U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1996
-------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File No. 0-9836
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Extended Family Care Corporation (Formerly Cosmetic Sciences, Inc.)
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(Exact name of small business issuer as specified in its charter)
New York 22-2210547
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(State of Incorporation) (I.R.S. Employer Identification No.)
One Old Country Road, Suite 335, Carle Place, New York 11514
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(Address of Principal Executive Office) (Zip Code)
(516) 248-2273
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(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No____
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(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING
DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes _____ No X
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Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
25,500,226 common shares, $.01 par value, as of October 30, 1996.
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Transitional Small Business Disclosure Format (check one): Yes _____ No X
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1
<PAGE>
EXTENDED FAMILY CARE CORPORATION
SECOND QUARTER REPORT ON FORM 10 - QSB
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Part I - Financial Information
Item 1 Page
----
Condensed Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 (Unaudited) .......................................3
Condensed Consolidated Statements of Operations (Unaudited)
for the three months and nine months ended September 30, 1996 and 1995 ..4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 1996 and 1995 ...................5
Notes to Condensed Consolidated Financial Statements (Unaudited) ..........6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................7
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders..............10
Item 5 - Other Information................................................11
Signatures................................................................12
Exhibit Index.............................................................13
2
<PAGE>
<TABLE>
<CAPTION>
EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1996 1995
---- ----
Assets
------
<S> <C> <C>
Current assets:
Cash $ 257,926 $ 511,563
Accounts receivable, net of allowance for
doubtful accounts of $100,000 1,173,359 895,131
Prepaid expenses 124,422 146,809
------------- ------------
Total current assets 1,555,707 1,553,503
Property and equipment, net 266,034 118,591
Other assets:
Deferred taxes 249,000 259,000
License, net 486,073 515,832
Other 29,410 11,197
------------ ------------
Total assets $ 2,586,224 $ 2,458,123
============ ============
Liabilities and Shareholders' Equity
-------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 776,186 $ 766,651
Payroll taxes payable 130,667 280,584
Notes payable 373,449 148,449
Other current liabilities 94,585 71,991
------------ ------------
Total current liabilities 1,374,887 1,267,675
------------ ------------
Non-current liabilities:
Long-term debt 41,000 54,500
Obligations under capital leases 87,193 40,010
------------ ------------
Total non-current liabilities 128,193 94,510
------------ ------------
Total liabilities 1,503,080 1,362,185
------------ ------------
Commitments and contingencies
Minority interest in subsidiary 138,292 140,008
------------ ------------
Shareholders' equity:
Preferred Stock , $.01 par value, 10,000,000
shares authorized, no shares issued or outstanding
Common stock, $.01 par value, 50,000,000
shares authorized, 19,000,226 and 19,300,229
shares issued and outstanding, respectively 190,002 194,506
Additional paid-in-capital 643,348 638,844
Retained earnings 111,502 122,580
------------ ------------
Total shareholders' equity 944,852 955,930
------------ ------------
Total liabilities and shareholders' equity $ 2,586,224 $ 2,458,123
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------- --- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net patient service revenue $ 2,276,407 $ 1,988,292 $ 6,479,412 $ 5,440,669
--------------- ------------ ------------- ---------------
Cost of services 1,434,333 1,242,090 4,079,105 3,433,157
--------------- ------------ ------------- ---------------
Gross profit 842,074 746,202 2,400,307 2,007,512
Selling, general and administrative expenses 790,894 515,591 2,399,381 1,427,388
Provision for doubtful accounts - 8,898 - 13,755
--------------- ------------ ------------ --------------
Income from operations 51,180 221,713 926 566,369
Interest expense 460 1,701 3,721 3,357
--------------- ------------ ------------ --------------
Income (loss) before provision
for income taxes and minority interest 50,720 220,012 ( 2,795) 563,012
Provision for income taxes 30,000 96,500 10,000 247,001
--------------- ------------ ------------ --------------
Net income (loss) before minority interest 20,720 123,512 (12,795) 316,011
Minority interest in subsidiary net income (loss) 3,675 21,150 ( 1,716) 54,322
--------------- ------------ ------------- --------------
Net income (loss) $ 17,045 $ 102,362 $ (11,079) $ 261,689
=============== ============ ============= ==============
Primary earnings (loss) per share $ 0.0007 $ 0.0053 $ (0.0006) $ 0.0136
=============== ============ ============== ==============
Fully diluted earnings (loss) per share $ 0.0007 $ 0.0053 $ (0.0006) $ 0.0136
=============== ============ ============== ==============
Weighted average number of shares outstanding:
Primary 28,200,181 19,300,229 19,133,561 19,300,229
=============== ============ ============ ==============
Fully diluted 28,200,181 19,300,229 19,133,561 19,300,229
=============== ============ ============ ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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<TABLE>
<CAPTION>
EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Cash flow from operating activities:
- ------------------------------------
Net (loss) income $ (11,079) $ 261,689
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 45,278 16,223
Amortization of intangible assets 29,760 29,760
Provision for income taxes 10,000 247,001
Minority interest in subsidiary (loss) income (1,716) 54,322
Change in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (278,228) (126,248)
Prepaid expenses 22,386 (4,224)
Other assets (18,213) (1,324)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 9,535 (87,081)
Payroll taxes payable (149,917) (12,823)
Other liabilities 11,245 (2,228)
--------------- ----------------
Net cash (used in) provided by operating activities (330,949) 375,067
---------------- ---------------
Cash flow from investing activities:
- ------------------------------------
Purchase of property and equipment (122,497) (71,653)
---------------- ----------------
Net cash used in investing activity (122,497) (71,653)
---------------- ----------------
Cash flow from financing activities:
- ------------------------------------
Proceeds from note payable 250,000 -
Payment of obligations under capital leases (11,691) -
Repayment of loans (38,500) (68,000)
---------------- ----------------
Net cash provided by (used in) financing activities 199,809 (68,000)
---------------- ----------------
Net (decrease) increase in cash (253,637) 235,414
Cash at beginning of period 511,563 97,190
--------------- ---------------
Cash at end of period $ 257,926 $ 332,604
=============== ===============
Supplemental disclosures:
Equipment acquired under capital lease obligation $ 70,223 $ -
=============== ===============
Cash paid during the period for:
Interest $ 4,736 $ 4,863
=============== ===============
Income taxes $ 1,333 $ 654
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Extended Family Care Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB from Regulation S-B.
Accordingly, these financial statements do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation (consisting of normal recurring accruals) have been
included. The results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer to
the audited consolidated financial statements and notes thereto for the year
ended December 31, 1995.
Note 2 - Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common stock and common stock equivalents
outstanding during each period. Common stock equivalents represent the dilutive
effect of the assumed exercise of outstanding stock options.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Except for the historical information and statements contained in this
Report, the matters and items set forth in this Report are forward looking
statements that involve uncertainties and risks some of which are discussed at
appropriate points in the Report and are also summarized below at "Forward
Looking Statements, Cautionary Factors."
The following discussion and analysis provides information which the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the attached unaudited consolidated financial
statements and related notes, and with the Company's audited consolidated
financial statements and notes thereto for the year ended December 31, 1995.
Overview
The Company's revenues are derived from providing home health care
services to individuals, in New York and New Jersey, through various contracts
with government agencies (under the Medicaid program) and to a lesser extent
hospitals, insurance companies, private pay and other third party payers.
Results of Operations
Third Quarter Ended September 30, 1996 Compared to Third Quarter Ended
September 30, 1995
Net Patient Service Revenue: Net patient service revenue increased $288,115 or
14% to $2,276,407 for the third quarter ended September 30, 1996 compared to
$1,988,292 for the third quarter ended September 30, 1995. Net patient
service revenue increased due to the addition of 3 branches during the period
July 1, 1995 to September 30, 1996, partially offset by a decrease in
pre-existing branches net patient service revenue. The decrease in pre-existing
branch net patient service revenue was mainly due to an overall general decrease
in authorized Medicaid reimbursable hours by New York State (See "Forward
Looking Statements - Cautionary Factors").
Cost of Services: Cost of services increased $192,243 or 15% to $1,434,333 for
the third quarter ended September 30, 1996 compared to $1,242,090 for the third
quarter ended September 30, 1995. The increase in cost of services is primarily
due to increases in field staff payroll costs resulting from the increase in net
patient service revenue. The Company's growth in the number of cases serviced
increased the need for additional field staff to service these cases.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased $275,303 or 53% to $790,894 for the third
quarter ended September 30, 1996 compared to $515,591 for the third quarter
ended September 30, 1995. Selling, general and administrative expenses as a
percentage of net revenues increased to 35% for the third quarter ended
September 30, 1996 from 26% for the third quarter ended September 30, 1995. This
increase reflects higher administrative salaries, marketing and facility
expenses associated with additional branch locations, and the Company's
investment in the corporate infrastructure necessary to achieve its business
strategy.
Provision For Income Taxes: The income tax provision for the third quarter ended
September 30, 1996 is based on a 59% effective tax rate compared to an effective
tax rate of 44% for the third quarter ended September 30, 1995. The increase in
the company's effective tax rate was primarily due to an increase in permanent
taxable differences including an adjustment for permanent taxable differences
which were omitted in the tax provision for the first 6 months of 1996.
7
<PAGE>
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Net Patient Service Revenue: Net patient service revenue increased $1,038,743 or
19% to $6,479,412 for the nine months ended September 30, 1996 compared to
$5,440,669 for the nine months ended September 30, 1995. Net patient
service revenue increased due to the addition of 3 branches during the period
July 1, 1995 to September 30, 1996, partially offset by a decrease in
pre-existing branches net patient service revenue. The decrease in pre-existing
branch net patient service revenue was mainly due to an overall general decrease
in authorized Medicaid reimbursable hours by New York State (See "Forward
Looking Statements - Cautionary Factors").
Cost of Services: Cost of services increased $645,948 or 19% to $4,079,105 for
the nine months ended September 30, 1996 compared to $3,433,157 for the nine
months ended September 30, 1995. The increase in cost of services is primarily
due to increases in field staff payroll costs resulting from the increase in net
patient service revenue. The Company's growth in the number of cases serviced
increased the need for additional field staff to service these cases.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased $971,993 or 68% to $2,399,381 for the nine
months ended September 30, 1996 compared to $1,427,388 for the nine months ended
September 30, 1995. Selling, general and administrative expenses as a percentage
of net revenues increased to 37% for the nine months ended September 30, 1996
from 26% for the nine months ended September 30, 1995. This increase reflects
higher administrative salaries, marketing and facility expenses associated with
the additional branch locations, and the Company's investment in the corporate
infrastructure necessary to achieve its business strategy. In addition,
professional fees increased due to the Company's commitment to resume filing the
reports required under the Securities Exchange Act of 1934.
Provision For Income Taxes: An income tax provision of $10,000 was provided
for the nine months ended September 30, 1996 loss from operations of $2,795
due to certain permanent taxable differences. An income tax benefit with an
effective tax rate of 42% would have been derived for this period if
there were no permanent taxable differences. The income tax provision for
the nine months ended September 30, 1995 is based on a 44% effective tax rate.
Inflation and Seasonality
Medicaid reimbursements, which represent the Company's principal source
of revenue, have historically been adjusted to keep pace with inflation. There
can be no assurance that future Medicaid reimbursement will keep pace with
inflation.
The Company's business is generally not subject to seasonal trends.
Liquidity and Capital Resources
The nature of the Company's business requires weekly payments of wages
to its personnel as they render services, while the Company receives payments
for services rendered over an extended period of time (30 to 90 days). At
September 30, 1996 the Company's accounts receivable balance increased $278,228
to $1,173,359 from $895,131 at December 31, 1995. The increase in accounts
receivable was due to increased net patient service revenue and an increase in
days sales in accounts receivable from approximately 49 to 53 days.
8
<PAGE>
For the nine months ended September 30, 1996 the Company used cash from
operating activities of $330,949 and for the nine months ended September 30,
1995 the Company generated cash from operating activities of $375,255. The
decrease in cash provided by operating activities was a result of increased
selling, general and administrative expenses and accounts receivable associated
with the additional branch locations, and increased salary and professional fees
associated with expanded financial reporting activities in order to comply with
SEC requirements.
At September 30, 1996, the Company had working capital of $180,820.
For the nine months ended September 30, 1996 the Company generated cash
from financing activities of $199,809 and for the nine months ended September
30, 1995 the Company used cash for financing activities of $68,000. The increase
in cash provided by financing activities was primarily due to the Company
entering into a note agreement on September 9, 1996 with Arbor Home Healthcare
Holding, LLC ("Arbor"), pursuant to the option agreement dated October 31, 1995
between Arbor, the Company, COSS Holding Corp.,and its shareholders, whereby the
Company borrowed $250,000 for a term of one month bearing interest at prime plus
3%. The proceeds from this loan were used to fund certain working capital needs.
On October 8, 1996 the $250,000 loan plus interest was repaid.
During the nine months ended September 30, 1996 the Company invested
$122,497 in property and equipment primarily for purchases of computers,
telecommunication equipment, and furniture and equipment associated with the
relocation of two branches and the opening of two additional branches.
The Company believes that between the cash generated from its internal
operations and the exercise of the Arbor options (See Part II, Item 5-Other
Information) that its liquidity and capital resources are adequate for its
current needs.
Forward Looking Statements - Cautionary Factors
The Company derives most of its revenues from Medicaid reimbursements.
To the extent Medicaid reimbursements are reduced, the Company's revenues may be
adversely impacted. Reductions in Medicaid budgetary dollars are being discussed
at the federal and state executive and legislative levels, including the states
of New York and New Jersey.
On July 9, 1996, the state of New Jersey met to discuss the reduction
of Medicaid reimbursement rates for the year July 1, 1996 to July 1 , 1997. Only
certain minimal reductions in Medicaid reimbursement rates were imposed as a
result of this meeting, and these reductions did not have a material adverse
effect on the Company's results of operations.
During the quarter ended March 31, 1996, a reduction in authorized
Medicaid reimbursable hours per case was imposed by New York State. The results
of this reduction did not have a material adverse effect on the Company's
results of operations for the three and nine months ended September 30, 1996.
However, if a similar Medicaid reduction is imposed by the state of New Jersey,
the results of this reduction would have a material adverse effect on the
Company's results of operations, as the Company currently derives a majority of
its revenues from New Jersey Medicaid reimbursements.
The Company cannot predict the magnitude of future reductions, if any, in
Medicaid reimbursement rates or reimbursable hours.
9
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Company held its Annual Meeting of Stockholders on September 25, 1996.
b. The following directors were elected at the Annual Meeting:
Joseph Heller Mary Ann Page
Paul Elenio Robert Kohlmeyer
c. Seven matters were voted on at the Annual Meeting:
1. Each of the four nominees for election as director for a one-year term
were elected with votes cast as follows:
Name Votes for Votes against
---- --------- -------------
Joseph Heller 13,118,939 10,600
Paul Elenio 13,112,414 17,125
MaryAnn Page 13,118,939 10,600
Robert Kohlmeyer 13,112,414 17,125
2. A proposal to amend the Company's certificate of incorporation to effect
an increase in the Company's authorized shares of common stock, $.01 par value,
to 50,000,000 shares was approved, with 13,084,749 votes cast for, 28,325 votes
against and 16,465 shares abstained. There were no broker non-votes for this
proposal.
3. A proposal to amend the Company's certificate of incorporation to create
a new class of authorized preferred stock of which 10,000,000 shares may be
issued subject to such rights, preferences and limitations as shall be
determined by the Board of Directors was approved, with 13,054,649 votes cast
for, 66,625 votes against and 8,265 shares abstained. There were no broker
non-votes for this proposal.
4. A proposal to amend the Company's certificate of incorporation to clarify
that the Company is permitted to engage in the home health care business and to
delete references to the Company's prior business was approved, with
13,123,939 votes cast for, 100 votes against and 5,500 shares abstained. There
were no broker non-votes for this proposal.
5. A proposal to amend the Company's certificate of incorporation to change
the name of the Company to Extended Family Care Corporation was approved, with
13,122,239 votes cast for 1,300 votes against and 6,000 shares abstained. There
were no broker non-votes for this proposal.
6. A proposal to amend the Company's certificate of incorporation to
eliminate personal liability of the Company's directors to the extent permitted
by New York Business Corporation Law was approved, with 13,064,049 votes cast
for, 55,625 votes against and 9,865 shares abstained.
There were no broker non-votes for this proposal.
7. A proposal to appoint Carpenter & Onorato, P.C. as independent auditors
of the Company for the year ending December 31, 1996 was approved, with
13,114,839 votes cast for, 3,000 votes against and 11,700 shares abstained.
There were no broker non-votes for this proposal.
d. Not applicable
10
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Item 5. Other information:
On April 26, 1996 the employees at one branch location voted in favor of the
employees unionizing the branch. The Company continues to negotiate with the
union but no contract between the Company and the union has been agreed upon.
However, the Company does not anticipate the union contract to have a material
adverse effect on the Company's operations or financial condition. The Company
does not know at this time whether efforts will be made to unionize the
Company's other branches, whether those efforts would be successful, and whether
if successful, there would be a material effect upon the Company's operations or
financial condition.
On August 21, 1996 Arbor exercised the first half of its option to purchase
13 million shares of the Company's common stock at $.10 per share.
Accordingly, Arbor contributed $650,000 into an escrow account pending the
Company's shareholders' approving an amendment to the Company's Certificate of
Incoporation to provide for sufficient authorized capital to issue the shares
subject to the option. On September 25, 1996 the Company's shareholders voted in
favor of authorizing an additional 30 million common shares and on October 8,
1996, the Company issued 6.5 million shares to Arbor and the $650,000 in cash
was released from escrow and contributed to the Company.
On October 31, 1996 Arbor exercised the second half of its option acquiring
another 6.5 million shares of the Company's common stocks for $650,000.
Item 6. Exhibits and reports on Form 8-K.
a. Exhibits
See accompanying index to Exhibits.
b. The Company filed a report on Form 8-K on August 30, 1996
regarding the exercise of the first half of Arbor's option
pursuant to which it acquired 6.5 million shares of the
Company's common stock for $.10 per share.
All other items required in Part II are not applicable for the quarter ended
September 30, 1996.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
(Registrant) EXTENDED FAMILY CARE CORPORATION.
Date: October 31 , 1996 By: \s\ Mary Anne Page
------------------
Mary Anne Page
Acting Chief Executive Officer
and Director
Date: October 31 , 1996 By: \s\ Paul Elenio
---------------
Paul Elenio
Vice President, Controller
and Principal Financial Officer
12
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EXHIBIT LIST
Exhibit Page No.
Number --------
EX-27 Financial Data Schedule......................................15
EX-3.1 Amended and Restated Certificate
of Incorporation as filed with New York
Department of State on October 1, 1996.......................16
EX-10.1 Receivables Security Agreement between
Cosmetic Sciences, Inc. and Arbor Home HealthCare
Holding LLC, dated as of September 6, 1996, including
letter agreement with TPC Home Care Services, Inc............24
EX-10.2 Promissory Note dated September 6, 1996 in the amount of
$250,000 made by Cosmetic Sciences, Inc. to Arbor Home
HealthCare Holding LLC.......................................41
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 257,926
<SECURITIES> 0
<RECEIVABLES> 1,273,359
<ALLOWANCES> 100,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,555,707
<PP&E> 439,991
<DEPRECIATION> 173,957
<TOTAL-ASSETS> 2,586,224
<CURRENT-LIABILITIES> 1,374,887
<BONDS> 0
0
0
<COMMON> 190,002
<OTHER-SE> 754,850
<TOTAL-LIABILITY-AND-EQUITY> 2,586,224
<SALES> 6,479,412
<TOTAL-REVENUES> 6,479,412
<CGS> 4,079,105
<TOTAL-COSTS> 4,079,105
<OTHER-EXPENSES> 2,399,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,721
<INCOME-PRETAX> (2,795)
<INCOME-TAX> 10,000
<INCOME-CONTINUING> (11,079)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,079)
<EPS-PRIMARY> (.001)
<EPS-DILUTED> (.001)
</TABLE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COSMETIC SCIENCES, INC.
Under Section 807 of the Business Corporation Law
of the State of New York
The undersigned, President and Secretary, pursuant to the provisions of
Section 807 of the Business Corporation Law of the State of New York, do hereby
certify as follows:
1. The name of the corporation is COSMETIC SCIENCES,
INC. (the "Corporation"). The name under which the Corporation was
formed is M.A.E. Enterprises, Inc.
2. The date of filing its original Certificate of
Incorporation with the Department of State was May 10, 1978. On
July 16, 1992 a Certificate of Amendment of Certificate of
Incorporation of the Corporation was filed pursuant to a provision
for such certificate contained in an order of the Court relative to
the Amended Joint Plan of Reorganization of the Corporation, dated
the 5th day of February, 1992 (the "Plan"), pursuant to Chapter 11
of the Code. The Plan had been confirmed as provided in said Code.
The proceeding for the reorganization of the Corporation resulting
in the aforesaid Plan and the confirmation thereof is entitled "In
re: TPC HOME CARE SERVICES, INC. d/b/a TPC HEALTH CARE SERVICES,
COSMETIC SCIENCES, INC. AND TPC HEALTH CARE MANAGEMENT SYSTEMS,
1
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INC." and the venue thereof is in the Court. The order confirming the aforesaid
plan for the reorganization of the Corporation was made on the 5th day of
February, 1992 and entered in the Clerk of the Court.
3. The Certificate of Incorporation is amended to
effect the following amendments authorized by the Business
Corporation Law:
A. The name of the Corporation shall be changed. Paragraph
"1" of the Certificate of Incorporation shall be amended in its
entirety to read as set forth below.
B. The purposes for which the Corporation is formed shall be
changed. Paragraph "2" of the Certificate of Incorporation shall
be amended in its entirety to read as set forth below.
C. The location of the office of the Corporation shall be
changed. Paragraph "3" of the Certificate of Incorporation shall be
amended in its entirety to read as set forth below.
D. The aggregate number of shares the Corporation shall have authority
to issue, shall be increased from an aggregate of twenty million (20,000,000)
shares of Common Stock, par value $.01 per share to an aggregate of sixty
million (60,000,000) shares of stock, of which fifty million (50,000,000) shares
shall be Common Stock, par value $.01 per share and ten million (10,000,000)
shares shall be Preferred Stock, par value $.01 per share.
Paragraph "4" of the Certificate of Incorporation shall be
amended in its entirety to read as set forth below.
2
<PAGE>
E. The address for service of process shall be changed.
Paragraph "5" of the Certificate of Incorporation shall be amended
in its entirety to read as set forth below.
F. The elimination of Paragraph "6" relating to the fiscal
year and the addition of a new Paragraph "6" relating to directors
liability.
4. The text of the Certificate of Incorporation as
amended heretofore is hereby restated as further amended to read as
herein set forth in full:
" (1) The name of the corporation is EXTENDED FAMILY CARE
CORPORATION (the "Corporation").
(2) The Corporation shall be authorized to engage in the business of
providing home health care services including both professional and
paraprofessional care and such other services necessary or desirable in relation
thereto. The Corporation in furtherance of its corporate purposes above set
forth, shall have all of the powers enumerated in Section 202 of the Business
Corporation Law, subject to any limitations provided in the Business Corporation
Law or any other statute of the State of New York.
(3) The office of the Corporation shall be in the County of Nassau and
State of New York.
(4) The total number of shares of stock that the Company shall have
authority to issue is sixty million (60,000,000), consisting of fifty million
(50,000,000) shares of common stock (the "Common Stock") of the par value of one
cent ($.01) each and ten million (10,000,000) shares of preferred stock (the
"Preferred Stock") of the par value of one cent ($.01) each.
Designation of Classes; Relative Rights, etc.. The
designation, relative rights, preferences and limitations
of the shares of each class are as follows:
The shares of Preferred Stock may be issued from time to time
in one or more series of any number of shares, provided that the
aggregate number of shares issued and not canceled of any and all such
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with distinctive serial designations, all
as shall hereafter be stated and expressed in the resolution or
resolutions providing for the issue of such shares of Preferred Stock
from time to time adopted by the Board of Directors pursuant to
3
<PAGE>
authority so to do which is hereby vested in the Board of Directors.
Each series of shares of Preferred Stock (a) may have such voting
powers, full or limited, or may be without voting powers; (b) may be
subject to redemption at such time or times and at such prices; (c) may
be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such
times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d)
may have such rights upon the dissolution of, or upon any distribution
of the assets of, the Company; (e) may be made convertible into or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of shares of the
Company at such price or prices or at such rates of exchange and with
such adjustments; (f) may be entitled to the benefit of a sinking fund
to be applied to the purchase or redemption of shares of such series in
such amount or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the
Company or any subsidiary, upon the issue of any additional shares
(including additional shares of such series or of any other series) and
upon the payment of dividends or the making of other distributions on,
and the purchase, redemption or other acquisition by the Company or any
subsidiary of, any outstanding shares of the Company and (h) may have
such other relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof; all as shall be
stated in said resolution or resolutions providing for the issue of
such shares of Preferred Stock. Shares of Preferred Stock of any series
that have been redeemed (whether through the operation of a sinking
fund or otherwise) or that if convertible or exchangeable, have been
converted into or exchanged for shares of any other class or classes
shall have the status of authorized and unissued shares of Preferred
Stock of the same series and may be reissued as a part of the series of
which they were originally a part or may be reclassified and reissued
as part of a new series of shares of Preferred Stock to be created by
resolution or resolutions of the Board of Directors or as part of any
other series of shares of Preferred Stock, all subject to the
conditions or restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issue
of any series of shares of Preferred Stock.
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<PAGE>
Subject to the provisions of any applicable law or of the By-laws of
the Company as from time to time amended, with respect to the closing
of the transfer books or the fixing of a record date for the
determination of shareholders entitled to vote and except as otherwise
provided by law or by the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock, the holders of
outstanding shares of Common Stock shall exclusively possess voting
power for the election of directors and for all other purposes, each
holder of record of shares of Common Stock being entitled to one vote
for each share of Common Stock standing in his or her name on the books
of the Company. Except as otherwise provided by the resolution or
resolutions providing for the issue of any series of shares of
Preferred Stock, the holders of shares of Common Stock shall be
entitled, to the exclusion of the holders of shares of Preferred Stock
of any and all series, to receive such dividends as from time to time
may be declared by the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, after payment shall have been made to the
holders of shares of Preferred Stock of the full amount to which they
shall be entitled pursuant to the resolution or resolutions providing
for the issue of any series of shares of Preferred Stock, the holders
of shares of Common Stock shall be entitled, to the exclusion of the
holders of shares of Preferred Stock of any and all series, to share,
ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Company available for distribution to
its shareholders.
Subject to the provisions of this Certificate of Incorporation and
except as otherwise provided by law, the stock of the Company,
regardless of class, may be issued for such consideration and for such
corporate purposes as the Board of Directors may from time to time
determine.
4A. No shareholder of this Corporation shall have a pre-emptive right
because of his holdings to have first offered to him any part of any of the
presently authorized shares of this Corporation hereafter issued, optioned or
sold or any part of any bonds of this Corporation convertible into shares,
hereafter issued, optioned or sold by the Corporation. This provision shall
operate to defeat pre-emptive rights in all shares and classes of shares now
authorized and also to defeat pre-emptive rights in any
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and all shares and classes of shares and bonds convertible into shares which
this Corporation may be hereafter authorized to issue by an amended certificate
duly filed. Thus, any and all of the shares of this Corporation presently
authorized and any and all of the shares or bonds of this Corporation which may
hereafter be authorized may at any time be issued, optioned and contracted for
sale, and/or sold and disposed of by direction of the directors of this
Corporation to such persons and upon such terms and conditions as may to the
directors seem proper and advisable without first offering the shares or bonds
or any part thereof to existing shareholders.
(5) The Secretary of State of the State of New York is designated as
the agent of the Corporation upon whom process against it may be served. The
post office address to which the Secretary of State shall mail a copy of any
such process served upon him is to the Corporation, 1 Old Country Road, Carle
Place, New York 11514.
(6) To the fullest extent permitted by the New York Business
Corporation Law as presently in effect or hereafter amended, a director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for damages for any breach of duty as a director. Any repeal or
modification of this Article by the shareholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification. "
5. The manner in which this Amended and Restated Certificate
of Incorporation was authorized was by the unanimous vote of the Board of
Directors and, as to amendments as to which shareholder vote is required,
followed by the vote of a majority of the holders of all issued and outstanding
shares entitled to vote thereon.
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IN WITNESS WHEREOF, the undersigned have hereunto signed their names
and affirm that the statements made herein are true under the penalties of
perjury, this 25th day of September, 1996.
/s/ Mary Ann Page
Mary Ann Page,
President
/s/ Robert Kohlmeyer
Robert Kohlmeyer,
Secretary
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AMENDED AND RESTATED CERTIFICATE INCORPORATION
OF
COSMETIC SCIENCES, INC.
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Under Section 807 of the Business Corporation Law
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Meltzer, Lippe, Goldstein, Wolf & Schlissel, P.C.
190 Willis Avenue
Mineola, New York 11501
Attention: Blanche S. Berkowitz, L.A.
8
RECEIVABLES SECURITY AGREEMENT
between
COSMETIC SCIENCES, INC.
and
ARBOR HOME HEALTHCARE HOLDING LLC
Dated as of September 6, 1996
<PAGE>
RECEIVABLES SECURITY AGREEMENT
RECEIVABLES SECURITY AGREEMENT, dated as of September 6, 1996 (as
modified, supplemented or amended from time to time, this "Agreement"), between
COSMETIC SCIENCES, INC., a New York corporation (together with its successors
and permitted assigns, the "Grantor") and ARBOR HOME HEALTHCARE HOLDING LLC (the
"Secured Party"). Capitalized terms used without definition herein shall have
the meaning set forth in Article V.
W I T N E S S E T H:
WHEREAS, the Secured Party is concurrently herewith loaning $250,000 to
the Grantor, such loan (the "Loan") to be evidenced by a Note of even date
herewith (the "Note"); and
WHEREAS, to induce the Secured Party to make the Loan, the Grantor has
agreed to grant the Secured Party a security interest in certain assets of the
Grantor
NOW, THEREFORE, in consideration of the benefits accruing to the
Grantor, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Grantor hereby makes the
following representations and warranties to the Secured Party and hereby
covenants and agrees with the Secured Party as follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As collateral security for the
prompt and complete payment and performance when due (whether by acceleration or
otherwise) of all of its Obligations, the Grantor does hereby pledge, assign and
transfer unto the Secured Party, and does hereby grant to the Secured Party a
continuing security interest in, and a right of setoff against, all of the
right, title and interest of the Grantor in, to and under all of the following,
whether now owned by the Grantor or hereafter from time to time acquired and
whether now existing or hereafter coming into existence, and wherever located:
(i) each and every Receivable, (ii) all Contracts, together with Contract Rights
arising thereunder, and (iii) all Proceeds and products of any and all of the
foregoing (all of the above collectively, the "Collateral").
(b) The security interest of the Secured Party under this Agreement
extends to all Collateral of the kind which is the subject of this Agreement
which the Grantor may acquire at any time during the continuation of this
Agreement.
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1.2. Power of Attorney. The Grantor hereby constitutes and appoints the
Secured Party its true and lawful attorney, irrevocably, with full power after
the date hereof (in the name of the Grantor or otherwise) to act, require,
demand, receive, compound and give acquittance for any and all monies and claims
for monies due or to become due to the Grantor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Secured Party may deem to be necessary or advisable to protect the
interests of the Secured Party, which appointment as attorney is coupled with an
interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Grantor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by the Grantor to the Secured Party hereby in respect of the
Collateral have been accomplished except to the extent arrangements have been
made to make such filings, registrations and recordings which arrangements are
satisfactory to the Secured Party in its sole discretion and, upon the
completion of such filings, registrations and recordings the security interest
granted to the Secured Party pursuant to this Agreement in and to the Collateral
of the Grantor will constitute a perfected security interest therein superior
and prior to the rights of all other Persons therein and subject to no other
Liens and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests.
2.2. No Liens. The Grantor is, and as to Collateral acquired by it from
time to time after the date hereof the Grantor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby) and the
Grantor shall defend its Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein adverse to the
Secured Party.
2.3. Other Financing Statements. There is no financing
statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any
interest of any kind in the Collateral and so long any of the
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Obligations remain unpaid, the Grantor will not execute or authorize to be filed
in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by the Grantor.
2.4. Chief Executive Office; Records. The chief executive office of the
Grantor is located at One Old Country Road, Carle Place, New York 11514.
Documents evidencing all Receivables and Contract Rights of the Grantor and the
books of account and records of the Grantor relating thereto are, and will
continue to be, kept at the chief executive office. All Receivables and Contract
Rights of the Grantor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, the office location described above.
2.5. Trade Names; Change of Name. The Grantor does not have or operate
in any jurisdiction under, or in the preceding 12 months has not had nor
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name and "Extended Family Care Corporation". The Grantor
shall not change its legal name or assume or operate in any jurisdiction under
any trade, fictitious or other name other than Extended Family Care Corporation.
2.6. No Sale, Merger, Etc. Grantor shall not directly or indirectly
sell, lease, transfer, abandon or otherwise dispose of all or any substantial
portion of its property or assets (except in the ordinary course of business) or
consolidate or merge with or into any other entity or permit any other entity to
consolidate or with or into it and Grantor shall at all times preserve, renew
and keep in full force and effect its existence as a corporation and the rights
and franchises with respect thereto. Furthermore, it shall be a default
hereunder if there shall be any change in the current ownership of Grantor,
except a change in ownership to Secured Party.
ARTICLE III
SPECIAL PROVISION CONCERNING
RECEIVABLES; CONTRACT RIGHTS
3.1. Additional Representations and Warranties. As of the time when
each of its accounts receivable arises, the Grantor shall be deemed to have
represented and warranted that such receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be and that all papers and documents (if any) relating thereto (i)
will represent the genuine, legal, valid and binding obligation of the account
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<PAGE>
debtor, evidencing indebtedness unpaid and owed by the respective account debtor
arising out of the performance of labor or services, (ii) will be the only
original writings held by the Grantor evidencing and embodying such obligation
of the account debtor named therein (other than copies created for general
accounting purposes) and (iii) will evidence true and valid obligations,
enforceable in accordance with their respective terms.
3.2. Maintenance of Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of its Receivables and
Contracts, including the originals of all documentation (including each
Contract) with respect thereto, records of all payments received, all credits
granted thereon, all merchandise returned and all other dealings therewith, and
the Grantor will make the same available to the Secured Party for inspection, at
the Grantor's own cost and expense, at any and all reasonable times upon demand.
At any time and whether or not an Event of Default has occurred and is
continuing, upon the request of the Secured Party, the Grantor shall, at its own
cost and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, copies of all documents evidencing the
Receivables and all Contracts, such copies, if requested by the Secured Party,
to be certified as true and complete by an appropriate officer of the Grantor)
and such books and records to the Secured Party or to its representatives
(copies of which evidence and books and records may be retained by the Grantor).
If the Secured Party so directs, the Grantor shall legend, in form and manner
reasonably satisfactory to the Secured Party, the Receivables and Contracts, as
well as books, records and documents of Grantor evidencing or pertaining to such
Receivables and Contracts with an appropriate reference to the fact that such
Receivables and Contracts have been assigned to the Secured Party and that the
Secured Party has a security interest therein.
3.3. Direction to Account Debtors; Contracting Parties, etc. If the
Secured Party so directs the Grantor and whether or not an Event of Default has
occurred and is continuing, the Grantor agrees (x) to cause all payments on
account of the Receivables and Contracts to be made directly to an account
established by and with the Secured Party, or at Secured Party's option, by and
with Grantor subject to withdrawal by Secured Party only, except for Grantor's
indorsement when required and (y) that the Secured Party may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x). Without notice to or assent by the Grantor, the Secured Party may
apply any or all amounts then in, or thereafter deposited in, the account
referred to in clause (x) in the manner provided in Section 4.4 of this
Agreement. The costs and expenses (including attorneys' fees)
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<PAGE>
of collection, whether incurred by the Grantor or the Secured
Party, shall be borne by the Grantor.
3.4. Modification of Terms, etc. The Grantor shall not rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any material term thereof or make any material adjustment with respect
thereto, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto, or sell any
Receivable or Contract, or interest therein, without the prior written consent
of the Secured Party, except as permitted by Section 3.5 hereof. The Grantor
will duly fulfill all obligations on its part to be fulfilled under or in
connection with the Receivables and Contracts and will do nothing to impair the
rights of the Secured Party in the Receivables or Contracts.
3.5. Collection. The Grantor shall endeavor to cause to be collected
from the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts which are
delinquent, such amounts to be collected in accordance with generally accepted
lawful collection procedures) any and all amounts owing under or on account of
such Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Receivable or
under such Contract. The costs and expenses (including, without limitation,
attorneys' fees) of collection whether incurred by the Grantor or the Secured
Party shall be borne by the Grantor.
3.6. Instruments. If the Grantor owns or acquires any Instrument
constituting Collateral and representing indebtedness in an aggregate principal
amount of not less than $1,000, the Grantor will within 10 Business Days notify
the Secured Party thereof, and upon request by the Secured Party promptly
deliver such Instrument to the Secured Party appropriately endorsed to the order
of the Secured Party as further security hereunder.
3.7. Protection of Secured Party's Security. Except as expressly
permitted herein, the Grantor will do nothing to impair the rights of the
Secured Party in the Collateral. The Grantor assumes all liability and
responsibility in connection with the Collateral acquired by it and the
liability of the Grantor to pay its Obligations shall in no way be affected or
diminished by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to the Grantor.
3.8. Further Actions. The Grantor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the
Secured Party from time to time such lists, descriptions and
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<PAGE>
designations of its Collateral, bills of lading, documents of title, vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, which the Secured Party deems reasonably appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral.
3.9. Financing Statements. The Grantor agrees to execute and deliver to
the Secured Party such financing statements, in form acceptable to the Secured
Party, as the Secured Party may from time to time reasonably request or as are
necessary or desirable in the opinion of the Secured Party to establish and
maintain a valid, enforceable, security interest in the Collateral as provided
herein and the other rights and security contemplated hereby all in accordance
with the Uniform Commercial Code as enacted in any and all relevant
jurisdictions or any other relevant law. The Grantor will pay any applicable
filing fees and related expenses. The Grantor authorizes the Secured Party to
file any such financing statements without the signature of the Grantor to the
extent permitted by law.
ARTICLE IV
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
4.1. Remedies; Obtaining the Collateral Upon Default. The Grantor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory requirements of applicable law
then in effect, the Secured Party, in addition to any rights now or hereafter
existing under this Agreement or applicable law, shall have all rights as a
secured creditor under the Uniform Commercial Code in all relevant jurisdictions
and may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from the Grantor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
the Grantor's premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of the Grantor; and
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation constituting the Collateral to make any
payment required by the terms of such instrument or agreement directly
to the Secured Party; and
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<PAGE>
(c) sell, assign or otherwise liquidate, or direct the Grantor
to sell, assign or otherwise liquidate, any or all of the Collateral or
any part thereof, and take possession of the proceeds of any such sale
or liquidation; and
(d) take possession of the Collateral or any part thereof, by
directing the Grantor in writing to deliver the same to the Secured
Party at any place or places designated by the Secured Party, in which
event the Grantor shall at its own expense:
(i) forthwith cause the same to be moved to the place or
places so designated by the Secured Party and there
delivered to the Secured Party,
(ii) store and keep any Collateral so delivered to the Secured
Party at such place or places pending further action by the
Secured Party as provided in Section 4.2 hereof, and
(iii) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition;
it being understood that the Grantor's obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly,
upon application to a court of equity having jurisdiction, the Secured
Party shall be entitled to a decree requiring specific performance by
the Grantor of said obligation.
4.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Secured Party under or pursuant to Section 4.1 hereof and any
other Collateral whether or not so repossessed by the Secured Party, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Secured Party may, in compliance
with any mandatory requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise disposed of,
in the condition in which the same existed when taken by the Secured Party. Any
such disposition which shall be a private sale or other private proceedings
permitted by such requirements shall be made upon not less than 10 days' written
notice to the Grantor specifying the time at which such disposition is to be
made and the
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<PAGE>
intended sale price or other consideration therefor, and shall be subject, for
the 10 days after the giving of such notice, to the right of the Grantor or any
nominee of the Grantor to acquire the Collateral involved at a price or for such
other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days' written
notice to the Grantor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Secured Party's option, be subject to reserve), after publication of
notice of such auction not less than 10 day's prior thereto in a newspaper in
general circulation in New York City. To the extent permitted by any such
requirement of law, the Secured Party may bid for and become the purchaser of
the Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the Grantor (except to the extent of surplus
money received as provided in Section 4.4 hereof). If, under mandatory
requirements of applicable law, the Secured Party shall be required to make
disposition of the Collateral within a period of time which does not permit the
giving of notice to the Grantor as hereinabove specified, the Secured Party need
give the Grantor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law.
4.3. Waiver of Claims. Except as otherwise provided in this Agreement,
THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING POSSESSION OR THE
SECURED PARTY'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH GRANTOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the
Grantor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of
possession except any damages which are the direct result of
the Secured Party's gross negligence or wilful misconduct;
(b) all other requirements as to the time, place and
terms of sale or other requirements with respect to the
enforcement of the Secured Party's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and the
Grantor, for itself
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<PAGE>
and all who may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Grantor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Grantor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Grantor.
4.4. Application of Proceeds. Except as otherwise herein expressly
provided and except as provided below in this Section 4.4, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Secured Party under
Article III hereof or this Article IV, shall be applied by the Secured Party:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Secured Party and the fees and
expenses of its agents and counsel, and all expenses incurred and
advances made by the Secured Party in connection therewith;
Next, to the payment in full of the Obligations; and
Finally, to the payment to the Grantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Section 4.4, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Grantor or any issuer of or obligor on
any of the Collateral.
4.5. Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Secured Party shall be in
addition to every other right, power and remedy specifically given
under this Agreement, the Note or any document related thereto or
now or hereafter existing at law or in equity, or by statute and
each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed
expedient by the Secured Party. All such rights, powers and
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remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Secured Party in the exercise of any such
right, power or remedy and no renewal or extension of any of the Obligations
shall impair any such right, power or remedy or shall be construed to be a
waiver of any Event of Default or an acquiescence therein. No notice to or
demand on the Grantor in any case shall entitle the Grantor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other further action in any
circumstances without notice or demand. In the event that the Secured Party
shall bring any suit to enforce any of its rights hereunder and shall be
entitled to judgment, then in such suit the Secured Party may recover reasonable
expenses, including attorneys' fees, and the amounts thereof shall be included
in such judgment.
ARTICLE V
DEFINITIONS
The following terms shall have the meanings herein specified unless the
context otherwise requires. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined.
"Business Day" means any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law to close.
"Contracts" shall mean all contracts between the Grantor and one or
more additional parties relating to the Receivables.
"Contract Rights" shall mean all rights of the Grantor (including
without limitation all rights to payments and indemnities) under each Contract.
"Event of Default" shall mean the Grantor's failure to pay when due any
amounts owing to the Secured Party under the Notes or under any Obligations or
to perform any of its covenants or agreements hereunder or under any other
document creating any Obligations.
"Instrument" shall have the meaning provided under the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement,
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lessor's interest in a financing lease or analogous instrument, in,
of, or on the Grantor's property.
"Obligations" shall mean: (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of the principle
of and interest on the Note; (ii) any and all loans, indebtedness, liabilities
and obligations of any kind owing by Grantor to the Secured Party, however
evidenced, whether now existing or hereafter arising, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed
or extended, and whether arising directly or acquired from others, and
including, without limitation, charges, commissions, interest, expenses, costs
and attorney's fees under any of the foregoing; (iii) any and all sums advanced
by the Secured Party in order to preserve the Collateral or preserve its
security interest in the Collateral; and (iv) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of the Grantor referred to in clauses (i), (ii) and (iii), the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing or realizing on the Collateral, or of any exercise by the
Secured Party of its rights hereunder, together with reasonable attorneys' fees
and court costs.
"Person" shall mean any individual, corporation, partnership, company,
voluntary association, joint venture, trust, limited liability company, trust,
governmental agency or any other entity.
"Proceeds" shall have the meaning provided under the Uniform Commercial
Code as in effect on the date hereof in the State of New York or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Secured Party or the Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (iii) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by Grantor and all of the Grantor's rights to
payment for goods sold or leased or services performed by the Grantor, whether
now in existence or arising from time to time hereafter, including, without
limitation,
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rights evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness or security, together with (a) all
security pledged. assigned, hypothecated or granted to or held by the Grantor to
secure the foregoing, (b) all of the Grantor's right, title and interest in and
to any goods, the sale of which gave rise thereto, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith, (e) all books, records, ledger cards,
and invoices relating thereto, (f) all evidences of the filing of financing
statements and other statements and the registration of other instruments in
connection therewith and amendments thereto, notices to other creditors or
secured parties, and certificates from filing or other registration officers,
(g) all credit information, reports and memoranda relating thereto, and (h) all
other writings related in any way to the foregoing.
ARTICLE VI
MISCELLANEOUS
6.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed to such party
at its address set forth opposite its signature below, or at such other address
as any of the parties hereto may hereafter notify the others in writing.
6.2. Waiver; Amendment. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any
manner whatsoever except in a writing signed by the parties hereto.
6.3. Obligations Absolute. The obligations of the Grantor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Grantor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, the Note or any other document;
or (c) any amendment to or modification of the Note or any security for any of
the Obligations, whether or not the Grantor shall have notice or knowledge of
any of the foregoing. The rights and remedies of the Secured Party herein
provided are cumulative and not exclusive of any rights or remedies which the
Secured Party would otherwise have.
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6.4. Successors and Assigns. This Agreement shall be binding upon the
Grantor and its successors and assigns and shall inure to the benefit of the
Secured Party and its successors and assigns, provided that the Grantor may not
transfer or assign any or all of its rights or obligations hereunder without the
written consent of the Secured Party. All agreements, statements,
representations and warranties made by the Grantor herein or in any certificate
or other instrument delivered by the Grantor or on its behalf under this
Agreement shall be considered to have been relied upon by the Secured Party and
shall survive the execution and delivery of this Agreement regardless of any
investigation made by the Secured Party.
6.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any
provision of this Agreement.
6.6. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
6.7. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.
6.8. Grantor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Grantor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Secured Party shall not have any obligations or liabilities
with respect to any Collateral by reason of or arising out of this Agreement,
nor shall the Secured Party be required or obligated in any manner to perform or
fulfill any of the obligations of the Secured Party under or with respect to any
Collateral.
6.9 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral hereof are insufficient to cover the costs
and expenses of such realization and the payment in full of the Obligations, the
Grantor shall remain liable for any deficiency in respect of the Obligations.
6.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on
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separate counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
Grantor:
COSMETIC SCIENCES, INC.
By:/s/Joseph Heller
Name:Joseph Heller
Title:Vice President
Address:
One Old Country Road
Carle Place, NY 11514
Secured Party:
ARBOR HOME HEALTHCARE HOLDING LLC
By:/s/ Ivan Kaufman
Name: Ivan Kaufman
Title: Member
Address:
333 Earle Ovington Blvd.
Uniondale, NY 11553
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STATE OF NEW YORK )
ss.:
COUNTY OF NASSAU )
On this 6th day of September, 1996, before me personally appeared
Joseph Heller, to be personally known, who, being by me duly sworn,
says that he is Vice President of Cosmetic Sciences, Inc.; that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
/s/Derek Warner
Notary Public
My Commission Expires:
[Notary Seal]
STATE OF NEW YORK )
ss.:
COUNTY OF NASSAU )
On this 6th day of September, 1996, before me personally appeared Ivan
Kaufman, to be personally known, who, being by me duly sworn, says that he is
Member of Arbor Home HealthCare Holding LLC; that said instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
he acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.
/s/Derek Warner
Notary Public
My Commission Expires
[Notary Seal]
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<PAGE>
TO: ARBOR HOME HEALTHCARE HOLDING LLC
TPC Home Care Services, Inc. ("TPC") hereby agrees that, as a 83% owned
subsidiary of Cosmetic Sciences, Inc. ("CSI") and as consideration for the funds
which will be made available to it by CSI from time to time, including funds
made available as a result of a $250,000 loan made by Arbor Home HealthCare
Holding LLC ("Arbor") to CSI, and in order to induce Arbor to make such loan to
CSI:
(i) TPC shall become a party to that certain Receivables
Security Agreement dated September __, 1996
("Receivables Security Agreement") between CSI, as
Grantor and Arbor, as Secured Party;
(ii) TPC shall be bound in the same manner as CSI with
respect to the grant as security of all Collateral
as defined therein, and that the terms Contracts,
Contract Rights, Proceeds, Receivables and
Collateral shall include such items in the same
manner and to the same extent as if TPC was the
Grantor as defined in the Receivables Security
Agreement;
(iii) TPC shall also be bound to any duties and
obligations of the Grantor with respect to the
Collateral provided by TPC and any "Event of
Default" as defined in the Receivables Security
Agreement, will grant Arbor the same rights with
respect to Collateral provided by TPC as it has
with respect to Collateral provided by CSI,
notwithstanding that TPC is not a party to a loan
agreement or promissory note with Arbor.
TPC HOME CARE SERVICES, INC.
By:/s/ Mary Ann Page
$250,000.00 September 6, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, COSMETIC SCIENCES, INC. ("Maker"),
promises to pay to the order of ARBOR HOME HEALTHCARE HOLDING LLC ("Holder"),
the principal amount of Two Hundred Fifty Thousand ($250,000) Dollars, in lawful
money of the United States of America, together with interest at the Prime Rate
(as quoted in the Wall Street Journal) plus 3% per annum from the date hereof on
the outstanding balance hereof until payment in full. The Prime Rate shall be
determined and adjusted monthly, commencing with the date hereof. The Prime Rate
on the date hereof is 8.25%. All unpaid and accrued interest and principal shall
be payable in full on October 6, 1996; provided, however, that this Note shall
be due and payable prior to October 6, 1996, immediately upon the release of
that certain $650,000 being held in escrow pursuant to the Stock Purchase
Agreement dated June 30, 1996 between Maker, Holder and Meltzer, Lippe,
Goldstein, Wolf & Schlissel, P.C., as Escrow Agent ("MLG"), as amended August
16, 1996 (the "Stock Purchase Agreement"). If this Note has not been fully
repaid prior to such release, Maker hereby directs MLG to pay the amounts held
in such escrow directly to Holder on Maker's behalf in such amounts as necessary
to satisfy this Note in full, and only thereafter to disburse the balance of the
amounts of said escrow to Maker, and this direction shall constitute a
modification of said Stock Purchase Agreement, which is acknowledged by MLG and
Holder pursuant to Annex A hereto. All payments made pursuant to this Note shall
first be applied against accrued interest on the principal balance hereof and
any remaining amounts in reduction of the principal balance hereof.
All payments shall be made for the account of Holder, at its
offices, 333 Earle Ovington Blvd., Uniondale, New York, 11553, or at such other
place as Holder shall hereafter designate.
The obligation evidenced by this Note is entitled to the
benefit of the security described in that certain Receivables Security Agreement
dated September 6, 1996 from Maker to Holder
(the "Receivables Security Agreement").
At its option, Maker may prepay the unpaid balance hereof in
part or in full at any time and from time to time without premium or penalty of
any kind. Partial prepayments shall be applied first to the payment of accrued
interest and then to prepayment of principal in the inverse order of the
installments hereunder.
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The entire unpaid balance of this Note shall immediately be
due and payable, at the option of Holder hereof, upon the occurrence of any one
or more of the following events of default ("Events of Default"):
(a) default in the payment of any payment due hereunder, or any other
amounts due from Maker to Holder, for a period of five (5) days after the same
has become due and payable and Maker hereby waives any Notice of Default.
(b) default in the performance or observance by Maker of any covenant,
condition or provision of this Note, any other note executed by Maker to Holder,
or of the Receivables Security Agreement, beyond the applicable period of cure,
if any, provided herein or therein; or
(c) if a court having jurisdiction in the premises enters a decree or order
for relief in respect of Maker in any involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or for
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of Maker or for any substantial part of its
property, which decree for relief remains unstayed and in effect for more than
sixty (60) consecutive days; or
(d) if Maker commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of any order for relief in an involuntary case under any such law, or
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or similar official) of Maker or
for any substantial part of its property, or makes any general assignment for
the benefit of creditors.
In the event of any such Event of Default, the entire
principal sum of this Note shall become immediately due and payable, at the
option of Holder. Failure to exercise this option shall not constitute a waiver
of the right to exercise the same in the event of the same or any subsequent
default.
Upon the occurrence of any Event of Default, Holder may
protect and enforce his rights by suit in equity, by action at law, or by other
appropriate proceedings (whether for the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power or right
granted by this Note), or enforce the payment of this Note or any other legal or
equitable right.
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No delay on the part of Holder in the exercise of any power or
right under this Note shall operate as a waiver thereof, nor shall a single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. Enforcement by Holder of
any security for the payment hereof shall not constitute any election of
remedies so as to preclude the exercise of any other remedy by Holder.
Except as set forth in the proceeding paragraph, all
stipulations and agreements set forth herein by or on behalf of Maker or Holder
shall bind the successors and assigns of such party, and shall inure to the
benefit of Maker or Holder, as the case may be, and their respective successors
and assigns.
Any notice to be given to or served upon Maker or Holder must
be in writing and may be given by personal delivery or by certified or
registered mail and shall be deemed to have been given when delivered to and
received by the party to whom it is addressed. Such notices shall be given to
the parties hereto at the addresses set forth below. Any party hereto may, at
any time, by giving five (5) days' written notice to the other party hereto,
designate any other address in substitution of the following address to which
such notice shall be given:
To Holder:
Arbor Home HealthCare Holding LLC
333 Earle Ovington Blvd.
Uniondale, New York 11553
With a copy to:
Richard A. Lippe, Esq.
Meltzer, Lippe, Goldstein, Wolf & Schlissel, P.C.
190 Willis Avenue
Mineola, New York 11501
To Maker:
Cosmetic Sciences, Inc.
One Old Country Road
Suite 335
Carle Place, New York 11514
With a copy to:
Richard Lane, Esq.
One Old Country Road
Suite 430
Carle Place, New York 11514
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If any provision hereof shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and this Note
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
In the Event of Default hereunder and where this Note is given
to an attorney for collection, or if this Note shall be collected in whole or in
part through legal proceedings of any nature, Maker agrees to pay, in addition
to the unpaid principal and interest hereof, reasonable attorneys' fees and all
expenses incurred in connection with the collection of the amounts due
hereunder. In addition, in the Event of Default hereunder, interest thereafter
shall accrue hereunder at the maximum rate permitted by law.
Maker hereby waives presentment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has duly executed this Note on the date set forth above.
COSMETIC SCIENCES, INC. (MAKER)
By:/s/Joseph Heller
Joseph Heller, Vice President
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<PAGE>
ANNEX A TO PROMISSORY NOTE
The undersigned, Meltzer, Lippe, Goldstein, Wolf & Schlissel, P.C.
("MLG") and Arbor Home HealthCare Holding LLC, hereby acknowledge and agree that
the certain Stock Purchase Agreement dated June 30, 1996, as amended August 16,
1996 (the "Stock Purchase Agreement") has been further amended as provided in
the Promissory Note to which this document constitutes Annex A.
This amendment provides that certain proceeds of the escrow being
maintained by MLG pursuant to the Stock Purchase Agreement are to be released to
Arbor Home HealthCare Holding LLC under the terms and conditions specified in
said Promissory Note. Such release direction supersedes the release direction
set forth in the Stock Purchase Agreement.
Agreed to and Acknowledged:
MELTZER, LIPPE, GOLDSTEIN, WOLF &
SCHLISSEL, P.C., as Escrow Agent
By:/s/ David I. Schaffer
ARBOR HOME HEALTHCARE HOLDING LLC
By:/s/ Ivan Kaufman
Ivan Kaufman, Member
5
