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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended June 30, 1995
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _______
COMMISSION FILE NUMBER 0-9185
MEDCO HEALTH CORPORATION
(FORMERLY WILLISTON OIL CORPORATION)
NEVADA 22-1934084
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
532 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
(Address of Principal executive offices) (Zip Code)
(201-541-8444)
(Registrant's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
CLASS A COMMON STOCK, $.001 PAR VALUE
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ ]
No [ ]
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and if 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. [ ]
$_________
(Issuer's revenues for its most recent fiscal year).
__________
(Aggregate market value of the voting stock held by non-affiliates of
Registrant)
36,695,543 SHARES CLASS A COMMON STOCK, $.001 PAR VALUE
1,250,000 SHARES CLASS B COMMON STOCK, $.001 PAR VALUE
(Number of shares outstanding of each of the Registrant's classes of common
stock, as of August 3, 1996
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
INTO PART I
Annual Report on Form 10-K of Registrant for
the year ended June 30, 1981
Current Reports on Forms 8-K of Registrant
Dated: May 11, 1981
July 1, 1981
October 13, 1981
October 20, 1981
November 16, 1981
PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
Since the "reverse acquisition" of its wholly-owned subsidiary, Medco
Health Corporation, in January of 1995, the Company's principal business
activities have been the marketing and distribution of medical equipment and
supplies and, until August 30, 1996, health care services. Health care is one of
the largest industries in the world and continues to grow as new products,
devices, procedures, and techniques are developed. According to industry
estimates, the physician office site segment of the health care industry
represents a $6.6 billion market estimated to be
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growing at 8% to 12% annually. It is the Company's goal to take advantage of
such growth by expanding its existing medical supply and equipment distribution
operations through increases in its sales staff and the broadening of its
product lines and markets. It also intends to extend its operations to include
two additional segments, the establishment and operation of a clinical
laboratory and a diagnostic imaging facility. To accomplish the foregoing, the
Company will require additional funding in an approximate amount of $4,700,000,
which it intends to raise by means of secured loans from banks and other lending
institutions. There can be no assurance that the Company will, in fact, be able
to raise such funding and actually expand its operations as contemplated or even
to bring its present operations to a profitable level. While such proposed
activities are discussed in this report, there can be no assurance that the
Company will, in fact, be successful in establishing and commencing operation of
either of its proposed new business, or in expanding, or reaching profitable
operational levels in, its existing medical supply and equipment distribution
business. A failure on the part of the Company to raise at least $4,700,000 in
additional financing, will have a material adverse effect upon its financial
position and prospects and its ability to continue in business. The Company's
existing medical equipment and supplies business and its proposed clinical
laboratory and diagnostic imaging businesses are discussed separately, below.
The Company held a meeting of its shareholders, pursuant to an
information statement conforming to the requirements of Schedule 14A of the
Securities Exchange Act of 1934, as amended (the "34 Act"), and changed its
corporate name to Medco Health Corporation. For a discussion of the Company's
corporate history prior to the Medco Acquisition and its former oil and gas
mining business, see the discussion, below, in this Item I under the subcaption,
"Historical Background".
EXISTING AND PROPOSED BUSINESS OPERATIONS
MARKETING AND DISTRIBUTION
OF MEDICAL EQUIPMENT AND SUPPLIES
OVERVIEW
The Company is currently engaged in the business of marketing and
distributing medical equipment and supplies. It distributes selected items from
substantially all major product lines of medical supplies and equipment. The
Company currently sells a broad range of medical supplies which include over
1,000 items in stock, such as various types and sizes of paper goods, needles
and syringes, gauze and wound dressings, sutures, latex gloves, orthopedic soft
goods and casting products, wood tongue blades and applicators, sterilization
and intravenous solutions, and specimen containers. Its equipment lines include
X-Ray machines, scales, blood chemistry analyzers, examination tables and
furniture, electrocardiograph monitors, cardiac stress systems, holter monitors,
as well as sophisticated diagnostic equipment, which the Company will supply on
order.
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PRODUCTS AND DELIVERY
The Company's principal objective in its existing operations is
complete customer satisfaction. Its goals in this area include delivery service
on a regular basis, knowledgeable consultative sales professionals, a broad
product line including sophisticated diagnostic equipment and supplies, no
minimum order size or shipping charges, and returns of unused, saleable products
for instant credit. As of the date hereof, however, the Company has been unable
to achieve such goals except on a limited basis because its limited financial
resources and insufficient warehouse space have effectively prevented it from
keeping sufficient supplies in stock or retaining, on a permanent basis, an
adequate, knowledgeable sales staff. The Company intends to remedy the foregoing
problems by raising adequate financing for investment in inventory and by
expanding its warehouse space. There can be no assurance, however, that the
Company will be able to obtain the financing required to accomplish the
foregoing.
The Company distributes over 1,000 different products manufactured by
approximately 200 manufacturers. The Company has in the past and is currently
experiencing difficulty maintaining good relations with its vendors because its
limited financial resources prevent it from paying its bills on a timely basis.
Unless the Company raises the additional financing it requires and cures these
problems with its vendors, it could have a material adverse effect on the
Company, and therefore affect the profitability of its business.
SALES AND MARKETING
The Company currently markets medical equipment and supplies medical
laboratories, office-based physicians, hospitals, and health maintenance
organizations in the northern New Jersey area principally through personal
contacts between its permanent sales staff of five and independent sales
representatives who may work on a comparatively continuous and exclusive basis
or on an isolated, one-time, single-item basis. During the fiscal year ended
June 30, 1996, approximately 60% percent of sales were booked by the Company's
in-house sales staff and approximately 40% percent were generated by independent
sales representatives who earned commissions or finders fees of from 6 to 10 %
of the total sales price of the item sold.
During the fiscal year ended June 30, 1996, approximately 70% of
revenues from this segment of the Company's business were from sales of
disposable medical supplies such as pregnancy and drug testing kits, latex
gloves, test tubes, syringes, etc., with the remaining 30% of revenues generated
by sales of medical equipment, ranging from X-Ray machines that cost
approximately $25,000 per unit to various lower-cost items such as examining
tables, microscopes, nebulizers, and scales. The Company's management and sales
personnel are familiar with the medical equipment market which includes highly
specialized and technical equipment manufactured for specific niches in the
medical community. Because of the Company's knowledge of the equipment available
in this field, and where it can be located and obtained on advantageous terms, a
significant portion of the Company's equipment sales are generated by customer
requests for difficult to locate items. In addition, through the Company's
services, busy individual or groups of physicians are saved the time and expense
of "shopping" for medical equipment and the best terms for its purchase.
Requests for equipment are received by the Company directly from customers and
from outside, independent sales representatives who also use the Company's
services
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to locate and negotiate the purchase of equipment. In such cases the Company
will pay a finder's fee to such independent sales representatives, generally in
the range of 6 to 10% of the total sales price.
Sales are generally made to customers on a payment basis of net
30-days. Purchases are made on a net 60-day payment basis. During the past
fiscal year, the Company has been unable to successfully collect payments from
its customers in the aggregate amount of approximately $60,000. Management
ascribes the failure of its customers to pay for purchases ordered and
delivered, generally to cash flow problems. Failure of some of the Company's
customers to pay for goods for which the Company was, in turn, obligated to pay
the manufacturers, resulted in a loss from operations during the twelve month
period ended August 31,1996, in the aggregate amount of $150,000. The Company
plans to avoid the reoccurrence of such customer failure to pay by instituting
credit analysis and D&B reporting. Unless the Company is successful in doing so,
the Company will continue to experience cash problems.
The Company may seek third parties for strategic alliances for
marketing and distributing products throughout the United States and in select
foreign countries. It will also endeavor to obtain contracts, licensing
agreements and joint ventures with product manufacturers as well as with other
distributors and sales representatives for the right to introduce and create a
demand for products which they manufacture or have the right to distribute, on
an exclusive or non-exclusive basis. The Company will also seek to enter into
exclusive or non-exclusive supply arrangements with health care institutions and
professionals. In this regard the Company has entered into negotiations with
Aprica Corp., for a five-year exclusive right to market a special bed for
paraplegics which Aprica is currently developing, and which is expected to be
available by February of 1997. Such negotiations are at too early a stage for
the Company to predict whether it will be successful in acquiring such right.
Likewise, the Company is not able to give any assurances that it will be
successful in entering into any supply or distribution contracts with product
users or manufacturers. Its inability to do so will have an adverse effect on
the Company's condition and prospects for improvement and expansion of its
existing business.
CUSTOMERS
During the fiscal year ended June 30, 1996, the Company's principal
customers for its medical equipment and supplies sales included three medical
laboratories, the Hackensack Medical Center, a major hospital in northern New
Jersey, the New Jersey Medical Group, a group physician medical center located
in Fort Lee, New Jersey, and eight physicians in single practices.
PROPOSED OPERATING STRATEGY FOR
MEDICAL SUPPLY AND EQUIPMENT DISTRIBUTION SEGMENT
The Company's primary objective is to establish itself as a leading
distributor of medical supplies and equipment in the tri-state area and capture
a significant market share of the medical
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supplies and equipment market in such area. To achieve this objective, the
Company will endeavor to:
Increase sales by adding additional sales personnel and
providing superior service, competitive pricing, and a broad
product line to include sophisticated diagnostic equipment to
be marketed by the Company on an exclusive or semi-exclusive
basis;
Achieve and maintain profitable operating margins by
increasing sales force productivity, reducing product costs
through volume purchase arrangements, leveraging fixed
distribution costs, and improving operational efficiencies
through the implementation of computer systems.
Develop agreements with large users of medical supplies and
equipment as exclusive suppliers of some or all of their
product requirements.
Develop agreements with reputable manufacturers of medical
products and equipment as exclusive or non-exclusive
distributors and/or sales representatives for their products.
Clearly, all of the foregoing strategies will require the
Company to raise additional funding to be devoted to this segment of its
operations. The Company is unable to give any assurance that it will be able to
raise sufficient funding, if any, to devote to this segment or to any of the
proposed segments discussed below nor that it will be able to implement the
foregoing, or any other, strategies which will enable it to remain in business
and to become profitable.
COMPETITION
The medical equipment and supplies distribution business is
highly competitive. Virtually all of the Company's competitors have longer
operating histories and are substantially larger, better financed and better
situated in the market than the Company. The Company's principal competitors are
multi-market medical distributors that are full-line, full-service medical
supply companies, some of which are national in scope. These national companies
have sales representatives competing directly with the Company, all of whom are
substantially larger in size, and have substantially greater financial resources
than those of the Company. There are also numerous other local dealers such as
the Company, as well as mail order firms that distribute medical supplies and
equipment within the same market as the Company. Unlike its larger, national
competitors, the Company must operate with limited product lines. The Company
also competes with certain manufacturers that sell their products both to
distributors and directly to users, including office-based physicians.
SEASONALITY OF BUSINESS
The Company's medical supply and equipment sales are not subject to seasonal
variations.
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BACKLOG
As a result of purchasing practices typical to the medical supply
industry in which the Company operates, there is no material backlog of unfilled
orders.
PROPOSED ESTABLISHMENT AND OPERATION OF
A CLINICAL LABORATORY AND DIAGNOSTIC IMAGING FACILITY.
OVERVIEW
The Company intends to establish and operate a clinical laboratory and
diagnostic imaging facility in northern New Jersey. It has entered into a
twenty-year lease with Ferolie Realty Associates, L.L.C., for the premises
located at 532 Sylvan Avenue, Englewood Cliffs, New Jersey 07632. The said
premises consist of an entire office building comprising 8,000 square feet,
together with the underlying land and parking area which include parking spaces
for twenty-seven vehicles (See Item 2-Properties and Equipment). The Company
plans to renovate the premises in order to establish a clinical laboratory and a
diagnostic imaging facility.
The Company estimates that it will cost approximately $4,700,000 to
renovate the premises and purchase the necessary equipment for both the
diagnostic imaging and clinical laboratory facilities. The Company intends to
borrow the funds it requires from various financial institutions through secured
loan agreements. To date, the Company has not received any commitments for the
necessary loans from any bank or other financial institution, nor can the
Company give any assurance that it will be able to obtain such commitments.
THE CLINICAL LABORATORY
Laboratory tests are used generally by physicians and other health care
providers to diagnose and monitor diseases and other medical conditions through
the detection of substances in blood, tissue and other specimens. Laboratory
testing is generally categorized as either clinical testing, which is performed
on bodily fluids including blood and urine, or anatomical pathology testing,
which is performed on tissue and other samples. Clinical and anatomical
pathology tests are frequently performed as part of regular physical
examinations and hospital admissions in connection with the diagnosis and
treatment of illnesses. The most frequently requested tests include blood
chemistry analyses, blood cholesterol level tests, urinalyses, blood cell
counts, PAP smears, AIDS tests and alcohol and other substance-abuse tests.
PROPOSED OPERATING STRATEGY
If the Company is successful in raising sufficient financing to develop
and establish a clinical laboratory facility, and is able to commence operation
thereof, its primary goal will be to become a leading regional provider of high
quality, cost-efficient clinical laboratory testing services
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to a diversified group of clients and payer sources. While there can be no
assurance that the Company will raise sufficient financing to implement any of
the following strategies, should it do so, it intends to:
Provide a Full Range of Laboratory Testing Services. The
Company intends to perform a full range of routinely
prescribed tests in various medical areas internally and to
use outside sources for more esoteric procedures for which it
may not have the required expertise or specialized equipment.
Deliver a High Level of Responsiveness. The Company intends to
commit itself to providing its customers with the highest
level of responsiveness in the reporting of testing results.
The industry standard is for test results to be communicated
to the requesting physician by the next business day. The
Company intends to strive to meet such standards at all times.
Deliver Quality Services at Competitive Prices. The Company
intends to strive to provide quality testing services in a
cost-effective manner at competitive prices. The Company
acknowledges however that as a new facility, it will be at a
disadvantage insofar as developing a high enough value of test
procedures to realize volume/cost savings. It notes however
that in the event that it raises the required financing, it
has budgeted approximately $4,200.000 for the purchase of the
most advanced state-of-the-art automated testing equipment and
management information systems. It intends to retain
experienced, high quality sales and technical personnel.
PROPOSED LABORATORY TESTING SERVICES
The Company intends to offer clinical laboratory tests which measure
the levels of chemical and cellular components in human body fluids and tissue.
Such tests include procedures in the areas of blood chemistry, hematology, urine
chemistry, immunology, virology, serology, histology, microbiology,
endocrinology and cytology. Management believes that the great bulk of revenues
from its proposed clinical laboratory operations, will be generated by commonly
ordered individual tests such as red and white blood cell counts, PAP smears,
and procedures for the measurement of blood glucose levels and the determination
of the existence of pregnancy.
Management believes that there are approximately 1,250 tests available
in the industry today, of which approximately 50% are generally considered to be
routine. Such routine tests include, among others, tests to determine the
function of the kidney, heart, liver and thyroid, as well as other organs, and a
general health screen that measures several important body health parameters.
Many of the tests which fall into the "routine" category require sophisticated,
computerized laboratory testing equipment and experienced and knowledgeable
technicians. Management believes that initially the Company will have the
facilities and personnel to perform approximately 50% percent of such tests and
that by three months it will be able to perform at least 95% of such tests.
Given the financial and personnel resources required, however, there can be no
assurance at this time that the Company will be able to process such a high
percentage of even routine tests upon commencement of its clinical laboratory
operations, if such commencement actually occurs.
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PROPOSED CLINICAL LABORATORY OPERATIONS
Since the Company does not have any commitment for financing and can
give no assurances that it will be able to obtain such financing, the Company
has not formulated a plan of operations for the clinical laboratory. At such
time when the Company has the necessary financing it will develop a plan of
operations, which will include among other things, the delivery or pick-up of
samples, the delivery of test results, the maintenance of records of tests
results, billing procedures, and storage of patient records. However, the
Company can give no assurance that it will be able to obtain the required
financing, and therefore, proceed with the foregoing objectives.
COMPETITION - CLINICAL LABORATORY
The clinical laboratory testing industry in northern New Jersey is
highly competitive. If the Company is successful in establishing its proposed
facility, it will face competition from numerous independent clinical
laboratories, physician-owned laboratories and hospital laboratories. Not least,
it will face intense competition from major nation-wide and regional clinical
laboratory chains with established reputations and volume/cost savings not
available to the Company. Such major potential competitors include Corning
Metpath, LabCorp, Bioreference, and Smith-Kline. Virtually all of the Company's
potential competitors in this field are larger and have substantially greater
resources than the Company in terms of finances, reputation, experience,
established customer relationships and personnel. In the event that the Company
establishes its own clinical testing facility and is able to commence operations
thereof, it intends to compete primarily on the basis of quality and service,
with a particular emphasis on accurate and rapid reporting of test results and
responsiveness to customers at a discounted price.
Given the advantages possessed by its potential competitors in this
field, the Company is unable to state whether it will be able to raise the
financing required to establish its own clinical laboratory facility and
commence its operation or, in the event that it is able to do so, whether it
will be able to compete successfully in this field so as to become profitable.
DIAGNOSTIC IMAGING FACILITY
PROPOSED ESTABLISHMENT AND OPERATION
The Company plans to establish and operate a facility which would
provide diagnostic imaging services, on an outpatient basis, for physicians,
managed care providers, and hospitals. These services would include magnetic
resonance imaging ("MRI"), computed tomography ("CT"), nuclear medicine and
ultrasound as well as X-Ray imaging.
Medical diagnostic imaging systems facilitate the diagnosis of disease
and disorders at an early stage, often minimizing the amount and cost of care
needed to stabilize or cure the patient and frequently obviating the need for
invasive diagnostic procedures, such as exploratory surgery. Diagnostic imaging
systems are based on the ability of energy waves to penetrate human tissue and
generate images of the body which can be displayed either on film or on a video
monitor. Imaging
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systems have evolved from conventional X-ray to the advanced technologies of
MRI, CT, nuclear medicine and ultrasound. The use of these technologies has
grown significantly in the United States during the last several years due to
increasing acceptance by physicians of the value of diagnostic imaging
technologies in the early diagnosis of disease, the expanding applications of
MRI and ultrasound (partially because they do not involve X-ray radiation) and
the growing patient base attributable to an aging population.
Since the Company does not have any commitment for financing and can
give no assurances that it will be able to obtain such financing, the Company
has not formulated a plan of operations for the diagnostic imaging facility. At
such time when the Company has the necessary financing it will develop a plan of
operations, which will include among other things, the taking of tests, the
delivery of test results, the maintenance of records of tests results, billing
procedures, and storage of patient records. However, the Company can give no
assurance that it will be able to obtain the required financing, and therefore,
proceed with the foregoing objectives.
Should the Company be able to finance the construction and equipping of
a diagnostic imaging center, it will attempt to select equipment that will
remain commercially viable for the duration of its financing term. Technology,
however, as it relates to MRI and CT has advanced, and may continue to advance
rapidly. This will subject the Company's equipment to the risk of obsolescence
and deterioration of fair market value.
The Company will have to assume the risk that revenues generated
through utilization of its equipment will be sufficient to meet its financial
obligations to lenders and lessors who provide financing for the equipment. The
Company will attempt to finance its acquisition of equipment on terms which will
match the amortization period of such financial obligations to a reasonable
estimate of its cash flow during such period. The Company may not be able to do
so unless it is able to achieve a sufficient level of business and cash flow
quickly. Given the start up nature of the Company's business, however, it may be
difficult or impossible to do so and such failure over a sustained period of
time could lead to insolvency.
COMPETITION - DIAGNOSTIC IMAGING
The healthcare industry in general, and the market for medical
diagnostic imaging services in particular, are highly competitive. If the
Company is able to finance, establish, equip, and commence operations of a
diagnostic imaging facility, it will compete for patients with hospitals,
managed care groups and other diagnostic medical centers as well as physician
groups and other providers of medical diagnostic imaging services. All of such
competitors have substantially greater resources than the Company in terms of
finances, experience, and personnel.
QUALITY ASSURANCE
Various federal and state laws, provide for the certification and
regulation of clinical laboratories and diagnostic imaging facilities, including
those operated by the Company. Virtually all clinical laboratories and
diagnostic imaging facilities are subject to the jurisdiction of the United
States Department of Health and Human Services ("HHS"), which has established
national
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standards for assuring the quality of laboratory and imaging facility
performance. Failure to meet such standards and comply with regulatory
requirements could result in denial or cancellation of the laboratory's and
diagnostic imaging facility's approval to receive Medicare payments and/or the
suspension, revocation, or limitation of its license.
It is the Company's intention to develop high standards for its
clinical testing and radiology operations. To do so, it intends to establish a
quality assurance program to govern all aspects of its test procedures. The goal
of such program will be to ensure that specimens are collected and transported
properly, tests are performed accurately and thoroughly, and all information
respecting the client, patient and test results are reported, billed and filed
correctly. Normally, clinical laboratory quality assurance programs include
testing of specimens of known concentration or reactivity in order to ensure
accuracy and precision of test results, routine checks and preventive
maintenance of laboratory testing and radiology equipment, and administration of
proficiency tests intended to ensure that only qualified personnel perform
testing.
The Company is required to have the clinical laboratory, all
laboratory personnel and radiological technicians licensed by the State of New
Jersey and New York (See Item 1, Subcaption "Certification and Licenses"). It is
the Company's intention to have both the clinical laboratory and diagnostic
imaging facility accredited by the State of New Jersey and New York. This
accreditation is mandatory. The accreditation will involve inspections and/or
testing of the lab and/or its personnel. Certification by Medicare and Medicaid
is also required.
The Company is already licensed by the State of New Jersey for a
Certificate of Need for MRI testing. Once the laboratory is completed, the
Company will be eligible for and will apply for all necessary licensing.
PROPOSED CLIENTS AND PAYERS
If the Company is able to establish its proposed clinical laboratory
and diagnostic imaging facilities, it intends to market its services to
office-based physicians, acute-care hospitals, HMOs and managed care entities.
If the Company is successful in enlisting such customers, it will
receive payment for its services directly from them as well as from patients and
third-party payers such as insurance companies, Medicare, and MediCaid. At this
time, the Company is unable to predict the percentage of Medicare/Medicaid/
Private Insurers.
Important factors in determining the profitability of any clinical
laboratory and diagnostic imaging facility include but are not limited to: (i)
the percentage of its net revenues billed at wholesale rates; (ii) regulatory
requirements; and (iii) cost-containment efforts on the part of payers. In
existing clinical laboratory operations, fees for clinical laboratory testing
services rendered for physicians are typically charged on a fee-per-test basis
and are billed to the physician, directly to the patient, to an HMO, or to
Medicare or Medicaid. In existing diagnostic imaging facilities, fees for tests
are typically charged on a fee-per-test basis or in some instances on the number
of images taken, such as x-rays. Typically, if the patient is billed directly,
laboratories and imaging facilities will charge their own "patient" (or
"retail") fees. When the physician is billed,
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laboratories and imaging facilities typically make such billings at discounts
from their retail fee schedules. Third-party payers generally reimburse clinical
laboratories and diagnostic imaging facilities in accordance with their own fee
schedules. Third party payer reimbursement schedules normally reflect prices
which are lower than the laboratory's and imaging facility's own retail fee
schedule. In the event that the Company is successful in establishing a clinical
laboratory and a diagnostic imaging facility and commencing operations thereof,
it will endeavor to market its testing services principally to doctors,
hospitals and clinics and it believes that if it is successful in enlisting such
customers it will be profitable within approximately 6 months. There can however
be no assurance at this time that the Company will be able to achieve any of the
foregoing.
Medicaid and Medicare Reimbursement Reforms
The entire health care industry is undergoing significant change. While
all third party payers are attempting to increase their control over the cost,
utilization and delivery of health care services, budgetary pressure on the
federal and state governments has led to calls for significant cutbacks in
reimbursement under the Medicare and Medicaid programs. Reductions in the
reimbursement rates of other third-party payers are also occurring. The Company
cannot predict the effect that ongoing and unpredictable health care reforms or
changes in reimbursement practices may have on its ability to either develop and
commence operations of its proposed clinical laboratory and diagnostic imaging
facility or, if such development is achieved, to operate such laboratory and
facility at profitable levels. Accordingly, even if the Company is able to raise
the financing for, and successfully establish a clinical laboratory and
diagnostic imaging facility, there can be no assurance that third party payer
cost containment programs and cutbacks in levels of reimbursements by such third
party payers would not have a material adverse effect on the Company.
Fees for laboratory testing and diagnostic imaging services to be
reimbursed by Medicare or Medicaid are required to be billed to Medicare or
Medicaid directly and the provider is required to accept Medicare or Medicaid
reimbursement as payment in full. In 1984, Congress established a reimbursement
fee schedule for clinical laboratory testing and diagnostic imaging performed
for Medicare beneficiaries (excluding hospital in-patients). Over the years,
Medicare has reduced its reimbursement rates, from 115% of the nationwide median
of local fee schedule rates for each test in 1986 to 100% in 1996. Such
reductions in Medicare reimbursement rates have been offset to some extent by
increases in both the national cap and local fee schedules tied to the Consumer
Price Index ("CPI"). However, laboratory fee increases tied to the CPI were
limited to 2% for each of the years 1991, 1992 and 1993, and were eliminated
entirely for fiscal 1994 and 1995, only to be reinstated for 1996. The effect of
reduced reimbursement rates on revenues from the Company's proposed clinical
laboratory operations could be significant.
Certification and Licenses
The federal government and the State of New Jersey impose various
certification and licensure obligations on clinical laboratory and diagnostic
imaging companies. The applicable certification and licensure programs establish
standards for the day-to-day operation of a clinical laboratory and diagnostic
imaging facility including, among other things, the training and skills
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required of personnel and quality control. Compliance with such standards is
verified by periodic inspections by inspectors representing the appropriate
federal or state regulatory agencies. In addition, federal and state law
mandates proficiency testing, which involves testing of control and comparison
of actual results with established standards.
The Company is already licensed by the State of New Jersey for a
Certificate of Need for MRI testing. Once the laboratory is complete, the
Company will be eligible for and will apply for all necessary licensing.
Restrictions on Self-Referral
Both the federal government and most states have enacted legislation
which prohibits clinical laboratories and diagnostic imaging facilities from
billing for laboratory tests, x-rays and MRI's if the physicians ordering the
test, x-ray or MRI (or an immediate relative of the physician) has a direct or
indirect ownership or investment interest in, or compensation agreement with,
the laboratory or facility. Section 1877 of the Social Security Act, commonly
known as the "Stark Bill," which became effective January 1, 1992, generally
prohibits a clinical laboratory and diagnostic imaging facility from billing for
tests covered by Medicare or Medicaid if the physician ordering the test (or an
immediate relative of such physician) has a direct or indirect ownership or
investment interest in, or compensation arrangement with, the laboratory or
facility. Congress has considered legislation that would extend this prohibition
to preclude laboratories and facilities from billing for services rendered to
any patient if the services were rendered on referral from a physician with a
financial relationship to the laboratory or facility, unless an exception
applied. Ownership interests would include ownership of shares of Common Stock.
It does not appear that there is an exception from the Stark Bill for which the
Company will qualify. This means that physicians who own stock in the Company
will not be able to utilize the Company's laboratory services if the Company is
successful in establishing and commencing operation thereof. In the event that a
public market for the shares of the Company's common stock develops and the
stock is traded publicly, it may not be possible fully to comply with the Stark
Bill on an ongoing basis.
Individuals or entities who are found to have violated the Stark Bill
may be subject to severe monetary civil penalties and possible exclusion from
the Medicare and State Medicaid programs. Items or services which are billed and
paid for in violation of the Stark Bill are subject to refund.
Unlike the Stark Bill as presently enacted, state laws, generally apply
regardless of who will pay for the ordered service. If New Jersey, or any other
state in which the Company may establish a clinical laboratory enacts such
legislation, the Company will not able to bill third-party payers for service
performed on referral from financially related physicians, even if the service
is not to be paid for by Medicare or State Medicaid.
Prohibitions on Mark-up of Laboratory Services
Some states have enacted legislation which prohibits those subject to
its provisions from marking up charges for any clinical laboratory or diagnostic
imaging services not actually rendered by the clinical laboratory, diagnostic
imaging facility, physician or other health care provider,
13
<PAGE> 14
unless the additional charge is for a service actually rendered to the patient
by the person billing for the service and is itemized in the bill. New Jersey
has not enacted such legislation.
Fraud and Abuse Laws
Clinical laboratories and diagnostic imaging facilities participating
in the Medicare and Medicaid programs are subject to a wide variety of laws
intended to eliminate the effects of fraud and abuse on these programs. These
laws include prohibitions on: (a) submitting false claims or false information
to the programs; (b) deceptive or fraudulent conduct; (c) the provision of
excessive or unnecessary services, or services at excessive prices; and (d)
inducing the referral of program patients through the offer or receipt of
remuneration, a prohibition often referred to as the "anti-kickback statute."
Penalties for violation of these federal laws include exclusion from
participation in the Medicare and Medicaid programs, asset forfeitures, civil
monetary penalties and criminal penalties. Civil penalties for a wide range of
offenses may include fines of up to $2,000 for each item or service plus twice
the amount claimed for such service, and exclusion from participation in the
Medicare and Medicaid programs. These provisions have been liberally interpreted
and aggressively enforced by the relevant enforcement authorities. In addition,
the federal "whistleblower" statute permits private litigants to bring a "qui
tam" action on behalf of the United States government in connection with the
submission of allegedly false claims. The Department of Justice is required to
investigate claims raised by such qui tam litigants, who are entitled to receive
a percentage of any recoveries obtained in the action they initiate.
In addition, Congress is presently considering the "Health Insurance
Reform Act of 1996" which, if enacted, would contain significant changes in the
scope, enforcement and penalties for violations of the federal fraud and abuse
laws, including programs to combat health care fraud, and increases in penalties
for violations.
Infectious and Hazardous Waste
Certain federal and state laws govern the handling and disposal of
infectious and hazardous wastes. Companies which fail to comply with such laws
are subject to fines, criminal penalties and/or other enforcement actions.
Protection of Workers.
Pursuant to the Federal Occupational Safety and Health Act,
laboratories have a general duty to provide a workplace to their employees that
is safe from hazard. Over the past years, the Occupational Safety and Health
Administration ("OSHA") has issued rules relevant to certain hazards that are
found in the laboratory and in the diagnostic imaging facility. In addition,
OSHA has adopted regulations applicable to protection of workers from
blood-borne pathogens. Failure to comply with any final standard relating to
blood-borne pathogens, other applicable OSHA rules or with the general duty to
provide a safe workplace could subject an employer, including a laboratory
employer, to substantial fines and penalties. The storage, use and disposal of
radioactive materials in nuclear medicine is subject to regulation by Federal
and State governmental authorities,
14
<PAGE> 15
including the United States Food and Drug Finance Administration, the Department
of Health and Human Services, the Health Care Finance Administration ("HCFA"),
and the Nuclear Regulatory Commission ("NRC").
GOVERNMENT REGULATION
The operation of a clinical laboratory and diagnostic imaging
businesses is subject to complex federal and state regulation and the
governmental and third-party payer reimbursement system for clinical laboratory
and diagnostic imaging services is complex and subject to variances among payers
and to variances in interpretation of billing regulations and guidelines. The
Company intends its initial clinical laboratory and diagnostic imaging
operations to be conducted in the State of New Jersey, it will therefore be
subject to all applicable federal and New Jersey state regulations. To the
extent that the Company's proposed clinical laboratory and diagnostic imaging
businesses operate in any other state, such operations will be subject to the
additional regulations thereof. The Company intends, in the event that it is
successful in establishing a clinical laboratory and a diagnostic imaging
facility and commencing the operations thereof, to engage special health care
counsel to assist it in developing a compliance program meeting the requirements
of the applicable federal and state guidelines. Some applicable regulations will
include, but not be limited to the following:
Certificate-of-Need Programs. The Company is affected by
Certificate-of-Need ("CON") programs implemented in a number of states
and by existing governmental regulations regarding expenditures for
medical technology by hospitals and other healthcare facilities. CON
programs vary considerably from state to state. CON agencies primarily
control the distribution and physical allocation of technological
equipment among healthcare institutions, frequently determining which
institutions may acquire new technologies. Such determinations are
based on broad concepts of "need", using various criteria and weighing
the relative need demonstrated by competing CON applicants to ensure
the equitable allocation of new technology among hospitals and other
healthcare facilities. The Department of Health and Senior Services of
the State of New Jersey approved Medco Health Corporation's
Certificate-of-Need application for the acquisition of magnetic
resonance imaging/nuclear magnetic resonance (MRI) equipment to be
located in Englewood Cliffs, New Jersey. The Certificate of Need was
approved on July 9, 1996 and expires on July 9, 2001.
HISTORICAL BACKGROUND OF THE COMPANY
GENERAL
The Company was incorporated in Nevada on October 6, 1971 as Williston
Oil and Development Corporation. Through a merger with a Delaware corporation of
the same name, it acquired certain leasehold interests and drilling equipment.
On July 6, 1979, the Company's name was changed to Williston Oil Corporation. On
April 14, 1997, the Company's name was again changed, this time to Medco Health
Corporation. The Company was engaged in the business of
15
<PAGE> 16
drilling wells for the production of natural gas and, to a lesser extent, oil
and other hydrocarbon substances from 1977 until March 1, 1993, when it ceased
all business operations. It commenced bankruptcy proceedings on June 27, 1983
and emerged therefrom on February 7, 1992. For a more detailed discussion of
such bankruptcy proceedings, see "Bankruptcy Proceedings", below, in this Item
I. The Company did not engage in any business or other activities of any kind
between March 1, 1983 and January 16, 1996, when it acquired Medco Health
Corporation ("Medco"), in exchange for twenty-four million (24,000,000) new
shares, which constituted upon their issuance, 65.40428% of its currently issued
and outstanding common stock. For a more detailed discussion of the recent
changes in the control of the Company which resulted in the "reverse
acquisition" of Medco, see "Recent Changes in Control" and "Reverse Acquisition
of Medco", below, in this Item I.
DISCONTINUED OIL AND GAS DRILLING BUSINESS
From its inception in July of 1971 until March 1, 1983, the Company was
in the business of drilling wells for the production of natural gas, and to a
lesser extent, oil and other hydrocarbon substances in the United States,
primarily in the State of Ohio and, to a lesser degree, in Kansas. In most
instances, the Company performed services as the operating company or as the
drilling contractor in gas and oil drilling activities, while other parties
furnished funds for the drilling of the wells, primarily in the form of limited
partnerships in which the Company was the general partner. Typically, the wells
drilled, if productive, were operated by the Company. The Company carried on the
foregoing business activities through three wholly-owned subsidiaries, Williston
Drilling, Inc., Hydrocarbons Management, Inc., and Williston Pipeline
Corporation. A fourth wholly-owned subsidiary, Futura Fuels, Inc ("Futura") was
the lessee of certain coal rights in Bell County, Kentucky. The last annual
report on Form 10-K filed by the Company prior to the filing of this report, was
for the fiscal year ended June 30, 1981 (the "1981 10-K"). The discussion of the
Company's business contained in Item 1 thereof, under the subtitle "Oil and Gas
Business", indicates that Futura had subleased part of its coal rights, that its
lessor had attempted to cancel its lease, and that its subleasee had given
notice of its intent to exercise its option to re-sell its sublease back to
Futura. At the time the 1981 10-K was filed, Futura was in litigation with the
lessor in an attempt to re-establish its position as lessee. The defendant
lessor filed a petition for reorganization under Chapter 11 of the U.S.
Bankruptcy code and, unable to regain possession of the coal rights in issue,
the Company eventually (in 1993) dropped the claim. As a result of the Company's
inability to re-establish itself as lessee of the said coal mining rights, the
Company's sublessee brought a successful action against the Company which
resulted in a judgment against the Company in the amount of $250,000.
The Company's current management has been informed by the Company's
former president that in and around 1981 and 1982, there was a significant
upheaval throughout the entire natural gas industry as a result of severe
changes in market conditions due to an unanticipated and substantial surplus of
available natural gas. As a direct result, the Company's financial position and
prospects suffered significant and irreversible declines, the specific key
factors in which were as follows:
1. During 1981, the Company borrowed 1.5 million dollars from a bank to
finance the construction of an 8-mile gas gathering pipeline. Such transaction
was based on a contract which the Company had obtained from Columbia Gas
Transmission Corporation ("Columbia"), pursuant to which Columbia had agreed to
buy the entire output of the projected pipeline. Projected
16
<PAGE> 17
revenues therefrom were expected to be in the range of $7,600 per day. However,
within thirty days after the completion of the said pipeline and the
commencement of gas drilling operations connected therewith, Columbia imposed a
moratorium on gas purchases and thereafter Columbia never purchased any gas from
the Company.
2. As a direct result of the foregoing, the bank which had lent the
Company the money to construct the pipeline called its loan, accelerating
payment of the entire principal amount. Without income from the anticipated
pipeline operations, Williston was unable to make any payments to the bank.
3. Prior to June 30, 1980, the Company had sold its drilling services
primarily to two customers, from which it received virtually all of its revenues
from such operations. During fiscal 1981 and 1982, relationships with both such
customers were terminated. As a direct result thereof, the Company's revenues
declined from $11,278,627 in fiscal 1980 to 1,157,675 in fiscal 1981. It should
be noted however that even at the higher revenue levels reached in fiscal 1980,
the Company's oil and gas operations were not profitable, with a loss from
operations recorded for fiscal 1980 in the amount of ($236,279).
4. One of the foregoing former major customers was indebted to the
Company at that time in an amount of approximately $520,000. The Company
instituted legal proceedings against them and they counter-sued for payment of a
secured loan which they had made to the Company in the amount of $137,000. Such
loan had been secured by certain gas rights leases and the Company's obligation
to drill additional wells pursuant to such leases. Additional collateral which
the Company had given for such loan was all of the stock of Williston Pipeline
Corporation, which owned the 8 mile gas pipeline discussed above. Because of the
events discussed above, the Company did not have the funds to drill the wells it
was obligated to drill nor the funds to pay any of its obligations.
The ultimate result of the foregoing was that the Company was not able
to replace the income lost as a result of the loss of the two major customers
nor meet any of its financial obligations. Such circumstances, coupled with the
change in market conditions throughout the industry, forced the Company to file
a Voluntary Petition for Arrangement pursuant to Chapter 11, Title 11, as
discussed more fully, below, under the caption "Bankruptcy Proceedings".
BANKRUPTCY PROCEEDINGS
On July 12, 1983, the Company filed a Voluntary Petition for
Arrangement pursuant to Chapter 11, Title 11, United States Code, in the United
States Bankruptcy Court for the Southern District of Ohio (the "Ohio Court");
Case No. 2-83-02174. Thereafter the case progressed as follows:
1. At approximately the same time that the Company filed the
foregoing voluntary petition in the Ohio Court, on July 11,
1983, certain creditors of the Company filed an involuntary
petition in bankruptcy pursuant to Chapter 11, Title 7, United
States Code, the United States Bankruptcy Court for the
District of New Jersey (the "New Jersey Court"); Case No.
83-04116DV.
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<PAGE> 18
2. On October 18, 1993, the New Jersey Court granted a motion of
the New Jersey involuntary petitioning creditors to transfer
the Ohio proceeding to the New Jersey Court and, at the same
time, granted the Company's motion to convert the involuntary
Chapter 7 New Jersey proceeding to a Chapter 11 proceeding.
3. On November 22, 1983, the Ohio Court ordered the entire
Chapter 11 proceeding to be transferred to the New Jersey
Court.
4. On September 26, 1986, the Company's plan of reorganization
was entered by Order of the New Jersey Court. In essence,
after payment of administrative expenses and priority claims,
the plan called among other things for the unsecured creditor
body to be paid fifty percent of their respective allowed
claims. The source of such payments was to have been one
hundred percent of the Company's post-confirmation normal
revenues after expenses and taxes during each fiscal year,
with the proviso that such annual payments were not to be less
than $150,000 per fiscal year, with reductions in that amount
allowed: (i) for the payment of administration expenses and
(ii) under certain stated circumstances.
5. On April 19, 1989, the official unsecured creditors committee
(the "Committee") submitted a Notice of Motion to Withdraw
Order of Confirmation of Plan and to Convert Proceeding to
Chapter 7 Liquidation. In its application therefor, the
Committee alleged that the Company, and more particularly, its
president, had basically ignored all of their responsibilities
under the plan in that they had turned over approximately
$21,000 to their counsel as the entire net proceeds of the
Company's post-confirmation operations and its conclusion that
the Company was completely unable and unwilling to carry out
the terms of the order confirming the plan and that there was
no reasonable likelihood that circumstances would change for
the better.
6. On June 5, 1989, the Committee's motion to withdraw the order
of confirmation of the plan and to convert the proceeding to a
Chapter 7 liquidation was granted.
7. On February 7, 1992, the New Jersey Court issued a final
decree, declaring the estate to have been fully administered
and the case closed.
CHANGES IN CONTROL OF THE COMPANY
Upon its emergence from Chapter 7 bankruptcy proceedings, as described
above, the Company had no assets or business operations. All other officers and
directors having resigned their positions during prior to the Company's
emergence from bankruptcy proceedings, Dr. Joseph Territo was the Company's sole
officer and director. Commencing at that time, the Company's business plan was
to seek one or more potential business combinations that might, merit the
Company's involvement. As a result of its complete lack of financial, managerial
and other resources, however, the number of promising potential businesses that
were available to the Company were extremely limited.
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<PAGE> 19
On August 14, 1995, Dr. Territo resigned his positions as sole officer
and director of the Company and Lorenzo Damiano to fill the vacancies created by
such resignations. As sole director, Mr. Damiano increased the number of members
of the Company's board of directors to two and appointed Evelyn Figueroa to fill
the vacancy created thereby. Ms. Figueroa was also appointed to the position of
Secretary of the Company.
In a "reverse acquisition", on January 16, 1996, the Company acquired
all of the issued and outstanding stock of Medco Inc.("Medco"), a Nevada
corporation, from Fahim Sahraie, the sole shareholder, (the "Medco
Shareholders") in exchange for twenty-four million shares, constituting upon
their issuance, 65.40482% of the Company's issued and outstanding common stock,
pursuant to the terms of a reorganization agreement between the Company and
Medco (the "Medco Acquisition Agreement").
On October 5, 1995, Dr. Joseph Territo and Dr. Pauline Territo sold
1,250,000 shares of the Class B common stock of Williston Oil Corporation to Sun
Capital Corporation.
On January 16, 1996 Sun Capital Corporation ("Sun Capital") purchased a
total of 1,250,000 shares of the Class B Common Stock of the Company, which was
subsequently sold to the sole shareholder.
On January 16, 1996, the resignations of Mr. Damiano and Ms. Figueroa
and the appointment of the current management of the Company were effective,
pursuant to the requirements of Rule 14f-1 of the Securities and Exchange Act of
1934 (the "Exchange Act").
ITEM 2. PROPERTIES AND EQUIPMENT
The Company's corporate headquarters are presently maintained at 532
Sylvan Avenue, Englewood Cliffs, New Jersey 07632.
The Company entered into an agreement on May 31, 1996 with Ferolie
Realty Associates, L.L.C., to lease the premises located at 532 Sylvan Avenue,
in Englewood Cliffs, New Jersey 07632. The said premises consist of the entire
office building comprising 8,000 square feet, together with the underlying land
and parking area which include parking spaces for twenty-seven vehicles. The
Company plans to renovate the premises in order to establish radiological
diagnostic facilities and clinical laboratory.(See Item 2-Properties and
Equipment). Under the terms of the lease, the Company is restricted to the
planned uses of the premises. The lease is for a twenty-year term commencing
July 1, 1996 and terminating June 30, 2016. Annual rent is fixed ("net rent") at
the rate of $96,000.00 for the first five years, payable in advance monthly
installments of $8,000.00. For Lease Years six through ten, the annual net rent
will be $96,000.00 multiplied by a factor, the numerator of which is the
Consumer Price Index ("CPI") for the month of June 2001, and the denominator of
which is the CPI for the month of June 1996. As used herein, CPI shall mean the
Consumer Price Index for the New York-Northeastern New Jersey area, issued by
the United States Department of Labor. For Lease Years eleven through fifteen,
the annual net rent will be $96,000.00 multiplied by a factor, the numerator of
which is the CPI for the month of June 2006, and the denominator of which is the
CPI for the month of June 1996. For Lease Years fifteen
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<PAGE> 20
through twenty, the annual net rent will be $96,000.00 multiplied by a factor,
the numerator of which is the CPI for the month of June 2011 and the denominator
of which is the CPI for the month of June 1996. In no event shall the factor be
less than one (1.00) for any year.
In addition to the above net rent, the lease provides for payment of
"additional rent" by way of, among other things, real estate taxes, water and
sewer charges, any license and permit fees necessary for the use of the
premises, and any other governmental charges relating to the premises.
The Company will be entitled to a net rate abatement in the amount of
$8,000.00 per month, up to a total amount of $32,000.00, provided that it is not
in default under the Lease. The abatement will be applied against the monthly
installments of the net rent due for the first four months of the term.
The Company does not lease or occupy any other properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is unaware of any pending legal proceedings to which the
Company is a party or of which any of its assets is the subject. No director,
officer or affiliate of the Company, or any associate of any of them, is a party
to or has a material interest in any proceeding adverse to the Company.
There are no existing lawsuits against the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matter to a vote of its security holders
during its fiscal year ended June 30, 1995.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no market for the Company's common stock, $.001 par value, and
there has been none since 1983. In the event that a market for the common stock
of the Company should develop, initial trading will be in the over-the-counter
market. In such event, the Company will endeavor to take all action necessary to
have the trading of the stock quoted on the OTC Bulletin Board of the National
Association of Securities Dealers Inc.
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<PAGE> 21
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of significant
factors which have affected the Company's financial position and operations
during the fiscal year ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company, required to be included in
this Report pursuant to Item 310(a) of Regulation S-B, are set forth below:
Independent Auditors' Report
Board of Directors
Medco Health Corporation (formerly Medco, Inc.)
We have audited the accompanying balance sheets of Medco Health
Corporation (formerly Medco, Inc.) (a development stage company) as of June 30,
1996, and 1995, and the related statements of operations, stockholders' equity
(deficit), and cash flows for the year ended June 30, 1996, the period July 1,
1994 (date of inception) to June 30, 1995 and for the cumulative period July 1,
1994 (date of inception) to June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Medco Health
Corporation (formerly Medco, Inc.) (a development stage company) at June 30,
1996 and 1995, and the results of their operations, and their cash flows for the
year ended June 30, 1996, the period from July 1, 1994 (date of inception) to
June 30, 1995 and for the cumulative period from July 1, 1994 (date of
inception) to June 30, 1996, in conformity with generally accepted accounting
principles.
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<PAGE> 22
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net cumulative loss of $131,931 for the
period July 1, 1994 (date of inception) to June 30, 1996, and, as of that date,
has a net worth deficiency of $29,931. As discussed in Note 2, the Company is
still in the development stage and it cannot be determined at this time if the
Company will obtain sufficient capital to begin operations planned principal
operations. The Company's uncertainty as to its productivity and its ability to
raise sufficient capital raise substantial doubt about the entity's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
April 23, 1997 Nevoso, Pivirotto, Pinkham & Foster
Fairfield, New Jersey Certified Public Accountant, LLC
Medco Health Corporation (formerly Medco, Inc.)
A Development Stage Company
Balance sheets
June 30,
Assets
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Current Assets
Cash $ 52,833 $ 1,519
Accounts receivable, net of allowance for
doubtful accounts of 460,746 in 1996 and
$0 in 1995 -- 1,922
Deposit on equipment 32,000 --
Prepaid expenses 85,000 --
-------- -------
169,833 3,441
-------- -------
Equipment, at cost, net of accumulated
depreciation of $12,834 in 1996 and
$3,325 in 1995 26,092 14,644
-------- -------
Other assets
Organization costs, net of accumulated
amortization of $1,000 4,000 --
License fees 5,005 --
-------- -------
9,005 --
-------- -------
$204,930 $18,085
-------- -------
</TABLE>
22
<PAGE> 23
Liability and Stockholder's Equity (Deficit)
--------------------------------------------
<TABLE>
<S> <C> <C>
Current Liabilities
Accrued expenses $ 3,050 $ 1,625
Income taxes payable 405 421
--------- --------
3,455 2,046
--------- --------
Due to stockholder 231,406 48,704
--------- --------
Stockholder's equity (deficit)
Common stock 38,128 37,944
Additional paid-in capital 63,872 (27,944)
Deficit accumulated during the
development stage (131,931) (42,665)
--------- --------
(29,931) (32,665)
--------- --------
$ 204,930 $ 18,085
--------- --------
</TABLE>
See Notes to Financial statements
23
<PAGE> 24
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Period from Cumulative
July 1, 1994 Period from
(Date of July 1, 1994
Year ended Inception) to (Date of
June 30, June 30, Inception) to
1996 1995 June 30, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 64,583 $ 18,486 $ 83,069
Cost of sales 11,611 5,328 16,939
------------ ------------ ------------
Gross profit 52,972 13,158 66,130
General and administrative expenses:
Payroll - officers 7,500 -- --
Payroll - other 9,225 -- --
Taxes - licenses 2,300 -- --
Management fees 5,925 -- --
Commission expense 8,400 -- --
Travel 6,874 -- --
Miscellaneous 750 -- --
Bad debt 60,746 -- --
Insurance 4,064 1,224 5,288
Advertising 1,696 148 1,844
Truck and auto expenses 1,188 2,314 3,502
Rent 9,500 1,575 11,075
Telephone 3,917 2,896 6,813
Utilities 1,740 385 2,125
Repairs and maintenance 591 361 952
Office expense 1,190 478 1,668
Seminars 68 580 648
Professional fees 5,650 2,023 7,673
Depreciation and amortization 10,509 3,325 13,834
------------ ------------ ------------
141,833 21,773 163,606
------------ ------------ ------------
Operating loss (88,861) (8,615) (97,476)
Loss on equipment -- (33,628) (33,628)
------------ ------------ ------------
Loss before provision for income taxes (88,861) (42,243) (131,104)
Income Taxes 405 422 827
------------ ------------ ------------
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
Net loss $ (89,266) $ (42,665) $ (131,931)
------------ ------------ ------------
Net loss per common share $ -- $ -- $ --
------------ ------------ ------------
Weighted average shares of
common stock outstanding $ 38,017,913 $ 37,944,453 $ 37,981,182
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements
25
<PAGE> 26
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Discount During
Common Stock On Common Development
Shares Account Stock Stage Total
----------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1994 -- $ -- $ -- $ -- $ --
Issuance of common Stock
Class A 36,694,453 36,694 (26,694) -- 10,000
Class B 1,250,000 1,250 (1,250) -- --
Net loss for period -- -- -- (42,655) (42,665)
----------- ------- --------- --------- --------
Balance at June 30, 1995 37,944,453 37,944 (27,944) (42,655) (32,665)
Issuance of Common Stock
Class A 184,000 184 91,816 -- 92,000
Net loss for period -- -- -- (89,266) (89,266)
----------- ------- --------- --------- --------
38,128,453 $38,128 $ 63,872 $ 131,921 $ 29,931
----------- ------- --------- --------- --------
</TABLE>
See Notes to Financial Statements
26
<PAGE> 27
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from Cumulative
July 1, 1994 Period from
(Date of July 1, 1994
Year ended Inception) to (Date of
June 30, June 30, Inception) to
1996 1995 June 30, 1996
--------- ------------- -------------
<S> <C> <C> <C>
Operating Activities
Net loss $ (89,266) $(42,665) $(131,931)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,509 3,325 13,834
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,922 (1,922) --
(Increase) in prepaid expenses (85,000) -- (85,000)
Increase in accrued expenses 1,425 1,625 3,050
(Decrease) Increase in income taxes payable
taxes payable (16) 421 405
--------- -------- ---------
Net cash used in operating activities (160,426) (39,216) (199,642)
--------- -------- ---------
Investing activities:
Organization costs (5,000) -- (5,000)
License fees (5,005) -- (5,005)
Deposits on equipment (32,000) -- (32,000)
Capital expenditures (20,957) (17,969) (38,926)
--------- -------- ---------
Net cash used in investing activities (62,962) (17,969) (80,931)
--------- -------- ---------
Financing activities:
Proceeds from stockholder loan 379,440 49,829 429,269
Repayment of stockholder loan (196,738) (1,125) (197,863)
Proceeds from issuance of common stock 92,000 2,000 94,000
Proceeds from additional paid-in-capital -- 8,000 8,000
--------- -------- ---------
Net cash provided by financing activities 274,702 58,704 333,406
--------- -------- ---------
Net increase in cash 51,314 1,519 52,833
Cash - beginning of period 1,519 -- --
--------- -------- ---------
Cash - end of period $ 52,833 $ 1,519 $ 52,833
--------- -------- ---------
Supplemental disclosure of Cash Flow Information:
Interest paid $ -- $ -- $ --
--------- -------- ---------
Income taxes paid $ 421 $ -- $ 421
--------- -------- ---------
</TABLE>
See Notes to Financial Statements
27
<PAGE> 28
Medco Health Corporation (formerly Medco, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 1
Summary of Accounting Policies
Nature of Business
Medco Health Corporation (formerly Medco, Inc.) (the "Company") was incorporated
under the laws of the state of New York on July 1, 1994. The Company's principal
business activities have been the marketing and distribution of medical
equipment, supplies and health care services.
Reorganization
On January 16, 1996 the sole shareholder of Medco, Inc. entered into an
acquisition agreement (the "Acquisition Agreement") with Williston Oil
Corporation for acquisition of all of the outstanding Capital stock of Medco,
Inc. in exchange for a portion of Williston's Class A Common Stock and 100% of
Class B Common Stock. subsequent to year end Williston Oil Corporation executed
a name change to Medco Health Corporation.
In July 1983, an involuntary Chapter 11 bankruptcy petition was filed against
Williston Oil Corporation by its creditors. In February 1992, the court granted
the creditors' petition and an order for relief under Chapter 7 of Bankruptcy
Code was entered. Since 1992 the Company has remained inactive, and has no pre
or post bankruptcy liabilities.
Equipment
Equipment is recorded at cost less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the assets by using the
straight-line method of depreciation.
Repairs and maintenance costs are expensed as incurred while additions and
betterments are capitalized. The cost and related accumulated depreciation of
assets sold or retired are eliminated from the accounts and any gain or losses
are reflected in earnings.
Per Share Data
The primary income (loss) per share was computed on the weighted number of
shares of common stock outstanding during the period. Common share equivalents
were not included as their inclusion would have been antidilutive.
Income Taxes
The Company has a net operating loss carryover of approximately $132,000 as of
June 30, 1996, expiring in 2011.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the establishment of a
deferred tax asset for all deductible temporary differences and operating loss
carry forwards. Because of the uncertainties discussed in Note 2, however, any
deferred tax asset established for utilization of the Company's tax loss carry
forwards would correspondingly require a valuation allowance of the same amount
28
<PAGE> 29
pursuant to SFAS No. 109. Accordingly, no deferred tax asset is reflected in
these financial statements.
Note 2
Capital Stock
The following is a summary of the various classes of capital stock at June 30,
1996:
<TABLE>
<S> <C>
Common Stock
Class A-Par value $.001 per share:
authorized 100,000,000 shares;
36,878,453 issued and outstanding $ 36,878
Class B-Par value $.001 per share:
authorized 25,000,000 shares;
1,250,000 issued and outstanding 1,250
----------
$ 38,128
----------
Preferred Stock
Par value $.001 per share:
authorized 25,000,000 shares;
none issued and outstanding
$ --
----------
</TABLE>
The holders of Class A common stock possess the voting power to one vote for
each share of stock held. The holders of Class A commons stock do not possess
any pre-emptive rights. Class A common stock holders have the right to elect a
minority of the directors of the Corporation.
The holders of Class B common stock possess the voting power of three votes for
each share of stock held and do not possess any pre-emptive rights. Class B
common stock holders have the right to elect the majority of the directors of
the Corporation Class B common stock holders will not be entitled to cash
dividends only for a period of three (3) years from the original date of
issuance of that share. The shares of Class B common stock shall be convertible
at any time and from time t time at the option of the holder into one share of
Class A common stock at the rate of one share of Class B common stock for one of
Class A common stock.
Preferred stock may be issued, from time to time, in one or more series, each of
such series to have such designations, preferences, and relative participating,
optional or other Special rights, and qualifications, limitations or
restrictions thereof as are started and expressed in the resolution or
resolutions providing for the issue of such series, adopted by the Board of
Directors.
Note 3
Going Concern
As shown in the accompanying financial statements, the Company incurred a net
cumulative loss of $131,931 during the period July 1, 1994 (date of inception)
to June 30, 1996, and as of that date, the Company's total liabilities exceeded
its normal assets by $29,931.
29
<PAGE> 30
Going Concerns (continued)
In January 1996, the Company, under a plan of reorganization was merged into
Williston Oil Corporation (Williston). Williston is a publicly traded company.
It is the intentions of management that the Company will obtain additional
capital from a public offering. These factors create an uncertainty that the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Note 4
Related Party Transactions
During the period July 1, 1994 (date of inception) to June 30, 1995, the
stockholder advanced the Company approximately $49,000. There are no stated
terms for repayment or interest on this advance.
Note 5
Commitment and Contingencies
The Company leases its facility under an operating lease which expired December
31, 1996. Lease expense for the period July 1, 1994 (date of inception) to June
30, 1995 amounted To $1,575 and $9,500 for the year ended June 30, 1996.
Effective September 1996 the Company signed a lease for new facilities. The new
lease will be for twenty years and will expire on august 30, 2016 with minimum
annual lease expense of $96,000.00.
In addition, the Company has entered into a contract for approximately $422,000
to have new facilities constructed to accommodate the operations of the Company.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICER, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of all directors and executive
officers of the Company and the date when each director was appointed, and all
positions and offices in the Company held by each:. Each director will hold
office until the next annual meeting of shareholders and until his or her
successor has been elected and qualified:
30
<PAGE> 31
<TABLE>
<CAPTION>
DATE
OTHER OFFICES APPOINTED
NAME AGE HELD DIRECTOR
- --------------- ----- ---------- -----------------------
<S> <C> <C> <C>
Fahim Sahraie 37 President, CEO January 16, 1996
Hashem Sahraie 62 Vice President, January 16, 1996
Secretary,
Treasurer
Nasim Sahraie 35 Vice President January 16, 1996
Sales and Marketing
Saboor Sahraie 45 No executive Position January 16, 1996
</TABLE>
FAMILY RELATIONSHIPS
Fahim, Nasim and Saboor Sahraie are brothers and Hashem Sahraie is
their father.
BUSINESS EXPERIENCE
The following summarizes the occupation and business experience during the
past five years for each director, executive officer, and significant employee
of the Company:
FAHIM SAHRAIE. Mr. Fahim Sahraie has served as president, treasurer,
and a director of the Company since 1996. He has served as president of Medco
Health Corporation from December, 1988 to January,1996. From January 1986
through January 1988, he worked for New York Scientific, Inc. as a Sales
Representative where his responsibilities included the sales of microscopes,
video equipment and imaging systems to hospitals, universities and private
companies in the New York metropolitan area. From February, 1988 through June,
1993, Mr. Sahraie worked as a Sales Representative for Curtin Matheson
Scientific, Inc., where his responsibilities included the sales of instruments,
reagents and supplies to hospitals and laboratories in the New York Metropolitan
area. Mr. Sahraie holds a Bachelor's degree in Biology and Chemistry from
Rutgers University, which he received in 1982 and a Masters degree in Virology
from Columbia University, which he received in 1986. He is the author of three
articles which are published in the Journal of Clinical Microbiology, New
England Journal of Medicine, and the Pediatric Infectious Diseases Journal.
HASHEM SAHRAIE. Hashem Sahraie has served as vice president and
secretary of the Company since 1996. From December of 1988 to January 1996, Mr.
Sahraie was vice president and secretary of Medco Health Corporation. Hashem
Sahraie worked for the U.S. Department of State at the American Embassey in
Afghanistan. Mr. Sharaie has also taught in the fields of psychology and
counseling at Kabul University of Afghanistan, as well as psychotherapy and
counseling at City University of New York.
31
<PAGE> 32
Hashem Sahraie received a B.A. in Philosophy in 1955 from Habibia
College, Afghanistan. He received a LL Degree in Public Administration in 1964
from Kabul University, Afghanistan. Mr. Sharaie received a Master of Arts in
Counseling Psychology in 1967 from Columbia University and a Doctor of Education
in Counseling and Psychotherapy in 1975 from Columbia.
NASIM SAHRAIE. Nasim Sahraie has been vice president of sales and
marketing of the Company since 1996. He served as vice president of sales and
marketing of Medco Health Corporation from 1996 to present. From December of
1988 until 1996, Nasim Sahraie was a senior filed service engineer account
manager of Dade International. From January of 1984 to December of 1988, Mr.
Sharaie was the senior electrical and mechanical technician with Clinical
Engineering.
Nasim Sahraie received an Associate Degree, with a major in Computer
Science from Bergen County Community College in 1981.
SABOOR SAHRAIE. Saboor Sahraie has been a director of the Company since
1996 and he served as a director of Medco Health Corporation from 1996 to
present. From August of 1988 to 1996, Saboor Sahraie was associated with Ritz
Camera in Middletown, New York.
Saboor Sahraie received a Bachelor of Science Degree, with a major in
Business Administration from the University of Southern Indiana in 1992.
ITEM 10. EXECUTIVE COMPENSATION
CURRENT REMUNERATION
The Company has no stock option or stock appreciation rights, long term
or other incentive compensation plans, deferred compensation plans, stock bonus
plans, pension plans, or any other type of compensation plan in place for its
executive officers, directors, or other employees; none of its executive
officers or directors have received any compensation of any such types from the
Company pursuant to plans or otherwise.
The following table sets forth information concerning the annual
compensation received or accrued for services, provided in all capacities, to
the Company for the years ended June 30, 1994 and 1995 by all individuals who
served as the Company's chief executive officer during the fiscal year ended
June 30, 1995 and by the most highly compensated executive officer, other than
the chief executive officer, who was serving as an executive officer at the end
of the fiscal year ended June 30, 1995. No other officer of the Company earned
more than $100,000 during such fiscal year.
32
<PAGE> 33
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND
PRINCIPAL POSITION YEAR SALARY
($)
(a) (b) (c)
- ------------------------------------------------------------------------
<S> <C> <C>
CEO Joseph J. Territo, M.D 1994 $ 0.00
Sole Officer & Director 1995
- ------------------------------------------------------------------------
CEO Lorenzo Damiano 1995 $ 0.00
President and Director
- ------------------------------------------------------------------------
CEO Fahim Sahraie 1995 $113,000.00
President and Director
- ------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS
The directors of the Company are not compensated for their services as
such.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EXECUTIVE AGREEMENTS
The Company has entered into an employment agreement with A.G.
Dikengil, M.D., dated April 1, 1996. This agreement is hereby incorporated by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
33
<PAGE> 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth information as of January 12, 1996, with
respect to the persons known to the Company to be the beneficial owners of more
than 5% of the Class A Common Stock, $.001 par value and of Class B Common
Stock, $.001 par value of the Company. The Company has no shares of any other
class issued or outstanding.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
TITLE NAME AND AMOUNT AND
OF ADDRESS OF NATURE OF PERCENT OF CLASS
BENEFICIAL BENEFICIAL
OWNER OWNER
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
President/ Fahim Sharaie 24,000,000 65.40428% of Class A
Director
President/ Fahim Sharaie 1,250,000 100% of Class B
Director (transferred from Sun Capital)
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of September 30, 1996,
with respect to the beneficial ownership of the Class A common stock, $.001 par
value and Class B common stock, $.001 of the Company by each of the executive
officers and directors of the Company and by all executive officers and
directors as a group:
<TABLE>
<CAPTION>
TITLE NAME AND AMOUNT AND
OF ADDRESS OF NATURE OF PERCENT OF CLASS
BENEFICIAL BENEFICIAL
OWNER OWNER
<S> <C> <C> <C>
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
President/ Fahim Sharaie 24,000,000 65.40428% of Class A
Director
Vice President/ Hashem Sahraie 10,000 .0002725% of Class A
Secretary/
Treasurer
Vice President Nasin Sharaie 11,000 .0002997% of Class A
No executive Saboor Sharaie 10,000 .0002725% of Class A
position
- --------------------------------------------------------------------------------
President/ Fahim Sharaie 1,250,000 100% of Class B
Director
</TABLE>
CHANGES IN CONTROL
The Company is not aware of any arrangements which may at a subsequent
date result in a change in control of the Company other then as set forth herein
(See "Business - Acquisition of Technology from Affiliates").
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS AND BUSINESS RELATIONSHIPS WITH MANAGEMENT
There are currently no transactions, nor have there been any
transactions within the last 2 years, which involve the Company and any member
of management or major shareholder, or any member of the immediate family of
such persons.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The financial statements filed as a part of this report are as follows:
Consolidated Balance Sheet - June 30, 1995
35
<PAGE> 36
Consolidated Statements of Operations for the years ended
June 30, 1994 and 1995, and cumulative for the period from inception
(July 15, 1987) to June 30, 1995
Consolidated Statements of Owners' Equity (Deficit) as at July 15, 1987
and June 30, 1988 - 1995
Consolidated Statements of Cash Flows for the years ended June 30, 1994
and 1995 and cumulative for the period from inception (July 15,1987) to
June 30, 1990
FINANCIAL STATEMENT SCHEDULES
Financial statements schedules have been omitted for the reason that
they are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
EXHIBITS
The exhibits filed as a part of this Report or incorporated herein by
reference are as follows:
Exhibits Incorporated
Herein By Reference,
Exhibit No. As Filed
With
Document Indicated
------------------
1. (a) Agreement and Plan of Reorganization by and among Williston Oil
Corporation, Sun Capital Corporation and Medco Health Corporation and Fahim
Sahraie dated January 16, 1995.
2. (a) Articles of Incorporation filed October 6, 1971 (1)1(a)
(b) Certificate of Amendment of Articles of Incorporation filed
July 5, 1979 (1)1(a)
(c) By-Laws (1)1(b)
3. Lease between Ferolie Realty Associate, L.L.C. and Medco Health
Corporation, dated July 1, 1996.
(1) Filed with the Securities and Exchange Commission in March 1980, as
an exhibit, numbered as indicated above, to the Company's Registration Statement
on Form 10.
36
<PAGE> 37
REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by Registrant during the last
quarter of the period covered by this report.
SIGNATURES
In accordance with the Securities Exchange Act of 1934, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDCO HEALTH CORPORATION
By /s/Fahim Sahraie
--------------------------
Fahim Sahraie, President
Date: 4/17 , 1997
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/Fahim Sahraie
- -----------------------------
Fahim Sahraie President 4/17 , 1997
---------------------
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/Fahim Sahraie
- -----------------------------
Fahim Sahraie Treasurer 4/17 , 1997
---------------------
A MAJORITY OF THE BOARD OF DIRECTORS:
/s/Fahim Sahraie
- -----------------------------
Fahim Sahraie Director 4/17 , 1997
---------------------
- -----------------------------
</TABLE>
37
<PAGE> 38
<TABLE>
<S> <C> <C>
Hashem Sahraie Director 4/17 , 1997
---------------------
/s/Hashem Sahraie Director 4/17 , 1997
- ----------------------------- ---------------------
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
- -----------------------------
No annual report or proxy materials have been sent to
security-holders during the fiscal year ended June 30, 1995 or the subsequent
interim period and, as at the date hereof, no plans exist for the furnishing of
such report or materials subsequent to the filing of this Report.
COMMISSION FILE NUMBER 33-17598-NY
- ---------------------------------------------------------
38
<PAGE> 39
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
--------------------------------
FORM 10-KSB
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 1995
-------------------------------
MEDCO HEALTH CORPORATION
(Formerly Williston Oil Corporation)
EXHIBITS
INDEX OF EXHIBITS BEING FILED HEREWITH
39
<PAGE> 40
Page
Exhibits Incorporated
Herein By Reference,
Exhibit No. As Filed With
Document Indicated
------------------
1. (a) Agreement and Plan of Reorganization by and among
Williston Oil Corporation, Sun Capital Corporation and Medco Health
Corporation and Fahim Sahraie dated January 16, 1995.
2. (a) Articles of Incorporation filed October 6, 1971 (1)1(a)
(b) Certificate of Amendment of Articles of Incorporation filed
July 5, 1979 (1)1(a)
(c) By-Laws (1)1(b)
3. Lease between Ferolie Realty Associate, L.L.C. and Medco Health
Corporation, dated July 1, 1996.
(1) Filed with the Securities and Exchange Commission in March 1980, as
an exhibit, numbered as indicated above, to the Company's Registration Statement
on Form 10.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to signed on its behalf by the undersigned
thereunto duly authorized.
MEDCO HEALTH CORPORATION
/s/Fahim Sahraie
-----------------------------------
Fahim Sahraie, President, Treasurer and Director
Date: , 1997
--------------------------
In accordance with the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
By /s/Fahim Sharaie
------------------------------
Fahim Sharaie
President, Treasurer, and Director
Date: 4/17 , 1997
----------------------
40
<PAGE> 41
By /s/Hashem Sahraie
--------------------------------
Hashem Sahraie
Secretary and Director
Date: 4/17 , 1997
----------------------
41
<PAGE> 42
[LETTERHEAD]
NEVOSO, PIVIROTTO, PINKHAM & FOSTER
CERTIFIED PUBLIC ACCOUNTANTS, LLC
Independent Auditors' Report
Board of Directors
Medco Health Corporation (formerly Medco, Inc.)
We have audited the accompanying balance sheets of Medco Health Corporation
(formerly Medco, Inc.) (a development stage company) as of June 30, 1996, and
1995, and the related statements of operations, stockholders' equity (deficit),
and cash flows for the year ended June 30, 1996, the period July 1, 1994 (date
of inception) to June 30, 1995 and for the cumulative period July 1, 1994
(date of inception) to June 30, 1995 and for the cumulative period July 1, 1994
(date of inception) to June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medco Health Corporation
(formerly Medco, Inc.) (a development stage company) at June 30, 1996 and 1995,
and the results of their operations, and their cash flows for the year ended
June 30, 1996, the period from July 1, 1994 (date of inception) to June 30,
1995 and for the cumulative period from July 1, 1994 (date of inception) to
June 30, 1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net cumulative loss of $131,931 for the
period July 1, 1994 (date of inception) to June 30, 1996, and, as of that date,
had a net worth deficiency of $29,931. As discussed in Note 2 the Company is
still in the development stage and it cannot be determined at this time if the
Company will obtain sufficient capital to begin planned principal operations.
The Company's uncertainty as to its productivity and its ability to raise
sufficient capital raise substantial doubt about the entity's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Nevoso, Pivorotto, Pinkham & Foster
Nevoso, Pivorotto, Pinkham & Foster
Certified Public Accountants, LLC
April 23, 1997
Fairfield, New Jersey
Division for CPA Firms AIC
710 Route 44 East Suite 201, Fairfield, NJ 07004
Tel 201/575/7999 Fax 201/575/7782
<PAGE> 43
MEDCO HEALTH CORPORATION (FORMERLY MEDCO, INC.)
(A DEVELOPMENT STAGE COMPANY)
INDEX
Independent Auditors' Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity (Deficit) 4
Statements of Cash Flows 5
Notes to Financial Statements 6-8
[LOGO]
Nevoso, Pivirotto, Pinkham & Foster
CERTIFIED PUBLIC ACCOUNTANTS, LLC
<PAGE> 44
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Balance Sheets
June 30,
ASSETS
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current assets
Cash $ 52,833 $1,519
Accounts receivable, net of allowance for
doubtful accounts of $60,746 in 1996 and
$0 in 1995 - 1,922
Deposits on equipment 32,000 -
Prepaid expenses 85,000 -
-------- --------
169,833 3,441
-------- --------
Equipment, at cost, net of accumulated
depreciation of $12,834 in 1996 and
$3,325 in 1995 26,092 14,644
Other assets
Organization costs, net of accumulated
amortization of $1,000 4,000 -
License fees 5,005 -
-------- --------
9,005 -
-------- --------
$204,930 $ 18,085
LIABILITY AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities
Accrued expenses $ 3,050 $ 1,625
Income taxes payable 405 421
-------- --------
3,455 2,046
-------- --------
Due to stockholder 231,406 48,704
-------- --------
Stockholder's equity (deficit)
Common stock 38,128 37,944
Additional paid-in capital 63,872 (27,944)
Deficit accumulated during the
development stage (131,931) (42,665)
-------- --------
(29,931) (32,665)
-------- --------
$204,930 $ 18,085
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 45
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Statement of Operations
<TABLE>
<CAPTION>
Period from Cumulative
July 1, 1994 Period from
(Date of July 1, 1994
Year ended Inception) to (Date of
June 30, June 30, Inception) to
1996 1995 June 30, 1996
---------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 64,583 $ 18,486 $ 83,069
Cost of sales 11,611 5,328 16,939
-------- ---------- ---------
Gross profit 52,972 13,158 66,130
General and administrative
expenses:
Payroll - officers 7,500 - -
Payroll - other 9,225 - -
Taxes and licenses 2,300 - -
Management fees 5,925 - -
Commission expense 8,400 - -
Travel 6,874 - -
Miscellaneous 750 - -
Bad debt 60,746 - -
Insurance 4,064 1,224 5,288
Advertising 1,696 148 1,844
Truck and auto expenses 1,188 2,314 3,502
Rent 9,500 1,575 11,075
Telephone 3,917 2,896 6,813
Utilities 1,740 385 2,125
Repairs and maintenance 591 361 952
Office expense 1,190 478 1,668
Seminars 68 580 648
Professional fees 5,650 2,023 7,673
Depreciation and
amortization 10,509 3,325 13,834
---------- ---------- ---------
141,833 21,773 163,606
---------- ---------- ---------
Operating loss (88,861) (8,615) (97,476)
Loss on equipment: - (33,628) (33,628)
---------- ---------- ---------
Loss before provision for
income taxes (88,861) (42,243) (131,104)
Income taxes 405 422 827
---------- ---------- ---------
Net loss (89,266) $(42,665) $(131,931)
---------- ---------- ---------
Net loss per common share $ - - -
---------- ---------- ----------
Weighted average shares of
common stock outstanding 38,017,913 37,944,453 37,981,182
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements
Nevoso, Privirotto, Pinkham & Foster
-3-
<PAGE> 46
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Discount During
Common Stock On Common Development
Shares Amount Stock Stage Total
---------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1994 - $ - $ - $ - $ -
Issuance of Common Stock
Class A 36,694,453 36,694 (26,694) - 10,000
Class B 1,250,000 1,250 (1,250) - -
Net loss for period - - - (42,655) (42,665)
---------- ------- ------- --------- --------
Balance at June 30, 1995 37,944,453 37,944 (27,944) (42,655) (32,665)
Issuance of Common Stock
Class A 184,000 184 91,816 - 92,000
Net loss for period - - - (89,266) (89,266)
---------- ------- ------- --------- --------
38,128,453 $38,128 $63,872 ($131,921) ($29,931)
</TABLE>
See Notes to Financial Statements
-4-
<PAGE> 47
MEDCO HEALTH CORPORATION (FORMERLY MEDCO, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Period from Cumulative
July 1, 1994 Period from
(Date of July 1, 1994
Year ended Inception) to (Date of
June 30, June 30, Inception) to
1996 1995 June 30, 1996
---------- ------------- -------------
Operating activities
Net loss $ (89,266) $(42,665) $(131,931)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,509 3,325 13,834
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,922 (1,922) --
(Increase) in prepaid expenses (85,000) -- (85,000)
Increase in accrued expenses 1,425 1,625 3,050
(Decrease) Increase in income taxes payable (16) 421 405
---------- --------- ----------
Net cash used in operating activities (160,426) (39,216) (199,642)
---------- --------- ----------
Investing activities:
Organization costs (5,000) -- (5,000)
License fees (5,005) -- (5,005)
Deposits on equipment (32,000) -- (32,000)
Capital expenditures (20,957) (17,969) (38,926)
---------- --------- ----------
Net cash used in investing activities (62,962) (17,969) (80,931)
---------- --------- ----------
Financing activities:
Proceeds from stockholder loan 379,440 49,829 429,269
Repayment of stockholder loan (196,738) (1,125) (197,863)
Proceeds from issuance of common stock 92,000 2,000 94,000
Proceeds from additional paid-in-capital -- 8,000 8,000
---------- --------- ----------
Net cash provided by financing activities 274,702 58,704 333,406
---------- --------- ----------
Net increase in cash 51,314 1,519 52,833
Cash - beginning of period 1,519 -- --
---------- --------- ----------
Cash - end of period $ 52,833 $ 1,519 $ 52,833
========== ========= ==========
Supplemental Disclosure of Cash Flow Information:
Interest paid $ -- $ -- $ --
========== ========= ==========
Income taxes paid $ 421 $ -- $ 421
========== ========= ==========
</TABLE>
See Notes to Financial Statements
-5-
<PAGE> 48
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Accounting Policies
Nature of Business
Medco Health Corporation (formerly Medco, Inc.) (the "Company") was
incorporated under the laws of the State of New York on July 1, 1994.
The Company's principal business activities have been the marketing and
distribution of medical equipment, supplies and health care services.
Reorganization
On January 16, 1996 the sole shareholder of Medco, Inc. entered into an
acquisition agreement (the "Acquisition Agreement") with Williston Oil
Corporation for acquisition of all of the outstanding capital stock of
Medco, Inc. in exchange for a portion of Williston's class A common
stock and 100% of class B common stock. Subsequent to year end
Williston Oil Corporation executed a name change to Medco Health
Organization.
In July 1983, an involuntary Chapter 11 bankruptcy petition was filed
against Williston Oil Corporation by its creditors. In February 1992,
the court granted the creditors' petition and an order for relief under
Chapter 7 of the Bankruptcy Code was entered. Since 1992 the Company
has remained inactive, and has no pre or post bankruptcy liabilities.
Equipment
Equipment is recorded at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the assets
by using the straight-line method of depreciation.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or retired are eliminated from the accounts
and any gain or losses are reflected in earnings.
Per Share Data
The primary income (loss) per share was computed on the weighted number
of shares of common stock outstanding during the period. Common share
equivalents were not included as their inclusion would have been
anti-dilutive.
Income Taxes
The Company has a net operating loss carryover of approximately
$132,000 as of June 30, 1996, expiring in 2011.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. SFAS No. 109 requires the
establishment of a deferred tax asset for all deductible temporary
differences and operating loss carryforwards. Because of the
uncertainties discussed in Note 2, however, any deferred tax asset
established for utilization of the Company's tax loss carryforwards
would correspondingly require a valuation allowance of the same amount
pursuant to SFAS No. 109. Accordingly, no deferred tax asset is
reflected in these financial statements.
-6-
<PAGE> 49
Medco Health Corporation (formerly Medco, Inc.)
(A Delaware Stage Company)
Notes to Financial Statements
Note 2 - Capital Stock
The following is a summary of the various classes of capital stock at
June 30, 1996:
Common Stock
Class A - Par value $.001 per share:
authorized 100,000,000 shares;
36,878,453 issued and outstanding $36,878
Class B - Par value $.001 per share:
authorized 25,000,000 shares;
1,250,000 issued and outstanding $ 1,250
-------
$38,125
=======
Preferred Stock
Par value $.001 per share:
authorized 25,000 shares;
none issued and outstanding $
=======
The holders of Class A common stock possess the voting power of one
vote for each share of stock held. The holders of Class A common stock
do not possess any pre-emptive rights. Class A common stock holders
have the right to elect a minority of the directors of the Corporation.
The holders of Class B common stock possess the voting power of three
votes for each share of stock held and do not possess any pre-emptive
rights. Class B common stock holders have the right to elect the
majority of the directors of the Corporation. Class B common stock
holders will not be entitled to cash dividends only for a period of
three (3) years from the original date of issuance of that share. The
shares of Class B common stock shall be convertible at any time and
from time to time at the option of the holder into one share of Class A
common stock at the rate of one share of Class B common stock for one
share of Class A common stock.
Preferred stock may be issued, from time to time, in one or more
series, each of such series to have such designations, preferences, and
relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof as are stated and
expressed in the resolution or resolutions providing for the issue of
such series, adopted by the Board of Directors.
Note 3 - Going Concern
As shown in the accompanying financial statements, the Company incurred
a net cumulative loss of $131,931 during the period July 1, 1994 (date
of inception) to June 30, 1996, and as of that date, the Company's
total liabilities exceeded its total assets by $29,931.
-7-
<PAGE> 50
Medco Health Corporation (formerly Medco, Inc.)
(A Development Stage Company)
Note 3 - Going Concern (continued)
-------------------------
In January 1996, the Company, under a plan of reorganization was merged
into Williston Oil Corporation (Williston). Williston is a publicly traded
company. It is the intentions of management that the Company will obtain
additional capital from a public offering. These factors create an uncertainty
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Note 4 - Related Party Transactions
--------------------------
During the period July 1, 1994 (date of inception) to June 30, 1995,
the stockholder advanced the Company approximately $49,000. There are no stated
terms for repayment or interest on this advance.
Note 5 - Commitments and Contingencies
-----------------------------
The Company leases its facility under a operating lease which expires
December 31, 1996. Lease expense for the period July 1, 1994 (date of inception)
to June 30, 1995 amounted to $1,575 and $9,500 for the year ended June 30, 1996.
Effective September 1996 the Company signed a lease for new
facilities. The new lease will be for twenty years and will expire on August
30, 2016 with minimum annual lease expense of $96,000.
In addition the Company has entered into a contract for approximately
$422,000 to have the new facilities constructed to accommodate the operations
of the Company.
-8-
<PAGE> 1
AGREEMENT AND PLAN OF REORGANIZATION
WILLISTON OIL CORPORATION
ACQUISITION OF
MEDCO HEALTH CORPORATION
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OR REORGANIZATION ("AGREEMENT") made as of this 16th
day of January, 1996, by and among Williston Oil Corporation ("Williston"), a
Nevada corporation with offices at 246 Clifton Avenue, Clifton, New Jersey
07011, Sun Capital Corporation ("Sun Capital"), a corporation with offices at
246 Clifton Avenue, Clifton, New Jersey 07011, and Medco Health Corporation
("Medco"), a New York corporation, with offices at 221 60th Street, West New
York, New Jersey 07093, and Fahim Sahraie (the "Sole Shareholder"), who resides
at 33A Mountain Road, Otisville, NY 10963.
PREMISES
The Sole Shareholder owns all of the issued and outstanding capital stock
of Medco, Williston desires to acquire all of the issued and outstanding stock
of Medco, so as to make Medco a wholly-owned subsidiary of Williston, and the
Sole Shareholder desires to make a tax-free exchange of his shares in Medco for
shares of Williston's common stock, to be exchanged as set out herein with the
said Sole Shareholder.
PLAN OF REORGANIZATION
The Reorganization will comprise the acquisition by Williston of all the
outstanding capital stock of Medco from the Sole Shareholder in exchange solely
for a part of Williston's voting stock. The Sole Shareholder is and will, as of
the Closing (as hereinafter defined), be the owner of all of the issued and
outstanding capital stock of Medco. The exchange by the Sole Shareholder of the
capital stock of Medco for voting common stock of Williston shall be made upon
and subject to the terms and conditions of this Agreement hereinafter set forth
and is intended to qualify as a tax free reorganization pursuant to the
provisions of Section 368(a) (1) (B) of the Internal Revenue Code of 1954, as
amended.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and respective agreements
hereinafter set forth, the aforementioned parties hereby agree as follows:
1. EXCHANGE OF SHARES
Williston and the Sole Shareholder agree that all of the issued and
outstanding shares of common stock of Medco ("the Medco Stock") shall be
exchanged with Williston for the issuance by Williston to the Sole Shareholder
of twenty-four million (24,000,000) shares of the Class A common stock of
Williston, $.001 par value, per share which shall upon their issuance constitute
65.40482% of the issued and outstanding shares of the Class A common stock of
Williston (the "New Williston shares"); and
<PAGE> 3
exchanged for 1.25 million shares of Class B, which represents all the issued
and outstanding shares of the voting class.
2. CLOSING
2.1 TIME AND PLACE
The closing of the transactions contemplated by Section 1 hereof shall
take place at 10:00 A.M., on January 16, 1996, at the offices of Sun Capital
Corporation, 246 Clifton Avenue, Clifton, New Jersey 07011, or such other time
and place as the parties hereto shall agree.
2.2 ACTIONS TO BE TAKEN
A. At the Closing the Sole Shareholder shall assign, transfer, deliver and
set over to Williston all of the Medco Stock duly endorsed and with any required
documentary or stamp taxes affixed at the Sole Shareholder's expense so as to
make Williston the sole owner thereof, free and clear of all liens, claims and
encumbrances. At the closing, Williston shall issue and deliver to the Sole
Shareholder the twenty-four million (24,000,000) New Williston Share.
3. REPRESENTATIONS AND WARRANTIES OF THE SOLE
SHAREHOLDER AND MEDCO
The Sole Shareholder and Medco, hereby represent and warrant to Williston
and Sun Capital that, with respect to the Medco Stock and with respect to Medco,
effective this date, the representations listed below are true and correct, and
further covenant and agree that, as of the Closing Date, the following
representations will be true and correct.
3.1 ORGANIZATION AND STANDING
Medco is a corporation duly organized and validly existing and in good
standing under the laws of the State of New Jersey and has all requisite
corporate power and authority to own its property, to carry or its business as
now being conducted and to enter into and carry out the provisions of this
Agreement. Medco is duly licensed and qualified to do business with all Federal,
State and other governmental agencies as required to own its properties and to
conduct its business.
3.2 CAPITALIZATION
The duly authorized capital stock of Medco consists of 200 shares of
Common Stock, no par value, of which 200 shares are outstanding, validly issued,
fully paid and nonassessable and owned of record by the Sole Shareholder. There
are no other securities of Medco now outstanding or securities on which it is or
may be liable, or securities that are or may become required to be issued by
reason of any statutory requirements
<PAGE> 4
(including, without limitation, preemptive rights), or warrants, rights,
options, calls, commitments or other agreements presently outstanding.
3.3 CORPORATE RECORDS
A copy of Medco's certificate of incorporation, the amendments thereto,
and the By-Laws, all of which are certified by the Secretary of Medco as of a
recent date, are attached as Schedule 3.3 hereto and each of the foregoing will
be complete, true and correct on the Closing date. The minute books of Medco
contain complete and accurate records of all corporate actions taken by the Sole
Shareholder, there having never been any other shareholders, officers, or
directors of Medco. The stock book of Medco reflects accurately the foregoing
or, in the event that there have in the past been shareholders of Medco, other
than the Sole Shareholder, the names of all persons who at any time in the past
were record shareholders of Medco, the number of shares of capital stock held by
each such shareholders and the circumstances of any past transfers or
redemptions of any shares of Medco held prior to the date hereof by any person
other than the Sole Shareholder.
3.4 SUBSIDIARIES
Medco owns no securities of any other entity.
3.5 DEFAULT UNDER LOANS
Medco is not in default in the payment of principal or interest and has
fully complied with all other covenants, obligations and conditions of all
indebtedness outstanding. Medco has no outstanding mortgages, loan agreements or
indebtedness of any kind, nature or description except as set forth on Schedule
3.5 hereto.
3.6 NO AGREEMENT OR COURT ORDERS
Neither Medco not the Sole Shareholder is a party or subject to or bound
by any agreement or any judgment, order, writ, injunction or decree of any court
or governmental body which contained any provisions which could operate to
impair the carrying out of this Agreement or any of the transactions
contemplated hereby.
3.7 AUTHORITY
The execution, delivery and performance of this Agreement by Medco has
been duly and effectively authorized by all requisite corporate action and will
not violate any provision of the Certificate of Incorporation or By-Laws of
Medco or any provision of, or result in the acceleration of any obligation
under, any agreement, indenture, instrument, lease, contract or other
undertaking to which Medco is a party or by which it is bound.
<PAGE> 5
3.8 RECENT FINANCIAL STATEMENTS
Medco and the Sole Shareholder have delivered to Williston a Balance Sheet
of the Company as of December 31, 1995, (the "Recent Balance Sheet") and the
related Statement of Earnings for the fiscal year then ended (the "Recent Income
Statement"). Such Recent Balance Sheet and Recent Income statement being
hereinafter sometimes collectively called the "Recent financial Statement" have
been audited by an independent auditor or are in form which is auditable. The
Recent Financial Statements are true, correct and complete and accurately and
truly present the financial condition of Medco as at the date thereof and the
results of its operations for the period therein specified and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of the preceding period and consistently maintained
throughout the periods involved. without limiting the generality of the
foregoing, the Recent Financial Statements, either on the face thereof or in the
notes thereto, include, reflect or disclose all periods involved. Without
limiting the generality of the foregoing, the Recent Financial Statements
disclose all debts, liabilities, commitments and obligations of every nature,
whether absolute, accrued, contingent or otherwise of Medco as at the date
thereof, including all appropriate reserves for taxes and there are no other
debts of Medco, or claims or demands with respect thereof, relating to or
arising out of any act, transaction or circumstances which occurred or existed
on or before the date of the Recent Balance Sheet, due or payable, except as
included, reflected or disclosed on the Recent Balance Sheet. the Recent Income
Statement does not contain any item of special or non recurring income or other
income not earned in the ordinary course of business except as expressly
specified therein.
3.9 OTHER FINANCIAL STATEMENTS
Medco and the Sole Shareholder will deliver to Williston copies of all
other financial statements of Medco, prepared by or for Medco as of a date
subsequent to the date of the Recent Financial Statements, all of which will be
true, complete and correct and will have been prepared in accordance with sound
generally accepted accounting principles consistently followed throughout the
period indicated.
3.10 LIABILITIES AND OBLIGATIONS
All liabilities of Medco and all obligations of Medco with respect to
contracts and commitments which arose or arise after the date of Medco's Recent
Financial Statements and prior to the Closing were or will be incurred only in
the ordinary course of business. All liabilities for taxes with respect to the
period after the date of Medco's Recent Financial Statements and prior to the
Closing were or will be incurred in the ordinary course of business. Except to
the extent reflected, included, disclosed or reserved against in Medco's recent
Balance Sheet, or specifically otherwise set forth or on Schedule 3.10, Medco
has no present knowledge of, or present reason to believe in the existence of,
any liability of any kind or nature whether accrued, absolute, contingent or
otherwise, including without limitation, tax liabilities due to or to become
due, with respect to any
<PAGE> 6
period after the date of Medco's Recent Balance Sheet and prior to the date of
this Agreement.
3.11 ABSENCE OF CHANGES
Since December 31, 1995, the business of Medco has been operated and as of
the Closing will be operated only in the ordinary course of business, and
without limiting the generality of the foregoing, Medco has not:
(a) Suffered any materially adverse change in its financial condition,
prospects, operations or business.
(b) Increased the rate of compensation payable to any officer, employee or
agent, or granted or accrued any bonus, payment or other benefit due under any
pension, incentive, deferred compensation or similar plan to any such person.
(c) Incurred any labor dispute, work stoppage, sabotage, formal or
informal complaint of unfair labor practices, or had any representational
proceedings initiated, demand made for the recognition of any union as
bargaining agent or any other similar event or condition which has materially
and adversely affected its business.
(d) Incurred any obligation or liability (absolute or contingent) except
current liabilities under contracts entered into in the ordinary course of
business, none or which materially adversely affects the business or prospects
of Medco.
(e) Discharged or satisfied any lien, encumbrance, obligation or liability
(absolute or contingent) other than current liabilities and obligations shown on
the Recent Financial Statements or incurred since the date of the Recent
Financial statements in the ordinary course of business.
(f) Mortgaged, pledged, or subjected to lien, charge or other encumbrances
any of its assets
(g) Sold, transferred, mortgaged, pledged, or subjected to lien, charge or
other encumbrances any of its assets.
(h) Suffered any extraordinary losses or waived any rights of substantial
value.
(i) Made or declared any distribution or divided to its shareholders with
respect to its capital stock, or otherwise.
(j) Entered into any transaction not in the ordinary course of business
other than this Agreement.
<PAGE> 7
3.12 TAXES
All required federal, states, municipal and local tax returns of Medco
have been accurately prepared and duly and timely filed, and all federal, state
and local taxes required to be paid with respect to the periods covered by such
returns have been paid. All federal, state, municipal and local taxes required
to be paid with respect to any period prior to the date of Medco's Recent
Balance Sheet have been reflected and fully reserved for on Medco's Recent
Financial Statements. Medco has no tax deficiency outstanding, proposed or
assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax. Medco's federal income
tax returns have not been audited by the Internal Revenue Service.
3.13 TITLE TO PROPERTIES
Medco has good and marketable title to all the properties and assets its
purports to own, including, without limitation, those reflected in its books and
records and in its Recent Financial statements (except assets thereafter sold in
the ordinary course of business). Such properties and assets are not subject to
any mortgage, pledge, lien, charge, security interest, encumbrance, restriction,
lease, license, easement, charge, liability or claim of any nature whatsoever,
direct or indirect, whether accrued, absolute, contingent or otherwise, except
those which are included, reflected or expressly set forth in its Recent
Financial Statements. All of such properties and assets are in good operating
condition and repair and conform with all applicable ordinances, regulations and
other laws or requirements. all of Medco's fixtures and improvements to real
property, and its use of real property, conform in all material respects with
all applicable building, zoning and other laws, ordinances, orders and
regulations and applicable public and private covenants or restrictions.
3.14 TITLE TO STOCK
The Sole Shareholder is the sole owner of the Medco Stock, which stock
constitutes all of the capital stock of Medco, issued and outstanding, and all
of which stock will be delivered by him hereunder, free and clear of all liens,
pledges, encumbrances, charges, agreements or claims by or on the part of any
persons, firm or corporation, and the Sole Shareholder has good and marketable
title thereto with full right and unrestricted power to assign , transfer and
deliver such stock to Williston as provided in this Agreement. No right or
option to purchase any of the Medco Stock or any other securities of Medco
exists in favor of any person, firm or corporation.
3.15 AGREEMENTS
Medco is not in default under any contract, agreement or commitment. No
consent of third parties to any contract, agreement or commitment of Medco is
required for the execution or consummation of this Agreement.
<PAGE> 8
3.16 INDEBTEDNESS OF OFFICERS AND DIRECTORS
Medco is not indebted to the Sole Shareholder or to any other person who
is or has been an officer, director, or stockholder of Medco, or to any member
of the immediate family of any such person.
3.17 LITIGATION
There are no claims, legal actions, suits, arbitrations, governmental
investigations or other legal or administrative proceedings in progress or
pending or to the knowledge of Medco or the Sole Shareholder threatened against
or relating to Medco, its properties, assets or business and neither Medco nor
the Sole Shareholder knows or has reason to be aware of any facts which might
result in any such claim, action, suit, arbitration or other proceeding.
3.18 PENSION OR BENEFIT PLANS
Medco has no formal or informal written or unwritten pension,
profit-sharing, stock option, bonus plan or employee benefit or welfare plans of
any kind whatsoever, or agreements with any persons for the making or granting
of any pension, profit sharing or bonus payments or benefits or any stock
options.
3.19 RELATIONS AND LABOR
Medco is not a party to any collective bargaining agreements and there is
no union or collective bargaining agent for Medco's employees. Medco has no
employment grievances, disputes, or controversies and there are no threats of
strikes or work stoppage or demand for the recognition of any union or
bargaining agent for any employees.
3.20 PATENTS
Medco is not infringing upon or otherwise acting adversely to any
copyrights, trademarks, trademark rights, patents, patent rights or licenses
owned by any person or persons, and there is no such claim or action pending or
threatened, with respect thereto.
3.21 GOOD STANDING
Each License, permit, franchise and authorization of Medco from any
federal, state or local governmental or other regulatory authority is in good
standing and in full force and effect. Medco and the Sole Shareholder do not
know of any reason which could cause any of the above to be terminated. there
shall not be any termination or suspension after the Closing date of any or all
of the above arising out of, relating to, or caused by (I) any failure to file,
or any inadequacy in filing of, any documents, reports and disclosures required
under applicable rules and regulations of any federal, state or local law or
agency to be filed by Medco prior to the Closing Date, (ii) activities of
<PAGE> 9
Medco or its personnel prior to the Closing date, (iii) any other failure to
comply with applicable rules and regulations prior to the Closing date, or (iv)
this Agreement or the transactions contemplated by this Agreement.
3.22 COMPLIANCE WITH LAW
Medco has complied with all federal, state and local applicable laws,
rules, regulations, ordinances and orders applicable to its business or
properties including, without limitation, those of any agency or subdivision
thereof. Medco has duly filed all returns, reports, registration statements and
other documents and furnished all information required or requested by any
federal, state or local governmental agency having jurisdiction with respect to
Medco or its business or properties and all of the foregoing are true and
complete in all respects and all payments, fees and charges reflected therein as
due, or upon any deficiency notice with respect thereto, have been paid. No act
of Medco, including without limitations the issuance and transfers of the
capital stock of Medco, required registration under the Securities Act of 1933,
as amended.
3.23 CONTINUANCE OF BUSINESS
The businesses now conducted by Medco are substantially the same as the
respective businesses conducted by it throughout the periods covered by its
respective financial statements referred to in Section 3.8 and 3.9 hereof, and
there has been no material change during any of such periods in the type or
nature of its respective services, products, customers, suppliers or methods of
operation. Neither Medco nor the Sole Shareholder have not received any
notification and have no reason to believe that any persons or businesses with
whom Medco does business will cease doing business, or any portion of any
business, with Medco.
3.24 ADVERSE FACTS
No facts are known to Medco or the Sole Shareholder which would materially
and adversely affect future operations of Medco.
3.25 BROKERS
The Sole Shareholder and Medco's negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by the Sole
Shareholder directly with Williston and Sun Capital in such manner, without the
intervention of any third parties so as not to give rise to any valid claims
against any of the parties hereto for a brokerage commission or other like
payment.
3.26 No Misrepresentation or warranty by Medco or the Sole Shareholder in
this Agreement or any statement or certification furnished or to be furnished to
Williston pursuant to this Agreement or in connection with the transaction
contemplated hereby,
<PAGE> 10
contains or will contain any untrue statement of material facts or omits or will
omit a materiel fact necessary to make the statements contained herein true and
correct.
4. REPRESENTATION AND WARRANTIES BY WILLISTON AND
SUN CAPITAL
Williston and Sun Capital hereby represent and warrant as follows:
4.1 ORGANIZATION AND STANDING
Williston is a corporation duly organized and validly existing and in good
standing under the laws of the State of Nevada, and Williston has all requisite
corporate power and authority to enter into and carry out the provisions of this
Agreement. Williston owns no property and neither conducts nor carries on any
business.
4.2 CAPITALIZATION
The duly authorized capital stock of Williston consists of one hundred
fifty million (150,000,000) shares, par value $.001 per share, consisting of:
(i) one hundred million (100,000,000) shares of Class A Common Stock, of which a
total of twelve million, six hundred ninety-four thousand, five hundred
forty-three (12,694,543) shares are outstanding, validly issued, fully paid and
non assessable and owned or record by the Shareholders in those amounts
indicated on a shareholder list, as of a date not more than thirty (30) days
prior to the date of this Agreement, certified as accurate by the duly appointed
transfer agent of Williston, and annexed hereto as Exhibit 4.2 hereof; (ii)
Twenty-five million (25,000,000) shares of Class B Common Stock, of which one
million, two hundred fifty thousand (1,250,000) shares are validly issued, fully
paid and non assessable and owned or controlled by Sun Capital (each share of
Class B Common stock can be converted, at any time, at the option of the
shareholder to one share of Class A Common Stock); and (iii) twenty-five million
(25,000,000) shares of Preferred Stock, none of which are issued or outstanding.
Except as otherwise noted by Williston and/or Sun Capital on the said
shareholder list, neither Williston nor Sun Capital knows of any beneficial
interests in the said outstanding common stock other than the interests of
record set forth on such list or on Schedule 4.2 hereto. There are no other
securities of Williston now outstanding or securities on which it is or may
become liable, or securities on which it is or may become liable, or securities
that are or may become required to be issued by reason of any statutory
requirements (including, without limitation, preemptive right(s), or warrants,
rights, options, calls, commitments or other agreements presently outstanding.
4.3 CORPORATE RECORDS
A copy of Williston's certificate of incorporation, all amendments
thereto, and the By-Laws, all of which are certified by the Secretary of
Williston as of a recent date are attached as Schedule 4.3 hereto and each of
the foregoing will be complete, true and
<PAGE> 11
correct on the Closing date. The minute books of Williston contain complete and
accurate records of all meetings of its stockholders and directors and of all
corporate action taken by them to the extent available as at the present date.
The shareholder records of Williston reflect accurately the names of the record
shareholders of Williston and the number of shares of capital stock held by each
stockholder.
4.4 SUBSIDIARIES
Williston owns no security of any other entity.
4.5 INACTIVE CORPORATION
Williston (i) has been totally inactive since 1992, (ii) has no business
and no assets, (iii) emerged from Chapter 7 Bankruptcy proceedings in 1986; and
(iv) has post bankruptcy liabilities and federal tax liabilities not exceeding
$-0- in the aggregate.
4.6 TRADABLE STOCK
All or some of Williston's Class A Common Stock is presently traded or is
eligible to be traded publicly in the over-the-counter market in accordance with
applicable SEC rules and regulations.
4.7 SEC REPORTING OBLIGATIONS
The Class A Common Stock of Williston is registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "34 Act") and Williston is
therefore required to comply with the reporting requirements of Section 13 of
the said 34 Act, all of which reporting operations have, to the best knowledge
of Williston and Sun Capital, been fulfilled except that the Williston is
delinquent in the filing of the SEC of its annual reports on Form 10-K (or
10-KSB) for the fiscal years ended 1982 through 1996 and its quarterly reports
on Form 10-Q (or 10-QSB) for the fiscal quarters ended 1982 through 1996.
4.8 DEFAULT UNDER LOANS
Williston has no outstanding mortgages, loan agreements or indebtedness of
any kind, nature or description except as set forth on Exhibit 4.8 hereto.
4.9 NO AGREEMENTS OR COURT ORDERS
Williston is not a party to or subject to or bound by any agreement or any
judgment, order, writ, injunction or decree of any court or governmental body
which contains any provisions which could operate to impair the carrying out of
this Agreement or any of the transactions contemplated hereby.
<PAGE> 12
4.10 AUTHORITY
The execution, delivery and performance of this Agreement by Williston and
Sun Capital have been duly and effectively authorized by all requisite corporate
action and will not violate any provision of the Certificate of Incorporation or
By-Laws of Williston or any provision of, or result in the acceleration of any
obligation under, any agreement, indenture, instrument, lease, contract or other
undertaking to which Williston is a party or by which it is bound.
4.11 AUDITED FINANCIAL STATEMENTS
Prior to the Closing Date, Williston will deliver to Medco and the Sole
Shareholder audited financial statements (the "Williston Financial Statements")
through its last fiscal year and any subsequent interim periods, as the SEC
shall require in order to bring Williston into full compliance with its
reporting requirements under the "34 Act", which financial statements will show
that Williston has no assets and has post bankruptcy liabilities and federal tax
liabilities not exceeding $-0- in the aggregate.
Financial Statements will be true, correct and complete and will
accurately and truly present the financial condition of Williston as at the date
thereof and the results of its operations for the period therein specified and
will be prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding period and consistently
maintained throughout the periods involved. Without limiting the generality of
the foregoing, the Williston Financial statements will disclose all debts,
liabilities, commitments and obligations of every nature, whether absolute,
accrued, contingent or otherwise of Williston as at the date thereof, and there
will be no other debts, claims, or demands relating to or arising out of any
act, transaction or circumstances which will have occurred or existed on or
before the date of the Williston Financial Statements.
4.12 AGREEMENTS
Williston is not a party to any contract, agreement or commitment and no
consent of any third party is required for the execution or consummation of this
Agreement.
4.13 COMPETING INTERESTS
None of Williston's principal shareholders (owning 5% or more of its
issued and outstanding common stock), officers or directors, own, directly or
indirectly, a material interest in any corporation, partnership, firm or
association which is a competitor or potential competitor of Medco.
4.14 INDEBTEDNESS OF OFFICERS AND DIRECTORS
<PAGE> 13
Williston is not indebted to any person who is or has been an officer,
director or stockholder of Williston or Sun Capital, or to any member of the
immediate family of any such person.
4.15 LITIGATION
There are no claims, legal actions, suits, arbitrations, governmental
investigations or other legal or administrative proceedings in progress or
pending or to the knowledge of Williston or Sun Capital threatened against or
relating to Williston, its assets of activities and Williston and Sun Capital
neither knows nor has any reason to be aware of any facts which might result in
any such claim, action, suit, arbitration or other proceeding.
4.16 ADVERSE FACTS
No facts are known to either Williston or Sun Capital which would
materially and adversely affect future activities of Williston.
4.17 BROKERS
Williston's and Sun Capital's negotiations relative to this Agreement and
the transaction contemplated hereby have been carried on by it directly with
Medco and the Sole shareholder in such manner, without the intervention of any
third parties, as not to give rise to any valid claims against any of the
parties hereto for a brokerage commission or other like payments.
4.18 CONFIDENTIAL INFORMATION
Neither Williston nor Sun Capital shall prior to or after the Closing
divulge to third parties any confidential information received from Medco or the
Sole Shareholder.
CONDUCT OF MEDCO'S BUSINESS PRIOR TO THE CLOSING
5.1 NEGATIVE COVENANTS
Medco and the Sole Shareholder agree that between the date hereof and the
Closing, and except as permitted by the prior written consent of Williston,
Medco will not take, or permit to be taken, any of the following actions:
(a) Alter or amend its Certificate of Incorporation or By-Laws.
(b) Issue or become obligated to issue any securities of any kind
including without limitation any notes or capital stock.
(c) Enter into any option, call or commitment with respect to its stock.
<PAGE> 14
(d) Declare or pay any dividend or other distribution with respect to its
capital stock.
(e) Incur any liability or obligation, except current liabilities in the
ordinary course of business and obligations under contracts entered into in the
ordinary course of business.
(f) Pay or accrue any salaries, fees, commissions or other compensation to
its officers or directors at a rate in excess of the rate of compensation in
effect as to such individual, respectively, on the date hereof.
(g) Enter into any contract or commitment which is not the ordinary course
of business of Medco or which does, or could be expected to, materially
adversely affect Medco's business.
(h) Borrow funds or incur any indebtedness of any nature except in the
ordinary court of business.
(i) Change its banking and safe deposit arrangements
(j) Accept, amend or grant any license, patent or trademark, or settle the
infringement of any trademark or patent.
(k) Compromise or settle any litigation, proceeding or governmental
investigation against it or its properties or business, except settlements made
by insurers.
5.2 AFFIRMATIVE COVENANTS
Medco and the Sole Shareholder agree that between the date hereof and the
Closing, Medco will:
(a) Conduct its business only in the ordinary course and at the place or
places said business is conducted.
(b) Maintain in force the insurance policies presently in force or
insurance policies providing substantially the same coverage, under which Medco
is the insured or the beneficiary.
(c) Preserve its business organization taken as a whole substantially
intact, keep available the services of its present officers and employees and
preserve the good will of its suppliers, customers and others having business
relations with any of them.
(d) Afford to Williston and its counsel, accountants, and other
representatives full access during normal business hours throughout the period
prior to the Closing to all
<PAGE> 15
of Medco's properties, books, contracts, commitments and records, and during
said period furnish all information which Williston may reasonably request.
6. CONDUCT OF WILLISTON'S CORPORATE AFFAIRS PRIOR TO THE CLOSING
6.1 NEGATIVE COVENANTS
Williston agrees that between the date hereof and the Closing, and except
as permitted by the prior written consent of Medco and the Sole Shareholder,
Williston will not take, or permit to be taken, any of the following actions:
(a) Initiate or engage in any business activities of any kind whatsoever.
(b) Alter or amend its Certificate of Incorporation or By-Laws.
(c) Issue or become obligated to issue and securities of any kind
including without limitation any notes or capital stock.
(d) Enter into any option, call or commitment with respect to its capital
stock.
(e) Declare or pay any dividend or other distribution with respect to its
capital stock.
(f) Incur any liability or obligation, except current liabilities in the
ordinary course of its activities.
(g) Pay or accrue any salaries, fees, commissions or other compensation to
its officers or directors.
(h) Make any profit sharing, incentive, pension or retirement payment.
(i) Enter into any contract of commitment.
(j) Borrow funds or incur any indebtedness.
(k) Compromise or settle any litigation, proceeding or governmental
investigation against it or its properties or business.
6.2 AFFIRMATIVE COVENANTS
Williston agrees that between the date hereof and the Closing, Williston
will:
(a) Preserve its organizations taken as a whole substantially intact, keep
available the services of its present officers and personnel.
<PAGE> 16
(b) Afford to Medco and the Sole Shareholder and their counsel,
accountants, and other representatives full access during normal business hours
throughout the period prior to the Closing to all of Williston's properties,
books, contracts, commitments and records, and during said period furnish all
information which Medco and the Sole Shareholder may reasonably request.
7. REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF THE SOLE SHAREHOLDER WITH RESPECT TO
THE NEW WILLISTON SHARES
7.1 RESTRICTIONS ON TRANSFERABILITY
The Sole Shareholder hereby agrees and acknowledges that the New Williston
Shares to be issued and delivered to him pursuant to the terms of this
Agreement, will not be registered under the Securities Act of 1933, as amended
(the "'33 Act"), on the basis of the Statutory exemption provided under in
Section 4(2) thereof and on the representations made by him in this article 7,
as follows:
The Sole Shareholder hereby represents to Williston that he will acquire
the New Williston Shares for investment for his own account and not with a view
to the resale or distribution thereof, and that he does not intend to divide his
participation with others or to resell or otherwise dispose of all or any part
of the New Williston Shares unless and until they are subsequently registered
under the Act, or an exemption from such registration is available. In making
these representations, the sole Shareholder understands that, in the view of the
Securities and Exchange Commission (The "Commission"), the statutory exemption
referred to above would not be available, if notwithstanding his
representations, he had in mind merely acquiring the New Williston shares for
resale upon the occurrence or nonoccurrence of some pre-determined event.
The Sole Shareholder hereby accepts the condition that before any transfer
of any of the New Williston Shares may be made by him, written approval must
first be obtained from Williston's counsel. The basis of such approval, which
shall not be unreasonably withheld, shall be compliance with requirements of the
federal and state statutes regulating securities. The Sole Shareholder
understands that a legend to this effect will be placed on the certificate or
certificates representing the New Williston Shares, and stop-transfer
instructions to Williston's transfer agent will be issued.
The Sole Shareholder understands that the New Williston Shares must be
held indefinitely until registered under the Act, or an exemption from such
registration is available. In the event Rule 144 of the Commission hereafter
becomes applicable to the New Williston Shares, the sole Shareholder understands
that any routine sales of the New Williston Shares made thereunder can be made
only in limited amounts in accordance with the terms and conditions of that
Rule. The Sole Shareholder understands that Williston has no obligation to
register the New Williston Shares.
<PAGE> 17
8. CONDITIONS PRECEDENT TO WILLISTON'S OBLIGATIONS
Williston's obligations under this Agreement are subject to the
fulfillment prior to the Closing of each of the following conditions:
8.1 Medco's and the Sole Shareholder's representations and warranties
contained in this Agreement and in any certificate or document delivered to
Williston pursuant hereto shall be deemed to have been made again at and as of
the time of the Closing and shall then be true in all materiel respect; Medco
and the Sole Shareholder shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
them prior to or at the Closing.
8.2 Neither Medco nor the Sole Shareholder shall be a defendant in any
suit or proceeding or governmental investigation pending or threatened against
Medco or the Sole Shareholder which would materially affect the carrying out of
this Agreement.
8.3 Medco shall have been furnished with an opinion dated the Closing date
of counsel to Medco and the Sole Shareholder to the effect that:
(a) Medco is a corporation duly organized, validly existing and in good
standing under the laws of the state of New York.
(b) The authorized and issued capital stock of Medco consists of the
number of shares stated in Section 3.2 of this Agreement and the sole record and
beneficial owner of all such stock is the Sole Shareholder.
(c) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and this Agreement has been
duly executed and delivered by Medco and constitutes the valid and binding
obligation of Medco in accordance with its terms.
(d) To the best of counsel's knowledge, there are no agreements,
judgments, orders, writs, injunctions or decrees of any court or governmental
body which would prevent the transactions contemplated by this Agreement.
(e) Medco's stock to be delivered to Williston by the Sole Shareholder
under this Agreement will, when so delivered, be validly issued and outstanding
and fully paid and non-assessable.
(f) Except as may be specified by said counsel, he does not know of any
litigation, proceeding or governmental investigation pending or threatened
against or relating to Medco or its properties or businesses, or the
transactions contemplated by this Agreement.
<PAGE> 18
8.4 Medco has not incurred any material adverse change in its assets,
liabilities, financial condition, business, prospects or operations since the
execution of this Agreement.
8.5 Medco shall deliver to Williston a certified copy of the resolution of
its Board of Directors approving this Agreement and the transaction contemplated
hereby.
8.6 All documents required to be delivered to Williston at or prior to the
Closing shall have been so delivered.
9. CONDITIONS PRECEDENT TO THE SOLE SHAREHOLDER
AND MEDCO'S OBLIGATIONS
The Sole Shareholder's and Medco's obligations under this Agreement are
subject to the fulfillment prior to the Closing of each of the following
conditions:
9.1 Williston's and Sun Capital's representation and warranties contained
in this Agreement and in any certificate of document delivered to the Sole
Shareholder and Medco pursuant hereto shall be deemed to have been made again at
and as of the time of the Closing and shall then be true in all material
respects; Williston shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing; and the Sole Shareholder and Medco shall have been
furnished with a certificate of Williston dated the Closing date, certifying in
such detail as the Sole shareholder and Medco may reasonably request to the
fulfillment of the foregoing conditions.
9.2 Williston shall not be a defendant in any suit or proceeding or
governmental investigation pending or threatened against Williston which would
materially affect the carrying out of this Agreement.
9.3 The Sole Shareholder and Medco shall have been furnished with an
opinion dated the Closing date of counsel for Williston, to the effect that:
(a) Williston is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada.
(b) The authorized and issued capital stock of Williston consists of the
number of shares stated in Section 4.2 of this Agreement.
(c) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and this Agreement has been
duly executed and delivered by Williston and constitutes the valid and binding
obligation of Williston in accordance with its terms.
<PAGE> 19
(d) To the best of counsel's knowledge, there are no agreements,
judgments, order, writs, injunctions or decrees of any court or governmental
body which would prevent the transactions contemplated by this Agreement.
(e) The New Williston Shares to be delivered to the Sole Shareholder by
Williston under this Agreement will, when so delivered, be validly issued and
outstanding and fully paid and non-assessable.
(f) Except as may be specified by said counsel, they do not know of any
litigation, proceeding or governmental investigation pending or threatened
against or relating to Williston or its activities or assets, or the
transactions contemplated by this Agreement.
9.4 Williston shall not have incurred any adverse change in its assets,
liabilities, financial condition, activities, prospects or operations.
9.5 Williston shall deliver to the Sole Shareholder and Medco a certified
copy of the resolutions of its Board of Directors approving this Agreement and
the transactions contemplated hereby.
9.6 All documents required to be delivered to the Sole Shareholder and
Medco at or prior to the Closing shall have been so delivered.
10. MISCELLANEOUS
10.1 SURVIVAL
All representations, warranties, covenants and agreements made by any of
the parties hereto in this Agreement or in any certificate or instrument
delivered by or on behalf of any of them pursuant hereto shall survive the
execution and delivery of this Agreement, any investigation that may have been
made or may be made at any time by or on behalf of any party hereto, and the
consummation of this Agreement.
10.2 PARTIES IN INTEREST
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by each corporate party hereto and its successors and each
individual party hereto and his heirs, personal representatives and successors.
This Agreement shall not be assigned by any party hereto (except by operation of
law) and any such prohibited assignment shall be null and void.
10.3 EXPENSES AND REORGANIZATION
Each of the parties to this Agreement shall bear their respective expenses
relating to this Agreement.
<PAGE> 20
10.4 GOVERNING LAW
This Agreement shall be governed by and construed and enforced under the
laws of the state of New Jersey.
10.5 ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties hereto
with respect to the subject mater herein contained and no amendment,
modification or termination of this Agreement shall be valid unless expressed in
a written instrument executed by the parties hereto or their respective
successors.
10.6 EXHIBITS
All Exhibits and Schedules to this Agreement or other certificates or
documents delivered pursuant to this Agreement shall be deemed to be a part of
this Agreement, whether or not required to be annexed hereto, and shall be
initialed by the party required to deliver such Exhibit, certificate or
document.
10.7 WAIVER
No waiver or any provision of, or any breach or default of this Agreement,
shall be considered valid unless in writing and signed by the party giving such
waiver and no waiver shall be deemed a waiver of any other provisions or any
subsequent breach or default of a similar nature.
10.8 FURTHER ASSURANCES
Each party to this Agreement will, at the request of the other, execute
and deliver to such other party all further endorsements and documents as such
other party may reasonably request in order to consummate and perfect the
transactions contemplated by this Agreement.
10.9 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of which taken together shall constitute
one and the same instrument.
10.10 HEADINGS
Section headings are contained on this Agreement only for purposes of
convenience of reference and shall not affect the interpretation of this
Agreement or modify any of its terms or provisions.
<PAGE> 21
10.11 NOTICES
Any notice or other communication permitted or required to be given
hereunder shall be in writing and shall be deemed to have been given upon
receipt by first class registered mail, certified mail, recognized over-night
courier, in all class and written confirmation of receipt required, addresses to
the parties as set forth below:
TO: WILLISTON OIL
246 CLIFTON AVENUE
CLIFTON, NJ 07011
TO: SUN CAPITAL CORPORATION
246 CLIFTON AVENUE
CLIFTON, NJ 07011
TO: FAHIM SHARAIE
532 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NJ
TO: MEDCO HEALTH CORPORATION
532 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NJ
EACH OF THE FOREGOING SHALL BE ENTITLED TO SPECIFY A DIFFERENT ADDRESS BY
GIVING NOTICE AS AFORESAID TO THE OTHER PARTIES.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE
DULY EXECUTED AS OF THE DAY AND YEAR FIRST WRITTEN ABOVE.
WILLISTON CORPORATION
BY:___________________________
LORENZO DAMIANO, JR., PRESIDENT
SUN CAPITAL CORPORATION
BY:___________________________
JOHN W. SURGENT, PRESIDENT
<PAGE> 22
MEDCO INCORPORATED
BY____________________________
FAHIM SHARAIE, PRESIDENT
______________________________
FAHIM SHARAIE, SOLE SHAREHOLDER
OF MEDCO INCORPORATED
<PAGE> 1
LEASE
-----
LANDLORD: FEROLIE REALTY ASSOCIATES, L.L.C.
TENANT: MEDCO HEALTH CORP.
PREMISES: 532 Sylvan Avenue
Englewood Cliffs, NJ 07632
TERM: Sept. 1, 1996 to Aug. 30, 2016
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C> <C>
1 DEMISE, PREMISES, TERM, RENTS, PARKING 1
2 USE 2
3 TENANT TAKES DEMISED PREMISES "AS IS" 2
4 LANDLORD FURNISHES NO SERVICES; NET RENT 2
5 NO WASTE 3
6 SUBORDINATION, NOTICE TO MORTGAGEES 3
7 QUIET ENJOYMENT 4
8 ASSIGNMENT, SUBELETTING, MORTGAGES 4
9 COMPLIANCE WITH LAWS AND REQUIREMENTS OF GOVERNMENTAL
AUTHORITIES 4
10 INSURANCE 5
11 ALTERATIONS 7
12 PARKING 7
13 MAINTENANCE AND REPAIRS 7
14 ACCESS 8
15 NOTICE OF ACCIDENTS 8
16 TENANT'S INDEMNIFICATION OF LANDLORD 8
17 DESTRUCTION OR DAMAGE 8
18 CONDEMNATION 9
19 LIENS 9
20 SURRENDER 9
21 TENANT'S DEFAULT OR BANKRUPTCY 10
22 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS 11
23 BROKERAGE 11
24 NOTICES 12
25 FLOOR LOAD 12
26 MISCELLANEOUS 12
27 ARBITRATION 13
28 SIGNS 14
29 PURCHASE OF DEMISED PREMISES 14
30 TAX APPEAL 14
31 ACKNOWLEDGMENTS 16
EXHIBIT A - LEGAL DESCRIPTION OF DEMISED PREMISES
</TABLE>
<PAGE> 3
LEASE, dated as of July 1, 1996, by FEROLIE REALTY ASSOCIATES, L.L.C.,
a New Jersey limited liability company, with offices at c/o The Ferolie Group,
2 Van Riper Road, Montvale, New Jersey 07645 ("Landlord") and MEDCO HEALTH
CORP., a Nevada corporation, with offices at 221 60th Street, West New York,
New Jersey 07093 ("Tenant").
WITNESSETH:
ARTICLE 1
DEMISE, PREMISES, TERM, RENTS, PARKING
1.01. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord, upon the terms hereinafter set forth, the entire office building
("Building") located at 532 Sylvan Avenue, Englewood Cliffs, New Jersey 07632,
together with all fixtures and equipment now or hereafter attached thereto
(except items constituting Tenant's property), together with the underlying
land and appurtenant areas ("Land") (collectively the "Demised (Premises.").
1.02. The Demised Premises, a description of which is set forth in
Exhibit A annexed hereto, are shown as Block 00617, Lot 00015, on the Official
Tax Map of Englewood Cliffs, New Jersey. The Building has a rentable area of
8,000 square feet.
1.03. The term of the Lease ("Term") shall commence July 1, 1996
("Commencement Date") and shall continue (unless sooner terminated pursuant
hereto or by law) until June 30, 2016 ("Expiration Date").
1.04. Tenant shall pay to Landlord during the Term:
(a) fixed rent ("Net Rent") at the annual rate of $96,000.00, for
Lease Years 1 through 5 (i.e., from July 1996 through June 2001), payable in
monthly installments of $8,000.00. The annual Net Rent for each of Lease Years
6 through 10 (i.e., from July 2001 through June 2006), also payable in monthly
installments, shall be the sum of $96,000.00 multiplied by a factor the
numerator of which is the CPI for the month of June 2001 and the denominator of
which is the CPI for the month of June 1996; provided, however, that in no
event shall the said factor be less than 1.00. The annual Net Rent for each of
Lease Years 11 through 15 (i.e., from July 2006 through June 2011), also
payable in monthly installments, shall be the sum of $96,000.00 multiplied by a
factor the numerator of which is the CPI for the month of June 2006 and the
denominator of which is the CPI for the month of June 1996; provided, however,
that in no event shall the said factor be less than 1.00. The annual Net Rent
for each of Lease Years 16 through 20 (i.e., from July 2011 through the
Expiration Date), also payable in monthly installments, shall be the sum of
$96,000.00 multiplied by a factor the numerator of which is the CPI for the
month of June 2011 and the denominator of which is the CPI for the month of
June 1996; provided, however, that in no event shall the said factor be less
than 1.00. As used herein, "CPI" shall mean the Consumer Price Index (All
Urban Consumers - 1982-4-100) for the New York-Northeastern New Jersey Area,
issued by the United States Department of Labor, Bureau of Labor Statistics. If
the CPI should be discontinued, there shall be substituted as the CPI the most
nearly comparable index published by any other governmental agency, or if no
such index shall be available, then a comparable index published by a major
bank or other financial institution or by university or recognized financial
publication. Such monthly installments are payable in advance (without notice,
deduction or setoff) on the first day of each month during the Term; and
1
<PAGE> 4
(b) additional rent ("Additional Rent") consisting of Landlord's
costs of repairs to the Demised Premises, and any other reasonable costs
incurred by Landlord in connection with the Demised Premises (except as
otherwise provided in Section 4.01), as well as all costs and expenses
relating to the demised Premises which are the obligation of Tenant.
Additional Rent payable to Landlord shall be paid by Tenant on written
demand. For default of Tenant in payment of Additional Rent, Landlord
shall have the same rights and remedies as for a default in the payment
of Net Rent.
All Net Rent and Additional Rent payable to Landlord shall be
paid, in lawful money of the United States of America, to Landlord at its
office, or at such other place as Landlord may designate by written notice to
Tenant. Rent for any partial month shall be prorated.
1.05. Provided Tenant is not in default under the Lease, Tenant shall
be entitled to a Net Rent abatement in the amount of $8,000.00 per month up to
an aggregate total amount of $32,000.00, said concession to be applied against
the monthly installments of Net Rent due under this Lease for the first four
(4) months of the Term.
ARTICLE 2
USE
2.01. Tenant shall use and occupy the Demised Premises only for
radiological diagnostic facilities, a clinical laboratory and ancillary
offices. Before the Commencement Date, Tenant shall obtain and furnish to
Landlord a certificate of occupancy for the Demised Premises permitting the
foregoing use.
ARTICLE 3
TENANT TAKES DEMISED PREMISES "AS IS"
3.01. Except for latent structural defects, Tenant shall accept the
Demised Premises from Landlord in their condition "as is," with no obligation
on the part of Landlord to do any fit-up work, alteration or renovation.
Except as otherwise provided herein, Landlord makes no
representation or warranty, express or implied, regarding the condition or
state of repair of the Demised Premises and shall, under no circumstances, be
liable for any patent or other structural defects in the Demised Premises or
the improvements thereon or appurtenances thereto. Tenant has made a physical
inspection of the Demised Premises and is satisfied with the condition thereof.
Tenant assumes full and complete responsibility for the condition of the
Demised Premises, subject only to Landlord's obligation with respect to
structural repairs as provided in Section 13.01.
ARTICLE 4
LANDLORD FURNISHES NO SERVICES; NET RENT
4.01. Except for Structural Repairs, Landlord will furnish no services,
supply no equipment or materials, and make no improvements of any kind in or to
the Demised Premises or any fixtures, appurtenances or equipment therein. All
required services, equipment removal and electricity) shall be procured by
Tenant at its sole cost. Tenant shall make the necessary arrangements directly
with the utilities and pay all charges incurred. Landlord represents that all
utilities are in place, connected and ready for use.
It is the intention of the parties that the rents stipulated in
section 1.04(a) shall be net to Landlord and that Tenant shall bear all costs
and expenses of every kind and nature relating to the Land and Building,
including, without limitation, real estate taxes for the Demised Premises,
water and sewer charges, license and permit fees required for Tenant's use of
the Demised Premises, and
<PAGE> 5
other governmental charges of every kind, imposed upon or relating to the
Demised Premises, any part thereof, the use thereof, or any income of Tenant
derived therefrom (collectively, "Impositions"). Tenant shall not be
responsible for interest and principal payments on any existing or future
mortgages placed by Landlord. Impositions shall be paid prior to the date
penalties, interest or costs may be incurred for non-payment, but any
penalties, interest or costs incurred shall be paid by Tenant.
Landlord shall cause bills for Impositions to be issued
directly to Tenant, who shall pay same on or before their due dates, and,
within ten (10) days after each due date, Tenant shall submit a photocopy of
each receipted bill to Landlord.
ARTICLE 5
NO WASTE
5.01. Tenant shall not suffer any waste or damage, disfigurement or
injury to the Demised Premises.
ARTICLE 6
SUBORDINATION, NOTICE TO MORTGAGEES
6.01. This Lease shall be subject and subordinate to any mortgage or
mortgages now or hereafter affecting the Demised Premises ("Superior
Mortgages"), and to all renewals, replacements, extensions or consolidations
thereof, provided such mortgage or mortgages contain a provision, or the holder
of such mortgage or mortgages ("Superior Mortgages") agrees, in substance,
that, so long as Tenant shall not be in default in the performance of its
obligations hereunder in such manner and after such notice as would entitle
Landlord to terminate this Lease, the Superior Mortgagee shall not disturb the
possession of Tenant, terminate or attempt to terminate this Lease or join
Tenant as a party defendant in any action brought for the foreclosure of such
mortgage or mortgages or the enforcement of the mortgage debt. The
non-disturbance form prescribed by the Superior Mortgagee shall be executed by
the parties hereto, provided it contains, in substance, the foregoing
provisions.
6.02. In the event of any act or omission of Landlord by reason of
which Tenant claims the right to terminate the Lease or the existence of a
partial or total eviction, Tenant shall not attempt to exercise such claimed
right of termination or to act upon such claim of eviction until
(a) it has given notice of such act or omission to all Superior
Mortgages whose names and addresses have been furnished to Tenant, and
(b) it has permitted such Superior Mortgagee a reasonable period
within which to remedy such act or omission, which reasonable period
shall in no event exceed thirty (30) days and they have not done so (or
have not commenced to do so, if such act or omission cannot be remedied
within such period, and proceeded diligently to remedy same)
6.03. If any Superior Mortgagee (or other person claiming through or
under a Superior Mortgagee) succeeds to Landlord's interest in the lease,
Tenant shall attorn to such successor ("Successor Landlord") if requested by
the latter, and shall promptly execute and deliver any reasonably requested
instrument confirming such attornment. The Successor Landlord, however, shall
not be:
(a) liable for any previous act or omission of Landlord under the
lease;
(b) subject to any offset or counterclaim which theretofore shall
have accrued to Tenant against Landlord; or
(c) bound by any previous modification of the Lease not expressly
provided for in the Lease, or by any prepayment of more than one month's
Fixed
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Rent, unless such modification or prepayment shall have been expressly
approved in writing by the Superior Mortgagee.
6.04. If a Superior Mortgagee or a prospective mortgagee of the Land
and/or the Building shall require minor modifications of the Lease as a
condition precedent to granting a mortgage or an extension of a Superior
Mortgage, Tenant shall, if requested in writing by Landlord, agree to such
modification, provided they neither materially impair or restrict Tenant's
rights or interests nor materially expand Tenant's obligations hereunder. Any
dispute as to such a request for modification shall be determined by
arbitration as hereinafter provided.
ARTICLE 7
QUIET ENJOYMENT
7.01. So long as Tenant performs its obligations under the Lease, it
shall, subject to the provisions of the Lease, quietly have and enjoy the
Demised Premises during the Term. Landlord represents and warrants that it is
the owner in fee of the Demised Premises. Title to the Demised Premises is
subject to such exceptions and state of facts as may exist, but Landlord
represents that it has no knowledge or information that would reasonably
warrant the belief that such exceptions and state of facts would jeopardize
Tenant's right of quiet enjoyment.
ARTICLE 8
ASSIGNMENT, SUBLETTING, MORTGAGES
8.01. Tenant shall not assign the Lease, sublet any portion of the
Demised Premises, or mortgage or otherwise encumber Tenant's leasehold
interest, without Landlord's prior written consent, which consent shall not be
unreasonably withheld.
8.02. In the event of a permitted assignment, Landlord may collect
Fixed Rent and Additional Rent from the assignee. In the event of a permitted
sublease, Landlord may, if Tenant defaults hereunder, collect Fixed Rent and
Additional Rent from the subtenant. In either such event, Landlord may apply
any amounts so collected to the Fixed Rent and Additional Rent without thereby
waiving any provisions hereof or releasing Tenant from liability for the
performance of its obligations hereunder. Landlord and any assignee or
sublessee may agree to the modification of the Lease without thereby releasing
Tenant from its obligations hereunder, provided that Tenant's liability or
obligations may not be enlarged or expanded by virtue of any such modification.
Tenant shall pay or assign to Landlord an amount equal to
one-half (1/2) of the excess of (i) the total average monthly consideration
Tenant receives from any assignee or sublessee under the assignment or sublease
for the Demised Premises, or any portion thereof, net of any expenses directly
relating to the Premises, over (ii) the monthly consideration Landlord receives
from Tenant under this Lease. The amount calculated in the prior sentence shall
be part of and paid with each monthly rent payment. In no event shall Landlord
receive an amount less than the Net Rent and Additional Rent Tenant is required
to pay under this Lease.
ARTICLE 9
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF GOVERNMENTAL AUTHORITIES
9.01. Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or ordinance or of any requirement of a
governmental or quasi-governmental authority, including the New Jersey Fire
Insurance Rating Organization or any similar body, and Tenant shall, at its
expense, comply with all laws and requirements of every kind applicable to its
use of the Demised Premises.
Without limitation of any of its obligations under the lease,
Tenant shall neither do nor permit anything to be done in or about the Demised
Premises which would constitute a violation of any environmental laws, codes,
ordinances or rules or regulations of any governmental agency or authority
having jurisdiction,
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and Tenant shall not dispose of any biologically or chemically active
substances, except in an environmentally safe manner through methods which have
been approved by and meet all of the applicable standards of the federal
Environmental Protection Agency and any other federal, state or local agency
with authority to enforce environmental laws, codes, ordinances, rules or
regulations. Tenant shall not (negligently or otherwise) cause or permit the
escape or release of any biologically or chemically active or other hazardous or
toxic substances or materials. Without limitation, hazardous substances and
materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., and all local laws, ordinances, rules and regulations. If
any lender or governmental agency shall ever require testing to ascertain
whether or not there has been a release of hazardous substances, then (unless
the test discloses that there has not been a release of hazardous substances, or
it is established that the release of hazardous substances, if present, was not
caused or permitted by Tenant) the reasonable costs thereof shall be reimbursed
by Tenant to Landlord, upon written demand, as Additional Rent, if such
requirement applies to the Demised Premises. In addition, Tenant shall execute
affidavits, representations and the like, from time to time, at Landlord's
written request, concerning Tenant's best knowledge and belief regarding the
presence of hazardous and toxic substances or materials on the Demised Premises.
At all events, Tenant shall indemnify and hold Landlord harmless from and
against all liability, damages, costs, claims, judgments and expenses arising
out of or relating to the presence, use or release of hazardous or toxic
materials on the Demised Premises while Tenant is in possession, or elsewhere if
caused by Tenant shall have no responsibility for any such condition that is
caused solely by Landlord or a third party or parties unrelated to Tenant. The
provisions of this Section 9.01 shall survive the expiration or earlier
termination of the Term.
9.02. Tenant may, at its expense (and, if necessary, in the name of,
but without expense to, Landlord), contest, by appropriate proceedings
prosecuted diligently and in good faith, the validity or applicability of any
such law or requirement with which Tenant is required to comply and may defer
compliance pending the determination of such contest, provided that:
(a) Landlord shall not thereby be subjected to criminal penalty
or prosecution;
(b) the Demised Premises, Land and/or Building shall not
thereby be subjected to forfeiture;
(c) Tenant obtains the written consent, if required, of
Superior Mortgagees; and
(d) Tenant keeps Landlord currently informed of the status of
such proceedings.
Landlord shall, if requested by Tenant and at Tenant's expense,
cooperate with Tenant in any such proceeding.
9.03. Tenant hereby indemnifies and holds harmless Landlord and its
employees, successors, assignees, agents, contractors, subcontractors,
licensees, affiliates, lessees, mortgagees, trustees, partners, principals,
members and invitees (collectively the ""Tenant Indemnified Parties"") from and
against any and all liability, damages, costs, claims, judgments and expenses
arising out or relating to the presence, use or release of hazardous or toxic
materials on the Demised Premises caused directly or indirectly by Tenant, its
agents, employees, or contractors.
<PAGE> 8
ARTICLE 10
INSURANCE
10.01. Tenant shall not knowingly violate or permit the violation of
any provision of any insurance policy covering the Building and shall not take
or permit any action which would increase any insurance rate applicable to the
Building or which would result in the refusal of insurance carriers to insure
the Building in amounts reasonably satisfactory to Landlord.
10.02. If any action taken or permitted by Tenant results in an
insurance rate increase, Tenant shall, without prejudice to any other rights of
Landlord, reimburse Landlord therefor on written demand. The schedule of rates
for the Building, issued by the New Jersey Fire Insurance Rating Organization
or other body exercising similar functions, shall be conclusive evidence of the
rates then applicable to the Building.
10.03. Landlord shall not be required to carry insurance on Tenant's
Property, Landlord shall not be obligated to repair any damage thereto or to
replace same, unless necessitated by the negligence or breach of lease or
willful misconduct of Landlord, its agents, employees or contractors.
10.04. Landlord, at Tenant's expense, shall:
(a) carry comprehensive general liability insurance (naming
Tenant as an additional insured) with an insurance carrier licensed by the
State of New Jersey, with a single combined limit of $3,000,000.00 for bodily
injury and property damage per occurrence in, on or about the Demised Premises,
appurtenant areas, adjoining streets and passageways;
(b) keep the Demised Premises insured for Landlord's benefit
(and shall name Tenant as an additional insured, as interest may appear) on an
"All Risk" Agreed Amount basis for the "full replacement cost," which, for the
purpose of this section 10.04 and Section 10.05, shall be deemed to be the cost
of replacing the Building (and other improvements) at the time of casualty,
less the cost of excavations, foundations, and footings below the basement
floor, and without any deduction for physical depreciation. Such "full
replacement cost" shall be established and redetermined from time to time, at
the request of Landlord, by a reputable independent appraiser, engineer,
architect, or valuation engineer designated and paid for by Landlord. If Tenant
shall dispute the determination of the appraiser, the issue shall be determined
by arbitration as hereafter provided; and
(c) purchase insurance against loss of Net Rent, on an "All
Risk" basis, in an amount equal to the Net Rent plus Impositions payable by
Tenant hereunder, for a period of twelve (12) months.
The aforesaid insurance shall not exclude, and shall
expressly cover, risks associated with Tenant's bringing in, storage, use,
escape, disposal or release of any biologically or chemically active or other
hazardous or toxic substances. Tenant shall reimburse Landlord, as additional
rent, within ten (10) days after written demand, for the cost of all such
insurance.
10.05. Tenant, at its sole expense, on written demand by Landlord (or,
at Landlord's option, Landlord, at Tenant's sole expense) shall procure and
maintain, additionally, for the benefit of Landlord and Tenant, as named
insureds, such other insurance, in such amounts as may from time to time
reasonably be required against other insurable extraordinary hazards which at
the time are commonly insured against in the case of premises similarly situated
in Bergen County, New Jersey or, if none therein, then in the nearest New Jersey
County in which such premises are found, due regard being given to the type of
the building (and other improvements), its construction, use and occupancy. If
Tenant shall dispute a determination by Landlord under this Section 10.05, the
issue shall be determined by arbitration as hereafter provided.
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10.06. The insurance described in Section 10.05, if obtained by
Tenant, may be wholly or partially satisfied by a blanket insurance policy
which covers other properties occupied by Tenant, provided the amount of
insurance specifically allocated to the Demised premises in accordance with the
requirements of this Article are not less than the amounts required to be
carried. Certificates of all insurance required under this Section 10.06 shall
be delivered to Landlord upon issuance of policies and prior to renewal dates
of expiring insurance.
10.07. All insurance policies carried by either party with respect to
the Demised Premises or the contents thereof shall either name the other party
as an additional insured or contain a waiver of all rights of subrogation
against the other, and the agents, employees, contractors and invitees of the
other. If payment of additional premiums is required to obtain a waiver of
subrogation, the other party shall be given the opportunity to make such
payment, failing which the waiver in its favor shall not be required.
Landlord and Tenant each shall look first to any insurance
policies in its favor before making any claim against the other and each hereby
waives all insured claims against the other, except insofar as such waiver
would void any insurance.
ARTICLE 11
ALTERATIONS
11.01. Tenant shall make no alterations in or to the Demised Premises
without Landlord's express written consent, which consent shall not be
unreasonably withheld or denied. Plans for any alterations shall be submitted
to Landlord with the request for consent.
11.02. Landlord is aware that Tenant will be performing certain Tenant
improvements to the Demises Premises immediately following the Commencement
Date. Tenant shall submit drawings to Landlord for its approval no later than
fifteen (15) days from the date of execution of this Lease. Landlord shall
engage an architect and structural engineer to review the drawings, the cost
and expense of which shall be borne by the Tenant. Landlord shall approve or
disapprove the drawings within fifteen (15) days of receipt, and shall not
withhold its approval except on account of concerns raised by Landlord's
architect or structural engineer based upon his/her/its professional review of
Tenant's drawings. If the drawings are approved, Tenant shall (i) obtain and
furnish to Landlord a performance bond in Landlord's favor to secure the
satisfactory completion of all of the Tenant improvements, and (ii) be
responsible for obtaining all necessary governmental permits and approvals, and
shall obtain and furnish to Landlord a final certificate of occupancy with
respect to the improvements prior to Tenant's commencing conduct of its
business in the Demised Premises.
11.03. All fixtures, improvements and appurtenances attached to or
built into the Demised Premises, whether at Landlord's or Tenant's expense,
shall be deemed Landlord's property and shall not be removed by Tenant unless
so directed by Landlord. Landlord shall, however, have the right to require
Tenant to restore the Demised Premises with respect to any alterations not
approved by Landlord in accordance with the lease.
ARTICLE 12
PARKING
12.01. Tenant shall have the use of all of the existing parking area,
which is comprised of twenty-seven (27) marked spaces.
ARTICLE 13
MAINTENANCE AND REPAIRS
13.01. The Landlord covenants throughout the term of this Lease, at
the Landlord's sole cost and expense, to make all structural repairs to the
building in
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which the Demised Premises are located which are defined to be repairs to the
foundation, the bearing walls, the structural steel, and the roof, including
the roof membrane, all in their structural and bearing capacities ("Structural
Repairs") but shall not perform any repairs which are necessitated by any act
or omission of the Tenant, its agents, servants, employees or invitees, all of
which repairs Tenant shall make at its own cost and expense. Landlord's
Liability pursuant to the provisions of this paragraph shall be limited to
making of any required Structural Repairs with respect to which Tenant gives
Landlord notice with reasonable promptness, and diligence. If, as a result of a
structural failure, which is Landlord's obligation to repair, damage results to
the glass, Landlord shall repair or replace the glass at Landlord's expense.
Landlord shall not be liable to Tenant for any inconvenience, annoyance or
interruption of or injury to business arising from Landlord's making Structural
Repairs or alterations, storing material or performing any work in the Demised
premises, provided repairs are not necessitated by the negligence, willful
misconduct or breach of this Lease by Landlord, its agents, employees or
contractors, and provided Landlord proceeds to make such repairs with
reasonable diligence, and the same shall not constitute an eviction, and Tenant
shall not be entitled to any rent abatement by reason of Landlord's said repair
or alteration activities.
13.02. Except as otherwise provided with respect to Structural
Repairs, Tenant, at its expense, shall maintain the Demised Premises
(including, without limitation, all appliances, equipment, appurtenances,
parking areas, sidewalks, and landscaping) in good condition and free of snow,
ice and litter, and shall promptly and diligently make all necessary repairs
and replacements using the same quality of materials and workmanship. If
Tenant shall fail to make or commence to make (and thereafter diligently
complete) any necessary Repair within fifteen (15) days after demand by
Landlord (or a reasonably shorter period in the event of an emergency),
Landlord may make such repair or replacement at Tenant's expense.
ARTICLE 14
ACCESS
14.01. Landlord and its authorized representatives may enter upon the
Demised Premises at any reasonable time or times for inspection, to make
repairs, and for exhibiting the Demised Premises to Superior Mortgagees,
prospective purchasers or mortgagees and prospective tenants (except that
exhibitions to prospectus tenants shall be limited to the last twelve (12)
months of the Term). Landlord shall give Tenant reasonable advance notice of
any such entry, unless, in the case of repairs, an emergency is involved or
Tenant requests that a repair be made.
ARTICLE 15
NOTICE OF ACCIDENTS
15.01. Tenant shall promptly notify Landlord of
(a) any accident occurring in or about the Demised Premises
involving death or personal injuries to employees or third parties,
damage to the Demised Premises, or to the property of third parties;
(b) any fire or other casualty occurring in or about the
Demised Premises; and
(c) any damage, disrepair or defects in or to any part of the
Demised Premises or any system, facility or installation.
ARTICLE 16
TENANT'S INDEMNIFICATION OF LANDLORD
16.01. To the extent Landlord is not indemnified by recoverable
insurance, Tenant shall indemnify Landlord, its agents and employees free and
harmless from
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and against all liability penalties, losses, damages, costs and expenses
(including reasonable architects' and reasonable attorneys' fees), demands,
causes of action, claims or judgments arising from or growing out of
(a) any act or acts, or omission or omissions or willful misconduct
of its officers, agents, contractors, employees, licensees or invitees;
(b) any injury or damage to any person or property occurring in or
about the Demised Premises which is not due to the fault of Landlord, its
agents, employees, contractors or invitees;
(c) any failure by Tenant to perform its obligations under the Lease;
and
(d) any of such matters and the defense of any action arising out of
the same or in discharging the Demised Premises or any part thereof, from any
and all liens, charges, or judgments which may accrue or be placed thereon by
reason of any act or omission or willful misconduct of the Tenant, its
officers, agents and employees.
ARTICLE 17
DESTRUCTION OR DAMAGE
17.01. If the Demised Premises are damaged by fire or other casualty
("Casualty"), the Lease shall continue in full force, subject, however, to the
following:
(a) Subject to subdivision (b) hereinbelow, if the Demised Premises
are partially damaged by Casualty, the damage shall promptly and diligently be
repaired by Landlord using the same quality of materials and workmanship, and,
during the period from the day following the Casualty until such repair is
substantially completed, the Net Ret shall be equitably reduced, taking into
account the portion of the Demised Premises which remains usable. If the
repairs are not made within 180 days from the Casualty, Tenant, at its option,
may terminate the Lease.
(b) If thirty (30%) percent or more of the Building area is rendered
substantially unusable as the result of Casualty, then either party may elect
to terminate the Lease by written notice to the other party, given within sixty
(60) days after the Casualty, specifying a date for the termination of the
Lease, which date shall not be more than ninety (90) days after the giving of
such notice and, upon the specified date, the Term shall expire and Tenant
shall vacate the Demised Premises, without prejudice, however, to Landlord's
and Tenant's respective rights against the other accruing prior to the
expiration date, and Net Rent and Additional Rent shall be paid to the date of
the Casualty; provided that, if the Demised Premises can be restored to usable
condition within a period of seven (7) months from the date of the Casualty and
Landlord elects to so restore, Tenant shall not have the right to terminate the
Lease unless the restoration is not completed within such period.
ARTICLE 18
CONDEMNATION
18.01. If the Demised Premises or any substantial part thereof is
condemned or conveyed to a condemning authority ("Condemnor") under threat of
condemnation (collectively, "Condemnation"), Landlord shall promptly notify
Tenant thereof and
the Lease shall terminate on the date title vests in the Condemnor. The parties
thereupon shall be relieved of all further obligations under the Lease except
as to any accrued and undischarged obligations or liability. Landlord only
shall be entitled to any award in condemnation, except that Tenant may file a
claim for its fixtures and relocation expenses only.
In the case of a partial condemnation, if Tenant is able to enjoy the
substantial use of the balance of the Demised Premises, with appropriate
restoration by Landlord, the Lease shall not terminate but there shall be an
appropriate abatement of Net Rent and Additional Rent. Any dispute under this
Article shall be submitted to arbitration as hereafter provided.
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ARTICLE 19
LIENS
19.01. If, because of any act or omission of Tenant or anyone claiming
through or under Tenant, any mechanic's or other lien or order for the payment
of money shall be filed against the Demised Premises or the Building, or
against Landlord (whether or not such lien or order is valid or enforceable),
Tenant shall, at its expense, either post a bond in an amount sufficient to
remove such lien or cause the same to be canceled and discharged of record
within thirty (30) days after the date of filing thereof, and shall also
indemnify and hole harmless Landlord from and against any and all costs,
expenses, claims, losses and damages, including, without limitation, reasonable
attorney's fees and all other reasonable costs incurred by Landlord to
discharge and satisfy any such lien or the underlying claim in the event Tenant
fails to discharge such lien. Nothing in the Lease nor any action or inaction
by Landlord shall be construed to grant to Tenant, expressly or impliedly, any
right or authority to do anything that might give rise to any lien, charge or
other encumbrance upon Landlord's estate in the Demised Premises.
ARTICLE 20
SURRENDER
20.01. Upon the expiration of the Term or any earlier termination of
the Lease, Tenant shall, if Landlord so requests, remove all exposed
computer, telephone and other wiring, cables and equipment and Tenant's
property; and tenant shall surrender the Demised Premises to Landlord
broom-clean and in good condition, ordinary wear and tear and damage from
causes beyond Tenant's reasonable control excepted. In the event of Tenant's
failure to so remove such equipment or Tenant's property, Landlord shall have
the option either to retain such property without obligation to Tenant or to
dispose thereof at Tenant's expense, including a charge of fifty cents per
square foot of rentable area for removal of wiring and equipment.
If Tenant retains possession of the Demised Premises or any part
thereof after the expiration of the Term or earlier termination of the Lease,
without Landlord's prior consent, Tenant (without prejudice to any of
Landlord's other rights and remedies) shall pay to Landlord, on a daily basis,
an amount equal to one and one-half (1-1/2) times the Net Rent stipulated in
Section 1.04(a) hereof (or the Net Rent payable during the Extended Term, if
any), for the time Tenant thus remains in possession, (i) all reasonable costs
and expenses relating to the Building incurred by Landlord for such period of
Tenant's holdover, and (ii) all damages sustained by Landlord by reason of
Tenant's retention of possession.
Nothing contained in the Lease shall be construed as a consent
by Landlord to the occupancy or possession by Tenant of the Demised Premises
beyond the expiration or prior termination of the Term, and Landlord, upon such
expiration or prior termination of the Term shall be entitled to the benefit of
all legal remedies now in force or hereafter enacted relating to the speedy
repossession of the Demised Premises.
ARTICLE 21
TENANT'S DEFAULT OR BANKRUPTCY
21.01. If any one or more of the following events (herein sometimes
called "Events of Default") occurs:
(a) If Tenant defaults in the payment of Net Rent or Additional
Rent, when due, and such default continues for five (5) days after written
notice from Landlord to Tenant; or
(b) If Tenant defaults in the performance of any other
obligation hereunder and such default continues for ten (10) days (or
appropriate shorter
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period in the event of an emergency) after written notice from Landlord
to Tenant (except for a default, not involving an emergency, which
cannot diligently be cured within such ten (10)-day period and which is
diligently cured by Tenant within a suitable longer period; or
(c) If a petition in bankruptcy, for a reorganization or for the
appointment of a receiver for all or any portion of Tenant's property is
filed against Tenant and is not discharged within sixty (60) days
thereafter; or
(d) If Tenant acquiesces in the appointment of such a receiver,
files any such petition, makes as assignment for the benefit of its
creditors, or otherwise seeks the benefit of any insolvency laws;
(e) If the Demised Premises or a substantial portion thereof is
or becomes abandoned, unused or vacated for more than ninety (90) days.
Landlord, notwithstanding any other right or remedy it may have under
the Lease, at law or in equity, may terminate the Lease, by written notice to
Tenant setting forth the basis therefor and to be effective not less than five
(5) days after the date of giving such written notice, whereupon the Lease shall
terminate upon such effective date (with the same effect as if such date were
the date fixed herein for the natural expiration of the Term), Tenant shall
surrender the Demised Premises to Landlord, and Tenant shall have no further
rights hereunder but shall remain liable as hereinafter provided. In such event,
Landlord may, without further notice, enter the Demised Premises, repossess same
and dispossess Tenant and all other persons and property therefrom.
21.02. If Landlord so terminates the Lease, Tenant shall pay to
Landlord, as damages, any rent of which Tenant may have been relieved pursuant
to any provision of the Lease, and:
(a) If an Event of Default occurs pursuant to subdivision (c) or
(d) of Section 21.01 hereof, a sum which represents any excess of (i)
the aggregate of the Net Rent and Additional Rent for the balance of the
Term (as if the Lease were not so terminated) over (ii) the net fair
rental value of the Demised Premises at the effective date of such
termination, both discounted at the rate of eight (8%) percent per
annum; and
(b) In all other such cases, sums equal to the Net Rent and
Additional Rent, at such times as they would have been payable if not
for such termination of the Lease, less the net rents received by
Landlord from any reletting, after deducting from such rents all
reasonable costs incurred in connection with such termination and
reletting (but Tenant shall not be entitled to receive any excess of
such net rents over such sums). Landlord shall make reasonable and
diligent efforts to relet the Demised Premises.
Landlord may commence actions or proceedings from time to time to
recover such damages or installments thereof. No provision hereof shall be
construed to preclude Landlord's recovery from Tenant or any other damages to
which Landlord may be entitled under applicable law.
In the event of a breach or threatened breach by Tenant of any of its
obligations under the Lease, Landlord shall also have the right of injunction.
The special remedies to which Landlord may resort hereunder are cumulative and
concurrent and are not intended to be exclusive of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time, and
Landlord may invoke any remedy allowed at law or in equity as if specific
remedies were not provided for herein.
21.03 Tenant, on behalf of itself and all persons claiming through
Tenant, including creditors, waives all rights, under present or future laws,
to repossess the Demised Premises.
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21.04. Neither Landlord's nor Tenant's failure to insist upon the
strict performance of Tenant's obligations hereunder or to exercise any remedy
consequent upon a default, nor Landlord's acceptance of rent or any other sums
during the continuance of any default of Tenant (with or without knowledge
thereof) shall constitute a waiver of any such obligations or default.
21.05. Rent paid more than ten (10) days after the due date shall bear
interest at a rate per annum equal to the then prime rate published in the Wall
Street Journal, plus two (2) percent, until paid (without prejudice to any
other rights or remedies of Landlord).
ARTICLE 22
LANDLORD'S RIGHT TO PERFORM
TENANT'S OBLIGATIONS
22.01. If Tenant fails to perform any of its obligations hereunder and
such failure continues for ten (10) days (or an appropriate shorter period in
the event of an emergency) after written notice thereof by Landlord, Landlord
may (but shall not be obligated to perform such obligation, in which event the
cost of such performance, together with interest from the date of payment
thereof until reimbursement is made, at the rate of 18% per annum, shall be
reimbursed by Tenant upon written demand and shall constitute additional rent.
The performance by Landlord of such obligation shall not constitute a waiver of
any right or remedy of Landlord arising from such failure of Tenant.
ARTICLE 23
BROKERAGE
23.01. Tenant acknowledges that it was introduced to the Demises
Premises by Weichert Commercial. Landlord acknowledges that it has entered into
an agreement with Weichert Commercial for satisfaction of any commission claim
by Weichert Commercial with respect to Tenant's lease of the Demised Premises
and Landlord shall indemnify Tenant against all liability and expense (including
reasonable attorney's fees) incurred in connection with any brokerage
commission claim by Weichert. Tenant Warrants that it has not had contact with
any brokers other than Weichert Commercial in connection with the Demised
Premises. Should any claim for commissions in connection with the Lease be made
against Landlord by any broker other than Weichert Commercial based on any acts
of Tenant or its representatives. Tenant shall indemnify Landlord against all
liability and expenses (including reasonable attorneys' fees) incurred in
connection therewith.
ARTICLE 24
NOTICES
24,01. All notices, demands, requests, approvals and consents
hereunder (collectively, "Notices") shall be in writing and shall be deemed to
have been properly made or given if delivered in person or sent by registered
or certified mail, return receipt requested, as follows:
To Landlord: At the address set forth above, with a copy to
Daryl Ury Fox, Esq., 2 Van Riper Road, Montvale, New Jersey 07645-0409.
To Tenant: At the Building, with a copy to Donald
Waskover, Esq., at 550 Kinderkamack Road, Orsdell, New Jersey 07649.
Either party may, be notice given pursuant to this section,
specify a different address. Mailed notices shall be deemed to have been given
as of the date which is two (2) days after the date on which they are mailed.
Notices may be given by an attorney-at-law or other authorized agent on behalf
of Landlord or Tenant with the same effect as if given by the party itself.
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ARTICLE 26
MISCELLANEOUS
26.01. Tenant, within twenty (20) days after a written request form
Landlord, shall execute and deliver to Landlord a statement in such form as may
be required by Landlord or a Superior Mortgage, certifying, without limitation,
that (a) the lease has not been modified and is in full force (or, if there
have been modifications, that the Lease is in full force as modified, and
stating the modifications), (b) the date to which the Fixed Rent has been paid,
(c) (if any option to extend the Term is provided for in the Lease) whether
Tenant has exercised its option to extend the Term, (d) whether or not, to the
best of the knowledge of the party executing such statement, Landlord is then
in default in the performance of any of its obligations under the Lease and, if
so, specifying each such default, (e) that Tenant has no defenses, offsets or
counterclaims against Landlord with respect to the lease or the Demised
Premises, and (f) whether any security has been deposited by Tenant with
Landlord, and, if so, the amount thereof; and any other facts within the
knowledge of Tenant reasonably requested by Landlord or a Superior Mortgagee.
26.02. The term "Landlord" means the Landlord named herein and any
successor to its interest in the Lease. If Landlord assigns such interest and
the assignee assumes Landlord's obligations hereunder, Landlord shall thereupon
cease to be liable for any subsequently accruing obligations under the Lease,
which shall be the sole liability of the assignee of such interest.
26.03. The term "Unavoidable Delays" means delays or prevention due to
strikes, lock-outs or other labor difficulties, acts of God, shortages of
labor, materials, supplies, fuel or utilities, governmental restrictions, enemy
action, war, civil commotion, fire or other casualty, emergency, holdover of
tenants, or any other causes beyond Landlord's or Tenant's reasonable control,
as the case may be.
26.04. Landlord and Tenant hereby waive trial by jury in any action or
preceeding and with respect to any counterclaim arising under or in connection
with the Lease.
26.05. The Lease shall be governed by the Laws of the State of New
Jersey.
26.06. The invalidity or unenforceability of any provision of the
Lease in any instance shall have no effect upon the validity or enforceability
of the remainder of the Lease or the validity or enforceability of such
provision in any other instance.
26.07. The Lease contains the entire agreement between the parties
concerning the Demised Premises, and the parties acknowledge that its execution
has not been induced by any representation or warranty by Landlord or Tenant
(or any representative or broker) not set forth herein.
26.08. The Lease may not be modified or terminated (except as
otherwise provided herein) and its provisions may not be waived except by a
written agreement signed by the parties.
26.09. Except as otherwise provided herein, the Lease shall be binding
upon and inure to the benefit of the parties and their respective heirs,
administrators, successors, executors and permitted assigns, and shall be
deemed to run with the Land.
26.10. The captions herein are for convenience of reference only and
shall not be deemed to define, limit or describe the scope or intendment of any
provision of the Lease.
26.11. Tenant shall look solely to Landlord's estate and property in
the Demised Premises (as the same may be subject to any ground leases or
mortgages) for the enforcement of any judgment or decree requiring the payment
of money to Tenant
13
<PAGE> 16
by reason of any default or breach by Landlord under the Lease. In no event
shall there be any personal liability on the part of Landlord (or any of the
Landlord's members, principals or partners) beyond such estate and property and
no other assets of Landlord (or of any member, principal or partner thereof)
shall be subject to levy, execution, attachment or any other legal process.
26.12. Landlord and Tenant represent (each for itself) that they have
full authority to enter into the Lease and that the person or persons signing
on their behalf are duly authorized to execute the Lease with binding effect
upon Landlord and Tenant.
26.13. The Lease shall not become effective or binding until signed by
Landlord, and a counterpart, so signed, has been delivered to tenant.
26.14. If Landlord shall engage an attorney to enforce the provisions
of the Lease or if suit shall be brought for recovery of possession of the
Demised Premises, for recovery of rent or any other amount due under the
provisions of the Lease, or because of the breach or threatened breach of any
other covenant herein contained on the part of Tenant to be kept or performed,
Tenant shall pay to Landlord, as additional rent, all reasonable expenses
incurred by Landlord in connection therewith, including a reasonable attorneys'
fee (whether or not the attorney is Landlord's salaried employee).
ARTICLE 27
ARBITRATION
27.01. Any dispute which the lease provides is to be determined by
arbitration shall be determined by binding arbitration in Bergen County, New
Jersey, before three (3) arbitrators of the American Arbitration Association in
accordance with its rules then obtaining, and judgment may be entered on the
award of the arbitrator(s) in any court of competent jurisdiction.
27.02. The arbitrator(s) may only interpret and apply the terms of the
Lease and may neither change such terms nor deprive either party to the Lease
of any of its rights hereunder.
27.03. Except for attorneys' fees, experts' fees and costs of
transcripts (each party to bear its own), the expenses of arbitration shall be
borne equally by Landlord and Tenant.
27.04. The existence of any dispute or the submission thereof to
arbitration shall not affect or delay the performance by the parties of their
obligations under the Lease. Tenant shall continue to pay all Fixed Rent and
Additional Rent and shall make any required deposits (as reasonably determined
by Landlord, if necessary), without prejudice to Tenant's rights; and, if
required by reason of the determination of the arbitrator(s), Landlord shall
make any appropriate adjustment or refund to Tenant.
ARTICLE 28
SIGNS
28.01. Tenant may maintain a name plate on the front of the Building,
subject, however, to Landlord's prior approval, which shall not be unreasonable
withheld, and subject also to the requirements of applicable law and the rules
and regulations of governmental authorities having jurisdiction. Any fees or
charges required to be paid in connection with the installation and maintenance
of such signs shall be paid by Tenant.
ARTICLE 29
PURCHASE OF DEMISED PREMISES
29.01 If, at any time during the Term, Landlord shall be ready and
willing to enter into a arms-length agreement to sell the Demised Premises to a
third
14
<PAGE> 17
party, Landlord shall communicate to Tenant in writing the price and terms upon
which Landlord is prepared to sell to such third party, and Tenant shall have a
period of thirty (30) days from the date of receipt of such written notice
within which to elect, by notice to Landlord, to enter into a contract to
purchase the Demised Premises at such purchase price and on such other terms.
The failure to so elect either by the passage of time or Tenant's notification
to Landlord of its decision not to so elect, shall constitute a waiver of
Tenant's right of first refusal and Landlord may within one (1) year thereafter
enter into an agreement with such third party or any other third party, at the
same purchase price and on substantially the same terms. If the price is
altered from that given in the notice to Tenant or any material terms are no
longer substantially the same as given in said notice to any such third party,
or if no such agreement is made with such third party within a one (1) year
period commencing with the date of Landlord's initial notice to Tenant, then
Tenant's right of first refusal shall be reinstated without further notice. No
sale to a related family member or any entity controlled by Landlord or any of
its general partners shall be construed a sale to a third party.
ARTICLE 30
TAX APPEAL
30.01. Tenant acknowledges that Landlord is currently appealing the
real property taxes for the Demises Premises for the years 1995 and 1996.
Tenant shall fully cooperate with Landlord in connection with such appeals,
including, without limitation, executing any documents which Landlord
reasonably believes necessary to prosecute the appeals and providing access to
the Demised Premises in connection with the appeals.
30.02. Tenant agrees that any real property tax refunds or credit
against future taxes for periods prior to the Commencement Date shall be the
property of Landlord, and Tenant shall promptly remit to Landlord any such
refund or the amount to be credited against future taxes, which Tenant shall
receive in trust for Landlord. To the extent any portion of a refund or credit
is attributable to any taxes to be paid by Tenant, the same shall belong to
Tenant (less Tenant's pro rata share of any attorneys' fees and costs in
connection with the tax appeal).
IN WITNESS WHEREOF, Landlord and Tenant have executed the Lease the
date first above written.
WITNESS; FEROLIE REALTY ASSOCIATES, L.L.C.
/s/ Daryl Fox By: /s/ Lawrence J. Ferolie
- --------------------------------- --------------------------------
Lawrence J. Ferolie
Manager
ATTEST: MEDCO HEALTH CORP.
(SEAL) /s/ Hashem Sahrale By: /s/ Fahim Sahrale
------------------- --------------------------------
Hashem Sahrale Fahim Sahrale
Secretary President/CEO
<PAGE> 18
STATE OF NEW JERSEY:
SS.:
COUNTY OF BERGEN;
BE IT REMEMBERED, that on this 3rd day of September 1996, before me,
the subscriber, a Notary Public of the State of New Jersey, personally appeared
Lawrence J. Ferolie who, I am satisfied, is the individual mentioned in the
within instrument and thereupon he acknowledged that he signed, sealed and
delivered the same as his act and deed, as Manager of Ferolie Realty
Associates, L.L.C., for the uses and purposes therein expressed.
Sworn to and subscribed before
me, the date aforesaid,
Daryl Fox
______________________________
Daryl Fox
Atty-at-Law of NJ
STATE OF NEW JERSEY;
SS.:
COUNTY OF BERGEN:
BE IT REMEMBERED, that on this 28th day of August 1996, before me, the
subscriber, a Notary Public of the State of New Jersey, personally appeared
Hashem Sahrale who, being by me duly sworn on this oath, desposes and makes
proof to my satisfaction that he is the Secretary of Medco Health Corp., the
corporation named in the within instrument; that Fahim Sahrale is the President
of said corporation; that the execution as well as the making of this
instrument, has been duly authorized by a proper resolution of the Board of
Directors of the said corporation; that deponent well knows the corporate seal
of said corporation, and that the seal affixed to said instrument is the proper
corporate seal and was thereto affixed and said instrument and delivered by
said President as and for the voluntary act and deed of said corporation, in
the presence of deponent, who thereupon subscribed his name thereto as
attesting witness.
Sworn to and subscribed before
me, the date aforesaid.
/s/ Donald S. Waskover
______________________________
Donald S. Waskover
Attorney At Law
of the State of New Jersey
16
<PAGE> 19
EXHIBIT A
BEGINNING on the westerly side of Sylvan Avenue (50' wide), distant 255.54 feet
south of the southerly side of Demarest Avenue (50' wide), said point also
being the dividing line between Tax Lots 14 and 15 in Block 617; and running
thence:
(1) South 78 degrees 58 minutes 00 seconds West, along the westerly side line of
Sylvan Avenue, a distance of 23.14 feet to a point; thence
(2) South 54 degrees 01 minutes 00 seconds West, still along the said westerly
side line of Sylvan Avenue, a distance of 105.20 feet to a point; thence
(3) South 46 degrees 35 minutes 00 seconds West, still along the westerly side
line of Sylvan Avenue, a distance of 25.55 feet to the center line of
Loretta Court (now vacated;) thence
(4) North 42 degrees 00 minutes 00 seconds West, along the former center line
of Loretta Court, a distance of 97.90 feet to a point; thence
(5) North 48 degrees 00 minutes 00 seconds East, a distance of 150.00 feet to a
point in the dividing line between Tax Lots 14 and 15; thence
(6) South 42 degrees 00 minutes 00 seconds East, along the dividing line between
Tax Lots 14 and 15, a distance of 120.20 feet to the westerly side line of
Sylvan Avenue, and the Point or Place of BEGINNING.
BEING KNOWN as Lots 1 thru 5 and a portion of Loretta Court (now vacated) as
shown on a Map entitled "Map of Property of Arkay Realty Co., Inc., at
Englewood Cliffs, N.J." said Map filed in the Bergen County Clerk's Office on
June 24, 1926 as filed Map No. 2118.
FOR INFORMATION PURPOSES: "In compliance with Chapter 157, Laws of 1977,
premises herein are Lot 15 in Block 617 on the Tax Map of the above
municipality."
<PAGE> 20
[Location Survey Map Graphic]
Map of Property of Arkay Realty Co., Inc., at Englewood Cliffs, N.J.
<PAGE> 21
RIDER TO LEASE BETWEEN
FEROLIE REALTY ASSOCIATES, L.L.C. AS LANDLORD
AND MEDCO HEALTH CORP. AS TENANT
FOR THE PREMISES LOCATED AT
532 SYLVAN AVENUE, ENGLEWOOD CLIFFS, NEW JERSEY
The following amends and supplements the Lease Agreement by and between
Ferolie Realty Associates, L.L.C. as Landlord and Medco Health Corp. as Tenant.
If there is any conflict between the provisions of the lease Agreement and this
rider, the provisions of this Rider shall be deemed to control.
1. The term of the Lease as set forth in Paragraph 1.03 shall be from
September 1, 1996 as the commencement date through August 30, 2016 as the
expiration date.
2. Paragraph 1.04(a) of the lease shall be amended to provide that
wherever the word "July" appears, the word "September" shall be substituted,
and wherever the word "June" appears, the word "August" shall be substituted.
3. The terms "any other reasonable costs" appearing in Paragraph
1.04(b) is understood to be modified to provide that such costs do not include
any costs associated with Landlord's operations in administering this Lease,
collecting rents, providing required notices, or any of Landlord's other costs
and expenses which are incurred in the course of Landlord's business unless
such costs are required as a result of the Tenant's default under the terms of
the Lease.
4. Paragraph 1.05 is modified to provide a net Rent abatement in the
amount of $8,000.00 per month, up to an aggregate total amount of $24,000.00
with the concession to be applied
<PAGE> 22
against the monthly installments of Net Rent due under the Lease for the first
three months of the term.
5. Paragraph 2.01 is modified by the addition of the following
language:
In the event Tenant is unable to secure such Certificate of Occupancy,
Tenant shall provide notice of such inability to the Landlord and
thereafter this Lease shall be null and void and of no further effect.
6. Paragraph 3.01 of the lease is amended by the addition of the
following language:
Notwithstanding the provisions of this paragraph, Landlord, at
Landlord's sole cost and expense, agrees to effect repairs to the
exterior stairs to the basement and drain at the bottom of such stairs,
all in accordance with the inspection report of Gerard Volk dated may
28, 1996. These repairs shall be completed prior to the commencement
date of the Lease.
7. The first sentence of the second paragraph of Paragraph 9.01 is
deleted and the following is substituted:
"Without limitation of any of its obligations under the Lease, Tenant
shall neither do nor permit anything to be done in or about the demised
premises which would constitute a violation of any environmental laws,
codes, ordinances or rules or regulations of any governmental agency or
authority having jurisdiction and Tenant shall
<PAGE> 23
not bring, store, use or dispose of any hazardous, toxic, biologically
active or chemically active substance on the Demised Premises except in
an environmentally safe manner through methods which have been approved
by and meet all of the applicable standards of the Federal Environmental
Protection Agency and any other Federal, State or Local agency with
authority to enforce environmental laws, codes, ordinances, rules or
regulations."
8. Paragraph 11.02 is supplemented to provide as follows:
The maximum cost and expense of the architect and structural engineer
engaged by Landlord to review drawings shall be $2,500.00. Any cost and
expense in excess of $2,500.00 shall be borne by the Landlord.
9. Paragraph 13.01 of the Lease is modified by the addition of the
following:
Tenant shall, however, be entitled to a rent abatement in the event that
Landlord's said repair or alteration activities prohibit Tenant's use of
the premises during the period of such use prohibition.
10. Paragraph 14.01 of the Lease is modified to provide that exhibition
to prospective tenants shall be limited to the last six months of the term.
11. Paragraph 17.01(b) of the Lease is amended to provide that Tenant
shall be entitled to a rent abatement in the
<PAGE> 24
event that Tenant's use of the premises is prohibited by the Landlord's
restoration in proportion to the period of restoration resulting in such use
prohibition and the extent of such use prohibition.
12. Paragraph 21.02 of the Lease is amended to provide that the
provisions of Paragraph 1.05 of the Lease providing for the rent abatement
should not be recoupable by Landlord as part of any damages.
13. Paragraph 26.01(e) is amended by deleting the language contained in
the Lease and inserting the following:
Whether or not, to the best of the knowledge of the party executing such
statements, the Tenant has any defenses, offsets, or counterclaims
against Landlord with respect to the Lease or demise of premises.
14. The Tenant under the Lease shall be Medco Health Corp., a New
Jersey corporation, with offices at 221 60th Street, West New York, New Jersey
07093. Landlord consents to the assignment of this Lease at any time during its
term to Medco Health Corp., a Nevada corporation and Tenant agrees to provide
notice of any such assignment to Landlord along with a copy of the document
assigning said Lease. In the event of such assignment, Landlord agrees to
recognize Medco Health Corp., a Nevada corporation, as the sole Tenant under
the terms of the Lease.
15. Landlord covenants that if and so long as the Tenant pays the rent
and "additional rent" reserved hereby and performs and observes the covenants
and provisions hereof, the Tenant shall
<PAGE> 25
quietly enjoy the demised premises subject, however, to the terms of this
Lease.
16. Landlord covenants that it is the owner of the demised premises in
fee simple and has the full right, title, and authority to enter into this
Lease Agreement and perform all of its obligations in accordance therewith.
Except as set forth above, all of the other terms and provisions of the
Lease shall remain in full force and effect.
In witness whereof, Landlord and Tenant have executed this Rider
contemporaneously with the execution of the Lease.
WITNESS: FEROLIE REALTY ASSOCIATES, L.L.C.
/s/ Daryl Ivy Fox By: /s/ Lawrence J. Ferolie
- ------------------------ -------------------------------
Lawrence J. Ferolie
Manager
ATTEST: MEDCO HEALTH CORP.
(SEAL) Hashem Sahraie By: /s/ Fahim Sahraie
------------------ -------------------------------
Hashem Sahraie Fahim Sahraie
Secretary President/CEO
