."
GROSS PROFIT
The Company commenced operations in July 1998 and received its initial
gross profit in August 1998. For the period from April 7, 1998 to December
31, 1998, the Company reported gross profit of $54,673 or 14.7% of revenue for
the period. Gross profit increased to $115,495, or 16.0% of revenue, for the
six months ended June 30, 1999.
Gross profit was derived from diagnostic product sales to managed care
payors and patients. The gross profit percentage is the result of volume
purchase discounts and immediate payment on delivery terms. The Company
expects an increase in gross profit percentage with increased direct sales to
managed care plans.
OPERATING EXPENSES
For the period from April 7, 1998 to June 30, 1998, operating expenses
were $64,419. Operating expenses increased to $1,890,329 for the six months
ended June 30, 1999, an increase of 2,834% reflecting initiation of the
Company's operating activities. For the period from April 7, 1998 to December
31, 1998, operating expenses were $856,532. The increase in operating expenses
is primarily associated with the initiation of operating business activities
including marketing and selling expenses, general and administrative costs,
consultant's compensation and the hiring and training of staff.
NET LOSS
The Company experienced a net loss of $829,854 for 1998, primarily
attributed to the development of the Company's business operations. Net
loss increased from $68,794 for the period from April 7, 1998 to June 30, 1998
in comparison to $1,756,343 for the six months ended June 30, 1999. The
Company expects the net loss to decrease with increased revenues and gross
profits from business operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements to date have been to fund
working capital in order to support growth of net sales. Because revenue from
operations has been inadequate to completely fund these requirements, the
Company has supplemented its revenue from operations with proceeds from its
private offerings of securities, loans and extensions of credit from vendors
in order to meet its working capital requirements. The Company anticipates
that as revenue from sales to managed care plans increases, the Company will
be able to satisfy all of its funding requirements for operations from such
revenue. The Company had an aggregate of $58,243 in cash as of June 30, 1999.
The Company has $130,000 of 15% Subordinated Debentures due in June
and December 1999. The Company paid $15,000 of the debentures in July 1999,
and has received an extension from June to December 1999 with respect to
$50,000 of the debentures, plus accrued interest, and an extension from
December to June 28, 2000 with respect to $5,000 of the debentures, plus
accrued interest. The debentures are owed to significant shareholders of the
Company. The Company has accrued wages of $110,000 primarily to Company
officers and insiders who are significant shareholders in the Company. The
Company expects to pursue additional equity and debt financing to meet future
working capital requirements.
15
<PAGE>
Accounts receivable are primarily derived from payments due to the
Company by managed care plans and providers. As revenues increase, the Company
expects working capital requirements to increase. Standard medical billing
cycles for managed care plans average between 45-60 days. The Company expects
to experience similar billing cycles as direct managed care plan business
increases.
The Company had no lines of credit as of June 30, 1999. In July 1999,
the Company obtained a verbal agreement to provide up to $100,000 of credit
so long as an officer of the Company maintains sufficient compensating
balances in accounts with the lender. Pursuant to this arrangement, R. Craig
Christopher, Chief Operating Officer of the Company, deposited $100,000 with
First Bank Texas N.A. ("First Bank") and transferred $35,000 to the Company's
account, which the Company subsequently repaid to Mr. Christopher without
interest. Mr. Christopher currently maintains a $100,000 compensating balance
with First Bank to support the Company's liquidity needs. Neither First Bank
nor Mr. Christopher have made any commitment to continue this practice, and
it could be terminated by either First Bank or Mr. Christopher at any time.
Pursuant to an asset purchase agreement with Scardello Marketing
Group, LLC ("SMG") in July 1999, the Company assumed a Commercial Revolving or
Draw Note, dated May 19, 1999, in the original principal amount of $25,000
executed by SMG for the benefit of First Bank and with a maturity date of June
5, 2001. The outstanding principal amount of the note is currently $25,000,
which bears interest at a variable rate per annum of 1.5% over the prime rate
as quoted and adjusted by First Bank. The Company expects to seek additional
lines of credit to finance inventory purchase requirements associated with
revenue growth.
YEAR 2000 READINESS
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in
the year 2000, these date code fields will need to accept four digit entries
in order to distinguish dates beginning "20" from dates beginning "19". As a
result, computer systems and/or software used by many companies will need to
be upgraded to comply with "Year 2000" requirements. This is commonly known
as the "Year 2000 Issue." The Company is presently evaluating the impact of
the Year 2000 Issue as it affects its business operations and interfaces with
customers and vendors. The Company believes that its greatest Year 2000 risk
is related to reimbursement from managed care payors. Risk also exists
relative to the flow of inventory from vendors, including strips, monitors,
lancets and nurse triage, and relative to the fulfillment of orders. Minimal
risks are associated with the Company's information technologies, financial
systems and internal communications.
The Company has developed an internal team, consisting of Grant
Gables, Dale Toney and Larry Wedekind, (the "Team") to assess the Company's
Year 2000 readiness. The Team has completed a detailed inventory and risk
assessment of all systems and business operations and has confirmed the Year
2000 readiness of most of the Company's suppliers, including Bayer, the
Company's primary supplier of products. The Team is continuing to evaluate
the Year 2000 readiness of the Company's smaller suppliers and will increase
the inventory of products from any supplier that does not confirm its Year
2000 readiness. The Team engaged outside systems consultants to evaluate the
Company's internal computer systems. After performing an upgrade on the
Company's software, the consultants approved the Company's hardware and
software systems as Year 2000 compliant.
The Team has surveyed all of its managed care payors in an effort to
assess their Year 2000 readiness. All have responded that they are Year 2000
compliant. Nonetheless, as the Company deems the risk of non-payment by these
payors to be its greatest Year 2000 risk, the Company is attempting to
increase its cash reserves to cover any delay in its receipt of payment from
these managed care payors.
The Company believes that the Year 2000 project compliance will cost
approximately $5,000, of which it had spent $1,000 as of October 11, 1999.
The Company is committed to providing the necessary resources for Year 2000
compliance.
Prior to year end 1999, the Company plans to develop Year 2000
contingency plans for continuing operations in the event of disruptions due to
the Year 2000 Issue. There can be no assurance, however, that all instances
of noncompliance which could have a material adverse effect on the Company's
operations or financial condition have been identified. Additionally, there
can be no assurance that the systems of other companies with which the Company
transacts business will be corrected on a timely basis, or that such failure,
or a correction which is incompatible with the Company's information systems,
would not have a material adverse effect on the Company's operations or
financial condition.
16
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Company's executive and administrative offices are located at
4295 San Felipe, Suite 200, Houston, Texas 77027, which facilities are leased
by the Company from an unaffiliated third party. The Company's lease on these
premises covers 3,820 square feet and expires on June 30, 2004. The monthly
rental rate for such premises is $5,252.50. Because services related to many
of the Company's business activities are provided by contractors or
consultants rather than Company employees, the Company requires only limited
office space and facilities for fulfillment operations. The Company believes
that the current facilities are adequate for its present needs. Furthermore,
the Company believes that suitable additional or replacement space will be
available when required on terms acceptable to the Company. The Company has
no present intent to invest in real estate, real estate mortgages or persons
primarily engaged in real estate activities, however the Company may change
this policy at any time without a vote of security holders. The Company has
obtained insurance to cover certain risks related to the premises as required
by the terms of the lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of December 8, 1999 as to (i)
each person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (ii) each Director of the Company, (iii) each
Executive Officer of the Company and (iv) all Directors and Officers of the
Company as a group.
17
<PAGE>
<TABLE>
<CAPTION>
Name of Shares of Common Percent
Beneficial Owner Stock Owned(1) of Class(2)
- ---------------- ---------------- -----------
<S> <C> <C>
Fisher Management Group, Inc.(3) 1,317,642 22.16%
3121 Buffalo Speedway, Ste. 5407
Houston, Texas 77098
Grant M. Gables(4) 972,756 16.36%
11549 Riverview Way
Houston, Texas 77077
Jocody Financial , Inc. 474,543 7.98%
5773 Woodway, Suite 290
Houston, Texas 77057
Howard B. Butler, Jr. 313,784 5.28%
7721 San Felipe
Houston, Texas 77063
Roger Cotrofeld, Jr. 306,637 5.16%
123 Mohawk Drive
Fort Plain, NY 13339
R. Craig Christopher 272,865 4.59%
8335 Ariel
Houston, Texas 77074
William Marciniak (5) 332,373 5.59%
908 Antler
Schertz, Texas 78164
Benjamin J. Scardello (6) 171,450 2.88%
17003 Windrow Drive
Spring, Texas 77379
Lawrence J. Wedekind (7) 21,500 0.36%
16266 Salmon Drive
Spring, Texas 77379
All Officers and Directors as a 2,084,728 35.07%
group (6 persons)
</TABLE>
- -------------
(1) Under the rules of the Securities and Exchange Commission, a person is
deemed to be the beneficial owner of a security if such person has or
shares the power to vote or direct the voting of such security or the
power to dispose or direct the disposition of such security. A person
is also deemed to be a beneficial owner of any securities if that
person has the right to acquire beneficial ownership within 60 days.
Accordingly, more than one person may be deemed to be a beneficial
owner of the same securities. Unless otherwise indicated by footnote,
the named entities or individuals have sole voting and investment power
with respect to the Shares of Common Stock beneficially owned.
(2) Represents the number of shares of Common Stock beneficially owned by
each named person or group, expressed as a percentage of all of the
shares of such class outstanding as of such date
18
<PAGE>
without giving effect to 250,000 shares issuable pursuant to warrants
held by consultants and advisors to the Company. See "SHARES ELIGIBLE
FOR FUTURE SALES."
(3) Such shares are attributable to Fisher Management Group, Inc. in its
capacity as general partner of various limited partnerships which each
own shares of Common Stock.
(4) Includes 474,543 shares held by Jocody Financial, Inc., a corporation
wholly owned by Mr. Gables' spouse.
(5) Includes 196,208 shares held by Mr. Marciniak's minor children
(6) Includes 30,708 shares held by Mr. Scardello's spouse.
(7) Includes 11,500 shares held by Greater Gulf Medical Alliance, Inc., of
which Mr. Wedekind is the sole shareholder and serves as president and
chief executive officer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information concerning the
Company's executive officers and directors. The members of the Board of
Directors are divided into three classes, as nearly equal in number as
possible. Generally, members are elected for a three-year term, with the term
of one class expiring each year. Howard B. Butler, Jr. is a Class I director,
William J. Marciniak is a Class II director, and Grant M. Gables is a Class
III director. The term of the Class I director expires at the Company's next
annual meeting of stockholders. The terms of the Class II and Class III
directors expire at the annual meeting of stockholders to be held in 2000 and
2001, respectively. At each annual meeting of stockholders, directors of the
class the term of which then expires will be elected by the holders of the
Common Stock to succeed those directors whose terms are expiring. Officers
are elected annually by, and serve at the discretion of, the Company's Board
of Directors.
<TABLE>
<CAPTION>
Name Age(1) Position
---- ------ --------
<S> <C> <C>
Lawrence J. Wedekind...............44 Chief Executive Officer
Grant M. Gables....................34 President and Director
William J. Marciniak...............49 Vice President of Marketing and Director
Howard B. Butler, Jr...............52 Secretary, Treasurer, Corporate Counsel and Director
R. Craig Christopher...............55 Chief Operating Officer
Benjamin J. Scardello..............45 Vice President of Managed Care Services
</TABLE>
- -------------------
(1) As of December 8, 1999.
LAWRENCE J. WEDEKIND has served as Chief Executive Officer of the
Company since September 7, 1999. In addition, Mr. Wedekind serves as
President and Chief Executive Officer of both IntegraNet Gulf Coast, Inc., an
independent practice association, and Greater Gulf Health Plan, Inc., a
non-profit occupational medicine network. Mr. Wedekind, 44, has 20 years of
experience in the healthcare industry, including management, marketing and
strategic development both in for-profit and not-for-profit entities. Since
1997, Mr. Wedekind has served as President and Chief Executive Officer of
Greater Gulf Medial Alliance, Inc., a comprehensive healthcare management
service organization. From 1996 to 1997, Mr. Wedekind managed and developed
multiple clinics for William D. Clark, M.D., who currently serves as medical
director of both IntegraNet Gulf Coast and Greater Gulf Health Plan. From
1995 to 1996, Mr. Wedekind served as administrator of Yale Hospital, a 99-bed
hospital located in Houston, Texas which was suffering financial difficulties
prior to Mr. Wedekind's engagement. From 1994, he served as the
court-appointed administrator of Twin Oaks Medical Center, a hospital located
in Ft. Worth, Texas, which was being reorganized under bankruptcy proceedings
pursuant to Chapter 11 of the United States Bankruptcy Code. In 1977, Mr.
Wedekind received a Bachelor of Science degree in Business Administration
from the University of Florida and, in 1979, he also received a Masters of
Health and Hospital Administration from the same school.
GRANT M. GABLES has been an officer and director of the Company
since April 7, 1998. Mr. Gables has served as executive management with three
health care billing and technology companies since January 1995. From March
1997 until June 1998, he was Vice President of Marketing for MediNet EDI
Solutions with responsibility for strategic
19
<PAGE>
planning and development of technology for health care organizations. From
September 1995 until February 1997, he was Executive Vice President of
Reimbursement Assurance Corporation with executive responsibility for
operations and sales and emphasis on information delivery technology for
health care groups. From January 1995 until August 1995, Mr. Gables was with
Rapid Reimbursement, Inc. as Chief Operating Officer with responsibility for
installation of medical billing capability and management of claims
processing and medical billing. From March 1994 until December 1994, he was
General Partner of GMG Capital Funding Company with responsibility for
investment analysis and financial planning for health care companies. He was
Senior Vice President of International Trade Exchange, Inc. from May 1992
until March 1994. Mr. Gables graduated from Texas A & M University in 1987
with a Bachelors of Business Administration degree with a major in Finance
and from the University of Houston in December 1993 with a Masters of
Business Administration - Finance with concentrations in Finance and
Marketing.
WILLIAM J. MARCINIAK has been an officer and director of the Company
since April 7, 1998. Since 1989, Mr. Marciniak has served as an independent
consultant to the health care industry. In such capacity he developed
employer funded employee stock ownership plans for the Mediplex Companies, an
infusion therapy company. In addition, he developed a medical receivables
securitization program for Advacare, Inc., a medical billing company, that
was funded by Prudential and arranged a $100,000,000 private placement for
Medical Funding, Inc. and $100,000,000 credit facility for Home Health Plan,
Inc. for the acquisition of infusion pharmacies. From 1982 to 1989 he was
President of Bankers United Trust and from 1974 to 1982 Regional Manager of
International Bank and Trust. Mr. Marciniak graduated from the Southern
Illinois University in 1973 with a major in Business Administration and a
minor in mathematics.
HOWARD B. BUTLER, JR. has been an officer and director of the
Company since April 7, 1998. Mr. Butler has been a practicing attorney in
Houston, Texas since 1972 and a sole practitioner since 1986. He is a 1969
graduate of Lamar University, Beaumont, Texas with a Bachelor of Business
Administration in economics and a 1972 graduate of the University of Houston
College of Law with a Doctor of Jurisprudence degree.
R. CRAIG CHRISTOPHER has been an officer of the Company since July
1, 1998. His primary responsibilities involve the development of strategic
alliances and distribution channels for MediQuik's health care products and
services. Prior to joining MediQuik, Mr. Christopher held senior level
management positions with a number of health care companies, most notably as
founder and Chairman of the Board of Directors of Taylor Medical, Inc., a
distributor of health supplies ("Taylor"). During his tenure, Taylor expanded
from a single location in Texas to 32 offices in 14 states having 150 sales
representatives and achieved total annual sales of $100 million. While at
Taylor, Mr. Christopher developed methods for marketing medical supplies to
physicians and new training and communications procedures to make the sales
force more responsive. In addition, Mr. Christopher led the development of
strict operating controls for Taylor. Mr. Christopher is a 1966 graduate of
Rice University where he was a scholarship athlete.
BENJAMIN J. SCARDELLO has been an officer of the Company since July 27,
1999. Mr. Scardello has held senior management and officer positions with both
regional and national firms in the retail and health care industries. Prior to
joining MediQuik, he was the founder and President of Scardello Marketing Group,
L.L.C. ("SMG"), which was formed to support the national marketing plans of
MediQuik. Prior to his association with MediQuik, Mr. Scardello served as a Vice
President for FH&R Healthcare Services, Inc., a Houston based information
management company. While at FH&R, he co-developed a series of new healthcare
information technologies designed to help physicians, hospital and insurance
companies improve their ability to manage health care operations under a managed
care reimbursement environment. In the early 1990's, Mr. Scardello founded and
served as President of Triad, a medical billing company with over 200 employees
serving leading healthcare providers throughout the nation.
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the period ended December 31,
1998 all compensation received or accrued by the Chief Executive Officer and
by each of the other most highly compensated executive officers ("Named
Executive Officers"). As of the date hereof, the Company has not entered into
employment agreements with the Named Executives.
20
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------------------
NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION (1) RESTRICTED STOCK
------------------------
SALARY (2) BONUS AWARDS (3)
- ----------------------------------------------- -------------------------------- -------------------------------------
<S> <C> <C> <C>
Grant M. Gables
President and
Chief Executive Officer (4)........... $ 56,000 - $400
William J. Marciniak
Vice President of Marketing........... $ 48,000 -- $100
R. Craig Christopher
Chief Operating Officer $ 34,000 - $250
</TABLE>
- ----------------
(1) The Named Executives received no compensation for periods prior to
April 7, 1998, the date of organization of Old MediQuik.
(2) Includes 1998 salary deferrals by Mr. Gables, Mr. Marciniak and Mr.
Christopher of $14,000, $14,000 and $12,625, respectively.
(3) Based on an estimated value of $.001per share for shares of restricted
stock issued by Old MediQuik pursuant to the Stock Incentive Plan
(defined below). The issuers right to repurchase the shares of
restricted stock expired June 17, 1999.
(4) Mr. Gables served as Chief Executive Officer until September 7, 1999,
at which time Mr. Lawrence J. Wedekind assumed the Chief Executive
Officer position.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has not entered into employment agreements with the
Named Executives. Effective September 7, 1999, the Company entered into a one
year employment agreement with Mr. Wedekind which is renewable for additional
one year periods at Mr. Wedekind's option if his efforts result in providing
the Company with an additional 40,000 patients by the end of his initial
term. The agreement provides for an annual salary equal to $150,000 (the
"Salary") which is initially payable $48,000 in cash and 51,000 shares of
Common Stock. The Common Stock portion of the Salary will be issued in equal
monthly installments and the cash portion will be paid in accordance with the
Company's payroll practices. When the Company achieves certain financial
performance, Mr. Wedekind may elect to receive up to 50% of the Salary in
cash. In addition, the Company issued 10,000 shares of Common Stock to
Mr. Wedekind in consideration of his execution of the employment agreement.
The employment agreement provides that the Company may not terminate Mr.
Wedekind's employment without cause during the initial term. If he is
terminated without cause during any subsequent year of employment, Mr.
Wedekind will be entitled to receive the compensation and benefits payable
over the remaining term of the employment agreement plus any other earned and
unpaid compensation. The employment agreement contains covenants limiting
competition with the Company during the term of the agreement and for an
additional one year period following termination of employment, except for
termination by the Company without cause.
STOCK INCENTIVE PLAN
The Board of Directors of the Company has approved and adopted by
written consent, the MediQuik Services, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). The purpose of the Stock Incentive Plan is to provide
deferred stock incentives to certain key employees and directors of the
Company who contribute significantly to the long-term performance and growth
of the Company. The following description provides a summary of the Stock
Incentive Plan. Such summary does not purport to be complete. Reference is
made to the more detailed provisions of the Company's Stock Incentive Plan,
which is included as an exhibit to this Registration Statement.
21
<PAGE>
GENERAL PROVISIONS OF THE STOCK INCENTIVE PLAN. The Stock Incentive
Plan is administered by the Board of Directors or a committee of the Board of
Directors duly authorized and given authority by the Board of Directors to
administer the Stock Incentive Plan (the Board of Directors or such
designated Committee as administrator of the Stock Incentive Plan shall be
hereinafter referred to as the "Board"). The Board has exclusive authority to
administer the Stock Incentive Plan including without limitation, to select
the employees to be granted awards under the Stock Incentive Plan, to
determine the type, size and terms of the awards to be made, to determine the
time when awards will be granted, and to prescribe the form of instruments
evidencing awards made under the Stock Incentive Plan. The Board is
authorized to establish, amend and rescind any rules and regulations relating
to the Stock Incentive Plan as may be necessary for efficient administration
of the Stock Incentive Plan. Board action with respect to the Stock Incentive
Plan requires a majority vote of the members of the Board taken at a meeting
at which a quorum is present (currently two directors).
Three types of awards are available under the Stock Incentive Plan:
(i) nonqualified stock options or incentive stock options, (ii) stock
appreciation rights, and (iii) restricted stock. An aggregate of 1,500,000
shares of Common Stock may be issued pursuant to the Stock Incentive Plan,
subject to adjustment to prevent dilution due to merger, consolidation, stock
split or other recapitalization of the Company.
The Stock Incentive Plan does not affect the right or power of the
Company or its stockholders to make or authorize any major corporate
transaction such as a merger, dissolution or sale of assets. Under terms of
the Stock Incentive Plan, if the Company is dissolved, liquidated or merged
out of existence, each participant will be entitled to a benefit as though he
became fully vested in all previous awards to him immediately prior to or
concurrently with such dissolution, liquidation or merger. The Board may
provide that an option or stock appreciation right will be fully exercisable,
or that a share of restricted stock will be free of such restriction upon a
change in control of the Company.
The Stock Incentive Plan may be amended at any time and from time to
time by the Board of Directors but no amendment which increases the aggregate
number of shares of Common Stock that may be issued pursuant to the Stock
Incentive Plan will be effective unless it is approved by the stockholders of
the Company. The Stock Incentive Plan will terminate upon the earlier of the
adoption of a resolution by the Board of Directors terminating the Stock
Incentive Plan, or ten years from the date of the Stock Incentive Plan's
initial approval by the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF ASSETS
Effective April 7, 1998, MediQuik Services, L.L.C., a Nevada limited
liability company ("MSL"), transferred its interest in six provider
agreements to the Company in exchange for 2,750,000 shares of Common Stock
(the "MSL Shares"), the forgiveness of MSL's indebtedness to Old MediQuik in
the amount of $64,404, and the assumption by the Company of payment
obligations under the 15% Subordinated Debentures (the "Debentures") issued
by MSL in the aggregate principal amount of $130,000. The Debentures are
payable in two equal installments due on June 30, 1999 and December 31, 1999.
The Debentures accrue interest at a rate of 15% per annum, which is payable
quarterly. Fisher Management Group, Inc., which beneficially owns 22.20% of
the outstanding Common Stock, is the General Manager of MSL.
Jana J. Gables, Howard B. Butler, Jr., and Grant M. Gables acted as
promoters of the Company and Jacody Financial , Inc., a corporation owned by
Jana J. Gables, wife of Grant M. Gables, received 451,000 of the MSL Shares,
as a designee of MSL in proportion to its interest in the MSL Assets. Grant
M. Gables and Howard B. Butler, Jr. purchased 88,000 and 22,000 shares,
respectively, in connection with the organization of the Company for a
purchase price of $.01 per share.
Effective July 27, 1999, the Company acquired certain assets of
Scardello Marketing Group LLC ("SMG") in exchange for $25,000 in cash, the
forgiveness of SMG's indebtedness to the Company in the amount of $15,396,
and 330,000 shares of Common Stock. The assets acquired from SMG include
contract rights, rights to assumed names, revenues and accounts receivable,
customer lists, books and records, claims or causes of action and computer
hardware
22
<PAGE>
and software. Benjamin J. Scardello, an executive officer of MediQuik, is the
managing member and 57.5% owner of SMG.
FINANCIAL CONSULTING AND OTHER SERVICE AGREEMENTS
Effective April 7, 1998 the Company entered into a Consulting
Agreement with The Fisher Group, an Oklahoma limited partnership ("Fisher")
and an affiliate of the Company, for acquisition and financial consulting
services to continue until terminated by either party. The Fisher agreement
initially provided for the payment of a monthly fee in the amount of $8,000
plus reimbursement of expenses. In August, 1999, the Fisher agreement was
amended, reducing the monthly fee to $2,000 plus reimbursement of expenses.
Fisher Management Group, Inc., which beneficially owns 22.20% of the
outstanding Common Stock, is the general partner of Fisher. The Company
believes that the Fisher agreement provides for services on terms no less
favorable to the Company than those which would be obtained from unrelated
parties.
Effective April 7, 1998 the Company entered into a Consulting
Agreement with Jocody Financial, Inc. ("Jocody"), an affiliate of the
Company, for acquisition and financial consulting services to continue until
terminated by either party. The Jocody agreement initially provided for the
payment of a monthly fee in the amount of $8,000 plus reimbursement of
expenses. In August, 1999, the Jocody agreement was amended, reducing the
monthly fee to $2,000 plus reimbursement of expenses. Jocody owns 8.00% of
the Common Stock of the Company and is wholly-owned by Jana J. Gables. The
Company believes that the Jocody agreement provides for services on terms no
less favorable to the Company than those which would be obtained from
unrelated parties.
The Company entered into an independent sales contractor and
provider agreement with Horizon Medical Services, San Antonio, Texas,
("Horizon") to continue until the agreement is terminated by either party in
accordance with its terms. The Horizon agreement provides for payment to
Horizon of an amount equal to 50% of the profit after deduction of all costs
from all sales of products or services procured by Horizon. William J.
Marciniak, a director and officer of the Company, is the owner and General
Manager of Horizon. The Company believes that the Horizon agreement provides
for services on terms no less favorable to the Company than those that would
be obtained from unrelated parties.
In June, 1999, the Company entered into an Agreement with Scardello
Marketing Group LLC ("SMG") for SMG to assist in the acquisition of a
diabetic pharmaceutical supply company ("DPS, Co.") by MediQuik and in the
financing of that acquisition. Upon the acquisition of DPS, Co. by the
Company, SMG will receive 200,000 shares of MediQuik Common Stock or options
to acquire such MediQuik Common Stock in consideration for the successful
acquisition. In addition, if the Company acquires DPS, Co., SMG will receive
100,000 shares of Common Stock or options to acquire such MediQuik Common
Stock in consideration for arranging financing for the acquisition on terms
as set forth in the Agreement, whether or not MediQuik utilizes the financing
source. Benjamin J. Scardello, an executive officer of MediQuik, is the
managing member and 57.5% owner of SMG. See "SHARES ELIGIBLE FOR FUTURE
SALES." The Company believes that the Scardello Agreement provides for
services on terms no less favorable to the Company than those that would be
obtained from unrelated parties.
ITEM 8. DESCRIPTION OF SECURITIES
The following summary is a description of certain provisions of the
Company's Certificate of Incorporation and By-laws. Reference is made to the
more detailed provisions of the Company's Certificate of Incorporation and
By-laws, which are included as exhibits to this Registration Statement.
COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance
of up to 25,000,000 shares of Common Stock, $.001 par value, of which
5,944,803 shares are issued and outstanding as of December 8, 1999. The
holders of Common Stock are entitled to one vote per share on the election of
directors and on all other matters submitted to a vote of stockholders.
Shares of Common Stock do not have preemptive rights or cumulative voting
rights. The Company's Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, as nearly equal in
23
<PAGE>
number as possible, and that at each annual meeting of stockholders all of
the directors of one class shall be elected for a three-year term.
The holders of Common Stock are entitled to receive dividends
ratably when, as and if declared by the Board of Directors, and upon
liquidation are entitled to share ratably in the Company's net assets.
Payment of dividends on the Common Stock may become subject to restrictions
contained in any agreement in connection with the future issuance of
preferred stock and to prior payment of dividends on future issuances of
preferred stock. See " - PREFERRED STOCK." The decision to pay dividends is
subject to such other financial considerations as the Board of Directors of
the Company may deem relevant. No assurance can be given as to the timing or
amount of any dividend that the Company may declare on the Common Stock.
PREFERRED STOCK
The Certificate of Incorporation of the Company authorizes the
issuance of up to 1,000,000 shares of serial preferred stock, $.001 par value
(the "Preferred Stock"), of which none have been issued or reserved for
issuance.
The Board of Directors of the Company is authorized by its
Certificate of Incorporation, without any action on the part of stockholders,
to issue Preferred Stock in one or more series, and to fix and state the
powers, designations, preferences and relative, participating, optional or
other special rights of the shares of each series, and the qualifications,
limitation or restrictions thereof, including, (1) the distinctive serial
designation and the number of shares constituting such series; (2) the rights
in respect of dividends, if any, to be paid on the shares of such series,
whether dividends shall be cumulative and, if so, from which date or dates,
the payment dates for dividends, and the participating or other special
rights, if any, with respect to dividends; (3) the voting powers, full or
limited, if any, of the shares of such series; (4) whether the shares of such
series shall be redeemable and, if so, the price or prices at which, and the
terms and conditions upon which such shares may be redeemed; (5) the amount
or amounts payable upon the shares of such series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation; (6)
whether the shares of such series shall be entitled to the benefits of a
sinking or retirement fund to be applied to the purchase or redemption of
such shares; (7) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or any other
series, the conversion price or prices, or the rate or rates of exchange; (8)
the subscription or purchase price and form of consideration for which the
shares of such series shall be issued; and (9) whether the shares of such
series which are redeemed or converted shall have the status of authorized
but unissued shares of serial preferred stock and whether such shares may be
reissued as shares of the same or any other series of serial preferred stock.
Thus, the Board of Directors, without stockholder approval, may authorize the
issuance of Preferred Stock which could make it more difficult for another
company to effect certain business combinations with the Company.
DEFENSES AGAINST HOSTILE TAKEOVERS
INTRODUCTION. While the following discussion summarizes the reasons
for, and the operation and effects of, certain provisions of the Company's
Certificate of Incorporation which management has identified as potentially
having an anti-takeover effect, it is not intended to be a complete
description of all potential anti-takeover effects. Reference is made to the
more detailed provisions of the Company's Certificate of Incorporation and
By-Laws, which are included as exhibits to this Registration Statement.
In general, the anti-takeover provisions in Delaware law and the
Company's Certificate of Incorporation are designed to minimize the Company's
susceptibility to sudden acquisitions of control which has not been
negotiated with and approved by the Company's Board of Directors. As a
result, these provisions may tend to make it more difficult to remove the
incumbent members of the Board of Directors. The provisions would not
prohibit an acquisition of control of the Company or a tender offer for all
of the Company's capital stock. The provisions are designed to discourage any
tender offer or other attempt to gain control of the Company in a transaction
that is not approved by the Board of Directors, by making it more difficult
for a person or group to obtain control of the Company in a short time and
then impose its will on the remaining stockholders. However, to the extent
these provisions successfully discourage the acquisition of control of the
Company or tender offers for all or part of the Company's capital stock
without approval of the Board of Directors, they may have the effect of
preventing an acquisition or tender offer which might be viewed by
stockholders to be in their best interests.
24
<PAGE>
Tender offers or other non-open market acquisitions of stock are
usually made at prices above the prevailing market price of a Company's
stock. In addition, acquisitions of stock by persons attempting to acquire
control through market purchases may cause the market price of the stock to
reach levels which are higher than would otherwise be the case. Anti-takeover
provisions may discourage such purchases, particularly those of less than all
of the Company's stock, and may thereby deprive stockholders of an
opportunity to sell their stock at a temporarily higher price. These
provisions may therefore decrease the likelihood that a tender offer will be
made, and, if made, will be successful. As a result, the provisions may
adversely affect those stockholders who would desire to participate in a
tender offer. These provisions may also serve to insulate incumbent
management from change and to discourage not only sudden or hostile takeover
attempts, but any attempts to acquire control which are not approved by the
Board of Directors, whether or not stockholders deem such transactions to be
in their best interests.
AUTHORIZED SHARES OF CAPITAL STOCK. The Company's Certificate of
Incorporation authorizes the issuance of up to 1,000,000 Shares of serial
preferred stock. When issued, the Preferred Stock will become additional
capital stock required to be purchased by an acquiror. The Board of Directors
could authorize the issuance of Preferred Stock with voting rights increasing
the number of votes required to approve any proposed acquisition. The Board
of Directors of the Company can determine the extent, if any, to which the
holders of shares of Preferred Stock of any series will be entitled to vote
as a class or otherwise with respect to the election of directors or
otherwise, subject to certain limitations under Delaware law. If the Board of
Directors of the Company decides to issue an additional class of voting
preferred stock to a person opposed to a proposed acquisition, such person
might be able to prevent the acquisition single- handedly.
STOCKHOLDER MEETINGS. Delaware law provides that the annual
stockholder meeting may be called by a corporation's board of directors or by
such person or persons as may be authorized by a corporation's certificate of
incorporation or By-Laws. The Company's Certificate of Incorporation provides
that annual stockholder meetings may be called only by the Company's Board of
Directors or a duly designated committee of the Board. Although the Company
believes that this provision will discourage stockholder attempts to disrupt
the business of the Company between annual meetings, its effect may be to
deter hostile takeovers by making it more difficult for a person or entity to
obtain immediate control of the Company between annual meetings as a forum to
address certain other matters and discourage takeovers which are desired by
the stockholders. The Company's Certificate of Incorporation also provides
that stockholder action may be taken only at a special or annual stockholder
meeting and not by written consent.
CLASSIFIED BOARD OF DIRECTORS AND REMOVAL OF DIRECTORS. The
Company's Certificate of Incorporation provides that the Company's Board of
Directors is to be divided into three classes which shall be as nearly equal
in number as possible. The directors in each class serve for terms of three
years, with the terms of one class expiring each year. Each class currently
consists of approximately one-third of the number of directors. Each director
will serve until his successor is elected and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of the Company's outstanding
stock, to force an immediate change in the composition of a majority of the
Board of Directors. Since the terms of only one-third of the incumbent
directors expire each year, it requires at least two annual elections for the
stockholders to change a majority, whereas a majority of a non-classified
Board may be changed in one year. In the absence of the provisions of the
Company's Certificate of Incorporation classifying the Board, all of the
directors would be elected each year. The provision for a staggered Board of
Directors affects every election of directors and is not triggered by the
occurrence of a particular event such as a hostile takeover. Thus a staggered
Board of Directors makes it more difficult for stockholders to change the
majority of directors even when the reason for the change would be unrelated
to a takeover.
The Company's Certificate of Incorporation provides that a director
may not be removed except for cause by the affirmative vote of the holders of
75% of the outstanding Shares of capital stock entitled to vote at an
election of directors. This provision may, under certain circumstances,
impede the removal of a director and thus preclude the acquisition of control
of the Company through the removal of existing directors and the election of
nominees to fill in the newly created vacancies. The supermajority vote
requirement would make it difficult for the stockholders of the Company to
remove directors, even if the stockholders believe such removal would be
beneficial.
25
<PAGE>
RESTRICTION OF MAXIMUM NUMBER OF DIRECTORS AND FILLING VACANCIES ON
THE BOARD OF DIRECTORS. Delaware law requires that the board of directors of
a corporation consist of one or more members and that the number of directors
shall be set by the corporation's By-Laws, unless it is set by the
corporation's certificate of incorporation. The Company's Certificate of
Incorporation provides that the number of directors (exclusive of directors,
if any, to be elected by the holders of preferred stock) shall not be less
than one or more than 15, as shall be provided from time to time in
accordance with the Company By-Laws. The power to determine the number of
directors within these numerical limitations and the power to fill vacancies,
whether occurring by reason of an increase in the number of directors or by
resignation, is vested in the Company's Board of Directors. The overall
effect of such provisions may be to prevent a person or entity from quickly
acquiring control of the Company through an increase in the number of the
Company's directors and election of nominees to fill the newly created
vacancies and thus allow existing management to continue in office.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH
RELATED PERSONS. To approve business combinations involving a "related
person", the Company's Certificate of Incorporation requires (i) the approval
of the holders of 75% of the Company's outstanding voting stock (and any
class or series entitled to vote separately) and (ii) a majority of the
outstanding stock not beneficially owned by the related person. The exception
to the foregoing is where the business combination has been approved in
advance by two-thirds of those members of the Company's Board of Directors
who were directors prior to the time the related person became a related
person. As defined in the Certificate of Incorporation, "related person"
generally includes any person who owns 10% or more of the Company's
outstanding voting stock.
Section 203 of the DGCL prohibits, with certain exceptions, a
Delaware corporation from engaging in any of a broad range of business
combinations with an "interested stockholder" for a period of three years
following the date such stockholder became an interested stockholder. An
"interested stockholder" is defined in Section 203 as any person that is (i)
the owner of 15% or more of the outstanding voting stock of a corporation or
(ii) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date on which it is sought to
be determined whether such person is an interested stockholder. However,
Section 203 does not apply to a corporation unless its voting stock is either
(A) listed on a national securities exchange, (B) authorized for quotation on
the NASDAQ Stock Market or (C) held of record by more than 2,000
stockholders. The Company does not currently satisfy any of these conditions
and, therefore, is not currently subject to Section 203. Unless the Company
amends its certificate of incorporation to elect not to be governed by
section 203, the Company will be subject to Section 203 upon satisfaction
upon the satisfactory of any of the foregoing conditions (A), (B), or (C).
The exceptions in Section 203 under which a corporation may engage
in a business combination with an interested stockholder are: (i) approval of
the acquisition by the board of directors prior to the date the stockholder
became an interested stockholder, (ii) the interested stockholder acquiring
at least 85% of the outstanding voting stock (excluding shares owned by
directors, officers and certain employee stock plans) as a result of the
transaction in which it became an interested stockholder or (iii) approval of
the transaction by the board of directors and the affirmative vote at an
appropriate meeting (and not by written consent) of two-thirds of the
outstanding voting stock not owned by the interested stockholder on or after
the date on which the interest stockholder became and interested stockholder.
Under Delaware law, business combinations resulting in the sale of
substantially all of the assets of the Company or merger of the Company with
another business organization must be approved by vote of the majority of the
Company's outstanding voting stock entitled to vote at a duly called meeting.
The supermajority provisions in the Certificate of Incorporation and Section
203 of the DGCL, if applicable, may have the effect of foreclosing mergers
and other business combinations which the holders of a majority of the
Company's stock deem desirable and place the power to prevent such a
transaction in the hands of a minority of the Company's stockholders.
Under Delaware law, there is no cumulative voting by stockholders
for the election of directors unless authorized in the corporation's
certificate of incorporation. MediQuik's Certificate of Incorporation does
not authorize cumulative voting. The absence of cumulative voting rights
effectively means that the holders of a majority of the stock voted at a
stockholder meeting may, if they so choose, elect all directors of the
Company, thus precluding representation of minority stockholders on the
Company's Board of Directors.
26
<PAGE>
ADVANCE NOTICE REQUIREMENTS FOR NOMINATION OF DIRECTORS AND PROPOSAL
OF NEW BUSINESS AT ANNUAL STOCKHOLDER MEETINGS. The Company's Certificate of
Incorporation generally provides that any stockholder desiring to make a
nomination for the election of directors or a proposal for new business at a
stockholder meeting must submit written notice not less than 30 or more than
60 days in advance of the meeting. This advance notice requirement may give
management time to solicit its own proxies in an attempt to defeat any
dissident slate of nominations, should management determine that doing so is
in the best interests of stockholders generally. Similarly, adequate advance
notice of stockholder proposals will give management time to study such
proposals and to determine whether to recommend to the stockholders that such
proposals be adopted. In certain instances, such provisions could make it
more difficult to oppose management's nominees or proposals, even if the
stockholders believe such nominees or proposals are in their interests. The
Company's Certificate of Incorporation provides that the period for
stockholders to nominate directors and introduce new business may be as short
as 10 days (when less than 40 days' notice of the stockholders meeting is
given). This may tend to discourage persons from bringing up matters
disclosed in the proxy materials furnished by the Company and could inhibit
the ability of stockholders to bring up new business in response to recent
developments.
LIMITATIONS ON ACQUISITIONS OF CAPITAL STOCK. The Company's
Certificate of Incorporation generally provides that if any person were to
acquire beneficial ownership of more than 20% of any class of the Company's
outstanding Common Stock, each vote in excess of 20% would be reduced to
one-hundredth of a vote, with the reduction allocated proportionately among
the record holders of the stock beneficially owned by the acquiring person.
The limitation on voting rights of Shares beneficially owned in excess of 20%
of the Company's outstanding Common Stock, would discourage stockholders from
acquiring a substantial percentage of the Company's stock in the open market,
without disclosing their intentions, prior to approaching management to
negotiate an acquisition of the Company's remaining stock. The effect of
these provisions is to require amendment of the Certificate of Incorporation,
which requires Board approval, before a stockholder can acquire a large block
of the Company's Common Stock. As a result, these provisions may deter
takeovers by potential acquirors who would have acquired a large holding
before making an offer for the remaining stock, even though the eventual
takeover offer might have been on terms favorable to the remaining
stockholders.
SUPERMAJORITY VOTING REQUIREMENT FOR AMENDMENT OF CERTAIN PROVISIONS
OF THE CERTIFICATE OF INCORPORATION. The Company's Certificate of
Incorporation provides that specified provisions contained in the Certificate
of Incorporation may not be repealed or amended except upon the affirmative
vote of the holders of not less than 75% of the outstanding stock entitled to
vote. This requirement exceeds the majority vote that would otherwise be
required by Delaware law for the repeal or amendment of the Certificate of
Incorporation. Specific provisions subject to the supermajority vote
requirement are (i) Article VIII, governing the calling of stockholder
meetings and the requirement that stockholder action be taken only at annual
or special meetings, (ii) Article IX, requiring written notice to the Company
of nominations for the election of directors and new business proposals,
(iii) Article X, governing the number and terms of the Company's directors,
(iv) Article XI, governing the removal of directors, (v) Article XII,
limiting acquisitions of 20% or more of the Company's stock, (vi) Article
XIII, governing approval of business combinations involving related persons,
(vii) Article XIV, relating to the consideration of various factors in the
evaluation of business combinations, (viii) Article XV, providing for
indemnification of directors, officers, employees and agents, (ix) Article
XVI, limiting directors' liability, and (x) Articles XVII and XVIII,
governing the required stockholder vote for amending the By-Laws and
Certificate of Incorporation, respectively. Article XIV is intended to
prevent the holders of less than 75% of the Company's outstanding voting
stock from circumventing any of the foregoing provisions by amending the
Certificate of Incorporation to delete or modify one of such provisions. This
provision would enable the holders of more than 25% of the Company's voting
stock to prevent amendments to the Certificate of Incorporation or By-Laws
even if they were favored by the holders of a majority of the voting stock.
TRANSFER AGENT AND REGISTRAR
Atlas Stock Transfer Corporation, 5899 South State Street, Salt Lake
City, Utah 84107, telephone number (801) 266-7151, serves as the transfer
agent, registrar and warrant agent of the Company.
27
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALES
Currently the Company has 25,000,000 shares of Common Stock and
1,000,000 shares of Preferred Stock authorized by its Certificate of
Incorporation, with 5,944,803 shares of Common Stock and no Preferred Stock
outstanding. Under Delaware law and the Company's Certificate of
Incorporation, the Board of Directors is authorized to issue all of the
remaining authorized but unissued shares of Common Stock and Preferred Stock
from time to time without approval of the stockholders (except as required by
the rules of a national securities exchange, if applicable) for such value
(not less than par value) as they determine.
Pursuant to a Consulting and Financial Advisory Services Agreement
dated February 1, 1999, the Company issued to R.F. Bearden, Associates, Inc.
("Bearden") warrants for the purchase of 250,000 shares of Common Stock at an
exercise price ranging from $3.00 to $4.00 per share (the "Bearden
Warrants"). All of the Bearden Warrants expire by April 30, 2000. Pursuant to
the agreement, Bearden has the right to include shares of Common Stock
issuable upon the exercise of the Bearden Warrants in certain registration
statements filed by MediQuik under the Securities Act, other than a
registration statement filed in connection with the Company's first
underwritten public offering. MediQuik is generally required to pay the costs
associated with such registration. The number of shares of Common Stock that
must be registered on behalf of Bearden is subject to limitation, however, if
the Company's managing underwriter determines that market conditions so
require.
Pursuant to a Letter Agreement dated June 18, 1999, the Company
engaged Scardello Marketing Group, L.L.C. ("SMG") to assist in the
acquisition and purchase of a diabetic pharmaceutical supply company ("DPS,
Co.") by the Company. Under the terms of the Letter Agreement, in the event
that the Company acquires DPS, Co., SMG shall receive 200,000 shares of
Common Stock or options to acquire such MediQuik Common Stock. Further, if
the Company acquires DPS, Co. and if SMG provides a financing service and a
firm commitment from said financing source at terms as set forth in the
Agreement, SMG shall receive 100,000 shares of Common Stock or options to
acquire such MediQuik Common Stock whether or not MediQuik uses the financing
source.
The Company recently entered into Memorandum of Understanding to
acquire all of the outstanding capital stock of RespiNET, Inc., a development
stage company that has acquired certain proprietary technologies for the
development of an Internet-based medical information system. If the Company
successfully concludes the RespiNET acquisition, MediQuik will issue
1,000,000 shares of Common Stock and Warrants to purchase an additional
2,000,000 shares of Common Stock. The Company is conducting a private
offering to finance the acquisition. Upon the successful completion of such
offering, the Company will issue up to 3,000,000 shares of Common Stock and
warrants to purchase an additional 6,000,000 shares of Common Stock. In
addition, as consideration for services to be provided pursuant to a
Consulting and Financial Advisory Services Agreement dated November 17, 1999,
the Company will issue Warrants to purchase up to 850,000 shares of Common
Stock.
Of the Common Stock currently outstanding, 5,091,055 shares are
"restricted securities," as that term is defined, under Rule 144 promulgated
under the Securities Act in that such shares were issued and sold by the
Company without registration, in private transactions not involving a public
offering, and/or are securities held be affiliates. All such shares may be
resold publicly only following their effective registration under the
Securities Act or pursuant to an exemption from the registration requirements
of the act, such as Rule 144 thereunder. Although such restricted securities
are not presently tradeable in any public market which may develop for the
Common Stock, such securities may in the future be publicly sold in to any
such market in accordance with the provisions of Rule 144.
In general, Rule 144 was adopted by Securities and Exchange
Commission under the Securities Act to provide an exemption for public
resales of restricted securities through brokers' transaction effected
without purchaser solicitation. Securities sold in compliance with Rule 144
lose their status as restricted securities in the hands of the purchaser and
thereafter trade free of restrictions in the same manner as securities sold
by the issuer in a transaction registered under the Securities Act.
Restricted securities may be resold pursuant to Rule 144 only if (i) the
securities are held for at least one year from the date of acquisition,
provided that (A) the shares are sold in ordinary brokers' transactions or
transactions directly with a market maker without public solicitation, (B)
adequate current information about the Company is publicly available and (C)
the amount of securities sold by or for the account of the holder during any
three-month period does not exceed the greater of 1% of the issuer's
outstanding shares or the average weekly trading volume for the four-week
period prior to the notice required by Rule 144(h), or (ii) the securities
are held for at least two years from the date of acquisition. Future sales by
current shareholders, especially of substantial amounts, could depress the
market price of the Common Stock in any market that may develop.
28
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
From January 1999 through October 7, 1999, the Company's Common
Stock was listed on the NASD Over-The- Counter Bulletin Board ("OTCBB"). On
October 8, 1999, the Common Stock began trading on the National Quotation
Bureau's Pink Sheets. The Company has been advised by the NASD
representatives that listing will resume on the OCTBB upon the satisfactory
completion of this amended registration statement.
As yet the Company's Common Stock has experienced limited trading
activity. A public trading market having the characteristics of depth,
liquidity and orderliness depends upon the existence of market makers as well
as the presence of willing buyers and sellers, which are circumstances over
which the Company does not have control. The following table sets forth the
high and low sale prices for the Common Stock (as reported by OTCBB) for the
periods indicated since the inception of trading in January 1999. The
quotations below reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1999:
First Quarter (from January 26, 1999 through March 31, 1999)........... $4.625 $ 1.75
Second Quarter ........................................................ $7.875 $3.125
Third Quarter.......................................................... $4.50 $1.125
Fourth Quarter (from October 1, 1999 through October 8, 1999). . . $2.00 $ 1.50
</TABLE>
On December 6, 1999 the last reported sales of the Common Stock on
the OTCBB was $2.50. As of December 6, 1999, there were 111 holders of record
of the Common Stock, as shown on the records of the Transfer Agent and
Registrar of the Common Stock. Since many shares may be held by investors in
nominee names, such as the name of their broker or their broker's nominee,
the number of record holders often bears little relationship to the number of
beneficial owners of the Common Stock.
The Company has reserved the trading symbol "MDQK."
The Company has never paid any cash dividends on its stock and
anticipates that for the foreseeable future it will retain earnings, if any,
for use in the operation of its business. Payment of cash dividends in the
future will depend upon the Company's earnings, financial condition, any
contractual restrictions, restrictions imposed by applicable law, capital
requirements and other factors believed relevant by the Company's Board of
Directors.
ITEM 2. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is involved in any
legal proceedings which the Company believes could have a material adverse
effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is certain information concerning all sales of
securities by Cash Flow, Old MediQuik and the Company that were not
registered under the Securities Act.
29
<PAGE>
In connection with its organization on July 10, 1997, Cash Flow
issued and sold an aggregate of 1,700,000 shares of its common stock to R.
David Preston, Chairman of the Board, President and Chief Executive Officer
of Cash Flow Colorado, Tracy Moore, Secretary and member of the board of
directors of Cash Flow Colorado, and Gaylene Granquist Preston, member of the
board of directors of Cash Flow Colorado, for $.001 per share or an aggregate
consideration of $1,700.
From July 15, 1997 to December 15, 1997, pursuant to Rule 504 of
Regulation D, Cash Flow issued and sold 283,047 shares of its Common Stock to
12 accredited investors and 19 non-accredited investors for an aggregate
consideration of $356,809.
In connection with the organization of Old MediQuik, on April 7,
1998, Old MediQuik issued and sold an aggregate of 110,000 shares of its
common stock to Grant M. Gables, President and Chief Executive of Old
MediQuik, and Howard B. Butler, Jr., Secretary and Treasurer of Old MediQuik,
for $.001 per share or an aggregate consideration of $110. On April 7, 1998,
Old MediQuik issued an aggregate of 2,750,000 shares of its common stock to
the designees of MediQuik Services, LLC in consideration of the transfer of
the initial operating assets of Old MediQuik from MediQuik Services, LLC.
On April 7, 1998, Old MediQuik also issued to R. F. Bearden Associates,
Inc. ("Bearden") warrants for the purchase of 1,540,000 shares of Old MediQuik
common stock at an exercise price ranging from $.01 to $5.00 per share in
consideration of $11,000 and consulting services pursuant to the exemption
provided by Section4(2) of the Securities Act. From July through September
1998, Bearden acquired 134,047 shares of Old MediQuik common stock, pursuant
to Rule 504 of Regulation D, through exercise of such warrants for $2.00 per
share. On November 18, 1998, Old MediQuik issued 117,961 shares of Common
Stock to Bearden for $.01 per share upon exercise of the warrants pursuant to
the exemption provided by Section 4(2) of the Securities Act. On February 1,
1999, the consulting services agreement was amended and all remaining warrants
issued April 7, 1998 were canceled without exercise. In connection with
execution of the amended consulting agreement, pursuant to the exemption
provided by Section 4(2) of the Securities Act, the Company issued 16,142
shares of Common Stock on March 9, 1999 for reimbursement of expenses and
settlement of Company obligations to Bearden, including 8,508 shares of
Common Stock due to Bearden in connection with the merger of Old MediQuik
into Cash Flow as described below.
From February to April 1999 the Company issued 150,000 shares of Common
Stock to Bearden pursuant to the amended consulting agreement and issued
additional warrants to purchase 250,000 shares of Common Stock at an exercise
price ranging from $3.00 to $4.00 per share in consideration of services
provided. The amended consulting agreement was terminated April 30, 1999.
On April 15, Old MediQuik granted an aggregate of 1,000,000 shares of its
restricted stock to its officers and directors pursuant to the MediQuik
Services, Inc. Stock Incentive Plan; such shares were issued on November 18,
1998. The restricted stock is common stock of Old MediQuik which was subject
to an option to repurchase by the issuer which expired, unexercised, on June
17, 1999.
From April 20, 1998 through April 22, 1998, Old MediQuik issued to
three accredited investors Series I NonNegotiable 9% Convertible Promissory
Notes in the aggregate principal amount of $153,000 pursuant to the exemption
provided by Section 4(2) of the Securities Act. Each note provided that
$1,000 of the outstanding principal was convertible, at the holders' option,
into 25 shares of Old MediQuik common stock for each $1.00 of debt converted.
In August 1998, the holders of the notes each exercised their option to
convert $1,000 of outstanding principal, which resulted in the issuance of
25,000 shares of Old MediQuik common stock to each holder, or an aggregate of
75,000 shares. The notes were fully paid by the Company and cancelled.
In connection with a merger effective December 31, 1998, pursuant to
which Old MediQuik was merged with and into Cash Flow, the Company issued an
aggregate of 4,849,000 shares of Common Stock to the stockholders of Old
MediQuik and the stockholders of Cash Flow pursuant to Rule 506 of Regulation
D.
From February 1, 1999 to February 19, 1999, pursuant to Rule 504 of
Regulation D, the Company issued and sold 350,000 shares of Common Stock to
30 accredited investors for the consideration of $2.00 per share.
Under terms of consulting and advisory agreements executed by the
Company during the period April 1998 to May 1999, the Company issued pursuant
to Rule 701 of the Securities Act an aggregate of 110,000 shares of Common
Stock on April 21, 1999 (of which, 72,000 shares are held in escrow by the
Company and will be distributed under the terms of the agreement through
March 2000), 20,000 shares on June 3, 1999 and 5,000 shares on June 22, 1999
to the following consultants and advisors: William J. Flato, Dale Toney, SSP
Management Corp., Albert McMullin, Robert Sonfeld and Ben Scardello.
30
<PAGE>
On June 9, 1999, pursuant to Regulation S, the Company issued and
sold 75,000 shares of Common Stock to one accredited investor in an offshore
transaction for $2.00 per share.
On July 1, 1999, the Company issued 330,000 shares of Common Stock
to Scardello Marketing Group, LLC in consideration of the transfer of assets
by Scardello Marketing Group, LLC to the Company.
In July 1999, pursuant to Rule 506 of Regulation D, the Company
issued and sold 38,000 shares of Common Stock to 4 accredited investors for
the consideration of $2.70 per share.
On October 29, 1999, the Company issued 10,000 shares of Common
Stock to Lawrence J. Wedekind, Chief Executive Officer of the Company, in
consideration of his execution of an employment agreement, effective
September 7, 1999, with the Company.
Except as otherwise indicated, the Company believes that the
transactions described above were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof as transactions not involving
any public offering because such securities were sold to a limited group of
persons, each of which was believed to have been a sophisticated investor or
had a pre-existing business or personal relationship with the Company or its
management and was purchasing for investment without a view to further
distribution. The Company took steps to ensure that the purchaser was
acquiring securities for purposes of investment and not with a view to
distribution, including execution of agreements concerning such purchaser's
investment intent. Except as otherwise indicated, all sales of the Company's
securities were made by officers of the Company who received no commission or
other remuneration for the solicitation of any person in connection with the
respective sales of securities described above. Restrictive legends were
placed on stock certificates evidencing the shares and/or agreements relating
to the right to purchase such shares.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and By-laws provide, in
effect, that, to the fullest extent and under the circumstances permitted by
Section 145 of the Delaware General Corporation Law (the "DGCL"), the Company
will indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he or she is a director, officer, incorporator, employee, or agent
of the Company or is or was serving at the Company's request as a director,
officer, incorporator, employee, partner, trustee or agent of another
corporation or enterprise. The Certificate of Incorporation also relieves
directors of the Company from monetary damages to the Corporation or its
stockholders for breach of such director's fiduciary duty as a director to
the fullest extent permitted by the DGCL. Under Section 102(b)(7) of the
DGCL, a corporation may relieve its directors from personal liability to such
corporation or its stockholders for monetary damages for any breach of their
fiduciary duty as directors except (i) for a breach of the duty of loyalty,
(ii) for failure to act in good faith, (iii) for intentional misconduct or
knowing violation of law, (iv) for willful or negligent violation of specific
provisions in the DGCL imposing requirements with respect to stock
repurchases, redemption and dividends, or (v) for any transactions from which
the director derived an improper personal benefit.
Section 145 of the DGCL provides generally that a person sued as a
director, officer, employee or agent of a corporation may be indemnified by
the corporation for reasonable expenses, including attorneys' fees, if in the
case of other than derivative suits such person has acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation (and, in the case of a criminal proceeding,
had no reasonable cause to believe that such person's conduct was unlawful).
In the case of a derivative suit, an officer, employee or agent of the
corporation which is not protected by the Certificate of Incorporation may be
indemnified by the corporation for reasonable expenses, including attorneys'
fees, if such person has acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in the case of a
derivative suit in respect of any claim as to which an officer, employee or
agent has been adjudged to be liable to the corporation unless that person is
determined to be fairly and reasonably entitled to indemnity for proper
expenses by the court in which such action or suit is brought.
Indemnification is mandatory in the case of a director, officer, employee, or
agent who is successful on the merits in defense of a suit against such
person.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
MediQuik Services, Inc.
Houston, Texas
We have audited the accompanying balance sheet of MediQuik Services, Inc.
(the "Company") as of December 31, 1998, and the related statements of
operations, changes in stockholders' equity (deficit), and cash flows for the
period from April 7, 1998 (date of incorporation) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998, and
the results of its operations and its cash flows for the period from April 7,
1998 (date of incorporation) to December 31, 1998 in conformity with
generally accepted accounting principles.
As discussed in Note 11, the accompanying financial statements for the period
from April 7, 1998 (date of incorporation) to December 31, 1998 have been
restated.
DELOITTE & TOUCHE LLP
Houston, Texas
July 16, 1999 (November 23, 1999
as to the effects of the matters
discussed in Note 11)
33
<PAGE>
MEDIQUIK SERVICES, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------
JUNE 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
-----------------------------------
(AS RESTATED, SEE NOTE 11)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 58,243 $ 7,578
Accounts receivable - trade 75,786 43,824
Accounts receivable - other 19,454 6,961
Advances 16,000 16,000
Inventory 1,442 79,093
----------- -----------
Total current assets 170,925 153,456
PROPERTY AND EQUIPMENT:
Office equipment 37,669 249
Less accumulated depreciation (836) (29)
----------- -----------
Total property and equipment 36,833 220
INVESTMENT - MP Total Care 250,001
OTHER ASSETS 54,525 61,651
----------- -----------
TOTAL $ 512,284 $ 215,327
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 159,382 $ 153,656
Accrued expenses 107,758 100,908
Notes payable - shareholders 130,000 280,000
----------- -----------
Total current liabilities 397,140 534,564
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - $.001 par value 25,000,000 shares authorized;
5,566,807 shares issued and 5,494,807 shares outstanding at
June 30, 1999 and 4,849,173 shares issued and outstanding at
December 31, 1998 5,495 4,849
Additional paid-in capital 2,695,846 505,768
Accumulated deficit (2,586,197) (829,854)
----------- -----------
Total stockholders' equity (deficit) 115,144 (319,237)
----------- -----------
TOTAL $ 512,284 $ 215,327
=========== ===========
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
<TABLE>
<CAPTION>
MEDIQUIK SERVICES, INC.
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED APRIL 7, 1998 TO PERIOD FROM
JUNE 30, JUNE 30, APRIL 7, 1998 TO
1999 1998 DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1998
-------------------------------------------------------------
(AS RESTATED, SEE NOTE 11)
<S> <C> <C> <C>
REVENUE:
Sales - strips $ 715,773 $ 368,513
Sales - lancets 579 795
Other revenues 4,502 2,918
------------ -------------- ---------------
Total revenue 720,854 372,226
------------ -------------- ---------------
COST OF SALES:
Purchase - strips 604,922 316,831
Purchases - lancets 437 617
Other cost of sales 105
------------ -------------- ---------------
Total cost of sales 605,359 317,553
------------ -------------- ---------------
GROSS PROFIT 115,495 54,673
OPERATING EXPENSES:
Salaries - officer 77,923 138,000
Consulting fees 1,505,422 $ 34,000 433,712
Other 306,984 30,419 284,820
------------ -------------- ---------------
Total operating expenses 1,890,329 64,419 856,532
------------ -------------- ---------------
LOSS FROM OPERATIONS (1,774,834) (64,419) (801,859)
OTHER INCOME (EXPENSE):
Interest income 2,795 315
Other income 41,204
Interest expense (25,508) (4,375) (28,310)
------------ -------------- ---------------
Total other income (expense) 18,491 (4,375) (27,995)
------------ -------------- ---------------
NET LOSS $ (1,756,343) $ (68,794) $ (829,854)
============ ============== ===============
BASIC AND DILUTED LOSS PER SHARE $ (0.34) $ (0.02) $ (0.21)
============ ============== ===============
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 5,157,350 4,036,455 3,934,409
============ ============== ===============
</TABLE>
See accompanying notes to financial statements
35
<PAGE>
<TABLE>
<CAPTION>
MEDIQUIK SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM APRIL 7, 1998 (DATE OF INCORPORATION)
TO DECEMBER 31, 1998 AND THE SIX MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
-------------------------------------------------------------------------------
(AS RESTATED, SEE NOTE 11)
<S> <C> <C> <C> <C> <C>
BALANCE APRIL 7 1998 (Date of Incorporation)
Proceeds from issuance of Founders' shares 110,000 $ 110 $ 110
Acquisition of MediQuik Services LLC assets 2,750,000 2,750 2,750
Proceeds from issuance of warrants $ 11,000 11,000
Issuance of warrants for consulting services 117,961 118 235,922 236,040
Issuance of restricted stock 1,000,000 1,000 1,000
Conversion of Convertible Debt 75,000 75 2,925 3,000
Acquisition of Cash Flow Management Inc. 662,165 662 662
Proceeds from exercise of warrants and
issuance of common stock 134,047 134 255,921 256,055
Net loss $ (829,854) (829,854)
----------- ---------- ---------- ----------- ----------
BALANCE DECEMBER 31, 1998 4,849,173 4,849 505,768 (829,854) (319,237)
Repurchase of unexercised warrants (12,880) (12,880)
Proceeds from issuance of common stock 425,000 425 849,575 850,000
Issuance of common stock under consulting
agreements 220,634 221 890,283 890,504
Issuance of warrants for consulting services 463,100 463,100
Net loss (1,756,343) (1,756,343)
----------- ---------- ---------- ----------- ----------
BALANCE JUNE 30, 1999 (UNAUDITED) 5,494,807 $ 5,495 $2,695,846 $(2,586,197) $ 115,144
=========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
<TABLE>
<CAPTION>
MEDIQUIK SERVICES, INC.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS PERIOD FROM PERIOD FROM
ENDED APRIL 7, 1998 TO APRIL 7, 1998 TO
JUNE 30, JUNE 30, DECEMBER 31,
1999 1998 1998
-------------------------------------------------------
AS RESTATED, SEE NOTE 11
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,756,343) $ (68,794) $ (829,854)
Adjustment for noncash transactions:
Common stock and warrants issued for services 1,340,724 240,040
Depreciation and amortization 7,641 2,278 9,141
Net changes in assets and liabilities:
Accounts receivable (44,453) (50,715)
Advances (82,506) (16,000)
Inventory 77,651 (79,093)
Accounts payable 5,726 153,656
Accrued expenses 6,850 100,908
Other assets 292 (70,763)
----------- ----------- -----------
Net cash used in operating activities (361,912) (149,022) (542,750)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,422) (249)
Investment in MP Total Care (250,001)
----------- ----------- -----------
Net cash used in investing activities (287,423) (249)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 150,000 280,000
Repayment of indebtedness (150,000)
Proceeds from sale of common stock 850,000 2,860 270,577
----------- ----------- -----------
Net cash provided by financing activities 700,000 152,860 550,577
----------- ----------- -----------
NET INCREASE IN CASH 50,665 3,838 7,578
CASH, Beginning of period 7,578
----------- ----------- -----------
CASH, End of period $ 58,243 $ 3,838 $ 7,578
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES -
Interest paid $ 16,362
NONCASH TRANSACTIONS:
Debt converted to stock $ 3,000
Stock issued in MediQuick Services LLC acquisition $ 2,750 2,750
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
MEDIQUIK SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 7, 1998 (DATE OF INCORPORATION)
TO DECEMBER 31, 1998 AND THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
AND THE PERIOD FROM APRIL 7, 1998 TO JUNE 30,1998 (UNAUDITED)
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY - MediQuik Services, Inc. ("MediQuik")
was organized in Delaware on April 7, 1998. On April 7, 1998, MediQuik
issued an aggregate of 2,750,000 shares of its common stock to designees
of MediQuik Services, LLC in consideration of the transfer of certain
assets of MediQuik from MediQuik Services, LLC. Effective December 31,
1998, MediQuik was merged with and into Cash Flow Marketing, Inc., a
Delaware corporation ("Cash Flow"), which, as the surviving corporation,
subsequently changed its name to MediQuik Services, Inc. (the "Company").
This transaction has been treated as a capital transaction in substance,
rather than a business combination; thus the accounting is similar to a
reverse acquisition but no goodwill and/or intangible has been recorded.
As a result, MediQuik is considered the acquiring entity for financial
statement purposes, and the financial statements for the period prior to
January 1, 1999 are those of MediQuik Services, Inc, not Cash Flow, the
legal acquirer.
In connection with the merger, the Company issued an aggregate of
4,849,000 shares of common stock to the stockholders of MediQuik and
Cash Flow. At the time of the merger, Cash Flow was a "Shell"
corporation with substantially no assets, business or operations.
USE OF ESTIMATES - The preparation of the accompanying financial
statements in conformity with generally accepted accounting principles
requires management to make certain estimates and assumptions that
directly affect the results of reported amounts of assets, liabilities,
revenues, and expenses. Actual results may differ from these estimates.
REVENUE AND COST RECOGNITION - The Company generates revenue from provider
agreements by delivering medical supplies directly to patients covered by
these provider agreements. The Company recognizes revenues from sales
contracts when products are shipped. The Company has not experienced any
product returns or allowances to date.
INVENTORY - Inventory consists of chronic disease management products and
is reflected in the financial statements at the lower of cost (first in
first out) or market.
CASH EQUIVALENTS - Cash equivalents for purposes of these financial
statements are considered to be all highly liquid debt instruments with an
original maturity of three months or less.
BAD DEBTS - Management has determined that no allowance is necessary at
December 31, 1998.
38
<PAGE>
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. The
cost of betterments are added to the property accounts. Maintenance and
repair costs are charged to expenses as incurred. Upon disposal of an
asset, the difference between the sales proceeds and the net book value is
charged or credited to income. Depreciation of property is provided using
primarily the straight-line method over the following estimated useful
lives:
CLASSIFICATION YEARS
Office equipment 5
Depreciation expense was $807 and $29 for the six months ended June 30,
1999 and the period from April 7, 1998 to December 31, 1998, respectively.
IDENTIFIED INTANGIBLE - As a result of the purchase of assets from
MediQuik Services, LLC, the Company has recorded an identified intangible
in other assets related to certain contracts acquired. This intangible is
being amortized over the life of the contracts. As of December 31, 1998,
a the accumulated amortization is $9,112. The Company reviews intangible
assets on a quarterly basis to determine if such intangibles have been
impaired. Any impairment would be recognized in the statement of
operations.
INTERIM FINANCIAL INFORMATION - The financial statements as of and for the
six months ended June 30, 1999 and as of and for the period from April 7,
1998 (date of incorporation) to June 30, 1998 included herein have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and reflect all
adjustments which are, in the opinion of management, necessary to present
a fair statement of the results for the interim periods on a basis
consistent with the annual audited financial statements. All such
adjustments are of a normal recurring nature. The results of operations
for the interim periods are not necessarily indicative of the results to
be expected for an entire year. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading.
SIGNIFICANT CUSTOMER - The Company had sales to a significant customer of
approximately 86% for the period ended December 31, 1998. Such customer
represented 80% of the accounts receivable balance at December 31, 1998.
COMPREHENSIVE INCOME - In June 1997 the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130,
"Reporting of Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting and displaying comprehensive income and its
components. SFAS 130 is effective for periods beginning after December 31,
1997. The purpose of reporting comprehensive income is to report a measure
of all changes in equity of an enterprise that results from recognized
transactions and other economic events of the period other than
transactions with owners in their capacity of owners. As of December 31,
1998, there are no adjustments ("Other Comprehensive Income") to net loss
in deriving comprehensive income.
SEGMENT DISCLOSURES - In June 1997 the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments. SFAS 131
is effective for periods beginning after December 31, 1997. The Company
currently operates under one segment.
DERIVATIVES - In June 1998 the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which establishes accounting and reporting standards for derivative
instruments and hedging activities. In June 1999 FASB issued SFAS No. 137,
which delays the
39
<PAGE>
effective date for implementation of SFAS 133 to fiscal years beginning
after June 15, 2000. The Company held no derivatives in 1999 or 1998 and
believes that SFAS No. 133, when adopted effective January 1, 2001, will
not materially impact its financial position or results of operations.
EQUITY INVESTMENT - The Company records its equity investments at cost
where management does not have significant ability to exercise significant
control over the investee's operating and financial policies.
Such investments represent common stock in a privately held company.
FAIR VALUES OF FINANCIAL INSTRUMENTS - At December 31, 1998, the carrying
amounts of the Company's cash, receivables and payables approximated their
fair values.
2. EARNINGS PER SHARE
The Company has adopted SFAS 128, "Earnings per Share," which establishes
standards for computing and presenting earnings per share ("EPS"). SFAS
128 requires the presentation of "basic" and "diluted" EPS on the face of
the income statement. Basic EPS amounts are calculated using the average
number of common shares outstanding during each period. Diluted earnings
per share assumes the exercise of all stock options and warrants having
exercise prices less than the average market price of the common stock
using the treasury stock method. No dilutive securities of the Company
were outstanding at December 31, 1998; however, warrants to purchase
250,000 shares of common stock at exercise prices ranging from $3.00 -
$4.00 per share were issued from February to April 1999. Since the Company
incurred a loss for all periods presented, these securities have been
excluded, as they would be anti-dilutive to basic EPS.
3. INCOME TAXES
The Company has a net operating loss carryforward of approximately
$734,000 as of December 31, 1998 that may be applied against future
federal taxable income. This loss gives rise to a deferred tax asset at
December 31, 1998 of approximately $249,000. Management has established a
valuation allowance equal to the amount of the deferred tax asset, as it
is more likely than not that the Company will not be able to realize this
asset. The loss carryforward begins to expire on December 31, 2018.
4. NOTES PAYABLE - SHAREHOLDERS
Notes payable - shareholders consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Three notes payable, $50,000 each to shareholders with interest
at 9%, payable February 20, 1999 $150,000
Note payable to shareholders with interest at 15%, payable in
two installments of $15,000 each, due on June 30, 1999 and
December 31, 1999 $ 30,000 30,000
Ten notes payable, $10,000 each to certain shareholders with
interest at 15%, payable in installments of $50,000 each, due
on June 30, 1999 and December 31, 1999 100,000 100,000
-------- --------
$130,000 $280,000
======== ========
</TABLE>
40
<PAGE>
Of the amounts due in June, $15,000 was paid in July 1999. The remaining
$50,000 payment due in June 1999 has been extended until December 31,
1999.
The three 9% notes payable had an original aggregate principal balance of
$153,000. Each of the notes provided for $1,000 of the outstanding
principal to be convertible into 25 shares of the Company's common stock
for $1.00 of debt converted. In August 1998 the three note holders each
converted $1,000 of principal into 25,000 shares of common stock, for a
total issuance of 75,000 shares.
5. LEASES
The Company leases office space on a month-to-month basis for $2,781 a
month. The lease requires a 60-day notice of termination. Rent expense
amounted to $29,096 and $29,369 for the six months ended June 30, 1999 and
the period ended December 31, 1998, respectively.
6. EQUITY TRANSACTIONS
WARRANTS - In April 1998 the Company issued warrants for the purchase of
1,100,000 shares of MediQuik common stock at an exercise price ranging
from $2.00 to $5.00 per share in consideration of $11,000. Additionally,
performance-based warrants for the purchase of 440,000 shares of common
stock were issued to a consultant at an exercise price of $.001 per share;
during November 1998, warrants for the purchase of 117,961 shares of
common stock were exercised based on the performance criteria. The Company
has recorded compensation expense of $235,922 based on the fair value of
the common stock issued in November 1998.
Following consummation of the Cash Flow merger, the consulting agreement
was amended and all unexercised warrants were repurchased.
From February to April 1999, the Company issued new warrants to purchase
250,000 shares of common stock at an exercise price ranging from $3.00 to
$4.00 per share in consideration for services provided. All warrants
expire by April 30, 2000; the Company has recorded an expense of
$463,100 based on the fair value of the warrants as of the issue date.
PRIVATE STOCK OFFERINGS - From July to September 1998, warrants for the
purchase of 134,047 shares of common stock were exercised for $256,055.
In February 1999 the Company issued 350,000 shares of common stock for
$700,000.
In June 1999 the Company issued 75,000 shares of common stock for
$150,000.
OTHER EQUITY TRANSACTIONS - On April 7, 1998, the Company issued 110,000
shares of common stock for $110.
On April 15, 1998, the Company granted 1,000,000 shares of common stock,
pursuant to the Company Stock Incentive Plan, to certain key executives at
a value of $.001 determined by the Board of Directors for issuance during
1998.
On April 15, 1998, the Company granted 300,000 non-vested shares of common
stock to a consultant for financial advisory and corporate consulting
services at a value of $.001 determined by the Board of Directors for
issuance by April 14, 1999. Such shares were canceled in connection with
the amended consulting agreement referred to above.
During February to June 1999, the Company issued 220,634 shares of common
stock to various consultants of the Company at a fair value of
approximately $890,504.
41
<PAGE>
7. RELATED PARTY TRANSACTIONS
As of December 31, 1998, the Company had certain outstanding receivable
and payable balances with related parties for $22,865 and $19,644,
respectively. The receivable amounts derive from sales in the ordinary
course of business and the payable amounts relate to certain consulting
services.
During the period ended 1998, the Company paid for business plan
development and investment banking services furnished by an affiliate and
certain consulting and legal services performed by other related parties.
During the period ended December 31, 1998, the Company incurred expenses
of $173,500 for these services, which are included in the statement of
operations.
8. STOCK INCENTIVE PLAN
The Company adopted a Stock Incentive Plan to provide stock incentives
to certain key employees and directors of the Company. An aggregate of
1,500,000 shares of common stock may be issued pursuant to the Stock
Incentive Plan. See Note 6 for information concerning shares issued in
connection with the stock incentive plan.
9. COMMITMENTS
The Company has entered into several provider agreements with various
corporations for terms ranging from one to five years. The Company
supplies diagnostic products to the patients under these provider
agreements. The Company has also entered into two consulting agreements
containing monthly fees.
LEASE - On May 7, 1999, the Company entered into a new five-year lease
agreement for office space. The minimum lease payments under such
agreement are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 31,515
2000 63,030
2001 63,030
2002 63,030
2003 63,030
Thereafter 31,515
--------
Total $315,150
========
</TABLE>
PURCHASE COMMITMENTS - The Company has entered into an agreement with a
supplier of diabetes management products to purchase certain minimum
quantities of product on an annual basis in order to receive specified
discounted prices.
10. SUBSEQUENT EVENTS
STOCK OFFERINGS AND FINANCING - In July 1999 the Company issued and sold
38,000 shares of common stock for $2.70 per share.
In July 1999 the Company obtained a $100,000 line of credit from a bank.
Repayment of such line of credit has been guaranteed by an officer of the
Company.
ACQUISITION OF ASSETS - The Company entered into an agreement to purchase
certain assets of Scardello Marketing Group, LLC ("SMG") on June 18, 1999;
this acquisition was effective and was closed July 1999. The Company
acquired the Exclusive Marketing Representative Agreement ("Marketing
Agreement") between SMG and the Company with a term of five years ending
in 2004, acquired certain
42
<PAGE>
computer equipment, and acquired all documents, materials, target lists,
customer lists, and receivables, if any, derived from the Marketing
Agreement. The Company also assumed a note payable of $25,000 due to a
bank but also received the proceeds of such note.
In connection with the acquisition of SMG's assets during July 1999,
330,000 shares of common stock were issued to SMG and the Company forgave
$15,396 in debt due from SMG. The Company acquired the assets of SMG
primarily to obtain rights to the Marketing Agreement and services of the
principal of SMG to further internally develop the Company's business. SMG
shareholders have represented that SMG had no significant operations and
that detailed SMG financial information is not available.
The allocation of purchase price is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Book value of net assets acquired at cost $ 3,000
Fair value adjustments -
Fair value of purchased Marketing Agreement and its related items 145,985
----------
Fair value of net assets acquired 148,985
----------
Purchase price:
Acquisition costs 4,000
Fair value of 330,000 shares issued 1,237,500
Debt forgiven 15,396
----------
Total 1,256,896
----------
Excess of purchase price over net assets acquired, allocated to goodwill
(amortized over five years) $1,107,911
==========
</TABLE>
11. RESTATEMENT
Subsequent to the issuance of the Company's financial statements,
management determined that certain issuances of common stock and
warrants to third parties in exchange for services provided were not
appropriately recorded; that the weighted average number of shares were
calculated incorrectly; that certain interest expense was
misclassified; the repurchase of certain unexercised equity instruments
had not been recorded; and that the inventory and related payable
balances originally reported were in error. As a result, the
accompanying financial statements have been restated to give effect to
the correction of these errors.
<TABLE>
<CAPTION>
A summary of the effects of the adjustments follows:
AS PREVIOUSLY AS
REPORTED RESTATED
<S> <C> <C>
As of December 31, 1998:
Additional paid-in capital $ 274,246 $ 505,768
Accumulated earnings (deficit) (598,332) (829,854)
For the period from April 7, 1998 to December 31, 1998:
Consulting fees 202,190 433,712
Other 313,130 284,820
Total operating expenses 653,320 856,532
Loss from operations (598,647) (801,859)
Interest expense (28,310)
Total other income (expense) 315 (27,995)
Net loss (598,332) (829,854)
Basic and diluted loss per share (0.24) (0.21)
Basic and diluted weighted-average number of common
shares outstanding 2,489,977 3,934,409
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------
As Previously As
Reported Restated
<S> <C> <C>
As of June 30, 1999:
Inventory $ 354,896 $ 1,442
Accounts payable 268,779 159,382
Accrued expenses 351,815 107,758
Common stock 5,572 5,495
Additional paid-in capital 1,416,689 2,695,846
Accumulated deficit (1,307,117) (2,586,197)
For the six months ended June 30, 1999:
Consulting fees 457,864 1,505,422
Total operating expenses 842,771 1,890,329
Loss from operations (727,276) (1,774,834)
Net loss (708,785) (1,756,343)
Basic and diluted loss per share (0.15) (0.34)
Basic and diluted weighted average number of common
shares outstanding 4,641,274 5,157,350
For the period from April 7, 1998 to June 30, 1998:
Other 34,794 30,419
Total operating expenses 68,794 64,419
Loss from operations (68,794) (64,419)
Interest expense (4,375)
Total other income (expense) (4,375)
Basic and diluted loss per share (0.08) (0.02)
Basic and diluted weighted average number of common
shares outstanding 907,404 4,036,455
</TABLE>
***********
44
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
+ 2.1 Certificate of Incorporation of MediQuik
+ 2.2 By-laws of MediQuik
+ 3.1 Specimen of Common Stock Certificate
+ 3.2 Specimen of Common Stock Purchase Warrant
+ 6.1 MediQuik Stock Incentive Plan
+* 6.2 Ancillary Services Participating Provider
Agreement, dated February 6, 1998, for PPO/EPO
Networks between MediQuik and National Healthcare
Alliance, Inc.
+* 6.3 Participating Facility Agreement, dated February
1, 1998, between MediQuik and Multiplan, Inc.
* 6.4 Health Care Service Ancillary Agreement, dated April 7, 1998, between MediQuik and USA
Managed Care Organization, Inc.
+ 6.5 Letter Agreement, dated May 25, 1999, between MediQuik and Cooperative Health Services
of Colorado
+* 6.6 1998 Mail Order and Mail Order Testing Compliance Agreement, dated October 2, 1998,
between MediQuik and Bayer Corporation
+* 6.7 1999 Nursing Home/Long Term Care/Home Health Care Distributor Agreement, dated
February 9, 1999, between MediQuik and Bayer Corporation
6.8 Agreement for the Sale of Company Assets dated June 18, 1999 between the MediQuik and
Scardello Marketing Group, LLC ("SMG")
6.9 Commercial Revolving or Draw Note, in the original
principal amount of $25,000 executed by SMG payable
to the order of First Bank Texas, N.A.
6.10 Assumption Agreement by and among MediQuik, SMG,
Jacody Financial , Inc. and First Bank of Texas, N.A.
6.11 Plan and Agreement of Merger dated, November 24,
1998, between Old MediQuik and Cash Flow Marketing,
Inc.
6.12 Agreement for the Sale of Corporate Assets, dated
April 7, 1998, between Old MediQuik and MediQuik
Services, L.L.C.
6.13 Lease Agreement, dated May 7, 1999, between Bancroft
Building Houston, LP and MediQuik
6.14 Letter Agreement, dated June 18, 1999, between MediQuik and SMG regarding
acquisition of a diabetic pharmaceutical supply company.
*6.15 Provider Agreement, effective July 1, 1999, between
MediQuik and Advantage Care Network, Inc.
6.16 Employment Agreement, effective September 7, 1999, between MediQuik and Lawrence J.
Wedekind
6.17 Ancillary Provider Agreement dated February 27, 1998,
between MediQuik and Global Medical Solutions, Inc.
</TABLE>
* Certain information in this exhibit is subject to a request for
confidential treatment. In accordance with Rule 24b-2 of the Securities
Exchange Act of 1934, as amended, such information has been omitted and
filed separately with the Securities and Exchange Commission.
+ Previously filed.
45
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDIQUIK SERVICES, INC.
Date: , 1999 By: /s/ GRANT M. GABLES
---------------------------- ---------------------------
Grant M. Gables
President
46
<PAGE>
EXHIBIT 6.4
CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION
HAS BEEN INDICATED WITH AN ASTERISK (*).
HEALTH CARE SERVICE ANCILLARY AGREEMENT
THIS Agreement is made by and between MediQuik Services, LLC. (hereinafter
referred to as "Facility"), a provider of health care services or items,
licensed to practice or administer such services or items in the state or states
where such services or items are provided, and USA MANAGED CARE ORGANIZATION,
INC. A TEXAS CORPORATION, (hereinafter referred to as "USA").
W I T N E S S E T H:
WHEREAS, USA is engaged in the business of administrating quality health
care service at an affordable price and Facility desires to provide services
for the members of various group, accident health plans (USA H & W Network a
group health and wellness program), work related injury/illness plans {USA
Workers' Injury Network (USAWIN)}, motorist medical plans, Medicare
supplemental plans, Select plans (USA, Medicare Select), HMO (Health
Maintenance Organization) plans (for out of service area coverage only), and
self-insured employers (hereinafter referred to as "INSUREDS"); and
WHEREAS, USA has a network of contracted facilities, physicians, and ancillary
service providers (hereinafter referred to along with Facility as "Providers")
available for use by the eligible INSUREDS of venous plans contracted with USA,
thereby making available to INSUREDS such Providers for health and medical care
needs: and
WHEREAS, USA has entered into agreements with one or more insurance carriers,
HMOs, self-insured groups, unions, and third party administrators (hereinafter
referred to as "INSURERS") to provide for health care review, medical service,
and other insurance utilization review services; and
WHEREAS, Providers will be made available by USA as a convenience to INSUREDS.
for the purpose of allowing INSUREDS access to health care, medical care, and
Medicare; and
WHEREAS, Facility desires to contract with USA and its affiliates to provide
services to INSUREDS and to accept as payment in full for such services the
amounts set forth in the attached Exhibit B; and
<PAGE>
WHEREAS, Facility agrees to conduct itself ethically and in a manner which
shall preserve and maintain the human dignity and integrity of all patients, and
by its attitude and manner shall convey to the patient compassion and concern
for the patient's problems. Facility shall dedicate itself to alleviating those
problems and providing comfort and care to those in need.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for good and valuable consideration, the legal adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
1. SERVICES TO BE PROVIDED.
a) USA does hereby agree to add Facility to its network of Providers,
and Facility does hereby agree to provide INSUREDS with services that
Facility normally and customarily provides, at the rates set forth
in Exhibit B of this Agreement. All services to be provided by
Facility under this Agreement shall be performed, or ordered and
approved by physicians who are members in good standing of Facility's
staff, or who are otherwise authorized by Facility to provide medical
care to patients being treated in Facility.
b) Facility shall provide to USA a current copy of their staff
roster and will make available to USA updates as changes occur.
2. RATES TO BE PAID TO THE FACILITY.
a) Facility is to be paid by INSURER according to the rates
established in Exhibit B. The negotiated rates in Exhibit B
represent the total amount to be received by Facility, including
any co-payments, co-insurance and/or deductibles paid by
INSUREDS. INSURER shall pay Facility the amount due for services
rendered to INSURED, based on the provisions to the applicable
plan, and Facility agrees to look to INSURER for the payment of
such services, except for any amounts required to be paid by
INSURED pursuant to Subparagraph 2(c). Payments will be made to
Facility for medical services actually rendered and only after
submission of a claim.
b) Facility agrees to provide services under this Agreement for the
treatment and care of illnesses, injuries or conditions of
INSUREDS for which Facility normally provides. In the event a
third party other than INSURER should have primary responsibility
for payment of the services provided an INSURED, Facility agrees
to collect payment from such other source prior to requesting
payment from INSURER. Any payment made by INSURER to Facility for
obligations which are the primary responsibility of a third
party, shall be refunded to the INSURER by Facility. By
executing this Agreement, Facility waives all rights to collect
and/or pursue collection of any amounts in excess
<PAGE>
of the reimbursement listed in Exhibit B from any INSURERS who may
have secondary responsibility.
c) Services rendered or items furnished INSUREDS by Facility which
are not covered as a benefit under the applicable plan, and all
co-payments, co-insurances and/or deductibles, are to be paid by
INSURED and Facility is responsible for collection of such
payments.
d) For Medicare supplemental plans, Facility agrees to waive 100%
(one hundred percent) of the Medicare Part "A" deductible. For
Medicare Select plans, Facility agrees to the provisions in
Attachment I.
e) Facility agrees and acknowledges that USA is administrating
health care on behalf of INSURERS under this Agreement. USA will
not be responsible or liable for the cost of any services
provided to INSUREDS by Facility or for the payment of any claim
to Facility.
f) Facility agrees to participate in the Cost Containment Guidelines
as set forth in Exhibit A.
3. PAYMENT OF CLAIM.
Payment of claims is subject to the temrs and conditions of INSURED'S
insurance plan. Payment by INSURER shall be limited to services
provided to INSURED for which INSURED is eligible. Payment by INSURER
will be reduced by co-insurance, co-payments and/or deductibles.
Facility agrees to bill at its usual and customary rate and further
agrees not to pursue collection of the difference between Facility's
usual and customary rates and the rates set forth in Exhibit B.
INSURER will make payments within thirty (30) days of receipt of
claims, unless written notice of dispute or discrepancy is mailed to
Facility within thirty (30) days. If claim is not paid within thirty
(30) days on undisputed claims and ninety (90) days on disputed
claims, Facility shall have the right to deny the negotiated rates set
forth in Exhibit B, and seek full billed charges.
4. HOLD HARMLESS.
a) PPO INSUREDS
Facility agrees that INSURER is responsible for payment of
Facility's compensation pursuant to this Agreement. Facility
shall not request payment from any INSURED for any treatment or
services provided to INSURED pursuant to the terms of the
Agreement except as otherwise provided herein. Facility agrees
to release and hold harmless INSURED, provided INSURER makes
payment pursuant to the terms of this Agreement. Notwithstanding
the foregoing, in the event INSURER fails to make payment within
ninety (90) days of receipt of claim or if INSURER is declared
insolvent or otherwise
<PAGE>
unable to make payment, Facility may bill the INSURED for services
rendered.
b) HMO INSUREDS (OUT OF SERVICE AREA)
Facility hereby agrees that in no event, including, but not
limited to non-payment by INSURER, INSURER insolvency, or breach
of this Agreement, shall Facility bill, charge, collect a deposit
from, seek compensation, remuneration, or reimbursement from, or
have any recourse against INSURED, or persons other than INSURER
acting on their behalf for services provided pursuant to this
Agreement. This provision shall not prohibit collection of
supplemental charges (non-covered services) or co-payments on
INSURER'S behalf made in accordance with the terms of the
applicable plan between INSURER and INSURED.
Facility further agrees that (1) this provision shall survive the
termination of this Agreement regardless of the cause giving rise
to termination and shall be construed to be for the benefit of
INSURED, and that (2) this provision supersedes any oral or
written contrary Agreement now existing or hereafter entered into
between Facility and INSURED or persons acting on their behalf.
Any modifications, addition or deletion to the provisions of this
clause shall be effective on a date no earlier than fifteen (15)
days after the Commissioner of Insurance has approved such
changes.
5. MEDICAL RECORDS.
a) With the proper patient consent and in accordance with all local,
state and federal laws governing confidentiality, Facility will
keep and make available to USA or INSURER copies of all medical
records. for the purpose of maintaining a quality assurance
program, required by USA or INSURER for a period of the greater
of five (5) years from the date of treatment or consultation, or
the number of years that medical records are required to be kept
under applicable governing laws.
b) Facility shall furnish, upon request and without charge, all
information reasonably required by USA to verify and substantiate
its provision of medical services, the charges for such services,
and the medical necessity for such services.
6. PRE-CERTIFICATION AND CERTIFICATION.
It is the responsibility of Facility to verify with INSURER prior to
the delivery of medical services in non-emergent situations and within
forty-eight (48) hours or the next business day in emergency
situations, that any patient is an INSURED in good standing under the
applicable plan, eligible for benefits, and to obtain information as
<PAGE>
to the extent and nature of INSURED'S benefits. Facility understands
that it is their responsibility to verify eligibility and benefits,
allowing Facility to determine, if/when pre-certification
(preauthorization) and certification (authorization) is required by
the plan. Facility understands that an INSURED'S membership
identification card is not a guarantee that the card holder is an
INSURED in good standing. INSURED'S I.D. card will display appropriate
telephone numbers for benefits eligibility verification.
Facility agrees and acknowledges that USA has contracted with venous
INSURERS. INSURERS have elected at their discretion to secure services
{pre-certification (pre-authorization), certification (authorization),
case management and utilization management} from the vendor of their
choice. While the requirements of the plan. as well as each vendor may
vary, Facility agrees, at a minimum to comply with the following:
Non-emergent and/or emergent admissions may require
pre-certification/certification to be eligible for full benefits.
Facility agrees to phone the appropriate number provided on INSURED'S
identification card to determine whether
pre-certification/certification is required. Facility agrees to
notify the appropriate party prior to the delivery of medical services
in non-emergent situations and within forty-eight (48) hours or the
next business day in emergent situations. Facility should be prepared
to provide the following information:
a) Patient's name, sex, and date of birth
b) INSURED'S name, address, social security number, and group/policy
number
c) Name of INSURER
d) Pre-admission diagnosis(es)
e) Name, address, and telephone number of the physician
f) Date of service (admission or procedural date)
g) Treatment and or surgical procedures
Facility further understands that pre-certification and certification
are a determination of medical necessity. Pre-certification/certification
shall be granted when the intensity level of the treatment and the level
of care are appropriate with respect to the severity of the illness.
Medical services will be pre-certified/certified based on the information
provided to the appropriate party at the time of notification.
Pre-certification and certification are not verification of eligibility
and/or benefits. To verify eligibility and/or benefits, Facility must
phone the appropriate number listed on INSURED'S identification card.
ln the case of an admission, if the medical condition of the INSURED
is such that he/she cannot be discharged from Facility on the last day
certified, Facility must call the appropriate telephone number on the
INSURED'S identification card, on or before the last day certified. An
additional number of days may be certified. Benefits may be reduced
for additional days which are not certified.
<PAGE>
In the case of an admission, where INSURED'S illness, injury or
condition (e.g. coma) prohibits INSURED from cooperating with Facility
to identify himself/herself as an INSURED having access to USA's
network Facility agrees to notify the appropriate party as soon as
Facility is able to identify INSURED.
Emergent admissions may be payable if they a) are certified or b) meet
the conditions of an emergency as defined below:
An emergency (according to the federal definition) is:
1) A medical condition manifesting itself by acute symptoms of
sufficient seventy (including severe pain) such that the
absence of immediate medical attention could reasonably be
expected to result in:
(i) placing the health of the individual (or, with respect
to a pregnant woman, the health of the woman or her unborn
child) in serious jeopardy; or
(ii) serious impairment to bodily functions; or
(iii) serious dysfunction of any bodily organ or part; or
2) With respect to a pregnant woman who is having contractions:
(i) that there is inadequate time to effect a safe transfer
to another hospital before delivery; or
(ii) that transfer may pose a threat to the health or safety
of the woman or the unborn child.
7. CHANGE IN TERMS AND BENEFITS.
It is agreed by the parties hereto that the benefits, terms and
conditions of the various agreements between INSURER and INSURED of
any plan may be changed during the term of this Agreement without
notice However, such changes will not affect this Agreement, unless
agreed to by Facility and USA.
8. TERMINATION OF COVERAGE OF INSUREDS.
Coverage for each INSURED may be terminated by INSURED or INSURER.
When an INSURED whose coverage has terminated receives services from
Facility, Facility agrees to bill INSURED directly. INSURER shall not
be liable to Facility for any bills incurred by an INSURED whose
coverage has been terminated.
9. DURATION.
The initial term of this Agreement shall be a period of one (1) year
from the date of execution of this Agreement by USA. During that time,
Facility agrees that the reimbursement rates listed in Exhibit B will
not be subject to increase. This Agreement shall automatically renew
for successive one (1) year terms on the anniversary date of this
Agreement and shall remain in force until termination, as provided for
in Section 10 (Termination) of this Agreement. Facility shall have the
<PAGE>
right to submit a proposal for a potential increase or decrease of
contractual rates to USA on an annual basis within ninety (90) days of
the anniversary date. Facility agrees to allow USA reasonable time to
review such proposal and counter-propose if necessary. Facility
understands that rates will never be made retroactive.
10. TERMINATION.
Either party to this Agreement may elect to terminate this Agreement
without cause at any time by giving one hundred eighty ( 180) days
prior written notice to the other party. Said notice shall clearly
explain the reason giving rise to termination to be considered in
compliance with this Section.
USA may terminate this Agreement for immediate cause, which includes,
but is not limited to, the following:
a) Facility's filing of bankruptcy (whether voluntary or
involuntary), declaration of insolvency, or the appointment of a
receiver or conservator of its assets.
b) Facility's failure to maintain appropriate accreditation by
agencies approved by USA.
In the event this Agreement is terminated for immediate cause,
termination shall be effective upon receipt of written notification.
USA may also terminate this Agreement for reasons other than immediate
cause. Those reasons may include. but are not limited to, a breach of
any provision contained in this Agreement, habitual neglect, or the
continued failure of Facility to perform its professional duties. If
termination is for reasons other than immediate cause. USA will notify
Facility in writing, stating the reason for termination. and giving
Facility sixty (60) days in which to cure.
If Facility has failed to effect a satisfactory cure, within the sixty
(60) day cure period, of all reasons stated in the nonce of
termination, termination shall be effective on the tenth (l0th) day
following the expiration of the sixty (60) day cure period.
11. NOTICE TO INSURER OF TERMINATION OF AGREEMENT.
In the event this Agreement is terminated by either party in
accordance with the procedure set forth herein USA shall notify
INSURER. Facility will notify INSURED, prior to giving service, that
this Agreement is no longer in effect.
12. ACCURACY OF INFORMATION.
Facility represents and warrants that all information provided USA is
true and accurate in all respects and acknowledges that USA is relying
on the accuracy of such information in entering into and continuing
the term of this Agreement. Facility shall promptly notify USA,
without request, of any change in the information provided.
<PAGE>
13. INDEPENDENT CONTRACTOR.
a) In entering into and complying with this Agreement, USA and
Facility are at all times performing as independent contractors.
Nothing in this Agreement shall be construed or be deemed to
create a relationship of employer and employee, principal and
agent, partnership, joint venture, or any relationship other than
that of independent parties contracting with each other solely to
carry out the provisions of this Agreement for the purposes
recited herein.
b) Facility shall be responsible for the hospital services provided
to each INSURED that uses Facility's services.
14. CONFIDENTIALITY.
Each party may, in the course of the relationship established by this
Agreement. disclose to the other party in confidence non-public
information concerning such party's earnings, volume of business,
methods, systems. practices, plans, purchaser discounts and contract
terms, and other confidential or commercially valuable proprietary
information (collectively referred to as "Confidential Information").
Each party acknowledges that the disclosing party shall at all times
be and remain the owner of all Confidential Information disclosed by
such party, and that the party to whom Confidential Information is
disclosed may use such Confidential Information only in furtherance of
the purposes and obligations of this Agreement. The party to whom any
Confidential Information is disclosed shall use its best efforts,
consistent with the manner in which it protects its own Confidential
Information, to preserve the confidentiality of any such Confidential
Information which such party knows or reasonably should know that the
other party deems to be Confidential Information.
The party to whom Confidential Information is disclosed shall not use
said information to the disadvantage of or in competition against the
disclosing party. It is understood by each party that any Confidential
Information disclosed is non-public information, which is of great
value to the disclosing party and that a breach of the foregoing
confidentiality provision would cause irreparable damage, and the
injured party shall have the right to seek and obtain, in any court of
competent jurisdiction, an injunction to restrain a violation or
alleged violation by the other party of this covenant, together with
any damages that the party may suffer in the event of such a breach.
15. DISPUTES.
All disputes and differences between Facility and INSURER, upon which
an amicable understanding cannot be reached, are to be decided by the
following method:
a) MEDIATION THROUGH USA:
Facility shall notify USA in writing of the dispute or
disagreement. Facility shall supply USA with all pertinent
information and state its
<PAGE>
position on the dispute. Upon receipt of this information USA will
immediately contact INSURER and request the same information. USA
will then attempt to mediate the dispute to the mutual satisfaction
of all parties. If mediation is not possible within a reasonable
time. not o exceed thirty (30) days from the time of first notice,
the procedure set forth in subparagraph 15 (b) will apply.
b) ARBITRATION:
If the dispute cannot be solved by the mediation process
described above, either Facility or INSURER may elect to submit
the dispute to binding arbitration under the rules of the
American Arbitration Association or any other method of
arbitration mutually agreed upon by the parties.
16. RESPONSIBILITY OF PARTIES.
Each party agrees it shall not be responsible for any claims, losses,
damages, liabilities, costs, expenses or obligations arising out of or
resulting from the negligent or willful misconduct of the other party,
its officers employees and agents in the performance of services
pursuant to this Agreement.
17. NOTICES.
All notices, requests, or correspondence required under this Agreement
shall be in writing, and delivered by United States mail to:
a) If to USA:
USA MANAGED CARE ORGANIZATION, INC.
916 Capital of Texas Highway South
Austin, Texas 78746
Attention: Provider Relations
b) If to Facility:
MediQuik Services, LLC
2008 West Main
Houston, Texas 77098
Attention: Ben Pierce
Either party may change the address to which communications are to
be sent by giving written notice. All communications will be directed
to Facility at the most current address on file with USA.
18. ATTORNEY'S FEES.
If it shall become necessary for either USA or Facility to employ an
attorney to enforce or defend its rights under this Agreement, the
non-prevailing party in any arbitration, legal action or proceeding
shall reimburse the prevailing party for its
<PAGE>
reasonable attorney's fees and costs of suit, in addition to any other
relief to which such party is entitled.
19. PARTIAL INVALIDITY.
If any part, clause or provision of this Agreement is held to be void
by a court of competent jurisdiction. the remaining provisions of this
Agreement shall not be affected and shall be given such construction,
if possible, as to permit it to comply with the minimum requirements
of any applicable law, and the intent of the parties hereto.
20. ASSIGNABILITY.
Neither party may assign any of its rights or delegate any of its
duties hereunder to a non-related third party without prior written
consent of the other party. Facility acknowledges USA's right to
assign its rights or delegate any of its duties hereunder to another
entity controlled by or affiliated with USA Managed Care Organization,
Inc.
21. WAIVER.
A party's waiver of a breach of any provision of this Agreement shall
not constitute a waiver of any subsequent breach of the same or
another provision contained in the Agreement. A party's subsequent
acceptance of performance by the other party shall not be construed as
a waiver of a preceding breach of this Agreement other than failure to
perform the particular dunes so accepted.
22. CONTROLLING LAW.
This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the state where services are
being provided.
23. CONFORMITY WITH STATE STATUTES.
Any provision of this Agreement which is in conflict with the
statutes, local laws, or regulations of the state in which services
are provided, is hereby amended to conform to the minimum requirements
of such statutes.
24. ENTIRE AGREEMENT.
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof, and supersedes all
prior Agreements and understandings, expressed or implied, oral or
written. Any material change to this Agreement's language or rates
must be in writing and signed by duly authorized of officers or
representatives of Facility and USA. Non-material changes can be
communicated via notifications. If neither party disapproves of a
notification in writing within thirty (30) days, such notice will be
considered accepted and binding. No other third party, including but
not limited to any INSUREDS and INSURERS, shall be required to consent
or receive notice of any such amendment or nonce in
<PAGE>
order for the amendments or notices to be effective and binding upon the
parties to this Agreement.
25. TITLE NOT TO AFFECT INTERPRETATION.
The paragraph and subparagraph headings in this Agreement are for
convenience only, and form no part of this Agreement and shall not
affect its interpretation.
26. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
including facsimiles, each of which are incorporated herein and shall
be deemed to be an original as against any part whose signature
appears thereon, and all of which shall together constitute one and
the same instrument.
27. FORCE MAJEUR.
Neither party shall be liable nor deemed to be in default for any
delay or failure in performance under this Agreement or other
interruption in the discharge of its responsibility, either directly
or indirectly, from acts of God, civil or military authority, acts of
public enemy, war, accidents, fires, explosions, earrhquakes, floods,
failure of transportation, machinery or supplies, vandalism, strikes
or other work interruptions by employees, or any similar or dissimilar
cause beyond the reasonable control of either party.
28. SURVIVAL.
In the event this Agreement is terminated as set forth herein,
Sections 4, 14, 16, 18, 22, 28, and 29 shall survive the termination
of this Agreement.
29. TERMINATION RESPONSIBILITIES.
In accordance with Section 10 (Termination) or any termination of this
Agreement, said termination shall have no effect upon the rights or
obligations of the parties arising out of any transactions occurring
prior to the effective date of such termination Facility agrees to
accept, as payment in full, the rates in Exhibit B for services
rendered to an INSURED who is inpatient upon the effective date of
such termination, until INSURED is discharged or safely transferred to
a participating USA facility.
30. DISCRIMINATION.
Facility agrees to provide services for INSUREDS within the normal
scope of Facility's medical practice. These services shall be
accessible to INSUREDS, and made available to them, without
limitation or discrimination, to the same extent as they are made
available to other parents of Facility, and in accordance with
accepted medical and professional practices and standards applicable
to Facility's other patients.
<PAGE>
31. SILENT PPO.
USA is not a silent PPO nor does it operate as one. Silent PPO's are
organizations who "sell" their contracted rates with providers to
brokers who use those discounts for their clients. USA maintains a
current contracted carrier/payor list indicating clients who have
directly contracted with USA for use of USA's network; and services.
Such clients are required via their direct contract with USA, to
provide a minimum 10% (ten percent) financial incentive, to encourage
the use of USA's contracted Providers. Such 10% (ten percent)
financial incentives can occur in a variety of ways, including, but
not limited to: A reduction or elimination of deductibles, a reduction
or elimination of a co-pay percentage, or a minimum differential in
the co-insurance of at least 10% (ten percent).
32. JOINT COMMISSION ON ACCREDITATION OF HEALTHCARE ORGANIZATIONS (JCAHO)
COMPLIANCE.
USA is assisting JCAHO in the preparation of standards for health care
delivery networks. Facility agrees to work with USA to meet the JCAHO
network standards.
33. INSURANCE.
Facility shall, at its expense, carry malpractice and professional
liability insurance, public liability and property damage insurance,
or an equivalent program of self-insurance, in an amount equal to the
greater of the amount required to maintain accreditation/certification
or the amount required to meet the state's minimum requirements.
34. LICENSURE.
Facility shall, throughout the duration of this Agreement, be required
to maintain all licenses, certifications, etc, as may be required by
the state in which Facility provides services.
This Agreement is effective upon the date of execution by USA.
For and on behalf of: For and on behalf of:
USA MANAGED CARE ORGANIZATION, INC. MediQuik Services LLC
916 Capital of Texas Highway South ---------------------------------
Austin, Texas 78746 2008 West Main
---------------------------------
Houston, Texas 77098
---------------------------------
4/28/98 3/24/98
- ------------------------------------ ---------------------------------
Date Date
/s/ Donna Smith /s/ Ben L. Pierce
- ------------------------------------ ---------------------------------
Signature Signature
Donna Smith Ben L. Pierce
- ------------------------------------ ---------------------------------
Printed name Printed Name
Vice President of Administration General Manager
- ------------------------------------ ---------------------------------
Title Title
<PAGE>
ATTACHMENT I
MEDICARE SELECT
This is an Attachment to the existing Agreement only, and in no way supersedes
the provisions agreed to in the Agreement.
1. SERVICES TO BE PROVIDED
Facility shall provide all Medicare Part A and Part B services offered
by Facility including Medicare Part A services not covered by Medicare
solely because Part A benefits have exhausted. Facility shall perform
its duties and obligations at all times with acceptable medical and
professional standards.
2. PAYMENT OF CLAIMS
a) INSURER shall make no payment for services rendered to INSUREDS
unless they are determined to be necessary under the Medicare
claims process. This requirement shall include any Medicare Peer
Review Organization procedures.
b) Facility understands and agrees that no benefits for providing
services to INSUREDS will be paid by INSURER unless those
services are covered under the Federal Medicare Program (Title
XVIII of the Social Security Act) and such services shall be paid
in accordance with the applicable plan.
3. HOLD HARMLESS
a) Facility agrees that in no event, including, but not limited to
non-pavement by INSURER, INSURER'S insolvency or breach of this
Attachment shall Facility bill, charge, collect a deposit from,
seek compensation, remuneration or reimbursement from, or have
any recourse against any INSURED, or persons other than INSURER
acting on behalf of any INSURED, for services provided pursuant
to this Attachment.
b) Facility further agrees that the provision of this Section shall
survive the termination of this Attachment regardless of the
cause giving rise to termination and shall be construed to be for
the benefit of INSURED.
c) Any modification, addition, or deletion to the provisions of this
Section must comply with state and federal changes to Medicare
law.
<PAGE>
4. RATES TO BE PAID TO THE FACILITY
a) Facility agrees to accept *. Facility further agrees to accept *
as payment in full for services covered under this Attachment to
the extent that the services are covered by *.
b) All services provided by Facility under this Attachment shall be
billed by Facility *, and Facility shall be responsible for
collecting the amount payable * for such services. Facility shall
accept reimbursement from * as payment in full for services
rendered according to the payment listed below:
1. Facility agrees to accept as payment in full for services
provided INSUREDS:
a) *, plus
b) *
2. Facility agrees that:
a) It will receive no payment for the *.
b) Upon exhaustion of *, Facility agrees to accept as
payment in full, payment by *.
c) Payment for charges for Hospital services eligible
under * will be:
*
d) In the event INSURED has other insurance that pays on
assignment to Facility some or all hospital charges *,
any such payments will be refunded to INSURED.
c) INSURER, or INSURER'S designee shall have the right to conduct
audits and evaluations, from time to time, of all billing and
medical records of Facility relating to the services provided to
any INSURED.
(*) This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
<PAGE>
d) In the event the Medicare method or formula for payment to
Facility for Medicare covered services changed after the date of
this Attachment, Facility agrees to accept new payment formula as
allowed by Medicare law. Such new payment formula shall in no
event provide for compensation which will exceed the liability of
INSURED to Facility in the absence of any insurance. Any such
updated compensation formula shall be effective as of the date of
the change in the Medicare payment formula.
5. BILLING PROCEDURES
a) Facility shall submit to INSURER or INSURER'S designee encounter
and billing information for INSUREDS who have received services.
For certain types of services, INSURER or its designee may
request copies of Medicare's payment notice to Facility and
Facility shall comply with any such reasonable request.
b) When payment for services has been made by INSURER in an amount
that exceeds the maximum benefits under the applicable plan, or
when INSURER has made payment to Facility in error, INSURER shall
have the right to recover such payment from Facility. INSURER has
agreed that recovery of overpayment shall not be taken from
future payments, but shall be separately requested by INSURER
with appropriate documentation to substantiate such request for
recovery of payment.
6. QUALITY ASSURANCE AND UTILIZATION REVIEW
Facility agrees to comply with and participate in INSURER'S quality
assurance and utilization review program. Facility agrees to comply
with such other procedures and to provide other data as may be
requested by INSURER or INSURER'S designee in order for INSURER or its
designee to conduct quality and utilization review activities
concerning services provided to INSUREDS.
7. USE OF NAME
a) USA shall market health care products and shall arrange to have
Facility's name and address included in the list of participating
facilities distributed to eligible INSUREDS and in marketing
brochures and other marketing literature without review and
approval by Facility.
b) Facility shall review and approve all other publications
containing Facility's name, pursuant to this Attachment, prior to
release to public.
<PAGE>
8. TERMINATION
a) Facility acknowledges that the plan year shall commence on
January 1 and end on December 31 of each year. Facility
understands that participation is required for the entire plan
year for any given year. Facility's right to terminate shall be
limited to giving one hundred eighty (180) days prior written
notice to USA and shall only be effective on December 31st of the
respective year. USA may elect to terminate this Attachment on
December 31st, for reasons other that those listed in Section 10
(Termination) of the Agreement, by giving at least one hundred
eighty (180) days prior written notice to Facility. Such
termination shall have no effect upon the rights or obligations
of the parties arising out of any transactions occurring prior to
the effective date of such termination. Upon termination of this
Attachment for any reason, Facility agrees to render services to
any INSUREDS hospitalized on the date of termination, until such
INSUREDS are discharged or transferred from Facility to another
participating facility.
b) If and when the sale of Medicare Select policies are no longer
authorized under the Federal Medicare program, this Attachment
will continue for any Medicare Select policies that were sold
prior to such program termination and for as long as any such
policies continue in force. In the event of any change in
applicable federal or state law which makes any provision of this
Attachment contrary to that law, the parties agree that this
Attachment is hereby amended to conform to the minimum
requirements of such applicable federal or state law.
For and on behalf of: (Facility name, address, etc.)
MediQuik Services LLC
- ------------------------------
2008 West Main
- ------------------------------
Houston, Texas 77098
- ------------------------------
04/07/98
- ------------------------------
Date
/s/ Ben L. Pierce
- ------------------------------
Signature
Ben L. Pierce
- ------------------------------
Printed Name
General Manager
- ------------------------------
Title
<PAGE>
EXHIBIT A
COST CONTAINMENT GUIDELINES
1. Facility agrees to provide health care service in conformity with
accepted prevailing medical and surgical practices in the community in
which Facility operates.
2. Facility agrees to utilize participating facilities and ancillary
services (e.g., laboratory, x-ray, ultrasound, etc.) when not
available in Facility and when consistent with good medical practice.
3. In an effort to avoid duplication of costs, Facility agrees to accept
participating physician pre-admission testing, subject to Facility's
policy and good medical practice.
4. Facility agrees to encourage the use of generic drugs whenever
medically possible, when in the best interest of the patient, and when
allowed upon physician order.
5. While Utilization Management is primarily conducted by telephone,
certain situations may require an on-site visit. Should this occur,
Facility agrees to accept Utilization Review Representative on
Facility campus for the purpose of reviewing medical records pertinent
to continued stay or retrospective review of INSURED. Utilization
Review Representative agrees to conduct reviews in accordance with
Facility's policies.
Current INSURED medical records shall immediately be made available by Facility,
upon request, with proper patient authorization, for the purpose of concurrent
review and retrospective review.
<PAGE>
EXHIBIT B
is a facility providing services in the State of National
- ---------------- -------------
PPO PAYMENT SCHEDULE
Facility agrees to accept the following as payment in full for services
rendered.
PROFESSIONAL SERVICES:
All Professional Services, billing under the name(s), tax ID number(s)
and address(es) listed on this Exhibit B. shall be reimbursed at *.
OUTPATIENT SERVICES:
All Outpatient Services and Emergency Room Services (excluding
emergency room physician services) shall be reimbursed at *.
MEDICARE:
For Medicare supplemental plans, *. For Medicare Select plans,
Facility agrees to the provisions in Attachment I.
WORKERS' INJURY SERVICES:
Facility agrees to accept as reimbursement in full for services
provided as a result of work-related injuries/illnesses, *.
- -------------------------------------------------------------------------------
1. Name of Billing Entity: MediQuik Services, LLC
---------------------------
2. Billing Tax Identification Number: 76-0550959
------------
3. Billing Address: 1004 Rolling Meadows Dr., Mt. Juliet, TN 37122
----------------------------------------------
4. Billing Telephone No. (800) 808-5261
--------------
5. Directory Address(es): Street Address, City, State, Zip, Telephone (No PO
Box Numbers)
(a) 2008 West Main b)
------------------------------- ------------------------------
Houston, TX 77098
------------------------------- ------------------------------
(713) 529-7572
------------------------------- ------------------------------
6. Facility Name: MediQuik Services, LLC
------------------------------------------------------------
* This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
<PAGE>
The services provided and billed for by this entity are (please be as
specific as possible):
Diabetes Management Services, including home delivery of blood glucose
--------------------------------------------------------------------------
monitoring supplies.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE>
EXHIBIT B (CONTINUED)
This facility is currently accredited/certified by the following (please circle
all that apply): American College of Radiology (ACR), American College of
Surgeons (ACS), American Lithotripsy Society (ALS), American Osteopathic
Association (AOA), American Society for Histocompatibility and Immunogenetics
(ASHI), College of American Pathologists (CAP), Commission on Accreditation of
Rehabilitation Facilities (CARF), Commission on Office Laboratory Accreditation
(COLA), Community Health Accreditation Program (CHAP), Council on Accreditation
(COA), Joint Commission on Accreditation of Healthcare Organizations (JCAHO),
Medical Quality Commission (MQC), Medicare, Stare of Washington Office of
Laboratory Quality Assurance.
(ATTACH COPIES OF ACCREDITATIONS/CERTIFICATIONS SUPPORTING YOUR RESPONSE)
For and on behalf of: For and on behalf of:
USA MANAGED CARE ORGANIZATION, INC. MediQuik Services LLC
916 S. Capital of Texas Hwy. ---------------------------------
Austin, TX 78746 2008 West Main
---------------------------------
Houston, TX 77098
4/28/98 3/24/98
- ----------------------------------- ---------------------------------
Date Date
/s/ Donna Smith /s/ Ben L. Pierce
- ----------------------------------- ---------------------------------
Signature Signature
Donna Smith Ben L. Pierce
- ----------------------------------- ---------------------------------
Printed name Printed Name
Vice President of Administration General Manager
- ----------------------------------- ---------------------------------
Title Title
<PAGE>
EXHIBIT 6.8
AGREEMENT FOR THE
SALE OF COMPANY ASSETS
This Agreement For the Sale of Company Assets ("the Agreement") is
executed and effective as of the date set forth hereinafter, by and between
MEDIQUIK SERVICES, INC., a Delaware corporation ("Purchaser"), SCARDELLO
MARKETING GROUP, LLC, a Texas limited liability company ("Seller"), and
BENJAMIN J. SCARDELLO, individually ("Scardello") for the purposes,
consideration, premises and conditions hereinafter set forth.
WHEREAS, Seller wishes to sell and Purchaser wishes to purchase certain
specified assets of Seller's business on the conditions set forth in this
Agreement, and
WHEREAS, Purchaser is desirous of enlisting the services of Scardello
and Scardello is amenable to same.
NOW, THEREFORE, in consideration of the mutual promises and conditions
hereinafter set forth, the parties hereby AGREE as follows:
I.
SALE OF CERTAIN ASSETS
Subject to the terms and conditions contain herein and simultaneously
with the execution of this Agreement, Purchaser is purchasing from Seller,
and Seller is selling to Purchaser, all of the right, title and interest of
Seller in and to the following assets.
a That one certain EXCLUSIVE MARKETING REPRESENTATIVE AGREEMENT between
the parties dated February 26, 1999 ("the Marketing Agreement") and
all contract rights related thereto,
b. Items listed on the attached Exhibit "A",
c. All names in which Seller has done business as ("assumed names") in
relation to the Marketing Agreement;
d. All revenues and accounts receivable resulting from the Marketing
Agreement;
e. All customer lists (with related history), advertising and promotional
material related, in any way, to the Marketing Agreement,
<PAGE>
f. All agreements, proposals, correspondence, documents, records, books
of accounts and files of Seller relating to the Marketing Agreement,
whether maintained on hardcopy, microfiche, microform, machine
readable record or other data storage media or computer or magnetic
tapes, disks or other computer storage device or physical form (the
"Records")
g. All past, present and future claims or causes of action, choses in
action, rights of recovery and rights of set-off, of any kind,
relating to the Marketing Agreement.
h. All contracts or agreements between Seller and any third parties
relating to the Marketing Agreement.
II.
WAIVER OF LIABILITIES
2.01. The Purchaser forgives Seller's indebtedness to Purchaser, in
the amount of FIFTEEN THOUSAND THREE HUNDRED NINETY-SIX AND 23/100THS
($15,396.23) DOLLARS.
2.02. Purchaser shall assume Seller's indebtedness to First Bank
Texas N.A., of Houston, Texas (the "Bank") arising from that one certain
Promissory Note between Seller and the Bank, dated May 19, 1999, in the
principal amount of $25,000.00 ("the Loan").
2.03. Upon execution of this Agreement, Seller shall transfer the
loan proceeds from the Loan to Purchaser.
III.
TRANSFERENCE OF COMMON STOCK
3 01. As partial consideration for the purchase and sale of assets,
as set forth herein, Purchaser shall convey, assign, and otherwise, transfer
a total of THREE HUNDRED THIRTY THOUSAND (333,000) common shares of MediQuik
Services, Inc. ("the Shares") to Seller.
3.02. The Shares are unregistered and shall be "restricted" pursuant
to Rule 144 of the Securities Act of 1933 (17 CFR, sec. 230 144). The Shares
shall be stamped with said language as provided for in "Exhibit B".
<PAGE>
IV.
REPRESENTATIONS AND WARRANTIES
4.01. SELLER'S REPRESENTATIONS AND WARRANTIES:
(a) That no material, data or information is or shall be deleted,
secreted or withheld from the items listed on Exhibit "A";
(b) That there are no liens, encumbrances, indebtedness or suits
threatened or filed in relation to the assets made the subject of
this agreement;
(c) That Seller is a duly organized, validly existing, limited
liability company and in good standing under the laws of the
State of Texas,
(d) That the sale of the assets made the subject of this agreement
has been fully authorized by one hundred (100%) percent of its
Members;
(e) That the indebtedness of the Seller made a subject of this
agreement was incurred in the ordinary course of business;
(f) That the items listed on Exhibit "A" are fully operational and/or
functional.
(g) That Purchaser has made full and complete disclosure to Seller,
as well as its Members, as to Purchaser's operations, activities,
sales, organizational structure, equity structure, sales
prospects, goals, plans, financial condition including
indebtedness, present and anticipated stock offerings, number of
common shares outstanding, financial statements, and all other
material information.
(h) Seller shall indemnify and hold Purchaser, its officers,
directors, or employees, harmless from any suits or actions, of
whatsoever nature, regarding, related to or concerning the assets
made the subject of this agreement including, but not limited to,
the Marketing Agreement.
(i) That the data and information contained in the items listed on
Exhibit "A" shall not be duplicated or distribute to, used or
implemented by any third party, for any reason, without the
express, wntten consent of Purchaser.
(j) Seller shall execute any and all documents reasonably necessary
to effect the intent of this Agreement including, but not limited
to, a BILL OF SALE, "GENERAL CONVEYANCE, TRANSFER AND
ASSIGNMENT", and CANCELLATION/REVOCATION OF ASSUMED NAMES,
<PAGE>
(k) There are no actions, suits, claims, arbitration proceedings or
government investigations or inquiries pending, or to the
knowledge of Seller threatened, against Seller seeking to prevent
or delay the consummation of the transactions contemplated
hereby.
(l) The Members of Seller are or have been actively involved in the
business affairs and/or activities of Purchaser.
(m) Seller shall indemnify and hold Purchaser harmless for any tax
liability accruing to Seller or its Members regarding the Shares.
(n) Seller shall indemnify and hold Purchaser harmless from any and
all claims or causes of action by its Members, relating to the
issuance of the Shares contemplated herein or the Marketing
Agreement.
4.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER:
(a) That the Shares are fully authorized, unissued, shares of
restricted common stock of the Purchaser;
(b) That the issuance of the Shares, as contemplated by this
Agreement, is fully authorized by the board of directors of
Buyer;
(c) That the Shares are free and clear of all liens, claims or
encumbrances, other than the restrictions related to Rule 144;
(d) That all applicable state and federal securities laws and
regulations, if any, have been complied with in relation to the
transfer of the Shares;
(e) That Purchaser is corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and
the State of Texas.
(d) That Purchaser has full corporate authority to enter into this
Agreement.
V.
EMPLOYMENT ASPECT
5.01. Purchaser shall hire Scardello, on a full-time basis, to act
as a Vice-President at a starting salary of $8,000.00 per month.
5.02. Scardello shall not disclose any trade secrets, client lists,
confidential information, compilations of data, sales materials or strategies
of Purchaser, during or after his employment with
<PAGE>
Purchaser, other than in the ordinary course of business of his affairs with
Purchaser or without the express consent of Purchaser.
VL.
GENERAL ADMINISTRATION PROVISIONS
6.01. MULTIPLE ORIGINALS: This Agreement may be executed in
multiple counterparts, and each such counterpart shall be deemed as an
original instrument upon execution of this document, and shall be binding
upon all the parties with the same force and effect as if all the parties had
signed the same document, and each such signed counterpart shall constitute
an original of this Agreement.
6.02. CHOICE OF LAW: This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas, and enforceable in Harris
County, Texas.
6.03. ASSIGNABILITY: Except with written consent of the other, the
rights and obligations under this Agreement are not assignable by the parties
to this agreement or their respective successors, assigns, heirs or legal
representatives.
6.04. NOTICES: Any notice, request, instruction or other
communication required or permitted hereunder shall be deemed to be properly
given when deposited in the United States Mail, postage prepaid, addressed as
follows:
SELLER: Scardello Marketing Group, LLC
Attention: Mr. Ben Scardello
(at address to be provided)
PURCHASER: MediQuik Services, Inc.
Attn.: Howard B. Butler, Jr.
General Counsel
770 South Post Oak Lane
Suite 520
Houston, Texas 77056
BENJAMIN SCARDELLO: At address to be provided
<PAGE>
6.05. ENTIRE AGREEMENT: This Agreement represents the entire
Agreement by and between the parties hereto except as otherwise provided in
this Agreement, it supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement of the
terms of the Agreement between the parties. This Agreement may be amended
only by a written instrument duly executed by the parties.
EFFECTIVE as of the 18th day of June, 1999.
PURCHASER SELLER
MEDIQUIK SERVICES, INC. SCARDELLO MARKETING GROUP, LLC
By: /s/ Grant M. Gables, By: /s/ Benjamin Scardello
-------------------------- ------------------------------------
Grant M. Gables, its President Benjamin Scardello, Managing Member
Effective only with signature
of all Scardello Marketing
Group LLC Shareholders
"SCARDELLO"
/s/ Benjamin J. Scardello
-----------------------------------
Benjamin J. Scardello, individually
<PAGE>
ACCEPTED AND APPROVED BY THE MEMBERS
OF
SCARDELLO MARKETING GROUP, LLC
/s/ Benjamin J. Scardello /s/ Brent J. Lanier
------------------------- ----------------------------
BENJAMIN J. SCARDELLO BRENT J. LANIER, M.D.
/s/ Albert J. McCullin /s/ Peter L. Scardello, Jr.
------------------------- ----------------------------
ALBERT J. MCCULLIN PETER L. SCARDELLO, JR.
/s/ Benjamin J. Scardello /s/ Peter J. Scardello, III
------------------------- ----------------------------
BARNEY P. RANDOL PETER J. SCARDELLO, III
ACKNOWLEDGEMENT
STATE OF TEXAS )(
)(
COUNTY OF HARRIS )(
This instrument was acknowledged before me on this the 18th day of June,
1999, by GRANT M. GABLES and BENJAMIN J. SCARDELLO, individually and in his
Managing Member capacity.
/s/ Andre E. Faust
------------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
My commission expires:
2-20-00
- ----------------------
<PAGE>
EXHIBIT "A"
TO THE
AGREEMENT FOR SALE OF COMPANY ASSETS
BY AND BETWEEN
MEDIQUIK SERVICES, INC.,
SCARDELLO MARKETING GROUP, LLC
AND
BENJAMIN J. SCARDELLO
- Compaq DeskPro Computer, serial # 6828BUF2J778
- Compaq Presario Monitor, serial # 906CF19KF166
- Hewlett Packard 2000C Printer, serial # US885140SR
- "Strategic Partner" Database (software), including
materials, manuals, schedules and related documents
- "MediQuik Marketing Service's" sales, marketing and
administration program, and all items related thereto
<PAGE>
Exhibit B
Stock Restriction Language
The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired for investment
and may not be offered, sold, or otherwise transferred in the absence of an
effective Registration Statement for the shares under the Securities Act of
1933, or a prior opinion of counsel satisfactory to the issuer, that
registration is not required under that Act .
<PAGE>
EXHIBIT 6.9
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
BORROWER
SCARDELLO MARKETING GROUP, L.L.C.
<S> <C> <C> <C>
FIRST BANK TEXAS N.A. COMMERCIAL
8820 WESTHEIMER REVOLVING OR DRAW
HOUSTON, TX 77063 ADDRESS NOTE-VARIABLE RATE
713-781-7171 (LENDER) 4295 SAN FELIPE, STE 200
HOUSTON, TX 77056
TELEPHONE NO. IDENTIFICATION NO.
76-0603523
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
INITIALS RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
RW VARIABLE $25,000.00 05/19/99 06/05/01 503993092542
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROMISE TO PAY
FOR VALUE RECEIVED, Borrower promises to pay to the order of Lender indicated
above the principal amount or TWENTY-FIVE THOUSAND AND NO/100 Dollars
($25,000.00) or, if less, the aggregate unpaid principal amount of all
advances made by the Lender to the Borrower, plus interest on the unpaid
principal balance at the rate and in the manner described below. All amounts
received by Lender shall be applied first to expenses, then to accrued unpaid
interest, and then to outstanding principal, or in any other manner as
determined by Lender, in Lender's sole discretion, as permited by law.
INTEREST RATE: This Note has a variable rate feature. Interest on the Note may
change from time to time if the Index Rate identified below changes. Interest
shall be computed on the basis of 360 days and the actual number of days
per year (and in any event, 365 or 366 days per year during periods when the
Maximum Lawful Rate which is defined on the reverse is in effect) and the
actual number of days elapsed. So long as there is no default under this Note,
interest on this Note shall be calculated at the variable rate of ONE AND
500/1000 percent (1.500%) per annum over the Index Rate, provided that such
rate shall not exceed the Maximum Lawful Rate. The initial Index Rate is
currently SEVEN AND 750/1000 percent (7.750%) per annum. Therefore, the
initial interest rate on this Note shall be NINE AND 250/1000 percent (9.250%)
per annum. Any change in the interest rate resulting from a change in the
Index Rate will be effective on:
INDEX RATE: The Index Rate for this Note shall be:
THE PRIME RATE AS QUOTED AND ADJUSTED BY FIRST BANK TEXAS N.A.
If the index becomes unavailable during the term of the loan, Lender may
substitute another index which is similar. MINIMUM RATE/MAXIMUM RATE: The
minimum interest rate on this Note shall be n/a percent (n/a%) per annum.
The maximum interest rate on this Note shall not exceed n/a percent (n/a%)
per annum, or the Maximum Lawful Rate, whichever is less.
DEFAULT RATE: In the event of a default under this Note, the Lender may, in
its sole discretion, determine that all amounts owing to Lender shall bear
interest as follows: 4.5% ABOVE THE INDEX RATE or the Maximum Lawful Rate,
whichever is less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to
the following schedule:
INTEREST ONLY PAYMENTS BEGINNING JUNE 19, 1999 AND CONTINUING AT
MONTHLY TIME INTERVALS THEREAFTER. A FINAL PAYMENT OF THE UNPAID
PRINCIPAL BALANCE PLUS ACCRUED INTEREST IS DUE AND PAYABLE ON JUNE 5,
2001.
All payments will be made to Lender at its address in the county described
above and in lawful currency of the United States of America.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. If this Note contains more than one installment, any partial
prepayment will not affect the due date or the amount of any subsequent
installment, unless agreed to, in writing, by Borrower and Lender. If this
Note is prepaid in full, there will be: No prepayment penalty. A prepayment
penalty of:
LATE CHARGE: If an installment is received more than 10 days late, Borrower
will be charged a late charge of 5.00% of the installment. Borrower will pay
this late charge only once on any installment.
SECURITY: To secure the payment and performance of obligations incurred
under this Note, Borrower grants Lender a security interest in, and pledges
and assigns to Lender all of Borrower's rights, title, and interest in all
monies, instruments, and savings, checking, and other deposit accounts of
Borrower's, (excluding IRA, Keogh, and trust accounts and deposits subject to
tax penalties if so assigned), that are now or in the future in Lender's
custody or control. Upon default, and to the extent permitted by applicable
law, Lender may exercise its security interest in all such property which
shall be in addition to and cumulative of Lender's right of common law
setoff. If checked, the obligations under this Note are also secured by a
lien and/or security interest in the property described in the documents
executed in connection with this Note as well as any other property
designated as security for this Note now or in the future.
DISHONORED CHECK CHARGE: Borrower will pay a processing fee of $15.00 if any
check provided to Lender as payment on this loan is dishonored and returned.
REVOLVING OR DRAW FEATURE: This Note possesses a revolving or draw feature
as indicated below.
/X/ This Note possesses a revolving feature. Borrower shall be entitled to
borrow up to the full principal amount of the Note from time to time during
the term of this Note.
/ / This Note possesses a draw feature. Borrower shall be entitled to make
one or more draws under this Note. The aggregate amount of such draws shall
not exceed the full principal amount of this Note.
Lender shall maintain a written ledger of the amounts loaned to and repaid by
Borrower under this Note. The aggregate unpaid principal amount shown on such
ledger shall be rebuttable presumptive evidence of the outstanding principal
amount owing and unpaid on this Note. The Lender's failure to record the date
and amount of any advance on such ledger shall not limit or otherwise affect
the obligations of the Borrower under this Note the repay the outstanding
principal amount of the advances together with all accrued, unpaid interest
thereon. Lender shall not be obligated to provide Borrower with a copy of the
ledger on a periodic basis, however, Borrower shall be entitled to inspect or
obtain a copy of the ledger during Lender's business hours.
CONDITIONS FOR ADVANCES: Borrower shall be entitled to borrow monies under
this Note (subject to the limitations described above) under the following
conditions:
<PAGE>
THERE IS NO MATERIAL ADVERSE CHANGE IN THE LENDER'S JUDGEMENT, IN THE BORROWER'S
OR GUARANTOR'S FINANCIAL CONDITION.
RENEWAL: If checked / / this Note is given in renewal of, but not in novation
or discharge of loan number___________________________________________________.
______________________________________________________________________________
BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO THE
TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE
SIDE. BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
THIS NOTE AND RELATED DOCUMENTS HAVE BEEN SIGNED IN THE COUNTY OF LENDER'S
ADDRESS UNLESS OTHERWISE SPECIFIED: HARRIS
NOTE DATE: MAY 19, 1999
BORROWER: SCARDELLO MARKETING GROUP, L.L.C. BORROWER:
/s/ Benjamin J. Scardello
- ------------------------------------------- ---------------------------------
BENJAMIN J. SCARDELLO
PRESIDENT
BORROWER: BORROWER:
- ------------------------------------------- ---------------------------------
BORROWER: BORROWER:
- ------------------------------------------- ---------------------------------
BORROWER: BORROWER:
- ------------------------------------------- ---------------------------------
<PAGE>
TERMS AND CONDITIONS
COMPLIANCE WITH APPLICABLE LAW: It is Lender's intention to comply fully with
Texas law, and federal law as applicable, regulating credit terms, interest,
fees, charges, expenses, and other amounts. For purposes of determining
Lender's compliance with such laws, the following shall apply to the extent
permitted by law: (a) any contract, charge or receipt by Lender, whether
occurring now or in the future, shall be strictly limited by this provision;
(b) the "Maximum Lawful Rate" shall mean the maximum lawful ceiling, rate or
amount that Lender could have contracted to charge or receive under Texas Law
or applicable federal law, whichever permits the highest maximum ceiling,
rate or amount; (c) to the extent the Texas Credit Title, as amended,
provides the Maximum Lawful Rate, the "weekly ceiling" shall apply unless
changed by Lender in accordance with Texas law; (d) Lender may calculate
rates or amounts by aggregating, amortizing, prorating, allocating, and
spreading amounts contracted for, charged or received over the full term of
the transaction; (e) no contract, charge or receipt shall obligate Borrower
or any obligor to pay any amount in excess of the Maximum Lawful Rate or
waive any right under the Texas Credit Title; and (f) any contract, charge or
receipt that in the event of acceleration or under any other contingency
purports to require the payment or collection of any amount in excess of the
Maximum Lawful Rate shall automatically be reformed to not obligate Borrower
or any other obligor to pay any amount in excess of the Maximum Lawful Rate.
If Lender ever contracts for, charges or receives a rate or amount in excess
of the Maximum Lawful Rate, the excess (whether denominated principal,
interest or otherwise) shall be automatically subject to reallocation,
cancellation, credit, application, or refund to eliminate any amount in
excess of the Maximum Lawful Rate.
2. DEFAULT: Borrower will be in default under this Note in the event that
Borrower or any guarantor:
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Note or any other present or future
written agreement regarding this or any indebtedness of Borrower to
Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) allows any loss, diminution, or impairment of the physical condition,
value, title, priority, possession, or control of any collateral
securing this Note or Borrower's or Lender's rights therein,
including, but not limited to, allowing any part of the collateral to
be placed into receivership, removed, impaired, lost, stolen,
destroyed, damaged, seized, confiscated or affected in any material
way;
(e) permits the entry or service of any garnishment, judgment, tax levy,
attachment or lien against Borrower, any guarantor, or any of their
property;
(f) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, or becomes the subject of any bankruptcy,
insolvency or debtor rehabilitation proceeding: or
(g) causes Lender to deem itself insecure in good faith.
3. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note,
Lender will be entitled to exercise one or more of the following remedies
without notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this Note
and all other present and future obligations of Borrower immediately
due and payable in full;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to lawfully and peaceably take possession of any collateral;
(d) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(e) to sell, lease or otherwise dispose of any collateral and collect any
deficiency balance in the manner permitted by law;
(f) to set-off Borrower's obligations (including past due installments)
against any amounts due to Borrower including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender; and
(g) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and
in any order.
4. DEMAND FEATURE: If this Note contains a demand feature, then
notwithstanding anything to the contrary contained in this Note, Lender's
rights with respect to the events of default identified above shall not be
limited, restricted, impaired or otherwise adversely affected by the demand
feature of this Note. Lender's right to demand payment, at any time and from
time to time, shall be in Lender's sole and absolute discretion, whether or
not any default has occurred.
5. FINANCIAL INFORMATION: Borrower will provide Lender with current
financial statements including, but not limited to, balance sheets and profit
and loss statements and other information upon request.
6. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay
or fail to exercise any of its rights without causing a waiver of those
obligations or rights. A waiver no one occasion will not constitute a waiver
on any other occasion. Borrower's obligations under this Note shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs
or releases any of the obligations belonging to any co-borrower or guarantor
or any of its rights against any co-borrower, guarantor or collateral.
7. SEVERABILITY: If any provision of this Note violates the law or is
unenforceable, the rest of the Note will remain valid.
8. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written
consent of Lender which may be withheld by Lender in its sole discretion.
Lender will be entitled to assign some or all of its rights and remedies
described in this Note without notice to or the prior consent of Borrower in
any manner.
9. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
10. APPLICABLE LAW: THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT THAT TEX. REV. CIV. STAT. ANN. ART.
5069, CHAPTER 15, OR ITS SUCCESSORS, (WHICH REGULATES CERTAIN REVOLVING LOAN
ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS), DOES NOT APPLY TO THIS NOTE.
<PAGE>
11. COLLECTION EXPENSES: If Lender hires an attorney (who is not a salaried
employee of Lender) to assist in collecting any amount due or enforcing any
right or remedy under this Note, Borrower agrees to pay Lender's reasonable
attorney's fees and collection costs subject to court award.
12. MISCELLANEOUS: This Note is being executed for commercial purposes.
Borrower and Lender agree that time is of the essence. Borrower waives
presentment, demand for payment, notice of intent to accelerate, notice of
acceleration, notice of dishonor and protest. All references to Borrower in
this Note shall include all of the parties signing this Note. If there is
more than one Borrower, their obligations will be joint and several. This
Note and any related documents represent the complete and integrated
understanding between Borrower and Lender pertaining to the terms and
conditions of those documents.
13. ADDITIONAL TERMS:
SEE YEAR 2000 ADDENDUM ATTACHED HERETO AND INCORPORATED HEREIN BY THIS
REFERENCE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
SCARDELLO MARKETING GROUP, L.L.C.
FIRST BANK TEXAS N.A. YEAR 2000
8820 WESTHEIMER ADDENDUM
HOUSTON, TX 77063 ADDRESS
713-781-7171 (LENDER) 4295 SAN FELIPE, STE 200
HOUSTON, TX 77056
TELEPHONE NO. IDENTIFICATION NO.
76-0603523
- --------------------------------------------------------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL FUNDING MATURITY CUSTOMER LOAN
INITIALS RATE AMOUNT DATE DATE NUMBER NUMBER
RW VARIABLE $25,000.00 05/19/99 06/05/01 503993092542
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
YEAR 2000 PROBLEM. Borrower understands that the "Year 2000" problem arises
from computer hardware and software (collectively, "Computer Systems") that
use two rather than four digits to present a calendar year and recognize all
two-digit years as occurring in the 20th century. These Computer Systems
will be unable to perform in a predictable manner after December 31, 1999.
For a Computer System to be considered "Year 2000 Compliant", it must record,
store, process, and present dates falling on or after January 1, 2000 in the
same manner and with the same functionality as it does for dates on or before
December 31, 1999.
YEAR 2000 BUSINESS RISKS. Borrower understands and acknowledges that there are
substantial business risks associated with the use of Computer Systems that are
not Year 2000 Compliant. Any Computer System that calculates, compares, sorts,
or uses dates, such as accounting and inventory programs, may be affected, as
may electronic devices such as telephone and security systems. Failure of
Computer Systems which perform important business functions to be Year 2000
Compliant could have a material adverse impact on Borrower's business, including
impairment of cash flow, reduction in the value of accounts and other assets,
significant decline in the value of collateral securing loans, and impairment of
the ability to pay and perform business obligations.
BORROWER'S YEAR 2000 COVENANTS, REPRESENTATIONS AND WARRANTIES. Recognizing the
business risks presented by the Year 2000 Problem, as part of and in addition to
any other covenants, representations, and warranties made by Borrower to Lender,
described above, Borrower represents and warrants to Lender, and covenants with
Lender that:
INTERNAL YEAR 2000 ASSESSMENT. Borrower has made a detailed inventory,
review and assessment of all areas within its business and operations that could
be adversely affected by the failure of Borrower to be Year 2000 compliant on a
timely basis.
KEY THIRD-PARTY INQUIRY. Borrower has made and will continue to make
written inquiry of those suppliers, vendors, customers and other third parties
with whom Borrower regularly does business and whose lack of Year 2000
compliance would, with reasonable probability, have a material adverse impact on
Borrower's business, assets, or financial condition, as to whether those persons
and entities will, on a timely basis, be Year 2000 Compliant in all material
respects. On the basis of such inquiry, Borrower believes that all such persons
will be so compliant.
YEAR 2000 COMPLIANCE PLAN. Borrower has developed a detailed plan and
timeline for becoming Year 2000 Compliant on a timely basis and has committed
adequate financial, personnel, and other resources to complete the plan on
schedule. The plan includes a course of action in the event that, even though
Borrower completes its plan, there are Year 2000 related Computer Systems
failures. Borrower has to date implemented the plan in accordance with the
timeline and shall complete the plan in accordance with the timeline.
DISCLOSURE TO LENDER. Borrower shall, both periodically and upon Lender's
request, provide updates on Borrower's status and progress on its Year 2000 plan
and timeline and other efforts to make itself Year 2000 Compliant. Borrower
shall permit Lender to examined all books, records and other information and to
inquire of Borrower's officers, employees, accountants, consultants, and other
representatives and agents, regarding the plan and Borrower's progress.
LENDERS' RESPONSIBILITIES. Borrower understands and acknowledges that
information about Year 2000 issues which may be taken by Lender to Borrower does
not constitute advice and is not intended to be relied upon by Borrower in
determining and taking the stops needed to be Year 2000 Compliant on a timely
basis. The rights granted to Lender and the obligations assumed by Borrower
herein are solely for the benefit of Lender, and are consideration for Lender's
extension of credit to Borrower. Lender neither has nor assumes any duty or
obligation to Borrower to oversee, manage, or supervise Borrower's Year 2000
plan.
MATERIAL BREACH. Borrower understands, covenants, and agrees that Borrower's
breach of or failure to perform the covenants, representations, and warranties
contained herein, or failure to comply with or fulfill its Year 2000 plan shall
constitute a material breach and default of Borrower's obligations to Lender.
- --------------------------------------------------------------------------------
THE PERSONS SIGNING BELOW ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND, AND AGREE
TO THE TERMS AND CONDITIONS OF THIS ADDENDUM, AND FURTHER ACKNOWLEDGE RECEIPT OF
AN EXACT COPY OF THIS ADDENDUM.
DATED: MAY 19, 1999
BORROWER: SCARDELLO MARKETING GROUP, L.L.C. BORROWER:
/s/ Benjamin J. Scardello
- ------------------------------------------ --------------------------
BENJAMIN J. SCARDELLO
PRESIDENT
BORROWER: BORROWER:
- ------------------------------------------ --------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
SCARDELLO MARKETING GROUP, L.L.C.
FIRST BANK TEXAS N.A. WAIVER OF
8820 WESTHEIMER JURY TRIAL
HOUSTON, TX 77063 ADDRESS
713-781-7171 (LENDER) 4295 SAN FELIPE, STE 200
HOUSTON, TX 77056
TELEPHONE NO. IDENTIFICATION NO.
76-0603523
- ---------------------------------------------------------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
INITIALS RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
RW VARIABLE $25,000.00 05/19/99 06/05/01 503993092542
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower and Lender (the "Parties") incorporate the following provision into
every document executed in connection with the transaction described above:
WAIVER OF JURY TRIAL. LENDER AND BORROWER KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THE
PROMISSORY NOTE, AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER MAKING THE LOAN EVIDENCED BY THE PROMISSORY NOTE.
ACKNOWLEDGMENT: THE UNDERSIGNED ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND,
AND AGREED TO THE TERMS AND CONDITIONS OF THIS AGREEMENT.
THIS AGREEMENT AND RELATED DOCUMENTS HAVE BEEN SIGNED IN THE COUNTY OF LENDER'S
ADDRESS UNLESS OTHERWISE SPECIFIED: HARRIS
LENDER FIRST BANK TEXAS N.A.
/s/ Robert Weakley
--------------------------------------
ROBERT WEAKLEY
VICE PRESIDENT
BORROWER: SCARDELLO MARKETING GROUP, L.L.C. BORROWER:
/s/ Benjamin J. Scardello
- ------------------------------------------- --------------------------
BENJAMIN J. SCARDELLO
PRESIDENT
BORROWER: BORROWER:
- ------------------------------------------- --------------------------
BORROWER: BORROWER:
- ------------------------------------------- --------------------------
BORROWER: BORROWER:
- ------------------------------------------- --------------------------
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BORROWER
SCARDELLO MARKETING GROUP, L.L.C.
FIRST BANK TEXAS N.A. STOCK/BOND
8820 WESTHEIMER ASSIGNMENT
HOUSTON, TX 77063 ADDRESS SEPARATE FROM
713-781-7171 (LENDER) 4295 SAN FELIPE, STE 200 CERTIFICATE
HOUSTON, TX 77056
TELEPHONE NO.
IDENTIFICATION NO.
76-0603523
- --------------------------------------------------------------------------------------------------------------
OWNER PURPOSE
JOCODY FINANCIAL, INC.
This Agreement is executed for BUSINESS purposes.
ADDRESS
5773 WOODWAY # 290
HOUSTON, TX 77057
TELEPHONE NO. IDENTIFICATION NO.
76-0423762
- --------------------------------------------------------------------------------------------------------------
FOR VALUE RECEIVED, Owner whose federal taxpayer identification number is 76-0423762 hereby sells,
assigns, and transfers to Lender the following stocks and/or bonds:
/ / STOCK: ___________________________________________________ (______________) Shares of
/ / Common / / Preferred / / Other _______________________________________________________
Stock of the ___________________________ ("Corporation") standing the Owner's
NAME OF CORPORATION
name on the books of the Corporation and represented by certificate number: __________________
______________________________________________________________________________________________
/ / BOND: _____________________________________________________ (___________________) Bond
of the _________________________________________________________________ ("Entity")
NAME OF ENTITY
in the amount of $____________________ standing in the Owner's name on the books of the Entity
and represented by bond number: ______________________________________________________________
______________________________________________________________________________________________
and does hereby irrevocably constitute and appoint ___________________________________________________________
as its attorney-in-fact to transfer the above described securities on the books of the Corporation or Entity
with full powers pertaining to the securities.
This Assignment will be governed by the laws of the State of Texas.
DATED:
SIGNATURE GUARANTEED
OWNER:
BY /s/ Bob L. Jordan, President
------------------------------------ ---------------------------------------------------------
TITLE LENDER'S NAME
The signature of the Owner is guaranteed in accordance
OWNER with the provisions of the investment Securities Article
of the Uniform Commercial Code as enacted in the state
indicated in Owner's address.
BY BY /s/
------------------------------------ ---------------------------------------------------------
TITLE
THE SIGNATURE(S) ON THIS ASSIGNMENT MUST BE IDENTICAL TO THE NAME(S) ON THE
STOCK CERTIFICATES OR BONDS IN ALL RESPECTS
<PAGE>
- --------------------------------------------------------------------------------------------------------------
BORROWER
SCARDELLO MARKETING GROUP, L.L.C.
FIRST BANK TEXAS N.A. COLLATERAL
RECEIPT
ADDRESS NO. 503993092542
4295 SAN FELIPE, STE 200
HOUSTON, TX 77056
TELEPHONE NO. IDENTIFICATION NO.
76-0603523
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Owner of Collateral ("Owner"):
JOCODY FINANCIAL, INC.
- --------------------------------------------------------------------------------------------------------------
Owner hereby deposits with Lender as collateral to secure the Obligations of Borrower of Owner to Lender the
following described property:
MEDIQUIK SERVICES, INC. CUSIP 58500V 10 4 #SL- 000286 IN THE AMOUNT OF 25000
SHARES.
Lender has received the above described property in satisfactory condition.
Date: JUNE 18, 1999 By: /s/ Robert Weakley
----------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RELEASE
Collateral Released To: ________________________________________ Date: _______________________________________
By: By:
--------------------------------------------- ------------------------------------------------
Receipt Acknowledged:
----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
OWNER'S ACKNOWLEDGMENT
Owner acknowledges receipt of the above described collateral in good condition.
Date:
OWNER: JOCODY FINANCIAL, INC. OWNER:
- --------------------------------------------- ---------------------------------------------------
BOB L. JORDAN
PRESIDENT
OWNER: OWNER:
- --------------------------------------------- ---------------------------------------------------
OWNER: OWNER:
- --------------------------------------------- ---------------------------------------------------
OWNER: OWNER:
- --------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 6.10
ASSUMPTION AGREEMENT
This Assumption Agreement is made by and among MEDIQUIK SERVICES,
INC., a Texas Corporation ( the "Assumptor"), SCARDELLO MARKETING GROUP, L.L.C.,
a Texas limited liability company (the "Borrower"), and FIRST BANK TEXAS N.A., a
national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower is obligated to pay that certain Commercial
Revolving or Draw Note (the "Note") dated May 19, 1999, in the original
principal sum of $25,000.00, executed by the Borrower and payable to the order
of the Lender, as therein provided, secured by security interests in and to
25,000 shares of stock in MEDIQUIK SERVICES, INC., Cusip 58500V 10 4, SL-000286
(the "Collateral), owned and held by JOCODY FINANCIAL, INC. (the "Owner of the
Collateral"); and,
WHEREAS, the Assumptor wishes to assume the indebtedness evidenced by
the Note and secured by the security interests in and to the Collateral.
NOW, THEREFORE, for good and valuable consideration paid by each party
to the other, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. The Assumptor, with the consent of the Lender, hereby assumes and
promises and agrees to pay the indebtedness evidenced by the Note to the order
of the Lender, in the City of Houston, Harris County, Texas, all upon the terms
and conditions stated in the Note. The present unpaid principal balance of the
Note as of the Effective Date of this Agreement is the sum of $25,000.
2. The security interests in and to the Collateral, and any other
security securing the Note, are ratified and confirmed as continuing to secure
the Note.
3. The Note, and all instruments or agreements securing or otherwise
relating to the Note shall continue unchanged, in full force and effect. This
Agreement shall not be deemed to release the Borrower from any liability in
connection with the Note or any related instrument, and the Borrower
acknowledges that it remains fully liable in connection therewith, along with
the Assumptor.
The Owner of the Collateral, a corporation, acting herein by and
through its duly authorized officer, joins in the execution hereof to evidence
its acceptance of the agreements herein made and the terms and conditions herein
set forth.
EXECUTED this the 16th day of July, 1999, to be effective as of May
19, 1999 (the "Effective Date").
"ASSUMPTOR"
MEDIQUIK SERVICES, INC.
By:/s/ GRANT M. GABLES
------------------------------------
Name: Grant M. Gables
---------------------------------
Title: President
--------------------------------
<PAGE>
"BORROWER"
SCARDELLO MARKETING GROUP,
L.L.C.
By: /s/ Benjamin J. Scardello
------------------------------------
Name: Benjamin J. Scardello
---------------------------------
Title: President & Manager
--------------------------------
"LENDER"
FIRST BANK OF TEXAS N. A.
By: /s/ Robert Weakley
------------------------------------
Name: Robert Weakley
---------------------------------
Title: Vice President
--------------------------------
"OWNER OF THE COLLATERAL"
JOCODY FINANCIAL, INC.
By: /s/ Bob L. Jordan
------------------------------------
Name: Bob L. Jordan
---------------------------------
Title: President
--------------------------------
ACCEPTED AND AGREED TO BY
THE GUARANTOR(S) OF THE NOTE:
- ---------------------------------
Printed Name:
- ---------------------------------
Printed Name:
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this the 16th day of July,
1999, by Grant M. Gables, the President of MEDIQUIK SERVICES, INC., a Texas
corporation, on behalf of said corporation.
/s/ Andre E. Faust
---------------------------------------
Notary Public in and for
The State of Texas
My Commission expires February 20, 2000
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this the 16th day of July,
1999, by Benjamin J. Scardello, the President & Manager of SCARDELLO MARKETING
GROUP, L.L.C., a Texas limited liability company, on behalf of said limited
liability company.
/s/ Andre E. Faust
---------------------------------------
Notary Public in and for
The State of Texas
My Commission expires February 20, 2000
<PAGE>
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this the 2nd day of August,
1999, by Robert Weakley, the Vice President of FIRST BANK TEXAS N.A., a national
banking association, on behalf of said banking association.
/s/ Barbara A. Carlton
---------------------------------------
Notary Public in and for
The State of Texas
My Commission expires July 9, 2003
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this the 19th day of July,
1999, by Bob L. Jordan, the President of JOCODY FINANCIAL, INC., a corporation,
on behalf of said corporation.
/s/ Elaine Peterson
---------------------------------------
Notary Public in and for
The State of Texas
My Commission expires April 30, 2002
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this the _____ day of
__________, 1999, by _______________________.
---------------------------------------
Notary Public in and for
The State of Texas
<PAGE>
EXHIBIT 6.11
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as this
"Agreement") dated as of November 24, 1998 is made and entered into by and
between MediQuik Services, Inc., a Delaware corporation ("MediQuik") and Cash
Flow Marketing, Inc., a Delaware corporation ("Cash").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, MediQuik is a corporation organized and existing under the laws of
the State of Delaware, having been incorporated on April 7, 1998; and
WHEREAS, Cash is a corporation organized and existing under the laws of the
State of Delaware, having been incorporated on November 24, 1998; and
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
MediQuik shall be merged into Cash (the "Merger") upon the terms and conditions
hereinafter set forth.
ARTICLE I
MERGER
On December 28, 1998 or as soon as practicable thereafter (the "Effective
Date"); MediQuik shall be merged into Cash, the separate existence of MediQuik
shall cease and Cash (following the Merger referred to as "New MediQuik") shall
continue to exist under the name of "MediQuik Services, Inc.," by virtue of, and
shall be governed by, the laws of the State of Delaware. The address of the
registered office of New MediQuik in the State of Delaware will be The
Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County
of Newcastle, State of Delaware.
ARTICLE II
CERTIFICATE OF INCORPORATION OF NEW MEDIQUIK
The Certificate of Incorporation of Cash as in effect on the date hereof
shall be the Certificate of Incorporation of New MediQuik on the Effective Date
without any change except a change of name from Cash Flow Marketing, Inc. to
MediQuik Services, Inc., unless and until amended in accordance with applicable
law.
ARTICLE III
BY LAWS OF NEW MEDIQUIK
The By Laws of Cash shall be the By Laws of New MediQuik as in effect on
the date hereof without change unless and until amended or repealed in
accordance with applicable law.
<PAGE>
ARTICLE IV
EFFECT OF MERGER ON STOCK OF CONSTITUENT CORPORATION
4.01 On the Effective Date, (i) each .9327 outstanding shares of MediQuik
common stock, $.001 par value ("MediQuik Common Stock") shall be converted into
one share of New MediQuik common stock, $.001 par value ("New MediQuik Common
Stock"), except for those shares of MediQuik Common Stock with respect to which
the holders thereof duly exercise their dissenters' rights under Delaware law,
and (ii) any fractional New MediQuik Common Stock interests to which a holder of
MediQuik Common Stock would be entitled will be cancelled with the holder
thereof being entitled to a whole share of New MediQuik Common Stock for each
fractional New MediQuik Common Stock interest which is cancelled.
4.02 On the Effective Date, (i) each 2.000 outstanding shares of Cash
common stock, $.001 par value ("Cash Common Stock") shall be converted into one
share of New MediQuik common stock, $.001 par value ("New MediQuik Common
Stock"), except for those shares of Cash Common Stock with respect to which the
holders thereof duly exercise their dissenters' rights under Delaware law, and
(ii) any fractional New MediQuik Common Stock interests to which a holder of
Cash Common Stock would be entitled will be cancelled with the holder thereof
being entitled to a whole share of New MediQuik Common Stock for each fractional
New MediQuik Common Stock interest which is cancelled. Immediately following
the closing of the Merger on the Effective Date, Mr. R. David Preston will sell
a total of 639,000 shares of New MediQuik Common Stock owned of record and
beneficially by him to New MediQuik in consideration for $5,000 in cash.
4.03 All options and rights to acquire MediQuik Common Stock or Cash
Common Stock under or pursuant to any options or warrants which are outstanding
on the Effective Date of the Merger will automatically be converted into
equivalent options and rights to purchase that whole number of shares of New
MediQuik Common Stock into which the number of shares of MediQuik Common Stock
or Cash Common Stock subject to such options or warrants immediately prior to
the Effective Date would have been converted in the merger had such rights been
exercised immediately prior thereto (with any fractional New MediQuik Common
Stock interest resulting from the exercise being adjusted to the next highest
whole share such holder would have received for any such fraction in the merger
had he exercised such warrants or options immediately prior to the Merger). The
option price per share of New MediQuik Common Stock shall be the option price
per share of MediQuik Common Stock or Cash Common Stock in effect prior to the
Effective Date. All plans or agreements of MediQuik or Cash under which such
options and rights are granted or issued shall be continued and assumed by New
MediQuik unless and until amended or terminated in accordance with their
respective terms.
4.04 (a) Atlas Stock Transfer Corporation shall act as exchange agent in
the Merger.
(b) Prior to, or as soon as practicable, after the Effective Date, New
MediQuik shall mail to each person who was, at the time of mailing or at the
Effective Date, a holder of record of issued and outstanding MediQuik Common
Stock or Cash Common Stock (i) a form letter of transmittal and (ii)
instructions for effecting the surrender of the certificate or certificates,
which immediately prior to the Effective Date represented issued and outstanding
shares of MediQuik Common Stock or Cash
<PAGE>
Common Stock ("MediQuik Certificates" or "Cash Certificates"), in exchange
for certificates representing New MediQuik Common Stock. Upon surrender of a
MediQuik Certificate of Cash Certificate for cancellation to New MediQuik,
together with a duly executed letter of transmittal, the holder of such
MediQuik Certificate or Cash Certificate shall subject to paragraph (g) of
this section 4.04 be entitled to receive in exchange therefor a certificate
representing that number of shares of New MediQuik Common Stock into which
MediQuik Common Stock or Cash Common Stock theretofore represented by the
MediQuik Certificate or Cash Certificate so surrendered shall have been
converted pursuant to the provisions of this Article IV; and the MediQuik
Certificate or Cash Certificate so surrendered shall forthwith be cancelled.
(c) No dividends or other distributions declared after the Effective Date
with respect to New MediQuik Common Stock and payable to holders of record
thereof after the Effective Date shall be paid to the holder of any
unsurrendered MediQuik Certificate or Cash Certificate with respect to New
MediQuik Common Stock which by virtue of the Merger are represented thereby, nor
shall such holder be entitled to exercise any right as a holder of New MediQuik
Common Stock until such holder shall surrender such MediQuik Certificate or Cash
Certificate. Subject to the effect, if any, of applicable law and except as
otherwise provided in paragraph (g) of this Section 4.04, after the subsequent
surrender and exchange of a MediQuik Certificate or Cash Certificate, the holder
thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which became payable prior to such surrender and
exchange with respect to New MediQuik Common Stock represented by such MediQuik
Certificate or Cash Certificate.
(d) If any stock certificate representing New MediQuik Common Stock is to
be issued in a name other than that in which the MediQuik Certificate or Cash
Certificate surrendered with respect thereto is registered, it shall be a
condition of such issuance that the MediQuik Certificate or Cash Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance to a person other than the registered
holder of the MediQuik Certificate or Cash Certificate surrendered or shall
establish to the satisfaction of New MediQuik that such tax has been paid or is
not applicable.
(e) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of MediQuik of the Shares of MediQuik
Common Stock, or of any other shares of stock of MediQuik which were outstanding
immediately prior to the Effective Date. If after the Effective Date
certificates representing such shares are presented to MediQuik they shall be
cancelled and, in the case of MediQuik Certificates, exchanged for certificates
representing New MediQuik Common Stock as provided in this Article IV.
(f) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of Cash of the Shares of Cash Common
Stock, or of any other shares of stock of Cash, which were outstanding
immediately prior to the Effective Date. If after the Effective Date
certificates representing such shares are presented to Cash they shall be
cancelled and, in the case of Cash Certificates, exchanged for certificates
representing New MediQuik Common Stock as provided in this Article IV.
<PAGE>
(g) No certificates or scrip representing fractional New MediQuik Common
Stock shall be issued upon the surrender for exchange of MediQuik Certificates
or Cash Certificates. In lieu thereof, the Exchange Agent shall issue to each
holder of MediQuik Common Stock or Cash Common Stock the a whole share of New
MediQuik Common Stock.
ARTICLE V
CORPORATE EXISTENCE, MEDIQUIK AND LIABILITIES OF MEDIQUIK
5.01 On the Effective Date the separate existence of MediQuik shall cease.
MediQuik shall be merged with and into Cash in accordance with the provisions of
this Agreement. Thereafter, New MediQuik shall possess all the rights,
privileges, powers and franchises as well of a public as of a private nature,
and shall be subject to all the restrictions, disabilities and duties of each of
the parties to this Agreement and all and singular; the rights, privileges,
powers and franchises of MediQuik and Cash, and all property, real, personal and
mixed, and all debts due to each of them on whatever account, shall be vested in
New MediQuik; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter and effectually the property of
New MediQuik, as they were of the respective constituent entities, and the title
to any real estate whether by deed or otherwise vested in MediQuik and Cash or
either of them, shall not revert to or be in any way impaired by reason of the
Merger; but all rights of creditors and all liens upon any property of the
parties hereto, shall be preserved unimpaired, and all debts, liabilities and
duties of the respective constituent entities, shall thenceforth attach to New
MediQuik, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
5.02 MediQuik agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds, assignments and other instruments, and
will take or cause to be taken such further or other action as New MediQuik may
deem necessary or desirable in order to vest in and confirm to New MediQuik
title to and possession of all the property, rights, privileges, immunities,
powers, purposes and franchises, and all and every other interest, of MediQuik
and otherwise to carry out the intent and purposes of this Agreement.
ARTICLE VI
OFFICERS AND DIRECTORS OF NEW MEDIQUIK
6.01 Upon the Effective Date, the officers and directors of MediQuik shall
be officers and directors of New MediQuik in office at such date, and such
persons shall hold office in accordance with the By Laws of Cash or until their
respective successors shall have been appointed or elected.
6.02 If, upon the Effective Date, a vacancy shall exist in the Board of
Directors of New MediQuik, such vacancy shall be filled in the manner provided
by its By Laws.
ARTICLE VII
APPROVAL BY SHAREHOLDERS; AMENDMENT; EFFECTIVE DATE
7.01 This Agreement and the Merger contemplated hereby are subject to
approval by the requisite vote of shareholders in accordance with applicable
Delaware law. As promptly as
<PAGE>
practicable after approval of this Agreement by shareholders in accordance
with applicable law, duly authorized officers of the respective parties shall
make and execute Articles of Merger and a Certificate of Merger and shall
cause such documents to be filed with the Secretary of State of Delaware in
accordance with the laws of the State of Delaware. The Effective Date of the
Merger shall be the date on which the Merger becomes effective under the laws
of Delaware.
7.02 The Boards of Directors of MediQuik and Cash may amend this Agreement
at any time prior to the Effective Date, provided that an amendment made
subsequent to the approval of the merger by the shareholders of MediQuik and
Cash shall not (1) alter or change the amount or kind of shares to be received
in exchange for or on conversion of all or any of the MediQuik Common Stock or
the Cash Common Stock (2) alter or change any term of the Certificate of
Incorporation of Cash, or (3) alter or change any of the terms and conditions of
this Agreement if such alteration or change would adversely affect the holders
of MediQuik Common Stock or Cash Common Stock.
ARTICLE VIII
TERMINATION OF MERGER
8.01 This Agreement may be terminated and the Merger may be abandoned any
time prior to the Effective Time, whether before or after approval by the
stockholders of Cash or MediQuik:
(a) The Merger may be abandoned any time prior to the Effective Time
by mutual consent of the Boards of Directors of MediQuik and Cash;
(b) The Merger may be abandoned any time prior to the Effective Time
by either MediQuik or Cash if, without fault of such terminating
party, the Merger shall not have been consummated on or before
December 28, 1998, which date may be extended by mutual consent of the
parties hereto to and including January 31, 1998;
(c) The Merger may be abandoned any time prior to the Effective Time
by either MediQuik or Cash, if any court of competent jurisdiction in
the United States or other governmental body in the United States,
other than at the request of the parties, or any affiliate thereof,
seeking to terminate this Agreement pursuant to this clause (c), shall
have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) The Merger may be abandoned any time prior to the Effective Time
by either MediQuik or Cash, if either of their respective Boards of
Directors determines that in light of the potential liability that
might result from the exercise of dissenters' rights under Section 262
of the General Corporation Law of Delaware, the Merger would be
impracticable, undesirable or not in the best interests of the their
respective shareholders.
<PAGE>
8.02 This Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of MediQuik, at any time prior to the Effective
Time, before or after the approval by the stockholders of MediQuik, if (a) Cash
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by Cash
at or prior to such date of termination, (b) there exists a breach or breaches
of any representation or warranty of Cash contained in this Agreement or any of
the Closing conditions are not satisfied; provided, however, that if such breach
or breaches are capable of being cured prior to the Effective Time, such
breaches shall not have been cured within 15 calendar days of delivery to Cash
of written notice of such breach or breaches, (c) Cash shall have furnished or
disclosed non-public information to, or commenced negotiations with, a third
party with respect to a Cash Acquisition Transaction or Cash Business
Combination Transaction (as hereinafter defined) or shall have resolved to do
either of the foregoing and publicly disclosed such resolution, or (d) the Board
of Directors of Cash shall have withdrawn, changed, modified in any manner or
taken action inconsistent with its recommendation of this Agreement, the Merger
or the other transactions contemplated hereby or thereby or shall have resolved
to do any of the foregoing and publicly disclosed such resolution.
8.03 This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
stockholders of Cash, by action of the Board of the Directors of Cash, if (a)
MediQuik shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by MediQuik at or prior to such date of termination, (b) there exists
a breach or breaches of any representation or warranty of MediQuik contained in
this Agreement such that the Closing conditions would not be satisfied;
provided, however, that if such breach or breaches are capable of being cured
prior to the Effective Time, such breaches shall not have been cured within 15
calendar days of delivery to MediQuik of written notice of such breach or
breaches, (c) MediQuik shall have furnished or disclosed non-public information
to, or commenced negotiations with, a third party with respect to a MediQuik
Acquisition Transaction or MediQuik Business Combination Transaction or shall
have resolved to do either of the foregoing and publicly disclosed such
resolution, or (d) the Board of Directors of MediQuik shall have withdrawn,
changed, modified in any manner or taken action inconsistent with its
recommendation of this Agreement and the Merger or shall have resolved to do any
of the foregoing and publicly disclosed resolution.
8.04 In the event of termination and abandonment of the Merger by MediQuik
or Cash pursuant to this Article VIII, written notice thereof shall forthwith be
given to the other.
8.05 In the event of termination of this Agreement and abandonment of the
Merger pursuant to this Article VIII, no party hereto (or any of its directors
or offices) shall have any liability or further obligation to any other party to
this Agreement, except that nothing herein shall relieve any party from
liability for any breach of this Agreement.
<PAGE>
ARTICLE IX
MISCELLANEOUS
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, all as of the day and year first above
written.
MEDIQUIK SERVICES, INC.
DELAWARE CORPORATION
By: /s/ Grant M. Gables
------------------------------------
Grant M. Gables, President
CASH FLOW MARKETING, INC.
A DELAWARE CORPORATION
By: /s/ R. David Preston
------------------------------------
R. David Preston, President
<PAGE>
EXHIBIT 6.12
AGREEMENT FOR THE
SALE OF CORPORATE ASSETS
This Agreement For the Sale of Corporate Assets ("the Agreement") is
executed and effective as of the date set forth hereinafter, by and between
MEDIQUIK SERVICES, INC., a Delaware corporation ("Purchaser") and MEDIQUIK
SERVICES, L.L.C., a Nevada limited liability company ("Seller"), for the
purposes, consideration, premises and conditions hereinafter set forth.
WHEREAS, Seller wishes to sell and Purchaser wishes to purchase
certain specified assets of Seller's business on the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and conditions
hereinafter set forth, the parties hereby AGREE as follows:
I.
SALE OF CERTAIN ASSETS
Seller hereby sells, conveys, transfers and/or assigns the following
contracts (known, collectively, as "THE PROVIDER AGREEMENTS"):
1) That one certain "ANCILLARY SERVICES PARTICIPATING PROVIDER
AGREEMENT" (the PPO/EPO Networks), by and between The Seller and
National Healthcare Alliance, dated February 06, 1998;
2) That one certain "PARTICIPATING FACILITY AGREEMENT" by and between
The Seller and Multiplan, Inc., dated February 01, 1998;
3) That one certain "AGREEMENT" by and between The Seller and
IntegraNet Physician Resources, Inc., dated June 17, 1998;
4) That one certain "AGREEMENT" by and between Certus Healthcare,
L.L.C. and The Seller, dated February 20, 1998;
5) That one certain "HEALTHCARE SERVICE ANCILLARY AGREEMENT" by and
between The Seller and USA Managed Care Organization, Inc., dated
April 28, 1998;
6) That one certain "ANCILLARY PROVIDER AGREEMENT", by and between
The Seller and Global Medical Solutions, Inc., dated February 27,
1998; and
<PAGE>
II.
ASSUMPTION OF LIABILITIES
2.01 The Purchaser forgives Seller's indebtedness to Purchaser, in
the amount of Sixty-four thousand four hundred four ($64,404.00) dollars, in
connection with sums advanced by Purchaser, on behalf of Seller, totaling
said amount.
2.02 The Purchaser agrees to assume legal responsibility for, and to
pay all obligations of Seller as to those certain Promissory Notes and/or
Debentures, in which The Seller is the Maker/Payor, totaling $160,000.00.
2.03 Purchaser, at its sole cost and expense, also agrees to defend
any claim, case, or action brought against Seller, its officers, directors,
agents or employees arising out of actions to recover sums claimed to be due
and owing as to the Notes.
2.04 Purchaser shall indemnify and hold Seller, its officers,
directors, or employees, harmless from any suits or other actions for the
purpose of seeking to collect monies claimed to be due and owing pursuant to
the Notes, including but not limited to any claim or action brought by the
Payees, their representatives, successors or assigns.
2.05 Purchaser shall pay, or cause to be paid, any resulting
negotiated settlement made by Purchaser or judgment issued by a court of
competent jurisdiction, relating to the Notes.
III.
TRANSFERENCE OF COMMON STOCK
3.01 As partial consideration for the purchase and sale of assets, as
set forth herein, Purchaser shall convey, assign, and otherwise, transfer a
total of Two Million Eight Hundred Sixty Thousand (2,860,000), common shares
of MediQuik Services, Inc. ("the Shares") to Seller or its designees, as set
forth hereinafter.
2
<PAGE>
IV.
REPRESENTATIONS AND WARRANTIES
4.01 SELLER'S REPRESENTATIONS AND WARRANTIES.
(a) That the Provider Agreements are fully executed and
enforceable;
(b) That the Provider Agreements are fully assignable;
(c) That there are no liens, encumbrances or suits threatened
or filed in relation to the Provider Agreements;
(d) That Seller is a duly organized, validly existing, and in
good standing under the laws of the State of Nevada;
(e) That the assignment of the Provider Agreements and the Notes
has been fully authorized by the board of directors of Buyer
as well as two-thirds (66 2/3 rds) of Buyer's shareholders
eligible to vote as to this transaction;
(f) That the Notes represent debt obligations of the Buyer that
were incurred in the ordinary course of business.
4.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER:
(a) That the Shares are fully authorized, unissued, shares of
common stock of the Purchaser;
(b) That the issuance of the Shares, as contemplated by this
Agreement, is fully authorized by the board of directors
of Buyer;
(c) That the Shares are free and clear of all liens, claims or
encumbrances;
(d) That all applicable state and federal securities laws and
regulations, if any, have been complied with in relation to
the transfer of the Shares;
(e) That Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State
of Delaware;
(f) That, in relation to the Provider Agreements, Purchaser is
ready, willing and able to fulfill the obligations of Seller,
pursuant to the Provider Agreements;
(g) That the assignment of the Provider Agreements and assumption
of the Notes has been fully authorized by the board of
directors of Purchaser.
3
<PAGE>
V.
GENERAL ADMINISTRATION PROVISIONS
4.01 MULTIPLE ORIGINALS. This Agreement may be executed in multiple
counterparts, and each such counterpart shall be deemed as an original
instrument upon execution of this document.
4.02 CHOICE OF LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas, and enforceable in Harris
County, Texas.
4.03 ASSIGNABILITY. Except with written consent of the other, the
rights and obligations under this Agreement are not assignable by the parties to
this agreement or their respective successors, assigns, heirs or legal
representatives.
4.04 NOTICES. Any notice, request, instruction or other
communication required or permitted hereunder shall be deemed to be properly
given when deposited in the United States Mail, postage prepaid, addresses as
follows:
SELLER: MediQuik Services, L.L.C.
Mr. Ben L. Pierce
General Manager
(at address to be provided)
PURCHASER: MediQuik Services, Inc.
Attn: Howard B. Butler, Jr.
General Counsel
770 South Post Oak Lane
Suite 520
Houston, TX 77056
4.05 ENTIRE AGREEMENT. This Agreement represents the entire
Agreement by and between the parties hereto except as otherwise provided in
this Agreement, and it may not be changed except by duly authorized written
amendment, duly executed by all parties to this Agreement.
4
<PAGE>
EFFECTIVE as of the 7th day of April, 1998.
PURCHASER SELLER
MediQuik Services, Inc. MediQuik Services, L.L.C.
By: /s/ Grant M. Gables By: /s/ Ben L. Pierce
--------------------------------- ---------------------------------
Grant M. Gables, its President Ben L. Pierce, its Gen. Manager
ACKNOWLEDGEMENT
STATE OF TEXAS )(
)(
COUNTY OF HARRIS )(
This instrument was acknowledged before me on this the 7th day of
April, 1998, by GRANT M. GABLES and BEN L. PIERCE.
/s/ Andre E. Faust
-----------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
My Commission expires:
___2-20-00________________
5
<PAGE>
EXHIBIT 6.13
THE STATE OF TEXAS )(
COUNTY OF HARRIS )(
This Lease Agreement made and entered into on this 7th day of May, 1999, between
BANCROFT BUILDING HOUSTON, LIMITED PARTNERSHIP (hereinafter called "Lessor")
whose address for purposes hereof is 1433 West Loop South, Suite 150, Houston,
TX 77027 and MEDIQUIK SERVICES, INC., (hereinafter called "Lessee") whose
address for purposes hereof is 770 S. Post Oak #520, Houston, TX 77027, prior to
the commencement of the terms of this Lease and thereafter being that of the
"Building" (hereafter defined).
1. LEASED PREMISES:
1 .1 In consideration of the mutual covenants herein, Lessor hereby leases to
Lessee and Lessee hereby hires from Lessor subject to all the Terms and
Conditions hereinafter set forth those certain Premises hereinafter
sometimes called the "Leased Premises" in the buildings known as 4295 &
4299 SAN FELIPE, ALSO KNOWN AS HERITAGE BANK CENTER (herein called the
"Building") located in Houston, Harris County, Texas, such Premises being
more particularly described as follows:
3,820 SQUARE FEET OF NET RENTABLE AREA ("SFNRA")
4295 SAN FELIPE, SUITE #200
HOUSTON, TEXAS 77027
as reflected on the floor plan of such Premises attached hereto and made
a part hereof as Exhibit "B". The real property upon which the Building
is constructed is described on Exhibit "A", attached hereto, and made a
part hereof (the "Real Property").
1.2 In the event of any expansion of Lessee's Leased Premises, the
measurement of any additional space shall be based upon the floorplans
included as Exhibit "B", shall be mutually agreed upon by the parties
hereto, and an "add-on factor" of 1.16 shall apply.
1.3 The NRA in the Leased Premises is hereby stipulated for purposes of this
lease to be 3,820 SF of NRA, whether the same should be more or less or a
result of minor variations resulting from actual construction and
completion of the leased premises for occupancy so long as such work is
in accordance with terms and provisions hereof. In all calculations,
Lessor represents to Lessee that the Building has 89,000 net rentable
square feet, and the Lessee occupies 4.3% of the Building.
2. TERMS:
2.1 Subject to and upon the terms and conditions set forth herein, this Lease
shall continue in force for a term of Sixty (60) Months, beginning on
July 1, 1999 and ending June 30, 2004.
<PAGE>
It is expressly understood that this lease is a valid and binding
obligation of both Lessor and Lessee as of the date of execution
with the term to commence as set above.
2.2 Lessor, at Lessor's cost, shall perform the improvements delineated on
the floorplan of the space which shall be attached hereto as Exhibit
"B". Lessor shall deliver the completed space to Lessee for occupancy on
or before June 1, 1999. Lessor agrees that Lessee may move its
possessions into the Leased Premises upon execution of this Lease
Agreement. Any above building standard items, or changes or additions
to Exhibit "B" which are requested by Lessee subsequent to the execution
of the Lease, shall be made by Lessor, but shall be made at the sole
cost of Lessee, who shall make payment for such items before it
occupies the Leased Premises.
3. USE:
3.1 The Leased Premises are to be used and occupied by Lessee solely for the
purpose of office space and for no other purpose whatsoever, without the
express prior written consent of Lessor which shall not be unreasonably
withheld. Without limiting the generality of the foregoing or the
provisions of Paragraph 21.1, the Leased Premises shall not be used at
any time or in any manner for any matter related in any way to the
conduct or operation of a pornographic bookstore, movie theater dance or
night club featuring nude or partially nude performers or employees, or
any other sexually explicit business.
4. BASE RENTAL:
4.1 Lessee hereby agrees to pay during the initial term hereof a base annual
rental herein called ("Base Rental") as provided for in the Addendum of
this Lease. Lessee shall also pay, as additional rent during the initial
term hereof all other sums of money as shall become due and payable by
Lessee to Lessor under this Lease. The Lessor shall have the same
remedies of default for the payment of additional rent as are available
to Lessor in the case of a default in the payment of Base Rental. Such
Base Rental, together with any adjustments of rent provided for herein
then in effect, shall be due and payable in twelve (12) equal
installments on the first day of each calendar month during the Lease
Term.
4.2 Lessee hereby agrees to pay the Base Rental to Lessor at Lessor's address
as provided herein monthly in advance without demand. Other remedies for
nonpayment of rent notwithstanding, if the Base Rental is not received by
the Landlord on or before the tenth day of the month for which rent is
due, a late charge in the amount of five percent (5%) of all past due
amounts owed on such date, shall become due and payable in addition to
the Base Rental owed under this Lease. Said late charge is intended to
defray the costs incurred by Landlord as a result of handling and
collecting such late payment, and will not be charged as either a penalty
or as interest on past due amounts.
5. BASE RENTAL ADJUSTMENT:
5.1 The Base Rental Adjustment shall be calculated in the following
manner:
<PAGE>
5.1.1 For the purpose of this Lease, Lessee's Base Rental includes an
expense component applicable to Lessee's prorata share of base year
"Basic Costs" (hereinafter defined) equal to the 1999 actual operating
expenses of the total Net Rentable Area of the Building, adjusted as
provided in 5.1.2, below.
5.1.2 Within 120 days from the end of each calendar year, Lessor shall
deliver to Lessee an operating statement of Lessor's actual Basic Costs
for said year. In the event the Building is not 100% occupied during any
year of the lease term, an adjustment shall be made in computing the
Basic Cost for such year so that the Basic Cost shall be computed for
such year as though the Building had been 95% occupied for an entire
year.
5.1.3 In the event that the Actual Basic Costs for the previous calendar
year exceed that set out in paragraph 5.1.1, i.e. the Basic Costs for
calendar year 1999, Lessee shall pay to Lessor within thirty days of
receipt of a Statement from Lessor reciting any rental adjustment due,
Lessee's share of such excess, whether or not this Lease shall then be in
effect, without reduction or set off, as additional rent over and above
the Base Rental.
5.2 At the time the operating statement for the previous year is delivered to
Lessee, Lessor shall also deliver a Basic Cost Expense Estimate for the
then current year, based on reasonable escalations from the previous
year's expenses. This delivery shall be incumbent on Lessor for each
year of the remaining term of the Lease.
5.2.1 Lessee shall pay Lessor the increase between the calendar year
1999 actual Basic Costs and the current operating year Basic Cost Expense
Estimate, but Lessor shall invoice Lessee 1/12 of said increase for each
month of the calendar year, and Lessee shall pay such increase coincident
with its normal monthly rental payment.
5.2.2 In the event that any Annual Estimate shall be in excess of the
expenses as indicated in the operating statement delivered to the Lessee,
as directed in 5.1.2, above, then Lessee shall receive a credit against
its rental payment due for such overpayment coincident with the delivery
of the operating statement to Lessee.
5.2.3 In the event that any Annual Estimate shall be less than the
expenses as indicated in the operating statement delivered to the Lessee,
as directed in 5.1.2, above, then Lessee shall pay such difference within
thirty days of the delivery of the operating statement to Lessee.
5.3 Nothing contained in this Paragraph 5 shall be construed at any time as
to reduce the monthly installments of Base Rental payable hereunder below
the amount set forth in Article 4, Paragraph 4.1 of this Lease.
6. BASIC COST DEFINED:
6.1 "Basic Cost" as said term is used herein shall consist of all normal and
customary operating expenses of the Building, which shall be computed on
the accrual basis in accordance with generally accepted accounting
principles and shall consist of all reasonable expenditures
<PAGE>
similar to other first class office buildings in Houston, Texas, by
Lessor to maintain all facilities in operation from the beginning of
the lease term and such additional facilities in subsequent years as
may be reasonably determined by Lessor to be necessary. The term
"operating expenses" as used herein shall mean all expenses, costs
and disbursements (but not replacement of capital investment items
nor specific costs especially billed to and paid by specific tenants)
of every kind or nature which Lessor shall pay or become obligated to
pay because of or in operation of the Building, including but not
limited to, the following:
6.1.1 Wages, salaries and benefits of all employees directly engaged in
operating and maintenance of the Building as well as employees of
independent contractors, security and janitorial services and personnel
who may provide traffic control relating to ingress and egress to and
from the Parking Garage (described in Paragraph 14.1) to the adjacent
public streets. All taxes, and benefits relating to employees providing
these services shall be included, but limited to the equivalent of one
building manager and one engineer in the exclusive service of the
building.
6.1.2 All supplies and materials directly used in and maintenance of the
Building and in maintaining the on site Management Office.
6.1.3 Cost of all utilities for the Building including the cost of water
and power, heating, lighting, air conditioning and ventilating for the
Building.
6.1.4 Cost of all maintenance and service agreements for the Building,
and the equipment therein, including alarm service, window cleaning,
elevator maintenance, pest control, and interior and exterior landscape
maintenance.
6.1.5 Cost of all insurance relating to the Building, including the cost
of casualty, liability and rental insurance applicable to the Building
and Lessor's on site personal property used in connection therewith.
6.1.6 All taxes and assessments and governmental charges whether
federal, state, county or municipal, and whether they be by taxing
districts or authorities presently taxing the Building, the Real Property
and/or the Parking Garage or by others, subsequently created and any
other taxes, assessments, expenses including disbursements to experts and
other witnesses' fees incurred in contesting the validity or amount of
any taxes or in obtaining a refund of taxes attributable to the Building
or its operation. It is agreed that Lessee will be responsible for ad
valorem taxes on its personal property and on the value of leasehold
improvements to the extent that same exceed standard building allowance.
6.1.7 Cost of repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Lessee or other
third parties, and alterations attributable solely to specific tenants of
the Building other than Lessee).
6.1.8 Amortization of the cost of installation of capital investment
items which are primarily for the purpose of reducing operating costs.
All such costs shall be amortized over
<PAGE>
the reasonable life of the capital investment items by an additional
rent, with the reasonable life and amortization schedule being
determined in accordance with generally accepted accounting
principles to be determined by Lessor and in no event to extend
beyond the reasonable life of the Building. In the case of capital
investment for the purpose of reducing operating expenses, Lessor
shall provide Lessee with a cost justification of its practicality.
The amortization cost shall not exceed the actual savings in any year.
6.1.9 Lessor's central accounting costs applicable to the Building.
6.1.10 A management fee for the management company of the Building, not
to exceed 4% of gross rentals.
6.2 Expressly excluded from the definition of the term Operating Costs are:
6.2.1 Repairs or other work occasioned by fire, windstorm, or other
casualty or condemnation.
6.2.2 Leasing commissions, attorney's fees, costs and disbursements and
other expenses incurred in connection with negotiations or disputes with
tenants, other occupants, or prospective tenants or other occupants.
6.2.3 Costs incurred in renovating or otherwise improving or decorating,
painting, or redecorating space for tenants or other occupants or vacant
space.
6.2.4 Lessor's cost of electricity and other services sold to tenants
and for which Lessor is entitled, or would ordinarily be entitled, to be
reimbursed by tenants as an additional charge or rental over and above
the base rental payable under the lease agreement with such tenant.
6.2.5 Costs incurred by Lessor for alterations, additions, and
replacements which are considered capital improvements and replacements
under generally accepted accounting principals.
6.2.6 Depreciation and amortization.
6.2.7 Costs of capital nature, including, but not limited to, capital
improvements, capital replacements, tenant improvements made to any lease
space, capital repairs, capital equipment and capital tools, all in
connection with generally accepted accounting principals.
6.2.8 Expenses in connection with services or other benefits of a type
which are not provided Lessee but which are provided to another tenant or
occupant.
6.2.9 Costs (including penalties, fines and legal expenses) incurred due
to violation by Lessor or any tenant of the terms and conditions of the
Lease or any other Lease.
<PAGE>
6.2.10 Fees or other compensation paid to subsidiaries or affiliates of
Lessor for services on or to the Building, to the extent that the costs
of such services exceed competitive costs of such services were they not
so rendered by a subsidiary or affiliate.
6.2.11 Interest on debt or amortization payments on any mortgage(s), and
rental under ground or underlying lease(s).
6.2.12 Any compensation paid to clerks, attendants, or other persons in
commercial concessions operated by Lessor.
6.2.13 Rentals and other related expenses incurred in leasing air
conditioning systems, elevators, or other equipment ordinarily considered
to be of a capital nature, except equipment which is used in providing
janitorial services and which is not fixed to the Building.
6.2.14 All items and services for which a lessee reimburses Lessor or
pays third persons.
6.2.15 Advertising and promotional expenditures.
6.2.16 Any other expense which under generally accepted accounting
principles and practice would not be rendered as a normal maintenance or
operating expense.
6.2.17 Any costs, fines, penalties, legal fees or costs of litigation
incurred due to violations by Lessor, its employee(s), agents,
contractors or assigns, of any governmental rule or authority.
6.2.18 Management fees in excess of four percent (4%) of base rent plus
escalations.
6.2.19 Costs of sculpture, paintings or other objects of art.
6.2.20 Wages, salaries, or other compensation paid to any executive
employees above the grade of building manager.
6.2.21 Interest or penalties due to late payments of taxes, utility bills
and other costs.
6.2.22 Federal and state taxes on income; death, estate or inheritance
taxes; franchise taxes and any taxes improved or measured on or by the
income of Lessor from the operation of the Building or imposed in
connection with any change of ownership of the Building.
6.2.23 All janitor and cleaning cost for specific tenants, or related to
construction.
6.2.24 Overtime HVAC charges paid by other tenants.
6.2.25 Lessor's general partnership on corporate overhead and general
administrative expenses.
<PAGE>
6.3 Within ninety (90) days of its receipt of the operating statement, Lessee
at its sole cost and expense shall have the right to review in Lessor's
offices and during normal business hours, Lessor's records of Taxes and
Basic Costs. If an error in calculating Basic Cost is disclosed by Lessee
(or its representative), the amount of any overcharges paid by Lessee
shall be credited against the next monthly escalation charges, or if
none, promptly refunded to Lessee.
7. SECURITY DEPOSIT: $5,250.00.
8. SERVICES TO BE FURNISHED BY LESSOR:
8.1 Lessor covenants and agrees with Lessee to operate the building and
parking garage in a first class manner, and at least equal to the
standards of office buildings of a like kind in the City of Houston,
including:
8.1.1 To use its best efforts to cause sufficient public utilities to
furnish the electricity, gas, HVAC and water utilized in operating any
and all facilities throughout the Leased Premises and Building. Lessee,
by advance notice may request, and Lessor shall provide, overtime HVAC
(i.e. HVAC services provided at other than normal building hours which
are defined in 8.1.3, below) service to Lessee's Leased Premises.
"Advance notice" shall be defined herein as being no later than 12:00
p.m. of the same day that overtime air is requested (except for weekend
overtime air which shall be requested by 12:00 p.m. on the Friday
preceeding the weekend on which overtime air is requested.) The overtime
air shall be charged to Lessee at the rate of $25/hour.
8.1.2 To provide (as part of the Basic Costs of the Building) limited
access to the building during weekends and after normal working hours
during the week. Lessor shall not be liable to Lessee for losses due to
theft or burglary, or other damages done by unauthorized persons on the
Building, Real Property or Parking Garage premise, unless due to the
negligence of Lessor, its employees, contractors, or agents.
8.1.3 To furnish the following services to (as part of the Basic Costs
of the Building) Lessee between normal business hours which are 8:00 a.m.
to 6:00 p.m. Monday through Friday and 8:00 a.m to 12:00 p.m. Saturday.
8.1.3.1 Water at those points of supply provided for general use of
other tenants in the building, central heat and air conditioning in
season, at such temperatures and in such amounts as are necessary to
maintain the temperature between 72-77 degrees F', but such services at
times during week days other than normal business hours for the Building,
on Saturday afternoons, Sundays and holidays to be furnished only upon
the request of Lessee, who shall bear the entire charge thereof except as
provided for in the Addendum to this Lease, routine maintenance and
electric lighting services for all public areas and special service areas
of the Building in the manner and to the extent necessary to maintain a
first class office building.
<PAGE>
8.1.3.2 Janitor service on a five (5) day week basis at no extra
charge, similar to standards of a first class office building in Houston,
Texas, such service to include, without limitation, cleaning and
maintenance of the public areas of the Building as well as all occupied
offices in the Building, including trash pick-up, vacuuming of rugs and
carpets, dusting, etc. The bathroom in Lessee's space shall be cleaned by
the janitorial service as part of the normal five day per week cleaning
service.
8.1.3.3 Electrical facilities to furnish sufficient power for
standard office equipment, but not including electricity required for any
item of electrical equipment which (singly) consumes more than 2.0
kilowatts at rated capacity or requires a voltage other than 120 volts
single phase. Lessee shall pay to Lessor, monthly as billed, such charges
as may be separately metered or as Lessor's engineer may compute for any
electrical service in excess of that first stated above.
8.1.3.4 All fluorescent bulb and ballast replacement in all areas,
and all incandescent bulb replacement in the leased premises and other
public areas, toilet, Restroom areas and stairwells. Failure by Lessor to
any extent to furnish these defined services, or any cessation thereof
resulting from causes beyond the control of Lessor shall not render
Lessor liable in any respect for damages to either person or property,
nor be construed as an eviction of Lessee nor work an abatement of rent
nor relieve Lessee from fulfillment of any covenant or agreement thereof.
Should any of the equipment or machinery break down, or for any cause
cease to function properly; Lessee shall have no claim for rebate,
abatement or deduction in any rental paid or payable hereunder due to
interruption in service occasioned thereby or resulting therefrom, except
as modified by the following paragraph.
Notwithstanding the above, in the event such services are not restored
within three (3) days, Lessee's rent shall abate until such services are
restored. In the event such services are not restored within thirty (30)
days of the initial occurrence, Lessee shall have the right to terminate
the Lease.
8.1.3.5 Elevator service 24 hours a day, seven days a week.
8.1.3.6 Telekey access which will allow Lessee to provide access to
its clients after normal business hours and on weekends.
8.1.3.7 Periodic window washing.
9. KEYS AND LOCKS:
9.1 Lessee shall be furnished with keys for access to the Leased Premises.
All such keys shall remain the property of Lessor. No additional locks
shall be allowed on any door of the Leased Premises without Lessor's
permission, except the existing mechanical punch key locks on the
interior corridor doors. Any additional key required by Lessee shall be
made by Lessor and billed to Lessee at Lessor's actual cost.
<PAGE>
Upon termination of this Lease, Lessee shall surrender to Lessor all keys
of the Leased Premises, and give to Lessor the explanation of the
combination of all locks for safes, safe cabinets and vault doors, if
any, in the Leased Premises.
10. GRAPHICS:
10.1 To provide and install, at Lessee's cost, all graphics as well as a
listing in the Building Directory.
11. IMPROVEMENTS:
11.1 Lessor and Lessee agree the Leased Premises will be built out in
accordance with Exhibit "B", and shall be at the sole cost of Lessor,
save and except additions and Tenant Extra Improvements, as may be
contracted for separately between Lessor and Lessee, and which shall be
delineated on Exhibit "B-1", attached hereto.
12. PEACEFUL ENJOYMENT:
12.1 That Lessee shall, and may peacefully have, hold and enjoy the Lease
Premises subject to the other terms thereof and also subject to any
ground leases or mortgages which shall be placed on the Building, the
Parking Garage and/or the Real Property, provided that Lessee pays the
rental and other sums herein recited to be paid by Lessee and performs
all of Lessee covenants and agreements herein contained. It is understood
and agreed that this covenant and any and all other covenants of Lessor
contained in the Lease shall be binding upon Lessor and its successors
only with respect to breaches occurring during its and their respective
ownership of the Lessor's interest hereunder.
13. LIMITATION OF LANDLORD'S PERSONAL LIABILITY:
13.1 Lessee specifically agrees to look solely to Lessor's interest in the
Building as it may be encumbered from time to time for the recovery of
any judgment from Lessor, it being agreed that Lessor shall never be
personally liable for any such judgment nor shall Lessor ever be liable
for consequential or specific damages of the Lessee as a result of the
Lessor's breach of this Lease. The provision contained in the foregoing
sentence is not intended to, and shall not limit any right the Lessee
might otherwise have to obtain injunctive relief against Lessor or
Lessor's successors in interest.
14. PARKING:
14.1 Lessee shall have as parking stickers for 10 spaces on a non-reserved
basis; seven (7) of these shall be in the basement level and three (3)
shall be on the roof level. These spaces shall be on a "first come-first
serve" basis. Lessor may designate the area within which each such car
may be parked and Lessor may change such designations from time to time.
Lessor may make, modify and enforce rules and regulations relating to the
parking of automobiles in the
<PAGE>
Parking Facilities, and Lessee will abide by such rules and regulations.
The right of Lessee to utilize the Parking Facilities shall be subject
to the right of other Lessees in the building.
15. PAYMENTS BY LESSEE:
15.1 Lessee covenants and agrees with Lessor to pay all rent and sums provided
to be paid to Lessor hereunder at the times and in the manner provided.
Lessee further agrees to pay late charges as provided herein.
16. REPAIRS BY LESSOR:
16.1 Unless otherwise stipulated herein, Lessor shall not be required to make
any improvements or repairs of any kind or character on the Leased
Premises during the term of this Lease, except such repairs as may be
required for normal maintenance operations. All improvements in excess of
building standard improvements will be maintained by Lessor at Lessor's
cost. Any such repairs caused by Lessee's negligence shall be at Lessee's
sole cost and expense. Notwithstanding, Lessor understands and agrees
that it is the obligation of Lessor to maintain the project in the manner
of office buildings in Houston, Texas of a similar class.
17. REPAIRS BY LESSEE:
17.1 Lessee agrees at its own cost and expense, to repair or replace any
damage or injury done to the Building, or any part thereof, caused by
Lessee or Lessee's agents, employees, or invitees; provided, however, if
Lessee fails to make such repairs or replacement promptly Lessor may, at
its option, make such repairs or replacements, and Lessee shall repay the
cost thereof to the Lessor on demand.
18. CARE OF THE LEASED PREMISES:
18.1 Lessee agrees not to commit or allow any waste or damage to be committed
on any portion of the Leased Premises, and at the termination of this
Lease, by lapse of time or otherwise, to deliver up said Leased Premises
to Lessor in as good condition as at date of possession by Lessee,
ordinary depreciation, wear and tear excepted, and damage by casualty
which Lessee is not obligated to repair or restore, and upon such
termination of the Initial Lease, Lessor shall have the right to re-enter
and resume possession of the Leased Premises.
19. ASSIGNMENT OR SUBLEASE:
19.1 In the event Lessee should desire to assign this Agreement or sublet the
Leased Premises or any part thereof subsequent to the sub-lease described
in Paragraph 19.1, above, Lessee shall give Lessor written notice of such
desire at least thirty (30) days in advance of the date on which Lessee
desires to make such assignment or sublease. Lessor shall then have a
period of fifteen (15) days following receipt of such notice within which
to notify Lessee in writing that Lessor elects either (1) to terminate
this agreement as to the space so affected as of the date so specified by
Lessee, in which event Lessee will be relieved of all further obligation
<PAGE>
hereunder as to such space provided Lessee may within ten (10) days
rescind its request to assign or sublet upon receipt of Lessor's written
notice to terminate; or (2) to permit Lessee to assign or sublessee
space, subject, however; to subsequent written reasonable approval of the
proposed assignee or sublessee by Lessor; or (3) to refuse to consent
(with cause only) to Lessee's assignment or subleasing such space and to
continue this Lease in full force and effect as to the entire Leased
Premises. If Lessor elects to exercise option (2) above, Lessee agrees to
provide at its expenses, direct access from such sublet space to a public
corridor of the Building. No assignment or subletting by Lessee shall
relieve Lessee of any obligation under this Lease. Any attempted
assignment of sublease by Lessee in violation of the terms and covenants
of this paragraph shall be an event of default hereunder and shall be
void.
19.2 Consent by Lessor to a particular assignment or sublease or other
transaction shall not be deemed a consent to any other or subsequent
transaction. If this lease be assigned, or if the Leased Premises be
subleased (whether in whole or in part) or in the event of the mortgage,
pledge or hypothecation of Lessee's leasehold interest without the prior
express written permission of Lessor, Lessor may nevertheless collect
rent from the assignee, sublessee, mortgagee, pledgee, party to whom the
leasehold interest was hypothecated, or other occupant and apply the net
amount collected to the rent payable hereunder, but no such transaction
or collection of rent or application thereof by Lessor shall be deemed a
waiver of these provisions or of any default hereunder or a release of
Lessee from the further performance by Lessee of its covenants, duties
and obligations hereunder. Lessor agrees to not unreasonably withhold or
delay its consent to any assignments or sublessee.
20. ALTERATIONS, ADDITIONS, IMPROVEMENTS:
Lessee agrees not to permit the Leased Premises to be used for any
purpose other than that stated in the Use clause hereof, or make or allow
to be made any alterations or physical additions in or to the Leased
Premises without first obtaining the written consent of Lessor, which
shall not be unreasonably withheld or delayed. Such alterations, physical
additions, improvements, to the Leased Premises by Lessee, shall at once
become the property of Lessor and shall be surrendered to Lessor upon the
termination of this Lease by lapse of time or otherwise, provided,
however, this clause shall not apply to trade fixtures, movable equipment
or furniture owned by Lessee. Also, should Lessee wish to make additions
to the space, at its cost, and remove such additions at the termination
of its Lease, then Lessee shall provide advance written notification of
such intent to Lessor, and Lessor shall be obligated to give its approval
so long as Lessee agrees to repair, at its cost, any damage caused by
such removal.
21. LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE:
21.1 Lessee agrees not to occupy or use, or permit any portion of the Leased
Premises to be occupied or used for any business or purpose which is
unlawful, disreputable or deemed to be extra-hazardous or permit anything
to be done which would in any way increases the rate of fire insurance
coverage on said Building and/or its contents.
<PAGE>
22. LAWS AND REGULATIONS/RULES OF BUILDING:
22.1 Lessee and Lessor agree to comply with-all laws, ordinances, orders,
rules and regulations (state, federal, municipal and other agencies or
bodies having any jurisdiction thereof) relating to the use, condition or
occupancy of the Leased Premises.
22.2 Lessee will comply with the reasonable and customary rules of the
Building provided herein by Lessor for the safety, care and cleanliness
of the Leased Premises and for preservation of good order therein. The
initial Building Rules and Regulations are set forth in Exhibit "C"
attached hereto and made a part hereof.
23. ENTRY FOR REPAIRS AND INSPECTION:
23.1 Lessee agrees to permit Lessor or its agents or representatives to enter
into and upon any part of the Leased Premises at all reasonable hours
with prior notice except in the case of an emergency (whether or not
accompanied by Lessee or an agent of Lessee) to inspect same, clean or
make repairs, alterations or additions thereto, as Lessor may reasonably
deemed necessary or desirable, and Lessee shall not be entitled to any
abatement or reduction or rent by reason thereof. Lessor agrees to use
its best efforts to make such repairs, alterations or additions after
normal business hours.
24. NUISANCE:
24.1 Lessee agrees to use its reasonable efforts to conduct its business and
control its agents, employees, and invitees in such manner as not to
create any nuisance, or interfere with, annoy or disturb any other tenant
or Lessor in his operation of the Building.
25. SUBORDINATION TO MORTGAGE:
25.1 This Lease is subject and subordinate to any lien mortgage or deed of
trust or ground lease which may now or hereafter encumber the Building of
which the Lease Premises is a part and to all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative and no further instrument of subordination need be
required by any mortgagee. In confirmation of such subordination,
however, Lessee shall at Lessor's request execute promptly any
appropriate certificate or instrument that Lessor may reasonably request.
In the event of the enforcement by the trustee or the beneficiary under
any such mortgage or deed of trust or ground lease, Lessee will, upon
request of any person or party succeeding to the interest of Lessor as a
result of such enforcement, automatically become the Lessee of such
successor in interest without change in the terms or other provisions of
this Lease; provided, however, that such successor in interest shall not
be bound by (i) any payment of rent or additional rent for more than one
month in advance except prepayments in the nature of security for the
performance by Lessee of its obligations under this Lease or (ii) any
amendment or modification of this Lease made without the written consent,
not unreasonably withheld, and subject to the "Non-Disturbance language"
contained in Exhibit "D" of this Lease, of such Trustee or such
beneficiary or such successor
<PAGE>
in interest, unless such amendment or modification was executed prior
to the transfer of interest. Upon request by such successor interest,
Lessee shall execute and deliver an instrument or instruments confirming
the attornment herein provided for.
26. ESTOPPEL CERTIFICATE OR THREE-PARTY AGREEMENT:
26.1 At Lessor's request Lessee will execute either an estoppel certificate
addressed to Lessor's mortgagee or a three-party agreement among Lessor,
Lessee and said mortgagee or an estoppel certificate addressed to Lessor
or any other party, certifying as to such fact (if true) and agreeing to
such notice provisions and other matters as such mortgagee or any other
party may reasonable require in connection with Lessor's financing.
27. CONDEMNATION AND LOSS OR DAMAGE:
27.1 Lessor and Lessee mutually covenant and agree as follows: If the Leased
Premises shall be taken or condemned for any public purpose, or if a
condemnation results in the loss of so many parking spaces or common
areas as to make it impossible for Lessee to reasonably carry on his
business (or if a voluntary conveyance in lieu thereof is made) this
lease shall cease and terminate. All proceeds from any taking or
condemnation of the Leased Premises shall belong to and be paid to
Lessor, and Lessor shall have the sole right and authority to negotiate
with any public or condemning authorities with respect thereto. However,
Lessee shall have the right to file a separate claim.
28. DAMAGES FROM CERTAIN CAUSES:
28.1 Lessor shall not be liable or responsible to Lessee for any loss or
damage to any property or person occasioned by theft, fire, act of God,
public enemy, injunction, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority, and other act of
force majeure.
29. DEFAULT BY LESSEE:
29.1 If default shall be made in the payment of any sum to be paid by Lessee
under this Lease, and default shall continue for ten (10) days following
receipt of written notice, or default shall be made in the performance of
any of the other covenants or conditions which Lessee is required to
observe and to perform, and such default (other than extra-hazardous use
of the Leased Premises) shall continue for twenty (20) days following
written notice, or if the interest of Lessee under this Lease shall be
levied on under execution or other legal process, or if any petition
shall be filed by or against Lessee or any Guarantor hereof to declare
Lessee or any Guarantor hereof bankrupt or to delay, reduce or modify
Lessee's debts or obligations, or that of any Guarantor hereof or if any
petition shall be filed or other action taken to reorganize or modify
Lessee's capital structure, or that of any Guarantor hereof or if Lessee
or any Guarantor hereof is declared insolvent according to law, or if any
assignment of Lessee's property or that of any Guarantor hereof shall be
made for the benefit of creditors, or if a receiver or trustee is
appointed for Lessee or any Guarantor or its property, or, if either
<PAGE>
Lessee or any Guarantor hereof is a corporation and a majority of the
common voting stock of Lessee or such Guarantor is sold, transferred,
assigned, or conveyed (whether voluntarily or involuntarily) without the
prior written consent of Lessor, or if either Lessee or any Guarantor
hereof is a joint venture, partnership or like entity and a majority of
the ownership interest therein is sold, transferred, assigned or conveyed
(whether voluntarily or involuntarily) without the prior written consent
of Lessor (excepting the case of a sale or transfer of corporate or joint
venture/partnership interests to family members or affiliates); or upon
any other event of default described in any other provision of this
Lease; then Lessor may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease (provided that no such levy,
execution, legal process or petition filed against Lessee shall
constitute a breach of this Lease if Lessee shall vigorously contest the
same by appropriate proceedings and shall remove or vacate the same
within thirty (30) days from the date its creation, service or filing)
and thereupon, at Lessor's option, may have any one or more of the
following described remedies in addition to all other rights and remedies
provided at law or in equity:
29.1.1 Lessor may terminate this Lease and forthwith repossess the Leased
Premises and be entitled to recover forthwith as damages a sum of money
equal to the total of (i) the cost of recovering the Leased Premises,
(ii) the unpaid rent earned at the time of termination, plus interest
thereon at the rate of eighteen percent (18%) per annum from the due
date, (iii) the balance of the rent for the remainder of term less the
fair market value of the Leased Premises for said period and (iv) any
other sum of money and damages owed by Lessee to Lessor.
29.1.2 Alter locks and other security devices at the Leased Premises.
29.1.3 Lessor may terminate Lessee right to possession (but not the
Lease) and may repossess the Leased Premises by forcible entry or
detainer suit or otherwise, without demand or notice of any kind to
Lessee and without terminating this Lease, in which event Lessor may, but
shall be under no obligation to do so unless provided by law, relet the
Leased Premises or any portion thereof for the account of Lessee for such
rent and upon such terms as shall be satisfactory to Lessor, as further
provided in Paragraph 31.1. For the purpose of such reletting, Lessor is
authorized to decorate or to make any repairs, changes, alteration or
additions in or to Leased Premises, or if the same are relet and a
sufficient sum shall not be realized from such reletting after paying the
unpaid basic and additional rent due hereunder earned but unpaid at the
time of reletting plus eighteen percent (18%) per annum thereon, no such
reletting shall be construed as an election on the part of Lessor to
terminate this Lease unless a written notice of such intention be given
by Lessor to Lessee.
Notwithstanding any such reletting without termination, Lessor may at any
time thereafter elect to terminate this Lease, for such pervious breach.
All claims or damages by reason of re-entry and/or possession and/or
alteration of locks or other security devices are hereby waived as are
all claims for damages by reason of any distress warrant, forcible
detainer proceedings, sequestration proceedings or any other legal
process. Lessee agrees that any re-entry by Lessor may be pursuant to
judgment obtained in detainer proceedings or other
<PAGE>
legal proceedings or without the necessity for any legal proceedings,
as Lessor may elect and Lessor shall not be liable in trespass or
otherwise.
29.1.4 The exercise by Lessor of any one or more remedies granted under
Article 30 or otherwise available to Lessor shall not be deemed to be an
acceptance of surrender of the Leased Premises by Lessee, whether by
agreement or by operation of law, it being understood that such surrender
can be effected only by the written agreement of Lessor and Lessee.
30. LESSOR'S RIGHT TO RELET:
30.1 In the event of default by Lessee in any of the terms or Covenants of
this Lease or in the event the Premises are abandoned by Lessee without
legal justification, Lessor shall make reasonable attempts to relet same
for so much of the remainder of the term provided for herein as Lessor
shall determine in its discretion; and if the rent received through such
reletting does not at least equal the rent provided for herein, Lessee
shall pay and satisfy the deficiency between the amount of the rent so
provided for and that received through reletting, and in addition
thereto, shall pay all reasonable expenses incurred in connection with
any such reletting, including, but not limited to, leasing commissions,
the cost of removing and storing Lessee's or other occupant's property,
and Lessor's legal fees.
Nothing herein shall be construed as in any way denying Lessor the right
in the event of abandonment of said Premises or other breach of this
Agreement by Lessee, to treat the same as an entire breach of this
Agreement and any and all damages which Lessor suffers thereby. In no
event shall Lessee be entitled to any excess of the rent obtained by
reletting over and above the rent herein reserved. Action to collect
amounts due by Lessee as provided in this Article 31 may be brought from
time to time, on one or more occasions, without the necessity of Lessor's
waiting until expiration of the Lease term.
30.2 In the event that Lessor is entitled to change the locks at the Leased
Premises pursuant to any of the foregoing provisions, Lessee agrees that
entry may be gained for that purpose through use of a duplicate or master
key or any other peaceable means, that same may be conducted out of the
presence of Lessee, if Lessor so elects, that no notice shall be required
to be posted by Lessor on any door to the Leased Premises (or any other
information), and that Lessor shall not be obligated to provide a key to
the changed lock to Lessee unless Lessee shall have first:
(1 ) brought current all payments due to Lessor under this Lease;
provided, however, that if Lessor has therefore formally and permanently
repossessed the Leased Premises, or has terminated this Lease, then
Lessor shall be under no obligation to provide a key to the new lock(s)
to Lessee regardless of Lessee's payment of past-due rent or other
past-due amounts, damages, or any other payments or amounts of any nature
or kind whatsoever;
(2) fully cured and remedied to Lessor's satisfaction all other defaults
of Lessee under this Lease (but if such default are not subject to cure,
such as, but not limited to, early
<PAGE>
abandonment or vacating of the Leased Premises, then Lessor shall not
be obligated to provide the new key to Lessee under any circumstances);
and,
(3) given Lessor security and assurance reasonably satisfactory to Lessor
that Lessee intends to and is able to meet and comply with its future
obligations under this Lease, both monetary and non-monetary.
Lessor will, upon written request by Lessee, at Lessor's convenience and
upon Lessee s execution and delivery of such waivers and indemnifications
as Lessor may require, at Lessor's option either (i) escort Lessee or its
specifically authorized employees or agents to the Leased Premises to
retrieve personal belongings and effects of Lessee's employees (as
opposed to property which is an asset of Lessee or any Guarantor), and
property of Lessee that is not subject to the landlord's liens and
security interest described in Paragraph 29.1 or (ii) obtain from Lessee
a list of such property described in (i), above, and arrange for such
items to be removed from the Leased Premises and made available to Lessee
at such place and at such time in or about the premises of the Building
as Lessor may designate; provided, however, that if Lessor elects option
(ii), then Lessee shall be required to deliver to Lessor such waivers and
indemnification as Lessor may require in correction therewith, and pay in
cash in advance to Lessor (A) the estimated costs that Lessor will incur
in removing such property from the Leased Premises and making same
available to Lessee at the stipulated location, and (B) all moving and/or
storage charges theretofore incurred by Lessor with respect to such
property. The provisions of this Paragraph 30.2 are intended to override
and supersede any conflicting provisions of the Texas Property Code
(including, without limitation, Section 92.008 thereof, and any
amendments or successor statutes thereto), and of any other law, to the
maximum extent permitted by applicable law.
30.3 In the event of termination or repossession of the Leased Premises for an
event of default, Lessor shall not have any obligation to relet or
attempt to relet the Leased Premises, or any portion thereof, or to
collect rental after reletting; but Lessor shall have the option to relet
or attempt to relet; and in the event of reletting, Lessor may relet the
whole or any portion of the Leased Premises for any period, to any
tenant, for any rental, and for any use and purpose, as Lessor may
determine in its discretion.
30.4 If Lessee should fail to make any payment or cure any default under this
Lease within the time period (if any) provided for in Paragraph 30.1,
above, Lessor, without being under any obligation to do so and without
thereby waiving such default, may make such payment and/or remedy such
other default for the account of Lessee (and enter the Leased Premises
for such purpose), and thereupon Lessee shall be obligated to, and hereby
agrees to, pay Lessor, upon demand, all costs, expenses and disbursements
(including, but not limited to, reasonable attorney's fees) incurred by
Lessor in taking such remedial action.
31. HOLDING OVER:
31.1 In the event of holding over by Lessee after expiration or termination of
this Lease without the written consent of Lessor, Lessee shall pay as
liquidated damages 110% of the then
<PAGE>
current rent for the entire holdover period. No holding over by Lessee
after the term of this Lease shall operate to extend the Lease. In the
event of any unauthorized holding over, Lessee shall indemnify Lessor
against all claims for damages by any other Lessee to whom Lessor may
have leased all or any part of the Premises covered hereby effective
upon the termination of this Lease. Any holding over with the consent
of Lessor in writing shall thereafter constitute the term of this
Lease to be renewable on a month to month basis provided both Lessor
and Lessee mutually agree to the terms and conditions thereof.
32. ATTORNEY'S FEES:
32.1 In the event that either party to this Lease defaults in the performance
of any of the terms, covenants, agreements, or conditions contained in
this Lease and, following any notice or grace period provided herein, the
non-defaulting party places the enforcement of this Lease or any part
thereof or, in the case of Lessor, the collection of any rents due or to
become due hereunder or recovery of the possession of the Leased
Premises, in the hands of an attorney or files suit upon the same, the
defaulting party shall pay to the non-defaulting party reasonable
attorney's fees in addition to any other amounts to which the
non-defaulting party may show itself entitled.
33. ALTERATION:
33.1 This agreement may not be altered, changed or amended, except by an
instrument in writing, signed by both parties hereto.
34. ASSIGNMENT BY LESSOR:
34.1 Lessor shall have the right to transfer and assign, in whole or in part,
all its rights and obligations hereunder and in the Building and property
referred to herein. In such event, no further liability or obligation
shall thereafter accrue against Lessor hereunder, provided such assignee
assumes all of Lessor's obligations herein.
35. NON-WAIVER:
35.1 Failure of Lessor to declare any default immediately upon occurrence
thereof, or delay in taking action in connection therewith, shall not
waive such default, but Lessor shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either in law or in equity. No action by acceptance of an
attempted surrender of the Leased Premises shall be valid unless made in
writing and signed by the Lessor. No entry or taking possession of the
Leased Premises by Lessor shall be construed as an election on its part
to terminate this Lease unless a written notice of such intent be given
to Lessee.
36. FIRE CLAUSE:
<PAGE>
36.1 Subject to the provisions of Paragraph 39.1 hereof, if the Leased
Premises, the Building or Parking Garage shall be damaged by fire or
other casualty resulting from any fault or negligence of Lessee, its
agents, employees or invitees, such damage shall be repaired by and at
the expense of Lessee under the direction and supervision of Lessor and
rent shall continue without abatement.
36.2 If the Leased Premises should be totally destroyed by fire or other
casualty not caused by negligence or fault of Lessee, its agents,
employees or invitees, or if the Leased Premises or the Building should
be so badly damaged by such fire or other casualty as to make the Leased
Premises untenantable, then, in any such event, Lessor shall have the
option to (a) terminate this Lease by written notice delivered to Lessee
within thirty (30) days following the event of such damage or
destruction, in which event neither party hereto shall thereafter have
any further or future obligations hereunder, or (b) continue this Lease
in force and effect, in which event Lessor shall promptly and diligently
repair and restore the damaged or destroyed improvements to substantially
the same condition existing prior to such damage or destruction. For the
period beginning on the date that the Leased Premises were rendered
untenantable to the date of restoration of the Leased Premises to
substantially the same condition existing prior to such damage or
destruction, the rental payable hereunder shall be proportionately
abated. For purposes of this Article 36.2, "untenantable" shall mean that
the Leased Premises have been made inaccessible or unfit in Lessor's
reasonable opinion, for use for the purposes set forth in Article 3.1 as
a result of fire or other casualty, and Lessee does not occupy the Leased
Premises during normal business hours following such casualty.
36.3 If the Leased Premises should be damaged by fire or other casualty not
caused by negligence, faults or acts of Lessee, its agents, employees or
invitees, but the Leased Premises are not made untenantable, this Lease
shall continue in force and effect, and Lessor shall promptly and
diligently repair and restore the damage improvements to substantially
the same condition existing prior to such damage; and for the period
during which Lessee is deprived of any part of the Leased Premises by
reason of such damage and the repair or restoration of the Leased
Premised, the rental payable hereunder shall be proportionately abated.
36.4 If the Building or the Parking Garage should be totally or substantially
destroyed by fire or other casualty not caused by negligence of Lessee,
its agents, employees or invitees, or if the Building or the Parking
Garage shall be so badly damaged as to become untenantable in Lessor's
reasonably opinion (whether or not the Leased Premises or any portion
thereof shall have been damaged), then Lessor may, at Lessor option,
terminate this Lease, and such option to terminate shall be exercised by
written notice delivered to Lessee within thirty (30) days following the
event of such damage or destruction. If Lessor elects to exercise such
option to terminate this Lease, neither party hereto shall thereafter
have any further or future obligations hereunder, and termination shall
be effective as of the date of such casualty. In the event any damage
caused cannot be repaired within 120 days of the occurrence, Lessee shall
have the right to terminate the lease upon giving Lessor thirty (30) days
prior written notice.
<PAGE>
36.5 Lessor's obligation to repair and restore the Leased Premises, the
Building or the Parking Garage in the event of a fire or other casualty
as provided for in this Article 36 shall not require Lessor to expend
funds in excess of insurance recoveries made by reason of such fire or
other casualty. In the event insurance recoveries are not sufficient to
make other repairs and restoration provided for in this Article 36,
Lessor may, at Lessor s option, terminate this Lease by written notice to
Lessee within thirty (30) days after the casualty. If Lessor elects to
exercise such option to terminate this Lease, neither party hereto shall
thereafter have any further or future obligations hereunder, and
termination shall be effective as of the date of such casualty.
36.6 In the event this Lease is so terminated as provided for in Paragraph
36.2, 36.4 or 36.5, the rentals payable hereunder shall be adjusted as of
the date of such damage, and any rental paid for any period beyond the
date of such termination shall be promptly refunded to Lessee.
37. INSURANCE:
37.1 Lessor and Lessee shall, at their sole respective cost and expense,
maintain comprehensive General Public Liability Insurance with limits of
not less than $500,000 in the event of bodily injury or death to any
number of persons in any one occurrence, limits of not less that $500,000
for property damage in any one occurrence, and providing Broad Form
Blanket Contractual Liability (for the same limits described above) and
Personal Injury Liability (with exclusions "a" and "c" deleted)
coverages. Such insurance shall be issued by, and binding upon, an
insurance company having a Best's rating of "A+" or better, or otherwise
acceptable to Lessor or Lessee, as applicable, and all premiums shall be
fully paid in advance.
37.2 Except as otherwise limited by current State Board of Insurance rules and
regulations, Lessee's insurance policies shall include endorsements
naming Lessor as an Additional Insured. All policies will also be
endorsed to provide Lessor thirty (30) days' written notice of
cancellation or material change of any coverages or limits. Upon
occupancy, Lessee shall provide Lessor a Certificate of Insurance showing
compliance with the aforesaid coverages, limits and endorsements, and
when requested by Lessor, shall finish certified copies of all said
insurance policies.
37.3 Lessor shall at all times during the term of this lease maintain a policy
or policies of insurance with the premiums paid in advance, issued by,
and binding upon, some solvent insurance company, providing property
coverage insuring the Complex against "All Risks" of loss or damage for
the full insurable value, provided that Lessor shall not be obligated in
any way or manner to insure any personal property (including, but not
limited to, any furniture, machinery, goods, or supplies) of Lessee which
Lessee may have upon or within the Leased Premises, or any fixtures
installed by or paid for by Lessee upon or within the Leased Premises, or
any additional improvements which Lessee may construct on the Leased
Premises.
<PAGE>
38. HOLD HARMLESS:
38.1 Lessee shall not do any act or thing upon the Building, Parking Garage or
Real Property which may subject Lessor to any liability or responsibility
for injury, damages to persons or property or to any liability by reasons
of any violation of law or of any legal requirement of public authority,
but shall exercise such control over the Leased Premises as to protect
Lessor against any such liability. Lessee agrees to indemnify and save
harmless Lessor from and against (a) all claims of whatever nature
against Lessor arising from act, omissions or negligence of Lessee, its
contractors, licensees, agents, servants, employees or invitees, or from
the joint concurrent act, omission or negligence of Lessor and Lessee in,
on or about the Building, Parking Garage and Real Property. In addition,
Lessee hereby agrees to indemnify and save harmless Lessor from and
against all claims against Lessor arising from any accident, injury or
damage occurring any where within or about the Leased Premises, where
such accident, injury or damage results or is claimed to have resulted
from any act or omission of Lessee or Lessee's agents, employees, or
invitees, or the joint or concurrent act, omission or negligence of
Lessee and Lessor, (b) Lessor shall not do any act or thing upon the
Building, Parking Garage or Real Property which may subject Lessee to any
liability or responsibility for any injury, damages to person or property
or to any liability by reasons of any violation of law or of any legal
requirements or public authority. Lessor hereby agrees to indemnify and
save harmless Lessee from and against all claims of whatever nature
against Lessee arising from any act, omission or negligence of Lessor,
its contractors, licensees, agents servants, employees or invitees, or
from the joint or concurrent act, omission or negligence of Lessee and
Lessor, in, on or about the Building, Parking Garage and Real Property.
In addition, Lessor hereby agrees to indemnify and save harmless Lessee
for and against all claims against Lessee arising from accident, injury
or damage which results or is claimed to have resulted from any act or
omission of Lessor or Lessor's agents, employees, or invitees, (c) The
foregoing indemnities shall be from and against any and all liability,
fines, suits, demands, costs and expenses (including court costs and
attorney's fees) of any kind or nature incurred in connection with any
such claim or proceeding brought thereon, and the defense thereof.
Lessor's recovery against Lessee and Lessee's recovery against Lessor
under this indemnity shall be subject to the provisions of Paragraph 39.1
hereof. For purposes of this paragraph 38.1, the term "Lessor" shall
include also Lessor's contractors, licensees, agents, servants, employees
(including, but not limited to, any management company employed by
Lessor) or invitees, and the term Lessee shall include also Lessee's
contractors, licensees, agents, servants, employees or invitees.
39. WAIVER OF SUBROGATION RIGHTS:
39.1 Anything in this Lease to the contrary notwithstanding, Lessor and Lessee
each hereby waives any and all rights of recovery, claim, action or cause
of action, against the other, its agents, officers, or employees, for any
loss or damage that may occur to the Leased Premises hereby demised, or
any improvements thereto, said Building of which the Leased Premises are
a part, or any improvements thereto, or any personal property of such
party therein, by reason of fire, the elements or any other cause which
could be insured against under the terms of standard fire and extended
coverage insurance policies referred to in paragraph 37.1 or
<PAGE>
37.2 whichever is applicable above, regardless of cause or origin,
including negligence of the other party hereto, its agents, officers
or employees, and covenants that no insurer shall hold any right of
subrogation against such other party.
39.2 Lessor and Lessee each agree to obtain the written consent and agreement
of their respective insurance companies to the provisions of Paragraph
39.1; provided, however, that the failure or inability of either or both
of them to obtain such consent or agreement shall not invalidate the
provisions of said Paragraph 39.1.
40. BROKER:
40.1 Lessee represents and warrants that no brokers other than L.W.
Montaverde, III, Executive Vice-president of Coldwell Bankers Commercial,
is involved in the negotiation of this lease or are entitled to any
commission in connection therewith, and the execution and delivery of
this Lease by Lessor shall be conclusive evidence that Lessor has relied
upon the foregoing representation and warranty.
In the event of a claim of representation of Lessee resulting in a claim
for a brokerage commission by any other broker with respect to the Lease,
then upon formal judgment by a court jurisdiction that such other broker
represented Lessee and is entitled to a commission on the Lease, Lessee
herein will indemnify and save and hold Lessor harmless from and against
all claims for fees, commissions, damages and other costs including
reasonable attorney fees suffered by Lessor.
41. INABILITY TO PERFORM:
41.1 Except as provided herein, this Lease and the obligation of Lessee to pay
rent hereunder and perform all of the other covenants and agreements
hereunder on the part of Lessee to be performed shall in no way be
affected, impaired or excused because Lessor is unable to fulfill any of
its obligations under this Lease expressly or impliedly to be performed
by Lessor or because Lessor is unable to make, or is delayed in
commencing or making any repairs, additions, alterations, improvements or
decorations or is unable to supply any equipment or fixtures if Lessor is
prevented or delayed from so doing by reason of strikes or labor troubles
or by accident, adjustment of insurance or by any cause whatsoever
reasonably beyond Lessor's control, including but not limited to, laws,
government preemption in connection with a National Emergency or by
reason of rule, order or regulation or any department or subdivision
thereof or by government agency or by reason of the conditions of supply
and demand which have been or are affected by war or other emergency.
42. MEMORANDUM OF LEASE:
Neither party shall record this Lease Agreement or any of the exhibits
and/or addenda attached hereto, but at the request of either party,
Lessor and Lessee shall enter into a "short form" or Memorandum of Lease
in recordable form which shall set forth the parties, the legal
description of the land underlying the Building, a description of the
Leased Premises, the
<PAGE>
Commencement Date and Expiration Date of the terms of the Lease and
any options and/or restrictions desired to be included by either
party, which Memorandum of Lease shall be satisfactory in form and
substance to Lessor and Lessee.
43. BILLS AND NOTICES:
43.1 Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, request or other communications
given or required to be given under this Lease shall be deemed
sufficiently given or rendered if in writing, sent by registered or
certified mail (return receipt requested) postage prepaid, addressed (a)
to Lessee (i) at Lessee's address set forth in this Lease if mailed prior
to Lessee's taking possession of the Premises, or (ii) at the Building if
mailed subsequent to Lessee's taking possession of the Premises, or (iii)
at any place where Lessee or any agent or employee of Lessee may be found
if mailed subsequent to Lessee's vacating, deserting, abandoning or
surrendering the Premises, or (b) to Lessor at Lessor's address as set
forth in this Lease, or (c) to such other address as either Lessor or
Lessee may designate as its new address for such purpose by notice given
to the other in accordance with the provisions of this Paragraph.. It is
expressly acknowledged and agreed that subject to any grace period or
notice provided herein, Lessee alone shall bear the risk of loss of
delivery of any payment or communication herein described. Any such bill,
statement, consent, notice, demand, request or other such communication
shall deemed to have been rendered or given on the date when it shall
have been mailed as provided in this Paragraph.
44. MISCELLANEOUS:
44.1 This Lease contains the entire agreement between the parties and
all prior negotiations and agreements are merged in this Lease. Any
executory agreement hereafter made shall be ineffective to change,
modify, discharge or effect an abandonment of it in whole or in part
unless such executory agreement is in writing and signed by the party
against whom enforcement of the change, modification, discharge or
abandonment is sought.
This Lease shall be binding upon and inure to the benefit of the successors
and assigns of the Lessor, and shall be binding upon and inure to the benefit
of Lessee, its successors, and assigns to the extent assignment may be
approved by Lessor hereunder, whether the singular or the plural shall
include the other. All rights and remedies of Lessor under this Lease shall
be cumulative and none shall exclude any other rights or remedies allowed by
law; and this lease is declared to be a Texas Contract, and all of the terms
thereof shall be construed according to the laws of the State of Texas.
<PAGE>
THE PARTIES HERETO HAVE EXECUTED THE LEASE OF THE DATE AFORESAID AND HAVE THE
AUTHORITY TO EXECUTE ON BEHALF OF THE CORPORATIONS INDICATED HEREIN.
Lessee: /s/ Grant Gables Lessor: /s/ G. Grant Roane
--------------------------- -----------------------------
By: Grant Gables, President By: G. Grant Roane
MediQuik Services, Inc. Vice President, Bancroft Building
Corporation
Gen'l. Partner, Bancroft Building
Houston, L.P.
Date: 5/7/99 Date: May 7, 1999
---------------------- -------------------------------
Witness:
/s/
- ----------------------------------
<PAGE>
ADDENDUM TO LEASE BY AND BETWEEN
BANCROFT BUILDING HOUSTON, L.P. & MEDIQUIK SERVICES, INC.
1. BASE RENTAL: $16.50/SF/Year, or the monthly sum of $5,252.50
2. TENANT IMPROVEMENTS: Lessor and Lessee have both reviewed and approved
the attached detailed floor plan layout ("Tenant's Plans") (Exhibit "B"),
together with the attached Schedule of Tenant Extra Improvements (Exhibit
"B-1"). The cost and installation of such improvements shall be handled as
follows:
A. Lessor shall, at its cost, provide for the tenant improvements
delineated on Exhibit "B", attached hereto, including the cost thereof.
B. In the event Lessee requires any Tenant Extra Improvements, then,
within fifteen (15) working days of the receipt of Lessee's request for changes
constituting Tenant's Extras, Lessor shall furnish Lessee with a written
statement evidencing the cost of all Tenant Extras, such costs herein referred
to as "Tenant Extra Costs". Prior to Lessor's commencing construction of any
Tenant Extras, Lessee shall execute a statement evidencing Lessee's approval of
all Tenant Extra Costs and Lessee's agreement to pay for all such costs within
ten (10) days after receiving written notice from Lessor of the amount due.
Failure by Lessee to timely pay for such Tenant Extra Costs will constitute an
Event of Default by Lessee under the Lease, giving rise to all remedies
available to Lessor under this Lease and at law for nonpayment of rent.
3. LEASE RENEWAL: Lessor hereby grants Lessee one option to renew this
Lease, at the then existing Market Rate and Terms, provided Lessee notifies
Lessor in writing of its decision to exercise this option by giving Lessor
written notice of such intent by December 31, 2003, and by negotiating in good
faith to consummate a Renewal Lease Agreement no later than February 28, 2004.
Agreed and accepted and made part and parcel of the Lease by and between
MediQuik Services, Inc. and
Lessee: /s/ Grant Gables Lessor: /s/ G. Grant Roane
----------------------------- ---------------------------
By: Grant Gables, President By: G. Grant Roane
MediQuik Services, Inc. Vice President, Bancroft Building
Corporation
Gen'l. Partner, Bancroft Building
Houston, L.P.
Date: 5/7/99 Date: May 7, 1999
-------------------- -----------------------------
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Tract 1: Lots Eleven (11), Twelve (12), Thirteen (13), Fourteen (14), and
Fifteen (15), in Block One (1), of Briarglen, and addition in Harris County,
Texas, according to the map or plat thereof recorded in Volume 43, Page of the
Map Records of Harris County, Texas.
Tract 2: Lots One (1), Two (2), Three (3), Four (4), and Five (5), in Block
One (1), A Partial Replat of a Replat of Parrett Subdivision, an addition in
Harris County, Texas, according to the map or plat thereof recorded in Volume
42, Page 67 of the Map Records of Harris County, Texas.
<PAGE>
EXHIBIT "B"
FLOOR PLAN OF PREMISES & OUTLINE OF BUILDOUT
Lessor, at Lessor's cost to install sink in current storage area and demising
wall, northwest of entry.
[diagram of floorplan]
<PAGE>
EXHIBIT "B-1"
TENANT EXTRA IMPROVEMENTS
(Tenant to add such items as are required; all items to be at Tenant's Cost.)
[diagram of floorplan]
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
1. All tenants will refer all contractors representatives and installation
technicians who are to perform any work within the Building to Lessor for
Lessor's supervision, approval, and control before the performance of any
such work. This provision shall apply to all work performed in the Building
including, but, not limited to, installations of telephones, telegraph
equipment, electrical devices and attachments, any and all installations of
every nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment and any other physical portion of the Building. Lessee shall not
mark, paint, drill into, or in any way deface any part of the Building or the
Leased Premises, except with prior written consent of the Lessor, and as the
Lessor may direct.
2. The work of the janitorial or cleaning personnel shall not be hindered by
Lessee after 6:00 P.M., and such work may be done at any time when the
offices are vacant. The windows, doors, and fixtures may be cleaned at any
time. Lessee shall provide adequate waste and rubbish receptacles, cabinets,
books cases, map cases, etc. necessary to prevent unreasonable hardship to
Lessor in discharging its obligations regarding cleaning services. Lessor
shall wax wood and vinyl tile floors in the Leased Premises twice per year.
Lessor shall wipe down kitchen area and bathroom nightly, at no additional
charge for the term of the Lease and any renewals, but it shall be expressly
understood that it shall be Lessee's duty to clean its own dishes and
utensils and to maintain general order in both the kitchen and the bathroom.
3. Movement of furniture or office equipment in or out of the Building, or
dispatch or receipt by Lessee of any heavy equipment, bulky material, or
merchandise which requires use of entrance shall be restricted to such hours
as Lessor shall designate. All such movement shall be in a manner to be
agreed upon between Lessee and Lessor in advance. Such prior arrangements
shall be initiated by Lessee. The time, method, routing of movement and
limitations for safety or other concern which may prohibit any article,
equipment or other item from being brought into the Building shall be subject
to Lessor's discretion and control. Any hand trucks, carryalls, or similar
appliances used for the delivery or receipt of such merchandise or equipment
shall be equipped with rubber tires, side guards, and such other safeguards
as the Building shall require. Although Lessor or its personnel may
participate in or assist in the supervision of such movement, Lessee assumes
final responsibility for all risks as to damage to articles moved and injury
to person or persons engaged in such movement, including equipment, property
and personnel of Lessor if damaged or injured as a result of acts in
connection with carrying out this service for Lessee from the time of
entering the property to completion of work. Lessor shall not be liable for
the acts of any persons engaged in, or any damage or loss to any of said
property or persons resulting from any act in connection with such service
performed by Lessee.
4. No signs of any kind or nature, symbol, or identifying mark shall be put
on the Building, in the halls, elevators, stairways, entrances, parking areas
or upon the doors or walls, whether plate glass or otherwise, of the Leased
Premises so as to be visible from the public areas or exterior of the
Building, without prior written approval of Lessor. All signs or lettering
shall conform in all respects to the sign and/or lettering criteria
established by Lessor.
<PAGE>
5. Lessee shall not make or permit any loud or improper noises in the
Building or otherwise interfere in any way with other Tenants.
6. Lessor will not be responsible for any lost or stolen personal property
or equipment from the Leased Premises or public areas, regardless of whether
such loss occurs when the area is locked against entry or not. Unless such
loss is due to the sole negligence of Lessor.
7. Lessee, or the employees, agents, servants, visitors, or licensees of
Lessee shall not, at any time or place, leave or discard rubbish, paper
articles or objects of any kind whatsoever outside the doors of the Leased
Premises or in the corridors or passageways of the Building or attached
Garage. No animals, bicycles, or vehicles of any description shall be brought
into or kept in or about the Building.
8. No additional lock or locks shall be placed by Lessee on any door in the
Building unless written consent of Lessor shall first have been obtained.
9. None of the entries, passages, doors, hallways, or stairways in the
Building shall be blocked or obstructed.
10. Lessor shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment, including computers, safes,
large files, etc., that are to be placed in the Building, and only those
which in the exclusive judgment of the Lessor will not do damage to the
floors, structure, and/or elevators may be moved into the Building. Any
damage caused by installing, moving or removing such aforementioned articles
in the Building shall be paid by Lessee.
11. All Christmas and other decorations of the Lessee must be constructed of
flame retardant materials and confined within Lease Premises.
12. Lessee shall provide Lessor with a list of all personnel authorized to
enter the Building after hours (6:00 P.M. to 7:00 A.M., Monday through
Friday, and 24 hours a day on weekends and holidays).
13. Anyone entering or leaving the Building after hours, as set forth in
paragraph 12, must sign his name, company, suite number, and time on the
Building Register and, if requested, show proper identification.
14. Air conditioning/heating will be provided during the periods of 8:00
A.M. to 6:00 P.M. Monday through Friday, 8:00 A.M. to 12:00 Noon on Saturday
or 1:00 P.M. at Lessee's request, and any other time (including holidays
which shall be published by Lessor) must be requested in writing by noon on
the Friday prior to when additional air conditioning/heating is required.
Lessee shall pay $25.00 per hours for such additional air
conditioning/heating.
15. Any furniture or equipment removed from the Building after hours must be
listed with the Building Manager no later than 3:00 P.M. on the day such
furniture or equipment is to be removed on Monday through Friday, and if such
removal is on a Saturday or Sunday, then by 3:00 P.M. on
<PAGE>
the Friday prior to such removal. Description and serial number should be
included. Pass out orders on Lessee's stationary must be surrendered to the
security officer in the lobby, or in another manner as Lessor shall from time
to time designate, when any article is being removed from the Building.
16. The elevator shall be used to handle packages and shipments of all kinds.
Parcel Post, Express, Small Freight, or Merchant's deliveries can be made any
time during building hours. Deliveries are to be made utilizing the delivery
ramps on the south or west side of the Building, and should these deliveries
require the use of a dolly, said dolly will be of such size and contain rubber
wheels so as not to damage the delivery areas, paves flooring, carpeting, and
building elevator. Furniture or freight shall be handled by previous
arrangement, and advance notice of the Building Management.
17. Names to be placed on or removed from the Directory Board should be
furnished to the Building Manager in writing on Lessee's letterhead. Lessee
shall have the use of the same percent of the Directory Board as Lessee's net
rentable area is to the total net rentable area of the Building which Lessee
occupies.
18. Any additional services as are routinely provided to tenants, not required
by the Lease to be performed by the Lessor, which Lessee requests Lessor to
perform, and which are perfonned by Lessor, shall be billed to Lessee at
Lessor's cost plus 5% and Lessee shall pay such bill on the next maturing date
as an installment of Base Rental.
19. All doors leading from public corridors to the Leased Premises are to be
kept closed when not in use.
20. Canvassing, soliciting, or peddling in the Building is prohibited and
Lessee shall cooperate to prevent the same.
21. Lessee shall give immediate notice to the Building Management Office of any
accidents in the Leased Premises or in the Building or of defects therein or in
any fixtures or equipment, or of any kind of emergency in the Building.
22. Lessee shall not use the Leased Premises or permit the Leased Premises to
be used for photographic, multilith, or multigraph reproductions, except in
connection with its own business.
23. The requirements of Lessee will be attended to only upon application at the
Building Management Office. Employees of Lessor shall not perform any work or do
anything outside of their regular duties unless under special instruction from
the Building Management Office.
24. Lessee, and the employees, agents, servants, visitors, and licensee of
Lessee, shall abide by the rules and regulations for the parking area.
25. Lessee shall not allow to pass into any sewer, drain, or toilet serving the
Leases Premises or located in the Building any oil, grease, or any other
deleterious effluent or substance which may cause an obstruction in or damage to
such sewer, drain, or toilet.
<PAGE>
EXHIBIT "D"
NON-DISTRUBANCE & ATTORNMENT AGREEMENT
Agreement made this 1st day of September, 1998 between Ingbert Jaus
having his principal place of business at 1980 Post Oak Blvd., Suite 700,
Houston, Texas 77056 (hereinafter called "Mortgagee"), Bancroft Building
Houston Limited Partnership, whose address is 1433 West Loop South, Suite
150, Houston, Texas 77027 (hereinafter called "Landlord"), and MediQuik
Services, Inc. whose address is 770 S. Post Oak, #520, Houston, TX 77027
(hereinafter called "Tenant"):
WITNESSETH:
WHEREAS, Mortgagee holds a long-term mortgage loan to Landlord
evidenced by that certain Promissory Note dated August 8, 1997, executed by
Landlord in favor of Mortgagee, in the original amount of $4,000,000.00
(hereinafter called "Note"), which Note was modified, renewed and extended in
the amount of $4,250,000 on November 6, 1997, which Note is secured by a
Mortgage (or Deed of Trust) August 8, 1997, executed by Landlord to Klaus
Thoma, Trustee, in favor of Ingbert Jaus filed for record on August 8, 1997,
under County Clerk's File No. S584455, in the Official Records of Harris
County, Texas (the "Mortgage") covering the real property and improvements
built thereon as an office building, more particularly described in Exhibit
"A" attached hereto and incorporated herein for all purposes (the "Mortgaged
Premises"); and,
WHEREAS, Tenant and Landlord have entered into a lease (the "Lease")
dated _______ covering a part (the "Demised Premises") of said Mortgaged
Premises; and,
WHEREAS, Landlord's interest in the Lease has been assigned to
Mortgagee as additional security for the Mortgage; and,
WHEREAS, Tenant and Mortgagee desire to confirm their understanding
with respect to the Lease and the Mortgage, it being understood that the lien
of the Mortgage shall be prior and superior to the leasehold interest and
estates created by the Lease, subject, however, to the terms of this
Agreement and the performance by Mortgagee of its obligations to hereunder;
and,
WHEREAS, Tenant has requested that Mortgagee agrees not to disturb
Tenant's rights, options, and estates in the Demised Premises and under the
Lease in the event Mortgagee exercises any rights, remedies or recourses with
respect to the Note and Mortgage, subject to the provisions hereof;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Mortgagee and Tenant agree and covenant as follows:
(1) That said mortgage or deed of trust securing said note in favor
of lender, and any renewals and extensions thereof, shall unconditionally be,
and remain at all times a lien or charge on the land described therein prior
and superior to the lease described above, to the leasehold estate
<PAGE>
created thereby and to all rights and privileges of Tenant, thereunder is
hereby subjected and made subordinate to the lien or change of the deed of
trust or mortgage in favor of Lender.
(2) So long as Tenant is not in default (beyond and period given
Tenant by the terms of the Lease to cure such default) in the payment of rent
or additional rent or in the performance of any of the terms, covenants or
conditions of the Lease on Tenant's part to be performed, Tenant's right to
quiet, peaceful and exclusive possession of the Demised Premises and Tenant's
other rights and privileges under the Lease, or any extensions, renewals or
expansions thereof will not be disturbed or interfered with by Mortgagee, or
anyone claiming by, through or under Mortgagee, and Mortgagee will not join
Tenant as a party defendant in any proceeding for the purpose of terminating
Tenants interest and estate under the Lease because of any default under the
Mortgage.
(3) If Mortgagee shall become the owner of the Mortgage Premises or
the Mortgaged Premises shall be sold by reason of foreclosure or other
proceedings brought to enforce the Mortgage or the Mortgaged Premises shall
be transferred by deed in lieu of foreclosure the lease shall continue in
full force and effect a direct Lease between the then owner of the Mortgaged
Premises (including Mortgagee, and purchaser at foreclosure of the Mortgaged
Premises, or the grantee under the deed in lieu of foreclosure) and Tenant,
upon and subject to all of the terms, covenants and conditions of the Lease
for the balance of the term thereof remaining and any extensions or renewals
thereof which may be affected in accordance with the provisions of the Lease,
and Tenant does hereby attorn to such owner of the Mortgaged Premises, said
attornment to be effective and self-operative without the execution of nay
further instrument and Tenant shall from and after said new owner's
succession to the interest of Landlord under the Lease have the same remedies
for the breach of covenant contained in the Lease that Tenant might have had
under the Lease. Mortgagee and all new owners of the Mortgaged Premises shall
be deemed to have assumed and agreed to perform the duties of Landlord under
the Lease during such period, if any, as it is collecting or entitled to
collect rent from Tenant thereunder, provided further, however, that
Mortgagee shall not be:
(a) Liable for an omission of any prior Landlord (including
Landlord);or,
(b) Subject to any offset or defenses which Tenant might
have against any prior Landlord (including Landlord).
(4) To the extent that the Lease shall entitle the Tenant to notice
of any mortgage this Agreement shall constitute such notice to the Tenant
with respect to the Mortgage.
(5) Upon the written request of either Mortgagee or Tenant to the
other given on or after any foreclosure trustee's sale or conveyance in lieu
of thereof, Mortgagee, as Landlord, and Tenant, as Tenant, shall execute a
lease of the Demised Premises containing all of the same terms, provisions,
options and conditions as are contained in the Lease between Landlord and
Tenant, which lease shall be for the then unexpired portion on the term of
the Lease.
(6) In the event any person or entity other that Mortgagee obtains
possession of the Mortgaged Premises by judicial or nonjudicial foreclosures
of the Mortgage or by deed in lieu of foreclosure, Mortgagee, Landlord and
Tenant agree as follows:
<PAGE>
(a) Mortgagee, as a condition to any judicial or nonjudicial
sale of the Mortgaged Premises, or deed in lieu of foreclosure sale or
grantee in such deed in lieu of foreclosure agrees to enter into a
Non-Disturbance and Attornment Agreement with Tenant in form and substance
equivalent to those contained herein, which Non-Disturbance and Attornment
Agreement shall be binding upon the heirs, executors, successors and assigns
of any such purchaser or grantee.
(b) Upon the execution of the Non-Disturbance and Attornment
Agreement provided for in subparagraph (a) above, Tenant agrees to attorn to
and accept the purchaser at the foreclosure sale or the grantee in such deed
in lieu of foreclosure and his or her heirs, executors, successors and
assigns as landlord under Lease for the balance the remaining of the term
thereof subject to all terms and conditions of the Lease. At such time
Mortgagee shall be released from all liability as Landlord under the Lease
and this Agreement.
(7) This Agreement may not be modified orally or in any other
manner than by an agreement in writing signed by the parties thereto or their
respective successors in interest.
(8) All notices hereunder shall ne hand delivered or sent by United
States registered or certified mail, with return receipt requested, postage
prepaid, to the parties hereto at their respective addresses set forth
hereinabove (or at such other address as shall be given in writing in the
manner set forth above) and shall be deemed given upon receipt.
(9) This Agreement shall inure to the benefit of the parties
hereto, their respective successors and assigns.
(10) This Agreement shall be governed by and construed in accordance
with the laws of the state in which the Demised Premises are located.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
MORTGAGEE: Ingbert Jaus
/s/ Klaus Thoma
----------------------------------------------
By: Dr. Klaus Thoma, Attorney-in-Fact for
Ingbert Jaus
TENANT: MediQuik Services, Inc.
/s/ Grant M. Gables, CEO
----------------------------------------------
By: Grant Gables, President
<PAGE>
LANDLORD: Bancroft Building Houston, Limited Partnership
/s/ G. Grant Roane
----------------------------------------------
By: G. Grant Roane, Vice President
Bancroft Building Corporation, General Partner
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on May 12, 1999, by Klaus Thoma,
of Attorney-in-Fact for Ingbert Jaus for the purposes intended therein.
/s/ Dolores Ramirez
-------------------------------------------
Notary Public in and for the
State of Texas
My commission expires: 6-10-2001
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on May 7, 1999, by Grant Gables,
of MediQuik Services, Inc. for the purposes intended therein.
/s/ Andre' E Faust
-------------------------------------------
Notary Public in and for the
State of Texas
My commission expires: 2-20-00
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on May 7th, 1999, by Grant Roane,
of Bancroft Building for the purposes intended therein.
/s/ Michelle Domian
-------------------------------------------
Notary Public in and for the
State of Texas
My commission expires: 06-29-01
<PAGE>
SCARDELLO MARKETING GROUP, L.L.C. EXHIBIT 6.14
d.b.a MediQuik Marketing Services
770 South Post Oak Lane, Suite 520
Houston, Texas 77056
June 18, 1999
VIA HAND DELIVERY
Grant M. Gables
President & CEO
MediQuik Services, Inc.
770 South Post Oak Lane, Suite 520
Houston, Texas 77056
RE: National Diabetic Pharmacies
Dear Grant:
Per our previous conversation, the following describes the terms of our
agreement pertaining to assistance provided by Scardello Marketing Group,
L.L.C. (hereinafter "SMC") with the acquisition and purchase of National
Diabetic Pharmacies (hereinafter "NDP").
In the event that MediQuik, Services, Inc. or any of its subsidiaries or
joint venture partners, et al (hereinafter "MediQuik") purchases NDP or any
of its assets, SMG shall receive the following payment:
NDP Corporate or Asset Purchase
200,000 Shares of MediQuik Common Restricted Stock or Zero Cost Options
In the event that MediQuik purchases NDP or any of its assets and SMG
provides a financing source and a firm commitment from said financing source
at terms not to exceed prime plus 2 points with customary origination fees
for senior debt of similar size, and no other discount points or fee's, SMG
shall receive the following payment:
Financing Provided for the NDP Corporate or Asset Purchase
100,000 Shares of MediQuik Common Restricted Stock or Zero Cost Options
The payment pertaining to the financing provision above shall occur
regardless if MediQuik utilizes the financing source and associated firm
commitment.
These terms shall continue for up to five years. In the event that MediQuik
elects to utilize the zero cost options, it is understood that rule 144 will
apply to said shares. MediQuik will pay legal costs associated with the
preparation of said option agreements.
Please indicate your agreement the terms stated herein where indicated below.
Sincerely,
/s/ Albert McMullin
Albert McMullin
Executive Vice President
The terms described herein are hereby agreed to this 18th day of June, 1999.
MediQuik Services, Inc.
/s/ Grant M. Gables_____________________
Grant M. Gables
President & CEO
<PAGE>
EXHIBIT 6.15
CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED
INFORMATION HAS BEEN INDICATED WITH AN ASTERISK (*).
ADVANTAGE CARE NETWORK, INC.
PROVIDER AGREEMENT
This agreement is between a health services provider (MEDICAL PROVIDER) and
ADVANTAGE CARE NETWORK, INC., (ACN). The purpose of this agreement is to
define the responsibilities of the MEDICAL PROVIDER for contracts and
agreements that may be entered into by ACN on behalf of the MEDICAL PROVIDER.
ADVANTAGE CARE NETWORK, INC., (hereinafter referred to as "ACN") and MEDIQUIK
SERVICES, INC. (hereinafter referred to as "MEDICAL PROVIDER"), are mutually
desirous of entering into this agreement whereby the MEDICAL PROVIDER
participates in and makes available certain medical and related services or
products to Health Care Service Organizations, Preferred Provider
Organizations, Exclusive Provider Networks and other medical delivery systems
(hereinafter collectively referred to as "HEALTH PLANS"), under agreements
and arrangements negotiated by the ACN.
WHEREAS, the ACN is a Texas Corporation organized by the physicians to
arrange for or administer the provision of health care services by
contracting directly or indirectly with Payors, Employers, Insurers and
others;
WHEREAS, the ACN obtains contracts with MEDICAL PROVIDERS, physicians,
hospitals and other health care practitioners and entities to arrange for or
administer at pre-determined rates, the delivery of such health care services;
WHEREAS, the MEDICAL PROVIDER is a Health Care Professional or business
licensed in the State and is qualified to provide health care goods or
services to Beneficiaries in El Paso, Texas.
THEREFORE, the ACN and MEDICAL PROVIDER agree to abide by and be governed by
all conditions set forth in this agreement including the Parties Obligations,
Attachments and any Exhibits or Amendments.
In consideration of the mutual promises herein, the parties agree as follows:
I. DEFINITIONS
<PAGE>
"BENEFICIARY" means any individual, or eligible dependent of such
individual, whether referred to as "Insured", "Subscriber", "Member",
"Participant", "Enrollee", "Dependent" or otherwise, who is eligible for
Covered Services pursuant to a Service Agreement that is entered into by
ACN.
"COINSURANCE" means a payment that a Beneficiary is required to make to a
Health Care Professional for Covered Services under a Service Agreement,
which is calculated as a percentage of the contracted reimbursement rate of
such services.
"CONTRACTOR" means the Advantage Care Network, Inc. sometimes referred to
as the (ACN), and its corporate Board of Directors.
"COPAYMENT OR DEDUCTIBLE" means a payment that a Beneficiary is required to
make to a Health Care Professional under a Service Agreement, which is
calculated, as a fixed dollar payment.
"COVERED SERVICES" means those health care services provided to a
Beneficiary in accordance with a Service Agreement.
"HEALTH CARE PROFESSIONAL" means a MEDICAL PROVIDER or any other health
care practitioner or entity that has a direct or indirect contractual
arrangement with ACN to provide Covered Services.
"PARTICIPATING HOSPITAL" means a hospital that has a direct or indirect
contractual agreement with ACN and to which a Health Care Professional may
admit Beneficiary for care and treatment.
"PAYOR" means a person or entity that has entered into an agreement with
ACN to participate in the ACN for the purpose of making available, by
contract, health care services to its Beneficiaries. Payors may enter into
such an agreement through duly licensed third party administrators that
have been authorized and empowered to act as their attorney-in-fact to
enter into a Payor Participation Agreement.
"ACN" means the ADVANTAGE CARE NETWORK, INC., a physician developed
organization developed for the purpose of (a) soliciting third party payors
for health care services for participation in the ACN, (b) entering into
agreements with such third party payors, hospitals and other health care
facilities, and other entities owned and controlled by medical providers
and other health care professionals ("HCPs") in order to facilitate the
execution and performance of Payor Service Agreements and performing or
arranging for the performance of services such as utilization review,
provider credentialing, quality assurance services and claims processing.
2
<PAGE>
QUALITY ASSURANCE" means the process established and operated by the ACN or
its designee relating to the quality of Covered Services.
"SERVICE AGREEMENT" means those agreements between ACN and an employer,
insurer, labor union, trust or other organization or entity, that specifies
services to be provided to or for the benefit of, or arranged for or
reimbursed to, or for the benefit of Beneficiaries, the terms and
conditions under which those services are to be provided and/or reimbursed.
"MEDICAL PROVIDER" means a provider of health care services or products who
agrees to furnish Covered Services to Beneficiaries.
"UTILIZATION REVIEW" means the processes to review and determine whether
certain health care services provided or to be provided to Beneficiaries
are medically necessary and are provided in an effective and cost efficient
manner.
II. OBLIGATIONS
A. SERVICES
1. MEDICAL PROVIDER and ACN shall act in accordance with the terms
of this Agreement and applicable Attachments. MEDICAL PROVIDER
shall accept the negotiated rates set forth in Attachments to
this Agreement as payment in full for all services provided to
Beneficiaries pursuant to this Agreement. The ACN may negotiate
service agreements with different payors that may have different
reimbursement criteria. All ACN approved agreements shall
include reimbursement rates that shall become individual
attachments to this agreement.
2. MEDICAL PROVIDER shall provide or deliver Covered Services with
the same standard of care, skill and diligence customarily used
by similar Health Care Professionals in the community in which
such services are rendered. MEDICAL PROVIDER shall render
Covered Services in the same manner, in accordance with the same
standards, and with the same availability, as offered to other
patients. MEDICAL PROVIDER shall not differentiate or
discriminate in the treatment of any Beneficiary because of race,
color, national original, ancestry, religion, sex, marital
status, sexual orientation, age, health status or source of
payment.
3. MEDICAL PROVIDER shall provide services only at Participating ACN
Hospitals except in the case of an Emergency or as otherwise
required by law.
3
<PAGE>
4. For referrals and if applicable, MEDICAL PROVIDER shall refer
Beneficiary to Participating ACN Health Care Professionals except
in the case of an Emergency or as otherwise required by law.
5. MEDICAL PROVIDER shall be bound by and comply with the provisions
of applicable state and federal laws and regulations and MEDICAL
PROVIDER shall comply with the requirements of and shall
participate in Quality Assurance and Utilization Review.
6. ACN shall establish a system of Beneficiary identification,
communicate requirements to Participating Health Care
Professionals and identify Participating Health Care
Professionals to Payors and Beneficiaries.
7. ACN shall contract, directly or indirectly, with Payors who agree
to pay in accordance with this Agreement for Covered Services
rendered by MEDICAL PROVIDER.
B. COMPENSATION AND BILLING
1. MEDICAL PROVIDER shall receive payments for Covered Services as
set forth in the attachments to this Agreement. Compensation
arrangements and rates are set forth in applicable Attachments
and may vary by payor. All Compensation arrangements and those
arrangements that involve risk between the payor and the ACN or
MEDICAL PROVIDER shall be approved by the ACN. Specific detail
concerning risk sharing and distribution of deficit or excess
fund balances shall be included in the specific payor attachment
to this agreement.
2. MEDICAL PROVIDER's reimbursement for Covered Services shall be
the lesser of Health Care Professional's usual and customary
charge for the service provided, or the ACN's negotiated fee as
described in Attachments to this Agreement, less applicable
Copayments, Deductibles and Coinsurance. MEDICAL PROVIDER shall
bill for Covered Services according to the following:
3. MEDICAL PROVIDER shall submit claims on the appropriate claim
form for all Covered Services within sixty (60) days of the date
those services are rendered. Any amount owing under this
Agreement shall be paid within thirty (30) days after the receipt
of a complete claim, unless additional required information is
requested within the thirty (30) day period, or the claim
involves coordination of benefits.
4
<PAGE>
4. Payors shall agree to deduct any Copayments, Deductibles, or
Coinsurance required by the Service Agreement from payment due to
MEDICAL PROVIDER. Deduction of for the Copayment, Deductible or
Coinsurance shall be determined on the basis of the lesser of
MEDICAL PROVIDER's usual and customary charges and ACN's
negotiated fee schedule.
5. MEDICAL PROVIDER shall not charge Beneficiary for services denied
as not being Medically Necessary (defined herein), unless MEDICAL
PROVIDER has obtained a written waiver from the Beneficiary.
Such a waiver shall be obtained in advance of the provision of
those services. The waiver shall clearly state that the
Beneficiary acknowledges that such services are not Medically
Necessary and that the Beneficiary shall be responsible for
payment of charges for such services.
6. MEDICAL PROVIDER will look solely to designated Payor for
compensation for Covered Services except for Copayments,
Deductibles or Coinsurance. MEDICAL PROVIDER agrees that whether
or not there is any unresolved dispute for payment, that under no
circumstances will MEDICAL PROVIDER directly or indirectly make
any charges or claims, other than for Copayments, Deductibles or
Coinsurance against any Beneficiaries or their representatives
for Covered Services and that this provision survives termination
of this Agreement for services rendered prior to such
termination. Except for the collection of Copayments,
Deductibles or Coinsurance, only those services that are not
Covered Services may be billed directly to Beneficiary, subject
to limitations listed above. This paragraph is to be interpreted
for the benefit of Beneficiary and does not diminish the
obligation of Payor to make payments to MEDICAL PROVIDER
according to the terms of this Agreement.
7. The following provisions apply regarding coordination of
benefits:
a. When designated Payor is primary under applicable
coordination of benefits rules, ACN or Payor shall pay
benefits as set forth in this Agreement without regard to
the obligations of any secondary payor.
b. When designated Payor is determined to be secondary to any
other payor, ACN or Payor will pay no greater amount than
the difference between the amount payable to MEDICAL
PROVIDER by the primary payor and the amount for Covered
Services owing under this Agreement. Payor shall not be
liable for any amount unless Payor has received MEDICAL
PROVIDER's claim for such secondary payment within
ninety (90) days of the date when Payor is determined to be
secondary.
5
<PAGE>
c. Where another payor is primary under coordination of
benefits rules, MEDICAL PROVIDER shall follow that payor's
billing rules.
8. MEDICAL PROVIDER may bill an individual directly for any services
provided following the date the individual ceases to be a
Beneficiary. Designated Payor has no obligation under this
Agreement to pay for services rendered to individuals who no
longer are Beneficiaries.
C. RECORDS
1. ACN AND MEDICAL PROVIDER agree that clinical records of
Beneficiaries shall be regarded as confidential and both shall
comply with all applicable federal and state laws and regulations
regarding access and retention of such records.
2. MEDICAL PROVIDER shall maintain and furnish such records and
documents as may be required by applicable laws and regulations.
Review, as required by Payor.
3. MEDICAL PROVIDER shall provide ACN or its designee with
reasonable access during regular business hours to specified
clinical and medical records of Beneficiaries maintained by
MEDICAL PROVIDER for the period required by applicable law and at
any time thereafter that such access is reasonably required in
connection with a Beneficiary's health care.
4. Designated Payor shall be responsible for obtaining Beneficiary's
consent to the release of medical record information by MEDICAL
PROVIDER for the purposes stated in this section, and such Payor
shall indemnify and hold harmless MEDICAL PROVIDER for any claim
by a Beneficiary for breach of confidentiality resulting from
MEDICAL PROVIDER's compliance with this section.
D. INSURANCE AND LIABILITY
1. Throughout the term of this Agreement, MEDICAL PROVIDER shall
maintain at MEDICAL PROVIDER's expense general and professional
liability coverage in a form and amount acceptable to ACN.
MEDICAL PROVIDER shall give ACN a certificate of insurance
evidencing such coverage upon request. MEDICAL PROVIDER shall
give ACN thirty (30) days prior written notice of cancellation,
modification or termination of such insurance. MEDICAL PROVIDER
shall give ACN prompt written notice of any claims against
MEDICAL PROVIDER's liability coverage.
6
<PAGE>
2. Neither party hereto shall be liable for defending or for the
expense of defending the other party, its agents, or employees,
against any claim, legal action, dispute resolution or
administrative or regulatory proceeding arising out of or related
to such other party's actions or omissions under this Agreement.
Neither party hereto shall be liable for any liability of the
other party, its agents, or employees, whether resulting from
judgment, settlement, award, fine or otherwise, which arises out
of such other party's actions or omissions under this Agreement.
E. UTILIZATION REVIEW
1. ACN shall establish or contract for Utilization Review, which
shall seek to assure that Covered Services compensated under the
Service Agreement are Medically Necessary. "Medically Necessary"
means services or supplies which, under the provisions of this
Agreement, are determined by the ACN under Utilization review to
be: (a) appropriate and necessary for the symptoms, diagnosis or
treatment of the medical condition; (b) provided for diagnosis or
direct care and treatment of the medical condition; within
standards of good medical practice within the organized medical
community and (d) not primarily for the convenience of the
Beneficiary, the Beneficiary's Health Care Professional or
another provider. Except as otherwise provided in a Service
Agreement, Covered Services must be Medically Necessary.
F. INSPECTIONS
1. Upon reasonable notice and at reasonable hours, ACN or its agents
may inspect MEDICAL PROVIDER's premises and operations to ensure
that they are adequate to meet Beneficiary's needs.
G. REPRESENTATIONS
1. MEDICAL PROVIDER represents and warrants that the information set
forth in the ACN's Credentialing Application is true and correct.
MEDICAL PROVIDER shall promptly notify ACN of any changes in the
information contained in the Application within thirty (30) days
of such change.
2. ACN makes no representations or guarantees concerning the number
of Beneficiaries it can or will refer to MEDICAL PROVIDER under
this Agreement.
7
<PAGE>
H. NON-DISCLOSURE
1. MEDICAL PROVIDER shall not discuss any information concerning
rates, terms or negotiations concerning this Agreement with other
parties unless prior approval has been provided by the ACN Board
of Directors.
III. MISCELLANEOUS OBLIGATIONS
A. CONTRACTOR RELATIONSHIP
1. This Agreement is intended to create a relationship between ACN
and MEDICAL PROVIDER for the purpose of effecting these
provisions.
2. Nothing in this Agreement, including MEDICAL PROVIDER's
participation in the Quality Assurance and Utilization Review
process, shall be construed to interfere with or in any way
affect MEDICAL PROVIDER's obligation and responsibility to
exercise independent medical judgment in rendering health care
services or goods to Beneficiaries.
B. TERM OF AGREEMENT
1. The initial term of this Agreement shall begin on the Effective
Date and shall continue from year to year thereafter, unless
terminated as set forth below.
C. TERMINATION
1. FOR CAUSE. MEDICAL PROVIDER or ACN may terminate this Agreement
at any time for cause. Cause for termination includes, but is
not limited to, the following:
a. Failure of ACN to maintain licenses or certifications
required to operate in conformity with this Agreement.
b. Habitual neglect or continued failure by either party to
perform its duties under this Agreement.
c. Initiation of bankruptcy proceedings by or against either
party.
d. Material breach of this Agreement by either party.
e. Failure by MEDICAL PROVIDER to maintain licenses required to
perform MEDICAL PROVIDER's duties under this Agreement, or
to comply with applicable laws and regulations.
8
<PAGE>
f. Any misrepresentation or falsification of any information on
MEDICAL PROVIDER's application submitted to ACN.
g. Any suspension or other involuntary termination or reduction
of MEDICAL PROVIDER's privileges.
h. Commission or omission of any act or any conduct or
allegation of conduct for which MEDICAL PROVIDER's license
and certification may be subject to revocation or
suspension, whether or not actually revoked or suspended, or
if MEDICAL PROVIDER is otherwise disciplined by any
licensing, regulatory, professional entity or any
professional organization with jurisdiction over MEDICAL
PROVIDER.
i. Failure of MEDICAL PROVIDER to maintain required liability
coverage protection.
j. Any occurrence under paragraph (e) through (j) above shall
be grounds for immediate termination. Termination for any
other reason set forth above shall be upon thirty (30) day's
prior written notice by the terminating party.
2. WITHOUT CAUSE. This Agreement may be terminated at any time
without cause or prejudice upon sixty (60) days prior written
notice by either party.
D. RIGHTS AND OBLIGATIONS UPON TERMINATION
1. Upon termination of this Agreement for any reason, the rights of
each party hereunder shall terminate. Any such termination,
however, shall not release MEDICAL PROVIDER or ACN from
obligations under this Agreement prior to the effective date of
termination.
E. ASSIGNMENT AND DELEGATION OF DUTIES
1. Neither ACN nor MEDICAL PROVIDER may assign duties, rights or
interests under this Agreement unless the other party shall so
approve by written consent.
F. USE OF NAME
1. MEDICAL PROVIDER agrees that MEDICAL PROVIDER's name, office
telephone number, address, specialty, board certification and
hospital
9
<PAGE>
affiliation, may be included in literature distributed to
existing or potential Beneficiaries, Participating Health Care
Professionals and Payors.
G. INTERPRETATION
1. The validity, enforceability and interpretation of this Agreement
shall be governed by any applicable federal law and by the laws
of Texas in which MEDICAL PROVIDER is licensed and has rendered
Covered Services.
H. AMENDMENT
1. ACN may amend this Agreement and Attachments by providing prior
written notice to MEDICAL PROVIDER. Failure of MEDICAL PROVIDER
to object in writing to any such proposed amendment within thirty
(30) days following receipt of notice shall constitute MEDICAL
PROVIDER's acceptance thereof. Notification to ACN of rejection
of any proposed amendment means that this Agreement shall remain
in force without the proposed amendment.
2. In the event that state or federal law or regulation should
change, alter or modify the present services, levels of payments
or standards of eligibility of Beneficiaries, such that the
terms, benefits and conditions of this Agreement must be changed
accordingly, then upon notice from ACN, MEDICAL PROVIDER shall
continue to perform services under this Agreement as modified.
3. Except as provided above, amendments to this Agreement shall be
agreed to in advance in writing by ACN and MEDICAL PROVIDER.
I. ENTIRE CONTRACT
1. This Agreement contains all the terms and conditions agreed upon
by the parties, and supersede all other agreements, express or
implied, regarding the subject matter.
J. NOTICE
1. Any notice required hereunder shall be in writing and shall be
sent by United States mail, postage prepaid, to ACN and MEDICAL
PROVIDER at the addresses set forth.
10
<PAGE>
K. ENFORCEABILITY AND WAIVER
1. The invalidity and non-enforceability of any term or provision of
this Agreement shall in no way affect the validity or
enforceability of any other term or provision. The waiver by
either party of a breach of any provision of this Agreement shall
not operate as or be construed as a waiver of any subsequent
breach thereof.
L. ARBITRATION
1. In the event any dispute should arise with regard to performance
or interpretation of any of the terms of this agreement, and the
dispute cannot be resolved by the ACN and MEDICAL PROVIDER, all
matters in controversy shall be submitted to arbitration pursuant
to the arbitration rules of the American Arbitration Association,
and such arbitration shall be held in Texas. Any decision
rendered in arbitration shall be binding and may be enforced in
any court or competent jurisdiction as provided by law.
M. INDEMNIFICATION
1. ACN shall indemnify and hold MEDICAL PROVIDER free and harmless
against any and all claims, demands, and expenses of all kinds
made against or incurred by ACN, which result or arise out of any
negligent act of ACN or any agent, employee or representative of
ACN in the performance or omission of any act or responsibility
assumed by the ACN pursuant to this agreement. MEDICAL PROVIDER
shall indemnify and hold ACN free and harmless against any and
all claims, demands, and expenses of all kinds made against or
incurred by MEDICAL PROVIDER, which result or arise out of any
negligent act of MEDICAL PROVIDER or any agent, employee or
representative of MEDICAL PROVIDER in the performance or omission
of any act or responsibility assumed by the MEDICAL PROVIDER
pursuant to this agreement.
MEDICAL PROVIDER ADVANTAGE CARE NETWORK (ACN)
Benjamin J. Scardello, Vice President Richard Mendoza, Vice President
- ------------------------------------- --------------------------------
TYPED NAME TYPED NAME
/s/ Benjamin J. Scardello /s/ Richard Mendoza
- ------------------------------------- --------------------------------
SIGNATURE SIGNATURE
6-29-99 effective 7-1-99
- ------------------------------------- --------------------------------
DATE DATE
11
<PAGE>
MEDIQUIK SERVICES, INC.
THE DIABETES ADVANTAGE PLAN PRICE SCHEDULE - EXHIBIT "A" - EFFECTIVE THRU
12/31/1999
<TABLE>
<CAPTION>
SUPPLIES CODE ITEMS UM QTY PRICE
<S> <C> <C> <C> <C>
Bayer Elite Care System w/Glucometer E0607 1 EA 1 *
Bayer Elite Glucose Strips A4253 50 BX 1 *
Gainor Cleanlet Lancets, 28 ga A4259 200 BX 1 *
Kendal Alcohol Prep Pad A4245 200 BX 1 *
Terumo Syringe 1/2cc 29x1/2 A4206 100 BX 1 *
Terumo Syringe 1cc 29x1/2 A4206 100 BX 1 *
Becton Dickinson Syringe 1/2 cc 30 x 1/2 A4207 100 BX 1 *
Winfield Sharps Container 1qt A4211 1 EA 1 *
Becton Dickinson HbA1c Test Kit 82948 1 EA 1 *
Becton Dickinson HbA1c Lab Results 82947 1 EA 1 *
The price for supplies reflects a 90-day distribution shipping schedule. In the event that more frequent shipping schedules are
required, additional charges may occur.
<CAPTION>
MEDICATIONS (FORMULARY & PRICE EXAMPLES) TYPE RX TABS PRICE
<S> <C> <C> <C> <C>
Formulary: AWP minus 15% plus $1.50 dispensing charge
Acarbose Generic 50 mg 100 *
Acetohexamide Generic 250 mg 100 *
Chloropamide Generic 250 mg 100 *
Glimepiride Generic 2 mg 100 *
Glipizide Generic 5 mg 100 *
Glucophage Brand 500 mg 100 *
Glyburide Generic 5 mg 100 *
Insulin Brand 10 mg 100U *
Tolazamide Generic 250 mg 100 *
Tolbutamide Generic 500 mg 100 *
Troglitazone Generic 200 mg 30 *
Medications are ordered and billed pursuant to the physician's prescription. The AWP amount for each medication may vary as
manufacturers adjust prices. For any medication not listed above contact MediQuik for availability and the AVP amount.
<CAPTION>
SERVICES FREQUENCY PRICE
<S> <C> <C> <C> <C>
Patient Telephone Contact 1 every 3 mos *
Educational Materials 1 every 3 mos *
Access to Information re: Classes / Seminars various *
Internet Web Site Access 24 hrs *
Nurse On Call Services - (Immediate Family Only) 24 hrs *
Pharmacist On Call Services 24 hrs *
Program Reports 1 every 3 mos *
These services are available upon the enrollment of eligible patients in The Diabetes Advantage Plan.
BILLING PROCEDURE & PRICING EXAMPLES (see The Diabetes Advantage Plan Proposal)
Products and services are grouped and shipped as one package for each patient according to their planned shipping schedule. Based
upon the physician's orders, prescriptions and the patient's profile upon enrollment, the actual content and price of each package
may vary. Typically, a three months supply of the required items is forwarded to each patient. Shipping schedules may vary,
however, based upon insulin usage and the physician's requirements.
</TABLE>
* This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
12
<PAGE>
MEDIQUIK SERVICES, INC.
THE DIABETES ADVANTAGE PLAN PRICE SCHEDULE - EXHIBIT "A" - EFFECTIVE THRU
1/1/2000
<TABLE>
<CAPTION>
SUPPLIES CODE ITEMS UM QTY PRICE
<S> <C> <C> <C> <C>
Bayer Elite Care System w/Glucometer E0607 1 EA 1 *
Bayer Elite Glucose Strips A4253 50 BX 1 *
Gainor Cleanlet Lancets, 28 ga A4259 200 BX 1 *
Kendal Alcohol Prep Pad A4245 200 BX 1 *
Terumo Syringe 1/2cc 29x1/2 A4206 100 BX 1 *
Terumo Syringe 1cc 29x1/2 A4206 100 BX 1 *
Becton Dickinson Syringe 1/2 cc 30 x 1/2 A4207 100 BX 1 *
Winfield Sharps Container 1qt A4211 1 EA 1 *
Becton Dickinson HbA1c Test Kit 82948 1 EA 1 *
Becton Dickinson HbA1c Lab Results 82947 1 EA 1 *
The price for supplies reflects a 90-day distribution shipping schedule and the net amount paid to MediQuik by the Payor. In the
event that more frequent shipping schedules are required, additional charges may occur.
<CAPTION>
MEDICATIONS TYPE RX TABS PRICE
<S> <C> <C> <C> <C>
Formulary: AWP minus 15% plus $1.50 dispensing charge
Acarbose Generic 50 mg 100 *
Acetohexamide Generic 250 mg 100 *
Chloropamide Generic 250 mg 100 *
Glimepiride Generic 2 mg 100 *
Glipizide Generic 5 mg 100 *
Glucophage Brand 500 mg 100 *
Glyburide Generic 5 mg 100 *
Insulin Brand 10 mg 100U *
Tolazamide Generic 250 mg 100 *
Tolbutamide Generic 500 mg 100 *
Troglitazone Generic 200 mg 30 *
Medications are ordered and billed pursuant to the physician's prescription. The price for each medication may vary as
manufacturers or distributors change prices. For any medication not listed above contact MediQuik for availability and pricing.
<CAPTION>
SERVICES FREQUENCY PRICE
<S> <C> <C>
Patient Telephone Contact 1 every 3 mos *
Educational Materials 1 every 3 mos *
Access to Information re: Classes / Seminars various *
Internet Web Site Access 24 hrs *
Nurse On Call Services - (Immediate Family Only) 24 hrs *
Pharmacist On Call Services 24 hrs *
Program Reports 1 every 3 mos *
These services are available upon the enrollment of eligible patients in The Diabetes Advantage Plan.
BILLING PROCEDURE & PRICING EXAMPLES (see The Diabetes Advantage Plan Proposal)
Products and services are grouped and shipped as one package for each patient according to their planned shipping schedule. Based
upon the physician's orders, prescriptions and the patient's profile upon enrollment, the actual content and price of each package
may vary. Typically, a three months supply of the required items is forwarded to each patient. Shipping schedules may vary,
however, based upon insulin usage and the physician's requirements.
CO-PAYMENTS, DEDUCTIBLES OR CO-INSURANCE
The price for supplies, medications and services reflect the net amount paid to MediQuik by the Payor. Co-payments, deductibles
or co-insurance are not associated with the net amount paid to MediQuik by the Payor. MediQuik has waived all co-payment
requirements.
</TABLE>
* This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
13
<PAGE>
EXHIBIT 6.16
EMPLOYMENT AGREEMENT
This Employment Agreement ("AGREEMENT") is made as of September 7, 1999,
by and between MediQuik Services, Inc., a Delaware Corporation ("MediQuik"),
located at 4295 San Felipe, Houston, Texas 77027 (the "COMPANY"), and Lawrence
J. Wedekind, an individual with an address of 16266 Salmon Drive Spring, TX
77379 (the "EXECUTIVE").
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to work for the Company under the terms and
conditions set forth herein. This Agreement supersedes and replaces any prior
employment agreement or other agreement between the parties dealing with the
subject matter hereof and such prior agreements, if any, are hereby terminated.
2. TERM OF EMPLOYMENT. The term of employment pursuant to this
Agreement shall begin on the date set forth above (the "Effective Date") and
shall continue in effect for an initial term of one (1) year from the date set
forth above unless terminated in accordance with SECTION 7, and shall be
extended from year to year thereafter at the Executive's option provided that
the Company realizes 40,000 serviced patients within initial term, unless
terminated effective as of the end of the initial term or any one-year extension
thereafter by written notice from the Company to Executive, or by written notice
of Executive to the Company, delivered not less than sixty (60) days prior to
the end of the initial term, or the end of any such one-year extension, as
applicable.
3. SCOPE OF DUTIES; COVENANTS.
(a) Executive will have such duties as are assigned or
delegated to Executive by the Board of Directors of the Company and will serve
as the Chief Executive Officer of the Company. Executive will devote
sufficient business time, attention, skill, and energy to the business of the
Company, will use his best efforts to promote the success of the Company's
business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Company; provided, however, that
nothing contained herein shall restrict Executive from managing his other
investments. The Company understands that the Executive has other business
investments IN WHICH he is in an executive employment capacity and that this
employment engagement will not represent all of the Executive's time. If
Executive is elected as a director of the Company or as a director or officer of
any of its affiliates, Executive will fulfill his duties as such director or
officer without additional compensation. Company will provide Director and
Officer Liability insurance for the benefit of Executive if elected to serve on
the Board of Directors. Company will indemnify Executive in the event of
litigation against Executive for Company related matters.
(b) So long as he is employed by the Company, Executive
shall devote his skill, energy and best efforts to the faithful discharge of
his duties as an employee of the Company. The Executive agrees that in the
provision of all services to the Company, he will comply with and follow the
provisions of this Agreement and all directives, policies, standards and
regulations from time to time established by the Board of Directors of the
Company.
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(c) Executive represents and warrants that Executive is under
no contractual or other restrictions or obligations which will significantly
limit the performance of Executive's obligations under this Agreement or which
will prohibit or limit the use by the Executive of any information which relates
to the business of the Company or the services to be rendered by the Executive
under this Agreement (including, without limitation, any agreement relating to
any proprietary information, knowledge or data acquired by Executive in
confidence, trust or under other obligation prior to Executive's employment by
the Company). Executive covenants and agrees that Executive shall not disclose
to the Company, or induce the Company to use, any such proprietary information,
knowledge or data belonging to any previous employer or others. Executive
further covenants and agrees not to enter into any agreement or understanding,
either written or oral, in conflict with the provisions of this Agreement during
the term of this Agreement.
(d) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company, the Executive
hereby agrees that all Intellectual Property (defined below) developed,
purchased or acquired by the Company, shall be the exclusive property of the
Company, and unless otherwise agreed by the Company, all right, title and
interest therein shall remain in the Company.
(e) The Executive will hold all Intellectual Property and
Confidential Information (defined below) in trust for the Company and will
deliver all Intellectual Property and Confidential Information in his
possession or control to the Company upon request and, in any event, at the
end of his employment with the Company. During the term of his employment
with the Company, the Executive will promptly disclose to the Company all
Confidential Information that comes to Executive's attention which has not
previously been disclosed to the Company, as well as any business opportunity
reasonably related to the scope of business of the Company or an Assisted
Affiliates as described in Section 8, which comes to his attention. The
Executive will not take advantage of or divert from the Company any such
business opportunity for the benefit of himself or any other party without
the prior written consent of the Company.
(f) The Company understands that the Executive has other
business interests that may represent potential conflicts of interest with his
duties as Chief Executive Officer. If the Executive determines that a conflict
exists on a particular issue, Executive shall refer the matter to the Board of
Directors for consideration.
4. COMPENSATION.
(a) During the first year of the term of employment
hereunder, the Company shall pay the Executive an annual base salary of
$48,000 cash and 51,000 shares of Rule 144 restricted common stock. The
equity payments will be payable in quarterly installments and the cash
payroll will be paid in accordance with the Company's payroll practices, not
less frequently than semi-monthly. Once the Company is cash flow positive,
the Executive may elect to receive up to 50% of the annual base salary in
cash payroll which election shall be provided to the Company in writing. In
each subsequent year of the term of employment, the Company shall pay to the
Executive a salary and any such other compensation as determined by the Board
of Directors following its annual salary
2
<PAGE>
and performance review; provided, however, that such salary and compensation
shall not be less than the base salary provided herein unless mutually agreed
to in writing.
(b) All payments of salary and other compensation to the
Executive shall be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws.
(c) Pursuant to the signing of this agreement, the Company
will provide the Executive with 10,000 shares of Rule 144 restricted common
stock in the Company.
(d) The Executive will participate in the Company's Stock
Option program. Such participation shall be developed by the Company's
Executive Compensation Committee and shall be approved by the Company's Board
of Directors.
5. VACATION/PERSONAL TIME. Executive shall be entitled to a minimum
of four (4) weeks paid vacation in accordance with the vacation policies of the
Company in effect from time to time. Executive shall also be entitled to paid
holidays and personal time off in accordance with the Company's policies in
effect from time to time. Unused holidays and days for personal time off and
vacation may not be carried over from one fiscal year to another. The aggregate
number of days specified for vacation and personal time off need not be taken by
Executive in succession, but in any increments and at any time during the year
as approved by the Company. For purposes of this Agreement, the term "personal
time off" shall refer to time taken off by Executive on account of illness,
family emergency or death in the immediate family which may result in the
absence of Executive with or without pay depending on the policies of the
Company in effect at the time.
6. FRINGE BENEFITS; EXPENSES. So long as the Executive is
employed by the Company, the Executive shall participate in any employee
benefit plans sponsored by the Company generally for its employees serving in
similar employment capacities as the Executive as determined from time to
time by the board of directors of the Company or any compensation committee
of the board of directors, if any, and on terms at least as favorable to
Executive as are generally offered to other employees of the Company serving
in a similar capacity. The Company shall also reimburse Executive for his
reasonable travel and other out-of-pocket business expenses incurred in
connection with his employment under this Agreement pursuant to expense
reports filed in accordance with the Company's policies in effect from time
to time. The Executive will receive $500.00 per month in a car allowance and
expense reimbursement authority up to $5,000.00/monthly without Board of
Directors approval. The Executive will also receive membership to the Houston
City Club or the Houston Galleria Club.
7. TERMINATION. The Company and Executive agree that Executive's
employment hereunder may be terminated by the Company with or without "Cause" at
any time, subject to the terms of this SECTION 7. Such termination shall be
effective upon delivery of written notice to the Executive of the Company's
election to terminate employment pursuant to this SECTION 7.
(a) DEFINITION OF "CAUSE". When used in connection with the
termination of employment with the Company, "CAUSE" shall mean: (i) Executive's
breach of his obligations under
3
<PAGE>
this Agreement; (ii) the Executive's failure to adhere to any written Company
policy after the Executive has been given a reasonable opportunity to comply
with such policy or cure his failure to comply; (iii) the conviction of, or
the indictment for (or its procedural equivalent), or the entering of a
guilty plea or plea of no contest with respect to, a felony, the equivalent
thereof, or any other crime with respect to which imprisonment is a possible
punishment; (iv) the commission by the Executive of an act of fraud upon the
Company or any of its affiliates; (v) the failure by the Executive to perform
duties assigned to him after reasonable notice and opportunity to cure such
performance.
(b) TERMINATION FOR CAUSE OR RESIGNATION. If the Company
terminates the Executive's employment for Cause or the Executive voluntarily
resigns, the Company shall pay the Executive's base salary earned through the
date of termination (and any other earned but unpaid compensation and accrued
vacation time prior to termination), but all rights to any other compensation
or benefits arising hereunder, shall be canceled and terminated in all respects
concurrently with such termination of employment; provided that the Executive
may elect to continue to participate, at Executive's own expense, in such health
insurance and other benefits as to which the opportunity for continuing
participation is mandated by applicable laws.
(c) TERMINATION WITHOUT CAUSE. Company shall not terminate
Executive's employment without cause during the first year of employment. In the
event that the Executive's employment is terminated by the Company without Cause
during any subsequent year of employment under this Agreement, the Company
shall, subject to the terms below, and only if and as long as Executive is not
in breach of his obligations under this Agreement, pay to Executive an amount
equal to the compensation and benefits payable over the remaining term of any
subsequent year of employment, plus any other earned and unpaid compensation.
Executive agrees that the above payments shall be a full settlement of the
Company's obligations to Executive hereunder in the event of a termination
without Cause.
(d) STANDSTILL AGREEMENT; LOCK-UP LETTERS. So long as
Executive is employed by the Company or receives severance compensation as
provided above, Executive agrees that he will sign any reasonable securities
lock-up letters, standstill agreements, or other similar documentation
required by an underwriter in connection with a public offering of securities
by MediQuik or the Company.
8. COVENANT NOT TO COMPETE.
(a) DURING TERM OF EMPLOYMENT. During Executive's term of
employment pursuant to this Agreement, Executive will not compete with the
Company or its affiliates, directly or indirectly, either for himself or as a
member of a partnership or a limited liability company or as a stockholder,
investor, owner, officer or director of a company or other entity, or as an
employee, agent, trustee, manager, associate or consultant of any person,
partnership, corporation or other entity, in any business in competition with
that carried on by the Company or any of its affiliates.
4
<PAGE>
(b) FOLLOWING TERM OF EMPLOYMENT. The business of the
Company is not local but rather relies on a nationwide client base of Client
Organizations and the delivery of materials and services to patients and
covered persons nationwide. Executive and the Company agree that the
Executive's covenant not to compete throughout the Company's nationwide
service area is reasonably necessary to protect the Company's investment in
the development of its business, including the Company's expenditures to
employ Executive under terms of this Agreement. Therefore, Executive agrees
that for one (1) year from and after the date of termination of Executive's
employment under this Agreement, except for a termination by the Company
without cause, in which case the covenant to not compete limitation shall not
be in effect, Executive will not represent, engage in, carry on, or have a
financial interest in, directly or indirectly, the Home Delivery Chronic
Disease Management Services Business. The one (1) year restricted period
shall be extended by the length of any period during which Executive is in
violation of his obligations under this Section 8. For purposes of this
Section 8, a "financial interest" means any interest, individually, as a
member of a partnership or limited liability company, equity owner,
shareholder (other than as a shareholder of less than one percent (1%) of the
issued and outstanding stock of a publicly-held company whose gross assets
exceed one hundred million dollars), investor, officer, director, trustee,
manager, employee, agent, associate or consultant.
(c) EXECUTIVE AGREES TO LIMITATIONS. Executive agrees that
the limitations set forth herein on his rights to compete with the Company
and its affiliates are reasonable and necessary for the protection of the
Company and its affiliates. In this regard, Executive specifically agrees
that the limitations as to period of time and geographic area, as well as all
other restrictions on his activities specified herein, are reasonable and
necessary for the protection of the Company and its affiliates. In the event
that the provisions of this Agreement should ever be legally held to exceed
the scope of business, time or geographic limitations permitted by applicable
law, such provisions shall be and are hereby reformed to the maximum scope of
business, time or geographic limitations permitted by applicable law.
(d) AFFILIATES. For purposes of this Agreement, an
"affiliate" of the Company is any person or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company; provided, however, for purposes
of this Section 8(d), the term "affiliate" shall not include any person or
entity with whom the Executive has had no substantial dealings or contact.
(e) SPECIFIC PERFORMANCE. Executive agrees that the remedy at
law for any breach by him of this SECTION 8 will be inadequate and that the
Company shall also be entitled to injunctive relief.
9. CONFIDENTIAL INFORMATION AND RESULTS OF SERVICES.
(a) TREATMENT OF CONFIDENTIAL INFORMATION. Executive agrees
that during the term of this Agreement, and for two (2) years after his
termination of employment, he will not use or disclose, without the prior
consent of the Company, the Confidential Information (as hereinafter
defined) owned by or subject contractually to be safeguarded by the
Company, or any of its affiliates, and further agrees, that he will
return to the Company all written,
5
<PAGE>
printed, or other physical presentation or holding of materials in his
possession embodying such Confidential Information. Executive
acknowledges that any information and materials received by the
Company from third parties in confidence (or subject to non-disclosure
or similar covenants) shall be deemed to be and shall be Confidential
Information within the meaning of this SECTION 9. Executive covenants
and agrees that Executive shall not, except with the prior written
consent of the Company, or unless Executive is acting as an employee
of the Company solely for the benefit of the Company in connection
with the Company's business and in accordance with the Company's
business practices and employee policies, at any time during or
following the term of Executive's employment by the Company, directly
or indirectly, disclose, divulge, reveal, report, publish, transfer or
use, for any purpose whatsoever, any of such information which has
been obtained by or disclosed to Executive as a result of Executive's
employment by the Company. Furthermore, any Company information that
is in the public domain shall not be considered confidential
information for the purposes of this agreement.
(b) DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of
this Agreement, "CONFIDENTIAL INFORMATION" includes information
conceived, compiled, created, developed, discovered or obtained by
Executive from and during his employment relationship with the
Company, whether solely by the Executive or jointly with others, which
concerns the affairs of the Company or its affiliates and which the
Company could reasonably be expected to desire be held in confidence,
or the disclosure of which would likely be materially embarrassing,
detrimental or disadvantageous to the Company or its affiliates and
without limiting the generality of the foregoing includes information
relating to inventions, and the trade secrets, technologies,
algorithms, products, services, systems, programs (including, without
limitation, the Company's computer software programs), procedures,
manuals, confidential reports and communications, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists,
potential clients, business prospects, business opportunities,
personnel assignments, contracts and assets of the Company and
information made available to the Company by other parties under a
confidential relationship. Executive agrees that the remedy at law for
any breach by his of this SECTION 9 will be inadequate and that the
Company shall also be entitled to injunctive relief. Furthermore, any
Company information that is in the public domain shall not be
considered confidential information for the purposes of this
agreement.
10. DEFINITION OF INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement, the term "Intellectual
Property" shall mean all of the information referred to in Section 9 hereof and
all of the materials and information (whether or not reduced to writing and
whether or not patentable or protectible by copyright) which Executive receives,
receives access to, conceives or develops or has received, received access to,
conceived or developed, in whole or in part, directly or indirectly, in
connection with Executive's employment with the Company and any assistance to
affiliates of the Company and related to the Company's and its affiliates scope
of business (in any capacity, whether executive, managerial, planning,
technical, sales, research, development, manufacturing, engineering or
otherwise) or through the use of any of the Company's facilities or resources.
6
<PAGE>
(b) For purposes of this Agreement, the term "Intellectual
Property" shall not apply to any ideas, inventions, techniques,
modifications, processes, or improvements for which no equipment,
supplies, facility or Intellectual Property of the Company was used,
which was developed entirely on Executive's own time, and which does not
(i) relate to the business of the Company, (ii) relate to the Company's
actual or demonstrably anticipated research or development (iii) result
from any work performed by Executive for the Company. Furthermore, any
Company information that is in the public domain shall not be considered
intellectual property for the purposes of this agreement.
11. OWNERSHIP OF INFORMATION.
(a) Executive covenants and agrees that all right, title and
interest in any Intellectual Property shall be and shall remain the exclusive
property of the Company. Executive agrees immediately to disclose to the Company
all Intellectual Property developed in whole or in part by Executive during the
term of Executive's employment with the Company and to assign to the Company any
right, title or interest Executive may have in such Intellectual Property.
Executive agrees to execute any instruments and to do all other things
reasonably requested by the Company (both during and after Executive's
employment with the Company) in order to vest more fully in the Company all
ownership rights in those items transferred by Executive to the Company;
(b) Executive will not contest the validity of any invention,
any copyright, any trademark or any mask work registration owned by or vesting
in the Company under this Agreement;
12. COVENANTS NOT TO HIRE EMPLOYEES. It is recognized and
understood by the parties hereto that the employees of the Company are an
integral part of the Company's business and that it is extremely important
for the Company to use its maximum efforts to prevent the Company from losing
employees. It is therefore understood and agreed by the parties hereto that,
because of the nature of the business of the Company, it is necessary to
afford fair protection to the Company from the loss of any such employees.
Consequently, as a material inducement to the Company to employ (or continue
to employ) Executive, Executive covenants and agrees that, for the period
commencing on the date of Executive's termination of employment for any
reason whatsoever and ending one (1) year after Executive's termination of
employment with the Company, Executive shall not, directly or indirectly,
hire or engage or attempt to hire or engage any individual who shall have
been an employee of the Company or any affiliate of the Company at any time
during the six month period prior to the date of Executive's termination of
employment with the Company, whether for or on behalf of Executive or for any
entity in which Executive shall have a direct or indirect interest (or any
subsidiary or affiliate of any such entity), whether as a proprietor,
partner, co-venturer, financier, investor or stockholder, director, officer,
employer, employee, servant, agent, representative or otherwise. If
Executive violates this Section 12, Executive agrees that, as part of the
damages recoverable by the Company, Executive shall pay to the Company a
liquidated damages amount equal to the compensation of the employee of the
Company solicited away from employment with the Company by Executive for the
twelve months preceding the date of said employee's termination from the
Company.
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13. INJUNCTIVE RELIEF. Executive understands and agrees that the
Company shall suffer irreparable harm in the event that Executive breaches any
of Executive's obligations under this Agreement and that monetary damages shall
be inadequate to compensate the Company for such breach. Accordingly, Executive
agrees that, in the event of a breach or threatened breach by Executive of any
of the provisions of this Agreement, the Company, in addition to and not in
limitation of any other rights, remedies or damages available to the Company at
law or in equity, shall be entitled to a temporary restraining order,
preliminary injunction and permanent injunction in order to prevent or to
restrain any such breach by Executive, or by any or all of Executive's partners,
co-venturers, employers, employees, servants, agents, representatives and any
and all persons directly or indirectly acting for, on behalf of or with
Executive.
14. MATERIALS. All notes, data, tapes, reference items, sketches,
drawings, memoranda, records and other materials in any way relating to any of
the Confidential Information or Intellectual Property or to the Company's
business shall belong exclusively to the Company and Executive agrees to turn
over to the Company all copies of such materials in Executive's possession or
under Executive's control at the request of the Company or, in the absence of
such a request, upon the termination of Executive's employment with the Company.
15. NOTICE. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) If to the Executive, to the address set out in the
beginning of this Agreement;
(b) If to the Company:
MediQuik Services, Inc.
4295 San Felipe, Suite 200
Houston, Texas 77027
Attn: President
Telecopy: (713) 888-1947
Either party may change such party's address by such notice to the
other parties.
16. ASSIGNMENT. This Agreement is personal to the Executive, and he
shall not assign any of his rights or delegate any of his duties hereunder
without the prior written consent of the Company. The Company shall have the
right to assign this Agreement to a successor in interest in connection with a
merger, sale of substantially all assets, or the like.
17. SURVIVAL. The provisions of Sections 7 through 25 of this
Agreement shall survive the termination of the Executive's employment hereunder
in accordance with their terms.
18. APPLICABLE LAW. The substantive laws of the State of Texas,
excluding any law, rule or principle which might refer to the substantive law of
another jurisdiction, will govern the
8
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interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof.
19. BINDING UPON SUCCESSORS. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the terms of employment of
the Executive by the Company and supersedes all prior agreements and
understandings, whether written or oral, between them concerning such terms of
employment.
21. WAIVER AND AMENDMENTS; CUMULATIVE RIGHTS AND REMEDIES.
(a) This Agreement may be amended, modified or supplemented,
and any obligation hereunder may be waived, only by a written instrument
executed by the parties hereto. The waiver by either party of a breach of any
provision of this Agreement shall not operate as a waiver of any subsequent
breach.
(b) All rights and remedies hereunder are cumulative and are in
addition to all other rights and remedies provided by law, agreement or
otherwise.
22. CONSTRUCTION. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel.
23. SEVERABILITY. In the event that any provision or provisions of
this Agreement is held to be invalid, illegal or unenforceable by any court of
law or otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement under seal on the date first above written, to be effective as of the
date first above written.
MEDIQUIK SERVICES, INC.: EXECUTIVE
By: /s/ Grant M. Gables By: /s/ Lawrence J. Wedekind
------------------------- ------------------------------
Name: Grant M. Gables Lawrence J. Wedekind
-----------------------
Title: Presdient
----------------------
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GLOBAL MEDICAL SOLUTIONS, INC. EXHIBIT 6.17
ANCILLARY PROVIDOR AGREEMENT
As a provider of medical services or products, your participation will allow
Global Medical Solutions (GMS) to market your products or services to our
clients.
GMS will be responsible for administration and providing other functions that
are required in maintaining benefits programs with any employer, insurance
carrier, association, or other client.
As a Medical provider, you agree:
1. To be listed in the GMS Provider Directory.
2. To provide a covered person with all necessary medical services that
you are qualified to perform on the same basis as you would a non-GMS
patient.
3. To use best efforts to direct GMS participants to other GMS Medical
Providers and Hospitals if medically appropriate.
4. To carry adequate professional liability coverage.
5. To notify GMS immediately if your insurance carrier fails to renew or
cancels your professional liability policy.
6. To accept assignment of the contract benefits from a covered
participant.
7. To work with GMS regarding any complaints by GMS participants and to
cooperate in resolving the matter.
8. To charge the GMS participant no amount considered above reasonable and
customary.
9. To provide a discounted fee arrangement in accordance with Schedule A
attached
This agreement is for one (1) year commencing on the date signed and will
automatically renew for successive one (1) year periods unless terminated by
either party. This agreement may be terminated by either party by giving ninety
(90) days written notice.
This agreement constitutes the entire understanding between the parties hereto,
and no changes, amendments or alterations shall be effective unless agreed to in
writing by both parties.
None of the provisions of this agreement are intended to create nor shall be
deemed or construes to create any relationship between GMS and the Medical
Provider other than that of independent entities contracting with each other
hereunder solely for the purpose of affecting the provisions of this agreement.
Neither of the parties hereto, nor any of their respective employees shall be
construed to be the agent, employee or representative of the other.
This agreement shall be governed by Florida Law.
The terms of this agreement shall remain confidential.
<PAGE>
The invalidity of unenforceability of any terms or provisions hereof shall in no
way affect the validity or enforceability of any other term or provision.
I accept the terms and provisions of this agreement with Global Medical
Solutions, Inc. as a Participating Medical Provider.
Date: 2/27/98
--------------------
Mediquik Services Inc.
- ---------------------------
Name of Medial Provider
/s/ Ben L. Pierce
- -------------------------
Authorized Signature
/s/
- --------------------------
Title
President
- -------------------------
Approved for GMS by
- -------------------------
Title
Date: 2/27/98
---------------------
