Registration No. 333-15773
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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METROVISION OF NORTH AMERICA, INC.
(exact name of registrant as specified in its charter)
New York 7311 16-1276525
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
424 Madison Avenue
New York, New York 10017
(212) 759-2850
(Address, including zip code, and telephone number, including area
code, of the registrant's principal executive offices)
Robert F. Hussey
President
MetroVision of North America, Inc.
424 Madison Avenue
New York, New York 10017
(212) 759-2850
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
With copies to:
Steven N. Haas, Esquire
Cozen and O'Connor
1900 Market Street
Philadelphia, Pennsylvania 19103
(215) 665-4171
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METROVISION OF NORTH AMERICA, INC.
CROSS-REFERENCE SHEET
BETWEEN
ITEMS IN FORM S-4 AND LOCATION IN PROSPECTUS
Form S-4 Item Number and Caption Location in Prospectus
-------------------------------- ----------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover of Prospectus.................. Facing Page; Cross-Reference Sheet;
Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus............ Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of
Earnings to Fixed Charges and
Other Information.................... Summary; Risk Factors; The Merger;
The Merger Agreement
4. Terms of the Transaction............... Summary; Risk Factors; The Special
Meeting; The Merger; The Merger
Agreement; Comparative Per Share
Data
5. Pro Forma Financial Information........ Summary; Combined Pro Forma
Condensed Financial Statements
(Unaudited); Notes to Pro Forma
Combined Condensed Financial
Statements (Unaudited)
6. Material Contacts with the
Company Being Acquired............... Summary; The Merger; The Merger
Agreement
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters...................... *
8. Interests of Named Experts and
Counsel.............................. Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities....... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to
S-3 Registrants...................... *
- ----------
* Not applicable or answer negative upon the date of filing of this registration
statement.
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Form S-4 Item Number and Caption Location in Prospectus
-------------------------------- ----------------------
11. Incorporation of Certain
Information by Reference............. *
12. Information with Respect to
S-2 or S-3 Registrants............... *
13. Incorporation of Certain
Information by Reference............. *
14. Information with Respect to
Registrants Other Than S-2 or
S-3 Registrants...................... Summary; Risk Factors; Beneficial
Ownership of MetroVision Common
Stock; Available Information; The
Merger; MetroVision's
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Proposal 4 - Election of
Alternate Slates of Board of
Directors; Information Concerning
MetroVision
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies........................ *
16. Information with Respect to
S-2 or S-3 Companies................. *
17. Information with Respect to
Companies Other than S-2 or
S-3 Companies........................ Summary; Risk Factors; The
Merger; Comparative Per Share
Data; York Hannover, Inc.
Selected Financial Data; York
Hannover Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Information
Concerning York Hannover; Summary
of York Hannover Partnership
Partnership Agreement
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations Are
to be Solicited...................... Summary; The Special Meeting; The
Merger; The Other Proposals;
Proposal 4 -- Election of
Alternate Slates of Board of
Directors; Beneficial Ownership
of MetroVision Common Stock
19. Information if Proxies,
Consents or Authorizations Are
Not to be Solicited or in an
Exchange Offer....................... *
- ----------
* Not applicable or answer negative upon the date of filing of this registration
statement.
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MetroVision of North America, Inc.
424 Madison Avenue
New York, New York 10017
____________ __, 1997
Dear Shareholder:
A Special Meeting of the Shareholders of MetroVision of North America, Inc.
("MetroVision") will be held on ________ __, 1997 at 10:00 a.m., local time, at
__________, New York, New York.
At this Special Meeting, you will be asked to consider and vote upon the
following proposals: 1) an amendment to MetroVision's Restated Certificate of
Incorporation to effect a reverse stock split, whereby holders of MetroVision
common stock, par value $.001 per share (the "Common Stock"), would receive one
share of newly issued Common Stock for every 4.6 shares of Common Stock held of
record on the effective date of the amendment (the "Reverse Stock Split"); 2)
the approval and adoption of a Merger Agreement dated as of May 10, 1996,
pursuant to which MetroVision will acquire, through a merger of York Hannover
Pharmaceuticals, Inc. ("York Hannover") with and into MetroVision, all of the
issued and outstanding common stock of York Hannover (the "Merger"); 3) an
amendment to MetroVision's Restated Certificate of Incorporation to change the
corporate name to "York Hannover Health Care, Inc.," to be effective only if the
Merger is consummated; 4) a proposal to elect two slates of nominees for
election as directors of MetroVision, only one slate of which will take office
depending upon whether the Merger is consummated; 5) an amendment to
MetroVision's Restated Certificate of Incorporation to increase the authorized
number of shares of MetroVision Common Stock which MetroVision has authority to
issue from 2,173,913 shares (after giving effect to the Reverse Stock Split) to
25,000,000 shares; 6) an amendment to MetroVision's Employee Stock Option Plan
to increase the number of shares of Common Stock authorized for issuance upon
the exercise of options granted thereunder; and 7) such other business as may
properly come before the meeting or any adjournments or postponements thereof.
MetroVision is registering under the Securities Act of 1933, as amended,
the 4,000,000 shares of Common Stock to be issued in the Merger in exchange for
the outstanding shares of common stock of York Hannover. These newly issued
shares will represent approximately 71.8% of the shares of Common Stock to be
issued and outstanding after consummation of the Merger (excluding shares of
Common Stock issuable upon the exercise of common stock purchase warrants which
will be issued to certain persons who will become employed as executive officers
of MetroVision following the Merger).
THE BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND
THE OTHER PROPOSALS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS,
AND HAS DETERMINED THAT THE MERGER AGREEMENT, THE MERGER AND THE OTHER PROPOSALS
ARE FAIR TO AND IN THE BEST INTERESTS OF METROVISION AND ITS SHAREHOLDERS. THE
BOARD OF DIRECTORS RECOMMENDS THAT THE METROVISION SHAREHOLDERS VOTE FOR THE
PROPOSALS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS.
In the materials accompanying this letter, you will find a Notice of
Special Meeting of Shareholders and a Proxy Statement/Prospectus relating to,
among other things, the actions to be taken by MetroVision shareholders at the
Meeting and a proxy card. Shareholders are urged to carefully review the
accompanying Proxy Statement/Prospectus which describes in detail the Merger and
the other proposals which are being submitted to the shareholders for their
consideration and approval, as well as the attendant risks associated with the
foregoing.
All shareholders of MetroVision Common Stock and 5% Series A Convertible
Preferred Stock are cordially invited to attend the Meeting in person. However,
whether or not you plan to attend the Meeting, please complete, sign, date and
return your proxy in the enclosed postage-paid envelope. If you attend the
Meeting, you may vote in person if you wish, even though you have previously
returned your proxy. It is important that your shares be represented and voted
at the Meeting.
Sincerely,
Robert F. Hussey
Chairman of the Board and President
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MetroVision of North America, Inc.
424 Madison Avenue
New York, NY 10017
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on _______ __, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
MetroVision of North America, Inc., a New York corporation ("MetroVision"), will
be held on _________ __, 1997, at 10:00 a.m., local time, at _______________
___________________, New York, New York, to consider and vote upon the following
matters:
1. To consider and vote upon a proposal to amend MetroVision's Restated
Certificate of Incorporation to effect a reverse stock split (the
"Reverse Stock Split"), whereby holders of MetroVision common stock,
$.001 par value per share ("Common Stock"), would receive one share of
newly issued Common Stock, $.001 par value per share, for every 4.6
shares of Common Stock held of record on the effective date of the
amendment. The number of shares of Common Stock issuable upon
conversion or exercise of all of MetroVision's outstanding derivative
securities, including the 5% Series A Convertible Preferred Stock and
employee stock options, would be adjusted to give effect to the
Reverse Stock Split if approved by the shareholders at the Meeting.
2. To consider and vote upon a proposal to approve and adopt an Agreement
of Merger dated as of May 10, 1996 (the "Merger Agreement"), among
MetroVision, Stockbridge Investment Partners, Inc. ("Stockbridge") and
York Hannover Pharmaceuticals, Inc. ("York Hannover"), a wholly-owned
subsidiary of Stockbridge, pursuant to which MetroVision will acquire,
through a merger of York Hannover with and into MetroVision (the
"Merger"), all of the common stock of York Hannover in consideration
of an aggregate of 4,000,000 shares of Common Stock, representing
approximately 71.8% of the shares of Common Stock to be issued and
outstanding following consummation of the Merger (excluding an
aggregate of 1,500,000 shares of Common Stock issuable upon exercise
of common stock purchase warrants to be issued to the two principal
shareholders of Stockbridge in lieu of salaries payable under
employment agreements to be entered into by such persons with
MetroVision upon consummation of the Merger).
3. To consider and vote upon a proposal to amend MetroVision's Restated
Certificate of Incorporation to change the corporate name of
MetroVision to "York Hannover Health Care, Inc.," which amendment
shall become effective only in the event the Merger is consummated.
4. To consider and vote upon a proposal to elect two slates of nominees
for election as directors, only one slate of which will take office
depending upon whether the Merger is consummated.
5. To consider and vote upon a proposal to amend MetroVision's Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock which MetroVision has authority to issue from
2,173,913 shares (giving effect to the Reverse Stock Split) to
25,000,000 shares.
6. To consider and vote upon a proposal to increase the number of shares
of Common Stock authorized for issuance upon the exercise of options
granted under MetroVision's Employee Stock Option Plan from 97,826
shares (giving effect to the Reverse Stock Split) to 900,000 shares.
7. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 3, 1997
as the record date for the Meeting. Only shareholders of record of Common Stock
and of 5% Series A Convertible Preferred Stock at the close of business on
March 3, 1997 are entitled to notice of, and to vote at, the Special Meeting,
or at any adjournment or postponement thereof.
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The accompanying form of proxy is solicited by the MetroVision Board of
Directors. Reference is made to the attached Proxy Statement/Prospectus for
further information with respect to the business to be transacted at the
Meeting. Duly executed but unmarked proxies will be voted "FOR" the Reverse
Stock Split, the Merger and each of the other proposals described above.
THE BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND
THE OTHER PROPOSALS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS,
AND HAS DETERMINED THAT THE MERGER AGREEMENT, THE MERGER AND THE OTHER PROPOSALS
ARE FAIR TO AND IN THE BEST INTERESTS OF METROVISION AND ITS SHAREHOLDERS. THE
BOARD OF DIRECTORS RECOMMENDS THAT THE METROVISION SHAREHOLDERS VOTE FOR THE
PROPOSALS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY
VOTE IN PERSON IF YOU WISH TO DO SO EVEN IF YOU PREVIOUSLY SENT IN YOUR PROXY.
By Order of the Board of Directors,
Robert F. Hussey
Chairman of the Board and President
New York, New York
____________, 1997
<PAGE>
SUBJECT TO COMPLETION DATED FEBRUARY 6, 1997
METROVISION OF NORTH AMERICA, INC.
PROXY STATEMENT/PROSPECTUS
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This Proxy Statement/Prospectus is being furnished to holders of
MetroVision common stock, par value $.001 per share ("Common Stock"), and
holders of MetroVision 5% Series A Convertible Preferred Stock ("5% Preferred
Stock") in connection with the solicitation of proxies by MetroVision's Board of
Directors for use at the Special Meeting of MetroVision shareholders (the
"Meeting") to be held on ____, _________ __, 1997 at ________________, New York,
New York, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof.
At the Meeting, shareholders are being asked to consider and approve a
number of proposals as stated in the Notice of Special Meeting accompanying this
Proxy Statement/Prospectus, including, but not limited to, a proposal to amend
MetroVision's Restated Certificate of Incorporation to effect a reverse stock
split (the "Reverse Stock Split"), whereby holders of MetroVision Common Stock
would receive one newly issued share of Common Stock for every 4.6 shares of
Common Stock held of record on the effective date of the amendment, and a
proposal to adopt and approve an Agreement of Merger dated as of May 10, 1996
among MetroVision, Stockbridge Investment Partners, Inc. ("Stockbridge") and
York Hannover Pharmaceuticals, Inc. ("York Hannover"), a wholly-owned subsidiary
of Stockbridge (the "Merger Agreement"), pursuant to which York Hannover would
merge with and into MetroVision, with MetroVision as the surviving corporation
(the "Surviving Corporation"), in consideration for the issuance of an aggregate
of 4,000,000 shares of MetroVision Common Stock (the "Merger"). The shares of
Common Stock to be issued in the Merger will represent approximately 71.8% of
the shares of Common Stock to be issued and outstanding following the Merger
(and excluding 1,500,000 additional shares of Common Stock issuable upon
exercise of common stock purchase warrants to be granted to the two principal
shareholders of Stockbridge in lieu of salaries payable under employment
agreements to be entered into by such persons with MetroVision upon consummation
of the Merger). A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex "A". Shareholders of MetroVision are not entitled
to dissenters' rights of appraisal in connection with the Reverse Stock Split or
the Merger.
Shareholders are urged to review this Proxy Statement/Prospectus for
further information regarding the Reverse Stock Split, the Merger and the other
proposals being submitted to shareholders for consideration at the Meeting,
including, but not limited to, the information set forth under "Risk Factors"
for a discussion of certain factors that should be considered by MetroVision
shareholders before voting on the matters more fully described herein.
This Proxy Statement/Prospectus also constitutes the prospectus of
MetroVision relating to the Common Stock to be issued in the Merger in exchange
for all outstanding shares of York Hannover common stock. All information herein
with respect to MetroVision has been furnished by MetroVision, and all
information herein with respect to York Hannover has been furnished by York
Hannover.
This Proxy Statement/Prospectus is first being mailed to shareholders of
MetroVision on or about __, 1997.
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THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------
The date of the Proxy Statement/Prospectus is ________, 1997.
<PAGE>
TABLE OF CONTENTS
[To be Supplied]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus in
connection with the solicitation of proxies or the offering of the Common Stock
in connection with the Merger and, if given or made, the information or
representations must not be relied upon as having been authorized by
MetroVision, York Hannover or any other person. This Proxy Statement/Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities, or the solicitation of any proxy, other than the registered
securities to which it relates or an offer to or solicitation of any person in
any jurisdiction in which the offer or solicitation would be unlawful. Neither
the delivery of this Proxy Statement/Prospectus nor any sale made hereunder
shall under any circumstances imply that the information contained herein is
correct as of any time subsequent to this date.
Until _____________, 1997 (90 days after the date of this Proxy
Statement/Prospectus), all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Proxy Statement/Prospectus. This is in addition to the obligations
of dealers to deliver a Proxy Statement/Prospectus when acting as underwriters.
AVAILABLE INFORMATION
MetroVision is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, must file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by MetroVision can be copied at the public reference
facilities maintained by the Commission at 450 Fifth Street N.W., Washington,
D.C. 20549 and at the Regional Offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10048; and at Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can be obtained at prescribed rates from the Public Reference Room of the
Commission at its office in Washington, D.C.
MetroVision has filed with the Commission a Registration Statement (the
"Registration Statement") on Form S-4 and schedules and exhibits thereto under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock to be issued in the Merger. This Proxy Statement/Prospectus
does not contain all the information set forth in the Registration Statement (of
which this Proxy Statement/Prospectus is part) and exhibits to the Registration
Statement that have been filed with the Commission, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. Copies
of the information and the exhibits are on file at the offices of the Commission
and may be obtained, upon payment of the fees prescribed by the Commission, or
may be examined without charge at the offices of the Commission. All summaries
of material agreements contained in this Proxy Statement/Prospectus are subject
in all respects to the full text of such documents. Reference is made to the
copies of those documents filed with the Commission for a complete statement of
their provisions. For further information with respect to MetroVision, York
Hannover and the Merger, reference is made to the Registration Statement,
including the exhibits filed as a part thereof.
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PROXY STATEMENT/PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes appearing elsewhere in this Proxy
Statement/Prospectus. Shareholders of MetroVision are urged to carefully review
this Proxy Statement/Prospectus in its entirety.
The Companies
MetroVision of North America, Inc. MetroVision of North America, Inc., a
New York corporation ("MetroVision"),
owns and operates the Commuter Channel,
a video cable network for the mass
transit industry. The Commuter Channel
displays a program cycle of generally 10
to 12 minutes which is segmented into
information from transit authorities,
news, weather, sports and entertainment
headlines and advertising. Broadcasts
on the Commuter Channel are displayed 24
hours a day, seven days a week, on
high-resolution video display monitors
and projection screens situated on rail
platforms and in passenger waiting
areas. The Commuter Channel is currently
installed in the Port Authority Trans
Hudson ("PATH") system in New York and
New Jersey, the Southeastern
Pennsylvania Transit Authority ("SEPTA")
system in Philadelphia, Pennsylvania,
the Massachusetts Bay Transit Authority
("MBTA") System in Boston,
Massachusetts, and the Bay Area Rapid
Transit ("BART") system in the San
Francisco Bay area in California. In
addition, MetroVision is currently
installing its electronic display system
in approximately 50 New Jersey Transit
stations and has several smaller
installations in other markets.
MetroVision's executive offices are
located at 424 Madison Avenue, New York,
New York 10017, and its telephone number
is (212) 759-2850.
York Hannover Pharmaceuticals, Inc. York Hannover Pharmaceuticals, Inc., a
Florida corporation ("York Hannover"),
through its sole asset, a 40%
interest in York Hannover Partnership, a
Wisconsin general partnership in which
United Professional Companies, Inc.
("UPC"), a subsidiary of United Health,
Inc., owns the remaining 60% interest,
purchases, repackages and dispenses
prescription and non-prescription
medication in accordance with physician
orders, and delivers such prescriptions
to a facility (typically a licensed
nursing home) for administration to
individual patients by the
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facility's nursing staff. York Hannover
Partnership also provides consultant
pharmacist services to these facilities,
including monitoring and reporting of
prescription drug therapies as well as
other pharmaceutical related functions
for the facility, and provides infusion
therapy products and wholesale medical
supplies and Medicare Part B billing
services. Additionally, York Hannover
provides certain billing services to
York Hannover Partnership for a
percentage of amounts billed. York
Hannover is a wholly-owned subsidiary of
Stockbridge Investment Partners, Inc.
("Stockbridge") which acquired York
Hannover in December 1993. York
Hannover's executive offices are located
at Suite 360, The Berkshire Common, 2
South Street, Pittsfield, MA 01201, and
its telephone number is (413) 448-2111.
The Special Meeting
Date, Time and Place of Meeting The Special Meeting of Shareholders of
MetroVision will be held at 10:00 a.m.,
local time, at ___________ on
____________, 1997.
Record Date; Shares Entitled to Vote Holders of MetroVision Common Stock and
of 5% Series A Convertible Preferred
Stock at the close of business on
March 3, 1997 are entitled to notice of
and to vote at the Meeting.
Purpose of the Meeting Holders of MetroVision Common Stock and
5% Preferred Stock are being asked to
consider and vote upon: 1) an amendment
to MetroVision's Restated Certificate of
Incorporation to effect a reverse stock
split, whereby holders of MetroVision
Common Stock would receive one share of
newly issued Common Stock for every 4.6
shares of Common Stock held of record on
the effective date of the amendment (the
"Reverse Stock Split"); 2) the approval
and adoption of a Merger Agreement,
pursuant to which MetroVision will
acquire, through a merger of York
Hannover with and into MetroVision, all
of the common stock of York Hannover
(the "Merger"); 3) an amendment to
MetroVision's Restated Certificate of
Incorporation to change the corporate
name to "York Hannover Health Care,
Inc.," to be effective only if the
Merger is consummated; 4) a proposal to
elect two slates of nominees for
election as directors, only one slate of
which will take office depending upon
whether the Merger is consummated; 5) an
amendment to MetroVision's Restated
Certificate of Incorporation
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to increase the authorized number of
shares of MetroVision Common Stock which
MetroVision has authority to issue from
2,173,913 shares (giving effect to the
Reverse Stock Split) to 25,000,000
shares; 6) an amendment to MetroVision's
Employee Stock Option Plan to increase
the number of shares of Common Stock
authorized for issuance upon the
exercise of options granted thereunder;
and 7) such other business as may
properly come before the Meeting or any
adjournment or postponements thereof.
Vote Required; Security The affirmative vote of the holders of
Ownership of Management two-thirds of the shares of MetroVision
Common Stock and 5% Preferred Stock,
voting together as a single class, in
person or by proxy, is required to
approve and adopt the Merger Agreement
and the Merger. The affirmative vote of
the holders of a majority of the shares
of MetroVision Common Stock and 5%
Preferred Stock, voting together as a
single class, in person or by proxy, is
required to approve each of the other
proposals submitted to shareholders for
their consideration at the Meeting. As
of the record date, there were issued
and outstanding 7,241,664 shares of
Common Stock and 648,535 shares of 5%
Preferred Stock, of which 525,366 shares
of Common Stock and 61,603 shares of 5%
Preferred Stock, representing 7.3% of
the issued and outstanding Common Stock
and 9.5% of the issued and outstanding
5% Preferred Stock, were beneficially
owned by directors and executive
officers of MetroVision as a group. Each
of MetroVision's officers and directors
has indicated his present intention to
vote for the Merger, the Reverse Stock
Split and each of the other proposals
being submitted to shareholders for
their consideration at the Meeting.
Additionally, the directors and
executive officers of York Hanover
benefically own 300,000 shares of Common
Stock, representing approximately 4.1%
of the issued and outstanding Common
Stock, and have indicated their present
intention to vote for each of the
foregoing proposals. See "The Annual
Meeting, Voting and Proxies," and
"Beneficial Ownership of MetroVision
Capital Stock."
The Merger
Effect of the Merger At the Effective Time, York Hannover
will merge with and into MetroVision,
the separate corporate existence of York
Hannover will cease and MetroVision will
be the surviving corporation in the
Merger. Each outstanding share of York
Hannover common stock will be converted
into the right to receive 4,000 shares
of MetroVision Common Stock, or an
aggregate of 4,000,000 shares,
representing approximately 71.8% of the
shares of Common Stock to be issued and
outstanding following the Merger (giving
effect to the Reverse Stock Split).
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Reason for the Merger In light of the Board's decision to
change the strategic focus of
MetroVision after having concluded that
its current business operations cannot
be sustained due in large part to
MetroVision's severe financial
difficulties, the Board of Directors
believes that the Merger represents the
most attractive alternative likely
available to the MetroVision
shareholders to maximize share value.
The Board has concluded that York
Hannover is strategically positioned to
effectively compete in an expanding
marketplace, and that the MetroVision
shareholders have an opportunity to
benefit therefrom. See "Proposal 2 --
The Merger - Reason for the Merger;
Recommendation of the Board of
Directors" and "MetroVision's
Management's Discussion and Analysis of
Financial Condition and Results of
Operations."
Recommendation of the Board The Board of Directors of MetroVision
of Directors has approved, by unanimous vote, the
Merger Agreement and the Merger and
recommends that all shareholders vote
"FOR" the Merger Agreement and the
"Merger." It is expected that all
directors and executive officers of
MetroVision will vote in favor of the
Merger Agreement and the Merger. See
"Proposal 2 -- The Merger - Reasons for
the Merger; Recommendation of the Board
of Directors."
No Opinion of Financial Advisor The Board of Directors concluded not to
engage a financial advisor to render an
opinion as to the fairness to the
MetroVision shareholders of issuing
4,000,000 shares of Common Stock in
exchange for all of the York Hannover
common stock in the Merger. See
"Proposal 2 -- The Merger - Reasons for
the Merger; Recommendation of the Board
of Directors."
Interests of Certain Persons The MetroVision Board of Directors has
in the Merger concluded that none of MetroVision's
officers and directors has any interest
in the Merger which is in material
conflict with or otherwise inconsistent
with the interests of the MetroVision
shareholders generally.
7
<PAGE>
Effective Time of the Merger The Effective Time of the Merger is the
date and time the Certificate of Merger
is filed with the Secretary of State of
the State of New York and the Secretary
of State of the State of Florida in
accordance with the applicable
provisions of the New York Business
Corporation Law, as amended (the "New
York Law"), and the Florida Business
Corporation Act (the "Florida Law"),
respectively. It is expected that the
Effective Time will occur shortly
following the Meeting and after all
filings incident to the Merger and all
other conditions as set forth in the
Merger Agreement have been satisfied or
waived. See "The Merger Agreement."
Conditions to the Merger The obligations of MetroVision and York
Hannover to consummate the Merger are
subject to certain conditions,
including, but not limited to: (a)
approval of the Merger and Merger
Agreement by the MetroVision
shareholders; (b) approval of the
Reverse Stock Split by the MetroVision
shareholders; (c) the absence of legal
challenges to the Merger; and (d) the
accuracy of the representations and
warranties made by the other parties and
compliance by the other parties with
applicable covenants. See "The Merger
Agreement."
Regulatory Filings or Approvals Except for compliance with applicable
federal and state securities laws,
neither MetroVision nor York Hannover is
aware of any governmental or regulatory
requirements relating to consummation of
the Merger.
Appraisal Rights MetroVision shareholders are not
entitled to dissenters' rights of
appraisal under the New York Law in
connection with the Merger.
Federal Income Tax Consequences MetroVision does not expect that the
Merger will have any specific federal
income tax consequences to the
MetroVision shareholders. See "The
Merger Agreement -- Federal Income Tax
Consequences of the Merger to the
MetroVision Shareholders."
Accounting Treatment The Merger will be accounted for as a
reverse acquisition of MetroVision by
York Hannover in a transaction accounted
for using the purchase method of
accounting as prescribed by Accounting
Principles Board ("APB") Opinion No. 16.
In the reverse acquisition transaction,
York Hannover will be treated as the
acquirer for financial reporting
purposes. The purchase method of
accounting prescribes that the acquiring
company allocate the cost of an acquired
company, including the expenses of the
acquisition, to the assets acquired and
liabilities assumed as of the date of
the acquisition based upon their fair
values. Any excess of cost incurred over
8
<PAGE>
the values of assets acquired less
liabilities assumed is recorded as
goodwill and amortized over its expected
benefit period. See "The Merger
Agreement -- Accounting Treatment of the
Merger."
Risk Factors The Merger and the business of York
Hannover is subject to certain risks
which all shareholders should consider
in evaluating the proposal to approve
and adopt the Merger Agreement and the
Merger. See "Risk Factors."
The Other Proposals
The Reverse Stock Split Pursuant to an amendment to
MetroVision's Restated Certificate of
Incorporation, one share of Common Stock
would be issued in exchange for every
4.6 shares of Common Stock held of
record on the effective date of the
amendment. Each shareholder whose shares
on the record date are not evenly
divisible by 4.6 will be entitled to
receive cash in lieu of fractional
shares based on the market price for the
Common Stock on the effective date. The
Reverse Stock Split will not affect any
shareholder's proportionate equity
interest in MetroVision except for those
shareholders who receive cash in lieu of
fractional shares. The purpose of the
Reverse Stock Split is both to comply
with a condition to the Merger that the
Reverse Stock Split be approved and
effective prior to the Effective Time,
as well as to attempt to increase the
price for the Common Stock to enable
MetroVision to again resume trading on
the Nasdaq SmallCap Market, which the
Board believes will stimulate interest
in the Common Stock and promote
liquidity for its shareholders. See
"Proposal 1 -- Amendment to Restated
Certificate of Incorporation to Effect
1 for 4.6 Reverse Stock Split."
Change of Corporate Name Pursuant to an amendment to
MetroVision's Restated Certificate of
Incorporation, the corporate name of
MetroVision would be changed to "York
Hannover Health Care, Inc." The change
in the corporate name, which would be
effective only if the Merger is
consummated, is intended to more
appropriately reflect the primary
business and strategic focus of
MetroVision following the Merger. See
Proposal 3 -- Change of Corporate Name."
Election of Alternate Slate In connection with the Merger,
of Directors MetroVision has agreed to increase the
number of members to its Board of
Directors from four to five and to
propose a slate of five directors,
consisting of Thomas M. Clarke, Lawrence
B. Cummings (Messrs. Clarke and Cummings
are the principal shareholders of
Stockbridge), Peter W. Doelger, Robert
F. Hussey
9
<PAGE>
and Courtlandt G. Miller as nominees
for election to the Board of Directors
and to serve if the Merger is
consummated (the "Merger Slate"). Since
there can be no assurance that the
Merger will, in fact, be consummated, an
alternative slate of directors,
consisting of the four incumbent
directors, Don Stephen Aron, Joseph A.
Calabrese, William Hessick III and
Robert F. Hussey, have been nominated
for election to the Board and to serve
if the Merger is not consummated (the
"Non-Merger Slate"). Since the outcome
of the Merger proposal will not be known
until after the Meeting, it is
imperative that shareholders of
MetroVision vote for BOTH slates of
directors with the understanding that
only one slate of directors will
actually serve depending on whether
the Merger is consummated. See "Proposal
4 Election of Alternate Slate of
Directors."
Increase in Authorized Shares By virtue of the Reverse Stock Split,
the number of authorized shares of
MetroVision Common Stock will be reduced
from 10,000,000 shares, $.001 par value
per share, to 2,173,913 shares, $.001
par value per share. At the Meeting,
shareholders are being asked to approve
an amendment to MetroVision's Restated
Certificate of Incorporation to increase
the number of authorized shares of
MetroVision Common Stock from 2,173,913
shares (giving effect to the Reverse
Stock Split) to 25,000,000 shares. To
consummate the Merger, MetroVision will
be obligated to issue an aggregate of
4,000,000 shares of Common Stock. In
addition, upon consummation of the
Merger, Messrs. Lawrence B. Cummings and
Thomas M. Clarke, MetroVision's new
Chief Executive Officer and Chairman,
respectively, will each be granted
common stock purchase warrants to
purchase 750,000 shares of Common Stock
pursuant to vesting agreements and in
lieu of salaries otherwise payable under
employment agreements to be entered into
upon closing of the Merger. Accordingly,
MetroVision will be unable to consummate
the Merger and related transactions
without shareholder approval of an
increase in the number of authorized
shares of Common Stock.
In addition, the MetroVision Board of
Directors has authorized an exchange
offer (the "Exchange Offer") to be made
to holders of the 5% Preferred Stock as
soon as possible following the Meeting
and consummation of the Merger. In the
Exchange Offer, holders of the 5%
Preferred Stock will be offered the
opportunity for a limited time to
exchange their shares of 5% Preferred
Stock, and to agree to forgive
10
<PAGE>
MetroVision from its obligation to pay
any accrued dividends thereon, for
shares of Common Stock. If all shares of
5% Preferred Stock are exchanged, an
aggregate of 800,000 shares of Common
Stock would be issued in the Exchange
Offer. Following the issuance of the
Common Stock in the Merger and the
Exchange Offer, the increase in the
number of authorized shares of Common
Stock will provide additional shares for
issuance, without the delay and expense
of further shareholder approval, for
such other corporate purposes as the
Board of Directors may in the future
deem advisable. See "Proposal 5.
Increase in Authorized Shares of
MetroVision Common Stock."
Increase in Shares Reserved for MetroVision's Employee Stock Plan (the
Issuance under MetroVision's "Employee Stock Plan") provides for the
Stock Option Plan grant of qualified and non-qualified
stock options to employees, consultants
and directors of MetroVision to purchase
an aggregate of 450,000 shares of Common
Stock (97,826 shares giving effect to
the Reverse Stock Split). As of the
record date, all 450,000 shares of
Common Stock were reserved for issuance
(97,826 shares giving effect to the
Reverse Stock Split) upon exercise of
outstanding stock options. On
November 1, 1996, the Board of Directors
of MetroVision authorized amendments,
subject to shareholder approval being
sought herein, to increase the number of
shares of Common Stock reserved under
the Plan to an aggregate of 900,000
shares (giving effect to the Reverse
Stock Split).
The Board of Directors believes that the
availability of a non-cash employment
compensation benefit in the form of
stock options enables MetroVision to
compete in the marketplace for qualified
personnel without having to deplete its
cash resources. Additionally, stock
options create an incentive for such
personnel to remain in the employ of
MetroVision and devote themselves to
MetroVision's success by providing them
with an opportunity to acquire or
increase their pecuniary interest in
MetroVision through equity ownership.
Consequently, the availability of
additional shares of Common Stock for
issuance in connection with grants of
options is an important tool to attract
and retain qualified management. See
"Proposal 6 - Increase in Shares
Reserved for Issuance under
MetroVision's Stock Option Plan."
11
<PAGE>
COMPARATIVE SHARE DATA
The following table sets forth for the periods indicated (1) the historical
net income (loss) per common share and the historical book value per common
share data of MetroVision Common Stock and (2) the unaudited pro forma net
income (loss) per common share of capital stock and the unaudited pro forma book
value data per share of MetroVision Common Stock after giving effect to the
Merger. MetroVision has not declared or paid cash dividends for the periods
indicated. See "Price Range of MetroVision Common Stock." The information
presented in the following table should be read in conjunction with the separate
historical consolidated financial statements, including the notes thereto, and
the interim unaudited consolidated condensed financial statements of MetroVision
and the notes thereto appearing elsewhere herein.
MetroVision Pro Forma
Historical Combined(1)
---------- -----------
Net (loss) per common share:
Nine months ended September 30, 1996......... (.22) (.25)
Twelve months ended December 31, 1995........ (.16) (.10)
Book value per share(2):
September 30, 1996........................... .09 (.17)
(1) Gives effect to the Merger and related transactions described herein under
"Unaudited Summary Pro Forma Combined Condensed Financial Information."
(2) Computed by dividing shareholders' equity by shares outstanding on the
dates indicated.
There is no established public trading market for the York Hanover Common
Stock insofar as all outstanding shares are owned by Stockbridge. Accordingly,
there are no published market quotations for such stock.
On May 7, 1996, the last trading day prior to the public announcement of
the Merger Agreement, the closing bid and asked prices for the MetroVision
Common Stock and Units as reported on the Nasdaq SmallCap Market were $.344 and
$.375 per share and $1.75 and $2.25 per Unit. See "Price Range of MetroVision
Common Stock."
12
<PAGE>
THE SPECIAL MEETING
Introduction; Purpose of the Meeting
This Proxy Statement/Prospectus is being furnished to holders of
MetroVision Common Stock and 5% Preferred Stock in connection with the
solicitation of proxies by the Board of Directors of MetroVision for use at the
Special Meeting of Shareholders (the "Meeting") to be held on ______, 1997 at
10:00 a.m., local time, at _______________.
At the Meeting, shareholders will be asked to consider and vote upon 1) the
Reverse Stock Split; 2) the Merger Agreement and the Merger; 3) a change to
MetroVision's corporate name to "York Hannover Health Care, Inc.," to be
effective only if the Merger is consummated; 4) the election of two slates of
nominees for election as directors of MetroVision, only one slate of which will
take office depending upon whether the Merger is consummated; 5) an amendment to
MetroVision's Restated Certificate of Incorporation to increase the authorized
number of shares of MetroVision Common Stock which MetroVision has authority to
issue from 2,173,913 shares (giving effect to the Reverse Stock Split) to
25,000,000 shares; 6) an amendment to MetroVision's Employee Stock Option Plan
to increase the number of shares of Common Stock authorized for issuance upon
the exercise of options granted thereunder to 900,000 shares; and 7) such other
business as may properly come before the meeting or any adjournments or
postponements thereof.
Pursuant to the Merger Agreement, a copy of which is included in this Proxy
Statement/Prospectus as Annex "A," MetroVision will issue 4,000,000 shares of
Common Stock to Stockbridge, the parent company of York Hannover, which shares
will represent approximately (71.8%) of the shares of Common Stock to be issued
and outstanding following consummation of the Merger. In addition, in connection
with the Merger, the sole shareholders of Stockbridge, Lawrence B. Cummings and
Thomas M. Clarke, each will be granted common stock purchase warrants to
purchase 750,000 shares of Common Stock, exercisable over five years pursuant to
vesting agreements, in lieu of salaries which otherwise would be payable in
connection with employment agreements to be entered into by such persons with
MetroVision. If all of such warrants are exercised by these individuals, Messrs.
Cummings and Clarke, directly or indirectly through Stockbridge, would
beneficially own approximately 78.7% of the Common Stock then issued and
outstanding.
This Proxy Statement/Prospectus also constitutes a prospectus of
MetroVision with respect to the shares of Common Stock to be issued in the
Merger in exchange for the shares of common stock of York Hannover.
Solicitation of Proxies
The enclosed proxy is being solicited by the Board of Directors for use in
connection with the Meeting and any postponement or adjournment thereof. All
shares of Common Stock and 5% Preferred Stock represented at the Meeting by
properly executed proxies received prior to or at the Meeting or any
postponement or adjournment thereof, and not revoked in the manner described
below, will be voted in accordance with the instructions indicated on such
proxies. If no instructions are indicated, the proxies will be voted in favor of
the proposal to approve and adopt the Merger Agreement and the Merger, for the
Reverse Stock Split, for the two slates of nominees for election to the Board of
Directors, for each of the other proposals being submitted to shareholders at
the Meeting for their consideration and, at the discretion of the proxy holder,
as to any other matter which may properly come before the Meeting.
The Board knows of no matter which will be presented for consideration at
the Meeting other than those matters set forth in the Notice of Special Meeting
accompanying this Proxy Statement/Prospectus. If any other matters are properly
presented for action at the Meeting or any postponement or adjournment thereof,
the persons named in the enclosed proxy will have authority to vote on such
matters in their sole discretion.
If a quorum for the Meeting is not obtained or, as to any one or more
proposals, if fewer shares are voted in favor of the proposal then the number of
shares required for such approval, the Meeting may be adjourned for the purposes
of obtaining additional proxies or votes or for any other purpose and, at any
subsequent reconvening of the Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
Meeting (except for any proxies which have
13
<PAGE>
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
Meeting. Any proxies voted against the Merger may not be voted at the Meeting in
favor of adjournment of the Meeting.
Proxies marked "abstain" are included in determining a quorum, but broker
proxies which have not voted on a particular proposal are not included in
determining a quorum with respect to that proposal. Abstentions from broker
non-votes are not treated as votes cast in the election of directors, and thus
are not the equivalent of votes against a nominee. An abstention will be counted
as present at the Meeting and is the equivalent of a vote against matters other
than the election of directors (i.e., to take affirmative action, the number of
affirmative votes must exceed the combined number of "no" votes and
abstentions). Broker non-votes on any matter other than the election of
directors will not be counted as shares present at the Meeting nor will they
affect the vote with respect to that matter.
Revocation of Proxies
Proxies may be revoked by those persons executing proxies at any time
before the authority granted thereby is exercised by (a) delivering to the
Secretary of MetroVision at or before the Meeting a written notice of revocation
bearing a later date than the proxy, (b) duly executing a subsequently dated
proxy relating to the same shares and delivering it to the Secretary of
MetroVision at or before the Meeting or (c) attending the Meeting and voting in
person (although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy should be delivered
at or prior to the Meeting to the attention of the Corporate Secretary,
MetroVision of North America, Inc., 424 Madison Avenue, New York, New York
10017.
Expenses
MetroVision will bear the costs of the solicitation of its proxies in
connection with the Meeting, including the costs of preparing, assembling and
mailing proxy materials and the handling and tabulations of proxies received. In
addition to solicitation of proxies by mail, proxies in connection with the
Meeting may be solicited by directors of MetroVision, at no additional
compensation, by telephone, telegram, personal interviews or otherwise.
Arrangements also had been made with respect to brokerage firms, custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of shares held of record by such persons or firms or their nominees, and in
connection therewith, such firms will be reimbursed for the reasonable
out-of-pocket expenses in forwarding such materials.
Neither MetroVision nor any person acting on its behalf has retained any
other person to make solicitations or recommendations to shareholders with
respect to the Reverse Stock Split, the Merger or any other proposal submitted
to the shareholders for consideration at the Meeting.
Voting Securities; Record Date; Quorum
Only shareholders of record of Common Stock and 5% Preferred Stock at the
close of business on March 3, 1997 are entitled to notice of and to vote at the
Meeting and at any adjournment or postponement thereof. At that date, there were
7,241,664 shares of Common Stock and 648,535 shares of 5% Preferred Stock issued
and outstanding. Each share of Common Stock and 5% Preferred Stock is entitled
to one vote per share, exercisable in person or by duly executed proxy, on all
matters which properly come before the meeting or any adjournment or
postponement thereof. There is no cumulative voting in the election of
directors. The presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the shares of Common Stock and 5% Preferred Stock,
counted as a single class, outstanding on the record date will constitute a
quorum for purposes of the Meeting. Approval of the Merger requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Common Stock and 5% Preferred Stock, voting as a single class in person or by
proxy at the Meeting. Approval of the Reverse Stock Split, the other amendments
to the MetroVision Restated Certificate of Incorporation, the election of
directors and the amendments to MetroVision Stock Option Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock and 5% Preferred Stock, voting together as a single class in person
or by proxy at the Meeting.
14
<PAGE>
METROVISION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial information as of December
31, 1995, 1994, 1993, 1992 and 1991, and for the fiscal years then ended, is
derived from the audited consolidated financial statements of MetroVision.
Reference is made to the historical audited condensed consolidated financial
statements as of December 31, 1995 and for each of the three fiscal years then
ended appearing elsewhere herein. The unaudited selected historical consolidated
financial information as of September 30, 1996 and for the nine months ended
September 30, 1996 and 1995 have been derived from the unaudited condensed
consolidated financial statements appearing elsewhere herein. The unaudited
condensed consolidated financial statements have been prepared on a basis
consistent with the audited financial statements and, in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial condition and results of
operations for the periods presented. The results for the nine months ended
September 30, 1996 are not necessarily indicative of results that may be
expected for the fiscal year ended December 31, 1996. The historical data should
be read in conjunction with the "MetroVision Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein. All of the data set forth below are qualified by reference to, and
should be read in conjunction with, the Unaudited Pro Forma Combined Condensed
Financial Statements and footnotes thereto included elsewhere herein.
MetroVision Selected Historical Consolidated Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended December 31, Nine Months
Ended September 30,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Net revenues ............................ $ 847 $ 1,011 $ 1,110 $ 1,030 $ 1,625 $ 1,063 $ 684
Expenses:
Cost of revenues ..................... 391 556 558 481 722 486 286
Selling, general and administrative .. 1,639 1,899 1,693 1,810 988 774 617
Depreciation and amortization ........ 336 369 480 467 443 484 398
Interest expense (income), net ....... 26 (67) 19 (37) 2 0 9
Writedown of contract rights and
installation assets ............... 0 0 400 250 0 608
Net loss ................................ (1,545) (1,746) (1,640) (2,091) (780) (681) (1,234)
Net loss per common share ............... (2.21) (1.07) (.66) (.34) (.16) (.14) (.22)
Weighted average shares outstanding ..... 763 1,765 2,775 6,717 5,988 5,964 6,299
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Working capital (deficit) ............... 2,973 34 1,829 (14) (181) (424)
Total assets ............................ 5,177 3,474 5,509 3,283 2,632 1,228
Short-term debt ......................... 55 70 250 96 96 136
Long-term debt (excluding current portion) 10 250 0 0 0 0
Common stockholders' equity ............. 4,376 2,743 4,760 2,643 1,866 633
</TABLE>
15
<PAGE>
YORK HANNOVER SUMMARY HISTORICAL
FINANCIAL DATA
The selected historical financial information as of December 31, 1995 and
1994 and for the fiscal years then ended, is derived from the audited financial
statements of York Hannover. Reference is made to the historical audited
financial statements as of December 31, 1995 and for each of the two fiscal
years then ended appearing elsewhere herein. The unaudited selected historical
financial information as of September 30, 1996 and September 30, 1995 and for
the nine month periods then ended have been derived from the unaudited financial
statements appearing elsewhere herein. The unaudited condensed financial
statements have been prepared on a basis consistent with the audited financial
statements and, in the opinion of management, include all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial condition and results of operations for the periods presented. The
results for the nine months ended September 30, 1996 are not necessarily
indicative of results that may be expected for the fiscal year ended December
31, 1996. The historical data should be read in conjunction with the "York
Hannover's Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein. All of the data set forth
below are qualified by reference to, and should be read in conjunction with, the
Unaudited Pro Forma Combined Condensed Consolidated Financial Statements and
footnotes thereto included elsewhere herein. York Hannover purchased its
business in December 1993.
York Hannover Summary Historical Condensed Financial Data
(In thousands)
<TABLE>
<CAPTION>
As Adjusted(1)
----------------------------------
Nine Months Ended Year Ended Nine Months
Year Ended December 31, September 30, December 31 Ended September 30,
-------------------------- ----------------- ------------ -------------------
Predecessor (2)
---------------
1993 1994 1995 1995 1996 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net patient revenues 3,466 4,260 2,673 2,673 -- -- -- --
Other revenues, including equity
earnings -- -- 277 87 399 473 364 399
------ ------ ------ ------ ------ ------ ------ ------
Total revenues 3,466 4,260 2,950 2,760 399 473 364 399
Cost of patient revenues 1,924 2,396 1,392 1,375 -- -- -- --
Selling, general and
administrative 950 1,128 1,546 1,363 252 360 270 252
Depreciation and amortization 476 82 45 45 -- -- -- --
Interest expense (income), net 159 319 290 227 214 290 217 214
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) (43) 335 (323) (250) (68) (177) (123) (68)
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
(1) To reflect operating results on an equity basis of accounting for revenues
and expenses given the formation of the equity investment in the York
Hannover Partnership made on August 1, 1995 as if it occurred on January 1,
1995.
(2) Operations of predecessor entity prior to purchase by York Hannover in
December 1993 and does not represent the ongoing operations after the
purchase.
York Hannover Summary Historical Financial Data
(In thousands)
<TABLE>
<CAPTION>
December 31, September 30,
------------------------ --------------
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Balance Sheet Data
Working capital (Deficit) 430 34 (192) (2,635)
Total assets 842 1,335 1,240 1,635
Short-term debt -- 771 174 2,107
Long-term debt
(excluding current portion) 2,713 1,924 2,180 --
</TABLE>
16
<PAGE>
Due to the significance of the York Hannover Partnership investment to York
Hannover, the following financial information is provided with regard to the
York Hannover Partnership. Subsequent to the Merger, York Hannover's sole asset
will consist of its 40% interest in the York Hannover Partnership.
York Hannover Partnership Historical Financial Data
(in thousands)
Five Months Ended Unaudited Nine Months
December 31, 1995(a) Ended
------------------- September 30, 1996
--------------------
Statement of Operations Data
Net revenues ......................... 2,563 6,583
Expenses:
Cost of revenue .................... 1,348 3,606
Selling, general and
administrative.................... 925 2,313
Depreciation ....................... 31 82
Net income ........................... 259 582
Balance Sheet Data
Working capital .................... 1,154 1,598
Total-assets ....................... 2,356 3,392
Short-term debt .................... 281 730
Long-term debt ..................... 360 388
Partner's capital .................. 1,383 1,840
(a) York Hannover Partnership commenced operations on August 1, 1995.
17
<PAGE>
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
MetroVision and York Hannover have entered into a Merger Agreement, subject
to approval by the shareholders of MetroVision, whereby Stockbridge, the sole
stockholder of York Hannover, will exchange all outstanding common stock of York
Hannover with MetroVision for 4,000,000 newly issued shares of Common Stock.
Under the terms of the Merger Agreement, York Hannover will distribute all of
its assets and liabilities to Stockbridge prior to the Merger except for its 40%
interest in York Hannover Partnership and certain outstanding debt and related
accrued interest. As a condition of the Merger, MetroVision will complete a 1 to
4.6 Reverse Stock Split of its Common Stock, reducing the number of MetroVision
shares outstanding on a post-Merger basis.
The Merger will be accounted for as a reverse acquisition of MetroVision by
York Hannover in a transaction accounted for using the purchase method of
accounting as prescribed by Accounting Principles Board Opinion No. 16. In the
reverse acquisition transaction, York Hannover will be treated as the acquirer
for financial reporting purposes. The purchase method of accounting prescribes
that the acquiring company allocate the cost of an acquired company, including
the expenses of the acquisition, to the assets acquired and liabilities assumed
as of the date of the acquisition based upon their fair values. Any excess of
cost incurred over the values of assets acquired less liabilities assumed is
recorded as goodwill and amortized over its expected benefit period. Therefore,
any excess of the fair value of MetroVision's assets less its liabilities over
the historical basis of MetroVision's assets less its liabilities would be
recorded as goodwill and amortized over its expected benefit period. Any excess
of the historical basis of MetroVision's assets less its liabilities over the
fair value of MetroVision's assets less its liabilities would result in negative
goodwill which would be allocated to reduce the noncurrent assets of the
Surviving Corporation. York Hannover management and MetroVision management have
estimated the fair value of MetroVision's assets less its liabilities to be
$600,000 as of September 30, 1996 compared to a historical basis of $632,633.
Based on this estimate, negative goodwill of $32,633 has been allocated to the
noncurrent assets of the Surviving Corporation in the pro forma information as
of and for the nine months ended September 30, 1996.
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 1996 has been prepared based on the historical balance sheets
of MetroVision and York Hannover, as adjusted to reflect the Merger as if it had
occurred on September 30, 1996. The unaudited pro forma condensed consolidated
income statements for the year ended December 31, 1995 and for the nine months
ended September 30, 1996 have been prepared based on the historical income
statements of MetroVision and York Hannover, adjusted to reflect the Merger as
if it had occurred on January 1 of each respective period. The information is
presented for informational purposes only and, therefore, is not necessarily
indicative of the financial position or operating results that would have
occurred or might be achieved if the Merger had occurred at an earlier date, nor
is it necessarily indicative of the financial position or operating results that
may occur in the future.
18
<PAGE>
York Hannover Summary Pro Forma Consolidated Balance Sheet Data
September 30, 1996
(Unaudited, in thousands)
<TABLE>
<CAPTION>
York Pro Forma
MetroVision Hannover Purchase Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets ........................... 171 494 (494)(a) 171
Property and Equipment, Net .............. 1,034 0 (29)(b) 1,005
Other .................................... 23 1,141 (485)(a) 675
------ ------ (4)(b) ------
------
Total Assets .............. 1,228 1,635 (1,012) 1,851
====== ====== ====== ======
Liabilities and Shareholders' Equity
Current liabilities, excluding
short-term debt ........................ 459 1,023 (792)(a) 690
Short-term debt .......................... 135 2,107 (157)(a) 2,085
Long-term debt ........................... -- -- -- --
Other .................................... -- 777 (777)(a) --
Preferred stock .......................... 1 -- -- 1
Common Shareholders' equity .............. 633 (2,272) (33)(b) (925)
------
747 (d)
----- ------ -----
Total Liabilities and shareholders'
equity ................................. 1,228 1,635 (1,012) 1,851
====== ====== ====== ======
</TABLE>
(a) Elimination of York Hannover assets (consisting of: cash -- $55; marketable
securities -- $439; due from York Hannover Partnership -- $98; due from
related parties -- $245; and deferred tax asset -- $142) and liabilities
(consisting of: accounts payable -- $260; accrued expenses -- $165; due to
affiliates -- $367; short-term debt -- $157; and deferred revenue -- $777)
not being contributed in the Merger.
(b) Adjustments to reflect estimated fair value of MetroVision's assets and
liabilities which have been estimated to be $600,000.
(c) At September 30, 1996, undeclared dividends in arrears on MetroVision's 5%
cumulative preferred stock were $676,996.
(d) Reflects cumulative effect of the above adjustments.
19
<PAGE>
York Hannover Summary Pro Forma Consolidated Statement of Income Data
Year Ended December 31, 1995
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments to Pro Forma
Retroactively Adjustments to
York Restate Reflect
MetroVision Hannover Partnership Purchase of Pro Forma
Historical Historical Transaction (a) MetroVision Combined
---------- ---------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues 1,625 2,950 (2,477) 2,098
Cost of revenues 722 1,392 (1,392) 722
Selling, general and
administrative 988 1,546 (1,186) (360)(d) 988
Depreciation and amortization 443 45 (45) (231)(b) 212
Interest expense, net 2 290 (23)(c) 269
Writedown of contract rights
and installation assets 250 -- 250
---- ---- --- --- ----
Net Loss (780) (323) 146 614 (343)
=== === ===
Less--Preferred stock dividend
requirements 182 182
--- ---
Net loss applicable to common
stock (962) (525)
=== ===
Weighted average number of
shares 5,988,143 5,301,770(e)
Net loss per common share (.16) (.10)(e)
</TABLE>
(a) To adjust York Hannover historical and York Hannover adjusted as if the
York Hannover Partnership transaction on August 1, 1995 had occurred on
January 1, 1995. See "Information Concerning York Hannover" appearing
elsewhere herein.
(b) To adjust depreciation and amortization to reflect reduced property and
equipment balance.
(c) To adjust interest expense for York Hannover debt not being contributed in
the Merger.
(d) To adjust selling, general and administrative expenses for York Hannover
management fees expense not to be incurred by the Surviving Corporation.
(e) Weighted average shares based on 1,519,097 shares outstanding after Reverse
Stock Split and 4,000,000 shares to be issued to the York Hannover
shareholder.
York Hannover Summary Pro Forma Consolidated Statement of Income Data
Nine Months Ended September 30, 1996
(Unaudited, in thousands, except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments to
Reflect
MetroVision York Hannover Purchase of Pro forma
Historical Historical MetroVision Combined
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Total revenues 684 399 (166)(d) 917
Cost of revenues 286 -- 286
Selling, general and administrative 617 252 (241)(c) 628
Depreciation and amortization 398 -- (11)(a) 387
Writedown of contract rights and
installation assets 608 -- -- 608
Interest expense, net 9 214 (27)(b) 196
------- --- --- ------
Net Loss (1,234) (67) 113 (1,188)
=== ===
Less--preferred stock dividend
requirements 135 135
------ ------
Net loss applicable to common
stock (1,369) (1,323)
====== ======
Weighted average number of
shares 6,299,083 5,369,366 (e)
Net loss per common share (.22) (.25)(e)
</TABLE>
- ----------
(a) To adjust depreciation and amortization to reflect reduced property and
equipment balance as a result of fair value assigned to the MetroVision
assets.
(b) To adjust interest expense for York Hannover debt not being contributed in
the Merger.
(c) To adjust selling, general and administrative expenses for York Hannover
management fees expense not to be incurred by the Surviving Corporation.
(d) To adjust revenues for amortization income and revenues related to services
not being contributed in the Merger.
(e) Weighted average shares based on 1,519,104 shares outstanding after Reverse
Stock Split and 4,000,000 shares to be issued to York Hannover
shareholders.
20
<PAGE>
RISK FACTORS
In addition to other information in this Proxy Statement/Prospectus, the
following factors should be considered carefully by MetroVision shareholders in
evaluating the Merger, York Hannover and its business and prospects and before
voting on the other matters described herein.
Losses from Continuing Operations
During the past three fiscal years, MetroVision has incurred net losses in
excess of $4.5 million. An integral factor in the Board of Directors'
determination to proceed with the Merger was its conclusion that MetroVision
does not currently have sufficient available cash, and is unable to generate
sufficient cash from operations or attract sufficient external debt or equity
financing, to continue to support its current business. MetroVision's auditors
included an explanatory paragraph in their report which accompanied the most
recent audited consolidated financial statements of MetroVision to the effect
that there was substantial doubt about MetroVision's ability to continue as a
going concern. Although following the Merger, MetroVision will endeavor to seek
a buyer for its video-cable network business as part of its strategy to focus on
the business currently operated by York Hannover, there can be no assurance that
MetroVision will be successful in selling its video-cable network business.
Until such time, if ever, as a sale occurs, MetroVision will continue to incur
operating losses in connection with meeting its obligations to third parties in
connection with its cable-network business, which losses will adversely affect
the results of operations to be derived from the business of York Hannover to be
conducted following the Merger, and the revenues to be generated by York
Hannover are not likely to be sufficient to offset the MetroVision losses. In
such event, some or all of MetroVision's operations would be curtailed or
suspended.
Potential Disadvantages Associated With the Merger
Although the MetroVision Board of Directors has concluded that the Merger
is fair to and in the best interests of MetroVision and its shareholders, and
has concluded that there are a variety of factors which make the Merger
advantageous to MetroVision and its shareholders, the Board also identified
and considered certain disadvantages which may arise from the Merger. These
disadvantages include: (i) that the Merger will result in the issuance of a
majority of the outstanding common stock to one entity (Stockbridge) that will
be able to dictate the policies and direction of the Surviving Corporation
following the Merger; (ii) the reliance of the Surviving Corporation, as the
minority partner of York Hannover Partnership, on the majority partner who
will have significant discretion in the affairs of York Hannover Partnership;
(iii) the assumption by MetroVision of a $1,950,000 obligation which must be
paid in full by September 30, 1997; and (iv) and the current limited geographic
concentration of York Hannover's business. There can be no assurance that the
advantages expected to be derived from the Merger will offset the adverse impact
which may arise from these foregoing factors. See the other risk factors set
forth herein for a more detailed discussion of these disadvantages and other
related risks.
Lack of Direct Operations; Dependence Upon Partnership Operations
Immediately preceding the Merger, the primary asset of York Hannover will
be its 40% minority partnership interest in York Hannover Partnership, a
Wisconsin general partnership, the remaining 60% partnership interest of which
is owned by United Professional Companies, Inc., a Delaware corporation owned by
United Health, Inc., one of the largest owners of nursing homes in the United
States. Since the formation of the Partnership in July 1995, and the
contribution by York Hannover of all of its assets to the Partnership in
exchange for its 40% partnership interest, York Hannover has not had any
operations or employees, and its business, revenues and results of operations
are entirely dependent upon the results of operations and business conducted by
the Partnership. Consequently, notwithstanding the Surviving Corporation's
proposed acquisition strategy following the Merger, the results of operations
and financial condition of the Surviving Corporation will initially be almost
exclusively dependent upon the results of operations and financial condition of
a partnership of which it is a minority partner. Accordingly, York Hannover is
subject to all of the risks attendant to a minority partner of a partnership,
including the ability of the majority general partner to control the day to day
operations and policies of the Partnership and, subject to certain limited
contractual consent rights contained in the Partnership Agreement, the ability
to control or determine all other fundamental decisions relating to the
Partnership's operation. York Hannover does not have control over distributions
made by York Hannover Partnership; however, under the Partnership Agreement for
the York Hannover Partnership, York Hannover is entitled to priority
distributions, which are limited to the lesser of $300,000 or the amount of
annual interest expense due on York Hannover's loan from National HealthCare,
L.P. The priority distributions are also subject to the availability of York
Hannover Partnership cash. No distributions were made during the year ended
December 31, 1995; however, $130,000 was received during the nine months ended
September 30, 1996. Consequently, other than payments in respect of accounts
receivable processing services provided to the York Hannover Partnership and the
priority distributions, York Hannover received no payments from York Hannover
Partnership. There can be no assurance that the interests of the majority
partner of York Hannover Partnership will continue to be consistent with the
interests of York Hannover.
Moreover, as a general partnership, each partner of York Hannover
Partnership is jointly and severally liable for the actions of the other
partner. Consequently, in the event the majority partner were to subject the
Partnership to liability by virtue of its actions, the Surviving Corporation
would become jointly and severally liable, even if it had not participated or
otherwise been involved in the actions of the majority partner giving rise to
the liability. Moreover, the ability of the Surviving Corporation to seek
indemnity against the majority partner for claims asserted against the Surviving
Corporation by virtue of the majority partner's actions would be dependent upon
the financial condition of the majority partner. See "Summary of York Hannover
Partnership Partnership Agreement."
21
<PAGE>
Need for Additional Financing
Neither MetroVision nor York Hannover has significant cash on hand.
Moreover, there can be no assurance that the Surviving Corporation's cash
generated from operations will support the Surviving Corporation's business.
Additionally, if the holders of MetroVision's 5% Preferred Stock elect not to
exchange their shares for shares of Common Stock pursuant to an Exchange Offer
to be made available following the Merger (see "Proposal 5 -- Increase in
Authorized Shares of MetroVision Common Stock"), the Surviving Corporation will
be obligated to pay to the holders of the 5% Preferred Stock accrued and unpaid
dividends which, at September 30, 1996, aggregated approximately $677,000. See
"MetroVision's Management's Discussion and Analysis of Financial Condition and
Results of Operations."
During 1993, York Hannover entered into a $2,500,000.00 promissory note
("the Promissory Note") with National HealthCare L.P. ("NHCLP"). The Promissory
Note was scheduled to mature on September 17, 1995. During 1995, the Promissory
Note was restructured and the maturity date was extended to January 17, 1999;
however, because York Hannover has breached certain covenants relating
principally to maintaining positive working capital, the Promissory Note's
maturity date has been accelerated to September 30, 1997. York Hannover's
failure to pay the Promissory Note on or before September 30, 1997 will result
in a default and NHCLP will be entitled to exercise its rights as a secured
creditor against York Hannover's partnership interest in the York Hannover
Partnership, including the right to take possession of and sell such partnership
interest to satisfy the obligation under the Promissory Note. As a result of the
Merger, the Surviving Corporation will assume by operation of law York
Hannover's obligation to repay the Promissory Note. In the event of a default in
the failure to pay the principal and interest on September 30, 1997, NHCLP will
be entitled to satisfy the obligation by taking title to the Surviving
Corporation's partnership interest in the York Hannover Partnership and by
seeking recourse against the Surviving Corporation's other assets if necessary.
There can be no assurance that the Surviving Corporation will be able to
generate sufficient cash to meet debt requirements and may have to finance
ongoing operations through alternate sources of financing or through the sale of
York Hannover's interest in the York Hannover Partnership.
In light of these commitments and the uncertainty as to the results of
operations of the Surviving Corporation following the Merger, it is likely that
the Surviving Corporation will be dependent upon external financial resources to
continue in business. MetroVision currently has no arrangements with respect to
sources of additional financing, and there can be no assurance that additional
financing will be available to the Surviving Corporation on commercially
reasonable terms, if at all. Any inability to obtain additional financing will
have a material adverse effect on the Surviving Corporation, including possibly
requiring it to significantly curtail some or all of its operations. See
"MetroVision's Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Risks Associated With Acquisitions
In accordance with its strategy for growth, which is to build its
institutional pharmacy business dedicated to serving the long-term care market,
the Surviving Corporation intends to engage in a geographic expansion program
which will incorporate an active acquisition program in the long-term care
pharmacy industry. Certain risks are inherent in an acquisition strategy, such
as increasing leverage and debt service requirements, diversion of management
time and attention and combining disparate company cultures and facilities, all
of which could adversely affect the Surviving Corporation's operating results.
The success of any acquisition will depend in part on the Surviving
Corporation's ability to integrate effectively the acquired business into the
Surviving Corporation, and the integration process may involve unforeseen
difficulties and delays and may utilize a substantial portion of the Surviving
Corporation's financial and other resources. No assurance can be given that
suitable acquisition candidates will be identified, financed and purchased on
acceptable terms, or that future acquisitions will, if completed, be successful.
Additionally, the size, timing and integration of possible future acquisitions
may cause substantial fluctuations in operating results from quarter to quarter.
As a result, operating results for any quarter may not necessarily be indicative
of results that may be achieved for any subsequent quarter or for a full fiscal
year.
Current Dependence on Geographic Market
To date, all of York Hannover Partnership's revenues are derived from
nursing home patients and correctional institution inmates in the State of
Florida. Any change in the regulatory environment or reimbursement rates under
the Florida Medicaid Program would materially adversely affect York Hannover.
Moreover, there can be no assurance that, notwithstanding the Surviving
Corporation's proposed acquisition strategy in other geographic locations, the
market conditions in these other locations will prove as favorable as those
currently in existence in the State of Florida.
22
<PAGE>
Dilution; Concentration of Share Ownership
In the event the Merger is consummated, MetroVision will issue 4,000,000
shares of Common Stock in exchange for the outstanding shares of common stock of
York Hannover, which shares will represent approximately 71.8% of the shares to
be issued and outstanding following the Merger. Additionally, in the event the
common stock purchase warrants to be issued to the two stockholders of
Stockbridge in lieu of salaries for their employment by MetroVision following
the Merger are exercised, the shareholders of Stockbridge will, directly and
indirectly through Stockbridge, beneficially own approximately 78.7% of the
issued and outstanding Common Stock. As a result of this concentration of share
ownership, the stockholders of Stockbridge effectively will be able to control
and dictate the policies and direction of the Surviving Corporation following
the Merger. See "The Merger Agreement" and "Beneficial Ownership of MetroVision
Common Stock."
Competition
The market for providing institutional pharmacy services to nursing home
patients is highly competitive and is likely to remain so in the foreseeable
future. Competition will remain intense both from existing competitors, such as
Pharmacy Corporation of American, Inc., OmniCare, Inc. and Allied Pharmacy,
Inc., as well as from new market entrants, many of whom are expected to have
greater financial, marketing and personnel resources than those available to the
Surviving Corporation in the foreseeable future. There can be no assurance that
the Surviving Corporation will be able to compete successfully with existing or
new competitors. See "Information Concerning York Hannover -- Business --
Competition."
Additionally, MetroVision's current business also is subject to competition
from a number of sources. However, in light of MetroVision's decision not to
expand its video cable business in the future, management does not believe that
any new competition will materially adversely affect the Surviving Corporation's
results of operations.
Customer Contracts
Consistent with the institutional pharmacy industry, York Hannover
Partnership's contracts with nursing facilities for consulting pharmacy,
wholesale medical supplies and Medicare Part B billing service are cancelable by
either party on 30 day's notice. Although approximately 90% of York Hannover
Partnership's contracts, which accounted for approximately 85% of its revenues
in fiscal year 1995, have been in existence for over five years, and although
termination rates have been historically low, there can be no assurance that its
customer contracts will be renewed and that York Hannover Partnership will
continue to serve all current facilities. Additionally, with respect to
individual prescription activity (both traditional drugs and intravenous
therapies), the State of Florida Medicaid program currently provides patients
with "freedom of choice." "Freedom of choice" prohibits a nursing facility from
requiring its residents to purchase pharmacy or other ancillary medical services
or supplies from particular providers that deal with the nursing home.
Consequently, York Hannover Partnership will usually service less than 100% of a
nursing home's residents. There can be no assurance that York Hannover
Partnership will continue to serve all current individual residents or patients.
See "Information Concerning York Hannover -- Business."
Regulation and Reimbursement
York Hannover Partnership's business is subject to Federal, state and local
regulations, and its pharmacy is required to be licensed by the State of
Florida. The failure to obtain or renew any required regulatory approvals or
licenses could adversely affect the continued operation of York Hannover
Partnership's business and, therefore, the financial condition of the Surviving
Corporation. In addition, the long term care facilities that contract for York
Hannover Partnership's services are also subject to Federal, state and local
regulations and are required to be licensed in the states in which they are
located (currently, Florida). The failure by these institutions to comply with
such regulations or to obtain or renew any required license could result in the
loss of York Hannover Partnership's ability to provide pharmacy services to
their residents. York Hannover Partnership is also subject to Federal and state
laws that prohibit certain direct and indirect payments between health care
providers that are intended, among other things, to induce or encourage the
referral of patients to, or the recommendation of, a particular provider of
items or services. Violation of these laws can result in loss of licensure,
civil and criminal penalties and exclusion from the Medicare and Medicaid
programs.
23
<PAGE>
Approximately 58% of York Hannover Partnership's billings are reimbursed by
government sponsored programs, largely Medicaid and, to a lesser extent,
Medicare, and the remainder is paid or reimbursed by individual patients, long
term care facilities and other third party payers, including private insurers.
Medicaid and Medicare are highly regulated. The failure, even if inadvertent, of
York Hannover Partnership and/or its client institutions to comply with
applicable reimbursement regulations could adversely affect York Hannover
Partnership's business. Additionally, changes in such reimbursement programs or
in regulations related thereto, such as reductions in the allowable
reimbursement levels, modifications in the timing or processing of payments and
other changes intended to limit or decrease the growth of Medicaid and Medicare
expenditures, could adversely affect York Hannover Partnership's businesses. See
"Information Concerning York Hannover -- Government Regulation."
Health Care Reform and Deferred Budget Legislation
In recent years, a number of legislative proposals have been introduced in
Congress that would effect major changes in the health care system, either
nationally or at the state level. Currently, Congress is considering various
initiatives to establish a framework for balancing the Federal budget. While
President Clinton vetoed the budget bill passed by Congress in November 1995,
many of the budget reduction proposals may still become part of final budget
reconciliation legislation. The bill passed by Congress would have resulted in
significant reductions in payments to providers under the Medicare program and a
major restructuring of the current Medicaid program. With respect to Medicare,
proposals included establishment of a prospective payment system for skilled
nursing facilities ("SNF's"); limits on payments to Medicare SNF's for certain
non-routine services, including, among others, prescription drugs, diagnostic
services, and physical therapy and other rehabilitative services; requiring
consolidated billing by SNF for all Part A and B claims for SNF residents; and
other limits on reimbursement of costs for Medicare SNF services.
The budget legislation would have also replaced the current Medicaid
program with a new "Medi-Grant" program involving Federal block grants to states
for medical assistance provided to low income individuals. While states would be
subject to certain Federal requirements, states would also have broad
flexibility to establish coverage, eligibility and payment standards. Given the
fixed Federal funds that would be available under this Medicaid reform proposal,
there can be no assurance that, if enacted, this or any Medicaid reform proposal
would not have a material adverse effect on the business of York Hannover
Partnership. While budget negotiations are continuing, York Hannover cannot
predict when or whether such legislation will be enacted. It is not possible to
predict the effect of recent reforms on the health care system on York Hannover
Partnership's business or the prospects for or effects of additional reforms.
See "Information Concerning York Hannover -- Government Regulation."
Maintenance Criteria for NASDAQ Securities; Disclosure Relating to Low Priced
Stock.
The National Association for Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, maintains criteria for continued NASDAQ eligibility. On May
22, 1996, MetroVision's Common Stock and Units were de-listed from the NASDAQ
Small Cap Market by the NASD because MetroVision failed to meet certain
maintenance criteria for continued listing. There can be no assurance, however,
that MetroVision will regain its listing on the NASDAQ Small Cap Market. Until
such time, if ever, that MetroVision's Common Stock and Units are so listed, the
Common Stock and Units will trade in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the NASDAQ
Small Cap Market listing requirements or in what is commonly referred to as the
"pink sheets" (the "Bulletin Board"). As a result, holders of Common Stock and
Units should expect to find it more difficult to dispose of, or to obtain
accurate quotations on the price of Common Stock and Units. In addition, by
virtue of the delisting, additional sales practice requirements are imposed on
broker-dealers who trade in the Common Stock and Units other than established
customers and accredited investors. For transactions covered by this rule, the
broker-dealer must make a special suitability determination for the purchaser
and must receive the purchaser's written consent to the transaction prior to
sale. Such burdens on trading in the Common Stock and Units should be expected
to discourage active trading which would reduce the liquidity of the Common
Stock and increase the spread between the bid and ask prices quoted by those
broker-dealers, if any, which quote the Common Stock. See "Market Price for
MetroVision Common Stock."
Shares Eligible for Future Sale
Sales of substantial amounts of Common Stock in the public market following
the Merger could adversely affect prevailing market prices of the Common Stock.
Giving effect to the proposed Reverse Stock Split, 1,574,275 shares of the
Common Stock will
24
<PAGE>
be outstanding, almost all of which shares are available for public sale. In
addition, by virtue of the Merger, Stockbridge will beneficially own 4,300,000
shares of which, by virtue of this Registration Statement, 4,000,000 shares will
also be available for public sale, subject to certain requirements imposed by
Rule 145 promulgated under the Securities Act. There exists no contractual
obligation or so called "lockup" restriction on Stockbridge's ability to sell
all or a portion of such shares at any time, subject to the application of Rule
145. The sale in the public market of such shares could, and depending on the
number of shares involved likely would, adversely affect prevailing market
prices. See "The Merger -- Federal Securities Laws Consequences."
Dependence Upon Key Personnel
The success of York Hannover will be largely dependent upon the continued
services of its executive management, particularly Thomas M. Clarke and Lawrence
B. Cummings, the principal stockholders of Stockbridge, each of whom will enter
into three year employment agreements with the Surviving Corporation to become
effective upon consummation of the Merger. The loss of the services of either of
such individuals could have a material adverse effect on York Hannover's
business and prospects.
PROPOSAL 1
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO EFFECT 1 FOR 4.6
REVERSE STOCK SPLIT
General
The Board of Directors believes that it would be in the best interests of
both MetroVision and its shareholders to amend MetroVision's Restated
Certificate of Incorporation to effect a reverse stock split (the "Reverse Stock
Split"), pursuant to which one share of newly issued Common Stock, $.001 par
value per share, would be issued in exchange for every 4.6 shares of Common
Stock, $.001 par value per share, issued and outstanding on the effective date
of the amendment. If shareholders approve the Reverse Stock Split, the Reverse
Stock Split will become effective upon filing the amendment with the Secretary
of State of the State of New York. No fractional shares will be issued as a
result of the Reverse Stock Split, and each shareholder whose shares are not
evenly divisible by 4.6 shall receive cash in lieu of such fractional shares of
Common Stock based upon the market price for the Common Stock on the date the
amendment is filed with the Secretary of State of the State of New York.
MetroVision is presently authorized to issue 10,000,000 shares of Common
Stock, of which 7,241,664 shares were issued and outstanding as of the record
date for the Meeting. The Reverse Stock Split would reduce the number of
authorized shares of Common Stock to 2,173,913 shares and the number of
outstanding shares to 1,574,275 shares. The Reverse Stock Split will not affect
any shareholder's proportionate equity interest in MetroVision, except for those
shareholders who would receive cash in lieu of fractional shares. The Reverse
Stock Split amendment would not change the presently authorized 2,000,000 shares
of Preferred Stock, but would increase the exchange ratio of shares of Common
Stock into which each share of 5% Preferred Stock is convertible from one to one
to 4.6 to 1. The conversion ratio and/or exercise price of outstanding options
and warrants to purchase Common Stock, including those granted under
MetroVision's stock option plans, would be similarly adjusted. See "Proposal 6
- -- Increase in Shares Reserved for Issuance under MetroVision's Stock Option
Plan". MetroVision's reporting obligations under the Securities Exchange Act of
1934 will not be affected by the Reverse Stock Split.
Reasons for Proposed Reverse Stock Split
A condition to consummation of the Merger is the consummation of the
Reverse Stock Split on or prior to the Effective Time. Under the New York Law,
MetroVision shareholder approval is required to amend the Company's Restated
Certificate of Incorporation to effectuate the Reverse Stock Split. If the
shareholders of MetroVision do not approve the Reverse Stock Split, a condition
to consummation of the Merger would not have been met and York Hannover would be
free to terminate the Merger Agreement. Accordingly, it is imperative that
MetroVision shareholders consider carefully the Reverse Stock Split proposal and
the Merger proposal and vote their shares accordingly.
25
<PAGE>
Equally important is the necessity to attempt to increase the price of the
MetroVision Common Stock. On May 22, 1996, MetroVision's Common Stock was
de-listed from the Nasdaq SmallCap Market by the National Association of
Securities Dealers, Inc. ("NASD") because, among other reasons, the bid price
for the Common Stock had fallen below the minimum allowable bid price of $1.00.
Until such time as MetroVision is able to regain its Nasdaq SmallCap Market
listing, if ever, the Common Stock will continue to trade in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap Market listing requirements or
on what is commonly referred to as the "pink sheets." As a result, holders of
Common Stock will find it more difficult to dispose of, or to obtain accurate
quotations for the price of their shares than if the shares were listed on the
SmallCap Market. While there can be no assurance that the Reverse Stock Split
will have the effect of increasing the publicly quoted price of the Common
Stock, the Board believes that, in theory, such a result may likely occur.
The Board of Directors of MetroVision believes that the current price per
share of the Common Stock has a tendency to diminish the effective marketability
of the Common Stock because of the reluctance of many brokerage firms to
recommend lower-priced stock to their clients. Additionally, the policies and
practices of a number of brokerage houses tend to discourage individual brokers
within those firms from dealing in lower-priced stocks. Some of these policies
and practices relate to the payment of brokerage commissions and to
time-consuming procedures that operate to make the handling of lower-priced
stocks economically unattractive to brokers. The structure of trading
commissions also tends to have an adverse impact upon holders of lower-priced
stocks since the brokerage commission payable on the sale of a lower-priced
stock generally represents a higher percentage of the sales price than the
commission on relatively higher-priced stock.
The Board of Directors also believes that the relatively low price of the
Common Stock impairs the marketability of the Common Stock to institutional
investors and members of the investing public and creates a negative impression
with respect to MetroVision. Theoretically, the number of shares of Common Stock
outstanding should not, by itself, affect the marketability of the Common Stock,
the type of investors who acquire it or MetroVision's reputation in the
financial community. In practice this may not necessarily be the case, as many
investors view low-priced stock as unduly speculative in nature and, as a matter
of practice, avoid or limit investments in such stocks. The foregoing factors
adversely affect not only the liquidity of the Common Stock, but also
MetroVision's ability to raise additional capital through a sale of equity
securities. Thus, the possible increase in trading price resulting from the
Reverse Stock Split is expected to be attractive to the financial community and
the investing public.
The Board of Directors is hopeful, although no assurance can be given, that
the decrease in the number of shares of Common Stock outstanding as a
consequence of the Reverse Stock Split, and the anticipated corresponding
increased price per share, will stimulate interest in the Common Stock and
possibly promote greater liquidity for MetroVision shareholders with respect to
those shares presently held by them. However, the possibility exists that such
liquidity may be adversely affected by the reduced number of shares which would
be outstanding if the Reverse Stock Split is effectuated.
The Board of Directors is also hopeful that the proposed Reverse Stock
Split will result in a price level for the shares that will mitigate the present
reluctance, policies and practices on the part of brokerage firms referred to
above and diminish the adverse impact of trading commissions on the potential
market for MetroVision's shares. However, there can be no assurance that the
Reverse Stock Split will achieve these desired results, nor can there be any
assurance that the price per share of the New MetroVision Common Stock
immediately after the Reverse Stock Split will increase proportionately with the
Reverse Stock Split or that any increase can be sustained for a long period of
time.
Management of MetroVision is not aware of any present efforts by any
persons to accumulate Common Stock or to obtain control of MetroVision, and the
Reverse Stock Split is not intended to be an anti-takeover device. The amendment
is being sought simply to enhance the image of MetroVision and to price the
Common Stock in a range more acceptable to the brokerage community and to
investors generally.
Exchange of Stock Certificates
If the Reverse Stock Split is approved by MetroVision shareholders at the
Meeting, MetroVision will file an amendment to its Restated Articles of
Incorporation with the Secretary of State of the State of New York as soon as
practicable thereafter. The Reverse Stock Split will become effective on the
date of such filing (the "Filing Date") and the shareholders will be notified on
or after the Filing Date that the Reverse Stock Split has been effected.
MetroVision's transfer agent, Continental Stock Transfer & Trust
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Company, will act as MetroVision's exchange agent (the "Exchange Agent") to act
for holders of Common Stock in implementing the exchange of their certificates.
As soon as practical after the Filing Date, shareholders will be notified
and requested to surrender their certificates representing shares of Common
Stock to the Exchange Agent in exchange for certificates representing the newly
issued Common Stock. Beginning on the Filing Date, each certificate representing
shares of Common Stock will be deemed for all corporate purposes to evidence
ownership of shares of Common Stock giving effect to the Reverse Stock Split.
Liquidation of Fractional Shares
No script or fractional certificates will be issued in connection with the
Reverse Stock Split. Assuming approval of the Reverse Stock Split by
MetroVision's shareholders, shareholders who ostensibly would be entitled to
receive fractional shares because they hold a number of shares of MetroVision
Common Stock not evenly divisible by 4.6 will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to a cash payment in
lieu thereof at a price equal to that portion of the closing price of the Common
Stock on the electronic bulletin board on the Filing Date for each such share of
Common Stock held prior to the Filing Date that is not consolidated.
MetroVision will either deposit sufficient cash with the Exchange Agent or
set aside sufficient cash for the purchase of the above referenced fractional
interests. Shareholders are encouraged to surrender their certificates to the
Exchange Agent, only after receipt of notification requesting such surrender,
for certificates evidencing whole shares of the newly issued Common Stock and to
claim the sums, if any, due them for fractional interests.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by shareholders in
connection with the exchange of certificates or the issuance of cash for
fractional interest, all of which costs will be borne and paid by MetroVision.
Federal Income Tax Consequences
MetroVision has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the Federal income tax
consequences of the Reverse Stock Split. The following summary of Federal income
tax consequences is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on the
date of this Proxy Statement/Prospectus. This summary is for general information
only and does not discuss the Federal income tax consequences which may apply to
non-resident aliens, broker-dealers, shareholders who receive Common Stock in
compensatory transactions or insurance companies. This discussion does not
address any foreign, state or local tax consequences that may be relevant to
MetroVision's shareholders. Accordingly, each shareholder is urged to consult
his or her own tax advisor to determine the particular consequences to him or
her of the Reverse Stock Split.
The exchange of shares of Common Stock for newly issued shares of Common
Stock will not result in recognition of gain or loss (except in the case of cash
received for fractional shares as describe below). The holding period of the
newly issued shares of Common Stock will include the shareholder's holding
period for the shares of Common Stock exchanged therefor, provided that the
shares of Common Stock were held as a capital asset. The adjusted basis of the
newly issued shares of Common Stock will be the same as the adjusted basis of
the Common Stock exchanged therefor, reduced by the basis applicable to the
receipt of cash in lieu of fractional shares described below. Any restrictive
legends affecting the transfer or sale of the original shares will be affixed to
and apply to the newly issued Common Stock.
A shareholder who receives cash in lieu of fractional shares will be
treated as if MetroVision had issued fractional shares to him and then
immediately redeemed such shares for cash. Such shareholder should generally
recognize gain or loss, as the case may be, measured by the difference between
the amount of cash received and the basis of his old Common Stock allocable to
such fractional shares, had they actually been issued, provided that such a
redemption is essentially equivalent to a dividend. Such gain or loss will be
capital gain or loss (if such shareholder's Common Stock was held as a capital
asset), and any such capital gain or
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loss will generally be long-term capital gain or loss to the extent such
shareholder's holding period for his or her Common Stock exceeds twelve months.
In the event the payment in cash for a fractional share is essentially
equivalent to a dividend, the amount received will be taxable as ordinary income
to the extent of MetroVision's current and accumulated earnings and profits
determined on a pro rata basis. Any amount distributed which is not a dividend
will first be applied against and reduce a shareholder's basis in his or her
Common Stock and thereafter be treated as gain from the sale or exchange of
property.
No Dissenter's Rights
Under the New York Law, shareholders are not entitled to dissenter's rights
of appraisal with respect to the proposed amendment to MetroVision's Restated
Certificate of Incorporation to effect the Reverse Stock Split.
Vote Required and MetroVision Board Recommendation
Approval of the Reverse Stock Split requires the affirmative vote of a
majority of the shares of MetroVision Common Stock and 5% Preferred Stock,
voting together as a single class, represented in person or by proxy at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REVERSE STOCK SPLIT PROPOSAL.
PROPOSAL 2
THE MERGER
Purpose and Structure of the Merger
The purpose of the Merger is for MetroVision to acquire the entire equity
interest of York Hannover. To that end, each share of York Hannover common stock
issued and outstanding at the Effective Time shall be converted into the right
to receive 4,000 shares of MetroVision Common Stock, or an aggregate of
4,000,000 shares, representing approximately 71.8% of the shares of Common Stock
to be issued and outstanding following the Merger. As a result of the Merger,
York Hannover will merge with and into MetroVision, the separate corporate
existence of York Hannover will cease and MetroVision will be the Surviving
Corporation. The Restated Certificate of Incorporation (as amended to give
effect to any amendment approved by the MetroVision shareholders at the Meeting)
and By-Laws of MetroVision in effect at the Effective Time will be the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
thereafter amended in accordance with their respective terms and the New York
Law.
Background of the Merger
The MetroVision Board of Directors believes that the Merger represents the
most attractive financial alternative available to the MetroVision shareholders.
In the course of the last three fiscal years, MetroVision has incurred net
losses in excess of $4,500,000 in the operation of its video cable network for
mass transit systems. During the same period, MetroVision realized net revenues
of only $3,765,000. The substantial losses incurred by MetroVision has to date
been funded primarily from the sale of its Common Stock and from the sale of 5%
Preferred Stock as well as, to a limited extent, from cash flow from operations.
For the period ended September 30, 1996, MetroVision had negative cash flow of
$97,125 and at September 30, 1996 had no cash on hand.
MetroVision believes that the inherent difficulty with its business
strategy and, consequently, the principal reason for the continuing losses from
operations, is that the current network of place-based media for mass transit
systems is not sufficiently large to attract national advertisers willing to
commit substantial sums from their advertising budgets. At the same time,
however, the high cost of operations requires MetroVision to charge advertising
rates which generally preclude local and regional advertisers from purchasing
advertising on MetroVision's network. As a result, the Company has been unable
to generate meaningful revenues from operations, and the substantial losses
incurred by MetroVision to date have been funded primarily from equity or debt
financings. Notwithstanding repeated attempts by the Board of Directors to seek
external financing after MetroVision's secondary public offering in December
1993, these
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efforts have proven largely unsuccessful. Accordingly, the Board of Directors
does not believe attempts at continued expansion of MetroVision's network is
appropriate, given its very limited financial resources and its relative
inability to generate meaningful revenues from such network. At the same time,
the Board believes that it will likely not be able to sustain its existing
operations for the foreseeable future and has begun curtailing operations in
certain transit markets. As a result, the Board has undertaken attempts to find
a suitable merger candidate which would be interested in a transaction with
MetroVision to take advantage of the existing public capital structure of
MetroVision and its substantial tax operating loss carryforward.
During the course of the past three years, MetroVision, both through its
senior management and Board of Directors, has attempted to identify a suitable
business combination candidate which could take advantage of MetroVision's
capital structure, its operating loss carryforward and the public market for its
shares, and which was in an industry where the candidate's competitive position
and where general opportunities for growth could ultimately benefit
MetroVision's shareholders and enhance shareholder value. While MetroVision held
numerous discussions with a variety of merger candidates, none of such
discussions ultimately resulted in the execution of a definitive agreement other
than in one instance, in which the definitive agreement was terminated by
MetroVision due to a material adverse change in the business of the acquisition
candidate. In some instances, the parties disagreed on the valuations of the
respective companies. In other instances, the nature of the business in which
the proposed business combination candidate was engaged, or its financial
condition or results of operations, created too much uncertainty on the part of
the MetroVision Board of Directors to pursue further discussions.
On February 16, 1996, Lawrence Cummings, Chief Executive Officer and a Director
of York Hannover, telephoned Robert F. Hussey, MetroVision's Chairman of the
Board and President, concerning information which he obtained regarding
MetroVision's interest in seeking a merger partner. On February 28, 1996,
Messrs. Cummings and Hussey, as well as Thomas Clarke, another officer of York
Hannover, conducted further discussions, and both companies agreed to exchange
certain information relating to their companies through the execution of
confidentiality agreements.
After several telephone conferences in early March, York Hannover submitted
a preliminary proposal outlining possible valuation concepts for the proposed
merger of York Hannover with MetroVision. After having reviewed the proposal,
the MetroVision Board of Directors directed Mr. Hussey on March 22 to forward a
proposed plan of merger and valuation model to York Hannover. The following
week, Mr. Clarke of York Hannover met with Mr. Hussey to further discuss the
valuation of both companies and to advise him that York Hannover would require
that it achieve a majority equity position giving effect to the Merger.
Following extensive discussions between the parties, on March 27, 1996, York
Hannover delivered a letter of intent to MetroVision, and the MetroVision Board
of Directors met on April 1 to discuss all aspects of the letter of intent,
which was subsequently executed.
On May 10, 1996, the Board of Directors discussed the terms of the Merger
Agreement and unanimously approved the Merger Agreement and the proposed Merger,
and authorized that the Merger Agreement and Merger be submitted to shareholders
for their approval.
Reasons for the Merger; Recommendation of the Board of Directors
The MetroVision Board of Directors has determined that the Merger is fair
to, and in the best interests of, MetroVision and its shareholders, and has
approved the Merger Agreement and the Merger. The MetroVision Board of Directors
recommends that the MetroVision shareholders vote FOR the Merger Agreement and
the Merger.
In reaching its conclusion that the Merger is in the best interests of
MetroVision and its shareholders, the MetroVision Board of Directors considered
a variety of factors including, among other things, the following:
1. The current financial condition and cash position of MetroVision is such
that, without the infusion of additional equity or debt financing, there is
substantial doubt about MetroVision's ability to continue as a going concern for
a sustained period, or generate meaningful, if any, profits. MetroVision has
been relatively unsuccessful in obtaining external financing from any third
parties other than from certain of its officers and directors, and it is
unlikely that these persons or any other third parties are prepared to make
capital investments in MetroVision at this time.
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2. Prior to the Merger Agreement with York Hannover, MetroVision attempted,
without success, to identify other potential merger candidates for MetroVision,
particularly in industries or markets, with seasoned management and with a
financial condition or capital structure which could potentially result in
maximizing shareholder value through a merger. In light of these unsuccessful
attempts, notwithstanding the repeated efforts of MetroVision's management and
Board, the Board has concluded that the Merger may be the best available
alternative in the foreseeable future to enable MetroVision shareholders to
preserve, and possibly enhance, their capital investment.
3. The MetroVision Board of Directors believes that York Hannover, through
York Hannover Partnership, represents a seasoned enterprise with experienced
management which is well positioned in a growing market, factors which the
Board of Directors believes offers an opportunity for shareholders to maximize
value for their shares.
4. The principals of Stockbridge, who will assume executive positions with
the Surviving Corporation following the Merger, have substantial and diverse
experience in the health care field and, in the case of Mr. Cummings, previously
served as the chief executive officer of a publicly held chain of nursing homes.
Additionally, the management of York Hannover Partnership has several decades of
experience in the provision of pharmacy services to nursing home patients.
5. Unlike other possible merger or acquisition candidates which insisted on
a cash component as part of the merger consideration, the Merger could be
structured as a stock for stock merger to enable MetroVision to preserve its
limited cash resources for working capital and not require MetroVision to seek
to obtain external sources of capital to consummate the transaction.
6. The Board considered that the market for the provision of pharmacy
services does not appear to be dominated, to any substantial degree, by any
single provider, thereby providing an opportunity for the Surviving Corporation
to effectively compete and increase its market share. Additionally, the Board
believes, but cannot assure, that the aging of the populace in the United States
and the increase in the utilization of drug therapies will translate into an
increase in nursing home patients and the greater utilization of drugs by such
individuals, thereby indicating a growing market with greater opportunities.
7. The current customer base of York Hannover Partnership is primarily
derived from patients in nursing homes owned and/or operated by the general
partners or their affiliates, York Hannover and United Health, Inc.,
respectively, thereby ensuring some degree of stability in the Partnership's
revenue base.
The MetroVision Board of Directors also considered certain negative
factors, in addition to those set forth herein under the caption "Risk Factors,"
including that the Merger would result in the issuance to one entity
(Stockbridge) of shares of Common Stock constituting a majority of the shares to
be issued and outstanding following the Merger, the reliance of the Surviving
Corporation, as a minority partner of York Hannover Partnership, on a majority
partner who has the ability to exercise significant discretion in the affairs of
such Partnership, the assumption by the Surviving Corporation of a significant
obligation which must be paid in full, or renegotiated, by September 30, 1997,
and the lack of a fairness opinion from an independent financial advisor.
In view of the variety of factors considered by the MetroVision Board in
connection with its evaluation of the Merger, the MetroVision Board did not find
it practicable to, and did not quantify or otherwise assign relative weights to,
the specific factors considered in reaching its conclusion.
All of the directors of MetroVision approved the Merger Agreement and the
Merger and all have indicated their present intention to vote the shares of
Common Stock owned by them in favor of the Merger Agreement and the Merger.
In light of the specific circumstances surrounding the Merger, including
but not limited to, the repeated but unsuccessful efforts by the MetroVision
management and Board to seek other potential merger candidates, the current
financial condition faced by MetroVision and the lack of any reasonable or
foreseeable near-term alternative to the Merger, the MetroVision Board did not
find it financially prudent to engage an independent financial advisor to render
an opinion for the benefit of the Board and the
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MetroVision shareholders as to the fairness from a financial point of view of
the consideration to be paid by MetroVision for the York Hannover shares of
common stock. The Board believed that the expense which would have been incurred
to engage a financial advisor for this purpose would have been an inappropriate
use of MetroVision's extremely limited cash resources without a likely
commensurate benefit to be achieved by the MetroVision shareholders in the form
of an appreciable adjustment in the number of shares of Common Stock to be
issued for the common stock of York Hannover.
Approval of the Merger Agreement and the Merger requires the affirmative
vote of the holders of two-thirds of the shares of MetroVision Common Stock and
5% Preferred Stock, voting together as a single class, represented in person or
by proxy at the Meeting. As of the record date, the MetroVision directors and
executive officers benefically owned 525,366 shares of Common Stock and 61,603
shares of 5% Preferred Stock as a group, or an aggregate of 7.4% of the total
number of shares entitled to vote at the Meeting. Additionally, Thomas Clarke, a
shareholder of Stockbridge, benefically owned 300,000 shares of Common Stock, or
4.1% of the total number of shares entitled to vote at the Meeting. All such
persons have indicated their present intention to vote for the Merger Agreement
and the Merger.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE METROVISION SHAREHOLDERS VOTE FOR THE
MERGER AGREEMENT AND THE MERGER.
THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the complete text of the Merger Agreement and the exhibits
thereto. A copy of the Merger Agreement is attached hereto as Annex A and is
incorporated herein by reference.
General
The Merger Agreement provides that, following approval of the Merger
Agreement and the Merger by the shareholders of MetroVision, and the
satisfaction or waiver of the other conditions of the Merger, York Hannover will
merge with and into MetroVision and MetroVision will be the surviving
corporation in the Merger. The Restated Certificate of Incorporation and By-Laws
of MetroVision immediately prior to the Effective Time (giving effect to
shareholder approval of any of the amendments submitted for consideration at the
Meeting) will become the Restated Certificate of Incorporation and By-Laws of
MetroVision immediately following the Effective Time.
Effective Time
The Merger shall become effective at the Effective Time, which is the date
and time the Certificate of Merger is filed with the Secretary of State of the
State of New York and the Secretary of State of the State of Florida in
accordance with the applicable provisions of the New York Law and the Florida
Law, respectively. It is expected that the Effective Time will occur shortly
after the Meeting and after all necessary filings incident to the Merger as
required by the applicable provisions of the New York Law and Florida Law, have
been made.
Conversion of Shares
At the Effective Time, each of the 1,000 shares of York Hannover common
stock then issued and outstanding shall be converted into and become a right to
receive 4,000 fully paid and nonassessable shares of MetroVision Common Stock or
an aggregate of 4,000,000 shares, after giving affect to the Reverse Stock
Split, representing approximately 71.8% of the shares of Common Stock to be
issued and outstanding immediately following consummation of the Merger.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties relating to the parties to the Merger Agreement, including, among
others: (a) their respective organization, capital structure and ownership and
similar corporation matters; (b) due authorization, execution, delivery,
performance and enforceability of the Merger Agreement and related matters;
(c) absence of conflicts in connection with the Merger Agreement and the Merger
arising under their respective charters and by-laws, and required consents or
approvals; (d) reports and other documents filed with Securities and Exchange
Commission and other regulatory agencies and the accuracy of the information
contained therein; (e) representations pertaining to employee benefit plans;
(f) representations
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pertaining to audited and unaudited financial statements and related financial
information; (g) representations relating to real estate, personal property and
contracts; (h) representations pertaining to accounts receivable and absence of
liabilities; (i) absence of any litigation which could adversely affect the
businesses or any acquired assets; (j) relationship with suppliers and
customers; (k) compliance with applicable licenses, regulations and orders;
(l) absence of certain material adverse events, changes or effects;
(m) representations relating to insurance, taxes, labor relations, and
compliance with laws; and (n) absence of any material adverse change in the
business, assets, results of operations or financial condition of MetroVision
and York Hannover since December 31, 1995.
Conduct of MetroVision's and York Hannover's Businesses Prior to Merger
MetroVision and York Hannover each has agreed that until closing of the
Merger, or the earlier termination of the Merger Agreement pursuant to the terms
thereof, each will conduct its operations in the ordinary course of business.
Among other limitations relating to the conduct of their businesses,
MetroVision and York Hannover each has agreed that, without the other's prior
consent or except as contemplated by the Merger Agreement, it will not: (a)
amend or otherwise change its charter documents or the terms of the York
Hannover Partnership Agreement, (b) issue, pledge or dispose of any shares of
capital stock of any class or any options, warrants or convertible securities,
(c) sell, dispose of or encumber any assets, except in the ordinary course of
business, (d) declare or pay any dividend, except that York Hannover may pay any
accrued Priority Distributions (as defined in the York Hannover Partnership
Partnership Agreement), (e) acquire any corporation, partnership or other
business or authorize any capital expenditures in excess of $25,000, (f)
increase employee compensation, except in ordinary course of business, (g)
change accounting policies or procedures, (h) make any material tax election
inconsistent with past practices, (i) pay or discharge any claims or liabilities
other than in the ordinary course of business, (j) enter into any contract or
agreement having a term longer than six months unless such contract or agreement
either may be canceled without penalty or does not require the expenditure of
more than $25,000 for any single contract or $50,000 for all such contracts, (k)
otherwise take or agree to take any action which would make the representations
and warranties contained in the Merger Agreement untrue or incorrect or result
in any of the conditions to the Merger not being satisfied.
In addition, both MetroVision and York Hannover have agreed not to initiate
any inquiries or proposals relating to any alternative merger, sale of
substantial assets, sale of shares of capital stock (including by way of tender
offer) or similar transactions.
Pursuant to the Merger Agreement, MetroVision and York Hannover have also
agreed to use all reasonable efforts to satisfy the conditions of closing
described in the Merger Agreement, and to take all action and to do all things
necessary, proper or advisable to consummate and make effective the Merger.
Conduct of the Business of the Combined Companies Following the Merger;
Management Following the Merger
Once the Merger is consummated, York Hannover will cease to exist as a
corporation and all of the business, assets (including all rights and interest
related to York Hannover's 40% ownership interest in York Hannover Partnership)
and liabilities and obligations of York Hannover will be merged into MetroVision
with MetroVision remaining as the Surviving Corporation. Assuming shareholder
approval is obtained at the Meeting, the Surviving Corporation will be renamed
York Hannover Health Care, Inc.
Pursuant to the Merger Agreement, the Restated Certificate of Incorporation
and By-Laws of MetroVision as in effect immediately prior to the Effective Time
will become the Restated Certificate of Incorporation of the Surviving
Corporation, except that the number of directors shall be increased from four to
five. At the Effective Time, the Merger Slate (See "Proposal 4 -- Election of
Alternate Slates of Board of Directors"), consisting of Robert F. Hussey,
currently Chairman of the Board, and Messrs. Thomas M. Clarke, Lawrence B.
Cummings, Peter W. Doelger and Courtlandt G. Miller, will assume office as the
Surviving Corporation's directors.
At the Effective Time, Mr. Hussey will resign as President of MetroVision,
but will remain as a director. Lawrence B. Cummings will be elected Chief
Executive Officer and Thomas M. Clarke will be elected Chairman of the Board.
The employment agreement of Messrs. Cummings and Clarke provides that each
perform his duties to the best of his ability under the direction of the Board
of Directors. The employment agreements, which have a term of three years,
require that Mr.
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Cummings or Mr. Clarke devote such amount of time as is necessary for them
to perform their duties. As compensation for their services, Mr. Cummings and
Mr. Clarke will each be granted warrants to purchase an additional 750,000
shares of Common Stock of the Company. The warrants will be exercisable in three
cumulative equal installments within 36, 48 and 60 months after the execution of
the employment agreements with the exercise price for the first installment
being equal to the closing bid price of the Company's common stock for the first
ten trading days after the execution date of the agreement, with the exercise
price for the second installment being equal to 125% of the first year exercise
price and with the exercise price for the final installment being equal to 150%
of the first year exercise price.
After consummation of the Merger, the headquarters will be moved from New
York, New York to Pittsfield, Massachusetts. It is intended that substantially
all of the employees of MetroVision and York Hannover prior to the Merger will
continue as employees following the Merger. The two lines of business of
MetroVision and York Hannover, place based media and institutional pharmacy,
respectively, will continue to be run as separate business lines; however, the
principal business focus of the Surviving Corporation will be the growth, both
internally and through acquisitions, of its institutional pharmacy business and
it will endeavor to sell its media business in due course. Due to the disparate
nature of the two business lines, the Surviving Corporation does not expect any
substantial consolidation of personnel unless and until it is able to sell its
media business. Consequently, it is not expected that the Surviving Corporation
will realize any meaningful cost savings from the Merger.
Conditions to the Merger
The respective obligations of MetroVision and York Hannover to consummate
the Merger are subject to the satisfaction or mutual waiver of a number of
conditions, including but not limited to: (a) no proceeding in respect of this
Proxy Statement/Prospectus shall have been initiated or threatened by the
Securities and Exchange Commission, (b) no temporary restraining order,
preliminary injunction or permanent injunction preventing the consummation of
the Merger shall be in effect, nor shall any proceeding brought by any
government authority seeking any of the foregoing be pending, and (c) the Common
Stock shall have been approved for listing, subject to notice of issuance, on
the Nasdaq SmallCap Market. The condition described in clause (c) was waived by
York Hannover subsequent to the execution of the Merger Agreement.
In addition, the obligation of York Hannover to consummate the Merger is
further subject to the satisfaction or waiver of a number of conditions,
including, (a) the continued truth and accuracy in all respects of the
representations and warranties of MetroVision set forth in the Merger Agreement,
(b) MetroVision's performance and compliance with all of its covenants set forth
in the Merger Agreement, (c) MetroVision shall have obtained shareholder
approval of and executed the Reverse Stock Split at or prior to the Effective
Time, and (d) for the quarter ended June 30, 1996, MetroVision shall not have
incurred an operating loss before interest, income taxes, depreciation and
amortization (exclusive of the costs associated with the transactions
contemplated by the Merger Agreement) of greater than $50,000 (which condition
was satisfied).
The obligation of MetroVision to consummate the Merger is further subject
to the satisfaction or waiver of a number of conditions, including (a) the
continued truth and accuracy of all representations and warranties made by York
Hannover in the Merger Agreement, (b) York Hannover's performance of and
compliance with all of its covenants set forth in the Merger Agreement,
(c) MetroVision's receipt from each person who is an "affiliate" of York
Hannover of an agreement from each of such individuals to the effect that they
will not offer to sell or otherwise dispose of any Common Stock issued in the
Merger except pursuant to an effective registration statement or in compliance
with Rule 145 of the Securities Act.
Termination or Amendment of Merger Agreement
The Merger Agreement provides that it may be terminated (a) by mutual
consent of MetroVision and York Hannover, (b) by either party after October 31,
1996 (which was extended to March 31, 1997 by amendment to the Merger
Agreement), (c) by either party if the requisite vote of MetroVision
shareholders is not obtained, (d) by either party if any material
representation, warranty, covenant on either party's part shall have become
untrue.
The Merger Agreement may be amended by the parties thereto, provided such
amendment is in writing, at any time before or after approval of the Merger
Agreement by the shareholders of MetroVision. After such shareholder approval
has been obtained,
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however, no amendment of any of the agreements executed in connection with the
Merger may be made which by law requires the further approval of the
shareholders, without obtaining such further approval.
Accounting Treatment of the Merger
The Merger will be accounted for as a reverse purchase of MetroVision by
York Hannover in a transaction accounted for using the purchase method of
accounting as prescribed by APB Opinion No. 16. In the reverse acquisition
transaction, York Hannover will be treated as the acquirer for financial
reporting purposes. The purchase method of accounting prescribes that the
acquiring company allocate the cost of an acquired company, including the
expense of the acquisition, to the assets acquired and liabilities assumed as of
the date of the acquisition based upon their fair values. Any excess of cost
incurred over the values of assets acquired less liabilities assumed is recorded
as goodwill and amortized over its expected benefit period. Therefore, any
excess of the fair value of MetroVision's assets less its liabilities over the
historical basis of metroVision's assets less its liabilities would be recorded
as goodwill and amortized over its expected benefit period. Any excess of the
historical basis of MetroVision's assets less its liabilities over the fair
value of MetroVision's assets less its liabilities would result in negative
goodwill which would be allocated to reduce the noncurrent assets of the
Surviving Corporation. York Hanover management and MetroVision management have
estimated the fair value of MetroVision's assets less its liabilities to be
$600,000 as of September 30, 1996 compared to a historical basis of $632,633.
Based on this estimate, negative goodwill of $32,633 has been allocated to the
noncurrent assets of the Surviving Corporation in the pro forma information as
of and for the nine months ended September 30, 1996 as shown in the "Unaudited
Summary Pro Forma Combined Condensed Consolidated Financial Information"
appearing elsewhere herein. See "Unaudited Pro Forma Combined Condensed
Financial Data" below.
Required Regulatory Approvals
York Hannover has represented to MetroVision in the Merger Agreement that
there are no Federal or state regulatory requirements which must be complied
with or other approvals which must be obtained prior to consummation of the
Merger.
Dissenters' Rights of Appraisal
Shareholders of MetroVision are not entitled to dissenters' rights of
appraisal under the New York Law in connection with the Merger.
Fees and Expenses
In connection with the Merger, the preparation and solicitation of proxies
and the registration of the Common Stock to be issued in the Merger, MetroVision
will incur the following estimated expenses:
Legal Fees and Expenses $ 60,000
Accounting Fees and Expenses 10,000
Printing Fees 25,000
Brokerage/Solicitation Fees 15,000
------
Total $110,000
========
Federal Income Tax Consequences of the Merger to MetroVision Shareholders
MetroVision does not expect that the Merger will have any specific Federal
income tax consequences to MetroVision's shareholders. After the Merger, the
shareholders of MetroVision will continue to own shares as before the Merger and
the acquisition by MetroVision of York Hannover through the Merger is not
expected to alter the income tax effect of owning or subsequently transferring
shares of MetroVision Common Stock. In view of the individual nature of each
shareholder's income tax situation,
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stockholders are urged to consult their own tax advisors with respect to the
specific Federal, state and local tax consequences associated with the Merger.
Interests of Certain Persons in the Merger
The Board of Directors of MetroVision has concluded that none of the
officers or directors of Metrovision has any material interest in the Merger
which is either inconsistent with or is otherwise different from the interests
of the MetroVision shareholders generally. None of the officers or directors is
receiving any shares or other securities of MetroVision or of any other entity
by reason of the Merger. Similarly, of the current directors of the Company,
only Robert Hussey will remain on the Board of Directors following the Merger,
although Mr. Hussey will resign as President of MetroVision upon consummation of
the Merger.
Federal Securities Laws Consequences
All shares of MetroVision Common Stock to be received by Stockbridge in the
Merger in exchange for the shares of York Hannover common stock owned by it will
be freely transferable, subject only to the resale provisions of Rule 145
promulgated under the Securities Act. This Proxy Statement/Prospectus does not
cover any resales of MetroVision Common Stock received by such persons since
they are deemed "affiliates" of York Hannover by virtue of their control of
Stockbridge, York Hannover's parent. There is no agreement between MetroVision
and such persons to register the shares of Common Stock to be received by them
in the Merger under the Securities Act.
PROPOSAL 3
CHANGE OF CORPORATE NAME
On May 10, 1996, the Board of Directors of MetroVision approved an amendment
to MetroVision's Restated Certificate of Incorporation, subject to shareholder
approval being sought herein, to change MetroVision's name to "York Hannover
Health Care, Inc." The proposed new corporate name was selected in light of the
new business in which the Surviving Corporation will be engaged following the
Merger. Although the Surviving Corporation will continue to be engaged in
providing placed based media for mass transit systems, the Company does not
intend to expand such business, but rather, will endeavor to sell that business
as it intends to focus principally on the growth of its institutional pharmacy
business. Insofar as the proposed new corporate name will only reflect
MetroVision's business following the Merger, the proposed name change, and the
proposed amendment to MetroVision's Restated Certificate of Incorporation, even
if approved by the shareholders at the Meeting, will only be filed with the
office of the Secretary of State of the State of New York and, therefore, become
effective, if the Merger is consummated.
The full text of the proposed Amendment to the Restated Certificate of
Incorporation is set forth below.
"RESOLVED, that Article First of the Restated Certificate of Incorporation
of the corporation be amended and restated in its entirety as follows:
FIRST: The name of the corporation is York Hannover Health Care, Inc. (the
"Corporation")."
Approval of a majority of the shares of MetroVision Common Stock and 5%
Preferred Stock, voting together as a single class, represented in person or by
proxy at the Meeting and entitled to vote is required to adopt the amendment to
the Restated Certificate of Incorporation changing the Company's name.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION SHAREHOLDERS VOTE FOR THE
CHANGE OF NAME PROPOSAL.
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PROPOSAL 4
ELECTION OF ALTERNATE SLATES OF BOARD OF DIRECTORS
Pursuant to MetroVision's By-Laws, the Board of Directors may be composed
of not less than three and not more than seven directors, with the precise
number to be fixed by the Board of Directors from time to time by resolution. In
connection with the Merger, the Company has agreed to fix the number of
directors at five and has proposed a slate of five nominees for election as
directors consisting of Thomas Clarke, Lawrence Cummings, Peter Doelger, Robert
Hussey and Courtlandt Miller (the "Merger Slate"). Of the proposed nominees,
only Mr. Hussey currently is a director of the Company.
In the event, however, the Merger is not approved by the MetroVision
shareholders or is not otherwise consummated, then the Board of Directors will
continue to be composed of four directors, each of whom will be elected at the
Meeting to serve until the next annual meeting of shareholders and until their
successors are elected and qualified. The Board has nominated the following
persons, all of whom currently serve as directors of the Company, for election
to Board in the event the Merger is not consummated: Don Stephen Aron, Joseph A.
Calabrese, William H. Hessick III and Robert F. Hussey (the "Non-Merger Slate").
Set forth below is certain biographical information regarding the nominees
constituting the Merger Slate who, if elected by the shareholders at the
Meeting, will take office only in the event the Merger is consummated:
Lawrence B. Cummings: Mr. Cummings, age 41, is the Chief
Executive Officer of Stockbridge Investment
Partners, Inc., the parent corporation of York
Hannover. Mr. Cummings has over ten years of
health care experience and is an active investor
in the health care industry. From 1989 to 1992,
Mr. Cummings was Chairman of the Board, Chief
Executive Officer and President of Providence
Health Care, Inc. ("Providence"), a Cleveland,
Ohio-based publicly-traded nursing home management
company which Mr. Cummings founded and which was
acquired by The Multicare Companies, Inc. in 1992.
Mr. Cummings received his undergraduate degree
from Harvard University and a Masters in Business
Administration from Harvard Business School. On
May 23, 1996, a Final Judgement of Dissolution of
Marriage was entered transferring certain assets
to Mr. Cummings' former spouse and ordering Mr.
Cummings to pay her over $6.0 million, which has
been appealed. Mr. Cummings also has substantial
personal indebtedness and is the obligor on
several contingent liabilities. On August 20,
1996, Mr. Cummings filed for personal reorganiza-
tion under Chapter 11, which case is now pending
in the U.S. Bankruptcy Court for the Southern
District of Florida.
Thomas M. Clarke: Mr. Clarke, age 41, has been the President and
Chief Financial Officer of Stockbridge Investment
Partners, Inc. since 1991. Mr. Clarke has over 16
years of experience in the health care industry
and has held positions with both public and
private health care organizations. From May 1987
until founding Stockbridge in 1991, Mr. Clarke was
the Treasurer and Chief Financial Officer of
Berkshire Health Systems, Inc., a Pittsfield,
Massachusetts based diversified health care
company. Mr. Clarke is a Fellow in the Health Care
Financial Management Association. Mr. Clarke is a
graduate of the University of Maine and completed
his Masters in Science in Business at Husson
College.
Robert F. Hussey: Mr. Hussey, age 47, has served as a Director of
MetroVision since February 1991 and was named
President of the Company in June 1991. From July
1985 to May 1991, Mr. Hussey was President and
Chief Executive Officer of POP Radio Corporation,
an alternative media company which created an
in-store broadcasting network. POP Radio was
purchased in 1991 by Heritage Media Corporation.
From 1979 to 1985, Mr. Hussey was Vice President
of Grey Advertising. Mr. Hussey has also held
marketing positions at E.F. Hutton and American
Home Products. He is a director of Inmark
Enterprises, Inc., a publicly held marketing and
promotions company; and is a director of Ivex
Corporation, a private company engaged in
electronic hardware and software design and
manufacturing. Mr. Hussey is a graduate of
Georgetown University and received his Masters in
Business Administration from George Washington
University.
Peter Doelger: Mr. Doelger, age 59, is the President, a position
he has held since 1978, and founder of DMC
Services, Inc., an energy conservation company
with 42 offices nationwide and 2,000 employees.
DMC Services, Inc. was acquired by Honeywell, Inc.
in 1995. From 1970 to 1975 Mr.
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Doelger was Executive Vice President of
CableVision Corporation of America, a New England
regional cable television company. From 1965 to
1970 Mr. Doelger was Executive Vice President of
Community Planning and Development Association, a
moderate income housing development corporation
serving New England. Mr. Doelger also has
extensive experience in financial and securities
analysis, having served as a real estate and
financial analyst at Taylor Investments and as a
securities analyst at Plan Management. Mr. Doelger
received his undergraduate degree from Middlebury
College.
Courtlandt Miller: Mr. Miller, age 44, is a private investor. From
1988 until its purchase by Value Health, Inc. in
1995, Mr. Miller was Executive Vice President and
general counsel of Diagnostek, Inc., a New York
Stock Exchange traded, pharmacy benefit management
company. He is also a director of Inmark
Enterprises, Inc., a publicly traded marketing and
promotions company, and a director of Power Bike
LLC, a privately held technology company. Mr.
Miller is a graduate of Fordham University and
received his law degree from the Tulane University
School of Law.
Set forth below is certain biographical information regarding the nominees
constituting the Non-Merger Slate (except for Mr. Hussey, whose biography
appears above), who, if elected by the shareholders at the Meeting, will take
office only if the Merger is not consummated:
Joseph A. Calabrese: Mr. Calabrese, age 43, co-founded MetroVision in
1986 and served as Executive Vice President,
Secretary, and a Director of the Company from 1986
to November 1993. In November 1993, Mr. Calabrese
was named Managing Director of MetroVision. Mr.
Calabrese presently serves as Executive Director
of Central New York Regional Transit Authority.
From 1978 to 1986, Mr. Calabrese was Assistant
General Manager of the Central New York Regional
Transit Authority. From 1975 to 1978, Mr.
Calabrese held various positions with the Central
New York Regional Transit Authority. Mr. Calabrese
holds a B.S. in Economics from Syracuse University
and a M.B.A. Degree from the University of
Buffalo. Mr. Calabrese has completed fellowship
programs at Northeastern University, The
University of Chicago and at the Wharton School,
University of Pennsylvania.
Don Stephen Aron: Mr. Aron, age 51, has served as a Director of
MetroVision since March 1990. Since January 1992,
Mr. Aron has been engaged in venture capital and
real estate development, acting as Managing
Director of The Aron Companies. From 1977 until
January 1992, Mr. Aron was a General Partner of
Gertner, Aron & Ledet Investments Inc., a private
venture capital and real estate development firm.
Since 1973, Mr. Aron has also been sole owner and
operator of Aron Investment Company and First DSA
Corporation, both of which are engaged in the
development and operation of apartments,
warehouses, nursing homes and condominiums. Since
1968, Mr. Aron has been associated with Gilbert
Getner Enterprises, a real estate development
firm. He is a director of several private
corporations.
William H. Hessick III: Mr. Hessick, age 57, has served as a Director of
the Company since August 1986. Since 1963, Mr.
Hessick has been President of Hessick Investment
Corporation, a commercial and residential real
estate developer.
Management believes that all of the nominees comprising both the Merger
Slate and the Non-Merger Slate are willing and able to serve as directors. If
any nominee at the time of election is unable or unwilling to serve or is
otherwise unavailable for election, and as a consequence thereof, other nominees
are designated, the persons named in the proxy or their substitutes will have
the discretion and authority to vote or to refrain from voting for other
nominees in accordance with their judgment. The Board of Directors does not have
a nominating committee.
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Committees
The Board of Directors has three committees: an audit committee, a
compensation committee and a stock option committee. The audit committee was
established to review internal accounting procedures of MetroVision and to
consult with and review MetroVision's independent auditors and the services
provided. The compensation committee makes recommendations to the Board of
Directors regarding remuneration of executive officers and directors. The stock
option committee administers the Employee Stock Option Plan. The stock option
committee held one meeting during the last fiscal year and the audit and
compensation committees did not meet.
Board Meetings
The Board of Directors held two meetings during fiscal year 1995. None of
the current directors attended less than 75% of the total number of meetings of
the Board of Directors and the total number of meetings held by all committees
of the Board of Directors on which such director served.
Compensation of Directors
Directors do not receive any cash compensation for their services on the
Board of Directors, but are reimbursed for reasonable travel and lodging
expenses incurred in attending Board and committee meetings. Non-employee
directors are eligible to receive grants of stock options under the MetroVision
Non-Employee Directors Stock Option Plan pursuant to a formula, the purpose of
which is to enable the Plan to satisfy the conditions relating to administration
of employee stock option plans set forth in Rule 16b-3 promulgated under the
Exchange Act. During fiscal year 1995 Don Aron, a non-employee director, was
granted options to purchase 7,000 shares of Common Stock and William Hessick,
the other non-employee director, was granted options to purchase 6,000 shares of
Common Stock. The foregoing options are immediately exercisable and are subject
to exercise until the earlier of expiration of ten years from the date of grant
or resignation or removal from the Board of Directors. The exercise price for
the options granted to the foregoing directors was $.15625 per share,
representing 100% of the fair market value of the Common Stock on the date of
grant.
Compensation Committee Interlocks and Insider Participation
None of the MetroVision directors serves as a member of a compensation or
stock option committee of any other publicly traded company for which any other
MetroVision director or officer also serves as a director or executive officer.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION SHAREHOLDERS VOTE FOR BOTH
SLATES OF NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS AS THE CONSUMMATION OF
THE MERGER CANNOT BE ASSURED.
PROPOSAL 5
INCREASE IN AUTHORIZED SHARES OF METROVISION COMMON STOCK
By virtue of the Reverse Stock Split, the number of authorized shares of
MetroVision Common Stock will be reduced from 10,000,000 shares, $.001 per
share, to 2,173,913 shares, $.001 par value per share. At the Meeting,
shareholders will be asked to approve an amendment to MetroVision's Restated
Certificate of Incorporation increasing the number of authorized shares of
MetroVision Common Stock by 22,826,087 shares, from 2,173,913 shares to
25,000,000 shares. The text of the amendment is as follows:
"RESOLVED, that the first paragraph of Article Fourth of the Restated
Certificate of Incorporation be amended and restated in its entirety as
follows:
FOURTH: The aggregate number of shares which the corporation shall
have the authority to issue is Twenty Seven Million (27,000,000) shares
consisting of (i) Twenty Five Million (25,000,000) shares of Common Stock
(hereinafter, the "Common Stock"), $.001 par value per share, and (ii) Two
Million (2,000,000) shares of Preferred Stock, $.001 par value per share,
of which Seven Hundred Twenty Thousand (720,000) shares shall be designated
5% Series A Convertible
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Preferred Stock (hereinafter, the "5% Preferred Stock"), and One Million
Two Hundred Eighty Thousand (1,280,000) shares (the "Remaining Preferred
Stock") shall have such designation as may be authorized by the Board of
Directors."
By virtue of the shares of Common Stock outstanding and the shares of
Common Stock reserved for issuance upon conversion of the 5% Preferred Stock and
upon the exercise of currently outstanding stock options and common stock
purchase warrants, MetroVision has only 47,244 authorized shares remaining
(10,270 shares after giving effect to the Reverse Stock Split). To consummate
the Merger, MetroVision will be obligated to issue an aggregate of 4,000,000
shares of Common Stock. In addition, upon consummation of the Merger, Messrs.
Lawrence B. Cummings and Thomas M. Clarke, who will assume the positions of
Chief Executive Officer and Chairman, respectively, following the Merger, will
each be granted common stock purchase warrants to purchase 750,000 shares of
Common Stock pursuant to vesting agreements and in lieu of salaries otherwise
payable under employment agreements to be entered into upon closing of the
Merger. Accordingly, MetroVision will be unable to consummate the Merger and
related transactions without shareholder approval of an increase in the number
of authorized shares of Common Stock.
In addition, the MetroVision Board of Directors has authorized an exchange
offer (the "Exchange Offer") to be made to holders of the 5% Preferred Stock as
soon as possible following the Meeting and consummation of the Merger. In the
Exchange Offer, holders of 5% Preferred Stock will be offered the opportunity,
for a limited time, to exchange their shares of 5% Preferred Stock, and agree to
forgive MetroVision from its obligation to pay any accrued dividends thereon,
for shares of Common Stock. If all of such holders of 5% Preferred Stock accept
the Exchange Offer, an aggregate of 800,000 shares of Common Stock would be
issued in exchange for all 648,535 shares of 5% Preferred Stock outstanding and
the forgiveness of accrued but unpaid dividends which, at September 30, 1996,
aggregated approximately $677,000. The terms of Exchange Offer, including the
exchange ratio, was determined on the basis of arms-length negotiations between
MetroVision and the two principal holders of the 5% Preferred Stock,
Fifty-Third Street Ventures, L.P. and Argentum Capital Partners, L.P., who own
32% and 19%, respectively, of the issued and outstanding shares of 5% Preferred
Stock. Don Aron, a director of MetroVision, owns 35,003 shares of 5% Preferred
Stock, or approximately 5.4% of the issued and outstanding shares of such class,
and is the only other beneficial owner of more than 5% of such class. Also,
MetroVision's Board of Directors has authorized, and has submitted for
shareholder approval at the Meeting, an increase to an aggregate of 900,000
shares of Common Stock authorized for issuance under MetroVision's Employee
Stock Option (giving effect to the Reverse Stock Split). See "Proposal 6 --
Increase in Shares Reserved for Issuance Under MetroVision Stock Option Plan."
MetroVision would be unable to effectuate the Exchange Offer or grant new
options under MetroVision's stock option plan without shareholder approval of an
increase in the number of authorized shares of Common Stock.
The increase in the number of authorized shares of Common Stock will
provide additional shares for issuance, without the delay and expense of further
shareholder approval, for such other proper corporate purposes as the Board of
Directors may in the future deem advisable. Such shares may be issued if and
when the financial needs of MetroVision require the obtaining of funds through
the sale of Common Stock to support MetroVision's working capital requirements
and for other corporate purposes, or if it should be decided to declare a stock
split or stock dividend, or for use in connection with the possible acquisition
of other products or businesses should the opportunity arise. Unless required by
applicable law, the MetroVision Restated Certificate of Incorporation or the
By-laws of MetroVision, it is not anticipated that MetroVision will solicit the
votes of shareholders prior to the issuance of Common Stock for any of the
purposes described above.
Approval of the proposal to increase the number of authorized shares of New
MetroVision Common Stock requires the affirmative vote of a majority of the
shares of MetroVision Common Stock and 5% Preferred Stock, voting together as a
single class, represented in person or by proxy at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION SHAREHOLDERS VOTE FOR
THE PROPOSAL TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL 6
INCREASE IN SHARES RESERVED FOR ISSUANCE
UNDER METROVISION'S EMPLOYEE STOCK OPTION PLAN
On June 1, 1991, the Board of Directors approved the MetroVision Employee
Stock Option Plan (the "Employee Stock Plan"), which provides for the grant of
qualified and non-qualified stock options to MetroVision employees, consultants
and directors to purchase an aggregate of 450,000 shares of Common Stock. Under
the Employee Stock Plan, MetroVision's Stock Option Committee has complete
discretion to establish the terms and conditions of each option, subject to the
express provisions of the Employee Stock
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Plan. At September 30, 1996, all 450,000 shares of Common Stock were reserved
for issuance upon exercise of outstanding options granted under the Plan.
If the proposed Reverse Stock Split is adopted, the total number of shares
authorized for issuance upon the exercise of options granted under the Employee
Stock Plan will automatically be reduced from 450,000 shares to 97,826 shares of
Common Stock. On November 1, 1996, the Board of Directors authorized an
amendment, subject to shareholder approval being sought herein, to increase the
number of shares of Common Stock authorized for issuance under the Employee
Stock Plan from 97,826 shares to 900,000 shares.
The Board of Directors believes that the availability of a non-cash
employment compensation benefit in the form of stock options enables MetroVision
to compete in the marketplace for qualified personnel without having to deplete
its cash resources. Additionally, stock options create an incentive for such
personnel to remain in the employ of MetroVision and devote themselves to
MetroVision's success by providing them with an opportunity to acquire or
increase their pecuniary interest in MetroVision through equity ownership. In
light of the proposed Merger and the increase in the number of employees of
MetroVision who will be eligible to receive options under the Employee Stock
Plan, the Board believes that the proposed increase in the number of shares
available under the Employee Stock Plan will provide MetroVision with the
ability to retain and attract qualified personnel, a significant factor in
contributing to MetroVision's anticipated growth. Notwithstanding the
recommended adoption of the proposal, however, the Board has no current plans to
issue options under the Employee Stock Plan and there currently are no
non-employee directors to whom formula options may be granted on an automatic
basis under the Non-Employee Stock Plan. The common stock purchases warrants
exercisable to purchase 750,000 shares of Common Stock being issued to each of
Messrs. Cummings and Clarke pursuant to employment agreements, to become
effective upon consummation of the Merger Agreement, are being granted outside
of the Employee Stock Plan and, therefore, a vote in opposition to this proposal
will not preclude the grant of such warrants. See "The Merger Agreement --
Conduct of the Combined Companies Following the Merger; Management Following the
Merger."
The material terms of the Employee Stock Plan are summarized below:
Number of Shares. The aggregate maximum number of shares for which options
may be granted under the Employee Stock Plan is 450,000 shares, which will be
reduced to 97,826 shares in the event the Reverse Stock Split is approved. The
number of shares which may be issued pursuant to the Employee Stock Plan is
subject to adjustment upon the occurrence of a dividend, stock split,
recapitalization or certain other capital adjustments. If options granted under
the Plan terminate, expire or are cancelled without having been exercised for
any reason, the shares allocable to the unexercised portion of the option will
be available for the grant of new options. In the event the proposal to increase
the shares authorized for issuance under the Plan is approved by the
shareholders at the Meeting, the number of shares reserved for issuance upon the
exercise of options granted under the Employee Stock Plan would be increased to
900,000 shares giving effect to the adoption of the Reverse Stock Split.
Administration. The Employee Stock Plan is administered by MetroVision's
Stock Option Committee, which has complete discretion to establish the terms and
conditions of each option, subject to the express provisions of the Employee
Stock Plan (the "Committee").
Eligibility. All employees and consultants of MetroVision (including
employees who are also members of the Board of Directors) are eligible to
receive options under the Employee Stock Plan. At September 30, 1996, there were
approximately four eligible employees.
Term of Plans. No options may be granted under the Employee Stock Plan
after May 31, 2001.
Options. Options granted under the Employee Stock Plan may either be
incentive stock options ("ISOs") or non-qualified stock options. ISOs are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code. Unless an option is specifically designated at the time of
grant to be an ISO, the option is deemed non-qualified. Options are not
transferrable by the optionee except by will or by the laws of dissent and
distribution or by reason of a qualified domestic relations order.
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Options granted under the Employee Stock Plan are evidenced by an option
document which sets forth the terms of the optionee's option. The Committee is
authorized under the Employee Stock Plan to determine the times and prices at
which the options will be granted and become exercisable, the type of options to
be granted and the number of shares subject to options, except as expressly
provided by the Plan.
Exercise Price. The exercise price of options granted under the Employee
Stock Plan is determined by the Committee, provided that the exercise price of
an ISO will be at least 100% of the fair market value of the shares on the date
an ISO is granted, or at least 110% of the fair market value of the shares on
the date an ISO is granted if the recipient owns, directly or by attribution
under Section 424(d) of the Code, shares possessing more than 10% of the total
combined voting power of all classes of shares of MetroVision. The aggregate
fair market value, determined as of the date of grant, of the Common Stock with
respect to which an ISO is first exercisable by the recipient during any
calendar year may not exceed $100,000.
Termination. Options will terminate on the earlier to occur of three months
following the termination of an optionee's employment if other than by reason of
death or disability, or one year following termination of employment if by
reason of death or disability, but in no event greater than the option term,
which may not exceed ten years.
Payment. Payment for shares upon exercise of options may be made in cash or
such other form of payment as permitted under the particular option document,
including, but not limited to, shares of Common Stock owned by the optionee.
Amendments. The Board of Directors may amend or terminate the Plan but may
not make any amendment which would increase the aggregate number of shares which
may be issued under the Plan, materially increase the benefits under the Plan or
modify the eligibility of participants under the Plan without obtaining
shareholder approval within twelve months from such amendment.
Federal Income Tax Consequences. The following discussion is a summary of
certain federal income tax consequences of the issuance of options and the
acquisition of shares of Common Stock by exercising options under the Employee
Stock Plan and Non-Employee Stock Plan does not present a complete analysis of
all tax consequences which may be relevant to any particular recipient. It does
not purport to discuss state or local income tax laws.
A recipient of an ISO will not recognize taxable income upon either the
grant or exercise of an ISO. The optionee will recognize long-term capital gain
or loss on a disposition of the shares acquired upon exercise of an ISO,
provided the optionee does not dispose of those shares within two years from the
date the ISO was granted or within one year after the shares were transferred to
such optionee. Currently, for regular federal income tax purposes, long-term
capital gain is taxed at a minimum rate of 28%, while ordinary income may be
subject to a maximum rate of 39.6%. If the optionee satisfies both of the
foregoing holding periods, MetroVision will not be allowed a deduction by reason
of the grant or exercise of an ISO.
As a general rule, if the optionee disposes of the shares before satisfying
both holding period requirements (a "disqualifying disposition"), the gain
recognized by the optionee on the disqualifying disposition will be taxed as
ordinary income to the extent of the difference between (a) the lesser of the
fair market value of the shares on the date of exercise or the amount received
for the shares in the disqualifying disposition, and (b) the adjusted basis of
the shares, and MetroVision will be entitled to a deduction in that amount. The
gain (if any) in excess of the amount recognized as ordinary income on a
disqualifying disposition will be long-term or short-term capital gain,
depending on the length of time the optionee held the shares prior to the
disposition.
The amount by which the fair market value of a share at the time of
exercise exceeds the option price will be included in the computation of such
optionee's "alternative minimum taxable income" in the year the optionee
exercises the ISO. Currently, the alternative minimum tax is imposed at the rate
of 26% or 28%. If an optionee pays alternative minimum tax with respect to the
exercise of an ISO, the amount of such tax paid will be allowed as a credit
against regular tax liability in subsequent years.
A recipient of a non-qualified stock option will not recognize taxable
income at the time of grant, and MetroVision will not be allowed a deduction by
reason of the grant. Such an optionee will recognize ordinary income in the year
in which the non-qualified stock option is exercised, in an amount equal to the
excess of the fair market value of the shares over the exercise price of the
option, and MetroVision will be allowed a deduction in that amount. Upon
disposition of the shares, an optionee will recognize long-term
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or short-term capital gain or loss, depending upon the length of time the shares
were held prior to disposition, equal to the difference between the amount
realized on disposition and the optionee's basis in the shares (which basis
ordinarily is the fair market value of the shares on the date the option was
exercised).
Approval of the proposal to increase the number of authorized shares of
MetroVision Common Stock reserved for issuance under the Employee and
Non-Employee Stock Plans requires the affirmative vote of a majority of the
shares of MetroVision Common Stock and 5% Preferred Stock, voting together as a
single class, represented in person or by proxy at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION SHAREHOLDERS VOTE FOR
THE PROPOSAL TO INCREASE THE AUTHORIZED NUMBER OF SHARES FOR ISSUANCE UNDER THE
METROVISION STOCK OPTION PLANS.
PRICE RANGE OF METROVISION COMMON STOCK
MetroVision's Common Stock and Units (consisting of six shares of Common
Stock and one Class B Common Stock Purchase Warrant (which Warrants expired on
November 4, 1996)) are traded in the over-the-counter market under the symbols
"MVTV" and "MVTVL," respectively. Until May 22, 1996, the Common Stock and Units
were included for quotation on the Nasdaq SmallCap Market. On that date, the
Common Stock and Units were delisted from the SmallCap Market for failing to
meet certain listing criteria. Consequently, since May 23, 1996, the Common
Stock and Units have traded on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap listing requirements. The
following table sets forth for the periods indicated the range of high and low
bid prices for the Common Stock and Units as reported by Nasdaq on the SmallCap
Market prior to May 23, 1996 and as reported on the electronic bulletin board
thereafter. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily reflect actual transactions.
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Price Per Share Price Per Unit
--------------- --------------
High Low High Low
---- --- ---- ---
Calendar Year 1994
Fourth quarter...................... 1/2 1/8 2 1/2 1
Third quarter....................... 1/2 5/16 4 2 1/2
Second quarter...................... 1 3/16 1/2 7 3 3/4
First quarter....................... 1 5/8 5/8 8 1/4 4 1/4
Calendar Year 1995
Fourth quarter...................... 3/16 1/8 1 1/16 1
Third quarter....................... 3/16 1/8 1 1/8 3/4
Second quarter ..................... 3/16 1/8 1 3/4
First quarter ...................... 1/4 1/8 1 1/4 1
Calendar Year 1996
Fourth quarter ..................... 1/8 1/8 5/8 5/8
Third quarter ...................... 1/4 1/8 1 1/4 1/2
Second quarter ..................... 1/2 1/8 2 1 1/4
First quarter ...................... 3/8 1/8 1 5/8
Calendar Year 1997
First quarter through
February 5, 1997 ................. 1/8 1/8 5/8 5/8
As of December 31, 1996, there were approximately 800 holders of record of
the Common Stock. On May 7, 1996, the last trading day prior to the public
announcement of the Merger Agreement, the closing bid and asked prices of the
MetroVision Common Stock and Units as reported on the NASDAQ Small Cap Market
were $.344 and $.375 per share and $1.75 and $2.25 per Unit.
No public market exists for the securities of either York Hannover or
Stockbridge.
Neither MetroVision nor York Hannover has ever paid cash dividends on their
respective shares of common stock. The payment of dividends, if any, in the
future is within the discretion of the Board of Directors, and is dependent upon
a number of factors, including earnings, capital requirements and financial
condition.
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996 the capitalization
of MetroVision on an historical basis and on a pro forma basis as adjusted to
give effect to the consummation of the Merger.
September 30, 1996
----------------------
Pro
Actual Forma(1)
------ --------
(In thousands)
Short-Term Debt:
Notes Payable and Current Portion
of Long-Term Debt .............................. $ 135 $ 2,085
======== ========
Long-Term Debt (less current portion): ............. 0 0
-------- --------
Total Long-Term Debt ........................... 0 0
======== =========
Preferred Stock .................................... 1 1
Common Shareholders' Equity:
Common Stock, $.001 Par Value; (10,000,000
shares authorized; 6,987,880 shares issued
at September 30, 1996 - historical, and
5,519,104 - pro forma) ........................... 7 5
Additional Paid in Capital ....................... 13,386 1,342
Retained Deficit ................................. (12,760) (2,272)
-------- --------
Total Common Shareholders' Equity .............. 633 (925)
======== =========
Total Capitalization ............................... $ 769 $ 1,161
======== ========
- ----------
(1) Gives effect to the Merger and related transactions described herein under
"Unaudited Summary Pro Forma Combined Condensed Financial Information."
INFORMATION CONCERNING METROVISION
Business
MetroVision owns and operates the Commuter Channel, a video cable network
for the mass transit industry. The Commuter Channel displays a program cycle of
generally 10 to 12 minutes which is segmented into information from transit
authorities; news, weather, sports and entertainment headlines; and advertising.
Broadcasts on the Commuter Channel are displayed 24 hours a day, seven days a
week, on high-resolution video display monitors and projection screens situated
on rail platforms and in passenger waiting areas.
The Commuter Channel is currently installed in the Port Authority Trans
Hudson ("PATH") system in New York and New Jersey, the Southeastern Pennsylvania
Transportation Authority ("SEPTA") system in Philadelphia, Pennsylvania,
Boston's Massachusetts Bay Transportation Authority ("MBTA") subway and commuter
rail system, and in the Bay Area Rapid Transit ("BART") System in the San
Francisco Bay Area in California. MetroVision is currently installing its
electronic display system in approximately 50 New Jersey Transit stations, and
has several smaller installations in other markets. The Commuter Channel is
designed to be the primary means by which transit authorities communicate
information to commuters using their systems. Transit information is input
directly by transit authorities and includes schedule information, route maps,
delay information, and emergency information. MetroVision believes the Commuter
Channel is an attractive communications medium to transit authorities in that it
provides them with a state-of-the-art information system and offers them
commissions on advertising sold on the Commuter Channel in their respective
transit systems.
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MetroVision derives its revenues from the sale or barter of advertising and
news information segments on its networks, and the sale of its complete video
display network to transit authorities. In addition, news, weather, sports and
entertainment headlines displayed on the Commuter Channel are obtained from
several information providers, certain of whom pay MetroVision fees for access
to the Commuter Channel. MetroVision believes that a principal attraction of the
Commuter Channel to advertisers is that it targets commuters during times when
they are otherwise unreachable by conventional visual broadcast media.
MetroVision's objective has been to expand its video cable network into
transit systems through the sale of complete systems to transit authorities
seeking to comply with the Americans with Disabilities Act ("ADA"). The ADA
requires transit authorities that provide verbal transit information to also
provide visual information to users. MetroVision believes that the ADA will
allow it to expand its networks without having to capitalize equipment and
installation costs. MetroVision believes that, if it is successful in meeting
its objective, the Commuter Channel will be attractive media alternatives for
advertisers attempting to reach large audiences and upscale demographic
characteristics in captive environments.
Alternative Media
MetroVision believes it presents advertisers with an attractive, highly
focused, place-based media outlet. "Place-based media" is a phrase generally
applied to new means of presenting advertising to highly-targeted or niche
(specialty) markets. The place-based media industry has emerged in response to a
perceived fragmentation of the mass market and the resulting reduced efficacy of
mass marketing advertising. In contrast to mass marketing, place-based media
seeks to target and isolate smaller, more discreet, stratified market segments.
Mass Transportation Advertising
There has been substantial advertising in mass transportation systems.
MetroVision believes that advertising in mass transportation systems has
generally been recognized as an effective means for advertisers to reach large
audiences with attractive demographic characteristics. Advertising within public
transportation systems (i.e., urban rail, commuter rail) generally has consisted
of transit shelter advertising and airport advertising. In all three cases,
consumers can be exposed to multiple advertising methods over an extended period
of time, enhancing recall and effectiveness. According to the American Public
Transit Association, nearly 8.4 billion riders rode on the nation's transit
systems during 1994, many of whom were commuting to work. This ridership has
augmented the desire of advertisers to reach this attractive audience and the
need for transportation operators to provide timely and relevant information to
passengers.
MetroVision Strategy
Historically, MetroVision has financed the purchase and installation of the
equipment necessary to fulfill a contract with a transit system or airport. More
recently, MetroVision has shifted its strategy to sales of "turn-key" systems to
transit authorities seeking to comply with the ADA, which requires transit
authorities that provide verbal transit information to also provide visual
information to passengers. MetroVision believes that "turn-key" sales do not put
such a strain on its very limited financial resources because the costs of
installation are borne by the customer. In addition, MetroVision believes such
sales, to the extent they are realized, carry significantly higher operating
margins than are associated with advertising revenue. MetroVision has completed
the installation of the Commuter Channel in the transit systems operated by the
Rhode Island Public Transit Authority and the Niagara Frontier Transit Authority
and is installing the Commuter Channel for the New Jersey Transit Authority. The
completion of these installations not only provides revenues from installation,
but also provides an expanded network for MetroVision to market to advertisers
and others without a significant cash outlay. In addition, MetroVision believes
that its network is an attractive media alternative for advertisers attempting
to reach a large audience with attractive demographic characteristics in captive
environments. MetroVision believes the principal attractions of the Commuter
Channel to advertisers include the following:
o They target commuter/business travelers during times when they are
otherwise generally unreachable by conventional visual broadcast
media.
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o They offer advertisers flexibility to vary advertising based on the
time (such as time of day or day of week) or location (such as
specific stations or cities) of the broadcast. Creative messages can
be changed on short notice.
o Commuter/business travelers represent captive audiences who are
attracted to the prominently located monitors to view important
transit and other information such as information related to local
events, ground transportation or traffic.
The Commuter Channel is designed to be a primary means by which transit
authorities communicate information to commuters in the respective transit
systems. MetroVision believes the Commuter Channel is an attractive
communication medium to transit authorities in that:
o The authorities are provided with state-of-the-art information systems
(including high-resolution video display monitors and computers), as
well as installation, maintenance, training and programming services.
o The authorities receive commissions on all advertising sold on the
Commuter Channel in their respective transit systems.
o The authorities are allotted, at no charge, approximately one-third of
the time in each program cycle on the network for transit or other
information such as information related to local events, ground
transportation or traffic.
System Configuration and Programming
The Commuter Channel installation generally consists of high-resolution
video display monitors and personal computers. The number of monitors installed
at a particular location can vary depending upon the size and configuration of
the location. Monitors at each location are connected via coaxial cables to, and
are controlled by, one or several IBM-compatible personal computers which are
generally located in non-public areas. These "display" computers receive
information via telephone communications lines from four separate input sources:
MetroVision, transit authorities, advertisers and information providers.
MetroVision provides the participating transit authorities, advertisers and
information providers with computers through which they can continuously input
and broadcast their respective information to the network. Information from
transit authorities includes schedule information, route maps, delay information
and emergency information. News, weather, sports and entertainment headlines
displayed on the Commuter Channel are obtained from several information
providers, including national and local news sources.
MetroVision generally installs a computer at the transit control center for
the transit authority's convenient input and broadcast of important delay and
emergency information. The public relations department of the transit authority
will often also have a second input computer for broadcast of public awareness
messages. Similarly, the computers for the information providers, such as ABC
local affiliate, KGO News, are generally installed in editorial or news rooms
for easy input of news updates.
Advertising creative is supplied by advertisers to MetroVision. The
creative is then digitized and edited by MetroVision's production staff.
Creative which takes the form of full-motion video is transferred onto a video
disc by MetroVision. Typically, advertisers will send MetroVision advertising
copy which is stored on laser disk or scanned into a computer and then edited.
All advertising messages are stored in the display computers or laser disk for
broadcast as scheduled by the advertiser.
Each display computer has a continuously running program cycle which is
divided into separate time allocations or "slots," each of which is dedicated to
transit information; news, weather, sports and entertainment headlines; or
advertising. From their respective computers, transit authorities and
information providers can update and change only the information in their
respective slots in the program cycle. Advertising is changed or added by
MetroVision. MetroVision can also change the composition or order of the program
cycle and of any of the slots in the broadcast.
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A key component of MetroVision's network is the computer software system
which controls the trafficking and display of all segments of programming on the
Commuter Channel. In November 1992, MetroVision received an exclusive long-term
license to use this software in the mass transportation and aviation markets.
See "--Software License Agreement."
Advertisers and Information Providers
MetroVision derives its revenues principally from sales of advertising on
the Commuter Channel. There are generally sixteen 15-second advertising slots in
a program cycle (not including advertising by information providers in their
programming slots). Each 15-second slot can be further divided into several
separate slots which can convey an advertising message on consecutively
displayed images or video clips, or be interspersed to provide greater frequency
of display. MetroVision's agreements with transit authorities generally allow
the transit authorities to reject advertising to be displayed on the network in
their respective systems if they deem it objectionable. Advertisers have the
opportunity to have advertising and other information presented on a total
network basis, individual transit market basis or individual station basis.
Advertising agreements are generally short-term (one year or less) and may be
canceled by the advertiser in certain circumstances. Certain advertisers are
guaranteed product category exclusivity. In addition to advertisers, certain
information providers pay MetroVision fees for access to the network. Fees from
information providers presently represent a significant portion of MetroVision's
revenues. MetroVision generally seeks to have information providers for national
and/or local news, weather and sports; time; health and lifestyle information;
financial news; and travel and entertainment.
Advertisers and information providers currently broadcasting on the
Commuter Channel include Dow Jones Telerate, the California and New Jersey
Lotteries and the ABC local affiliate KGO (San Francisco). For the fiscal year
ended December 31, 1995, MetroVision's five largest advertisers and information
providers accounted for approximately 61% of revenues, with ABC News and KGO-TV
accounting for approximately 31% and 9% of gross advertising revenues,
respectively. For the nine months ended September 30, 1996, MetroVision's five
largest advertisers and information providers accounted for approximately 64.7%
of advertsing and news service revenues, with Dow Jones Telerate and KGO News
accounting for approximately 20% and 14.5% of revenues, respectively.
Installations and Installation Contracts
The Commuter Channel is currently installed in New York/New Jersey's PATH
system, Philadelphia's SEPTA system, San Francisco/Oakland's BART system and
Boston's MBTA system. The New York, Philadelphia, San Francisco and Boston
metropolitan areas are four of the largest mass transit markets in the United
States as measured by annual commuter trips. MetroVision typically seeks to
install the Commuter Channel in the stations of a transit system with the
highest level of commuter traffic.
The table below sets forth information with respect to MetroVision's
primary and contracted installations of the Commuter Channel at September 30,
1996:
No. of No. of No. of
Installation Location Stations Monitors Computers
New York/New Jersey (PATH) 13(1) 130(1) 18(1)
Philadelphia, Pennsylvania (SEPTA) 9 56 11
San Francisco, California (BART) 6 112 12
Boston, Massachusetts (MBTA) 5 64 5
New Jersey Transit 12 54 12
(1) Includes 10 monitors and 3 computers contracted to be installed in the PATH
system.
The following is additional information relating to MetroVision's primary
installations:
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The Port Authority Trans Hudson (PATH) System. The PATH commuter rail line
provides access to Manhattan's downtown and midtown business districts for New
Jersey residents. Installation of the Commuter Channel in PATH commenced in
1989. MetroVision's agreement with PATH was amended on December 31, 1996 for an
indefinite term, subject to earlier revocation or termination as provided in the
permit. MetroVision is contracted to install an additional ten monitors and
three computers in three PATH stations. All of the Company's installations at
the Path Stations have been upgraded to allow the display of full-motion video.
MetroVision pays PATH a monthly commission based on the net revenues MetroVision
receives from sales of advertising (not including revenues, if any, received
from information providers) on the Commuter Channel in PATH. This monthly
commission is determined on an annual basis using several components, including
the number of passengers in the PATH system during the previous 12 months and
the advertising rates charged by MetroVision, and is subject to an overall
maximum of 20% of net revenues. For the fiscal year ended December 31, 1995, the
monthly commission was 12 1/2%. In the event all of MetroVision's advertising
slots are sold, PATH would be entitled to a greater percentage of the net
revenues received by MetroVision from the sale of advertising displayed during
program cycle time otherwise reserved for use by PATH. MetroVision's agreement
with PATH, in accordance with what MetroVision believes is PATH's policy and
practice for all of its vendor agreements, is non-exclusive and terminable on 30
days notice by PATH.
The Southeastern Pennsylvania Transit Authority (SEPTA) System. SEPTA
operates a commuter rail line connecting Philadelphia to its suburban areas,
including the Main Line area and Bucks County. The Commuter Channel at SEPTA
commenced operations in 1987. On July 5, 1995, MetroVision entered into a
revised operating agreement. MetroVision's agreement with SEPTA expires July 5,
1998 and provides MetroVision with a right of first refusal. MetroVision is
required to pay SEPTA commissions equal to 50% of MetroVision's net revenues
from sales of advertising on the Commuter Channel in SEPTA.
The Bay Area Rapid Transit (BART) System. The BART commuter rail network
connects downtown San Francisco with the Bay Area's other major cities and
suburbs, including Oakland and Alameda and Contra Costa counties. MetroVision's
agreement with BART expires in July 1999. Subject to mutual agreement by the
parties for an extension and on the amount of the commissions to be applied
during the extended term, MetroVision may renew the agreement for an additional
36 months by giving BART written notice at least 30 days prior to the expiration
of the agreement's initial term. MetroVision is obligated to pay BART 10% of
MetroVision's net revenues from sales of advertising (not including revenues, if
any, from information providers) on the Commuter Channel in BART during the
first five years of the agreement and 12% of its net revenues for the remaining
two years of the initial term.
The Massachusetts Bay Transit Authority (MBTA) System. MetroVision has a
contract to install the Commuter Channel in the Boston commuter rail system,
which transports passengers to Boston from 78 cities and towns in a service
district of 2.6 million people. Boston is the fifth largest mass transit market
in the nation. The agreement will expire five years from the completion of
installation and acceptance of the system. MetroVision is to pay the MBTA 10% of
MetroVision's net revenue from the sale of advertising on the Commuter Channel
in the MBTA, subject to certain yearly minimums which equal $286,080 in the
aggregate for the initial five-year term of the agreement. Current expansion of
the Commuter Channel in the MBTA from the presently installed five stations has
been halted.
The Chicago Transit Authority (CTA) System. The CTA operates Chicago's
metropolitan rail line, providing urban transportation between Chicago's
business district and numerous residential neighborhoods. The Commuter Channel
at the CTA commenced operations in 1988. The Company's agreement with the CTA
expired on April 1, 1993. On March 21, 1996, MetroVision and the CTA mutually
agreed to terminate the Agreement effective March 31, 1996.
Other Installations - ADA Sales
MetroVision has recently completed the installation of, or is in the
process of completing the installation of, the Commuter Channel in the transit
system operated by the RIPTA, NFTA and the NJT. RIPTA and NFTA will receive 20%
of the advertising revenue received from the sale of advertising on their
respective systems. MetroVision will be responsible for on-going maintenance
costs and software fees, which are to be reimbursed from advertising revenues.
MetroVision believes that "turn-key" sales may allow it to rapidly expand its
network without
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the need to capitalize equipment and installation costs. In addition,
MetroVision believes that "turn-key" sales, to the extent realized, will carry a
significantly higher operating margin than are associated with advertising
revenue.
In addition, MetroVision has several smaller installations, at the McKinney
Transportation Center in Stamford, Connecticut and in other markets. These
include installations in various non-rail locations, including bus stations and
bus stops, in Syracuse and Rochester, New York. Revenues from these
installations have not been, and are not expected to be, material to
MetroVision's business.
Sales and Marketing
MetroVision markets its network to two primary client sources: advertisers
and transit authorities. MetroVision's marketing and sales are primarily handled
in house by MetroVision's President and to a lesser extent, using outside sales
representatives. The sales representatives are generally compensated on a
commission basis, which is typically 10% to 15% of gross advertising sales. To
assist its sales process, MetroVision utilizes research materials detailing,
among other things, demographic characteristics of commuters in the transit
systems in which MetroVision's network is installed. In addition, MetroVision
has prepared presentation materials for advertisers, including brochures and an
audio/visual promotional tape focusing on the successful use of the Commuter
Channel by certain advertisers.
MetroVision markets its network to transit authorities principally by
direct contact and presentations through membership in an industry trade
association and participation in industry conventions and trade shows. Because
transit authorities are predominantly municipal or government related or
supported, these entities may be required to award contracts after issuance of
requests for proposals and pursuant to competitive bidding. MetroVision is
currently engaged in ongoing discussions with various transit systems relating
to the installation of its network. MetroVision believes that its existing
installations are an important competitive factor in the marketing of its
network to transit systems and enhance MetroVision's position in connection with
awards of new contracts.
Software License Agreement
MetroVision licenses the software which controls the trafficking and
display of all segments of the Commuter Channel's programming from Target
Vision, Inc. ("Target Vision") pursuant to an exclusive long-term license. The
Target Vision license is an exclusive license to use the software in all
transportation centers, bus stations, subways and train stations in the United
States. MetroVision acquired the software license pursuant to an agreement dated
November 1, 1992 with Target Vision in consideration of a lump sum payment of
$150,000. In addition MetroVision was obligated to pay minimum quarterly
servicing and use fees to Target Vision of $27,000 per quarter in 1993
increasing to $30,000 per quarter in 1996, at which time the license to use the
version of the software in use at such time became perpetual. On September 30,
1996, MetroVision notified Target Vision that it would not automatically renew
its software license agreement. Negotiations on a revised agreement are
currently ongoing.
Equipment Suppliers and Installation
MetroVision typically purchases television monitors, computers, kiosk
enclosures and other installation equipment immediately prior to their
installation. Equipment used in connection with MetroVision's network is
manufactured by various large manufacturers and obtained from various sources.
MetroVision believes that there are multiple sources for all the equipment
comprising the Commuter Channel. MetroVision does not anticipate difficulties in
obtaining equipment necessary to conduct its business or install new systems
from current suppliers or alternative sources. MetroVision has contracted with
several companies for the fabrication of kiosk units and enclosures in which to
house television monitors. MetroVision uses both in-house and local contractors
for each installation project. MetroVision does not anticipate any difficulty in
identifying qualified local contractors.
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System Maintenance and Security
MetroVision utilizes both in-house staff and outside contractors for the
cleaning and maintenance of its network equipment. Cleaning and minor repairs
are performed by in-house technical service personnel in the New York, Boston
and San Francisco markets. In the other markets, these services are provided by
outside contractors. MetroVision believes that the cost of retaining in-house
staff is comparable to the cost of utilizing outside contractors for these
tasks. MetroVision has typically entered into service agreements for all
computer repair work with local firms. MetroVision currently contracts for
computer repair services and monitor repairs. MetroVision believes that
alternative sources of these services are readily available.
All of MetroVision's monitors are located in enclosures and kiosks that are
equipped with locking devices and are specially designed for durability and
safety in construction. Ceiling mounted monitor enclosures are designed to
support significantly more weight than that of the monitor itself, and kiosk
structures are bolted directly to the floor. MetroVision has experienced
moderate losses due to theft and/or vandalism. In addition, the software
utilized by the Commuter Channel has been designed to minimize the risk of
unauthorized access to the network.
Competition
MetroVision believes the Commuter Channel is the only network of its type
currently installed in mass transit locations. MetroVision believes that its
existing installations are an important competitive factor in the marketing of
its network to prospective transit systems as well as in the sale
of advertising. MetroVision's business could be adversely affected by the broad
commercialization of competitive networks or new media which have the same
benefits to advertisers as the Commuter Channel.
MetroVision competes generally for advertising dollars with national, local
and cable television; radio; magazines (including in-flight magazines); and
billboards, including billboards and other similar forms of advertising located
in transit systems. There are a number of companies, including Gannett Transit,
Ackerley Communications, Inc. and Transportation Displays, Inc. that have
established a significant position in the transit advertising industries and
target national, regional and local advertisers. MetroVision's network also
competes for advertising dollars with other newer, highly-targeted alternative
media advertising. MetroVision believes that the principal competitive factors
affecting its business are the ability of its network to reach its target
audience efficiently and the ability to demonstrate to advertisers the cost
effectiveness of MetroVision's service as compared to other forms of
advertising.
Trademarks, Proprietary Information and Patents
MetroVision has registered its trademark, Commuter Channel, with the United
States Patent and Trademark Office covering the broadcast of video transmissions
in the mass transit industry. The term of this registration is 20 years
(expiring in 2010) and is renewable indefinitely if the mark is still in use at
the time of renewal. MetroVision's rights in the Commuter Channel mark is a
significant part of MetroVision's business. Accordingly, MetroVision intends to
maintain its mark and related registration. MetroVision does not hold any
patents.
Employees
As of February 1, 1997, MetroVision employed 12 persons, including two in
executive positions, seven service and maintenance technicians, two
administrative support staff and one management position. None of MetroVision's
employees is covered by a collective bargaining agreement. MetroVision believes
that the relationship with its employees is satisfactory.
Properties and Facilities
MetroVision's headquarters are located in leased space at 424 Madison
Avenue, New York, New York 10017. MetroVision rents the space on a month to
month basis at a rate of $1,250 monthly. MetroVision also leases space in San
Francisco, Boston, Newark and Woodbridge. MetroVision believes that suitable
alternative office space is readily available on substantially similar terms.
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MetroVision believes that its facilities are adequate for its current
operations and for the foreseeable future.
Legal Proceedings
On October 23, 1996, Leeward Avary, an individual (the "Plaintiff"), filed
a complaint against MetroVision, MetroVision's subsidiary, Touchtel, Inc., and
one other defendant in the Superior Court of Cobb County, Georgia (Civil Action
No. 9617567-33), alleging a default by MetroVision and the other defendants
under a promissory note and related guarantees in the amount of $75,505.17,
which indebtedness is recorded on MetroVision's consolidated balance sheet at
September 30, 1996. The Plaintiff sought damages in the amount of the note plus
interest thereon at the rate of 1.5% above the prime rate and $3,775.00 in late
fees associated with the promissory note. On January 28, 1997, MetroVision and
the Plaintiff entered into an agreement pursuant to which MetroVision has agreed
to pay to the Plaintiff the sum of $61,325 in full satisfaction and discharge of
all the Plaintiff's claims, which payment shall be made in installments through
July 1, 1997. The Plaintiff has agreed to dismiss the lawsuit against
MetroVision; provided, however, that if MetroVision fails to make any payment
when due, the Plaintiff may confess judgment against MetroVision for the total
amount allegedly due less any payments theretofore made by MetroVision. Except
as stated above, MetroVision is not a party to any material legal proceedings.
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Directors and Officers
The following sets forth information concerning MetroVision's officers and
directors. For biographical information concerning the directors, See "Proposal
4 -- Election of Alternative Slates of Board of Directors." See also "The Merger
Agreement -- Conduct of the Business of the Combined Companies Following the
Merger; Management Following the Merger" for information concerning the
executive management of the Surviving Corporation.
Name Age Position Presently Held Director
- ---- --- ----------------------- Since
-----
Robert F. Hussey 47 President and Chairman of the Board 1991
Joseph A. Calabrese 43 Managing Director and 1986
Director
Don Stephen Aron(1) 51 Director 1990
William H. Hessick III(1) 57 Director 1986
David M. Fancher 36 Chief Financial Officer and Secretary
(1) Member of the Audit, Compensation and Stock Option Plan Committees. See
"Election of Alternate Slates of Board of Directors."
David M. Fancher joined MetroVision in November 1994 as Principal Financial
Officer. On January 1, 1995, Mr. Fancher was named Secretary and Chief Financial
Officer. Prior to joining MetroVision, Mr. Fancher served as Controller for
McMillan Publishing, Professional Business Reference Division, between
1991-1994, and for Chemical Waste Management, a wholly owned subsidiary of Waste
Management, Inc. between 1988-1991. Mr. Fancher is a graduate of Monmouth
University with a B.S. Degree in Business Administration.
Executive Compensation
The following table sets forth all cash compensation paid by MetroVision,
as well as certain other compensation paid or accrued, for the fiscal years
ended December 31, 1995, 1994 and 1993 to MetroVision's President. No executive
officer of MetroVision other than MetroVision's President had total annual
salary and bonus exceeding $100,000 for the reported years.
Summary Compensation Table
Long Term
Annual Compensation(1) Compensation
--------------------- ------------
Securities
Underlying
Name and Principal Position Year Salary Options
- --------------------------- ---- ------ -------
Robert F. Hussey
President and Chairman of 1995 -- 25,000
the Board
1994 $ 83,333 --
1993 $ 100,000 --
- ----------
(1) The value of perquisites and other personal benefits, securities and other
property paid to or accrued for Mr. Hussey did not exceed the lesser of
$50,000 or 10% of Mr. Hussey's total reported annual salary and bonus,
and thus are not included in the table.
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<PAGE>
Stock Options
The following table contains information concerning the grant of stock
options under MetroVision's 1991 Employee Stock Option Plan to MetroVision's
President during the last fiscal year.
Option Grants in Last Fiscal Year
Number of
Shares Percent of Total Exercise
Underlying Options Granted Price Per Expiration
Name Options in Fiscal Year Share Date
- ---- ---------- ---------------- --------- ----------
Robert F. Hussey 25,000 25% $.20 2001
The following table summarizes for MetroVision's President the total number
of unexercised options, if any, held at December 31, 1995 and the aggregate
dollar value of in-the-money, unexercised options held at December 31, 1995. The
value of an unexercised, in-the-money option at fiscal year-end is the
difference between its exercise or base price and the fair market value of the
underlying stock on December 31, 1995, which was $.1563 per share. These values
have not been and may never be realized. The underlying options have not been,
and may not be exercised; and actual gains, if any, on exercise will depend on
the value of shares of Common Stock on the date of exercise. There can be no
assurance that these values will be realized.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ---- ----------- -------- ------------- -------------
Robert F. Hussey N/A N/A 224,286/ 0/
25,000 0
Employment Agreements
MetroVision's employment agreement with Robert F. Hussey expired effective
June 1, 1994. No other individual is a party to an employment agreement with
MetroVision.
Certain Relationships and Related Transactions
On July 10, 1996, each of Robert Hussey and Don Aron loaned MetroVision
$12,500 at 10% interest per annum with principal and accrued interest due no
later than November 1, 1996. In connection with this loan, MetroVision issued to
each such person warrants to purchase 34,500 shares of Common Stock at an
exercise price of $.15 per share. MetroVision currently is in default of such
loans, although no action has been taken to date to collect the unpaid sums. In
September 1996, each of Robert Hussey and Don Aron loaned an additional $20,000,
and William Hessick loaned $5,000, to MetroVision at 10% interest per annum with
principal and interest due no later than December 1, 1996. In connection with
this loan, MetroVision issued to each of Messrs. Hussey and Aron warrants to
purchase 55,200 shares of Common Stock, and issued to Mr. Hessick warrants to
purchase 13,800 shares of Common Stock, at an exercise price of $.20 per share.
MetroVision currently is in default of such loans; however, no action has been
taken to date to collect the unpaid sums.
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BENEFICIAL OWNERSHIP OF
METROVISION COMMON STOCK
The following table sets forth information at ____________ __, 1997, based
on information obtained from the persons named below or from reports filed on
Schedules 13G or 13D, with respect to the beneficial ownership of shares of
Common Stock by (i) each person known by MetroVision to be the owner of more
than 5% of the outstanding shares of Common Stock, (ii) each director, (iii)
each nominee for election as director and (iv) all officers and directors as a
group. Except as otherwise indicated below, each of the entities or person named
in the table has sole voting and investment powers with respect to all shares of
Common Stock beneficially owned by it or him as set forth opposite its or his
name.
<TABLE>
<CAPTION>
Amount and Nature Percentage of
of Beneficial Outstanding Owned After Merger Percentage of Shares
Name of Beneficial Owner Ownership(1) Shares Owned Number of Shares (2) Owned After Merger (2)
- ------------------------ ----------------- ------------ -------------------- ----------------------
<S> <C> <C> <C> <C>
Robert F. Hussey(3) 782,070(4) 10.3% 170,015 2.9%
Joseph A. Calabrese(3) 144,922(5) 2.0% 31,505 *
Thomas M. Clarke 300,000(6) 4.1% 4,550,000(6)(7) 78.1%
Lawrence B. Cummings -- * 4,250,000(7) 73.0%
Don Stephen Aron(3) 184,927(8) 2.5% 40,202 *
William H. Hessick III(3) 59,990(9) *% 13,041 *
Peter Doelger -- * -- *
Courtlandt G. Miller -- * -- *
William G. Walters
c/o Whale Securities
650 Fifth Avenue
New York, NY 10019 1,939,490 26.3% 421,628 7.5%
All officers and directors 1,185,909(10) 15.0% 257,806 4.5%
as a group (5 persons)
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise noted, MetroVision believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) Gives effect to Reverse Stock Split, which is a condition precedent to the
consummation of the Merger. See "Proposal 1 - Amendment to Restated
Certificate of Incorporation to Effect 1 for 4.6 Reverse Stock Split."
(3) The address of this individual is c/o MetroVision of North America, Inc.,
424 Madison Avenue, New York, NY 10017.
(4) Includes 19,926 shares issuable upon conversion of shares of 5% Preferred
Stock, 109,700 shares issuable upon the exercise of immediately exercisable
warrants and 232,619 shares issuable upon the exercise of immediately
exercisable stock options.
(5) Includes 5,016 shares issuable upon conversion of shares of 5% Preferred
Stock and 90,047 shares issuable upon the exercise of immediately
exercisable stock options.
(6) Includes 3,800 shares owned by Mr. Clarke's wife, 104,000 shares owned by
Greylock Health Corporation, of which Mr. Clarke is a controlling
stockholder, and 33,000 shares owned by York Hannover, as to all of
which shares Mr. Clarke disclaims beneficial ownership.
(7) Represents 4,000,000 shares to be issued to Stockbridge in the Merger of
which the named individual is a principal stockholder and director and
immediately exercisable warrants to purchase 250,000 shares to be granted
to the named individual.
(8) Includes 35,003 shares issuable upon conversion of shares of 5% Preferred
Stock, 25,500 shares issuable upon the exercise of immediately exercisable
stock options and 99,700 shares issuable upon exercise of immediately
exercisable warrants.
(9) Includes 1,658 shares issuable upon conversion of shares of 5% Preferred
Stock and 24,500 shares issuable upon the exercise of immediately
exercisable stock options and 13,800 shares issuable upon exercise of
immediately exercisable warrants.
(10) See footnotes (4), (5), (8) and (9) above. Also includes 14,000 shares
owned by an officer of MetroVision.
INFORMATION CONCERNING YORK HANNOVER
The information set forth below has been provided by York Hannover and has
been included herein by MetroVision upon receipt by MetroVision of York
Hannover's representation and warranty as to its accuracy.
Business
York Hannover Pharmaceuticals, Inc. ("York Hannover") was incorporated
under the laws of the State of Florida on June 20, 1990. On July 24, 1990, York
Hannover's shares were transferred to York Hannover Leisure Properties, Inc.
("YHLPI"), a Florida corporation and a wholly owned subsidiary of Progressive
Investments International, Inc. ("Progressive"). On December 17, 1993,
Stockbridge Investment Partners, Inc. ("SIP"), a Florida corporation, purchased
the stock of Progressive and concurrent with the acquisition, merged with
Progressive and renamed it Stockbridge Investment Partners, Inc.
("Stockbridge"). It has the corporate power and authority and is in possession
of all approvals necessary to own, lease and operate the properties it purports
to own. Prior to August 1, 1995, York Hannover provided institutional pharmacy
service, infusion therapy, urological, enteral and general medical supplies to
licensed nursing facilities, hospitals, correction facilities and retirement
facilities throughout the State of Florida. On August 1, 1995, York Hannover
formed
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a partnership with United Professional Companies, Inc. ("UPC"), a Delaware
corporation, named York Hannover Partnership ("Partnership") which now provides
the above-mentioned services.
Relation of York Hannover and Stockbridge
York Hannover is a wholly owned subsidiary of Stockbridge. Stockbridge
purchased York Hannover from Progressive Investments International, Inc. on
December 17, 1993. From that time until August 1, 1995, York Hannover provided
institutional pharmacy services, infusion therapy, urological, enteral and
general medical supplies to licensed nursing facilities, hospitals, correction
facilities, and retirement facilities throughout the State of Florida. Effective
August 1, 1995, York Hannover formed a partnership ("York Hannover
Partnership"), with United Professional Companies, Inc. ("UPC") whereby York
Hannover and UPC each contributed property and equipment, inventory and existing
contracts with nursing facilities to provide services and products. Presently,
the York Hannover Partnership is 60% owned by UPC and 40% owned by York
Hannover, and is accounted for by York Hannover using the equity method of
accounting.
York Hannover's sole asset at the time of the Merger will be its investment
in the York Hannover Partnership. Additionally, York Hannover provides certain
billing services to York Hannover Partnership for a percentage of amounts
billed.
Relationship of York Hannover and United Health, Inc.
United Health, Inc., one of the largest owners of nursing homes in the
United States, indirectly owns UPC. As mentioned above, UPC and York Hannover
own York Hannover Partnership on a 60/40 relationship, respectively. The
partnership agreement requires that neither partner can conduct pharmacy related
business in the State of Florida outside of York Hannover Partnership. See
"Summary of York Hannover Partnership Partnership Agreement."
Pharmacy Services
York Hannover Partnership purchases, repackages and dispenses prescription
and non-prescription medication in accordance with physician orders and delivers
such prescriptions at least daily to the nursing facility for administration to
individual patients by the facility's nursing staff. York Hannover Partnership
currently services 55 nursing homes from its centralized pharmacy located in
Brooksville, Florida. York Hannover Partnership maintains a 24-hour, on-call
pharmacist service 365 days per year for emergency dispensing and delivery or
for consultation with the facility's staff or attending physician.
Upon receipt of a prescription, the relevant patient information is entered
into York Hannover Partnership's computerized dispensing and billing systems. At
that time, the dispensing system will check the prescription for any potentially
adverse drug interactions or patient sensitivity. When required and/or
specifically requested by the physician or patient, branded drugs are dispensed;
generic drugs are substituted in accordance with applicable state and federal
laws and as requested by the physician or patient.
York Hannover Partnership utilizes a "unit dose" distribution system. Most
of its prescriptions are filled utilizing specialized unit-of-use packaging and
delivery systems. Maintenance medications are typically provided in 30-day
supplies utilizing either a box unit dose system or unit dose punch card system.
The unit dose system, preferred over the bulk delivery systems employed by
retail pharmacies, improves control over drugs in the nursing facility and
improves patient compliance with drug therapy by increasing the accuracy and
timeliness of drug administration.
Integral to York Hannover Partnership's drug distribution system is its
computerized medical records and documentation system. York Hannover Partnership
provides to the facility computerized medication administration records and
physician's order sheets and treatment records for each patient. Data extracted
from these computerized records are also formulated into monthly management
reports on patient care and quality assurance. The computerized documentation
system in combination with the unit dose drug delivery system results in greater
efficiency in nursing time, improved control, reduced drug waste in the facility
and lower error rates in both dispensing and administration. These benefits
improve drug efficacy and result in fewer drug-related hospitalizations.
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Consultant Pharmacist Services
Federal and state regulations mandate that nursing facilities, in addition
to providing a source of pharmaceuticals, retain consultant pharmacist services
to monitor and report on prescription drug therapy in order to maintain and
improve the quality of patient care. The Omnibus Budget Reconciliation Act
("OBRA") implemented in 1990 seeks to further upgrade and standardize care by
setting forth more stringent standards relating to planning, monitoring and
reporting on the progress of prescription drug therapy as well as facility-wide
drug usage.
York Hannover Partnership provides consultant pharmacist services which
help clients comply with such federal and state regulations applicable to
nursing homes. The services offered by York Hannover Partnership's consultant
pharmacists include: (i) comprehensive, monthly drug regimen reviews for each
patient in the facility to assess the appropriateness and efficacy of drug
therapies, including a review of the patient's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and recommending
alternate therapies or discontinuing unnecessary drugs; (ii) participation on
the Pharmacy and Therapeutics, Quality Assurance and other committees of client
nursing facilities as well as periodic involvement in staff meetings; (iii)
monthly inspection of medication carts and storage rooms; (iv) monitoring and
monthly reporting on facility-wide drug usage and drug administration systems
and practices; (v) development and maintenance of pharmaceutical policy and
procedures manuals; and (vi) assistance to the nursing facility in complying
with state and federal regulations as they pertain to patient care.
Ancillary Services
York Hannover Partnership provides the following ancillary products and
services to nursing facilities:
Infusion Therapy Products and Services. York Hannover Partnership provides
infusion therapy support services for residents in its client nursing
facilities. Infusion therapy consists of the product (a nutrient, antibiotic,
chemotherapy or other drugs in solution) and the intravenous administration of
the product. York Hannover Partnership prepares the product to be administered
using proper equipment in a sterile environment and then delivers the product to
the nursing home for administration by the nursing staff. Proper administration
of intravenous ("IV") drug therapy requires a highly trained nursing staff. York
Hannover Partnership's consultant pharmacists and nurse consultants operate an
education and certification program on IV therapy to assure proper staff
training and compliance with regulatory requirements in client facilities
offering an IV program.
By providing an infusion therapy program, York Hannover Partnership enables
its client nursing facilities to admit and retain patients who otherwise would
need to be cared for in an acute-care facility. York Hannover Partnership
believes that by providing these high acuity pharmacy services it has a
competitive advantage over other pharmacy providers. The most common infusion
therapies York Hannover Partnership provides are total prenatal nutrition,
antibiotic therapy, chemotherapy, pain management and hydration.
Wholesale Medical Supplies/Medicare Part B Billing. York Hannover
Partnership distributes disposable medical supplies, including urological,
ostomy, nutritional support and wound care products and other disposables needed
in the nursing home environment. In addition, York Hannover Partnership provides
direct Medicare billing services for certain of these product lines for patients
eligible under the Medicare Part B program. As part of this service, York
Hannover Partnership determines patient eligibility, obtains certifications,
orders products and maintains inventory on behalf of the nursing facility. York
Hannover Partnership also contracts to act as billing agent for certain nursing
homes that supply these products directly to the patient.
Other Services. York Hannover Partnership's majority partner, UPC, also
provides respiratory therapy products and durable medical equipment for its
clients in certain of its market areas. York Hannover Partnership continues to
review the expansion of these as well as other products and services that may
further enhance the ability of its client nursing facilities to care for their
residents in a cost-effective manner.
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<PAGE>
Product and Market Development
York Hannover Partnership's pharmacy business engages in a continuing
program for the development of new services and the marketing thereof. New
service and new market development are important factors for the growth of this
business. Any new service or marketing effort, including those in the
developmental stage, could require the investment of a material portion of York
Hannover Partnership's assets.
Materials/Supply
York Hannover Partnership purchases pharmaceuticals through a wholesale
distributor with whom it has a prime vendor contract and under contracts
negotiated directly with pharmaceutical manufacturers. York Hannover Partnership
also is a member of industry buying groups which contract with manufacturers for
discounted prices based on volume which are passed through to York Hannover
Partnership by its wholesale distributor. York Hannover Partnership has numerous
sources of supply available to it and has not experienced any difficulty in
obtaining pharmaceuticals or other products and supplies used in the conduct of
its business.
Patents, Trademarks and Licenses
York Hannover Partnership's business operations are not dependent upon any
material patents, trademarks or licenses.
Inventories
York Hannover Partnership's centralized pharmacy maintains adequate on-site
inventories of pharmaceuticals and supplies to ensure prompt delivery service to
its customers. Inventories on hand are not considered to be high by industry
standards. York Hannover Partnership's primary wholesale distributor also
maintains a local warehouse.
Competition
By its nature, the long-term care pharmacy business is highly regionalized
and, within a given geographic region of operations, highly competitive. In the
geographic region it serves, York Hannover Partnership competes with numerous
local retail pharmacies, local and regional institutional pharmacies and
pharmacies owned by long-term care facilities. York Hannover Partnership
competes in this market on the basis of quality, cost-effectiveness and the
increasingly comprehensive and specialized nature of its services along with the
clinical expertise, pharmaceutical technology and professional support it
offers.
Government Regulation
Institutional pharmacies, as well as the long-term care facilities they
serve, are subject to extensive Federal, state and local regulation. These
regulations cover required qualifications, day-to-day operations, reimbursement
and the documentation of activities. York Hannover Partnership continuously
monitors the effects of regulatory activity on its operations.
Licensure, Certification and Regulation. States generally require that
companies operating a pharmacy within the state be licensed by the state board
of pharmacy. York Hannover Partnership currently has a pharmacy license in the
State of Florida in which it operates a pharmacy. In addition, York Hannover
Partnership's pharmacy is registered with the appropriate state and Federal
authorities pursuant to statutes governing the regulation of controlled
substances.
Client nursing facilities are also separately required to be licensed in
the states in which they operate and, if serving Medicare or Medicaid patients,
must be certified to be in compliance with applicable program participation
requirements. Client nursing facilities are also subject to the nursing home
reforms of the Omnibus Budget Reconciliation Act of 1987, which imposed strict
compliance standards relating to quality of care for nursing home operations,
including vastly increased documentation and reporting requirements. In
addition, pharmacists, nurses and other health care professionals who provide
services on York Hannover Partnership's behalf are in most cases required to
obtain and maintain professional licenses and are subject to state regulation
regarding professional standards of conduct.
66
<PAGE>
Federal and State Laws Affecting the Repacking, Labeling, and Interstate
Shipping of Drugs. Federal and state laws impose certain repackaging, labeling,
and package insert requirements on pharmacies that repackage drugs for
distribution beyond the regular practice of dispensing or selling drugs directly
to patients at retail. A drug repackager must register with the Food and Drug
Administration. York Hannover Partnership holds all required registrations and
licenses, and its pre-packaging operations are in compliance with applicable
state and Federal requirements.
Medicare and Medicaid. The nursing home pharmacy business has long operated
under regulatory and cost containment pressures from state and Federal
legislation primarily affecting Medicaid and, to a lesser extent, Medicare.
As is the case for nursing home services generally, York Hannover
Partnership receives reimbursement from the Medicaid and Medicare programs,
directly from individual residents (private pay), and from other payors such as
third-party insurers. York Hannover Partnership believes that its reimbursement
mix is in line with nursing home expenditures nationally. For the year ended
December 31, 1995, York Hannover Partnership's payor mix was approximately as
follows: 39% private pay and nursing homes, 32% Medicaid, 26% Medicare and 3%
insurance and other private sources.
For those patients who are not covered by government-sponsored programs or
private insurance, York Hannover Partnership generally directly bills the
patient or the patient's responsible party on a monthly basis. York Hannover
Partnership may alternatively bill private patients through the nursing
facility. Pricing for private pay patients is based on prevailing regional
market rates or "usual and customary" charges.
The Medicaid program is a cooperative Federal-state program designed to
enable states to provide medical assistance to aged, blind, or disabled
individuals, or members of families with dependent children whose income and
resources are insufficient to meet the costs of necessary medical services.
State participation in the Medicaid program is voluntary. To become eligible to
receive Federal funds, a state must submit a Medicaid "state plan" to the
Secretary of the Department of Health and Human Services ("HHS") for approval.
The Federal Medicaid statute specifies a variety of requirements which the state
plan must meet, including requirements relating to eligibility, coverage of
services, payment and administration.
Federal law and regulations contain a variety of requirements relating to
the furnishing of prescription drugs under Medicaid. First, states are given
broad authority, subject to certain standards, to limit or specify conditions to
the coverage of particular drugs. Second, Federal Medicaid law establishes
standards affecting pharmacy practice. These standards include general
requirements relating to patient counseling and drug utilization review and more
specific requirements for nursing facilities relating to drug regimen reviews
for Medicaid patients in such facilities. Recent regulations clarify that, under
Federal law, a pharmacy is not required to meet the general standards for drugs
dispensed to nursing facility residents if the nursing facility complies with
the drug regimen review requirements. However, the regulations indicate that
states may nevertheless require pharmacies to comply with the general standards,
regardless of whether the nursing facility satisfies the drug regimen review
requirement. Florida, the state in which the York Hannover Partnership operates
currently, requires its pharmacies to comply therewith.
Third, Federal regulations impose certain requirements relating to
reimbursement for prescription drugs furnished to Medicaid patients. In addition
to requirements imposed by Federal law, states have substantial discretion to
determine administrative, coverage, eligibility and payment policies under their
state Medicaid programs which may affect the Partnership's operations. For
example, some states have enacted "freedom of choice" requirements which may
prohibit a nursing facility from requiring its residents to purchase pharmacy or
other ancillary medical services or supplies from particular providers that deal
with the nursing home. Such limitations may increase the competition which York
Hannover Partnership faces in providing services to nursing facility patients.
The Medicare program is a Federally funded and administered health
insurance program for individuals age 65 and over or who are disabled. The
Medicare program consists of two parts: Part A, which covers, among other
things, inpatient hospital, skilled nursing facility, home health care and
certain other types of health care services; and Medicare Part B, which covers
physicians' services, outpatient services, and certain items and services
provided by medical suppliers. Medicare Part B also covers a limited number of
specifically designated prescription drugs. The Medicare program establishes
certain requirements for participation of providers and suppliers in the
Medicare program. Pharmacies are not subject to such certification requirements.
Skilled nursing facilities and suppliers of medical equipment and supplies,
however, are subject to specified standards. Failure to comply with these
requirements and standards may adversely affect an entity's ability to
participate in the Medicare program and receive reimbursement for services
provided to Medicare beneficiaries.
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The Medicare and Medicaid programs are subject to statutory and regulatory
changes, retroactive and prospective rate adjustments, administrative rulings,
freezes and funding reductions, all of which may adversely affect York Hannover
Partnership's business. There can be no assurance that payments for
pharmaceutical supplies and services under governmental reimbursement programs
will continue to be based on the current methodology or remain comparable to
present levels. In this regard, York Hannover Partnership may be subject to rate
reductions as a result of federal budgetary legislation related to the Medicare
and Medicaid programs. In addition, various state Medicaid programs periodically
experience budgetary shortfalls which may result in Medicaid payment delays to
York Hannover Partnership. To date, York Hannover Partnership has not
experienced any material adverse effect due to any such budgetary shortfall. In
addition, the failure, even if inadvertent, of York Hannover Partnership and/or
its client institutions to comply with applicable reimbursement regulations
could adversely affect York Hannover Partnership's business. Additionally,
changes in such reimbursement programs or in regulations related thereto, such
as reductions in the allowable reimbursement levels, modifications in the timing
or processing of payments and other changes intended to limit or decrease the
growth of Medicaid and Medicare expenditures, could adversely affect York
Hannover Partnership's business.
Referral Restrictions. The Company is subject to Federal and state laws
which govern financial and other arrangements between health care providers.
These laws include the Federal anti-kickback statute, which was originally
enacted in 1977 and amended in 1987, and which prohibits, among other things,
knowingly and willfully soliciting, receiving, offering or paying any
remuneration directly or indirectly in return for or to induce the referral of
an individual to a person for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. Many states
have enacted similar statutes which are not necessarily limited to items and
services for which payment is made by Medicare or Medicaid. Violations of these
laws may result in fines, imprisonment, and exclusion from the Medicare and
Medicaid programs or other state-funded programs. Federal and state court
decisions interpreting these statutes are limited, but have generally construed
the statutes to apply if "one purpose" of remuneration is to induce referrals or
other conduct within the statute.
Federal regulations establish "safe harbors," which give immunity from
criminal or civil penalties to parties in good faith compliance. While the
failure to satisfy all criteria for a safe harbor does not mean that an
arrangement violates the statute, it may subject the arrangement to review by
the HHS Office of Inspector General ("OIG"), which is charged with administering
the Federal anti-kickback statute. There are no procedures for obtaining binding
interpretations or advisory opinions from the OIG on the application of the
Federal anti-kickback statute to an arrangement or its qualification for a safe
harbor upon which York Hannover Partnership can rely.
The OIG issues "Fraud Alerts" identifying certain questionable arrangements
and practices which it believes may implicate the Federal anti-kickback statute.
The OIG has issued a Fraud Alert providing its views on certain joint venture
and contractual arrangements between health care providers. The OIG also issued
a Fraud Alert concerning prescription drug marketing practices that could
potentially violate the Federal statute. Pharmaceutical marketing activities may
implicate the Federal anti-kickback statute because drugs are often reimbursed
under the Medicaid program. According to the Fraud Alert, examples of practices
that may implicate the statute include certain arrangements under which
remuneration is made to pharmacists to recommend the use of a particular
pharmaceutical product.
In addition, a number of states have recently undertaken enforcement
actions against pharmaceutical manufacturers involving pharmaceutical marketing
programs, including programs containing incentives to pharmacists to dispense
one particular product rather than another. These enforcement actions arose
under state consumer protection laws which generally prohibit false advertising,
deceptive trade practices, and the like. York Hannover Partnership believes its
contract arrangements with other health care providers, its pharmaceutical
suppliers and its pharmacy practices are in compliance with these laws. There
can be no assurance that such laws will not, however, be interpreted in the
future in a manner inconsistent with York Hannover Partnership's interpretation
and application.
Health Care Reform and Federal Budget Legislation. The Clinton
administration and members of Congress have proposed plans to reform the health
care system. Currently, Congress is considering such reforms in the context of
Federal budget reconciliation legislation. This legislation could result in
significant reductions in payments to providers under the Medicare program and a
complete restructuring and reduced payments to providers under the Medicaid
program. With respect to Medicare, proposals include establishment of a
prospective payment system for Skilled Nursing Facilities ("SNFs"); limits on
payments to Medicare SNFs for certain non-routine services, including, among
others, prescription drugs, diagnostic services, and physical therapy and other
rehabilitative services; requiring consolidated billing by a SNF for all Part A
and B claims for SNF residents; and other limits on reimbursement of costs for
Medicare SNF services. If
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enacted, there can be no assurance that such proposals could not have a material
adverse effect on the business of York Hannover Partnership. While budget
negotiations are continuing, the future of any reform proposals in Congress is
unknown.
In addition, a number of states have enacted and are considering various
health care reforms, including reforms through Medicaid demonstration projects.
Federal law allows HHS to authorize waivers of Federal Medicaid program
requirements, including requirements relating to coverage, free choice of
providers and payment for health care services, in connection with state
demonstration projects that promote Medicaid program objectives. HHS published
procedures and public notice requirements designed to open the waiver approval
process to public comment and to expedite processing. Legal actions have been
initiated challenging the waiver process and the authority of HHS to approve
waivers for broad-based Medicaid managed care programs. The Federal budget
legislation restructuring the Medicaid program would effectively eliminate
Medicaid managed care demonstration projects.
Several state Medicaid programs have established mandatory statewide
managed care programs for Medicaid beneficiaries to control costs through
negotiated or capitated rates, as opposed to traditional cost-based
reimbursement for Medicaid services, and propose to use savings achieved through
these programs to expand coverage to those not previously eligible for Medicaid.
HHS has approved waivers for statewide managed care demonstration projects in
several states, and are pending for several other states. These demonstration
projects generally exempt institutionalized care, including nursing facility
services, from the programs. York Hannover Partnership is unable to predict what
impact, if any, future projects might have on its operations. Because there are
currently various reform proposals under consideration at the Federal and state
levels, it is uncertain at this time what health care reform initiatives, if
any, will be implemented, or whether there will be other changes in the
administration of governmental health care programs or interpretations of
governmental policies or other changes affecting the health care system. There
can be no assurance that future health care or budget legislation or other
changes will not have an adverse effect on the business of York Hannover
Partnership.
Environmental Matters
In operating its facility, York Hannover Partnership makes every effort
to comply with pollution control laws. No major difficulties have been
encountered in effecting compliance. No material capital expenditures for
environmental control facilities are expected. While York Hannover Partnership
cannot predict the effect which any future legislation, regulations, or
interpretations may have upon its operations, it does not anticipate any changes
that would have a material adverse impact on its operations.
Employees
As of December 31, 1996, York Hannover Partnership employed 56 persons,
including one in an executive position, 20 pharmacists and pharmacy technicians,
three administrators and 32 other supporting services. None of such individuals
are covered by a collective bargaining agreement. York Hannover Partnership
believes that the relationship with its employees is satisfactory.
Properties and Facilities
York Hannover Partnership owns an 18,000 square foot building in
Brooksville, Florida which is used as both Partnership headquarters and as a
central dispensing facility. York Hannover Partnership purchased the building in
September, 1995 and following extensive renovations, occupied the space in
January, 1996.
Legal Proceedings
There are no material pending lawsuits against either York Hannover or York
Hannover Partnership.
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Directors and Officers
Information with respect to York Hannover's directors and officers
(other than for Messrs. Cummings and Clarke, whose biographies are included
herein under "Proposal 4 - Election of Alternate Slates of Board of Directors")
is set forth below.
Name Age Position Presently Held
---- --- -----------------------
Lawrence B. Cummings 41 Chief Executive Officer and Director
Thomas M. Clarke 41 President and Director
Linda M. Clarke 44 Treasurer, Secretary and Director
Amory Cummings 43 Director
Linda M. Clarke: Mrs. Clarke has been Treasurer of Stockbridge since 1991.
Mrs. Clarke has over seven years experience in the health care industry. In
addition to her position with Stockbridge, Mrs. Clarke was previously employed
by the Houlton Regional Hospital Development Office and participated in various
fundraising activities. Mrs. Clarke attended the University of Maine and was
previously employed by the Maine School Administrative District #29 for 5 years.
She continues to be Treasurer of Stockbridge Investment Partners, Inc. as well
as Treasurer of publicly held Healthcare Investors of America, Inc. and several
other privately held health care companies.
Amory Cummings: Mr. Cummings is an attorney and has served as a director of
York Hannover since 1994. He is Of Counsel to the Chicago law firm of Freeborn &
Peters, of which he was a partner since 1991. Freeborn & Peters from time to
time provides legal services to York Hannover and its affiliates. Mr. Cummings
received his undergraduate degree from Yale University and is a graduate of the
University of Michigan Law School.
Executive Compensation
York Hannover currently has no employees. Day to day operations of York
Hannover are managed by Lenox Healthcare, Inc. for a management fee. Lenox
Healthcare, Inc. is a Massachusetts corporation owned by Mr. Thomas Clarke and
Linda M. Clarke, Mr. Clarke's spouse. For the fiscal year ended December 31,
1995, York Hannover paid a total of $488,500 to Lenox Healthcare, Inc. for
management fees. For the nine months ended September 30, 1996, a total of
$231,000 had been paid to Lenox Healthcare, Inc. for such fees. The management
agreement between York Hannover and Lenox Healthcare, Inc. will be terminated
upon consummation of the Merger.
METROVISION'S MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis should be read in conjunction with
the historical and pro forma consolidated financial statements and notes thereto
appearing elsewhere herein. Since inception, MetroVision has generated limited
revenues, has incurred significant losses, and anticipates that losses will
continue until MetroVision generates sufficient advertising and system sale
revenues to offset its operating costs.
MetroVision's major installations are in the PATH system in New York and
New Jersey, the SEPTA system in Philadelphia, the BART system in the San
Francisco Bay Area in California and the MBTA system in Boston. MetroVision has
derived substantially all of its revenues from sales of advertising and
information provider spots on the Commuter Channel in the PATH, SEPTA, BART and
MBTA systems, and the sale of systems on a "turn-key" basis to transit
authorities seeking to comply with the ADA. MetroVision and the Chicago Transit
Authority ("CTA") mutually terminated MetroVision's Commuter Channel operations
in the CTA effective March 31, 1996. For the year ended December 31, 1995,
MetroVision derived approximately $122,000 of its revenue from the CTA
installation.
Results of Operations
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December 31,
1994
Gross Revenues. MetroVision derives its revenues from the sale or barter of
advertising and information provider spots on the Commuter Channel, and the sale
of complete systems to transit authorities. Gross revenues for the year ended
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December 31, 1995 were $1,701,981, an increase of 52.9% from gross revenues of
$1,112,945 for the year ended December 31, 1994. The increase in gross revenues
was primarily the result of increased sales of installed video systems to
various transit authorities. System sales revenue included in gross revenues was
$708,570 and $111,476 for the years ended December 31, 1995 and 1994,
respectively.
Agency Commissions. Agency commissions consist of the fees charged by
advertising agencies against the value of the advertising contracts billed to
their clients by MetroVision. These commissions generally are 15% of gross
revenues from advertisers represented by agencies. The total number of
MetroVision's advertisers which are represented by agencies varies each month.
Agency commissions for the year ended December 31, 1995 were $77,093, a decrease
of 7.5% from agency commissions of $83,371 for the year ended December 31, 1994.
The decrease in agency commissions was the result of an increased percentage of
advertising contracts being negotiated directly with advertisers who do not use
advertising agencies.
Net Revenue. Net revenues are equal to gross revenues after deducting
advertising agency commissions. Net revenues for the year ended December 31,
1995 were $1,624,888, an increase of 57.8% from net revenues of $1,029,574 for
the year ended December 31, 1994. The increase in net revenues resulted from
higher sales of installed video systems in 1995 compared to 1994.
Cost of Sales. Cost of sales consists primarily of costs of installed
systems, commissions to installed transit systems, maintenance costs, and
software licensing fees. Commissions to installed transit systems are based on a
percentage of revenues. Maintenance costs and software licensing fees are
directly related to increases in the number of installed television monitors and
computers. Cost of sales for the year ended December 31, 1995 were $721,625, an
increase of $240,885 or 50% from the year ended December 31, 1994. This increase
was at a rate less than gross revenues due to a higher margin realized from
system sales, rather than system leasing, and a decrease in maintenance costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1995 were $988,021, a
decrease of $821,913 from $1,809,934 for the year ended December 31, 1994. This
decrease resulted primarily from decreases in salaries and wages, sales
commissions, rents and professional fees associated with cost cutting efforts to
preserve existing cash resources.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1995 was $442,774, a decrease of 5.2% from $466,817
for the year ended December 31, 1994. This decrease in depreciation and
amortization expenses is primarily the result of equipment becoming fully
depreciated.
Write Down of Contract Rights and Installation Assets. MetroVision recorded
a charge of $250,000 to reduce the carrying value of certain purchased contract
rights and equipment purchased for airport installations to their net realizable
value. The ultimate realization of these assets is contingent upon MetroVision
obtaining funds to complete the project which was halted, or obtaining a buyer
for the contract rights and related equipment.
Interest Income. For the year ended December 31, 1995, interest totaled
$5,901 as compared to $46,812 for the year ended December 31, 1994. The decrease
is the result of a smaller cash balance earning interest throughout most of
1995.
Fiscal Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Gross Revenues. Gross revenues for the year ended December 31, 1994 were
$1,112,945, a decrease of 5.9% from gross revenues of $1,182,615 for the year
ended December 31, 1993. The decrease in gross revenues is primarily the result
of decreased sales of installed video systems to various transit authorities.
System sales revenue included in gross revenues was $111,476 and $256,790 for
the years ended December 31, 1994 and 1993, respectively.
Agency Commissions. Agency commissions for the year ended December 31, 1994
were $83,371, an increase of 15.4% from agency commissions of $72,245 for the
year ended December 31, 1993. The increase in agency commissions is the result
of an increased percentage of advertising contracts being negotiated with
advertisers who use advertising agencies.
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Net Revenues. Net revenues for the year ended December 31, 1994 were
$1,029,574, a decrease of 7.3% from net revenues of $1,110,370 for the year
ended December 31, 1993. The decrease in net revenues resulted from lower sales
of installed video systems in 1994 compared to 1993.
Cost of Sales. Cost of sales for the year ended December 31, 1994 was
$480,740, a decrease of $77,374 or 13.9% from the year ended December 31, 1993.
This decrease is at a rate less than the increase in gross revenues due to a
higher margin realized from system sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1994 were $1,809,934, an
increase of 9.08% or $116,568 from $1,693,366 for the year ended December 31,
1993. This decrease resulted primarily from decreases in salaries and wages, and
sales commissions.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1994 was $466,817 a decrease of 3% from $479,844 for
the year ended December 31, 1993. The decrease in depreciation and amortization
expense is primarily the result of equipment being fully depreciated.
Write Down of Contract Rights and Installation Assets. The company recorded
a charge in 1994 of $400,000 to reduce the carrying value of certain purchase
contract rights and equipment purchased for airport installations to their net
realizable value. The ultimate realization of these assets is contingent upon
the Company obtaining funds to complete the project, which was halted, or
obtaining a buyer for the contract rights and related equipment.
Interest Income. For the year ended December 31, 1994, interest totaled
$46,812 as compared to $15,313 for the year ended December 31, 1993. The
increase is the result of a larger cash balance earning interest throughout most
of 1994.
Nine Months and the Quarter Ended September 30, 1996 Compared to Nine Months
and the Quarter Ended September 30, 1995
Gross Revenues. For the nine months ended September 30, 1996, gross
revenues decreased $416,791 or 37.2% to $703,194 compared to $1,119,985 for
the same period in 1995. For the three months ended September 30, 1996, gross
revenues decreased by $69,520 or 28.7% to $169,622, compared to $242,111 for
the three month period ended September 30, 1995. The decrease in the first nine
months is attributable to a decrease in system sales of $187,972 and advertising
and news service revenues of $228,819. The decrease in ad revenues reflects
MetroVision's increased emphasis on system sales. System sales for the nine
months ended September 30, 1996 were adversely affected by harsh weather
conditions which delayed the installation of the New Jersey Transit project
during the first three months of 1996 and the lack of additional system
installation contracts. System sales involves the sale of complete, installed
video system to the transit market.
Agency Commissions. Agency commissions consist of the fees charged by
advertising agencies against the value of the advertising contracts billed to
their clients by MetroVision. These commissions generally are 15% of gross
revenues from advertisers represented by agencies. For the nine months ended
September 30, 1996, agency commissions totaled $19,037, a decrease of $38,147 or
66.7% from agency commissions for the nine months ended September 30, 1995. For
the three months ended September 30, 1996, agency commissions totaled $6,163, or
$13,522 or 68.7% less than the agency commissions for the three months ended
September 30, 1995. The decrease is attributable to the amount of advertising
contracts being obtained through advertising agencies and the decrease in
advertising revenue.
Net Revenues. Net revenues are equal to gross revenues after deducting
advertising agency commissions. Net revenues for the nine months ended September
30, 1996 were $684,157, a decrease of $378,644 from net revenues of $1,062,801
for the nine months ended September 30, 1995. Net revenues for the three months
ended September 30, 1996 were $166,428 a decrease of $55,998 from net revenues
of $222,426 for the three months ended September 30, 1995. The decrease is
consistent with the decrease in system sales and advertising revenues.
Cost of Sales. Cost of sales consists primarily of commissions paid to
installed transit systems, the cost of system installations, maintenance costs,
and software licensing fees. Commissions to installed transit systems are based
on a percentage of revenues. Maintenance costs are directly related to increases
in the number of installed television monitors and computers. Cost of sales for
the nine months ended September 30, 1996 were $285,744, a decrease of $199,866
or
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41.2% from $485,610 for the nine months ended September 30, 1995. Cost of sales
for the three months ended September 30, 1996 were $62,356 a decrease of $12,951
or 17.2% from $75,307 for the three months ended September 30, 1995. The
decrease is consistent with the decline in system sales revenues related to the
installation of the video cable network in certain New Jersey Transit terminals.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1996 were
$617,041 compared to $773,768 for the nine months ended September 30, 1995.
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $187,723 a decrease of $64,738 or 25.6% for the three
months ended September 30, 1995. The decrease is primarily attributable to a
decrease in salaries, wages, and related employee costs resulting from
reductions in sales, marketing and operations employees.
Interest Income. For the nine months ended September 30, 1996, interest
income totaled $514 compared to $5,909 for the same period in 1995. For the
three months ended September 30, 1996, interest income totaled $222 compared to
$935 for 1995. The decrease for both periods was the result of a smaller cash
balance earning interest in 1996.
Depreciation and Amortization. Depreciation and amortization expense for
the nine months ended September 30, 1996 was $398,000 a decrease of $86,500 or
17.9% from $484,500 for the nine months ended September 30, 1995. This decrease
in depreciation and amortization expense is directly related to the write down
of certain contract rights and installation assets.
Write Down of Contract Rights and Installation Assets. MetroVision recorded
a charge of $607,761 to reduce the carrying value of certain purchased contract
rights, and installation equipment for the New York area airports and The
Massachusetts Bay Transit Authority ("MBTA") to their net realizable value.
Pursuant to the notification by the Port Authority of its intent to terminate
the contract and MetroVision's decision to halt construction of the MBTA
installation related to litigation and the inability to generate significant
revenues, MetroVision has recorded a charge to recognize the impairment in the
value of long lived assets.
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Liquidity and Sources of Capital
At September 30, 1996, MetroVision had negative working capital of $423,801
which is primarily the result of a reduction in the cash balance, accounts
receivable, prepaid expenses and increases in accrued salaries and loans due to
officers and directors offset by a decrease in accounts payable and deferred
income.
Cash decreased $97,125 from December 31, 1995 to $0. The net decrease is
the result of cash being expended for operating purposes and the repayment of
notes to former stockholders, offset by proceeds of loans from certain officers
and directors. Accounts receivable, net of allowance for doubtful accounts,
decreased $274,867 to $167,088 at September 30, 1996. The decrease is primarily
the result of the collection of account balances and lower gross revenues.
Accrued salaries and commissions increased $15,870 from $133,284 at December 31,
1995 to $149,154 at September 30, 1996. The increase is the result of the timing
of certain cash payments to sponsors for accrued commissions. Deferred income
decreased $153,740 to $132,807 at September 30, 1996 from $286,547 at December
31, 1995. The decrease is primarily the result of recording revenue against
advance billings on system sales to the New Jersey Transit Authority in
accordance with their budgetary and funding requests. The retained deficit
increased $1,233,848 from $11,526,485 at December 31, 1995 to $12,760,333 at
September 30, 1996. The increase is the result of the net loss for the period
ending September 30, 1996.
On July 10, 1996 certain officers and directors loaned MetroVision $25,000
at 10% interest per annum with principal and accrued interest due no later than
November 1, 1996. In connection with this borrowing MetroVision issued to the
lenders warrants to purchase 69,000 shares of common stock at an exercise price
of $.15625 per share. In September, 1996, certain officers and directors loaned
MetroVision an additional $45,000 at 10% interest per annum with principal and
interest due no later than December 1, 1996. In connection with this loan,
MetroVision issued to the lenders warrants to purchase 133,200 shares of common
stock at an exercise price of $.20 per share. As of December 31, 1996
MetroVision had not repaid these loans. The exercise price for these warrants
approximated the market price for the shares on the date of issuance; therefore,
no value was attributable to the warrants.
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On October 23, 1996, an action was filed seeking a judgement against
MetroVision regarding a past due note of approximately $76,000 plus accrued
interest and attorney fees. On January 27, 1997, MetroVision and the plaintiff
entered into an agreement pursuant to which MetroVision has agreed to pay an
aggregate of $61,325 in full satisfaction and discharge of the plaintiffs
claims, which amount will be paid in installments through July 1, 1997. The
plaintiff has agreed to dismiss the lawsuit; provided, however, the plaintiff
may confess judgment against MetroVision for the full amount, less amounts
previously paid, if MetroVision fails to make an installment payment when due.
On November 6, 1996, MetroVision received net proceeds of approximately
$51,000 as a result of the exercise of outstanding redeemable common stock
purchase warrants.
MetroVision is continuously engaged in discussions regarding the sale of
new installations. MetroVision has an agreement amounting to approximately $2.9
million with New Jersey Transit to install and maintain approximately 50 transit
stations of which $954,000 has been received to date.
MetroVision's independent auditors have included an explanatory paragraph
in their report on the 1995 consolidated financial statements stating that
recurring losses, resulting in negative cash flows, raise substantial doubt
about MetroVision's ability to continue as a going concern. MetroVision
anticipates that losses will continue until MetroVision generates sufficient
advertising, system sale or other revenues to offset its operating costs.
MetroVision believes that generation of that level of revenues is dependent
upon, among other things (i) expanding its network through sales of complete
systems to transit authorities seeking to comply with the ADA, (ii)
MetroVision's ability to contract and select alternative/transit media sales
organizations in order to significantly increase the sale of advertising on its
network and (iii) the completion of MetroVision's proposed merger with York
Hannover or alternative strategic corporate and marketing alliances. There can
be no assurance, however, that MetroVision will be able to generate
significantly increased revenues or ever achieve profitable operations.
MetroVision is not currently generating sufficient cash flow to fund its
operations and is dependent on the contract with New Jersey Transit or other
financing in order to sustain its operations. Although there can be no
assurance, MetroVision believes that, based on currently proposed plans and
assumptions relating to its operations, the contract with New Jersey Transit,
the recent receipt of approximately $51,000 from the exercise of common stock
purchase warrants together with projected cash flow from operations, will be
sufficient to satisfy MetroVision's contemplated cash requirements for 1996. In
the event MetroVision's plans change or its assumptions change or prove
inaccurate or projected cash flows prove to be insufficient to fund operations,
MetroVision would be required to seek additional financing. Except for the loans
from certain officers and directors discussed above, MetroVision has no current
arrangements with respect to or sources of additional financing, and there can
be no assurance that financing will be available to MetroVision on commercially
reasonable terms, if at all. Any inability to obtain additional financing could
have a material adverse effect on MetroVision, including possibly requiring
MetroVision to significantly curtail or cease its operations.
Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Statement establishes financial accounting and reporting
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standards for stock-based compensation and is effective for fiscal years
beginning after December 15, 1995, or upon adoption of the Statement.
MetroVision has not decided whether it will adopt the expense recognition
provisions of the Statement or continue to use the expense recognition
provisions of Accounting Principles Board Opinion No. 25.
Net Operating Loss Carryforwards
As of September 30, 1996, for federal income tax purposes, MetroVision has
cumulative operating loss carryforwards of approximately $9,030,00 available to
offset future taxable income through 2010. Of this amount, $710,000 is
attributable to 1995, $1,670,000 is attributable to 1994 and $1,570,000 is
attributable to 1993. Due to a change in ownership as a result of the
recapitalization in November 1993, the utilization of $6,400,000 of the pre-
ownership change losses are subject to an annual limitation of $150,000.
YORK HANNOVER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General
The following management discussion and analysis should be read in
conjunction with the York Hannover historical and pro forma consolidated
financial statements and notes thereto appearing elsewhere herein.
York Hannover is a wholly-owned subsidiary of Stockbridge Investment
Partners, Inc. ("Stockbridge"). York Hannover was purchased by Stockbridge on
December 17, 1993. Prior to August 1, 1995, York Hannover provided institutional
pharmacy services, infusion therapy, urological, enteral and general medical
supplies throughout the State of Florida. Effective August 1, 1995, York
Hannover formed a partnership ("York Hannover Partnership") with United
Professional Companies, Inc. ("UPC") whereby York Hannover and UPC each
contributed property and equipment, inventory and existing contracts with
nursing facilities to provide services and products. York Hannover accounts for
its 40.0% interest in York Hannover Partnership under the equity method of
accounting. York Hannover provides certain billing services to York Hannover
Partnership for which York Hannover receives 7.5% of amounts billed.
York Hannover experienced a loss from operations for the year ended
December 31, 1995 and for the nine months ended September 30, 1996 and had
negative stockholder's equity as of December 31, 1995 and September 30, 1996.
York Hannover management believes, but cannot assure, that York Hannover will be
able to generate sufficient cash to meet debt requirements and to finance
ongoing operations through alternative sources of financing or through the sale
of York Hannover's interest in York Hannover Partnership, if necessary.
Results of Operations
Fiscal Year Ended December 31, 1995 Compared to the Fiscal Year Ended December
31, 1994
Net Patient Revenues. Net patient revenues for the twelve months ended
December 31, 1994 consisted of sales to nursing homes for pharmacy and related
products. Net patient revenues for the twelve months ended December 31, 1995
consisted primarily of sales to nursing homes for pharmacy and related products
from January through July. For the year ended December 31, 1995, net patient
revenues decreased by $1,587,267 from $4,260,145 for the year ended December 31,
1994 to $2,672,878. This reflects the change in the nature of the operations and
associated revenue sources.
Other Revenues. Other revenues for the year ended December 31, 1995
consisted primarily of deferred revenue amortization from an agreement not to
compete, equity in the earnings of York Hannover Partnership and management fees
from York Hannover Partnership for accounts receivable billing services from
August to the fiscal year end. Other revenues for the year ended December 31,
1995 were $277,250 compared to $0 for the year ended December 31, 1994. This
reflects with the change in the nature of operations and associated revenue
sources.
Cost of Patient Revenues. Cost of patient revenues for the twelve months
ended December 31, 1994 consisted of pharmacy product costs to support the sales
to nursing homes for pharmacy and related products. Cost of patient revenues for
the twelve months ended December 31, 1995 consisted of pharmacy product costs to
support sales to nursing homes for pharmacy and related products costs from
January through July. For the year ended December 31, 1995, cost of patient
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revenues decreased $1,004,570 from $2,396,158 in fiscal year ended December 31,
1994, to $1,391,588. This reflects with the change in the nature of the
operations and associated revenue sources.
Operating Expenses. Operating expenses for the fiscal year ended December
31, 1994 consisted of pharmacy operation expenses related to support sales to
nursing homes for pharmacy and related products. Operating expenses for January
to July, 1995 consisted of pharmacy operation expenses related to support sales
to nursing homes for pharmacy and York Hannover Partnership for accounts
receivable billing activity. For the fiscal year ended December 31, 1995,
operating expenses increased by $380,647 to $1,591,303 from $1,210,656 for the
year ended December 31, 1994. The increase was due to an increase in provision
for uncollectible accounts of $200,000 resulting from the Company's final review
and reconciliation of accounts receivable from its business prior to the
formation of the York Hannover Partnership, an increase in management fees of
$308,000 paid to Lenox Healthcare, Inc., a corporation owned by two of the
stockholders of Stockbridge, and a reduction in other operating expenses of
approximately $128,000. The management agreement with Lenox Healthcare, Inc.
will terminate upon consummation of the Merger.
Interest Expense. Interest expense is primarily related to a promissory
note York Hannover has with National Healthcare L.P. This note was entered into
in 1993 and restructured in 1995. Interest expense for year ended December 31,
1995 decreased by $28,832 to $289,830 from $318,662 for the year ended December
31, 1994.
Nine Months and the Quarter Ended September 30, 1996 Compared to Nine Months and
Quarter Ended September 30, 1995
Net Patient Revenues. Net patient revenues for the three and nine months
ended September 30, 1995 consisted of sales to nursing homes for pharmacy and
related products. For the nine months ended September 30, 1996, net patient
revenues were $0 compared to $2,673,311 for the nine months ended September 30,
1995. For the three months ended September 30, 1996 net patient revenues were
$0 as compared to $302,604 for the three month period ended September 30, 1995.
The decrease in both the three and nine months ended periods reflect the change
in nature of the operations and associated revenue sources.
Other Revenues. Other revenues for the nine months ended September 30, 1996
consisted primarily of deferred revenue amortization from an agreement not to
compete, equity in the earnings of York Hannover Partnership and management fees
from York Hannover Partnership for accounts receivable billing services.
Other revenues for the nine months ended September 30, 1996 were $402,107, an
increase of $315,448 from net revenues of $86,659 for the nine months ended
September 30, 1995. Other revenues for the three months ended September 30, 1996
were $135,723 an increase of $49,064 from other revenues of $86,659 for the
three months ended September 30, 1995. The increase in both the three and nine
months ended periods reflect the change in nature of the operations and
associated revenue sources.
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Cost of Patient Revenues. Cost of patient revenues for the three and nine
months ended September 30, 1995 consisted of pharmacy product costs to support
sales to nursing homes for pharmacy and related products. Cost of patient
revenues for the three and nine months ended September 30, 1996 were nonexistent
during the period. Cost of patient revenues for the nine months ended September
30, 1995 were $1,374,772 and for the three months ended September 30, 1996 were
$153,562. This is consistent with the change in the nature of the operations and
associated revenue sources.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three and nine months ended September 30, 1995
consisted of pharmacy operation expenses related to support sales to nursing
homes for pharmacy and related products. Selling, general and administrative
expenses for the three and nine months ended September 30, 1996 consisted of
expenses related to providing management services to the York Hannover
Partnership for accounts receivable billing activity. Selling, general and
administrative expenses for the nine months ended September 30, 1996 were
$251,743, a decrease of $1,110,668 or 81.5% from $1,362,411 for the nine months
ended September 30, 1995, Selling, general and administrative expenses for the
three months ended September 30, 1996 were $19,852 a decrease of $403,826 or
95.3% from $423,678 for the three months ended September 30, 1995. The decrease
in both the three and nine months ended periods is consistent with the change in
the nature of the operations and associated revenue sources.
Interest Expense. Interest expense was primarily related to a promissory
note York Hannover entered into with National HealthCare L.P. This note was
entered into in 1993 and restructured in 1995. For the nine months ended
September 30, 1996, interest expense totaled $214,442 a decrease of $12,856 or
5.7% as compared to $227,298 for the same period in 1995. For the three months
ended September 30, 1996, interest expense totaled $74,620 an increase of $8,935
or 13.6% as compared to $65,685 for the same period in 1995.
Depreciation. For the nine months ended September 30, 1996, depreciation
expense totaled $0 compared to $45,075 for the same period in 1995. For the
three months ended September 30, 1996 depreciation expense totaled $0
compared to $6,923 for the same period in 1995. This decrease in depreciation
expense is consistent with the change in nature of the operations.
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Liquidity and Sources of Capital
At September 30, 1996, York Hannover had negative working capital of
$2,635,453 which is primarily the result of the re-classification of long-term
debt to short-term and an increase in accounts payable and accrued expenses.
Cash increased $39,213 from December 31, 1995 to $55,129 at September 30,
1996. The net increase is primarily the result of proceeds received from York
Hannover Partnership priority distributions, offset by cash being expended for
the repayment of long-term debt borrowings. Accounts receivable decreased
$108,275 to $3,263 at September 30, 1996. The decrease is the result of the
collection of account balances and the write-off of uncollectible accounts which
related to periods prior to August 1, 1995. Accounts payable and accrued
expenses increased $441,928 to $655,791 at September 30, 1996 from $213,863 at
December 31, 1995. The increase is primarily the result of certain brokerage
payables related to marketable securities and estimated taxes. Short-term debt
increased $1,932,731 from $173,878 at December 31, 1995 to $2,106,609 at
September 30, 1996. This increase was primarily due to the re-classification of
debt that matures in September 1997, from long term to current. The retained
deficit increased $67,665 from $2,203,915 at December 31, 1995 to $2,271,580 at
September 30, 1996. The increase is the result of the net loss for the nine
months ended September 30, 1996.
York Hannover had outstanding as of September 30, 1996 $2,179,877 of
short-term debt that is due in January 1997. This debt includes a term
loan of $1,950,000 due NHCLP and a line of credit of $229,877. Although the
stated maturity date of the indebtedness due NHCLP is in January 1999, York
Hannover is currently not in compliance with certain covenants under the loan
agreement relating to the indebtedness, principally relating to its failure to
maintain positive working capital. As a result of such noncompliance, the
$1,950,000 principal amount, together with accrued interst, will be due on
September 30, 1997. Neither York Hannover currently has, nor is the Surviving
Corporation expected to have, the financial resources necessary to meet this
payment obligation absent obtaining external financing, whether from an equity
offering or otherwise. In the event York Hannover or, if the Merger is
consummated, the Surviving Corporation, is unable to meet this payment
obligation, or if the loan is not renegotiated, NHCLP, as a secured creditors,
has the right to take possession of or otherwise sell the 40% partnership
interest in the York Hannover Partnership in satisfaction of the indebtedness
and may seek recourse against the Surviving Corporation's other assets, if
necessary. See "Risk Factors - Need for Additional Financing."
As of September 30, 1996, York Hannover's primary asset was its ownership
of a 40% interest in York Hannover Partnership. For the three and nine months
ended September 30, 1996, York Hannover's net income from the partnership
totaled $87,498 and $232,755 respectively.
York Hannover does not have control over distributions made by York
Hannover Partnership. However, under the Partnership agreement, York Hannover is
entitled to priority distributions, which are limited to the lesser of $300,000
or the actual annual interest expense
79
<PAGE>
related to its $1,950,000 promissory note to NHCLP. The priority distributions
are subject to the availability of York Hannover Partnership cash.
York Hannover's independent auditors have included an explanatory paragraph
in their report on 1995 financial statements stating the Company experienced a
loss from operations in 1995 and had negative stockholder's equity as of
December 31, 1995.
80
<PAGE>
SUMMARY OF YORK HANNOVER PARTNERSHIP PARTNERSHIP AGREEMENT
The following summary of the Agreement of General Partnership of York
Hannover Partnership is qualified in its entirety by reference to the Agreement
of General Partnership, a copy of which has been filed as an exhibit to the
Registration Statement of which this Proxy Statement\Prospectus is part.
Formation of the Partnership. York Hannover Partnership (the "Partnership")
is a Wisconsin general partnership which commenced operations on August 1, 1995.
Under the terms of the York Hannover Agreement of General Partnership (the
"Partnership Agreement"), York Hannover contributed to the Partnership assets
with a total net book value of approximately $450,000, including approximately
$302,000 of inventory. In exchange for its contribution, York Hannover received
a 40% general partnership interest. United Professional Companies, Inc., a
subsidiary of United Health, Inc. which itself is a subsidiary of Extendacare,
Inc. ("UPC"), contributed assets with a total net book value of approximately
$675,000, including approximately $509,000 of cash. In consideration of such
contribution, UPC received a 60% general partnership interest.
Allocation of Profits, Losses and Distributions. Earnings and losses of the
Partnership are allocated among York Hannover and UPC in accordance with their
percentage interests in the Partnership. York Hannover has a right to a priority
distribution on its share of Partnership net income limited to the lesser of
$300,000 or the actual amount of annual interest expense due on the York
Hannover promissory note to NHCLP, which priority distribution is for the sole
purpose of paying interest due on such indebtedness. Upon York Hannover
attaining its maximum priority distribution as aforesaid, distributions are made
in accordance with the respective capital partnership interests, except that
York Hannover can receive no more than an amount necessary for it to pay
interest on the York Hannover Promissory Note to NHCLP. Any cash not required
for interest payments on the Promissory Note to NHCLP shall be utilized, at
UPC's option, to pay down UPC's disproportionate working capital loans, if any,
or make payments to UPC to balance the distributions until UPC's
disproportionate working capital loans have been reduced to zero, and each
partner has received distributions in accordance with its Partnership Interest.
Thereafter, additional distributions are payable to York Hannover and UPC in
proportion to
81
<PAGE>
their respective partnership interests in the Partnership. No distributions
were made by York Hannover Partnership during the fiscal year ended December 31,
1995, and no distribution other than the priority distributions were made by
York Hannover Partnership during the nine months ended September 30, 1996. At
September 30, 1996, the current amount of UPC's disproportionate working capital
loans was $570,000 on the basis of $650,000 of working capital loans outstanding
from UPC and $80,000 of working capital
loans outstanding from York Hannover.
Management of the Partnership. York Hannover Partnership is managed by UPC.
In such capacity, UPC has the ability to control all partnership decisions;
provided, however, that the Partnership may not take the following actions
without first obtaining York Hannover's consent: (i) the incurrence of any
Partnership debt for borrowed money; (ii) transferring, hypothecating,
compromising or releasing any Partnership claim except for payment in full
satisfaction and discharge; (iii) selling, leasing or hypothecating any
Partnership property or entering into any contract for any such purpose, other
than the ordinary course of the Partnership's business; (iv) knowingly suffering
or causing anything to be done whereby the Partnership's property may be seized
or attached or taken in execution, or its ownership or possession otherwise
endangered; (v) expansion of either the products or services offered by the
Partnership or of the market in which the Partnership operates; (vi) undertaking
any acquisition of a business or of any property other than in the ordinary
course of the Partnership's business; (vii) amending the management agreement
between the Partnership and UPC; (viii) entering into any contract, other than
the aforementioned management agreement, between the Partnership and any
affiliate of any partner which has a term for more than one year or provides for
more than $5,000 in the aggregate or the purchase from an affiliate of either
partner of goods or services in a single transaction or a series of transactions
of more than $7,500; or (ix) entering into any agreement for the lease, purchase
or sale of goods, services and property, in which the property leased, purchased
or sold thereunder would exceed $25,000, other than the ordinary course of the
Partnership's business.
In consideration for providing management services, UPC is entitled to
receive a management fee equal to 4% of the Partnership's net revenues.
Additionally, York Hannover provides certain billing services to York Hannover
Partnership for which it receives in the aggregate 7.5% of amounts billed.
Funding. Pursuant to the terms of the Partnership Agreement, York Hannover
and UPC have agreed to provide working capital funding to York Hannover
Partnership as required, in proportion to their respective partnership
interests. During the fiscal year ended December 31, 1995, York Hannover
Partnership and UPC loaned net amounts of $80,000 and $120,000, respectively, to
the Partnership for working capital purposes. The Partnership Agreement provides
that if one of the partners is unable to provide working capital funding in
proportion to its ownership interests, the other partner has the right to
provide the additional working capital and receive interest at a rate equal to
the prime rate plus 4%. Otherwise, the working capital notes issued by the
Partnership in favor of the partners do not bear interest.
Transfer of Partnership Interests. The Partnership Agreement provides that
the interests of the partners may not be transferred, sold, assigned, pledged,
optioned or otherwise transferred, whether by contract, operation of law or
otherwise, except in connection with a right of first refusal discussed below
and through a "put agreement" wherein York Hannover has an option to sell its
interests in the Partnership to UPC at fair market value as of the exercise
date, which may occur no earlier than one day prior to the termination or the
dissolution of the Partnership, or through the option to purchase additional
partnership interests, whereby York Hannover has the right to purchase from UPC
up to an additional 9% partnership interest so that, if exercised in full, York
Hannover would have a 49% interest and UPC would have a 51% interest.
Notwithstanding the foregoing, these transfer restrictions may be waived by the
written consent of the partners. In the event a partner receives an offer to
purchase all or a part of such partner's interest, and is willing to accept the
offer, the remaining partner has a right of first refusal.
Term of the Partnership. The Partnership will continue in effect until
August 1, 2000, unless extended by mutual agreement of the partners, except that
the Partnership will terminate and be dissolved prior to that date upon the
occurrence of the following: (i) any event which makes it unlawful for the
business of the Partnership to be conducted; (ii) the suspension or exclusion of
the Partnership from participation under the applicable sections of the Social
Security Act; or (iii) the failure to meet any other requirement necessary to
conduct the Partnership's business.
Restrictions on Activities of the Partners. Under the terms of the
Partnership Agreement, York Hannover, Stockbridge and its stockholders have
agreed that they will be bound by the terms of a covenant not to compete
executed by the parties restricting those individuals and entities from
participating in activities which compete with the business of the Partnership
or any of the partners within a specified market territory which includes
various counties within the State of Florida during the term of the Partnership
Agreement and for a two year period following dissolution of the Partnership.
82
<PAGE>
DESCRIPTION OF METROVISION CAPITAL STOCK
The statements made under this caption include summaries of certain
provisions contained in MetroVision's Restated Certificate of Incorporation and
in the New York Laws. These statements do not purport to be complete and are
qualified in their entirety by reference to such Restated Certificate of
Incorporation, MetroVision's By-laws and the New York Law.
Common Stock
MetroVision is authorized to issue 10,000,000 shares of Common Stock, par
value $.001 per share. As of the record date, there were 7,241,664 shares of
Common Stock outstanding. The holders of Common Stock are entitled to one vote
for each share held of record on all matters to be voted on by shareholders.
There is no cumulative voting with respect to the election of directors. The
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution of winding up of MetroVision, the
holders of Common Stock are entitled to share ratably in all assets remaining
which are available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are fully paid and nonassessable.
Preferred Stock
MetroVision is authorized to issue 2,000,000 shares of preferred stock, par
value $.001 per share, of which 720,000 shares have been designated as 5% Series
A Convertible Preferred Stock. The Board of Directors of MetroVision has the
authority at any time to establish and designate one or more series of preferred
stock, to fix the number of shares of any series (which number may vary between
series) and to fix the dividend rights and preferences, the redemption price and
terms, liquidation rights, sinking fund provisions (if any), conversion
provisions (if any) and the voting powers (if any). The Board of Directors,
without shareholder approval, could issue preferred stock with voting and
conversion rights that could adversely affect the voting power of holders of
Common Stock and 5% Preferred Stock. Certain companies have used the issuance of
preferred stock as an anti-takeover device and the Board of Directors of
MetroVision could, without shareholder approval, issue preferred stock with
certain voting, conversion and/or redemption rights that could discourage any
attempt to obtain control of MetroVision in a transaction not approved by its
Board of Directors.
Currently, there are 648,535 shares of 5% Preferred Stock outstanding. The
5% Preferred Stock has a liquidation value of approximately $5.556 per share.
Holders of 5% Preferred Stock are entitled to receive, when and as declared by
MetroVision's Board of Directors out of funds legally available therefor, cash
dividends at the annual rate of approximately $.2778 per share. Dividends are
payable quarterly on the first day of March, June, September and December of
each year and began accruing as of December 17, 1992. Total accrual and unpaid
dividends at September 30, 1996 aggregated approximately $677,000.
The 5% Preferred Stock is redeemable by MetroVision, at its sole option, at
any time; provided, however, that all of the outstanding common stock purchase
warrants issued in MetroVision's initial public offering must be redeemed
before any redemption of the 5% Preferred Stock may occur, but in any event, at
any time after December 17, 1993, at a redemption price of $5.556 per share plus
accrued and unpaid dividends thereon. The 5% Preferred Stock may, at the option
of the holder, be converted at any time into shares of MetroVision Common Stock
at an initial rate of one share of Common Stock for each share of MetroVision
5% Preferred Stock which rate shall be subject to adjustment, including, for
example, by reason of the Reverse Stock Split.
The holders of 5% Preferred Stock are entitled to vote, together with the
holders of the Common Stock, on the basis of number of whole shares of Common
Stock into which their shares of 5% Preferred Stock are convertible, on all
matters to be voted on by the shareholders of MetroVision.
83
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that MetroVision's officers and
directors and persons who own more than ten percent (10%) of a registered class
of the Common Stock (Collectively the "Reporting Persons") to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish MetroVision with copies of these reports. Based on MetroVision's
review of the copies of these reports received by it, MetroVision believes that
all filings required to be made by the Reporting Persons during fiscal year 1995
were made on a timely basis.
RELATIONSHIP WITH INDEPENDENT AUDITORS
MetroVision engaged Dannible & McKee, LLP as its independent auditors to
audit MetroVision's financial statements for the fiscal year ended December 31,
1995. A representative of Dannible & McKee, LLP will be present at the meeting
with the opportunity to make a statement if he desires to do so and to answer
appropriate questions.
84
<PAGE>
PROPOSALS OF SECURITY HOLDERS
All proposals of any shareholder of Metrovision which the holder desires be
presented at the next Annual Meeting of shareholders and be included in the
proxy statement and form of proxy prepared for that meeting must be received by
MetroVision at its principal executive offices no later than _____________,
1997. All such proposals must be submitted in writing to the Secretary at the
address appearing on the notice accompanying this proxy statement.
LEGAL MATTERS
The legality of the shares of Common Stock to be issued in the Merger to
the shareholder of York Hannover will be passed upon by Cozen and O'Connor,
Philadelphia, Pennsylvania.
EXPERTS
The Consolidated Financial Statements of MetroVision of North America, Inc.
at December 31, 1993, 1994 and 1995 and the three years then ended included in
this Proxy Statement/Prospectus and the related financial statement schedules
included elsewhere in the registration statement of which this Proxy
Statement/Prospectus is a part have been audited by Dannible & McKee, LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in this Proxy Statement/Prospectus (which reports express an unqualified opinion
and include an explanatory paragraph referring to MetroVision's ability to
continue as a going concern) and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The Financial Statements of York Hannover at December 31, 1995 and 1994 and
for the two years then ended included in this Proxy Statement/Prospectus have
been audited by Arthur Andersen LLP, independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The Financial Statements of York Hannover Partnership at December 31, 1995
and for the five months then ended included in this Proxy Statement/Prospectus
have been audited by Arthur Andersen LLP, independent accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
85
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Historical Audited Consolidated Financial Statements of MetroVision of North
America, Inc.:
Page
----
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1995 and December 31, 1994
Consolidated Statements of Operations for the Fiscal Year ended
December 31, 1995, December 31, 1994 and December 31, 1993
Consolidated Statements of Shareholders' Equity for the fiscal year ended
December 31, 1995, December 31, 1994 and December 31, 1993
Consolidated Statements of Cash Flows for the fiscal year ended
December 31, 1995, December 31, 1994 and December 31, 1993
Notes to Consolidated Financial Statements
Historical Unaudited Consolidated Financial Statements of MetroVision of North
America, Inc.:
Consolidated Balance Sheet at September 30, 1996
Consolidated Statements of Operations for the three months and nine
months ended September 30, 1996 and September 30, 1995
Consolidated Statements of Cash Flows for the three months and nine
months ended September 30, 1996 and September 30, 1995
Notes to Unaudited Consolidated Financial Statements
Historical Audited Consolidated Financial Statements of York Hannover
Pharmaceuticals, Inc.:
Report of Independent Auditors
Balance Sheets at December 31, 1995 and December 31, 1994
Statements of Income and Stockholders' Deficit for the fiscal years ended
December 31, 1995 and December 31, 1994
Statements of Cash Flows for the fiscal years ended
December 31, 1995 and December 31, 1994
Notes to Financial Statements
Historical Unaudited Consolidated Financial Statements of York Hannover
Pharmaceuticals, Inc.:
Balance Sheet at September 30, 1996
Statements of Income for the three months and nine months ended
September 30, 1996 and September 30, 1995
Statements of Cash Flows for three months and the nine months ended
September 30, 1996 and September 30, 1995
Notes to Unaudited Financial Statements
Historical Audited Financial Statements of York Hannover Partnership:
Report of Independent Auditors
Balance Sheet at December 31, 1995
Statement of Income for the five month period ended December 31, 1995
Statement of Partner's Capital for the five month period ended December
31, 1995
Statement of Cash Flows for the five month period ended December 31, 1995
Notes to Financial Statements
86
<PAGE>
METROVISION OF NORTH AMERICA, INC.
AUDITED CONSOLIDATED
FINANCIAL STATEMENTS
* * *
DECEMBER 31, 1995, 1994 AND 1993
<PAGE>
[Letterhead of Dannible & McKee, LLP]
Independent Auditor's Report
March 8, 1996
(Except for Note 12, as to which
the date is March 21, 1996)
To the Board of Directors and Stockholders
of MetroVision of North America, Inc.
We have audited the accompanying consolidated balance sheets of MetroVision
of North America, Inc. as of December 31, 1994 and 1995, and the related
consolidated statements of operations, common stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly in all material respects, the consolidated financial position of
MetroVision of North America, Inc. at December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that MetroVision of North America, Inc. will continue as a going
concern. As more fully described in Note 2, the Company has continued to incur
operating losses. This condition raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 2. The consolidated financial statements do
not include any adjustments to reflect the future effects on the recoverability
and classification of assets or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a
going concern.
/s/ Dannible & McKee, LLP
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
Assets 1994 1995
----------- -----------
Current assets:
Cash and cash equivalents $ 400,716 $ 97,125
Accounts receivable, net of allowance of
$53,840 in 1994 and $10,230 in 1995 177,474 441,955
Prepaid expenses 47,375 45,415
----------- -----------
Total current assets 625,565 584,495
----------- -----------
Operating equipment (Notes 1, 3 and 12):
Installations and equipment 3,458,825 3,550,257
Installations-in-process 266,458 221,416
Equipment and fixtures 189,201 195,378
----------- -----------
3,914,484 3,967,051
Less - Accumulated depreciation (1,816,968) (2,223,742)
----------- -----------
2,097,516 1,743,309
----------- -----------
Other assets 29,757 10,846
Prepaid software license (Note 6) 72,000 36,000
Contract rights (Notes 1 and 11) 457,761 257,761
----------- -----------
$ 3,282,599 $ 2,632,411
=========== ===========
See accompanying notes to financial statements.
- CONTINUED -
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(- CONTINUED -)
December 31,
---------------------------
Liabilities and Stockholders' Equity 1994 1995
----------- -----------
Current liabilities:
Accounts payable - trade $ 195,369 $ 182,545
Accrued salaries and commissions 152,906 133,284
Deferred income (Note 1) 129,884 286,547
Other accrued expenses 65,122 66,905
Current portion of notes payable including
amounts due to stockholders (Note 4) 96,000 96,000
------------ ------------
Total current liabilities 639,281 765,281
------------ ------------
Preferred stock, $.001 par value 2,000,000
shares authorized (Note 9)
Preferred stock 5% Series A $.001 par value,
$5.56 redemption value, cumulative convertible
658,895 and 648,535 shares issued and
outstanding in 1994 and 1995, respectively 659 649
------------ ------------
Common stockholders' equity (Notes 8 and 9):
Common stock, $.001 par value, 10,000,000
shares authorized; 6,947,524 and 6,987,846
shares issued and outstanding in 1994 and
1995, respectively 6,947 6,987
Capital in excess of par value 13,382,576 13,385,979
Retained deficit (10,746,864) (11,526,485)
------------ ------------
Total common stockholders' equity 2,642,659 1,866,481
------------ ------------
$ 3,282,599 $ 2,632,411
============ ============
See accompanying notes to financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1993 1994 1995
----------- ----------- ------------
<S> <C> <C> <C>
Gross revenues $ 925,825 $ 981,914 $ 1,001,797
Installation revenues 256,790 131,031 700,184
Less - Agency commissions (72,245) (83,371) (77,093)
----------- ----------- -----------
Net revenues 1,110,370 1,029,574 1,624,888
----------- ----------- -----------
Operating costs and expenses:
Cost of sales 426,867 400,380 306,482
Cost of sales-installations 131,247 80,360 415,143
Selling, general and administrative 1,693,366 1,809,934 988,021
Depreciation and amortization 479,844 466,817 442,774
Write down of contract rights and
installation assets (Note 11) -- 400,000 250,000
----------- ----------- -----------
2,731,324 3,157,491 2,402,420
----------- ----------- -----------
Loss from operations (1,620,954) (2,127,917) (777,532)
----------- ----------- -----------
Interest income 15,313 46,812 5,901
Interest expense (34,613) (9,925) (7,990)
----------- ----------- -----------
(19,300) 36,887 (2,089)
----------- ----------- -----------
Net loss (1,640,254) (2,091,030) (779,621)
Less - Preferred stock dividend requirements 200,000 194,394 182,813
----------- ----------- -----------
Net loss applicable to common stock (Note 1) $(1,840,254) $(2,285,424) $ (962,434)
=========== =========== ===========
Net loss per common share (Note 1) $ (.66) $ (.34) $ (.16)
=========== =========== ===========
Weighted average number of shares (Note 1) 2,775,124 6,717,220 5,988,143
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Deficit Total
----- --------- ------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $ 1,801 $ 9,756,492 $ (7,015,580) $ 2,742,713
Issuance of 278,348 shares, $.001 par value,
common stock from exercise of warrants, less
related expenses of $47,760 278 438,390 -- 438,668
Issuance of 766 shares of $.001 par value,
common stock in exchange for services 1 1,532 -- 1,533
Issuance of 4,800,000 shares of $.001 par
value, common stock in connection with the
November 1993 stock offering, less related
expenses of $782,730 4,800 3,212,470 -- 3,217,270
Net loss -- -- (1,640,254) (1,640,254)
------------ ------------ ------------ ------------
Balance at December 31, 1993 6,880 13,408,884 (8,655,834) 4,759,930
Issuance of 6,150 shares of $.001 par value,
common stock from exercise of warrants 6 1,223 -- 1,229
Conversion of 61,105 shares of preferred stock
for 61,105 shares of common stock 61 -- -- 61
Payment of cumulative dividends on preferred
stock converted to common stock -- (27,531) -- (27,531)
Net loss -- -- (2,091,030) (2,091,030)
------------ ------------ ------------ ------------
Balance at December 31, 1994 6,947 13,382,576 (10,746,864) 2,642,659
Issuance of 29,962 shares of $.001 par value,
common stock 30 11,206 -- 11,236
Conversion of 10,360 shares of preferred stock
for 10,360 shares of common stock 10 -- -- 10
Payment of cumulative dividends on preferred
stock converted to common stock -- (7,803) -- (7,803)
Net loss -- -- (779,621) (779,621)
------------ ------------ ------------ ------------
Balance at December 31, 1995 $ 6,987 $ 13,385,979 $(11,526,485) $ 1,866,481
============ ============ ============ ============
</TABLE>
-CONTINUED-
See accompanying notes to financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss $(1,640,254) $(2,091,030) $ (779,621)
Adjustments to reconcile net loss to net cash used
in operating activities:
Provision for doubtful accounts -- 40,540 10,414
Write down of contract rights and installation
assets -- 400,000 250,000
Value of advertising services exchanged for operating
equipment (11,829) (19,300) (19,200)
Provision for depreciation and amortization 479,844 466,817 442,774
Loss on disposal of system equipment -- 39,554 --
Amortization of consulting agreement -- 30,000 30,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (62,926) 41,216 (274,895)
(Increase) decrease in prepaid expenses and
other assets 18,290 (34,506) (9,129)
Increase in accounts payable and other
accrued expenses 39,886 64,338 156,436
----------- ----------- -----------
Net cash used in operating activities (1,176,989) (1,062,371) (193,221)
----------- ----------- -----------
Investing activities:
Capital expenditures for operating equipment (379,408) (633,258) (102,567)
----------- ----------- -----------
Net cash used in investing activities $ (379,408) $ (633,258) $ (102,567)
----------- ----------- -----------
</TABLE>
-CONTINUED-
See accompanying notes to financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(- CONTINUED -)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Financing activities:
Proceeds from borrowings $ 550,000
Principal payments on borrowings (550,000)
Principal payments on and reduction in
notes to stockholders (69,852) $ (154,000)
Proceeds from issuance of common stock
and exercise of warrants 3,657,471 1,229 $ --
Dividends paid to preferred stockholders
on conversion (27,531) (7,803)
----------- ----------- -----------
Net cash provided by (used for) financing
activities 3,587,619 (180,302) (7,803)
----------- ----------- -----------
(Decrease) increase in cash and cash equivalents 2,031,222 (1,875,931) (303,591)
Cash and cash equivalents at beginning of year 245,425 2,276,647 400,716
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,276,647 $ 400,716 $ 97,125
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
Note 1 - Summary of significant accounting policies
Description of business - The Company owns and operates a video cable
network for the mass transit industry, under contracts ranging from five to
seven years, for the purpose of providing information and selling advertising.
In addition, the Company installs, under contract, video equipment in certain
mass transit locations.
The Company operates in one business segment and has no foreign operations.
In 1993, 1994 and 1995, sales to the five largest customers represented 67%, 48%
and 67% of gross revenues, respectively. Certain customers accounted for more
than 10% of gross revenues as follows: 1993: ABC News 23%, Niagara Frontier
Transit Metro System 15%, Bloomberg Financial Services 12%; 1994: ABC News 26%;
1995: New Jersey Transit 37%, ABC News 17%.
The Company provides, at no charge to the transit authorities, free
advertising time in each program cycle. Costs related to providing this time
represent normal recurring expenses of operating the networks and are included
in cost of sales.
In 1993, the Company exchanged advertising on its network for video
monitors with a fair market value of approximately $60,000. The Company is
obligated at December 31, 1994 and 1995, to provide $29,000 and $10,000 of
advertising, respectively, related to this transaction.
Principles of consolidation - The consolidated financial statements include
the accounts of the Company and its subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Revenue recognition - Advertising revenues are recognized when billed after
the related advertising has been broadcast over the network. Bartered revenues
represent merchandise or services received in lieu of cash for advertising
provided. Barter revenues are recognized when advertising is broadcast and
merchandise or services are recorded when received or used. If merchandise or
services are received prior to the advertising being broadcast, a liability is
recorded. Revenues from installation contracts are recognized on the
percentage-of-completion method based on costs incurred to date to the total
estimated cost at completion. Amounts received in excess of costs and estimated
earnings are shown in the accompanying balance sheets as deferred income. There
were no significant costs and estimated earnings in excess of amounts received
at December 31, 1994 and 1995.
Financial instruments and credit risks - The Company grants unsecured
credit under standard credit terms. In addition, the Company exchanges
advertising time for certain services. Advertising revenue is recorded at the
fair value of services to be provided. Included in accounts receivable is
approximately $43,000 and $18,000 of amounts due under these agreements at
December 31, 1994 and 1995, respectively. The Company maintains cash balances
with a local financial institution, which are secured by the Federal Deposit
Insurance Corporation up to
<PAGE>
$100,000. The Company has approximately $331,000 and $34,000 in uninsured
balances at December 31, 1994 and 1995, respectively. The Company maintains
various financial instruments in the ordinary course of business. The carrying
value of these financial instruments, which are cash and cash equivalents,
accrued expenses and notes payable, approximate fair value. The fair value of
notes payable is determined based on rates at which the Company could refinance
the notes with a bank.
Cash and cash equivalents - For the purpose of the statement of cash flows,
the Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Operating equipment and installations-in-process - Operating equipment is
stated at cost, including materials, labor, and installation overhead and
includes computers, monitors, and enclosures which are being depreciated using a
straight-line method over their estimated useful lives which range from four to
seven years. For income tax purposes, depreciation is computed using methods
prescribed by appropriate income tax regulations. Depreciation on
installations-in-process commence when a site is fully installed. Maintenance
and repairs are expensed as incurred.
During 1994, approximately $560,000 of operating equipment related to a
completed project was transferred from installations-in-process to installations
and equipment. The remaining balance in installations-in-process relates to an
installation at the New York and New Jersey Airports, more fully described in
Note 11.
During 1994, work on the installations was halted as the Company negotiated
a merger, and the cash previously designated for new installations was used in
operations.
Income taxes - Prior to November 30, 1989, the Company operated under
Subchapter S of the Internal Revenue Code, and, consequently, was not subject to
Federal income taxes and certain state taxes. The Company had an accumulated
loss of $2,446,683 as a Subchapter S Corporation.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 109 (SFAS 109), "Accounting for Income Taxes," in
February 1992. The Company adopted the new method of accounting for income taxes
effective January 1, 1993 (see Note 7).
Post-retirement benefits - The Company presently offers no post-retirement
benefits.
Legal proceedings - The Company is not involved in any material legal
proceedings that in the opinion of management would have a material effect on
the Company.
Net loss per common share - Net loss per common share is computed based on
the weighted average number of common shares outstanding during each period
including, for all periods presented, shares and common stock equivalents issued
in the twelve months prior to the initial public offering of the Company's
common stock at prices below the initial offering price.
<PAGE>
Common stock equivalents also include outstanding options, warrants, and
cumulative convertible preferred shares. Where anti-dilutive, cumulative
convertible preferred shares, options and warrants have been excluded from the
computations and net loss has been adjusted for imputed dividends on the
convertible preferred stock (see Note 9).
Effective July 31, 1992, the Company reduced the exercise price of 95,143
options outstanding from $3.11 to $1.75 (see Note 9). Because these options had
been issued in the twelve months prior to the Company's initial public offering,
earnings per share have been restated to reflect the reduction in the exercise
price.
Contract rights - These rights represent a contract to install and operate
interactive video at major airports in the greater New York City area. The
rights were acquired through the purchase of the stock of TouchTel, Inc. in
December 1992 (see Note 11).
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Liquidity
The Company's inability to generate significant revenues to finance
operations has resulted in net losses and negative cash flows from operations as
shown in the accompanying financial statements. These conditions have
significantly weakened the Company's financial position and raise substantial
doubt about the Company's ability to continue as a going concern.
Since December 31, 1992, the Company has addressed these concerns by
obtaining net proceeds of approximately $439,000 from the exercise of
outstanding warrants in a special price reduction period from February 17, 1993,
through June 28, 1993, during which time outstanding warrants to purchase one
share of common stock were exercisable at $1.75 and approximately $3,217,000
from a secondary offering of common stock and warrants to purchase common stock
in November 1993. Proceeds from the warrant offering and stock offering were
utilized to pay down the short-term loans in the amount of $450,000 in 1993.
The Company executed a joint marketing agreement with a national
advertising agency (TDI), in 1993, to enhance the marketing and sales of
advertising on the Company's systems. TDI terminated the agreement in April
1994. No significant revenues were generated as a result of the agreement and
the termination did not have a material effect on the Company's results of
operations. Also during 1994, the Company entered into a letter of intent for
the merger of MetroVision with and into another entity. This merger was
subsequently terminated in January 1995. The Company continues to pursue ongoing
exploration of strategic corporate and marketing alliances.
<PAGE>
During 1994, the Company began working with the New Jersey Transit
Authority (NJT) to install, under contract, its video cable network in certain
terminals. In 1995, the Company executed a contract with NJT to install its
video network in all NJT terminals. The contract is for approximately $2,900,000
over an estimated three-year period. Purchase orders received during 1994
amounted to approximately $100,000. In 1995, purchase orders for approximately
$1,162,000 were received related to this project for installation of video
systems in twenty-two additional terminals.
The ability of the Company to continue in existence depends upon whether
the Company is able to significantly increase revenues through the contract sale
of system installations and/or advertising, or enter into other strategic
corporate or marketing alliances.
The Company anticipates that, based on its currently proposed plans and
assumptions relating to its operations, that cash flow from advertising revenues
and installation contract revenues will be sufficient to satisfy its anticipated
cash requirements for 1996. However, if the Company enters into significant
additional network installation contracts, its currently proposed plans change
or its assumptions prove to be inaccurate, the Company may be required to seek
additional financing. Furthermore, implementation of expansion programs beyond
the Company's currently proposed expansion will require additional resources not
otherwise available to the Company. In addition, unless the Company is able to
significantly increase revenues through the sale of systems or advertising or
enter into strategic corporate or marketing alliances, the Company will require
additional financing. The Company has not identified any potential sources of
debt or equity financing and there can be no assurance that the Company will be
able to obtain additional financing if and when needed or that, if available,
financing will be on terms acceptable to the Company. Furthermore, the results
of these matters cannot be predicted, and there is no assurance, therefore, that
the Company will continue in existence. The financial statements do not include
any adjustments to reflect the possible future effects of the recoverability and
classification of assets or amounts and classification of liabilities that may
result from the possible inability of the Company to continue as a going
concern.
Note 3 - System contracts
The Company has installed equipment pursuant to contractual agreements in
public mass transit systems, airports, and a public park. These agreements range
from five to seven years, generally have renewal options, and expire at various
dates in years 1995 through 2000. Some agreements are on a month to month basis.
One agreement has a 30-day termination clause; whereby, if terminated, the
transit authority must reimburse the Company for undepreciated costs incurred in
the installation of the system. The contracts provide for payment in the form of
sponsor commissions ranging from 8% to 50% of net advertising revenue and
certain of these contracts provided for minimum guaranteed commissions. Future
commissions guaranteed as of December 31, 1995, are as follows:
1996 $ 44,900
=========
<PAGE>
Note 4 - Borrowing arrangements
The Company's borrowing arrangements are summarized as follows:
December 31,
-----------------
1994 1995
------- -------
Note payable to a bank, due August 1, 1994; interest
payable monthly at an annual rate of 8%.(a) $76,000 $76,000
Obligation payable to stockholder in monthly installments
of $5,000 through December 1994.(a) 20,000 20,000
------- -------
96,000 96,000
Less - Current portion 96,000 96,000
------- -------
$ -- $ --
======= =======
(a) Obligations incurred in connection with purchase of contract rights on
December 10, 1992 (see Note 11).
Interest paid aggregated $34,612, $9,925 and $7,927 for 1993, 1994 and
1995, respectively.
At December 31, 1995, the Company was in default on their outstanding
borrowing arrangements.
Note 5 - Operating leases
The Company leases certain of its office facilities and equipment under
cancelable and noncancelable agreements expiring at various dates through 2000.
Rental expense charged to operations was $143,441, $142,910 and $93,113 for
1993, 1994 and 1995, respectively.
The future minimum rental commitments as of December 31, 1995, for
noncancelable operating leases, are as follows:
1996 $ 30,250
1997 30,250
1998 10,850
1999 500
2000 500
--------
$ 72,350
========
Note 6 - License agreement
The Company entered into a software license agreement for certain software
utilized in its operations commencing on November 1, 1992, and terminating on
December 31, 1996. The agreement is automatically extended for successive
one-year terms thereafter, unless either party gives 90 days' notice prior to
the expiration of any term its intention not to renew. Concurrent with the
execution of this agreement the Company paid a $150,000 license fee which is
being
<PAGE>
amortized over the term of the agreement. While the Company believes that
alternative software is currently available on satisfactory terms, future
termination of the Target Vision license, in the absence of readily available
software, would have a material adverse effect on the Company.
Licensing fees paid under this agreement aggregated $93,000, $115,600 and
$126,600 for 1993, 1994 and 1995, respectively. Future minimum fees in 1996 are
$120,000.
Fees payable under the agreement are based upon the number of monitors in
service at the rate of $1,200 per monitor, per year.
Note 7 - Income taxes
As of January 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." This statement requires use of the liability method, which
records deferred income tax expense and benefits for the temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities. The effect of adopting SFAS No. 109 in 1993 was not material to
operating results or financial position.
As of December 31, 1994 and 1995, the Company has cumulative operating loss
carryforwards of approximately $8,320,000 and $9,030,000, respectively, for
Federal income tax purposes available to offset future taxable income through
2010. Of this amount, approximately $710,000 is attributable to 1995, $1,670,000
is attributable to 1994 and $1,570,000 is attributable to 1993. Due to a change
in ownership as a result of the recapitalization in November 1993, the
utilization of the preownership change losses of approximately $6,400,000 are
subject to a cumulative annual limitation of approximately $150,000.
Deferred tax assets and liabilities are comprised of the following:
December 31
---------------------------
1994 1995
----------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 1,917,000 $ 2,042,000
Accrual accounting for book purposes, cash basis
reporting for tax purposes 127,000 151,000
Installation assets 80,000 123,000
Covenants 5,000 5,000
----------- -----------
2,129,000 2,321,000
Valuation allowance (1,934,000) (2,072,000)
----------- -----------
195,000 249,000
----------- -----------
Deferred tax liabilities:
Depreciation (128,000) (135,000)
Accrual accounting for book purposes, cash basis
reporting for tax purposes (67,000) (114,000)
----------- -----------
(195,000) (249,000)
----------- -----------
$ -- $ --
=========== ===========
<PAGE>
The following summarizes the change in the valuation allowance during 1993,
1994 and 1995:
1993 1994 1995
----------- ----------- -----------
Valuation allowance at January 1 $ 1,085,000 $ 1,458,000 $ 1,934,000
Valuation allowance at December 31 1,458,000 1,934,000 2,072,000
----------- ----------- -----------
Increase in valuation allowance $ (373,000) $ (476,000) $ (138,000)
=========== =========== ===========
Because of the Company's valuation allowance recorded in 1993, 1994 and
1995, there is no provision for Federal income taxes in any of the years
presented.
Note 8 - Warrants
The Company issued 1,000,000 redeemable warrants each to purchase one share
of common stock in connection with the Company's initial public offering in
December 1991. The number of shares issuable upon exercise of the warrants and
the exercise price are subject to adjustment based upon certain stock
transactions as defined in the warrant agreement. The warrants could be redeemed
by the Company at any time after June 17, 1992, at $.25 per warrant subject to
certain market conditions. The warrants expired December 19, 1994.
As of December 31, 1992 and 1993, the warrants were exercisable at $5.00
per share (the initial public offering price) subject to certain adjustments.
However, the Company offered these warrants at a reduced exercise price of $1.75
from February 17, 1993, to June 28, 1993. A total of 278,348 warrants were
exercised providing net proceeds of $439,000 during the period.
Also in connection with the public offering, the Company issued warrants to
the underwriters (as adjusted for anti-dilution provisions) to purchase up to
337,838 units (each unit consisting of one share of common stock at an exercise
price of $.74 per unit and one warrant to purchase a share of stock at $1.48 as
noted above). The exercise price of these warrants was equal to or greater than
the fair market value of the common stock at the measurement date. The
underwriters warrants are exercisable during the three year period commencing
December 17, 1993. None of these warrants have been exercised.
In connection with the issuance of bridge loans in 1993, the Company has
granted certain stockholders an additional 220,000 warrants to purchase one
share of common stock at an exercise price of $2.00 or $.83, which was not less
than the fair market value of the common stock at the date the warrants were
issued. As part of a secondary offering in November 1993, the Company sold
800,000 Class B Redeemable warrants each to purchase one share of .001 par value
common stock at a price of $.20 from May 1994 until November 1996. During 1994,
6,150 of these warrants were exercised. Beginning in May 1994, these warrants
are redeemable at $.05 per warrant under certain circumstances.
In connection with the November 1993 offering, as compensation for
services, the underwriters were issued warrants to purchase 80,000 units at
$6.00 per unit. Each unit consists of six shares of common stock and a warrant
to purchase an additional share of stock for $.20. None of the warrants have
been exercised.
<PAGE>
Note 9 -Stock transactions
The Company has authorized capital of 10,000,000 shares of $.001 par value
common stock; 720,000 shares of $.001 par value 5% preferred stock; and
1,280,000 shares of $.001 par value preferred stock undesignated, as of December
31, 1994 and 1995. The Company has issued 6,947,524 and 6,987,846 of $.001 par
value common stock at December 31, 1994 and 1995, respectively; 658,895 and
648,535 of $.001 par value preferred stock; 5% Series A at December 31, 1994 and
1995, respectively, with a liquidation value of approximately $3,663,000 and
$3,606,000 at December 31, 1994 and 1995, respectively, and no shares issued of
the $.001 par value preferred stock, undesignated, at December 31, 1994 and
1995.
Each share of the Company's 5% Series A preferred stock has a liquidation
preference of $5.56 per share, plus accrued but unpaid dividends. The dividends
were accumulated from the first anniversary of the Company's initial public
offering on December 17, 1992. In 1994 and 1995, 61,105 and 10,360 shares,
respectively, of the 5% Series A preferred stock were converted to an equal
number of common shares. In connection with these conversions, cumulative
dividends of $27,531 and $7,803 in 1994 and 1995, respectively, were paid to the
stockholders. At December 31, 1994 and 1995, dividends in arrears on the 5%
Series A preferred stock were $366,800 or $.56 per share and $542,000 or $.84
per share, respectively. The stock is senior to all preferred stock and is
convertible at the option of the holder at any time prior to redemption by the
Company, subject to certain provisions at the rate of one share of preferred for
one share of common stock, plus accrued and unpaid dividends. All accrued
dividends must be paid in cash at the time of conversion. The holders are
entitled to vote on a converted basis, together with the holders of the common
stock in all matters in which holders of common stock are entitled to vote. This
security is a common stock equivalent.
In November 1993, the Company completed a secondary offering of common
stock and warrants (see Note 8). In connection with the offering, 4,800,000
shares of common stock, providing net proceeds of $3,217,270, were issued.
In April 1995, 29,962 shares of common stock were issued to a national
advertising agency in settlement of services rendered. The services were valued
at $11,236 and were accrued in 1994.
The Company's Stock Option Plan (the Plan) provides for the grant of
qualified and non-qualified stock options to employees, consultants, and
directors of the Company to purchase in the aggregate up to 450,000 shares of
common stock. Under the Plan, the Company's Stock Option Committee has complete
discretion to establish the terms and conditions of each option, subject to the
plan provisions. The options may be exercised over a specified period not in
excess of ten years from the date of grant. As of December 31, 1993 and 1994,
non-qualified options have been granted to purchase 95,143 shares of common
stock. The exercise price of other options outstanding was reduced to $.20
during 1995. The price of $.20 per share was equal to the fair market value of
the common stock at the date of the price reduction.
<PAGE>
Options outstanding under the above plan are as follows:
Option Price Shares
Per Share Under Option
------------ ------------
Outstanding December 31, 1994 $ 1.38 - 2.00 335,998
Options canceled during 1995 .20 (32,998)
Options granted during 1995 .20 115,000
------------- -------
Outstanding December 31, 1995 $ .20 418,000
============= =======
As of December 31, 1994 and 1995, outstanding options for 179,200 and
221,800 shares, respectively, were exercisable at prices ranging from $1.38 to
$2.00 per share in 1994 and $.20 per share in 1995. None of the options have
been exercised as of December 31, 1995. All options have been granted with an
exercise price equal to the fair market value of the common stock on the date of
the grant.
In May 1993, the Board of Directors approved the Company's Non-Employee
Directors Stock Option Plan. The Plan provides for the grant of non-qualified
stock options to non-officer directors of the Company to purchase in the
aggregate up to 50,000 shares of common stock.
Options are granted under the plan according to a formula based upon
attendance at Board of Directors meetings. Options are granted with an exercise
price equal to the fair market value on the date of grant and may be exercised
over a period not in excess of ten years from the date of grant. As of December
31, 1994 and 1995, 32,000 and 50,000 options, respectively, were outstanding and
exercisable at prices ranging from $.16 to $.74 per share.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Statement establishes financial accounting and reporting
standards for stock-based compensation and is effective for fiscal years
beginning after December 15, 1995, or upon adoption of the Statement. The
Company has not decided whether it will adopt the expense recognition provisions
of the Statement or continue to use the expense recognition provisions of
Accounting Principles Board Opinion No. 25.
Note 10 - Related party transactions
In March 1993, the Company obtained $250,000 in short-term loans at 10%
from certain stockholders. In May 1993, the Company extended the terms of
$101,780 in principal amount of these loans and repaid the remainder with the
net proceeds of warrants exercised during the warrant reduction period (see Note
8). In September 1993, the Company obtained an additional $200,000 in bridge
loans from stockholders at an interest rate of 10%. These amounts were repaid
with proceeds from the November 1993 stock offering. In connection with the
issuance of March and September bridge loans the Company has granted certain
stockholders 140,000 warrants to purchase one share of common stock at an
exercise price of $2.00 and 80,000 warrants to purchase one share of common
stock at $.83. The market value of the common stock was equal to or less than
the exercise price as stated in the warrants at the date they were issued.
<PAGE>
Note 11 - Contract rights
On December 10, 1992, the Company purchased the rights to a contract to
install and operate interactive video at major airports in the greater New York
City area. The rights were acquired through the purchase of the stock of
TouchTel, Inc., which was an inactive company whose sole asset is the rights to
the aforementioned contract which is between TouchTel, Inc. and the New York
Port Authority. The contract can be canceled by the New York Port Authority
without cause upon 30 days notice.
During 1994, while the Company was negotiating a proposed merger, the
installation at the airports described above was halted. Because of the
protracted nature of the merger discussions, the Company has no funds available
to continue the project. The Company is currently seeking a partner, or joint
venture arrangement, to provide funds to complete the project, or identify a
buyer for the rights and equipment included in the captions of contract rights
and installations-in-process on the balance sheet. At December 31, 1994 and
1995, the Company wrote down the value of the contract rights and
installations-in-process by $400,000 and $250,000, respectively, to their
estimated net realizable value.
The ultimate realization of these assets is dependent upon the Company
obtaining funds to complete the project or obtaining a buyer for the contract
rights and related equipment. However, there is no assurance that the Company
will be successful in obtaining financing or a buyer for these assets. If the
Company is not successful, then a further write-down of the assets may be
required. Accordingly, no provision has been made in the financial statements
for any additional write-down that may result from this uncertainty.
Note 12 - Subsequent events
On March 21, 1996, the Company and the Chicago Transit Authority (CTA)
mutually agreed to terminate operation of its video cable network. Management
does not expect this event to have an adverse effect on the Company. The
Company's anticipated 1996 revenues of approximately $60,000 relate to news
services and is expected to be reallocated to other systems. The capitalized
equipment related to this system is substantially depreciated and can be used by
the Company in other networks. The total amount is not material to the financial
statements at December 31, 1995.
<PAGE>
Note 13-Subsequent Event (UNAUDITED)
On October 21, 1996, MetroVision was notified that the contract between the
Company and the New York Port Authority to install and operate interactive video
at major airports in the greater New York City area would expire on November 8,
1996. Management has not determined the effect of the contract termination on
the financial position or results of operations of the Company.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
----------- -----------
(Note) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 97,125 $ 0
Accounts receivable, net of allowances 441,955 167,088
Prepaid expenses 45,415 4,303
----------- -----------
TOTAL CURRENT ASSETS 584,495 171,391
OPERATING EQUIPMENT
Installations and equipment 3,550,257 3,259,467
Installations-in-process 221,416 46,416
Equipment and fixtures 195,378 197,953
----------- -----------
3,967,051 3,503,836
Less: accumulated depreciation (2,223,742) (2,469,353)
----------- -----------
1,743,309 1,034,483
OTHER ASSETS 10,846 13,600
PREPAID SOFTWARE LICENSE 36,000 9,000
CONTRACT RIGHTS 257,761 0
----------- -----------
$2,632,411 $1,228,474
=========== ===========
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable-trade $ 182,545 $ 137,027
Accrued salaries and commissions 133,284 149,154
Deferred Income 286,547 132,807
Accrued expenses 66,905 40,698
Current portion of notes payable to stockholders 96,000 76,000
Loans to Officers and Directors 0 59,506
----------- -----------
TOTAL CURRENT LIABILITIES 765,281 595,192
PREFERRED STOCK, 5% SERIES A 649 649
COMMON STOCKHOLDERS' EQUITY
Common stock, Class A 6,987 6,987
Capital in excess of par value 13,385,979 13,385,979
Retained deficit (11,526,485) (12,760,333)
----------- -----------
TOTAL COMMON STOCKHOLDERS' EQUITY 1,866,481 632,633
----------- -----------
$2,632,411 $1,228,474
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
1
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- ----------------------------
1995 1996 1995 1996
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
GROSS REVENUES $ 242,111 $ 172,591 $1,119,985 $ 703,194
Less: agency commissions (19,685) (6,163) (57,184) (19,037)
--------- --------- ---------- -----------
NET REVENUES 222,426 166,428 1,062,801 684,157
OPERATING COSTS AND EXPENSES
Cost of sales 75,307 62,356 485,610 285,744
Selling, general, and administrative 252,461 187,723 773,768 617,041
--------- --------- ---------- -----------
327,768 250,079 1,259,378 902,785
--------- --------- ---------- -----------
OPERATING LOSS BEFORE DEPRECIATION
AND AMORTIZATION (105,342) (83,651) (196,577) (218,628)
Depreciation and amortization 161,500 75,000 484,500 398,000
Write Down of Contract Rights
and Installation Assets 0 607,761 0 607,761
--------- --------- ---------- -----------
LOSS FROM OPERATIONS (266,842) (766,412) (681,077) (1,224,389)
Interest income 935 222 5,909 514
Interest expense (1,981) (6,235) (6,018) (9,973)
--------- --------- ---------- -----------
NET LOSS (267,888) (772,425) (681,186) (1,233,848)
Less: Preferred stock dividend requirements 45,793 45,041 137,379 135,123
--------- --------- ---------- -----------
NET LOSS APPLICABLE TO COMMON STOCK $(313,681) $(817,466) $ (818,565) $(1,368,971)
========= ========= ========== ===========
NET LOSS PER COMMON SHARE $ (0.05) $ (0.13) $ (0.14) $ (0.22)
========= ========= ========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 6,073,829 6,194,965 5,964,440 6,299,083
========= ========= ========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1995 1996
--------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(681,186) $(1,233,848)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for depreciation and amortization 484,500 398,000
Write down of contract rights and installation assets 0 607,761
Loss on sale of equipment 0 611
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (net) (300,124) 274,867
Decrease in prepaid expenses and other assets 7,604 38,358
Increase/(decrease) in accounts payable and other accrued expenses 210,714 (209,595)
--------- -----------
NET CASH USED IN OPERATING ACTIVITIES (278,492) (123,846)
--------- -----------
INVESTING ACTIVITIES
Capital expenditures for operating equipment (84,640) (15,285)
Proceeds from sale of equipment 0 2,500
--------- -----------
NET CASH USED IN INVESTING ACTIVITIES (84,640) (12,785)
--------- -----------
FINANCING ACTIVITIES
Payments of Dividends (7,803) 0
Proceeds from loans to officers and directors 70,000
Principal payments on loans to officers and directors 0 (10,494)
Principal payments on notes to former stockholders 0 (20,000)
--------- -----------
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES (7,803) 39,506
--------- -----------
(370,935) (97,125)
Cash and cash equivalents at beginning of period 400,716 97,125
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,781 $ 0
========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
METROVISION OF NORTH AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
NOTE B--SUBSEQUENT EVENTS
On November 6, 1996, the Company received net proceeds of approximately $51,000
as a result of the exercise of outstanding redeemable common stock purchase
warrants. In connection with the exercise of these warrants the company issued a
total of 253,965 shares of it's common stock.
On October 23, 1996, an action was filed seeking a judgement against the company
regarding a past due note of approximately $76,000 plus accrued interest and
attorney fees. The Company is currently attempting to negotiate a settlement
with the noteholder.
NOTE C--RELATED PARTY TRANSACTIONS
On July 10, 1996 certain officers and directors loaned the Company $25,000 at
10% interest per annum with principal and accrued interest due no later than
November 1, 1996. In connection with this borrowing the Company issued to the
lenders warrants to purchase 69,000 shares of common stock at an exercise price
of $.15625 per share, which approximated its market price; therefore, no value
was attributed to the warrants. As of November 13, 1996, the Company has not
repaid these loans.
In September, 1996, certain officers and directors loaned the Company
$45,000 at 10% interest per annum with principal and accrued interest due no
later than December 1, 1996. In connection with this borrowing the Company
issued to the lenders warrants to purchase 132,200 shares of common stock at an
exercise price of $.20 per share, which approximated its market price;
therefore, no value was attributed to the warrants.
NOTE D--ASSET IMPAIRMENT
In the third quarter of 1996, the Company recorded a charge of $607,761 to
reduce the carrying value of certain purchased contract rights, and installation
equipment for the New York area airports and The Massachusetts Bay Transit
Authority ("MBTA") project to their net realizable value. Pursuant to the
notification by the Port Authority of it's intent to terminate the New York area
airport contract and the Company's decision to halt construction of the MBTA
installation related to litigation and the inability to generate significant
revenues, the Company has recorded a charge to recognize the impairment in the
value of these long lived assets.
4
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of
York Hannover Pharmaceuticals, Inc.:
We have audited the accompanying balance sheets of YORK HANNOVER
PHARMACEUTICALS, INC. (a Florida corporation) as of December 31, 1995 and 1994,
and the related statements of income and stockholder's deficit and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 York Hannover Pharmaceuticals,
Inc. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
August 14, 1996
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
- ----------------------------------------------------- ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 15,916 $ 15,001
Marketable securities 67,823 --
Accounts receivable, less allowance for doubtful
accounts of $522,960 and $376,655, respectively 111,538 879,346
Inventory and other -- 250,060
----------- -----------
Total current assets 195,277 1,144,407
----------- -----------
FURNITURE AND EQUIPMENT, at cost: -- 251,026
Less accumulated depreciation -- (82,171)
----------- -----------
Net furniture and equipment -- 168,855
----------- -----------
OTHER ASSETS:
Investment in York Hannover Partnership 553,334 --
Due from York Hannover Partnership 105,468 --
Due from related parties 244,372 --
Due from affiliates and other -- 21,400
Non-current deferred tax asset 141,876 --
----------- -----------
Total other assets 1,045,050 21,400
----------- -----------
TOTAL ASSETS $ 1,240,327 $ 1,334,662
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDER'S DEFICIT 1995 1994
- --------------------------------------------------- ----------- ------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 173,878 $ 771,303
Accounts payable -- 220,717
Accrued expenses 213,863 118,094
----------- -----------
Total current liabilities 387,741 1,110,114
----------- -----------
LONG-TERM DEBT, less current portion 2,179,877 1,923,878
DEFERRED REVENUE, net of accumulated
amortization of $55,476 876,524 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, $.10 par value, 10,000 shares
authorized, 1,000 shares issued and outstanding 100 100
Accumulated deficit (2,203,915) (1,699,430)
----------- -----------
TOTAL STOCKHOLDER'S DEFICIT (2,203,815) (1,699,330)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 1,240,327 $ 1,334,662
=========== ===========
The accompanying notes to financial statements are an integral part of
these balance sheets.
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
STATEMENTS OF INCOME AND STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
REVENUES:
Net patient revenues $ 2,672,878 $ 4,260,145
Equity in earnings of York Hannover
Partnership 103,696 --
Other revenues 173,554 --
----------- -----------
Total revenues 2,950,128 4,260,145
----------- -----------
EXPENSES:
Cost of patient revenues 1,391,588 2,396,158
Salaries, wages and benefits 502,152 705,121
General and administrative 314,994 202,984
Management fees 488,500 180,000
Provision for uncollectible accounts 240,582 40,380
Depreciation and amortization 45,075 82,171
Interest expense 289,830 318,662
----------- -----------
Total expenses 3,272,721 3,925,476
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES (322,593) 334,669
INCOME TAX PROVISION -- --
----------- -----------
NET INCOME (LOSS) (322,593) 334,669
STOCKHOLDER'S DEFICIT, beginning of period (1,699,430) (2,034,099)
DISTRIBUTION TO STOCKHOLDER (181,892) --
----------- -----------
STOCKHOLDER'S DEFICIT, end of period $(2,203,915) $(1,699,430)
=========== ===========
The accompanying notes to financial statements are an integral
part of these statements.
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Increase (Decrease) in Cash and Cash Equivalents)
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(322,593) $ 334,669
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 45,075 82,171
Amortization of deferred revenue (55,476) --
Equity in earnings of York Hannover Partnership (103,696) --
Changes in assets and liabilities:
Receivables, net 767,808 (554,369)
Noncurrent deferred tax asset (141,876) --
Inventory and other (62,674) (51,783)
Accounts payable (220,717) 108,356
Accrued expenses 95,769 67,740
--------- ---------
Net cash used in operating activities 1,620 (13,216)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Non-compete agreement 932,000 --
Loans to York Hannover Partnership (105,468) --
Loans to related parties (244,372) --
Payments received on loans to affiliates 21,400 --
Purchases of marketable securities (67,823) --
Furniture and equipment, net (13,124) (3,243)
--------- ---------
Net cash provided by (used in) investing activities 522,613 (3,243)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt borrowings (771,303) (17,882)
Long-term debt borrowings 429,877 --
Distribution to stockholder (181,892) --
--------- ---------
Net cash used in financing activities (523,318) (17,882)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 915 (34,341)
CASH AND CASH EQUIVALENTS, beginning of year 15,001 49,342
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 15,916 $ 15,001
========= =========
SUPPLEMENTAL INFORMATION:
Cash payments of interest expense $ 293,413 $ 270,391
========= =========
The accompanying notes to financial statements are an integral part
of these statements.
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements include the accounts of York Hannover
Pharmaceuticals, Inc. ("the Company"), a wholly-owned subsidiary of
Stockbridge Investment Partners, Inc. ("SIP"). The Company was purchased by
SIP from Progressive Investments International, Inc. on December 17, 1993.
Prior to August 1, 1995, the Company provided institutional pharmacy
services, infusion therapy, urological, enteral and general medical
supplies to licensed nursing facilities, hospitals, correction facilities
and retirement facilities throughout the State of Florida. As discussed in
Note 3, effective August 1, 1995, the Company formed a partnership ("York
Hannover Partnership" or "the Partnership") with United Professional
Companies, Inc. ("UPC") whereby the Company and UPC each contributed
property and equipment, inventory and existing contracts with nursing
facilities to provide services and products. The Company accounts for its
40% interest in the Partnership under the equity method of accounting. The
Company provides certain billing services to the Partnership for which the
Company receives 7.5% of amounts billed.
The accompanying financial statements have been prepared on the accrual
basis of accounting under the assumption that the Company will continue as
a going concern. The Company experienced a loss from operations in 1995 and
had negative stockholder's equity as of December 31, 1995. Management
anticipates that it will be able to negotiate an extension of the maturity
date of the Promissory note payable to National HealthCare L.P. ("NHCLP")
(see Note 4). While management believes it will be able to accomplish such
an extension, there can be no assurance that a successful extension will be
completed. In the event that management's extension efforts are not
successful, management believes that the Company will be able to generate
sufficient cash to meet debt requirements and to finance ongoing operations
through alternative sources of financing or through the sale of the
Company's interest in the Partnership.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
-2-
Operational Management
Effective January 1, 1995, the operations of the Company are being managed
by Lenox Healthcare, Inc. ("Lenox") for a management fee of $30,000 per
month.
During 1994 and through September 17, 1995, the Company paid management
fees of $15,000 per month to Nutritional Support Services L.P. ("NSS"), a
subsidiary of NHCLP. Accordingly, in 1995 and 1994, the Company paid
$128,500 and $180,000, respectively, in management fees to NSS. The
management agreement with NSS was terminated on September 17, 1995.
Revenues
Net patient revenues represent revenues generated prior to August 1, 1995
from the sale of institutional pharmacy services, infusion therapy,
urological, enteral and general medical supplies to licensed nursing
facilities, hospitals, correction facilities and retirement facilities
throughout the State of Florida. Prior to August 1, 1995, the Company
received payment for the sale of certain supplies to patients covered by
Medicare and the Florida Medicaid programs. Revenues generated from
patients covered by Medicare and the Florida Medicaid programs are based on
reasonable charge reimbursement principles and are not subject to "cost"
limitations. In the opinion of management, adequate provision has been made
for any adjustments that may result from reviews by the Medicare and
Medicaid programs. Approximately 84% of revenues in 1995 were to patients
in nursing facilities owned by SIP.
Marketable Securities
Marketable securities approximate fair value based on quoted market prices.
Management has classified the securities as available for sale.
Inventory
All inventories as of December 31, 1994 were priced at the lower of cost
(on a first-in, first-out basis) or market.
Furniture and Equipment
Prior to August 1, 1995, the Company's furniture and equipment were
depreciated using the straight-line method over the estimated useful lives
of the assets. The estimated useful lives were from 3 to 10 years.
Concentration of Credit Risks
The Company's credit risks primarily relate to cash and cash equivalents
and receivables. Cash and cash equivalents are primarily held in bank
accounts. Receivables consist primarily of amounts due from patients in the
state of Florida and from the Medicare and Florida Medicaid programs. The
Company maintains allowances for uncollectible accounts on these
receivables.
<PAGE>
-3-
Cash Equivalents
Cash equivalents include highly liquid investments with an original
maturity of less than three months.
2. RELATED PARTIES
Lenox, Pinellas Healthcare Investors, Inc. ("Pinellas") and Monterey
Investments, Inc. ("Monterey") are related parties to the Company as the
majority stockholders of these entities are also the majority stockholders
of SIP. Net amounts due to or from related parties as of December 31, 1995
consist of the following:
December 31,
1995
-----------
Due from York Hannover Partnership $ 105,468
=========
Due from related parties - noncurrent:
Pinellas Healthcare Investors, Inc. $ 235,000
Monterey Investments, Inc. 9,372
---------
$ 244,372
=========
The Company's management believes that all amounts owed to the Company by
related parties will be paid in full and that related receivables are
realizable.
See Note 1 for discussion of management fees paid to Lenox during 1995 and
see Note 3 for discussion of the Company's relationship with York Hannover
Partnership.
3. INVESTMENT IN YORK HANNOVER PARTNERSHIP
Effective August 1, 1995, the Company formed a partnership with UPC for the
purpose of operating a business which provides institutional pharmacy,
infusion therapy, third-party billing, medical equipment and supplies,
respiratory therapy and other services. Pursuant to the terms of the
partnership agreement, the Company contributed to the Partnership all of
its furniture and equipment, inventory and existing contracts with nursing
facilities to provide services and products. UPC also contributed certain
property and equipment, inventory, cash and existing contracts to the
Partnership. The total net book value of assets contributed by the Company
was $449,638 as of the date of contribution. The Company's investment in
the Partnership, as determined using the equity method, has increased to
$553,334 as of December 31, 1995. The Company received a 40% interest in
the Partnership and also received $932,000 for entering into a covenant not
to compete. Cash proceeds of $750,000 from the covenant not to compete were
used to reduce the promissory note payable to NHCLP as discussed in Note 4.
The covenant not to compete is currently being amortized over the covenant
life which is seven years.
<PAGE>
-4-
The Company and UPC will provide working capital funding to the
Partnership, as required, in proportion to their respective ownership
interests. During 1995, the Company loaned $80,000 to the Partnership for
working capital purposes. The Company has a right to priority distributions
of its share of Partnership net income limited to the lesser of $300,000 or
the amount of annual interest expense due on the promissory note payable to
NHCLP (see Note 4). Under the Partnership Agreement, the priority
distributions are to be used for the sole purpose of paying interest due on
the promissory note payable to NHCLP. The priority distributions are
subject to the availability of Partnership cash. No distributions were made
by the Partnership during 1995. The Company and UPC each provide certain
management services to the Partnership. The Company provides certain
billing services to the Partnership for which the Company receives 7.5% of
amounts billed. As of December 31, 1995, the Partnership owes $25,468 to
the Company primarily as a result of billing services. The Company has an
option to sell its interest in the Partnership to UPC (the "Put Option") at
fair market value at the Put Option exercise date. The Put Option can be
exercised by the Company at any date subsequent to the termination of the
Partnership and upon 180 days written notice to UPC. The Partnership has a
minimum term of five years.
The Company pledged its interest in the Partnership as collateral for the
remaining balance due under the promissory note payable to NHCLP.
The following unaudited pro forma income statement information for the
Company is presented as though the Partnership had been entered into on
January 1, 1995. The unaudited pro forma information is presented for
informational purposes only and is not necessarily indicative of the
operating results that would have occurred had the Partnership been
consummated on January 1, 1995, nor are they necessarily indicative of
future operating results.
Year Ended
December 31,
1995
---------------
Unaudited
---------------
Equity in earnings of York Hannover Partnership $ 266,012
Other revenues 207,337
Other expenses (649,830)
----------
Net loss before income taxes (176,481)
Income tax provision -
----------
Net loss $ (176,481)
==========
Other revenues in the above unaudited pro forma income statement includes a
full year of amortization revenue from the not to compete agreement and a
full year of revenue from billing services provided to the Partnership.
Other expenses includes management fees paid to Lenox and interest expense
incurred by the Company during 1995.
<PAGE>
-5-
Summary financial statements of the Partnership as of and for the five
months ended December 31, 1995 are as follows:
December 31,
Balance Sheet 1995
-----------
Accounts receivable $ 1,142,412
Inventory 495,350
Cash 109,086
Other current assets 19,069
Net property, plant and equipment 589,726
-----------
Total assets $ 2,355,643
===========
Working capital loans - due to the Company and UPC $ 200,000
Accounts payable 243,657
Due to the Company 25,468
Due to UPC 40,431
Accrued expenses 87,869
Current portion of promissory note payable 14,625
Promissory note payable 360,254
Partners' capital 1,383,339
-----------
Total liabilities and partners' capital $ 2,355,643
===========
Income Statement
Revenues $ 2,563,354
Cost of sales (1,348,470)
-----------
Gross profit 1,214,884
Expenses (955,643)
-----------
Net income $ 259,241
===========
<PAGE>
-6-
4. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 was composed of the following:
December 31,
------------------------
1995 1994
---------- ----------
Promissory note payable to NHCLP $1,950,000 $2,500,000
Line of credit promissory note payable to NHCLP 229,877 -
Other notes - interest at 9% and principal due
in equal monthly installments with remaining
balance due on December 1, 1996 173,878 195,181
---------- ----------
2,353,755 2,695,181
Less current portion (173,878) (771,303)
---------- ----------
$2,179,877 $1,923,878
========== ==========
During 1993, the Company entered into a $2,500,000 promissory note ("the
Promissory Note") with NHCLP. The Promissory Note was scheduled to mature
on September 17, 1995. During 1995, the Promissory Note was restructured
and the maturity date was extended to January 17, 1999 with certain
incentives for the Company if the debt was prepaid on or before January of
1997. However, as a result of certain covenants included in the
restructured Promissory Note, the Company's failure to pay the Promissory
Note on or before January 17, 1997 will result in a default. As such, the
Promissory Note is disclosed as due during 1997 in the schedule of the
principal maturity of long-term debt. Interest accrues at 12% and is
payable monthly with the entire principal due on January 17, 1997.
During 1995, the Company entered into a line of credit promissory note
("the LOC Note") with NHCLP. The LOC Note matures on January 17, 1997.
Interest accrues at 12% and is payable monthly with the entire principal
due on January 17, 1997. No additional borrowings are available under the
LOC Note.
The Promissory Note and the LOC Note are secured by all of the assets of
the Company, including the Company's interest in the Partnership, the
personal guarantees of two stockholders of SIP, and certain assets of SIP
and Monterey.
All of the assets of the Company are pledged as collateral on a line of
credit owed by SIP to NHCLP. The outstanding balance owed by SIP to NHCLP
under this line of credit was $1,913,163 as of December 31, 1995.
A schedule of the principal maturity of long-term debt for the years
subsequent to December 31, 1995 is as follows:
1996 $ 173,878
1997 2,179,877
<PAGE>
-7-
5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). This statement requires that the asset and liability method
be used in calculating the prepaid or deferred tax position of the Company.
Accordingly, deferred or prepaid taxes are based on the difference between
the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect in the years the differences are expected to
reverse. The net deferred tax assets, at 38% of the respective amount, as
of December 31, 1995 and 1994 are as follows:
December 31,
---------------------------
1995 1994
----------- -----------
Current Deferred Asset:
Asset and Liability Accounts $ 196,790 $ 113,731
Less Valuation Allowance (196,790) (113,731)
----------- -----------
$ - $ -
=========== ===========
Non-Current Deferred Asset:
Asset and Liability Accounts $ 329,836 $ 115,714
Net operating loss carryforwards - 45,555
----------- -----------
329,836 161,269
Less Valuation Allowance (187,960) (161,269)
----------- -----------
$ 141,876 $ -
=========== ===========
In estimating the future tax consequences under SFAS 109, the Company
considers expected future events and the existence of sufficient taxable
income. Due to an operating loss in 1995, sufficient taxable income is not
anticipated to utilize all of the deferred tax assets. Therefore, a
valuation allowance has been recorded to fully reserve for the net current
tax asset and to partially reserve for the net non-current tax asset.
The current deferred asset primarily relates to accounts receivable
reserves not deducted for tax purposes. The non-current deferred asset as
of December 31, 1995 relates primarily to non-compete agreement revenue
which is not yet recognized for financial reporting purposes.
The Company uses the separate return method in determining the deferred and
current tax benefit or expense and related valuation allowance to be
recorded. Under the separate return method, the determination of the tax
benefit or expense and related valuation allowance is based on what the
Company's tax benefit or expense and related valuation allowance would have
been had the Company filed a separate tax return.
<PAGE>
-8-
6. COMMITMENTS AND CONTINGENCIES
During 1994 and through February 1, 1995, the Company assumed certain risks
related to worker's compensation insurance claims of its employees. The
Company is still liable for any worker's compensation claims which may have
been incurred but not reported prior to February 1, 1995. In the opinion of
management, no additional worker's compensation claims which were incurred
prior to February 1, 1995 are expected to be filed. During March of 1995,
the Company obtained a bond which will pay up to $250,000 of any future
worker's compensation claims.
7. EVENT SUBSEQUENT TO YEAR END (UNAUDITED)
On May 10, 1996, SIP and the Company entered into a merger agreement with
MetroVision of North America, Inc. ("MetroVision"). MetroVision owns and
operates a video cable network for the mass transit industry, under
contracts ranging from five to seven years, for the purpose of providing
information and selling advertising. In addition, MetroVision installs,
under contract, video equipment in certain mass transit locations.
Under the terms of the merger agreement, the Company will distribute all of
its assets and liabilities to SIP prior to the merger except for its 40%
interest in the Partnership and its outstanding debt under the NHCLP
Promissory Note and related accrued interest. Pursuant to the agreement,
SIP will exchange all outstanding common stock of the Company with
MetroVision for 4,000,000 newly issued registered shares of MetroVision. As
a condition of the merger, MetroVision will complete a 4.6 to 1 reverse
split of its common stock, reducing the number of MetroVision shares
outstanding on a post merger basis. SIP will also be granted warrants to
purchase 1,500,000 shares of common stock in the post merger MetroVision.
The Company anticipates that the merger will be completed during April
1997.
<PAGE>
-9-
YORK HANNOVER PHARMACEUTICALS, INC.
UNAUDITED FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
September 30,
1996
-------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 55,129
Accounts receivable 3,263
Marketable Securities 436,012
----------
TOTAL CURRENT ASSETS 494,404
OTHER ASSETS
Investment in York Hannover Partnership 656,089
Due from York Hannover Partnership 97,409
Due from related parties 245,266
Non-current deferred tax asset 141,876
----------
TOTAL OTHER ASSETS 1,140,640
----------
TOTAL ASSETS $1,635,044
==========
LIABILITIES and STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 260,270
Accrued expenses 395,521
Short-term debt 2,106,609
Due to Affiliates 367,457
----------
TOTAL CURRENT LIABILITIES 3,129,857
LONG-TERM DEBT, less current portion 0
DEFERRED REVENUE 776,667
STOCKHOLDER'S EQUITY
Common stock 100
Accumulated deficit (2,271,580)
----------
TOTAL COMMON STOCKHOLDERS' EQUITY (2,271,480)
----------
$1,635,044
==========
1
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF INCOME AND STOCKHOLDER'S DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -------------------------
1995 1996 1995 1996
-------- ------- ---------- -------
<S> <C> <C> <C> <C>
Net patient revenues $302,604 $ 0 $2,673,311 $ 0
Other revenue, including equity in earnings
of York Hannover Partnership 86,659 135,723 86,659 398,521
-------- ------- ---------- -------
NET REVENUES 389,263 135,723 2,759,970 398,521
OPERATING COSTS AND EXPENSES
Cost of patient revenues 153,562 0 1,374,772 0
Selling, general, and administrative 423,678 19,852 1,362,411 251,743
Depreciation and amortization 6,923 0 45,075 0
Interest expense (65,685) (74,620) (227,298) (214,442)
-------- ------- ---------- -------
TOTAL EXPENSES 649,848 94,472 3,009,556 466,185
-------- ------- ---------- -------
NET INCOME (LOSS) (260,585) 41,251 (249,586) (67,664)
STOCKHOLDER'S DEFICIT, BEGINNING OF
PERIOD (1,688,431) (2,312,830) (1,699,430) (2,203,915)
----------- ----------- ----------- ----------
STOCKHOLDER'S DEFICIT, END OF PERIOD $(1,949,016) $(2,271,579) $(1,949,016) $(2,271,579)
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1995 1996
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(249,586) $(67,665)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for depreciation 45,075 0
Amortization of deferred revenue (22,190) (99,858)
Equity in earnings of York Hannover Partnership (47,398) (232,755)
Changes in operating assets and liabilities:
Decrease in accounts receivable (net) 527,135 108,275
Decrease in inventory and other assets 62,674 8,059
Increase/(decrease) in accounts payable and other accrued expenses (272,305) 441,929
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 43,405 157,985
--------- --------
INVESTING ACTIVITIES
Proceeds from Non compete agreement 932,000 0
Proceeds from Priority Distributions 0 130,000
Proceeds from repayment of loans from Affiliates 1,400 0
Loans to related parties (103,339) (894)
Purchases of Marketable Securities (67,823) (732)
Capital expenditures for Furniture and Equipment (13,124) 0
--------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 749,114 128,374
--------- --------
FINANCING ACTIVITIES
Principal Payments on Long-Term Debt Borrowings (767,762) 0
Principal Payments on Short-Term Debt Borrowings 0 (247,146)
--------- --------
NET CASH USED IN FINANCING ACTIVITIES (767,762) (247,146)
--------- --------
24,757 39,213
Cash and cash equivalents at beginning of period 15,001 15,916
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39,758 $ 55,129
========= ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 218,060 $ 32,783
======== ========
See notes to condensed financial statements.
</TABLE>
3
<PAGE>
YORK HANNOVER PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer to
the condensed financial statements and footnotes thereto included in York
Hannover's audited financial statements for the year ended December 31, 1995.
NOTE B--CHANGE IN YORK HANNOVER'S OPERATIONS
The financial statements for the three month and nine month periods ended
September 30, 1995 reflect York Hannover's former business of dispensing
prescription and non-prescription medications and providing infusion therapy,
medical supplies and enteral and urological products primarily to long term care
nursing facilities. On August 1, 1995 York Hannover's operations ceased when it
contributed its operating assets to York Hannover Partnership, a joint venture
formed with United Professional Companies, Inc., a subsidiary of United Health
Inc. The financial statements for the three and nine month periods ended
September 30, 1996 are consistent with the change in the nature of the
operations and associated revenue sources.
NOTE C--SHORT TERM DEBT
Short term debt at September 30, 1996 was composed of the following:
September 30,
1996
----------
Promissory note payable $1,950,000
Notes payable to former shareholders 156,609
----------
Total short-term debt $2,106,609
4
<PAGE>
As of December 31, 1995, York Hannover's promissory note payable and line of
credit promissory note payable to National HealthCare L.P. were classified as
long-term debt. However, since the National HealthCare L.P. debt matures in
September, 1997 it has been reclassified to short-term debt.
NOTE D--INVESTMENT IN YORK HANNOVER PARTNERSHIP
Effective August 1, 1995, York Hannover formed a partnership with United
Professional Companies, Inc. for the purpose of operating a business which
provides institutional pharmacy, infusion therapy, third party billing, medical
equipment and supplies and other services. Pursuant to the terms of the
partnership agreement, York Hannover contributed to the partnership all of its
furniture and equipment, inventory and existing contracts with nursing
facilities to provide services and products. York Hannover's 40% interest in the
Partnership is recorded using the equity method of accounting.
NOTE E--AMOUNTS DUE FROM RELATED PARTIES
Pinellas Healthcare Investors, Inc. and Monterey Investments, Inc. are related
parties to York Hannover as the majority shareholders of these entities are also
the majority shareholders of York Hannover. Net amounts due from related parties
as of September 30, 1996 consist of the following:
September 30,
1996
--------
Due from York Hannover Partnership $97,409
--------
Due from related parties - noncurrent:
Pinellas HealthCare Investors, Inc. 235,000
Monterey Investments, Inc. 10,266
--------
$245,266
York Hannover's management believes all monies due by related parties will be
paid in full and that all related receivables are realizable.
NOTE F--RELATED PARTY TRANSACTIONS
On September 25, 1996 Stockbridge Investment Partners, Inc., parent company to
York Hannover, transferred 59,386 shares of Star Multi Care Services, Inc.
common stock to the company valued at approximately $367,000.
5
<PAGE>
NOTE G--MERGER AGREEMENT
On May 10, 1996, York Hannover entered into a merger agreement with MetroVision
of North America, Inc. ("MetroVision"). MetroVision owns and operates a video
cable network for the mass transit industry, under contracts ranging from five
to seven years, for the purpose of providing information and selling
advertising. In addition, MetroVision installs, under contract, video equipment
in certain mass transit locations.
Under the terms of the merger agreement, the Company will distribute all of its
assets and liabilities to Stockbridge Investment Partners, Inc. prior to the
merger except for its 40% interest in the Partnership and its outstanding debt
under the NHCLP Promissory Note and related accrued interest. Pursuant to the
agreement, Stockbridge will exchange all outstanding common stock of the Company
with MetroVision for 4,000,000 newly issued registered shares of MetroVision. As
a condition of the merger, MetroVision will complete a 4.6 to 1 reverse split of
its common stock, reducing the number of MetroVision shares outstanding on a
post merger basis. Stockbridge will also be granted warrants to purchase
1,500,000 shares of common stock in the post merger MetroVision.
The following unaudited pro forma balance sheet information for the Company is
presented as though the merger with MetroVision had been consummated on
September 30, 1996. The unaudited pro forma information is presented for
informational purposes only.
Balance Sheet
September 30,
1996
-------------
Unaudited
-------------
Assets
Current assets ............................................. $ 171,000
Property and equipment, net ................................ 1,005,000
Other assets ............................................... 675,000
----------
Total assets ............................................ 1,851,000
==========
Liabilities and Stockholder's Equity
Current liabilities, excluding short-term debt ............. 690,000
Short-term debt ............................................ 2,085,000
Preferred stock ............................................ 1,000
Total common stockholder's equity .......................... (925,000)
-----------
Total common liabilities and stockholder's equity ....... $1,851,000
==========
NOTE H--SUBSEQUENT EVENTS
On January 24, 1997, York Hannover Pharmaceuticals and National HealthCare L.P.
entered into an agreement to extend the maturity date of the promissory note
payable in the amount of $1,950,000 to September 30, 1997.
Subsequent to September 30, 1996 and through January 31, 1997 York Hannover
Pharmaceuticals has received additional priority distributions from the
Partnership amounting to $170,000.
6
<PAGE>
YORK HANNOVER PARTNERSHIP
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
York Hannover Partnership:
We have audited the accompanying balance sheet of YORK HANNOVER PARTNERSHIP
(a Wisconsin general partnership) as of December 31, 1995, and the related
statements of income, partners' capital, and cash flows for the five month
period then ended. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of York Hannover Partnership as of
December 31, 1995, and the results of its operations and its cash flows for the
five month period then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
August 14, 1996
<PAGE>
YORK HANNOVER PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 109,086
Accounts receivable, less allowance for doubtful
accounts of $60,070 1,142,412
Inventory 495,350
Other current assets 19,069
-----------
Total current assets 1,765,917
-----------
PROPERTY AND EQUIPMENT:
Furniture and equipment 231,203
Construction in progress 389,879
-----------
621,082
Accumulated depreciation (31,356)
-----------
Property and equipment, net 589,726
-----------
Total assets $ 2,355,643
===========
The accompanying notes to financial statements are an integral part
of this balance sheet.
<PAGE>
YORK HANNOVER PARTNERSHIP
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1995
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Working capital note payable to
York Hannover Pharmaceuticals, Inc. $ 80,000
Working capital note payable to
United Professional Companies, Inc. 120,000
Accounts payable 243,657
Accrued expenses 87,869
Due to York Hannover Pharmaceuticals, Inc. 25,468
Due to United Professional Companies, Inc. 40,431
Current portion of promissory note
payable to United Health, Inc. 14,625
----------
Total current liabilities 612,050
----------
PROMISSORY NOTE PAYABLE TO UNITED HEALTH, INC 360,254
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 1,383,339
----------
Total liabilities and partners' capital $2,355,643
==========
The accompanying notes to financial statements are an integral part
of this balance sheet.
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENT OF INCOME
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1995
REVENUES $ 2,563,354
COST OF SALES (1,348,470)
-----------
Gross margin 1,214,884
-----------
EXPENSES:
Salaries, wages and benefits 479,244
General and administrative 281,971
Management fees 102,535
Provision for uncollectible accounts 60,537
Depreciation 31,356
-----------
Total expenses 955,643
-----------
NET INCOME $ 259,241
===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
York Hannover United Professional
Pharmaceuticals, Inc. Companies, Inc. Total
--------------------- ------------------- -----
<S> <C> <C> <C>
BALANCE, August 1, 1995 $ -- $ -- $ --
Capital contributions 449,638 674,460 1,124,098
Net income 103,696 155,545 259,241
----------------- ----------------- -----------------
BALANCE, December 31, 1995 $ 553,334 $ 830,005 $ 1,383,339
================= ================= =================
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE FIVE MONTH PERIOD ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 259,241
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation 31,356
Changes in assets and liabilities:
Accounts receivable, net (1,142,412)
Inventory and other assets (73,313)
Accounts payable 243,657
Accrued expenses 87,869
Due to partners 65,899
-----------
Net cash used in operating activities (527,703)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (446,987)
-----------
Net cash used in investing activities (446,987)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 508,897
Long-term debt borrowings 374,879
Short-term debt borrowings 200,000
-----------
Net cash provided by
financing activities 1,083,776
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 109,086
CASH AND CASH EQUIVALENTS, beginning of period --
-----------
CASH AND CASH EQUIVALENTS, end of period $ 109,086
===========
SUPPLEMENTAL INFORMATION:
Non-cash capital contributions $ 615,201
===========
The accompanying notes to financial statements are an integral
part of this statement.
<PAGE>
YORK HANNOVER PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements include the accounts of York Hannover Partnership
("the Partnership") formed for the purpose of providing institutional
pharmacy services, infusion therapy, urological, enteral and general
medical supplies to licensed nursing facilities, hospitals, correction
facilities and retirement facilities throughout the State of Florida.
The Partnership commenced operations August 1, 1995, upon formation of the
Partnership by and between York Hannover Pharmaceuticals, Inc. ("YHPI"), a
wholly-owned subsidiary of Stockbridge Investment Partners, Inc. ("SIP"),
and United Professional Companies, Inc. ("UPC"), a wholly-owned subsidiary
of United Health, Inc. ("UHI"). Pursuant to the terms of the Partnership
agreement, YHPI contributed to the Partnership assets with a total net
book value of $449,638 as of the date of the contribution. Those assets
included $302,424 of inventory. Other assets contributed by YHPI consisted
primarily of furniture and equipment. UPC contributed assets with a total
net book value of $674,460 as of the date of the contribution. Those
assets included $508,897 of cash. The remainder of assets contributed by
UPC consisted primarily of inventory and property and equipment. In
exchange for these contributions, YHPI received a 40% general partnership
interest and UPC a 60% general partnership interest in the Partnership.
The Partnership has a minimum term of five years.
Earnings and losses are allocated based on general partnership interests.
Under the terms of the Partnership agreement, YHPI has a right to priority
distributions of its share of Partnership net income limited to the lesser
of $300,000 or the amount of annual interest expense due on certain debt
owed by YHPI. After reaching the maximum priority distribution to YHPI,
then UPC receives distributions up to an amount representing an equality
of the ownership percentages. Then, additional distributions would be made
to YHPI and UPC in proportion to each partners' respective ownership
interest. All distributions, including the priority distributions, are
subject to the availability of Partnership cash. No distributions were
made by the Partnership during 1995.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Operational Management
The operations of the Partnership are managed by UPC for a maximum
management fee of 4% of net revenues. YHPI and UPC also provide certain
billing services to the Partnership for which they receive 7.5% of amounts
billed.
Revenues
Health care revenues represent revenues generated from the sale of
institutional pharmacy services, infusion therapy, urological, enteral and
general medical supplies to licensed nursing facilities, hospitals,
correction facilities and retirement facilities throughout the State of
Florida. The Partnership receives payment for the sale of certain supplies
to patients covered by Medicare and the Florida Medicaid programs.
Revenues generated from patients covered by Medicare and the Florida
Medicaid programs are based on reasonable charge reimbursement principles
and are not subject to "cost" limitations. In the opinion of management,
adequate provision has been made for any adjustments that may result from
reviews by the Medicare and Medicaid programs.
Approximately 29% and 23% of 1995 revenues were to patients in nursing
facilities owned by SIP and UHI, respectively.
Inventory
All inventories as of December 31, 1995 were priced at the lower of cost
(on a first-in, first-out basis) or market.
Property and Equipment
The Partnership's furniture and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives range from 3 to 10 years.
Construction in progress relates to the purchase and improvement of a
building that will house the operations of the Partnership.
<PAGE>
Concentration of Credit Risks
The Partnership's credit risks primarily relate to cash and cash
equivalents and receivables. Cash and cash equivalents are primarily held
in bank accounts. Receivables consist primarily of amounts due from
patients in the state of Florida and from the Medicare and Florida
Medicaid programs. The Company maintains allowances for uncollectible
accounts on these receivables.
Cash Equivalents
Cash equivalents include highly liquid investments with an original
maturity of less than three months.
Federal Income Taxes
The Partnership is a general partnership for purposes of federal and state
income taxation. As such, income or losses of the Partnership are
attributed to the partners and are reflected on the partners' income tax
returns. Accordingly, no income tax provision or benefits are recorded in
the financial statements.
2. RELATED PARTIES
Net amounts due to related parties as of December 31, 1995 consist of the
following:
December 31,
1995
Working capital note payable - YHPI $ 80,000
Working capital note payable - UPC 120,000
--------------
$ 200,000
==============
Due to related parties - current:
YHPI $ 25,468
UPC 40,431
--------------
$ 65,899
==============
Promissory note payable to UHI $ 374,879
Less current portion (14,625)
--------------
$ 360,254
==============
<PAGE>
Pursuant to the terms of the Partnership agreement, YHPI and UPC will
provide working capital funding to the Partnership, as required, in
proportion to their respective ownership interests. During 1995, YHPI and
UPC loaned net amounts of $80,000 and $120,000, respectively, to the
Partnership for working capital purposes. In the event that one of the
partners is unable to provide working capital funding in proportion to its
ownership interest, the other partner shall have the right to provide the
additional working capital and receive interest at the prime rate plus 4%.
In the event that both partners are able to provide working capital
funding in proportion to their respective ownership interests, the working
capital notes shall not bear interest. The working capital notes have no
stated maturity date and have been classified as current as of December
31, 1995. The working capital notes are secured by the Partnership's
receivables.
Amounts due to YHPI and UPC as of December 31, 1995 are primarily the
result of billing and managerial services provided by YHPI and UPC to the
Partnership (see Note 1).
During 1995, the Partnership entered into a promissory note payable with
UHI to finance the purchase and improvement of a building in Brooksville,
Florida. The promissory note payable bears interest at the prime rate plus
.5%. Equal monthly payments of interest and principal are required based
on a 15 year amortization with the remaining principal and accrued and
unpaid interest due on August 1, 2000. The maximum principal outstanding
under the promissory note is limited to $400,000. The promissory note
payable is secured by the related building and improvements. The
promissory note payable is guaranteed by SIP and by the personal
guarantees of the stockholders of SIP.
A schedule of the principal maturity of amounts owed to related parties
for the five years subsequent to December 31, 1995 is as follows:
1996 $ 214,625
1997 15,580
1998 17,000
1999 18,550
2000 309,034
3. COMMITMENTS AND CONTINGENCIES
Health insurance and worker's compensation insurance for the Partnership
is maintained by UPC in accordance with UPC's management of the
Partnership. In management's opinion, there are no outstanding claims that
would result in losses that would be material to the financial condition
or results of operations of the Partnership.
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
METROVISION OF NORTH AMERICA, INC.
and
YORK HANNOVER PHARMACEUTICALS, INC.
Dated as of May 10, 1996
<PAGE>
AGREEMENT
ARTICLE I
THE MERGER ................................................................. 2
SECTION 1.01. The Merger ................................................... 2
SECTION 1.02. Effective Time ............................................... 2
SECTION 1.03. Effect of the Merger ......................................... 2
SECTION 1.04. Certificate of Incorporation; By-Laws ........................ 3
SECTION 1.05. Directors and Officers ....................................... 3
SECTION 1.06. Effect on Capital Stock ...................................... 3
SECTION 1.07. Tax and Accounting Consequences .............................. 3
SECTION 1.08. Taking of Necessary Action: Further Action .................. 4
SECTION 1.09. Material Adverse Effect ...................................... 4
SECTION 1.10. Merger Consideration ......................................... 4
ARTICLE II
YORK HANNOVER REPRESENTATIONS AND WARRANTIES ............................... 4
SECTION 2.01. Organization ................................................. 5
SECTION 2.02. Capital Stock of York Hannover ............................... 5
SECTION 2.03. Articles of Incorporation and By-Laws; Subsidiaries of York
Hannover ..................................................... 6
SECTION 2.04. Validity and Conflicts; Required Filings and Consents ........ 6
<PAGE>
SECTION 2.05. Authority .................................................... 7
SECTION 2.06. SEC Documents ................................................ 7
SECTION 2.07. (a) York Hannover Company Financials ........................ 7
SECTION 2.08. Absence of Adverse Change .................................... 9
SECTION 2.09. Licenses ..................................................... 9
SECTION 2.10. Compliance with Law .......................................... 9
SECTION 2.11. Title by York Hannover ....................................... 10
SECTION 2.12. (a) Taxes and Tax Returns by York Hannover ................... 11
SECTION 2.13. Material Contracts ........................................... 12
SECTION 2.14. Insurance .................................................... 12
SECTION 2.15. Litigation ................................................... 13
SECTION 2.16. Employee Plans and Contacts .................................. 13
SECTION 2.17. Trade Names .................................................. 13
SECTION 2.18. Disclosure ................................................... 14
SECTION 2.19. Registration Statement/Proxy ................................. 14
SECTION 2.20. No Undisclosed Liability ..................................... 14
SECTION 2.21. Necessary Action ............................................. 14
SECTION 2.22. Restrictions on Business Activities .......................... 14
SECTION 2.23. Investment Company Act ....................................... 15
<PAGE>
ARTICLE III
METROVISION REPRESENTATIONS AND WARRANTIES ................................ 15
SECTION 3.01. Organization of MetroVision ................................. 15
SECTION 3.02. Capital Stock of MetroVision ................................ 15
SECTION 3.03. Articles of Incorporation and By-Laws; Subsidiaries
of MetroVision ............................................. 16
SECTION 3.04. Validity and Conflicts; Required Filings and Consents ....... 16
SECTION 3.05. Authority ................................................... 17
SECTION 3.06. SEC Documents ............................................... 17
SECTION 3.07. The MetroVision Financials .................................. 18
SECTION 3.08. Absence of Adverse Change ................................... 18
SECTION 3.09. Licenses .................................................... 18
SECTION 3.10. Compliance with Law ......................................... 19
SECTION 3.11. Title ....................................................... 19
SECTION 3.12. Taxes and Tax Returns ....................................... 19
SECTION 3.13. Material Contracts .......................................... 20
SECTION 3.14. Insurance ................................................... 20
SECTION 3.15. Litigation .................................................. 21
SECTION 3.16. Employee Plans and Contacts ................................. 21
SECTION 3.17. Trade Names ................................................. 21
SECTION 3.18. Disclosure .................................................. 21
<PAGE>
SECTION 3.19. Registration Statement/Proxy ................................ 22
SECTION 3.20. No Undisclosed Liability .................................... 22
SECTION 3.21. Necessary Action ............................................ 22
SECTION 3.22. Restrictions on Business Activities ......................... 22
SECTION 3.23. Investment Company Act ...................................... 22
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER .................................... 23
SECTION 4.01. Conduct of Business by York Hannover Pending the Merger ..... 23
SECTION 4.02. Conduct of Business by MetroVision Pending the Merger ....... 26
SECTION 4.03. No Solicitation by MetroVision .............................. 29
SECTION 4.04. No Solicitation by York Hannover ............................ 30
ARTICLE V
ADDITIONAL AGREEMENTS ..................................................... 31
SECTION 5.01. Preparation of S-4 and the Proxy Statement .................. 31
SECTION 5.02. Stockholders' Meeting ....................................... 31
SECTION 5.03. Access to Information: Confidentiality ...................... 32
SECTION 5.04. Consents: Approval .......................................... 32
SECTION 5.05. Agreement of Affiliates ..................................... 33
SECTION 5.06. Indemnification and Insurance ............................... 33
<PAGE>
SECTION 5.07. Notification of Certain Matters ............................. 34
SECTION 5.08. Further Action/Tax Treatment ................................ 34
SECTION 5.09. Public Announcements ........................................ 35
SECTION 5.10. Listing of Surviving Corporation Common Shares .............. 35
SECTION 5.11. Conveyance Taxes ............................................ 35
ARTICLE VI
CONDITIONS TO THE MERGER .................................................. 35
SECTION 6.01. Conditions to Obligation of Each Party to
Effect the Merger ......................................... 35
SECTION 6.02. Additional Conditions to Obligations of York Hannover ....... 36
SECTION 6.03. Additional Conditions to Obligation of MetroVision .......... 38
ARTICLE VII
TERMINATION ............................................................... 39
SECTION 7.01. Termination ................................................. 39
SECTION 7.02. Effect of Termination ....................................... 40
SECTION 7.03. Fees and Expenses ........................................... 40
ARTICLE VIII
GENERAL PROVISIONS ........................................................ 42
SECTION 8.01. Effectiveness of Representations, Warranties and
Agreements ................................................ 42
SECTION 8.02. Notices ..................................................... 42
SECTION 8.03. Certain Definitions ......................................... 44
<PAGE>
SECTION 8.04. Amendment ................................................... 45
SECTION 8.05. Waiver ...................................................... 45
SECTION 8.06. Headings .................................................... 45
SECTION 8.07. Severability ................................................ 45
SECTION 8.08. Entire Agreement ............................................ 45
SECTION 8.09. Assignment .................................................. 46
SECTION 8.10. Parties in Interest ......................................... 46
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative ....... 46
SECTION 8.12. Governing Law ............................................... 46
SECTION 8.13. Counterparts ................................................ 46
SECTION 8.14. Waiver of Jury Trial ........................................ 52
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 10, 1996 (the "Agreement"),
between York Hannover Pharmaceuticals, Inc., a Florida corporation ("York
Hannover") and MetroVision of North America, Inc., a New York corporation
("MetroVision");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of MetroVision and York Hannover have each
determined that it is advisable and in the best interests of their respective
stockholders for MetroVision to enter into a business combination with York
Hannover upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such combination, the Boards of Directors of
MetroVision and York Hannover have each approved the merger (the "Merger") of
York Hannover with and into the MetroVision in accordance with the applicable
provisions of the New York Business Corporation Law ("New York Law") and the
Florida Business Corporations Act ("Florida Law"), and upon the terms and
subject to the conditions set forth herein;
WHEREAS, pursuant to the Merger, all shares of York Hannover's 12%
Preferred Stock (the "York Hannover 12% Preferred Stock") which shall be issued
prior to the Merger having a redemption value of $1,950,000 plus accrued
dividends will be exchanged for like preferred stock of MetroVision and York
Hannover's Common Shares shall be exchanged for the Merger consideration as
defined in Section 1.10, upon the terms and subject to the conditions set forth
herein; and
WHEREAS, MetroVision and York Hannover intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder; and
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated hereby shall be accounted for as a purchase under United States
generally accepted accounting principles ("GAAP");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
MetroVision and York Hannover hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 1.02
hereof), and subject to and upon the terms and conditions of this Agreement,
Florida Law and New York Law, York Hannover shall be merged with and into
MetroVision, the separate corporate existence of York Hannover shall cease, and
MetroVision shall continue as the Surviving Corporation. MetroVision as the
Surviving Corporation after the Merger is herein sometimes referred to as the
"Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI, at the offices of Shereff,
Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New York 10022,
unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
Merger as contemplated by Section 607.1106 of Florida Law and Section 904 of New
York Law (the "Certificate of Merger") together with any required related
certificates with the Department of State of the State of New York and the
Secretary of State of the State of Florida in such form as required by, and
executed in accordance with the related provisions of, New York Law and Florida
Law, respectively (the time of such filing being the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of New York Law and Florida Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
assets of York Hannover including all rights and interest related to York
Hannover's 40% ownership interest in the York Hannover Partnership (the "York
Hannover Partnership") shall vest in MetroVision, and all debts, liabilities and
duties of York Hannover shall become the debts, liabilities and duties of
MetroVision.
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SECTION 1.04. Certificate of Incorporation; By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined by
MetroVision prior to the Effective Time, at the Effective Time the Certificate
of Incorporation of MetroVision, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
subject to the modifications contemplated by this Agreement until thereafter
amended as provided by New York Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is York Hannover Health Care, Inc.".
(b) By-Laws. The By-Laws of MetroVision, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by New York Law, the Certificate of Incorporation
of the Surviving Corporation and such By-Laws; provided, however, that the
By-laws shall be amended to provide that there shall be no more than five (5)
directors and each director's term shall be for three years, with the terms of
initial directors being staggered as set forth in Section 1.05.
SECTION 1.05. Directors and Officers. MetroVision shall obtain the
Resignation of Joseph A. Calabrese, Don Stephan Aron, and William H. Hessick,
III as Directors of MetroVision and Robert F. Hussey as President and David M.
Fancher as Chief Financial Officer of MetroVision as of the Effective Time.
Effective as of the Effective Time, directors of the Surviving Corporation shall
be Robert F. Hussey (1 year term), Lawrence B. Cummings (3 year term), Thomas M.
Clarke (1 year term), Peter W. Doelger (3 year term) and Courtlandt G. Miller (2
year term); each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Surviving Corporation shall be Robert F. Hussey, Chairman of the Board, Lawrence
B. Cummings, Chief Executive Officer and Thomas M. Clarke, President, in each
case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.06. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of MetroVision or York Hannover,
each share of York Hannover Common Stock held in the treasury of York Hannover
and each MetroVision Common Share held in the treasury or owned by MetroVision
or any direct or indirect wholly owned subsidiary of MetroVision immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
SECTION 1.07. Tax and Accounting Consequences. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization of the type
defined in Section 368(a)(1)(A) of the Code and (ii) qualify for accounting
treatment as a purchase under GAAP. The parties hereto
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hereby adopt this Agreement as a "plan of reorganization" within the meaning of
Section 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
SECTION 1.08. Taking of Necessary Action: Further Action. MetroVision and
York Hannover will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of York Hannover and MetroVision, the officers and directors of
York Hannover and MetroVision are fully authorized in the name of their
respective corporation or otherwise to take, and will take, all such lawful and
necessary action.
SECTION 1.09. Material Adverse Effect. When used in connection with York
Hannover or any of its respective subsidiaries, or MetroVision or any of its
respective subsidiaries, as the case may be, the term "Material Adverse Effect"
means any change or effect that, individually or when taken together with all
other such changes or effects that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial conditions or results of operations of York
Hannover and its respective subsidiaries or MetroVision and its respective
subsidiaries, as the case may be, in each case taken as a whole.
SECTION 1.10. Merger Consideration. In consideration of the Merger,
Stockbridge Investment Partners, Inc. ("Stockbridge"), the sole shareholder of
York Hannover, shall receive, at Closing, 4,000,000 MetroVision Common Shares
(as defined below). As used herein, MetroVision Common Shares shall mean validly
issued, and fully paid and nonassessable, par value $0.001 per share, registered
shares of the Surviving Corporation (after giving effect to the 4.6 for 1
reverse stock split of MetroVision Common Shares as required by Section 6.01 (b)
and (f)).
ARTICLE II
YORK HANNOVER REPRESENTATIONS AND WARRANTIES
York Hannover on behalf of itself and as a general partner of the York
Hannover Partnership (as defined below) hereby warrants and represents to
MetroVision that, except as otherwise specifically set forth in the York
Hannover Disclosure Schedule attached hereto as Exhibit A (the "York Hannover
Disclosure Schedule"); provided that, no warranty or representation by York
Hannover as a general partner of the York Hannover Partnership regarding York
Hannover shall be deemed to be a warranty or representation of the York Hannover
Partnership:
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SECTION 2.01. Organization.
(a) York Hannover. York Hannover is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has the
requisite corporate power and authority and is in possession of all approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and approval would not have a Material Adverse Effect. York
Hannover is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not have a Material
Adverse Effect.
(b) York Hannover Partnership. The York Hannover Partnership is a general
partnership formed under the laws of Wisconsin, the general partners of which
are York Hannover (40% interest) and United Professional Companies, Inc., a
Delaware corporation (60% interest). York Hannover Partnership is a Partnership
duly organized, validly existing and in good standing under the laws of the
State of Wisconsin and has the requisite power and authority and is in
possession of all approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and approval would not have a
Material Adverse Effect. York Hannover Partnership is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
have a Material Adverse Effect.
SECTION 2.02. Capital Stock of York Hannover. Section 2.02 of the York
Hannover Disclosure Schedule sets forth, by class, the entire authorized amount
of capital stock and other securities of York Hannover, along with the amount of
securities of each such class which is issued and outstanding. All such issued
and outstanding shares are duly authorized, validly issued, fully paid and
nonassessable. Except as otherwise disclosed in Section 2.02 of the York
Hannover Disclosure Schedule, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that require York Hannover to issue,
sell or otherwise cause to become outstanding any of its capital stock or other
securities. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to York Hannover.
Except as otherwise specifically set forth in Section 2.02 of the York Hannover
Disclosure Schedule, there are no stockholders' agreements, voting trusts,
proxies or other agreements or understandings with respect to the voting of the
capital stock of York Hannover.
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SECTION 2.03. Articles of Incorporation and By-Laws; Subsidiaries of York
Hannover.
(a) Section 2.03 of York Hannover Disclosure Schedule sets forth a complete
and correct copy of its Articles of Incorporation and the By-Laws, as amended to
date. Such Articles of Incorporation and By-Laws are in full force and effect.
York Hannover is not in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
(b) Section 2.03 of the York Hannover Disclosure Schedule sets forth the
Partnership Agreement between York Hannover and United Professional Companies,
Inc. forming the York Hannover Partnership which partnership agreement is in
full force and effect. York Hannover does not control directly or indirectly or
have any direct or indirect equity participation in any corporation,
partnership, joint venture, trust or other business association other than the
York Hannover Partnership.
SECTION 2.04. Validity and Conflicts; Required Filings and Consents.
(a) This Agreement is valid, binding and enforceable against York Hannover
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to the enforcement of creditors' rights generally and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Except as set forth in Section 2.04(b) of the York Hannover Disclosure
Schedule, the execution and delivery of this Agreement by York Hannover do not,
and the performance of this Agreement by York Hannover shall not, (i) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to York Hannover or any of it subsidiaries or the York Hannover Partnership or
by which its or their respective properties are bound or affected, or
(ii) conflict with or violate the Partnership Agreement (iii) conflict with or
violate the Articles of Incorporation or ByLaws of York Hannover, (iv) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or impair York Hannover's rights or
alter the rights or obligations of any party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, any material
contract or result in the creation of a lien or encumbrance on any of the
properties or assets of York Hannover or any of its subsidiaries or the York
Hannover Partnership pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which York Hannover or any of its subsidiaries or the York
Hannover Partnership is a party or by which York Hannover or the York Hannover
Partnership or any of its subsidiaries or its or any of their respective
properties are bound or affected, except in any such case for any such breaches,
defaults or other occurrences that would not have a Material Adverse Effect.
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(c) The execution and delivery of this Agreement by York Hannover will not
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act of 1933 as
amended (the "Securities Act"), the Exchange Act and the blue sky laws, and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filing or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent York Hannover from performing
their respective obligations under this Agreement, and would not have a Material
Adverse Effect.
SECTION 2.05. Authority. Obtaining the approval of its shareholders, as
described more fully in Section 6.01(a), York Hannover has full corporate power
and authority to execute and to deliver this Agreement and all related
documents, and to carry out the transactions contemplated herein and therein.
York Hannover has full corporate power and authority to conduct its business as
the same is now being conducted.
SECTION 2.06. SEC Documents. York Hannover is not a reporting company as
such term is defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
SECTION 2.07. (a) York Hannover Company Financials. True and correct copies
are set forth as Section 2.07(a) of the York Hannover Disclosure Schedule of
(i) the audited consolidated balance sheet of York Hannover for the fiscal years
ended as of December 31, 1995 (the "1995 Company Balance Sheet"), and December
31, 1994, and the related unaudited consolidated statements of income, retained
earnings, stockholders' equity and cash flows of York Hannover, together with
all related notes and schedules thereto, and York Hannover shall, on or before
May 27, 1996, deliver the audited consolidated balance sheet of York Hannover
for the fiscal years ended as of December 31, 1995 and December 31,1994 and the
related audited consolidated statements of income, retained earnings,
stockholders' equity and cash flows of York Hannover together with all related
notes and schedules thereto, (which together with the unaudited financial
statements are collectively referred to herein as the "York Hannover Company
have been delivered by York Hannover Interim Financials") and (ii) the
unaudited consolidated balance sheet of York Hannover as of March 31, 1996, and
the related consolidated statements of income, retained earnings, stockholders'
equity and cash flows of York Hannover, together with all related notes and
schedules thereto (collectively referred to herein as the "York Hannover Company
Interim Financials"). The York Hannover Company Financials and the York Hannover
Company Interim Financials (i) were prepared in accordance with the books of
account and other financial records of York Hannover, (ii) present fairly the
consolidated financial condition and results of operations of York Hannover and
its subsidiaries as of the dates thereof or for the periods covered thereby,
(iii) have been prepared in accordance with GAAP applied on a basis consistent
with the past practices of York Hannover and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of York Hannover and its
subsidiaries and the
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results of the operations of York Hannover and its subsidiaries as of the dates
thereof or for the periods covered thereby, except that the unaudited interim
Financial Statement was and is subject to normal and recurring year-end
adjustments which were or are not expected to be of a material amount. Any
financial statements prepared by York Hannover subsequent to the date hereof,
(but only to the extent the same are required to be prepared prior to the
Effective Time) (the "Subsequent York Hannover Company Financials") will be
prepared in the same manner as the Financial Statement and the Interim Financial
Statement will fairly represent the financial condition, and will accurately set
forth in all material respects the results of the operations of York Hannover
for the periods covered thereby.
(b) The York Hannover Partnership Financials. True and correct copies are
set forth as Section 2.07(b) of the York Hannover Disclosure Schedule of (i) the
unaudited balance sheet of the York Hannover Partnership for the fiscal year
ended as of December 31, 1995 (the "1995 Partnership Balance Sheet"), and the
related unaudited statements of income, retained earnings, stockholders' equity
and cash flows of York Hannover Partnership, together with all related notes and
schedules thereto, (collectively referred to herein as the "York Hannover
Partnership Financials" and (ii) the unaudited balance sheet of York Hannover
Partnership as of March 31, 1996, and the related statements of income, retained
earnings, stockholders' equity and cash flows of York Hannover Partnership,
together with all related notes and schedules thereto (collectively referred to
herein as the "York Hannover Partnership Interim Financials") The York Hannover
Partnership Financials and the York Hannover Partnership Interim Financials (i)
were prepared in accordance with the books of account and other financial
records of York Hannover Partnership, (ii) present fairly the financial
condition and results of operations of York Hannover Partnership as of the dates
thereof or for the periods covered thereby, (iii) have been prepared in
accordance with GAAP applied on a basis consistent with the past practices of
York Hannover Partnership and (iv) include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the
financial condition of York Hannover Partnership and the results of the
operations of York Hannover Partnership as of the dates thereof or for the
periods covered thereby, except that the unaudited interim Financial Statement
was and is subject to normal and recurring year-end adjustments which were or
are not expected to be of a material amount. Any financial statements prepared
by York Hannover Partnership subsequent to the date hereof, (but only to the
extent the same are required to be prepared prior to the Effective Time) (the
"Subsequent York Hannover Partnership Financials") will be prepared in the same
manner as the Financial Statement and the Interim Financial Statement will
fairly represent the financial condition, and will accurately set forth in all
material respects the results of the operations of York Hannover Partnership for
the periods covered thereby.
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(c) York Hannover Financials. As used herein, York Hannover Financials
shall mean both the York Hannover Company Financials and the York Hannover
Partnership Financials; York Hannover Interim Financials shall mean both York
Hannover Company Interim Financials and York Hannover Partnership Interim
Financials; and Subsequent York Hannover Financials shall mean both Subsequent
York Hannover Company Financials and Subsequent York Hannover Partnership
Financials.
SECTION 2.08. Absence of Adverse Change. Except as set forth on
Section 2.08 of York Hannover Disclosure Schedule, since December 31, 1995, York
Hannover and the York Hannover Partnership have conducted their business in the
ordinary course and there has not occurred: (i) any Material Adverse Effect;
(ii) any amendments or changes in the Articles of Incorporation or By-Laws of
York Hannover or the York Hannover Partnership Agreement; (iii) any damage to,
destruction or loss of any assets of York Hannover or the York Hannover
Partnership, (whether or not covered by insurance) that could have a Material
Adverse Effect; (iv) any change in its accounting methods, principles or
practices; (v) any revaluation by York Hannover or the York Hannover Partnership
of any of their assets, including without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts receivable
other than in the ordinary course of business; (vi) except as disclosed in York
Hannover Disclosure Schedule, any other action or event that would have required
the consent of MetroVision pursuant to Section 4.02 had such action or event
occurred after the date of this Agreement, or (vii) any sale of a material
amount of assets of York Hannover or the York Hannover Partnership, except in
the ordinary course of business.
SECTION 2.09. Licenses. York Hannover and the York Hannover Partnership
have all material licenses, permits and authorizations necessary for the
operation of their businesses (collectively, the "York Hannover Licenses").
Section 2.09 of the York Hannover Disclosure Schedule sets forth the York
Hannover Licenses, true and correct copies of which have been provided to
MetroVision prior to the date hereof. There is no action pending, or to the best
knowledge of York Hannover, threatened by the appropriate state or federal
agency having jurisdiction thereof, to either revoke, withdraw or suspend any of
the York Hannover Licenses or any decision not to renew any of the York Hannover
Licenses.
SECTION 2.10. Compliance with Law. York Hannover and the York Hannover
Partnership are in compliance with all applicable municipal, county, state and
federal laws and regulations applicable to their business except where the
failure to so comply therewith would not have a Material Adverse Effect.
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SECTION 2.11. Title by York Hannover.
(a) York Hannover has fee, leasehold or other title to all of its assets
(the "York Hannover Assets"), including, but not limited to, the furniture,
fixtures, equipment and other tangible and intangible personal property owned or
leased by York Hannover and used in connection with the operation of the
business of York Hannover (collectively, the "York Hannover Personal Property"),
and there are no liens, claims, charges or encumbrances on such assets other
than the York Hannover Permitted Liens (as defined herein). For purposes hereof,
the term York Hannover Permitted Liens shall mean: (i) mortgages, deeds of
trust, liens or security interests securing indebtedness or lease obligations
incurred by York Hannover and reflected on the York Hannover Financials or the
York Hannover Interim Financials, (ii) mortgages, deeds of trust, liens or
security interest securing York Hannover's obligations in connection with the
York Hannover 12% Preferred Stock, provided, however, such mortgages, deeds of
trust, liens and security interests shall allow the York Hannover 12% Preferred
Stock to be classified as equity by GAAP, the Exchange Act and the Securities
and Exchange Commission, (iii) liens for taxes, assessments or governmental
charges not yet delinquent, (iv) such easements, rights of way, exceptions,
reservations, restrictions, conditions, limitations, covenants, adverse rights
or interests, mechanics' or materialmen' liens and any other defects,
imperfections in title, if any, as do not in the aggregate materially interfere
with the present use thereof or otherwise materially impair the business
operations of York Hannover and (v) purchase money security interest arising
from the financing of the acquisition of certain of the York Hannover Assets.
(b) Title by the York Hannover Partnership. York Hannover Partnership has
fee, leasehold or other title to all of its assets (the "York Hannover
Partnership Assets"), including, but not limited to, the furniture, fixtures,
equipment and other tangible and intangible personal property owned or leased by
the York Hannover Partnership and used in connection with the operation of the
business of the York Hannover Partnership (collectively, the "York Hannover
Partnership Personal Property"), and there are no liens, claims, charges or
encumbrances on such assets other than the York Hannover Partnership Permitted
Liens (as defined herein). For purposes hereof, the term York Hannover
Partnership Permitted Liens shall mean: (i) mortgages, deeds of trust, liens or
security interests securing indebtedness or lease obligations incurred by York
Hannover Partnership and reflected on the York Hannover Partnership Financials
or York Hannover Partnership Interim Financials, (ii) liens for taxes,
assessments or governmental charges not yet delinquent, (iii) such easements,
rights of way, exceptions, reservations, restrictions, conditions, limitations,
covenants, adverse rights or interests, mechanics' or materialmen's liens and
any other defects, imperfections in title, if any, as do not in the aggregate
materially interfere with the present use thereof or otherwise materially impair
the business operations of the York Hannover Partnership and (iv) purchase money
security interest arising from the financing of the acquisition of certain of
the York Hannover Partnership Assets.
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SECTION 2.12. (a) Taxes and Tax Returns by York Hannover. All tax and other
returns, reports and filings of any kind or nature required to be filed by York
Hannover prior to date of execution of this Agreement have been and, all tax and
other returns, reports and filings of any kind or nature required to be filed
prior to the consummation of the Merger will be, properly completed and timely
filed, or extensions for the filing thereof have been (or will be) timely
secured, and all such filings are (or will be) in material compliance with all
applicable requirements and all taxes due with respect to York Hannover have
been (or will be) timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on the York Hannover Financials or will be reflected in
the Subsequent York Hannover Financials in accordance with the representations
and warranties contained in the Agreement. Copies of the December 31, 1994
federal and state tax returns filed by York Hannover have been provided to
MetroVision. The accruals for taxes reflected in the York Hannover Financials
are or, in the case of the Subsequent York Hannover Financials, will in the
aggregate be adequate to cover any and all federal, state or local tax
liabilities (whether or not in dispute) of York Hannover or any other entity
required to be consolidated with York Hannover under GAAP for the period ended
on the date thereof and all prior periods. With respect to the tax liabilities
of York Hannover, (i) there are no disputes pending with any taxing authority
with respect to taxes of any nature which are or may be owing by York Hannover
which are not reflected in the York Hannover Financials, (ii) no tax deficiency
has been proposed in writing or, to the best knowledge of York Hannover,
threatened against York Hannover and no action, proceeding or audit of any tax
returns or reports filed by York Hannover is pending or, to the best knowledge
of York Hannover, threatened by any governmental authority, (iii) York Hannover
has not executed any waiver to extend, or otherwise taken or failed to take any
action that would have the effect of extending, the applicable statute of
limitations with respect to its tax liabilities, (iv) York Hannover is not a
"consenting corporation" within the meaning of Section 341(f) of the Code,
(v) York Hannover has at all times been taxable as a Subchapter C corporation
under the Code and has filed all tax returns consistent with this
characterization, (vi) other than as a part of a consolidated group with
Stockbridge Investment Partners, Inc. York Hannover has not been a member of any
consolidated, combined or unitary group for federal, state or local taxes
purposes, and (vii) York Hannover has, or will have, all records and information
necessary for the timely and accurate filing of any tax returns due after the
date hereof, including any returns due after the Effective Date which relate to
the period prior to the Effective Date. Stockbridge, the sole stockholder of
York Hannover, is a domestic corporation within the meaning of Code Section 7701
(a)(30).
(b) Taxes and Tax Returns by York Hannover Partnership. All tax and other
returns, reports and filings of any kind or nature required to be filed by York
Hannover Partnership prior to the date of execution of this Agreement have been
and, all tax and other returns, reports and filings of any kind or nature
required to be filed prior to the consummation of the Merger will be, properly
completed and timely filed, or extensions for the filing thereof have been (or
will be) timely secured, and all such filings are (or will be) in material
compliance with all applicable requirements and all
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taxes due with respect to York Hannover Partnership have been (or will be)
timely paid, except to the extent that the same are being duly contested in good
faith in accordance with applicable law and adequate reserves therefor are
reflected on the York Hannover Partnership Financials or will be reflected in
the Subsequent York Hannover Partnership Financials in accordance with the
representations and warranties contained in this Agreement. York Hannover
Partnership has at all times been taxable as a Partnership under the Code and
has filed all tax returns consistent with this characterization, York Hannover
Partnership has not been a member of any consolidated combined or voluntary
group for federal, state or local tax purposes and York Hannover Partnership
has, or will have, all records and information necessary for the timely and
accurate filing of any tax returns due after the date hereof, including any
returns due after the Effective Date which relate to the period prior to the
Effective Date.
SECTION 2.13. Material Contracts. Set forth on Section 2.13 of the York
Hannover Disclosure Schedule is a true and complete list of all contracts,
agreements, plans, leases, policies and licenses of York Hannover and the York
Hannover Partnership of the type that would be required to be filed as exhibits
by York Hannover under item 601 of Regulation S-K of the Securities Act (the
"York Hannover Material Contracts"), true and correct copies of which have been
provided to MetroVision prior to the date hereof. A list of all employment
contracts, severance agreements, partnership and joint venture agreements,
contractual indemnity obligations and any other agreement which imposes a
present or future restriction of York Hannover or the York Hannover
Partnership's right to do business and all York Hannover Material Contracts
which York Hannover or the York Hannover Partnership will be required to file as
exhibits to any York Hannover SEC Documents filed in connection with the Merger
is included in Section 2.13 of the York Hannover Disclosure Schedule, true and
correct copies of which have been provided to MetroVision prior to the date
hereof. To the extent the same have continuing effect as of the date hereof,
neither York Hannover nor the York Hannover Partnership have breached any
material provision of, nor is York Hannover or the York Hannover Partnership
delinquent in any payment required under, or in default in any material respect
under the terms thereof, nor has any condition or event occurred which, with the
giving of notice or the passage of time or both, would constitute an event of
default or a breach thereunder, except to the extent the same has been waived in
writing.
SECTION 2.14. Insurance. The properties and employees of York Hannover and
the York Hannover Partnership are insured by the insurers or through the funds
and with the types and amounts of insurance (including, but not limited to,
property, professional liability, automobile, workers compensation, business
interruption and excess indemnity insurance) set forth in Section 2.14 of the
York Hannover Disclosure Schedule (the "York Hannover Insurance Coverage"). York
Hannover and the York Hannover Partnership are not delinquent with respect to
the payment of any premiums due with respect to the York Hannover Insurance
Coverage, and has never been denied coverage which may be required by the laws
of the states in which York Hannover and the York Hannover Partnership conducts
business. The premiums due on the insurance which covers calender
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year 1995 have been paid in full and the premiums due for the period from the
date of execution of this Agreement to the Effective Date will be paid in full
as and when due.
SECTION 2.15. Litigation. There is not, nor has York Hannover received
written or verbal notice of any litigation, investigation or other proceeding
pending or, to the best of York Hannover's knowledge, threatened against or
relating to York Hannover, the York Hannover Partnership or their properties or
business where the amount claimed exceeds $25,000 in any single action or
$50,000 in the aggregate. There is no, nor has York Hannover or the York
Hannover Partnership received written or verbal notice of any litigation,
investigation or other proceeding pending, or to the best of York Hannover's
knowledge threatened by the Securities and Exchange Commission ("SEC"), NASD,
NASDAQ, the Food and Drug Administration or any other governmental agency
relating to York Hannover or the York Hannover Partnership. York Hannover and
the York Hannover Partnership are not a party to or bound by any orders,
judgments, injunctions, decrees or settlement agreements under which it or they
may have continuing obligations as of the date hereof or as of the Effective
Date and which may materially restrict or affect the present business operations
of York Hannover or the York Hannover Partnership. The right or ability of York
Hannover to consummate the transaction contemplated herein has not been
challenged by any governmental agency or any other person and York Hannover and
the York Hannover Partnership have no knowledge of the occurrence of any event
which would provide a reasonable basis for any such litigation, investigation or
other proceeding.
SECTION 2.16. Employee Plans and Contacts. Set forth on Schedule 2.16 of
the York Hannover Disclosure Schedule is a true and complete list of all bonus,
pension, stock option, stock purchase, benefit, welfare, profit sharing,
retirement, disability, vacation, severance, hospitalization, insurance,
incentive, deferred compensation and other similar fringe or employee benefit
plans, funds, programs or arrangements, and all employment contracts, contracts
for services with employees of York Hannover or the York Hannover Partnership
("York Hannover Employees") and executive compensation agreements, written or
oral, in each of the foregoing cases which cover, are maintained for the benefit
of, or relate to any or all York Hannover Employees or former York Hannover
Employees (the "York Hannover Employees Plans").
SECTION 2.17. Trade Names. Set forth in Section 2.17 of the York Hannover
Disclosure Schedule is a true and complete list of trade names under which York
Hannover and the York Hannover Partnership are doing, or within the last 12
months has done, business and a statement as to whether, when and where such
trade names have been registered or filed. York Hannover and York Hannover
Partnership have not received any notice from any person challenging or
questioning the right of York Hannover or the York Hannover Partnership to use
any such trade names.
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SECTION 2.18. Disclosure. No representation or warranty by or on behalf of
York Hannover or the York Hannover Partnership contained in this Agreement and
no statement contained in any certificate, list, exhibit, or other instrument
furnished or to be furnished to MetroVision pursuant hereto contains or will
contain any untrue statement of material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
SECTION 2.19. Registration Statement/Proxy. The Registration Statement on
Form S-4 at the time it is declared effective, the Proxy Statement/Prospectus at
the time of its mailing to the MetroVision shareholders and at the time of the
meeting of the shareholders of MetroVision will not contain any untrue statement
of a material fact or omit to state a material fact concerning York Hannover or
the York Hannover Partnership or omit to state a material fact required or
necessary to be stated therein in order to make the statements contained therein
concerning York Hannover or the York Hannover Partnership, in light of the
circumstances under which they are made, not misleading; except that, York
Hannover makes no representation or warranty with respect to any statement,
information or omission relating to MetroVision contained in the Registration
Statement, the Proxy Statement/Prospectus or in any other registration
statement.
SECTION 2.20. No Undisclosed Liability. York Hannover and the York Hannover
Partnership do not have any liabilities or obligations except (i) those
liabilities which are set forth in the York Hannover Financials and (ii) those
liabilities which are set forth in Section 2.20 of the York Hannover Disclosure
Schedule.
SECTION 2.21. Necessary Action. York Hannover has duly and properly taken
or obtained or caused to be taken or obtained, or prior to Closing will have
duly and properly taken or obtained or caused to be taken or obtained, all
action necessary for York Hannover (i) to enter into and to deliver this
Agreement and any and all documents and agreements executed by York Hannover in
connection herewith or in furtherance hereof and (ii) to carry out the terms
hereof and thereof and the transaction contemplated herein and therein. Except
as contemplated by Sections 5.01 and 5.05, no other action by or on behalf of
York Hannover is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by York
Hannover in connection herewith or the transaction contemplated herein. York
Hannover represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and shareholders
to the execution this Agreement and of any documents or agreements necessary to
carry out the terms hereof and for the consummation of the transaction
contemplated by this Agreement, including but limited to the Merger.
SECTION 2.22. Restrictions on Business Activities. Except for this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon York Hannover or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting
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or materially impairing any business practice of York Hannover or any of its
subsidiaries, any acquisition of property by York Hannover or any of its
subsidiaries or the conduct of business by York Hannover or any of its
subsidiaries as currently conducted or as proposed to be conducted by York
Hannover.
SECTION 2.23. Investment Company Act. Neither York Hannover or York
Hannover Partnership is an Investment Company within the meaning of the
Investment Company Act of 1940, as amended.
ARTICLE III
METROVISION REPRESENTATIONS AND WARRANTIES
MetroVision hereby warrants and represents to York Hannover that, except as
otherwise specifically set forth in the MetroVision Disclosure Schedule attached
hereto as Exhibit B (the "MetroVision Disclosure Schedule"):
SECTION 3.01. Organization of MetroVision.
(a) MetroVision is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has the requisite
corporate power and authority and is in possession of all approvals necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power,
authority and approval would not have a Material Adverse Effect. MetroVision is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a Material
Adverse Effect.
SECTION 3.02. Capital Stock of MetroVision. Section 3.02 of the MetroVision
Disclosure Schedule sets forth, by class, the entire authorized amount of
capital stock and other securities of MetroVision, along with the amount of
securities of each such class which is issued and outstanding. All such issued
and outstanding shares are duly authorized, validly issued, fully paid and
nonassessable. Except as otherwise disclosed in Section 3.02 of the MetroVision
Disclosure Schedule, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that require MetroVision to issue, sell or
otherwise cause to become outstanding any of its capital stock or other
securities.
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There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to MetroVision. Except as otherwise
specifically set forth in Section 3.02 of the MetroVision Disclosure Schedule,
there are no stockholders' agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of the capital stock of
MetroVision.
SECTION 3.03. Articles of Incorporation and By-Laws; Subsidiaries of
MetroVision.
(a) Section 3.03 of MetroVision Disclosure Schedule sets forth a complete
and correct copy of its Articles of Incorporation and the By-Laws, as amended to
date. Such Articles of Incorporation and By-Laws are in full force and effect.
MetroVision is not in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
(b) Section 3.03 of the MetroVision Disclosure Schedule sets forth
Touchtel, Inc. ("Touchtel"), the sole subsidiary of MetroVision, its
jurisdiction of incorporation, and the states in which it is qualified to do
business as a foreign corporation. All issued and outstanding shares of Touchtel
are duly authorized, validly issued, fully paid and nonassessable and
MetroVision is the sole owner of all such issued and outstanding shares. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that require Touchtel to issue, sell or otherwise cause to become
outstanding any of its capital stock or other securities. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Touchtel. There are no
stockholders' agreements, voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of Touchtel.
MetroVision does not control directly or indirectly or have any direct or
indirect equity participation in any corporation, partnership, joint venture,
trust or other business association other than Touchtel.
SECTION 3.04. Validity and Conflicts; Required Filings and Consents.
(a) This Agreement is valid, binding and enforceable against MetroVision in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Except as set forth in Section 3.04(b) of the MetroVision Disclosure
Schedule, the execution and delivery of this Agreement by MetroVision do not,
and the performance of this Agreement by MetroVision shall not, (i) conflict
with or violate the Articles of Incorporation or ByLaws of MetroVision or
Touchtel, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to MetroVision or any of it subsidiaries or by
which its or their
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respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair MetroVision's rights or alter the
rights or obligations of any party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material contract
or result in the creation of a lien or encumbrance on any of the properties or
assets of MetroVision or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which MetroVision or any of its
subsidiaries is a party or by which MetroVision or any of its subsidiaries or
its or any of their respective properties are bound or affected, except in any
such case for any such breaches, defaults or other occurrences that would not
have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by MetroVision will not
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act, the
Exchange Act and the blue sky laws, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filing or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent MetroVision from performing its obligations under this
Agreement, and would not have a Material Adverse Effect.
SECTION 3.05. Authority. Subject to obtaining the approval of its
shareholders, as described more fully in Section 6.01(b), MetroVision has full
corporate power and authority to execute and to deliver this Agreement and all
related documents, and to carry out the transactions contemplated herein and
therein. Each of MetroVision and Touchtel has full corporate power and authority
to conduct its business as the same is now being conducted.
SECTION 3.06. SEC Documents. MetroVision is a reporting company as such
term is defined in the Exchange Act and has delivered to York Hannover a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by it with Securities and Exchange Commission
(the "Commission") (and any such documents have since the time of their filing
been amended the "MetroVision SEC Documents") since January 1, 1993, which are
all the documents (other than preliminary material) that it was required to file
with the Commission since such date. As of their respective dates, the
MetroVision SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the Commission thereunder applicable to such
MetroVision SEC Documents, and none of the MetroVision SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
material agreements, contracts and other documents required to be filed as
exhibits to any of the MetroVision SEC Documents have been so filed.
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SECTION 3.07. The MetroVision Financials. True and correct copies of the
financial statements for three years ending December 31, 1995 relating to the
operations of MetroVision, including its filing with the Commission pursuant to
the Exchange Act, have been previously delivered to York Hannover. Except as
otherwise noted therein, all such financial statements included within the
MetroVision SEC Documents have been prepared in accordance with GAAP (in the
case of audited statements) and in accordance with applicable accounting
requirements of the Commission (in the case of unaudited statements),
consistently applied, fairly represent the financial condition, and accurately
set forth in all material respect the results of the combined operations, of
MetroVision and Touchtel for the periods covered thereby (the "MetroVision
Financials"). Any financial statements prepared by MetroVision subsequent to the
date hereof, (but only to the extent the same are required to be prepared prior
to the Effective Time) (the "Subsequent MetroVision Financials"); will be
prepared in accordance with GAAP (in the case of audited statements) and in
accordance with the applicable accounting requirements of the Commission (in the
case of unaudited statements), consistently applied, will fairly represent the
financial condition, and will accurately set forth in all material respects the
results of the combined operations, of MetroVision and Touchtel for the periods
covered thereby.
SECTION 3.08. Absence of Adverse Change. Except as set forth on Section
3.08 of MetroVision Disclosure Schedule, since December 31, 1995, MetroVision
and Touchtel have conducted their business in the ordinary course and there has
not occurred: (i) any Material Adverse Effect; (ii) any amendments or changes in
the Articles of Incorporation or By-Laws of MetroVision; (iii) any damage to,
destruction or loss of any assets of MetroVision, (whether or not covered by
insurance) that could have a Material Adverse Effect; (iv) any change in its
accounting methods, principles or practices; (v) any revaluation by MetroVision
or Touchtel of any of their assets, including without limitation, writing down
the value of capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) except as
disclosed in MetroVision Disclosure Schedule, any other action or event that
would have required the consent of York Hannover pursuant to Section 4.02 had
such action or event occurred after the date of this Agreement, or (vii) any
sale of a material amount of assets of MetroVision or Touchtel, except in the
ordinary course of business.
SECTION 3.09. Licenses. MetroVision and Touchtel have all material
licenses, permits and authorizations necessary for the operation of their
businesses (collectively, the "MetroVision Licenses"). Section 3.09 of the
MetroVision Disclosure Schedule sets forth the MetroVision Licenses, true and
correct copies of which have been provided to York Hannover prior to the date
hereof. There is no action pending, or to the best knowledge of MetroVision,
threatened by the appropriate state or federal agency having jurisdiction
thereof, to either revoke, withdraw or suspend any of the MetroVision Licenses
or any decision not to renew any of the MetroVision Licenses.
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SECTION 3.10. Compliance with Law. Except as set forth in Section 3.10 of
the MetroVision Disclosure Schedule, MetroVision is in compliance with all
applicable municipal, county, state and federal laws and regulations applicable
to its business except where the failure to so comply therewith would not have a
Material Adverse Effect.
SECTION 3.11. Title. MetroVision and Touchtel have fee, leasehold or other
title to all of their assets (the "MetroVision Assets"), including, but not
limited to, the furniture, fixtures, equipment and other tangible and intangible
personal property owned or leased by MetroVision and Touchtel and used in
connection with the operation of the business of MetroVision (collectively, the
"MetroVision Personal Property"), and there are no liens, claims, charges or
encumbrances on such assets other than the MetroVision Permitted Liens (as
defined herein). For purposes hereof, the term MetroVision Permitted Liens shall
mean: (i) mortgages, deeds of trust, liens or security interests securing
indebtedness or lease obligations incurred by MetroVision and reflected on the
MetroVision Financials or the MetroVision SEC Documents, (ii) liens for taxes,
assessments or governmental charges not yet delinquent, (iii) such easements,
rights of way, exceptions, reservations, restrictions, conditions, limitations,
covenants, adverse rights or interests, mechanics' or materialmens' liens and
any other defects, imperfections in title, if any, as do not in the aggregate
materially interfere with the present use thereof or otherwise materially impair
the business operations of MetroVision and (iv) purchase money security interest
arising from the financing of the acquisition of certain of the MetroVision
Assets.
SECTION 3.12. Taxes and Tax Returns. All tax and other returns, reports and
filings of any kind or nature required to be filed by MetroVision prior to the
date of execution of this Agreement have been and, all tax and other returns and
filings of any kind or nature required to be filed prior to the consummation of
the Merger, will be, properly completed and timely filed, or extensions for the
filing thereof have been (or will be) timely secured, and all such filings are
(or will be) in material compliance with all applicable requirements and all
taxes due with respect to MetroVision have been (or will be) timely paid, except
to the extent that the same are being duly contested in good faith in accordance
with applicable law and adequate reserves therefor are reflected on the
MetroVision Financials or will be reflected in the Subsequent MetroVision
Financials and the MetroVision Financials in accordance with the representations
and warranties contained in the Agreement. Copies of the December 31, 1994
federal and state tax returns filed by MetroVision or any of the MetroVision
Subsidiaries will be provided to York Hannover on request. The accruals for
taxes reflected in the MetroVision Financials are or, in the case of the
Subsequent MetroVision Financials, will , in the aggregate, be adequate to cover
any and all federal, state or local tax liabilities (whether or not in dispute)
of MetroVision or any other entity required to be consolidated with MetroVision
under GAAP for the period ended on the date thereof and all prior periods. With
respect to the tax liabilities of MetroVision, (i) there are no disputes pending
with any taxing authority with respect to taxes of any nature which are or may
be owing by MetroVision which are not reflected in the MetroVision Financials,
(ii) no tax deficiency has been proposed in writing or, to
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the best knowledge of MetroVision, threatened against MetroVision and no action,
proceeding or audit of any tax returns or reports filed by MetroVision is
pending or, to the best knowledge of MetroVision, threatened by any governmental
authority, (iii) MetroVision has not executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations with respect to its tax liabilities,
(iv) MetroVision is not a "consenting corporation" within the meaning of Section
341(f) of the Code, (v) MetroVision has at all times after December 17, 1991
been taxable as a Subchapter C corporation under the Code and has filed all tax
returns consistent with this characterization, (vi) MetroVision has not been a
member of any consolidated combined or unitary group (other than with Touchtel)
for federal, state, or local tax purposes and (vii) MetroVision has, or will
have, all records and information necessary for the timely and accurate filing
of any tax returns due after the date hereof, including any returns due after
the Effective Date which relate to the period prior to the Effective Date.
SECTION 3.13. Material Contracts. Set forth on Section 3.13 of the
MetroVision Disclosure Schedule is a true and complete list of all contracts,
agreements, plans, leases, policies and licenses of MetroVision of the type
required to be filed as exhibits by MetroVision under item 601 of Regulation S-K
of the Securities Act (the "MetroVision Material Contracts"), true and correct
copies of which have been provided to York Hannover prior to the date hereof. A
list of all employment contracts, severance agreements, partnership and joint
venture agreements, contractual indemnity obligations and any other agreement
which imposes a present or future restriction of MetroVision's right to do
business and all MetroVision Material Contracts which MetroVision will be
required to file as exhibits to any MetroVision SEC Documents filed after the
date hereof is included in Section 3.13 of the MetroVision Disclosure Schedule,
true and correct copies of which have been provided to York Hannover prior to
the date hereof. To the extent the same have continuing effect as of the date
hereof, MetroVision has not breached any material provision of, nor is
MetroVision delinquent in any payment required under, or in default in any
material respect under the terms thereof, nor has any condition or event
occurred which, with the giving of notice or the passage of time or both, would
constitute an event of default or a breach thereunder, except to the extent the
same has been waived in writing.
SECTION 3.14. Insurance. The properties and employees of MetroVision are
insured by the insurers or through the funds and with the types and amounts of
insurance (including, but not limited to, property, professional liability,
automobile, workers compensation, business interruption and excess indemnity
insurance) set forth in Section 3.14 of the MetroVision Disclosure Schedule (the
"MetroVision Insurance Coverage"). MetroVision is not delinquent with respect to
the payment of any premiums due with respect to the MetroVision Insurance
Coverage, and has never been denied coverage which may be required by the laws
of the states in which MetroVision conducts business. The premiums due on the
insurance which covers calender year 1995 have been paid in full and the
premiums due for the period from the date of execution of this Agreement to the
Effective Date will be paid in full as and when due.
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SECTION 3.15. Litigation. Except as set forth on Schedule 3.15 of the
MetroVision Disclosure Schedule, there is not, nor has MetroVision received
written or verbal notice of any litigation, investigation or other proceeding
pending or, to the best of MetroVision's knowledge, threatened against or
relating to MetroVision or their properties or business where the amount claimed
exceeds $25,000 in any single action or $50,000 in the aggregate. There is no,
nor has MetroVision received written or verbal notice of any litigation,
investigation or other proceeding pending, or to the best of MetroVision's
knowledge threatened by the SEC, NASD, NASDAQ, the Food and Drug Administration
or any other governmental agency relating to MetroVision. MetroVision is not a
party to or bound by any orders, judgments, injunctions, decrees or settlement
agreements under which it or they may have continuing obligations as of the date
hereof or as of the Effective Date and which may materially restrict or affect
the present business operations of MetroVision. The right or ability of
MetroVision to consummate the transaction contemplated herein has not been
challenged by any governmental agency or any other person and MetroVision has no
knowledge of the occurrence of any event which would provide a reasonable basis
for any such litigation, investigation or other proceeding.
SECTION 3.16. Employee Plans and Contacts. Set forth on Schedule 3.16 of
the MetroVision Disclosure Schedule is a true and complete list of all bonus,
pension, stock option, stock purchase, benefit, welfare, profit sharing,
retirement, disability, vacation, severance, hospitalization, insurance,
incentive, deferred compensation and other similar fringe or employee benefit
plans, funds, programs or arrangements, and all employment contracts, contracts
for services with employees of MetroVision ("MetroVision Employees") and
executive compensation agreements, written or oral, in each of the foregoing
cases which cover, are maintained for the benefit of, or relate to any or all
MetroVision Employees or former MetroVision Employees (the "MetroVision
Employees Plans").
SECTION 3.17. Trade Names. Set forth in Section 3.17 of the MetroVision
Disclosure Schedule is a true and complete list of trade names under which
MetroVision and Touchtel are doing, or within the last 12 months have done,
business and a statement as to whether, when and where such trade names have
been registered or filed. Neither MetroVision not Touchtel have received any
notice from any person challenging or questioning the right of MetroVision or
Touchtel to use any such trade names.
SECTION 3.18. Disclosure. No representation or warranty by or on behalf of
MetroVision contained in this Agreement and no statement contained in any
certificate, list, exhibit, or other instrument furnished or to be furnished to
York Hannover pursuant hereto contains or will contain any untrue statement of
material fact, or omits or will omit to state any material facts which are
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.
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SECTION 3.19. Registration Statement/Proxy. The Registration Statement on
Form S-4 at the time it is declared effective, the Proxy Statement/Prospectus at
the time of its mailing to the MetroVision shareholders and at the time of the
meeting of the shareholders of MetroVision, will not contain any untrue
statement of a material fact or omit to state a material fact concerning
MetroVision or omit to state a material fact required or necessary to be stated
therein in order to make the statements contained therein concerning
MetroVision, in light of the circumstances under which they are made, not
misleading; except that, MetroVision makes no representation or warranty with
respect to any statement, information or omission relating to York Hannover
contained in the Registration Statement, the Proxy Statement/Prospectus or in
any other registration statement.
SECTION 3.20. No Undisclosed Liability. MetroVision does not have any
liabilities or obligations except (i) those liabilities which are set forth in
the MetroVision Financials and, (ii) those liabilities which are set forth in
Section 3.20 of the MetroVision Disclosure Schedule.
SECTION 3.21. Necessary Action. MetroVision has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for MetroVision (i) to enter into and to deliver this Agreement and
any and all documents and agreements executed by MetroVision in connection
herewith or in furtherance hereof and (ii) to carry out the terms hereof and
thereof and the transaction contemplated herein and therein, including, but not
limited to, obtaining the consent of the Board of Directors. Except as provided
in Sections 5.01 and 5.02, no other action by or on behalf of MetroVision is or
will be necessary to authorize the execution, delivery and performance of this
Agreement and any documents and agreements executed by MetroVision in connection
herewith or the transaction contemplated herein.
SECTION 3.22. Restrictions on Business Activities. Except for this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon MetroVision or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of MetroVision or any of its subsidiaries, any acquisition
of property by MetroVision or any of its subsidiaries or the conduct of business
by MetroVision or any of its subsidiaries as currently conducted or as proposed
to be conducted by MetroVision.
SECTION 3.23. Investment Company Act. Neither MetroVision or Touchtel are
an Investment Company within the meaning of the Investment Company Act of 1940,
as amended.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by York Hannover Pending the Merger.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, York
Hannover covenants and agrees that, unless MetroVision shall otherwise agree in
writing, York Hannover shall conduct its business, and shall use its best
efforts to cause the businesses of the York Hannover Partnership to be
conducted, in the ordinary course of business and consistent with past practice,
other than actions taken by York Hannover or the York Hannover Partnership in
connection herewith or otherwise change York Hannover's Articles of
Incorporation, or amend the terms of the York Hannover Partnership Agreement or
issue any class or new stock other than the 12% Preferred Stock of which the
proceeds will be used to payoff York Hannover's existing term loan in the amount
of $1,950,000 plus all accrued interest issued to National HealthCare L.P.; and
York Hannover shall use reasonable commercial effects to preserve substantially
intact the business organization of York Hannover and the York Hannover
Partnership, to keep available the services of the present officers, employees
and consultants of Hannover and the York Hannover Partnership, to take all
action necessary to prevent the loss, cancellation, abandonment, forfeiture or
expiration of any York Hannover Intellectual Property and York Hannover
Partnership Intellectual Property, and to preserve the present relationships of
York Hannover and the York Hannover Partnership with customers, suppliers and
other persons with which Hannover or the York Hannover Partnership has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, York Hannover or the York Hannover
Partnership shall not, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of MetroVision:
(a) amend or otherwise change York Hannover's Articles of
Incorporation or By-Laws, or amend the terms of the York Hannover
Partnership Agreement;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any option, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) of York Hannover or the York Hannover Partnership, other than the
York Hannover 12% Preferred Stock, the terms of which
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shall be mutually agreeable to the parties hereto, of which the proceeds
will be used to payoff York Hannover's existing term loan in the amount of
$1,950,000 plus all accrued interest issued to National HealthCare L.P.
(the "NHC Loan");
(c) sell, pledge, dispose of or encumber any assets of York Hannover
or the York Hannover Partnership (except for (i) sales of assets in the
ordinary course of business and in a manner consistent with past practice
and (ii) dispositions of obsolete or worthless assets);
(d) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock, property or any combination thereof) of the York
Hannover Partnership, except that the York Hannover Partnership may declare
and pay all current and accrued Priority Distributions (as defined therein)
and the prepayment of all amounts contributed as additional capital to the
York Hannover Partnership, furthermore York Hannover is permitted to redeem
or cancel all other classes of preferred stock outstanding, except the York
Hannover 12% Preferred Stock, and to distribute all assets other than its
40% interest in the York Hannover Partnership prior to the Effective Time;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee (other than guarantees of bank
debt of York Hannover Partnership entered into in the ordinary course of
business) or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except
in the ordinary course of business; (iv) authorize any capital expenditures
or purchase of fixed assets which are, in the aggregate, in excess of
$25,000 for York Hannover or the York Hannover Partnership; or (v) enter
into or amend any contract, agreement, commitment or arrangement to effect
any of the matters prohibited by this Section 4.01(e);
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in salaries or wages of
employees of York Hannover or the York Hannover Partnership who are not
officers of York Hannover in accordance with past practices, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer (except for officers who are
terminated on an involuntary basis) or other employee of York Hannover or
the York Hannover Partnership, or establish, adopt, enter into or amend any
employee plan other than as contemplated in this Agreement;
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(g) take any action to change accounting policies or procedures
(including, without limitation, procedure with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitation except to the
extent the amount of any such settlement has been reserved for on the York
Hannover Financials;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unassented, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of York Hannover or the York
Hannover Partnership or incurred in the ordinary course of business and
consistent with past practice;
(j) enter into or commit to enter into any contract, agreement,
arrangement or understanding having a term longer than six months unless
such contract, agreement, arrangement or understanding either (i) may be
canceled by it without penalty on not more than thirty days' notice or
(ii) does not require the expenditure of more than $25,000 for any single
contract, agreement or arrangement and $50,000 for all such contracts,
arrangements and agreements;
(k) modify, amend or terminate any contract, waive, release,
relinquish or assign any contract or other rights or claims or cancel or
forgive any indebtedness owed to it, other than in the ordinary course of
business consistent with past practice with respect to contracts which are
not material to York Hannover or the York Hannover Partnership taken as a
whole; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in Section 4.01(a) through (k) above, or any action which would
make any of the representations or warranties of York Hannover contained in
this Agreement untrue or incorrect or prevent York Hannover from performing
or cause York Hannover not to perform its covenants hereunder or result in
any of the conditions to the Merger set forth herein not being satisfied.
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SECTION 4.02. Conduct of Business by MetroVision Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, MetroVision covenants
and agrees that, unless York Hannover shall otherwise agree in writing,
MetroVision shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and MetroVision and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice, other than actions taken by MetroVision or
Touchtel in connection herewith; and MetroVision shall use reasonable commercial
effects to preserve substantially intact the business organization of
MetroVision and its subsidiaries, to keep available the services of the present
officers, employees and consultants of MetroVision and its subsidiaries, to take
all action necessary to prevent the loss, cancellation, abandonment, forfeiture
or expiration of any MetroVision Intellectual Property and to preserve the
present relationships of MetroVision or any of its subsidiaries with customers,
suppliers and other persons with which MetroVision or any of its subsidiaries
has significant business relations. In addition to the foregoing, MetroVision
shall take such additional actions as are necessary and appropriate to improve
its cash flow such that as of the Effective Time MetroVision will reasonably
project positive case flow by December 31, 1996. By way of amplification and not
limitation, except as contemplated by this Agreement, neither MetroVision nor
any of it subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of York Hannover:
(a) amend or otherwise change MetroVision's Certificate of
Incorporation or By-Laws:
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any option, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) of MetroVision, any of its subsidiaries or affiliates (except for
the issuance of shares of MetroVision Common Shares issuable pursuant to
MetroVision's 1991 Stock Option Plan (the "1991 Plan") and MetroVision's
1993 Non-employee Directors' Stock Option Plan (the "Director Plan")
(together, the "MetroVision Stock Option Plans"), which options are
outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of MetroVision or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice and
(ii) dispositions of obsolete or worthless assets);
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(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned
subsidiary of MetroVision may declare and pay a dividend to MetroVision,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, other than the
4.6 for 1 reverse stock split of the MetroVision Common Shares and the
conversion of the 5% Series A Preferred Stock, each as contemplated in this
Agreement, or (iii) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any subsidiaries to repurchase, redeem or otherwise
acquire, any of its securities or any securities of its subsidiaries, or
propose to do any of the foregoing;
(e) amend or change the period (or permit any acceleration, amendment
or change) of exercisability of options or restricted stock granted under
the Employee Plans (including the MetroVision Stock Option Plans) or
authorize cash payments in exchange for any options granted under any of
such plans;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee (other than guarantees of bank
debt of MetroVision's subsidiaries entered into in the ordinary course of
business) or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except
in the ordinary course of business; (iv) authorize any capital expenditures
or purchase of fixed assets which are, in the aggregate, in excess of
$25,000 for MetroVision and its subsidiaries taken as a whole; or (v) enter
into or amend any contract, agreement, commitment or arrangement to effect
any of the matters prohibited by this Section 4.02(f);
(g) increase the compensation payable or to become payable to its
officers or employees, except for increases in salaries or wages of
employees of MetroVision or its subsidiaries who are not officers of
MetroVision in accordance with past practices, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with any director, officer (except for officers who are terminated on an
involuntary basis) or other employee of MetroVision or any of its
subsidiaries, or establish, adopt, enter into or amend any Employee Plan
other than as contemplated in this Agreement;
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(h) take any action to change accounting policies or procedures
(including, without limitation, procedure with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(i) make any material tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitation except to the
extent the amount of any such settlement has been reserved for on
MetroVision's most recent SEC Report;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unassented, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of MetroVision or incurred in
the ordinary course of business and consistent with past practice;
(k) enter into or commit to enter into any contract, agreement,
arrangement or understanding having a term longer than six months unless
such contract, agreement, arrangement or understanding either (i) may be
canceled by it without penalty on not more than thirty days' notice or (ii)
does not require the expenditure of more than $25,000 for any single
contract, agreement or arrangement and $50,000 for all such contracts,
arrangements and agreements;
(l) except as may be required by law, take any action to terminate any
of its Employee Plans;
(m) modify, amend or terminate any contract, waive, release,
relinquish or assign any contract or other rights or claims or cancel or
forgive any indebtedness owed to it, other than in the ordinary course of
business consistent with past practice with respect to contracts which are
not material to MetroVision and its subsidiaries taken as a whole; or
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(n) take, or agree in writing or otherwise to take, any of the actions
described in Section 4.02(a) through (n) above, or any action which would
make any of the representations or warranties of MetroVision contained in
this Agreement untrue or incorrect or prevent MetroVision from performing
or cause MetroVision not to perform its covenants hereunder or result in
any of the conditions to the Merger set forth herein not being satisfied.
SECTION 4.03. No Solicitation by MetroVision.
(a) MetroVision shall not, directly or indirectly, through any officer,
director, employee, representative or agent of MetroVision or any of its
subsidiaries, solicit or encourage (including by way of furnishing information)
the initiation of any inquiries or proposals regarding any merger, amalgamation,
take-over bid, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transaction
involving MetroVision or any subsidiaries of MetroVision (any of the foregoing
inquiries or proposals being referred to herein as an "MetroVision Acquisition
Proposal"); provided, however, that nothing contained in this Agreement shall
prevent the Board of Directors of MetroVision, after consultation with its
financial advisors, and after receiving advice from outside counsel to the
effect that the Board of Directors is required to do so in order to discharge
properly its fiduciary duties, from considering, negotiating, approving and
recommending to the stockholders of MetroVision an unsolicited bona fide
MetroVision Acquisition Proposal which the Board of Directors of MetroVision
determines in good faith would result in a transaction more favorable to
MetroVision's stockholders than the transaction contemplated by this Agreement
(any such Acquisition Proposal being referred to herein as a "MetroVision
Superior Proposal").
(b) MetroVision shall immediately notify York Hannover after receipt of any
MetroVision Acquisition Proposal or any request for nonpublic information
relating to MetroVision or any of its subsidiaries in connection with a
MetroVision Acquisition Proposal or for access to the properties, books or
records of MetroVision or any subsidiaries by any person or entity that informs
the Board of Directors of MetroVision or such subsidiary that it is considering
making, or has made, a MetroVision Acquisition Proposal. Such notice to York
Hannover shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contract.
(c) If the Board of Directors of MetroVision receives a request for
material nonpublic information by a party who makes a bona fide MetroVision
Acquisition Proposal and the Board of Directors of MetroVision determines that
such proposal is a MetroVision Superior Proposal, then, and only in such case,
MetroVision may, subject to the execution of a confidentiality and standstill
agreement, provide such party with access to information regarding MetroVision.
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(d) MetroVision shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than York Hannover)
conducted heretofore with respect to any of the foregoing. MetroVision agrees
not to release any third party from any confidentiality or standstill agreement
to which MetroVision is a party.
(e) MetroVision shall ensure that the officers, directors and employees of
MetroVision and its subsidiaries and any investment banker or other advisor or
representative retained by MetroVision are aware of the restrictions described
in this Section, and shall be responsible for any breach of this Section 4.04 by
such bankers, advisors and representatives.
SECTION 4.04. No Solicitation by York Hannover.
(a) York Hannover shall not, directly or indirectly, through any officer,
director, employee, representative or agent of York Hannover or any of its
subsidiaries, solicit or encourage (including by way of furnishing information)
the initiation of any inquiries or proposals regarding any merger, amalgamation,
take-over bid, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transaction
involving York Hannover Partnership, York Hannover or any subsidiaries of York
Hannover (any of the foregoing inquiries or proposals being referred to herein
as a "York Hannover Acquisition Proposal"); provided, however, that nothing
contained in this Agreement shall prevent the Board of Directors of York
Hannover, after consultation with its financial advisors, and after receiving
advice from outside counsel to the effect that the Board of Directors is
required to do so in order to discharge properly its fiduciary duties, from
considering, negotiating, approving and recommending to the stockholders of York
Hannover an unsolicited bona fide York Hannover Acquisition Proposal which the
Board of Directors of York Hannover determines in good faith would result in a
transaction more favorable to York Hannover's stockholders than the transaction
contemplated by this Agreement (any such Acquisition Proposal being referred to
herein as a "York Hannover Superior Proposal").
(b) York Hannover shall immediately notify MetroVision after receipt of any
York Hannover Acquisition Proposal or any request for nonpublic information
relating to York Hannover or any of its subsidiaries in connection with a York
Hannover Acquisition Proposal or for access to the properties, books or records
of York Hannover or any subsidiaries by any person or entity that informs the
Board of Directors of York Hannover or such subsidiary that it is considering
making, or has made, a York Hannover Acquisition Proposal. Such notice to
MetroVision shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contract.
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(c) If the Board of Directors of York Hannover receives a request for
material nonpublic information by a party who makes a bona fide York Hannover
Acquisition Proposal and the Board of Directors of York Hannover determines that
such proposal is a York Hannover Superior Proposal, then, and only in such case,
York Hannover may, subject to the execution of a confidentiality and standstill
agreement, provide such party with access to information regarding York
Hannover.
(d) York Hannover shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than MetroVision)
conducted heretofore with respect to any of the foregoing. York Hannover agrees
not to release any third party from any confidentiality or standstill agreement
to which York Hannover is a Party.
(e) York Hannover shall ensure that the officers, directors and employees
of York Hannover and its subsidiaries and any investment banker or other advisor
or representative retained by York Hannover are aware of the restrictions
described in this Section, and shall be responsible for any breach of this
Section 4.03 by such bankers, advisors and representatives.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of S-4 and the Proxy Statement. York Hannover
and MetroVision promptly will prepare and file with the Commission a proxy
statement/prospectus (which shall be the Proxy Statement) on Form S-4. Each of
York Hannover and MetroVision will use its best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
MetroVision also will take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of
MetroVision Common Shares pursuant to this Agreement. York Hannover will furnish
any audited financial statements required under the Securities Act and all
information concerning York Hannover, the York Hannover Partnership and the
holders of its securities as reasonably may be requested in connection with any
such action.
SECTION 5.02. Stockholders' Meeting. MetroVision shall call and hold the
MetroVision Stockholders' Meeting as promptly as practicable for the purpose of:
(a) voting upon (i) the approval of the Merger (ii) a 4.6 for 1 reverse stock
split of the MetroVision Common Shares, (iii) the election of directors, (iv)
the approval of the amendment of MetroVision's 1991 Plan; (v) the amendment of
MetroVision's Certificate of Incorporation to increase the number of authorized
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shares and change its name to York Hannover Health Care, Inc., (vi) the
amendment of MetroVision's By-Laws to limit MetroVision's Board of Directors to
five (5) directors, each having a three (3) year term, initially staggered as
contemplated in Section 1.05, (collectively, the "Approval Events") and (b)
offering to the holders of the MetroVision 5% Series A Preferred Stock the
opportunity to exchange any or all such shares (and all accrued dividends
thereon) for an aggregate of 800,00 MetroVision Common Shares (on a post-reverse
stock split basis). MetroVision shall use its reasonable best efforts to solicit
from holders of the MetroVision Common Shares and the 5% Series A Preferred
Stock proxies in favor of the Approval of Events, and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required by New York Law to obtain such approvals.
SECTION 5.03. Access to Information: Confidentiality.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject, York Hannover and
MetroVision shall each (and shall cause each of their subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
other, reasonable access, during the period prior to the Effective Time, to all
its properties, books, contracts, commitments and records and, during such
period, York Hannover and MetroVision each shall (and shall cause each of their
subsidiaries to) furnish promptly to the other all information concerning its
business, properties and personnel as such other party may reasonably request,
and each shall make available to the other the appropriate individuals
(including attorneys, accountants and other professionals) for discussion of the
other's business, properties and personnel as either party may reasonably
request. Each party shall keep such information confidential in accordance with
the terms of the confidentiality agreements, each dated April 16, 1996, as
amended (the "Confidentiality Agreements") between MetroVision and York
Hannover.
(b) MetroVision shall provide as promptly as available drafts of
MetroVision's Quarterly Report on Form 10-QSB for the quarter year ended June
30, 1996.
SECTION 5.04. Consents: Approval. York Hannover and MetroVision shall each
use their best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
foreign governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by York Hannover and
MetroVision and the consummation by them of the transactions contemplated
hereby. York Hannover and MetroVision shall furnish all information required to
be included in the Proxy Statement, or for any application or other filing to be
made pursuant to the rules and regulations of any United States or foreign
governmental body in connection with the transaction contemplated by this
Agreement.
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SECTION 5.05. Agreement of Affiliates. York Hannover shall deliver to
MetroVision, prior to the Effective Time, a letter (the "Affiliate Letter")
identifying all persons who are, or may be deemed to be "affiliates" of York
Hannover for purposes of Rule 145 under the Securities Act. York Hannover shall
use its best efforts to cause each person who is identified as an "affiliate" in
the Affiliate Letter to deliver to MetroVision, prior to the Effective Time, a
written agreement (an "Affiliate Agreement") in a form reasonably satisfactory
to the parties to the effect that such person will not offer to sell, sell or
otherwise dispose of any MetroVision Common Shares issued in the Merger except
pursuant to an effective registration statement, in compliance with Rule 145 or
in a transaction that, in the opinion of legal counsel satisfactory to
MetroVision, is exempt from the registration requirements of the Securities Act.
SECTION 5.06. Indemnification and Insurance.
(a) To the extent permitted by New York Law, the Certificate of
Incorporation of MetroVision shall be amended to contain the provisions with
respect to indemnification set forth in the By-Laws of York Hannover, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of York Hannover or MetroVision, unless such
modification is required by law.
(b) York Hannover shall, to the fullest extent permitted under applicable
law or under York Hannover's Articles of Incorporation or By-Laws and regardless
of whether the Merger becomes effective, indemnify and hold harmless, and after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable law or under Surviving Corporation's Certificate of
Incorporation or By-Laws, indemnify and hold harmless, each present and former
director, officer , employee, fiduciary and agent of York Hannover or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgement, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceedings or
investigations (whether arising before or after the Effective Time) Surviving
Corporation shall choose counsel for such Indemnified Parties, unless the
retention of such counsel on behalf of such Indemnified Parties would create an
actual conflict of interest for such counsel in which case the Indemnified
Parties as a group may retain only one law firm to represent them with respect
to any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. Any counsel retained by the Indemnified Parties shall
be reasonably satisfactory to Surviving Corporation
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and Surviving Corporation shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
(c) MetroVision shall, to the fullest extent permitted under applicable law
or under MetroVision's Articles of Incorporation or By-Laws and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and after the
Effective Time, Surviving Corporation shall, to the fullest extent permitted
under applicable law or under Surviving Corporation's Certificate of
Incorporation or By-Laws, indemnify and hold harmless, each present and former
director, officer, employee, fiduciary and agent of MetroVision or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgement, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceedings or
investigations (whether arising before or after the Effective Time) Surviving
Corporation shall choose counsel for such Indemnified Parties, unless the
retention of such counsel on behalf of such Indemnified Parties would create an
actual conflict of interest for such counsel in which case the Indemnified
Parties as a group may retain only one law firm to represent them with respect
to any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. Any counsel retained by the Indemnified Parties shall
be reasonably satisfactory to Surviving Corporation and Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld).
SECTION 5.07. Notification of Certain Matters. York Hannover shall give
prompt notice to MetroVision, and MetroVision shall give prompt notice to York
Hannover, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in the Agreement to be untrue or inaccurate and (ii) any
failure of York Hannover or MetroVision, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided; further
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.02(a) or 6.03(a) unless the failure to give such
notice results in material prejudice to the other party.
SECTION 5.08. Further Action/Tax Treatment. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
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Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to
otherwise satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement. Each of MetroVision and York Hannover shall
use its best efforts to cause the Merger to qualify, and will not (both before
and after consummation of the Merger) take any actions which could prevent the
Merger from qualifying as a reorganization under the provisions of Section 368
of the Code.
SECTION 5.09. Public Announcements. MetroVision and York Hannover shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger or this Agreement and shall not
issue any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the advice of
counsel be required by law or the NASD if it has used all reasonable efforts to
consult with the other party.
SECTION 5.10. Listing of Surviving Corporation Common Shares. MetroVision
and York Hannover shall use their reasonable best efforts to cause the
MetroVision Common Shares to be issued in the Merger to be approved for listing
on the Nasdaq Small Cap Market.
SECTION 5.11. Conveyance Taxes. MetroVision and York Hannover shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Proxy Statement Clearance. No proceeding in respect of the Proxy
Statement shall have been initiated or threatened by the SEC and the Proxy
Statement shall have been declared effective by the SEC;
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(b) Stockholder Approval. The Approval Events shall have been approved
and adopted by the requisite vote of the stockholders of MetroVision and
this Agreement and the Merger shall have been approved and adopted by the
sole shareholder of York Hannover;
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by any administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; and there shall not be any action
taken, or any statute, rule, regulation, or order enacted, entered,
enforced, or deemed applicable to the Merger, which makes the consummation
of the Merger illegal;
(d) Nasdaq Small Cap Market listing. The Surviving Corporation Common
Shares shall have been approved for listing, subject to notice of issuance,
on the Nasdaq Small Cap Market.
SECTION 6.02. Additional Conditions to Obligations of York Hannover. The
obligations of York Hannover to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
MetroVision contained in this Agreement shall be true and correct in all
respects on and as of the Effective Time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall remain true and correct as of such
date) and (iii) where the failure to be true and correct would not have a
Material Adverse Effect on MetroVision, with the same force and effect as if
made on and as of the Effective Time, and York Hannover shall have received a
certificate to such effect signed by the President and Chief Financial Officer
of MetroVision;
(b) Agreements and Covenants. MetroVision shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and York Hannover shall have received a certificate to such effect signed
by the President and Chief Financial Officer of MetroVision;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by MetroVision for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by MetroVision;
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(d) Governmental Actions. There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry that
might result in such an action or proceeding) by any governmental authority or
administrative agency before any governmental authority, administrative agency
or court of competent jurisdiction, nor shall there be in effect any judgment,
decree or order of any governmental authority, administrative agency or court of
competent jurisdiction, in either case, seeking to prohibit or limit the
Surviving Corporation from exercising all material rights and privileges
pertaining to the ownership or operation by the Surviving Corporation or any of
its subsidiaries of all or a material portion of the business or assets of York
Hannover or any of its subsidiaries, or seeking to compel the Surviving
Corporation or any of its subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of York Hannover or any of its
subsidiaries, as a result to the Merger or the transactions contemplated by this
Agreement;
(e) Material Adverse Change. Since the date of this Agreement, there shall
have been no change, occurrence or circumstance in the business, results of
operations or financial condition of MetroVision or any subsidiary of
MetroVision having or reasonably likely to have a Material Adverse Effect;
(f) Reverse Stock Split. MetroVision shall have obtained shareholder
approval of and executed a 4.6 for 1 reverse stock split of MetroVision Common
Shares at or prior to the Effective Time. All warrants and options shall be
repriced and split accordingly, with consents and notice to all holders, if
required;
(g) MetroVision Net Loss. Loss shall mean operating loss before
depreciation and amortization as shown on MetroVisions consolidated statement of
operations for said quarter; and MetroVision Subsequent Financials for the
second quarter of 1996 shall reflect a Net Loss (as defined below) no greater
than $50,000.00. As used herein, Net Loss shall mean operating loss before
interest, income taxes, depreciation and amortization as shown on MetroVision's
consolidated statement of operations for said quarter but shall not include the
costs associated with the transactions contemplated by this Agreement;
(h) Employment Agreements. The Surviving Corporation shall have executed
employment agreements with Lawrence B. Cummings and Thomas M. Clarke in a form
reasonably satisfactory to the parties hereto and to Messrs, Cummings and
Clarke, pursuant to which Messrs, Cummings and Clarke shall be granted warrants
for each to purchase an additional 750,000 MetroVision Common Shares. The first
tranche of warrants representing 250,000 Common Shares each to Mr. Cummings and
Mr. Clarke shall be exercisable at any time within 36 months of the Effective
Time, at a price equal to the average or the closing bid price of the
MetroVision Common Shares for the first ten trading days after the Effective
Time (the "First Year Exercise Price"). The second 250,000 Common Shares tranche
of warrants may be exercised at any time between the
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thirteenth (13th) and forty-eighth (48th) month after the Effective Time at a
price equal to 125% of the First Year Exercise Price. The final 250,000 Common
Shares tranche of warrants may be exercised between the twenty-fifth (25th) and
the sixtieth (60th) months after the Effective Time at a price equal to 150% of
the First Year Exercise Price;
(i) Tax Effect. York Hannover shall receive the advice of counsel that the
merger will constitute a reorganization within the meaning of Code Section
368(a)(1)(A).
SECTION 6.03. Additional Conditions to Obligation of MetroVision. The
obligation of MetroVision to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
York Hannover contained in the Agreement shall be true and correct in all
respects on and as of the Effective Time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall remain true and correct as of such
date) and (iii) where the failure to be true and correct would not have a
Material Adverse Effect on York Hannover, with the same force and effect as if
made on and as of the Effective Time, and MetroVision shall have received a
certificate to such effect signed by the Chief Executive Officer and President
of York Hannover;
(b) Agreement and Covenants. York Hannover shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and MetroVision shall have received a certificate to such effect signed by
the Chief Executive Officer and President of York Hannover;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by York Hannover for the authorization, execution and delivery of this
Agreement and the consummations by them of the transactions contemplated hereby
shall have been obtained and made by York Hannover;
(d) Material Adverse Change. Since the date of this Agreement, there shall
have been no change, occurrence or circumstance in the business, results of
operations or financial condition of York Hannover or any subsidiary of York
Hannover having or reasonably likely to have a Material Adverse Effect;
(e) Affiliate Agreements. MetroVision shall have received from each person
who is identified in the Affiliate Letter as an "affiliate" of York Hannover, an
Affiliate Agreement, and such Affiliate Agreement shall be in full force and
effect;
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(f) York Hannover Indebtedness. The NHC Loan shall have been paid in full
utilizing the proceeds from the issuance of the York Hannover 12% Preferred
Stock and the security interest related thereto shall have been released;
(g) Audited York Hannover Financials. MetroVision shall have received from
York Hannover audited York Hannover Financials on or before June 21, 1996 as
provided under Section 2.07, reflecting no Material Adverse Change;
(h) Tax Effect. MetroVision shall receive the advice of counsel that the
merger will constitute a reorganization within the meaning of Code Section
368(a)(1)(A).
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the stockholder
of York Hannover or MetroVision:
(a) by mutual written consent duly authorized by the Boards of Directors of
MetroVision and York Hannover; or
(b) by either MetroVision or York Hannover if the Merger shall not have
been consummated by October 31, 1996 (provided, that, the right to terminate
this Agreement under this Section 7.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date); or
(c) by either MetroVision or York Hannover if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a non-appealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by MetroVision or York Hannover, if, at the MetroVision Stockholders'
Meeting (including any adjournment or postponement thereof), the requisite vote
of the stockholders of MetroVision shall not have been obtained; or
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(e) by York Hannover, if (i) the Board of Directors of MetroVision shall
withdraw, modify or change its recommendation of this Agreement or the Merger in
a manner adverse to York Hannover or shall have resolved to do so; (ii) the
Board of Directors of MetroVision shall have taken a "neutral" position with
respect to an Alternative Transaction (as defined in Section 7.03(d)); or (iii)
a tender offer or exchange offer for 15% or more of the outstanding MetroVision
Common Shares is commenced (other than by York Hannover or an affiliate of York
Hannover); or
(f) by MetroVision or York Hannover, upon a breach of any representation,
warranty, covenant or agreement on the part of York Hannover or MetroVision,
respectively, set forth in this Agreement or if any representation or warranty
of MetroVision or York Hannover, respectively, shall have become untrue, in
either case, such that the conditions set forth in Section 6.02(a) or 6.02(b),
or Section 6.03(a) or 6.03(b), would not be satisfied (a "Terminating Breach"),
provided, that, if such Terminating Breach is curable prior to the expiration of
30 days from its occurrence (but in no event later than October 31, 1996) by
MetroVision or York Hannover, as the case may be, through the exercise of its
reasonable best efforts and for so long as MetroVision or York Hannover, as the
case may be, continues to exercise such reasonable best efforts, neither York
Hannover nor MetroVision, respectively, may terminate this Agreement under this
Section 7.01(f) until the expiration of such period without such Terminating
Breach having been cured; or
(g) by York Hannover or MetroVision, if the Board of Directors of
MetroVision shall have resolved to accept, or accepted, a MetroVision Superior
Proposal; or
(h) by York Hannover or MetroVision if the Board of Directors of York
Hannover shall resolved to accept, or accepted, a York Hannover Superior
Proposal.
SECTION 7.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except as set forth in
Section 7.03 and Section 8.01 hereof.
SECTION 7.03. Fees and Expenses.
(a) Except as set forth in this Section 7.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated.
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(b) MetroVision shall pay York Hannover a termination fee of $25,000.00
(the "Fee"), in lieu of any actual damages including documented and reasonable
out-of-pocket expenses of York Hannover relating to the transactions
contemplated by the Agreement, upon the earliest to occur of the following
events:
(i) the termination of this Agreement by York Hannover pursuant to Section
7.01(e) or (g); or
(ii) the termination of this Agreement by York Hannover pursuant to Section
7.01(f) after a breach by MetroVision of this Agreement.
(c) York Hannover shall pay MetroVision a termination fee of $25,000.00
(the "Fee"), in lieu of any actual damages including documented and reasonable
out-of-pocket expenses of MetroVision relating to the transactions contemplated
by the Agreement, upon the termination of this Agreement by MetroVision pursuant
to Section 7.01(f) after a breach by York Hannover of this Agreement or upon the
termination of this Agreement by MetroVision pursuant to Section 7.01(h).
(d) As used herein, "MetroVision Alternative Transaction" means either (i)
a transaction pursuant to which any person (or group of persons) other than York
Hannover or its affiliates (a "Third Party") acquires more that 15 percent of
the outstanding MetroVision Common Shares, whether from MetroVision or pursuant
to a tender offer or exchange offer or otherwise, (ii) a merger or other
business combination involving MetroVision pursuant to which any Third Party
acquires more than 15 percent of the outstanding equity securities of
MetroVision or the entity surviving such merger or business combination or (iii)
any other transaction pursuant to which any Third Party acquires control of
assets (including for this purpose the outstanding equity securities of
subsidiaries of MetroVision, and the entity surviving any merger or business
combination including any of them) of MetroVision, any of its subsidiaries
having a fair market value (as determined by the board of Directors of
MetroVision in good faith) equal to more than 15 percent of the fair market
value of all the assets of MetroVision, and its subsidiaries, taken as a whole,
immediately prior to such transaction; provided, however, that the term
MetroVision Alternative Transaction shall not include any acquisition of
securities by a broker dealer in connection with a bona fide public offering of
such securities.
(e) As used herein, "York Hannover Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other than
MetroVision or its affiliates (a "Third Party") acquires more that 15 percent:
(a) of the outstanding York Hannover Common Shares, or (b) the interests in the
York Hannover Partnership, whether from York Hannover or the York Hannover
Partnership or pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving York Hannover or the York
Hannover Partnership pursuant to which any Third Party acquires more than 15
percent of (a) the outstanding equity
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securities of York Hannover or (b) the interests in the York Hannover
Partnership or the entity surviving such merger or business combination or
(iii) any other transaction pursuant to which any Third Party acquires control
of assets (including for this purpose the outstanding equity securities of
subsidiaries of York Hannover, and the entity surviving any merger or business
combination including any of them) of York Hannover, any of its subsidiaries
having a fair market value (as determined by the board of Directors of York
Hannover in good faith) equal to more than 15 percent of the fair market value
of all the assets of York Hannover, and its subsidiaries, taken as a whole,
immediately prior to such transaction; provided, however, that the term York
Hannover Alternative Transaction shall not include any acquisition of securities
by a broker dealer in connection with a bona fide public offering of such
securities.
(f) The Fee payable pursuant to Section 7.03(b) or (c) shall be paid within
ten business days after the first to occur of the events described in Section
7.03(b) or 7.03(c) respectively.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements.
Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Section 5.05 and 5.06 shall survive the Effective Time for the periods
described in such sections and those set forth in Sections 5.03 shall survive
termination indefinitely. The Confidentiality Agreements shall survive
termination of this Agreement as provided therein.
SECTION 8.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties as the following addresses (or at such other address for a party as
shall be specified by like changes of address shall be effective upon receipt)
or sent by electronic transmission, with confirmation received, to the telecopy
number specified below:
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(a) If to York Hannover:
YORK HANNOVER PHARMACEUTICALS, INC.
2 South Street, Suite 360
Pittsfield, MA 01201
Attention: Thomas M. Clarke, President
Fax (413) 448-2120
With a copy to:
MARTIN & OLIVEIRA
100 North Street, Suite 301
Pittsfield, MA 01201
Attention: William E. Martin, Esquire
Fax (413) 445-5883
(b) If to MetroVision:
METROVISION OF NORTH AMERICA, INC.
424 Madison Avenue, 9th Floor
New York, NY 10017
Attention: Robert F. Hussey, President
Fax (212) 759-3181
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With a copy to:
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 Third Avenue
New York, NY 10022
Attention: Charles I. Weissman, Esquire
Fax (212) 758-9526
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which York Hannover (either alone, or through or together
with any other subsidiary) has, directly or indirectly, an interest of 5 percent
or more;
(b) "beneficial owner" with respect to any shares of stock, means a person
who shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding of the purpose of acquiring, holding, voting or disposing of any
shares;
(c) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
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(f) "subsidiary" or "subsidiaries" of York Hannover, or MetroVision or any
other person means any corporation, partnership, joint venture or other legal
entity of which York Hannover, or MetroVision or such other person, as the case
may be, (either alone or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger by the stockholders of MetroVision, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.08. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreement), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
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SECTION 8.09. Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
SECTION 8.10. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5.07 (which is intended to be for the benefit of
the Indemnified Parties and may be enforced by such Indemnified Parties).
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. Governing Law. This agreement shall be governed by and
construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed within the State of New
York.
SECTION 8.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterpart, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. Waiver of Jury Trial. Each of MetroVision and York Hannover
hereby irrevocably waives, to the fullest extent permitted by law, all rights to
trial by jury in any action, proceeding, or counterclaim (whether based upon
contract, tort or otherwise) arising out of or relating to this agreement or any
of the transactions contemplated hereby.
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IN WITNESS WHEREOF, MetroVision and York Hannover have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
METROVISION OF NORTH AMERICA, INC.
By: /s/ Robert F. Hussey
------------------------------------
Robert F. Hussey,
its President
YORK HANNOVER PHARMACEUTICALS, INC.
By: /s/ Thomas M. Clarke
------------------------------------
Thomas M. Clarke,
its President
Agreed and Assented to
this 10 day of April, 1996.
STOCKBRIDGE INVESTMENT PARTNERS, INC.
By: /s/ Thomas M. Clarke
------------------------------------
Thomas M. Clarke
its President
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Officers and Directors
Section 721 of the New York Business Corporation Law provides that the
indemnification and advancement of expenses of directors and officers may be
provided by the certificate of incorporation or by-laws of a corporation, or
when authorized by the certificate of incorporation or by-laws, a resolution of
shareholders, a resolution of directors or an agreement providing for indemni-
fication (except in cases where a judgment or other final adjudication
establishes that such acts were committed in bad faith or were the result of
active or deliberate dishonesty and were material to the cause of action so
adjudicated or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled).
Section 722 of the New York Business Corporation Law provides that a
corporation may indemnify any person, made, or threatened to be made, a party to
an action or proceeding other than one by or in the right of the corporation to
procure a judgment in its favor, whether civil or criminal, including an action
by or in the right of any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he was a director or officer of the corporation, or served such
other cor- poration, partnership, joint venture, trust, employee benefit plan or
other entity in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
corporation and, in criminal acts or proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful.
Section 722 of the New York Business Corporation Law also states that a
Rcorporation may indemnify any person made, or threatened to be made, a party
to an action by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director or officer of the
corporation or any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity at the request of the corporation, against
amounts paid in settlement and reasonable expenses actually and necessarily
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation, partnership, joint venture, employee benefit
plan or other entity, not opposed to, the best interests of the corporation,
except that no indemnification shall be made in respect of a threatened or
pending action which is settled or otherwise disposed of, or any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless the court determines the person is fairly and reasonably
entitled to indemnity for such portion of the settlement amount and expenses as
the court deems proper.
Section 726 of the New York Business Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance for indem-
nification of directors and officers. However, no insurance may provide for any
payment, other than cost of defense, to or on behalf of any director or officer
for a judgment or a final adjudication adverse to the insured director or
officer if (i) a judgment or other final adjudication establishes that his acts
of active and deliberate dishonesty were material to the cause of action adju-
dicated or that he personally gained a financial profit or other advantage to
which he was not legally entitled or (ii) if prohibited under the insurance law
of New York.
Section 724 of the New York Business Corporation Law provides that
indemnification shall be awarded by a court to the extent authorized under
Sections 722 or 723(a) of the New York Business Corporation Law notwithstanding
the failure of a corporation to provide indemnification, and despite any con-
trary resolution of the board or of the shareholders.
<PAGE>
For information regarding provisions under which a director or officer of
the Company may be insured or indemnified in any manner against any liability
which he may incur in his capacity as such, reference is made to Article VII of
the Company's Bylaws (included as Exhibit 3(3) to this Registration Statement
and incorporated by reference herein).
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
No. Description of Document
- ------- -----------------------
2 -- Agreement and Plan of Merger, dated as of May 10, 1996, among
MetroVision of North America, Inc., Stockbridge Investments, Inc.
and York Hannover Pharmaceuticals, Inc. (Filed as Annex A to the
Proxy Statement-Prospectus forming a part of this Registration
Statement.)
3.1(1) -- Restated Certificate of Incorporation, as amended.
3.2(1) -- Certificate of Amendment to Restated Certificate of Incorporation.
3.3(1) -- By-Laws.
4.1(1) -- Unit Purchase Option sold to Whale Securities Co., L.P. in
December, 1991.
4.2(4) -- Form of Underwriter's Warrant Agreement between the Company and
Whale Securities Co., L.P.
4.3(1) -- Specimen Common Stock Certificate.
4.4(4) -- Form of Class B Warrant Agreement and Warrant Certificate.
5 -- Opinion of Cozen and O'Connor re: legality of shares
10.1(3) -- Agreement, dated November 1, 1992, between the Company and
Target Vision, Inc. relating to the licensing of software.
10.2(1) -- Agreement, dated August 9, 1989, between the Company and
Port Authority Trans Hudson Corporation.
10.3(1) -- Agreement, dated July 29, 1987, between the Company and the Chicago
Transit Authority.
10.4(1) -- Agreement, dated July 10, 1995, between the Company and the
Southeastern Pennsylvania Transportation Authority.
II-1
<PAGE>
10.5(1) -- Agreement, dated August 30, 1991, between the Company and the
San Francisco Bay Area Rapid Transit District.
10.6(3) -- Agreement, dated August 13, 1992, between the Company and the
Massachusetts Bay Transportation Authority.
10.7(1) -- 1991 Stock Option Plan of the Company and forms of incentive
stock option agreement and non-qualified stock option agreement.*
10.8(4) -- 1993 Non Employee Directors Stock Option Plan of the Company.*
10.14(3) -- Agreement, dated as of October 28, 1991, between TouchTel, Inc.
and the Port Authority of New York and New Jersey.
10.24(4) -- Agreement, dated May 24, 1993, between the Company and
Robert F. Hussey.*
10.25(4) -- Promissory Note, dated May 24, 1993, by the Company to
Robert F. Hussey.
10.26(4) -- Warrant, dated May 24, 1993, issued to Robert F. Hussey.
10.27(4) -- Agreement, dated March 8, 1993, between the Company and Chief
Communications America, Inc.
10.29(4) -- Form of Agreement, dated September 1993, between the Company and
Bridge Investor.
10.30(4) -- Form of Promissory Note, dated September 1993, by the Company to
Bridge Investor.
10.31(4) -- Form of Warrant, dated September 1993, issued to Bridge Investor.
10.32(4) -- Form of agreement between the Company and certain holders of
options and warrants to purchase the Company's Common Stock and 5%
Preferred Stock.
10.33 -- Form of Warrant to be issued to Lawrence Cummings and Thomas
Clarke.*
10.34 -- Form of Employment Agreements between the Surviving Corporation and
each of Thomas Clarke and Lawrence Cummings.*
10.35 -- Agreement of General Partnership of York Hannover Partnership.
11.1(5) -- Computation of Earnings Per Share.
22.1(4) -- Subsidiaries of the Company.
23.1 -- Consent of Cozen and O'Connor (included in Exhibit 5).
II-2
<PAGE>
23.2 -- Consent of Dannible & McKee, LLP
23.3 -- Consents of Arthur Andersen LLP
- ----------
(1) Exhibits to the Company's 1991 Registration Statement on Form S-1 and its
pre-effective amendments are incorporated herein by reference.
(2) Exhibits to the Company's Current Report on Form 8-K dated December 10,
1992 are incorporated herein by reference.
(3) Exhibits to the Company's Post Effective Amendment No. 2 to Registration
Statement on Form S-1 filed February 16, 1993 are incorporated herein by
reference.
(4) Exhibits to the Company's 1993 Registration Statement on Form S-1 (File No.
33-67786) and its pre-effective amendments are incorporated herein by
reference.
(5) Exhibit to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 is incorporated herein by reference.
* Management Contract or Compensatory Plan or Arrangement
(b) Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provisions are made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are not applicable and, therefore, have been
omitted.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;"
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in New York, New
York, on February 6, 1997.
METROVISION OF NORTH AMERICA, INC.
By: /s/ Robert F. Hussey
---------------------------------
Robert F. Hussey, Chairman of the Board;
President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 6, 1997.
Signature Title
--------- -----
/s/ Robert F. Hussey Chairman of the Board, President
------------------------ (Principal Executive Officer)
Robert F. Hussey
/s/ David M. Fancher Vice President - Chief Financial
------------------------ Officer; Secretary
David M. Fancher (Principal Financial and Accounting Officer)
/s/ * Director
------------------------
Joseph A. Calabrese
/s/ * Director
------------------------
Don Stephen Aron
/s/ * Director
------------------------
William H. Hessick, III
_______________
* By Robert F. Hussey, Attorney-In-Fact pursuant to a Power of Attorney
included in this Registration Statement.
/s/ Robert F. Hussey
-----------------------
Robert F. Hussey, Attorney-In-Fact
II-4
[COZEN AND O'CONNOR LETTERHEAD]
February 6, 1997
MetroVision of North America, Inc.
424 Madison Avenue
New York, NY 10017
Re: Securities and Exchange Commission --
Registration Statement on Form S-4
Gentlemen:
As counsel to MetroVision of North America, Inc. (the "Company"), we
have assisted in the preparation of the Company's Registration Statement on
Form S-4 (the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, covering
4,000,000 shares of the Company's Common Stock, par value $.001 per share
(the "Common Stock"), that may be issued to holders of Common Stock of
York Hannover Pharmaceuticals, Inc. ("York Hannover Shares") in a merger
transaction (the "Merger") pursuant to an Agreement and Plan of Merger dated
as of May 10, 1996 between the Company and York Hannover Pharmaceuticals, Inc.
(the "Merger Agreement").
In this connection, we have examined and considered the original or copies,
certified or otherwise identified to our satisfaction, of the Company's Articles
of Incorporation and its Bylaws, as each has been amended to date, resolutions
of its Board of Directors, the Merger Agreement and such other documents and
records relating to the Company and the issuance and sale of the Common Stock
as we have deeemed appropriate for the purpose of rendering this opinion.
In our examination of documents, instruments and other papers, we have
assumed the genuiness of all signatures on original and certified documents
and the conformity to original
<PAGE>
MetroVision of North America, Inc.
February 6, 1997
Page 2
and certified documents of all copies submitted to us as conformed, photostat
or other copies. As to matters of fact which have not been independently
established, we have relied upon representations of the officers of the
Company.
Based upon the foregoing examination, and the information supplied, it is
our opinion that the Common Stock to be issued by the Company in the Merger
pursuant to the Merger Agreement are duly authorized and, when issued and paid
for in accordance with the terms of the Merger Agreement, and giving effect to
the amendments to the Company's Certificate of Incorporation to increase the
authorized number of shares of the Company's Common Stock as proposed for
adoption by the Company's stockholders, will be validly issued, fully paid and
non-assessable.
We hereby expressly consent to the inclusion of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
COZEN AND O'CONNOR
[SEE LEGENDS ON PAGE 6]
No. W-1 No. of Shares Subject to Warrant: 750,000
Void after 5:00 p.m. New York, New York Time on , 2007.
WARRANT TO PURCHASE OF COMMON STOCK
OF
YORK HANNOVER HEALTH CARE, INC.
This is to certify that, for value received,
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from York Hannover Health Care, Inc., a Delaware corporation ("Company"),
750,000 shares of Common Stock, $.001 par value, of the Company ("Common
Stock"), of which: (i) warrants to purchase 250,000 shares of Common Stock will
be exercisable at a price per share equal to $____ at any time during the period
beginning ________, 1997 and ending 5:00 p.m. New York, New York Time on
________, 31, 2000; (ii) warrants to purchase 250,000 shares of Common Stock
will be exercisable at a price per share equal to $____ at any time during the
period beginning ________, 1998 and ending 5:00 p.m. New York, New York Time on
________, 31, 2001; and (iii) warrants to purchase 250,000 shares of Common
Stock will be exercisable at a price per share equal to $____ at any time during
the period beginning ________, 1999 and ending 5:00 p.m. New York, New York
Time on ________, 31, 2002. The number of shares of Common Stock to be received
upon the exercise of this Warrant and the price to be paid for a share of Common
Stock may be adjusted from time to time as hereinafter set forth. The shares of
Common Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "Warrant Shares," and the exercise
price of a share of Common Stock in effect at any time and as adjusted from time
to time is hereinafter sometimes referred to as the "Exercise Price."
(a) EXERCISE OF WARRANT. Subject to the provision of Section
(G) hereof, this Warrant may be exercised as to (i) 250,000 shares of Common
Stock at any time during the period beginning ________, 1997 and ending 5:00
p.m. New York, New York Time on ________, 31, 2000; (ii) 250,000 shares of
Common Stock at any time during the period beginning ________, 1998 and ending
5:00 p.m. New York, New York Time on ________, 31, 2001; and (iii) 250,000
shares of Common Stock at any time during the period beginning ________, 1998
and ending 5:00 p.m. New York, New York Time on ________, 31, 2002; provided,
that, if any such day is a day on which banking institutions in the State of
New York are authorized by law to
<PAGE>
close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, with the Purchase Form annexed hereto
duly executed and accompanied by payment of the Exercise Price for the number of
shares specified in such form, in lawful money of the United States of America
in cash or by official bank or certified check made payable to York Hannover
Health Care, Inc. If this Warrant shall be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise and together with payment of the Exercise
Price in the manner provided herein, the Holder shall be deemed to be the holder
of record of the shares of Common Stock or other securities issuable upon such
exercise, provided, however, that if at the date of surrender of such Warrants
and payment of such Exercise Price, the transfer books for the Common Stock or
such other securities shall be closed, the certificates for the shares of other
securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any certificate for such
shares or other securities and the Holder shall not be deemed to have become a
holder of record of such shares or the owner of any such other securities.
(b) RESERVATION OF SHARES. The Company hereby agrees that at
all times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) FRACTIONAL SHARES. The Company shall not be required to
issue fractions of shares on the exercise of Warrants. If any fraction of a
share would, except for the provisions of this Section, be issuable on the
exercise of any Warrant, the Company will (1) if the fraction of a share
otherwise issuable is equal to or less than one-half, round down and issue to
the Holder only the largest whole number of shares of Common Stock to which the
Holder is otherwise entitled, or (2) if the fraction of a share otherwise
issuable is greater than one-half, round-up and issue to the Holder one
additional share of Common Stock in addition to the largest whole number of
shares of Common Stock to which the holder is otherwise entitled.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other
- 2 -
<PAGE>
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
Subject to the provisions of Section (G), upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof at the office of the Company or at the office of its stock transfer
agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of such indemnification
as the Company may in its discretion impose, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will execute and deliver a new
Warrant of like tenor and date.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in
this Warrant and are not enforceable against the Company except to the extent
set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price and the
number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time as hereinafter provided:
(1) In the case of Company shall issue Common Stock
as a dividend upon Common Stock or in payment of a dividend thereon, shall
subdivide the number of outstanding shares of its Common Stock into a greater
number of shares or shall contract the number of outstanding shares of its
Common Stock into a lesser number of shares, the Exercise Price then in effect
shall be adjusted, effective at the close of business on the record date for the
determination of stockholders entitled to receive such dividend or be subject to
such subdivision or contraction, to the price (computed to the nearest cent)
determined by dividing (A) the product obtained by multiplying the Exercise
Price in effect immediately prior to the close of business on such record date
by the number of shares of Common Stock outstanding prior to such dividend,
subdivision or contraction, by (B) the sum of the number of shares of Common
Stock
- 3 -
<PAGE>
outstanding immediately after such dividend, subdivision, or contraction.
(2) If any capital reorganization or reclassification
of the capital stock of the Company (other than as set forth in subsection (1)
of this Section (f), or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder of each Warrant shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in the Warrant and in lieu of the shares of Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented by such Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented by such Warrant had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provision shall be made with respect to the rights and interest
of the Holder to the end that the provisions of the Warrant (including, without
limitation, provisions for adjustment of the Exercise Price and of the number of
shares issuable upon the exercise of Warrants) shall thereafter be applicable as
nearly as may be practicable in relation to any shares of stock, securities, or
assets thereafter deliverable upon exercise of Warrants. The Company shall not
effect any such consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof, the successor corporation purchasing such assets
shall assume, by written instrument, the obligation to deliver to the Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder may be entitled to purchase.
(3) Upon each adjustment of the Exercise Price
pursuant to subsection (1) of this Section (f), the number of shares of Common
Stock specified in each Warrant shall thereupon evidence the right to purchase
that number of shares of Common Stock (calculated to the nearest hundredth of a
share of Common Stock) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable immediately prior to such adjustment upon exercise of such Warrant
and dividing the product so obtained by the Exercise Price in effect after such
adjustment.
(4) Irrespective of any adjustments of the number or
kind of securities issuable upon exercise of warrants or the Exercise Price,
Warrants theretofore or thereafter issued may
- 4 -
<PAGE>
continue to express the same number of shares of Common Stock and Exercise Price
as are stated in similar Warrants previously issued.
(5) The Company may, at its sole option, retain the
independent public accounting firm regularly retained by the Company, or another
firm of independent public accountants of recognized standing selected by the
Company's Board of Directors, to make any computation required under this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of any computation made under this Section (f).
(6) Whenever there is an adjustment in the Exercise
Price or in the number or kind of securities issuable upon exercise of the
Warrants, or both, as provided in this Section (f), the Company shall (i)
promptly file in the custody of its Secretary or Assistant Secretary a
certificate signed by the Chairman of the Board or the President or Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company, setting forth the facts
requiring such adjustment and the number and kind of securities issuable upon
exercise of each Warrant after such adjustment; and (ii) cause a notice stating
that such adjustment has been effected and stating the Exercise Price then in
effect and the number and kind of securities issuable upon exercise of each
Warrant to be sent to each registered holder of a Warrant.
(7) The Exercise Price and the number of shares
issuable upon exercise of a Warrant shall not be adjusted except in the manner
and only upon the occurrence of the events heretofore specifically referred to
in this Section (f).
(8) The Board of Directors of the Company may,
without the prior consent of the Holder, reduce the Exercise Price or increase
the number of shares of Common Stock or other securities issuable upon exercise
of the Warrant.
(g) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933 AND
OTHER APPLICABLE SECURITIES LAWS. This Warrant or the Warrant Shares or any
other security issued or issuable upon exercise of this Warrant may not be sold
or otherwise disposed of unless the Holder provides the Company with an opinion
of counsel satisfactory to the Company in form satisfactory to the Company that
this Warrant or the Warrant Shares may be legally transferred without violating
the Act and any other applicable securities law and then, if such opinion states
that certificates representing the Warrants or Warrant Shares being transferred
- 5 -
<PAGE>
shall be required to bear a legend restricting further transfer, only against
receipt of an agreement of the transferee to comply with the provisions of this
Section (g) with respect to any resale or other disposition of such securities.
YORK HANNOVER HEALTH CARE, INC.
[SEAL]
By: _________________________
, President
Attest:
By: _____________________________
, Secretary
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS BEEN
TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR
DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR DISPOSED OF WITHOUT AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION
DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER.
- 6 -
<PAGE>
PURCHASE FORM
Dated: , 19
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ________ shares of Common Stock
and hereby makes payment of ________ in payment of the Exercise Price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
-----------------------------------------------------------------------
(Please typewrite or print in block letters.)
Address
--------------------------------------------------------------------
--------------------------------------------------------------------
Signature
-------------------------------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED hereby
sells, assigns and transfers unto
Name
-----------------------------------------------------------------------
(Please typewrite or print in block letters.)
Address
--------------------------------------------------------------------
--------------------------------------------------------------------
The right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ________________, Attorney, to transfer the on the books
of the Company with full power of substitution in ________ the premises.
Date , 19
Signature
-------------------------------------------------------------------
- 7 -
<PAGE>
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT made this _____ day of ________, 1997 by and between YORK
HANNOVER HEALTH CARE, INC., a New York corporation (the "Company") having a
mailing address of 75 South Street, Suite 650, Pittsfield, Massachusetts 01201
and _________________________________________________________ (the "Employee");
W I T N E S S E T H :
WHEREAS, the Company and the Employee desire to enter into an Employment
Agreement setting forth the terms and conditions under which the Employee shall
be employed by the Company;
NOW THEREFORE, in consideration of the mutual promises and mutual covenants
contained herein, the parties agree as follows:
1. EMPLOYMENT
The Company hereby hires Employee as ____________________ of the Company
and the Employee hereby accepts such employment, subject to the terms and
conditions of this Agreement.
2. DUTIES OF EMPLOYEE
The Employee will serve the Employer faithfully and to the best of his
ability under the direction of the Board of Directors of the Company. The
Employee shall be responsible for such duties as ______________________ as are
set forth in the Company's By-Laws and as delegated to him by the Board of
Directors of the Company. Notwithstanding anything to the contrary set forth
herein or in the By-Laws of the Company, the Employee shall not be required to
devote any particular amount of time to the performance of his duties as Chief
Executive Officer and shall not be prohibited from serving as an officer or
director of other unrelated business entities.
3. TERM OF EMPLOYMENT
This Agreement and the employment under this Agreement shall commence on
the date hereof and continue for three (3) years.
1
<PAGE>
4. COMPENSATION
Compensation for the Employee's services under this Agreement shall be as
follows:
A. On the date hereof, the Company shall issue Stock Warrants in the form
attached hereto as Exhibit A to the Employee, pursuant to which the Employee
shall be granted the right to purchase an additional 750,000 Common Shares of
the Company. The first tranche of warrants representing 250,000 Common Shares
may be exercisable by the Employee at any time within thirty-six months (36) of
the date hereof, at a price equal to the average closing bid price of the
Company's common shares for the first ten (10) trading days after the date
hereof (the "First Year Exercise Price"). The second 250,000 Common Shares
tranche of warrants may be exercised between the Thirteenth (13th) and
Forty-Eighth (48th) month after the date hereof, as a price equal to One Hundred
and Twenty Five Percent (125%) of the First Year Exercise Price. The final
250,000 Common Shares Tranche of Warrants may be exercised between the
Twenty-Fifth (25th) and Sixtieth (60th) month after the date hereof, at a price
equal to One Hundred and Fifty Percent (150%) of the First Year Exercise Price.
As used herein, Common Shares shall mean validly issued and fully paid and
non-assessable, par value $0.001 per share, registered shares of the Company
(after giving effect to the 4.6 for 1 Reverse Stock Split of the Common Shares)
as required by 6.01(b) of the agreement and Plan for Merger dated May 10, 1996;
and
B. Such additional compensation as may be approved from time to time by the
Company's Board of Directors.
5. EMPLOYEE SERVICE AS DIRECTOR
The Employee hereby consents to serve as a Director of the Company or any
parent, subsidiary or corporation affiliated with the Company, on the condition
that the Employee receive the same compensation paid to other directors of any
such company for their services as directors.
6. REIMBURSEMENT FOR EXPENSES
The Company shall reimburse the Employee for all reasonable expenses that
the employee shall incur in connection with his services for the Company
contemplated by this agreement, upon presentation by the Employee of such
appropriate vouchers and receipts or other documentation for such expenses as
are reasonably required by the Company.
7. BINDING EFFECT
This Agreement shall be binding on and inure to the benefit of any
successor or successors of the Company and to the personal representative of the
Employee.
2
<PAGE>
8. BINDING LAW
It is agreed that this Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
9. ENTIRE AGREEMENT
This Agreement shall constitute the entire Agreement between the parties
and any prior understanding or representation of any kind preceding the date of
this Agreement shall not be binding either party except to the extent
incorporated in this Agreement.
10. MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional obligation assumed by
either party in connection with this Agreement shall be binding only if
evidenced in writing signed by each party or an authorized representative of
each party.
11. NO WAIVER
The failure of either party to this Agreement to insist upon the
performance of any of the terms and conditions of this Agreement, or the waiver
of any breach of any of the terms and conditions of this Agreement, shall not be
construed as thereafter waiving any such terms and conditions, but the same
shall continue and remain in full force and effect as if no such forebearance or
waiver had occurred.
12. ATTORNEY FEES
In the event that any action is filed in relation to this agreement, the
unsuccessful party in the action shall pay to the successful party, in addition
to all the sums that either party may be required to pay, a reasonable sum for
the successful party's attorney's fees.
13. NOTICES
Any notice provided for or concerning this agreement shall be in writing
and shall be deemed sufficiently given when sent by certified or registered mail
if sent to the respective address of each party as set forth at the beginning
of this Agreement.
3
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EXECUTED as in instrument under seal as of the date first above written.
COMPANY
YORK HANNOVER
HEALTHCARE, INC.
By:
--------------------------------
Its: Treasurer
EMPLOYEE:
---------------------------------
Individually
4
YORK HANNOVER PHARMACEUTICALS, INC.
AND
UNITED PROFESSIONAL COMPANIES, INC.
AGREEMENT OF GENERAL PARTNERSHIP
THIS AGREEMENT of General Partnership is made as of July 13,
1995, by and between York Hannover Pharmaceuticals, Inc., a Florida corporation
("York Hannover"), and United Professional Companies, Inc., a Delaware
corporation ("UPC"), collectively referred to herein as the Partnership.
INTENTIONS OF THE PARTIES
WHEREAS, York Hannover and UPC desire to form a general
partnership under the laws of the State of Wisconsin for the purposes and on the
terms and conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereby create a Partnership on the terms and conditions set forth
below:
SECTION I: DEFINED TERMS
The defined terms used in this Agreement shall, unless the
context otherwise requires, have the meanings specified in this Section I. The
singular shall include the plural and vice versa, and the use of any gender
shall be deemed to be or include the other gender, whenever appropriate.
1.1 Act - means the Wisconsin Uniform Partnership Act, as from
time to time amended.
1.2 Administrative Partner - means York Hannover.
1.3 Affiliated Person or Affiliate - means, as to any named
Partner, any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the Partner.
1.4 Agreement - means this Agreement of Partnership, as it may
be amended from time to time. Words such as "herein," "hereinafter," "hereof,"
"hereto," "hereby," and "hereunder," when used with reference to this Agreement,
refer to this Agreement as a whole including those items which are included by
reference, unless the context otherwise requires.
1.5 Bankruptcy or Insolvency - means any Partner's or the
Partnership's filing in any court pursuant to any statute of the United States
or of any state, of a petition in bankruptcy or insolvency, any Partner's or the
Partnership's filing for reorganization or for appointment of
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a receiver or trustee of all or a material portion of the Partner's or
Partnership's assets; the making by any Partner or the Partnership of an
assignment for the benefit of creditors; the admission by any Partner or the
Partnership in writing of its inability to pay its debts as they fall due; or
any Partner's or the Partnership's seeking, consenting to or acquiescing in the
appointment of a trustee, receiver or liquidator of any material portion of its
property. The phrase "bankruptcy or insolvency" shall also include the filing
against any Partner or the Partnership in any court pursuant to any statute of
the United States or of any State, of a petition in bankruptcy or insolvency, or
for the reorganization, or for appointment of a receiver or a trustee of all or
a substantial portion of the Partner's or Partnership's property, and within
ninety (90) days after such commencement of any such proceeding against the
Partner or Partnership such petition shall not have been dismissed (or
satisfactory evidence that such Partner or Partnership is diligently contesting
such petition shall not have been received by the other Partners, provided such
other Partner is not otherwise in default hereunder). In addition, if the whole
or any portion of the Partnership Interest of any Partner is subject to levy or
attachment, and such levy or attachment is not released or discharged within
sixty (60) days, such Partner shall be deemed "bankrupt or insolvent" for
purposes of this Agreement.
1.6 Capital Account - means, as to any Partner, the account
established on the books and records of the Partnership under Section 6.1. Each
Partner's Capital Account shall initially equal the Capital Contribution made by
the Partner to the Partnership pursuant to Section 3.1 and during the term of
the Partnership shall be
(a) increased by the amount of
(1) Profit allocated to such Partner, and
(2) any Capital Contributions subsequently made by
such Partner, and
(b) decreased by the amount of
(1) all loss allocated to the Partner, and
(2) all money and the agreed value of other property
(net of liabilities assumed or to which the property is subject) distributed
to such Partner.
1.7 Capital Contribution - means the total amount of money and
the agreed value of other property contributed to the Partnership by a Partner
(net of any liabilities assumed or to which the property is subject). "Capital
Contribution" shall also mean any amounts paid by a Partner pursuant to any
guarantees to a lender of funds to the Partnership for the purpose of owning,
developing or operating the Business. Any reference in this Agreement to the
Capital Contribution of a then Partner shall refer to the interest of such
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then Partner, except to the extent that the interest of any prior Partner shall
have been forfeited and the portion so forfeited was not transferred to a
successor Partner.
1.8 Closing - means the date on which this Agreement is
executed by the initial Partners.
1.9 Code - means the Internal Revenue Code of 1986.
1.10 Control, Controlling and Controlled - means the direct or
indirect ownership interest of more than 10% ownership or voting power of the
Person or Entity in question. "Self-dealing" shall not mean the contracting for
services or the purchasing of Products and Services, from or to the Affiliates
of any Partners, or the management or marketing of the Business by a General
Partner or by the Entities or Persons in whom a General Partner or one or more
partners of a General Partner has an interest, subject to Sections 2.7-3 and
5.3-8 hereof.
1.11 Dissolution or Termination of a Partner - means in the
case of a corporate or partnership Partner, the earlier of (i) the adoption of a
plan of liquidation by such Partner or (ii) the effective date of dissolution in
accordance with applicable law.
1.12 General Partner - means UPC, York Hannover and any
successor General Partner(s) admitted pursuant to the terms hereof.
1.13 Incapacity - means the Bankruptcy, Dissolution, or
Termination of such Partner.
1.14 Net Revenues - means all revenues subsequent to any
deductions for Medicare, Medicaid, or other third party disallowances.
1.15 Notification - means a writing, containing the
information required by this Agreement to be communicated to any Person, sent in
accordance with the provisions of Section 9.1 herein (including all required
copies).
1.16 Operating Partner - means UPC.
1.17 Partner- means any General Partner.
1.18 Partnership - means this Partnership, as it may from time
to time be constituted.
1.19 Partnership Interest - means the entire ownership
interest (which may be segmented into and/or expressed as a percentage of
various rights and/or obligations) of a
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Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Partner
to comply with all of the terms and provisions of this Agreement and of the Act.
1.20 Partnership's Business - means the provision of the
following services and products Institutional pharmacy, infusion therapy,
third-party billing, medical equipment and supplies, respiratory (except
respiratory therapy services and supplies to Part A eligible patients will not
be provided by the Partnership; provided, however, that the Partnership shall
provide the delivery services presently being provided as part of the
respiratory Part A Program of UPC), and such other services and products as
shall be specifically agreed upon by the Partners (hereafter "Products and
Services"), to long term care and other facilities located in the counties
listed on Exhibit A (with the exception of that certain facility set forth on
Exhibit A which is and will continue to be served by York Hannover or its
Affiliates) and in those presently existing facilities owned by Unicare Health
Facilities, Inc. and its affiliated corporations outside the designated counties
which facilities are also described in Exhibit A attached hereto and
incorporated herein by reference ("Partnership Market").
1.21 Percentage of Interest or Interests in the Partnership -
means each Partner's percentage of the total Partnership Interest in the
Partnership, as set forth in Section 3.3.
1.22 Person - means any natural person or entity, and the
successors and assigns of such Person where the context so permits.
1.23 Profit and Loss - means the taxable income and loss of
the Partnership as determined for federal income tax purposes, including all
items required to be separately stated by Section 702 of the Code and Treasury
Regulations thereunder.
1.24 Working Capital Loan(s) - means all loans required by the
Partnership and made by a Partner, as made from time to time, to pay costs and
expenses of the Partnership in excess of cash receipts. Such loans shall be
obligations of the Partnership and shall be increased by (i) the amount of
accumulated interest thereon (to be computed at the simple annual rate equal to
the prime lending rate charged by Firstar Bank Milwaukee N.A. plus four percent
(4%)), if but only if such loan results from one Partner's inability to provide
its proportionate working capital and the other Partner's exercise of its right
to provide said portion of the working capital, and decreased by (ii) the
amounts distributed to the Partners that made the Working Capital Loan, pursuant
to Section 3.1-2, which amounts shall be applied first to accrued and unpaid
interest, and the balance, if any, to reduction of principal.
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SECTION II: THE PARTNERSHIP
2.1 Formation. UPC and York Hannover hereby form a general
partnership under and pursuant to the provisions of the Act for the purposes and
upon the terms and conditions hereinafter set forth in this Agreement.
2.2 Name. The name of the Partnership shall be "York Hannover
Partnership," and all business of the Partnership shall be conducted in such
name.
2.3 Location. The initial location of the office of the
Partnership shall be in Brooksville, Florida.
2.4 Purpose.
2.4-1 The purpose of the Partnership is to provide
Products and Services to patients in the Partnership Market.
2.4-2 The Partnership shall be a partnership only for the
purposes and in the market specified hereinabove. This Agreement shall not be
deemed to create a general or limited partnership, joint venture or other
arrangement between the Partners with respect to any activities whatsoever other
than the activities within the purpose of the Partnership as specified above.
2.4-3 The Partnership is empowered to do any and all
things necessary, appropriate, or convenient for the furtherance and
accomplishment of its purposes, and for the protection and benefit of the
Partnership and its properties, including but not limited to the following:
a. Entering into and performing contracts;
b. Applying for and obtaining governmental
authorizations, licenses and approvals;
c. Bringing and defending actions at law or equity;
and
d. Subject to the express provisions of this
Agreement, purchasing the interest of any Partner.
2.4-4 The credit and assets of the Partnership shall be
used solely for the benefit of the Partnership. No asset of the Partnership
shall be transferred or encumbered for, or in payment of, any individual
obligation of a Partner. In the event the Partnership is made a party to any
obligation, or otherwise incurs any losses or expenses as a result of or in
connection with personal obligations or liabilities of any Partner unconnected
with Partnership Business, such Partner shall reimburse the Partnership for all
such losses or
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expenses incurred by the Partnership, including attorneys' fees, and the cash
distributions pursuant to Section IV hereof of any such Partner may be charged
therefor. Each Partner shall bear its own costs and expenses, including without
limitation all legal fees, incurred in connection with the formation of the
Partnership.
2.4-5 All real and personal property owned by the
Partnership shall be deemed owned by the Partnership as an entity, and no
Partner shall have any ownership interest in such property in its individual
name or right, excepting only certain property including without limitation
licensed software which cannot be transferred from a Partner to the Partnership.
Such Partnership property, including property contributed to the Partnership by
the Partners, shall include leasehold interests.
2.5 Term. The term of the Partnership shall commence at 12:01
a.m. on August 1, 1995 and shall continue for five (5) years subject to
dissolution and continuation as described herein. On or prior to the fourth
(4th) anniversary of the Closing, the Partners shall determine whether they
desire to have the Partnership dissolved at the end of the five (5) year period.
In the event that the Partners concur that they wish the Partnership to
continue, the Partnership shall continue for an additional one (1) year period
beyond the five (5) years and thereafter the Partnership shall automatically
continue for periods of two (2) years unless at least one (1) year prior to the
then-effective date of termination, at least one of the Partners determines that
the Partnership should be dissolved and so notifies the other Partner.
2.6 Authority. Each party hereto represents to the other party
that it has the requisite power and authority, under its Charter, Bylaws and
governing state law, to enter into and perform this Agreement, and that the
execution and performance of this Agreement shall not violate any provisions of
any laws, contracts, or other documents applicable to such party.
2.7 Disclosure. Conflicts and Waiver; Fiduciary Duty.
2.7-1 Except otherwise expressly provided elsewhere in
this Agreement, nothing in this Agreement shall be deemed to restrict in any way
the rights of any Partner, or of any Affiliate, to conduct any business or
activity whatsoever (other than those described in this Agreement) without any
accountability to the Partnership or to any Partner. Each Partner acknowledges
that each other Partner or its Affiliate may be interested, directly or
indirectly, in various other businesses and undertakings not including the
Partnership.
2.7-2 York Hannover, its owner, Stockbridge Investment
Partners, Inc. ("Stockbridge") and Stockbridge's shareholders agree that they
shall not engage in any business or enterprise, directly or indirectly, which
competes with the Partnership's Business
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or any of the Partners within the Partnership Market during the term of this
Agreement and for a two (2) year period following the dissolution of the
Partnership. York Hannover, Stockbridge, Stockbridge's shareholders and UPC
shall execute a covenant not to compete agreement on or before the Closing.
2.7-3 Subject to Section 5.3-8, the Partnership may
transact business with the Partners and/or their subsidiaries, Affiliates,
partners, shareholders and/or others involved in a management capacity with the
Partners and/or the General Partner under the following terms and conditions:
a. The Partnership may purchase goods or services
from the Partners if there is set forth in writing the terms and conditions of
any purchase, sale or contract in question; and
b. The cost of any goods or services from any
Partner to the Partnership shall not exceed the cost of such goods or services
as charged by said entity to comparable third parties.
2.7-4 Without limiting Section 5.7 below, each Partner
shall at all times act in a manner consistent with or for the benefit of the
Partnership, in accordance with its fiduciary obligation under law and,
specifically, the Act.
2.8 Statutory Compliance.
2.8-1 The Partnership shall exist under and be governed
by, and this Agreement shall be construed in accordance with the applicable laws
(without resort to choice of law doctrines) of the State of Wisconsin, and
relevant federal statutes including, but not limited to, titles XVIII and XIX of
the Social Security Act, 42 U.S.C. ss.ss. 1395 and 1396. The Partnership shall
make all filings and disclosures required by, and shall otherwise comply with,
all such laws.
2.8-2 The Operating Partner, on behalf of the Partnership,
shall execute and file any assumed or fictitious name certificate or
certificates required by law to be filed in connection with the formation of the
Partnership, and shall execute and file such other documents and instruments as
may be necessary or appropriate to the formation of, and conduct of Business by,
the Partnership.
SECTION III: PARTNERSHIP CAPITAL AND PERCENTAGE OF INTEREST
3. 1 Capitalization
3.1-1 Capital Contributions of the Partners. The Partners
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shall contribute the assets described in Exhibit B. The initial contributions
shall be made no later than July 31, 1995. Each Partner shall also be obligated
to contribute to the Partnership, no later than July 31, 1995, an amount of cash
which, when added to the value of the inventory and fixed assets contributed by
such Partner to the Partnership, will equal that Partner's Partnership Interest
multiplied by the sum of the total value of the inventory and fixed assets
contributed by both Partners plus such amount of cash. For purposes of this
provision, the "value" of the inventory and fixed assets contributed by each
Partner shall be calculated as of the Closing date. For example, if the value of
the inventory and fixed assets contributed by York Hannover were $439,000 and
the value of the inventory and fixed assets contributed by UPC were $181,000,
then UPC would be obligated to contribute cash in the amount of $477,500
($477,500 plus $181,000 equals 60% of the sum of $477,500 plus $439,000 plus
$181,000). Each Partner shall be liable to the Partnership for that Partner's
share of the aggregate contributions duly called for under this Section 3.1.
Each Partner's share shall be in proportion to its Partnership Interest.
3.1-2 Working Capital Loans. The Partners shall provide
any additional required working capital needed by the Partnership to commence
operations by loaning money to the Partnership on the Closing date in an amount
equal to their Partnership Interests, i.e., if the additional required working
capital is $1,000,000, then York Hannover shall contribute $400,000 (40%) and
UPC $600,000 (60%). In the event one Partner is unable to provide its working
capital loan on the date of execution of this Agreement, the other Partner shall
have the right (but not the obligation) to provide said portion of the working
capital and, in such event, receive interest at the prime rate charged by
Firstar Bank Milwaukee N.A. plus four percent (4%). Otherwise, the working
capital loans shall not bear interest. Any and all loans shall be evidenced by a
negotiable note executed by the Partnership, shall be secured by Partnership
receivables and shall provide for monthly payment of principal and interest, in
the situation specified herein, on a priority basis.
3.2 General Provisions Concerning Partnership Capital.
3.2-1 Benefit of Obligations. The obligation of the
Partners to make Capital Contributions hereunder shall not inure to the benefit
of, or be enforceable by, any person or entity other than the Partnership and
the Partners.
3.2-2 Capital Accounts. An individual Capital Account
shall be maintained for each Partner.
3.2-3 Return of Capital. Except as specifically provided
herein, no Partner may withdraw capital from the Partnership without the express
approval of the Partners. To the extent any monies which any Partner is entitled
to receive pursuant to Section IV hereof or pursuant to any other provision of
this Agreement would constitute a return of capital, each of the Partners hereby
consents to the withdrawal of such capital.
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3.2-4 Partner Loans. Any loans, including Working Capital
Loans, by any Partner to the Partnership shall not be considered Capital
Contributions and shall not increase the Capital Account of the lending Partner,
and shall be evidenced by a written agreement signed by the Operating Partner,
on behalf of the Partnership, contemporaneously with the making of such loan.
3.2-5 Interest on Capital. No interest shall be paid on
any Capital Contribution to the Partnership by any Partner.
3.3 Partnership Interests. The respective Percentage Interests
of the Partners shall be as follows:
UPC 60%
York Hannover 40%
---
100%
In addition, York Hannover shall have the option (the "YH
Option") to purchase from UPC up to an additional nine percent (9%) Partnership
Interest so that, if exercised in full, York Hannover would have up to a
forty-nine percent (49%) Partnership Interest and UPC would then have a
fifty-one percent (51%) Partnership Interest.
3.3-1 Date of Exercise. The YH Option shall be exercised
within six (6) months from the date of closing by written notice delivered to
UPC.
3.3-2 One Exercise. The YH Option may be exercised in
whole or in part (no fractional percentage interests, however), but there shall
be only one exercise election made.
3.3-3 Purchase Price. The purchase price for the YH Option
shall be determined as follows:
<TABLE>
<S> <C>
========================================================================================================================
1. Base Price $568,000
- ------------------------------------------------------------------------------------------------------------------------
2. Plus 9% of total initial contributed
tangible personal
property plus cash
- ------------------------------------------------------------------------------------------------------------------------
3. Plus 9% of any Profit and Loss from
the date of Closing until the date of Option
exercise
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- ------------------------------------------------------------------------------------------------------------------------
4. Less 9% of any pro-rata cash
distributions from the date of Closing until
the date of Option exercise (i.e., no
subtraction would be made for any
Priority Distributions)
- ------------------------------------------------------------------------------------------------------------------------
Subtotal
5. Multiplied by the percentage acquired x 0% acquired (1% - 9%) divided by 9%
divided by 9 maximum
Option purchase price
========================================================================================================================
</TABLE>
3.3-4 Separate Agreement. The parties shall execute a
separate option-to purchase agreement on the Closing Date.
3.4 Penalty for Removal of Contribution. The Partners agree
that no more than twenty percent (20%) of the initial beds serviced by the
Partnership which are located in facilities owned by either of the Partners may
be removed from the Partnership during the Partnership Term without the prior
consent of the other Partner. However, in the event that in excess of twenty
percent (20%) of a Partner's contributed beds are removed during the Partnership
Term, for any reason, the Partner whose beds have not been so removed shall not
unreasonably withhold its consent to such removal if such Partner is compensated
directly (with the Partnership having no liability therefor) by the Partner
whose beds are being removed according to the following formula:
Owned Beds Total Minimum Target (80%)
YH 876 701
UPC 1440 1152
The Partners agree that it shall not be considered unreasonable to refuse
consent to a removal of beds if it appears that a Partner or a Partner's
Affiliate will provide Products and Services for such beds in competition with
the Partnership. An amount equal to the number of beds by which a Partner's
owned beds falls below the Minimum Target multiplied by $1,436 multiplied by the
number of months remaining in the then-current Partnership Term divided by sixty
(60) months shall be paid to the Partner whose beds have not been removed. In
all cases of greater than 20% bed removal, the Partners shall not remove or
cause the removal of any of their contributed beds from the Partnership without
notice and approval of all Partners, which approval shall not be unreasonably
withheld.
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SECTION IV: PROFIT, LOSS AND DISTRIBUTION
4.1 Allocation of Profit or Loss and Distribution of Cash from
Operations.
4.1-1 For any fiscal year after the first fiscal year of
the Partnership, ended December 31, 1995, there shall be distributed to the
extent possible quarterly, but in no event less frequently than semi-annually,
in cash to the Partners, in proportion to their respective Percentage Interests,
an amount equal to the Partnership's Profit for that period as computed under
this Agreement, but increased by the amounts deducted for that period as
depreciation or cost recovery, depletion, or amortization on the Partnership's
federal income tax return, reduced by (A) payments made by the Partnership to
either Partner, including Priority Distributions, (B) any payments made by the
Partnership during that period on account of the principal of all debt
obligations, other than obligations for which provision was made in computing
Profit, and (C) a reserve reasonably retained for the operating and capital
requirements of the Partnership's Business and subject to the existence of
available cash.
4.1-2 York Hannover shall be allowed a priority
distribution ("Priority Distribution") subject to the terms, conditions and the
restrictions described below, for the sole purpose of making interest payments
which are due from York Hannover to National HealthCare L.P. pursuant to the
$2.5 million loan dated December 17, 1993, described in full in the documents
attached as Exhibit C, such principal amount to be reduced to $1.75 million on
or before the Closing date ("York Hannover/NH Loan") or to a lender which has
made a loan to York Hannover replacing the York Hannover/NH Loan (the
"Replacement Debt"). In no event during the term of the Partnership shall the
York Hannover/NH Loan or the Replacement Debt be greater in principal amount
than $1.75 million nor shall the interest rate be higher than that of the York
Hannover/NH Loan. The Priority Distribution shall be determined and paid in the
following manner:
4.1-2-1 On a monthly basis, UPC, as Operating Partner,
shall calculate the Partnership's pre-tax earnings as determined in accordance
with generally accepted accounting principles ("Pre-Tax Earnings").
4.1-2-2 To the extent that York Hannover's share (as
represented by its Percentage Interest) of cumulative Pre-Tax Earnings net of
prior cash distributions to York Hannover is a positive number, and subject to
the availability of cash within the Partnership, York Hannover shall be entitled
to a Priority Distribution, which shall be made on the last business day of each
month. Under no circumstances shall the Priority Distribution exceed on a
monthly basis one-twelfth of the amount specified in Section 4.1-2-4, except
that if a full Priority Distribution has not been made for any month due to a
shortage of available cash, such shortfall shall be made up in the first
subsequent month (in addition to the payment of the Priority Distribution for
such month, but subject to the limitation set forth in Section 4.1-2-4) in which
adequate cash is available.
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4.1-2-3 Once the cumulative Pre-Tax Earnings net of prior
cash distributions to York Hannover has been calculated and the potential
Priority Distribution amount has been calculated, for the potential Priority
Distribution to be made by the Partnership to York Hannover the Partnership must
have sufficient cash available to make such potential Priority Distribution. In
the event there is not sufficient cash available to make the potential Priority
Distribution, the Priority Distribution shall be made only up to the amount of
available cash unless the Partners determine to provide additional working
capital pursuant to Section 3.1-2 in order to make the full potential Priority
Distribution.
4.1-2-4 Under no circumstances shall more than the lesser
of $300,000 or the actual annual interest expense on the York Hannover/NH Loan
(or the Replacement Debt) in the aggregate be distributed, and be outstanding at
any one point in time during the Partnership, to York Hannover as a Priority
Distribution during the term of the Partnership.
4.1-2-5 Partnership distributions, unless otherwise
provided herein, shall be made according to the following hierarchy:
(A) Expenses incurred by the Partners, such as third
party billing fees and expenses and management fees, shall be paid by the
Partnership in the ordinary course and will be included in calculating
Partnership profitability.
(B) Assuming the Partnership is profitable and cash
is available, Partnership shall make the Priority Distributions described in
this Section 4.1. York Hannover's Priority Distributions will not result in
distributions to York Hannover in excess of the distributions that would have
been made to York on a pro rata basis in accordance with its Percentage
Interest, plus $300,000, at any time during the term of the Partnership. For
example, if UPC had received, as of a particular date, total distributions of
$90,000 since the inception of the Partnership, York Hannover could not received
total distributions, including Priority Distributions, in excess of $360,000 by
such date.
(C) After reaching the maximum Priority Distribution
amount, available cash will be distributed as follows:
(i) Pay York Hannover and UPC distributions on a
pro rata basis, in accordance with their respective Partnership Interests,
except that York Hannover can receive no more than an amount necessary for it to
pay interest on the York Hannover/NHC or Replacement Debt; that is, if York
Hannover would receive additional cash in accordance with its Partnership
Interest not required for interest payments on the York Hannover/NHC or
Replacement Debt, then such extra cash would not be paid to York Hannover but
would rather be utilized as set forth in
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(ii) below until the uses set forth in such
clauses have been satisfied;
(iii) At UPC's option, pay down UPC's
disproportionate working capital loans, if any, or make payments to UPC to
"balance" the distributions until UPC's disproportionate working capital loans
have been reduced to zero and the distributions are "balanced" (i.e., YH's
Priority Distribution will be assumed equal to its Partnership Interest (40%));
UPC would then receive cash sufficient to equal its Partnership Interest (60%);
(iii) Remaining available cash will be distributed to Partners in relation to
their Partnership Interests.
4.2 Certain Covenants. Each of the Partners covenants and
agrees as follows
4.2-l Until the York Hannover/NH Loan is repaid in full,
the Partnership shall incur no indebtedness other than (A) indebtedness with
respect to accounts payable in the ordinary course of business consistent with
past practice, (B) indebtedness in an amount of up to Four Hundred Thousand
Dollars ($400,000) for acquisition of a warehouse, (C) loans from the Partners
pursuant to Section 3.1-2 which loans shall be made only for working capital
purposes and (D) loans solely for the acquisition of assets used in the
operation of the Partnership's Business and for no other purpose which assets
shall not exceed a cost of Twenty-Five Thousand Dollars ($25,000) individually
or more than One Hundred Fifty Thousand Dollars ($150,000) in the aggregate in
any consecutive twelve (12) month period.
4.2-2 Until the York Hannover/NH Loan is repaid in full,
the Partnership shall grant no lien, charge or encumbrance upon any of its
assets nor permit any such lien to exist upon its assets except for liens
securing debt permitted under Subsections 4.2-1(B) and (D) above which liens
shall attach only to the assets so acquired and which liens are not
cross-defaulted or cross-collateralized with any other debt and except for liens
on accounts receivables of the Partnership securing loans permitted under
Subsection 4.2-1(C) above.
4.2-3 Except in the ordinary course of business consistent
with past practice until the York Hannover/NH Loan is repaid in full the
Partnership shall not dispose in any single transaction or series of
transactions of any material portion of its assets.
4.2-4 Notwithstanding any other provisions in this
Agreement, following the acceleration of the York Hannover/NH Loan there shall
be no payments of the types described below until all foreclosure proceedings
upon the collateral securing the York Hannover/NH Loan have been concluded
provided that such proceedings have been commenced within sixty (60) days after
the declaration of such acceleration and provided further that such limitation
shall be of no effect if foreclosure is not commenced within such
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sixty (60) day period:
4.2-4-1 Any management fees or billing fees under the
Management Agreement or any other similar agreements.
4.2-4-2 Any payments of principal or interest on loans
from Partners to the Partnership, whether for working capital purposes or
otherwise.
4.2-4-3 Any distributions of profit or return of capital
to the Partners except for the Priority Distribution which shall be paid in
accordance with the provisions of this Agreement to York Hannover to permit
payments of interest on the York Hannover/NH Loan.
4.2-4-4 Any payment of funds by the Partnership to any
Partner (other than Priority Distributions or the payment of expenses for leased
employees or payroll expense to Partners in the ordinary course of business) or
any third party outside the ordinary course of the Partnership Business.
4.2-5 National HealthCare L.P. shall promptly notify the
Partners upon any acceleration of the York Hannover/NH Loan and upon the
disposition of the foreclosed collateral. Subject to federal and state laws,
rules and regulations regarding the confidentiality of patient health care
records, the Partners agree to provide to National HealthCare L.P. reasonable
access to those books and records necessary to facilitate the disposition of the
foreclosed collateral and to cooperate in all reasonable requests of National
HealthCare L.P. in disposition of the collateral.
4.3 Liquidation or Dissolution. In the event of a Liquidation
or Dissolution, the assets of the Partnership shall be distributed to the
Partners in accordance with the balances in their respective Capital Accounts,
after taking into account the allocations of Profit and Loss pursuant to Section
4.1, if any, and distributions of cash or property pursuant to Section 4.1, if
any.
4.4 General.
4.4-l If any assets of the Partnership are distributed to
the Partners in kind, such assets shall be valued on the basis of the fair
market value thereof, and any Partner entitled to any interest in such assets
shall receive such interest as a tenant-in-common with all other Partners so
entitled, if any, subject to Section 4.4-3. The fair market value of such assets
shall be determined by an independent appraiser who shall be selected by
agreement of the Operating Partner and the Administrative Partner. Such
appraiser shall be a member of the Master Appraisal Institute, or comparable
organization. Based upon such fair market value, the Profit or Loss for each
unsold asset shall be
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determined as if such asset had been sold at its fair market value, and such
Profit or Loss shall be allocated as provided in Section 4.1 and shall be
properly credited or charged to the Capital Accounts of the Partners prior to
the Dissolution of the assets in Liquidation pursuant to Section 4.3.
4.4-2 All Profit and Loss of the Partnership shall be
allocated with respect to each taxable year of the Partnership as of the end of,
and within one hundred five (105) days after, the end of such taxable year.
4.4-3 All Profit and Loss shall be allocated, and all
distributions of cash shall be distributed, as the case may be, to the Persons
shown on the records of the Partnership to have been Partners on the day that
such allocation or distribution is to be made except that if a Partner sells,
exchanges or otherwise disposes of all or any portion of its Partnership
Interest to any Person who during such fiscal year is admitted as a Partner, the
Profit and Loss shall be allocated between (and cash distributed to) the
transferor and the transferee on the basis of their pro rata shares based on the
year in which the transfer occurred.
4.4-4 The methods set forth hereinabove by which Profit,
Loss, and Distributions are allocated, apportioned and paid are hereby expressly
consented to by each Partner as an express condition to becoming a Partner.
4.4-5 Notwithstanding anything to the contrary otherwise
contained in this Agreement and solely for purposes of determining a Partner's
liability with respect to a creditor of the Partnership under applicable law, to
the extent that depreciation, cost recovery or other deductions or distribution
taken by a Partner shall cause a deficit in such Partner's Capital Account, such
deficit, to the extent of the amount of any depreciation cost recovery, or other
deductions or distributions so taken, shall not be deemed an asset of the
Partnership or the personal liability of any such Partner.
SECTION V: THE PARTNERS, RIGHTS, POWERS, AND DUTIES
5.1 Operation of the Partnership. The management of the
Partnership and the Partnership Business shall be vested in the Operating
Partner. It shall have control over the Business of the Partnership and assume
direction of its operations. The Operating Partner shall consult and confer as
far as practicable with the other Partner or Partners. Except as otherwise
expressly provided in this Agreement or the management agreement to be executed
by and among the Partnership, York Hannover and the Operating Partner (the
"Management Agreement"), however, all things to be done by the Partnership shall
be done under the Operating Partner's control and supervision.
5.2 Administrative Partner. The Administrative Partner shall
perform all duties
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pursuant to the Management Agreement as are specified therein to be performed by
it and as may be reasonably assigned by the Operating Partner and compensated
for by the Partnership.
5.3 Partners' Concerns. By way of illustration, but not by
limitation, the areas in which Partners holding Partnership Interests of at
least sixty-one percent (61%) must consent to those decisions affecting the
Partnership include the following:
5.3-1 The incurrence of any Partnership debt for borrowed
money;
5.3-2 Transferring, hypothecating, compromising, or
releasing any Partnership claim except on payment in full;
5.3-3 Selling, leasing, or hypothecating any Partnership
property or entering into any contract for any such purpose, other than in the
ordinary course of the Partnership's Business
5.3-4 Knowingly suffering or causing anything to be done
whereby Partnership property may be seized or attached or taken in execution, or
its ownership or possession otherwise endangered
5.3-5 Expansion of either the Products and Services
offered by the Partnership or of the Partnership Market;
5.3-6 The undertaking of any acquisition of a business or
of any property other than in the ordinary course of business;
5.3-7 Any amendment of the Management Agreement;
5.3-8 The entering into of any contract, other than the
Management Agreement, between the Partnership and an Affiliate of either Partner
covering more than one year or more than $5,000 in the aggregate or the purchase
from an Affiliate of either Partner of goods and services in one transaction or
a series of transactions of more than $7,500; or
5.3-9 The entering into of any agreement for the lease,
purchase, or sale of goods, services and property, in which the property leased,
purchased or sold thereunder exceeds a value of $25,000, other than in the
ordinary course of business.
5.4 Premises. The Partnership shall acquire, as soon as
reasonably practicable, a building in Brooksville, Florida for use by the
Partnership in conducting the Partnership Business.
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5.5 Execution of Documents. Except as otherwise provided
herein or in that certain management agreement referenced at Section 5.1 hereof,
the Operating Partner shall have the full power to execute, for and on behalf of
the Partnership, any and all documents and instruments which may be necessary or
desirable to carry on the Partnership Business.
5.6 Duties and Obligations Performed in Good Faith. The
Operating Partner shall be under a fiduciary duty to conduct the affairs of the
Partnership in the best interests of the Partnership, including the safekeeping
and use of all Partnership funds and assets for the benefit of the Partnership.
The Operating Partner shall at all times act in good faith and exercise due
diligence in all activities relating to the conduct of the business of the
Partnership.
5.7 Kenneth Norfleet Employment Agreement. Each Partner
acknowledges and agrees that the Partnership shall enter into an acceptable
employment agreement with Kenneth Norfleet, Chief Pharmacist of York Hannover,
as soon as practicable after the execution of this Agreement, and that pending
the execution of such employment agreement Mr. Norfleet will be employed by the
Partnership at his current rate of compensation.
SECTION VI: ACCOUNTING RECORDS
6.1 Books, Records and Reports.
6.1-1 Books of Account. Proper books of account shall be
kept by the Operating Partner or under its direction and control for the
Partnership, in accordance with generally accepted accounting principles on an
accrual basis for both financial accounting and tax purposes, and entries shall
be made therein of all monies expended and received by the Partnership as well
as all other transactions relating to the Partnership usually or properly
entered in books of account, including a Capital Account for each Partner.
6.1-2 Reports. The Operating Partner shall prepare and
distribute monthly balance sheets, income statements and statements of the
Partners' equity to each Partner within thirty (30) days following the last day
of each month. All such reports shall be prepared in accordance with generally
accepted accounting principles. The annual balance sheets, income statements and
statements of Partners' equity shall cover the immediately preceding twelve (12)
calendar month period, and will be distributed to each Partner within sixty (60)
days after year end. In addition to the above, the Operating Partner, on behalf
of the Partnership, shall prepare tax documentation including Schedules K-1 for
each Partner.
6.1-3 Availability of Books and Records. The Operating
Partner shall make available to each Partner and its agents, for inspection and
copying at the requesting Partner's expense upon reasonable notice and during
regular business hours, the books and records of the Partnership. All
information obtained by reason of such inspection shall be
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deemed to be confidential and proprietary, and shall be so held. Each Partner,
at its own expense, may cause an audit to be conducted of the Partnership's
books and records (but not more often than annually) by an independent auditor.
The Operating Partner shall cooperate in the conduct of such audit.
6.1-4 Access to Books and Records. The Operating Partner
agrees, upon a proper request from the Comptroller General of the United States,
the U.S. Department of Health and Human Services, or their duly authorized
representatives, to allow such agency prompt access to the Partnership's books,
records and documents which may be necessary to verify the nature and extent of
the costs of services provided under this Agreement. Agency access shall be
permitted for a period of four (4) years from the date any services are provided
or performed under this Agreement. The Operating Partner shall notify all other
Partners immediately upon receipt of any request from an agency, or its
representative, for access to the Partnership's books and records.
6.2 Tax Elections. In connection with any assignment or
transfer of a Partnership Interest permitted by the terms of this Agreement, the
Operating Partner, with the consent of the other remaining Partner(s), shall
cause the Partnership, at the request of the transferor or the transferee or
successor to such Interest, on behalf of the Partnership and at the time and in
the manner provided in Treasury Regulations 1.754-l(b) (or any like statute or
regulation then in effect), to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b) and 743(b), of
the Code or any like statute or regulation then in effect.
6.3 Tax Returns. Each tax return and any other statement to be
filed by the Partnership with the Internal Revenue Service or any other taxing
authority shall be prepared by the Operating Partner or a preparer designated by
the Operating Partner, and such returns shall be distributed to all of the
Partners within one hundred five (105) days after the end of the fiscal year of
the Partnership. Each of the Partners shall in its respective income tax return
and other statements filed with the Internal Revenue Service, or other taxing
authority, report taxable income in accordance with the provisions of this
Agreement.
6.4 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year unless otherwise agreed to by the Operating Partner and the
Administrative Partner. As used in this Agreement, a fiscal year shall include
any partial fiscal year at the beginning and ending of the Partnership.
SECTION VII: TRANSFER OF PARTNER'S INTEREST; ADDITIONAL PARTNERS
7.1 Transfer of Partner's Interest. The Partnership Interest
of each Partner (including such Partner's right to receive a share of the
profits and a return of its Capital Account) shall not be transferred, sold,
assigned, pledged, optioned or otherwise transferred,
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by contract, operation of law or otherwise except through the process described
at Section 7.2, the Put Agreement and the Option to Purchase Additional
Partnership Interest, each to be executed on the Closing date, or with the
written consent of the each and every Partner. The Operating Partner shall amend
the Partnership Agreement to reflect any assignment made under this Section or
Section 7.2 whereby the assignee is to become a Partner. Any purported transfer
which does not meet the requirements of this Section, the Put Agreement, the
Option to Purchase Additional Partnership Interest or Section 7.2 shall be void
and of no effect. However, York Hannover and its permitted assignees shall be
permitted to assign its Partnership Interest to an Affiliate (including by means
of a merger or consolidation of York Hannover with or into another Affiliate)
if, but only if, UPC consents to such assignment, which consent shall not be
unreasonably withheld. Further, York Hannover and its permitted assigns shall be
permitted to pledge York Hannover's Partnership Interest to National HealthCare
L.P. or other third-party lender, which pledge is hereby acknowledged and agreed
to by UPC subject, in the case of a pledge to a third-party lender other than
National HealthCare L.P., to UPC's review and consent to the pledge agreement
which consent shall not be unreasonably withheld.
7.2 Right of First Refusal. If any Partner receives an offer,
whether or not solicited by that Partner, from a person not then a Partner to
purchase all or any portion of the Partner's interest in the Partnership, and if
the Partner receiving the offer is willing to accept it, the Partner may
transfer the interest or portion specified in the offer only after it has
afforded the other Partners the right of first refusal. The Partner desiring to
make the transfer (the "Transferor") must notify the Partnership and each of the
Partners, in writing, of the terms of the proposed transfer.
7.2-1 If, but only if, the Partnership is composed of more
than two (2) Partners, the Partnership shall have the option to purchase the
interest at the lesser of (1) the value of the interest, as of the date the
notice of proposed transfer is received, as determined by an independent
appraiser selected by the non-transferring Partner (which appraiser must be a
member of the Master Appraisal Institute or comparable organization), or (2) the
same price and on the same terms as the proposed transfer.
7.2-2 If the Partnership declines to exercise its option,
or if the Partnership consists of only two (2) Partners, then any of the
Partners may negotiate with the Transferor. If any Partner makes an offer to the
Transferor which is equal to or more favorable than the terms included in the
notice of proposed transfer, then the Transferor shall transfer its interest to
such Partner. If more than one (1) Partner makes an offer to the Transferor
which is equal to or more favorable than the terms included in the notice of
proposed transfer, then the Transferor may transfer its interest to any offering
Partner, at its discretion.
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7.2-3 If neither the Partnership nor any Partner purchases
the Transferor's interest within sixty (60) days after the notice of proposed
transfer, the Transferor may transfer its interest at its discretion.
7.3 Costs of Transfer. All costs and expenses incurred by the
Partnership or the other Partners in connection with the transfer, sale or
assignment of a Partnership Interest in accordance with the provisions hereof,
including any filing fees and publishing costs and the reasonable fees and
disbursements of counsel, shall be prepaid by the assigning Partner, or if not
paid by it, then by the assignee.
7.4 Incapacity of a Partner. In the event of the Bankruptcy,
Insolvency, Incapacity, Termination or Dissolution of a Partner, only one (1)
duly appointed personal representative of such Partner shall be recognized by
the remaining Partners as having the authority to exercise the rights of such
Partner under this Agreement on behalf of its beneficiaries, successors or
assigns. Except as otherwise provided herein, the Bankruptcy, Insolvency,
Incapacity, Termination or Dissolution of a Partner shall not dissolve or
terminate the Partnership.
7.5 Additional Partners. On the written consent of each and
every Partner, additional Partners may be admitted at any time on terms and
conditions agreed upon by the existing Partners. Each new Partner shall be
admitted only if the new Partner shall have executed this Agreement or an
appropriate supplement to it in which the new Partner agrees to be bound by the
terms and provisions of this Agreement as they may be modified by that
supplement. Admission of a new Partner shall not cause dissolution or
termination of the Partnership .
7.6 Liability of a Withdrawn Partner.
7.6-1 If a Partner voluntarily withdraws from the
Partnership it shall be, and remain, liable for all obligations and liabilities
incurred by it as Partner prior to the time withdrawal becomes effective.
7.6-2 If a Partner sells, exchanges, or otherwise
disposes of all or any portion of its Partnership Interest it shall be, and
remain, Liable for all obligations and liabilities incurred by it as a Partner
prior to the time the admission of the assignee or transferee of all or a
portion of the Interest of the Partner as a successor or additional Partner to
the Partnership is effective.
SECTION VIII: DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
8.1 Events Causing Dissolution and Termination.
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8.1-1 The Partnership shall continue in effect until the
date set forth in Section 2.5 hereof, except that the Partnership shall dissolve
prior to such date upon the happening of any of the following events: (i) any
event which makes it unlawful for the Business of the Partnership to be carried
on or for the Partners to carry it on in partnership; (ii) the suspension or
exclusion of the Partnership from participation in either title XVIII or title
XIX of the Social Security Act, 42 U.S.C. ss.ss. 1395 and 1396; or (iii) the
failure to meet any other requirement necessary to the conduct of the
Partnership's business.
8.1-2 Dissolution of the Partnership shall be effective on
the day on which the event occurs giving rise to the Dissolution, but the
Partnership shall not terminate until this Agreement has been canceled and the
assets of the Partnership have been distributed as provided in Section 9 hereof.
IX. LIQUIDATION OF THE PARTNERSHIP
9.1 Liquidation.
9.1-1 As soon as practicable after the Dissolution of the
Partnership, the remaining Partners may give written notice to any Partner of
such fact and shall prepare a plan as to whether and in what manner the assets
of the Partnership shall be liquidated or transferred to a successor entity. All
expenses incurred in any reformation, or attempted reformation, of the
Partnership shall be deemed to be expenses of the Partnership.
9.1-2 The Operating Partner shall liquidate the assets of
the Partnership, apply and distribute the proceeds thereof in accordance with
Section 4.2 hereof and cause the termination of this Agreement.
9.1-3 Notwithstanding the provisions of Section 9.1-2
hereof, in the event the Operating Partner shall determine that an immediate
sale of part or all of the Partnership assets would cause undue loss to the
Partners, the Operating Partner, in order to avoid such loss, may, after having
given written notice to all Partners, either defer Liquidation of and withhold
from distribution for a reasonable time any assets of the Partnership except
those necessary to satisfy the Partnership's debts and obligations, or
distribute the assets to the Partners in kind.
SECTION X: MISCELLANEOUS
10.1 Notices. Any notice which may or is required to be given
hereunder shall be deemed given when deposited into the custody of the United
States Post Office and properly posted and addressed. If such notice is mailed,
it shall be deposited, registered or certified, return receipt requested, in the
United States mail, addressed to each Partner at the address set forth after its
respective name below, or at such different address as to which
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either Partner shall have theretofore given notice hereunder.
If to UPC: James Cialdini, Vice President
United Professional Companies, Inc.
3724 West Wisconsin Avenue
Milwaukee, WI 53208
With a Copy to: United Health, Inc.
105 West Michigan Street
Milwaukee, WI 53202
Attention: Legal Department
If to York
Hannover: c/o Lenox Healthcare, Inc.
The Berkshire Common
2 South Street, Suite 360
Pittsfield, MA 01201
Attention: Thomas M. Clarke, President
With a copy to: Freeborn & Peters
311 South Wacker Drive
Chicago, IL 60606
Attention: Amory Cummings, Esq.
10.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, successors and
assigns.
10.3 Waiver of Partition. Unless otherwise expressly
authorized in this Agreement, no Partner will, either directly or indirectly,
take any action to require partition or apportionment of the Partnership or of
any of its assets or properties. Notwithstanding any provisions of applicable
law to the contrary, each Partner (and its legal representative, successor or
assign) hereby irrevocably waives any and all right to maintain any action for
partition or to compel any sale with respect to its interest in, or with respect
to any assets or properties of the Partnership, except as expressly provided in
this Agreement.
10.4 No Oral Modifications; Amendments. No oral amendment of
this Agreement shall be binding on the Partners. Any modification or amendment
of this Agreement must be in writing signed by all the Partners.
10.5 Captions. Any article, section or paragraph titles or
captions contained in
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this Agreement and the table of contents are for convenience of reference only
and shall not be deemed a part of this Agreement.
10.6 Terms. Common nouns and pronouns shall be deemed to refer
to the masculine, feminine, neuter, singular and plural, as the identity of the
person or persons, firm or corporation may in the context require. Any reference
to the Code or other statutes or laws shall include all amendments,
modifications or replacements of the specific sections and provisions concerned.
10.7 Invalidity. If any provision of this Agreement shall be
held invalid, the same shall not affect in any respect whatsoever the validity
of the remainder of this Agreement.
10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument.
10.9 Further Assurances. The parties hereto agree that they
will cooperate with each other and will execute and deliver, or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from tim-e to time in order to
effectuate the provisions and purposes hereof.
10.10 Complete Agreement. This Agreement constitutes the
complete and exclusive statement of the agreement between the Partners as to the
matters set forth herein. It supersedes all prior written and oral statements
and no representation, statement, condition or warranty not contained in this
Agreement shall be binding on the Partners or have any force or effect
whatsoever.
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IN WITNESS WHEREOF, the Partners acknowledge that this
Agreement of Partnership is their act, and acknowledge under the penalties for
perjury, to the best of their knowledge, information and belief, that they have
executed this Agreement under seal as of the date set forth hereinabove.
WITNESS: UNITED PROFESSIONAL COMPANIES, INC.
/s/ By: /s/
- ---------------------------- ---------------------------------
Title:
-----------------------------
WITNESS: YORK HANNOVER PHARMACEUTICALS, INC.
/s/ By: /s/
- ---------------------------- --------------------------------
Title:
-----------------------------
WITNESS: STOCKBRIDGE INVESTMENT PARTNERS, INC.
/s/ By: /s/
- ----------------------------- -------------------------------
Title:
-----------------------------
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EXHIBIT 23.2
Independent Auditor's Consent and Report on Schedules
February 5, 1997
To the Board of Directors and Stockholders of
MetroVision of North America, Inc.
We consent to the use in this Registration Statement of MetroVision of
North America, Inc. on Form S-4 of our report dated March 8, 1996, which
expresses an unqualified opinion and includes an explanatory paragraph referring
to MetroVision's ability to continue as a going concern, appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedules of MetroVision of North
America, Inc., listed in Item 21(b). These financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
herein.
DANNIBLE & MCKEE, LLP
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated August 14, 1996 for York Hannover Pharmaceuticals, Inc. for the
years ended December 31, 1995 and 1994 included in MetroVision of North America
Inc.'s Form S-4 and to all references to our Firm included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 4, 1997
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated August 14, 1996 for York Hannover Partnership for the year ended
December 31, 1995 included in MetroVision of North America Inc.'s Form S-4 and
to all references to our Firm included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 4, 1997
