<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 0-5567
SEAL HOLDINGS CORPORATION
(Name of small business issuer in its charter)
Delaware 65-0769296
(State of Incorporation) (IRS Employer ID No.)
125 WORTH AVENUE, SUITE 314
PALM BEACH, FLORIDA 33480-4466
(address of principal executive offices) (zip code)
(561) 833-5111
(issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Class A Common
Stock, par value $.20
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year:......... $ 115,000
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 26, 1998:........ $ 452,282
State the number of shares outstanding of the issuer's classes of
common stock as of February 26, 1998:
Class A common stock, $.20 par value 1,193,601 shares
Class B common stock, $.20 per value 25,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders, which will be filed within 120 days from the end of the fiscal
year covered by this Annual Report on Form 10-KSB, are incorporated by
reference into Part III hereof.
Transitional Small Business Disclosure Format (check one)
Yes No X
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PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development - The History of Seal Holdings Corporation
Seal Holdings Corporation ("the Company") is a corporation organized in
March 1997 under the laws of the State of Delaware as a wholly owned
subsidiary of the then registrant, Seal Fleet, Inc., and is the successor
thereof as herein described.
As used in this report, the terms "Seal" and "the Company" may refer
to Seal Fleet, Inc. and its subsidiaries or to Seal Holdings Corporation
and its subsidiaries unless the context indicates otherwise.
Prior to 1979, Seal Holdings Corporation's primary business was life
insurance with the Company operating under the name "First National
Corporation." In 1979, the Company went through a quasi-reorganization.
It sold its insurance business, had a simultaneous reverse and forward
stock split, purchased an offshore service boat company, and amended its
Articles of Incorporation to change its name from First National Corporation
to Seal Fleet, Inc. to describe the nature of its business.
On August 14, 1996, with stockholder approval, Seal Fleet sold its
operating assets to Hvide Marine Incorporated (Hvide) and left the offshore
supply business. Several factors led the Company to sell its marine assets.
The Company was in default on its debt of over $7 million, had a negative
net worth, and had only minimal continuing marine operations remaining. The
Company was in competition with large marine companies capable of making
significant investment which increased the difficulty for small companies,
such as Seal to compete. Because of the overall financial condition of
the offshore marine industry, the prices for the Company's supply boats
reached levels where the Company concluded that it was appropriate to
sell its marine assets and transform the nature of its business.
At the Annual Meeeting of Stockholders held on May 14, 1997, several
proposals were approved to implement the new direction of the Company.
To reduce the administrative costs associated with maintaining shareholders
with fewer than 50 shares, the stockholders approved the purchase of such
shares through a reverse stock split of the Company's Class A and Class
B common stock. On June 30, 1997, the Company effected a one-for-fifty
shares reverse split of the common stock, immediately followed by a
twenty-five-shares-for-one share forward split of the Company's common
stock. The reverse stock split resulted in all shares being purchased
from stockholders holding fewer than 50 shares, and excess shares over even
multiples of fifty shares from stockholders holdings more than fifty shares.
Of the outstanding shares in Seal Fleet, Inc. prior to the reverse split,
approximately 65,200 shares were purchased at a price of $.70 per share.
This share repurchase resulted in an insignificant change in the relative
percentage of total shares held by individual stockholders.
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Also approved at the Annual Meeting of Stockholders was the Reincorporation
Proposal whereby the Company's state of incorporation was changed from
Nevada to Delaware as a result of the merger of the Company into its
wholly-owned subsidiary, Seal Holdings Corporation, a Delaware corporation.
The stockholders also approved a proposal to increase the number of
authorized shares of Class A common stock to 14,975,000 shares and to
create a class of preferred stock (No preferred stock has been issued
by the Company.). Finally, the stockholders approved the removal of a
restriction requiring the Board of Directors to seek stockholder approval
of an initial acquisition in its transformation process, to the extent
that such approval is not required by applicable law.
In this report, reference is made to the "discontinued operation." This term
refers to the business of the Company prior to August 14, 1996.
The Company's current business objective is the acquisition of one or more
operating businesses with growth potential. The Company has identified
health care services as a business opportunity of particular promise, and
it intends to utilize cash, equity, debt or a combination thereof in effecting
such acquisitions. The Company is presently investigating acquisition
opportunities in this industyr. There can be no assurance that the Company
will succeed in acquiring any businesses or in operating any business which is
may acquire.
The Company is now effectively controlled by First Magnum Corporation
("Magnum") which owns all of the Class B common stock and is entitled to
elect a majority of the directors of the Company. The sole shareholder
of Magnum is Thomas M. Ferguson ("Ferguson"), the Company's Chairman,
President and Chief Executive Officer.
Principal Products and Services
The Company can be described as an acquisition company, and as such
has no products or services. As more particularly developed herein,
the Company has announced that it is investigating opportunities in the
health care industry. The Company has devoted substantial resources
to pursuing such opportunities.
Significant Customers
The Company currently has no customers.
Competitive Conditions
The Company faces intense competition in its efforts to acquire operating
businesses. Many other companies seeking to acquire businesses have
greater resources than does the Company.
Governmental Regulations
It is possible that the Company will make one or more acquisitions in
areas which might subject the Company to significant governmental
regulation in the operation of its business.
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Environmental Disclosure.
Should the Company acquire one or more active businesses in accordance
with its plan, it is possible that laws and governmental regulations
regarding environmental quality control may have a significant effect
upon the Company.
Number of Employees.
Currently, the Company employs six people, in addition to using consultants
and accounting and legal professionals. None of the Company's employees is
represented by a labor union.
ITEM 2. DESCRIPTION OF PROPERTY
The Company
The corporate and general offices of the Company are located in leased space of
approximately 1,950 square feet in Palm Beach, Florida. This lease expires on
March 31, 2002.
The Company also rents public warehouse space in West Palm Beach for storage of
Company records. This rental agreement is "month to month."
At the beginning of 1997 the Company owned a 516-acre tract of unimproved
land in Brazoria County, Texas. The land was considered to be "wet lands"
not subject to commercial development. Much of the land bordering the
Company's tract had been purchased by the Fish and Wildlife Service of the
United States Department of Interior for a bird sanctuary. This land was
sold to the Fish and Wildlife Service for its stated fair market value of
$154,000. Payment was received by the Company in April, 1997.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved only in litigation which it deems to be in the
ordinary course of the discontinued marine business which it conducted
prior to August 14, 1996. Some of this litigation has to do with boat
employee injury claims which are insured. Additional cases are maritime
asbestos claims agianst the Company. On May 1, 1996, the asbestos claims
were administratively dismissed subject to reinstatement on motion of
plaintiff's counsel. It is expected that all of these cases will be
reinstated in the future. The Company is presently unable to determine
what, if any, impact these cases could have upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of 1997 through the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no public market for the Class B common stock, all of which is owned
by First Magnum Corporation, an entity wholly owned by Mr. Thomas M.
Ferguson, the Company's Chairman, President and Chief Executive Officer.
The Class A common stock (1,311,123 shares issued, including 117,522 shares
held in treasury, as of February 26, 1998) is publicly traded in the over-the-
counter market under the symbol SEAH. Through November 1987, the Company's
shares were listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") under the symbol SEALA. At that time, NASDAQ dropped the
listing because the Company no longer maintained the required equity level.
Since November 1987, the stock has been listed on the National Daily Quotation
Service ("Pink Sheets"). The following table provides information regarding
the bid prices for Class A common stock during the periods indicated.
1997 1996
HIGH LOW HIGH LOW
---- ---- ---- ----
First Quarter $1.43 $ .96 $ .62 $.38
Second Quarter 1.33 1.08 .88 .50
Third Quarter 1.33 .83 1.12 .50 ,
Fourth Quarter 1.13 .94 1.38 .76
Prices prior to June 30, 1997 have been adjusted to reflect the impact of the
one-for-two reverse/forward stock split. The resulting prices are not
necessarily indicative of what actual prices would have been had the reverse/
forward stock split occurred prior to 1996.
The high and low bid information set forth above was taken from the CompuServe-
provided database of historical stock pricing. These bid prices are inter-
dealer price quotations, which do not include retail mark-ups, mark-downs or
commissions and may not represent actual transactions.
HOLDERS
The number of stockholders of record as of Febuary 26, 1998, were 1,739 for
Class A common stock and one for Class B common stock.
DIVIDENDS
The Company has no plans to declare or pay dividends, in cash or otherwise, in
the foreseeable future. Any change in those plans in the future will depend
on earnings, if any, of the Company, its financial requirements and other
factors. The Company has never had any redeemable preferred stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
During the year 1997, as confirmed to stockholders and stated in its Form 8-K
dated June 10, 1997, and in subsequent regular reports on Form 10-Q, the
Company invested in developing health care expertise in order to advance its
decision to engage in acquisitions or investments in that business sector.
In 1997, the Company employed two senior executives, knowledgeable in health
care, and utilized consultants, accountants and attorneys in developing a
business strategy and in negotiating with physicians for the purpose of
establishing a network of centers for the treatment of musculo-skeletal
injuries and disease. The network concept embodies the establishment of
a multi-disciplinary regimen of integrated care using different medical
disciplines in the treatment, diagnoses, ancillary testings, physical and
occupational therapy and rehabilitation of patients. The Company continues
to develop the concept and study both public and private financing option.
Although substantial expenditures have been made for staff,
consultants, accountants, attorneys as well as related developmental
expenditures to further the health care program, no assurance can be made
that the Company will successfully implement this program. These expenses
have led to a loss for 1997 because the Company did not generate revenues
sufficient to offset such expenditures.
Since the Company presently has no operations, the impact of the Year 2000
issue on the Company's financial and other computer systems is not considered
to be significant.
FINANCIAL CONDITION
The Company satisfies, in part, its working capital needs with funds generated
from interest and dividend income on short-term investments. When working
capital needs exceed interest and dividend income, short term investments are
liquidated. Working capital requirements include salaries, travel and other
expenses associated with evaluating possible business combinations. Capital
expenditures incurred in 1997 consisted of minor leasehold improvements
on rented space along with purchases of some furniture and office equipment.
Under the terms of the office lease, most of the Company's requirements for
furniture were supplied by the landlord.
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The Company has no outstanding bank debt.
The Company's liquid assets have been diminished in furtherance of its
investigations towards the acquisition or development of a new line of
business. The Company believes it has sufficient cash reserves to continue
operations through December 31, 1998. The Company's long-term ability to meet
its operating expenses will be dependent on its ability to raise additional
capital or to complete a business combination successfully with an entity
with sufficient cash flow to meet the Company's ongoing obligations.
RESULTS OF OPERATIONS
As a result of the substantial expenditures incurred by the Company
in connection with the physician practice management program, the
Company incurred a loss of $1,716,343 in 1997.
RISK FACTORS
The future viability and success of the Company are subject to numerous
risks and uncertainties, several of which are described below:
No Agreement for Business Combination or Other Transaction. The Company
is attempting to establish its network of multi-disciplinary centers, but
it does not have any arrangement, agreement, financing or understanding with
respect to a merger with, or acquisition of, any business or entity. A
large number of established and well financed entities, including venture
capital firms, are active in mergers and acquisitions of private companies
which may be desirable target candidates for the Company. Many of such
entities have significantly greater financial resources, technical expertise
and managerial capabilities than the Company, and consequently, the Company
will be at a competitive disadvantage in identifying possible merger or
acquisition candidates. There can be no assurance the Company will be
successful in concluding a merger or acquisition or that any such transaction
will prove beneficial to the Company.
No Operating History. The Company has no operating history in any
line of business which it is likely to select for its future operations.
There can be no assurance that the Company's activities will be profitable.
Limited Financial Resources. The Company's only assets are cash, short-
term investments, furniture, and equipment. The Company's liquid assets
have been diminished in furtherance of its investigations towards the
acquisition or development of a new line of business. The Company's long-term
ability to meet its operating expenses will be dependent on its ability to
raise additional capital or to complete a business combination successfully
with an entity with sufficient cash flow to meet the Company's ongoing
obligations. Any business activity that the Company eventually undertakes
may require substantial capital, which may be difficult to obtain or may not
be available. The success of the Company will be dependent upon its
ability to acquire additional capital.
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Possible Dilution or Change in Control. The Company's business strategy
is based upon a merger with or acquisition of a private concern, which
could result in the Company issuing securities to stockholders of any
such target concern. The issuance of previously authorized and unissued
or newly authorized Common Stock of the Company or the authorization and
issuance of preferred stock could result in substantial dilution to present
stockholders of the Company, which may result in a change in control or
management of the Company.
Speculative Nature of the Company. The success of the Company will depend
to a great extent on the operations, financial condition and management of the
company or companies with which the Company may merge or which it may acquire.
While the Company intends to merge with or acquire one or more privately held
entities with established operating histories, there can be no assurance that
the Company will be successful in locating an acquisition candidate meeting
such criteria.
Dependence on Inexperienced Management. The success of the Company
largely depends upon the active participation of individuals with experience
in the business sectors in which the Company becomes involved. At the present
time, the Company may not have sufficient experience or expertise in these
business sectors. Opportunities which may become available to the Company for
mergers or acquisitions may be lost or delayed as a result of the limited
amount of experienced resources the Company has to devote to such
opportunities. Once the Company acquires a business opportunity, the
acquired Company's current management may resign which could result in the
need to hire additional management personnel. In order to supplement the
business experience of management, the Company may employ accountants,
technical experts, appraisers, attorneys or other consultants or advisors.
The selection of any such advisors will be made by management without any
control from stockholders. Additionally, it is anticipated that such persons
would be engaged by the Company on an independent basis without a continuing
fiduciary or other obligation to the Company.
Risks of any Acquired Business. It is possible that the Company may enter
into one or more lines of business in which the success of the Company would be
subject to various risks which cannot be identified at this time. The Company
may be unable to diversify its business activities and, as a consequence, may
suffer a total loss to the Company and the stockholders should an acquisition
by the Company prove to be unprofitable. The Company's failure or inability
to diversify its activities into a number of areas may subject the Company to
economic fluctuations within a particular business or industry and, therefore,
increase the risks associated with the Company's operations.
Conflicts of Interest. All of the directors and most of the officers of
the Company are associated with other firms or occupations involving other
business activities. Because of these affiliations and because these
individuals may not devote full time to the affairs of the Company, there are
potential inherent conflicts of interest in their acting as directors and
officers of the Company and of other entities. The Company's directors and
officers may be directors or controlling stockholders of other entities
engaged in a variety of businesses which may in the future have various
transactions with the Company. Additional conflicts of interest and non-arm's
length transactions may also arise in the future in the event the Company's
officers or directors are involved in the management of any firms with which
the Company transacts business. The Company may pay finder's fees or other
fees to its officers, directors or affiliates in connection with any potential
business combination involving the Company.
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Control by Single Stockholder. Magnum owns all of the Class B common
stock and is able to select a majority of the Board of Directors of the
Company and thus controls the direction of the Company.
No Dividends Anticipated. At the present time, the Company does not
anticipate that it will pay dividends, cash or otherwise, on its common stock
in the foreseeable future. Future dividends will depend on earnings, if any,
of the Company, its financial requirements and other factors.
Regulation. Although the Company is subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Company
believes it is not subject to regulation under the Investment Company Act of
1940 insofar as the Company is not engaged in the business of investing or
trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to its
status under the Investment Company Act of 1940, and consequently, any
violation of such Act would subject the Company to material adverse
consequences.
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ITEM 7. FINANCIAL STATEMENTS
SEAL HOLDINGS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant 11
Report of Independent Certified Public Accountant 12
Consolidated Balance Sheets--
December 31, 1997 and 1996 13
Consolidated Statements of Operations--
Years ended December 31, 1997 and 1996 14
Consolidated Statements of Shareholders' Equity--
Years ended December 31, 1997 and 1996 15
Consolidated Statements of Cash Flows--
Years ended December 31, 1997 and 1996 16
Notes to Consolidated Financial Statements 17
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Report of Independent Certified Public Accountants
Shareholders and Board of Directors
Seal Holdings Corporation
We have audited the accompanying consolidated balance sheet of Seal Holdings
Corporation and subsidiaries (formerly known as Seal Fleet, Inc.) as of
December 31, 1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Seal Holdings Corporation and subsidiaries at December 31, 1997, and the
consolidated results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
West Palm Beach, Florida
March 27, 1998
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INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Seal Holdings Corporation
We have audited the consolidated balance sheets of Seal Holdings Corporation
(formerly known as Seal Fleet, Inc.) and subsidiaries as of December 31, 1996
and the related consolidated statements of operations, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Seal Holdings
Corporation and subsidiaries at December 31, 1996, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
February 4, 1997, except for the first
three paragraphs under "Options" in
Note C, as to which the date is March 21, 1997
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Seal Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
----------------
1997 1996
------ ------
ASSETS
Current assets
Cash, includes $960 and $2,171 of cash equivalents
in 1997 and 1996, respectively $1,037 $2,437
Other receivables 8 14
Prepaid expenses 7 8
Net assets of discontinued operations 64 64
------ ------
Total current assets 1,116 2,523
------ ------
Furniture and equipment
Furniture and equipment 118 58
Less accumulated depreciation (61) (53)
------ ------
Furniture and equipment, net 57 5
------ ------
Other assets
Land held for sale - 154
Other assets 16 4
------ ------
Total assets $1,189 $2,686
------ ------
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
------------------
1997 1996
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable and accrued expenses $ 304 $ 54
Other current liabilities 15 -
------- -------
Total current liabilities 319 54
------- -------
Total liabilities 319 54
------- -------
Commitments and contingencies
Shareholders' equity
Preferred Stock, $.001 par value; 3,000,000 shares
authorized; no shares issued or outstanding.
Class A common stock, $.20 par value; 14,975,000 shares
authorized; 1,311,123 shares issued and outstanding
at December 31, 1997, and 1,216,123 issued and
outstanding at December 31, 1996 267 243
Class B common stock, $.20 par value; 25,000 shares
authorized, issued and outstanding in 1997 and 1996 5 5
Additional paid-in capital 4,571 4,475
Retained deficit (3,758) (2,042)
Treasury stock, at cost, 117,522 and 84,920 shares at
December 31, 1997 and 1996, respectively (95) (49)
Note receivable - shareholder (120) -
------- -------
Total Shareholders' Equity 870 2,632
------- -------
Total liabilities and shareholders' equity $1,189 $ 2,686
------- -------
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, except Per Share Amounts)
December 31,
------------------------
1997 1996
---------- ---------
Revenue
Interest and dividend income $ 115 $ -
Expenses
Salaries and benefits 346 -
General and administrative 720 -
Professional fees 765
-
--------- --------
Loss from continuing operations (1,716) -
Discontinued operations (Note B)
Net loss from discontinued operations in 1996 (less
applicable income tax benefit of $38) - (1,167)
Gain on sale of discontinued operations (less
applicable income tax of $223) - 6,836
--------- ---------
Income from discontinued operations - 5,669
--------- ---------
Net income (loss) before extraordinary item (1,716) 5,669
Extraordinary item - gain on extinguishment of debt
(less applicable income taxes of $16) - 484
--------- ---------
Net income (loss) $ (1,716) $ 6,153
--------- ---------
Net income (loss) per share - basic
and dilutive:
From continuing operations $ ( 1.41) $ -
From discontinued operations - 5.18
From extraordinary item - .44
--------- ---------
( 1.41) $ 5.62
--------- ---------
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------- Receivable Additional
Par from Paid-In Retained Treasury
Shares Value Shareholder Capital Deficit Stock Total
--------- ---------- --------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Jan. 1, 1996 1,241,123 $248 $4,456 $(8,195) $(130) $(3,621)
Net income - 1996 - - - 6,153 - 6,153
Treasury stock sold - - 19 - 81 100
--------- ---- ---- ------- ------ ------- -------
Balance at Dec. 31, 1996 1,241,123 248 4,475 (2,042) (49) 2,632
Net loss - 1997 (1,716) ( 1,716)
Receivable from Shareholder $(120) (120)
Common Stock issued 120,000 24 96 120
Treasury stock purchased (46) ( 46)
--------- ---- ----- ------ ------- ----- -------
Balance at Dec. 31, 1997 1,336,123 $272 $(120) $4,571 $(3,758) $ (95) $ 870
</TABLE>
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
-------- -------
<S> <C> <C>
Cash flows from operating activities
Loss from continuing operations $(1,716)
Adjustments to reconcile net loss from continuing operations
before income taxes to net cash provided by operating activities
Depreciation and amortization 8
Changes in net assets of operations
Decrease in other receivables 6
Decrease in prepaid expenses 1
Increase in accounts payable and accrued expenses 250
Increase in other current liabilities 15
------- ------
(1,436)
Income from discontinued operations 5,669
Adjustments to reconcile pretax income from discontinued operations
to net cash provided by discontinued operations
Depreciation and amortization 1,040
Loss on disposition of assets (7,059)
Change in net assets of discontinued operations 971
------- -------
- 621
Income from extraordinary gain 484
Adjustments to reconcile pretax income from extraordinary gain
to net cash provided by discontinued operations
Gain on extinguishment of debt (500)
------- -------
Net cash (required) provided by operating activities (1,436) 605
------- -------
Cash flows from investing activities
Decrease in notes receivable - 3
Purchases of property and equipment (60) (5)
Proceeds from sale of discontinued operations - 10,082
Proceeds from sale of land 154 -
Purchase of Shares (46) -
Increase in other assets (12) -
Discontinued operations:
Deferred drydocking additions (611)
Decrease (increase) in other assets - 31
------- ------
Net cash provided by investing activities 36 9,500
------- ------
</TABLE>
See notes to consolidated financial statements.
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Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Cash Flows - Continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
------ -------
<C> <C>
Cash flows from financing activities
Proceeds from sale of treasury stock 100
Decrease in long-term debt of discontinued operations - (8,823)
------- ------
Net cash (required) by financing activities - (8,723)
------- ------
(Decrease) Increase in cash and cash equivalents (1,400) 1,382
Cash and cash equivalents at beginning of year 2,437 1,055
------- ------
Cash and cash equivalents at end of year 1,037 $ 2,437
------- ------
Interest paid to related parties - $ 1,359
------- ------
Income taxes paid - $ 195
------- ------
</TABLE>
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
-------------
The accompanying financial statements include the accounts of Seal
Holdings Corporation and its subsidiaries, all of which are wholly-owned
(collectively "Seal Holdings" or the "Company"). All significant
intercompany accounts and transactions are eliminated in consolidation.
Current Activities
------------------
The Company had no revenue producing operations during 1997. The Company
is currently investing in developing health care expertise in order to
engage in acquisitions or investments in that business sector. At
December 31, 1997, the Company does not have any arrangement, agreement
or understanding with respect to a merger or acquisition of any
business or entity.
Discontinued Operations
-----------------------
During 1996, the Company sold all marine assets and ceased all activities
which were related to ownership, management, brokerage, and operation of
offshore supply ships (see Note B). All related activities for 1996 have
been presented in the accompanying financial statements as discontinued
operations.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash
equivalents consist of certificates of deposit, U.S. treasury bills, and
other government securities.
Concentration of credit risk
----------------------------
Financial instruments which subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents. The
Company maintains cash and cash equivalents with various financial
institutions. Company policy is designed to limit exposure to any one
institution. The Company has not incurred losses related to these
deposits.
-19-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Furniture and equipment
----------------------
Furniture and equipment are stated at cost. For financial reporting
purposes, the Company records depreciation and amortization expense
on a straight-line method over the estimated useful lives of the
related assets (leasehold improvements over the shorter of the
life of the related lease or life of the improvement; furniture
and equipment, 3-8 years). For tax purposes, depreciation and
amortization expense are computed using straight-line and accelerated
methods.
Net income (loss) per share
---------------------------
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Shares" ("SFAS 128"). SFAS 128
requires the disclosure of basic and diluted earnings per share for
periods ending after December 15, 1997 and restatement of prior periods
to conform with the new disclosure format. The computation under
SFAS 128 differs from the primary and fully diluted earnings per share
computed under APB Opinion No. 15 primarily in the manner in which
potential common stock is treated. Basic earnings per share is
computed by dividing net income by the weighted-average number of
common shares outstanding.
The following table sets forth the computation of basic and diluted
earnings per share:
1997 1996
Numerator:
Loss from continuing operations $(1,716) -
Income from discontinued operations - $5,669
Extraordinary gain - 484
Denominator for basic earnings
per share-weighted average shares 1,217,359 1,095,061
Options to purchase shares of common stock of the Company outstanding
during 1996 and 1997 were not included in the computation of diluted
earnings per share because the options' exercise price was greater than
the average market price of the common shares in 1996 and the Company
had a loss from operations in 1997, therefore, their effect would be
antidilutive.
-20-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Accounting for stock base compensation:
--------------------------------------
In 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 allows either adoption of a fair
value based method of accounting for stock-based compensation or
continuation under Accounting Principles Board Option No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). The Company
has chosen to continue to account for stock-based compensation
using the intrinsic value based method prescribed in APB 25.
Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the corporation's
stock at the date of the grant.
NOTE B - DISCONTINUED OPERATIONS
On August 14, 1996, the Company sold its marine assets to Hvide Marine
Incorporated ("Hvide") for $10,075,000, resulting in a gain of $6,836,000.
In connection with the sale, all long-term debts of the Company were
extinguished and a gain of $484,000 was realized on the extinguishment.
Simultaneously, Hvide purchased five boats which had been owned by the
Three R Trusts and managed by the Company, and terminated the Company's
management of the boats. As a result of these events, the Company ceased
its business activities which were related to the ownership, management,
brokerage, and operation of offshore supply ships. Virtually all 1996
activities of the Company were related to marine operations prior to the
sale, or winding them down thereafter. Accordingly, all 1996 activities
have been presented in the accompanying financial statements as
discontinued operations.
The Company is subject to legal proceedings in the ordinary course of
its discontinued marine business which it conducted prior to August 14,
1996. Included in these cases are maritime asbestos claims against
the Company. On May 1, 1996, these cases were adminsitratively
dismissed subject to reinstatement on motion of plaintiffs' counsel.
It is expected that all of these cases will be reinstated. The Company
is presently unable to determine what, if any, impact these cases could
have upon the Company. Accordingly, no accrual for these claims has
been made in the financial statements.
-21-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE B - DISCONTINUED OPERATIONS (CONTINUED)
The following summarizes net losses from discontinued operations during
1996 (dollars in thousands):
Revenues
Charter revenue $ 4,048
Other revenue 609
------
4,657
Costs and expenses
Direct operating costs 1,757
Selling, general and administrative 2,595
Depreciation and amortization 892
------
5,244
------
Loss from operations (587)
Other - primarily interest expense (618)
------
Loss before Federal income taxes (1,205)
Federal income tax benefit 38
------
Net loss from discontinued operations $(1,167)
------
The following summarizes assets and liabilities of discontinued operations
as of December 31 (dollars in thousands):
1997 1996
------ ------
Current assets of discontinued operations
Accounts receivable $ 64 $ 26
Other assets - 195
----- -----
Total net current assets of discontinued
operations 64 221
----- -----
Current liabilities of discontinued operations
Accounts payable and accrued expenses - (157)
----- -----
Total net assets of discontinued operations $ 64 $ 64
----- -----
-22-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS
Stock Split
On June 30, 1997, the Company effected a one-for-fifty-shares reverse
split of the Company's Class A and Class B common stock, immediately
followed by a twenty-five-shares-for-one-share forward split of the
Company's common stock. On that same date, Seal Fleet, Inc. merged
into its wholly owned subsidiary, Seal Holdings Corporation with Seal
Holdings Corporation remaining as the survivor corporation. Following
the forward split, new share certificates are being issued by Seal
Holdings Corporation.
The reverse stock split resulted in all shares being purchased from
shareholders holding fewer than 50 shares and excess shares over even
multiples of fifty shares from shareholders holding more than fifty
shares. This share repurchase resulted in an insignificant change in
the relative percentage of total shares held by individual shareholders.
The par value of the Class A and Class B common stock was changed to $0.20
per share. Historical share and per share amounts have been restated
to reflect retroactively the stock splits.
Options
On August 14, 1996, the Board of Directors of the Company adopted a
Long-Term Incentive Plan (the "1996 Plan") for certain key employees,
officers, directors and outside consultants. The 1996 Plan authorized an
aggregate of 300,000 shares of the Company's common stock with the
option price being the fair market value of the common stock on the day
the option is granted.
As of December 31, 1996, there were 200,000 stock options granted under
the 1996 Plan at an option price of $1.00 per share. In accordance with
the resolution of the Company's Board of Directors on March 21, 1997, the
options became exercisable on that date. In addition, a loan of $120,000
to the Company's Chief Executive Officer was authorized to finance the
exerrcise of his option on 120,000 shares of the Company's common stock, and
the 1996 Plan was terminated, except as to those options which already had
been granted.
Further, on March 21, 1997, the Board of Directors of the Company
adopted the 1997 Incentive Option Plan (the "1997 Plan") which authorizes
grant of incentive stock options and non-statutory stock options covering
an aggregate of up to 1,200,000 shares of the Company's common stock.
During 1997, 785,000 options have been granted under the 1997 plan at an
option price of $1.75 per share. Of this amount, options to purchase
150,000 shares vested upon issuance. The remaining options vest upon the
successful financing of the physician practice management program business
plan. The options have a 10 year life.
-23-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS (Continued)
Pro forma information regarding net income and earnings per share has
been determined as if the Company had accounted for its employee stock
options under the fair value method of FASB Statement No. 123,
"Accounting for Stock-Based Compensation." The fair value for these
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weight-average assumptions for 1997:
risk-free interest rate of 7%; dividend yield of 0%; volatility factor
of .50 and a weighted-average expected option life of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different form those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for
earnings per share information):
1997 1996
---- ----
Pro forma net (loss) income $(1,794) $6,111
Pro forma earnings per share-
basic and dilutive $ (1.47) $5.58
Information regarding these option plans is as follows:
Shares
Under Option
Option Prices
Options outstanding at January 1, 1996 200,000 $1.00
Granted -
Exercised -
Canceled -
Options outstanding at December 31, 1996 200,000 $1.00
Granted 785,000 $1.75
Exercised (120,000) $1.00
Canceled -
Options outstanding at December 31, 1997 865,000 $1.00 - $1.75
Exercisable at December 31, 1997 230,000
Exercisable at December 31, 1996 -
-24-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS (Continued)
Exercise prices for options outstanding as of December 31, 1997 was
$1.00 for 80,000 options and $1.75 for 785,000 options. The
weighted-average exercise price of options outstanding at December
31, 1997 was $1.68 and the remaining weighted average contractual life of
the options was 9.3 years. The exercise price of all options issued in 1997
exceeded the market price of the stock at date of grant.
At December 31, 1997, the Company has 865,000 shares of common stock
reserved for future issuance.
Class B Common Stock
All of the Class B common stock is owned by First Magnum Corporation,
an entity wholly owned by the Company's Chairman, President and
Chief Executive Officer. First Magnum Corporation has the right to
select a majority of the Board of Directors of the Company.
Loan to Shareholder
On March 25, 1997, the Company's Chairman, Thomas M. Ferguson,
purchased from the Company 120,000 shares of the Class A common stock
of the Company. On that date Mr. Ferguson issued a promissory note
to the Company for $120,000 secured by a pledge agreement granting
the Company a security interest in the shares. The note comes due
upon the earlier of March 21, 1999, the termination of Mr. Ferguson's
employment with the Company, the date of sale or other disposition of
the shares by Mr. Ferguson or any breach of his obligations under the
Pledge Agreement.
NOTE D - LAND HELD FOR SALE
The Company owned a 516-acre tract of unimproved land in Brazoria
County, Texas which was recorded at its estimated fair market value
of $154,000 as "wet lands" and had no possibility of commercial
development in the foreseeable future. The Company sold this tract
of land to the United States Department of the Interior's Fish and
Wildlife Service for $154,000.
-25-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE E - RELATED PARTY TRANSACTIONS
At January 1, 1996, Three R Trusts ("Trusts") owned approximately 9% of
the Class A common stock and all of the Class B common stock of the
Company. The Trusts, as the owner of the Class B stock, had the right to
elect 51% of the board of directors. The four children of Robert L.
Moody, Sr., the majority shareholder prior to the August 14, 1996
transaction, were the beneficiaries of the Trusts. All Class A and
Class B common stock of the Company held by the Trusts was sold to
Hvide Marine Incorporated and subsequently to First Magnum Corporation
on August 14, 1996.
Transactions with the Trusts, Mr. Moody, and other related parties
in 1996 were as follows:
Management income and receivables
---------------------------------
The Company managed and operated various ships owned by the Trusts.
The Company earned fees based on 6% of the ships' revenues.
Management fees earned by the Company on the Trusts' ships totaled
$248,000 during 1996.
Accounts receivable/payable
---------------------------
On behalf of related parties, the Company collected revenues and paid
expenses for the management of these ships. This activity resulted in
a receivable from the Trusts of $758,000 at January 1, 1996. The
accounts with the Trusts were settled in connection with the August 14,
1996 transaction.
Rents and leases
----------------
The Company leased its office space from a partnership in which
Mr. Moody participated. Rent expense was $16,500 in 1996. The Company
was also responsible for repairs, insurance and taxes during the life
of the lease. The Company continued to lease the office space through
October 31, 1996, at which time the lease expired and the Company moved
its offices to Florida.
The Company leased hunting grounds from Robert L. Moody, Jr., a
beneficiary of the Trusts. Lease expense was $13,000 in 1996. The
lease terminated on August 14, 1996.
Consulting fee
--------------
Mr. Moody earned consulting fees from the Company of $29,000 in 1996.
No fees were paid in 1997.
-26-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE E - RELATED PARTY TRANSACTIONS (CONTINUED)
Notes payable
-------------
The Company had a note payable to the Trusts at January 1, 1996,
face amount of $5,925,000, stated interest at 7%, collateralized
by the common stock of six subsidiaries of the Company. Principal
payments were due in two equal installments on December 27, 1990
and 1991. The Company was unable to make the principal payments to
the Trusts putting the Company in default. In 1993, the Company
made a principal payment of $100,000. The Trusts did not call the
note and granted an indefinite extension. This note payable was
paid in full at August 14, 1996, with the proceeds of the sale of
virtually all of the Company's assets.
During each of the years 1986 through 1989, the Company paid one-
half of the interest due to the Trusts during the year and gave
promissory notes for the remainder. The total of the notes was
$830,000 and they were due on December 27, 1991. Total interest expense
on the notes was $284,000 for the period through August 14, 1996.
In connection with the 1996 sale of virtually all of the Company's
assets, the Company paid an additional $154,000 in interest which
amount was based on a corrected method of calculation of interest
due through August 14, 1996. In addition, the Trusts forgave $500,000
of debt of the Company. This amount has been recorded as an
extraordinary gain on extinguishment of debt.
NOTE F - FEDERAL INCOME TAX
The Company accounts for income taxes under FASB Statement No. 109,
"Accounting for Income Taxes (FASB 109)." Deferred income tax assets
and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's net deferred
income taxes are as follows:
Year Ended December 31
1997 1996
Deferred tax assets:
Allowance for bad debts $48,498 $30,568
Depreciation and amortization 4,714
Charitable Contributions 1,701
NOL Carryforward 671,279
Tax credits 275,701 761,389
--------- -------
Deferred tax assets 1,001,893 791,957
--------- --------
Less valuation allowance (1,001,893) (791,957)
--------- --------
Net deferred tax assets 0 0
--------- --------
-27-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE F - FEDERAL INCOME TAX (Contineud)
SFAS 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. After consideration of the evidence, both
positive and negative, management has determined that a $1,651,092
valuation allowance at December 31, 1997 is necessary to reduce the
deferred tax assets to the amount that will more likely than not be
realized. The change in the valuation allowance for the current year
is $209,936. At December 31, 1997, the Company has available net
operating loss carryforwards of $1,783,893, which expire in the year
2012. The Company has approximately $84,000 in general business credit
carryforwards which expire in the years 1998 through 2000. The Company
also has an alternative minimum tax credit carryforward of approximately
$192,000 which carries forward indefinitely.
NOTE G - COMMITMENTS
At December 31, 1997, the Company had a commitment for leased
office space of approximately 1,950 square feet, which commenced
on April 1, 1997 and ends 60 months later, or March 31, 2002.
Under the terms of the lease, the first three months were rent-free
followed by the following schedule of payments.
4th through 22nd Month $3,918.00 per month plus taxes
23rd through 41st Month 4,244.50 per month plus taxes
42nd through 60th Month 4,571.00 per month plus taxes
This schedule is subject to adjustment according to an inflation-
based formula.
Rent was $36,000 and $16,500 for the years ended December 31st, 1997
and 1996 respectively.
The Company has entered into two employment contracts with members
of senior management. The contracts call for minimum annual salaries
of $150,000 for each individual and run through May 31, 2000.
At December 31, 1997, the Company had no other significant commitments.
NOTE H - 401(K) EMPLOYEE RETIREMENT PLAN
The Company has a 401(k) Employee Retirement Plan ("401(k) Plan")
effective January 1, 1985. The 401(k) Plan covers all eligible Company
employees and has been approved by the Internal Revenue Service.
Contributions can be made by an employee in amounts not to exceed the
maximum allowed by the Internal Revenue Service. The Company does not
contribute to the 401(k) Plan. It does, however, pay administrative
fees which are deemed to be immaterial. At December 31, 1997 there were
four former employees and one active employee in the 401(k) Plan.
-28-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR ACCOUNTING AND
FINANCIAL DISCLOSURE
Due to the Company's move from Texas to Florida, management recommended,
and the shareholders so approved, that the Company's independent auditors
be changed from Pannell Kerr Forster of Texas, P.C. to Ernst and Young LLP.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information appearing under the captions "Proposal Two," "Executive
Officers and Pre-Sale Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement covered by this
Annual Report on Form 10-KSB is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
Company's Proxy Statement to be is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Security Ownership Of Certain
Beneficial Owners And Management" in the Company's Proxy is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Relationships And
Related Transactions" in the Company's Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The Exhibits listed in the accompanying Index to Exhibits are filed
as part of, or incorporated by reference into, this Annual Report on Form
10-K. The following is a list of such Exhibits:
-29-
Exhibit Description
2 Merger Agreement between Seal Fleet, Inc.
and Seal Holdings Corporation, attached to
the proxy statement for the annual meeting
of shareholders of Seal Fleet, Inc. held May 14,
1997, is hereby incorporated herein by reference.
3.1 Articles of Incorporation of Seal Holdings Corporation,
attached to the proxy statement for the annual meeting
of shareholders of Seal Fleet, Inc. held May 14, 1997,
is hereby incorporated herein by reference.
3.2 Bylaws of Seal Holdings Corporation, attached to the
proxy statement for the annual meeting of shareholders
of Seal Fleet, Inc. held May 14, 1997, is hereby incorporated
herein by reference.
10.1 Employment Agreement entered into as of June 1, 1997, by
and between Primary Care Medical Centers of America, Inc.
and Louis C. Morgenier III.
10.2 Employment Agreement entered into as of June 1, 1997, by and
between Primary Care Medical Centers of America, Inc. and
Craig T. Cuden.
10.3 Primary Care Medical Centers of America, Inc. 1997
Employee Incentive Stock Option Plan.
10.4 Secured Promissory Note dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached as
Exhibit 1 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
10.5 Stock Pledge Agreement dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached
as Exhibit 2 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
*10.6 1997 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Fleet, Inc.
held May 14, 1997, is hereby incorporated herein by reference.
*10.7 Seal Fleet, Inc. Amended 1996 Long-Term Incentive Plan,
filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB of Seal Fleet, Inc. for the quarterly period
ended March 31, 1997, is hereby incorporated herein by
reference.
*10.8 Seal Fleet, Inc. Bonus Plan, as amended, filed as
Exhibit 10(viii) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1980, is hereby
incorporated herein by reference.
-30-
<PAGE>
10.9 Asset Purchase Agreement dated as of March 29, 1996,
among Hvide Marine Incorporated, Seal Fleet, Inc. Sealcraft
Operators, Inc. Seal GP, Inc. South Corporation and Thomas M.
Ferguson, filed as Exhibit 1 to the Company's Current Report
on Form 8-K dated August 14, 1996, is hereby incorporated
herein by reference.
10.10 Amendment No. 1 to Asset Purchase Agreement, dated July 23,
1996, filed as Exhibit 2 to the Company's Current Report on
Form 8-K dated August 14, 1996, is hereby incorporated herein
by reference.
10.11 Indemnity letter dated July 23, 1996, from Hvide Marine
Incorporated to Seal Fleet, Inc., filed as Exhibit 10.3
to the Company's Annual Report on Form 10-KSB of Seal Fleet, Inc.
for the fiscal year ended December 31, 1996, is hereby
incorporated herein by reference.
10.12 Notice dated July 23, 1996, from Seal Fleet, Inc., Hvide
Marine Incorporated regarding waiver of paragraph 11(b) of Asset
Purchase Agreement, filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-KSB of Seal Fleet, Inc. for the fiscal year
ended December 31, 1996, is hereby incorporated herein by
reference.
10.13 Reconciliation Agreement dated August 14, 1996, among Seal
Fleet, Inc., Three R Trusts, Ross Seal Partners, Ltd., Bengal
Seal Partners Ltd., Indian Seal Partners, Ltd., Baffin Seal
Partners, Ltd., and Baltic Seal Partners, Ltd., filed as Exhibit
10.5 to the Company's Annual Report on Form 10-KSB of Seal Fleet,
Inc. for the fiscal year ended December 31, 1996, is hereby
incorporated herein by reference.
16 Letter re change in certifying accountant, filed as
Exhibit 16 to the Current Report on Form 8-K dated April 30,
1997, is hereby incorporated herein by reference.
21 Subsidiaries of the Registrant.
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with item 14(a)(3).
The Company will furnish a copy of any Exhibit on request in payment of the
Company's reasonable expenses of furnishing such Exhibit.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Fourth Quarter of the
Company's Fiscal Year Ended December 31, 1997.
-31-
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Company caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEAL HOLDINGS CORPORATION
Dated: March 27, 1998 /s/ Thomas M. Ferguson
----------------------------------
By: Thomas M. Ferguson,
Chairman of the Board, President and
Chief Executive Officer
In Accordance with the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ------- ------
/s/ Thomas M. Ferguson Chairman of the Board, March 27, 1998
- - ------------------------ President, Chief Executive
Thomas M. Ferguson Officer and Director
/s/ James S. Goodner Vice President, March 27, 1998
- - ------------------------ Chief Financial Officer,
James S. Goodner Treasurer and Secretary
/s/ J. Erik Hvide Director March 27, 1998
- - ------------------------
J. Erik Hvide
/s/ Donald L. Caldera Director March 27, 1998
- - ------------------------
Donald L. Caldera
-32-
<PAGE>
EXHIBIT INDEX
Exhibit Description
2 Merger Agreement between Seal Fleet, Inc. and Seal Holdings
Corporation, attached to the proxy statement for the annual
meeting of shareholders of Seal Fleet, Inc. held May 14, 1997,
is hereby incorporated herein by reference.
3.1 Articles of Incorporation of Seal Holdings Corporation,
attached to the proxy statement for the annual meeting of
shareholders of Seal Fleet, Inc. held May 14, 1997, is hereby
incorporated herein by reference.
3.2 Bylaws of Seal Holdings Corporation, attached to the proxy
statement for the annual meeting of shareholders of Seal Fleet,
Inc. held May 14, 1997, is hereby incorporated herein by
reference.
10.1 Employment Agreement entered into as of June 1, 1997, by and
between Primary Care Medical Centers of America, Inc. and
Louis C. Morgenier III.
10.2 Employment Agreement entered into as of June 1, 1997, by and
between Primary Care Medical Centers of America, Inc. and
Craig T. Cuden.
10.2 Primary Care Medical Centers of America, Inc. 1997 Employee
Incentive Stock Option Plan.
10.4 Secured Promissory Note dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached
as Exhibit 1 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
10.5 Stock Pledge Agreement dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached
as Exhibit 2 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
*10.6 1997 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Fleet, Inc.
held May 14, 1997, is hereby incorporated herein by reference.
*10.7 Seal Fleet, Inc. Amended 1996 Long-Term Incentive Plan,
filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB of Seal Fleet, Inc. for the quarterly period
ended March 31, 1997, is hereby incorporated herein by
reference.
*10.8 Seal Fleet, Inc. Bonus Plan, as amended, filed as
Exhibit 10(viii) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1980, is hereby
incorporated herein by reference.
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<PAGE>
10.9 Asset Purchase Agreement dated as of March 29, 1996, among
Hvide Marine Incorporated, Seal Fleet, Inc. Sealcraft
Operators, Inc. Seal GP, Inc. South Corporation and Thomas M.
Ferguson, filed as Exhibit 1 to the Company's Current Report
on Form 8-K dated August 14, 1996, is hereby incorporated herein
by reference.
10.10 Amendment No. 1 to Asset Purchase Agreement, dated July 23,
1996, filed as Exhibit 2 to the Company's Current Report on
Form 8-K dated August 14, 1996, is hereby incorporated herein
by reference.
10.11 Indemnity letter dated July 23, 1996, from Hvide Marine
Incorporated to Seal Fleet, Inc., filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-KSB of Seal Fleet, Inc. for
the fiscal year ended December 31, 1996, is hereby incorporated
herein by reference.
10.12 Notice dated July 23, 1996, from Seal Fleet, Inc., Hvide Marine
Incorporated regarding waiver of paragraph 11(b) of Asset
Purchase Agreement, filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-KSB of Seal Fleet, Inc. for the fiscal
year ended December 31, 1996, is hereby incorporated herein by
reference.
10.13 Reconciliation Agreement dated August 14, 1996, among Seal Fleet,
Inc., Three R Trusts, Ross Seal Partners, Ltd., Bengal Seal
Partners Ltd., Indian Seal Partners, Ltd., Baffin Seal Partners,
Ltd., and Baltic Seal Partners, Ltd., filed as Exhibit 10.5
to the Company's Annual Report on Form 10-KSB of Seal Fleet,
Inc. for the fiscal year ended December 31, 1996, is hereby
incorporated herein by reference.
16 Letter re change in certifying accountant, filed as Exhibit 16 to
the Current Report on Form 8-K dated April 30, 1997, is hereby incorporated
herein by reference.
21 Subsidiaries of the Registrant.
27 Financial Data Statement
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with item 14(a)(3).
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of June 1,
1997 ("Effective Date"), by and between Primary Care Medical Centers of
America, Inc., a Delaware corporation ("Employer"), and Louis C. Morgenier
III ("Employee"). Employer and Employee may be referred to herein
collectively as the "parties" and individually as a "party."
ARTICLE I
TERM OF EMPLOYMENT; FORMATION OF SUBSIDIARY
Employer hereby employs Employee and Employee hereby accepts employment
with Employer for a period (the "Term") beginning as of the Effective Date and
ending on the third (3rd) anniversary of the Effective Date (the "Scheduled
Termination Date"), subject, however, to earlier termination as hereinafter
provided.
ARTICLE II
DUTIES OF EMPLOYEE
2.1 Duties. Employee is engaged to be the President and Chief Operating
Officer of Employer. Employee shall be elected to the Board of Directors
of Employer and shall be reelected as necessary to permit Employee to serve
as a director throughout the Term. In general, Employee shall have such
authority, duties and responsibilities with respect to Employer as are
consistent with his title. Employee's specific duties and powers shall be
determined from time to time by Employer's Board of Directors. Employee
shall perform perform and discharge such duties well and faithfully.
Employee shall be subject to the supervision and direction of Employer's
Board of Directors and its Chairman.
2.2 Full Time Employment. Employee shall devote his entire productive time,
ability, and attention to the business of Employer during the Term. Except
for services provided to affiliates of Employer, during the Term, Employee
shall not, directly or indirectly, render any services of a business,
commercial or professional nature to any other person, corporation, firm or
organization, whether for compensation or otherwise, without the prior
written consent of Employer. Employee hereby represents and warrants to
Employer that the execution and performance of Employee's duties under this
Agreement do not and will not conflict with or result in a breach of or a
default under any agreement, contract, or instrument to which Employee is a
party or by which Employee is bound.
ARTICLE III
COMPENSATION AND BENEFITS
3.1 Base Salary. As partial compensation for services rendered and
Employee's covenants and agreements under this Agreement, Employee shall be
entitled to receive from Employer a base salary, initially set at $150,000
per year, payable in twenty-four equal semi-monthly installments for each
year during the Term. The salary of Employee may be adjusted from time to
time at the sole discretion of Employer's Board of Directors but shall not
be decreased below $150,000 without Employee's consent.
3.2 Performance Bonus. In addition to the compensation specified in Section
3.1, Employee shall also be entitled to receive from Employer for each
twelve-month Bonus Period, as defined below, an additional amount (the
"Performance Bonus") equal to five percent (5%) of Employer's net pre-tax
earnings ("NPTE") for the Bonus Period provided that Employer has achieved a
return on investment ("ROI") during the Bonus Period at least equal to 15.0%,
16.5% or 18.0% in the first, second or third Bonus Periods, respectively;
provided, however, that in the event Employee is employed by Employer for
less than all of any Bonus Period, the Employee's Performance Bonus for such
partial Bonus Period shall be determined by multiplying the amount
calculated pursuant to the previous sentence by a fraction, the numerator
of which shall be the number of days in the Bonus Period during which
Employee was employed by Employer, and the denominator of which shall be
the total number of days in the Bonus Period. Any Performance Bonus
payable with respect to a partial Bonus Period shall be paid within 90 days
after the end of each fiscal year. The "Bonus Period" shall mean each of the
three twelve-month periods commencing June 1, 1997, and the first and second
anniversaries of such date. NPTE shall equal Employer's consolidated net
income for the Bonus Period, prior to the deduction therefrom of any income
tax expense, but after application thereto of any monitoring or administrative
fees chargeable to the Subsidiary by any other company, including, but not
limited to, Seal Holdings Corporation (the "Parent"). The above
notwithstanding, in calculating NPTE, there shall be excluded from the gross
revenues of Employer the full amount of any consideration received by
Employer in any Special Event, as defined in Section 3.C, below. The ROI
for any Bonus Period shall equal that percentage of the shareholders' equity
of Employer on the last day of the Bonus Period shall equal that percentage
of the shareholders' equity of Employer on the last day of the Bonus Period
which is equal to the NPTE of Employer for that Bonus Period less (i) any
and all income taxes paid or payable by the Company or the Parent with
respect to such earnings and (ii) the sum of the Performance Bonuses payable
with respect to the Bonus Period hereunder and pursuant to that Employment
Agreement dated June 1, 1997, between Employer and Louis C. Morgenier III.
3.3 Special Event Bonus. In addition to the compensation specified in
Sections 3.1 and 3.2, Employee shall also be entitled to receive from
Employer an additional amount (the "Special Event Bonus") in the event of the
occurrence of any "Special Event," as defined below. "Special Event" means
the sale by Employer of a network of multi-disciplinary primary care clinics
or any group of such networks. Upon the occurrence of any Special Event,
Employee shall receive a Special Event Bonus equal to twenty percent (20%) of
the gross proceeds of the Special Event, which shall be payable in cash,
except that Employer may, in its discretion, pay up to forty percent (40%) of
any Special Event Bonus in the Class A Common Stock of the Parent, which shall
be valued for the purposes of such payment at the average bid price of such
stock in the market over the ten business days immediately preceding the
date of the Special Event. The Special Event Bonus payable with respect to
any Special Event shall be paid within ninety (90) days after the occurrence
of the Special Event, except that any portion of the Special Event Bonus
based upon any amounts received by Employer on a deferred basis may be
similarly deferred by Employer, provided that such deferred payments shall
be made no later than ninety (90) days after the receipt by Employer of
such deferred consideration. In the event that any Special Event involves
the receipt by the Company of consideration other than cash, the Special
Event Bonus shall be calculated based upon the fair market value of the
consideration received, as determined by the Board of Directors of Employer.
3.4 Incentive Stock Options. Simultaneously with the execution of this
Agreement, Employer shall grant to Employee an incentive stock option to
purchase up to ten thousand (10,000) shares of the common stock of Employer
on such terms and conditions as shall be approved by Employer's Board of
Directors.
3.5 Securities Law Compliance. Employee recognizes that the stock options
provided for in Section 3.4, above, any shares of the common stock of the
Company issuable thereunder and any shares of the Class A Common Stock of the
Parent issued pursuant to Section 3.3, above, will be granted or issued to
Employee without registration under the Securities Act of 1933 (the "Act") or
any qualification under any applicable state "blue sky laws" and are subject
to significant restrictions upon resale. Employee recognizes that the stock
option agreement to be entered into by the parties pursuant to such options
or pursuant to Section 3.4 and all certificates representing securities issued
to Employee pursuant to such options or pursuant to Section 3.3 shall bear
legends reflecting the restrictions upon transferability of such securities
resulting from applicable securities law. As a condition to his receipt of
any such securities, Employee shall execute a letter of investment intent in
a form reasonably satisfactory to Employer.
3.6 Other Benefits. During the period of his employment hereunder, Employee
shall also be entitled to receive all other benefits of employment which are,
and which may be in the future, generally available to members of Employer's
management, and, specifically, an allowance for the use of an automobile as
provided from time to time by action of the Board of Directors of Employer,
as well as, without limitation, group health and life insurance benefits,
participation in any company pension plan, and paid vacation consistent with
the vacation policies of Employer. The above notwithstanding, in view of
the benefits expressly granted to Employee hereunder, Employee shall not be
entitled to participate in any benefit plans of Employer or any of its
affiliates which provide for cash bonuses, stock bonuses, stock options or
similar cash or equity incentives.
3.7 Expenses. Employer, in accordance with the rules and regulations that
Employer may issue and revise from time to time, shall reimburse Employee for
business expenses directly and reasonably incurred in the performance of his
duties.
ARTICLE IV
TERMINATION
This Agreement shall terminate prior to the expiration of its Term upon the
occurrence of any of the following events:
4.1 Disability. In the event that Employee is unable fully to perform his
duties and responsibilities hereunder to the full extent required by the
Board of Directors of Employer by reason of illness, injury or incapacity
for ninety (90) consecutive calendar days, during which time Employee shall
continue to be compensated as provided in Section 3.1 hereof (but not Section
3.2 or Section 3.3), this Agreement may be terminated by Employer, and
Employer shall have no further liability or obligation to Employee for
compensation hereunder; provided, however, that Employee will be entitled
to receive the payments prescribed under any disability benefits plan in
which Employee was participating, and Employee shall continue to be bound
by Article V. In the event of any dispute between Employer and Employee
under this Section 4.A as to whether Employee's employment may be terminated
under this Section, Employee shall submit to a physical examination by a
licensed physician selected by Employer, and the determination of such
physician shall be binding on the parties.
4.2 Death. In the event that Employee dies during the Term, Employer shall
pay to his executors, legal representatives or administrators an amount
equal to the installment of Employee's compensation set forth in
Sections 3.1, 3.2 and 3.3 hereof for the month in which Employee dies, and
thereafter Employer shall have no further liability or obligation hereunder
to Employee's executors, legal representatives, administrators, heirs or
assigns or any other person claiming under or through Employee; provided,
however, that Employee's executors, legal representatives and administrators
will be entitled to receive and disburse to the proper persons the payments
prescribed under any death or disability benefits plan in which Employee was
participating.
4.3 Cause. Nothing in this Agreement shall be construed to prevent the
termination of this Agreement by Employer for "cause." For purposes of this
Agreement, "cause" shall mean (i) Employee's failure to perform or observe
(other than by reason of illness, injury or incapacity) any of the terms or
provisions of this Agreement, including the failure of Employee to follow the
directions of the Board of Directors of Employer or the Chairman of Employer,
(ii) dishonesty, misconduct or action on the part of Employee that is or is
reasonably likely to be materially damaging or detrimental to the business of
the Employer, (iii) conviction of a felony, or of any misdemeanor involving
moral turpitude, (iv) insobriety or drug addition that is materially affecting
or is likely materially to affect Employee's ability to perform the services
required of him hereunder, or (v) misappropriation of funds. Subject to
applicable cure periods as set out in the next sentence, Employee's
employment may be terminated for cause at any time. Prior to terminating
this Agreement on account of a cause described in clause (i) above (but not
for any of the enumerated "causes"), Employer shall give Employee thirty
(30) days' written notice and an opportunity to cure such failure to the
satisfaction of Employer. Upon termination for cause, Employer shall pay to
Employee all sums due to Employee through the date of such termination.
Following a termination for cause and payment of the amounts required under
this Section, Employer shall have no further duty or obligation to Employee;
provided, however, that Employee shall continue to be bound by Article V.
4.4 Termination Upon Lack of Positive Cash Flow. Employee and Employer
recognize that Employer is embarking on a business venture with significant
risks of business failure. If, after the first twelve (12) months of the
Term, Employer has not achieved positive cash flow, as defined below,
Employee's employment hereunder shall terminate on June 1, 1998, and
Employer shall pay to Employee all sums due to Employee through such date.
Following such a termination and payment of the amounts required under this
Section, Employer shall have no further duty or obligation to Employee;
provided, however, that Employee shall continue to be bound by Article V.
Employer shall be deemed not to have achieved positive cash flow after the
first twelve (12) months of the Term if Employer fails to generate cash
collections in excess of cash disbursements during each of the months of
April and May of 1998.
4.5 Termination Without Cause. Employer may terminate Employee's
employment hereunder pursuant to this Section 4.5 at any time upon thirty
(30) days' prior written notice of termination; provided that Employer
shall pay to Employee all sums due to Employee hereunder through the date
of termination and, in addition, severance compensation in the amount of
$150,000. Following such a termination and the payment of the amounts
required under this Section, Employer shall have no further duty or
obligation to Employee; provided, however, that Employee shall continue to
be bound by Article V.
4.6 Initial Public Offering. In the event Employer effects an underwritten
public offering of its securities pursuant to a registration statement filed
under the Act (a "Public Offering"), the stock options provided for in
Section 3.4, above, shall, by their terms, become immediately exercisable
by Employee, subject to any further terms and conditions contained in the
agreements embodying such incentive stock options or in the stock option
plan pursuant to which they are granted. This Agreement shall continue in
full force and effect notwithstanding any such Public Offering and, to the
extent deemed appropriate by Employer's Board of Directors, Employee shall
be granted such further stock options and benefits as are appropriate to
reflect the status of Employee as an Employee of a public company.
4.7 Change in Control. Upon the occurrence of a "Change in Control" of
Employer, as defined below, Employee shall be entitled to terminate his
employment hereunder, whereupon Employer shall be obligated to pay to
Employee a lump sum equal to $150,000 together with any and all other sums
due Employee hereunder through the date of the termination. Following
such a termination and payment of the amounts required under this section,
Employer shall have no further duty or obligation to Employee; provided,
however, that Employee shall continue to be bound by Article V. The term
"Change in Control" shall mean the occurrence at any time during the term
of the Agreement of any of the following events: (i) Employer is merged,
consolidated or reorganized into or with another corporation or other
legal person and as a result of such merger, consolidation or reorganization
less than fifty-one percent (51%) of the combined voting power of the then-
outstanding securities of such corporation or persons immediately after such
transaction are held in the aggregate by holders of voting securities of
Employer immediately prior to such transaction; (ii) Employer sells all or
substantially all of its assets to any other corporation or other legal
person less than fifty-one percent (51%) of the combined voting power of
the then-outstanding voting securities of which are held in the aggregate
by holders of the voting securities of Employer immediately prior to such
sale; or (iii) More than fifty percent (50%) of the voting securities of
Employer are held by persons other than the Parent, Employee and Cuden;
provided, however, that no Public Offering shall be deemed to be a Change
in Control, no transaction provided for an items (i) through (iii), above,
which occurs after a Public Offering shall be deemed to be a Change in
Control, and the provisions of this Section 4.G shall terminate upon a
Public Offering.
ARTICLE V
PROPERTY RIGHTS
5.1 Non-Competition. During the Term and for a twelve month period
following the termination of his employment under this Agreement, Employee
shall not, directly or indirectly, either as an employee, employer,
consultant, agent, lender, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in the health care business or any business that is
in competition with the business of Employer in any state in which
Employer has established a commercial relationship, except as approved in
writing by Employer. For the purposes of this Section 5.A, the business
of Employer shall include any business in which Employer has engaged or has
taken substantial steps to enter as of the date of the termination of
Employee's employment hereunder.
5.2 Solicitation. For a twelve month period following the termination of
his employment under this Agreement, Employee shall not, directly or
indirectly, call on or solicit, any person, firm, corporation or other
entity who or which during the Term was or had been a customer, referral
source, supplier, or employee of the Employer.
5.3 Confidential Information. Employee will not, during the Term of or
after the termination of his employment under this Agreement, disclose any
confidential information of Employer to any person or entity for any reason
whatsoever, nor shall Employee make use of any such confidential information
for his own purposes or for the benefit of any person or entity (except
Employer) under any circumstances during the Term, or after the
termination, of this Agreement. Employee agrees that, upon termination
of his employment under this Agreement or on demand of Employer, he shall
immediately deliver any such printed or written material and copies
thereof to Employer.
5.4 Reasonableness of Restrictions. Employee agrees that (a) the covenants
contained in Sections 5.1, 5.2 and 5.3 hereof are necessary for the
protection of Employer's business goodwill and trade secrets, (b) a portion
of the compensation paid to Employee under this Agreement is paid in
consideration of the covenants herein contained, the sufficiency of which
consideration is hereby acknowledged, (c) Employee is not, and under this
Agreement, will not be engaged in a common calling, and (d) if the scope of
any restriction contained in Sections 5.1, 5.2, or 5.3 is too broad to
permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and
the parties hereto hereby consent that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction. The
existence of any claim or cause of action of Employee against Employer,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Employer of these convenants.
5.5 Enforcement. Employee acknowledges that the restrictions contained in
Sections 5.1, 5.2, and 5.3 hereof are reasonable and necessary to protect the
legitimate interests of Employer and its affiliates, that Employer would not
have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in
irreparable injury to Employer. Employee also acknowledges that Employer
shall be entitled to preliminary and permanent injunctive relief, without
the necessity of proving actual damages, as well as an equitable accounting
of all earnings, profits and other benefits arising from any such violation,
which rights shall be cumulative and in addition to any other rights or
remedies to which Employer may be entitled.
5.6 Copy of Covenants. Until the expiration of the applicable restrictions,
Employee will provide, and Employer similarly may provide, a copy of the
covenants contained in Sections 5.1, 5.2 and 5.4 of this Agreement to any
business or enterprise which Employee may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management,
operation, financing, or control of, or serve as an officer, director,
employee, partner, principal, agent, representative, consultant, lender or
otherwise, or with which he may use his name or permit his name to be used.
ARTICLE VI
GENERAL PROVISIONS
6.1 Arbitration. If a dispute or claim shall arise with respect to any
of the terms or provisions of this Agreement, or with respect to the
performance of either of the parties under this Agreement, either party
may require that the dispute be submitted for arbitration under the
Commercial Arbitration Rules of the American Arbitration Association.
Each party shall bear one-half (1/2) of the cost of any such proceedings,
including the payment of the arbitrator's fees. The arbitration shall
be conducted before a single arbitrator in Palm Beach County, Florida.
The written decision of the arbitrator shall be binding and conclusive
upon the parties. Judgment may be entered upon any such award in any
court having jurisdiction thereof.
6.2 Notices. Any notices to be given hereunder by either party to the other
may be effected either by personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested:
If to Employer:
Primary Care Medical Centers of America, Inc.
125 Worth Avenue, Suite 314
Palm Beach, Florida 33480
with a copy to:
Bronson, Bronson & McKinnon LLP
505 Montgomery Street
San Francisco, California 94111-2514
Attention: Richard P. Walker, Esq.
If to Employee:
Louis C. Morgenier III
Palm Beach Polo
2864C Winding Oak Lane
Wellington, Florida 33414
Mailed notices shall be addressed to the parties at the addresses set forth
above, but each party may change his address by written notice in accordance
with this Section 6.2. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of ten (10) days after mailing.
6.3 Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by Employer, and contains all of
the covenants and agreements between the parties with respect to such
employment.
6.4 Headings. The headings or titles to sections in this Agreement are
intended solely for convenience, and no provision of this Agreement is to be
construed by reference to the heading of title of any section.
6.5 Certain Acknowledgments. Employee by his execution and delivery of this
Agreement represents to Employer as follows:
1. That Employee has been advised by Employer to have this Agreement
reviewed by an attorney representing Employee, and Employee has either
had this Agreement reviewed by an attorney or has chosen not to have this
Agreement reviewed because Employee, after reading the entire Agreement,
fully and completely understands each provision and has determined not to
obtain the services of an attorney.
2. Employee either on his own or with the assistance and advice of his
attorney has in particular reviewed Article V and understands and accepts
that the restrictions imposed on Employee by Article V are reasonable and
necessary for the protection of the property rights of Employer.
6.6 Amendment or Modification; Waiver. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or
waiver is authorized by the Board of Directors of Employer and is agreed
to in writing, signed by Employee and by an officer of Employer (other
than Employee) thereunto duly authorized. Except as otherwise
specifically provided in this Agreement, no waiver by either party of
any breach by the other party of any provision of this Agreement shall
be deemed a waiver of a similar or disimilar provision at the same or at
any prior or subsequent time; not shall the receipt or acceptance of
Employee's continuing services be deemed a waiver of any provision hereof.
6.7 Assignability. Employee shall not assign, pledge or encumber any
interest in this Agreement or any part thereof without the express written
consent of Employer, this Agreement being personal to Employee. This
Agreement shall not be assignable by Employer without the written consent of
Employee, except that Employer may assign this Agreement without obtaining
Employee's consent either to the Staffing Subsidiary or to the successor
to Employer resulting from any transaction in which Employer shall merge
or consolidate with or into, or transfer substantially all of its assto,
another person or entity.
6.8 Governing Law. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive
law of the State of Florida.
I. Severability. Each provision of this Agreement constitutes a separate
and distinct undertaking, covenant and/or provision. In the event that any
provision shall be determined to be unlawful, such provision shall be deemed
severed from this Agreement, but every other provision shall remain in full
force and effect, and in substitution for any such provision held unlawful,
there shall be substituted a provision of similar import reflecting the
original intent of the parties to the extent permissible under law.
EXECUTED as of the day and year first above written.
EMPLOYER:
PRIMARY CARE MEDICAL CENTERS
OF AMERICA, INC.
By: /s/Thomas M. Ferguson
Name: Thomas M. Ferguson
Title: Chairman
EMPLOYEE:
/s/ Louis C. Morgenier III
Louis C. Morgenier III
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of June 1, 1997
("Effective Date"), by and between Primary Care Medical Centers of America,
Inc., a Delaware corporation ("Employer"), and Craig T. Cuden ("Employee").
Employer and Employee may be referred to herein collectively as the "parties"
and individually as a "party."
ARTICLE I
TERM OF EMPLOYMENT; FORMATION OF SUBSIDIARY
Employer hereby employs Employee and Employee hereby accepts employment with
Employer for a period (the "Term") beginning as of the Effective Date and
ending on the third (3rd) anniversary of the Effective Date (the "Scheduled
Termination Date"), subject, however, to earlier termination as hereinafter
provided.
ARTICLE II
DUTIES OF EMPLOYEE
2.1 Duties. Employee is engaged to be the Chief Executive Officer of
Employer. Employee shall be elected to the Board of Directors of Employer
and shall be reelected as necessary to permit Employee to serve as a
director throughout the Term. In general, Employee shall have such
authority, duties and responsibilities with respect to Employer as are
consistent with his title. Employee's specific duties and powers shall be
determined from time to time by Employer's Board of Directors. Employee
shall perform and discharge such duties well and faithfully. Employee
shall be subject to the supervision and direction of Employer's Board
of Directors and its Chairman.
2.2 Full Time Employment. Employee shall devote his entire productive
time, ability, and attention to the business of Employer during the Term.
Except for services provided to affiliates of Employer, during the Term,
Employee shall not, directly or indirectly, render any services of a
business, commercial or professional nature to any other person, corporation,
firm or organization, whether for compensation or otherwise, without the
prior written consent of Employer. Employee hereby represents and warrants
to Employer that the execution and performance of Employee's duties under
this Agreement do not and will not conflict with or result in a breach of
or a default under any agreement, contract or instrument to which Employee
is a party or by which Employee is bound.
ARTICLE III
COMPENSATION AND BENEFITS
3.1 Base Salary. As partial compensation for services rendered and
Employee's covenants and agreements under this Agreement, Employee shall
be entitled to receive from Employer a base salary, initially set at
$150,000 per year, payable in twenty-four equal semi-monthly installments
for each year during the Term. The salary of Employee may be adjusted from
time to time at the sole discretion of Employer's Board of Directors but
shall not be decreased below $150,000 without Employee's consent.
3.2 Performance Bonus. In addition to the compensation specified in
Section 3.1, Employee shall also be entitled to receive from Employer
for each twelve-month Bonus Period, as defined below, an additional amount
(the "Performance Bonus") equal to five percent (5%) of Employer's net
pre-tax earnings ("NPTE") for the Bonus Period provided that Employer has
achieved a return on investment ("ROI") during the Bonus Period at least
equal to 15.0%, 16.5% or 18.0% in the first, second or third Bonus Periods,
respectively; provided, however, that in the event Employee is employed
by Employer for less than all of any Bonus Period, the Employee's
Performance Bonus for such partial Bonus Period shall be determined by
multiplying the amount calculated pursuant to the previous sentence by a
fraction, the numerator of which shall be the number of days in the Bonus
Period during which Employee was employed by Employer, and the denominator
of which shall be the total number of days in the Bonus period. Any
Performance Bonus payable with respect to a partial Bonus Period shall be
paid within 90 days after the end of such fiscal year. The "Bonus Period"
shall mean each of the three twelve-month periods commencing June 1, 1997,
and the first and second anniversaries of such date. NPTE
shall equal Employer's consolidated net income for the Bonus Period, prior
to the deduction therefrom of any income tax expense, but after application
thereto of any monitoring or administrative fees chargeable to the
Subsidiary by any other company, including, but not limited to, Seal Holdings
Corporation (the "Parent"). The above notwithstanding, in calculating
NPTE, there shall be excluded from the gross revenues of Employer the full
amount of any consideration received by Employer in any Special event, as
defined in section 3.3, below. The ROI for any Bonus Period shall equal
that percentage of the shareholders' equity of Employer on the last
day of the Bonus Period which is equal to the NPTE of Employer for that
Bonus Period less (i) any and all income taxes paid or payable by the
Company or Parent with respect to such earnings and (ii) the sum of the
Performance Bonuses payable with respect to the Bonus Period hereunder
and pursuant to that Employment Agreement dated June 1, 1997, between
Employer and Louis C. Morgenier III.
3.3 Special Event Bonus. In addition to the compensation specified in
Sections 3.1 and 3.2, Employee shall also be entitled to receive from
Employer an additional amount (the "Special Event Bonus") in the event of
the occurrence of any "Special Event," as defined below. "Special Event"
means the sale by Employer of a network of multi-disciplinary primary care
clinics or any group of such networks. Upon the occurrence of any Special
Event, Employee shall receive a Special Event Bonus equal to twenty
percent (20%) of the gross proceeds of the Special event, which shall be
payable in cash, except that Employer may, in its discretion, pay up to
40% (40%) of any Special event Bonus in the Class A Common Stock of the
Parent, which shall be valued for the purposes of such payment at the
average bid price of such stock in the market over the ten business days
immediately preceding the date of the Special Event. The Special Event
Bonus payable with respect to any Special Event shall be paid within
ninety (90) days after the occurrence of the Special event, except that any
portion of the Special Event Bonus based upon any amounts received by
Employer on a deferred basis may be similarly deferred by Employer, provided
that such deferred payments shall be made no alter than ninety (90) days
after the receipt by Employer of such deferred consideration. In the
event that any Special event involves the receipt by the Company of
consideration other than cash, the Special event Bonus shall be calculated
based upon the fair market value of the consideration received, as
determined by the board of directors of Employer.
3.4 Incentive Stock Options. Simultaneously with the execution of this
Agreement, Employer shall grant to Employee an incentive stock option to
purchase up to ten thousand (10,000) shares of the common stock of Employer
on such terms and conditions as shall be approved by Employer's Board of
Directors.
3.5 Securities Law Compliance. Employee recognizes that the stock options
provided for in Section 3.4, above, any shares of the common stock of the
Company issuable thereunder and any shares of the Class A Common Stock of
the Parent issued pursuant to Section 3.3, above, will be granted or issued
to Employee without registration under the Securities Act of 1933 (the "Act")
or any qualification under any applicable state "blue sky laws" and are
subject to significant restrictions upon resale. Employee recognizes that
the stock option agreement to be entered into by the parties pursuant to
Section 3.4 and all certificates representing securities issued to Employee
pursuant to such options or pursuant to Section 3.3 shall bear legends
reflecting the restrictions upon transferability of such securities resulting
from applicable securities laws. As a condition to his receipt of any such
securities, Employee shall execute a letter of ivnestment intent in a form
reasonably satisfactory to Employer.
3.6 Other Benefits. During the period of his employment hereunder,
Employee shall also be entitled to receive all other benefits of employment
which are, and which may be in the future, generally available to members
of Employer's management, and, specifically, an allowance for the use of
an automobile as provided from time to time by action of the Board of
Directors of Employer, as well as, without limitation, group health and
life insurance benefits, participation in any company pension plan, and
paid vacation consistent with the vacation policies of Employer. The
above notwithstanding, in view of the benefits expressly granted to
Employee hereunder, Employee shall not be entitled to participate in
any benefit plans of Employer or any of its affilitates which provide for
cash bonuses, stock bonuses, stock options or similar cash or equity
incentives.
3.7 Expenses. Employer, in accordance with the rules and regulations that
Employer may issue and revise from time to time, shall reimburse Employee for
business expenses directly and reasonably incurred in the performance of his
duties.
ARTICLE IV
TERMINATION
This Agreement shall terminate prior to the expiration of its Term upon the
occurrence of any one of the following events:
4.1 Disability. In the event that Employee is unable fully to perform
his duties and responsibilities hereunder to the full extent required by
the Board of Directors of Employer by reason of illness, injury or
incapacity for ninety (90) consecutive calendar days, during which time
Employee shall continue to be compensated as provided in Sections 3.1
hereof (but not Section 3.2 or Section 3.3), this Agreement may be
terminated by Employer, and Employer shall have no further liability or
obligation to Employee for compensation hereunder; provided, however,
that Employee will be entitled to receive the payments prescribed under
any disability benefits plan in which Employee was participating, and
Employee shall continue to be bound by Article V. In the event of any
dispute between Employer and Employee under this Section 4.1 as to
whether Employee's employment may be terminated under this Section,
Employee shall submit to a physical examination by a licensed physician
selected by Employer, and the determination of such physician shall be
binding on the parties.
4.2 Death. In the event that Employee dies during the Term, Employer
shall pay to his executors, legal representatives or administrators an
amount equal to the installment of Employee's compensation set forth
in Sections 3.1, 3.2 and 3.3 hereof for the month in which Employee dies,
and thereafter Employer shall have no further liability or obligation
hereunder to Employee's executors, legal representatives, administrators,
heirs or assigns or any other person claiming under or through Employee;
provided, however, that Employee's executors, legal representatives and
administrators will be entitled to receive and disburse to the proper
persons the payments prescribed under any death or disability benefits
plan in which Employee was participating.
4.3 Cause. Nothing in this Agreement shall be construed to prevent the
termination of this Agreement by Employer for "cause." For purposes of this
Agreement, "cause" shall mean (i) Employee's failure to perform or observe
(other than by reason of illness, injury or incapacity) any of the terms or
provisions of this Agreement, including the failure of Employee to follow the
directions of the Board of Directors of Employer or the Chairman of Employer,
(ii) dishonesty, misconduct or action on the part of Employee that is or is
reasonably likely to be materially damaging or detrimental to the business of
the Employer, (iii) conviction of a felony, or of any misdemeanor involving
moral turpitude, (iv) insobriety or drug addiction that is materially
affecting or is likely materially to affect Employee's ability to perform
the services required of him hereunder, or (v) misappropriation of funds.
Subject to applicable cure periods as set out in the next sentence,
Employee's employment may be terminated for cause at any time. Prior to
terminating this Agreement on account of a cause described in clause
(i) above (but not for any of the other enumerated "causes"), Employer
shall give Employee thirty (30) days' written notice and an opportunity to
cure such failure to the satisfaction of Employer. Upon termination for
cause, Employer shall pay to Employee all sums due to Employee through
the date of such termination. Following a termination for cause and
payment of the amounts required under this Section, Employer shall have
no further duty or obligation to Employee; provided, however, that
Employee shall continue to be bound by Article V.
4.4 Termination Upon Lack of Positive Cash Flow. Employee and Employer
recognize that Employer is embarking on a business venture with
significant risks of business failure. If, after the first twelve (12)
months of the Term, Employer has not achieved positive cash flow,
as defined below, Employee's employment hereunder shall terminate
on June 1, 1998, and Employer shall pay to Employee all sums due to
Employee through such date. Following such a termination and payment
of the amounts required under this section, Employer shall have no
further duty or obligation to Employee; provided, however, that Employee
shall continue to be bound by Article V. Employer shall be deemed not
to have achieved positive cash flow after the first twelve (12) months
of the Term if Employer fails to generate cash collections in excess of cash
disbursements during each of the months of April and May of 1998.
4.5 Termination Without Cause. Employer may terminate Employee's employment
hereunder pursuant to this Section 4.5 at any time upon thirty (30) days'
prior written notice of termination; provided that Employer shall pay to
Employee all sums due to Employee hereunder through the date of
termination and, in addition, severance compensation in the amount of
$150,000. Following such a termination and the payment of the amounts
required under this section, Employer shall have no further duty or
obligation to Employee; provided, however, that Employee shall continue
to be bound by Article V.
4.6 Initial Public Offering. In the event Employer effects an underwritten
public offering of its securities pursuant to a registration statement filed
under the Act (a "Public Offering"), the stock options provided for in Section
3.4, above, shall, by their terms, become immediately exercisable by
Employee, subject to any further terms and conditions contained in the
agreements embodying such incentive stock options or in the stock option
plan pursuant to which they are granted. This Agreement shall continue in
full force and effect notwithstanding any such Public Offering and, to
the extent deemed appropriate by Employer's Board of Directors, Employee
shall be granted such further stock options and benefits as are
appropriate to reflect the status of Employee as an Employee of a public
company.
4.7 Change in Control. Upon the occurrence of a "Change in Control" of
Employer, as defined below, Employee shall be entitled to terminate his
employment hereunder, whereupon Employer shall be obligated to pay to
Employee a lump sum equal to $150,000 together with any and all other
sums due Employee hereunder through the date of the termination.
Following such a termination and payment of the amounts required under
this section, Employer shall have no further duty or obligation to
Employee; provided, however, that Employee shall continue to be bound
by Article V. The term "Change in Control" shall mean the occurrence
at any time during the term of the Agreement of any of the following events:
(i) Employer is merged, consolidated or reorganized into or with another
corporation or other legal person and as a result of such merger,
consolidation or reorganization less than fifty-one percent (51%) of the
combined voting power of the then-outstanding securities of such
corporation or persons immediately after such transaction are held in the
aggregate by holders of voting securities of Employer immediately prior
to such transaction; (ii) Employer sells all or substantially all of
its assets to any other corporation or other legal person less than
fifty-one percent (51%) of the combined voting power of the then-
outstanding voting securities of which are held in the aggregate by
holders of the voting securities of Employer immediately prior to
such sale; or (iii) More than fifty percent (50%) of the voting
securities of Employer are held by persons other than Parent, Employee
and Morgenier; provided, however, that no Public Offering shall be
deemed to be a Change in Control, no transaction provided for in items (i)
through (iii), above, which occurs after a Public Offering shall be deemed to
be a Change in Control, and the provisions of this Section 4.7 shall
terminate upon a Public Offering.
ARTICLE V
PROPERTY RIGHTS
5.1 Non-Competition. During the Term and for a twelve month period
following the termination of his employment under this Agreement,
Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, lender, principal, partner, stockholder,
corporate officer, director, or in any other individual or
representative capacity, engage or participate in the health care
business or any business that is in competition with the business of
Employer in any state in which Employer has established a commercial
relationship, except as approved in writing by Employer. For the
purposes of this Section 5.1, the business of Employer shall include
any business in which Employer has engaged or has taken substantial
steps to enter as of the date of the termination of Employee's
employment hereunder.
5.2 Solicitation. For a twelve month period following the termination
of his employment under this Agreement, Employee shall not, directly or
indirectly, call on or solicit, any person, firm, corporation or other
entity who or which during the Term was or had been a customer, referral
source, supplier, or employee of the Employer.
5.3 Confidential Information. Employee will not, during the Term of
or after the termination of his employment under this Agreement,
disclose any confidential information of Employer to any person or
entity for any reason whatsoever, nor shall Employee make use of any
such confidential information for his own purposes or for the benefit
of any person or entity (except Employer) under any circumstances
during the Term, or after the termination, of this Agreement. Employee
agrees that, upon termination of his employment under this
Agreement or on demand of Employer, he shall immediately deliver any such
printed or written material and copies thereof to Employer.
5.4 Reasonableness of Restrictions. Employee agrees that (a) the
covenants contained in Sections 5.1, 5.2 and 5.3 hereof are necessary
for the protection of Employer's business goodwill and trade secrets,
(b) a portion of the compensation paid to Employee under this Agreement
is paid in consideration of the covenants herein contained, the
sufficiency of which consideration is hereby acknowledged, (c) Employee
is not, and under this Agreement, will not be engaged in a common calling,
and (d) if the scope of any restriction contained in Sections 5.1, 5.2,
or 5.3 is too broad to permit enforcement of such restriction to its
full extent, then such restriction shall be enforced to the maximum
extent permitted by law, and the parties hereto hereby consent that
such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction. The existence of any claim or
cause of action of Employee against Employer, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the
enforcement by Employer of these covenants.
5.5 Enforcement. Employee acknowledges that the restrictions
contained in Sections 5.1, 5.2, and 5.3 hereof are reasonable and
necessary to protect the legitimate interests of Employer and its
affiliates, that Employer would not have entered into this Agreement
in the absence of such restrictions, and that any violation of any
provision of those Sections will result in irreparable injury to Employer.
Employee also acknowledges that Employer shall be entitled to preliminary
and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any such violation, which
rights shall be cumulative and in addition to any other rights or
remedies to which Employer may be entitled.
5.6 Copy of Covenants. Until the expiration of the applicable
restrictions, Employee will provide, and Employer similarly may provide,
a copy of the covenants contained in Sections 5.1, 5.2 and 5.3 of this
Agreement to any business or enterprise which Employee may directly or
indirectly own, manage, operate, finance, join, control or participate
in the ownership, management, operation, financing, or control of, or
serve as an officer, director, employee, partner, principal, agent,
representative, consultant, lender or otherwise, or with which he may
use his name or permit his name to be used.
ARTICLE VI
GENERAL PROVISIONS
6.1 Arbitration. If a dispute or claim shall arise with respect to any
of the terms or provisions of this Agreement, or with respect to the
performance of either of the parties under this Agreement, either party
may require that the dispute be submitted for arbitration under the
Commercial Arbitration Rules of the American Arbitration Association.
Each party shall bear one-half (1/2) of the cost of any such proceedings,
including the payment of the arbitrator's fees. The arbitration shall
be conducted before a single arbitrator in Palm Beach County, Florida.
The written decision of the arbitrator shall be binding and conclusive
upon the parties. Judgment may be entered upon any such award in
any court having jurisdiction thereof.
6.2 Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested:
If to Employer:
Primary Care Medical Centers of America, Inc.
125 Worth Avenue, Suite 314
Palm Beach, Florida 33480
with a copy to:
Bronson, Bronson & McKinnon LLP
505 Montgomery Street
San Francisco, California 94111-2514
Attention: Richard P. Walker, Esq.
If to Employee:
Craig T. Cuden
404 Sabal Palm Lane
Palm Beach Gardens, Florida 33418
Mailed notices shall be addressed to the parties at the addresses set forth
above, but each party may change his address by written notice in accordance
with this Section 6.2. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of ten (10) days after mailing.
6.3 Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by Employer, and contains all of
the covenants and agreements between the parties with respect to such
employment.
6.4 Headings. The headings or titles to sections in this Agreement are
intended solely for convenience, and no provision of this Agreement is to be
construed by reference to the heading of title of any section.
6.5 Certain Acknowledgments. Employee by his execution and delivery of
this Agreement represents to Employer as follows:
1. That Employee has been advised by Employer to have this Agreement
reviewed by an attorney representing Employee, and Employee has either
had this Agreement reviewed by an attorney or has chosen not to have
this Agreement reviewed because Employee, after reading the entire
Agreement, fully and completely understands each provision and has
determined not to obtain the services of an attorney.
2. Employee either on his own or with the assistance and advice of his
attorney has in particular reviewed Article V and understands and accepts
that the restrictions imposed on Employee by Article V are reasonable
and necessary for the protection of the property rights of Employer.
6.6 Amendment or Modification; Waiver. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification
or waiver is authorized by the Board of Directors of Employer and is
agreed to in writing, signed by Employee and by an officer of Employer
(other than Employee) thereunto duly authorized. Except as otherwise
specifically provided in this Agreement, no waiver by either party of
any breach by the other party of any provision of this Agreement shall
be deemed a waiver of a similar or dissimilar provision at the same or
at any prior or subsequent time; nor shall the receipt or acceptance
of Employee's continuing services be deemed a waiver of any provision hereof.
6.7 Assignability. Employee shall not assign, pledge or encumber any
interest in this Agreement or any part thereof without the express
written consent of Employer, this Agreement being personal to Employee.
This Agreement shall not be assignable by Employer without the written
consent of Employee, except that Employer may assign this Agreement
without obtaining Employee's consent either to the Staffing Subsidiary
or to the successor to Employer resulting from any transaction in which
Employer shall merge or consolidate with or into, or transfer
substantially all of its assets to, another person or entity.
6.8 Governing Law. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive law of
the State of Florida.
6.9 Severability. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision. In the
event that any provision shall be determined to be unlawful, such
provision shall be deemed severed from this Agreement, but every other
provision shall remain in full force and effect, and in substitution
for any such provision held unlawful, there shall be substituted a
provision of similar import reflecting the original intent of the
parties to the extent permissible under law.
EXECUTED as of the day and year first above written.
EMPLOYER:
PRIMARY CARE MEDICAL CENTERS
OF AMERICA, INC.
By:
Name:
Title:
EMPLOYEE:
Craig T. Cuden
<PAGE>
EXHIBIT 10.3
1997 EMPLOYEE INCENTIVE STOCK OPTION PLAN
OF PRIMARY CARE MEDICAL CENTERS OF AMERICA, INC.
I. Purpose.
The purpose of this 1997 Employee Incentive Stock Option Plan (the "Plan") of
Primary Care Medical Centers of America, Inc., a Delaware corporation (the
"Company"), is to encourage ownership in the Company by key employees of the
Company, because long-term employment of such key employees is considered
essential to the Company's continued progress. The Plan provides an additional
incentive for these key employees to continue in the employ of the Company.
Options granted under the Plan are intended to be Incentive Stock Options
(ISOs) under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
II. Administration.
The Board of Directors of the Company (the "Board") shall supervise and
administer the Plan. The Board shall from time to time designate the key
employees of the Company who may be granted stock options under the Plan
and the amount of stock to be optioned to each employee and the Company
shall thereupon give notice of the grant to such employee. All questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Board, whose determination shall be final and binding
upon all persons having an interest in the Plan. Any or all powers and
discretion vested in the Board under this Plan may be exercised by any
subcommittee of the Board so authorized by the Board.
III. Participation in the Plan.
Key employees and officers of the Company shall be eligible to participate in
the Plan.
IV. Stock Subject to the Plan.
The maximum number of shares of the $.01 par value Common Stock of the Company
(the "Shares") which may be optioned under the Plan shall be Twenty Thousand
Shares (20,000). The limitation on the number of Shares which may be optioned
under the Plan shall be subject to adjustment as provided in Section 0 of the
Plan. If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the Shares allocable to the
unexercised portion of such option shall again become available for option
pursuant to the Plan.
V. Time for Granting Options.
All options for Shares subject to this Plan shall be granted, if at all, not
later than ten (10) years after the approval of this Plan by the Shareholders
of the Company.
VI. Terms, Conditions and Form of Options.
Each option granted under this Plan shall be authorized by action of the Board
and shall be evidenced by a written agreement in such form as the Board shall
from time to time approve, which agreement shall comply with and be subject to
the following terms and conditions:
A. Transferability. Each option granted under the Plan by its terms shall
not be transferable by the optionee and shall be exercisable only by the
optionee during his or her lifetime. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee, whether by
operation of law or otherwise, or be made subject to execution, attachment
or similar process.
B. Period of Option. Subject to any vesting requirements established by
the Board and reflected in the written agreement evidencing the option,
each option may be exercised at any time during the term of the option
upon such terms and conditions as the Board shall determined; provided,
however, that no option shall be exercisable after the expiration of
ten (10) years from the date upon which such option is granted. The
foregoing notwithstanding, all outstanding options shall immediately
become exercisable in full in the event that (i) the shareholders of the
Company approve a dissolution or liquidation of the Company or a sale of
all or substantially all of the Company's assets to another entity;
(ii) a tender offer within the meaning of Section 14 of the Securities
Exchange Act of 1934, as amended, is made for five percent (5%) or more
of the Company's outstanding capital stock by any person other than
the Company or an affiliate; or (iii) the Company effects an underwritten
public offering of its securities pursuant to a registration statement
filed under the Securities Act of 1933. Each option shall be subject
to termination before its date of expiration as hereinafter provided.
C. Exercise of Options. Options may be exercised only be written notice
to the Company at its head office accompanied by payment in cash of the full
consideration for the Shares as to which they are exercised.
D. Termination of Options. All rights of an optionee in an option, to
the extent that it has not been exercised, shall terminate six (6) months
after the death of the optionee or the termination of his employment for
any reason.
E. Limit on Exercise of Options. To the extent that the aggregate fair
market value (determined as of the time the option is granted) of the
stock with respect to which ISOs are exercisable for the first time by
any individual during any calendar year (under all plans of the Company
or its parent or subsidiary corporations) exceeds One Hundred Thousand
Dollars ($100,000), such options shall be treated as options which are
not ISOs.
F. Ten Percent (10%) Shareholders. An employee who owns more than ten
percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company is not eligible to receive an ISO
pursuant to this Plan unless the exercise price of the shares subject
thereto is at least one hundred ten percent (110%) of the fair market
value of such shares at the time the ISO is granted, and such option
by its terms is not exercisable after the expiration of five (5)
years from the date such option is granted. For the purposes of this section
when stock ownership is determined, an employee shall be considered as owning
the stock owned, directly or indirectly, by or for his brothers and sisters,
spouse, ancestors and lineal descendants. Stock owned, directly or indirectly,
by or for a corporation, partnership, estate or trust shall be considered as
being owned proportionately by or for its shareholders, partners or
beneficiaries. Stock with respect to which such employee holds an option shall
not be counted.
VII. Modification, Extension and Renewal of Options.
The Board shall have the power to modify, extend or renew outstanding options
and authorize the grant of new options in substitution therefor, provided that
any such action may not have the effect of altering or impairing any rights or
obligations of any option previously granted without the consent of the
optionee.
VIII. Option Price.
Except as provided above for Ten Percent Shareholders, the option price per
share for the Shares covered by each option shall be one hundred percent (100%)
of the fair market value of a Share of the Company on the date the option is
granted. The fair market value shall be determined by the Board.
IX. Limitation of Rights.
A. No Right to an Option. Nothing in the Plan shall be construed to give any
employee or officer of the Company any right to be granted an option.
B. No Employment Rights. Neither the Plan nor the granting of an option
nor any other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or implied, that the
Company will employ an optionee for any period of time or in any position
or at any particular rate of compensation.
C. No Shareholders' Rights. An optionee shall have no rights as a
shareholder with respect to the Shares covered by his options until the
date of the issuance to him of a share certificate therefor, and no
adjustment will be made for dividends or other rights for which the
record date is prior to the date such certificate is issued.
X. Changes in Present Shares.
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Shares, appropriate adjustment
shall be made by the Board in the number (including the aggregate numbers
specified in Section IV) and kind of shares, and the option price of shares
which are or may become subject to options granted or to be granted hereunder.
XI. Effective Date of the Plan.
The Plan shall take effect on the date of adoption by the Board, subject to
approval by the Shareholders. Options may be granted under the Plan at
any time after the adoption of the Plan by the Board and prior to the
termination of this Plan.
XII. Amendment of the Plan.
The Board may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that without approval of the
Shareholders no revision or amendment shall change the number of Shares
subject to the Plan (except as provided in Section 0), change the
designation of the class of persons eligible to receive options, or
materially increase the benefits accruing to participants under the Plan.
Date Plan Approved by the Board: ____________________
Date Plan Approved by Shareholders: ____________________
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF SEAL HOLDINGS CORPORATION
A DELAWARE CORPORATION
AS OF MARCH 27, 1998
Subsidiary State of Incorporation
- ----------- ----------------------
Primary Care Medical Centers of America, Inc. Delaware
Sealcraft Operators, Inc. Texas
Caribe Company Delaware
Seal Properties, Inc. Texas
Corpus Company Delaware
South Corporation Delaware
Seal Offshore, Inc. Delaware
First Seal, Inc. Texas
Seal (GP), Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 12 THROUGH 14 OF THE COMPANY'S FORM 10-KSB FOR THE YEAR AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,037
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,116
<PP&E> 118
<DEPRECIATION> 61
<TOTAL-ASSETS> 1,189
<CURRENT-LIABILITIES> 319
<BONDS> 0
0
0
<COMMON> 272
<OTHER-SE> 598
<TOTAL-LIABILITY-AND-EQUITY> 1,189
<SALES> 0
<TOTAL-REVENUES> 115
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,716
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
