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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended NOVEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number 0-11781
HOSPITAL STAFFING SERVICES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2150637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6245 NORTH FEDERAL HIGHWAY, SUITE 400
FORT LAUDERDALE, FLORIDA 33308-1900
(Address of principal executive offices)
(954) 771 - 0500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
COMMON STOCK $.001 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 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 ___
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO RULE 405
OF REGULATION S-K (SS. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND
WILL NOT 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-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] [ADDED IN RELEASE NO. 34-28869
(P. 84, 709) EFFECTIVE MAY 1, 1991, 56. F.R. 7242.]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405, 17 CFR 230.405).
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at January 31, 1996 was $11,355,227.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of January 31, 1996, 6,349,770 shares of common stock, par value $.001
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by this item will be set forth in the Proxy
Statement of the Company relating to the 1995 Annual Meeting of Stockholders and
is incorporated herein by reference.
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PART I
ITEM 1. BUSINESS
Hospital Staffing Services, Inc. and Subsidiaries (the "Company") is a
Florida corporation which was incorporated in 1981. The Company's principal
executive offices are located at 6245 North Federal Highway, Suite 400, Fort
Lauderdale, Florida 33308-1900.
GENERAL
The Company provides: (i) home health care and other in-home support
services through its "HSSI HomeCare Group"; (ii) interim staffing of nurses and
other medical personnel, primarily to hospitals through its "Travel Nurse
Group"; and (iii) rehabilitation services, including physical, occupational,
speech and other therapy services, primarily to manufacturing enterprises,
long-term care facilities, counties, school boards, home care companies and
through the Company's own clinics. These services are offered through a pool of
caregivers operating within the Company's network which, as of November 30,
1995, consisted of 26 home health care branch offices in five states, active
relationships for interim staffing needs with approximately 91 hospitals in 28
states and the U.S. Virgin Islands, and three rehabilitation clinics with two
clinics located in Georgia and one clinic located in Tennessee.
HOME CARE GROUP
SERVICES. The "HSSI HomeCare Group" offers a broad range of professional
health care and support services to meet the medical and personal needs of
individuals in their homes. These home care services provide an alternative to
institutional care. These services include specialized skilled nursing services
such as administration of infusion therapies (including chemotherapy,
antibiotics, enteral and parenteral feeding), medical social work, standard
skilled nursing services (such as changing of dressings, injections,
catheterization and administration of medication), physical therapy,
occupational therapy, speech therapy, home aide services (such as assistance
with personal hygiene, dressing and feeding), and homemaker services (such as
preparation of meals, light housecleaning and shopping). The home care services
provided by the HSSI HomeCare Group are available twenty-four hours per day,
seven days per week, on a live-in, hourly, shift or per visit basis.
Based on published industry information, the Company considers home health
care a rapidly growing and diverse industry. The National Association of
HomeCare ("NAHC") estimates that home health care was a $26.5 billion industry
in 1995. The industry has experienced an estimated annual growth rate of
approximately 12% since 1991. The primary reasons for rapid growth in the home
health care market include (i) the general aging of the U.S. population; (ii)
the realization of substantial cost savings through treatment at home as an
alternative to hospitalization; (iii) the fixed amount of Medicare reimbursement
to hospitals based upon a patient's diagnosis, regardless of the cost of
service, thereby providing hospitals with an incentive to minimize the length of
patient stays and requiring an alternative means of patient care; (iv) advances
in medical technology, which have enabled a growing number of treatments to be
provided in the home rather than requiring hospitalization; (v) the general
preference of patients to receive treatment in a familiar environment; and (vi)
the growing acceptance within the medical profession of home health care.
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HISTORY AND RECENT DEVELOPMENTS. The HSSI HomeCare Group began operation in
1990 with the Company's acquisition of the home health care division of
Continental Health Affiliates, Inc. In 1991, the Company acquired substantially
all of the assets, exclusive of accounts receivable, of CarePoint Personal
Services d/b/a CarePoint Nursing Services. The Company has been refining its
operating strategy for HSSI HomeCare Group since the 1990 acquisition. The 1992
federal investigation into the Medicare practices of the Company in Dade County,
Florida, and the suspension of Medicare reimbursement to the Company's South
Florida Medicare Providers led the Company to close down its South Florida
Medicare operations (see "Dade County Investigation and Related Matters"
herein). The situation in South Florida resulted in decreased revenue, cash flow
tensions, and a diversion of resources and management's time and focus. In
response to the financial and management strain, the Company evaluated the
profitability of its various home care operations and decided to focus its home
care business in the New England operating region (including Massachusetts, New
Hampshire and Rhode Island) and the South Central operating region (including
Tennessee and Mississippi). In keeping with this strategy, in August 1994, the
Company sold its California, New York and Arizona home care operations, and in
early fiscal 1995, the Company sold its remaining South Florida and Texas-based
branches. The South Florida branch office was sold to the Company's Chairman
and Chief Executive Officer. See Notes 2 and 6 to the accompanying consolidated
financial statements for further discussion of the acquisitions and sales of
the Company and their financial impact on the Company.
The Company's current strategy anticipates focusing on smaller acquisitions
in the New England and South Central operating regions to build the strength of
the home care business in those regions. The Company is also considering
geographic expansion beyond those regions.
BRANCHES. The home health care industry is a localized industry. Patients
and referral sources utilize home care services based in the immediate
geographic area in which the services are required. Therefore, the Company's
branch managers are responsible for the majority of the Company's home care
development and networking efforts. Additionally, the Company's computer systems
have been designed to allow the branches to handle certain administrative
functions, such as entering plans of treatment. The generation of claims,
invoices and payroll checks are performed at the regional level. This point of
service process eliminates duplicate corporate efforts with respect to those
functions and reduces the need for corporate personnel and overhead. Credit and
collections functions for private pay and insurance beneficiaries who have a
co-pay responsibility are all handled at the regional level.
As of November 30, 1995, HSSI HomeCare operated 26 branches located within
two regions: New England, encompassing Massachusetts, New Hampshire and Rhode
Island; and South Central, encompassing Tennessee and Mississippi. During fiscal
1995, the "regionalization" of the Company's New England home care operations
was completed. Consequently, as of November 30, 1995, all of the Company's home
health care operations are fully independent with complete back office
capabilities.
DEVELOPMENT AND SALES. While clients select their own home health
providers, they usually receive input from physicians, hospitals, nursing homes,
community resources, other home health care agencies, managed care programs
("HMO's"), and state programs (collectively, "primary referral sources").
Therefore, the Company's coordinating and liaising efforts are predominantly
directed at the primary referral sources. The Company believes the growth of its
business depends
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on its ability to maintain and enhance current working relationships and
establish and maintain new working relationships with these primary referral
sources.
Because the Company believes relationships with primary referral sources
must be established on a local basis, the Company spends considerable resources
in hiring branch clinical personnel and training such personnel in coordinating
and liaison skills. While coordinating and liaising are primarily the
responsibility of the branch office, members of the Company's senior management
(including regional managers) devote considerable time in assisting the branch
offices with these efforts.
RECRUITMENT. The Company recruits personnel through its in-house corporate
recruiting department in Fort Lauderdale, Florida. That department maintains a
file of registered and licensed practical nurses, nurses' aides, home health
aides and companions, and physical, speech and occupational therapists available
for assignment. The Company recruits its personnel principally through referrals
from its current personnel and through advertisements. The Company supplements
its recruiting efforts with periodic direct mail solicitations to nursing
schools, therapy schools and certified aide training programs. The Company
conducts qualified educational training for its staff. Management believes that
the experience and reputation of the Company for recruiting qualified medical
personnel for its Travel Nurse Group have enhanced the Company's ability to
recruit home health care personnel for the HSSI HomeCare Group. Demand for
physical, occupational and speech therapists typically exceeds supply. The HSSI
HomeCare Group has occasionally been unable to capitalize on opportunities due
to the shortage of such therapists. The HomeCare Group has sought to address
this shortage by offering attractive compensation packages to needed therapists.
SEASONALITY. Traditionally, the business of the HSSI HomeCare Group has not
been subject to material seasonal fluctuations.
COMPETITION. The HSSI HomeCare Group faces competition from freestanding,
independently owned Medicare/Medicaid certified and non-certified home health
providers, hospital-based home health agencies, home care providers owned by or
affiliated with other proprietary chains, and a variety of public and
semi-public home care providers, such as home care divisions of state public
health departments and visiting nurse associations. Some of these entities or
their sponsoring organizations have capital resources substantially greater than
those of the Company.
Recent industry data published by NAHC indicates that there are in excess
of 17,500 home care agencies (including home health agencies, home care aide
organizations, and hospices) in the United States. This number of agencies
reflects growth of home health care from, approximately, a $2 billion industry
in 1980 to a $26.5 billion industry in 1995. The Company believes that no one
company controls more than 10% of the current home care market.
Since most home health care business is generated through referrals from
primary referral sources, home care providers must compete to develop
relationships with these key referral sources. Home care providers also compete
to deliver high quality, accessible, cost effective services to their customers.
Furthermore, providers must compete for the most qualified
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caregivers and also must strive to provide all of the home care services needed
in the areas they serve.
CUSTOMERS. The HSSI HomeCare Group does not depend upon a single customer
or a few customers, the loss of which would have a material adverse effect on
that group of the Company's business.
TRAVEL NURSE GROUP.
SERVICES. The Travel Nurse Group provides registered nurses and other
professional medical personnel, often referred to as "Travel Nurses", primarily
to client hospitals on a contractual basis for periods generally ranging from 8
to 52 weeks, with the average being approximately 17 weeks. Clients utilize
Travel Nurses to provide cost effective interim staff to meet predictable
fluctuations in staffing requirements. In addition, unlike daily or other very
short-term supplemental staff, Travel Nurses serve the client for a long enough
period to function as permanent hospital staff. The ability of Travel Nurses to
function as permanent staff improves the continuity and consistency of patient
care and reduces the overall administration, orientation and supervisory
requirements of the clients' permanent staff.
Each of the programs administered by the Travel Nurse Group includes (i)
recruitment and pre-screening of medical personnel to fill specific positions;
(ii) verification of valid state licenses and immigration status; (iii)
completion of all applications and other administrative work; (iv) coordination
of travel arrangements; and (v) preliminary orientation. The Company typically
employs its Travel Nurses on a full-time basis for the period of each
assignment. The Company also provides Travel Nurses with housing (or a housing
subsidy) while on assignment, travel allowance, and other employee benefits,
including malpractice and health insurance at little or no cost to the employee.
HISTORY AND RECENT DEVELOPMENT. The Company has provided Travel Nurses to
clients since 1981. All back office support for the Travel Nurse Group is
provided through the Corporate office. When the Company entered the home care
field in 1990, the Company shifted its primary focus to the development and
operation of the HSSI HomeCare Group. The Company has developed the strategy and
support for its home care operations and is now placing a renewed emphasis on
the Travel Nurse Group. The Company anticipates an increase in marketing efforts
for the Travel Nurse Group and continued efforts to expand and increase this
line of business. This marketing effort will reflect and respond to the
increasing consolidation among health care providers. The Company anticipates
that, to the extent that the increased marketing and expansionary efforts result
in increases in the dollar volume of business, the Travel Nurse Group will
experience decreasing margins.
CLIENTS AND MARKETING. As of November 30, 1995, active clients of the
Travel Nurse Group consisted of approximately 91 hospitals and other clients
located in 28 states and the U.S. Virgin Islands. Travel Nurses serve both
for-profit and not-for-profit entities which range from small rural hospitals to
major teaching and research institutions. The Company's typical client is a
hospital with approximately 250 beds which is located in or near a major
metropolitan area. Approximately 48% of Travel Nurse Group revenue for the
fiscal year 1995 was from two hospitals and two small nursing home clients
located in the U.S. Virgin Islands. The Company presently provides services to
its U.S. Virgin Island client based on verbal agreements. However,
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a written agreement with the St. Thomas Hospital has been negotiated, and will
be effective upon its signing by the appropriate U.S. Virgin Island government
officials. The U.S. Virgin Island business and revenue has increased over the
years relative to total Travel Nurse Group revenue.
The Company markets Travel Nurses principally through its corporate sales
department. The Company's marketing approach targets hospitals in major
metropolitan areas and in other areas which are attractive from a patient census
perspective and which also appeal geographically to Travel Nurses. In addition,
the Travel Nurse Group targets niche markets, including home health agencies,
clinics and per diem staffing companies. Marketing activities are conducted
primarily by telephone contact, direct mail, attendance at national and regional
conventions, seminars, and direct contact with providers of Healthcare
Services.
Through years of recruiting nurses and other medical personnel, the Company
has developed an extensive computer database of available, qualified personnel
which enhances the Company's ability to match personnel with a client's specific
needs. The Company believes its database serves as a competitive advantage in
the interim staffing market.
RECRUITMENT. The Company recruits personnel for its Travel Nurse Group
through its in-house corporate recruiting department. Recruiting methods
include national and local advertising, attendance at national and regional
conventions, personal and professional referrals and the sponsoring of local
seminars in selected cities throughout the United States and Canada.
Approximately one-third of the Company's current Travel Nurses are recruited
from Canada.
The Company maintains an extensive database of information on qualified
nurses and medical personnel. The aggregate database contains information on
approximately 15,000 pre-screened personnel classified by skill, experience,
and choice of and availability for assignments. The Company updates the database
on a regular basis. When called upon to fill an assignment, the Company's
recruiters can readily access this database to appropriately match a client's
staffing needs with available personnel. Nurses and other medical personnel
listed in the Company's database generally do not work exclusively for the
Company.
The Company believes the traveling nurse program is attractive to nurses
because it provides an opportunity to combine work and travel. Demand for
medical professionals in the Travel Nurse business is high. The Travel Nurse
Group has addressed this shortage by offering attractive compensation packages
to needed personnel, particularly physical, speech and occupational therapists.
In addition, the Travel Nurse Group has not been able to capitalize on all of
its opportunities due to the shortage of personnel.
SEASONALITY. Historically, the Company's Travel Nurse business in the U.S.
Virgin Islands has not been subject to material seasonal fluctuations. However,
the Travel Nurse business in the rest of the United States has been seasonal,
with demand for Travel Nurses being highest in the first and fourth quarters of
the fiscal year (September through February) and lowest in the third quarter of
the fiscal year (June through August). This is due largely to increased demand,
particularly during the peak vacation period in Florida, coupled with an
increase in the availability of nurses during the first and fourth quarters of
the Company's fiscal year.
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COMPETITION. The Company's Travel Nurse Group competes with other
professional medical recruitment organizations which offer the same or similar
services provided by the Company. The Company's management believes that the
Travel Nurse portion of the supplemental staffing market is highly fragmented.
Management also estimates that the ten largest traveling nurse firms, which
includes the Company, account for approximately 60% of the market. Certain of
the Company's competitors have capital or other resources greater than those
available to the Company. Competition for hospital clients is generally based
upon the ability to provide qualified nurses and medical personnel on a timely
basis to a hospital in a cost-competitive manner. Location of assignment,
compensation and benefits are generally the principal factors considered by
nurses and medical personnel when determining whether to become a traveling
professional. The Company believes that it can effectively compete in the Travel
Nurse market because of its long-standing position in the industry and
established name recognition.
REHABILITATION GROUP
On February 15, 1995, the Company acquired certain assets of a therapy
company. As a result, the Company now has a rehabilitation line of business. The
rehabilitation services offered by the Company include physical, occupational,
speech and other therapy services, and are provided to manufacturing
enterprises, long-term care facilities, hospitals, school boards, home care
companies and through the Company's own clinics. The Company currently owns
three clinics, two located in Georgia and one located in Tennessee.
REIMBURSEMENT AND PAYMENT SOURCES
HOME HEALTH CARE AND REHABILITATION SERVICES.
GENERAL. Most of the revenues of the Company are derived from Medicare,
Medicaid, and other third-party payors, including local government health care
programs, commercial insurance carriers, managed care entities, and nursing
homes. The Company obtains an assignment of benefits from each patient which
enables the Company to be paid directly by third-party payors for the
reimbursable amounts of its charges. The Company's experience has been that
insurance carriers typically reimburse between 80% to 100% of the Company's
charges, and that the coverage policies may impose payment limitations. Where
coverage policies do not provide coverage for 100% of the Company's charges, the
balance of the Company's charges are the responsibility of the patient. Where
patients have more than one source of coverage, the portion of the Company's
charges that are not covered by a primary payor may be covered by a secondary
payor.
The Company reasonably expects to generate sufficient revenues from its
third-party payors to cover its expenses. However, third-party reimbursement and
coverage policies, and federal and state regulations, may change. Such
unanticipated changes may affect the Company's expectations. Significant changes
may be made in Medicare and other third-party payor programs, which changes
could have a material impact on the Company's financial condition.
Legislation has been or may be introduced in the Congress of the United
States which, if enacted, could affect the financial operations of the Company
by, for example, altering reimbursement by third-party payors such as Medicare
and Medicaid, or by encouraging the growth of managed care networks. One such
budget proposal would impose a prospective payment system applicable to
Medicare-reimbursed home health services, and would include a "fail-safe"
mechanism to automatically reduce all Medicare spending if certain federal
budget
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projections are not realized. It is impossible to predict whether these or any
other legislative or regulatory proposals will be enacted or promulgated, and if
so, whether such changes would affect the Company's ability to remain
competitive and/or the Company's level of reimbursement for medical services
rendered by the Company.
While occasional funding delays occur with respect to governmental payor
sources, the Company generally has had adequate external funds available under
its credit facility to finance temporary buildups in accounts
receivable. In the case of Medicare, which is a cost-reimbursement program, the
interest charges the Company incurs on outside borrowings are reimbursed to the
Company to the extent that such charges are within the Medicare allowable cost
limits.
MEDICARE. A substantial portion of the revenues of the Company are derived
from the federal Medicare program. Title XVIII of the Social Security Act
authorizes Part A of the Medicare program, the health insurance program that
pays for home health care services for covered persons (generally, those aged 65
and older and the long-term disabled). Home health care providers, including the
Company, may participate in the Medicare program subject to certain conditions
of participation and upon acceptance of a provider agreement by the Secretary of
the Department of Health and Human Services. Only enumerated services, upon the
satisfaction of certain coverage criteria, are eligible for Medicare
reimbursement as a Medicare "provider".
Currently, Medicare Part A reimburses providers for certain costs for
certain home health care visits to eligible Medicare beneficiaries. There is no
limit to the number of home health visits a beneficiary may receive. Covered
services include part-time or intermittent skilled nursing care; physical,
occupational, or speech therapy; medical social services; part-time or
intermittent services of a home health aide; and certain medical supplies.
Reimbursement is made on a reasonable cost basis subject to program-imposed
cost per visit limitations applicable to each type of home health service.
Medicare reimbursement does not include a profit factor. Medicare providers are
subject to periodic audits of charges submitted for reimbursement, which could
result in recoupment of payments previously made to the provider, or increases
in payments to the provider.
Medicare providers are also subject to regulation by state health care
agencies, which award operating licenses and perform certain delegated
administrative functions including certification (See "Regulation"). Failure to
remain in compliance with any program requirements may subject the Medicare
provider to fines, suspensions, or termination from the Medicare program. The
Company is Medicare certified in its current home health care service areas.
Management of the Company believes it is in material compliance with all
relevant licensure and certification requirements imposed by those states. In
areas where the Company is not certified as a Medicare provider, it may provide
home health personnel on a subcontract basis to certified home health care
providers, who in turn receive Medicare reimbursement.
The Company closed its South Florida Medicare home health operations
subsequent to fiscal year 1992 as a result of a suspension of Medicare payments
relative to the South Florida operation. While the suspension of Medicare
payments applied to all South Florida Medicare home health operations, to the
best of the Company's knowledge, the related federal investigation
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did not involve any of the Company's operations outside of Dade County, Florida
(See "Dade County Investigation and Related Matters"). As a result of the sale
or nonrenewal of certain of the Company's Medicare certifications, the Company
is no longer Medicare certified in Dade, Broward, and Palm Beach Counties,
Florida (See "Regulation").
MEDICAID. The Company derives a portion of its revenue from Medicaid
reimbursement. Pursuant to the Medicaid program, the federal Government
supplements funds provided by the various states for medical assistance to the
indigent. Payment for home health care services rendered to eligible Medicaid
recipients is made in an amount determined in accordance with procedures and
standards established by state law under federal guidelines. States differ as to
reimbursement policies and rates. However, in all states where the Company
currently provides home health care services to Medicaid recipients, the Company
is reimbursed on a fee schedule or prospective charge rate for its services.
Medicaid reimbursement rates may be reduced in response to state economic and
budgetary constraints.
TRAVEL NURSE GROUP.
The Travel Nurse Group's services are paid for directly by clients. Since
the Company's inception in 1981, the Company has not experienced significant
problems collecting its accounts receivable in a timely manner from its client
hospitals other than those in the U.S. Virgin Islands. The Company's accounts
receivable from the U.S. Virgin Islands was approximately $3.0 million as of
November 30, 1995 (see Note 11 to the accompanying consolidated financial
statements). As of January 31, 1996, approximately $2.2 million of the November
30, 1995 outstanding receivable balance from these customers remained unpaid, of
which approximately $507,000 has been outstanding for greater than 180 days.
Delayed receipts from the U.S. Virgin Islands sometimes requires the Company to
delay payment to its vendors.
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NET REVENUE BY PAYOR SOURCE. While the Company does not, in all cases,
track revenue by payor source, the following chart sets forth the Company's
estimated percentage breakdown of net revenue by payor source for the five years
ended November 30, 1995:
1995 1994 1993(1) 1992 1991
---- ---- ------- ---- ----
HOME HEALTH CARE
Medicare 59% 49% 44% 53% 44%
Medicaid(2) 5% 15% 14% 10% 13%
Insurance Carriers 3% 5% 6% 6% 8%
Private (Individuals) 6% 6% 6% 7% 7%
Contract 5% 7% 9% 6% 5%
Management Fees(3) -- 1% -- -- --
--- --- --- --- ---
Total 78% 83% 79% 82% 77%
TRAVEL NURSE 20% 17% 21% 18% 23%
REHABILITATION 2% -- -- -- --
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
(1) During the fiscal year ended November 30, 1993, revenue was decreased
by $6.9 million as a result of providing for estimated Medicare
reimbursement disallowances related primarily to potentially
non-reimbursable costs which were incurred during fiscal years 1991 and
1992 on subcontracted staffing for the Company's now closed Dade County
Medicare offices. See Note 7 and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for further
discussion.
(2) Medicaid revenue declined in fiscal 1995 as a result of the sale by the
Company of its California and New York home health care operations in
August 1994, and the Company's remaining Florida home health care
operations in January 1995.
(3) Represents management services to third-party owned home health
agencies.
REGULATION
The Company is subject to various city, county and state payroll,
occupational and professional licensing laws that apply to medical
professionals. Many states have laws requiring training, monitoring and
regulating of medical professionals. The nature of the services provided by the
Company potentially exposes the Company to greater risks of liability for acts
or omissions than are posed by other non-medical personnel service businesses.
The Company maintains public liability and malpractice insurance in amounts
which it deems adequate to protect against this potential risk.
The federal government and all states in which the Company currently
operates regulate various aspects of the Company's home health care business.
Home health agency certification by the Health Care Financing Administration
("HCFA") is required to enable the Company to receive reimbursement for patient
care services and supplies provided to Medicare beneficiaries. The Company has
23 branches which provide services covered by Medicare. As conditions of
participation as a home health agency in the Medicare program, HCFA requires,
among other things, satisfaction of certain standards with respect to personnel,
services and supervision, the preparation of annual budgets, cost reports and
capital expenditure plans, and the establishment
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of a professional advisory group that includes at least one practicing
physician, one registered nurse and other representatives from related
disciplines and consumer groups. The Medicare and Medicaid Patient and Program
Protection Act of 1987 authorized the Office of Inspector General ("OIG") to
exclude from the Medicare and Medicaid programs persons who engage in certain
activities. The OIG has been given authority to exclude individuals and entities
on any one of several grounds, such as criminal convictions relating to health
programs and engaging in activities subject to criminal and civil penalties
under the Social Security Act. The OIG has also authorized permissive exclusions
derived from a criminal conviction, including convictions relating to fraud,
license revocation or suspension, prior suspension or exclusion, failure to make
certain disclosures, failure to grant immediate access and failure to take
certain corrective actions. The exclusion may be for a period of three years,
but the OIG has the authority to increase or decrease the period based on the
existence of aggravating or mitigating circumstances, the degree of culpability,
prior history of sanctions or offenses and other factors as justice may require.
The regulations do not establish a precise time period for non-derivative
permissive exclusions. Rather, the OIG considers aggravating and mitigating
circumstances.
Some states have enacted Certificate of Need ("CON") legislation requiring
a provider to file an application that must be approved by the appropriate state
authority before certain health care services can be provided in an area.
Approval is dependent upon a demonstration that the need exists for such
services in the area. In states having a CON requirement, HCFA will grant
Medicare certification only to providers which have obtained a CON. As of
November 30, 1995, of the five states in which the HSSI HomeCare Group operates,
three have CON requirements. The Company operates in compliance with these
requirements. To the extent that a provider has not obtained a CON with respect
to a geographic service area in a state which requires one, the provider is
unable to bill directly for services to Medicare-covered patients in that
geographic service area. CONs limit the access of providers to markets and
impose costs, because providers who wish to serve an area subject to CON
legislation must be approved for a CON or purchase the CON of a qualified
provider. Other providers will be unable to enter that market and bill for care
to Medicare patients without obtaining a CON. As a result of the 1992 Dade
County investigation (see below), the Company sold its CONs in Broward and Palm
Beach Counties, and the CON in Dade County was not renewed.
The Corporation is also subject to various local, state and federal
environmental laws and regulations which regulate the discharge of materials
into the environment or are otherwise designed to protect the environment.
Management of the Company does not project that any material capital
expenditures will be necessary for the Company to comply with such environmental
laws and regulations.
DADE COUNTY INVESTIGATION AND RELATED MATTERS
As reflected in prior annual and quarterly reports of the Company, the
Company is involved in a federal investigation concerning the propriety of
certain of its Medicare claims. On December 3, 1992, in connection with a
federal investigation into Medicare practices by health care providers in South
Florida, the Company was served with federal search warrants. In response to the
issuance of the federal search warrants, the Company engaged legal counsel who
initiated and directed an internal investigation into its Medicare claims
processing system. The internal investigation focused on a review of the
Company's compliance with applicable Medicare laws and regulations.
12
<PAGE>
On December 15, 1992, HCFA (through its fiscal intermediary) notified the
Company of its decision to suspend reimbursement to the Company's South Florida
Medicare Providers. Such suspension of Medicare payments in South Florida was
based, in part, upon allegations of fraud arising from the federal investigation
into claims that were submitted to Medicare for services that were not rendered.
Management believes that the alleged violations and investigation relate to
services performed by the Company's Dade County provider and to the allocation
of certain corporate overhead costs to that provider and other of the Company's
providers. Neither the federal investigation nor the reason for the suspension
relates to services performed by any other of the Company's former or existing
Medicare providers.
In December 1992, due to circumstances arising from the investigation and
suspension of Medicare payments, the Company curtailed its operations in Dade,
Broward and Monroe counties, terminated its subcontracting relationships with
staffing providers in South Florida, and ultimately ceased operations.
Subsequent to December 1992, the Company continued to operate its Medicare
Provider in Palm Beach County, Florida at a substantial cost to the Company in
anticipation of the reinstatement of Medicare payments. However, the Company was
unable to reach agreement with HCFA regarding the reinstatement of Medicare
payment to its South Florida operations. Therefore in February 1993, the Company
effectively closed its South Florida Medicare operations by closing the Palm
Beach County Medicare Branch. The Company currently has no Medicare operations
in Florida.
As of November 30, 1992, based on information available to management at
that time, the Company provided for estimated Medicare reimbursement
disallowances for potentially non-reimbursable costs incurred in fiscal years
1991 and 1992. As a result of the federal investigation and HCFA suspension, in
fiscal year 1993 the Company undertook an internal review program, which
included obtaining advice and consultation from counsel specializing in Medicare
law, engaging a criminal defense attorney, and implementing a billing review and
submission program.
As of November 30, 1994, the Company had completed the billing program with
respect to all visits not subject to a claim of untimely filing. While the
majority of fiscal years 1991 and 1992 claims were billed, a number of claims
were not billed based upon the Company's determination that the claims did not
comply with the guidelines established as part of its internal review program.
Management at this time is unable to estimate when the ultimate outcome of the
fiscal years 1991 and 1992 claims submissions will be known or when the federal
investigation may conclude. Accordingly, it is unknown what ultimate impact, if
any, the outcome of these matters will have on the Company's consolidated
financial statements.
The estimated settlement amounts due to the Company as reflected in the
accompanying consolidated balance sheets, as well as net revenue from services
presented in the accompanying consolidated statements of operations, are
presented net of estimated Medicare reimbursement disallowances. The estimated
disallowances are subject to continual review and, as such, may be increased or
decreased as substantive information becomes available. Included in the
estimated settlements due from Medicare as of November 30, 1995 is approximately
$2.7 million for the Company's former South Florida Medicare operations
representing primarily claims billed by the Company subsequent to closure of its
South Florida Medicare operations. The Company believes
13
<PAGE>
that the estimated settlements due from Medicare as recorded in the Company's
consolidated balance sheet as of November 30, 1995 are realizable at their
recorded amount.
In December 1992, as a result of the South Florida Medicare investigation,
the Company's Board of Directors appointed a special committee of its Board of
Directors to work with legal counsel to oversee the defense of the federal
investigation, and to otherwise review the Company's Medicare operations in
South Florida. The special committee had the responsibility of conducting,
through counsel, an internal investigation into the underlying facts and
circumstances which gave rise to the execution of the search warrants. While the
special committee received information suggesting that employees of the Company
may have been involved in Medicare improprieties, such information has neither
been substantiated nor disproved. Future action by the Board of Directors could
include consideration of legal action against any individuals or entities whose
actions adversely affected the Company.
As of February 1996, 38 months have passed since execution of the search
warrants, and no charges have been brought against the Company or any of its
officers or employees. The Company has been engaged in discussions with
representatives from the United States Attorney's Office for the Southern
District of Florida concerning the possible resolution of the Medicare
investigation and allegations as they might affect the Company directly. There
are no assurances that these discussions will result in a successful resolution
of these matters or in a resolution that would not be materially adverse to the
Company. Even if the Company is successful in resolving the Medicare
investigation with the federal government, in accordance with its
indemnification obligations under its Articles of Incorporation and Bylaws, the
Company may continue to incur legal expenses on behalf of certain of its
existing and former employees who are individually the subject of such
investigation. In addition, the Company has been the subject of an investigation
by the Securities and Exchange Commission ("SEC") relating to the Medicare
investigation by the United States Attorney. The SEC has not instituted any
enforcement proceedings against the Company and any resolution of the matter
with the United States Attorney's Office would not necessarily resolve any
potential future action by the SEC.
BACKLOG OF ORDERS
The Company does not have a waiting list for its home care or
rehabilitation services. The Company's Travel Nurse Group has a backlog since it
is sometimes unable to immediately match a medical professional with the medical
skills or location required by the assignment.
EMPLOYEES
Exclusive of medical personnel (caregivers), as of November 30, 1995, the
Company had approximately 300 full-time employees. For the week ending November
30, 1995, the Company employed approximately 1,500 caregivers for the HSSI
HomeCare Group, the Travel Nurse Group and its rehabilitation services. These
caregivers do not necessarily work full-time shifts. The Company's employees are
not represented by a union and the management of the Company considers relations
with employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's headquarters are in office facilities at 6245 North Federal
Highway, Suite 400, Fort Lauderdale, Florida. During the fourth quarter of 1994,
in connection with the downsizing of its corporate office, the Company
terminated its old lease early and simultaneously
14
<PAGE>
entered into a new lease to reflect the reduction in its needed space. The new
lease consists of approximately 7,900 square feet and expires in January, 2000,
subject to one five-year renewal period, and provides for an annual base rental
of approximately $95,000. In connection with this early termination, the Company
agreed to a penalty of $800,000 in exchange for the landlord's release of the
Company from approximately $1.5 million in future minimum rentals. On November
1, 1994, $100,000 of the penalty was paid. The $700,000 balance was scheduled to
be paid on November 1, 1995. Instead of the scheduled payment, the Company
executed a Promissory Note under which the Company made an initial cash payment
of $150,000 plus accrued interest at the rate of 11% and agreed to make,
beginning on January 1, 1996, twelve equal monthly installments of principal and
interest in the amount of approximately $48,610. The Company has made the
January and February payments under the Promissory Note (See Note 7 to the
accompanying consolidated financial statements). In addition, the Company leases
all of its branch office locations with terms generally from one to three years.
ITEM 3. LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is subject to certain
claims and lawsuits. The Company maintains insurance in such amounts and with
such coverages and deductibles as management believes are reasonable and
prudent. The principal risks that the Company insures against are workers'
compensation, director and officer liability, personal injury, bodily injury and
professional malpractice. There is no assurance that the Company's insurance
coverage will be sufficient to cover the liabilities resulting from claims
brought against the Company.
Significant legal matters outside the ordinary course of business as of
November 30, 1995 were as follows:
WALTER ROE AND MATT SANSEVERIO, ON BEHALF OF THEMSELVES AND ALL OTHERS
SIMILARLY SITUATED VS. HOSPITAL STAFFING SERVICES, INC., LEONARD J. CASS, RONALD
A. CASS, BRIAN M. LECHNER, JACK R. KRONFELD AND ARTHUR ANDERSEN & COMPANY (Case
No. C92-4101CAL).
On October 31, 1992, plaintiffs filed a proposed class action alleging, in
general, that the Company and certain of its officers and directors violated
provisions of the Securities Exchange Act of 1934 by issuing allegedly false and
misleading statements during the period February 19, 1991, through July 15,
1992.
On October 29, 1994, the Company's Board of Directors, after evaluating the
economic merits of the continuing legal costs required to defend this class
action as well as the potential for an adverse judgment, versus the settlement
amount sought by the plaintiff class, agreed to a proposed settlement between
the Company and the plaintiff class. Based on the value of the common stock
issuance and cash payment, the Company recorded a charge totaling approximately
$1.9 million in its fiscal 1994 consolidated statement of operations to accrue
the estimated settlement liability. At a June 30, 1995 hearing, the court
approved the settlement and ordered the dismissal of the claims of all class
members against the Company and the other defendants as described in the
Stipulation of Settlement. The court's judgment is now final and the required
cash payment plus the shares of common stock have been deposited with the escrow
agent.
15
<PAGE>
WIDER V. HOSPITAL STAFFING SERVICES, INC., RONALD A. CASS, LEONARD J. CASS,
BRIAN M. LECHNER AND ARTHUR ANDERSEN & COMPANY, (Case No. 93-1013 CIV-GONZALEZ).
The WIDER matter, a proposed class action, was filed November 24, 1993. In
substance, the complaint contained the same allegations as the ROE amended
complaint. The plaintiffs in WIDER stipulated to dismissal of the case, in view
of the settlement in the ROE matter. On October 30, 1995, an Order of Dismissal
was entered by the Court.
For information with respect to the federal investigation of South Florida
Medicare practices and HCFA suspension, see "Regulation" and "Dade County
Investigation and Related Matters".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1994 Annual Meeting of Shareholders of the Company was held in Fort
Lauderdale, Florida on November 17, 1995. The following individuals were elected
as directors to hold office until the next annual meeting of shareholders or
until their successors have been elected and duly qualified:
DIRECTOR SHARES FOR SHARES WITHHELD
-------- ---------- ---------------
Ronald A. Cass 4,906,178 183,946
Robert B. Fields 4,911,278 178,846
William F. McConnell 4,905,478 184,646
Hector L. Ziperovich, M.D. 4,911,778 178,346
Shareholders also acted upon the following proposal at the Annual Meeting:
Ratified the appointment of Arthur Andersen LLP as independent auditors of
the Company for the fiscal year ending November 30, 1995. Votes totaled
5,031,510 for; 35,611 against; and 23,003 abstentions.
16
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
The Company has never declared or paid cash dividends on its common stock.
The Company presently intends to retain all future earnings, if any, for the
operation and expansion of its business and does not anticipate paying cash
dividends in the foreseeable future. In addition, the Company's credit agreement
precludes the Company from paying any dividends or purchasing, redeeming or
retiring any of its capital stock without the prior written consent of the
lender. Notwithstanding the above, holders of the Company's common stock are
entitled to receive such dividends as may be declared from time to time by the
Board of Directors and paid out of funds legally available therefore. Any future
determination as to the payment of cash dividends will depend upon the Company's
results of operations, financial condition, capital requirements and lender
restrictions, if any, as well as such other factors as the Company's Board of
Directors may consider. As of January 31, 1996, there were 454 holders of the
Company Common Stock and approximately 3,000 beneficial holders.
As of June 1, 1992, the Company's common stock commenced trading on the New
York Stock Exchange, Inc. ("NYSE") under the symbol HSS. Prior thereto, the
Company's common stock traded in the over-the-counter market on the NASDAQ
National Market System under the symbol HSSI. The following table sets forth,
for the period indicated, the high and low closing sales prices for the
Company's common stock as reported on the NYSE.
HIGH LOW
---- ---
FISCAL YEAR 1995
First Quarter $1 3/4 $1 1/8
Second Quarter 2 1/4 15/16
Third Quarter 2 1/2 1 5/8
Fourth Quarter 2 3/8 1 3/4
FISCAL YEAR 1994
First Quarter $3 7/8 $1 3/4
Second Quarter 3 3/4 2 7/8
Third Quarter 3 1/4 1 7/8
Fourth Quarter 2 1/8 1 5/8
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five years ended November 30,
1995 have been compiled by the Company from its consolidated financial
statements which have been audited by independent certified public accountants.
17
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED NOVEMBER 30,
------------------------
SELECTED FINANCIAL DATA: 1995(1) 1994 1993(2) 1992 1991(3)
------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Net revenue from services $56,186 $78,624 $84,061 $120,591 $90,121
Cost of services $33,626 $50,703 $56,934 $79,848 $57,994
Gross margin $22,560 $27,921 $27,127 $40,743 $32,127
Selling, general and administrative
expenses $21,113 $36,970 $33,860 $45,978 $27,424
Income (loss) before income taxes and
cumulative effect of change in
accounting principle $1,202 ($8,896) ($6,454) ($4,824) $4,511
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle $1,903 ($11,417) ($5,858) ($3,185) $2,711
Primary earnings (loss) from
continuing operations per
common and common shares
equivalent before cumulative
effect of change in accounting
principle $0.32 ($2.02) ($1.04) ($0.58) $0.57
Fully diluted earnings (loss) from
continuing operations per
common and common shares
equivalent N/A N/A N/A N/A $0.55
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
------------
1995 1994 1993 1992 1991(3)(4)
---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets $23,371 $24,413 $34,690 $45,785 $41,867
Long-term debt, including current portion $1,173 -- -- -- $2,500
Notes Payable - Severance Obligations $1,017 $1,000 -- -- --
Stockholders' equity $11,075 $8,035 $19,276 $24,905 $27,120
<FN>
- ---------------------
(1) On August 31, 1994, the Company sold its California, New York, and
Arizona home health care operations. In January and March of fiscal 1995 the
Company sold its Florida and Texas home care operations. These sold operations
contributed approximately $25.5 million to net revenues in fiscal 1994. During
fiscal 1995, the Company was able to maintain its ongoing revenue base in its
home health care operations and experienced modest growth in select areas.
(2) During the fiscal year ended November 30, 1993, revenue was decreased
by $6.9 million as a result of providing for estimated Medicare reimbursement
disallowances related primarily to potentially non-reimbursable costs which were
incurred during fiscal years 1991 and 1992 on subcontracted staffing for the
Company's now closed Dade County Medicare offices. See Note 7 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
further discussion.
(3) Effective February 24, 1991, the Company acquired substantially all of
the assets of CarePoint which were accounted for under the purchase method of
accounting and accordingly, the results of operations of CarePoint subsequent to
those respective dates are included herein.
(4) In 1991, the Company issued an additional 1,151,400 shares of Common
Stock in a secondary public offering and received approximately $10,300,000 in
net proceeds in connection therewith.
</FN>
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company provides: (i) home health care and other in-home support
services, (ii) interim staffing of nurses and other medical personnel, primarily
to hospitals and (iii) rehabilitation services, including physical,
occupational, speech and other therapy services. These services are offered
through a pool of caregivers operating within the Company's network which as of
November 30, 1995 consisted of 26 home health care branch offices in five
states, active relationships for interim staffing needs with approximately 91
hospitals in 28 states and the U.S. Virgin Islands and three rehabilitation
clinics with two clinics located in Georgia and one clinic located in Tennessee.
On August 31, 1994, the Company sold its California, New York, and Arizona
home health care operations. In January and March of fiscal 1995 the Company
sold its Florida and Texas home care operations. These sold operations
contributed approximately $25.5 million to net revenues in fiscal 1994. During
fiscal 1995, the Company was able to maintain its ongoing revenue base in its
home health care operations and experienced modest growth in select areas as
discussed below.
On February 15, 1995, a wholly-owned subsidiary of the Company acquired
certain fixed and intangible assets of a therapy company. The purchase price
included the forgiveness of trade accounts receivable owed to the Company and
the issuance of a promissory note with the balance due in equal annual payments
over the next five years.
Results of Operations
The following table sets forth for the periods indicated the net revenue by
operating group in the Company's statement of operations:
<TABLE>
<CAPTION>
(IN MILLIONS)
FISCAL YEARS ENDED NOVEMBER 30,
-------------------------------
OPERATING GROUP: 1995 1994 1993
- ---------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Home Care Group $43.9 78% $65.6 83% $66.2 79%
Travel Nurse Group $10.9 20% $13.0 17% $17.9 21%
Rehabilitative Group (Therapy) $1.4 2% -- --% -- --%
----------------------------------------------------------------
Total Net Revenue $56.2 100% $78.6 100% $84.1 100%
</TABLE>
19
<PAGE>
The following table sets forth certain items included in the
Company's Consolidated Statements of Operations as a percentage of the Company's
revenue for the periods indicated:
PERCENTAGE OF REVENUE
---------------------
YEARS ENDED NOVEMBER 30,
------------------------
1995 1994 1993
---- ---- ----
Net revenue from services 100.0% 100.0% 100.0%
Cost of services 59.8% 64.5% 67.7%
Gross margin 40.2% 35.5% 32.3%
Selling, general and administrative expenses 37.6% 47.0% 40.3%
Other income/(expense), net (0.4)% 0.2% 0.3%
Net income/(loss) before income taxes and
cumulative effect of change in
accounting principle 2.1% (11.3)% (7.7)%
Net income/(loss) 3.4% (14.3)% (7.0)%
The following unaudited selected proforma financial data represents ongoing
operations net of sold operations described above, and should be read in
conjunction with the consolidated financial statements and related notes herein:
(IN MILLIONS)
-------------
YEARS ENDED NOV. 30TH
---------------------
Proforma Selected Financial Data -
Ongoing Operations 1995 1994
---- ----
Net Revenue from Services $55.7 100.0% $53.1 100.0%
Cost of Services $33.1 59.4% $32.5 61.2%
Gross Margin $22.6 40.6% $20.6 38.8%
Comparison of 1995 to 1994
NET REVENUES. Net revenues decreased approximately $22.4 million, or 28.5%,
from $78.6 million in Fiscal 1994 to $56.2 million for the year ended November
30, 1995. This decrease is directly attributable to the sale of the Company's
home health care operations in California, New York, and Arizona on August 31,
1994 and the sale of its Florida and Texas operations in January and March of
Fiscal 1995. In Fiscal 1994, these sold operations contributed in excess of
$25.5 million to consolidated revenue.
Net revenues from services provided by the Company's HomeCare Group
decreased approximately $21.7 million, or 33.1%, to $43.9 million for the year
ended November 30, 1995, from approximately $65.6 million for the year ended
November 30, 1994. These decreases in revenues are principally due to the sale
of certain Company operations previously discussed, offset by an increase in net
revenues within ongoing Homecare operations of approximately $2.4 million, or
5.9%, from $41.0 million to $43.4 million for the fiscal years ended November
30, 1994 and 1995, respectively. The growth is attributed to increased Medicare
business within remaining Homecare operations.
The revenues for the Company's Travel Nurse Group were down approximately
$2.1 million, or 16.0%, from $13.0 million in Fiscal 1994 to $10.9 million in
Fiscal 1995 due primarily to reduced demand for contract nursing staff in
serviced hospitals.
20
<PAGE>
Since the acquisition, during its first nine months of operations in fiscal
1995, the Company's rehabilitative service business generated net revenues of
approximately $1.4 million. The focus of this group will be on hospital
rehabilitation facility management, providing therapy services to other home
care companies, and expansion of its existing clinics in Georgia and Tennessee.
COST OF SERVICES. The cost of services for the HomeCare Group decreased
approximately $16.4 million, or 40.8%, from approximately $40.2 million to
approximately $23.8 million for the fiscal years ended November 30, 1994 and
1995, respectively. The primary reasons for this reduction are the sale of
certain HomeCare operations, discussed earlier, and lower estimated litigation
losses based upon favorable trends in the resolution of certain independent
contractor claims related to the Dade County operations as discussed in Part I.
This reduction in estimated litigation losses resulted in decreased costs of
services in the fourth quarter by approximately $715,000.
Cost of services from the Travel Nurse Group decreased to $8.9 million in
the year ended November 30, 1995 from $10.5 million in the year ended November
30, 1994. The decrease in cost of services is attributable to a reduction in
contracts primarily due to cutbacks of open positions (less demand for nurses)
at various hospitals within the current services areas.
The cost of services for the Company's rehabilitative services group were
approximately $848,000 during its first nine months of operation.
GROSS MARGIN. The Company's gross margin before selling, general and
administrative expenses is the difference between amounts charged by the Company
to its clients or amounts reimbursed by third party payors and wages the Company
pays to its medical personnel, plus related housing costs, travel, insurance
costs and other benefits.
The Company's gross margin is subject to a number of factors such as
billing rates, pay rates and cost of travel and housing. The impact of these
factors vary due to competitive and seasonal factors as well as the geographic
mix and type of service (discipline and payor source) being performed by the
Company.
The Company's gross margin decreased approximately $5.3 million, or 19.0%,
from $27.9 million in fiscal 1994 to approximately $22.6 million in fiscal 1995.
This resulted from the sale of certain Company operations previously discussed.
As a percentage of revenue, gross margin increased from 35.5% to approximately
40.2% for the years ended November 30, 1994 and 1995. This increase resulted
from the sale of low performing operations, the improvement of the expected
settlement of certain claims discussed above, and a general improvement in
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses decreased from approximately $37.0 million, or 47.0% of
net revenue, during 1994 to approximately $21.1 million, or 37.5% of net
revenue, during 1995. The 1995 decrease is attributable to operations of the
Company being sold in late 1994 and early 1995, offset by certain employee
severance costs and litigation settlements. Bad debt expense decreased $1.8
million from $2.4 million, or 3.1% of net revenues, in fiscal 1994 to
approximately $553,000, or 1.0% of net revenues, in fiscal 1995. The principal
reason for this is the additional reserves required, in fiscal 1994, related to
the accounts receivable from sold operations.
21
<PAGE>
INTEREST AND OTHER INCOME(EXPENSE). The net amount of interest and other
income/(expense), changed from net income of $153,049 in 1994 to expense of
$245,319 in 1995. This change resulted primarily from the recognition of the
gain on the Company's sale of its California, New York, and Arizona home health
care operations in the amount of $300,000 in fiscal 1994. Interest costs were
lower in 1995 due to average outstanding borrowings being less than they had
been in 1994.
PRE-TAX NET INCOME. Pre-tax net income increased by approximately $10.1
million from approximately ($8.9) million for the fiscal year ended 1994 to
approximately $1.2 million for the fiscal year ended 1995, and increased as a
percentage of revenue from (11.3)% to 2.1%.
INCOME TAXES. The Company recognized a net benefit for income taxes for the
fiscal year ended November 30, 1995 of approximately $701,000 primarily as a
result of certain tax deductible legal settlements which can be carried back to
recover income taxes previously paid by the Company. The provision (benefit) for
income taxes from 1995 to 1994 changed significantly as a result of the
recognition of certain deferred tax assets which were fully reserved in fiscal
1994. See Note 8 to the Consolidated Financial Statements.
Comparison of 1994 to 1993
Net revenue for the fiscal year ended November 30, 1994 decreased
approximately $5.4 million (6.5%) from revenue for fiscal year 1993. In the
absence of the $6.9 million provision for estimated Medicare reimbursement
disallowances recorded as a reduction of revenue in fiscal year 1993 (see below)
net revenue for fiscal year ended November 30, 1994 decreased approximately
$12.3 million (13.6%) from revenue for fiscal year 1993.
This decrease is attributable, in part, to the downsizing of the Company's
South Florida Medicare offices which began in December 1992 and which were
effectively closed by the end of the quarter ended February 28, 1993 (See "Dade
County Investigation and Related Matters"). The remaining decrease in net
revenue during fiscal year 1994 is primarily attributable to four factors.
First, the August 31, 1994 sale of the Company's California, New York and
Arizona home health care operations which had contributed revenue of
approximately $8 million in the fourth quarter of fiscal year 1993. Second,
revenue for the Travel Nurse Group declined by approximately $4.9 million in
1994 due to less demand for contract nursing staff in serviced hospitals.
Thirdly, an additional provision was recorded as a reduction of revenue for
estimated reimbursement disallowances on the Company's non-South Florida
Medicare receivables in connection with management's continuing review of its
estimated reimbursement disallowances. Lastly, certain 1993 and 1994 home care
visits that were initially considered reimbursable by the Medicare program were
determined as part of the Company's internal patient chart review during the
second quarter of 1994 to be reimbursable by other payor sources. As these other
payor sources have yet to be identified and billing for these services has
therefore not occurred, a reduction of revenue of approximately $800,000 was
recorded.
Net revenue from services from HSSI HomeCare decreased to $65.6 million in
the year ended November 30, 1994 from $66.2 million in the year ended November
30, 1993. In the absence of the $6.9 million provision for estimated Medicare
reimbursement disallowances recorded in fiscal year 1993 (see below) net revenue
from home health care operations decreased by $7.5 million between the two
years. Cost of services from HSSI HomeCare decreased to $40.7 million in the
year ended November 30, 1994 from $42.8 million in the year ended November 30,
1993. The decreases in net revenue from
22
<PAGE>
services and cost of services are attributable to the factors discussed in the
paragraph above.
Net revenue from services from the Travel Nurse Group and supplemental
staffing services decreased to $13 million in the year ended November 30, 1994
from $17.9 million in the year ended November 30, 1993. Cost of services from
the Travel Nurse Group and supplemental staffing services decreased to $10.5
million in the year ended November 30, 1994 from $14.1 million in the year ended
November 30, 1993. The decreases in net revenue from services and cost of
services are attributable to a reduction in contracts primarily due to cutbacks
of open positions (less demand for nurses) at various hospitals within the
current services areas.
The Company's gross margin before selling, general and administrative
expenses is the difference between amounts charged by the Company to its clients
or amounts reimbursed by third party payors and wages the Company pays to its
medical personnel, plus related housing costs, travel, insurance costs and other
benefits.
The Company's gross margin increased by 3.3% to approximately 35.5% for the
year ended November 30, 1994 from approximately 32.2% for 1993. Most
significantly, the Company's 1994 gross margin was higher than in 1993 because
of the 1993 $6.9 million reduction of revenue from recording a provision for
estimated Medicare reimbursement disallowances as discussed below. Secondly,
gross margin in 1994 was positively impacted by a decrease in the use of
independent contractors for providing home health care services, most notably in
the Company's South Florida Medicare business whose operations ceased at the end
of the first quarter of fiscal 1993. The Company's gross margin is subject to a
number of factors such as billing rates, pay rates and cost of travel and
housing. The impact of these factors vary due to competitive and seasonal
factors as well as the geographic mix and type of service (discipline and payor
source) being performed by the Company.
Selling, general and administrative expenses increased from approximately
$33.9 million or 40.3% during 1993 to approximately $37.0 million or 47.0%
during 1994. The 1994 increase is attributable to a number of factors. These
factors include an increase in the trade accounts receivable bad debt provision
over the prior year amounting to approximately $1 million resulting from an
on-going analysis of accounts receivable whereby the Company revised its
estimate of collectability, a severance obligation to a previous officer of
approximately $310,000 (see Note 6 to the consolidated financial statements),
and to a previous key employee of approximately $85,000, the probable settlement
of the two shareholder suits of approximately $1.9 million (see Note 7 to the
consolidated financial statements), a lease penalty of approximately $400,000
incurred on terminating the old and entering into a new Corporate office lease
net of the remaining pro rata future payments under the old lease (see Note 7 to
the consolidated financial statements) and an accelerated severance obligation
to a current officer of $1 million (see Note 6 to the consolidated financial
statements).
In light of the 1994 loss from operations, that portion of the 1993 bonus
accrual which had not been reversed as of November 30, 1993, approximately
$300,000, was reversed during 1994. No accrual was recorded for bonuses during
1994.
Interest and other income (expense), net, decreased approximately $125,000
during the year ended November 30, 1994 from the comparable year ended November
30, 1993. The decrease resulted primarily from the receipt of $900,000 in 1993
of insurance proceeds in connection with the original proposed shareholder class
action suit (See Note 7 to the consolidated financial statements). No such
23
<PAGE>
proceeds were received in 1994. Offsetting the amount of this decrease is an
approximately $300,000 gain on the 1994 sale of the Company's California, New
York, and Arizona home health care operations. Further offsetting the decrease
between years is the lower interest costs in 1994 on outside indebtedness as the
Company's 1994 average outstanding borrowings were less than they had been in
1993.
The provision (benefit) for income taxes from 1993 to 1994 also changed
significantly as a result of the Company's decision to fully reserve its net
deferred tax asset resulting in an increase in the income tax provision of $2.1
million (See Note 8).
Liquidity and Capital Resources
General. The Company's capital requirements consist of funding current
operations, expanding services provided by its home care, staffing and
rehabilitative businesses, and the acquisition of compatible companies that can
be integrated with existing operating units.
The Company expects to meet short-term liquidity needs through cash flow
and borrowings available under its new credit facility as discussed below.
Prior Line of Credit. At November 30, 1995, under an arrangement with a
commercial finance company, the Company had a $15 million uncommitted revolving
line of credit, of which $2.0 million was reserved to support a standby letter
of credit for the benefit of the Company's workers' compensation insurance
carrier (the "Prior Line of Credit"). Amounts outstanding under the Prior Line
of Credit accrued interest at the rate of prime plus two percent per annum
payable monthly, and were secured by substantially all of the Company's assets.
Loan activity (exclusive of the $2.0 million reserved to support the standby
letter of credit for the Company's workers' compensation insurance carrier) for
the two years ended November 30 was as follows:
(IN MILLIONS, EXCEPT PERCENTAGES)
1995 1994
---- ----
Maximum outstanding $2.1 $5.1
Borrowings outstanding at November 30, 1995 $0.8 $0.3
Amount available for additional borrowing $0.4 $1.0
Weighted average interest rate 21% 17%
The New Line of Credit. In February 1996, under an arrangement with a
commercial finance company, the Company entered into a new $8 million
uncommitted revolving line of credit, of which $1.8 million was reserved to
support a standby letter of credit for the benefit of the Company's workers'
compensation insurance carrier (the "New Line of Credit"). Like the Prior Line
of Credit, the amount of the New Line of Credit available to the Company at any
time is determined primarily by the eligible accounts receivable, as defined.
Although the Company's Prior Line of Credit was for $15 million rather than $8
million, the New Line of Credit increases the Company's base of borrowing,
because the new loan agreement contains a less restrictive definition of
eligible accounts receivable. A comparison on a proforma basis of the Prior Line
of Credit with the New Line of Credit as of November 30, 1995 reflects that the
permitted borrowing under the Prior Line of Credit was $1.1 million and under
the New Line of Credit (taking into account the amounts reserved under each line
of credit to support the standby letter of credit referenced above) would have
been $4.6 million for a $3.5 million increase in available borrowing. While the
interest rate on the amount outstanding under the New Line of Credit is
unchanged
24
<PAGE>
from that on the amount outstanding under the Prior Line of Credit,
administration fees and charges related to the New Line of Credit are greatly
reduced.
Early retirement of the Prior Line of Credit will result in the Company
incurring a penalty of approximately $150,000 and the write-off of unamortized
loan costs in the amount of approximately $144,000, the aggregate of which will
be recorded as a charge in the first quarter of 1996.
Restrictive Covenants under the New Line of Credit. The Company's New Line
of Credit contains certain restrictive covenants precluding the Company from
paying any dividends, other than stock dividends, or purchasing, redeeming or
retiring any of the Company's capital stock. In addition, as with the Prior Line
of Credit, if written contracts are not finalized with the government agencies
operating the two hospitals in the U.S. Virgin Islands to which the Company
provides Travel Nurse services, the commercial finance company providing the New
Line of Credit may restrict the definition of those eligible accounts
receivable, so that no U.S. Virgin Island accounts receivable are included.
While this restriction would have limited the amount available to the Company
under the New Line of Credit by approximately $1.7 million, as of November 30,
1995 the permitted borrowing under the new line of credit would still be
substantially greater than under the Prior Line of Credit (See Note 4).
Trade Accounts Receivable. At November 30, 1995 and 1994, the Company had
outstanding accounts receivables, net of allowances for doubtful accounts, of
approximately $6.1 million and $7.6 million, respectively. During Fiscal 1995,
the Company's ability to convert receivables to cash improved significantly,
particularly within ongoing home care operations. The improvement in conversion
of receivables to cash resulted primarily from the transfer of billing and
collection activities from the central to the regional level, and the recruiting
of qualified staff to administer this process at the regional level. For the
fiscal year ended November 30, 1995, turnover of accounts receivable increased
19.7%, from 2.96 to 3.54 times per year and average days outstanding decreased
16.4%, from 123 days to 103 days. The improvements in conversion of receivables
increased cash by approximately $1,200,000. The improvement in conversion of
receivables to cash did not occur in the U.S. Virgin Islands accounts. The
Company's U.S. Virgin Island clients are traditionally very slow-paying clients.
At November 30, 1995 and 1994, the average days outstanding for the U.S. Virgin
Island accounts were 198 and 142 days, respectively.
During the third and fourth quarters of 1995, all outstanding accounts
receivables relating to sold operations were written off as uncollectible. These
outstanding accounts receivables amounted to approximately $1,200,000 and were
fully reserved at November 30, 1994. Cash recoveries of these write-offs,
subsequent to year end 1995, were approximately $157,000 and minimal future
recoveries are expected.
Settlements due to and due from Medicare. Periodically, the Company
estimates settlements due to the Medicare Program. The estimated settlement
amounts due are the result of: 1) interim reimbursement rates, at which the
Company was paid for its services throughout the year, exceeding the Company's
actual costs of providing such services and 2) revisions by certain
intermediaries of the Company's reported reimbursable costs after the
intermediaries' review or audits of the Company's cost report filings. Estimated
settlements due from Medicare are presented net of estimated settlements due to
Medicare in the accompanying consolidated balance sheets. Management's plans to
fund settlements to Medicare as they become due include: 1) negotiating extended
payment plans, 2) incurring additional borrowings under the New Line of Credit,
if available, or 3) using proceeds from additional capital that
25
<PAGE>
may be raised. However, there are no assurances that the Company will be able to
successfully utilize any of these three funding options. For the twelve months
ended November 30, 1995, the Company had received notification from the Medicare
program's fiscal intermediaries of approximately $2,400,000 due to Medicare. As
of November 30, 1995, $78,000 of this amount had been repaid as the first
payment of an 11 month repayment plan applicable to $859,000 of the noticed
debt. As of November 30, 1995, the intermediaries were not pursuing the
remaining $1,500,000 amount because the future settlement of certain provider
cost reports of the Company are expected to result in amounts in excess of
$1,500,000 due to the Company from Medicare. These future settlements will be
used to offset the $1,500,000 due to Medicare.
In addition to external sources, the Company generates or uses cash in its
operating activities. Net cash generated by (used in) operating activities was
$109,552, ($630,475), and $333,394 in fiscal years 1995, 1994 and 1993,
respectively.
Cash Position. In addition to cash flow from operating activities, the
Company's overall cash position can be significantly affected by its investing
and financing activities. Significant investing activities for the twelve months
ended November 30, 1995 consisted of liquidating the Company's short-term
investments to satisfy cash flow requirements. Additionally, in connection with
the shareholder class action settlement, as previously discussed, a Money Market
account was established in the second quarter of 1995 to accumulate funds to
liquidate the shareholder obligations which became due in July and August 1995.
The Company's principal financing activities for the fiscal year ended November
30, 1995 consisted of net borrowings under the Prior Line of Credit.
Net Working Capital. As of November 30, 1995, the Company had current
assets of approximately $20.2 million and current liabilities of approximately
$11.4 million, resulting in net working capital of approximately $8.8 million
and a current ratio of 1:8x. This compares to working capital of approximately
$6.0 million and a current ratio of 1:4x at November 30, 1994. Cash and cash
equivalents were approximately $1.7 million at fiscal year ended November 30,
1995.
The increase in working capital for fiscal 1995 was primarily due to the
liquidation of a current liability in the amount of $1,137,500 by issuing of
700,000 shares of common stock at $1-5/8 per share. As of November 30, 1995, the
Company's commitments that would require large or unusual amounts of cash,
consisted of office rents, repayments to the Medicare program, the severance
obligation to a former officer and an amount due its current Chairman and Chief
Executive Officer (See Notes 6 and 7).
Seasonality
Historically, the Company's Travel Nurse business in the U.S. Virgin
Islands has not been subject to material seasonal fluctuations. However, the
Travel Nurse business in the rest of the United States has been seasonal, with
demand for Travel Nurses being highest in the first and fourth quarters of the
fiscal year (September through February) and lowest in the third quarter of the
fiscal year (June through August). This is due largely to increased demand,
particularly during the peak vacation period in Florida, coupled with an
increase in the availability of nurses during the first and fourth quarters of
the Company's fiscal year. The Company's Homecare business has not been subject
to material seasonal fluctuations.
26
<PAGE>
Impact of Inflation
Inflation, while moderate, continues to increase the cost of goods and
services purchased by the Company. Inflation is considered in all contract
proposals developed for hospital and home care clients. Historically, inflation
has not had a significant impact on the operations of the Company.
Statement of Financial Accounting Standards SFAS No. 109
Effective December 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No.
109 required, among other things, recognition of future tax benefits as an
asset.
During 1994, the Company determined that, due to recurring losses in prior
years and other factors, realization of the net deferred tax asset did not meet
the "more likely than not" criteria of SFAS No. 109. Consequently, at November
30, 1994, the valuation allowance was increased so that the net deferred tax
asset was fully reserved. As a result of pre-tax income generated in 1995, the
Company has realized certain deferred tax assets previously reserved.
Additionally, the Company has recognized approximately $310,000 of its net
operating loss carryforward generated in fiscal 1995 as management believes that
it is more likely than not the Company will generate sufficient future taxable
income to realize this asset. The valuation allowance is subject to continual
review and, as such, may be decreased in the future as substantive information
becomes available about the Company's ability to generate sufficient future
taxable income to realize the net deferred tax asset (See Note 8).
The effective tax rate for the provision (benefit) for income taxes during
the fiscal years ended 1995, 1994 and 1993 differ from the statutory tax rate.
This is primarily due to adjustments to the valuation allowance, as noted above,
and the Company's inability to derive a benefit from its net operating loss
carryforwards in 1994 and 1993 and due to the increase in the valuation
allowance discussed above.
27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE NUMBER
-----------
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
28
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30,
ASSETS
--------------
1995 1994
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,697,804 $ 516,770
Short-term investments 11,620 1,148,729
Trade accounts receivable, less allowance
for doubtful accounts of $599,599
and $2,345,598, respectively 6,129,371 7,554,155
Settlements due from Medicare 10,372,741 10,120,218
Prepaid expenses 418,335 249,904
Amounts due from officers/directors 40,392 240,781
Current and deferred income taxes receivable 1,149,634 212,042
Other 344,482 785,360
----------- -----------
Total current assets 20,164,379 20,827,959
----------- -----------
NON-CURRENT ASSETS:
Net property and equipment (Note 3) 986,592 1,254,676
----------- -----------
Intangibles related to businesses acquired 2,160,016 2,022,183
Non-competition agreements 479,426 551,544
----------- -----------
Total intangibles 2,639,442 2,573,727
Less: Accumulated amortization (664,418) (759,725)
----------- -----------
Net intangibles 1,975,024 1,814,002
----------- -----------
Deposits and other assets 244,826 516,512
----------- -----------
Total non-current assets 3,206,442 3,585,190
----------- -----------
Total assets $23,370,821 $24,413,149
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1995 1994
---------- -----------
CURRENT LIABILITIES:
Accounts payable $2,577,470 $5,744,272
Line of credit payable (Note 4) 767,115 304,912
Accrued payroll and benefits 2,240,404 2,473,643
Accrued expenses (Note 12) 4,224,210 5,594,163
Income taxes payable 296,000 561,245
Capital leases 7,131 --
Notes payable (Notes 2, 6 & 7) 1,255,130 156,000
----------- -----------
Total current liabilities 11,367,460 14,834,235
----------- -----------
NON CURRENT LIABILITIES:
Notes payable (Notes 2, 6 & 7) 882,965 844,000
Capital leases 45,304 --
Lease settlement (Note 7) -- 700,000
----------- -----------
Total non-current liabilities 928,269 1,544,000
----------- -----------
Total liabilities 12,295,729 16,378,235
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4,5 & 7)
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value;
authorized 5,000,000 shares;
none issued or outstanding -- --
Common stock- $.001 par value;
authorized 20,000,000 shares;
issued and outstanding;
6,349,770 and 5,649,770 shares 6,350 5,650
Additional paid-in capital 22,428,887 21,292,087
Accumulated deficit (11,360,145) (13,262,823)
----------- -----------
Total stockholders' equity 11,075,092 8,034,914
----------- -----------
Total liabilities and
stockholders' equity $23,370,821 $24,413,149
=========== ===========
The accompanying notes are an integral part of
these consolidated balance sheets.
29
<PAGE>
<TABLE>
<CAPTION>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED NOVEMBER 30,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET REVENUE FROM SERVICES $ 56,185,723 $ 78,624,465 $ 84,060,916
COST OF SERVICES:
PROFESSIONAL SALARIES AND BENEFITS 28,231,790 44,531,227 49,911,330
OTHER PROFESSIONAL EXPENSES 5,393,817 6,172,436 7,022,704
------------ ------------ ------------
TOTAL COST OF SERVICES 33,625,607 50,703,663 56,934,034
------------ ------------ ------------
GROSS MARGIN 22,560,116 27,920,802 27,126,882
------------ ------------ ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
SALARIES AND BENEFITS 11,891,179 15,743,219 17,900,751
LEGAL EXPENSES 1,040,019 2,106,442 1,708,216
SEVERANCE OBLIGATIONS (NOTE 6) 646,724 1,387,480 --
LITIGATION SETTLEMENTS (NOTE 7) 135,000 1,887,500 --
ALL OTHER EXPENSES 7,399,767 15,845,168 14,251,132
------------ ------------ ------------
TOTAL SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 21,112,689 36,969,809 33,860,099
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 1,447,427 (9,049,007) (6,733,217)
------------ ------------ ------------
INTEREST AND OTHER INCOME (EXPENSE):
INTEREST EXPENSE (273,027) (398,590) (579,344)
INTEREST INCOME 71,523 63,318 68,008
OTHER INCOME (EXPENSE),NET (43,815) 488,321 790,164
------------ ------------ ------------
TOTAL INTEREST AND OTHER INCOME (EXPENSE) (245,319) 153,049 278,828
------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR
INCOME TAXES 1,202,108 (8,895,958) (6,454,389)
(PROVISION) BENEFIT FOR INCOME TAXES (NOTE 8) 700,570 (2,520,565) 596,581
------------ ------------ ------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 1,902,678 (11,416,523) (5,857,808)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE -- 162,000 --
------------ ------------ ------------
NET INCOME (LOSS) $1,902,678 ($11,254,523) ($5,857,808)
============ ============ ============
INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE $0.32 ($2.02) ($1.04)
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE -- 0.03 --
------------ ------------ ------------
INCOME (LOSS) PER COMMON SHARE $0.32 ($1.99) ($1.04)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: 5,922,213 5,649,770 5,646,020
============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
30
<PAGE>
<TABLE>
<CAPTION>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK
------------------------
NUMBER OF ADDITIONAL
SHARES PAID-IN RETAINED
OUTSTANDING AMOUNT CAPITAL EARNINGS (DEFICIT)
----------- ------- ------------ ------------------
<S> <C> <C> <C> <C>
BALANCE, November 30, 1992 5,646,020 $5,646 $21,049,966 $ 3,849,508
Additional offering costs of 1991
issuance of common stock -- -- (40,000) --
Tax benefit of disqualifying
disposition of incentive stock options -- -- 269,000 --
Net loss -- -- -- (5,857,808)
--------- ------ ----------- ------------
BALANCE, November 30, 1993 5,646,020 5,646 21,278,966 (2,008,300)
Exercise of warrants 3,750 4 13,121 --
Net loss -- -- -- (11,254,523)
--------- ------ ----------- ------------
BALANCE, November 30, 1994 5,649,770 5,650 21,292,087 (13,262,823)
Litigation settlement (Note 7) 700,000 700 1,136,800 --
Net income -- -- -- 1,902,678
--------- ------ ----------- ------------
BALANCE, November 30, 1995 6,349,770 $6,350 $22,428,887 ($11,360,145)
========= ====== =========== ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
31
<PAGE>
<TABLE>
<CAPTION>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30,
1995 1994 1993
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 1,902,678 ($11,254,523) ($ 5,857,808)
------------ ------------ ------------
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Severance obligations (Note 6) 630,000 1,310,000 --
Depreciation and amortization 989,741 1,340,748 1,400,681
Cumulative effect of change in accounting principle -- (162,000) --
Provision for losses on trade accounts receivable 552,663 2,382,948 1,365,224
Gain on sale of California, New York and Arizona home health operations -- (299,492) --
Loss on disposal and retirement of intangibles, property and equipment 129,541 10,611 145,257
Write-off of intangibles related to businesses acquired, net -- 133,505 110,281
Deferred income tax provision (benefit), net of increase in valuation
allowance (309,532) 2,120,655 592,000
Changes in assets and liabilities:
(Increase) decrease in assets-
Trade accounts receivable 797,122 1,920,683 (173,619)
Settlements due from Medicare (252,523) (3,022,514) 6,263,091
Prepaid expenses and other current assets (168,431) (171,622) 223,273
Amounts due from officers/directors 77,749 32,897 45,662
Income taxes receivable (628,061) 1,850,802 783,830
Deposits and other assets 263,705 204,304 (980,464)
Increase (decrease) in liabilities -
Accounts payable (2,006,662) 1,874,055 (996,653)
Accrued payroll and benefits (233,239) (1,534,022) (1,177,242)
Accrued expenses (1,369,954) 1,777,733 (1,392,343)
Other liabilities -- 293,512 (17,776)
Income taxes payable (265,245) 561,245 --
------------ ------------ ------------
Total adjustments (1,793,126) 10,624,048 6,191,202
------------ ------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 109,552 (630,475) 333,394
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Sale (purchase) of short-term investments, net 1,137,109 (148,729) (743,775)
Capital expenditures (369,775) (130,205) (193,394)
Proceeds from disposal of property and equipment 9,500 22,071 35,646
Proceeds from sale of California, New York and Arizona home health operations 100,000 3,492,993 --
Proceeds from sale of Texas home health operations 60,000 -- --
------------ ------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 936,834 3,236,130 (901,523)
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Line of credit borrowings 59,199,000 83,830,000 36,147,437
Line of credit repayments (58,736,797) (86,842,794) (38,029,731)
Payments under notes payable (327,555) -- --
Borrowings under term loan -- -- 8,100,000
Payments under term loan -- -- (8,100,000)
Exercise of warrants -- 13,125 --
Borrowings under loans payable to officers -- -- 480,000
Repayments under loans payable to officers -- -- (480,000)
------------ ------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 134,648 (2,999,669) (1,882,294)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,181,034 (394,014) (2,450,423)
Cash and cash equivalents at beginning of period 516,770 910,784 3,361,207
------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,697,804 $ 516,770 $ 910,784
============ ============ ============
Supplemental Cash Flow Disclosures:
Cash paid: Income Taxes $ 499,139 $ 661,793 $ 76,213
Interest $ 276,816 $ 396,448 $ 691,498
Cash received: Income Tax Refunds $ -- $ 2,644,910 $ --
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
32
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
ORGANIZATION AND PURPOSE: Hospital Staffing Services, Inc. and subsidiaries (the
"Company" or "HSSI") provides (i) home health care and other in-home support
services through its "HSSI HomeCare Group", (ii) interim staffing of nurses and
other medical personnel, primarily to hospitals through its "Travel Nurse
Group", and (iii) rehabilitation services, including physical, occupational, and
speech therapy services to patients in the home, other healthcare facilities,
and through its own clinics. These services are provided through a pool of
caregivers operating within the Company's network of 26 home health care branch
offices in five states, 91 hospitals in 28 states and the U.S.
Virgin Islands and three rehabilitative clinics in the Southeast.
BASIS OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of Hospital Staffing Services, Inc. and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
REVENUE RECOGNITION POLICY: Gross revenue is recorded on an accrual basis based
upon the date of service at amounts equal to the Company's established rates or
estimated cost reimbursement rates, as applicable. Allowances and contractual
adjustments representing the difference between the established rates or
estimated cost reimbursement rates for covered services and the amounts
estimated to be paid by third parties are also recorded on an accrual basis and
deducted from gross revenue to determine net revenue from services. The Company
provides certain care to charity patients, based upon need, but these unbilled
revenues and related costs are immaterial.
CASH AND CASH EQUIVALENTS: The Company classifies as cash and cash equivalents
all highly liquid investments with maturities of three months or less. At
November 30, 1995 and 1994, cash equivalents were composed primarily of
investments in money market funds and are reflected at their approximate fair
value.
TRADE ACCOUNTS RECEIVABLE: All Company services, other than to patients covered
by the Medicare program, are recorded at established rates as trade accounts
receivable on an accrual basis. Provisions for estimated uncollectible accounts
are reported as selling, general and administrative expenses in the financial
statements in the period that services are rendered.
The Company is subject to losses which may be incurred from Accounts Receivable
that may be uncollectible in excess of its established reserves. The provision
for doubtful accounts included in operations was approximately $553,000 in 1995,
$2,400,000 in 1994, and $1,400,000 in 1993.
SETTLEMENTS DUE FROM MEDICARE: The Company is a provider of home health care
services to patients covered by the Medicare program. Reimbursement for covered
services is based on cost reimbursed rates. Final reimbursement is determined
after submission of annual cost reports and audits thereof by the fiscal
intermediaries. The settlement amounts due the Company as reflected in the
accompanying
33
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
consolidated balance sheets and the net revenue from services as reflected in
the accompanying consolidated statements of operations are presented net of
estimated reimbursement disallowances.
PROPERTY AND EQUIPMENT: Property and equipment, consisting primarily of
furniture, fixtures, office and computer equipment, and leasehold improvements
are recorded at cost. Depreciation expense is calculated using the straight-line
method over the estimated useful lives of the depreciable assets (3 - 7 years).
Betterments, renewals and extraordinary repairs that extend the useful life of
the asset are capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation applicable to assets
retired are removed from the accounts and the gain or loss on disposition is
recognized in Other Income(Expense).
Included in property and equipment are capitalized leases which consist
primarily of computer equipment. Capital leases are recorded at the present
value of the future rentals at lease inception and are amortized over the lesser
of the applicable lease term or the useful life of the equipment (See Note 3).
INTANGIBLE ASSETS: Intangible assets, primarily goodwill, represent the excess
of the purchase price of acquisitions over the fair value of net assets
acquired. Such costs are being amortized over various periods not exceeding
forty years. Amortization expense was approximately $345,000 in 1995, $740,000
in 1994, and $717,000 in 1993. The Company periodically reviews the value of its
goodwill to determine if an impairment has occurred. The Company measures the
potential impairment of recorded goodwill by the undiscounted value of expected
future operating cash flows in relation to its net capital investment. Based on
its review, the Company does not believe that an impairment of its goodwill has
occurred.
NON-COMPETITION AGREEMENTS: Non-competition agreements are amortized on a
straight-line basis over the estimated period to be benefited, usually three to
five years.
INCOME TAXES: The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" (SFAS No. 109) effective the beginning of
fiscal 1994 which decreased the net loss by $162,000 for that year. Under SFAS
No. 109, deferred tax assets and liabilities are computed based upon differences
between financial reporting and tax bases of assets and liabilities. Prior to
1994, deferred income tax expenses or credits were provided to reflect the tax
consequences of income and expense differences between financial reporting and
tax filings (See Note 8 for additional information related to income taxes).
INCOME (LOSS) PER COMMON SHARE: Income (loss) per common share is computed based
on the weighted average of common shares and common share equivalents
outstanding during the periods. Fully diluted income (loss) per share has not
been presented as it would be antidilutive.
ACCOUNTING PRONOUNCEMENTS: In March 1995, the Financial Accounting Standards
Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", which requires adoption by the
Company in fiscal 1997. SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed. The Company believes the
adoption of SFAS No. 121 will not have a material effect on the Company's
financial condition or results of operations. In October 1995, the Financial
Accounting
34
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation",
which requires adoption by the Company in fiscal 1997. SFAS No. 123 requires
that the Company's financial statements include certain disclosures about
stock-based employee compensation arrangements and permits the adoption of a
change in accounting for such arrangements. Changes in accounting for
stock-based compensation are optional and the Company plans to adopt only the
disclosure requirements in 1997.
NOTE 2: ACQUISITIONS AND DIVESTITURES -
In 1994, the Company sold certain assets of its home health
care operations in California, New York and Arizona to a national home health
care provider. In connection with the sale, the Company placed $500,000 of the
purchase price into an escrow account; $100,000 to be released on November 1,
1995 and the remaining $400,000 to be released upon the Company demonstrating
its ability to collect certain specified accounts receivable. In September 1995,
the initial $100,000 was released to the Company; however, the release of the
remaining $400,000 is in dispute. Subsequent to November 30, 1995, the Company
received approximately $145,000 of the $400,000 outstanding and believes that
losses, if any, in excess of established reserves will not be material.
In 1995, operations in Texas were sold for $60,000.
On January 13, 1995, all the fixed assets and certain
intangible assets of the Company's Broward County, Florida private duty home
health agency were sold to the Company's Chairman and Chief Executive Officer.
The assets were sold at their fair market value of $185,000.
On February 15, 1995, a wholly-owned subsidiary of the Company
acquired certain assets of a therapy company for an aggregate purchase price of
approximately $496,000, representing approximately $96,000 in fixed assets and
approximately $400,000 in certain intangibles. The purchase price is being
satisfied by the forgiveness of a $75,000 trade accounts receivable that the
therapy company owed the Company for therapy services provided by the Company
prior to the acquisition date and through the issuance of a promissory note of
$420,650 with the balance due in equal annual payments of $84,130 for five
years.
During 1993, in connection with the closure of its South Florida Medicare
Branches and subsequent sale of the related Certificates of Need ("CON") for
approximately $375,000, the Company wrote off approximately $485,000, net of
accumulated amortization, in intangibles related to businesses acquired. Such
charge was recorded net of the proceeds of the sale of the related CONs as a
component of Other Income (Expense), in the accompanying 1993 consolidated
statement of operations.
35
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
NOTE 3: NET PROPERTY AND EQUIPMENT -
Net Property and Equipment at November 30 consist of assets owned or leased
under capital lease arrangements and were approximately as follows:
1995 1994
------ -----
Furniture and Fixtures $ 400,000 $ 389,000
Clinical and Office Equipment 687,000 1,166,000
Computer Equipment 918,000 1,279,000
Capitalized Software 723,000 704,000
---------- ----------
2,728,000 3,538,000
Less Accumulated Depreciation (1,741,000) (2,283,000)
---------- ----------
Net Property and Equipment $ 987,000 $1,255,000
========== ==========
Depreciation expense was approximately $645,000 in 1995, $765,000 in 1994, and
$791,000 in 1993.
NOTE 4: DEBT -
In February 1996, the Company entered into a two-year $8
million uncommitted revolving line of credit with a commercial finance company.
The credit facility bears interest at prime plus two percent
per annum, payable monthly, is secured by substantially all assets of the
Company and requires adherence to certain financial covenants. Borrowing is
based on the Company's eligible accounts receivable as defined. A portion of the
proceeds from this new credit facility was used to retire the remaining
outstanding indebtedness with the Company's prior lender.
The new credit facility includes up to $2.0 million securing a
standby letter of credit required by the insurance carrier for the Company's
workers' compensation coverage. As of November 30, 1995, the Company was
contingently liable for a $2.0 million standby letter of credit issued by its
lender representing a reduction of otherwise eligible borrowing. In connection
with the Company's new financing arrangements the Company's workers'
compensation insurance carrier reduced the letter of credit requirement to $1.8
million from $2.0 million.
Based on a broader base of eligible accounts receivable, the
Company has approximately $3.5 million available of additional borrowing under
the line compared to the prior line of credit at November 30, 1995. However, the
total borrowing available is subject to the renewal of certain nursing services
contracts in the U.S. Virgin Islands. Such contracts are in the process of
renewal and management is of the opinion that the full borrowing capacity will
be available to the Company. Additionally, while the interest rate on the new
facility is unchanged from the prior facility, administration fees and charges
related to the line of credit are significantly reduced. Borrowing throughout
fiscal 1995 had a weighted average interest rate of approximately 21%, inclusive
of the unused line of credit and other fees. The maximum amount outstanding
during the fiscal year under the line of credit was approximately $2.1 million.
In retiring the old line of credit, the Company will incur a penalty of
approximately $150,000
36
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
and will write off approximately $144,000 of unamortized loan costs, the
aggregate of which will be recorded as a charge in the first fiscal quarter
of 1996.
The new line of credit contains a number of covenants some of
which could affect the Company's operations. The more significant of those
covenants include (i) maintenance of minimum tangible net worth; (ii) timely
submission of monthly, quarterly and annual financial statements; (iii)
limitations on payments to employees or related parties for consulting
agreements and in the case of terminating employees, severance agreements; (iv)
restrictions on new debt, guarantees and the payment of dividends; and (v)
approval and/or notice requirements for acquisitions, mergers, the sale of
assets and changes in management.
NOTE 5: STOCK OPTION PLANS -
1983 Stock Option Plan
The Company's 1983 Incentive Stock Option Plan, as amended
(the "1983 Plan"), provided for the grant of options to purchase up to 300,000
shares of common stock at an exercise price of not less than 100% of the fair
market value of the Company's Common Stock on the date of grant (110% of fair
market value in the case of an optionee who is the owner of greater than 10% of
the outstanding shares).
During the three fiscal years ended November 30, 1995 no
options were granted or exercised under the 1983 Plan and none expired. At
November 30, 1995, options to purchase 17,250 shares were outstanding at an
exercise price of $5.875 per share. These options are exercisable for up to ten
years from the date of grant. No options will be granted under the 1983 Plan in
the future.
1990 Stock Option Plan
In 1989, the Company adopted the 1990 Stock Option Plan (the
"1990 Plan") which provides that options may be granted to purchase up to
770,000 shares of common stock. Options granted under the 1990 Plan are in the
form of either an incentive stock option ("ISO") qualified under Section 422 of
the Internal Revenue Code, a non-qualified stock option ("NSO") or a reload
option (a newly issued option to purchase shares of common stock equal in number
to the shares of common stock which may be tendered, in lieu of cash, to pay for
the exercise of options previously granted). The Company's Stock Option
Committee determines which employees are awarded options under the 1990 Plan and
the terms and vesting provisions of such options.
37
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
At November 30, 1995, options to purchase 224,300 shares of
common stock were outstanding under the 1990 Plan with exercise prices ranging
from $1.75 to $13.50 per share. These options are exercisable for periods
ranging up to six years from vesting dates. As of November 30, 1995, 545,700
options were available to be granted under the 1990 Plan.
SHARES
1990 PLAN UNDER OPTIONS PRICE PER SHARE
- --------- ------------- -----------------
Outstanding, December 1, 1992 354,319 $3.000 to $14.125
Granted 100,000 $3.000 to $6.875
Expired (93,519) $3.250 to $13.500
--------
Outstanding, November 30, 1993 360,800 $3.000 to $14.125
Expired (168,000) $3.000 to $14.125
--------
Outstanding, November 30, 1994 192,800 $3.000 to $13.500
Granted 90,000 $1.75 to $3.00
Expired (51,000) $3.000 to $13.500
Terminated (7,500) $13.500
--------
Outstanding, November 30, 1995 224,300 $1.75 to $13.500
========
The weighted average exercise price of the options outstanding
at November 30, 1995 under the 1990 plan was approximately $3.142 per share.
Warrants
During fiscal 1994, the Company issued warrants to acquire
3,750 shares of common stock with an exercise price of $.01 to a non-employee in
exchange for services to the Company. These warrants were exercised in August
1994. During 1991, the Company issued warrants to acquire 10,000 shares of
common stock with an exercise price of $7.75 in exchange for services to the
Company. These warrants have not been exercised.
Other Options
From time to time the Company has granted options to purchase
common stock to consultants or other individuals which were not under the 1983
or 1990 plans. At November 30, 1995 options to purchase 302,500 shares
of common stock were outstanding with exercise prices from $3.00 to $10.25
per share and a weighted average price of $3.488. No such grants were issued
in fiscal years 1995 or 1994.
NOTE 6: SEVERANCE OBLIGATIONS -
In 1992, the Company incurred a severance obligation to a
previous officer of approximately $900,000. Such amount was expensed as of the
date of the termination. As of November 30, 1995, the Company's obligation to
the officer was satisfied in its entirety.
In May 1994 the Company incurred a severance obligation to a
previous officer of approximately $310,000. Such amount was expensed as of the
date of the May termination. As of November 30, 1995, the Company's obligation
to the officer was satisfied in its entirety.
38
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
On December 30, 1994, the Company and its Chairman and Chief
Executive Officer entered into an agreement to modify the Termination and
Benefits Agreement dated June 1, 1991. The Company and the Chief Executive
Officer agreed to currently settle the future obligation for $1 million. Such
amount was charged to expense in the fiscal year ended November 30, 1994.
In connection with the January 13, 1995 sale of the Broward
County home health agency to the Chief Executive Officer (see Note 2), $185,000
of the $1 million obligation was satisfied as an offset to the purchase price of
the Broward agency. Additionally, $100,000 of the $1 million obligation was
satisfied as settlement of the amounts advanced from the Company to the Chief
Executive Officer in prior years. As of November 30, 1995, the Company's
remaining future obligation to the officer was approximately $571,000 and is
being satisfied under a note payable at prime rate (8.75% at November 30, 1995)
with monthly payments of $13,000.
As part of a severance agreement with the Company's former
Chief Financial Officer, approximately $647,000 was expensed in 1995. As of
November 30, 1995, the Company's remaining liability was approximately $446,000
payable under a promissory note with a payment of $26,250 per month.
NOTE 7: COMMITMENTS AND CONTINGENCIES -
Dade County Medicare Investigation:
On December 3, 1992, in connection with a federal
investigation into Medicare practices by health care providers in South Florida,
the Company was served with federal search warrants. In response to the issuance
of the federal search warrants, the Company engaged counsel who initiated a
lawyer-directed internal investigation into its Medicare claims processing
system. This internal investigation focused on a review of the compliance of the
Company's Medicare practices with applicable laws and regulations.
On December 15, 1992, Health Care Financing Administration
(HCFA) (through its fiscal intermediary) notified the Company of its decision to
suspend reimbursement to the Company's South Florida Medicare offices. Such
suspension of Medicare payments in South Florida was based, in part, upon
allegations of fraud arising from the federal investigation into claims that
were submitted to Medicare for services that were not rendered. Management
believes that the alleged violations and investigation relate to the Company's
Dade County Medicare provider and to the allocation of certain corporate
overhead costs to that provider and other of the Company's providers. Neither
the federal investigation nor the reason for the suspension relates to services
performed by other of the Company's former or existing Medicare providers.
In December 1992, due to circumstances arising from the
investigation and suspension of Medicare payments, the Company downsized, and
eventually closed, its offices in Dade, Broward and Monroe counties and
terminated its subcontracting relationships with staffing providers in South
Florida.
39
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
Subsequent to December 1992, the Company continued to operate
its Medicare office in Palm Beach County, Florida at a substantial cost to the
Company in anticipation of the reinstatement of Medicare payments. However, the
Company was unable to reach agreement with HCFA regarding the reinstatement of
Medicare payment to its South Florida operations. Therefore, in February 1993,
the Company effectively closed its South Florida Medicare operations by closing
the Palm Beach County Medicare office. The Company currently has no Medicare
operations in Florida.
As a result of the federal investigation and HCFA suspension,
in fiscal year 1993 the Company undertook an internal review program, which
included obtaining advice and consultation from an attorney specializing in
Medicare law, engaging a criminal defense attorney and implementing a billing
review and submission program. As of November 30, 1994, the Company had
completed the billing program with respect to all visits not subject to a claim
of timely filing. While the majority of fiscal years 1991 and 1992 claims were
billed, a number of claims were not billed based upon the Company's
determination that the claims did not comply with the guidelines established as
part of its internal review program. Management at this time is unable to
estimate when the ultimate outcome of the fiscal years 1991 and 1992 claims
submissions will be known or when the federal investigation may conclude.
Accordingly, it is unknown what ultimate impact, if any, the outcome of these
matters will have on the Company's consolidated financial statements.
The estimated settlement amounts due to the Company as
reflected in the accompanying consolidated balance sheets, as well as net
revenue from services presented in the accompanying consolidated statements of
operations, are presented net of estimated Medicare reimbursement disallowances.
The estimated disallowances are subject to continual review and, as such, may be
increased or decreased as substantive information becomes available. Included in
the estimated settlements due from Medicare as of November 30, 1995 is
approximately $2.7 million for the Company's former South Florida Medicare
operations representing primarily claims billed by the Company subsequent to
closure of its South Florida Medicare operations. The Company believes that the
estimated settlements due from Medicare as recorded in the Company's
consolidated balance sheet as of November 30, 1995 are realizable at their
recorded amount.
As of February 1996, 38 months have passed since execution of
the search warrants, and no charges have been brought against the Company or any
of its officers or employees. The Company has been engaged in discussions with
representatives from the United States Attorney's Office for the Southern
District of Florida concerning the possible resolution of the Medicare
investigation and allegations as they might affect the Company directly. There
are no assurances that these discussions will result in a successful resolution
of these matters or in a resolution that would not be materially adverse to the
Company. Even if the Company is successful in resolving the Medicare
investigation with the federal government, in accordance with its
indemnification obligations under its Articles of Incorporation and Bylaws, the
Company may continue to incur legal expenses on behalf of certain of its
existing and former employees who are individually the subject of such
investigation. In addition, the Company has been the subject of an investigation
by the Securities and Exchange Commission ("SEC") relating to the Medicare
investigation by the United States Attorney. The SEC has not instituted any
enforcement proceedings against the Company and any resolution of the matter
with the United States Attorney's Office would not necessarily resolve any
potential future action by the SEC.
40
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
Proposed Shareholder Class Action Suits:
In October 1992, plaintiffs filed a proposed class action
alleging, in general, that the Company and certain of its officers and directors
and the Company's independent certified public accountants violated provisions
of the Securities and Exchange Act of 1934 by issuing alleged false and
misleading financial statements during the period February 19, 1991 through July
15, 1992.
On October 29, 1994, the Company's Board of Directors, after
evaluating the economic merits of the continuing legal costs required to defend
this class action, as well as its potential exposure to adverse judgment, versus
the settlement amount sought by the plaintiff class, agreed to a settlement
between the Company and plaintiff class. Based on the value of the common stock
issued and the cash payment, the Company recorded a charge totaling
approximately $1.9 million in its fiscal year ended November 30, 1994
consolidated statement of operations to accrue the estimated settlement
liability. At a June 30, 1995 hearing, the court approved the settlement and
ordered the dismissal of the claims of all class members against the Company and
the other defendants as described in the Stipulation of Settlement. The court's
judgment is now final and the required cash payment plus the shares of common
stock have been deposited with the escrow agent.
In November 1993, a proposed class action with nearly
identical allegations as those set forth above was filed against the Company,
certain of its officers and directors, and the Company's independent certified
public accountants. On October 30, 1995, an Order of Dismissal was entered by
the Court discharging this proposed class action.
The Company received $900,000 of directors and officers
insurance proceeds during 1993 to fund legal fees with respect to these
matters. Such proceeds were included in Other Income (Expense) in the
consolidated statement of operations.
Other Litigation, Claims and Assessments:
In the ordinary course of business, the Company is exposed to
various claims, incidents which may lead to claims, and legal proceedings other
than those items discussed above. In management's opinion, the outcome of such
matters will not have a material impact upon the Company's consolidated
financial position and consolidated results of operations.
Lease Commitments:
The Company leases its corporate office and substantially all
of its branch offices under certain non-cancelable long-term operating leases
which expire at various dates. Certain of these leases require additional
payments for taxes, insurance, common area maintenance, and in most cases
provide for renewal options. Generally, terms are from one to three years.
41
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
The following is a schedule of future minimum lease payments as of November 30,
1995:
FISCAL YEAR AMOUNT
----------- ------
1996 $1,582,000
1997 471,000
1998 242,000
1999 170,000
2000 40,000
The Company's headquarters are located at 6245 North Federal
Highway, Suite 400, Fort Lauderdale, Florida. During the fourth quarter of 1994
the Company terminated its old lease and agreed to a penalty of $800,000 in
exchange for the landlord's release of the Company from approximately $1.4
million in future minimum rentals. On November 1, 1994, $100,000 of the penalty
was paid and the remaining $700,000 was scheduled to be liquidated on November
1, 1995, either by a cash payment or newly issued common stock. Prior to
November 1, 1995, the Company entered into discussions with the Landlord and it
was agreed that the Company would execute a Promissory Note whereby the Company
would make an initial cash payment of $150,000 plus accrued interest at the rate
of 11% and thereafter, beginning January 1, 1996, twelve equal monthly
installments of principal and interest in the amount of approximately $48,610
until December 1, 1996.
Total rent expense for the years ended November 30, 1995,
1994, and 1993, including the Corporate office, branch facilities and nurses'
housing for the Travel Nurse Group was approximately $3,452,000, $4,514,000 and
$5,229,000, respectively.
Termination and Benefits Agreements:
The Company has agreements with certain of its key employees
which provide for severance in the case of involuntary termination and/or a
change in control to promote adherence to non-competition provisions. Such
agreements provide for severance up to 12 months dependent upon the employee
involved. The maximum aggregate salary component commitment for these agreements
would be approximately $450,000 as of November 30, 1995.
Self-Funded Insurance Plans:
The Company self-funds its health and workers' compensation
programs up to policy limits, as defined. Claims in excess of such limits are
insured by third party reinsurers. The Company's estimate of its liability for
both outstanding as well as incurred but not reported claims is based upon its
historical loss experience. As of November 30, 1995 and 1994, such reserves
totaled approximately $2.6 million and $2.9 million, respectively, and are
included as a component of accrued expenses in the accompanying consolidated
balance sheets (See Note 12). Differences between actual losses and reserve
estimates are recognized in the period when such differences become known. As of
November 30, 1995, management believes that the differences between actual
losses to be incurred after November 30, 1995 related hereto and its recorded
reserve estimates will not be material.
42
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
Directors Indemnification Fund:
On October 29, 1994, the Company's Board of Directors approved
the creation of an indemnification fund for up to $2 million for any potential
future expenses which may be incurred by the directors as a result of any future
action against them resulting from their services to the Company. Such
indemnification fund would, if funded, supplement proceeds which may be
available to the directors under the Company's Directors and Officers insurance
policy. As of November 30, 1995, no funding has occurred; however, at the
director's discretion and based upon the Company's future cash position and
other factors as need be considered, such funding may take place. On April 3,
1995, the Company's Board of Directors approved the inclusion of the Company's
past directors, and current and past officers, in the indemnity fund.
NOTE 8: INCOME TAXES -
The provision (benefit) for income taxes is comprised of the
following:
YEARS ENDED NOVEMBER 30,
---------------------------
1995 1994 1993
---------- ---------- -----------
Current:
Federal $ (780,000) $ -- $(1,940,000)
State 247,000 115,000 175,000
Foreign 141,188 284,910 576,000
---------- ---------- -----------
(391,812) 399,910 (1,189,000)
---------- ---------- -----------
Deferred:
Federal 890,000 (2,673,193) 592,419
State 141,000 (394,000) --
Foreign 285,000 (284,910) --
---------- ---------- -----------
1,316,000 (3,352,103) 592,419
---------- ---------- -----------
Increase (decrease) in
valuation allowance (1,624,758) 5,472,758 --
---------- ---------- -----------
$ (700,570) $2,520,565 $ (596,581)
========== ========== ===========
43
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
The significant components of deferred tax assets (liabilities) which are
included in the accompanying consolidated balance sheets at November 30 are:
1995 1994
----------- ----------
Self insurance reserve $ 994,344 $1,089,271
Accrued legal and accounting fees 406,767 446,584
Accrued severance, compensation & benefits 544,185 707,478
Depreciation and amortization (146,655) (272,348)
Bad debt reserve 212,648 891,327
Accrued shareholder suit settlement -- 717,250
Accrued transition costs related to branches sold -- 447,350
Net operating loss carryforwards 3,027,540 2,047,467
Foreign tax credit carryforward -- 284,910
Other, net 168,703 163,469
----------- ----------
5,207,532 6,522,758
Valuation allowance (4,898,000) (6,522,758)
----------- ----------
$ 309,532 $ --
=========== ==========
The deferred tax provision for 1993, prior to the adoption of
SFAS No. 109, is related to the recognition in different periods of certain
components of income and expense for financial statement and tax reporting
purposes, primarily accruals for litigation and compensation settlements and
allowances for doubtful accounts.
As of November 30, 1995, the Company has available Federal and
State net operating loss carryforwards totaling approximately $6.8 million and
$17.8 million, respectively, expiring through 2010.
The effective income tax provision (benefit) on pre-tax
income (loss) differed from the provision (benefit) computed at the U.S.
Federal statutory rate for the following reasons:
1995 1994 1993
--------- ---------- ---------
Provision (benefit) computed at
Federal statutory rate of 34% $408,717 ($3,024,626) ($2,194,492)
Tax benefit not realized subject to
future realization -- -- 638,985
Effect of state income taxes 213,000 (279,000) 175,000
Foreign tax effects 130,000 -- 576,000
Effect of alternative minimum tax -- -- 182,000
Non-deductible meal expenses 148,447 307,194 --
Increase (decrease) in valuation
allowance (1,624,758) 5,472,758 --
Other 24,024 44,239 25,926
--------- ---------- ---------
Provision (benefit) for income taxes ($700,570) $2,520,565 ($596,581)
========= ========== =========
44
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
In fiscal 1995, the Company recognized a benefit for income
taxes of approximately $701,000. Such benefit is primarily a result of certain
tax deductible legal settlements which can be carried back to recover income
taxes previously paid by the Company, as well as, the recognition of certain
deferred tax assets previously reserved by the Company, as discussed below.
During 1994, the Company determined that, due to recurring
losses in prior years and other factors, realization of the net deferred tax
asset did not meet the "more likely than not" criteria of SFAS No. 109.
Consequently, at November 30, 1994, the valuation allowance was increased so
that the net deferred tax asset was fully reserved. As a result of pre-tax
income generated in 1995, the Company has realized certain deferred tax assets
previously reserved. Additionally, the Company has recognized approximately
$310,000 of its net operating loss carryforward generated in fiscal 1995 as
management believes that it is more likely than not the Company will generate
sufficient future taxable income to realize this asset. The valuation allowance
is subject to continual review and, as such, may be decreased in the future as
substantive information becomes available about the Company's ability to
generate sufficient future taxable income to realize the net deferred tax asset.
NOTE 9: RELATED PARTY TRANSACTIONS -
Starting in 1994, the Company has utilized the services of an
outside director as a consultant. Such services included shareholder relations,
evaluation of strategic alternatives for the Company and other duties as
assigned by the Chief Executive Officer. The fees for such services were
approximately $32,000 in 1995 and $173,000 in 1994.
During 1995, the Company utilized the services of an outside
director as its National Medical Director and in July 1995 entered into a
written contractual arrangement whereby the Director would continue as the
Company's Medical Director for an indeterminate time or until the contract is
terminated by either party. Such services include utilization review, quality
assurance, medical guidance, and compliance with all Federal and State
regulations. For the Fiscal Year 1995, the fees for such services were
approximately $42,000.
During 1994 and 1995, the Company also received consulting
services from two former officers of the Company. Fees for those services were
approximately $28,000 and $146,000 for the years ended 1995 and 1994,
respectively.
See Note 2 and Note 6 for a description of the sale of the
Company's Broward County, Florida home health agency to the Company's Chairman
and Chief Executive Officer.
NOTE 10: DEFINED CONTRIBUTION PLAN -
The Company has a defined contribution plan under Section
401(K) of the Internal Revenue Code (the "Plan"). The Plan is available to all
full-time employees. Participants can contribute from 1% up to 15% of their
annual compensation to the Plan. Additional discretionary contributions may be
made by the Company. Since inception of the Plan, no discretionary contributions
have been made.
NOTE 11: CONCENTRATION OF CREDIT RISK -
The Company has been providing services to healthcare
facilities located in the U.S. Virgin Islands, which are owned by the government
of the U.S. Virgin Islands, since 1991. Revenues from these facilities accounted
for approximately 9.6% and 7.2% of consolidated net revenue from services for
the fiscal years ended November 30, 1995 and 1994, respectively. Outstanding
accounts receivable were approximately $3.0 million and $2.2 million as of
November 30, 1995 and 1994, respectively, and are included in trade accounts
receivable in the accompanying consolidated balance sheets. As of January 31,
1996, approximately $2.2 million of the November 30, 1995 outstanding receivable
balance from these facilities remained unpaid. Approximately $507,000 of this
amount has been outstanding for 180 days or greater. Collections from customers
located in the U.S. Virgin Islands are generally slower than the Company's
domestic customer base. Management believes the November 30, 1995 balances due
are realizable at their recorded amounts primarily because 100% of all prior
amounts due the Company for services rendered since the inception of these
contracts have been paid in full by the government agencies. The government
currently acknowledges the debt and is instituting a plan to liquidate the
amounts past
45
<PAGE>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
due. Accordingly, no allowance for doubtful accounts has been recorded related
to these outstanding receivables.
NOTE 12: ACCRUED EXPENSES
Accrued expenses consisted of the following approximate
amounts at November 30:
1995 1994
---------- ----------
Workers' Compensation Insurance $2,088,000 $2,250,000
Health Insurance 527,800 615,600
Litigation Services 661,000 807,000
Professional Fees 334,800 271,900
Termination Costs-Sold Operations 27,500 1,177,000
Other 585,100 472,500
---------- ----------
Total $4,224,200 $5,594,000
========== ==========
46
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Hospital Staffing Services, Inc.:
We have audited the accompanying consolidated balance sheets
of Hospital Staffing Services, Inc. (a Florida Corporation) and subsidiaries
(the "Company"), as of November 30, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended November 30, 1995. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the schedule 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 Hospital
Staffing Services, Inc. and subsidiaries as of November 30, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended November 30, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial
statements, effective December 1, 1993, the Company changed its method of
accounting for income taxes.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in Part IV,
Item 14.2 of this Form 10-K is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 23, 1996.
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
48
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item will be set forth in the
Proxy Statement of the Company relating to the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth in the
Proxy Statement of the Company relating to the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be set forth in the
Proxy Statement of the Company relating to the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be set forth in the
Proxy Statement of the Company relating to the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
49
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
1. FINANCIAL STATEMENTS
(I) REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS;
(II) CONSOLIDATED BALANCE SHEETS;
(III) CONSOLIDATED STATEMENTS OF OPERATIONS;
(IV) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY;
(V) CONSOLIDATED STATEMENTS OF CASH FLOWS;
(VI) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2. FINANCIAL STATEMENT SCHEDULES
(I) VALUATION AND QUALIFYING ACCOUNTS.
3. EXHIBITS
(I) REPORTS ON FORM 8-K
NONE
(II) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT NO.
2.1 PURCHASE AGREEMENT DATED SEPTEMBER 2, 1994 AND EFFECTIVE AS OF
AUGUST 31, 1994 BETWEEN HOSPITAL STAFFING SERVICES, INC., HOSPITAL
STAFFING SERVICES OF CALIFORNIA, INC., CURA CARE, INC. OF ARIZONA,
AND HSSI ACQUISITION CORP. AS SELLER AND INTERIM HEALTHCARE OF NEW
YORK INC., AND INTERIM HEALTHCARE INC. AS BUYER. (INCORPORATED BY
REFERENCE TO EXHIBIT 10.31 TO REGISTRANT'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED AUGUST 31, 1994).
2.2 PURCHASE AGREEMENT DATED DECEMBER 30, 1994 AND EFFECTIVE JANUARY 1,
1995 BETWEEN HOSPITAL STAFFING SERVICES, INC. AND CARDINAL NURSING
AND HOME CARE, INC. AS SELLERS AND RONALD A. CASS AS BUYER.
2.3 PURCHASE AGREEMENT DATED AND EFFECTIVE AS OF FEBRUARY 15, 1995
BETWEEN TRI THERAPY, INC., AS SELLER AND HSSI OF GEORGIA, INC. AS
BUYER.
3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE REGISTRANT
(INCORPORATED BY REFERENCE TO AN EXHIBIT TO THE REGISTRATION
STATEMENT ON FORM S-18 (NO. 2-87290-A) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OCTOBER 19, 1983, AMENDED ON NOVEMBER 23, 1983
AND DECEMBER 5, 1983 AND DECLARED EFFECTIVE ON DECEMBER 6, 1983
("FORM S-18 (NO. 2-87290-A)")).
3.2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION (INCORPORATED BY
REFERENCE TO AN EXHIBIT TO THE REGISTRATION STATEMENT ON FORM S-1
(NO. 33-42640) FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
SEPTEMBER 6, 1991, AMENDED ON OCTOBER 4, 1991 AND DECLARED EFFECTIVE
ON OCTOBER 4, 1991 ("FORM S-1 (NO. 33-42640)").
50
<PAGE>
3.3 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF THE REGISTRANT.
(INCORPORATED BY REFERENCE TO EXHIBIT 3.4 FILED WITH THE REGISTRANT'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30,
1993).
3.4 BY-LAWS OF THE REGISTRANT, AS AMENDED (INCORPORATED BY REFERENCE TO
THE REGISTRANT'S CURRENT REPORT ON FORM 8-K DATED JULY 30, 1991 FILED
AUGUST 1, 1991).
4.1 FORM OF COMMON SHARE CERTIFICATE (INCORPORATED BY REFERENCE TO AN
EXHIBIT TO THE REGISTRATION STATEMENT ON FORM S-18 (NO. 2-87290-A)).
10.1 INCENTIVE STOCK OPTION PLAN, AS AMENDED (INCORPORATED BY REFERENCE
TO EXHIBIT A(I) TO REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED AUGUST 31, 1989).
10.2 AMENDED AND RESTATED 1990 STOCK OPTION PLAN (INCORPORATED BY
REFERENCE TO EXHIBIT 4 FILED WITH THE REGISTRANT'S REGISTRATION
STATEMENT ON FORM S-8 ON MAY 17, 1991).
10.3 SECOND AMENDED AND RESTATED 1990 STOCK OPTION PLAN (INCORPORATED BY
REFERENCE TO EXHIBIT 4 FILED WITH THE REGISTRANT'S REGISTRATION
STATEMENT ON FORM S-8 ON JUNE 26, 1992).
10.4 ALTERNATIVE DEFERRED COMPENSATION PLAN APPROVED JANUARY 19, 1994.
(INCORPORATED BY REFERENCE TO EXHIBIT 10.26 FILED WITH THE
REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1993).
10.5 AGREEMENT FOR LEASE BETWEEN REGISTRANT AND 62ND STREET PARTNERS,
DATED JULY 29, 1989 FOR REGISTRANT'S OFFICE IN FORT LAUDERDALE,
FLORIDA (INCORPORATED BY REFERENCE TO EXHIBIT A(II) TO REGISTRANT'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 1989).
10.6 ADDENDUM TO LEASE AGREEMENT DATED OCTOBER 31, 1994.
10.7 SECOND ADDENDUM TO LEASE AGREEMENT DATED NOVEMBER 1, 1995, AND
RELATED PROMISSORY NOTE DATED DECEMBER 1, 1995.
10.8 TERMINATION AND BENEFITS AGREEMENT WITH WARREN MARMORSTEIN DATED
NOVEMBER 1, 1993. (INCORPORATED BY REFERENCE TO EXHIBIT 10.25 FILED
WITH THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 1993).
10.9 TERMINATION AGREEMENT WITH BRIAN M. LECHNER DATED JUNE 1, 1994.
(INCORPORATED BY REFERENCE TO EXHIBIT 10.29 TO REGISTRANT'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MAY 31, 1994).
10.10 SETTLEMENT AGREEMENT WITH RONALD A. CASS DATED JANUARY 1, 1995.
10.11 EMPLOYMENT AGREEMENT WITH JAY GERSHBERG DATED SEPTEMBER 1, 1995.
10.12 EMPLOYMENT AGREEMENT WITH JEFFREY A. BARNHILL DATED SEPTEMBER 1,
1995.
10.13 EMPLOYMENT AGREEMENT WITH RONALD HUNEYCUTT DATED FEBRUARY 1, 1996.
10.14 LOAN AND SECURITY AGREEMENT WITH CONGRESS FINANCIAL CORPORATION
(FLORIDA) DATED AUGUST 23, 1993. (INCORPORATED BY REFERENCE TO
EXHIBIT 10.24 FILED WITH THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1993).
10.15 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT WITH CONGRESS
FINANCIAL CORPORATION (FLORIDA) DATED JANUARY 27, 1994. (INCORPORATED
BY REFERENCE TO EXHIBIT 10.27 FILED WITH THE REGISTRANT'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1993).
51
<PAGE>
10.16 AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT WITH CONGRESS
FINANCIAL CORPORATION (FLORIDA) DATED MARCH 15, 1994. (INCORPORATED
BY REFERENCE TO EXHIBIT 10.28 TO REGISTRANT'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED MAY 31, 1994.)
10.17 MANAGEMENT AGREEMENT BETWEEN HOSPITAL STAFFING SERVICES, INC. AND
ITS WHOLLY-OWNED SUBSIDIARIES DATED JUNE 13, 1994, EFFECTIVE DECEMBER
1, 1990. (INCORPORATED BY REFERENCE TO EXHIBIT 10.30 TO REGISTRANT'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MAY 31, 1994.)
10.18 LOAN AND SECURITY AGREEMENT WITH CAPITAL HEALTHCARE FINANCING DATED
FEBRUARY 7, 1996.
21.1 SUBSIDIARIES OF THE REGISTRANT.
23.1 CONSENT OF ARTHUR ANDERSEN LLP - FILED HEREWITH.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Hospital Staffing Services, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
HOSPITAL STAFFING SERVICES, INC.
By: /S/RONALD A. CASS Ronald A. Cass, Chairman of the Board,
----------------- and Chief Executive Officer, and President
Date: February 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/S/RONALD A. CASS Chairman of the Board, Chief 2/27/96
- -------------------------- Executive Officer and President,
Ronald A. Cass (Principal Executive Officer)
/S/RONALD G. HUNEYCUTT Vice President Finance and Chief 2/27/96
- -------------------------- Financial Officer
Ronald G. Huneycutt
/S/WILLIAM F. MCCONNELL Director 2/27/96
- --------------------------
William F. McConnell
/S/ROBERT B. FIELDS Director 2/27/96
- --------------------------
Robert B. Fields
/S/HECTOR L. ZIPEROVICH Director 2/27/96
- --------------------------
Hector L. Ziperovich, M.D.
53
<PAGE>
<TABLE>
<CAPTION>
HOSPITAL STAFFING SERVICES, INC. AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DESCRIPTION AMOUNT PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
NOVEMBER 30, 1995
DEDUCTED FROM THE BALANCE
SHEET CAPTION "TRADE UNCOLLECTIBLE
ACCOUNTS RECEIVABLE" ACCOUNTS
ALLOWANCE FOR DOUBTFUL CHARGED AGAINST
ACCOUNTS $2,345,598 $552,663 -- ALLOWANCE $2,298,662 $599,599
----------------------------------------------------------------------------------------
FOR THE YEAR ENDED
NOVEMBER 30, 1994
DEDUCTED FROM THE BALANCE
SHEET CAPTION "TRADE UNCOLLECTIBLE
ACCOUNTS RECEIVABLE" ACCOUNTS
ALLOWANCE FOR DOUBTFUL CHARGED AGAINST
ACCOUNTS $1,724,655 $2,382,948 $608,166(1) ALLOWANCE $2,370,171 $2,345,598
----------------------------------------------------------------------------------------
FOR THE YEAR ENDED
NOVEMBER 30, 1993
DEDUCTED FROM THE BALANCE
SHEET CAPTION "TRADE UNCOLLECTIBLE
ACCOUNTS RECEIVABLE" ACCOUNTS
ALLOWANCE FOR DOUBTFUL CHARGED AGAINST
ACCOUNTS $1,069,266 $1,365,224 $107,442(2) ALLOWANCE $817,277 $1,724,655
----------------------------------------------------------------------------------------
<FN>
(1) RECLASSIFICATIONS BETWEEN ACCOUNTS RECEIVABLE AND ALLOWANCE ACCOUNT.
(2) CHARGED DIRECTLY AGAINST REVENUE.
</FN>
</TABLE>
S-1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
DATED
DECEMBER 30, 1994
AND
EFFECTIVE AS OF
JANUARY 1, 1995
BETWEEN
HOSPITAL STAFFING SERVICES, INC.
CARDINAL NURSING & HOME CARE, INC.
as Seller
and
RONALD A. CASS
as Buyer
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. SALE, PURCHASE AND ASSIGNMENT OF ASSETS
1.1 Transfer of Assets....................................2
1.2 Excluded Assets.......................................2
1.3 Transition Period.....................................3
1.4 Leases................................................4
1.5 Management Agreement..................................4
SECTION 2. NO ASSUMPTION OF LIABILITIES
2.1 No Assumption of Liabilities..........................4
2.2 Assumed Liabilities...................................4
SECTION 3. PURCHASE PRICE
3.1 Determination of Purchase Price.......................6
3.2 Payment of the Purchase Price.........................6
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.1 Organization and Good Standing........................6
4.2 Due Authority.........................................7
4.3 No Consents...........................................7
4.4 No Breach.............................................8
4.5 Financial Statements..................................9
4.6 Books and Records.....................................9
4.7 Taxes.................................................9
4.8 Compliance with Laws.................................10
4.9 Actions and Proceedings..............................10
4.10 Agreements...........................................11
4.11 Insurance............................................12
4.12 Brokers or Finders...................................12
4.13 Tangible Assets......................................13
4.14 Intangible Property..................................13
4.15 Liabilities..........................................14
4.16 Employees............................................14
4.17 ERISA................................................14
4.18 Leased Property......................................15
4.19 Arrangements with Subcontractors.....................16
4.20 Compliance of Arrangements with Law..................16
4.21 Full Disclosures.....................................16
4.22 Representations and Warranties on Closing Date.......17
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Due Authority........................................17
5.2 No Consents..........................................18
5.3 No Broker............................................18
5.4 Agreement Not to Transfer Assets.....................18
5.5 Representations and Warranties on Closing Date.......18
SECTION 6. COVENANTS OF SELLERS AND BUYER
6.1 Books and Records....................................19
SECTION 7. EXPENSES....................................................19
SECTION 8. FURTHER ASSURANCES AND ACTIONS
SUBSEQUENT TO CLOSING................................20
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................21
SECTION 10. INDEMNIFICATION
10.1 Obligation of the Sellers to Indemnify...............21
10.2 Obligation of the Buyer to Indemnify.................22
10.3 Claims by Third Parties..............................23
10.4 Opportunity to Defend................................24
10.5 Effect of Insurance Payment..........................25
SECTION 11. CLOSING
11.1 Closing..............................................25
11.2 Sellers' Action at Closing...........................25
11.3 Buyer's Actions at Closing...........................27
SECTION 12. POST CLOSING ITEMS.........................................27
SECTION 13. MISCELLANEOUS
12.1 Publicity............................................27
12.2 Notices..............................................28
12.3 Remedies Not Exclusive...............................29
12.4 Governing Law........................................29
12.5 No Assignment........................................30
12.6 Headings.............................................30
12.7 Severability of Provisions...........................30
12.8 Counterparts.........................................30
12.9 Subrogation of the Buyer.............................30
12.10 Amendment and Modification...........................30
12.11 Binding Effect.......................................31
12.12 Entire Agreement.....................................31
12.13 Prevailing Party.....................................31
<PAGE>
12.14 Waiver...............................................31
12.15 Signatures...........................................31
12.16 Definitions..........................................32
<PAGE>
SCHEDULES
Schedule 1.1 Assets
Schedule 1.2.1 Excluded Assets
Schedule 1.2.2 Computer Software
Schedule 1.2.3 Trademarks
Schedule 1.4 Leases
Schedule 2.2 Assumed Liabilities
Schedule 3.1 Allocation of Purchase Price
Schedule 4.3 Consents
Schedule 4.4 No Breach
Schedule 4.8 Compliance with Laws
Schedule 4.9 Actions and Proceedings
Schedule 4.10 Agreements
Schedule 4.11 Insurance Policies
Schedule 4.12 Brokers or Finders
Schedule 4.13 Tangible Assets
Schedule 4.14 Intangible Property
Schedule 4.16 Employees
Schedule 4.17 ERISA
Schedule 4.18 Leases
Schedule 4.19 Arrangements with Subcontractors
Schedule 5.2 No Consents
Schedule 5.3 No Broker
<PAGE>
EXHIBITS
Exhibit A - Excluded Assets License
Exhibit B - Licensed Home Health Care Management Agreement
Exhibit C - Settlement Agreement
<PAGE>
THIS AGREEMENT (the "Agreement") is made this 30th day of December,
1994, but effective as of January 1, 1995, by and between HOSPITAL STAFFING
SERVICES, INC., a Florida corporation ("HSSI") and CARDINAL NURSING AND HOME
CARE, INC., a Florida corporation ("Cardinal" or "Selling Subsidiary") (HSSI and
Cardinal sometimes referred to individually as "Seller" and collectively as
"Sellers") and RONALD A. CASS, an individual residing in Broward County, Florida
( the "Buyer").
W I T N E S S E T H:
WHEREAS, the Selling Subsidiary is engaged in the proprietary home care
business in Broward County, Florida; and
WHEREAS, HSSI desires to sell and Buyer desires to purchase certain
specified assets of the Selling Subsidiary; and
WHEREAS, HSSI is the sole shareholder of Cardinal and accordingly, the
transactions contemplated hereby will inure to the direct benefit of HSSI, and,
but for HSSI's participation as a joint obligor with Cardinal, the Buyer would
not enter into or consummate the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereto
agree as follows:
SECTION 1. SALE, PURCHASE AND ASSIGNMENT OF ASSETS.
1.1 TRANSFER OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, Buyer, in reliance upon the representations and
warranties of Sellers contained in this Agreement and any Schedules annexed
hereto, will, at the "Closing," (the
<PAGE>
"Closing") as hereinafter defined in Section 11, shall acquire from Sellers, and
Sellers at the Closing will sell, assign, transfer and convey to Buyer, the
"Assets" of the Selling Subsidiary set forth in Schedule 1.1, including
furniture, equipment and other fixed assets, customer and employee lists,
telephone numbers and current patient and client files and records to the extent
permitted by law and all goodwill associated with any of the foregoing listed on
Schedule 1.1 (which assets shall be collectively referred to herein as the
"Assets"), at the "Location" of the Subsidiary (the "Location") set forth on
Schedule 1.1, including without limitation, all claims and rights under
contracts, and all books and records relating to the Assets being conveyed,
transferred, and assigned pursuant to the terms of this Agreement, all as the
same shall exist at the time of the Closing listed on Schedule 1.1 and all
substitutions, replacements and additions thereto (provided however that with
respect to any contracts, only after such substitutions, replacements and
additions have been approved by Buyer in writing) and the proceeds from the sale
of any of the Assets between the date hereof and the Closing Date.
1.2 EXCLUDED ASSETS. Section 1.1 above notwithstanding, there
shall be excluded from the Assets being sold and transferred pursuant to the
terms of this Agreement the following ("Excluded Assets"):
1.2.1 Except as set forth in Schedule 1.2.1 all cash and cash
equivalents of Sellers, excluding Assets set forth above in Section 1.1 above at
Closing.
1.2.2 Except as set forth in Schedule 1.2.2, all computer
software and licenses, including, but not limited to, the HCAS[copyright]
computer software owned by Sellers.
1.2.3 Except as set forth in Schedule 1.2.3, all tradenames
and trademarks.
<PAGE>
1.2.4 Any indebtedness of HSSI or any of its subsidiaries to
any of the Sellers.
1.2.5 All contracts, agreements and commitments (whether oral
or written) between the Sellers or any of their Affiliates (as hereinafter
defined) and any "Interested Person," (as hereinafter defined).
1.2.6 All accounts receivable of the subsidiary.
1.2.7 Any other assets including without limitation all
provider numbers, provider agreements, Home Health Agency or Licensed Home Care
Services Agency licenses, all deposits, prepaid expenses and any other assets
whether real or personal, tangible or intangible not set forth on Schedule 1.1.
1.3 TRANSITION PERIOD.
Notwithstanding the provisions of Section 1.2 above, the Buyer
shall be granted at the Closing a nonexclusive, nontransferable, royalty-free
license (the "Excluded Assets License"), in the form attached hereto as Exhibit
A, to use the Excluded Assets described in subsections 1.2.2 and 1.2.3 for a
period of six (6) months following the Closing Date in order to allow the Buyer
to effectuate a smooth transition of control; provided however the Sellers shall
be reimbursed by the Buyer within thirty (30) days for any and all incidental
documented costs or expenses incurred by the Sellers as a result of the Excluded
Asset License. Buyer and Seller shall enter into a lease agreement to permit the
Buyer to use the HCAS[copyright] computer software owned by Seller.
1.4 LEASES. To the extent that the lease obligations of the
Sellers for office space, furniture, copy machines and other office equipment as
set forth in Schedule 1.4 shall be assignable to Buyer, Buyer shall assume such
leases. In the alternative, Buyer
<PAGE>
may, if Buyer or Sellers are unable to obtain required consents to assignment,
enter into sub-lease agreements with Sellers.
1.5 MANAGEMENT AGREEMENT. To the extent that the Buyer has not
obtained the licenses to operate as a Home Health Agency or Licensed Home Care
Services Agency, the Buyer and Seller shall enter into a Licensed Home Health
Care Management Agreement, whereby Cardinal shall manage the Assets until such
time as such license is obtained by Buyer, pursuant to the terms set forth in
the form of Management Agreement attached hereto as Exhibit B.
SECTION 2. NO ASSUMPTION OF LIABILITIES.
2.1 NO ASSUMPTION OF LIABILITIES. Except as specifically set forth
in Subsection 2.2 below, Buyer shall not assume or be liable for any
"Liabilities" (as defined in Section 4.17) of Sellers, whether contingent or
otherwise, and whether or not such Liabilities are reflected on the books or
records of the Sellers on the Closing Date.
2.2 ASSUMED LIABILITIES. From and after the Closing, Buyer shall
assume only those obligations, contracts or other liabilities of Sellers
specifically set forth on Schedule 2.2 and no others.
The Assets shall not include any liabilities, obligations or
commitments of the Sellers not specifically listed on Schedule 2.2 or included
in the contracts or property specifically referred to in Section 1.1. The Buyer
shall not assume or have any liability for any obligations or liabilities of the
Sellers not expressly assumed pursuant to the terms of this Agreement. Without
limiting the specificity or generality of the foregoing, the Buyer shall be
under no obligation to, and shall not be deemed to assume any obligation or
liability of the Sellers for the following:
(a) any governmental or other healthcare provider agreements
or provider numbers or provider relationships of the Sellers or any of them;
(b) any liability with respect to any life, health, accident,
disability or any other "employee welfare benefit plan," as such term is defined
in Section 3(1) of the Employee Retirement Security Act of 1974, as amended
("ERISA"), or any pension, profit sharing, stock bonus, deferred compensation,
retirement, bonus or other "employee pension benefit plan," as defined in
Section 3(2) of ERISA, maintained, or to which contributions have been made, by
the Sellers or any predecessor or any corporation which is a controlled group or
corporations of which any Sellers are a member, as defined in Section 414(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), or any trade or
business (whether or not incorporated) under common control with the Sellers, as
defined in Section 414(c) of the Code or any affiliated service group aggregated
with the Sellers under Section 414(m) of the Code (the "ERISA Employer");
(c) the Sellers legal, accounting or other fees or expenses
arising out of the transactions contemplated by this Agreement;
(d) with respect to any pending litigation or other legal
proceedings, arbitrations, mediations or investigations related to the Sellers;
(e) with respect to accrued but unpaid wages, salaries,
customary bonuses which are consistent with past practice or overtime, sick,
vacation, severance or "paid time off" or other employee benefits. Any wages,
salaries, or customary bonuses or any taxes in connection therewith which are
paid by Buyer on behalf of Seller after the date of Closing shall be immediately
reimbursed to Buyer by Seller after receipt of documentation in connection
therewith.
<PAGE>
SECTION 3. PURCHASE PRICE.
3.1 DETERMINATION OF PURCHASE PRICE. The "Purchase Price" to be
paid by Buyer for all of the Assets set forth on Schedule 1.1 (the "Purchase
Price") will be One Hundred Eighty Five Thousand and No/100 Dollars ($185,000),
which Purchase Price shall be allocated as set forth on Schedule 3.1 hereto and
which allocations with respect to the Assets which shall be used by the parties
for purposes of reporting to the Internal Revenue Service (the "IRS") on Form
8594.
3.2 PAYMENT OF THE PURCHASE PRICE. Payment of the Purchase Price
shall be made as part of the consideration set forth in the Settlement Agreement
of even date, the form of which is attached hereto as Exhibit C.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
In order to induce the Buyer to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, the Sellers,
jointly and severally, make the following representations, warranties and
covenants, each of which is relied upon by Buyer in consummating the
transactions contemplated hereby regardless of any other investigation made or
information obtained by the Buyer, as follows:
4.1 ORGANIZATION AND GOOD STANDING. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and each Seller is qualified to do business in each state
in which it is required to be so qualified which affects the Assets, other than
states, either individually or in the aggregate, in which the failure to be so
qualified will not have a material adverse affect on any such Seller.
<PAGE>
Each Seller has full corporate power and authority to own or lease its
properties and to carry on the business of the Assets as it is now being
conducted. The Selling Subsidiary has no subsidiaries and owns no capital stock
or other securities or interests of or in any other entity, partnership or joint
venture.
4.2 DUE AUTHORITY. Each Seller has all power and authority
necessary to enable each of them to carry out the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by it have been authorized by all
necessary corporate action. Shareholder approval (other than the approval of
HSSI as the sole shareholder of the Selling Subsidiary) of the transactions
contemplated by this Agreement is not necessary. This Agreement is a valid and
binding agreement of each Seller, enforceable against each Seller in accordance
with its terms.
4.3 NO CONSENTS. To the best of each Seller's Knowledge, no
governmental filings, authorizations, approvals or consents, other than the
approvals listed on Schedule 4.3 are required (a) to permit each Seller to
fulfill all of each of their obligations under this Agreement, (b) as a result
of the transfer of the Assets contemplated by this Agreement, or (c) to enable
the Buyer to continue the operation of the Assets substantially as conducted
prior to the Closing.
4.4 NO BREACH. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the Articles of Incorporation or Bylaws of any
Sellers; (ii) violate, conflict with or result in the breach of any of the terms
of, result in a material modification of, otherwise give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time
<PAGE>
or both constitute) a default under, any contract, option, mortgage, indenture
or other material agreement or instrument to which any Sellers are a party or by
or to which it or any of the Assets may be bound or subject except to the extent
that parties to agreements may be required to consent to the transaction which
is the subject of this Agreement; (iii) violate any order, judgment, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, any Sellers, or upon the properties or business of any
Sellers; (iv) except as set forth on Schedule 4.4, violate any statute, law,
regulation or ordinance of any jurisdiction; or (v) result in the creation of
any liens, mortgages, pledges, options, claims, security interests, title
defects, encumbrances, conditional sales contracts, charges and other
restrictions of every kind (collectively, the "Liens") on the Assets being
conveyed to Buyer hereunder, other than Liens resulting from acts of Buyer; (vi)
result in the imposition or creation of any Lien on any of the Assets or
accelerate any indebtedness of the Sellers or to which the Assets may be bound;
or (vii) breach, impair or in any way limit any governmental or official
license, approval, permit or authorization of the Sellers which would affect or
impact the operations of the Assets.
4.5 FINANCIAL STATEMENTS. The Buyer has been provided with the
unaudited financial statements for the Selling Subsidiary for the fiscal year
ended November 30, 1993, including any related notes, and the most recent
unaudited monthly and year to date financial statements (the "Interim
Statements") of the Selling Subsidiary as of September 30, 1994 (collectively,
the "Financial Statements"). The Financial Statements are true, correct and
complete, are in accordance with the books and records of the Selling
Subsidiary, were prepared in accordance with generally accepted accounting
principles
<PAGE>
applied on a consistent basis and fairly present the financial condition and
results of operation for the periods so indicated.
4.6 BOOKS AND RECORDS. The books and records of any Sellers which
relate to or could affect to the Assets and the corporate constituent documents
of any Sellers, all of which have been made available to the Buyer, are true,
complete and correct
4.7 TAXES. All federal, state and local tax returns and reports
required to be filed by the Sellers have been or will be filed with the
appropriate governmental authorities in all jurisdictions in which such returns
and reports are required to be filed, which returns and reports were true and
correct for the period for which they were filed which could affect the
operations of the Selling Subsidiary or the Assets. All federal, state and local
income, ad valorem, profits, franchise, sales, use, occupation, property,
excise, gross receipts, regulatory assessment fees and other taxes, fees and
assessments (including interest and penalties, if any) payable by the Sellers
which could affect the operation of the Selling Subsidiary or the Assets on or
prior to the date hereof were paid when due, and will be paid to the extent they
become due and payable after the date hereof with respect to periods on or prior
to the Closing Date except to the extent that any tax, fee, or assessment is
being contested in good faith and reasonable reserves have been set aside
therefor. There are no unpaid taxes which are or could become a Lien on the
Assets. No claim for any additional tax or assessment is being asserted against
the Selling Subsidiary by any tax authority or against HSSI which could
adversely affect the Assets, and the Sellers have not been notified of, and
there are no facts or circumstances known to the Sellers which could result in
any claim being asserted with respect to any such taxes. The charges, accruals
and reserve on the Sellers' books in respect of taxes for all fiscal
<PAGE>
periods are adequate, and there are no unpaid assessments or, to the best
Knowledge of the Sellers, any basis for the assessment of any amount of
additional taxes for any fiscal period. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or assets held
or acquired by the Sellers. All taxes that the Sellers are or were required to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental authority or other person.
4.8 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.8, the
Sellers have complied in all material respects with all federal, state, county
and local laws, ordinances, regulations, inspections, orders, judgments,
injunctions, awards or decrees applicable to the business of the Selling
Subsidiary with respect to matters affecting or which could affect the Assets,
or the transactions contemplated by this Agreement.
4.9 ACTIONS AND PROCEEDINGS. Except as set forth on Schedule 4.9,
there is no outstanding order, judgment, injunction, award or decree of any
court, governmental or regulatory body or arbitration tribunal against,
involving the Sellers in respect of, or in connection with, the business of the
Selling Subsidiary or matters affecting the Assets, the Selling Subsidiary or
the operation thereof.
4.10 AGREEMENTS. Schedule 4.10 sets forth each contract or
arrangement of the following types in respect of, or in connection with, the
Selling Subsidiary or to which the Selling Subsidiary is a party or by or to
which it or the Assets are bound or subject: any (i) service distribution or
supply agreements, which shall include, without limitation, all contracts by
which any of the Sellers are offering or selling services to customers with
respect to the Assets or the Selling Subsidiary; (ii) agreement not to compete
which affects the Selling Subsidiary or other agreement or covenants which in
any way purport to restrict
<PAGE>
any Sellers' business activity or purport to limit the freedom of the Sellers to
engage in any line of business or to compete with any person which affects or
could affect the operations of the Selling Subsidiary or the Assets or the
Buyer's operation thereof after Closing; (iii) other material contract,
agreement or arrangement whether or not made in the Ordinary Course of Business;
or (iv) each licensing agreement or other contract with respect to patents,
trademarks, copyrights, or other intellectual property. Except as set forth on
Schedule 4.10, the Sellers have full legal power and authority to assign their
rights under such contracts to Buyer in accordance with this Agreement, and such
assignment will not affect the validity, enforceability or continuity of any of
such contracts. Except as set forth on Schedule 4.10, the Sellers have not
received any notice from any other party to a contract of the termination or
threatened termination thereof, and no Seller has any Knowledge of the
occurrence of any event which would allow such other party to terminate such
contract except for non-default expiration terms contained therein. The
contracts comply in all material respects with all applicable laws and
regulations including, without limitation, Section 1128B of the Social Security
Act, as amended, and codified at 42 U.S.C ss.1320a-7b, Section 1877 of the
Social Security Act, as amended, and codified at 42 U.S.C. ss.1395nn, and
regulations promulgated thereunder in each such case, and any comparable state
fraud and abuse and self-referral laws, rules and regulations.
All of the agreements set forth on Schedule 4.10 (except as otherwise
set forth on Schedule 4.10) are valid agreements, in full force and effect and
binding upon the parties, enforceable in accordance with their terms, and the
Selling Subsidiary is not in default in any material respect under any of them
(nor, to the Knowledge of any Sellers, is any other
<PAGE>
party to any of such agreements), nor does any condition exist which, with
notice or lapse of time or both, would constitute a default thereunder.
4.11 INSURANCE. Schedule 4.11 sets forth a list and brief
description of all policies or binders of insurance, including (but not limited
to) workers' compensation and employer liability, professional liability
insurance, automobile insurance, industrial insurance, product liability and
title insurance applicable to the Assets or in respect to the conduct of the
business of the Selling Subsidiary and of all performance bonds and letters of
credit securing any obligations of the Sellers maintained by the Sellers in the
conduct of the business of the Selling Subsidiary or the Assets.
4.12 BROKERS OR FINDERS. Except as set forth on Schedule 4.12,
there has been no broker's or finder's services utilized in connection with the
transaction contemplated by this Agreement and no Sellers have taken any action
which could obligate Buyer to pay any broker's or finder's fee in connection
with the transaction contemplated hereunder.
4.13 TANGIBLE ASSETS. Schedule 4.13 sets forth all "material" items
of furniture, equipment, and other fixed assets, including leasehold
improvements, fixtures, structures, any related capitalized items or other
tangible property owned by or used in the business of the Selling Subsidiary
(the "Tangible Assets") but excluding (i) computer equipment which is a part of
the Selling Subsidiary's or HSSI's computer network and (ii) the Excluded
Assets. Except as set forth on Schedule 4.13, Buyer, upon the Closing, will
acquire valid leasehold interests in all of the leased property and good and
marketable title to all other Assets and all of the Sellers' respective rights,
title and interest in the Tangible Assets, free and clear of all Liens. All of
the Tangible Assets are in good operating condition and repair and are usable in
the Ordinary Course of Business of the Selling Subsidiary.
<PAGE>
4.14 INTANGIBLE PROPERTY. Schedule 4.14 sets forth any patent,
trademark, service mark, trade name, copyright, franchise and any application
for any of the foregoing owned by or used in the business of the Selling
Subsidiary and which is material to the business of the Selling Subsidiary (the
"Intangible Property") and, with respect to any federally registered trademarks
or service marks used in connection with the business of the Selling Subsidiary,
the U.S. Patent and Trademark Office Registration Number and a copy of the
Certificate of Registration pertaining to such mark. All Intangible Property of
the Sellers are subsisting and have not been abandoned.
4.15 LIABILITIES. Except as specifically set forth on Schedule 2.2,
Buyer will not acquire or be liable for direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured,
accrued or absolute, contingent or otherwise, including, without limitation, any
liability on account of taxes, any governmental program including without
limitation, Medicare or Medicaid, any other governmental charge or lawsuit
brought, whether or not of a kind required by generally accepted accounting
principles to be set forth on a financial statement (all of the foregoing being
collectively referred to herein as "Liabilities"), arising out of or in
connection with the business of the Selling Subsidiary on or prior to the
Closing Date. To the best Knowledge of any Sellers after inquiry, except as
disclosed in any Schedules to this Agreement, there is no circumstance,
condition, event or arrangement which may hereafter give rise to Liabilities not
in the Ordinary Course of Business subsequent to the Closing Date arising out of
or in connection with the business of the Selling Subsidiary on or prior to the
Closing Date.
<PAGE>
4.16 EMPLOYEES. Schedule 4.16 sets forth a complete and accurate
list of the names and current annual salary or hourly rates of all current,
full-time employees of the Sellers with respect to, or in connection with, the
business of the Selling Subsidiary.
4.17 ERISA. Schedule 4.17 sets forth a list of all employment
agreement, bonus, deferred compensation, stock purchase, stock option, pension,
profit sharing, retirement, severance, medical, dental, disability, life
insurance, and other employee benefit plans, funds, programs or arrangements
which have been maintained, established or contributed to by the ERISA Employer
(collectively the "Plans"), and contains true and complete copies of the Plans
and other documents (including trust, investment management or custodial
agreements and insurance policies or contracts) relating to the Plans.
4.18 LEASED PROPERTY. Schedule 4.18 contains true and complete
copies of the leases of all leased property (the "Leases"), and separately
designates which Leases require the consent, waiver or approval of the other
parties thereto with respect to the transactions contemplated by this Agreement.
Except as set forth on Schedule 4.18, the Sellers enjoy peaceful and undisturbed
possession of the leased real property, and the Leases are the valid and legally
binding obligations of the Sellers and the lessors thereunder, enforceable in
accordance with their respective terms subject to bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally, and are in full
force and effect. None of the leased real property is affected or, to the best
Knowledge of the Sellers, threatened by or subject to any condemnation or
eminent domain proceeding or any assessments for public improvements. Except as
set forth on Schedule 4.18, the Sellers have received no notice of default under
any of the Leases, none of the Leases are in default, and, to the best of any
Sellers' Knowledge, no event has occurred
<PAGE>
which, with the passage of time or the giving of notice or both, would
constitute a default thereunder. Except as set forth on Schedule 4.18, the
Sellers have, or will have on or before the Closing Date, delivered all notices
to, and obtained all consents, waivers and approvals from, all parties which are
required in connection with this Section 4.18. All rents, rental payments and
other amounts due as of the date hereof have been, and as of the Closing Date
will be, paid in full.
4.19 ARRANGEMENTS WITH SUBCONTRACTORS. Schedule 4.19 is a complete
list of all contractual arrangements with persons and entities (the
"Subcontractors") with whom or with which any Sellers provide health care
services to any of Subcontractors. Sellers have furnished copies of each written
agreement (an "Arrangement") currently or previously in effect between Sellers
and each Subcontractor, as well as financial records reflecting the amount of
all payments made by such Sellers to each Subcontractor.
4.20 COMPLIANCE OF ARRANGEMENTS WITH LAW. Each Arrangement with,
including the methodology for determining payment, and each payment under such
an Arrangement, to a Subcontractor complies in all material respects with all
federal and state laws and regulations, including, without limitation, 42 U.S.C.
ss. 1320a-7b and regulations promulgated thereunder. No payments of any
remuneration, in cash or in kind, directly or indirectly, have been offered or
made by any Sellers to a Subcontractor or to a person or entity with a financial
relationship with such Subcontractor or to any other person or entity to induce
such Subcontractor or such person or entity to refer an individual to such
Sellers for the provision of Program Services. No payments of any remuneration,
in cash or in kind, directly or indirectly, have been solicited or received from
any Sellers by a Subcontractor or by a person or entity with a financial
relationship with such Subcontractor
<PAGE>
or by any other person or entity in return for the referral to any Sellers by
such Subcontractor or such person or entity of an individual for the provision
of Program Services.
4.21 FULL DISCLOSURE. No representation or warranty by Sellers in
this Agreement or in any document to be delivered by the same pursuant hereto,
and no statement, list, certificate or instrument furnished or to be furnished
to Buyer pursuant hereto or in connection with the negotiation, execution or
performance of this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
any statement herein or therein not materially misleading. To the best Knowledge
of Sellers, there is no fact, development or threatened development (except as
disclosed on Schedule 4.7) which Sellers have not disclosed to Buyer and which
materially adversely affects the business of the Selling Subsidiary.
4.22 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Section 4 shall be true and
complete in all material respects on the Closing Date, with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date, except as otherwise may be amended, modified or supplemented.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
In order to induce the Sellers to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, the Buyer makes
the following representations, warranties and covenants, each of which is relied
upon by Sellers in consummating the transactions contemplated hereby regardless
of any other investigation made or information obtained by Sellers as follows:
<PAGE>
5.1 DUE AUTHORITY. Buyer has all power and authority necessary to
enable it to carry out the transactions contemplated by this Agreement. This
Agreement is a valid and binding agreement of Buyer, enforceable against Buyer
in accordance with its terms. Neither the execution and delivery of this
Agreement by Buyer nor the consummation of the transactions contemplated by this
Agreement will violate, result in a breach of, or constitute a default under,
any agreement or instrument to which Buyer is a party or by which Buyer is
bound, or any order, rule or regulation of any court or governmental agency
having jurisdiction over Buyer.
5.2 NO CONSENTS. No governmental filings, authorizations,
approvals or consents, other than the approvals listed on Schedule 5.2 are
required to permit Buyer to fulfill all its obligations under this Agreement.
5.3 NO BROKER. Except as set forth on Schedule 5.3, there has been
no broker's or finder's services utilized in connection with the transaction
contemplated by this Agreement.
5.4 AGREEMENT NOT TO TRANSFER ASSETS. Except for a transfer of the
Assets in accordance with Section 12.5 of this Agreement, or a transfer made
pursuant to the laws of distribution or descent, Cass shall not sell, transfer
or dispose of the Assets by way of liquidation, dissolution or otherwise for a
period of at least six (6) months unless (i) Cass shall die or become disabled,
(ii) the business cannot be lawfully conducted, or (iii) the business shall be
unable to meet its obligations as they come due in the ordinary course of
business. If a transfer is made by Cass under Section 12.5, then the transferee
shall be bound by the restrictions contained in the previous sentence.
<PAGE>
5.5 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Section 5 shall be true and
complete in all material respects on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and of the Closing Date. Buyer shall promptly give notice to Sellers of any
event, condition or circumstances occurring from the date hereof through the
Closing Date which would constitute a violation or breach of this Agreement.
SECTION 6. COVENANTS OF SELLERS AND BUYER.
6.1 BOOKS AND RECORDS. The Sellers shall maintain all books,
records, files, expired contracts, medical and patient records, non-current
accounts payable, non-current operating data, books and files relating to
non-current transactions, documents and records of the Sellers pertaining to the
Assets, correspondence, non-current budgets and other similar documents and
records which are not to be delivered to Buyer as part of the Assets through the
date of Closing (the "Other Records"). The Buyer and its representatives shall
be granted full access to such Other Records during normal business hours for
any legitimate business purpose. The Sellers shall maintain such Other Records
for a minimum of three (3) years from the Closing Date, unless under the
Seller's own record retention policy currently in effect, Seller would otherwise
maintain such Other Records for longer than three (3) years. In such case, the
Seller shall maintain such Other Records for the same number of years.
<PAGE>
SECTION 7. EXPENSES.
The parties to this Agreement shall bear their respective direct and
indirect expenses incurred in connection with the preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, whether or not the transactions contemplated hereby are consummated,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
SECTION 8. FURTHER ASSURANCES AND ACTIONS SUBSEQUENT TO CLOSING.
8.1 The parties shall execute such documents and other papers and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby. Each such
party shall use its best efforts to fulfill or obtain their respective
fulfillment of the conditions to the Closing, including, without limitation, the
execution and delivery of any documents or other papers, the execution and
delivery of which are conditions precedent to the Closing.
8.2 In addition and following the Closing, Buyer and Sellers shall
grant to the other reasonable access to the books and records of, or relating
to, the Selling Subsidiary so as to permit, if necessary, the filing of tax
returns, audits of tax returns or other bona fide corporate purposes, including
purposes relating to collections of accounts receivable in existence as of
Closing but not yet collected by Sellers, Social Security and other employee
matters.
8.3 The parties acknowledge that certain agreements by Sellers to
provide nursing services may not be assignable to Cass. To the extent that the
services to be provided by such agreements may be subcontracted to Cass the
Sellers agree that upon request by Cass that they shall enter into a
subcontracting agreement with Cass. No
<PAGE>
charges shall be made by Sellers with respect to such agreements and upon
receipt by Sellers of payment for services rendered pursuant to the agreement to
provide nursing services such payment shall be immediately remitted to Cass.
Further, if necessary for the maintenance of the agreement and for a period of
not more than six months, Sellers shall maintain the effectiveness of their
license to operate a home health agency.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
9.1 Notwithstanding any right of Buyer fully to investigate the
affairs of Sellers and notwithstanding any Knowledge of facts determined or
determinable by Buyer pursuant to such investigation or right or investigation,
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of Sellers contained in this Agreement or in any
document delivered to Buyer by Sellers or any of their representatives, in
connection with the transactions contemplated by this Agreement. All such
representations, warranties, covenants and agreements shall survive the
execution and delivery hereof and the Closing hereunder for a period of three
years.
9.1.0.1 Notwithstanding any right of Sellers fully to investigate the
affairs of Buyer and notwithstanding any Knowledge of facts determined or
determinable by Sellers pursuant to such investigation or right of
investigation, Sellers have the right to rely fully upon the representations,
warranties, covenants and agreements of Buyers contained in this Agreement or in
any document delivered to Sellers by Buyer or any of its representatives in
connection with the transactions contemplated by this Agreement. All such
representations, warranties, covenants and agreements shall survive the
execution and delivery hereof and the Closing hereunder for a period of three
years.
<PAGE>
SECTION 10. INDEMNIFICATION
10.1 OBLIGATION OF THE SELLERS TO INDEMNIFY. Each of Sellers,
jointly and severally agree to indemnify the Buyer and defend and hold harmless
the Buyer and his permitted assigns and each of such assign's respective
directors, officers and employees ("Indemnitees") from and against any losses,
liabilities, damages, deficiencies, all suits, proceedings, investigations,
claims, charges, assessments, costs or expenses (including interest, penalties
and reasonable attorneys' fees and disbursements) incurred or suffered by such
Indemnitees or any of them, whether suit is instituted or not, and, if
instituted, whether at any trial and appellate level, and whether raised by the
parties hereto or any third party (collectively, a "Loss") based upon, arising
out of or otherwise due to:
(a) Any false and inaccurate representation or warranty made
by or on behalf of Sellers contained in this Agreement or in any document or
other writing delivered pursuant to this Agreement;
(b) Any breach or default in the performance, covenant or
agreement of Sellers contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement;
(c) Facts or circumstances existing on or prior to the Closing
Date which give rise to claims by any third parties against the Selling
Subsidiary or the Buyer or any of them, including (but not limited to) any
claims arising from any service rendered by the Selling Subsidiary; or
(d) Any brokerage fee or other commission arising by virtue of
the Sellers' broker listed on Schedule 4.14.
<PAGE>
The Sellers shall be obligated to indemnify the Buyer only for those
Losses as to which Buyer has given to the Sellers written notice thereof on or
prior to three years from the Closing Date.
10.2 OBLIGATION OF THE BUYER TO INDEMNIFY. The Buyer, and any
assignee of Buyer, jointly and severally agree to indemnify the Sellers, defend
and hold harmless the Sellers and their respective directors, officers,
employees, affiliates and assigns ("Indemnitees") from and against any losses,
liabilities, damages, deficiencies, all suits, proceedings, investigations,
claims, charges, assessments, costs or expenses (including interest, penalties
and reasonable attorneys' fees and disbursements) incurred or suffered by such
Indemnitees or any of them, whether suit is instituted or not, and, if
instituted, whether at any trial and appellate level, and whether raised by the
parties hereto or any third party (collectively, a "Loss") based upon, arising
out of or otherwise due to:
(a) Any false and inaccurate representation or warranty made
by or on behalf of Buyer contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; or
(b) Any breach or default in the performance, covenant or
agreement of Buyer contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement.
The Buyer shall be obligated to indemnify the Sellers only for those
Losses as to which Sellers has given to the Buyer written notice thereof on or
prior to three years from the Closing Date.
10.3 CLAIMS BY THIRD PARTIES. Promptly after receipt by a party
(the "indemnified party") of notice of any demand, claim or circumstances which,
with the lapse of time,
<PAGE>
would give rise to a claim or the commencement (or threatened commencement) of
any action, proceeding or investigation (an "Asserted Liability") that may
result in a Loss, the indemnified party shall properly give written notice
thereof (the "Claims Notice") to the other party (the "indemnifying party"). The
Claims Notice shall describe the Asserted Liability in reasonable detail, and
shall indicate the amount (if stated) of the Loss that has been or may be
suffered by the party.
10.4 OPPORTUNITY TO DEFEND. The indemnifying party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the indemnifying party elects to compromise or defend such
Asserted Liability, it shall within 30 days (or sooner, if the nature of the
Asserted Liability so requires), notify the indemnified party of its intent to
do so, and the indemnified party shall cooperate, at the expense of the
indemnifying party, in the compromise of, or defense against, such Asserted
Liability. Thereafter, the indemnified party may elect to participate at its own
expense, in the defense of such Asserted Liability; provided that, if the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party or if the indemnifying party
proposes that the same counsel represent both the indemnified party and the
indemnifying party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them,
then the indemnified party shall have the right to retain its own counsel at the
cost and expense of the indemnifying party; provided that the indemnifying party
shall have the right to approve such counsel (which consent is not to be
unreasonably withheld) and further provided that the indemnifying party shall in
no event be responsible for the cost or expenses of more than one counsel for
the indemnified
<PAGE>
party. If the indemnifying party elects not to compromise or defend the Asserted
Liability, fails to notify the indemnified party of its election as herein
provided, contests its obligations to indemnify under this Agreement, or at any
time fails to pursue in good faith the resolution of any Asserted Liability, in
the opinion of the indemnified party, then the indemnified party may, upon
thirty (30) days' notice to the Sellers, pay, compromise or defend any such
Asserted Liability (as it may in its reasonable discretion deem proper, at the
sole cost and expense of the indemnifying party). If the indemnifying party
choose to defend any claim, the indemnified party shall make available to the
Indemnifying party any books, records or other documents or personnel within its
control that are reasonably necessary or appropriate for such defense.
10.5 EFFECT OF INSURANCE PAYMENT. Notwithstanding the foregoing
contained in this Section 10, Buyer or its affiliates shall not be entitled to
be indemnified hereunder for any portion of the amount of any Loss with respect
to which Buyer or its affiliates receive payment from any insurer; provided,
however, that Buyer shall not be obligated to seek reimbursement from any of its
insurers in order to mitigate any damages incurred, it being acknowledged by the
Sellers that Buyer may not seek reimbursement from its insurers for
indemnifiable Losses.
SECTION 11. CLOSING.
11.1 CLOSING. Subject to the conditions contained herein and as set
forth more fully below, the "Closing" of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Atlas, Pearlman, Trop &
Borkson, P.A., 200 East Las Olas Boulevard, Suite 1900, Ft. Lauderdale, Florida,
or at such other time or place as agreed
<PAGE>
upon by the parties. The Closing will be effective as of 11:59 p.m. Eastern
Standard Time, on January 1, 1995.
11.2 SELLERS' ACTIONS AT CLOSING. At the Closing Sellers will
deliver to Buyer the following:
(a) DEEDS, DOCUMENTS OF CONVEYANCE AND TRANSFER. Such deeds,
bills of sale, endorsements, assignments, and other good and sufficient
instruments of conveyance, transfer and assignment as requested by Buyer in
order to vest in Buyer good, valid and marketable title in and to the Assets and
all the right, title and interest of the Sellers in and to the Assets, business
and goodwill to be transferred pursuant to this Agreement free and clear of all
Liens. At or after the Closing, and without further consideration, Sellers will
execute and deliver such further instruments of conveyance and transfer and take
such other action as Buyer may reasonably request in order to convey and
transfer to Buyer any of the Assets, to be transferred pursuant to this
Agreement, or to quiet Buyer's title thereto.
(b) CERTIFICATE OF EACH SELLER'S SECRETARIES. A certificate of
each Seller's Secretary certifying that all actions of that Seller necessary to
authorize consummation of the sale contemplated hereunder have been duly taken.
(c) RELEASE OF LIENS. Evidence satisfactory to Buyer's counsel
of any payment or release required under this Agreement of any and all claims,
liens and encumbrances of any nature asserted against any of the Assets.
(d) RECORDS AND CONTRACTS. The Sellers shall deliver to the
Buyer the originals (or copies if originals are not in the possession of the
Sellers) of all of the records of the Selling Subsidiary and the Contracts being
assigned pursuant to this Agreement.
<PAGE>
(e) RECEIPTS. Each of the Buyer and the Sellers shall execute
and deliver documents acknowledging receipt from the other, respectively, of the
Assets and the Purchase Price.
(f) SUB-CONTRACT AGREEMENT. The Buyer and the Seller shall
execute and deliver a Sub-Contract Agreement in connection with the Contract
between the State of Florida, Department of Health and Rehabilitative Services
and Hospital Staffing Services, Inc., which form shall be approved by Buyer and
Seller prior to Closing.
(g) OTHER AGREEMENTS. The Buyer and the Seller shall execute
and deliver the Excluded Assets License and the Settlement Agreement.
11.3 BUYER'S ACTIONS AT CLOSING.
(a) ASSUMPTION OF OBLIGATIONS. One or more instruments
evidencing Buyer's assumption and agreement to pay, discharge and perform, in
accordance with the terms of each, the obligations of Sellers, following the
Closing Date, under the terms of the agreements listed in Schedule 4.10
transferred or assigned to Buyer pursuant to the terms hereof.
(b) SETTLEMENT AGREEMENT. Buyer shall execute the Settlement
Agreement, which is attached hereto as Exhibit C.
(c) SUB-CONTRACT AGREEMENT. The Buyer and the Seller shall
execute and deliver a Sub-Contract Agreement in connection with the Contract
between the State of Florida, Department of Health and Rehabilitative Services
and Hospital Staffing Services, Inc., which form shall be approved by Buyer and
Seller prior to Closing.
SECTION 12. POST CLOSING ITEMS.
<PAGE>
12.1 POST CLOSING ITEMS. To the extent that the Buyer has paid any
expenses, salaries, wages, or taxes on behalf of Seller, Seller shall
immediately reimburse Buyer for such expenses upon documented receipts.
SECTION 12. MISCELLANEOUS.
12.1 PUBLICITY. Except as required by law, no publicity release or
announcement concerning this Agreement or the transactions contemplated hereby
shall be issued by either party hereto at any time from the signing hereof
without advance approval in writing of the form and substance thereof by the
other party hereto (not to be unreasonably withheld).
12.2 NOTICES. Any notice or other communication required or which
may given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered, or express mail, postage prepaid, and shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or
if mailed, four (4) days after the date of mailing, as follows:
(i) If to Sellers to:
Hospital Staffing Services, Inc.
Cardinal Nursing and Home Care, Inc.
6245 N. Federal Highway, Suite 400
Ft. Lauderdale, Florida 33308-2220
Attention: William F. McConnell
Facsimile No. (305) 771-0899
With a copy to:
Kirkpatrick & Lockhart
Miami Center, Suite 2000
201 South Biscayne Boulevard
Miami, Florida 33131
Attention: Brian Foremny, Esq.
Facsimile No.: (305) 358-7095
<PAGE>
(ii) If to Buyer, to:
Ronald A. Cass
2901 N.E. 35th Street
Fort Lauderdale, Florida 33306
With a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Charles B. Pearlman, Esq.
Facsimile No.: (305) 523-1952
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notice
hereunder.
12.3 REMEDIES NOT EXCLUSIVE. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
any party may otherwise have at law or in equity. The rights and remedies of any
party based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty, covenant or agreement contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which the claim of any inaccuracy or
breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or any other
agreement between the parties) as to which there is no inaccuracy or breach.
12.4 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida applicable to agreements
made and to be performed entirely within such state without regard to conflicts
of law principles thereunder.
12.5 NO ASSIGNMENT. This Agreement is not assignable except by
operation of law, except that Buyer may assign any or all of his rights
hereunder, to Teresa Cass, and
<PAGE>
any entity formed or to be formed and in which the Buyer and/or Teresa Cass are
the sole shareholders.
12.6 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
12.7 SEVERABILITY OF PROVISIONS. The invalidity or unenforceability
of any term, phrase, clause, paragraph, restriction, covenant, agreement or
other provision of this Agreement shall in no way affect the validity or
enforcement of any other provision or any part thereof.
12.8 COUNTERPARTS. This Agreement may be executed ln any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall constitute but one and the same
document.
12.9 SUBROGATION OF THE BUYER. In the event that the Buyer shall
subsequent to the Closing Date become liable for or suffer any damage with
respect to any matter which was covered by insurance maintained by the Sellers
on the Assets at or prior to the Closing, the Sellers agree that the Buyer shall
be subrogated to any rights of the Sellers under the insurance coverage and
indemnified by the Sellers, and, in addition, the Sellers agree to promptly
remit to the Buyer any insurance proceeds which it may receive on account of any
such liability or damage.
12.10 AMENDMENT AND MODIFICATIOn. This Agreement may only be
amended by written instrument signed by the parties hereto.
12.11 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
<PAGE>
12.12 ENTIRE AGREEMENT. This Agreement and the schedules and
exhibits attached hereto constitute the entire agreement of the parties with
respect to the sale of the Assets and the other transactions contemplated in
this Agreement, and supersede all prior understandings and agreements of the
parties with respect to the subject matter of this Agreement. Any reference to
this Agreement shall include the schedules and exhibits hereto.
12.13 PREVAILING PARTY. If any legal action or any other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
12.14 WAIVER. Any party to this Agreement may extend the time for or
waive the performance of any of the obligations of the other, waive any
inaccuracies in the representations or warranties by the other, or waive
compliance by the other with any of the covenants or conditions contained in
this Agreement. Any such extension or waiver shall be in writing and signed by
the Buyer or the Sellers, as appropriate. No such waiver shall operate or be
construed as a waiver of any subsequent act or omission of the parties.
12.15 SIGNATURES. Facsimile signatures shall be deemed to be
original signatures, provided that original signatures shall be delivered
promptly thereafter.
12.16 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings ascribed below:
<PAGE>
(a) "Affiliate" of any person or entity shall mean any person,
entity or group (currently existing or hereafter created) controlling,
controlled by or under common control with, the specified person or entity, and
"control" of a person or entity (including, with correlative meaning, the terms
"control by" and "under common control with") means the power to direct or cause
the direction of the management, policies or affairs of the controlled person,
whether through ownership of securities or partnership or other ownership
interests, by contract.
(b) "Knowledge" an individual shall be deemed to have
"Knowledge" of a particular fact, circumstance or other matter if:
(i) such person is actually aware of such fact or
matter; or
(ii) a prudent individual could be expected to
discover or otherwise become aware of such fact, circumstance or other
matter in the course of conducting a reasonable investigation concerning
the truth or existence of such fact, circumstance or other matter.
A person (other than an individual) shall be deemed to have "Knowledge" of a
particular fact, circumstance or other matter if any individual who is serving,
or who has at any time served, as a director, trustee, or executive officer of
such person, or in a similar capacity, has, or at any time had, knowledge of
such fact or other matter.
(c) "Interested Person" shall mean any person who is or was an
executive officer or director of the Sellers or any of their respective
affiliates, or any physician in a position to refer patients to the Sellers or
any of them.
(d) "Ordinary Course of Business" shall mean an action taken
by a person if:
<PAGE>
(i) such action is recurring in nature, is consistent
with the past practices of such person and is taken in the ordinary course
of the normal day-to-day operations of such person;
(ii) such action is not required to be authorized by
the Board of Directors or such person and does not require any special or
separate authorization of any nature; or
(iii) such action is similar in nature and magnitude
to actions customarily taken, without any special or separate
authorization, in the ordinary course of the day-to-day operations of other
persons that are in the same line of business as the person in question.
(e) "Person" shall mean any individual, corporation (including, without
limitation, any non-profit corporation), general partnership, limited
partnership, joint venture, estate, trust, cooperative, foundation, union,
syndicate, league, consortium, coalition, committee, society, firm, company or
other enterprise, association, organization or governmental, body.
(g) "Threatened" a claim, proceeding, investigation, dispute, action or
other matter shall be deemed to have been "threatened" if any demand or
statement shall have been made (orally or in writing) or any notice shall have
been given (orally or in writing).
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SELLERS:
HOSPITAL STAFFING SERVICES, INC.,
a Florida corporation
By: /s/ WARREN MARMORSTEIN
-------------------------
CARDINAL NURSING AND HOME CARE, INC.
a Florida corporation
By: /s/ WARREN MARMORSTEIN
------------------------
BUYER:
/s/ RONALD A. CASS
------------------------
RONALD A. CASS
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BETWEEN
HSSI OF GEORGIA, INC. ("BUYER")
AND
TRI-THERAPY, INC. ("SELLER")
DATED
FEBRUARY 15, 1995
<PAGE>
TAB NO. DESCRIPTION
- ------- -----------
1. Asset Purchase Agreement dated February 15, 1995 between HSSI of
Georgia, Inc., a Georgia corporation (the "Company") and Tri-Therapy,
Inc., a Georgia corporation (the "Seller").
SCHEDULES
---------
Schedule 2.1(a)
1. Schedule of Fixed Assets
2. Schedule of Intangible Assets
3. Employee Lists
4. Locations and Telephone Numbers
Schedule 2.1(c) Description of trademarks, trade names and labels
Schedule 2.1(d)
1. Licenses
2. Contracts
3. Schedule of Suppliers
4. Customer Lists
Schedule 2.2 Amount due by Seller to All Care Professional
Services
Schedule 2.3 List of Assumed Liabilities
Schedule 2.4 Names and addresses of Employees
Schedule 5.11 Material Contracts.
Schedule 5.11(a) Material Contracts not
valid, binding, enforceable, subsisting or
in full force and effect.
Schedule 5.12(a) Insurance Policies
Schedule 5.12(b)
1. Past and Current Liability Insurance Policies
2. List of all Currently Unsettled or Uncompromised
Claims
Schedule 5.13 Employment Arrangements
<PAGE>
Schedule 5.14 Schedule of Real Property Interests
Schedule 5.15 Schedule of Leases for Real and Personal Property
Schedule 5.16 Liabilities
Schedule 5.20 List of Conflicts of Interest
Schedule 5.22 Adverse Effect
Schedule 11.2 Outstanding Staffing Lease Obligations
<PAGE>
EXHIBITS
--------
Exhibit A - Staffing Agreement dated August 3, 1994, as
modified on October 20, 1994
Exhibit B - Form of Employment Agreement with Billie
Bradford
Exhibit C - Form of Promissory Note securing the
Staffing Obligations
Exhibit D - Form of Security Agreement Securing the
Staffing Obligations
Exhibit E - Form of Promissory Note Securing the Payment
of the Purchase Price
Exhibit F - Form of Security Agreement securing the
Payment of the Purchase Price
2. Employment Agreement between the Company and Billie Bradford dated
February 15, 1995.
3. Promissory Note with the Seller as Maker and the Company as Holder,
securing the Staffing Obligations in the amount of $188,641.31.
4. Security Agreement securing the STAFFING OBLIGATIONS with the Seller
as Debtor and the Company as the Secured Party.
5. Copy of UCC-1 Financing Statements filed in Walker County, Georgia
and State of Georgia, securing the obligations set forth in the
Security Agreement Securing the Staffing Obligations (Accounts
Receivable and all proceeds thereto).
<PAGE>
6. Promissory Note Securing the Payment of the Purchase Price with the
Company as Maker and the Seller as Holder in the amount of
$420,650.00.
7. Security Agreement securing the PAYMENT OF THE PURCHASE PRICE with
the Company as Debtor and the Seller and the Secured Party.
8. Copy of UCC-1 Financing Statements filed in Walker County, Georgia
and State of Georgia securing the obligations set forth in the
Security Agreement securing the Payment of the Purchase Price.
9. Good standing certificate of the Seller from the Secretary of State
of the State of Georgia.
10. A certified copy of Resolution of the Board of Directors of the
Seller authorizing the execution and delivery of the Agreement, and
the transfer of the Assets.
11. A copy of the Unanimous Written Consent of the Board of Directors of
Hospital Staffing Services, Inc., authorizing the execution and
delivery of the Agreement and the purchase of the Assets.
12. A copy of Unanimous Written Consent of the Sole Director of HSSI of
Georgia, Inc, authorizing the execution and delivery of the Agreement
and the purchase of the Assets.
13. Tri-Therapy, Inc. Officer's Certificate including certification of
the Seller that all of the representations and warranties made by the
Seller are true and correct on the Closing Date and Incumbency
Certificate.
14. General Conveyance Bill of Sale and Assignment for Tri-Therapy to
HSSI of Georgia, Inc. dated February 15, 1995.
15. Compliance certificate of the Seller.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1 - RECITALS
1.1 Recitals..................................................2
SECTION 2 -PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale.........................................2
2.2 Accounts Receivable, Automobile and Real Property.........2
2.3 Assumed Liabilities.......................................2
2.4 Employment of Seller's Employees..........................3
2.5 Employment Agreement with Billie Bradford.................3
SECTION 3 - PURCHASE PRICE
3.1 Determination of Purchase Price...........................3
3.2 Payment of Purchase Price.................................3
3.3 Security in the Payment of the Purchase Price.............3
3.4 No Brokers................................................4
3.5 Purchase Price Allocation.................................4
SECTION 4 - CLOSING
4.1 Closing...................................................5
4.2 Further Acts and Assurances...............................5
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF THE SELLER
5.1 Organization, Power and Qualification.....................5
5.2 Corporate Action..........................................5
5.3 Capitalization............................................6
5.4 Financial Statements, Books and Records...................6
5.5 No Material Adverse Changes...............................6
5.6 Taxes.....................................................6
5.7 Compliance with Laws......................................7
5.8 Compliance with Other Instruments.........................7
5.9 No Breach.................................................7
5.10 Litigation................................................8
5.11 Agreements................................................8
5.12 Insurance Policies........................................8
5.13 Employment Matters........................................8
5.14 Real Property.............................................9
5.15 Leases....................................................9
5.16 Liabilities...............................................9
5.17 Banks.....................................................9
5.18 Operations of the Company................................10
5.19 Potential Conflicts of Interest..........................10
5.20 Changes in Business Relationship.........................11
5.21 Full Disclosures.........................................11
5.22 No Adverse Effect........................................11
<PAGE>
5.23 Representations and Warrants on Closing Date.............11
SECTION 6 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
6.1 Organization and Standing of the Company.................11
6.2 Authority................................................11
SECTION 7 - CONFIDENTIALITY
7.1 Confidentiality of the Company's Books, Records
and Other Information....................................12
7.2 Confidentiality of the Seller's Books, Records and
Other Information........................................12
SECTION 8 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY TO CLOSE
8.1 Representations and Warranties True......................12
8.2 No Obstructive Proceedings...............................12
8.3 Certificates, Documents, Financial Statements and
Due Diligence Inspection Satisfactory....................12
8.4 Performance of the Seller................................13
8.5 Governmental Permits and Approvals.......................13
8.6 Third Party Consents.....................................13
8.7 Satisfactory Due Diligence Review........................13
8.8 Tax Returns..............................................13
8.9 Litigation...............................................13
8.10 Accounts Payable.........................................13
8.11 Staffing Lease Obligations...............................14
8.12 Other Obligations .......................................14
8.13 No Restraining Order.....................................14
8.14 Compliance Certificate...................................14
8.15 Dissenters' Rights.......................................14
SECTION 9 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SELLER TO CLOSE
9.1 Representations and Warranties True......................14
9.2 No Obstructive Proceeding................................14
9.3 Performance by the Company...............................15
SECTION 10 - CERTAIN ACTIVITIES AT CLOSING
10.1 Delivery by the Seller...................................15
10.2 Delivery by the Company..................................16
SECTION 11 - SELLER'S OBLIGATION TO THE COMPANY
11.1 Obligations of the Seller to the Company.................17
11.2 Staffing Obligations.....................................18
11.3 Obligations Due by Seller to All Care Professional
Services.................................................18
11.4 Remaining Accounts Receivables...........................18
SECTION 12 - INDEMNIFICATION
<PAGE>
12.1 Obligation of the Seller to Indemnify....................18
12.2 Obligation of the Company to Indemnify...................18
12.3 Claims by Third Parties..................................19
12.4 Opportunity to Defend....................................19
SECTION 13 - MISCELLANEOUS
13.1 Publicity................................................19
13.2 Further Assurances.......................................19
13.3 Severability.............................................20
13.4 Notices..................................................20
13.5 Entire Agreement.........................................20
13.6 Law Governing............................................21
13.7 Section Headings.........................................21
13.8 Waiver...................................................21
13.9 Survival of Representations and Warranties...............21
13.10 Schedules................................................21
13.11 Assignment...............................................21
13.12 Binding on Successors and Assigns........................21
13.13 Amendments...............................................21
13.14 Time of Essence..........................................22
13.15 Counterparts.............................................22
13.16 Reproduction of Documents................................22
13.17 Access to Records after Closing..........................22
13.18 Specific Performance and Injunctive Relief...............22
13.19 Construction.............................................22
<PAGE>
SCHEDULES
LIST OF SCHEDULES
Schedule 2.1(a)
1. Schedule of Fixed Assets
2. Schedule of Intangible Assets
3. Employee Lists
4. Locations and Telephone Numbers
Schedule 2.1(c) Description of trademarks, trade names and labels
Schedule 2.1(d)
1. Licenses
2. Contracts
3. Schedule of Suppliers
4. Customer Lists
Schedule 2.2 Amount due by Seller to All Care Professional
Services
Schedule 2.3 List of Assumed Liabilities
Schedule 2.4 Names and addresses of Employees
Schedule 5.11 Material Contracts.
Schedule 5.11(a) Material Contracts not valid, binding, enforceable,
subsisting or in full force and effect.
Schedule 5.12(a) Insurance Policies
Schedule 5.12(b)
1. Past and Current Liability Insurance Policies
2. List of all Currently Unsettled or Uncompromised
Claims
Schedule 5.13 Employment Arrangements
Schedule 5.14 Schedule of Real Property Interests
Schedule 5.15 Schedule of Leases for Real and Personal Property
Schedule 5.16 Liabilities
<PAGE>
Schedule 5.19 List of Conflicts of Interest
Schedule 5.22 Adverse Effect
Schedule 11.2 Outstanding Staffing Lease Obligations
LIST OF EXHIBITS
Exhibit A - Staffing Agreement dated August 3, 1994, as modified
on October 20, 1994
Exhibit B - Form of Employment Agreement with Billie Bradford
Exhibit C - Form of Promissory Note securing the Staffing
Obligations
Exhibit D - Form of Security Agreement Securing the Staffing
Obligations
Exhibit E - Form of Promissory Note Securing the Payment of the
Purchase Price
Exhibit F - Form of Security Agreement securing the Payment of
the Purchase Price
<PAGE>
ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT (the "Agreement") is dated this
15th day of February, 1995 (the "Effective Date") between HSSI of Georgia,
Inc., a Georgia corporation (the "Company") and Tri-Therapy, Inc., a Georgia
corporation (the "Seller").
W I T N E S S E T H
WHEREAS, the Seller is engaged in the business of providing
occupational, speech, and physical therapy services to both proprietary and
Medicare patients (the "Business"); and
WHEREAS, Seller desires to sell and the Company desires to purchase the
"Assets" of the Seller, as set forth more fully in Section 2 of this Agreement,
upon the terms and conditions set forth in this Agreement, and the Company
desires to acquire such Assets upon the terms and conditions set forth in this
Agreement; and
WHEREAS, the Hospital Staffing Services, Inc. ("HSSI"), the parent of
the Company and the Seller have entered into a staffing agreement dated August
3, 1994, as modified on October 20, 1994 (the "Staffing Agreement"), a copy of
which is attached hereto as Exhibit A and incorporated herein, and pursuant to
which HSSI is currently providing employee personnel to the Seller; and
WHEREAS, in connection with the Staffing Agreement, the Seller has
incurred certain obligations (the "Staffing Obligations"), which, as of the
Effective Date, are outstanding; and
WHEREAS, the Company agrees that after the date of "Closing," as
defined in Section 4.1 of this Agreement, the Company shall employ the Seller's
employees; and
WHEREAS, the Company agrees to assume certain liabilities of the
Seller, upon the terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the recitals hereinbefore stated
and the mutual representations, warranties, covenants and agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged, the
Company and Seller do hereby represent, warrant, covenant and agree as follows:
SECTION 1
RECITALS
1.1. RECITALS. The above recitals are true, correct and are herein
incorporated by reference.
<PAGE>
SECTION 2
PURCHASE AND SALE OF ASSETS
2.1. PURCHASE AND SALE. Upon the terms and conditions set forth in this
Agreement, Seller agrees to sell, assign, transfer, convey and deliver, or cause
to be sold, assigned, transferred, conveyed and delivered, to the Company, and
the Company agrees to purchase, at the "Closing," as defined in Section 4.1, the
following "Assets" (the "Assets"), free and clear of any debts, mortgages,
security interests, other liens or encumbrances ("Liens"):
(a) Except as set forth in Section 2.2, all the assets,
property, and business of Seller, of every kind, character, and description,
whether tangible, intangible, personal, or mixed, contingent or otherwise, and
wherever located, which are related to Business, as set forth more fully and
particularly described in Schedule 2.1(a) attached hereto and made a part
hereof;
(b) The goodwill of the Business and the exclusive right
to use the name "Tri-Therapy."
(c) The exclusive right to all Seller's trademarks,
trade names and labels which are used and owned in connection with the Business,
as is more fully and particularly described in Schedule 2.1(c) attached hereto
and made a part hereof;
(d) All licenses, contracts, lists of suppliers and lists
of customers which are related to the Business, as is more fully and
particularly described in Schedule 2.1(d) attached hereto and made a part
hereof;
2.2. AUTOMOBILES, REAL PROPERTY AND ACCOUNTS RECEIVABLE. The (i)
automobiles owned by the Seller, (ii) real property owned by the Seller and
(iii) after deducting (a) all amounts due pursuant to the Staffing Agreement and
(b) all amounts due to All-Care Professional Services, as set forth on Schedule
2.2 and (c) except as otherwise set forth in Section 11 of this Agreement, the
accounts receivables as of the date of Closing (the "Retained Assets") shall be
retained by the Seller.
2.3. ASSUMED LIABILITIES. From and after the Closing, the Company shall
assume only those obligations, contracts or other liabilities of Seller
specifically set forth on Schedule 2.3, on the terms set forth on Schedule 2.3
and no others and whether or not such liabilities are reflected on the books and
records of the Seller on the Closing Date including, without limitation (a) any
provider agreements or provider numbers of the Seller; (b) any liability with
respect to any life, health, accident or other employee welfare benefit plan or
any pension , profit sharing, stock bonus, deferred compensation, retirement or
bonus plan; (c) any pending litigation or other legal proceedings, arbitrations,
mediations, or investigations relating to the Seller; (d) except as pursuant to
the Staffing Agreement, with respect to accrued but unpaid wages, salaries,
bonuses or overtime, sick, vacation, severance or holiday pay or other employee
benefits.
<PAGE>
2.4. EMPLOYMENT OF THE SELLER'S EMPLOYEES. The Company agrees to employ
the Seller's employees as of the Closing Date, which employees' names and
addresses are set forth on Schedule 2.4; provided, however, continued employment
of the Seller's employees subsequent to the Closing Date shall be in the sole
discretion of the Company.
2.5. EMPLOYMENT AGREEMENT WITH BILLIE BRADFORD. The Company agrees to
employ Billie Bradford for a period of two (2) years commencing on the Closing
Date, pursuant to the terms and conditions set forth in a definitive employment
agreement, the form of which is attached hereto as Exhibit B, which employment
agreement may be renewed upon mutual agreement of the parties thereto.
SECTION 3
PURCHASE PRICE
3.1. DETERMINATION OF PURCHASE PRICE. The total purchase price (the
"Purchase Price") for the Assets shall be Four Hundred Ninety Five Thousand, Six
Hundred Fifty Dollars ($495,650).
3.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as
follows:
(a) Subject to the provisions set forth in Section 11,
the sum of Seventy-Five Thousand Dollars ($75,000) (the "Initial Payment"),
payable at Closing.
(b) Subject to the provisions set forth in Section 11
of this Agreement, the sum of Four Hundred, Twenty Thousand, Six Hundred Fifty
Dollars ($420,650) payable in five (5) equal annual payments of Eighty-Four
Thousand, One Hundred Thirty Dollars ($84,130), commencing on the first
anniversary of the Closing Date.
(c) The provisions of Section 3.1 and 3.2 of this
Agreement notwithstanding, the Purchase Price amount shall be adjusted by such
amount of liabilities not assumed by the Company, but to be paid by the Company
on behalf of the Seller which may include, without limitation, accrued but
unpaid wages, salaries, bonuses, overtime, sick, vacation, severance or holiday
pay or other employee benefits.
3.3. SECURITY IN THE PAYMENT OF THE PURCHASE PRICE. The payment of the
Purchase Price by the Company shall be evidenced by a Promissory Note securing
the payment of the Purchase Price, the form of which is attached hereto as
Exhibit C, and secured by the Assets which shall be the sole remedy available to
the Seller in the event of non-payment by the Company of its Obligations to the
Seller. In order to perfect the Assets in favor of the Seller until such time as
the total Purchase Price has been paid by the Company, the Company shall execute
(i) a security agreement securing the payment of the Purchase Price, the form of
which is attached hereto as Exhibit D; (ii) all necessary UCC-1 financing
statements that the Seller may request; and (iii) such other additional
documents as may be reasonably requested by Seller.
3.4. NO BROKERS. Each of the parties represents and warrants to the
other that it has not engaged nor is obligated to any broker or finder in
connection with the transactions
<PAGE>
proposed herein and each party shall hold harmless and indemnify the other from
any such claim made through such party.
3.5. PURCHASE PRICE ALLOCATION. The purchase price shall be allocated
among all the assets being sold by Seller in a manner set forth on Schedule 3.6
of this Agreement, including, to the extent it is applicable:
(a) Equipment, Furniture and Fixtures
(b) Intangible Assets
Each party warrants and covenants to the other that it shall report the purchase
price allocation as mutually agreed upon by the parties on all state and/or
federal tax returns and filings and not take any position with any governmental
authority that varies or is inconsistent of such position and shall indemnify
and hold each other harmless for any damage the other may sustain by reason of
not reporting the above allocation on any state or federal return or filing. The
above indemnity and hold harmless provision includes the indemnifying party
compensating the non-indemnifying party for all of its expenses in connection
with an audit resulting from a failure to report the Purchase Price Allocation
set forth above, including but not limited to attorney fees, certified public
accountant fees and costs. Further, each party agrees to execute such Internal
Revenue Service Form 8594 regarding the allocation of the purchase price and to
provide the other written notice of any notification or correspondence from any
state or federal taxing authority that concerns the purchase price allocation or
the reporting thereof. Each party shall have the right to participate in the
defense of any audit or claim by a state or federal taxing authority. This
covenant shall survive closing for a period of five (5) years.
SECTION 4
CLOSING
4.1. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur on the "Closing Date" contemplated by this
Section 4, at the location contemplated by Subsection 4.1(b), unless another
place, date or time is fixed by mutual agreement of the parties.
(a) The Closing Date will be on February 15, 1995, or
such later date as the parties may mutually determine.
(b) At the choice of the Company, the Closing shall be
consummated either (i) via the delivery of closing documentation, via facsimile
with originals following within two (2) business days via overnight express, or
(ii) at the offices of Tri-Therapy, Inc., 787 Chickamauga Avenue, Rossville,
Georgia 30741; or (iii) or such other place as is mutually agreed upon by the
parties.
4.2. FURTHER ACTS AND ASSURANCES. The Seller shall, at any time and
from time to time, at and after the Closing, upon request of the Company, take
any and all reasonable steps necessary to place the Company in possession and
operating control of the Assets to be transferred hereunder and will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds,
<PAGE>
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required for the transfer to the Company or to its successors or
assigns, or for reducing to possession, any or all of the Assets.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Company (which
representations and warranties shall survive the Closing), with the full
understanding that the Company is relying thereon, the following:
5.1. ORGANIZATION, POWER AND QUALIFICATION. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia and has full power to own, lease, and operate its properties
and assets and to carry on its business in the State of Georgia, to enter into
this Agreement and to irrevocably consummate the transactions contemplated
hereby. A copy of the Seller's Articles of Incorporation and ByLaws and all
amendments thereto and the minute books which will be provided to the Company
prior to Closing, are true, accurate and complete as of the date of Closing.
5.2. CORPORATE ACTION. All corporate action necessary on the part of
the Seller to authorize the execution and delivery to the Company of this
Agreement and the performance or satisfaction of the obligations of the Seller
in connection with the transactions contemplated by this Agreement has been or
will have been duly taken prior to the Closing. This Agreement constitutes the
valid and binding obligations of the Seller and are enforceable in accordance
with its terms.
5.3. CAPITALIZATION. All of the outstanding shares of capital stock of
the Seller have been duly issued in accordance with all applicable laws, rules
and regulations, are fully paid and non-assessable and are owned by the
stockholders of the Seller. There are no outstanding subscriptions, rights,
options, warrants or other agreements obligating the Seller to issue, sell or
transfer any stock or other securities of the Seller except as otherwise
described pursuant to his Agreement.
5.4. FINANCIAL STATEMENTS, BOOKS AND RECORDS. The Seller will provide
to the Company, prior to Closing, copies of profit and loss statements for the
months of November 1994, December 1994 and January 1995, together with related
notes thereto, if applicable, each of which is in accordance with the books of
account and records of the Seller, is complete and correct in all material
respects and presents fairly the Seller's financial condition as of the date
indicated.
5.5. NO MATERIAL ADVERSE CHANGES. As of the date of its balance sheet
for the period ending January 31, 1995 (hereinafter referred to as the "Current
Balance Sheet"), there has not been:
(a) any material adverse change in the assets, operations,
conditions (financial or otherwise) or prospective business of the Seller;
<PAGE>
(b) any damage, destruction or loss materially affecting
the assets, prospective business, operations or conditions (financial or
otherwise) of the Seller, whether or not covered by insurance;
(c) any declaration, setting aside or payment of any
dividend or distribution with respect to any redemption or repurchase of the
Seller's capital stock;
(d) any sale of an asset (other than in the ordinary
course of business or otherwise approved by the Company) or mortgage or pledge
by the Seller of any properties or assets; or
(e) adoption of any pension, profit sharing, retirement,
stock bonus, stock option or similar plan or arrangement.
5.6. TAXES. Except as such taxes relate to any payroll taxes paid by
the Company pursuant to the Staffing Agreement, the Seller has prepared and
filed all appropriate federal, state and local tax returns of every kind and
category (including without limitation, income taxes, estimated taxes, excise
taxes, payroll taxes, sales taxes, inventory taxes, use taxes, gross receipt
taxes, franchise taxes and property taxes) for all periods prior to and through
the Effective Date for which any such returns have been required to be filed by
it and has paid all taxes shown to be due by said returns or on any assessments
received by it or has made adequate provisions for the payment thereof.
5.7. COMPLIANCE WITH LAWS. The Seller and all business conducted by it
has complied with all federal, state, county, local laws, ordinances,
regulations, inspections, orders, judgments, injunctions, awards or decrees
applicable to it or its business, including without limitation, those relating
to environmental protection, hazardous waste, occupational safety and health and
equal employment practices, which, if not complied with, would materially and
adversely affect the business of the Seller. No notice, citation, summons or
order has been assessed and, to the knowledge of the Seller, no investigation or
review is pending or threatened by any governmental or other entity with respect
to any alleged violation by the Seller of any such laws, statutes, rules,
regulations or orders.
5.8. COMPLIANCE WITH OTHER INSTRUMENTS. Neither the execution or
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will result in any violation of or be in conflict with any term of any
contract or other instru ment to which the Seller is a party or of any judgment,
statute, rule or regulation applicable to the Seller, or result in the creation
of any Lien, charge or encumbrance on any of its properties or assets, or result
in the acceleration of any obligation of the Seller under any deed of trust,
mortgage, lease, or similar instrument to which it is a party.
5.9. NO BREACH. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) violate any provision of the Articles of
Incorporation or Bylaws of the Seller;
<PAGE>
(b) violate, conflict with or result in the breach of
any of the terms of, result in a material modification of, otherwise give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any contract or other
agreement to which the Seller is a party or to which it or any of its assets or
properties may be bound or subject;
(c) violate any order, judgment, injunction, award or
decree of any court, arbitrator or governmental or regulatory body against, or
binding upon, the Seller, or upon the properties or business; or
(d) violate any statute, law or regulation of any
jurisdiction applicable to the transactions contemplated herein.
5.10. LITIGATION. There is no outstanding order, judgment, injunction,
award or decree of any court, governmental or regulatory body or arbitration
tribunal against or involving the Seller. There is no action, suit or claim or
legal, administrative or arbitral proceeding or any investigation (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or threatened against or involving the Seller or any of their
respective properties or assets. There is no fact, event or circumstances that
may give rise to any suit, action, claim, investigation or proceeding. There is
no action, suit or claim or legal, administrative or arbitral proceeding pending
or threatened that would give rise to any right of indemnification on the part
of any director of either the Seller or their respective heirs, executors or
administrators of such directors or officers.
5.11. AGREEMENTS. Schedule 5.11 sets forth any material contract or
arrangement to which the Seller is a party or by or to which it or its assets,
properties or business are bound or subject, whether oral or written. All of the
agreements set forth in Schedule 5.11 (except as otherwise set forth on Schedule
5.11(a)) are valid, binding, enforceable, subsisting agreements, in full force
and effect. The Seller is not in default under any of them (nor is any other
party to any of such agreements, nor does any condition exist which with notice
or lapse of time or both would constitute thereunder). The Seller is not a party
to, nor are the Assets subject to or bound by or affected by, any provision of
any order of any court or other agency of government or any indenture, agreement
or other instrument or commitment which adversely effects the operations of the
Seller.
5.12. INSURANCE POLICIES. Schedule 5.12(a) attached hereto is a
complete and correct list and summary description of all insurance policies held
by the Seller and in force and effect at the date hereof including, but not
limited to, key-man insurance, worker's compensation and employer liability,
automobile insurance, malpractice insurance, product liability and title
insurance. True and complete copies of all insurance policies listed in Schedule
5.12(a) have been delivered to the Company. Such policies are sufficient and
comply with all requirements of law and of all material contracts to which the
Seller is a party. Schedule 5.12(b) contains a description of the past and
current liability insurance of the Seller. Schedule 5.12(b) contains a
description of all claims against the Seller that are currently unsettled or
uncompromised (whether in litigation or not).
5.13. EMPLOYMENT MATTERS. Except as otherwise set forth in the Staffing
Agreement, the Seller is not a party to any employment agreement or agreement to
lend
<PAGE>
to, or guarantee any loan to an employee or agreement relating to a bonus,
severance pay or similar plan, agreement, arrangement or understanding, except
as reflected on Schedule 5.13. The Seller has incurred no liability, or taken or
failed to take, any action which will result in any liability in respect of any
failure to comply with the Fair Labor Standards Act or any other applicable laws
dealing with minimum wages or maximum hours for any employees, and all payments
due from the Seller on account of its employee health and welfare insurance,
holiday and vacation pay and similar benefits have been paid. The Seller is not
a party to any collective bargaining agreement governing its employees. There is
no pending or threatened election for union representation of the Seller's
employees.
5.14. REAL PROPERTY. Schedule 5.14 attached hereto is a correct and
complete list and brief description of all interests in real property or
buildings or improvements thereon (other than a leasehold interest and
improvements relating thereto) owned by the Seller, as referenced on Schedule
5.14, whether situated within or without the State of Georgia, including any
options to acquire real property.
5.15. LEASES. Schedule 5.15 attached hereto is a correct and complete
list and brief description of all leases or agreements under which the Seller is
lessee of or holds, or operates any property, real or personal, owned by any
third party. Each of such leases and agreements is in full force and effect and
constitutes a legal, valid, and binding obligation of the respective parties
thereto enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to the
enforcement of creditors' rights generally and to the availability of equitable
remedies which are subject to the discretion of the court before which any
proceeding therefor may be brought. True and complete copies of all such leases
and agreements have been delivered to the Company.
5.16. LIABILITIES. As of the date of Closing and except as set forth on
Schedule 5.16, the Seller did not have any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured,
accrued or absolute, contingent or otherwise, including, without limitation, any
liability on account of taxes, any other governmental charge or lawsuit brought
(all of the foregoing collectively the "Liabilities"), which were not fully,
fairly and adequately reflected in the Financial Statements. As of the Closing
Date, the Seller will not have any Liabilities, other than Liabilities fully and
adequately reflected on the Financial Statements or on Schedule 5.16. There is
no circumstance, condition, event or arrangement which may hereafter give rise
to any Liabilities not in the ordinary course of business, except as set forth
on Schedule 5.16.
5.17. BANKS. The Seller has delivered to the Company a complete and
correct list of each bank in which it has an account or safe deposit box, and
the names of all persons authorized to draw thereon or to have access thereto.
The Seller shall assist the Company in reestablishing these bank accounts on
behalf of the Business and the Company at and as of the Closing Date.
5.18. OPERATIONS OF THE COMPANY. From January 31, 1995, through the
date hereof the Seller has not:
<PAGE>
(a) incurred any indebtedness for borrowed money;
(b) declared or paid any dividends or declared or made
any distributions of any kind to its stockholders, or made any direct or
indirect redemption, retirement, purchase or other acquisition of any shares in
its capital stock;
(c) made any loans or advances to any of its
stockholders, officers, directors, employees, consultants, agents or other
representatives or made any other loans or advances otherwise than in the
ordinary course of business;
(d) made any payment or commitment to pay any severance
or termination pay to any of its officers, directors, employees, consultants,
agents, or other representatives;
(e) except in the ordinary course of business, incurred
or assumed any indebtedness or liability whether or not currently due and
payable;
(f) alter the Articles of Incorporation or Bylaws of the
Seller;
(g) terminated or failed to renew, or received any threat
(that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreements; or
(h) except in the ordinary course of business, entered
into any contract, agreement or transaction.
5.19. POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Schedule 5.19, the Seller, its stockholders and no family member of a
stockholder ("family member" defined as spouse, child, parent or sibling):
(a) owns, directly or indirectly, any interest in
(except not more than one percent (1%) stock holdings for investment purposes in
securities of publicly-held and traded companies) or is an officer, director,
employee or consultant of any person who is a competitor, lessor, lessee,
customer or supplier of the Company;
(b) owns, directly or indirectly, in whole or in part,
any copyright, trademark, trade name, service mark, franchise, patent,
invention, permit, license, or secret or confidential information the Seller is
using or the use of which is material to its business;
(c) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company, except for claims in the ordinary
course of business; or
(d) has made any payment to or commitment to pay any
commission, fee or other amount to, or purchase or obtain or otherwise contract
to purchase or obtain any goods or services from, any corporation or other
person of which any stockholder or a family member is a stockholder, is a
partner or stockholder (except stock holdings solely for investment purposes in
securities of publicly-held and traded companies).
<PAGE>
5.20. CHANGES IN BUSINESS RELATIONSHIP. The Seller is not aware of
any material changes or threatened changes in its business or client
relationships, including any discontinuance of contractual relationships.
5.21. FULL DISCLOSURES. No representation or warranty of the Seller
in this Agreement, and no statement contained in any Schedule, certificate, or
other document furnished or to be furnished by the Seller to the Company
pursuant hereto or in connection with the transactions contemplated hereby
contains or at the Closing will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make it not
misleading or necessary to provide the Company with full information as to the
Seller and its affairs.
5.22. NO ADVERSE EFFECT. Except as set forth on Schedule 5.22,
there is known to the Seller no event or condition of any kind or character
pertaining to the business or the Assets that may adversely and materially
affect such business or the Seller.
5.23. REPRESENTATIONS AND WARRANTS ON CLOSING DATE. The
representations and warranties contained in this Section 5 shall be true and
complete on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
<PAGE>
SECTION 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Seller, the
following:
6.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida and has full corporate power to enter into this
Agreement and to consummate the transactions contemplated hereby.
6.2. AUTHORITY. The Company has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
SECTION 7
CONFIDENTIALITY
7.1. CONFIDENTIALITY OF THE COMPANY'S BOOKS, RECORDS AND OTHER
INFORMATION. The Seller agrees to maintain in confidence all information and
materials obtained as a result of any investigations and exchange of information
and documents. If this acquisition is not consummated for any reason, all
documentation will be returned to the respective parties.
7.2. CONFIDENTIALITY OF THE SELLER'S BOOKS, RECORDS AND OTHER
INFORMATION. The Company agrees to maintain in confidence all information and
materials obtained as a result of any investigations and exchange of information
and documents. If this acquisition is not consummated for any reason, all
documentation will be returned to the respective parties.
SECTION 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE COMPANY TO CLOSE
The obligations of the Company to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of each and every one of the following conditions, any of which the
Company may in its sole discretion waive.
8.1. REPRESENTATIONS AND WARRANTIES TRUE. All of the
representations and warranties of the Seller contained in Section 5 of this
Agreement shall be true as of the Closing Date. The Seller shall have performed
or complied in all material respects with all covenants and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing.
8.2. NO OBSTRUCTIVE PROCEEDINGS. No action or proceedings shall
have been instituted against, and no order, decree or judgment of any court,
agency, commission or governmental authority shall be subsisting against the
Seller which seeks to or would render it unlawful as of the Closing to effect
the asset sale in accordance with the terms
<PAGE>
hereof, and no such action shall seek damages in a material amount by reason of
the transactions contemplated hereby. Furthermore, no substantive legal
objection to the transactions contemplated by this Agreement shall have been
received from or threatened by any governmental department or agency.
8.3. CERTIFICATES, DOCUMENTS, FINANCIAL STATEMENTS AND DUE
DILIGENCE INSPECTION SATISFACTORY. All certificates, financial statements and
documents delivered by the Seller to the Company pursuant to this Agreement
shall be satisfactory in form and substance to the Company and its counsel
acting reasonably and in good faith. The Company shall be satisfied, as
determined in its sole discretion, that its due diligence inspection of the
Seller has revealed no reason why the Company should not consummate the
transactions contemplated by this Agreement.
8.4. PERFORMANCE OF THE SELLER. The Seller 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.
8.5. GOVERNMENTAL PERMITS AND APPROVALS. Any and all permits and
approvals from any governmental or regulatory body required for the lawful
consummation of the Closing shall have been obtained.
8.6. THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts or other agreements with the Seller which may be
required in connection with the performance by the Seller of its obligations
under such contracts or other agreements after the Closing shall have been
obtained.
8.7. SATISFACTORY DUE DILIGENCE REVIEW. The Company shall have
satisfied itself in its sole discretion, after receipt and consideration of the
Seller's complete history of the accounts receivable, including the accounts
receivable trial balance, bad debt experience, analysis of days' sales
outstanding and any and all other documents as the Company, its representatives
or lenders may reasonably request, which documents shall be prepared and
provided at Seller's expense the Schedules and after the Company and its
representatives, including without limitation, the Company has completed the
review of the Business of the Seller contemplated by this Agreement, that none
of the information revealed thereby has resulted in, or in the opinion of the
Company may result in, an adverse change in the assets, properties, business,
operations or condition (financial or otherwise) of the Seller.
8.8. TAX RETURNS. Prior to Closing, the Seller shall have provided
to the Company copies of all federal and state tax returns for the preceding two
(2) fiscal years.
8.9. LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body to restrain, modify or prevent
the carrying out of the transactions contemplated hereby or to seek damages or a
discovery order in connection with such transactions, or which has or may have,
in the opinion of the Company, a materially-adverse effect on the assets,
properties, business, operations or conditions (financial or otherwise) of the
Seller.
<PAGE>
8.10. ACCOUNTS PAYABLE. All outstanding accounts payable
obligations of the Seller shall have been satisfied prior to Closing.
8.11. STAFFING LEASE OBLIGATIONS. Except as permitted by Section
11, as of the date of Closing, all obligations due and owing to the Company by
Seller, including without limitation with regard to the Staffing Agreement,
shall be satisfied.
8.12. OTHER OBLIGATIONS. All other Obligations of the Seller,
including without limitation, payroll and related taxes and all payments
including sick days and accrued vacation to any employees of the Seller and all
obligations to independent contractors, shall be satisfied on or prior to
Closing.
8.13. NO RESTRAINING ORDER. There shall not have been any action or
proceeding instituted or threatened before any court or governmental agency to
restrain or prohibit, or obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated hereby, which in
the opinion of the Company would make it inadvisable to consummate such
transaction.
8.14. COMPLIANCE CERTIFICATE. The Company shall have received a
certificate signed by the President or a Vice President and the Secretary of the
Seller dated as of the Closing and satisfactory in form and substance to the
Company certifying to the fulfillment of the conditions specified in this
Section 8.
8.15. DISSENTERS' RIGHTS. None of the Seller's stockholders shall
have exercised his or her dissenters' rights pursuant to applicable state law.
SECTION 9
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE SELLER TO CLOSE
The obligations of the Seller to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of each and every one of the following conditions, any of which the
Seller may, in its reasonable discretion, waive.
9.1. REPRESENTATIONS AND WARRANTIES TRUE. All of the
representations and
warranties made by the Company contained in Section 6 of this Agreement shall be
true as of the Closing Date. The Company shall have performed and complied with
all covenants and conditions required by this Agreement to be performed or
complied with by it prior to or at Closing.
9.2. NO OBSTRUCTIVE PROCEEDING. No action or proceeding shall have
been instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against the Company
which seeks to or would render it unlawful as of the Closing to affect the asset
sale in accordance with the terms hereof, and no such action shall seek damages
in a material amount by reason of the transactions contemplated hereby. Also, no
substantive legal objection to the transactions
<PAGE>
contemplated by this Agreement shall have been received from or threatened by
any governmental department or agency.
9.3. PERFORMANCE BY THE COMPANY. The Company shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them either prior to or at the Closing.
SECTION 10
CERTAIN ACTIVITIES AT CLOSING
10.1. DELIVERY BY THE SELLER. In addition to the documents and
activities mentioned above at the Closing, the Seller shall deliver to the
Company, at the Seller's expense:
(a) the Assets and, simultaneously with such delivery,
will take such steps as may be requisite to put the Company in actual possession
and operating control of such Assets;
(b) a good standing certificate for the Seller from the
Secretary of State of the State of Georgia dated within five (5) days of the
Closing Date;
(c) a certified copy of resolution of the Board of
Directors of the Seller authorizing, INTER ALIA, the execution and delivery of
the Agreement, and the transfer of the Assets;
(d) an officer's certificate and certification of the
Seller that all of the representations and warranties made by the Seller are
true and correct on the Closing Date;
(e) a certificate, dated the Closing Date, executed by
the Seller, stating that from the date hereof to the Closing: (i) no event shall
have occurred or have been threatened which has or could have a material and
adverse effect upon the Assets; (ii) there has been no change in the authority
of the Seller to fully consummate this transaction; (iii) the representations
and warranties of the Seller contained in Section 5 of this Agreement were and
are true in all material respects at the date of this Agreement and on the
Closing Date and that the Seller has performed or complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by the Seller prior to or at the Closing; and (iv)
the conditions set forth in Section 8 have been satisfied or waived.
(f) a duly-executed General Conveyance Bill of Sale and
Assignment, endorsements, assignments and other good and sufficient instruments
of conveyance and transfer, in form satisfactory to the Company and its counsel,
as are necessary or desirable in the opinion of the Company or its counsel to
effect the sale, conveyance, assignment, transfer and delivery to the Company of
the Assets (the "Bill of Sale");
(g) compliance certificate of the Seller described in
Section 8.14;
<PAGE>
(h) all consents or other appropriate documents,
properly executed by all necessary third parties (or receipt by the Company of
evidence or assurances satisfactory to the Company that it will be able to
obtain all such documents) as may be necessary as a result of the transfer of
the Assets in order that the Company may operate the Business;
(i) all other previously-undelivered documents required
to be delivered by the Seller to the Company at or prior to the Closing by the
terms and provisions of this Agreement; and
(j) a Promissory Note evidencing the outstanding Staffing
Obligations as of the date of Closing, but after payment of the Initial Payment,
the form of which is attached as Exhibit C;
(k) a Security Agreement securing the remaining Staffing
Obligations, the form of which is attached as Exhibit D; and
(l) any other document reasonably requested by counsel
for the Company prior to Closing as necessary for the consummation of the
transactions contemplated by this Agreement.
10.2. DELIVERY BY THE COMPANY. In addition to the documents and
activities mentioned above, at the Closing the Company shall deliver to the
Seller:
(a) the Initial Payment, as set forth more fully in
Section 3 of the Agreement;
(b) a Promissory Note evidencing the remaining Payment
Price as of the Closing, but after payment of the Initial Payment, the form of
which is attached as Exhibit E;
(c) a Security Agreement securing the remaining Purchase
Price, the form of which is attached Exhibit F; and
(e) all other previously undelivered documents required
to be delivered by the Company to the Seller at or prior to the Closing by the
terms and provisions of this Agreement.
SECTION 11
SELLER'S OBLIGATIONS TO THE COMPANY
11.1. OBLIGATIONS OF THE SELLER TO THE COMPANY. Pursuant to the
Staffing Agreement, the Company is performing certain services to the Seller in
consideration for certain compensation. To the extent that at the Closing, there
are any outstanding amounts due to the Company by the Seller pursuant to the
Staffing Agreement (the "Staffing Obligation"), the parties agree as follows:
(a) To the extent that the Staffing Obligation is less
than Seventy-Five Thousand Dollars ($75,000), the Company shall pay the
difference between the Initial
<PAGE>
Payment of Seventy-Five Thousand Dollars ($75,000) (the "Initial Payment") and
the Staffing Obligation to the Seller at Closing.
(b) To the extent that the Staffing Obligations exceed
Seventy Five Thousand Dollars ($75,000), the first Seventy-Five Thousand Dollars
($75,000) of the Staffing Obligations shall be used to satisfy the Initial
Payment and the proceeds from the Retained Assets, as set forth in Section 2.2
of this Agreement, shall be used to satisfy the remaining outstanding Staffing
Obligations above in the following manner:
(i) As of the date of Closing, the Company
shall collect the Retained Assets for the benefit of the Seller, which
funds shall be placed in a segregated account held by the Company;
(ii) On a weekly basis, the Retained Assets shall be
released to the Company until such time as the Staffing Obligations
have been satisfied; provided that prior to distribution of the
Retained Assets, the parties have received written accountings of the
amount of collected Retained Assets for that period;
(iii) The outstanding Staffing Obligations shall be
evidenced by a Promissory Note, the form of which is attached hereto as
Exhibit D. The Company shall have a security interest in the Retained
Assets until such time as the Staffing Obligations have been satisfied.
In order to perfect the security interest in the Retained Assets in
favor of the Company until such time as the total Staffing Obligations
have been satisfied, the Seller shall execute: (i) a security
agreement, the form of which is attached hereto as Exhibit H; (ii) all
necessary UCC-1 financing statements that the Company may request; and
(iii) such other additional documents as may be reasonably requested by
the Company.
(v) In order to further secure the payments of
the Staffing Obligations and in addition to the provisions set forth in
Section 12 below, the liens held by the Company on the "Property", as
defined in the Staffing Agreement shall remain in full force and effect
until such time as all Staffing Obligations are satisfied by the Seller
to the Company. The Seller shall execute such other additional
documents as may be reasonably requested by the Company in order to
evidence the Company's security interest in the Property.
11.2 STAFFING OBLIGATIONS. The total Staffing
Obligations, as of the Closing Date, shall be set forth on Schedule 11.2 of this
Agreement.
11.3 OBLIGATIONS DUE BY SELLER TO ALL CARE PROFESSIONAL
SERVICES.
The total amount of obligations due by the Seller to All-Care
Professional Services, as set forth more fully on Schedule 2.2 of this Agreement
shall be satisfied after all Staffing Obligations shall have been satisfied.
11.4 REMAINING ACCOUNTS RECEIVABLES. After deducting all
obligations due by the Seller (i) to the Company pursuant to the Staffing
Agreement; and (ii) All-Care Professional Services, all remaining Accounts
Receivable be retained by the Seller.
<PAGE>
SECTION 12
INDEMNIFICATION
12.1. OBLIGATION OF THE SELLER TO INDEMNIFY.
(a) Subject to the limitations on the survival of
representations and warranties contained in Section 13.9, the Seller and its
officers, directors, employees hereby agree to indemnify, defend and hold
harmless the Company, from and against any losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements) (a "Loss") based upon, arising out of or
otherwise due to any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of the Seller contained in this Agreement or in
any document or other writing delivered pursuant to this Agreement.
(b) In order to secure the obligation of the Seller to
indemnify the Company, and in addition to the provisions set forth in Section 11
above, the liens held by the Company on the "Property", as defined in the
Staffing Agreement shall remain in full force and effect during the term set
forth in Section 13.9 of this Agreement. The Seller shall execute such other
additional documents as may be reasonably requested by the Company in order to
evidence the Company's security interest in the Property.
12.2. OBLIGATION OF THE COMPANY TO INDEMNIFY. Subject to the
limitations on the survival of representations and warranties contained in
Section 13.9, the Company hereby agrees to indemnify, defend and hold harmless
the Seller from and against any losses, liabilities, damages, deficiencies,
costs or expenses (including interest, penalties and reasonable attorneys' fees
and disbursements) based upon, arising out of or otherwise due to any inaccuracy
in or any breach of any representation, warranty, covenant or agreement of the
Seller contained in this Agreement or in any document or other writing delivered
pursuant to this Agreement.
12.3. CLAIMS BY THIRD PARTIES. Promptly after receipt by either
party hereto (the "Indemnitee") of notice of any demand, claim or circumstances
which, with the lapse of time, would give rise to a claim or the commencement
(or threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in a Loss, the Indemnitee shall give
notice thereof (the "Claims Notice") to the other party or parties (the
"Indemnitor"). The Claims Notice shall describe the Asserted Liability in
reasonable detail, and shall indicate the amount (estimated, if necessary) of
the loss that has been or may be suffered by the Indemnitee.
12.4. OPPORTUNITY TO DEFEND. Indemnitor may elect to compromise or
defend, at its own expense and by its own counsel, any Asserted Liability. If
the Indemnitor elects to compromise or defend such Asserted Liability, it shall
do so, and the Indemnitee shall cooperate, in the compromise of, or defense
against, such Asserted Liability. The Indemnitee may participate at its own
expense in the defense of such Asserted Liability. If Indemnitor elects not to
compromise or defend the Asserted Liability, fails to notify the Indemnitee of
its election as herein provided, contests its obligations to indemnify under
this Agreement, or at any time fails to pursue in good faith the resolution of
any Asserted Liability, in the opinion of Indemnitee, then Indemnitee may, upon
ten (10) days' notice to
<PAGE>
Indemnitor, pay, compromise or defend any such Asserted Liability. If the
Indemnitor chooses to defend any claim, the Indemnitee shall make available to
the Indemnitor any books, records or other documents within its control that are
necessary or appropriate for such defense.
SECTION 13
MISCELLANEOUS
13.1. PUBLICITY. No publicity release or announcement concerning
this Agreement or the transactions contemplated hereby shall be issued by any
party to this Agreement at any time from the signing hereof without advance
approval in writing in the form and substance by the Company.
13.2. FURTHER ASSURANCES. The parties shall execute such documents
and other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby. Each such party shall use its best efforts to fulfill or obtain the
fulfillment of the conditions to the Closing, including, without limitation, the
execution and delivery of any documents or other papers, the execution and
delivery of which are conditions precedent to the Closing.
13.3. SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including thereon any such part, parts, or portion which may, for any reason, be
hereafter declared invalid.
13.4. NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall only be deemed to have been duly given
if delivered in person or mailed by certified mail, postage prepaid:
(i) If to the Company:
HSSI of Georgia, Inc.
6245 N. Federal Highway, Suite 500
Fort Lauderdale, FL 33487
Attention: Jay Gershberg
With a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Attention: Charles B. Pearlman, Esq.
<PAGE>
(ii) If to the Seller:
Tri-Therapy, Inc.
787 Chickamauga Avenue
Rossville, GA 30741
Attention: Billie Bradford
With a copy to:
----------
----------
Attention: ___________________
or to such other address as the Seller or the Company may designate by notice to
the other.
13.5. ENTIRE AGREEMENT. This Agreement and the Schedules and
documents delivered pursuant hereto constitute the entire contract between the
parties hereto pertaining to the subject matter hereof and supersede all prior
and contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral, of the parties, and there are no representations,
warranties or other agreements between the parties in connection with the
subject matter hereof, except as specifically set forth herein. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party or parties to be bound thereby.
13.6. LAW GOVERNING. This Agreement shall be deemed to have been
entered into under the laws of the State of Florida, and the rights and
obligations of the parties hereunder shall be governed and determined according
to the laws of said state without giving any effect to conflict of laws. Venue
shall be Broward County, Florida.
13.7. SECTION HEADINGS. The section headings are for reference only
and shall not limit or control the meaning of any provisions of this Agreement.
13.8. WAIVER. No delay or omission on the part of any party hereto
in exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement, except as otherwise provided herein.
13.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, agreements, covenants, and obligations herein made
by or in any certificates or financial statements delivered by any of the
parties hereunder are material, shall be deemed to have been relied upon by each
of the other parties, shall survive the Closing for a period of five (5) years
thereafter and shall not merge in the performance of any obligation by any party
hereto.
13.10. SCHEDULES. All Schedules and documents referred to in, or
attached to, this Agreement are integral parts of this Agreement as if fully set
forth herein and all statements appearing therein shall be deemed to be
representations. All items disclosed
<PAGE>
hereunder shall be deemed disclosed only in connection with the specific
representation to which they are explicitly referenced or to wherever else they
otherwise may apply.
13.11. ASSIGNMENT. No party hereto shall assign this Agreement
without first obtaining the written consent of the other party, except the
Company shall have the right to assign this Agreement to an affiliated company.
13.12. BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall inure
to the benefit of and bind the respective successors and assigns of the parties
hereto. Nothing expressed or referred to in this Agreement is intended or shall
be construed to give any person other than the parties to this Agreement or
their respective successors or permitted assigns any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein, it being the intention of the parties to this Agreement that this
Agreement shall be for the sole and exclusive benefit of such parties or such
successors and assigns and not for the benefit of any other person.
13.13. AMENDMENTS. This Agreement may be amended, but only in
writing, signed by the parties hereto.
13.14. TIME OF ESSENCE. Time is of the essence in the performance of
this Agreement.
13.15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall comprise one and the same instrument.
13.16. REPRODUCTION OF DOCUMENTS. The Seller agrees and stipulates
that any such reproduction of this Agreement, any Schedule or other documents
related to this Agreement or the transactions contemplated hereby shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by the Company in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
13.17. ACCESS TO RECORDS AFTER CLOSING. The Seller will cause its
counsel and certified public accountants to afford to the representatives of the
Company, including their counsel and accountants, reasonable access to, and
copies of, any records not transferred to the Company, including, but not
limited to, all audit and reimbursement work papers. The Company will afford to
the representatives of the Seller reasonable access to, and copies of, records
transferred to the Seller at the Closing during normal business hours after the
Closing. Copies furnished to the party gaining such access shall be furnished at
the cost of the recipient.
13.18. SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF. Notwithstanding
the indemnity provisions of this Agreement, the parties recognize that in some
instances damages may not afford an adequate or proper remedy, and therefore
agree in the event it is determined by either party that such an instance
exists, such violations of this Agreement shall be the proper subject matter for
a suit for specific performance and/or injunctive relief.
13.19. CONSTRUCTION. This Agreement shall be construed with the fair
meaning of each of its terms and not against the party drafting the Agreement.
<PAGE>
THE UNDERSIGNED HAS READ THIS AGREEMENT, UNDERSTANDS EACH AND EVERY ONE OF THE
TERMS AND CONDITIONS SET FORTH HEREIN, HAS HAD THE OPPORTUNITY TO CONSULT WITH
INDEPENDENT LEGAL COUNSEL OF THEIR OWN CHOICE AND AGREES TO BE BOUND BY THE
TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT AND ALL EXHIBITS AND SCHEDULES
THERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
THE COMPANY:
ATTEST: HSSI OF GEORGIA, INC., A GEORGIA
CORPORATION
By: /s/ KATHRYN DEBORD By: /s/ JAY GERSHBERG
--------------------- ----------------------------
Name: Jay Gershberg
Its: President
THE SELLER:
ATTEST: TRI-THERAPY, INC., A GEORGIA CORPORATION
By: /s/ EDWARD WARREN By: /s/ BILLIE BRADFORD
--------------------- ---------------------------
Name Billie Bradford
Its: President
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 15th day of February, 1995 (the "Effective Date"), between HSSI of
Georgia, Inc., a Florida corporation, whose principal place of business is
located at 6245 N. Federal Highway, Suite 400, Fort Lauderdale, FL 33308 or its
assigns (the "Company"), and Billie Bradford (the "Employee").
WHEREAS, the Company is engaged in the business of providing
occupational, speech, and physical therapy services to proprietary and Medicare
patients and to institutions (the "Business"); and
WHEREAS, the Company has established a valuable reputation and goodwill
in its Business, with expertise in all aspects of the Business; and
WHEREAS, the Employee is desirous of being employed by the Company, and
the Company has agreed to hire the Employee upon certain terms and conditions,
one of which is the execution of this Agreement by Employee; and
WHEREAS, the Employee, by virtue of the Employee's employment by the
Company shall become familiar with and possessed with the manner, methods, trade
secrets and other confidential information pertaining to the Company's Business,
including the Company's client base;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee and the
Employee hereby accepts such employment, upon the terms and conditions
hereinafter
set forth.
2. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD. The duties of
the Employee shall be subject to the direction of the Company as set forth more
fully on Schedule A hereto. The Employee shall devote full attention and render
exclusive, full-time services to the Company and shall be employed solely by the
Company according to the terms of this Agreement.
3. TERM. Subject to Section 15 of this Agreement, the term of
employment hereunder will commence on the Effective Date and shall continue for
a period of two (2) years thereafter, which may be renewed for an additional one
(1) year periods, unless terminated by the Company upon at least sixty (60) days
written notice by the Company, prior to the termination of this Agreement, in
the sole discretion of the Company.
4. COMPENSATION AND BENEFITS.
A. SALARY. For all services rendered by the Employee
pursuant to the terms of this Agreement and in consideration of the execution of
this Agreement by the
<PAGE>
Employee, the Company shall pay the Employee a weekly salary of Nine Hundred
Sixty-One and 50/100 Dollars ($961.50), payable bi-weekly.
B. EMPLOYEE BENEFITS. The Employee shall be entitled to
receive such employee benefits as are currently provided to employees in a like
position with the Company.
C. AUTOMOBILE ALLOWANCE. The Company shall provide the
Employee with an automobile allowance of $400 per month, plus $.07 a mile for
approved business mileage.
5. COVENANT NOT TO COMPETE. The Employee acknowledges and
recognizes the highly competitive nature of the Company's Business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of continued employment and compensation by the
Company, the Employee agrees to the following:
A. That during the Restricted Period (as defined
herein) and within the Restricted Area (as defined herein), the Employee will
not, individually or in conjunction with others, directly or indirectly, engage
in any Business Activities (as hereinafter defined) other than on behalf of the
Company and as agreed by the Company and the Employee, whether as an officer,
director, proprietor, employer, partner, independent contractor, investor,
stockholder (other than as a holder of less than one percent (1%) of the
outstanding capital stock of a publicly traded corporation), consultant,
advisor, agent or otherwise. Except that during the term of Employee's
employment with the Company, the foregoing limitations as to Restricted Area
shall not be applicable.
B. That during the Restricted Period and within the
Restricted Area (as defined herein), the Employee will not, indirectly or
directly, compete with the Company by soliciting, inducing or influencing any of
the Company's Clients which have a business relationship with the Company at any
time during the Restricted Period to discontinue or reduce the extent of such
relationship with the Company. Except that during the term of Consultant's
employment with the Company, the foregoing limitations as to Restricted Area
shall not be applicable.
C. That during the Restricted Period and within the
Restricted Area, the Employee will not (a) directly or indirectly recruit,
solicit or otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the Company, or (b)
employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of Company (the "Competitive
Business") to employ or seek to employ for any Competitive Business any person
who is then (or was at any time within six (6) months prior to the date Employee
or the Competitive Business employs or seeks to employ such person) employed by
the Company.
D. That during the Restricted Period, the Employee will
not interfere with, disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or
<PAGE>
otherwise, between the Company and any Company's client, employee, agent,
vendor, supplier or customer.
6. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
A. The Employee acknowledges that the Company's trade
secrets, private or secret processes, methods and ideas, as they exist from time
to time, customer lists and information concerning the Company's products,
services, business records and plans, inventions, product design information,
price structure, discounts, costs, computer programs and listings, source code
and/or subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, training methods, development, technical
information, marketing activities and procedures, method for operating of the
Company's Business, credit and financial data concerning the Company and the
Company's Clients and Client Lists, which Client Lists shall not only mean one
or more of the names and addresses of the clients of the Company but it shall
also encompass any and all information whatsoever regarding them, including
their needs, and marketing and advertising practices and plans and information
which is embodied in written or otherwise recorded form, but it shall also
include information which is mental, not physical (collectively, the
"Confidential Information") are valuable, special and unique assets of the
Company, access to and knowledge of which are essential to the performance of
the Employee hereunder. In light of the highly competitive nature of the
industry in which the Company's business is conducted, the Employee agrees that
all Confidential Information, heretofore or in the future obtained by the
Employee as a result of the Employee's association with the Company shall be
considered confidential.
B. Excluded from the Confidential Information, and
therefore not subject to the provisions of this Agreement, shall be any
information which:
i. At the time of disclosure, is in the public
domain as evidenced by printed publications;
ii. After the disclosure, enters the public
domain by way of printed publication through no fault of the Employee
or those in privity with it;
iii. Employee can show by written documentation
was in its possession at the time of disclosure and which was not
acquired directly or indirectly from the Company; or
iv. Employee can show by written documentation
was acquired, after disclosure, from a third party who did not receive
it from the Company, and who had the right to disclose the information
without any obligation to hold such information confidential.
C. The Employee acknowledges that, as between the
Company and the Employee, the Confidential Information and any and all rights
and privileges provided under the trademark, copyright, trade secret and other
laws of the United States, the individual states thereof, and jurisdictions
foreign thereto, and the goodwill associated therewith, are and at all times
will be the property of the Company.
<PAGE>
D. Employee agrees that it shall:
i. Hold in confidence and not disclose or make
available to any third party any such Confidential Information unless
so authorized in writing by the Company;
ii. Exercise all reasonable efforts to prevent
third parties from gaining access to the Confidential Information;
iii. Not use, directly or indirectly, the
Confidential Information in any respect of its business, except as
necessary to evaluate the information;
iv. Restrict the disclosure or availability of
the Confidential Information to those of Employee's employees who have
read and understand this Agreement and who have a need to know the
information in order to achieve the purposes of this Agreement;
v. Not copy or modify any Confidential
Information without prior written consent of the Company.
vi. Take such other protective measures as may
be reasonably necessary to preserve the confidentiality of the
Confidential Information; and
vii. Relinquish and require all of its employees
to relinquish all rights it and its employees may have in any matter,
such as drawings, documents, models, samples, photographs, patterns,
templates, molds, tools or prototypes, which may contain, embody or
make use of the Confidential Information; promptly deliver to the
Company any such matter as the Company may direct at any time; and not
retain any copies or other reproductions thereof.
E. Employee further agrees:
i. That it shall promptly disclose in writing
to the Company all ideas, inventions, improvements and discoveries
which may be conceived, made or acquired by Employee or its employees
as the direct or indirect result of the disclosure by the Company of
the Confidential Information to Employee;
ii. That all such ideas, inventions,
improvements and discoveries conceived, made or acquired by Employee,
alone or with the assistance of others, relating to the Confidential
Information, shall be the property of the Company and shall be treated
as Confidential Information in accordance with the provisions hereof
and that Employee shall not acquire any intellectual property rights
under this Agreement except the limited right to use set forth in this
Agreement.
iii. That Employee and its employees shall assist
in the preparation and execution of all applications, assignments and
other documents which the Company may deem necessary to obtain patents,
copyrights and the like
<PAGE>
in the United States and in jurisdictions foreign thereto, and to
otherwise protect the Company.
F. Upon written request of the Company, Employee shall
return to the Company all written materials containing the Confidential
Information. Employee shall also deliver to the Company written statements
signed by the Employee certifying all materials have been returned within five
(5) days of receipt of the request.
7. COMPANY'S CLIENTS. The "Company's Clients" shall be deemed to
be any persons, partnerships, corporations, professional associations or other
organizations for whom the Company has performed Business Activities.
8. RESTRICTIVE PERIOD. The "Restrictive Period" shall be deemed
to be during the Employee's employment with the Company and for a period of
twelve (12) months following termination of the Employee's employ, regardless of
the reason for termination.
9. RESTRICTED AREA. The Restricted Area shall be deemed to mean
within one hundred (100) miles of any of the Company's Business locations.
10. BUSINESS ACTIVITIES. "Business Activities" shall be deemed to
include any activities which are included in the Company's Business now or
during the effective period of this Agreement.
11. COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT. It is
understood by and between the parties hereto that the foregoing covenants by
Employee contained in Section 5 and 6 of this Agreement shall be construed to be
agreements independent of any other element of the Employee's employment with
the Company. The existence of any other claim or cause of action, whether
predicated on any other provision in this Agreement, or otherwise, as a result
of the relationship between the parties shall not constitute a defense to the
enforcement of the covenants in this Agreement against the Employee.
12. REMEDIES.
A. The Employee acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Sections 5 or 6 herein would be inadequate and the breach shall be
per se deemed as causing irreparable harm to the Company. In recognition of this
fact, in the event of a breach by the Employee of any of the provisions of
Sections 5 or 6, the Employee agrees that, in addition to any remedy at law
available to the Company, including, but not limited to monetary damages, the
Company, without posting any bond, shall be entitled to obtain, and the Employee
agrees not to oppose the Company's request for, equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to the
Company.
B. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Confidential Information would not be an adequate remedy
upon breach or threatened breach of Section 6 and consequently agrees, upon
proof of any such breach, to the
<PAGE>
granting of injunctive relief prohibiting any form of competition with the
Company. Nothing herein contained shall be construed as prohibiting the Company
from pursuing any other remedies available to it for such breach or threatened
breach.
C. In the event that the Employee shall be in violation
of the aforementioned restrictive covenants, then the time limitation during
which breach or breaches should occur, and in the event the Company should be
required to seek relief from such breach in any court or other tribunal, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including appeal.
13. ATTORNEYS' FEES. The Employee agrees that in the event that
the Company is required to engage an attorney to enforce the terms of the
covenants in Sections 5 or 6 of this Agreement, the Employee shall pay all costs
and expenses of that attorney or firm, whether or not a complaint or suit is
filed with any court of competent jurisdiction.
14. EFFECT ON PRIOR AGREEMENTS. This Agreement supersedes any and
all prior or written agreement in their entirety between the Company and the
Employee, which shall be void and of no further force and effect after the date
of this Agreement.
15. TERMINATION.
A. TERMINATION WITHOUT CAUSE. The Company and the
Employee may terminate this Agreement without cause upon giving two (2) months'
prior written notice. During such two (2) month period, the Employee shall
continue to perform the Employee's duties pursuant to this Agreement, and the
Company shall continue to compensate the Employee in accordance with this
Agreement.
B. MUTUAL AGREEMENT. The Company and the Employee may
terminate this Agreement by mutual agreement of the parties hereto at any time.
C. IMMEDIATE TERMINATION. This Agreement may be
terminated immediately by the Company upon the occurrence of any of the
following events:
i. Any assignment of this Agreement by the
Employee in violation of Paragraph 20; or
ii. The death of the Employee;
iii. The Employee has a guardian of the person or
estate appointed by a court of competent jurisdiction;
iv. The Employee is disabled so as to be unable
to perform duties required under this Agreement for a period of thirty
(30) consecutive days or forty-five (45) days in any sixty (60) day
period; or
v. The willful engagement in misconduct that is
materially injurious to the Company, monetarily or otherwise; or
<PAGE>
vi. An act or acts (a) constituting a felony
under the laws of the United States or any state thereof or (b) causing
the Employee to lose any of the Employee's professional licenses
necessary to the performance of the Employee's duties pursuant to this
Agreement.
D. TERMINATION AFTER FAILURE TO CURE BREACH. If the
Employee commits a material breach of any provisions of this Agreement, the
Company may terminate the Agreement at any time, if after providing written
notice to the Employee of the alleged breach or failure, the breach or failure
remains uncured for a period of ten (10) days after receipt of such notice.
Nothing herein shall prevent the Company from terminating Employment
for "Cause," as hereinafter defined. The Employee shall continue to receive
salary only for the period ending with the date of such termination as provided
in this Section 15(D). Any rights and benefits the Employee may have in respect
of any other compensation shall be determined in accordance with the terms of
such other compensation arrangements or such plans or programs.
"Cause" shall mean (A) committing or participating in an injurious act
of fraud, gross neglect, misrepresentation, embezzlement or dishonesty against
the Company; (B) committing or participating in any other injurious act or
omission wantonly, willfully, recklessly or in a manner which was grossly
negligent against the Company, monetarily or otherwise; (C) engaging in a
criminal enterprise involving moral turpitude; (D) an act or acts (i)
constituting a felony under the laws of the United States or any state thereof
or (ii) if applicable, loss of any state or federal license required for the
Employee to perform the Employee's material duties or responsibilities for the
Company; or (E) any assignment of this Agreement by the Employee in violation of
Section 20 of this Agreement;
Notwithstanding anything else contained in this Agreement, this
Agreement will not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Employee a notice of termination stating
that the Employee committed one of the types of conduct set forth in the
definition of Cause contained in this Agreement and specifying the particulars
thereof.
16. NOTICES. Any notice required or permitted to be given under
the terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt requested; by
overnight delivery; by courier; or by confirmed telecopy, in the case of the
Employee to the Employee's last place of business or residence as shown on the
records of the Company, or in the case of the Company to its principal office as
set forth in the introductory paragraph, or such other place as it may
designate.
17. WAIVER. Unless agreed in writing, the failure of either party,
at any time, to require performance by the other of any provisions hereunder
shall not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the
<PAGE>
performance of any other obligation or act hereunder.
18. COMPLETE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the contents hereof and
supersedes all prior agreements and understandings between the parties with
respect to such matters, whether written or oral. Neither this Agreement nor any
term or provision hereof may be changed, waived, discharged or amended in any
manner other than by an instrument in writing, signed by the party against which
the enforcement of the change, waiver, discharge or amendment is sought.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
20. BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
upon the parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Employee but shall be
assignable by the Company in connection with the sale, transfer or other
disposition of its business or to any of the Company's affiliates controlled by
or under common control with the Company.
21. GOVERNING LAW. This Agreement shall become valid when executed
and accepted by Company. The parties agree that it shall be deemed made and
entered into in the State of Florida and shall be governed and construed under
and in accordance with the laws of the State of Florida. Anything in this
Agreement to the contrary notwithstanding, the Employee shall conduct the
Employee's business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political subdivision in which
the Employee is located.
22. HEADINGS. The headings of the sections are for convenience
only and shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
23. SURVIVAL. Any termination of this Agreement shall not,
however, affect the ongoing provisions of this Agreement which shall survive
such termination in accordance with their terms.
24. SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any court
determines that any provision of Section 5 or 6 hereof is unenforceable because
of the duration or scope of such provision, such court shall have the power to
reduce the scope or duration of such provision, as the case may be, and, in its
reduced form, such provision shall then be enforceable.
<PAGE>
25. ENFORCEMENT. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
26. VENUE. Company and Employee acknowledge and agree that the
U.S. District for the Southern District of Florida, or if such court lacks
jurisdiction, the 17th Judicial Circuit (or its successor) in and for Broward
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
27. CONSTRUCTION. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party drafting the
document.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF
THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WITNESS: THE COMPANY
/s/ KATHRYN DEBORD HSSI OF GEORGIA,INC.
- -----------------------
By: /s/ JAY GERSHBERG
-------------------------
Jay Gershberg, President
/s/ EDWARD WARREN THE EMPLOYEE
- ------------------------
/s/ BILLIE BRADFORD
----------------------------
BILLIE BRADFORD
<PAGE>
PROMISSORY NOTE
Dated as of: February 15, 1995 Walker County, Georgia
$188,641.31
FOR VALUE RECEIVED, TRI-THERAPY, INC., a Georgia corporation (the
"Maker"), promises to pay to HSSI of Georgia, a Florida corporation (the
"Holder"), in lawful money of the United States of America, in the manner and at
the times provided hereunder, the principal sum of $188,641.31, as set forth on
Schedule 11.2 of the Asset Purchase Agreement between the Maker and the Holder,
of even date herewith, at no interest, pursuant to and in accordance with the
terms of this Note. Except as otherwise provided herein, all capitalized terms
shall have the same meaning as set forth in the Asset Purchase Agreement between
the Maker and the Holder of even date.
The Principal Amount shall be payable pursuant to the terms set forth
in the Asset Purchase Agreement.
This Note may be prepaid without premium or penalty, at any time, in
whole or in part. All payments on this Note shall be applied to the principal.
All installments of principal are payable at such place as the Holder
hereof may, from time to time, designate in writing, in lawful money of the
United States of America. If any of said installments of principal shall not be
paid within fifteen (15) days when due, then the entire unpaid principal sum
shall become due and payable at once at the option of the Holder of this Note,
and such event shall also be deemed an "Event of Default" under the Security
Agreement securing this Note.
Should it become necessary to collect the sum due under this Note
through an attorney, the Maker hereby agrees to pay all costs of collection,
including a reasonable attorney's fee. Said reasonable attorney's fee shall
include fees for services rendered in all appellate proceedings. The Maker
waives presentment for payment and protest for non-payment of this Note; agrees
to an extension of the time of payment of this Note or any agreement given to
secure this Note, without notice; and agrees that any such extensions will not
release the Maker's liability hereon.
This Note is to be construed according to the laws of the State of
Georgia.
Dated: February 15, 1995 MAKER:
TRI-THERAPY, INC., a Georgia
corporation
/s/ BILLIE BRADFORD
----------------------------
Name: Billie Bradford
Its: President
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as of
February 15, 1995, between HSSI of Georgia, Inc., a Florida corporation (the
"HSSI/Secured Party"), whose principal place of business is 6245 N. Federal
Highway, Suite 400, Fort Lauderdale, FL 33308 and Tri-Therapy, Inc., a Georgia
corporation whose principal place of business is 787 Chickamauga Avenue,
Rossville, GA 30741 (the "TTI/Debtor"). Unless otherwise set forth in this
Agreement, all capitalized terms shall have the same meanings as set forth in
the Assets Purchase Agreement (the "Purchase Agreement") of even date.
WHEREAS, HSSI, as the Company, and TTI, as the Seller, entered into the
Purchase Agreement whereby HSSI agreed to purchase the Assets of the Seller for
the Purchase Price; and
WHEREAS, the Purchase Agreement provides that the payment of the
Staffing Obligations by TTI to Hospital Staffing Services, Inc., the parent
company of HSSI, shall be secured by the Retained Assets, as set forth in the
Purchase Agreement,
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in further consideration of other financial
accommodations extended by the Secured Party to the Debtor or to other persons
and guaranteed by the Debtor, the Debtor hereby grants a continuing security
interest in, and assigns to the Secured Party, the Collateral to secure payment
and performance of all of the Obligations of the Debtor to the Secured Party.
Section 1. DEFINITIONS. Definitions in the Code apply to words
and phrases in this Security Agreement and, if Code definitions conflict,
definitions in Title 11 of the Code of the Georgia Statutes, shall apply. In
addition to terms defined in the Code or elsewhere in this Security Agreement,
the following terms have the meanings indicated below, which meanings shall be
equally applicable to both the singular and the plural forms of such terms:
"Code" means the Uniform Commercial Code as in effect from time to time
in the State of Georgia, Title 11, Chapters 11-2 through 11-9, inclusive, of the
Georgia Statutes.
"Collateral" means the Retained Assets, including without limitation,
all accounts receivable, automobiles, real property and all proceeds thereto, as
set forth more fully in the Purchase Agreement and Schedules attached thereto.
"Obligations" shall mean the outstanding Staffing Obligations as of the
Closing Date, as set forth more fully on Schedule 11.2 of the Purchase
Agreement, and executed on an even date herewith, and any and all renewals,
modifications, amendments and replacements thereof.
Section 2. COLLATERAL. The Debtor warrants and agrees that it
is the owner of the Collateral free and clear of all liens and security
interests except the security interest
<PAGE>
granted by this Security Agreement or encumbrances created by Secured Party
(herein called "Permitted Encumbrances").
Section 3. NO OTHER SECURITY INTERESTS. So long as any
Obligation to the Secured Party is outstanding, the Debtor will not, without the
prior written consent of the Secured Party, grant to any third party a security
interest in any of the Collateral or permit any lien or encumbrance to attach to
any part of the Collateral (except for taxes not yet due and payable) or suffer
or permit any levy to be made on any part of the Collateral or permit any
financing statement except that of Secured Party to be on file with respect
thereto, except with respect to Permitted Encumbrances; provided, however, that
this security interest may be subordinated to lender security interests under
conventional lines of credit which Debtor may request in the ordinary course of
business. Such lines of credit security interests shall also be deemed Permitted
Encumbrances. The Debtor will not sell, transfer, lease or otherwise dispose of
any of the Collateral or any interest therein, or offer to do so or permit
anything to be done to impair the value of the Collateral or the security
interest; provided, however, the Debtor may sell Inventory in the ordinary
course of its business. The Secured Party shall have the right, by written
notice to the Debtor, to terminate the Debtor's authority to sell, lease,
otherwise transfer, manufacture, process or assemble, or furnish under contracts
of service, any or all of the Inventory.
Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING
THE COLLATERAL. The Debtor represents, warrants and covenants that:
4.1. The Collateral shall be kept at the address specified
above. The Debtor will not permit any of the Collateral to be moved without the
prior written consent of the Secured Party, other than Collateral that may be
sold as permitted under Section 3 hereof.
4.2. The Debtor will at all times keep the Collateral
insured against loss, damage, theft, and such other risks as Secured Party may
require in such amounts and companies and under such policies and in such form,
and for such periods, as shall be satisfactory to Secured Party, and each such
policy shall provide that loss thereunder and proceeds payable thereunder shall
be payable to Secured Party as its interest may appear (and Secured Party may
apply any proceeds of such insurance which may be received by Secured Party
toward payment of the Obligations, whether or not due, in such order of
application as Secured Party may determine) and each such policy shall provide
for fifteen (15) days written minimum cancellation notice to Secured Party; and
each such policy shall, if Secured Party so requests, be deposited with Secured
Party; and Secured Party may act as attorney for Debtor in obtaining, adjusting,
settling, and cancelling such insurance and endorsing any drafts.
4.3. The Debtor will at all times keep the Collateral in
good order and repair and will not waste or destroy the Collateral or any part
thereof.
4.4. The Debtor warrants that no financing statement
covering any Collateral or any proceeds thereof is on file in any public office,
other than financing statements naming the Secured Party and financing
statements filed with respect to Permitted Encumbrances. The Debtor authorizes
the Secured Party to file financing
<PAGE>
statements with respect to the Collateral signed only by the Secured Party. The
Debtor will join with the Secured Party in executing financing statements,
notices, affidavits or similar instruments in forms satisfactory to the Secured
Party and such other documents as the Secured Party may from time to time
request, and will pay the cost of filing the same in any public office deemed
advisable by the Secured Party. The Debtor will do such other acts and things,
all as the Secured Party may request, to maintain a valid, first perfected
security interest in the Collateral (free of all other liens and claims
whatsoever other than Permitted Encumbrances) to secure the payment of the
Obligations secured hereby. The Secured Party is hereby appointed the Debtor's
attorney-in-fact to do all acts and things that the Secured Party may deem
necessary to perfect and to continue the perfection of the security interest
created hereby and to protect the Collateral.
4.5. The Debtor will not use the Collateral or permit the
same to be used in violation of any statute or ordinance. The Secured Party may
examine and inspect the Collateral at any time, wherever located. The Debtor
will pay promptly when due all taxes and assessments upon the Collateral or for
its use or operation or upon this Security Agreement or other writing evidencing
the Obligations, or any of the them.
Section 5. DEFAULTS AND REMEDIES. If any one of the following
"Events of Default" shall occur and shall not have been remedied within sixty
(60) days after notification of Default:
(a) Any "Event of Default" under the Obligations; or
(b) Any representation or warranty made by the Debtor herein or
in any certificate or report furnished by the Debtor hereunder shall prove to
have been incorrect in any material respect; or
(c) The Debtor shall default in the performance of any
agreement, covenant or obligation contained herein, if the
default continues for a period of fifteen (15) business days
after notice of default to the Debtor by the Secured Party,
then the Secured Party may, in addition to any other rights and remedies that it
may have, immediately and without demand, exercise any and all of the rights and
remedies granted to a secured party upon default under the Code; and upon
request or demand of the Secured Party, the Debtor shall at its expense assemble
all or any part of the Collateral and make it available to the Secured Party at
a convenient place designated by the Secured Party. The Secured Party and its
agents are authorized to enter into or onto any premises where the Collateral
may be located for the purpose of taking possession of such Collateral. Any
notice of sale, disposition or other intended action by the Secured Party, sent
to the Debtor at the address specified at the beginning of this Security
Agreement or at such other address of the Debtor as may from time to time be
shown on the Secured Party's records, at least ten (10) days prior to such
action, shall constitute reasonable notice to the Debtor. Any proceeds of any
disposition of any of the Collateral may be applied by the Secured Party toward
payment of such of the Obligations and in such order of application as the
Secured Party may from time to time elect. This Agreement shall not restrict
whatever rights Secured Party has upon default of the Obligation under the
<PAGE>
Purchase Agreement and Sales, Consulting and Non-Compete Agreement signed by the
parties on the date hereof.
Section 6. MISCELLANEOUS.
6.1. No waiver by the Secured Party of any default shall
operate as a waiver of any other default or of the same default on a future
occasion. No delay or omission on the part of the Secured Party in exercising
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Secured Party of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. Time is
of the essence of this Security Agreement. The provisions of this Security
Agreement are cumulative and in addition to the provisions of any liability of
the Debtor under any note, any guaranty or any other writing, and the Secured
Party shall have all the benefits, rights and remedies of a secured party under
this Security Agreement and any other document.
6.2. All rights of the Secured Party hereunder shall inure
to the benefit of its successors and assigns, and all Obligations of the Debtor
shall bind the successors and assigns of the Debtor.
6.3. This Security Agreement has been delivered in the
State of Georgia and shall be construed in accordance with the laws of Georgia.
6.4. At its option, the Secured Party may discharge taxes,
liens or security interests or other encumbrances at any time levied or placed
on the Collateral, may pay for insurance on the Collateral, and may pay for the
maintenance and preservation of the Collateral. The Debtor agrees to reimburse
the Secured Party on demand for any payment made, or any expense incurred, by
the Secured Party, pursuant to the foregoing authorization. Except as otherwise
expressly provided in this Security Agreement, until default the Debtor may have
possession of the Collateral and use it in any lawful manner not inconsistent
with this Security Agreement and not inconsistent with any policy of insurance
thereon.
6.5. In the event that any one or more of the provisions
contained in this Security Agreement 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 provision of this Security
Agreement, but this Security Agreement shall be reformed, construed and enforced
as if such invalid, illegal or unenforceable provision had never been contained
herein.
6.6. The Secured Party's rights under the Obligations are
cumulative. Without limiting the generality of the foregoing, the Secured Party
may enforce its rights hereunder in all or part of the Collateral or in any
other security in the order selected by Secured Party.
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be
executed as of the date hereinabove first written, but in fact this Security
Agreement was executed on February 15, 1995.
DEBTOR/TTI
TRI-THERAPY, INC., a Georgia
corporation
By: /s/ BILLIE BRADFORD
------------------------------
Name: Billie Bradford
Its: President
SECURED PARTY/HSSI
HSSI OF GEORGIA, INC., a Florida
corporation
By: /s/ JAY GERSHBERG
------------------------------
Name: Jay Gershberg
Its: President
STATE OF ___________ )
)SS:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ____ day of
February __, 1995 by ____________________, the ____________________ of
TRI-THERAPY, INC., who is personally known to me or who has produced
___________________ as identification and who did under penalty of perjury take
an oath and attest as to the foregoing.
Notary Public:
sign_________________________________
print________________________________
State of __________ at Large (Seal)
My Commission Expires:
<PAGE>
STATE OF ___________ )
)SS:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ____ day of
February __, 1995 by ____________________, the ____________________ of HSSI OF
GEORGIA, INC., who is personally known to me or who has produced
___________________ as identification and who did under penalty of perjury take
an oath and attest as to the foregoing.
Notary Public:
sign_________________________________
print________________________________
State of __________ at Large (Seal)
My Commission Expires:
<PAGE>
PROMISSORY NOTE
Dated as of: February 15, 1995 Walker County, Georgia
$420,650.00
FOR VALUE RECEIVED, HSSI of Georgia, Inc., a Florida corporation (the
"Maker"), promises to pay to TRI-THERAPY, INC., a Georgia corporation (the
"Holder"), in lawful money of the United States of America, in the manner and at
the times provided hereinunder, the principal sum of up to Four Hundred Twenty
Thousand, Six Hundred Fifty Dollars ($420,650) (the Principal Amount"), at no
interest, pursuant to and in accordance with the terms of this Note. Except as
otherwise provided herein, all capitalized terms shall have the same meaning as
set forth in the Assets Purchase Agreement between the Maker and the Holder of
even date.
The Principal Amount shall be payable in five equal annual payments of
Eighty-Four Thousand, One Hundred Thirty Dollars ($84,130), commencing on the
first anniversary of the Closing Date, and continuing for a period of four (4)
years thereafter until the Principal Amount has been paid.
This Note may be prepaid without premium or penalty, at any time, in
whole or in part. All payments on this Note shall be applied to the principal.
All installments of principal are payable at such place as the Holder
hereof may, from time to time, designate in writing, in lawful money of the
United States of America. If any of said installments of principal shall not be
paid within fifteen (15) days when due, then the entire unpaid principal sum
shall become due and payable at once at the option of the Holder of this Note,
and such event shall also be deemed an "Event of Default" under the Security
Agreement securing this Note.
Should it become necessary to collect the sum due under this Note
through an attorney, the Maker hereby agrees to pay all costs of collection,
including a reasonable attorney's fee. Said reasonable attorney's fee shall
include fees for services rendered in all appellate proceedings. The Maker
waives presentment for payment and protest for non-payment of this Note; agrees
to an extension of the time of payment of this Note or any agreement given to
secure this Note, without notice; and agrees that any such extensions will not
release the Maker's liability hereon.
<PAGE>
This Note is to be construed according to the laws of the State of Georgia.
Dated: February 15, 1995 MAKER:
HSSI of Georgia, Inc., a Florida
corporation
/s/ JAY GERSHBERG
-----------------------------------
Name: Jay Gershberg
Its: President
<PAGE>
COMPLIANCE CERTIFICATE
OF
TRI-THERAPY, INC.
The undersigned, as President of TRI-
THERAPY, INC. (the "Seller") hereby certifies as follows:
1. REPRESENTATIONS AND WARRANTIES TRUE. All of the representations and
warranties of the Seller contained in Section 5 of this Agreement shall be true
as of the Closing Date. The Seller shall have performed or complied in all
material respects with all covenants and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing.
2. NO OBSTRUCTIVE PROCEEDINGS. No action or proceedings shall have been
instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against the Seller
which seeks to or would render it unlawful as of the Closing to effect the asset
sale in accordance with the terms hereof, and no such action shall seek damages
in a material amount by reason of the transactions contemplated hereby.
Furthermore, no substantive legal objection to the transactions contemplated by
this Agreement shall have been received from or threatened by any governmental
department or agency.
3. CERTIFICATES, DOCUMENTS, FINANCIAL STATEMENTS AND DUE DILIGENCE
INSPECTION SATISFACTORY. All certificates, financial statements and documents
delivered by the Seller to the Company pursuant to this Agreement shall be
satisfactory in form and substance to the Company and its counsel acting
reasonably and in good faith. The Company shall be satisfied, as determined in
its sole discretion, that its due diligence inspection of the Seller has
revealed no reason why the Company should not consummate the transactions
contemplated by this Agreement.
4. PERFORMANCE OF THE SELLER. The Seller 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.
5. GOVERNMENTAL PERMITS AND APPROVALS. Any and all permits and
approvals from any governmental or regulatory body required for the lawful
consummation of the Closing shall have been obtained.
6. THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts or other agreements with the Seller which may be
required in connection with the performance by the Seller of its obligations
under such contracts or other agreements after the Closing shall have been
obtained.
7. SATISFACTORY DUE DILIGENCE REVIEW. The Company shall have satisfied
itself in its sole discretion, after receipt and consideration of the Seller's
complete history of the
<PAGE>
accounts receivable, including the accounts receivable trial balance, bad debt
experience, analysis of days' sales outstanding and any and all other documents
as the Company, its representatives or lenders may reasonably request, which
documents shall be prepared and provided at Seller's expense the Schedules and
after the Company and its representatives, including without limitation, the
Company has completed the review of the Business of the Seller contemplated by
this Agreement, that none of the information revealed thereby has resulted in,
or in the opinion of the Company may result in, an adverse change in the assets,
properties, business, operations or condition (financial or otherwise) of the
Seller.
8. TAX RETURNS. Prior to Closing, the Seller shall have provided to the
Company copies of all federal and state tax returns for the preceding two (2)
fiscal years.
9. LITIGATION. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body or instituted or threatened
by any governmental or regulatory body to restrain, modify or prevent the
carrying out of the transactions contemplated hereby or to seek damages or a
discovery order in connection with such transactions, or which has or may have,
in the opinion of the Company, a materially-adverse effect on the assets,
properties, business, operations or conditions (financial or otherwise) of the
Seller.
10. ACCOUNTS PAYABLE. All outstanding accounts payable obligations of
the Seller shall have been satisfied prior to Closing.
11. STAFFING LEASE OBLIGATIONS. Except as permitted by Section 11, as
of the date of Closing, all obligations due and owing to the Company by Seller,
including without limitation with regard to the Staffing Agreement, shall be
satisfied.
12. OTHER OBLIGATIONS. All other Obligations of the Seller, including
without limitation, payroll and related taxes and all payments including sick
days and accrued vacation to any employees of the Seller, including all
obligations due to independent contractors, shall be satisfied on or prior to
Closing.
13. NO RESTRAINING ORDER. There shall not have been any action or
proceeding instituted or threatened before any court or governmental agency to
restrain or prohibit, or obtain substantial damages in respect of, this
Agreement or the consummation of the transactions contemplated hereby, which in
the opinion of the Company would make it inadvisable to consummate such
transaction.
<PAGE>
14. DISSENTERS' RIGHTS. None of the Seller's stockholders shall have
exercised his or her dissenters' rights pursuant to applicable state law.
Dated this 15th day of February, 1995.
TRI-THERAPY, INC., a Georgia corporation
By: /s/ BILLIE BRADFORD
-------------------------
Name: Billie Bradford
Its: President
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement"), dated as of
February 15, 1995, between HSSI of Georgia, Inc., a Florida corporation (the
"HSSI/Debtor"), whose principal place of business is 6245 N. Federal Highway,
Suite 400, Fort Lauderdale, FL 33308 and Tri-Therapy, Inc., a Georgia
corporation, whose principal place of business is 787 Chickamauga Avenue,
Rossville, GA 30741 (the "TTI/Secured Party"). Unless otherwise set forth in
this Agreement, all capitalized terms shall have the same meanings as set forth
in the Assets Purchase Agreement (the "Purchase Agreement") of even date.
WHEREAS, HSSI, as the Company, and TTI, as the Seller, entered into the
Purchase Agreement whereby HSSI agreed to purchase the Assets of the Seller for
the Purchase Price; and
WHEREAS, the Purchase Agreement provides that the payment of the
Purchase Price by HSSI to TTI shall be secured by the Assets, as set forth in
the
Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in further consideration of other financial
accommodations extended by the Secured Party to the Debtor or to other persons
and guaranteed by the Debtor, the Debtor hereby grants a continuing security
interest in, and assigns to the Secured Party, the Collateral to secure payment
and performance of all of the Obligations of the Debtor to the Secured Party.
Section 1. DEFINITIONS. Definitions in the Code apply to words
and phrases in this Security Agreement and, if Code definitions conflict,
definitions in Title 11 of the Code of the Georgia Statutes, shall apply. In
addition to terms defined in the Code or elsewhere in this Security Agreement,
the following terms have the meanings indicated below, which meanings shall be
equally applicable to both the singular and the plural forms of such terms:
"Code" means the Uniform Commercial Code as in effect from time to time
in the State of Georgia, Title 11, Chapters 11-2 through 11-9, inclusive, of the
Georgia
Statutes.
"Collateral" means the Assets, as set forth in the Purchase Agreement
and the Schedules attached thereto.
"Obligations" shall mean the Promissory Note of the Debtor in the
principal amount of Four Hundred Twenty Thousand, Six Hundred Forty Dollars
($420,650), executed on an even date herewith, and any and all renewals,
modifications, amendments and replacements thereof.
Section 2. COLLATERAL. The Debtor warrants and agrees that it
is the owner of the Collateral free and clear of all liens and security
interests except the security interest granted by this Security Agreement or
encumbrances created by Secured Party (herein called "Permitted Encumbrances").
<PAGE>
Section 3. NO OTHER SECURITY INTERESTS. So long as any
Obligation to the Secured Party is outstanding, the Debtor will not, without the
prior written consent of the Secured Party, grant to any third party a security
interest in any of the Collateral or permit any lien or encumbrance to attach to
any part of the Collateral (except for taxes not yet due and payable) or suffer
or permit any levy to be made on any part of the Collateral or permit any
financing statement except that of Secured Party to be on file with respect
thereto, except with respect to Permitted Encumbrances; provided, however, that
this security interest may be subordinated to lender security interests under
conventional lines of credit which Debtor may request in the ordinary course of
business. Such lines of credit security interests shall also be deemed Permitted
Encumbrances. The Debtor will not sell, transfer, lease or otherwise dispose of
any of the Collateral or any interest therein, or offer to do so or permit
anything to be done to impair the value of the Collateral or the security
interest; provided, however, the Debtor may sell Inventory in the ordinary
course of its business. The Secured Party shall have the right, by written
notice to the Debtor, to terminate the Debtor's authority to sell, lease,
otherwise transfer, manufacture, process or assemble, or furnish under contracts
of service, any or all of the Inventory.
Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING
THE COLLATERAL. The Debtor represents, warrants and covenants that:
4.1. The Collateral shall be kept at the address specified
above. The Debtor will not permit any of the Collateral to be moved without the
prior written consent of the Secured Party, other than Collateral that may be
sold as permitted under Section 3 hereof.
4.2. The Debtor will at all times keep the Collateral
insured against loss, damage, theft, and such other risks as Secured Party may
require in such amounts and companies and under such policies and in such form,
and for such periods, as shall be satisfactory to Secured Party, and each such
policy shall provide that loss thereunder and proceeds payable thereunder shall
be payable to Secured Party as its interest may appear (and Secured Party may
apply any proceeds of such insurance which may be received by Secured Party
toward payment of the Obligations, whether or not due, in such order of
application as Secured Party may determine) and each such policy shall provide
for fifteen (15) days' written minimum cancellation notice to Secured Party; and
each such policy shall, if Secured Party so requests, be deposited with Secured
Party; and Secured Party may act as attorney for Debtor in obtaining, adjusting,
settling, and cancelling such insurance and endorsing any drafts.
4.3. The Debtor will at all times keep the Collateral in
good order and repair and will not waste or destroy the Collateral or any part
thereof.
4.4. The Debtor warrants that no financing statement
covering any Collateral or any proceeds thereof is on file in any public office,
other than financing statements naming the Secured Party and financing
statements filed with respect to Permitted Encumbrances. The Debtor authorizes
the Secured Party to file financing statements with respect to the Collateral
signed only by the Secured Party. The Debtor will join with the Secured Party in
executing financing statements, notices, affidavits or similar instruments in
forms satisfactory to the Secured Party and such other documents
<PAGE>
as the Secured Party may from time to time request, and will pay the cost of
filing the same in any public office deemed advisable by the Secured Party. The
Debtor will do such other acts and things, all as the Secured Party may request,
to maintain a valid, first perfected security interest in the Collateral (free
of all other liens and claims whatsoever other than Permitted Encumbrances) to
secure the payment of the Obligations secured hereby. The Secured Party is
hereby appointed the Debtor's attorney-in-fact to do all acts and things that
the Secured Party may deem necessary to perfect and to continue the perfection
of the security interest created hereby and to protect the Collateral.
4.5. The Debtor will not use the Collateral or permit the
same to be used in violation of any statute or ordinance. The Secured Party may
examine and inspect the Collateral at any time, wherever located. The Debtor
will pay promptly when due all taxes and assessments upon the Collateral or for
its use or operation or upon this Security Agreement or other writing evidencing
the Obligations, or any of them.
Section 5. DEFAULTS AND REMEDIES. If any one of the following
"Events of Default" shall occur and shall not have been remedied within sixty
(60) days after notification of Default:
(a) Any "Event of Default" under the Obligations; or
(b) Any representation or warranty made by the Debtor
herein or in any certificate or report furnished by the Debtor
hereunder shall prove to have been incorrect in any material
respect; or
(c) The Debtor shall default in the performance of any
agreement, covenant or obligation contained herein, if the
default continues for a period of fifteen (15) business days
after notice of default to the Debtor by the Secured Party,
then the Secured Party may, in addition to any other rights and remedies that it
may have, immediately and without demand exercise any and all of the rights and
remedies granted to a secured party upon default under the Code; and upon
request or demand of the Secured Party, the Debtor shall at its expense assemble
all or any part of the Collateral and make it available to the Secured Party at
a convenient place designated by the Secured Party. The Secured Party and its
agents are authorized to enter into or onto any premises where the Collateral
may be located for the purpose of taking possession of such Collateral. Any
notice of sale, disposition or other intended action by the Secured Party, sent
to the Debtor at the address specified at the beginning of this Security
Agreement or at such other address of the Debtor as may from time to time be
shown on the Secured Party's records, at least ten (10) days prior to such
action, shall constitute reasonable notice to the Debtor. Any proceeds of any
disposition of any of the Collateral may be applied by the Secured Party toward
payment of such of the Obligations and in such order of application as the
Secured Party may from time to time elect. This Agreement shall not restrict
whatever rights Secured Party has upon default of the Obligation under the
Purchase Agreement and Sales, Consulting and Non-Compete Agreement signed by the
parties on the date hereof.
<PAGE>
Section 6. MISCELLANEOUS.
6.1. No waiver by the Secured Party of any default shall
operate as a waiver of any other default or of the same default on a future
occasion. No delay or omission on the part of the Secured Party in exercising
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Secured Party of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. Time is
of the essence of this Security Agreement. The provisions of this Security
Agreement are cumulative and in addition to the provisions of any liability of
the Debtor under any note, any guaranty or any other writing, and the Secured
Party shall have all the benefits, rights and remedies of a secured party under
this Security Agreement and any other document.
6.2. All rights of the Secured Party hereunder shall inure
to the benefit of its successors and assigns, and all Obligations of the Debtor
shall bind the successors and assigns of the Debtor.
6.3. This Security Agreement has been delivered in the
State of Georgia and shall be construed in accordance with the laws of Georgia.
6.4. At its option, the Secured Party may discharge taxes,
liens or security interests or other encumbrances at any time levied or placed
on the Collateral, may pay for insurance on the Collateral, and may pay for the
maintenance and preservation of the Collateral. The Debtor agrees to reimburse
the Secured Party on demand for any payment made, or any expense incurred, by
the Secured Party, pursuant to the foregoing authorization. Except as otherwise
expressly provided in this Security Agreement, until default the Debtor may have
possession of the Collateral and use it in any lawful manner not inconsistent
with this Security Agreement and not inconsistent with any policy of insurance
thereon.
6.5. In the event that any one or more of the provisions
contained in this Security Agreement 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 provision of this Security
Agreement, but this Security Agreement shall be reformed, construed and enforced
as if such invalid, illegal or unenforceable provision had never been contained
herein.
6.6. The Secured Party's rights under the Obligations are
cumulative. Without limiting the generality of the foregoing, the Secured Party
may enforce its rights hereunder in all or part of the Collateral or in any
other security in the order selected by Secured Party.
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be
executed as of the date hereinabove first written, but in fact this Security
Agreement was executed on February 15, 1995.
<PAGE>
HSSI of Georgia, Inc., a Florida corporation
By: /s/ JAY GERSHBERG
---------------------------
Name: Jay Gershberg
Its: President
TRI-THERAPY, INC., a Georgia corporation
By: /s/ BILLIE BRADFORD
--------------------------
Name: Billie Bradford
Its: President
STATE OF __________ )
) SS:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ____ day of
February, 1995, by ____________________, the ____________________ of HSSI of
Georgia, Inc., who is personally known to me or who has produced
__________________________________ as identification and who did under penalty
of perjury take an oath and attest as to the foregoing.
Notary Public:
sign_________________________________
print________________________________
State of __________ at Large (Seal)
My Commission Expires:
<PAGE>
STATE OF __________ )
) SS:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ____ day of
February, 1995, by ____________________, the ____________________ of
TRI-THERAPY, INC., who is personally known to me or who has produced
__________________________________ as identification and who did under penalty
of perjury take an oath and attest as to the foregoing.
Notary Public:
sign_________________________________
print________________________________
State of __________ at Large (Seal)
My Commission Expires:
ADDENDUM TO LEASE AGREEMENT
DATED AS OF OCTOBER 31, 1994, BETWEEN
PMG CENTER, INC. ("LANDLORD") AND
HOSPITAL STAFFING SERVICES, INC. ("TENANT")
PREMISES: 6245 NORTH FEDERAL HIGHWAY,
FORT LAUDERDALE, FLORIDA 33308
Despite any language in the captioned Lease Agreement, Landlord and Tenant
have agreed to the following additional terms and provisions, which shall govern
in the event of any conflict:
1. PMG Center, Inc. is a Florida corporation in good standing and successor
in interest, as record owner of the premises, to 62nd Street Partners, a Florida
general partnership which had previously executed a lease with Tenant dated July
28, 1989 ("Original Lease").
2. Full and adequate consideration has been given for execution of this
Lease Agreement, which replaces the Original Lease, including but not limited to
a cash payment of $100,000.00, and other good and valuable consideration,
receipt of which is acknowledged by both parties hereto. In addition to Tenant's
obligation to pay rent and other payments, Tenant shall pay to Landlord, no
later than November 1, 1995, Seven Hundred Thousand Dollars ($700,000) by cash
or cashier's check. At the sole option of Tenant, Tenant in lieu of cash may
deliver to Landlord shares of its common stock having a current market value of
$700,000 to be determined as follows. The valuation shall be made based upon the
average closing price of Tenant's shares of common stock on the New York Stock
Exchange for the period from October 26 to October 31, 1995 (or based upon the
average closing bid price if the shares are traded on NASDAQ or any other
exchange) provided that the minimum valuation for the shares shall be $1.00 and
a maximum valuation for the shares shall be $3.00. By way of example, if the
average closing price shall be $2.00 per share, Tenant shall deliver to Landlord
350,000 shares of its common stock. The shares of common stock to be delivered
to Landlord shall be duly issued shares of the Company's authorized but unissued
shares of common stock which shares shall be of the same class as are presently
publicly traded on the New York Stock Exchange. However, the shares of common
stock to be received by Landlord shall not be registered pursuant to federal or
state securities laws, such shares being issued pursuant to an exemption
therefrom.
3. Upon execution of this Lease Agreement by Landlord, the Original Lease
is, for all purposes, deemed terminated and of no consequence to the parties
with respect to Tenant's occupancy of the premises or otherwise, and all
incidents of Tenant's occupancy of the premises shall be governed by this Lease
Agreement alone.
<PAGE>
4. Tenant's share of common area maintenance costs and real estate taxes
shall not in total, exceed $7.50 per square foot at any time.
5. The rentable square footage for the purpose of calculating base rent, at
the rate of $12.00 per square foot, is 7,553 square feet, as set forth in that
certain letter agreement dated October 17, 1994 between Landlord and Tenant.
6. Landlord may not require the change or removal of the current signage at
the premises installed by Tenant, and will not unreasonably withhold consent to
any change thereof proposed by Tenant, or any successor in interest to Tenant.
7. Landlord will not, throughout the term hereof so long as Tenant is in
compliance with this Lease Agreement, modify current parking assignments, and
Tenant's present use of parking spaces shall continue through the duration of
the term of this Lease.
8. "Landlord's Work" shall consist of sealing closed the doorway providing
access to the fourth floor from the fifth floor of the building in the demised
premises, said work to be accomplished by November 30, 1994, at Landlord's sole
cost and expense.
9. The "service charge" described at Section II, Paragraph 4 shall be no
more than one and one-half (1 1/2%) percent per month.
10. The "common area expenses" described at Section III, Paragraph 1 shall
not include a fifteen (15%) percent "administrative cost" component, nor any
contribution to "reserves" nor "rateable depreciation" of roof replacement costs
or other costs. Additionally excluded shall be any unreasonable costs associated
with decorating of the common areas, or promotion or advertising of the building
in which the demised premises is a part, as well as public relations, promotion,
enhancement, or enlargement of the reputation or business or trade of said
building, unless expressly consented to in advance in writing by Tenant.
11. At Section V, Paragraph 3, the final sentence is deleted in its
entirety.
12. At Section V, Paragraph 5, insert the words "Except for negligence"
before the word "Landlord" in the first line of Paragraph 5.
<PAGE>
13. At Section IX, Paragraphs 1 and 2(a), Landlord may only have access to
the premises in an emergency, after attempting first to notify Tenant in writing
in advance of such access. At other times, inspection shall be limited to a
mutually convenient time and date, with Tenant's consent, after written notice
from Landlord.
14. Any repair work to be done by Landlord, alleged to be the obligation of
Tenant, shall only be commenced ten days after written notice and demand upon
Tenant has been received and Tenant has failed to perform the work; and in all
such events, Tenant will only remain liable for the reasonable costs of repair,
which shall not include any fifteen (15%) percent "administrative" or other
"overhead" costs of Landlord.
15. Article X is amended to include the additional provision that should
Tenant, in its sole discretion, conclude that damage caused by fire or any other
casualty has rendered the demised premises unsuitable for Tenant's intended use,
then Tenant may elect to terminate this Lease and have no further obligation to
Landlord thirty days after written notice of such election to terminate.
16. With respect to Article XI, Paragraph 2, should any access road to the
demised premises be closed or modified by eminent domain or other governmental
action, Tenant may elect, upon thirty days advance written notice to terminate
this Lease.
17. With respect to Article XIV, Section 1(a), Tenant shall have five days
grace period with respect to any monetary default, and fifteen days grace period
with respect to any non-monetary default, after receipt of notice from Landlord
within which to cure such alleged default.
18. Article XV is deleted in its entirety.
19. Article XVII is deleted in its entirety.
20. With respect to Article XVIII, Tenant and Landlord represent that no
broker has been retained by either party in connection with this transaction and
each shall defend, indemnify, and hold harmless the other from the claims of any
broker alleging to be representing the indemnifying party.
21. Should any portion of this Lease Agreement, including but not limited
to this Addendum, be declared unenforceable for any reason by a Final Judgment
of a court of competent jurisdiction, the remaining portions shall be unaffected
and remain obligations between the parties and their successors in interest.
Under no
<PAGE>
circumstance will the Original Lease be "revived" or reinstated.
22. The Lease Agreement to which this Addendum is attached and made part
remains in full force and effect and unaffected except to the extent
inconsistent herewith, in which case this Addendum shall govern.
NOW THEREFORE, the parties have executed this Addendum to Lease Agreement
as of October 31, 1994.
Witnesses: Landlord:
_____________________________________ PMG CENTER, INC.
_____________________________________ By:____________________________________
Tenant:
_____________________________________ HOSPITAL STAFFING SERVICES, INC.
_____________________________________ By:____________________________________
STATE OF FLORIDA )
)SS:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this _____ day of
____________________, 1994 by ______________________________ as
____________________ of PMG CENTER, INC., a ____________________ corporation, on
behalf of the corporation. He or she is personally known to me or has produced
_________________________ as identification and did/did not take an oath.
Notary Public:
sign___________________________________
print__________________________________
State of Florida at Large (Seal)
My Commission Expires:
STATE OF FLORIDA )
)SS:
COUNTY OF BROWARD )
<PAGE>
The foregoing instrument was acknowledged before me this _____ day of
____________________, 1994 by ______________________________ as
____________________ of HOSPITAL STAFFING SERVICES, INC., a Florida corporation,
on behalf of the corporation. He or she is personally known to me or has
produced _________________________ as identification and did/did not take an
oath.
Notary Public:
sign___________________________________
print__________________________________
State of Florida at Large (Seal)
My Commission Expires:
SECOND ADDENDUM TO LEASE AGREEMENT BETWEEN PMG CENTER, INC.
("LANDLORD") AND HOSPITAL STAFFING SERVICES, INC. ("TENANT") FOR
PREMISES: 6245 NORTH FEDERAL HIGHWAY, 4TH FLOOR FORT
LAUDERDALE, FLORIDA 33308
Despite any language in the captioned Lease Agreement and Addendum,
Landlord and Tenant have agreed to the following additional terms and
provisions, which shall govern in the event of any conflict:
WITNESSETH:
WHEREAS, Paragraph 2 of the First Addendum required Tenant to pay to
Landlord, no later than November 1, 1995, Seven Hundred Thousand Dollars
($700,000) by cash or cashier's check, or at the sole option of Tenant, to
deliver to Landlord shares of its common stock having a current market value of
$700,000; (the "Obligation")and
WHEREAS, Tenant was in default of the Obligation; and
WHEREAS, Landlord and Tenant have agreed to a workout of Tenant's
Obligation by Treating the $700,000.00 payment obligation as a loan, with
payment terms provided for below.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand, each
party paid to the other, the receipt of which is hereby acknowledged, and in the
additional considerations of the promises, obligations and forbrearances
contained herein, the parties agree as follows:
1. All of the above recitals are true.
2. This Addendum is to amend Tenant's obligation to as provided in
Paragraph 2 of the first Addendum to Lease.
3. Tenant agrees to pay the Seven Hundred Thousand Dollars ($700,000) cash
or cashier's check payment originally due on November 1, 1995, to be determined
as follows. Interest shall accrue at the rate of 11% per annum. Tenant shall
make a principal payment of $150,000.00, plus one month's interest of $6,416.67,
totaling $156,416.67, no later than December 1, 1995, or the date of execution
of this Agreement., whichever is later. The remaining $550,000.00 shall be paid
in equal payments of principal and interest, in accordance with the following
amortization schedule:
PAYMENT INTEREST
DATE AMOUNT AMOUNT PRINCIPAL BALANCE
- ---- ------ ------ --------- -------
Dec 1, 1995 550,000.00
1/1/96 48,609.91 5041.67 43,568.25 506,431.75
2/1/96 48,609.91 4642.29 43,967.62 462,464.13
3/1/96 48,609.91 4239.25 44,370.66 418,093.48
4/1/96 48,609.91 3832.52 44,777.39 373,316.09
5/1/96 48,609.91 3422.06 45,187.85 328,128.24
6/1/96 48,609.91 3007.84 45,602.07 282,526.17
7/1/96 48,609.91 2589.82 46,020.09 236,506.08
8/1/96 48,609.91 2167.97 46,441.94 190,064.14
9/1/96 48,609.91 1742.25 46,867.66 143,196.48
10/1/96 48,609.91 1312.63 47,297.28 95,899.20
11/1/96 48,609.91 879.08 47,730.84 48,168.37
12/1/96 48,609.91 441.54 48,168.37 0.00
1. Tenant shall execute a promissory note (the "Note") to evidence the
$550,000.00 obligation subsequent to the $150,000.00 payment, in the form
attached as Exhibit "A" to this Addendum.
2. Tenant shall further pay a loan origination fee of $14,719.25, together
will Landlord's reasonable attorneys' fees. Tenant shall be responsible for its
own attorneys' fees and costs.
3. The Note shall be secured by Tenant's Treasury Stock. Tenant shall
execute a Security Agreement, U.C.C.-1 Financing Statements, and any other
documents appropriate or necessary to perfect the security interest in the
stock, including a pledge agreement and power of attorney to transfer the stock
in the event of default. The documents referred to in this paragraph shall be
prepared by Tenant or its counsel, to the extent requested by Landlord. Tenant
<PAGE>
shall also be required to provide an opinion of counsel as to the validity and
enforceability of the security interest in the stock, enforceable by Landlord.
4. Tenant shall not be entitled to any notice or grace period with regard
to the payment obligations pursuant to this Addendum. Any default by Tenant
under the Note shall, at the option of the Landlord and in addition to
Landlord's remedies under the Note and Security Agreement, be a default of
Tenant's rental payment obligations pursuant to this Lease equal to the amount
in default under the Note. Notwithstanding any provisions in the Lease to the
Contrary, if Tenant defaults in obligations pursuant to this Addendum, such
default shall be deemed to be a default in Tenant's rental obligations under the
Lease for which any opportunity to cure as expired.
5. Should any portion of this Lease Agreement, including but not limited to
this Addendum, be declared unenforceable for any reason by a Final Judgment of a
court of competent jurisdiction, the remaining portions shall be unaffected and
remain obligations between the parties and their successors in interest. In the
event this Addendum is declared unenforceable for any reason, Landlord will be
entitled to enforce the Lease prior to amendment.
6. The Lease Agreement to which this Addendum is attached and made part
remains in full force and effect and unaffected except to the extent
inconsistent herewith, in which case this Addendum shall govern.
NOW THEREFORE, the parties have executed this Second Addendum to Lease
Agreement on _____________________ _______, 1995.
Witnesses: Landlord:
____________________________________ PMG CENTER, INC.
____________________________________ By:__________________________________
Tenant:
____________________________________ HOSPITAL STAFFING SERVICES, INC.
____________________________________ By:__________________________________
EXHIBIT 10.10
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into
this 30th day of December, 1994, and is effective as of the 1st day of January,
1995 (the "Effective Date") by and between Ronald A. Cass, an individual
currently residing at 2901 N.E. 35th Street, Fort Lauderdale, Florida 33306
("Cass") and Hospital Staffing Services, Inc., a Florida corporation whose
principal address is 6245 N. Federal Highway, Suite 400, Fort Lauderdale,
Florida 33308 ("HSSI" or the "Company").
WHEREAS, Cass, on the one hand, and HSSI and Cardinal Nursing and Home
Care, Inc. ("Cardinal"), on the other hand, have entered into an Assets Purchase
Agreement (the "Purchase Agreement") of even date herewith which provides, INTER
ALIA, that the consideration paid for the "Assets," as defined in the Purchase
Agreement, shall be set forth more fully in a settlement agreement; and
WHEREAS, Cass and HSSI have previously entered into a Termination and
Benefits Agreement dated June 1, 1991 (the "Benefits Agreement") pursuant to
which Cass is entitled to certain benefits upon his termination of employment
with the Company; and
WHEREAS, Cass has certain outstanding obligations to the Company in the
form of a Loan in the amount of $100,000 (the "Loan"); and
WHEREAS, as an inducement for the parties to enter into this Agreement,
Cass has proposed that his base compensation be reduced; and
WHEREAS, the parties believe it is in the best interest of the Company
and its shareholders to enter into the Purchase Agreement and satisfy its
obligations to Cass pursuant to the Benefits Agreement as set forth herein; and
WHEREAS, Cass continues to be employed at will by HSSI as its Chairman
of the Board, Chief Executive Officer and President.
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. RECITALS. The above recitals are true, correct, and are
herein incorporated by reference.
2. SATISFACTION OF BENEFITS AGREEMENT.
<PAGE>
In consideration of and full satisfaction for the obligations
of the Company pursuant to the Benefits Agreement, Cass shall receive the
following:
a. The Assets described in the Purchase Agreement
inclusive of the intangible and fixed assets and goodwill, the value of which is
$185,000, which is the fair market value of the Assets.
b. Forgiveness of a shareholder loan to Cass by the
Company in the outstanding amount of $100,000 (inclusive of any accrued but
unpaid interest).
c. A promissory note in the principal amount of Seven
Hundred Fifteen Thousand and No/100 Dollars ($715,000), the form set forth on
Exhibit A hereto.
3. CONTINUING EMPLOYMENT OF CASS BY HSSI AND REDUCTION OF BASE
SALARY. As an inducement for the Company to enter into this Settlement Agreement
Cass shall continue as an at-will employee of the Company except that the base
compensation for Cass shall be reduced from $330,000 to $175,000 effective
January 1, 1995. At all times as Cass shall be an employee of the Company, Cass
shall be entitled to receive all other benefits that he was receiving or was
entitled to receive thirty (30) days prior to the Effective Date including
without limitation, an automobile allowance, life and health insurance benefits,
and certain retirement benefits (based upon an annual base salary of
$175,000.00), as set forth more fully on Exhibit B.
4. MODIFICATION OF BENEFITS AGREEMENT.
a. Except as set forth in this Section 4, the Benefits
Agreement is terminated, and Cass hereby releases the Company from all its
duties and obligations pursuant to the Benefits Agreement, and Cass shall be
entitled to no further rights thereunder.
b. The Company hereby releases Cass from all his duties
and obligations pursuant to the Benefits Agreement and the Company shall be
entitled to no further rights thereunder.
c. The provisions of Section 3, 4, 5 and 6 of the
Benefits Agreement shall remain in full force and effect; provided, however,
that Section 4(a) of the Benefits Agreement shall be amended to provide that the
restricted area shall be limited to any county in the United States where HSSI
or any of its subsidiaries are engaged in the homecare business as may be
conducted by HSSI or any of its subsidiaries as of the date of this Agreement or
during the Term hereof EXCEPT that the restricted area shall not relate to
Florida (the "Permitted Area"). If, during such one (1) year period after
termination, HSSI or any of its subsidiaries are no longer engaged in the
homecare business within a previously restricted area, for purposes of this
Section, that restricted area is waived.
<PAGE>
d. Cass shall be given no less than three (3) months'
prior written notice of termination by the Board of Directors of the Company
during which time Cass shall be entitled to receive all compensation and
benefits to which Cass was entitled prior to such notice of termination. To the
extent that such three (3) month notice is not provided to Cass, Cass shall be
paid compensation for Ninety (90) days, based upon an annual base salary of One
Hundred Seventy Five Thousand and No/100 Dollars ($175,000.00), as set forth
more fully in Section 2(a) above.
e. Upon the termination of Cass' employment with the
Company, for whatever reason, Cass shall be entitled to receive such health,
disability and life benefits as Cass was receiving prior to such termination,
for one (1) year from the effective date of termination. Cass shall not be
entitled to receive any other compensation or benefits in connection with such
termination.
f. In the event of Cass' death or "disability," as
hereinafter defined,
(i) Cass' spouse and/or dependents shall be
entitled to receive the benefits set forth in Section 4(e) hereof for a
period of one (1) year or, in the event Cass' termination occurred
prior to his death or disability, his spouse and/or dependents shall be
entitled to such benefits for the remainder of the one (1) year period
from the date of his termination; and
(ii) Cass' estate shall receive an aggregate of
three (3) months (or in the event Cass' termination occurred without
proper notice as provided in Section 4(d) and Cass dies subsequent to
such termination his spouse and/or his dependents shall be entitled to
the remainder of the ninety (90) day salary which the Company has not
previously paid to Cass. salary that would have been paid to Cass had
proper notice prior to termination been provided to Cass.
g. For purposes of Section 4(f), "disability" means such
mental impairment which would require a guardian to be appointed for
Cass.
5. DEVOTION OF TIME. The purchase by Cass of the Assets
notwithstanding, Cass shall devote substantially all of his time and efforts to
the business of HSSI and its subsidiaries.
6. EXECUTION OF THE PURCHASE AGREEMENT. This Agreement is
subject to the approval and execution of all parties to the Purchase Agreement
and which approval specifically includes the Board of Directors of HSSI
(excluding Cass).
7. SEVERABILITY. In the event any provisions contained herein
shall for any reason be held to be inapplicable, invalid, illegal or
unenforceable in any respect, such inapplicability, invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and this
Agreement shall be construed as if such provision had never been contained
herein.
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties hereto and may not be terminated, except in
accordance with its terms, or amended, except in a prior writing executed by the
parties hereto.
9. WAIVER. Any waiver by any party of any provision of this
Agreement or breach thereof shall not operate or be construed as a waiver of any
other provision of subsequent breach thereof.
10. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Florida and shall be binding upon
and inure to the benefit of the respective successors and assigns of the parties
hereto.
11. NOTICES. All notices, requests, demands, declarations, and
other communication required or permitted to be given hereunder shall be in
writing and shall be given and deemed to have been duly given, if delivered in
person, given by prepaid telegram or mailed first class, postage prepaid,
registered or certified mail, or delivered to an independent local or overnight
courier directed to the respective addresses set forth below or to such other
address as may be directed by any party in written notice to the other party;
If to HSSI: 6245 N. Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Attention: William F. McConnell
With a copy to: Kirkpatrick & Lockhart
Miami Center - Suite 2000
201 South Biscayne Boulevard
Miami, Florida 33131
Attention: Brian Foremny, Esq.
If to Cass: 2901 N.E. 35th Street
Fort Lauderdale, FL 33306
With a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
200 E. Las Olas, Blvd., Suite 1900
Fort Lauderdale, Florida 33301
Attention: Charles B. Pearlman, Esq.
12. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
13. HEADINGS. The headings used in this Agreement are solely for
convenience of reference and shall not affect its meaning or interpretation in
any way.
<PAGE>
14. ATTORNEYS' FEES. In connection with any litigation arising
out of the enforcement of this Agreement, or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, from the other party if such party was an adverse party to such
litigation.
15. MISCELLANEOUS PROVISIONS.
(a) The obligations of HSSI and Cass are absolute and
unconditional, except as may be otherwise provided for herein and therein, and
independent.
(b) Cass shall execute such documents, if necessary, for
HSSI to obtain term life insurance on his life to cover the payment of the
benefits set forth in this Agreement.
(c) This Agreement constitutes the entire understanding
between the parties hereto and shall not be terminated, except in accordance
with their terms, or amended, except in writing executed by the parties hereto
and thereto.
(d) This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE PARTIES TO THIS AGREEMENT HAVE READ THE AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT LEGAL COUNSEL
OF THEIR OWN CHOICE AND AGREE TO BE BOUND TO ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WITNESSES: HOSPITAL STAFFING SERVICES, INC.,
a Florida corporation
/s/ DOROTHY R. ZOGHBY By: /s/ WARREN MARMORSTEIN
- ------------------------------ ----------------------------------
Name: Warren Marmorstein
Its: Vice President
/s/ BETH TOMER /s/ RONALD A. CASS
- ------------------------------ ----------------------------------
Ronald A. Cass
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of September , 1995 (the "Effective Date"), between Hospital
Staffing Services, Inc., a Florida corporation, whose address is 6245 N. Federal
Highway, Suite 400, Fort Lauderdale, FL 33308 (the "Company"), and Jay
Gershberg, whose address is 3260 N. W. 112 Avenue, Coral Springs, Florida 33065
(the "Employee").
RECITALS
A. The Company is principally engaged in the business, inter alia,
of (1) providing home health care; (2) acting as a professional recruiter of
registered nurses and other professional medical personnel for provision to
hospitals on an interim staffing basis (the "Business").
B. The Company has established a valuable reputation and goodwill
in its Business, with expertise in all aspects of the Business.
C. The Company wishes to employ the Employee and the Employee
wishes to be employed by the Company, pursuant to the terms and conditions
set forth in this Agreement.
D. In consideration for the Employee's employment with the Company,
the Company wishes to provide certain benefits to the Employee upon certain
events of termination of the Employee's employment with the Company, as
described more fully in this Agreement.
E. The Employee, by virtue of the Employee's employment by the
Company, shall become familiar with and possessed with the manner, methods,
trade secrets and other confidential information pertaining to the Company's
Business, including the Company's client base.
NOW THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. RECITALS. The above recitals are true, correct, and are herein
incorporated by reference.
2. EMPLOYMENT. The Company hereby employs the Employee in the
capacity as the Company's Vice President of Finance, and the Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
3. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD. The duties of the
Employee
<PAGE>
shall be subject to the direction of the Company and the Employee shall
perform all duties as shall be directed by the Company. The Employee shall
devote full attention and render exclusive, full time services to the Company
and shall be employed solely by the Company according to the terms of this
Agreement. Employee's job title is subject to change by the Board of Directors.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. For all services rendered by the Employee
pursuant to the terms of this Agreement and in consideration of the execution of
this Agreement by the Employee, the Company shall pay the Employee a base salary
as is set forth on Exhibit A of this Agreement.
b. ADDITIONAL COMPENSATION. The Employee shall be entitled
to receive such additional compensation as set forth on Exhibit B of this
Agreement.
c. EMPLOYEE BENEFITS. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to senior executives and/or other salaried employees
including, without limitation, those set forth on Exhibit C of the Agreement.
d. AUTOMOBILE ALLOWANCE. The Employee shall be entitled to
receive an automobile allowance as set forth on Exhibit D of this Agreement.
e. BUSINESS EXPENSE REIMBURSEMENT. During the Employee's
employment, the Employee shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by the Employee (in accordance
with the policies and procedures established by the Company for its executives)
in performing services hereunder, provided the Employee properly accounts
therefor.
5. TERM. The Term of employment hereunder will commence on the
Effective Date as set forth above and continue for a period of twelve (12)
months from the Effective Date. The Term shall be automatically renewed for
successive twelve (12) month periods unless otherwise terminated pursuant to
Section 6 hereof.
6. TERMINATION.
a. TERMINATION BY THE COMPANY FOR CAUSE.
(1) Nothing herein shall prevent the Company from
terminating Employee for "Cause," as hereinafter defined.
(2) "Cause" shall mean (i) committing or participating
in an injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (ii) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or
<PAGE>
otherwise; (iii) engaging in a criminal enterprise involving moral turpitude;
(iv) conviction of a felony under the laws of the United States or any state
thereof; (v) if applicable, loss of any state or federal license required for
the Employee to perform the Employee's material duties or responsibilities for
the Company; provided, however, that this Subsection 6(a)(2) shall not be
applicable if such loss of license shall be a result of any actions or inactions
outside the Employees control; (vi) failure or refusal of Employee to perform
the lawful orders or instructions of his superiors; or (vii) any assignment of
this Agreement in violation of Section 16 of this Agreement.
(3) Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a notice of
termination stating that the Employee committed one of the types of conduct set
forth in Section 6(a) of this Agreement and specifying the particulars thereof
and the Employee shall be given a thirty (30) day period to cure such conduct
set forth in Section 6(a)(2); provided that the conduct set forth in clause (vi)
is subject to only one thirty (30) notice and cure period.
b. CONSTRUCTIVE TERMINATION OF EMPLOYMENT. A termination by
the Company Without Cause under Section 7 shall be deemed to have occurred upon
the occurrence of one or more of the following events without the EXPRESS
written consent of the Employee:
(1) a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached to the
Employee's position as described in Section 2; or
(2) a five percent (5%) reduction in the Employee's
salary below the salary in effect immediately prior to such reduction; or
(3) a material breach of this Agreement by the Company;
(4) failure by a successor company to assume the
obligations under the Agreement; or
(5) change in the Employee's principal office to
a location outside the Dade-Broward-Palm Beach County, Florida area.
Anything herein to the contrary notwithstanding, the Employee shall give written
notice to the Board of Directors of the Company that the Employee believes an
event has occurred which would result in a Constructive Termination of the
Employee's employment under this Section 6(b), which written notice shall
specify the particular act or acts, on the basis of which the Employee intends
to so terminate the Employee's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event.
(c) TERMINATION FOLLOWING A CHANGE OF CONTROL.
(1) In the event that a "Change in Control," as
hereinafter defined, of
<PAGE>
the Company shall occur at any time during the Term or any renewal thereof, the
Employee shall have the right to terminate his employment under this Agreement
upon thirty (30) days written notice given at any time within one (1) year after
the occurrence of such event, and such termination of the Employee's employment
with the Company pursuant to this Section 6(c)(1), then, in any such event, such
termination shall be deemed to be a termination by the Company Without Cause.
(2) For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (i) as set forth in
Section 280G of the Internal Revenue Code or (ii) of a nature that would be
required to be reported in response to Item 1 of the current report on Form 8K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred at such
time as:
(a) any "person," other than the Employee
(as such term is used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's outstanding
securities then having the right to vote at elections of directors; or,
(b) the individuals who, at the commencement
date of the Agreement constitute the Board of Directors, cease for any reason to
constitute a majority thereof unless the election, or nomination for election,
of each new director was approved by a vote of at least two thirds of the
directors then in office who were directors at the commencement of the
Agreement; or
(c) there is a failure to elect a number of
directors as would constitute a majority of the Board of Directors' candidates
nominated by management of the Company to the Board of Directors; or
(d) the business of the Company for which
the Employee's services are principally performed is disposed of by the Company
pursuant to a partial or complete liquidation of the Company, a sale of assets
(including stock of a subsidiary of the Company) or otherwise.
(3) Anything in this Section 6(c) to the contrary
notwithstanding, in no event will any action or non-action by the Employee at
any time prior to the first anniversary date of the applicable Change in Control
be deemed consent to any of the events described in this
<PAGE>
Section 6(c).
7. TERMINATION WITHOUT CAUSE; TERMINATION AS A RESULT OF CHANGE OF
CONTROL AND SEVERANCE BENEFITS.
a. If the Employee is terminated Without Cause, and subject
to Employee's compliance with the provisions of Sections 8 and 9 hereof or as
otherwise provided in this Agreement, following the effective date of the
Employee's effective date of termination of his employment, the Employee shall
continue to receive (1) the base salary which existed at the time of the
Employee's termination as set forth on Exhibit "A" of this Agreement (the
"Severance Compensation") for a period of three (3) months thereafter; and (2)
all accrued but unused vacation through the date of termination.
b. If the Employee is terminated as a result of a Change of
Control as defined herein and subject to Employee's compliance with the
provisions of Sections 8 and 9 hereof or as otherwise provided in this
Agreement, following the effective date of the Employee's effective date of
termination of his employment, the Employee shall continue to receive, for a
period of three (3) months following the effective date of termination, (1) the
base salary which existed at the time of the Employee's termination as set forth
on Exhibit A (the "Severance Compensation"); (2) all accrued but unused
vacation; (3) the Employee's pro-rata share of Additional Compensation for the
year, as described in Section 4(b) and on Exhibit B and (payable through
month-end of the last full month prior to the date of termination); (4) a Car
Allowance in the amount set forth on Exhibit C; and (5) each and every one of
the benefits of any employee of the Company which existed at the time of the
Employee's termination (collectively the "Severance Compensation and Benefits").
c. All Severance Compensation shall be payable to the
Employee weekly; provided that in the event the Employee is entitled to receive
the Severance Compensation and Benefits as a result of a Change of Control, at
the Employee's option, the Employee may receive either (i) a lump sum equal to
the Compensation and Benefits due to the Employee pursuant to Section 7(a)
reduced to present value, as set forth in Section 280G of the Internal Revenue
Code or (ii) weekly.
8. COVENANT NOT TO COMPETE. The Employee acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
company having been acquired through considerable time, money and effort.
Accordingly, in consideration of continued employment and compensation by the
Company, the Employee agrees to the following:
a. That during the Restricted Period (as defined herein) and
within the Restricted Area (as defined herein), the Employee will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined) other than on behalf of the
Company and as agreed by the Company and the Employee, whether as an officer,
director, proprietor, employer, partner, independent contractor, investor,
stockholder
<PAGE>
(other than as a holder of less than one percent (1%) of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise. Except that during the term of Employee's employment with the
Company, the foregoing limitations as to Restricted Area shall not be
applicable.
b. That during the Restricted Period and within the
Restricted Area (as defined herein), the Employee will not, indirectly or
directly, compete with the Company by soliciting, inducing or influencing any of
the Company's Clients which have a business relationship with the Company at any
time during the Restricted Period to discontinue or reduce the extent of such
relationship with the Company. Except that during the term of the Employee's
employment with the Company, the foregoing limitations as to Restricted Area
shall not be applicable.
c. At no time during the Employee's employment with the
Company and for any time thereafter, the Employee will not (i) directly or
indirectly recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the Company,
or (ii) employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of Company (the "Competitive
Business") to employ or seek to employ for any Competitive Business any person
who is then (or was at any time within six (6) months prior to the date the
Employee or the Competitive Business employs or seeks to employ such person)
employed by the Company.
d. That during the Restricted Period, the Employee will not
interfere with, disrupt or attempt to disrupt any past, present or prospective
relationship, contractual or otherwise, between the Company and any Company's
client, employee, agent, vendor, supplier or customer.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company's trade
secrets, private or secret processes, methods and ideas, as they exist from time
to time, customer lists and information concerning the Company's products,
services, business records and plans, inventions, product design information,
price structure, discounts, costs, computer programs and listings, source code
and/or subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, training methods, development, technical
information, marketing activities and procedures, method for operating the
Company's Business, credit and financial data concerning the Company and the
Company's Clients and Client Lists, which Client Lists shall not only mean one
or more of the names and addresses of the Clients of the Company but it shall
also encompass any and all information whatsoever regarding them, including
their needs, and marketing and advertising practices and plans and information
which is embodied in written or otherwise recorded form, but it shall also
include information which is mental, not physical (collectively, the
"Confidential Information") as valuable, special and unique assets of the
Company, access to and knowledge of which are essential to the performance of
the Employee hereunder. In light of the highly competitive nature of the
industry in which the Company's business is conducted, the Employee agrees that
all Confidential Information, heretofore or in the future obtained by the
Employee as a result of the Employee's association with the Company, shall
<PAGE>
be considered confidential.
b. Excluded from the Confidential Information, and therefore
not subject to the provisions of this Agreement, shall be any information which:
(1) At the time of disclosure, is in the public domain
as evidenced by printed publications;
(2) After the disclosure, enters the public domain by
the way of printed publication through no fault of the Employee or those in
privity with it;
(3) Employee can show by written documentation was in
its possession at the time of disclosure and which was not acquired directly or
indirectly from the Company; or
(4) Employee can show by written documentation was
acquired, after disclosure, from a third party who did not receive it from the
Company, and who had the right to disclose the information without any
obligation to hold such information confidential.
c. The Employee acknowledges that, as between the Company and
the Employee, the Confidential Information and any and all rights and privileges
provided under the trademark, copyright, trade secret and other laws of the
United States, the individual states thereof, and jurisdictions foreign thereto,
and the goodwill associated therewith, are and at all times will be the property
of the Company.
d. Employee agrees that he shall:
(1) Hold in confidence and not disclose or make
available to any third party any such Confidential Information unless so
authorized in writing by the Company;
(2) Exercise all reasonable efforts to prevent third
parties from gaining access to the Confidential Information;
(3) Not use, directly or indirectly, the Confidential
Information in any respect of its business, except as necessary to evaluate the
information;
(4) Restrict the disclosure or availability of the
Confidential Information to those of Employee's employees who have read and
understand this Agreement and who have a need to know the information in order
to achieve the purposes of this Agreement;
(5) Not copy or modify any Confidential Information
without prior written consent of the Company.
(6) Take such other protective measures as may be
reasonably necessary to preserve the confidentiality of the Confidential
Information; and
<PAGE>
(7) Relinquish and require all of his employees, if
applicable, to relinquish all rights he may have in any matter, such as
drawings, documents, models, samples, photographs, patterns, templates, molds,
tools or prototypes, which may contain, embody or make use of the Confidential
Information; promptly deliver to the Company any such matter as the Company may
direct at any time; and not retain any copies or other reproductions thereof.
e. Employee further agrees:
(1) That he shall promptly disclose in writing to the
Company all ideas, inventions, improvements and discoveries which may be
conceived, made or acquired by Employee or its employees as the direct or
indirect result of the disclosure by the Company of the Confidential Information
to Employee;
(2) That all such ideas, inventions, improvements and
discoveries conceived, made or acquired by Employee, alone or with the
assistance of others, relating to the Confidential Information, shall be the
property of the Company and shall be treated as Confidential Information in
accordance with the provisions hereof and that the Employee shall not acquire
any intellectual property rights under this Agreement except the limited right
to use set forth in this Agreement.
(3) That Employee and its employees shall assist in the
preparation and execution of all applications, assignments and other documents
which the Company may deem necessary to obtain patents, copyrights and the like
in the United States and in jurisdictions foreign thereto, and to otherwise
protect the Company.
f. Upon written request of the Company, Employee shall return
to the Company all written materials containing the Confidential Information.
Employee shall also deliver to the Company written statements signed by the
Employee certifying all materials have been returned within five (5) days of
receipt of the request.
10. COMPANY'S CLIENTS. The "Company's Clients" shall be deemed to be
any persons, partnerships, corporations, professional associations or other
organizations for whom the Company has performed Business Activities.
11. RESTRICTIVE PERIOD. The "Restrictive Period" shall be deemed to
be during the Employee's employment with the Company and for a period of twelve
(12) months following termination of the Employee's employment, regardless of
the reason for termination.
12. RESTRICTED AREA. The Restricted Area shall be deemed to mean
within the restricted area and shall be limited to any county in the United
States or in any country throughout the world where Company or any of its
subsidiaries are engaged in the homecare business as may be conducted by Company
or any of its subsidiaries as of the date of this Agreement or during the term
of the Employee's employment with the Company.
13. BUSINESS ACTIVITIES. "Business Activities" shall be deemed to
include any activities
<PAGE>
which are included in the Company's Business now or during the effective period
of this Agreement.
14. COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT.
a. It is understood by and between the parties hereto that
the foregoing covenants by Employee contained in Sections 8 or 9 of this
Agreement shall be construed to be agreements independent of any other element
of the Employee's employment with the Company. The existence of any other claim
or cause of action, whether predicated on any other provision in this Agreement,
or otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of the covenants in the Agreement
against the Employee.
b. The covenants by Employee contained in Sections 5 and 6
shall survive the expiration of this Agreement if the Employee continues to work
for the Company, in any manner, without renewing this Agreement. The Employee
further agrees that the covenants set forth in Sections 8 and 9 of this
Agreement shall continue to be in effect following the expiration or termination
of the Employee's employment with the Company.
15. REMEDIES.
a. The Employee acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Sections 8 or 9 herein would be inadequate and the breach shall be per se deemed
as causing irreparable harm to the Company. In recognition of this fact, in the
event of a breach by the Employee of any of the provisions of Sections 8 or 9,
the Employee agrees that, in addition to any remedy at law available to the
Company, including, but not limited to monetary damages, the Company, without
posting any bond, shall be entitled to obtain, and the Employee agrees not to
oppose the Company's request for, equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available to the Company.
b. The Employee acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Confidential Information would not be an adequate remedy
upon breach or threatened breach of Sections 8 or 9 and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
c. In the event that the Employee shall be in violation of
the aforementioned restrictive covenants, then the time limitation during which
breach or breaches should occur, and in the event the Company should be required
to seek relief from such breach in any court or other tribunal, then the
covenant shall be extended for a period of time equal to the pendency of such
proceedings, including appeal.
<PAGE>
16. BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding upon
the parties hereto, their heirs, legal representatives, successors and assigns.
This Agreement shall not be assignable by the Employee but shall be assignable
by the Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
17. MISCELLANEOUS PROVISIONS. Any notice required or permitted to be
given under the terms of this Agreement shall be sufficient if in writing and if
sent postage prepaid by registered or certified mail, return receipt requested;
by overnight delivery; by courier; or by confirmed telecopy, in the case of the
Employee to the Employee's last place of business or residence as shown on the
records of the Company, or in the case of the Company to its principal office as
set forth in the introductory paragraph, or such other place as it may
designate. This Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof, and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be modified or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties. This Agreement shall
be governed by the laws of the State of Florida. Venue shall be Broward County,
Florida. In the event of any dispute as to the terms of this Employment
Agreement, the prevailing party in any litigation shall be entitled to
reasonable attorney's fees.
18. CONSTRUCTION. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
19. SEVERABILITY. This Agreement shall be deemed severable, and the
invalidity or enforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF
THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written in Broward County, Florida.
WITNESS: THE COMPANY
HOSPITAL STAFFING SERVICES, INC.
BY: /s/ RONALD A. CASS
- ---------------------- ----------------------------
NAME: Ronald A. Cass
Its: Chief Executive Officer
THE EMPLOYEE
- ----------------------
/s/ JAY GERSHBERG
-----------------
Jay Gershberg
<PAGE>
EXHIBIT A
BASE SALARY
The base salary is $141,750.
<PAGE>
EXHIBIT B
ADDITIONAL COMPENSATION
The Employee shall be entitled to receive
a. Eight percent (8%) of the Employee's base salary in deferred
compensation, pursuant to the Company's deferred compensation plan.
<PAGE>
EXHIBIT C
EMPLOYEE BENEFITS
The Employee shall be entitled to
a. family health benefits;
b. Employee disability benefits;
c. a $100,000 term life insurance policy (standard premium); and
d. three (3) weeks paid vacation per year, commencing one (1) year
after the Effective Date.
<PAGE>
EXHIBIT D
AUTOMOBILE ALLOWANCE
The Automobile Allowance is $9,000 per year.
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of September , 1995 (the "Effective Date"), between Hospital
Staffing Services, Inc., a Florida corporation, whose address is 6245 N. Federal
Highway, Suite 400, Fort Lauderdale, FL 33308 (the "Company"), and Jeffrey
Barnhill, whose address is 150 N. W. 112 Lane, Coral Springs, Florida 33071 (the
"Employee").
RECITALS
A. The Company is principally engaged in the business, inter
alia, of (1) providing home health care; (2) acting as a professional recruiter
of registered nurses and other professional medical personnel for provision to
hospitals on an interim staffing basis (the "Business").
B. The Company has established a valuable reputation and
goodwill in its Business, with expertise in all aspects of the Business.
C. The Company wishes to employ the Employee and the Employee
wishes to be employed by the Company, pursuant to the terms and conditions set
forth in this Agreement.
D. In consideration for the Employee's employment with the
Company, the Company wishes to provide certain benefits to the Employee upon
certain events of termination of the Employee's employment with the Company, as
described more fully in this Agreement.
E. The Employee, by virtue of the Employee's employment by the
Company, shall become familiar with and possessed with the manner, methods,
trade secrets and other confidential information pertaining to the Company's
Business, including the Company's client base.
NOW THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. RECITALS. The above recitals are true, correct, and are
herein incorporated by reference.
2. EMPLOYMENT. The Company hereby employs the Employee in the
capacity as the Company's Vice President of Finance, and the Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
3. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD. The duties of
the Employee shall be subject to the direction of the Company and the Employee
shall perform all duties as shall
<PAGE>
be directed by the Company. The Employee shall devote full attention and render
exclusive, full time services to the Company and shall be employed solely by the
Company according to the terms of this Agreement. Employee's job title is
subject to change by the Board of Directors.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. For all services rendered by the
Employee pursuant to the terms of this Agreement and in consideration of the
execution of this Agreement by the Employee, the Company shall pay the Employee
a base salary as is set forth on Exhibit A of this Agreement.
b. ADDITIONAL COMPENSATION. The Employee shall be
entitled to receive such additional compensation as set forth on Exhibit B of
this Agreement.
c. EMPLOYEE BENEFITS. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to senior executives and/or other salaried employees
including, without limitation, those set forth on Exhibit C of the Agreement.
d. AUTOMOBILE ALLOWANCE. The Employee shall be entitled
to receive an automobile allowance as set forth on Exhibit D of this Agreement.
e. BUSINESS EXPENSE REIMBURSEMENT. During the Employee's
employment, the Employee shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by the Employee (in accordance
with the policies and procedures established by the Company for its executives)
in performing services hereunder, provided the Employee properly accounts
therefor.
5. TERM. The Term of employment hereunder will commence on the
Effective Date as set forth above and continue for a period of twelve (12)
months from the Effective Date. The Term shall be automatically renewed for
successive twelve (12) month periods unless otherwise terminated pursuant to
Section 6 hereof.
6. TERMINATION.
a. TERMINATION BY THE COMPANY FOR CAUSE.
(1) Nothing herein shall prevent the Company
from terminating Employee for "Cause," as hereinafter defined.
(2) "Cause" shall mean (i) committing or
participating in an injurious act of fraud, gross neglect, misrepresentation,
embezzlement or dishonesty against the Company; (ii) committing or participating
in any other injurious act or omission wantonly, willfully, recklessly or in a
manner which was grossly negligent against the Company, monetarily or otherwise;
(iii) engaging in a criminal enterprise involving moral turpitude; (iv)
conviction of a
<PAGE>
felony under the laws of the United States or any state thereof; (v) if
applicable, loss of any state or federal license required for the Employee to
perform the Employee's material duties or responsibilities for the Company;
provided, however, that this Subsection 6(a)(2) shall not be applicable if such
loss of license shall be a result of any actions or inactions outside the
Employees control; (vi) failure or refusal of Employee to perform the lawful
orders or instructions of his superiors; or (vii) any assignment of this
Agreement in violation of Section 16 of this Agreement.
(3) Notwithstanding anything else contained in
this Agreement, this Agreement will not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Employee a notice
of termination stating that the Employee committed one of the types of conduct
set forth in Section 6(a) of this Agreement and specifying the particulars
thereof and the Employee shall be given a thirty (30) day period to cure such
conduct set forth in Section 6(a)(2); provided that the conduct set forth in
clause (vi) is subject to only one thirty (30) notice and cure period.
b. CONSTRUCTIVE TERMINATION OF EMPLOYMENT. A
termination by the Company Without Cause under Section 7 shall be deemed to have
occurred upon the occurrence of one or more of the following events without the
EXPRESS written consent of the Employee:
(1) a significant change in the nature or scope
of the authorities, powers, functions, duties or responsibilities attached to
the Employee's position as described in Section 2; or
(2) a five percent (5%) reduction in the
Employee's salary below the salary in effect immediately prior to such
reduction; or
(3) a material breach of this Agreement by the
Company;
(4) failure by a successor company to assume the
obligations under the Agreement; or
(5) change in the Employee's principal office to
a location outside the Dade-Broward-Palm Beach County, Florida area.
Anything herein to the contrary notwithstanding, the Employee shall give written
notice to the Board of Directors of the Company that the Employee believes an
event has occurred which would result in a Constructive Termination of the
Employee's employment under this Section 6(b), which written notice shall
specify the particular act or acts, on the basis of which the Employee intends
to so terminate the Employee's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event.
c. TERMINATION FOLLOWING A CHANGE OF CONTROL.
(1) In the event that a "Change in Control," as
hereinafter defined, of
<PAGE>
the Company shall occur at any time during the Term or any renewal thereof, the
Employee shall have the right to terminate his employment under this Agreement
upon thirty (30) days written notice given at any time within one (1) year after
the occurrence of such event, and such termination of the Employee's employment
with the Company pursuant to this Section 6(c)(1), then, in any such event, such
termination shall be deemed to be a termination by the Company Without Cause.
(2) For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (i) as set forth in
Section 280G of the Internal Revenue Code or (ii) of a nature that would be
required to be reported in response to Item 1 of the current report on Form 8K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred at such
time as:
(a) any "person," other than the Employee
(as such term is used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's outstanding
securities then having the right to vote at elections of directors; or,
(b) the individuals who, at the
commencement date of the Agreement constitute the Board of Directors, cease for
any reason to constitute a majority thereof unless the election, or nomination
for election, of each new director was approved by a vote of at least two thirds
of the directors then in office who were directors at the commencement of the
Agreement; or
(c) there is a failure to elect a number
of directors as would constitute a majority of the Board of Directors'
candidates nominated by management of the Company to the Board of Directors; or
(d) the business of the Company for
which the Employee's services are principally performed is disposed of by the
Company pursuant to a partial or complete liquidation of the Company, a sale of
assets (including stock of a subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6(c)(2) will not
apply where the Employee gives the Employee's explicit written waiver stating
that for the purposes of this Section 6(c)(2), a Change in Control shall not be
deemed to have occurred. The Employee's participation in any negotiations or
other matters in relation to a Change in Control shall in no way constitute such
a waiver which can only be given by an express written waiver as provided in the
preceding sentence.
(3) Anything in this Section 6(c) to the
contrary notwithstanding, in no event will any action or non-action by the
Employee at any time prior to the first anniversary date of the applicable
Change in Control be deemed consent to any of the events described in this
<PAGE>
Section 6(c).
7. TERMINATION WITHOUT CAUSE; TERMINATION AS A RESULT OF CHANGE
OF CONTROL AND SEVERANCE BENEFITS.
a. If the Employee is terminated Without Cause, and
subject to Employee's compliance with the provisions of Sections 8 and 9 hereof
or as otherwise provided in this Agreement, following the effective date of the
Employee's effective date of termination of his employment, the Employee shall
continue to receive (1) the base salary which existed at the time of the
Employee's termination as set forth on Exhibit "A" of this Agreement (the
"Severance Compensation") for a period of three (3) months thereafter; and (2)
all accrued but unused vacation through the date of termination.
b. If the Employee is terminated as a result of a
Change of Control as defined herein and subject to Employee's compliance with
the provisions of Sections 8 and 9 hereof or as otherwise provided in this
Agreement, following the effective date of the Employee's effective date of
termination of his employment, the Employee shall continue to receive, for a
period of three (3) months following the effective date of termination, (1) the
base salary which existed at the time of the Employee's termination as set forth
on Exhibit A (the "Severance Compensation"); (2) all accrued but unused
vacation; (3) the Employee's pro-rata share of Additional Compensation for the
year, as described in Section 4(b) and on Exhibit B and (payable through
month-end of the last full month prior to the date of termination); (4) a Car
Allowance in the amount set forth on Exhibit C; and (5) each and every one of
the benefits of any employee of the Company which existed at the time of the
Employee's termination (collectively the "Severance Compensation and Benefits").
c. All Severance Compensation shall be payable to the
Employee weekly; provided that in the event the Employee is entitled to receive
the Severance Compensation and Benefits as a result of a Change of Control, at
the Employee's option, the Employee may receive either (i) a lump sum equal to
the Compensation and Benefits due to the Employee pursuant to Section 7(a)
reduced to present value, as set forth in Section 280G of the Internal Revenue
Code or (ii) weekly.
8. COVENANT NOT TO COMPETE. The Employee acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
company having been acquired through considerable time, money and effort.
Accordingly, in consideration of continued employment and compensation by the
Company, the Employee agrees to the following:
a. That during the Restricted Period (as defined
herein) and within the Restricted Area (as defined herein), the Employee will
not, individually or in conjunction with others, directly or indirectly, engage
in any Business Activities (as hereinafter defined) other than on behalf of the
Company and as agreed by the Company and the Employee, whether as an officer,
director, proprietor, employer, partner, independent contractor, investor,
stockholder
<PAGE>
(other than as a holder of less than one percent (1%) of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise. Except that during the term of Employee's employment with the
Company, the foregoing limitations as to Restricted Area shall not be
applicable.
b. That during the Restricted Period and within the
Restricted Area (as defined herein), the Employee will not, indirectly or
directly, compete with the Company by soliciting, inducing or influencing any of
the Company's Clients which have a business relationship with the Company at any
time during the Restricted Period to discontinue or reduce the extent of such
relationship with the Company. Except that during the term of the Employee's
employment with the Company, the foregoing limitations as to Restricted Area
shall not be applicable.
c. At no time during the Employee's employment with
the Company and for any time thereafter, the Employee will not (i) directly or
indirectly recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the Company,
or (ii) employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of Company (the "Competitive
Business") to employ or seek to employ for any Competitive Business any person
who is then (or was at any time within six (6) months prior to the date the
Employee or the Competitive Business employs or seeks to employ such person)
employed by the Company.
d. That during the Restricted Period, the Employee
will not interfere with, disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
Company's client, employee, agent, vendor, supplier or customer.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company's trade
secrets, private or secret processes, methods and ideas, as they exist from time
to time, customer lists and information concerning the Company's products,
services, business records and plans, inventions, product design information,
price structure, discounts, costs, computer programs and listings, source code
and/or subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, training methods, development, technical
information, marketing activities and procedures, method for operating the
Company's Business, credit and financial data concerning the Company and the
Company's Clients and Client Lists, which Client Lists shall not only mean one
or more of the names and addresses of the Clients of the Company but it shall
also encompass any and all information whatsoever regarding them, including
their needs, and marketing and advertising practices and plans and information
which is embodied in written or otherwise recorded form, but it shall also
include information which is mental, not physical (collectively, the
"Confidential Information") as valuable, special and unique assets of the
Company, access to and knowledge of which are essential to the performance of
the Employee hereunder. In light of the highly competitive nature of the
industry in which the Company's business is conducted, the Employee agrees that
all Confidential Information, heretofore or in the future obtained by the
Employee as a result of the Employee's association with the Company, shall
<PAGE>
be considered confidential.
b. Excluded from the Confidential Information, and
therefore not subject to the provisions of this Agreement, shall be any
information which:
(1) At the time of disclosure, is in the public
domain as evidenced by printed publications;
(2) After the disclosure, enters the public
domain by the way of printed publication through no fault of the Employee or
those in privity with it;
(3) Employee can show by written documentation
was in its possession at the time of disclosure and which was not acquired
directly or indirectly from the Company; or
(4) Employee can show by written documentation
was acquired, after disclosure, from a third party who did not receive it from
the Company, and who had the right to disclose the information without any
obligation to hold such information confidential.
c. The Employee acknowledges that, as between the
Company and the Employee, the Confidential Information and any and all rights
and privileges provided under the trademark, copyright, trade secret and other
laws of the United States, the individual states thereof, and jurisdictions
foreign thereto, and the goodwill associated therewith, are and at all times
will be the property of the Company.
d. Employee agrees that he shall:
(1) Hold in confidence and not disclose or make
available to any third party any such Confidential Information unless so
authorized in writing by the Company;
(2) Exercise all reasonable efforts to prevent
third parties from gaining access to the Confidential Information;
(3) Not use, directly or indirectly, the
Confidential Information in any respect of its business, except as necessary to
evaluate the information;
(4) Restrict the disclosure or availability of
the Confidential Information to those of Employee's employees who have read and
understand this Agreement and who have a need to know the information in order
to achieve the purposes of this Agreement;
(5) Not copy or modify any Confidential
Information without prior written consent of the Company.
(6) Take such other protective measures as may
be reasonably necessary to preserve the confidentiality of the Confidential
Information; and
<PAGE>
(7) Relinquish and require all of his employees,
if applicable, to relinquish all rights he may have in any matter, such as
drawings, documents, models, samples, photographs, patterns, templates, molds,
tools or prototypes, which may contain, embody or make use of the Confidential
Information; promptly deliver to the Company any such matter as the Company may
direct at any time; and not retain any copies or other reproductions thereof.
e. Employee further agrees:
(1) That he shall promptly disclose in writing
to the Company all ideas, inventions, improvements and discoveries which may be
conceived, made or acquired by Employee or its employees as the direct or
indirect result of the disclosure by the Company of the Confidential Information
to Employee;
(2) That all such ideas, inventions,
improvements and discoveries conceived, made or acquired by Employee, alone or
with the assistance of others, relating to the Confidential Information, shall
be the property of the Company and shall be treated as Confidential Information
in accordance with the provisions hereof and that the Employee shall not acquire
any intellectual property rights under this Agreement except the limited right
to use set forth in this Agreement.
(3) That Employee and its employees shall assist
in the preparation and execution of all applications, assignments and other
documents which the Company may deem necessary to obtain patents, copyrights and
the like in the United States and in jurisdictions foreign thereto, and to
otherwise protect the Company.
f. Upon written request of the Company, Employee shall
return to the Company all written materials containing the Confidential
Information. Employee shall also deliver to the Company written statements
signed by the Employee certifying all materials have been returned within five
(5) days of receipt of the request.
10. COMPANY'S CLIENTS. The "Company's Clients" shall be
deemed to be any persons, partnerships, corporations, professional associations
or other organizations for whom the Company has performed Business Activities.
11. RESTRICTIVE PERIOD. The "Restrictive Period" shall be deemed
to be during the Employee's employment with the Company and for a period of
twelve (12) months following termination of the Employee's employment,
regardless of the reason for termination.
12. RESTRICTED AREA. The Restricted Area shall be deemed to mean
within the restricted area and shall be limited to any county in the United
States or in any country throughout the world where Company or any of its
subsidiaries are engaged in the homecare business as may be conducted by Company
or any of its subsidiaries as of the date of this Agreement or during the term
of the Employee's employment with the Company.
13. BUSINESS ACTIVITIES. "Business Activities" shall be deemed to
include any activities
<PAGE>
which are included in the Company's Business now or during the effective period
of this Agreement.
14. COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT.
a. It is understood by and between the parties hereto
that the foregoing covenants by Employee contained in Sections 8 or 9 of this
Agreement shall be construed to be agreements independent of any other element
of the Employee's employment with the Company. The existence of any other claim
or cause of action, whether predicated on any other provision in this Agreement,
or otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of the covenants in the Agreement
against the Employee.
b. The covenants by Employee contained in Sections 5
and 6 shall survive the expiration of this Agreement if the Employee continues
to work for the Company, in any manner, without renewing this Agreement. The
Employee further agrees that the covenants set forth in Sections 8 and 9 of this
Agreement shall continue to be in effect following the expiration or termination
of the Employee's employment with the Company.
15. REMEDIES.
a. The Employee acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Sections 8 or 9 herein would be inadequate and the breach shall be
per se deemed as causing irreparable harm to the Company. In recognition of this
fact, in the event of a breach by the Employee of any of the provisions of
Sections 8 or 9, the Employee agrees that, in addition to any remedy at law
available to the Company, including, but not limited to monetary damages, the
Company, without posting any bond, shall be entitled to obtain, and the Employee
agrees not to oppose the Company's request for, equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to the
Company.
b. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Confidential Information would not be an adequate remedy
upon breach or threatened breach of Sections 8 or 9 and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
c. In the event that the Employee shall be in
violation of the aforementioned restrictive covenants, then the time limitation
during which breach or breaches should occur, and in the event the Company
should be required to seek relief from such breach in any court or other
tribunal, then the covenant shall be extended for a period of time equal to the
pendency of such proceedings, including appeal.
<PAGE>
16. BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
upon the parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Employee but shall be
assignable by the Company in connection with the sale, transfer or other
disposition of its business or to any of the Company's affiliates controlled by
or under common control with the Company.
17. MISCELLANEOUS PROVISIONS. Any notice required or permitted
to be given under the terms of this Agreement shall be sufficient if in writing
and if sent postage prepaid by registered or certified mail, return receipt
requested; by overnight delivery; by courier; or by confirmed telecopy, in the
case of the Employee to the Employee's last place of business or residence as
shown on the records of the Company, or in the case of the Company to its
principal office as set forth in the introductory paragraph, or such other place
as it may designate. This Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and supersedes and cancels any
prior communications, understandings and agreements between the parties. This
Agreement cannot be modified or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties. This Agreement shall
be governed by the laws of the State of Florida. Venue shall be Broward County,
Florida. In the event of any dispute as to the terms of this Employment
Agreement, the prevailing party in any litigation shall be entitled to
reasonable attorney's fees.
18. CONSTRUCTION. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party drafting the
document.
19. SEVERABILITY. This Agreement shall be deemed severable, and
the invalidity or enforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF
THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written in Broward County, Florida.
WITNESS: THE COMPANY
HOSPITAL STAFFING SERVICES, INC.
/s/ SUZETTE PALMER BY: /s/ BOBBY L. SHIELDS
- ---------------------------- ----------------------------
NAME: Bobby L. Shields
Its: Corporate Counsel/Secretary
THE EMPLOYEE
/s/ DOROTHY R. ZOGHBY
- ----------------------------
/s/ JEFFREY A. BARNHILL
--------------------------------
Jeffrey A. Barnhill
<PAGE>
EXHIBIT A
BASE SALARY
The base salary is $130,000 per year.
<PAGE>
EXHIBIT B
ADDITIONAL COMPENSATION
The Employee shall be entitled to receive
a. Eight percent (8%) of the Employee's base salary in deferred
compensation, pursuant to the Company's deferred compensation plan.
<PAGE>
EXHIBIT C
EMPLOYEE BENEFITS
The Employee shall be entitled to
a. family health benefits;
b. Employee disability benefits;
c. a $100,000 term life insurance policy (standard premium); and
d. three (3) weeks paid vacation per year, commencing one (1)
year after the Effective Date.
<PAGE>
EXHIBIT D
AUTOMOBILE ALLOWANCE
The Automobile Allowance is $6,000 per year.
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of February , 1996 (the "Effective Date"), between Hospital
Staffing Services, Inc., a Florida corporation, whose address is 6245 N. Federal
Highway, Suite 400, Fort Lauderdale, FL 33308 (the "Company"), and Ronald
Huneycutt, whose address is 7421 S.W. 7th Street, Plantation, Florida 33317 (the
"Employee").
RECITALS
A. The Company is principally engaged in the business, inter
alia, of (1) providing home health care; (2) acting as a professional recruiter
of registered nurses and other professional medical personnel for provision to
hospitals on an interim staffing basis (the "Business").
B. The Company has established a valuable reputation and
goodwill in its Business, with expertise in all aspects of the Business.
C. The Company wishes to employ the Employee and the Employee
wishes to be employed by the Company, pursuant to the terms and conditions set
forth in this Agreement.
D. In consideration for the Employee's employment with the
Company, the Company wishes to provide certain benefits to the Employee upon
certain events of termination of the Employee's employment with the Company, as
described more fully in this Agreement.
E. The Employee, by virtue of the Employee's employment by the
Company, shall become familiar with and possessed with the manner, methods,
trade secrets and other confidential information pertaining to the Company's
Business, including the Company's client base.
NOW THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. RECITALS. The above recitals are true, correct, and are
herein incorporated by reference.
2. EMPLOYMENT. The Company hereby employs the Employee in the
capacity as the Company's Vice President of Finance, and the Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
3. AUTHORITY AND POWER DURING EMPLOYMENT PERIOD. The duties of
the Employee shall be subject to the direction of the Company and the Employee
shall perform all duties as shall be directed by the Company. The Employee shall
devote full attention and render exclusive, full time
<PAGE>
services to the Company and shall be employed solely by the Company according to
the terms of this Agreement. Employee's job title is subject to change by the
Board of Directors.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. For all services rendered by the
Employee pursuant to the terms of this Agreement and in consideration of the
execution of this Agreement by the Employee, the Company shall pay the Employee
a base salary as is set forth on Exhibit A of this Agreement.
b. ADDITIONAL COMPENSATION. The Employee shall be
entitled to receive such additional compensation as set forth on Exhibit B of
this Agreement.
c. EMPLOYEE BENEFITS. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to senior executives and/or other salaried employees
including, without limitation, those set forth on Exhibit C of the Agreement.
d. AUTOMOBILE ALLOWANCE. The Employee shall be entitled
to receive an automobile allowance as set forth on Exhibit D of this Agreement.
e. BUSINESS EXPENSE REIMBURSEMENT. During the Employee's
employment, the Employee shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by the Employee (in accordance
with the policies and procedures established by the Company for its executives)
in performing services hereunder, provided the Employee properly accounts
therefor.
5. TERM. The Term of employment hereunder will commence on the
Effective Date as set forth above and continue for a period of twelve (12)
months from the Effective Date. The Term shall be automatically renewed for
successive twelve (12) month periods unless otherwise terminated pursuant to
Section 6 hereof.
6. TERMINATION.
a. TERMINATION BY THE COMPANY FOR CAUSE.
(1) Nothing herein shall prevent the Company
from terminating Employee for "Cause," as hereinafter defined.
(2) "Cause" shall mean (i) committing or
participating in an injurious act of fraud, gross neglect, misrepresentation,
embezzlement or dishonesty against the Company; (ii) committing or participating
in any other injurious act or omission wantonly, willfully, recklessly or in a
manner which was grossly negligent against the Company, monetarily or otherwise;
(iii) engaging in a criminal enterprise involving moral turpitude; (iv)
conviction of a felony under the laws of the United States or any state thereof;
(v) if applicable, loss of any state or federal license required for the
Employee to perform the Employee's material duties or responsibilities for the
Company; provided, however, that this Subsection 6(a)(2) shall not be applicable
if such loss of license shall be
<PAGE>
a result of any actions or inactions outside the Employees control; (vi) failure
or refusal of Employee to perform the lawful orders or instructions of his
superiors; or (vii) any assignment of this Agreement in violation of Section 16
of this Agreement.
(3) Notwithstanding anything else contained in
this Agreement, this Agreement will not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Employee a notice
of termination stating that the Employee committed one of the types of conduct
set forth in Section 6(a) of this Agreement and specifying the particulars
thereof and the Employee shall be given a thirty (30) day period to cure such
conduct set forth in Section 6(a)(2); provided that the conduct set forth in
clause (vi) is subject to only one thirty (30) notice and cure period.
b. CONSTRUCTIVE TERMINATION OF EMPLOYMENT. A
termination by the Company Without Cause under Section 7 shall be deemed to have
occurred upon the occurrence of one or more of the following events without the
EXPRESS written consent of the Employee:
(1) a significant change in the nature or scope
of the authorities, powers, functions, duties or responsibilities attached to
the Employee's position as described in Section 2; or
(2) a five percent (5%) reduction in the
Employee's salary below the salary in effect immediately prior to such
reduction; or
(3) a material breach of this Agreement by the
Company;
(4) failure by a successor company to assume the
obligations under the Agreement; or
(5) change in the Employee's principal office to
a location outside the Dade-Broward-Palm Beach County, Florida area.
Anything herein to the contrary notwithstanding, the Employee shall give written
notice to the Board of Directors of the Company that the Employee believes an
event has occurred which would result in a Constructive Termination of the
Employee's employment under this Section 6(b), which written notice shall
specify the particular act or acts, on the basis of which the Employee intends
to so terminate the Employee's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event.
(c) TERMINATION FOLLOWING A CHANGE OF CONTROL.
(1) In the event that a "Change in Control," as
hereinafter defined, of the Company shall occur at any time during the Term or
any renewal thereof, the Employee shall have the right to terminate his
employment under this Agreement upon thirty (30) days written notice given at
any time within one (1) year after the occurrence of such event, and such
termination of the Employee's employment with the Company pursuant to this
Section 6(c)(1), then, in any such event, such termination shall be deemed to be
a termination by the Company Without Cause.
<PAGE>
(2) For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (i) as set forth in
Section 280G of the Internal Revenue Code or (ii) of a nature that would be
required to be reported in response to Item 1 of the current report on Form 8K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred at such
time as:
(a) any "person," other than the
Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's
outstanding securities then having the right to vote at elections of directors;
or,
(b) the individuals who, at the
commencement date of the Agreement constitute the Board of Directors, cease for
any reason to constitute a majority thereof unless the election, or nomination
for election, of each new director was approved by a vote of at least two thirds
of the directors then in office who were directors at the commencement of the
Agreement; or
(c) there is a failure to elect a number
of directors as would constitute a majority of the Board of Directors'
candidates nominated by management of the Company to the Board of Directors; or
(d) the business of the Company for
which the Employee's services are principally performed is disposed of by the
Company pursuant to a partial or complete liquidation of the Company, a sale of
assets (including stock of a subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6(c)(2) will not
apply where the Employee gives the Employee's explicit written waiver stating
that for the purposes of this Section 6(c)(2), a Change in Control shall not be
deemed to have occurred. The Employee's participation in any negotiations or
other matters in relation to a Change in Control shall in no way constitute such
a waiver which can only be given by an express written waiver as provided in the
preceding sentence.
(3) Anything in this Section 6(c) to the
contrary notwithstanding, in no event will any action or non-action by the
Employee at any time prior to the first anniversary date of the applicable
Change in Control be deemed consent to any of the events described in this
Section 6(c).
7. TERMINATION WITHOUT CAUSE; TERMINATION AS A RESULT OF
CHANGE OF CONTROL AND SEVERANCE BENEFITS.
a. If the Employee is terminated Without Cause, and
subject to Employee's compliance with the provisions of Sections 8 and 9 hereof
or as otherwise provided in this Agreement, following the effective date of the
Employee's effective date of termination of his employment, the Employee shall
continue to receive (1) the base salary which existed at the time of
<PAGE>
the Employee's termination as set forth on Exhibit "A" of this Agreement (the
"Severance Compensation") for a period of three (3) months thereafter; and (2)
all accrued but unused vacation through the date of termination.
b. If the Employee is terminated as a result of a
Change of Control as defined herein and subject to Employee's compliance with
the provisions of Sections 8 and 9 hereof or as otherwise provided in this
Agreement, following the effective date of the Employee's effective date of
termination of his employment, the Employee shall continue to receive, for a
period of three (3) months following the effective date of termination, (1) the
base salary which existed at the time of the Employee's termination as set forth
on Exhibit A (the "Severance Compensation"); (2) all accrued but unused
vacation; (3) the Employee's pro-rata share of Additional Compensation for the
year, as described in Section 4(b) and on Exhibit B and (payable through
month-end of the last full month prior to the date of termination); (4) a Car
Allowance in the amount set forth on Exhibit C; and (5) each and every one of
the benefits of any employee of the Company which existed at the time of the
Employee's termination (collectively the "Severance Compensation and Benefits").
c. All Severance Compensation shall be payable to the
Employee weekly; provided that in the event the Employee is entitled to receive
the Severance Compensation and Benefits as a result of a Change of Control, at
the Employee's option, the Employee may receive either (i) a lump sum equal to
the Compensation and Benefits due to the Employee pursuant to Section 7(a)
reduced to present value, as set forth in Section 280G of the Internal Revenue
Code or (ii) weekly.
8. COVENANT NOT TO COMPETE. The Employee acknowledges and
recognizes the highly competitive nature of the Company's business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
company having been acquired through considerable time, money and effort.
Accordingly, in consideration of continued employment and compensation by the
Company, the Employee agrees to the following:
a. That during the Restricted Period (as defined herein)
and within the Restricted Area (as defined herein), the Employee will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined) other than on behalf of the
Company and as agreed by the Company and the Employee, whether as an officer,
director, proprietor, employer, partner, independent contractor, investor,
stockholder (other than as a holder of less than one percent (1%) of the
outstanding capital stock of a publicly traded corporation), consultant,
advisor, agent or otherwise. Except that during the term of Employee's
employment with the Company, the foregoing limitations as to Restricted
Area shall not be applicable.
b. That during the Restricted Period and within the
Restricted Area (as defined herein), the Employee will not, indirectly or
directly, compete with the Company by soliciting, inducing or influencing any of
the Company's Clients which have a business relationship with the Company at any
time during the Restricted Period to discontinue or reduce the extent of such
relationship with the Company. Except that during the term of the Employee's
employment with the Company, the foregoing limitations as to Restricted Area
shall not be applicable.
<PAGE>
c. At no time during the Employee's employment with the
Company and for any time thereafter, the Employee will not (i) directly or
indirectly recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the Company,
or (ii) employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of Company (the "Competitive
Business") to employ or seek to employ for any Competitive Business any person
who is then (or was at any time within six (6) months prior to the date the
Employee or the Competitive Business employs or seeks to employ such person)
employed by the Company.
d. That during the Restricted Period, the Employee
will not interfere with, disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
Company's client, employee, agent, vendor, supplier or customer.
9. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
a. The Employee acknowledges that the Company's trade
secrets, private or secret processes, methods and ideas, as they exist from time
to time, customer lists and information concerning the Company's products,
services, business records and plans, inventions, product design information,
price structure, discounts, costs, computer programs and listings, source code
and/or subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, training methods, development, technical
information, marketing activities and procedures, method for operating the
Company's Business, credit and financial data concerning the Company and the
Company's Clients and Client Lists, which Client Lists shall not only mean one
or more of the names and addresses of the Clients of the Company but it shall
also encompass any and all information whatsoever regarding them, including
their needs, and marketing and advertising practices and plans and information
which is embodied in written or otherwise recorded form, but it shall also
include information which is mental, not physical (collectively, the
"Confidential Information") as valuable, special and unique assets of the
Company, access to and knowledge of which are essential to the performance of
the Employee hereunder. In light of the highly competitive nature of the
industry in which the Company's business is conducted, the Employee agrees that
all Confidential Information, heretofore or in the future obtained by the
Employee as a result of the Employee's association with the Company, shall be
considered confidential.
b. Excluded from the Confidential Information, and
therefore not subject to the provisions of this Agreement, shall be any
information which:
(1) At the time of disclosure, is in the public
domain as evidenced by printed publications;
(2) After the disclosure, enters the public
domain by the way of printed publication through no fault of the Employee or
those in privity with it;
(3) Employee can show by written documentation
was in its possession at the time of disclosure and which was not acquired
directly or indirectly from the Company; or
<PAGE>
(4) Employee can show by written documentation
was acquired, after disclosure, from a third party who did not receive it from
the Company, and who had the right to disclose the information without any
obligation to hold such information confidential.
c. The Employee acknowledges that, as between the
Company and the Employee, the Confidential Information and any and all rights
and privileges provided under the trademark, copyright, trade secret and other
laws of the United States, the individual states thereof, and jurisdictions
foreign thereto, and the goodwill associated therewith, are and at all times
will be the property of the Company.
d. Employee agrees that he shall:
(1) Hold in confidence and not disclose or make
available to any third party any such Confidential Information unless so
authorized in writing by the Company;
(2) Exercise all reasonable efforts to prevent
third parties from gaining access to the Confidential Information;
(3) Not use, directly or indirectly, the
Confidential Information in any respect of its business, except as necessary to
evaluate the information;
(4) Restrict the disclosure or availability of
the Confidential Information to those of Employee's employees who have read and
understand this Agreement and who have a need to know the information in order
to achieve the purposes of this Agreement;
(5) Not copy or modify any Confidential
Information without prior written consent of the Company.
(6) Take such other protective measures as may
be reasonably necessary to preserve the confidentiality of the Confidential
Information; and
(7) Relinquish and require all of his employees,
if applicable, to relinquish all rights he may have in any matter, such as
drawings, documents, models, samples, photographs, patterns, templates, molds,
tools or prototypes, which may contain, embody or make use of the Confidential
Information; promptly deliver to the Company any such matter as the Company may
direct at any time; and not retain any copies or other reproductions thereof.
e. Employee further agrees:
(1) That he shall promptly disclose in writing
to the Company all ideas, inventions, improvements and discoveries which may be
conceived, made or acquired by Employee or its employees as the direct or
indirect result of the disclosure by the Company of the Confidential Information
to Employee;
<PAGE>
(2) That all such ideas, inventions,
improvements and discoveries conceived, made or acquired by Employee, alone or
with the assistance of others, relating to the Confidential Information, shall
be the property of the Company and shall be treated as Confidential Information
in accordance with the provisions hereof and that the Employee shall not acquire
any intellectual property rights under this Agreement except the limited right
to use set forth in this Agreement.
(3) That Employee and its employees shall assist
in the preparation and execution of all applications, assignments and other
documents which the Company may deem necessary to obtain patents, copyrights and
the like in the United States and in jurisdictions foreign thereto, and to
otherwise protect the Company.
f. Upon written request of the Company, Employee shall
return to the Company all written materials containing the Confidential
Information. Employee shall also deliver to the Company written statements
signed by the Employee certifying all materials have been returned within five
(5) days of receipt of the request.
10. COMPANY'S CLIENTS. The "Company's Clients" shall be deemed to
be any persons, partnerships, corporations, professional associations or other
organizations for whom the Company has performed Business Activities.
11. RESTRICTIVE PERIOD. The "Restrictive Period" shall be deemed
to be during the Employee's employment with the Company and for a period of
twelve (12) months following termination of the Employee's employment,
regardless of the reason for termination.
12. RESTRICTED AREA. The Restricted Area shall be deemed to mean
within the restricted area and shall be limited to any county in the United
States or in any country throughout the world where Company or any of its
subsidiaries are engaged in the homecare business as may be conducted by Company
or any of its subsidiaries as of the date of this Agreement or during the term
of the Employee's employment with the Company.
13. BUSINESS ACTIVITIES. "Business Activities" shall be deemed to
include any activities which are included in the Company's Business now or
during the effective period of this Agreement.
14. COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT.
a. It is understood by and between the parties hereto
that the foregoing covenants by Employee contained in Sections 8 or 9 of this
Agreement shall be construed to be agreements independent of any other element
of the Employee's employment with the Company. The existence of any other claim
or cause of action, whether predicated on any other provision in this Agreement,
or otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of the covenants in the Agreement
against the Employee.
b. The covenants by Employee contained in Sections 5
and 6 shall survive the expiration of this Agreement if the Employee continues
to work for the Company, in any manner,
<PAGE>
without renewing this Agreement. The Employee further agrees that the covenants
set forth in Sections 8 and 9 of this Agreement shall continue to be in effect
following the expiration or termination of the Employee's employment with the
Company.
15. REMEDIES.
a. The Employee acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Sections 8 or 9 herein would be inadequate and the breach shall be
per se deemed as causing irreparable harm to the Company. In recognition of this
fact, in the event of a breach by the Employee of any of the provisions of
Sections 8 or 9, the Employee agrees that, in addition to any remedy at law
available to the Company, including, but not limited to monetary damages, the
Company, without posting any bond, shall be entitled to obtain, and the Employee
agrees not to oppose the Company's request for, equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to the
Company.
b. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Confidential Information would not be an adequate remedy
upon breach or threatened breach of Sections 8 or 9 and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
c. In the event that the Employee shall be in
violation of the aforementioned restrictive covenants, then the time limitation
during which breach or breaches should occur, and in the event the Company
should be required to seek relief from such breach in any court or other
tribunal, then the covenant shall be extended for a period of time equal to the
pendency of such proceedings, including appeal.
16. BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
upon the parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Employee but shall be
assignable by the Company in connection with the sale, transfer or other
disposition of its business or to any of the Company's affiliates controlled by
or under common control with the Company.
17. MISCELLANEOUS PROVISIONS. Any notice required or permitted
to be given under the terms of this Agreement shall be sufficient if in writing
and if sent postage prepaid by registered or certified mail, return receipt
requested; by overnight delivery; by courier; or by confirmed telecopy, in the
case of the Employee to the Employee's last place of business or residence as
shown on the records of the Company, or in the case of the Company to its
principal office as set forth in the introductory paragraph, or such other place
as it may designate. This Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and supersedes and cancels any
prior communications, understandings and agreements between the parties. This
Agreement cannot
<PAGE>
be modified or changed, nor can any of its provisions be waived, except by
written agreement signed by all parties. This Agreement shall be governed by the
laws of the State of Florida. Venue shall be Broward County, Florida. In the
event of any dispute as to the terms of this Employment Agreement, the
prevailing party in any litigation shall be entitled to reasonable attorney's
fees.
18. CONSTRUCTION. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party drafting the
document.
19. SEVERABILITY. This Agreement shall be deemed severable, and
the invalidity or enforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND
CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF
THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written in Broward County, Florida.
WITNESS: THE COMPANY
HOSPITAL STAFFING SERVICES, INC.
/s/ JACQUELINE BAEZ BY: /s/ RONALD CASS
- --------------------------- -----------------------------
NAME: Ronald Cass
Its: Chief Executive Officer
THE EMPLOYEE
/s/ JACQUELINE BAEZ
- ---------------------------
/s/ RONALD HUNEYCUTT
--------------------------------
Ronald Huneycutt
<PAGE>
EXHIBIT A
BASE SALARY
The base salary is $117,500.
<PAGE>
EXHIBIT B
ADDITIONAL COMPENSATION
The Employee shall be entitled to receive
a. Eight percent (8%) of the Employee's base salary in deferred
compensation, pursuant to the Company's deferred compensation plan; and
b. Options to purchase up to 10,000 shares or restricted common
stock of the Company at $3.00 per share, exercisable for a period of five (5)
years from the date of vesting, which options shall vest after one (1) year from
the Effective Date; subject to the Employee being employed with the Company as
of the vesting date, as set forth more fully in a definitive Stock Option
Agreement between the Company and the Employee, the form of which is attached
hereto as Schedule 1.
<PAGE>
EXHIBIT C
EMPLOYEE BENEFITS
The Employee shall be entitled to
a. family health benefits;
b. Employee disability benefits;
c. a $100,000 term life insurance policy (standard premium); and
d. three (3) weeks paid vacation per year, commencing one (1)
year after the Effective Date.
<PAGE>
EXHIBIT D
AUTOMOBILE ALLOWANCE
The Automobile Allowance is $6,000 per year.
EXHIBIT 10.18
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
PROVIDER REVOLVING LOAN AGREEMENT
This Provider Revolving Loan Agreement ("AGREEMENT") is made
as of the 7th day of February, 1996, by and between Capital Healthcare
Financing, a division of Capital Factors, Inc., a Florida corporation ("CHF"),
and each of the entities listed on ANNEX I hereto (collectively, "PROVIDER").
W I T N E S S E T H:
WHEREAS, Provider has requested that CHF make a series of
loans to Provider on a revolving credit basis, on the terms and conditions of
this Agreement and the other Loan Documents (as hereinafter defined) executed in
connection herewith; and
WHEREAS, CHF is willing to make available up to $8,000,000.00
of financing (the "TOTAL ADVANCE LIMIT") on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises, provisions
and covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Provider and CHF,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined in the body of this Agreement shall have the meanings ascribed thereto
in EXHIBIT A attached hereto and made a part hereof.
2. LOAN FACILITY.
2.1. ADVANCES.
2.1.1. AGREEMENT TO MAKE ADVANCES. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of
Provider herein set forth, CHF may, in its sole and absolute discretion, upon
Provider's written or verbal request and provided there does not then exist a
Default or Event of Default, or event or condition which with the making of an
Advance hereunder would result in a Default or an Event of Default, make a
series of loans (the "ADVANCES") to Provider up to an amount equal to the
Revolving Credit Advance Ceiling applicable to such Provider, subject to the
Total Advance Limit less the amounts of such reserves as CHF may establish from
time to time. As used herein, "REVOLVING CREDIT ADVANCE CEILING" means, as to
Provider, an amount equal to up to eighty five percent (85%) of (1) the
Estimated Value of the outstanding Eligible Claims of Provider on the Advance
Date less (2) any Mandatory Claims Reductions. Without limiting the foregoing,
the Revolving Credit Advance Ceiling will fluctuate with changes in the
Estimated Value of outstanding Eligible Claims of Provider. CHF may, in its sole
discretion, make Advances to Provider in excess of the foregoing limits and all
such Advances shall be subject to the terms and conditions of this Agreement and
shall constitute Obligations secured by the Collateral and any Guaranties.
2.1.1.1. LETTERS OF CREDIT FACILITY. In order to assist Provider
in establishing or opening Letters of Credit from time to time with a bank or
trust company (herein the "Bank") in an aggregate amount not to exceed
$2,000,000.00 for the purpose of Provider's self-funded worker's compensation as
required by Sentry Insurance, Provider requests that CHF join in the
applications for such Letters of Credit and/or guarantee payment or performance
of such Letters of Credit and any drafts or acceptances thereunder, thereby
lending CHF's credit to Provider. These arrangements shall be handled by
Provider subject to the terms and conditions set forth in this Agreement. CHF's
funding of any Letter of Credit hereunder is contingent upon, in addition to all
other terms and conditions set forth in this Agreement all of the following
conditions: (1) Sentry Insurance located at 1800 North Point Drive, Stevens
Point, Wisconsin 54481, the beneficiary of that certain Letter of Credit number
512802P issued by CoreStates Bank, N.A., for the account of Provider (the
"CoreStates LC") for obligations of Provider due Sentry Insurance under an
agreement between Sentry Insurance and Provider dated March 20, 1993; and (2)
Sentry Insurance shall agree to notify CoreStates
<PAGE>
Bank, N.A. to terminate the CoreStates LC and thereby release CoreStates Bank,
N.A. of its obligations thereunder and accept a Letter of Credit in replacement
of the CoreStates LC arranged by CHF and Provider pursuant to this Agreement on
terms and conditions similar to the Core States LC; and (3) any security
interest maintained by CoreStates Bank, N.A. and/or Congress Financial (the
Parent company of CoreStates, N.A.) in the assets of Provider shall be promptly
assigned to CHF or released upon Sentry Insurance's notification to CoreStates
Bank, N.A. of the termination of the CoreStates LC and release of CoreStates
Bank, N.A.'s obligations thereunder.
CHF's assistance in this matter shall at all times and in all respects be in
CHF's sole discretion. The amount and extent of the Letters of Credit and the
terms and conditions thereof and of any drafts or acceptances thereunder, shall
in all respects be determines solely by CHF and shall be subject to change,
modification and revision by CHF at any time and from time-to-time.
Any indebtedness, liability or obligation of any sort whatsoever, however
arising, whether present or future, fixed or contingent, secured or unsecured,
due or to become due, paid or incurred, arising or incurred in connection with
any Letters of Credit, guarantees for any such Letters of Credit, drafts or
acceptances thereunder or otherwise shall be incurred solely as an accommodation
to Provider for Provider's Account and shall include, without being limited to,
all amounts due or which may become due under said Letters of Credit, guarantees
for any such Letters of Credit or any drafts or acceptances thereunder; all
amounts charged or chargeable to Provider or to CHF by any Bank, other financial
institution or correspondent bank which opens, issues or is involved with such
Letters of Credit; any other bank charges; fees and commissions; duties and
taxes; costs of insurance; all such other charges and expenses which may pertain
either directly or indirectly to such Letters of Credit, drafts, acceptances,
guarantees for any such Letters of Credit or to the goods, services or documents
relating thereto, all of the foregoing being deemed an Obligation hereunder. CHF
shall have the right, at any time and without notice to Provider, to charge
Provider's Account with the amount of any and all such Obligations. Any debit
balance which may exist at any time or from time to time in Provider's Account
shall be repayable to CHF on demand and shall incur interest at the rate
provided in this Agreement.
Provider unconditionally agrees to indemnify CHF and hold CHF harmless from any
and all loss, claim or liability arising from any transactions or occurrences
relating to Letters of Credit established or opened for Provider's Account, and
any drafts or acceptances thereunder, and all Obligations hereunder, including
any such loss or claim due to any action taken by any Bank. Provider further
agrees to hold CHF harmless for any errors or omissions, whether caused by CHF,
by the Bank or otherwise. Provider agrees that any charges made to CHF for
Provider's Account by the Bank shall be conclusive on CHF and may be charged to
Provider's Account.
With respect to any Letter of Credit opened on Provider's behalf CHF shall not
be responsible for : the validity, sufficiency or genuineness of any documents
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged.
Provider agrees that any action taken by CHF, if taken in good faith, or any
action taken by any Bank, under or in connection with the Letters of Credit, the
drafts or acceptances, shall be binding on Provider and shall not put CHF in any
resulting liability to Provider. In furtherance thereof, CHF shall have in its
sole discretion and in good faith, the full right and authority to clear and
resolve any questions of noncompliance of documents; to give any instructions as
to acceptance or rejection of any documents; to grant any extensions of maturity
of, time of payment for, or time of presentation of, any drafts, acceptances or
documents; and to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of the applications
for Letters of Credit, Letters of Credit, drafts or acceptances; all in
Provider's name, and the Bank shall be entitled to comply with and honor any and
all such documents or instruments executed by or received solely from CHF, all
with notice to Provider.
Without CHF's express consent and endorsement in writing, Provider agrees not to
clear and resolve any questions of noncompliance of documents; to give any
instructions as to acceptance or rejection of any documents; to grant extensions
of the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications for Letters of Credit, Letters of Credit, drafts or
acceptances.
<PAGE>
Any rights, remedies, duties or obligations granted or undertaken by Provider to
any Bank in any application for Letters of Credit, or any standing agreement
relating to Letters of Credit or otherwise, shall be deemed to have been granted
to CHF and apply in all respects to CHF and shall be in addition any rights,
remedies, duties or obligations contained herein.
2.1.2. ADVANCE REQUESTS. When Provider desires for CHF to make an
Advance hereunder, Provider shall deliver a written or verbal request for the
Advance (the "ADVANCE REQUEST") to CHF no later than 11:00 A.M.. (Eastern
standard time) on the day (the "ADVANCE DATE") the Advance is desired (which
shall be a Business Day). Each Advance Request must (1) be made by a duly
authorized officer or representative of Provider, (2) specify the amount of the
Advance requested, (3) state that, to the best of his knowledge, after giving
effect to such Advance, the limits set forth in Section 2.1.4 shall not have
been exceeded by the making of such Advance, and (4) concurrent with the
execution of this Agreement by Provider and concurrent with each request for an
Advance and on the thirtieth (30th) day of each month during the term of this
Agreement, Provider shall deliver to CHF a fully completed Borrowing Base
Certificate (in form as set forth in Annex IV to this Agreement) certified by
the Chief Executive Officer, Chief Financial Officer, or Controller of Provider
as being true and correct as of the last day of the immediately preceding
business week. Concurrent with the delivery of the Borrowing Base Certificate,
Provider shall provide a written report to CHF of all disputes and claims in
excess of $1,000.00. If Provider fails to deliver to CHF the Borrowing Base
Certificate on the date when due, then notwithstanding any other provisions
contained in this Agreement to the contrary, CHF shall not make any Advances to
Provider until the Borrowing Base Certificate is delivered to CHF. Prior to the
funding of any such requested Advance, Provider shall provide to CHF all
documentation described elsewhere herein and such other documentation requested
by CHF, including but not limited to, the following information (collectively,
the "RECEIVABLES REPORT"): (A) a summary of billings to Medicare, Medicaid, all
other Third Party Payors and contracted staffing services, (B) a copy of every
remittance advice received, (C) such invoices, receipts and other back-up as may
be requested by CHF, (D) all Government Audit reports, as described below and
(E) quarterly Periodic Interim Payment (PIP) Review and the quarterly Periodic
Interim Payment (PIP) Review Letter. CHF may make all or a portion of such
requested Advance if it believes in good faith that such request has been
properly given by a duly authorized officer or representative of Provider. Each
request for an Advance hereunder shall be deemed to be a representation to CHF
by Provider that all of the representations and warranties set forth herein are
true and correct in all material respects on the date of such request (except
for representations and warranties that by their terms are made only as of a
specific date).
2.1.3. ADJUSTMENTS TO REVOLVING CREDIT ADVANCE CEILING. In the event
of any audit of payments to Provider under any Medicaid or Medicare program by
any Governmental Authority including, without limitation, a Base Year Audit,
audit of the CMI or audit of the RUG Index (a "GOVERNMENT AUDIT"), the following
shall apply:
2.1.3.1. If a Government Audit results or could reasonably be
expected to result in claims, charges, disputes or proposed reductions
(collectively, "PROPOSED CLAIMS REDUCTIONS") regarding any or all of the
outstanding Eligible Claims of Provider by an amount such that when the Proposed
Claims Reduction added to the then outstanding Advances is greater than eighty
five percent (85%) of Eligible Claims (the "ADVANCE OVERAGE"), which Proposed
Claims Reductions are appealable or non-binding until a final determination by
the applicable Governmental Authority, then, if:
2.1.3.1.1. such Advance Overages are in excess of eighty
five percent (85%) of Eligible Claims, Provider agrees to reduce such overages
immediately to no more than eighty five percent (85%).
2.1.3.2. The sum of any reductions of Eligible Claims imposed by
any Governmental Authority pursuant to a final, non appealable order or decision
shall automatically ("FINAL CLAIMS REDUCTIONS") be deducted from Eligible Claims
for purposes of calculating the Revolving Credit Advance Ceiling (such Final
Claims Reductions, together with any Proposed Claims Reductions to be paid
pursuant to Subsection 2.1.3.1.1. above are referred to herein as "MANDATORY
CLAIMS REDUCTIONS").
2.1.4. ADVANCE LIMITS. Notwithstanding the foregoing, in no event
shall the total of all Advances to Provider and all other Obligations of
Provider to CHF outstanding at any one time
<PAGE>
exceed the lesser of the Total Advance Limit or the Revolving Credit Advance
Ceiling (except as set forth in Subsection 2.1.3.1.1).
2.1.5. INELIGIBLE RECEIVABLES. Any Receivable which has been assigned
to CHF pursuant to the terms of this Agreement, has not been collected and is
disputed or reserved pursuant to Section 2.6, may be deemed an Ineligible
Receivable.
2.2. REVOLVING PROMISSORY NOTE. Provider shall execute and deliver to CHF a
Revolving Promissory Note substantially in the form of EXHIBIT B attached hereto
and made a part hereof (the "NOTE") to evidence Provider's obligation to repay
Advances, all Obligations, and interest thereon.
2.3. PAYMENT.
2.3.1. Provider shall pay the principal amount of all Advances,
together with interest thereon from time to time outstanding, in accordance with
the terms of the Note and this Agreement.
2.3.2. All Advances made by CHF to Provider and other sums included in
the Obligations shall be charged to a loan account in Provider's name on CHF's
books and records. Such Advances when made by CHF shall be deposited in a bank
account maintained by Provider.
2.3.3. All payments by Provider of the Obligations shall be made
without deduction, defense, setoff or counterclaim and in same day funds are
delivered to CHF by check, wire transfer or as otherwise agreed to by the
parties in writing, to such account as CHF may direct from time to time by
notice to Provider.
2.3.4. Provider hereby agrees, represents and warrants to CHF that all
invoices or other statements to Medicare, Medicaid and all other Third Party
Obligors (which shall mean any governmental entity, insurance company or other
entity approved by CHF) concerning Receivables shall clearly state that all
remittances must be made only to Provider at a post office box address as CHF
may so designate.
2.3.5. CHF shall determine in its sole discretion the order and manner
in which proceeds of Collateral and other payments that CHF receives are applied
to the Advances, interest thereon and the other Obligations, and Provider hereby
irrevocably waives the right to direct the application of any payment or
proceeds. CHF shall have the continuing and exclusive right to apply and reverse
and reapply any and all such proceeds and payments to any portion of the
Obligations. Provider shall receive credit against outstanding Obligations on
the day CHF receives credit for such proceeds.
2.3.6. Provider shall pay on demand to CHF any and all amounts
required to reduce the outstanding Advances to, at or below the lesser of (1)
the Total Advance Limit or (2) the Revolving Credit Advance Ceiling (subject to
the repayment provisions of Subsection 2.1.3.1.1.).
2.4. INTEREST.
2.4.1. Provider will pay CHF interest at the Interest Rate on the
daily balance of all Advances, Obligations, or other monies remitted, paid or
otherwise advanced to Provider. Interest will be charged to Provider's Account
(which account is maintained by CHF on its books and records in the name of
Provider and shall hereinafter be referred to as the "PROVIDER ACCOUNT")
monthly, in arrears.
2.4.2. Interest shall be computed on a daily basis on the basis of a
360-day year for the actual number of days elapsed. Any increase or decrease in
the Base Rate shall result in an adjustment to the Interest Rate on the first
day of each calendar month occurring during the term hereof. In no event shall
the total interest received by CHF on the principal amount of the Obligations
pursuant to the terms hereof exceed the maximum rate permitted by applicable law
(the "MAXIMUM RATE") and in the event excess interest ("EXCESS INTEREST") is
determined by a court of competent jurisdiction to have been paid, (1) at CHF's
option, such Excess Interest shall be applied as a credit against the
outstanding principal balance of the Obligations or accrued but unpaid interest
(not to exceed the maximum amount permitted by law), refunded to Provider or any
combination thereof, (2) the Interest Rate shall be automatically reduced to the
Maximum Rate, and (3) Provider shall not have
<PAGE>
any action against CHF for any damages arising out of the payment or collection
of Excess Interest.
2.4.3. Following the occurrence of an Event of Default, at the option
of CHF evidenced by its written notice, Provider shall pay to CHF interest from
the date of such Event of Default to and including the date of cure of such
Event of Default, if ever, on the outstanding principal balance of all Advances
and Obligations at the Default Interest Rate, in order to compensate CHF for the
additional credit risk and not as a penalty.
2.5. COLLECTIONS. Provider shall instruct all of the Third Party Payors to
make payments to the post office box established pursuant to the Lock Box
Agreement dated as of even date herewith. Upon the occurrence of an Event of
Default, CHF or CHF's designee may, at any time, notify patients or Third Party
Payors of Provider that the Accounts have been assigned to CHF and that CHF has
a security interest therein, collect them directly, and charge the collection
costs and expenses to Provider's Account, but, unless and until CHF does so or
gives Provider other written instructions, Provider shall be entitled, subject
to the terms of the Lock Box Agreement, to collect the Accounts and, upon
receipt, Provider shall immediately deliver to CHF the proceeds of such
Accounts, together with a full collection report in the form satisfactory to
CHF. Provider agrees that all payments received by Provider in connection with
the Accounts and any other Collateral shall be held in trust for CHF as CHF's
trustee. The receipt of any wire transfer of funds, check, or other item of
payment by CHF shall be immediately applied to conditionally reduce Provider's
Obligations, but shall not be considered a payment on account unless such wire
transfer is of immediately available federal funds and is made to the
appropriate deposit account of CHF or unless and until such check or other item
of payment is honored when presented for payment. The receipt of any wire
transfer, check or other item of payment by CHF shall be deemed to have been
paid to CHF two (2) business days after the date CHF actually receives
possession of such check or other item of payment for all funds other than
Federal Government Funds and one (1) business day after the date CHF actually
receives possession of such check or other item of payment for all Federal
Government Funds.
2.6. DISPUTES AND RESERVES.
2.6.1. Provider shall promptly reimburse CHF or CHF shall have the
right to charge Provider's Account: (i) for any payment which CHF receives with
respect to any Receivables if such payment is subsequently required by law to be
disgorged by CHF, whether as a result of any proceeding in bankruptcy or
otherwise and (ii) any receivables that are Ineligible Receivables. Provider
shall use its best efforts to give CHF notice of any proceeding in bankruptcy
relating to any Receivables. Provider agrees to indemnify and save CHF harmless
from and against any and all loss, costs and expenses, caused by or arising out
of Disputes, including, but not limited to, collection expenses and attorneys'
fees incurred with respect thereto.
2.6.2. Notwithstanding anything herein to the contrary, in the event
of a change in Provider's or any Guarantor's financial condition or change in
the Collateral which CHF believes will materially impair the value of the
Collateral or materially impair the ability of Provider or any Guarantor to
repay the Obligations, CHF may establish and maintain reserves against the
Obligations, in the form of a hold back of Advances that Provider would
otherwise be entitled to request hereunder but for the establishment of such
reserves or from the collection of any Receivables, as CHF shall, in its sole
discretion, deem appropriate.
2.6.3. Notwithstanding anything herein to the contrary, CHF reserves
the right that, as to any customer, if 50% or more of the Receivables
outstanding to that customer are Ineligible, then all receivables outstanding to
that customer may be considered Ineligible.
2.7. MAINTENANCE FEES. As additional consideration for the services to be
provided by CHF hereunder and for CHF's agreement to make Advances, Provider
shall pay to CHF the fees in accordance with the schedule of fees attached
hereto as ANNEX II. Said maintenance fees shall compensate CHF for the internal
costs associated with the origination, structuring, processing, approving, and
closing of the transactions and maintenance of the financing facility
contemplated by this Agreement, including, but not limited to, administrative,
general overhead, and lost opportunity costs, but not including any
out-of-pocket expenses for which Provider has agreed to reimburse CHF pursuant
to this Agreement, including, without limitation, CHF's out-of-pocket expenses
incurred in connection with its due diligence examination of Provider and the
closing of the transactions
<PAGE>
contemplated by this Agreement. Said maintenance fees shall be fully earned by
CHF on the dates they are due and shall not be subject to proration or rebate
upon the termination of this Agreement.
3. CONDITIONS TO LOAN. The effectiveness of this Agreement and the obligation of
CHF to make Advances to Provider is subject to the prior or concurrent
satisfaction of the conditions set forth below.
3.1. CLOSING CONDITIONS. Provider shall have satisfied the following
conditions on or prior to the Closing Date and the initial funding hereunder:
3.1.1. PERFECTION OF LIENS; SEARCH REPORTS. Provider shall have
delivered to or caused to be delivered to CHF executed documents (including
financing statements under the Code and other applicable documents under the
laws of any jurisdiction with respect to the perfection of Liens) as CHF may
deem necessary to perfect its Liens on the Collateral. CHF shall have received
certified copies of search reports listing all effective financing statements
that name Provider and Debtor, together with copies of all other financing
statements (none of which shall cover the Collateral).
3.1.2. SATISFACTION OF PRIOR LIENS AND INDEBTEDNESS. CHF shall have
received duly executed payoff letters, executed UCC-3 termination statements and
such other instruments in form and substance reasonably satisfactory to CHF, as
shall be necessary to terminate and satisfy all Indebtedness other than
Permitted Indebtedness incurred in the ordinary course of business and all Liens
securing such Indebtedness.
3.1.3. OFFICER'S CERTIFICATE. CHF shall have received a certificate
duly executed by the chief executive officer of Provider acting in their
official capacities as officers of Provider or the managing general partner of
Provider acting in such capacity, as applicable, stating that: (1) on the
Closing Date, no Default or Event of Default has occurred and is continuing; (2)
no material adverse change in the Collateral or the financial condition or
operations of the business of Provider or any of its respective Subsidiaries or
the projected cash flow of Provider or any of its respective Subsidiaries has
occurred since OCTOBER 31, 1996; (3) the representations and
warranties of Provider contained herein are true and correct in all respects on
and as of such date with the same effect as though made on and as such date; and
(4) Provider on the Closing Date is in compliance with all the terms and
provisions set forth in this Agreement on its part to be observed and performed.
3.1.4. CERTIFICATES OF INCORPORATION: GOOD STANDING. CHF shall have
received certified copies of the articles or certificate of incorporation,
certificate of limited partnership and other organizational documentation, as
amended and as applicable, of Provider as in effect on the Closing Date,
together with good standing certificates from the state(s) of its incorporation
or organization, from the state(s) in which its principal place of business is
located and from all states in which the laws thereof require Provider to be
qualified and/or licensed to do business, each to be dated a recent date prior
to the Closing Date.
3.1.5. BYLAWS. CHF shall have received copies of the bylaws, as
amended, of Provider certified as of the Closing Date by its corporate secretary
or an assistant secretary to be complete, true and accurate.
3.1.6. RESOLUTIONS. CHF shall have received resolutions of the Board
of Directors of Provider, approving and authorizing the execution, delivery and
performance of this Agreement and the other Loan Documents, certified as of the
Closing Date by Provider's corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment.
3.1.7. INCUMBENCY. CHF shall have received signature and incumbency
certificates of the officers of Provider executing the Loan Documents.
3.1.8. OTHER DOCUMENTS. CHF shall have received such other documents
respecting Provider and each of its Subsidiaries as CHF may reasonably request.
3.1.9. LITIGATION. There shall not be pending or, to the best
knowledge of Provider after due inquiry, threatened, any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
against or affecting Provider or any of its Subsidiaries or
<PAGE>
Debtor or any property of Provider or any of its Subsidiaries or Debtor that has
not been disclosed to CHF by Provider in writing and there shall have occurred
no development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration that in the opinion of CHF
would reasonably be expected to have a Material Adverse Effect.
3.1.10. LOAN DOCUMENTS. Provider shall have delivered the following
documents, which shall be in full force and effect:
3.1.10.1. the Note in the form attached hereto as EXHIBIT B;
3.1.10.2. Performance guaranty by an officer of Provider in the
form attached hereto as EXHIBIT C and made a part hereof (the "Guaranty") duly
executed by each such officer;
3.1.10.3. a security agreement in the form attached hereto as
EXHIBIT D and made a part hereof (the "SECURITY AGREEMENT") duly executed by
Provider; and
3.1.10.4. all other Loan Documents required by CHF hereunder,
duly executed by the applicable parties.
3.2. OTHER CONTINUING CONDITIONS. Provider shall have satisfied all the
following conditions on each date an Advance is requested:
3.2.1. All of the conditions set forth in Sections 2.1, 3.1, 4.1 and
4.2 have been and shall continue to be met at all times.
3.2.2. The representations and warranties contained herein and in the
Loan Documents shall be true, correct and complete in all respects on and as of
that date to the same extent as though made on and as of that date, except for
any representations or warranties limited by its terms to a specific date.
3.2.3. Provider shall have performed in all material respects all
agreements and satisfied all conditions which any Loan Documents provide shall
be performed by it on or before that funding date.
4. ADMINISTRATION.
4.1. REPORTS. The Receivables Report shall be delivered to CHF daily during
the term hereof in addition to the delivery thereof with each Advance Request as
provided in Section 2.1.2 hereof. Provider shall also deliver to CHF no later
than the end of each calendar month during the term hereof a summary of all
accounts receivable due to Provider in whole or in part from Governmental
Authorities, insurance companies or other third party payors, contract rights,
notes, bills, acceptances and all other obligations due to Provider for the
payment of money, in cash or in kind, together with all proceeds thereof, all
security and guarantees therefor, and all of Provider's rights to the goods and
property represented thereby. All such reports shall be in form and substance
satisfactory to CHF.
4.2. PROCESSING. Provider acknowledges and agrees that the routine
processing of billings and collections with regard to the Receivables, and the
funds derived therefrom, in accordance with Section 5.1 hereof are a condition
to the continued obligation of CHF hereunder.
4.3. RECEIVABLES HELD IN TRUST. Provider's receipt of remittances on
Receivables not otherwise delivered to CHF shall create, and Provider shall act
as trustee of, an express trust for CHF's benefit. Provider shall forward each
payment within one (1) business day of receipt of such payment.
4.4. VERIFICATION OF RECEIVABLES. CHF shall have the right, at any time or
times hereafter, in Provider's name, in the name of a nominee of CHF or in CHF's
name, to verify the validity, amount or any other matter relating to any
Eligible Claim or other Receivable, by mail, telephone, in person or in any way
which the payor provides now or in the future.
<PAGE>
4.5. APPOINTMENT OF CHF AS PROVIDER'S ATTORNEY-IN-FACT. Provider hereby
irrevocably designates, makes, constitutes and appoints CHF (and all persons
designated by CHF) as Provider's true and lawful agent and attorney-in-fact
(which appointment shall be for all purposes deemed to be coupled with an
interest and shall be irrevocable for so long as any Obligations are
outstanding) and authorizes CHF, in Provider's or CHF's name, and only upon the
occurrence of and during the continuance of an Event of Default, but only to the
extent permitted by law, to (1) settle, adjust, compromise, extend or renew a
Receivable; (2) discharge and release any Receivable; (3) prepare, file and sign
Provider's name on any proof of claim in bankruptcy, cost report (final or
interim) or other similar document against a payor; (4) settle, adjust or
compromise any legal proceedings brought to collect the Receivables; (5) endorse
Provider's name to any items of payment or proceeds that come into CHF's
possession or under its control; and (6) do all acts and things which are
necessary, in CHF's reasonable discretion, to collect the outstanding
Receivables and to fulfill Provider's Obligations under this Agreement.
4.6. RECORDS. Provider acknowledges and agrees that Provider has full and
complete legal responsibility for the accuracy and validity of all Receivables
and medical file documentation submitted to payors that require correction,
modification or additional information. Provider acknowledges that it has
implemented an effective information processing system to manage the
Receivables, which includes keeping correct and accurate records itemizing and
describing the names and addresses of patients and payors, nature of services
performed, and relevant billing statement information, all of which records
shall be available, upon 24 hour notice, during Provider's usual business hours
at the request of any of CHF's officers, employees or agents. Promptly upon
request by CHF, Provider will deliver to CHF copies of all billings and other
information evidencing the Receivables and such other documentation as CHF may
require. Provider agrees that every billing it submits to the appropriate payor
will be supported by an original document (if required by such payor) that
includes the patient's duly executed assignment of its rights against the payor,
as permissible, which documents shall be maintained by Provider for six (6)
years from the date payment is received on or in respect of the applicable
Receivable. Provider shall institute appropriate measures to safeguard these
records and to provide disaster recovery programs as appropriate. Provider shall
cooperate fully with CHF and its agents who shall have the right at any time or
times during normal business hours to inspect all records relating to the
Receivables. CHF may, to the extent allowed by law, at any time after an Event
of Default hereunder, remove from Provider's premises copies of all such
records, files and books relating to Receivables.
4.7. ADJUSTMENT OF RECEIVABLES. CHF may adjust the Estimated Value of
Eligible Claims upon notice from Provider or payor of any change, adjustment or
modification to the amount or other terms or conditions of any Receivable which
may serve to reduce the value of the Receivable or as otherwise provided in this
Agreement.
4.8. FINANCING STATEMENTS. Provider authorizes CHF to execute on Provider's
behalf and file such UCC financing statements as CHF may deem necessary, in its
sole discretion, in order to perfect and maintain the security interests granted
by Provider in accordance with this and any other agreement. Provider agrees to
bear the cost of all filing fees, filing taxes, search reports procured from
time-to-time by CHF, reasonable legal fees and other charges incurred by CHF in
the perfection, protection and preservation of the rights and collateral
security granted herein or in the Security Agreement to CHF. All financing
statements filed hereunder shall remain in full force and effect until this
Agreement shall have been terminated in accordance with the provisions hereof,
even if, at any time or times prior to such termination, no Advances shall be
outstanding hereunder. Provider waives any right to demand the filing of
termination statements with respect to the Collateral, and agrees that CHF shall
not be required to send such termination statements to Provider, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and the Obligations paid in full in
immediately available funds.
4.9. COSTS. As additional consideration for the services to be provided by
CHF hereunder and for CHF's agreement to make Advances, Provider shall pay to
CHF the cost associated with providing the Advances in accordance with the
schedule of fees and costs attached hereto as ANNEX II, which costs are subject
to change by written notice by CHF to Provider. All of the foregoing shall be
part of the Obligations, payable on demand and secured by the Collateral.
4.10. STATEMENTS. CHF shall render to Provider a monthly statement setting
forth the
<PAGE>
principal balance of Obligations and the calculation of interest due thereon on
or before the fifteenth (15th) day of each calendar month occurring during the
term of this financing facility. Each such statement shall be subject to
subsequent adjustment by CHF but shall constitute an account stated unless,
within thirty (30) days after CHF mailed any such statement to Provider,
Provider shall deliver to CHF by registered or certified mail to the address set
forth in this Agreement objection thereto specifying the error or errors, if
any, contained in such statement and CHF in its good faith discretion determines
such exceptions are accurate and makes an appropriate adjustment. In the absence
of a written objection delivered to CHF as set forth above, CHF's statement of
Provider's Obligations shall be conclusive and prima facie evidence of the
amount of Provider's Obligations.
4.11. NO DEDUCTIONS. Any and all payments or reimbursements made hereunder
or under the Note(s) shall be made free and clear of and without deduction for
any and all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto; excluding, however, the following: federal
income taxes imposed on the income of CHF by the jurisdiction under the laws of
which CHF is organized or doing business or any political subdivision thereof
and taxes imposed on its income by the jurisdiction of CHF's applicable lending
office or any political subdivision thereof.
4.12. FURTHER ASSURANCES. Provider agrees to execute and deliver to CHF
such further instruments of assignment, financing statements and instruments of
further assurance as CHF may reasonably require.
5. REPRESENTATIONS AND WARRANTIES.
5.1. RECEIVABLES.
5.1.1. At the time of the creation of each Receivable, (1) each
Receivable is a valid, bona fide Receivable, and represents a legally
enforceable indebtedness arising in the ordinary course of business or
profession from the rendition of health care services or sale of merchandise;
(2) to Provider's knowledge there are no setoffs, counterclaims, deductions,
disputes or defenses to payment of any kind, genuine or otherwise, against the
Receivable other than those disclosed to CHF to determine the Estimated Value of
the Receivable; (3) Provider is the lawful owner of each Receivable; (4) each
Receivable is free of all security interests, Liens and encumbrances other than
those in CHF's favor and the Receivable is due and payable; (5) each Receivable
is based on an actual and bona fide rendition of services or prescribed goods,
to a patient by Provider in the ordinary course of Provider's business and each
such Receivable is payable, in whole or in part, by a Third Party Payor which is
financially obligated to do so, (6) the services provided and reflected in each
Receivable were medically necessary for the patient who received such services,
and in compliance with the rules, policies and requirements, if any, of the
payor; (7) the fees charged for such services were the usual, customary and
reasonable fees charged by other providers in the same community, and do not
exceed any applicable limitations of Governmental Authorities; (8) Provider
possesses all appropriate licenses, approvals or otherwise satisfy any and all
conditions imposed for the provision of all of the services reflected in and
giving rise to each Receivable; (9) Provider has properly executed time sheets
for contract staffing service personnel; (10) Provider has verified the credit
worthiness of the contract staffing service customers.
5.1.2. Complete and accurate copies of all cost reports and related
forms required by Medicaid, Medicare and, if applicable, other Third Party
Payors have been properly filed with the appropriate Governmental Authority and
such payors during the past three years by Provider in respect of its business.
The amounts set up as provisions for payors' adjustments on Provider's financial
statements are sufficient to pay any amounts for which Provider may be liable.
Provider is not aware of any basis for any claims pending or threatened against
Provider by any payor other than routine audit adjustments. Provider has
received no notices and has no knowledge that any payor has any claims against
Provider which could result in consolidated net offsets against future
reimbursement in excess of that provided for in the financial statements.
Neither Provider nor any of its employees or Subsidiaries or Debtor has
committed a violation of the Medicare and Medicaid fraud and abuse provisions of
the Federal Social Security Act, including, but not limited to, the
anti-kickback provisions in violation of law. The payor cost reports have been
independently audited and fully settled through the period of November 30, 1991.
To the best of Provider's knowledge, after due inquiry, payor cost reports were
filed when due or within the allowable 30-day extension period, and (except for
immaterial amounts) such reports do not claim and Provider has not received
reimbursement in excess
<PAGE>
of the amount provided by law. There is no dispute between Provider and any
payor, fiscal intermediary or carrier regarding such cost reports other than
with respect to adjustments thereto made in the ordinary course of business and
Medicare PRO review and denials in progress that do not involve amounts in
excess of $50,000.00 in the aggregate which have been and will during the term
of this Agreement be promptly disclosed to CHF.
5.1.3. On or after the Closing Date, Provider agrees that no payments
shall be made in respect of Eligible Claims to Provider other than as expressly
provided for herein; provided, however, in the event that Provider receives such
payment in another manner, Provider agrees to immediately notify CHF thereof and
hold the payment in trust for the benefit of CHF.
5.1.4. To Provider's knowledge, there are no facts, events or
occurrences not previously disclosed to CHF which in any way impair the
validity, collection or enforcement of any Receivables or reduce the amount
payable thereunder.
5.1.5. The Receivables information furnished to CHF by Provider is
true, accurate and complete. Provider has verified existing coverage for all
Receivables with the applicable payor and has complied with all verification
procedures required by CHF, and the services performed or merchandise sold was
covered by the existing coverage for each Receivable.
5.1.6. Provider is in substantial and material full compliance with
all federal, state and municipal laws and regulations relating to the
Receivables and Provider has made and will make all necessary disclosures
required by law to its patients and payors, as applicable and/or necessary
regarding this Agreement.
5.2. DUE INCORPORATION, ETC.; SOLVENCY.
5.2.1. If Provider is a corporation, it is duly incorporated and in
good standing under the laws of the State of its incorporation and qualified in
all states where such qualifications are required. Provider has full
organizational power, authority and legal right to incur the Obligations,
execute and deliver this Agreement and the other Loan Documents and keep and
observe all of the terms of this Agreement and the other Loan Documents on
Provider's part to be performed. There is no further consent required under any
applicable laws of any Governmental Authority for such actions by Provider from
any other Person from whom such consent has not been obtained.
5.2.2. This Agreement and each of the other Loan Documents to which
Provider is a party are legal, valid and binding obligations of Provider,
enforceable against Provider in accordance with their respective terms.
5.2.3. The execution, delivery and performance by Provider of this
Agreement and of the other Loan Documents to which Provider is a party (1) will
not violate any provision of any applicable laws of any Governmental Authority,
(2) will not violate any provision of, or constitute a breach of or default
under, or result in the creation or imposition of any lien except those granted
to CHF on any asset of Provider pursuant to the provisions of, any mortgage,
deed of trust, indenture, contract, agreement or other undertaking to which
Provider is a party or which is binding upon Provider or upon any of its assets
or properties and (3) will not contravene, as applicable, Provider's articles or
certificate of incorporation or by-laws or other organizational document
relating to Provider.
5.2.4. Provider is Solvent.
5.3. NAMES. Provider does not conduct business and has not at any time
during the past five (5) years conducted business under any assumed name, trade
name or fictitious business name other than those listed on ANNEX III hereto,
if none, so state.
5.4. FINANCIAL CONDITION. All audited financial statements concerning
Provider which have been or will hereafter be furnished by Provider or its
Subsidiaries to CHF pursuant to this Agreement have been or will be prepared in
accordance with GAAP, consistently applied, throughout the periods involved
(except as disclosed therein) and do, or will with respect to future submissions
of financial statements, present fairly the financial condition of the entities
covered thereby as at the dates thereof and the results of their operations for
the periods then ended.
<PAGE>
5.5. TITLE TO PROPERTIES; LIENS. Provider has good, sufficient and valid
legal title, subject to Permitted Encumbrances, to all of its respective
properties and assets. Except for Permitted Encumbrances, all such properties
and assets are free and clear of all Liens. To the best knowledge of Provider
after due inquiry, there are no actual, threatened or alleged defaults with
respect to any leases of real property under which Provider is lessee or lessor
which would have a Material Adverse Effect.
5.6. PERFECTION. Assuming proper execution and filing, this Agreement,
together with the Security Agreement, creates a valid and, except for the
Permitted Encumbrances, first priority security interest in the Collateral,
securing the payment and performance of the Obligations and all actions
necessary by Provider to perfect and protect such security interest have been
duly taken.
5.7. LITIGATION; ADVERSE FACTS. There are no judgments outstanding against
Provider or affecting any property of Provider nor is there any action, charge,
claim, demand, suit, proceeding, petition, governmental investigation or
arbitration or Government Audit now pending or, to the best knowledge of
Provider after due inquiry, threatened against or affecting Provider or any
property of Provider which could reasonably be expected to result in any
Material Adverse Effect. Provider has not received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability or disadvantage which could reasonably be expected to result in any
Material Adverse Effect.
5.8. PAYMENT OF TAXES. All tax returns and reports of Provider required to
be filed by it have been timely filed, and all taxes, assessments, fees and
other governmental charges upon Provider or upon its properties, assets, income,
and franchises which are shown on such returns as due and payable have been paid
when due and payable. None of the United States income tax returns of Provider
and each of its Subsidiaries are under audit. No tax liens have been filed and
no claims are being asserted with respect to any such taxes unless such taxes
are not yet due and payable. The shares, accruals and reserves on the books of
Provider and each of its Subsidiaries in respect of any taxes or other
governmental charges are in accordance with GAAP.
5.9. PERFORMANCE OF AGREEMENTS. Provider is not in material default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any contractual obligation of Provider which would have
a Material Adverse Effect, and no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a default.
5.10. EMPLOYEE BENEFIT PLANS. Provider, each Subsidiary of Provider, and
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Provider, any subsidiary of
Provider, or any ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan.
5.11. BROKER'S FEES. Provider has not engaged the services of any broker or
finder in connection with the transactions contemplated hereby and knows of no
reason why a fee or commission will be payable with respect to the issuance and
sale of the Note or any of the other transactions contemplated hereby, except
as outlined in Annex V.
5.12. INSURANCE. Provider maintains adequate insurance policies for public
liability and property damage for its business and properties, no notice of
cancellation has been received with respect to such policies and Provider is in
material compliance with all conditions contained in such policies. A true and
correct copy of all of the foregoing insurance policies have been delivered to
CHF.
5.13. COMPLIANCE WITH LAWS.
5.13.1. Provider is not in material violation of any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
Governmental Authority, having jurisdiction over the conduct of its business or
the ownership of its properties, which violation would subject Provider or any
of its respective officers to criminal or material civil liability or have a
Material Adverse Effect and no such violation has been alleged.
<PAGE>
5.13.2. Provider is not in violation of or the subject of any
investigation, inquiry or enforcement action by any Governmental Authority under
the Medical Waste Tracking Act, 42 U.S.C. ss. 6992 ET SEQ. or any applicable
state or local law, governmental statute, ordinance or regulation dealing with
the disposal of medical wastes ("MEDICAL WASTE LAWS"). As of the date hereof,
Provider has obtained and is in material compliance with any permits related to
medical waste disposal required by Medical Waste Laws and has taken reasonable
steps to determine, and has determined, that all disposal of medical waste by
Provider has been in compliance with Medical Waste Laws.
5.13.3. Neither Provider nor the real property used in connection with
its facilities or the buildings, improvements, fixtures or equipment forming a
part of such facilities (collectively, the "PHYSICAL PLANT") are in violation of
or the subject of any investigation or inquiry or enforcement action by any
Governmental Authority for the recovery of environmental response costs or for
compliance with remedial obligations under any applicable law including, but not
limited to, those pertaining to the use, release and disposal of any "Hazardous
Substances" as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, as codified at 42 U.S.C.
ss. 9601 ET SEQ., the Hazardous Materials Transportation Act, as codified at 42
U.S.C. ss. 1801 ET SEQ., and the Resource Conservation and Recovery Act, as
codified at 42 U.S.C. ss. 6901 ET SEQ., and any other applicable state or local
law, governmental statutes, ordinances or regulations (all such laws, statutes,
ordinances and regulations shall hereinafter be collectively referred to as
"ENVIRONMENTAL LAWS"). Provider has obtained and is in compliance with all
environmental permits required by any applicable Environmental Laws to
construct, occupy, operate and use the Physical Plant; and has taken reasonable
steps to determine and has determined that no Hazardous Substances which are or
may have been used by Provider have been disposed of or otherwise released on or
from the Physical Plant during the period of Provider's ownership or operation
thereof. The uses Provider has made, continues to make or intends to make of the
Physical Plant have not and will not result in the generation, storage, disposal
or release of any Hazardous Substances in violation of any of the Environmental
Laws except in accordance with the law.
5.14. BANK ACCOUNTS. Provider has supplied to CHF the account numbers and
locations of all bank accounts of Provider.
5.15. DISCLOSURE. No representation or warranty of Provider contained in
this Agreement, the financial statements, the other Loan Documents, or any other
document, certificate, or written statement furnished to CHF by or on behalf of
Provider for use in connection with the Loan Documents contains any materially
untrue statement of a material fact or omitted, omits, or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. There is no material fact known to Provider that has had or will have a
Material Adverse Effect, and that has not been disclosed herein or in such other
documents, certificates and statements furnished to CHF for use in connection
with the transactions contemplated hereby.
5.16. TANGIBLE NET WORTH. Provider shall maintain, on a consolidated basis,
a Tangible Net Worth of not less than SIX MILLION DOLLARS ($6,000,000.00).
5.17. REGULATIONS. The proceeds of the Advances are not being and shall not
be used: (1) to purchase or carry any "margin stock" within the meaning of
Regulation "U" of the Board of Governors of the Federal Reserve System, nor to
extend credit to others for that purpose, (2) to extend or maintain credit
secured directly or indirectly by "margin stock" within the meaning of
Regulation "G" of the Board of Governors of the Federal Reserve System nor to
extend credit to others for that purpose, (3) to extend credit by and to brokers
and dealers within the meaning of Regulation "T" of the Board of Governors of
the Federal Reserve System nor to extend credit to others for that purpose, nor
(4) to obtain credit outside the United States to purchase or carry United
States securities or within the United Sates to purchase or carry any securities
within the meaning of Regulation "X" of the Board of Governors of the Federal
Reserve system, nor to extend credit to others for that purpose. Provider shall
only use the Advances for business or commercial purposes.
6. COVENANTS. Provider covenants and agrees that until payment in full of all
Obligations, Provider shall comply with and shall cause each of its Subsidiaries
to comply with all covenants in this Section 6 applicable to such Person.
<PAGE>
6.1. AFFIRMATIVE COVENANTS.
6.1.1. MATERIAL ADVERSE EFFECT. Provider shall notify CHF immediately
of any Material Adverse Effect in Provider's business or prospects or of the
institution or threat of any litigation by or against Provider or its
Subsidiaries or any Debtor.
6.1.2. NEW BANK ACCOUNTS. Provider will advise CHF promptly of any new
bank accounts opened by Provider prior to making any deposits.
6.1.3. FINANCIAL STATEMENTS AND OTHER REPORTS. Provider will maintain,
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. Provider
will deliver to CHF the financial statements and other reports described below.
6.1.3.1. MONTHLY FINANCIALS. As soon as available and in any
event within thirty (30) days after the end of each month, Provider will deliver
to CHF its consolidated balance sheet of Provider as at the end of such month
and the related consolidated statements of income, stockholder's equity and cash
flow for such month and for the period from the beginning of the then current
Fiscal Year to the end of such month.
6.1.3.2. QUARTERLY FINANCIALS. As soon as available and in any
event within sixty (60) days after the end of each quarter, Provider will
deliver to CHF its consolidated balance sheet of Provider as at the end of such
quarter and the related consolidated statements of income, stockholder's equity
and cash flow for such quarter and for the period from the beginning of the then
current Fiscal Year to the end of such quarter.
6.1.3.3. YEAR-END FINANCIALS. As soon as available and in any
event no later than one hundred twenty (120) days after the end of the year,
Provider will deliver financial statements from a firm of independent certified
public accountants selected by Provider, which report shall be unqualified as to
scope of audit of Provider and its Subsidiaries and shall state that (1) such
consolidated financial statements, including a balance sheet, present fairly the
consolidated financial position of Provider and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis consistent with prior years
and (2) that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with generally
accepted auditing standards.
6.1.3.4. ACCOUNTANTS' REPORTS. Promptly upon receipt thereof,
Provider will deliver copies of all material reports submitted to Provider by
independent certified public accountants in connection with each annual, interim
or special audit of the financial statements of Provider made by such
accountants, including the comment letter submitted by such accountants to
management in connection with their annual audit.
6.1.3.5. COMPLIANCE CERTIFICATE. Together with the delivery of
each set of financial statements, Provider will deliver to CHF a Compliance
Certificate stating that the financial statements have been provided for in
conformity with GAAP.
6.1.4. ACCESS TO ACCOUNTANTS. Provider authorizes CHF to discuss the
financial condition and financial statements of Provider and its Subsidiaries
with Provider's independent certified public accountants upon reasonable notice
to Provider of its intention to do so.
6.1.5. GOVERNMENT NOTICES. Promptly after receipt, Provider will
deliver to CHF copies of all material notices, requests, subpoenas, inquiries or
other writings received from any Governmental Authority concerning any
Government Audits or other audits of any kind or nature, licensing reviews or
infractions with respect thereto, any Employee Benefit Plan, the violation or
alleged violation of any Environmental Laws, the storage, use or disposal of any
Hazardous Materials or Provider's payment or non-payment of any taxes including
any tax audit.
6.1.6. EVENTS OF DEFAULT, ETC. Promptly upon any officer of Provider
obtaining knowledge of any of the following events or conditions, Provider shall
deliver a certificate of Provider's
<PAGE>
chief executive officer, specifying the nature and period of existence of such
conditions or event and what action Provider has taken, is taking and proposes
to take with respect thereto: (1) any condition or event that constitutes an
Event of Default or Default; (2) any notice of default with respect to any
agreement or arrangement that any Person has given to Provider or any of its
Subsidiaries or any other action taken with respect to a claimed default; or (3)
any Material Adverse Effect.
6.2. NEGATIVE COVENANTS.
6.2.1. INDEBTEDNESS. Provider will not and will not permit any of its
Subsidiaries directly or indirectly to create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except: (1) the Obligations; (2) intercompany Indebtedness among
Provider and its Subsidiaries, PROVIDED that such Indebtedness is subordinated
in right of payment to the Obligations; and (3) Permitted Indebtedness. Except
for Indebtedness described in the preceding sentence, Provider will not incur
and will not permit any of its Subsidiaries to incur any Indebtedness or other
liabilities except for trade payables and normal accruals in the ordinary course
of business not yet due and payable or with respect to which Provider or any of
its Subsidiaries is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that Provider or any of its
Subsidiaries has established adequate reserves therefor, if appropriate under
GAAP.
6.2.2. GUARANTEES. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, Provider shall not
and shall not permit any of its Subsidiaries to guaranty, endorse, or otherwise
in any way become or be responsible for any obligations of any other Person,
whether directly or indirectly by agreement to purchase the indebtedness of any
other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any indebtedness or obligation of such other
Person or otherwise
6.2.3. TRANSFERS AND LIENS. Provider shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option or
right with respect to any of the Collateral. Except for Permitted Encumbrances,
Provider will not and will not permit any of its subsidiaries directly or
indirectly to create, incur, assume or permit to exist any Lien on or with
respect to any of the Collateral or any income or profits therefrom.
6.2.4. RESTRICTED PAYMENTS. Provider will not and will not permit any
of its Subsidiaries to directly or indirectly declare, order, pay, make or set
apart any sum for (1) any dividend on account of any capital stock of Provider
or any of its Subsidiaries, now or hereafter outstanding, or any other payment
or distribution, except stock dividends or distributions to Guarantors and/or
Debtor; (2) any redemption, conversion, exchange, retirement, sinking fund or
other purchase of any capital stock of Provider or any of its Subsidiaries now
or hereafter outstanding; (3) any payment or prepayment of principal, premium or
interest on, redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or other payment with respect to any indebtedness other than
Permitted Indebtedness; (4) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
capital stock of Provider or any of its Subsidiaries now or hereafter
outstanding; (5) any sum for payment to any officer for termination of
employment pursuant to any current or future agreements in excess of
$100,000.00, annually, except for those agreements listed on Annex VI hereto
provided that the exceptions will not lead to an Event of Default under this
Agreement; and (6) any sum for payment to any officer, outside director or
related party pursuant to any consulting agreement, or any other agreement that
may be made, in excess of $100,000.00, annually.
6.2.5. RESTRICTION ON FUNDAMENTAL CHANGES. Without the express prior
written consent of CHF, neither Provider nor any of its Subsidiaries will: (1)
enter into any transaction of merger or consolidation; (2) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (3) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any material part of its business or assets, or
the capital stock of any of its Subsidiaries, whether now owned or hereafter
acquired; or (4) acquire by purchase or otherwise all or any substantial part of
the business or assets of or stock or other evidence of beneficial ownership of,
any Person.
<PAGE>
6.2.6. CHANGES RELATING TO PERMITTED INDEBTEDNESS. Provider will not
and will not permit any of its Subsidiaries to change or amend the terms of any
Indebtedness, except for the Permitted Indebtedness, if the effect of such
amendment is to: (1) increase the interest rate on such Indebtedness; (2) change
the dates upon which payments of principal or interest are due on such
Indebtedness; (3) change any event of default or add any covenant with respect
to such Indebtedness; (4) change the payment provisions of such Indebtedness;
(5) change the subordination provisions thereof, or (6) change or amend any
other term, if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder of
such Indebtedness in a manner adverse to Provider, any of its Subsidiaries, or
CHF.
6.2.7. TRANSACTION WITH AFFILIATES. Provider will not, and will not
permit any Subsidiary to, enter into any transaction with an affiliate,
including the purchase, sale or exchange of property or the rendering or
purchasing of any service to or from any affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of Provider's business and
upon fair and reasonable terms no less favorable to Provider than it would
obtain in a comparable arm's length transaction with an unaffiliated Person.
6.2.8. CONDUCT OF BUSINESS. From and after the Closing Date, Provider
will continue to operate and be licensed as listed on ANNEX VII hereto.
6.2.9. LOCATION OF CHIEF EXECUTIVE OFFICES. Provider shall not change
its corporate name or the location of its corporate office or open any new
offices without giving CHF at least thirty (30) days prior written notice. At
the present time, Provider carries on business only at the address(es) in
Section 11.3 and otherwise as disclosed to CHF in writing.
6.2.10. LOCATION OF BOOKS AND RECORDS. All books and records
pertaining to the Receivables shall be maintained solely and exclusively at the
above address(es) and such books and records shall not be moved or transferred
without giving CHF thirty (30) days prior written notice.
6.2.11. PROVIDER'S PROPERTIES. Provider shall not sell, lease,
transfer or otherwise dispose of all or substantially all of Provider's property
or assets, or consolidate with or merge into or with any corporation or entity
without CHF's prior written consent. Provider shall give CHF at least sixty (60)
days prior written notice prior to any change in ownership of Provider's capital
stock or change in management of Provider.
6.2.12. COMPLIANCE WITH ERISA. Except as required by law or with the
express written consent of CHF, provider will not establish any new Employment
Benefit Plan or amend any existing Employment Benefit Plan if the liability or
increased liability resulting from such establishment or amendment is material.
Provider shall not fail to establish, maintain and operate any Employment
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
6.2.13. COLLECTION. Provider shall not retain or engage any Person to
perform services in connection with the Collateral that could affect the value
of the Collateral without CHF's prior written consent, including, but not
limited to, hiring collection agents to collect Receivables except as listed on
Annex VIII hereto.
7. COLLATERAL SECURITY. As security for all Obligations, Provider shall, and
shall cause Debtor to, execute and deliver to CHF the Security Agreement, which
shall grant to CHF a continuing first position security interest in, lien and
mortgage on and assignment of all right, title and interest of Provider and
Debtor in and to all of the Collateral. Provider agrees to, and CHF shall have
the right at any time to, notify all payors that CHF has been granted a security
interest in the Collateral.
8. EVENTS OF DEFAULT/REMEDIES.
8.1. The occurrence of any of the following acts or events shall constitute
an Event of Default:
8.1.1. if Provider fails to make payment of any of its Obligations
when due and such default continues for one (1) Business Day following written
notice of such default by CHF to Provider;
<PAGE>
8.1.2. if Provider fails to make any remittance required by this
Agreement or the other Loan Documents and such default continues for one (1)
Business Day following written notice of such default by CHF to Provider or
Provider fails to comply with any payment mechanism for the Obligations
established by CHF;
8.1.3. if Provider commits any breach of or fails to comply with any
of the terms, representations, warranties, covenants, conditions or provisions
of this Agreement or the other Loan Documents, or of any present or future
supplement, amendment or addendum hereto or thereto or of any agreement between
Provider and CHF and such breach continues for more than five (5) Business days
after written notice of such breach by CHF to Provider, provided that such grace
period shall not apply, and such breach shall constitute an Event of Default, if
such breach may not, in CHF's reasonable determination, be cured by Provider
during such five (5) Business-day grace period;
8.1.4. Provider ceases to be Solvent;
8.1.5. if Provider delivers to CHF a materially false financial
statement;
8.1.6. if Provider shall (1) admit in writing its inability or be
generally unable, to pay its debts as they become due (2) commence a voluntary
case under the federal bankruptcy code, as now or hereafter in effect and
including any successor legislation thereto (the "BANKRUPTCY CODE"), (3) make a
general assignment for the benefit of creditors, (4) apply for, consent to, or
acquiesce in, the appointment of or the taking of possession by, a receiver,
custodian, liquidator or trustee of herself or himself or the whole or any
substantial part of its or his properties or assets, (5) file a petition or
answer seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up, arrangement, composition, adjustment of
debts, liquidation, dissolution, or similar relief, (6) fail to controvert in a
timely or appropriate manner, or shall acquiesce in writing to, any petition
filed against Provider or any Guarantor in an involuntary case under the
Bankruptcy Code or (7) take any action for the purposes of effecting any of the
foregoing;
8.1.7. (1) if a proceeding or case shall be commenced in a court of
competent jurisdiction seeking the appointment of a receiver, liquidator,
custodian, trustee or the like of Provider of the whole or any substantial part
of the property or assets of Provider and such order, judgment or decree shall
remain unvacated, or not set aside, or unstayed for sixty (60) days from
commencement of such proceeding or case, or (2) if a petition, proceeding or
case shall be filed against Provider seeking reorganization, arrangement,
composition, readjustment, liquidation, winding up, dissolution or similar
relief under the federal bankruptcy laws or any other applicable law and such
petition shall remain undismissed for sixty (60) days from commencement of such
proceeding or case or (3) if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction shall assume
custody or control of Provider of the whole or any substantial part of its or
his property or assets, and such custody or control shall remain unterminated or
unstayed for sixty (60) days, or an order for relief against Provider shall be
entered in an involuntary case under the Bankruptcy Code;
8.1.8. if Provider suspends or discontinues doing business for any
reason;
8.1.9. if any guaranty of Provider's Obligations is terminated,
subject to the terms and conditions of the Guarantees provided by the Guarantors
as outlined on Annex IX hereto;
8.1.10. Provider is enjoined, restrained, or in any way prevented by
the order of any court or any administrative or regulatory agency, including but
not limited to, the Department of Health, from conducting any material part of
its business;
8.1.11. any default or breach which is not cured or waived in the
allotted time under any agreement evidencing Indebtedness of Provider in the
amount of $100,000.00 or more shall occur and shall continue after any
applicable grace period specified in any such document if the effect of such
default or breach is to accelerate, or to permit the acceleration of, the
maturity of all or any part of any such Indebtedness, whether or not such
default or breach shall be waived by the holders or trustees (if any) for such
Indebtedness, or any such Indebtedness shall be declared to be due and payable,
or be required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
<PAGE>
8.1.12. a breach by Provider occurs under any material agreement,
document or instrument (other than an agreement, document or instrument
evidencing Indebtedness), whether heretofore, now or hereafter existing between
it and any other Person;
8.1.13. the loss, suspension or revocation of or failure to renew, any
material license or permit now held or hereafter acquired by Provider, which
loss, suspension, revocation or failure to renew might have a Material Adverse
Effect and such loss, suspension, revocation or failure to renew continues for
more than thirty (30) days after such occurrence, provided that such grace
period shall not apply, and such event shall constitute an Event of Default, if
such event may not, in CHF's reasonable determination, be cured by Provider
during such thirty (30) day grace period;
8.1.14. the termination of Provider's ability to participate in any
Medicare or Medicaid programs or the amendment, repeal or modification of any
such program that may adversely affect payment of Eligible Claims; or
8.1.15. a Change of Control shall occur.
8.2. OBLIGATIONS. If an Event of Default shall exist or occur, CHF may
notify Provider of its election to terminate this Agreement and to make no
further Advances hereunder, whereupon the Obligations shall be accelerated and
all of the Obligations shall automatically, without further notice of any kind,
be immediately due and payable, provided that upon the occurrence of any Event
of Default referred to in Sections 8.1.6, 8.1.7, or 8.1.14 hereof no notice of
any kind need be given to Provider prior to acceleration of the Obligations,
which shall occur automatically. If CHF, in its sole discretion, elects to make
Advances after the occurrence of an Event of Default which has not been waived,
cured, or removed within the applicable grace or cure period, if any, the
making, issuing, or providing of such Advances, if any, shall not be deemed a
waiver by CHF of any such Event of Default.
8.3. RIGHTS AND REMEDIES GENERALLY. Upon acceleration of the Obligations,
CHF shall have, in addition to any other rights and remedies contained in this
Agreement or in any of the other Loan Documents, all of the rights and remedies
of a secured party under applicable laws, all of which rights and remedies shall
be cumulative and non-exclusive, to the fullest extent permitted by law.
8.4. WAIVERS BY PROVIDER. THE BORROWER AND ANY ENDORSERS, SURETIES AND
GUARANTORS HEREOF OR HEREON HEREBY WAIVE PRESENTMENT FOR PAYMENT, DEMAND,
PROTEST, NOTICE OF NON-PAYMENT OR DISHONOR AND OF PROTEST, AND AGREE TO REMAIN
BOUND UNTIL THE OBLIGATIONS AND ALL OTHER SUMS PAYABLE HEREUNDER ARE PAID IN
FULL NOTWITHSTANDING ANY EXTENSIONS OF TIME FOR PAYMENT WHICH MAY BE GRANTED
EVEN THOUGH THE PERIOD OF EXTENSION BE INDEFINITE, AND NOTWITHSTANDING ANY
INACTION BY, OR FAILURE TO ASSERT ANY LEGAL RIGHT AVAILABLE TO, CHF. PROVIDER
ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO
THIS TRANSACTION, THIS AGREEMENT AND THE OTHER DOCUMENTS OR HAS BEEN ADVISED TO
DO SO AND HAS ELECTED NOT TO SEEK THE ADVICE OF COUNSEL, AND CONSEQUENTLY WAIVES
ANY RIGHTS WITH RESPECT THERETO.
8.5. SETOFF. Upon the occurrence and during the continuance of any Event of
Default, CHF and each assignee of or participant in the Obligations may, and is
hereby authorized to, at any time and from time to time, without notice to
Provider (any such notice being expressly waived by Provider) and to the fullest
extent permitted by law, set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by CHF to or for the credit or the account of
Provider against any and all obligations of Provider now or hereafter existing
under this Agreement or the other Loan Documents, irrespective of whether or not
CHF shall have made any demand under this Agreement and although such
Obligations may be contingent or unmatured. CHF agrees promptly to notify
Provider after any such set-off and application made CHF, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of CHF under this Section 8.5 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which CHF may have.
8.6. MARSHALING; PAYMENTS SET ASIDE. CHF shall not be under any obligation
to marshal any assets in favor of Provider or any other party or against or in
payment of any or all of the Obligations. To the extent that Provider makes a
payment or payments to CHF or CHF enforces its
<PAGE>
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred (by increasing the principal balance
under the Note).
9. TERM AND TERMINATION. This Agreement shall continue in full force and effect
for a period of two (2) year(s) from the date hereof and shall be deemed renewed
from year to year thereafter unless Provider gives CHF notice in writing, by
registered or certified mail, not less than thirty (30) and not more than sixty
(60) days prior to the expiration of the original term of this Agreement (or any
renewal term thereof), of Provider's intention to terminate this Agreement as of
the end of such term (the date of the last day of such term being referred to
herein as the "TERMINATION DATE"). CHF may terminate this Agreement at any time
upon thirty (30) days prior written notice to Provider or CHF may terminate this
Agreement immediately if an Event of Default has occurred as set forth in this
Agreement (also known as the "TERMINATION DATE"). Notwithstanding the foregoing,
if the Provider becomes insolvent or unable to meet its debts as they mature,
fail, close, suspend, or go out of business, commit an act of bankruptcy, file
or become the subject of a petition under the Bankruptcy Act or law permitting
the appointment of a receiver, liquidator, conservator, or similar functionary,
breach or become in default under this Agreement or any other agreement with CHF
(or the Provider's parent subsidiaries or affiliates), or any Obligation to CHF,
then, notwithstanding the foregoing, CHF shall have the right to terminate this
Agreement at any time without notice. In the event CHF elects to terminate this
Agreement, and CHF's decision to do so is a result of a breach of this Agreement
by the Provider, then, notwithstanding any other provisions contained herein,
CHF shall be entitled to charge the Provider Account, and the Provider agrees to
pay to CHF, the monthly maintenance fee specified in Annex II herein for the
remaining term of the Agreement or until any and all of the Provider's
indebtedness to CHF pursuant to this Agreement shall have been paid in full. On
the termination date, all outstanding Advances, together with accrued interest
thereon and all other Obligations shall be due and payable without any
additional notice or demand of any kind. Notwithstanding such notice of
termination, the respective rights and obligations arising out of transactions
having their inception prior to the specified date of termination shall not be
affected by such termination and all terms, provisions and conditions hereof,
including, but not limited to, the security interests herein above granted to
CHF, shall continue in full force and effect in all Receivables and Collateral
arising on and after the termination of this Agreement until all Obligations
have been paid in full. All of the representations, warranties, covenants and
agreements of Provider made herein shall survive the termination of this
Agreement.
10. PARTICIPATIONS. Provider hereby consents to CHF's sale, assignment, transfer
or other disposition, at any time and from time to time hereafter, of this
Agreement and the other Loan Documents or any portion thereof, including,
without limitation, all or any part of CHF's rights, title, interests, remedies,
powers and/or duties hereunder or thereunder. Without limiting the generality of
the foregoing, CHF shall have the right to sell or assign to a participant(s)
participating interests in the Obligations hereunder in such amounts and on such
terms and conditions as CHF shall determine. Unless an Event of Default shall
have occurred hereunder or, in the opinion of CHF's counsel any law, regulation
or an amendment to either, ruling or order is adopted or rendered which
adversely affects CHF's performance of this Agreement, CHF shall remain as the
lead participant in any sale or assignment of a participating interest in the
Obligations hereunder. Provider authorizes CHF to disclose to any participant
and any prospective participant any and all financial and other information in
CHF's possession concerning Provider which has been delivered to CHF pursuant to
this Agreement or which has been delivered to CHF in connection with CHF's
credit evaluation of Provider prior to entering into this Agreement.
11. MISCELLANEOUS.
11.1. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Florida without regard to
conflicts of law principles. All judicial proceedings brought against Provider
or its Subsidiaries arising out of, in connection with or relating to this
Agreement or any Obligation may be brought in any state or federal court of
competent
<PAGE>
jurisdiction in the State of Florida and by execution and delivery of this
Agreement, Provider accepts for itself and in connection with its properties,
generally and unconditionally, the jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement or such
Obligations. Provider waives personal service of any summons, complaint or other
process, and agrees that service thereof may be made by registered or certified
mail directed to Provider at its address set forth in Section 11.3 hereof or
such other address of which Provider has previously notified CHF in accordance
with Section 11.3 hereof. Nothing herein shall affect the right to serve process
in any other manner permitted by law or shall limit the right of CHF to bring
proceedings against Provider in the courts of any other jurisdiction.
11.2. WAIVER OF JURY TRIAL. PROVIDER AND CHF HEREBY IRREVOCABLY WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
11.3. NOTICES. All notices, requests, consents or other communications
provided for in or to be given under this Agreement shall be in writing, may be
delivered in person, by facsimile transmission (fax), by overnight air courier
or by certified or registered mail, and shall be deemed to have been duly given
and to have become effective (A) upon receipt if delivered in person or by fax
(and followed by the same or next business day of mailing of such faxed notice
by one of the other methods of delivery permitted hereunder), (B) one (1) day
after having been delivered to an overnight air courier or (C) five (5) days
after having been deposited in the mails as certified or registered mail, all
fees prepaid, directed to the parties at the following addresses (or at such
other address as shall be given in writing by a party hereto):
If to CHF at:
Capital Healthcare Financing
1799 West Oakland Park Boulevard
Fort Lauderdale, FL 33311
If to Provider at:
The Address for Notices
set forth in ANNEX I attached hereto
or to such other address as each party designates to the other in the manner
herein prescribed. Failure or delay in delivering copies of any notice to the
Persons designated above to receive copies shall in no way affect the
effectiveness of such notice.
11.4. INDEMNITY. Provider agrees to indemnify and hold CHF harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, or incurred by, or asserted
against CHF in any claim, action, suit, proceeding or investigation asserted,
instituted or conducted by any Governmental Authority or any other Person in
connection with, arising out of, based upon or with respect to the enforcement
by CHF of any right or remedy granted to it hereunder, except to the extent that
any of the foregoing arises out of the gross negligence or willful misconduct of
CHF.
11.5. EQUITABLE RELIEF. Provider recognizes that, in the event Provider
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to CHF,
therefore, Provider agrees that CHF, if CHF so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
11.6. PREFERENCE PAYMENTS. Provider expressly agrees that to the extent
Provider or payor makes a payment or payments to CHF and such payment or
payments, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside or are required to be repaid to a trustee,
receiver or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or repayment,
the Obligations or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment or payments had not been
made (by increasing the principal balance of the Note or otherwise).
<PAGE>
11.7. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
11.8. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof to Provider or any circumstance in any jurisdiction
governing this Agreement shall, to any extent, be invalid or unenforceable under
any applicable statute, regulation or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict herewith and shall be
deemed modified to conform to such statute, regulation or rule of law, and the
remainder of this Agreement and the application of any such invalid or
unenforceable provision to parties, jurisdictions or circumstances other than to
whom or to which it is held invalid or unenforceable shall not be affected
thereby nor shall the same affect the validity or enforceability of any other
provision of this Agreement.
11.9. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
Words of masculine, feminine or neuter gender shall mean and include the
correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and VICE VERSA as the context may
require.
11.10. NO FIDUCIARY RELATIONSHIP. No provision in this Agreement or in any
of the other Loan Documents and no course of dealing or other relationship
between the parties shall be deemed to create any fiduciary duty by CHF to
Provider.
11.11. SUCCESSORS AND ASSIGNS; NO WAIVER. This Agreement and the other Loan
Documents shall be binding upon the parties' respective successors and assigns,
but may not be assigned by Provider without CHF's prior written consent which it
may decline to permit to provide in its sole and absolute discretion. No delay
or failure on CHF's part in exercising any right, privilege or option hereunder
shall operate as a waiver thereof or of any other right, privilege or option, it
being understood and agreed that the CHF's rights, remedies and options under
this Agreement and the other Loan Documents are and shall be cumulative and are
in addition to all other rights, remedies and options of CHF in law or in equity
or under any other agreement.. No waiver whatsoever shall be valid unless in
writing, signed by CHF, and then only to the extent therein set forth.
11.12. JOINT AND SEVERAL LIABILITY. Where two or more Persons have executed
this Agreement and/or the other Loan Documents as Provider, the Obligations of
such Persons shall be joint and several, and each representation, warranty,
covenant and agreement set forth herein and in the other Loan Documents, shall
be deemed to have been made jointly and/or severally by each such Person, as the
context requires.
<PAGE>
11.13. ENTIRE AGREEMENT. This Agreement, the Note, and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
IN WITNESS WHEREOF, the parties enter into this Agreement as of the day
and year first above written.
PROVIDER:
HOSPITAL STAFFING SERVICES, INC.
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSSI TRAVEL NURSE OPERATIONS, INC.
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSS RECRUITING, INC.
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSSI MEDICARE HOME OFFICE, INC. D/B/A
HOME CARE HOME OFFICE
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC.
D/B/A ALTERNATIVE CARE MEDICAL SERVICES
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A
MID-SOUTH COMPREHENSIVE HOME HEALTH
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
<PAGE>
ALL-CARE PROFESSIONAL SERVICES, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HSSI OF GEORGIA, INC. D/B/A
TRI-THERAPY
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HSSI PROPRIETARY HOME OFFICE, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF FLORIDA, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HSSI ACQUISITION CORP.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF CALIFORNIA, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF BROWARD, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF
PALM BEACH, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
HSSI OF FLORIDA PROPRIETARY, INC.
By: /S/ BOBBY L. SHIELDS
---------------------------------
Bobby L. Shields, Secretary
<PAGE>
CHF: CAPITAL HEALTHCARE FINANCING
a division of CAPITAL FACTORS, INC.
By: /S/ JOHN B. APGAR
----------------------------------
John B. Apgar, Senior Vice President
<PAGE>
EXHIBITS AND ANNEXES
Annex I List of Entities Comprising Provider
Annex II Schedule of Fees and Costs
Annex III List of Assumed Names, Trade Names and
Fictitious Business Names Pursuant to
Section 5.3
Annex IV Borrowing Base Certificate
Annex V List of Brokers Pursuant to Section 5.11
Annex VI List of Existing Termination Agreements with
Payments in Excess of $100,000 Pursuant to
Section 6.2.4
Annex VII List of Licenses Pursuant to Section 6.2.8
Annex VIII List of Collection Companies Pursuant to Section
6.2.13
Annex IX List of Guarantors
Exhibit A Definitions
Exhibit B Revolving Promissory Note
Exhibit C Performance Guaranty
Exhibit D Security Agreement
Exhibit E Stand-By Letter of Credit
Exhibit F Lock Box Agreement
Exhibit G Corporate Guaranty
<PAGE>
ANNEX I TO PROVIDER REVOLVING LOAN AGREEMENT
List of Entities Comprising the Provider
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Medicare Home Office, Inc. d/b/a
Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Massachusetts, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Rhode Island, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Tennessee, Inc. d/b/a
Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Georgia, Inc. d/b/a
Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
ADDRESS FOR NOTICES FOR ALL ENTITIES LISTED ABOVE:
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
ANNEX II TO PROVIDER REVOLVING LOAN AGREEMENT
SCHEDULE OF FEES AND COSTS
FEES
1. An closing fee equal to one percent (1%) of the Total Advance Limit,
payable on the Closing Date.
2. A monthly maintenance fee equal to FIVE THOUSAND DOLLARS ($5,000.00)
per month. The maintenance fee payable by Provider shall be due and
payable on the first (1st) day of each calendar month during the term of
this Agreement and CHF shall, at its option, charge such maintenance fee
and any and all CHF Expenses to Provider's Account with CHF, which
amounts shall thereupon constitute obligations hereunder.
COSTS
1. Audit Fee: $250.00 per day plus all out-of-pocket
expenses
2. Quarterly Search Fees: Pass along charges for each Secretary of
State and County Clerk for which any
entities of Provider are located.
3. Federal Express: Per invoice charge
4. Wire Transfer: $20.00 per transfer (only if wired to a bank
other than Capital Bank)
5. UCC Filing Fees: Pass along charges which are currently
estimated to be up to $50.00 per filing
6. D & B Report: $25.00 per report (estimated)
7. Attorney: As and when incurred by CHF in accordance
with the terms and conditions of the Loan
Documents
8. Letter of Credit Fees: 2% of Letter of Credit Facility per year
THE COSTS STATED ABOVE ARE ESTIMATES ONLY AND SUBJECT TO CHANGE
<PAGE>
ANNEX III TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF ASSUMED NAMES, TRADE NAMES, AND FICTITIOUS BUSINESS NAMES PURSUANT TO
SECTION 5.3
HSSI Homecare
Alternative Care Medical Services
Mid-South Comprehensive Home Health
Mid-South Staffing
Tri-Therapy
Recovery Task Force
<PAGE>
ANNEX IV
BORROWING BASE CERTIFICATE
As of Week-End Date: ____________________ , 19 ___
Pursuant to Section 2.1.2 of that certain Provider Revolving Loan Agreement
dated as of ________________ , 1996, between _______________ and Capital
Healthcare Financing (defined terms therein being used herein with the same
meanings), the undersigned represents as follows:
<TABLE>
<CAPTION>
Eligible Accounts GROSS NET BORROWING BASE
<S> <C> <C> <C>
(0 - 150 days)
TRI-THERAPY
Government $_____________ x100% $ ____________
Non-Government $_____________ x100% $ ____________
Total Eligible Accounts (Net) $ ______________
ALTERNATIVE CARE - NEW ENGLAND
MEDICARE
Massachusetts $_____________ x 73% $ ____________
New Hampshire $_____________ x 73% $ ____________
Rhode Island $_____________ x 45% $ ____________
Medicaid $_____________ x100% $ ____________
Commercial Ins $_____________ x100% $ ____________
Managed Care $_____________ x100% $ ____________
Total Eligible Accounts (Net) $ _____________
ALL CARE TENNESSEE
Medicare $_____________ NA $ _____________ PIP*
Medicare Part B $_____________ x 49% $ _____________
Commercial Ins $_____________ x 79% $ _____________
Medicaid $_____________ x 79% $ _____________
Total Eligible Accounts (Net) $ _____________
MID SOUTH TENNESSEE
Medicare $_____________ NA $ _____________ PIP*
Medicare Part B $_____________ x 54% $ _____________
Medicaid $_____________ x 59% $ _____________
Commercial Ins $_____________ x 74% $ _____________
Total Eligible Accounts (Net) $ _____________
Eligible Accounts
(0 - 120 Days)
TRAVEL NURSE VI $_____________ x100% $ _____________
TRAVEL NURSE NET OF VI
Government $_____________ x100% $ _____________
Non-Government $_____________ x100% $ _____________
Total Eligible Accounts (Net) $ _____________
Total Accounts $ _____________
X 85%
Total Borrowing Base $ _____________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INELIGIBLE ACCOUNTS
UNBILLED SELF - PAY
<S> <C> <C> <C>
Travel Nurse $_____________ Travel Nurse $____________
Tri-Therapy $_____________ Tri-Therapy $____________
All Care $_____________ All Care
$____________
MidSouth $_____________ MidSouth $____________
Alternative Care $_____________ Alternative Care $____________
</TABLE>
* ADVANCES ON TENNESSEE MEDICARE ARE CAPPED AT BI-MONTHLY PIP PAYMENTS.
In connection with the foregoing, the undersigned further certifies that no
Event of Default or an event which the giving of notice or the passage of time
or both would constitute an Event of Default presently exists.
PROVIDER
By: ______________________________
Title: ___________________________
<PAGE>
ANNEX V TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF BROKERS PURSUANT TO SECTION 5.11
NONE
<PAGE>
ANNEX VI TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF EXISTING TERMINATION AGREEMENTS WITH PAYMENTS IN EXCESS OF $100,000
PURSUANT TO SECTION 6.2.4
Ronald A. Cass
Jay Gershberg
Jeffery A. Barnhill
<PAGE>
ANNEX VII TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF LICENSES PURSUANT TO SECTION 6.2.8
<PAGE>
ANNEX VIII TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF COLLECTION COMPANIES PURSUANT TO SECTION 6.2.13
Recovery Task Force
<PAGE>
ANNEX IX TO PROVIDER REVOLVING LOAN AGREEMENT
LIST OF GUARANTORS
PERFORMANCE GUARANTY
Bobby L. Shields
592 NW 111 Terrace
Coral Springs, Florida 33071
CORPORATE GUARANTY
Cardinal Nursing and Home Care, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Cura Care, Inc. of Arizona
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Arizona, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Louisiana, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of New Jersey, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Pennsylvania, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Virginia, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSS Advertising, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSS Associates, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Staff Source, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI Management Company, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
<PAGE>
Hospital Staffing Services of Caribbean, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI of New York, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI of Texas, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
<PAGE>
EXHIBIT A
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
DEFINITIONS
"ADVANCE DATE" shall have the meaning set forth in
Section 2.1.2.
"ADVANCE OVERAGE" shall have the meaning set forth in
Section 2.1.3.1.
"ADVANCE REQUEST" shall have the meaning set forth in
Section 2.1.2.
"ADVANCES" shall mean the advance(s) made by CHF to Provider
pursuant to Section 2.1.
"AFFILIATE" shall mean any person (other than CHF): (1)
directly or indirectly controlling, controlled by, or under common control with
Provider; (2) directly or indirectly owning or holding fifty percent (50%) or
more of any equity interest in provider; or (3) fifty percent (50%) or more of
whose voting stock or other equity interest is directly or indirectly owned or
held by Provider. For purposes of this definition "control" (including with
correlative meanings, the terms "controlling". "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the directing of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.
"BASE RATE" shall mean the prime rate which is announced from
time to time in the Wall Street Journal (or such other prime rate as CHF shall
designate from time to time in the event the Wall Street Journal ceases to
publish such rate) (with the understanding that any such rates may merely serve
as a basis upon which effective rates of interest are calculated for loans
making reference thereto, and that such rates are not necessarily the lowest or
best rates at which any bank or other financial institution calculates interest
or extends credit).
"BUSINESS DAY" shall mean a day on which CHF is open for the
transaction of business, excluding any national holidays, and any performance
which would otherwise be required on a day other than a banking day shall be
timely performed in such instance, if performed on the next succeeding banking
day. Notwithstanding such timely performance, interest shall continue to accrue
hereunder until such payment or performance has been made.
"CHANGE OF CONTROL" shall mean the change of ownership of more
than (50%) of Provider's capital stock or that would result in a change of
control of Provider or a management change with respect to Provider.
"CLOSING DATE" shall mean the date of execution of this
Agreement by Provider and CHF.
"CMI" shall mean the census mix indices of the Provider.
"CODE" shall mean the Uniform Commercial Code of the State of
Florida or as to any particular Collateral, as in effect in any other
jurisdiction whose laws govern the perfection or the effect or nonperfection of
CHF's security interest in such Collateral.
"COLLATERAL" shall have the meaning set forth in the Security
Agreement.
"COMPLIANCE CERTIFICATE" shall mean a certificate duly
executed by the chief executive officer, chief financial officer or managing
general partner, as the case may be, of Provider appropriately completed in a
form acceptable to CHF.
"CONTRACT YEAR" shall mean the twenty-four (24) months
immediately following the Closing Date or any anniversary thereof.
<PAGE>
"DEBTOR" shall have the meaning set forth in the Security
Agreement.
"DEFAULT" shall mean an event which through the passage of
time or the service of notice or both would mature into an Event of Default.
"DEFAULT INTEREST RATE" shall mean a fluctuating interest rate
per annum equal to the sum of the otherwise applicable Base Rate plus three
percent (3%).
"DISPUTE" shall mean, with respect to Receivables, a dispute
or claim, BONA FIDE or otherwise, as to cost, terms, necessity of service
rendered, quality or any cause or defense to payment whatsoever.
"ELIGIBLE CLAIMS" shall mean all rights to payment or
reimbursement under Medicare, Medicaid, Blue Cross, other Third Party payors or
contracted staffing services, services actually rendered or goods actually sold
by Provider, as to which CHF has a valid, first priority and fully perfected
security interest.
Eligible Claims shall include:
(i) Medicare, Medicaid, Blue
Cross, or other Third Party Claims up to 150 days from claim date except for
Medicare Claims under Medicare PIP payments;
(ii) Medicare Claims under
Medicare PIP limited to two PIP payments;
(iii) Contracted Staffing
Services up to 150 days from invoice date except for Contracted Staffing
Services to the U.S. Virgin Islands;
(iv) Contracted Staffing
Services to the U.S. Virgin Islands up to 120 days from invoice date in the
event that valid, executed contracts from the Government of the U.S. Virgin
Islands are not delivered to CHF;
(v) Contracted Staffing
Services to the U.S. Virgin Islands up to 180 days from invoice date for
Contracted Staffing Services to the island of St. Croix and up to 210 days
from the invoice date for the Contracted Staffing Services to the island of
St. Thomas in the event that valid, executed contracts from the Government of
the U.S. Virgin Islands are delivered to CHF.
No other Receivables shall be deemed to be Eligible Claims including, without
limitation:
1. Receivables with respect to
which CHF does not have a valid,
first priority and fully
perfected security interest; and
2. Receivables subject to any Lien
except those in favor of CHF.
"EMPLOYMENT BENEFIT PLAN" shall mean any employee benefit plan
within the meaning of Section 3(3) of ERISA which (a) is maintained for
employees of Provider or any ERISA affiliate or (b) has at any time within the
preceding six (6) years been maintained for the employees of Provider or any
current or former ERISA Affiliate.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in
Section 5.13.3.
"ESTIMATED VALUE" shall mean the amount of each Receivable
that CHF determines in its sole discretion will be paid by the third party Payor
with respect to such Receivable, which amount shall be subject to adjustment
from time to time by CHF in its sole discretion.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor statute and all rules
and regulations promulgated thereunder.
"ERISA AFFILIATE" as applied to Provider, shall mean any
Person who is a member of a group which is under common control with Provider,
who together with Provider is treated as a single employer within the meaning of
Section 414(b) and (c) of the IRC.
"EVENT OF DEFAULT" shall mean the occurrence or existence
of an event described in Section 8.1 hereof.
<PAGE>
"EXCESS INTEREST" shall have the meaning set forth in Section
2.4.2.
"FEDERAL GOVERNMENT FUNDS" shall mean funds received for
services provided under Medicare, Medicaid, or State health care program.
"FINAL CLAIMS REDUCTIONS" shall have the meaning set forth
in Section 2.1.3.2.
"FISCAL YEAR" shall mean the twelve month period ending on
November 30 of each year.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state,
municipal or other governmental department, commission, board, bureau, agency,
court, tribunal or other instrumentality, and any arbitrator.
"GOVERNMENT AUDIT" shall have the meaning set forth in
Section 2.1.3.2.
"GUARANTIES" shall have the meaning set forth in
Section 3.1.11.3.
"GUARANTORS" shall mean all officers, as applicable, of
Provider and Persons who execute and deliver a Guaranty.
"INDEBTEDNESS" shall mean at a particular time (1)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which Provider is liable, contingently or otherwise,
as obligor, guarantor or otherwise or any commitment by which Provider assures a
creditor against loss, including, but not limited to subordinated indebtedness,
(2) obligations under leases which shall have been or should be, in accordance
with GAAP, recorded as capital leases in respect of which obligations Provider
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations Provider assures a creditor against loss, and (3)
any obligation of Provider to a multi-employer plan or any other unfunded
pension obligations and liabilities with respect to any other plan.
"INTANGIBLE ASSETS" shall mean the amount of a Person's
intangible assets (determined in conformity with GAAP), including, without
limitation, goodwill, trademarks, licenses, organization costs, deferred
amounts, covenants not to compete, unearned income, and restricted funds.
"INTEREST RATE" shall mean a rate per annum equal to the
greater of seven percent (7%) or the Base Rate plus TWO percent (2%).
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.
"LIEN" shall mean any lien, mortgage, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance of any kind,
whether voluntary or involuntary whether such interest is based on common law,
statute, or contract (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Note, the Security Agreement, the Guaranties and all agreements, instruments and
documents whether heretofore, now, or hereafter executed by or on behalf of
Provider and delivered to CHF with respect to the transactions contemplated by
this Agreement, together with all agreements and documents between Provider and
CHF referred to therein or contemplated thereby. Any one of the foregoing may be
referred to herein as a "Loan Document".
<PAGE>
"MANDATORY CLAIMS REDUCTIONS" shall have the meaning set
forth in Section 2.1.3.2.
"MATERIAL ADVERSE EFFECT" - Material Adverse Effect means (1)
a material adverse effect upon the business, operations, properties, assets or
condition (financial or otherwise) of Provider on an individual basis or taken
as a whole or (2) the impairment of the ability of Provider to perform in all
material respects its obligations under any Loan Document to which it is a party
or of CHF to enforce or collect of any Obligations.
"MAXIMUM RATE" shall have the meaning set forth in
Section 2.4.2.
"MEDICAL WASTE LAWS" shall have the meaning set forth in
Section 5.13.2.
"NET WORTH" as applied to any Person, shall mean as of the
date of any determination thereof, such Person's total assets less such Person's
total liabilities (as such terms are defined under GAAP).
"NOTE" shall mean the Revolving Promissory Note executed by
Provider pursuant to Section 2.2 hereof in the principal amount of
$8,000,000.00.
"OBLIGATIONS" - Obligations shall mean all Advances, service
charges, fees, debts, liabilities, obligations, covenants and duties owing by
Provider to CHF, including, but not limited to, the principal amount of the
Advances, any letter of credit obligations arranged by CHF with a bank on behalf
of or for the benefit of Provider, all claims, and indebtedness, accrued and
unpaid interest and all fees, costs, and expenses, whether primary or secondary,
direct or indirect, absolute or contingent, fixed or otherwise heretofore, now
and/or from time to time hereafter owing, due or payable.
"PHYSICAL PLANT" shall have the meaning set forth in
Section 5.13.3.
"PERMITTED ENCUMBRANCES" shall mean the following types of
Liens: (1) Liens for taxes, assessments or other governmental charges not yet
due and payable; (2) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more than thirty (30)
days delinquent; (3) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (4) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Provider or any of its
Subsidiaries (5) Liens in favor of CHF, and (6) and other Liens approved by CHF
in writing.
"PERMITTED INDEBTEDNESS" shall mean the following
indebtedness: all expenditures incurred in the ordinary course for capital
leases of less than $50,000.00, indebtedness less than $100,000.00 in the
aggregate or any other indebtedness approved by CHF in writing.
"PERSON" - Person shall mean any individual, sole
proprietorship, partnership, limited liability partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
corporation, institution, entity, party, or government (whether territorial,
national, federal, state, provincial, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency body or
department thereof).
"PROPOSED CLAIMS REDUCTIONS" shall have the meaning set forth
in Section 2.1.3.1.
"PROVIDER'S ACCOUNT" shall have the meaning set forth in
Section 2.4.1.
"RECEIVABLES" shall mean all presently existing, hereafter
created and future rights, title and interest of Provider in and to payment for
services rendered or goods or merchandise sold, accounts (including any
"account", as such term is defined in the Code), receivables, contract rights,
chattel paper, instruments, documents, rights to payment or reimbursement under
Medicare, Medicaid, other
<PAGE>
government-sponsored or funded health care programs or insurance or other
medical benefit payments assigned to Provider by patients or pursuant to any
preferred provider, health maintenance organization, capitated payment
agreements, or other Provider-Payor agreements, all guaranties and security
therefor, whether owned directly, as assignee, by law or otherwise, including,
without limitation, all of Provider's accounts receivable, lease receivables,
license receivables, and other amounts from time to time owing to or owned by
Provider for goods sold or leased or for services rendered or for Capital
Expenditures, whether or not earned by performance, and all rights now or
hereafter existing in and to all security agreements, leases, licenses and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, documents and rights to payment or reimbursement;
and all proceeds of the foregoing.
"RECEIVABLES REPORT" shall have the meaning set forth in
Section 2.1.2.
"REVOLVING CREDIT ADVANCE CEILING" shall have the meaning set
forth in Section 2.1.1.
"SOLVENT" shall mean, when used with respect to any Person,
that (i) the fair saleable value of its assets is in excess of the total amount
of its liabilities (including for purposes of this definition all liabilities,
whether or not reflected on a balance sheet prepared in accordance with GAAP,
and whether direct or indirect, fixed or contingent, secured or unsecured,
disputed or undisputed); and (ii) it is able to pay its debts or obligations in
the ordinary course as they mature; and (iii) that Person has capital sufficient
to carry on its business and all business in which it is about to engage.
"SUBSIDIARY" - Subsidiary means, with respect to any Person,
any corporation, association or other business entity of which more than 50% of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"TANGIBLE NET WORTH" - Tangible Net Worth, as applied to any
Person, shall mean as of the date of any determination thereof, an amount equal
to: (a) such Person's Net Worth; LESS (b) such Person's net Intangible Assets;
LESS (c) all obligations owed to a Person or any of its subsidiaries by any
Affiliate of a Person or any of its Subsidiaries; and LESS (d) all loans by a
Person to officers, stockholders, shareholders, or employees of a Person.
"TERMINATION DATE" shall have the meaning provided in
Section 9 hereof.
"THIRD PARTY OBLIGORS" shall have the meaning set forth in
Section 2.3.4.
"TOTAL ADVANCE LIMIT" shall mean $8,000,000.00 which amount
shall be inclusive of any letters of credit arranged with a bank or trust
company by CHF for the amount of or on behalf of Provider.
<PAGE>
EXHIBIT B
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
REVOLVING PROMISSORY NOTE
$8,000,000.00 Atlanta, Georgia
Dated: February 7, 1996
FOR VALUE RECEIVED, the undersigned, each of which is listed on ANNEX I
hereto (jointly and severally referred to herein as "BORROWER"), HEREBY JOINTLY
AND SEVERALLY PROMISE TO PAY to the order of CAPITAL HEALTHCARE FINANCING, a
division of Capital Factors, Inc., a Florida corporation ("LENDER") the
principal amount of EIGHT MILLION DOLLARS ($8,000,000.00) or so much thereof as
shall have been advanced by Lender to Borrower pursuant to the Provider
Revolving Loan Agreement described below with interest thereon, or on the amount
thereof from time to time outstanding, to be computed as hereinafter provided,
until the said principal sum shall be fully paid and to be due and payable as
hereinafter provided.
1. LOAN PAYMENTS.
a. INTEREST AND PRINCIPAL PAYMENTS. Installments of interest only
shall be due and payable in arrears on or before the fifth (5th) day of each
calendar month during the term hereof commencing on the 5th day of March, 1996
and on the 5th day of each succeeding month thereafter until the termination of
the Loan Agreement (as hereafter defined) or should an event of default occur as
defined in the Loan Agreement at which time the entire outstanding principal
balance together with all accrued and unpaid interest shall be due and payable
without demand. Interest on the principal amount hereof from time to time
outstanding, shall be at a rate equal to the greater of seven percent (7%) or
two percent (2%) per annum above the Base Rate (as hereinafter defined) in
effect from time to time (herein, the "STATED RATE"), from the date hereof until
such principal amount is paid in full. The Stated Rate shall change from time to
time in accordance with changes in the Base Rate. Borrower further agrees to pay
interest on any amount of principal and interest which is not paid when due
(whether at stated maturity, by acceleration or otherwise), from the date on
which such amount is due until such amount is paid in full, payable on demand,
at a rate per annum, in lieu of the Stated Rated, equal at all times to three
percent (3%) per annum above the Stated Rate (the "DEFAULT RATE"). "BASE RATE"
shall mean prime which is announced from time to time in the Wall Street Journal
(or such other prime rate as Lender shall designate from time to time in the
event the Wall Street Journal ceases to publish such rate) (with the
understanding that any such rates may merely serve as a basis upon which
effective rates of interest are calculated for loans making reference thereto,
and that such rates are not necessarily the lowest or best rates at which any
bank or other financial institution calculates interest or extends credit).
b. TIMING OF PAYMENTS. Both principal and interest are payable in
lawful money of the United States of America to Lender, in funds which shall be
available to Lender in an account designated by Lender no later than 2:00 P.M.
(Eastern Standard time) on or before the day that the applicable payment of
principal or interest is due.
2. PREPAYMENT. Except for collections received by or on behalf of
lender pursuant to the loan documents (as hereafter defined), Borrower may not
prepay this Note. Under no circumstances may there be a partial prepayment of
this Note. Borrower may prepay only the entire unpaid balance of this Note upon
payment of a prepayment fee as follows:
Beginning with the date of this Note and continuing through
February 6, 1997, the prepayment fee shall be two percent (2%) of the Total
Advance Limit and prepayment fee shall decrease to one (1%) of the Total Advance
Limit beginning on February 7, 1997. Beginning on February 7, 1998, there shall
be no prepayment fee. In the event that payment of this Note shall be
<PAGE>
accelerated for any reason whatsoever by Lender, the prepayment fee in effect as
of the date of such acceleration shall be paid and such prepayment fee shall
also be added to the outstanding balance of this Note in determining the debt
for the purposes of the Loan Documents given to secure this Note.
3. SECURITY. This Note is secured by, among other things, a Provider
Revolving Loan Agreement, dated the date hereof, by and among Borrower and
Lender (the "LOAN AGREEMENT"), a Security Agreement, dated the date hereof, by
and among Borrower, Lender and the other parties granting a security interest as
provided therein and a Performance Guaranty made by an officer of Borrower in
favor of Lender, (collectively, the "LOAN DOCUMENTS"). It is expressly agreed
that the principal sum of this Note (and all accrued interest thereon and other
sums payable hereunder) shall become immediately due at the option of Lender on
the happening of any default, and the expiration of any applicable notice and/or
grace period under the terms of this Note or under any of the other Loan
Documents.
4. APPLICABLE LAW. Borrower agrees that this Note shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Florida.
5. MODIFICATION. This Note may not be modified or terminated orally.
6. WAIVER.
a. Borrower and any endorsers, sureties and guarantors hereof or
hereon hereby waive presentment for payment, demand, protest, notice of
non-payment (except for such notice as is expressly provided in the Loan
Agreement) or dishonor and of protest, and agree to remain bound until the
principal sum of this Note or the amount thereof outstanding and interest and
all other sums payable hereunder are paid in full notwithstanding any extensions
of time for payment which may be granted even though the period of extension be
indefinite, and notwithstanding any inaction by, or failure to assert any legal
right available to, Lender.
b. No delay or failure on Lender's part in exercising any right,
privilege or option hereunder shall operate as a waiver thereof or of any other
right, privilege or option, it being understood and agreed that Lender's rights,
remedies and options under this Note and the other Loan Documents are and shall
be cumulative and are in addition to all other rights, remedies and options of
Lender in law or in equity or under any other agreement. No waiver whatsoever
shall be valid unless in writing, signed by Lender, and then only to the extent
therein set forth.
7. SUCCESSORS. The term "Lender" shall mean the then holder of this
Note from time to time and its successors and assigns.
8. LATE CHARGES. In the event any payment or installment due or
payable under this Note and/or under any of the other Loan Documents shall
become overdue for a period in excess of five (5) days, in addition to interest
being charged at the Default Rate and Lender's other remedies, a "late charge"
of $0.04 for each dollar so overdue may be charged by Lender for the purpose of
deferring the expenses incident to handling such delinquent payment or
installment.
9. COST OF COLLECTION. Borrower shall pay all costs of collection when
incurred after an Event of Default (as defined in the Loan Agreement),
including, without limitation, the reasonable attorneys' fees and disbursements
of Lender's counsel and court costs, which costs may be added to the
indebtedness evidenced hereby and must be paid promptly on demand, together with
interest thereon at the Default Rate from the time of Lender's payment.
10. USURY. In no event shall this or any other provision herein or in
the Loan Agreement or the Security Agreement, permit the collection of any
interest which would be usurious under the law governing this transaction. If
any such interest in excess of the maximum rate allowable under applicable law
has been collected, Borrower agrees that the amount of interest collected above
the maximum rate permitted by applicable law, shall be refunded to Borrower, and
Borrower agrees to accept such refund, or, at Borrower's option, such refund
shall be applied as a principal payment hereunder.
<PAGE>
11. WAIVER OF JURY TRIAL. BY EXECUTION HEREOF AND ACCEPTANCE HEREOF,
BORROWER AND LENDER AGREE THAT NEITHER BORROWER NOR LENDER, NOR ANY ASSIGNEE,
SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE (ALL OF WHOM ARE HEREINAFTER REFERRED
TO AS THE "PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF
THIS NOTE OR ANY OTHER LOAN DOCUMENTS, ANY RELATED AGREEMENT OR INSTRUMENT, ANY
OTHER COLLATERAL FOR THE DEBT OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR
AMONG THE PARTIES, OR ANY OF THEM. NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES WITH LENDER, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. LENDER HAS IN NO WAY AGREED WITH
OR REPRESENTED TO BORROWER, ANY GUARANTOR, OR ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
12. MISCELLANEOUS.
a. In the event that any provision of this Note or the
application thereof to Borrower or any circumstance in any jurisdiction
governing this Note shall, to any extent, be invalid or unenforceable under any
applicable statute, regulation or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict herewith and shall be
deemed modified to conform to such statute, regulation or rule of law, and the
remainder of this Note and the application of any such invalid or unenforceable
provision to parties, jurisdictions or circumstances other than to whom or to
which it is held invalid or unenforceable shall not be affected thereby nor
shall the same affect the validity or enforceability of any other provision of
this Note.
b. Time is of the essence as to all dates set forth in this Note,
subject to any applicable notice or grace period provided herein; PROVIDED,
HOWEVER, that, whenever any payment to be made hereunder shall be stated to be
due on a day other than a Business Day, such payment may be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of interest payable hereunder.
c. Borrower hereby agrees to perform and comply with each of the
terms, covenants and provisions contained in this Note and in any instrument
evidencing or securing the indebtedness evidenced by this Note on the part of
Borrower to be observed and/or performed hereunder and thereunder. No release of
any security for the principal sum due under this Note, or any portion thereof,
and no alteration, amendment or waiver of any provision of this Note or of any
instrument evidencing and/or securing the indebtedness evidenced by this Note
made by agreement between Lender and any other person or party shall release,
discharge, modify, change or affect the liability of Borrower under this Note or
under such instruments.
d. Except as expressly provided in the Loan Agreement, no act of
commission or omission of any kind or at any time upon the part of Lender, its
co-lenders and participants, if any, in respect of any matter whatsoever shall
in any way impair the rights of Lender to enforce any right, power or benefit
under this Note and no set-off, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature which Borrower has or may have
against Lender, its co-lenders and participants, if any, shall be available
hereunder to Borrower, except that to the extent applicable rules of court would
require that Borrower assert any counterclaim it may have against Lender in the
same action filed by Lender to enforce collection hereof, only such counterclaim
shall be so preserved.
e. The captions preceding the text of the various paragraphs
contained in this Note are provided for convenience only and shall not be deemed
to in any way affect or limit the meaning or construction of any of the
provisions hereof.
f. This Note shall be governed by and interpreted in accordance
with the
<PAGE>
internal laws of the State of Florida without regard to conflicts of law
principles. All judicial proceedings brought against Borrower arising out of, in
connection with or relating to Note may be brought in any state or federal court
of competent jurisdiction in the State of Florida and by execution and delivery
of this Note, Borrower accepts for itself and in connection with its properties,
generally and unconditionally, the jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Note. Borrower waives
personal service of any summons, complaint or other process, and agrees that
service thereof may be made by registered or certified mail directed to Borrower
at its address of which Borrower has previously notified Lender in accordance
with Section 11.3 of the Provider Revolving Loan Agreement. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Lender to bring proceedings against Borrower in the courts of
any other jurisdiction.
g. This Note is a Master Promissory Note, and Borrower is
extended a line of credit up to but not exceeding the amount shown herein. In
accordance with the Loan Documents, Lender, in its sole discretion, may make
advances pursuant to the Loan Agreement from time to time and it is therefore
contemplated that the outstanding balance may fluctuate accordingly. Nothing
herein shall be construed as a warranty or representation by Lender that it will
at any time make advances to Borrower, other than in accordance with the Loan
Documents. Any request for an advance under this Note shall be subject to review
and approval by Lender.
<PAGE>
Lender may assign to one or more banks or other entities or
participants all or a portion of its rights under this Note. In the event of an
assignment of all of its rights, Lender may transfer this Note to the assignee.
In the event of an assignment of a portion of its rights under this Note, Lender
shall retain this note for the mutual benefit of the participants subject to
Lender's rights pursuant to the Loan Agreement, which rights shall include
Lender's right to transfer this note to another lead lender without further
liability or responsibility to Borrower. Lender may sell participations to one
or more banks or other entities in or to all or a portion of its rights under
this Note. Lender may, in connection with any assignment or participation or
proposed assignment or proposed participation, disclose to the assignee or
participant or proposed assignee or proposed participant any information
relating to Borrower furnished to Lender by or on behalf of Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered as of the day and year first above written.
HOSPITAL STAFFING SERVICES, INC.,
a Florida corporation
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSSI TRAVEL NURSE OPERATIONS, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSS RECRUITING, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HSSI MEDICARE HOME OFFICE, INC. D/B/A
HOME CARE HOME OFFICE
a Florida corporation
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC.
D/B/A ALTERNATIVE CARE MEDICAL SERVICES
a Florida corporation
By: /S/ BOBBY L. SHIELDS
--------------------------------
Bobby L. Shields, Secretary
<PAGE>
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES
a Florida corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A
MID-SOUTH COMPREHENSIVE HOME HEALTH
a Florida corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
ALL-CARE PROFESSIONAL SERVICES, INC.
a Tennessee corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
HSSI OF GEORGIA, INC. D/B/A
TRI-THERAPY
a Florida corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
HSSI PROPRIETARY HOME OFFICE, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF FLORIDA, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
HSSI ACQUISITION CORP.
a New York corporation
By: /S/ BOBBY L. SHIELDS
-------------------------------------------------
Bobby L. Shields, Secretary
<PAGE>
HOSPITAL STAFFING SERVICES OF CALIFORNIA, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
---------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF BROWARD, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
---------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF
PALM BEACH, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
---------------------------------------------------
Bobby L. Shields, Secretary
HSSI OF FLORIDA PROPRIETARY, INC.
a Florida corporation
By: /S/ BOBBY L. SHIELDS
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Bobby L. Shields, Secretary
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
I HEREBY CERTIFY that on this date, before me, a Notary Public
duly authorized in the State and County named above to administer oaths and take
acknowledgments, personally appeared BOBBY L. SHIELDS, as Secretary
of HOSPITAL STAFFING SERVICES, INC., HSSI TRAVEL NURSE OPERATIONS, INC., HSS
RECRUITING, INC., HSSI MEDICARE HOME OFFICE, INC., HOSPITAL STAFFING SERVICES OF
MASSACHUSETTS, INC., HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC., HSSI OF
GEORGIA, INC., HOSPITAL STAFFING SERVICES OF TENNESSEE, INC., HSSI PROPRIETARY
HOME OFFICE, INC., HOSPITAL STAFFING SERVICES OF FLORIDA, INC., HOSPITAL
STAFFING SERVICES OF CALIFORNIA, INC., HOSPITAL STAFFING SERVICES MEDICARE OF
BROWARD, INC., HOSPITAL STAFFING SERVICES MEDICARE OF PALM BEACH, INC., HSSI OF
FLORIDA PROPRIETARY, INC., all Florida corporations, ALL-CARE PROFESSIONAL
SERVICES, INC., a Tennessee corporation, and HSSI ACQUISITION CORP., a New York
Corporation, to me well known and to me known to be the person described above,
and known to me to be the person who signed the foregoing instrument in the City
of Atlanta, County of Fulton, in the State of Georgia, and he acknowledged the
execution thereof at said place and the physical delivery of the instrument to
the representative of Lender at said place to be his free act and deed on behalf
of the Corporation for the purposes and uses therein expressed.
WITNESS my hand and official seal in the State and County
aforesaid this 6TH day of FEBRUARY , 1996.
/S/ BARBARA MCCORKLE
------------------------------
Notary Public State of Georgia
My Commission Expires: Print Name: BARBARA MCCORKLE
Commission Number: ____________
<PAGE>
ANNEX I TO REVOLVING PROMISSORY NOTE
List of Entities Comprising the Borrower
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Medicare Home Office, Inc. d/b/a
Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Massachusetts, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Rhode Island, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Tennessee, Inc. d/b/a
Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Georgia, Inc. d/b/a
Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
ADDRESS FOR NOTICES FOR ALL ENTITIES LISTED ABOVE:
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
EXHIBIT C
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
PERFORMANCE GUARANTY
In order to induce Capital Healthcare Financing, a division of
Capital Factors, Inc., a Florida Corporation (hereinafter called "Capital") to
enter into the Provider Revolving Loan Agreement (hereinafter the "Agreement")
dated FEBRUARY 7, 1996 between Capital and each of the entities listed on ANNEX
I hereto (collectively the "Client"), and in consideration of the acceptance by
Capital of the Agreement, and of other valuable consideration, the receipt of
which is hereby acknowledged, the undersigned does warrant and guarantee to
Capital, its successors and assigns, that: no person (including an organization,
agency or other entity), shall with respect to Receivables, as defined in the
Agreement, assigned by Client to Capital, (1) present or cause to be assigned to
Capital a Receivable that is for, (A) a claim that is for a medical or other
item or service that the person knows or should know was not provided as
claimed, (B) is for a medical or other item or service and the person knows or
should know the claim is false or fraudulent, (C) is presented for a physician's
service (or an item or service incident to a physician's service) by a person
who knows or should know that the individual who furnished (or supervised the
furnishing of) the service (i) was not licensed as a physician, or (ii) at the
time the service was furnished that the physician was not certified in a medical
specialty by a medical specialty board when required by the regulations
(Medicare, Medicaid, or otherwise), or (D) is for a medical or other item or
service furnished during a period in which the Client was excluded from the
program (Medicare, Medicaid, State Health, or otherwise) under which the claim
was made, (2) knowingly and willfully make or cause to be made any false
statement or representation of a material fact in any application for any
benefit or payment under a program (Medicare, Medicaid, State Health, or
otherwise), (3) at any time knowingly and willfully make or cause to be made any
false statement or representation of a material fact for use in determining
rights to such benefit or payment, (4) having knowledge of the occurrence of any
event affecting (A) the initial or continued right to any such benefit or
payment, or (B) the initial or continued right to any such benefit or payment of
any individual in whose behalf the person has applied for or is receiving such
benefit or payment, conceals or fails to disclose such event with an intent
fraudulently to secure such benefit or payment either in a greater amount or
quantity than is due or when no such benefit or payment is authorized, or (5)
having made application to receive any such benefit or payment for the use and
benefit of another and having received it, knowingly and willfully converts such
benefit or payment or any part thereof to use other than for the use and benefit
of such other person; and (6) that no payments have been or shall be made on
such Receivables except payments delivered by or for Client to Capital as
provided in the Agreement; and that Client, immediately upon its receipt
thereof, will deliver to Capital all original checks, drafts, notes, acceptances
and other instruments of payment received by Client in payment of or on account
of said Receivables, in accordance with the terms of the Agreement; and that
Client's books and records reflect that Client has granted to Capital a first
and valid security interest in and to all its present and future Receivables,
the proceeds thereof and returned goods, free and clear of all liens, claims,
encumbrances and security interests other than those of Capital; and that at the
time all such Receivables are assigned to Capital, neither Client nor the
undersigned will be aware of any facts, events or circumstances which in any way
will impair the validity or enforceability of such Receivables.
This shall be a continuing guarantee and shall not be limited
to any specific sum.
The undersigned agrees that this guaranty shall not be
impaired by any modification, supplement, extension, amendment, release or other
alteration of any agreement, the Agreement, or of the obligations hereby
guaranteed or of any security therefor, to all of which the undersigned
consents. This guaranty shall not be terminable by the undersigned so long as
any advances by Capital under the Agreement remain outstanding and unpaid,
except that this guaranty shall terminate with respect to the undersigned on the
date that Capital receives written notice of the undersigned's termination of
employment with Client, but such termination shall not affect the undersigned's
warranties, guaranties or obligations hereunder with respect to Receivables
which were assigned to Capital on or prior to the date Capital receives notice
of termination of the undersigned's employment with Capital. Additionally,
Client represents and warrants to Capital that Client shall, within ten days
<PAGE>
of the date of Capital's receipt of the undersigned's termination of employment
with Client, provide Capital with a performance guaranty in the same form and
content as this guaranty from an officer involved in the operations and/or
management of Client with the approval of Capital, which approval shall not be
unreasonably withheld. In the event that Capital fails to receive this form of
guaranty from such officer or officers of Client as set forth above, such shall
constitute a default by Client under the Agreement.
This guaranty is made in the State of Florida and shall be
governed by construed and interpreted in accordance with the laws of the State
of Florida. THE UNDERSIGNED WAIVES TRIAL BY JURY AND RIGHT TO TRIAL BY JURY in
all actions and proceedings between Capital and the undersigned and agree that
all legal actions or proceedings between Capital and the undersigned may be
brought in any court of competent jurisdiction in the State of Florida, the
undersigned hereby waiving objections to summons, service of process, personal
jurisdiction of the person or venue of any such court. Any summons or other
service of process may be served on the undersigned in accordance with the
provisions of the General Statutes of Florida relating to service of Process or
by forwarding a copy of the summons and complaint or other documents by
registered mail, return receipt requested, to the undersigned at the following
address 592 NORTHWEST 111TH TERRACE, CORAL SPRINGS, FL 33071 along with a copy
to Client at its address set forth in the Agreement and the receipt thereof
by the undersigned or any agent executing a receipt shall constitute
personal service of process on the undersigned.
The undersigned waives notice of acceptance hereof or of any
transaction with Capital; presentment and protest of any instrument and notice
of default; and forbearance or extension and any other notices.
No modification, waiver or discharge of the liability of the
undersigned shall be valid unless in writing, signed and subscribed by Capital.
This agreement of guaranty shall bind and inure for and to the benefit of the
respective parties hereto, their heirs, executors, administrators, successors
and assigns.
THE UNDERSIGNED ACKNOWLEDGES HE HAS READ THE GUARANTY AND HAS EXECUTED IT AS
A SPECIFIC INDUCEMENT FOR CAPITAL HEALTHCARE FINANCING, a division of, CAPITAL
FACTORS, INC. TO ENTER INTO THE AGREEMENT.
Witness:
/S/ JACQUELINE BAEZ /S/ BOBBY L. SHIELDS
----------------- -----------------------
Bobby L. Shields
Date: FEBRUARY 7, 1996
Client hereby acknowledges this Guaranty and agrees in all
respects to be bound thereby and to keep, observe and perform the matters and
things therein intended of it to be done.
HOSPITAL STAFFING SERVICES, INC.
for itself, and for those entities
listed on Annex I attached hereto.
By: /S/ RONALD A. CASS
------------------------------
Ronald A. Cass, Chief Executive Officer
<PAGE>
ANNEX I TO PERFORMANCE GUARANTY
List of Entities Comprising the Borrower
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Medicare Home Office, Inc. d/b/a
Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Massachusetts, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Rhode Island, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Tennessee, Inc. d/b/a
Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Georgia, Inc. d/b/a
Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
EXHIBIT D
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
SECURITY AGREEMENT
SECURITY AGREEMENT, made as of the 7th day of February, 1996, by each
of the entities listed on ANNEX I hereto (collectively the "DEBTOR"), and
Capital Healthcare Financing, a division of Capital Factors, Inc., a Florida
corporation (the "SECURED PARTY").
W I T N E S S E T H:
WHEREAS, the Secured Party and the Borrower have entered into a Provider
Revolving Loan Agreement dated as of February 7, 1996 (said Agreement, as it may
hereafter be amended or otherwise modified from time to time, being referred to
herein as the "LOAN AGREEMENT"); and
WHEREAS, it is a condition precedent to the making of Advances by the
Secured Party under the Loan Agreement that the Debtor shall have granted the
security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
the Debtor and the Secured Party, and in order to induce the Secured Party to
make Advances under the Loan Agreement, the Debtor hereby agrees with the
Secured Party as follows:
1. DEFINITIONS. Reference is hereby made to the Loan Agreement for a statement
of the terms thereof. All terms used in this Agreement which are defined in the
Loan Agreement or the Uniform Commercial Code (the "CODE") currently in effect
in the State of Florida and which are not otherwise defined herein shall have
the same meanings as set forth therein.
2. ASSIGNMENT AND GRANT OF SECURITY. The Debtor hereby assigns to the Secured
Party, and hereby grants to the Secured Party, a first priority continuing
security interest in all of the following collateral (collectively, the
"COLLATERAL"):
2.1. all presently existing, hereafter created and future rights, title and
interest of Debtor in and to payment for services rendered or goods or
merchandise sold or leased, accounts (including any "account", as such term is
defined in the Code), "General Intangibles' (which means and includes all of
Debtor's present and future general intangibles and all other presently owned or
hereafter acquired intangible personal property of Debtor including, without
limitation, any and all choses or things in action, computer programs, computer
discs, computer tapes, deposit accounts, tax refunds and tax refund claims),
accounts receivable and other receivables, contract rights, rights to payment or
reimbursement under Medicare, Medicaid, other government-sponsored or funded
health care programs or insurance or other medical benefit payments assigned to
Debtor by patients or pursuant to any preferred provider, health maintenance
organization, capitated payment agreements, or other provider-payor agreements,
whether owned directly, as assignee, by law or otherwise, and whether or not
earned by performance, and all rights now or hereafter existing in and to all
security agreements, guaranties, leases, licenses and other contracts securing,
and all instruments and documents evidencing, or otherwise relating to any such
accounts, accounts receivable and other receivables, contract rights, rights to
payment or reimbursement; and all proceeds of the foregoing (any and all such
accounts, accounts receivable and other receivables, contract rights, rights to
payment or reimbursement, and proceeds being referred to herein collectively as
the "RECEIVABLES", and any and all such security agreements, guaranties, leases,
licenses and other contracts and instruments and documents being referred to
herein collectively as the "RELATED CONTRACTS");
2.2. all Advances made pursuant to the Loan Agreement;
<PAGE>
2.3. all monies, securities and other property now or hereafter held or
received by, or in transit to the Secured Party from or for the Debtor, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and all
of the Debtor's deposits and credit balances in the Secured Party's possession;
2.4. all deposit accounts and all of the Debtor's right, title, and
interest in and to any deposits or other sums at any time created by or due from
any bank or financial institution to the Debtor;
2.5. all books of account and records in respect of Receivables and the
Related Contracts including, without limitation, all computer programs,
applications, software, and other books and records pertaining to any of the
foregoing all books and records; and
2.6. all proceeds of any and all of the foregoing Collateral (including,
without limitation, proceeds which constitute property of the types described in
clauses 2.1 - 2.5 of this Section 2 and "proceeds" (as such term is defined in
the Code) and, to the extent not otherwise included, all cash collections and
cash and non-cash proceeds.
3. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of all Advances,
service charges, fees, debts, liabilities, obligations, covenants and duties
owing by Debtor to Secured Party, including, but not limited to, the principal
amount of the Advances, all claims, and indebtedness, accrued and unpaid
interest and all fees, costs, and expenses, whether primary or secondary, direct
or indirect, absolute or contingent, fixed or otherwise heretofore, now and/or
from time to time hereafter owing, due or payable under the Loan Documents (all
such obligations of the Debtor being referred to herein collectively as the
"OBLIGATIONS").
4. DEBTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, (1)
the Debtor shall remain liable under the contracts and agreements included in
the Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (2) the exercise by the Secured Party of any of the rights hereunder
shall not release the Debtor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (3) the Secured Party
shall have no obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Debtor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
5. REPRESENTATIONS AND WARRANTIES. The Debtor represents and warrants as
follows:
5.1. The chief place of business and chief executive office of the Debtor
and the office where the Debtor keeps its records concerning the Receivables,
and the original copies of the Related Contracts and the originals of all
chattel paper that evidence Receivables, are located at its address specified in
Section 16. None of the Receivables is evidenced by a promissory note or other
instrument.
5.2. The Debtor is the legal and beneficial owner of the Collateral free
and clear of any lien, security interest, option or other charge or encumbrance
except for the security interest created by this Agreement. No effective
financing statement or other document similar in effect covering all or any part
of the Collateral is on file in any recording office, except such as may have
been filed in favor of the Secured Party relating to this Agreement and except
for permitted encumbrances as listed in ANNEX II hereto. The Debtor has no trade
names except as set forth on ANNEX III hereto.
5.3. This Agreement creates a valid and perfected first priority security
interest in the Collateral, securing the payment of the Obligations, and all
filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
<PAGE>
5.4. No consent of any other person or entity and no authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than consents or approvals to be obtained by
the Secured Party, or filings or actions to be made or taken by the Secured
Party, in order to perform its obligations or exercise its rights under the Loan
Documents) is required (1) for the grant by the Debtor of the assignment and
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Debtor, (2) for the perfection or maintenance of the
assignment and security interest created hereby (including the first priority
nature of such assignment and security interest) or (3) for the exercise by the
Secured Party of the rights provided for in this Agreement or the remedies in
respect of the Collateral pursuant to this Agreement.
5.5. There are no conditions precedent to the effectiveness of this
Agreement that the Debtor has not satisfied or performed or received a written
waiver from the Secured Party with respect thereto.
5.6. The Debtor has, independently and without reliance upon the Secured
Party and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.
6. FURTHER ASSURANCES.
6.1. The Debtor agrees that from time to time, at the expense of the
Debtor, the Debtor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that the Secured Party may reasonably request, in order to perfect and protect
any assignment or security interest granted or purported to be granted hereby or
to enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, the Debtor will:
6.1.1. mark conspicuously each document included in each chattel paper
included in the Receivables and each Related Contract and, at the request of the
Secured Party, each of the Debtor's records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Secured Party, indicating that
such document, chattel paper, Related Contract or Collateral is subject to the
assignment and security interest granted hereby;
6.1.2. if any Collateral shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Secured Party
hereunder such note or instrument or chattel paper duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to the Secured Party; and
6.1.3. execute for filing such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
reasonably necessary or desirable, or as the Secured Party may reasonably
request, in order to perfect and preserve the assignment and security interest
granted or purported to be granted hereby.
6.2. The Debtor hereby authorizes the Secured Party to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Debtor where permitted
by law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
6.3. The Debtor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail.
7. PLACE OF PERFECTION; RECORDS; COLLECTION OF RECEIVABLES.
7.1. The Debtor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Receivables at
the location therefor specified in Section
<PAGE>
5.1 or, upon 30 days prior written notice to the Secured Party, at any other
locations in a jurisdiction where all actions required by Section 6 shall have
been taken with respect to the Receivables. The Debtor will hold and preserve
such records and will permit representatives of the Secured Party, upon 24 hour
notice, at any time during normal business hours to inspect and make abstracts
from such records.
7.2. Debtor shall instruct all of the account debtors to make payments to
the post office box established pursuant to the Lock Box Agreement dated as of
even date herewith, (said Agreement, as it may hereafter be amended or otherwise
modified from time to time, being referred to herein as the "Lock Box
Agreement"). Upon the occurrence and during the continuance of an Event of
Default, Secured Party or Secured Party's designee may, at any time, notify
customers or account debtors of Debtor that the Receivables have been assigned
to Secured Party and that Secured Party has a security interest therein, collect
them directly, and charge the collection costs and expenses to Debtor's loan
account, but, unless and until Secured Party does so or gives Debtor other
written instructions, Debtor shall be entitled, subject to the terms of the Lock
Box Agreement, to collect the Receivables and, upon receipt, Debtor shall
immediately deliver to Secured Party the proceeds of such Receivables, together
with a detailed collection report in form and manner satisfactory to Secured
Party. Debtor agrees that all payments received by Debtor in connection with the
Receivables and any other Collateral shall be held in trust for Secured Party as
Secured Party's trustee. The receipt of any wire transfer of funds, check, or
other item of payment by Secured Party shall be immediately applied to
conditionally reduce Debtor's Obligations, but shall not be considered a payment
on account unless such check or other item of payment is honored when presented
for payment. The receipt of any wire transfer, check or other item of payment by
CHF shall be deemed to have been paid to CHF two (2) business days after the
date CHF actually receives possession of such check or other item of payment for
all funds other than federal government funds and one (1) business day after the
date CHF actually receives possession of such check or other item of payment for
all federal government funds.
8. AS TO RELATED CONTRACTS. The Debtor shall at its expense:
8.1. perform and observe all the terms and provisions of the Related
Contracts to be performed or observed by it, maintain the Related Contracts in
full force and effect, enforce the Related Contracts in accordance with their
respective terms, and take all such action to such end as may be from time to
time reasonably requested by the Secured Party.
8.2. furnish to the Secured Party promptly upon receipt thereof copies of
all notices, requests and other documents received by the Debtor under or
pursuant to the Related Contracts, and from time to time (1) furnish to the
Secured Party such information and reports regarding the Collateral as the
Secured Party may reasonably request and (2) upon request of the Secured Party
make to any other party to any Related Contracts such demands and requests for
information and reports or for action as the Debtor is entitled to make
thereunder.
8.3. The Debtor shall not:
8.3.1. cancel or terminate any Related Contracts or consent to or
accept any cancellation or termination thereof;
8.3.2. amend or otherwise modify any Related Contracts or give any
consent, waiver or approval thereunder;
8.3.3. waive any default under or breach of any Related Contracts; or
8.3.4. take any other action in connection with the Related Contracts
which would impair the value of the interest or rights of the Debtor thereunder
or which would impair the interest or rights of the Secured Party.
9. TRANSFERS AND OTHER LIENS. The Debtor shall not (1) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the Collateral or (2)
<PAGE>
create or permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement and except for permitted encumbrances.
10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Debtor hereby irrevocably
designates, makes, constitutes and appoints the Secured Party (and all persons
designated by the Secured Party) as the Debtor's true and lawful agent and
attorney-in-fact (which appointment shall be for all purposes deemed to be
coupled with an interest and shall be irrevocable for so long as any Obligations
are outstanding) and authorizes the Secured Party, in the Debtor's or the
Secured Party's name, and only upon the occurrence and during the continuance of
an Event of Default, but only to the extent permitted by law, to take any action
and to execute any instrument which the Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
10.1. to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
10.2. to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection therewith; and
10.3. to file any claims or take any action or institute any proceedings
which the Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce compliance with the rights of the
Secured Party with respect to any of the Collateral.
11. SECURED PARTY MAY PERFORM. If the Debtor fails to perform any agreement
contained herein, the Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of the Secured Party incurred in connection
therewith shall be payable by the Debtor under Section 14.2.
12. THE SECURED PARTY'S DUTIES. The powers conferred on the Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Secured Party shall have no duty as to any
Collateral, whether or not the Secured Party has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of any Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which Secured Party accords its
own property.
13. REMEDIES. If any Event of Default shall have occurred and be continuing:
13.1. The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the Code
(whether or not the Code applies to the affected Collateral) and all other
applicable law, and also may (1) require the Debtor to, and the Debtor hereby
agrees that it will at its expense and upon request of the Secured Party
forthwith, assemble all or part of the Collateral as directed by the Secured
Party and make it available to the Secured Party at a place to be designated by
the Secured Party which is reasonably convenient to both parties and (2) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Secured Party's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Secured Party may deem commercially reasonable. The Debtor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
<PAGE>
13.2. Any cash held by the Secured Party as Collateral and all cash
proceeds received by the Secured Party in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in the
discretion of the Secured Party, be held by the Secured Party as collateral for,
and/or then or at any time thereafter be applied (after payment of any amounts
payable to the Secured Party pursuant to Section 14) in whole or in part by the
Secured Party against, all or any part of the Obligations in such order as the
Secured Party shall elect. Any surplus of such cash or cash proceeds held by the
Secured Party and remaining after payment in full of all the Obligations shall
be paid over to the Debtor or to whomsoever may be lawfully entitled to receive
such surplus.
13.3. The Secured Party may exercise any and all rights and remedies of the
Debtor under or in connection with or otherwise in respect of the Collateral.
13.4. All payments received by the Debtor under or in connection with or
otherwise in respect of the Collateral shall be received in trust for the
benefit of the Secured Party, shall be segregated from other funds of the Debtor
and shall be forthwith paid over to the Secured Party in the same form as so
received (with any necessary endorsement).
14. INDEMNITY AND EXPENSES.
14.1. The Debtor agrees to indemnify and hold the Secured Party harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, cost, expenses or disbursements of any
kind or nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, or incurred by, or asserted
against the Secured Party in any claim, action, suit, proceeding or
investigation asserted, instituted or conducted by any Governmental Authority or
any other Person in connection with, arising out of, based upon or with respect
to the enforcement by the Secured Party of any right or remedy granted to it
hereunder, except to the extent that any of the foregoing arises out of the
gross negligence or willful misconduct of the Secured Party.
14.2. Subject to the terms of the Loan Agreement, the Debtor will upon
demand pay to the Secured Party the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of the
Secured Party hereunder or (iv) the failure by the Debtor to perform or observe
any of the provisions hereof.
15. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition of this
Agreement, the Loan Agreement or the Notes may not be amended, waived or
consented to unless and until such amendment, waiver or consent is in writing
and is signed by the Secured Party and, in the case of an amendment, by the
Debtor. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given.
16. ADDRESSES FOR NOTICES. All notices, requests, consents or other
communications provided for in or to be given under this Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by certified or registered mail, and shall be deemed to
have been duly given and to have become effective (1) upon receipt if delivered
in person or by fax (and followed by the same or next business day of mailing of
such faxed notice by one of the other methods of delivery permitted hereunder),
(2) one day after having been delivered to an overnight air courier or (5) FIVE
days after having been deposited in the mails as certified or registered mail,
all fees prepaid, directed to the parties at the following addresses (or at such
other address as shall be given in writing by a party hereto):
If to Secured Party, at:
Capital Healthcare Financing
1799 West Oakland Park Boulevard
Fort Lauderdale, FL 33311
<PAGE>
If to Debtor, at:
the Address for Notices
set forth in ANNEX I hereto
or to such other address as each party designates to the other in the manner
herein prescribed. Failure or delay in delivering copies of any notice to the
parties designated above to receive copies shall in no way affect the
effectiveness of such notice.
17. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER LOAN AGREEMENT. This
Agreement shall create a continuing security interest in the Collateral and
shall (1) remain in full force and effect until the payment in full of the
Obligations and all other amounts payable under this Agreement, (2) be binding
upon the Debtor, its successors and assigns, (3) inure to the benefit of, and be
enforceable by, the Secured Party and its successors, transferees and assigns
and (4) be absolute, unconditional and irrevocable. Without limiting the
generality of the foregoing clause (3), the Secured Party may assign or
otherwise transfer all or any portion of its rights and obligations under the
Loan Agreement and the Note to any other person or entity, and such other person
or entity shall thereupon become vested with all the benefits in respect thereof
granted to the Secured Party herein or otherwise. Upon the later of the payment
in full of the Obligations and all other amounts payable under this Agreement,
the security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Debtor. Upon any such termination, the Secured
Party will, at the Debtor's expense, execute and deliver to the Debtor such
documents as the Debtor shall reasonably request to evidence such termination.
18. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Florida without regard to
conflicts of law principles. All judicial proceedings brought against the Debtor
arising out of, in connection with or relating to this Agreement or any
Obligation may be brought in any state or federal court of competent
jurisdiction in the State of Florida and by execution and delivery of this
Agreement, the Debtor accepts for itself and in connection with its properties,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non conveniens and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement or
such Obligations. The Debtor waives personal service of any summons, complaint
or other process, and agrees that service thereof may be made by registered or
certified mail directed to the Debtor at its address set forth in Section 16
hereof or such other address of which the Debtor has previously notified the
Secured Party in accordance with Section 16 hereof. Nothing herein shall affect
the right to serve process in any other manner permitted by law or shall limit
the right of the Secured Party to bring proceedings against the Debtor in the
courts of any other jurisdiction.
19. WAIVERS OF RIGHTS. The Debtor waives (1) any requirement, and any right to
require, that any right or power be exercised or any action be taken against any
other person or any collateral for the Obligations; (2) all defenses to, and all
setoffs, counterclaims and claims of recoupment against, the Obligations that
may at any time be available to any other person except that, to the extent
applicable rules of court would require that debtor assert any counterclaim it
may have against CHF in the same action filed by CHF to enforce the obligations
only such counterclaim shall be so preserved (3) all notices that may be
required by applicable law or otherwise to preserve any rights against the
Debtor hereunder, including any notice of default, demand, dishonor, presentment
and protest; (4) any defense based upon, arising out of or in any way related to
(A) any claim that any election of remedies by the Secured Party, including the
exercise by the Secured Party of any rights against any Collateral, impaired,
reduced, released or otherwise extinguished any right that the Debtor might
otherwise have had against any person or against any Collateral, including any
right of subrogation, exoneration, reimbursement or contribution or right to
obtain a deficiency judgment, and (B) any claim that this Agreement should be
strictly construed against the Secured Party; (5) TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED
PARTY'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT THAT THE DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
<PAGE>
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND 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 (6) rights of
redemption, appraisement, valuation, stay and extension or moratorium; and (7)
except as expressly provided in the other Loan Documents, all other rights and
defenses under applicable law the exercise of which would, directly or
indirectly, prevent, delay or inhibit the enforcement of any of the rights or
remedies under this Agreement or the absolute sale of the Collateral or would be
a reduction or limitation of the Obligations or a defense against the Debtor's
obligations hereunder.
20. RIGHTS CUMULATIVE. The rights and remedies of the Secured Party under this
Agreement shall be cumulative and not exclusive of nor limiting upon any rights
or remedies that it otherwise has, and no failure or delay by the Secured Party
in exercising any right shall operate as a waiver of it, nor shall any single or
partial exercise of any power or right preclude its other or further exercise or
the exercise of any other power or right.
21. NO ASSIGNMENT BY DEBTOR. The Debtor may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
the Secured Party, and no such assignment or transfer of any such obligations
shall relieve the Debtor thereof unless the Secured Party shall have consented
to such release in a writing specifically referring to the obligation from which
the Debtor is to be released.
22. NO JURY TRIAL. THE SECURED PARTY AND THE DEBTOR HEREBY IRREVOCABLY WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT.
23. SEVERABILITY OF PROVISIONS. In the event that any provision of this
Agreement or the application thereof to the Debtor or any circumstance in any
jurisdiction governing this Agreement shall, to any extent, be invalid or
unenforceable under any applicable statute, regulation or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
herewith and shall be deemed modified to conform to such statute, regulation or
rule of law, and the remainder of this Agreement and the application of any such
invalid or unenforceable provision to parties, jurisdictions or circumstances
other than to whom or to which it is held invalid or unenforceable shall not be
affected thereby nor shall the same affect the validity or enforceability of any
other provision of this Agreement.
24. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto were upon the same instrument.
25. HEADINGS. Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect. Words of
masculine, feminine or neuter gender shall mean and include the correlative
words of the other genders, and words importing the singular number shall mean
and include the plural number, and VICE VERSA.
<PAGE>
26. ENTIRE AGREEMENT. This Agreement, the Loan Agreement and the other Loan
Documents embody the entire agreement between the Debtor and the Secured Party
and supersede all prior agreements, representations and understandings, if any,
relating to the subject matter hereof.
IN WITNESS WHEREOF, each Debtor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
HOSPITAL STAFFING SERVICES, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI TRAVEL NURSE OPERATIONS, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSS RECRUITING, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI MEDICARE HOME OFFICE, INC. D/B/A
HOME CARE HOME OFFICE
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC.
D/B/A ALTERNATIVE CARE MEDICAL SERVICES
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A
MID-SOUTH COMPREHENSIVE HOME HEALTH
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
<PAGE>
ALL-CARE PROFESSIONAL SERVICES, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI OF GEORGIA, INC. D/B/A
TRI-THERAPY
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI PROPRIETARY HOME OFFICE, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF FLORIDA, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI ACQUISITION CORP.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES OF CALIFORNIA, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF BROWARD, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HOSPITAL STAFFING SERVICES MEDICARE OF
PALM BEACH, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
HSSI OF FLORIDA PROPRIETARY, INC.
By: /S/ BOBBY L. SHIELDS
------------------------------------------------
Bobby L. Shields, Secretary
<PAGE>
ANNEX I TO SECURITY AGREEMENT
List of Entities Comprising the Debtor
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Medicare Home Office, Inc. d/b/a
Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Massachusetts, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Rhode Island, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Tennessee, Inc. d/b/a
Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Georgia, Inc. d/b/a
Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
ADDRESS FOR NOTICES FOR ALL ENTITIES LISTED ABOVE:
Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
ANNEX II TO SECURITY AGREEMENT
List of Permitted Encumbrances Pursuant to Section 5.2
All expenditures incurred in the ordinary course for capital leases of less than
$50,000.00, indebtedness less than $100,000.00 in the aggregate or any other
indebtedness approved by CHF in writing.
<PAGE>
ANNEX III TO SECURITY AGREEMENT
List of Trade Names Pursuant to Section 5.2
HSSI Homecare
Alternative Care Medical Services
Mid-South Comprehensive Home Health
Mid-South Staffing
Tri-Therapy
Recovery Task Force
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HSSI TRAVEL NURSE OPERATIONS, INC., a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400, Fort
Lauderdale, FL 33308 ("Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE: February 7, 1996
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996.
As security for the Advances, Client has assigned to CHF certain
collateral, including amongst other things Client's accounts receivable, and the
proceeds of that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI Travel Nurse Government
Depository/Capital Healthcare Financing", no. 3550009410.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9117, Miami, FL 33141-9117.
3. All checks, drafts, and money orders received by Client shall be
mailed to the foregoing address. The Bank's authorized representatives
shall have exclusive access to the Lock Box under the authority given
by Client and shall make regular pick-ups from the Lock Box.
Remittances so received will be processed and deposited to the Account.
Bank will process items on a daily basis in accordance with Annex I
attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned,
<PAGE>
whether for insufficient funds or for any other reason, and without
regard to the timeliness of return of any such check or item, and (b)
Bank's usual and customary fees and charges for services rendered in
connection with the Account, and (c) claims of breach of the Uniform
Commercial Code's warranties of good title or of no material alteration
made against Bank in connection with checks and other items deposited
to the Account. CHF agrees that its interest in the Account is
subordinate to the rights reserved by Bank in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009410 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
<PAGE>
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /S/ JOHN B. APGAR
---------------------------------------------
John B. Apgar, Senior Vice President
HSSI TRAVEL NURSE OPERATIONS, INC.,
a Florida corporation
By: /S/ BOBBY L.. SHIELDS
---------------------------------------------
Bobby L. Shields, Secretary
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /S/ R. THOMAS BURGE
---------------------------------------------
Title: R. THOMAS BURGE, SENIOR VICE PRESIDENT
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI Travel Nurse Government Depository
Account Number: 3550009410
Lockbox Address: PO Box 41-9117, Miami, FL 33141-9117
Mailing Address: Hospital Staffing Services, Inc.
6245 N Federal Highway, Suite 400
Ft. Lauderdale, FL 33308-1900
Contact Person: Controller (954) 771-0500
Return Items: Charge Travel Nurse Ops. - Return Item Account
Return Item Account Number: 3550009771
Acceptable Payees: Hospital Staffing Services, Inc.
HSSI
HSSI Travel Nurse
HSSI Travel Nurse Operations, Inc.
Third-Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily
basis to Client to the mailing address for the lockbox:
Deposit Summary, Detail Check Listing, Rejected Items,
Photocopies attached to envelopes and invoices, and all
correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HSSI TRAVEL NURSE OPERATIONS, INC., a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400, Fort
Lauderdale, FL 33308 ("Client")
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI Travel Nurse Non-Government
Depository/Capital Healthcare Financing", no. 3550009437.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9118, Miami, FL 33141-9118.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned, whether for insufficient funds or for any
other reason, and without regard
<PAGE>
to the timeliness of return of any such check or item, and (b) Bank's
usual and customary fees and charges for services rendered in
connection with the Account, and (c) claims of breach of the Uniform
Commercial Code's warranties of good title or of no material alteration
made against Bank in connection with checks and other items deposited
to the Account. CHF agrees that its interest in the Account is
subordinate to the rights reserved by Bank in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009437 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
--------------------------------------
John B. Apgar, Senior Vice President
HSSI TRAVEL NURSE OPERATIONS, INC.,
a Florida corporation
By: /s/ RONALD A. CASS
--------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI Travel Nurse Non-Government Depository
Account Number: 3550009437
Lockbox Address: PO Box 41-9118, Miami, FL 33141-9118
Mailing Address: Hospital Staffing Services, Inc.
6245 N Federal Highway, Suite 400
Ft. Lauderdale, FL 33308-1900
Contact Person: Controller (954) 771-0500
Return Items: Charge Travel Nurse Ops. - Return Item Account
Return Item Account Number: 3550009771
Acceptable Payees: Hospital Staffing Services, Inc.
HSSI
HSSI Travel Nurse
HSSI Travel Nurse Operations, Inc.
Third-Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily
basis to Client to the mailing address for the lockbox:
Deposit Summary, Detail Check Listing, Rejected Items,
Photocopies attached to envelopes and invoices, and all
correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A MID-SOUTH
COMPREHENSIVE HOME HEALTH, a Florida Corporation, whose principal
address is 6245 North Federal Highway, Suite 400, Fort Lauderdale,
FL 33308 ("Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "Mid-South Comp. Government
Depository/Capital Healthcare Financing", no. 3550009445.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9119, Miami, FL 33141-4119.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the
<PAGE>
Account and returned, whether for insufficient funds or for any other
reason, and without regard to the timeliness of return of any such
check or item, and (b) Bank's usual and customary fees and charges for
services rendered in connection with the Account, and (c) claims of
breach of the Uniform Commercial Code's warranties of good title or of
no material alteration made against Bank in connection with checks and
other items deposited to the Account. CHF agrees that its interest in
the Account is subordinate to the rights reserved by Bank in this
paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009445 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A
MID-SOUTH COMPREHENSIVE HOME HEALTH,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: Mid-South Comp. Government Depository
Account Number: 3550009445
Lockbox Address: PO Box 41-9119, Miami, FL 33141-9119
Mailing Address: Mid-South Comprehensive Home Health
5705 Stage Road, Suite 201
Memphis, TN 38134
Contact Person: Accounting Manager (901) 372-2500
Return Items: Charge Mid-South Comp. - Return Item Account
Return Item Account Number: 3550009798
Acceptable Payees: All Payees
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily
basis to Client to the mailing address for the lockbox:
Deposit Summary, Detail Check Listing, Rejected Items,
Photocopies attached to envelopes and invoices, and all
correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A MID-SOUTH
COMPREHENSIVE HOME HEALTH, a Florida Corporation, whose principal
address is 6245 North Federal Highway, Suite 400, Fort Lauderdale,
FL 33308 ("Client")
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "Mid-South Comp. Non-Government
Depository/Capital Healthcare Financing", no. 3550009453.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9120, Miami, FL 33141-9120.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned, whether for insufficient funds or for any
other reason, and without regard to the timeliness of return of any
such check or item, and (b) Bank's usual and customary fees and
<PAGE>
charges for services rendered in connection with the Account, and (c)
claims of breach of the Uniform Commercial Code's warranties of good
title or of no material alteration made against Bank in connection with
checks and other items deposited to the Account. CHF agrees that its
interest in the Account is subordinate to the rights reserved by Bank
in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009453 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC. D/B/A
MID-SOUTH COMPREHENSIVE HOME HEALTH,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: Mid-South Comp. Non-Government Depository
Account Number: 3550009453
Lockbox Address: PO Box 41-9120, Miami, FL 33141-9120
Mailing Address: Mid-South Comprehensive Home Health
5705 Stage Road, Suite 201
Memphis, TN 38134
Contact Person: Accounting Manager (901) 372-2500
Return Items: Charge Mid-South Comp. - Return Item Account
Return Item Account Number: 3550009798
Acceptable Payees: All Payees
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily
basis to Client to the mailing address for the lockbox:
Deposit Summary, Detail Check Listing, Rejected Items,
Photocopies attached to envelopes and invoices, and all
correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: ALL-CARE PROFESSIONAL SERVICES, INC., a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400, Fort
Lauderdale, FL 33308 ("Client")
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI All Care Government
Depository/Capital Healthcare Financing", no. 3550009461.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9121, Miami, FL 33141-9121.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned, whether for insufficient funds or for any
other reason, and without regard to the timeliness of return of any
such check or item, and (b) Bank's usual and customary fees and
<PAGE>
charges for services rendered in connection with the Account, and (c)
claims of breach of the Uniform Commercial Code's warranties of good
title or of no material alteration made against Bank in connection with
checks and other items deposited to the Account. CHF agrees that its
interest in the Account is subordinate to the rights reserved by Bank
in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009461 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
ALL-CARE PROFESSIONAL SERVICES, INC.,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI All-Care Government Depository
Account Number: 3550009461
Lockbox Address: PO Box 41-9121, Miami, FL 33141-9121
Mailing Address: All-Care Professional Services, Inc.
5705 Stage Road, Suite 201
Memphis, TN 38134
Contact Person: Accounting Manager (901) 372-2500
Return Items: Charge Mid-South Comp. - Return Item Account
Return Item Account Number: 3550009798
Acceptable Payees: All Payees
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client
to the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: ALL-CARE PROFESSIONAL SERVICES, INC., a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400,
Fort Lauderdale, FL 33308 ("Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI All Care Non-Government
Depository/Capital Healthcare Financing", no. 3550009488.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9122, Miami, FL 33141-9122.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned, whether for insufficient funds or for any
other reason, and without regard
<PAGE>
to the timeliness of return of any such check or item, and (b) Bank's
usual and customary fees and charges for services rendered in
connection with the Account, and (c) claims of breach of the Uniform
Commercial Code's warranties of good title or of no material alteration
made against Bank in connection with checks and other items deposited
to the Account. CHF agrees that its interest in the Account is
subordinate to the rights reserved by Bank in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009488 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
ALL-CARE PROFESSIONAL SERVICES, INC.,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI All Care Non-Government Depository
Account Number: 3550009488
Lockbox Address: PO Box 41-9122, Miami, FL 33141-9122
Mailing Address: All-Care Professional Services, Inc.
5705 Stage Road, Suite 201
Memphis, TN 38134
Contact Person: Accounting Manager (901) 372-2500
Return Items: Charge Mid-South Comp. - Return Item Account
Return Item Account Number: 3550009798
Acceptable Payees: All Payees
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client to
the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC. D/B/A ALTERNATIVE
CARE MEDICAL SERVICES, a Florida Corporation, whose principal address
is 6245 North Federal Highway, Suite 400, Fort Lauderdale, FL 33308
HOSPITAL STAFFING SERVICES OF RHODE ISLAND,
INC. D/B/A ALTERNATIVE CARE MEDICAL
SERVICES, a Florida Corporation, whose
principal address is 6245 North Federal
Highway, Suite 400, Fort Lauderdale, FL
33308 (collectively, "Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "Alternative Care Government
Depository/Capital Healthcare Financing", no. 3550009496.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9123, Miami, FL 33141-9123.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be subject
to deductions, setoff, banker's liens, or any other right in favor of
any person other than CHF. Nothing herein constitutes a waiver of, and
Bank reserves all of its present and future rights (whether described
as rights of offset, banker's lien, chargeback or otherwise, and
whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the Account and returned, whether for insufficient funds or for any
other reason, and without regard to the timeliness of return of any
such check or item, and (b) Bank's usual and customary fees and charges
for services rendered in connection with the Account, and (c) claims of
breach of the Uniform Commercial Code's warranties of good title or of
no material alteration made against Bank in connection with checks and
other items deposited to the Account. CHF agrees that its interest in
the Account is subordinate to the rights reserved by Bank in this
paragraph.
<PAGE>
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009496 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand-delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
<PAGE>
10. At the end of each month, the Bank shall deliver a copy
of the Bank's regular statement covering deposits to and withdrawals
from the Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: Alternative Care Government Depository
Account Number: 3550009496
Lockbox Address: PO Box 41-9123, Miami, FL 33141-9123
Mailing Address: Alternative Care Medical Services
430 Bedford Street, Suite 325
Lexington, MA 02173
Contact Person: Regional Controller (617) 674-0001
Return Items: Charge Alternative Care - Return Item Account
Return Item Account Number: 3550009763
Acceptable Payees: Hospital Staffing Service of Massachusetts, Inc.
d/b/a Alternative Care Medical Services, Inc.
ACMS Alternative Care Medical Services
HSSI d/b/a Alternative Care Medical Services
HSSI d/b/a ACMS
Hospital Staffing Services of Massachusetts, Inc.
d/b/a ACMS
Third Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client
to the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC. D/B/A ALTERNATIVE
CARE MEDICAL SERVICES, a Florida Corporation, whose principal address
is 6245 North Federal Highway, Suite 400, Fort Lauderdale, FL 33308
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A ALTERNATIVE
CARE MEDICAL SERVICES, a Florida Corporation, whose principal address
is 6245 North Federal Highway, Suite 400, Fort Lauderdale,
FL 33308 (collectively, "Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "Alternative Care Non-Government
Depository/Capital Healthcare Financing", no. 3550009518.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9124, Miami, FL 33141-9124.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or
<PAGE>
under the Uniform Commercial Code) with respect to (a) checks and other
items deposited to the Account and returned, whether for insufficient
funds or for any other reason, and without regard to the timeliness of
return of any such check or item, and (b) Bank's usual and customary
fees and charges for services rendered in connection with the Account,
and (c) claims of breach of the Uniform Commercial Code's warranties of
good title or of no material alteration made against Bank in connection
with checks and other items deposited to the Account. CHF agrees that
its interest in the Account is subordinate to the rights reserved by
Bank in this paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009518 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or
modifies, or notifies Bank of Client's intent to terminate or modify,
the Lock Box Agreement within one (1) business day of such
notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
<PAGE>
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC. D/B/A
ALTERNATIVE CARE MEDICAL SERVICES,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: Alternative Care Non-Government Depository
Account Number: 3550009518
Lockbox Address: PO Box 41-9124, Miami, FL 33141-9124
Mailing Address: Alternative Care Medical Services
430 Bedford Street, Suite 325
Lexington, MA 02173
Contact Person: Regional Controller (617) 674-0001
Return Items: Charge Alternative Care - Return Item Account
Return Item Account Number: 3550009763
Acceptable Payees: Hospital Staffing Service of Massachusetts, Inc.
d/b/a Alternative Care Medical Services, Inc.
ACMS
Alternative Care Medical Services
HSSI d/b/a Alternative Care Medical Services
HSSI d/b/a ACMS
Hospital Staffing Services of Massachusetts, Inc.
d/b/a ACMS
Third Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client
to the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HSSI OF GEORGIA, INC. D/B/A TRI-THERAPY, a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400, Fort
Lauderdale, FL 33308 ("Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI Tri-Therapy Government
Depository/Capital Healthcare Financing", no. 3550009526.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9125, Miami, FL 33141-9125.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the
<PAGE>
Account and returned, whether for insufficient funds or for any other
reason, and without regard to the timeliness of return of any such
check or item, and (b) Bank's usual and customary fees and charges for
services rendered in connection with the Account, and (c) claims of
breach of the Uniform Commercial Code's warranties of good title or of
no material alteration made against Bank in connection with checks and
other items deposited to the Account. CHF agrees that its interest in
the Account is subordinate to the rights reserved by Bank in this
paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009526 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
<PAGE>
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
HSSI OF GEORGIA, INC. D/B/A
TRI-THERAPY,
a Florida corporation
By: /s/ RONALD A. CASS
----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI Tri-Therapy Government Depository
Account Number: 3550009526
Lockbox Address: PO Box 41-9125, Miami, FL 33141-9125
Mailing Address: Hospital Staffing Services, Inc.
6245 N. Federal Highway, Suite 400
Ft. Lauderdale, FL 33308-1900
Contact Person: Controller (954) 771-0500
Return Items: Charge Tri-Therapy - Return Item Account
Return Item Account Number: 3550009801
Acceptable Payees: Tri-Therapy
Tri-Therapy, Inc.
Hospital Staffing Service of Georgia, Inc.
Southern Rehabilitation
Third Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client
to the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
EXHIBIT F
CAPITAL HEALTHCARE FINANCING
A DIVISION OF CAPITAL FACTORS, INC.
LOCK BOX AGREEMENT
AMONG: CAPITAL HEALTHCARE FINANCING, a Florida corporation, which has an
address at 1799 West Oakland Park Boulevard, Fort Lauderdale,
FL 33311 ("CHF").
AND: HSSI OF GEORGIA, INC. D/B/A TRI-THERAPY, a Florida Corporation, whose
principal address is 6245 North Federal Highway, Suite 400, Fort
Lauderdale, FL 33308 ("Client").
AND: CAPITAL BANK, a Florida banking corporation, whose address is
1666 Kennedy Causeway, North Bay Village, FL 33141("Bank").
DATE:
CHF is making certain advances (the "Advances") to Client pursuant to a Provider
Revolving Loan Agreement (the "Agreement") dated February 7, 1996. As
security for the Advances, Client has assigned to CHF certain collateral,
including amongst other things Client's accounts receivable, and the proceeds of
that collateral.
CHF and Client agree as follows and request Bank to establish a special
depository account (the "Account") on the terms set forth in this Agreement:
1. The Account shall be designated "HSSI Tri-Therapy Non-Government
Depository/Capital Healthcare Financing", no. 3550009534.
2. A postal box (the "Lock Box") has been rented in the name of
Client to be used for collecting payments from Client's customers. The
address of the Lock Box is PO Box 41-9126, Miami, FL 33141-9126.
3. All checks, drafts, and money orders received by Client shall
be mailed to the foregoing address. The Bank's authorized
representatives shall have exclusive access to the Lock Box under the
authority given by Client and shall make regular pick-ups from the Lock
Box. Remittances so received will be processed and deposited to the
Account. Bank will process items on a daily basis in accordance with
Annex I attached hereto.
4. Except as otherwise provided herein, the Account shall not be
subject to deductions, setoff, banker's liens, or any other right in
favor of any person other than CHF. Nothing herein constitutes a waiver
of, and Bank reserves all of its present and future rights (whether
described as rights of offset, banker's lien, chargeback or otherwise,
and whether available to Bank at law, in equity, or under the Uniform
Commercial Code) with respect to (a) checks and other items deposited
to the
<PAGE>
Account and returned, whether for insufficient funds or for any other
reason, and without regard to the timeliness of return of any such
check or item, and (b) Bank's usual and customary fees and charges for
services rendered in connection with the Account, and (c) claims of
breach of the Uniform Commercial Code's warranties of good title or of
no material alteration made against Bank in connection with checks and
other items deposited to the Account. CHF agrees that its interest in
the Account is subordinate to the rights reserved by Bank in this
paragraph.
5. On each day of the week, and provided the day is a business day
for the Bank, the Bank shall transfer the entire amount of each such
collected deposit via internal sweep, wire transfer or ACH DTC
electronic funds transfer from the Account, no. 3550009534 to the
account of CHF, Account No. 3050008997 maintained at Capital Bank, 1221
Brickell Avenue, Miami, FL 33131 ABA # 067008414. All amounts
transferred to CHF's account shall be applied by CHF against the
Client's obligations to CHF in accordance with the terms of the
Agreement.
Bank reserves the right to place holds on items deposited to the
Account to the extent permitted by Federal Reserve Regulation CC. CHF
represents and warrants that the account number at Capital Bank is
correct. CHF and Client understand that under the Uniform Commercial
Code, if a funds transfer instruction identifies the beneficiary, the
beneficiary's bank, or an intermediary bank by name and an account or
other identifying number, the Bank and subsequent parties to the funds
transfer may act solely on the basis of such number(s), even if the
name and number do not agree.
6. The Bank shall charge Client's operating account no. 3550009542
maintained at Capital Bank for any and all costs and expenses of
administration of the Account in accordance with Bank's fee
schedule(s). The Bank shall provide a copy of the Lock Box activity to
Client and CHF each month at the addresses set forth above or to such
address as any party hereto may have designated by like notice
forwarded to the other parties hereto. The Bank shall notify CHF and
Client of all deposited customer items that are returned for any
reason. Client shall reimburse the Bank on the day of receipt by the
Bank of any and all returned and uncollected items originally deposited
in the Account. Reimbursement will be accomplished by debiting the
Account. If the total of returned or dishonored items shall exceed the
Account, Client agrees to indemnify and reimburse the Bank for such
reasonable fees and charges including those for items returned for any
reason that were deposited to the Account.
7. Client agrees that Bank shall not be liable to Client, or any
third party for any indirect, special, consequential or exemplary
damage arising from the performance or non-performance of this
Agreement by Bank, its officers, employees, or agents absent the gross
negligence or willful misconduct of Bank. In addition, Client hereby
agrees to indemnify and hold Bank harmless from and against any and all
liabilities, claims, losses, damages, attorney's fees and expenses,
incurred or suffered by Bank. In entering into or performing this
Agreement, except where such loss or liability is occasioned by Bank's
gross negligence or willful misconduct.
8. This Agreement shall remain in full force and effect until express
written notice of termination is given to the Bank by CHF; provided,
however, that the Bank reserves the right to terminate this Agreement
at any time upon thirty days' written notice to both CHF and Client.
Upon termination of this Agreement for any reason other than the
satisfaction of the Obligations of Client to CHF in accordance with the
terms of the Agreement, the then remaining balance of the Account shall
be transferred to CHF's account as provided in Section 5 of this
Agreement. Upon satisfaction of the Obligations of Client to CHF in
accordance with the terms of the Agreement, CHF shall immediately give
the Bank written notice of termination of this Agreement, and in such
instance the then remaining balance of the Account shall be the sole
property of Client. Termination shall not affect the duties or
obligations of any party hereto arising out of transactions occurring
prior to termination.
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if hand- delivered, mailed from within the
United States by certified or registered mail, or sent by prepaid
telegram or via facsimile transmission to the addresses set forth in
the first paragraph of this Agreement or to such other address as any
such party may have designated by like notice forwarded to the other
parties hereto. All notices except notices of change of address and
notice of termination of this Agreement, shall be deemed given when
mailed and notices of changes of address or notice of termination of
this Agreement shall be deemed given when received.
10. At the end of each month, the Bank shall deliver a copy of the
Bank's regular statement covering deposits to and withdrawals from the
Account to Client and CHF at the addresses set forth above.
11. Bank agrees to notify CHF if Client terminates or modifies, or
notifies Bank of Client's intent to terminate or modify, the Lock Box
Agreement within one (1) business day of such notification.
12. Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
13. Each party hereby represents and warrants to the other parties
hereto that it has full power and authority to enter into and perform
this Agreement and the person executing this Agreement on behalf of
such party has been properly authorized and empowered to so execute
this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
In witness whereof, the parties hereto have executed this instrument to be
effective on the date first set forth above.
CAPITAL HEALTHCARE FINANCING,
a division of CAPITAL FACTORS, INC.,
a Florida Corporation
By: /s/ JOHN B. APGAR
----------------------------------------
John B. Apgar, Senior Vice President
HSSI OF GEORGIA, INC. D/B/A
TRI-THERAPY,
a Florida corporation
By: /s/ RONALD A. CASS
-----------------------------------------
Ronald A. Cass, Chief Executive Officer
ACCEPTED AND APPROVED:
CAPITAL BANK,
a Florida banking corporation
By: /s/ R. THOMAS BURGE
----------------------------------------
Title: R. Thomas Burge, Senior Vice President
<PAGE>
ANNEX I TO LOCKBOX AGREEMENT
Account Title: HSSI Tri-Therapy Non-Government Depository
Account Number: 3550009534
Lockbox Address: PO Box 41-9126, Miami, FL 33141-9126
Mailing Address: Hospital Staffing Services, Inc.
6245 N. Federal Highway, Suite 400
Ft. Lauderdale, FL 33308-1900
Contact Person: Controller (954) 771-0500
Return Items: Charge Tri-Therapy - Return Item Account
Return Item Account Number: 3550009801
Acceptable Payees: Tri-Therapy
Tri-Therapy, Inc.
Hospital Staffing Service of Georgia, Inc.
Southern Rehabilitation
Third Party Endorsed
1) LOCKBOX PROCEDURES:
A) Differences in Amount
If the script and numerical amounts
themselves do not agree, yet one of these
amounts agrees with the invoice amount,
credit for the invoice amount. If there is
no invoice, or if neither the script or
numerical amount agree with the invoice
amount, credit for the script amount.
B) Checks Marked "Paid-in-Full"
Reject these checks
C) Correspondence, Orders, Etc., Received
Left in original envelope, marked with
"correspondence" stamp, and sent to the
company, with a copy to CHF as indicated in
Mailing Instructions below.
2) PROCESSING FEATURES:
A) Retain Envelopes
B) Two Photocopies of each check
C) One Photocopy of each EOB, invoice, correspondence, or
other items received, etc.
3) MAILING INSTRUCTIONS:
A) Send the following materials to CHF on daily basis via
interoffice: Deposit Summary, Detail Check Listing, One
photocopy of each check processed, Photocopies of EOB's,
correspondence, and other items received, and One photocopy
of each returned item.
B) Send the following materials on a daily basis to Client
to the mailing address for the lockbox: Deposit Summary,
Detail Check Listing, Rejected Items, Photocopies attached
to envelopes and invoices, and all correspondence.
4) RETURN ITEMS:
Rerun upon the first return. If returned a second time, charge
the account listed with each lockbox account. Send check and
debit memo with the daily materials.
5) BILLING INFORMATION:
Charge the master operating account no. 3550009542 for all
lockbox charges.
<PAGE>
THE FORM OF "GUARANTY BY CORPORATION" FOLLOWING WAS EXECUTED BY EACH OF THE
GUARANTOR CORPORATIONS INCLUDED IN ANNEX IX TO PROVIDER REVOLVING LOAN
AGREEMENT.
<PAGE>
EXHIBIT G
GUARANTY BY CORPORATION
Date FEBRUARY 7, 1996
Gentlemen:
LISTED ON ANNEX I ATTACHED HERETO, a corporation organized under the laws of the
state of LISTED ON ANNEX I ATTACHED HERETO (herein called the "Debtor") is (a)
engaged in business as a corporate affiliate of the undersigned, or (b) engaged
in selling, marketing, using, or otherwise dealing in merchandise, supplies,
products, equipment or other articles supplied to it by the undersigned, or (c)
______________________________________________________________________________
________________________________________________ Because of our inter-corporate
or business relations, it will be our direct interest and advantage to assist
the Debtor to procure funds, credit or other financial assistance from you
(which shall mean and be a reference to Capital Factors, Inc. and its successors
and assigns) in order to further its business and sales.
Accordingly, in order to induce you to purchase or otherwise acquire from the
Debtor accounts receivable, conditional sales or lease agreements, chattel
mortgages, drafts, notes, bills, acceptances, trust receipts, contracts or other
obligations or chooses-in-action (herein collectively called "receivables"), or
to advance moneys or extend credit to the Debtor thereon, or to factor the sales
or finance the accounts of the Debtor (either according to any present or future
agreements or according to any changes in any such agreements or on any other
terms and arrangements from time to time agreed upon with the Debtor, the
undersigned hereby consenting to and waiving notice of any and all such
agreements, terms and arrangements and changes thereof) or to otherwise directly
or indirectly advance money to or give or extend faith and credit to the Debtor,
or otherwise assist the Debtor in financing its business or sales (without
obligating you to do any of the foregoing), we, the undersigned, for value
received, do hereby unconditionally guarantee to you and your successors and
assigns the prompt payment in full at maturity and all times thereafter (waiving
notice of non-payment) of any and all indebtedness, obligations and liabilities
of every kind or nature (both principal and interest) now or at any time
hereafter owing to you by the Debtor, and of any and all receivables heretofore
or hereafter acquired by you from the Debtor in respect of which the Debtor has
or may become in any way liable, and the prompt, full and faithful performance
and discharge by the Debtor of all the terms, conditions, agreements,
representations, warranties, guaranties and provisions on the part of the Debtor
contained in any such agreement or arrangement or in any modification or addenda
thereto or substitution thereof, or contained in any schedule or other
instrument heretofore or hereafter given by or on behalf of the Debtor in
connection with the sale or assignment of any such receivables to you, or
contained in any other agreements, undertakings or obligations of the Debtor
with or to you, of any kind or nature, and we also hereby agree on demand to
reimburse you and your assigns for all expenses, collection charges, court costs
and attorney's fees (including those incurred at the trial and appellate levels)
incurred in endeavoring to collect or enforce any of the foregoing against the
Debtor and/or undersigned or any other person or concern liable thereon; for all
of which, with interest at the highest lawful contract rate after due until
paid, we hereby agree to be directly, unconditionally and primarily liable
jointly and severally with the Debtor and agree that the same may be recovered
in the same or separate actions brought to recover the principal indebtedness.
Notice of acceptance of this guaranty, the giving or extension of credit to the
Debtor, the purchase or acquisition of receivables, or the advancement of money
or credit thereon, and presentment, demand, notices of default, non-payment of
partial payments and protest, notice of protest and all other notices or
formalities to which the Debtor might otherwise be entitled, prosecution of
collection or remedies against the Debtor or against the makers, endorsers, or
other person(s) liable on any such receivables or against any security or
collateral thereto appertaining, are hereby waived. The undersigned also waives
notice of any consents to the granting of indulgences or extensions of time,
payment, the taking and releasing of security in respect of any receivable
agreements, obligations, indebtedness or liabilities so guaranteed hereunder, or
your accepting partial payments thereon or your settling, compromising or
compounding any of the same in such manner and at such times as you may deem
advisable, without in any way impairing or affecting our liability for the full
amount thereof; and you shall not be required to prosecute collection,
enforcement or other remedies against the Debtor or against any person liable on
any said receivables, agreements, obligations, indebtedness or liabilities so
guaranteed, or to enforce or resort to any security, liens, collateral or other
rights or remedies thereto appertaining, before calling on us for payment; nor
shall our liability in any way be released or affected by reason of any failure
or delay on your part so to do.
This guaranty is absolute, unconditional and continuing and payment of the sums
for which the undersigned become liable shall be made to you at your office from
time to time on demand as the same become or are declared due, notwithstanding
that you hold reserves, credits, collateral or security against which you may be
entitled to resort for payment, and one or more and successive or concurrent
actions may be brought hereon against the undersigned, either in the same action
in which the Debtor is sued or in separate actions, as often as deemed
advisable. We expressly waive and bar ourselves from any right to set-off,
recoup or counterclaim any claim or demand against the Debtor, or against any
other person or concern liable on said receivables, and, as further security to
you, any and all debts or liabilities now or hereafter owing to us by the Debtor
or by such other person or concern are hereby subordinated to your claims and
are hereby assigned to you.
In case bankruptcy or insolvency proceedings, or proceedings for reorganization,
or for the appointment of a receiver, trustee or custodian for us or the Debtor
or over our or the Debtor's property or any substantial portion thereof, be
instituted by or against either us or the Debtor, or if we or the Debtor become
insolvent or make an assignment for the benefit of creditors, or attempt to
effect a composition with creditors, or encumber or dispose of all or a
substantial portion of our or the Debtor's property or if we or the Debtor
default in the payment or repurchase of any such receivables or indebtedness as
the same falls due, or fail promptly to make good any default in respect of any
undertakings, then the liability of the undersigned thereunder shall at your
option and without notice become immediately fixed and be enforceable for the
full amount thereof, whether then due or not, the same as though all said
receivables, debts and liabilities had become past due.
This guaranty shall inure to the benefit or yourself, your successors and
assigns. It shall be binding on the undersigned, its successors and assigns, and
shall continue in full force and effect until written notice of termination is
given by us and received by you. No such termination shall affect
<PAGE>
in any manner your rights and our obligations under this guaranty with respect
to: (i) indebtedness, obligations and liabilities which shall have been created,
contracted, assumed or incurred prior to receipt by you of written notice of
such termination, or (ii) indebtedness, obligations and liabilities which shall
have been created, contracted, assumed or incurred after receipt of such written
notice pursuant to any contract entered into by you prior to receipt of such
notice. The sole effect of our written notice to you of termination of this
guaranty shall be to exclude from this guaranty indebtedness, obligations and
liabilities arising after your receipt of our notice of termination of this
guaranty which are not connected with indebtedness, obligations and liabilities
theretofore arising or transactions theretofore entered into. This guaranty
shall otherwise continue in full force and effect until any and all
indebtedness, obligations and liabilities created or assumed have been paid and
satisfied in full.
ATTEST: CARDINAL NURSING AND HOME CARE, INC.
/S/ BOBBY L. SHIELDS By: /S/ RONALD A. CASS
- -------------------------------- --------------------------
Secretary President
(AFFIX CORPORATE SEAL HERE)
CERTIFICATION
I, BOBBY L. SHIELDS , do hereby certify that I am the duly
elected and qualified Secretary of Cardinal Nursing and Home Care, Inc. , a
Florida corporation, the Guarantor named in the foregoing Guaranty; that a
(special) (regular) meeting of the Board of Directors of said Corporation held
on FEBRUARY 6, 1996, at which meeting a quorum was present and acting
throughout, the foregoing Guaranty was submitted to, and approved by, the Board
of Directors of said Corporation, and that the officer that executed the
Guaranty for and on behalf of the Corporation was so authorized by the Board of
Directors of the Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the seal of said Corporation this 7TH day of FEBRUARY, 1996.
/S/ BOBBY L. SHIELDS
------------------------------
Secretary
(Corporate Seal)
<PAGE>
ANNEX I TO CORPORATE GUARANTY
HOSPITAL STAFFING SERVICES, INC., a Florida corporation
HOSPITAL STAFFING SERVICES OF MASSACHUSETTS, INC., a Florida corporation
HOSPITAL STAFFING SERVICES OF RHODE ISLAND, INC., a Rhode Island corporation
HSS RECRUITING, INC., a Florida corporation
HSSI MEDICARE HOME OFFICE, INC., a Florida corporation
HOSPITAL STAFFING SERVICES OF TENNESSEE, INC., a Tennessee corporation
HSSI OF TRAVEL NURSE OPERATIONS, INC., a Florida corporation
ALL-CARE PROFESSIONAL INC., a Tennessee corporation
HSSI OF GEORGIA, INC., a Florida corporation
HSSI PROPRIETARY HOME OFFICE, INC., a Florida corporation
HOSPITAL STAFFING SERVICES OF FLORIDA, INC., a Florida corporation
HSSI ACQUISITION CORP., a New York corporation
HOSPITAL STAFFING SERVICES OF CALIFORNIA, INC., a Florida corporation
HOSPITAL STAFFING SERVICES MEDICARE OF BROWARD, INC., a Florida corporation
HOSPITAL STAFFING SERVICES MEDICARE OF PALM BEACH, INC., a Florida corporation
HSSI OF FLORIDA PROPRIETARY, INC., a Florida corporation
<PAGE>
OFFICER'S CERTIFICATE PURSUANT TO SECTION 3.1.3
OF THE PROVIDER REVOLVING LOAN AGREEMENT
Pursuant to Section 3.1.3 of the Provider Revolving Loan Agreement
(the "Loan Agreement") dated FEBRUARY 7, 1996 between the parties listed in
Annex I thereto (the "Provider") and Capital HealthCare Financing, a division of
Capital Factors, Inc. ("CHF"), the undersigned hereby certify to CHF as follows:
1. Capitalized terms used and not defined herein shall have the
meanings ascribed thereto in the Loan Agreement.
2. The undersigned are the chief executive officer and the treasurer
of Provider.
3. On the Closing Date, no Default or Event of Default has occurred
and is continuing.
4. No material adverse change in the Collateral or the financial
condition or operations of the business of Provider or any of its
respective Subsidiaries or the projected cash flow of Provider or
any of its respective Subsidiaries has occurred since OCTOBER 31,
1995.
5. The representations and warranties of Provider contained in the
Loan Agreement are true and correct in all respects on and as of
the date hereof with the same effect as though made on and as of
such date.
6. Provider on the Closing Date is in compliance with all the terms
and provisions set forth in the Loan Agreement on its part to be
observed and performed.
7. Provider, numbered two (2) through nine (9) listed on Annex I
hereto, on the Closing Date is not under investigation by a
Governmental Entity or being audited by the Internal Revenue
Service.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 6TH day of FEBRUARY, 1996.
/S/ RONALD A. CASS
--------------------------
Name:
Title: Chief Executive Officer
/S/ BOBBY L. SHIELDS
---------------------------
Name:
Title: Secretary
<PAGE>
ANNEX I TO OFFICER'S CERTIFICATE
List of Entities Comprising the Provider
1) Hospital Staffing Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
2) HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
3) HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
4) HSSI Medicare Home Office, Inc. d/b/a
Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
5) Hospital Staffing Services of Massachusetts, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
6) Hospital Staffing Services of Rhode Island, Inc. d/b/a
Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
7) Hospital Staffing Services of Tennessee, Inc. d/b/a
Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
8) All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
9) HSSI of Georgia, Inc. d/b/a
Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
10) HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
11) Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
12) Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
13) HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
14) Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
15) Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
16) HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
THE FORM OF "CERTIFICATE PURSUANT TO SECTION 3.1.7 OF PROVIDER REVOLVING LOAN
AGREEMENT" WAS EXECUTED BY EACH OF THE ENTITIES COMPRISING THE PROVIDER INCLUDED
IN ANNEX I TO PROVIDER REVOLVING LOAN AGREEMENT.
<PAGE>
CERTIFICATE PURSUANT TO SECTION 3.1.7
OF PROVIDER REVOLVING LOAN AGREEMENT
SECRETARY'S CERTIFICATE
I, BOBBY L. SHIELDS, Secretary of (Parent Subsidiary Unit), a Florida
corporation (the "Corporation"), do hereby certify that:
1. I am duly elected, qualified and currently serving Secretary of the
Corporation.
2. As appears from the records of the Corporation in my possession or
available to me as Secretary, the following named persons are the duly elected,
qualified and acting principal officers of the Corporation, holding at the date
hereof the offices set opposite their respective names, and the signatures set
opposite their names are their genuine signatures:
Ronald A. Cass OR /s/ RONALD A. CASS OR
-------------------
JAY GERSHBERG President /s/ JAY GERSHBERG
------------------------
Vice President
BOBBY L. SHIELDS Secretary /s/ BOBBY L. SHIELDS
------------------------
Treasurer
3. Attached as Exhibit A hereto is a true, complete and correct copy
of the Certificate of Incorporation of the Corporation as in effect as at the
date hereof.
4. Attached as Exhibit B hereto is a true, complete and correct copy
of the By-Laws of the Corporation as in effect as at the date hereof.
5. Attached as Exhibit C hereto is a true, complete and correct copy
of the resolutions duly adopted by the Board of Directors of the Corporation.
Such resolutions have not been amended, modified or rescinded and are in full
force and effect as at the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Corporation this 7th day of February, 1996.
[CORPORATE SEAL]
/s/ BOBBY L. SHIELDS
------------------------
Secretary
Ronald A. Cass
I, JAY GERSHBERG, President of the Corporation, hereby certifies that
BOBBY L. SHIELDS is the duly elected Secretary of the Corporation and that the
signature above set forth opposite his name is his genuine signature.
/s/ RONALD A. CASS OR
------------------
/s/ JAY GERSHBERG
------------------------
President
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
HSSI Travel Nurse Operations, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSS Recruiting, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Medicare Home Office, Inc.
d/b/a Home Care Home Office
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Massachusetts, Inc.
d/b/a Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Rhode Island, Inc.
d/b/a Alternative Care Medical Services
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Tennessee, Inc.
d/b/a Mid-South Comprehensive Home Health
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
All-Care Professional Services, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Georgia, Inc.
d/b/a Tri-Therapy
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Proprietary Home Office, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of California, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services of Florida, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI Acquisition Corp.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
<PAGE>
Hospital Staffing Services Medicare of Broward, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Hospital Staffing Services Medicare of Palm Beach, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
HSSI of Florida Proprietary, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, FL 33308
Cardinal Nursing and Home Care, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Cura Care, Inc. of Arizona
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of New Jersey, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Pennsylvania, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSS Advertising, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSS Associates, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Staff Source, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI Management Company, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
Hospital Staffing Services of Caribbean, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI of New York, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
HSSI of Texas, Inc.
6245 North Federal Highway, Suite 400
Fort Lauderdale, Florida 33308
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed Registration Statements on Forms S-8, File Nos. 33-40658 and
2-92689.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 23, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000731625
<NAME> HOSPITAL STAFFING SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<CASH> 1,697,804
<SECURITIES> 11,620
<RECEIVABLES> 16,502,112
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,164,379
<PP&E> 986,592
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,370,821
<CURRENT-LIABILITIES> 11,367,460
<BONDS> 0
0
0
<COMMON> 6,350
<OTHER-SE> 11,068,742
<TOTAL-LIABILITY-AND-EQUITY> 23,370,821
<SALES> 56,185,723
<TOTAL-REVENUES> 56,185,723
<CGS> 33,625,607
<TOTAL-COSTS> 33,625,607
<OTHER-EXPENSES> 21,112,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (245,319)
<INCOME-PRETAX> 1,202,108
<INCOME-TAX> 700,570
<INCOME-CONTINUING> 1,447,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,902,678
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
EXHIBIT INDEX
FILING EXHIBIT
METHOD NO.
- ------ -------
P 2.1 PURCHASE AGREEMENT DATED SEPTEMBER 2, 1994 AND EFFECTIVE AS
OF AUGUST 31, 1994 BETWEEN HOSPITAL STAFFING SERVICES, INC.,
HOSPITAL STAFFING SERVICES OF CALIFORNIA, INC., CURA CARE,
INC. OF ARIZONA, AND HSSI ACQUISITION CORP. AS SELLER AND
INTERIM HEALTHCARE OF NEW YORK INC., AND INTERIM HEALTHCARE
INC. AS BUYER. (INCORPORATED BY REFERENCE TO EXHIBIT 10.31 TO
REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED AUGUST 31, 1994).
DT 2.2 PURCHASE AGREEMENT DATED DECEMBER 30, 1994 AND EFFECTIVE
JANUARY 1, 1995 BETWEEN HOSPITAL STAFFING SERVICES, INC. AND
CARDINAL NURSING AND HOME CARE, INC. AS SELLERS AND RONALD A.
CASS AS BUYER.
DT 2.3 PURCHASE AGREEMENT DATED AND EFFECTIVE AS OF FEBRUARY 15,
1995 BETWEEN TRI THERAPY, INC., AS SELLER AND HSSI OF
GEORGIA, INC. AS BUYER.
P 3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE
REGISTRANT (INCORPORATED BY REFERENCE TO AN EXHIBIT TO THE
REGISTRATION STATEMENT ON FORM S-18 (NO. 2-87290-A) FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19,
1983, AMENDED ON NOVEMBER 23, 1983 AND DECEMBER 5, 1983 AND
DECLARED EFFECTIVE ON DECEMBER 6, 1983 ("FORM S-18 (NO.
2-87290-A)")).
P 3.2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
(INCORPORATED BY REFERENCE TO AN EXHIBIT TO THE REGISTRATION
STATEMENT ON FORM S-1 (NO. 33-42640) FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 6, 1991,
AMENDED ON OCTOBER 4, 1991 AND DECLARED EFFECTIVE ON OCTOBER
4, 1991 ("FORM S-1 (NO. 33-42640)").
P 3.3 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF THE
REGISTRANT. (INCORPORATED BY REFERENCE TO EXHIBIT 3.4 FILED
WITH THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1993).
P 3.4 BY-LAWS OF THE REGISTRANT, AS AMENDED (INCORPORATED BY
REFERENCE TO THE REGISTRANT'S CURRENT REPORT ON FORM 8-K
DATED JULY 30, 1991 FILED AUGUST 1, 1991).
P 4.1 FORM OF COMMON SHARE CERTIFICATE (INCORPORATED BY REFERENCE
TO AN EXHIBIT TO THE REGISTRATION STATEMENT ON FORM S-18 (NO.
2-87290-A)).
<PAGE>
P 10.1 INCENTIVE STOCK OPTION PLAN, AS AMENDED (INCORPORATED BY
REFERENCE TO EXHIBIT A(I) TO REGISTRANT'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 1989).
P 10.2 AMENDED AND RESTATED 1990 STOCK OPTION PLAN (INCORPORATED
BY REFERENCE TO EXHIBIT 4 FILED WITH THE REGISTRANT'S
REGISTRATION STATEMENT ON FORM S-8 ON MAY 17, 1991).
P 10.3 SECOND AMENDED AND RESTATED 1990 STOCK OPTION PLAN
(INCORPORATED BY REFERENCE TO EXHIBIT 4 FILED WITH THE
REGISTRANT'S REGISTRATION STATEMENT ON FORM S-8 ON JUNE 26,
1992).
P 10.4 ALTERNATIVE DEFERRED COMPENSATION PLAN APPROVED JANUARY 19,
1994. (INCORPORATED BY REFERENCE TO EXHIBIT 10.26 FILED WITH
THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED NOVEMBER 30, 1993).
P 10.5 AGREEMENT FOR LEASE BETWEEN REGISTRANT AND 62ND STREET
PARTNERS, DATED JULY 29, 1989 FOR REGISTRANT'S OFFICE IN FORT
LAUDERDALE, FLORIDA (INCORPORATED BY REFERENCE TO EXHIBIT
A(II) TO REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED AUGUST 31, 1989).
DT 10.6 ADDENDUM TO LEASE AGREEMENT DATED OCTOBER 31, 1994.
DT 10.7 SECOND ADDENDUM TO LEASE AGREEMENT DATED NOVEMBER 1, 1995,
AND RELATED PROMISSORY NOTE DATED DECEMBER 1, 1995.
P 10.8 TERMINATION AND BENEFITS AGREEMENT WITH WARREN MARMORSTEIN
DATED NOVEMBER 1, 1993. (INCORPORATED BY REFERENCE TO EXHIBIT
10.25 FILED WITH THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1993).
P 10.9 TERMINATION AGREEMENT WITH BRIAN M. LECHNER DATED JUNE 1,
1994. (INCORPORATED BY REFERENCE TO EXHIBIT 10.29 TO
REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED MAY 31, 1994).
DT 10.10 SETTLEMENT AGREEMENT WITH RONALD A. CASS DATED JANUARY 1,
1995.
DT 10.11 EMPLOYMENT AGREEMENT WITH JAY GERSHBERG DATED SEPTEMBER 1,
1995.
DT 10.12 EMPLOYMENT AGREEMENT WITH JEFFREY A. BARNHILL DATED
SEPTEMBER 1, 1995.
DT 10.13 EMPLOYMENT AGREEMENT WITH RONALD HUNEYCUTT DATED FEBRUARY 1,
1996.
<PAGE>
P 10.14 LOAN AND SECURITY AGREEMENT WITH CONGRESS FINANCIAL
CORPORATION (FLORIDA) DATED AUGUST 23, 1993. (INCORPORATED BY
REFERENCE TO EXHIBIT 10.24 FILED WITH THE REGISTRANT'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30,
1993).
P 10.15 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT WITH CONGRESS
FINANCIAL CORPORATION (FLORIDA) DATED JANUARY 27, 1994.
(INCORPORATED BY REFERENCE TO EXHIBIT 10.27 FILED WITH THE
REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 1993).
P 10.16 AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT WITH CONGRESS
FINANCIAL CORPORATION (FLORIDA) DATED MARCH 15, 1994.
(INCORPORATED BY REFERENCE TO EXHIBIT 10.28 TO REGISTRANT'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MAY 31,
1994.)
P 10.17 MANAGEMENT AGREEMENT BETWEEN HOSPITAL STAFFING SERVICES,
INC. AND ITS WHOLLY-OWNED SUBSIDIARIES DATED JUNE 13, 1994,
EFFECTIVE DECEMBER 1, 1990. (INCORPORATED BY REFERENCE TO
EXHIBIT 10.30 TO REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 31, 1994.)
DT 10.18 LOAN AND SECURITY AGREEMENT WITH CAPITAL HEALTHCARE
FINANCING DATED FEBRUARY 7, 1996.
DT 21.1 SUBSIDIARIES OF THE REGISTRANT.
DT 23.1 CONSENT OF ARTHUR ANDERSEN LLP - FILED HEREWITH.
