SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
[Amendment No. ___________]
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
HEART LABS OF AMERICA, INC
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
(5) Total fee paid:
____________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
____________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
(3) Filing party:
____________________________________________________________________
(4) Date filed:
____________________________________________________________________
<PAGE>
PRELIMINARY
HEART LABS OF AMERICA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1996
To the stockholders of Heart Labs of America, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Heart
Labs of America, Inc., a Florida corporation (the "Company"), will be held at
the Sheraton Inn Lakeside, 7769 W. Irlo Bronson Memorial Highway, Kissimmee,
Florida 34747, at 9:00 a.m., eastern daylight time on Tuesday, September 24,
1996, for the following purposes:
1. To elect three directors to each serve until the next annual meeting
of stockholders of the Company and until their successors have been duly elected
and qualified;
2. To ratify the selection of Grant-Schwartz Associates, CPA's as
independent public accountants of the Company for the fiscal year ending
December 31, 1996;
3. To consider and act upon a proposal to amend the Company's Articles
of Incorporation to increase the number of authorized shares of capital stock of
the Company;
4. To consider and act upon a proposal to amend the Company's Articles
of Incorporation to change the name of the Company to "Medical Industries of
America, Inc.;"
5. To consider and act upon a proposal to approve the 1996 Stock Option
Plan for Officers and Directors;
6. To consider and act upon a proposal to approve the 1996 Employee
Stock Option Plan; and
7. To consider and act upon a proposal to transact such other business
as may properly come before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on August 21, 1996,
are entitled to notice of and to vote at the meeting, or any adjournment
thereof.
Stockholders unable to attend the Annual Meeting in person are requested
to read the enclosed Proxy Statement and then complete and deposit the Proxy
together with the power of attorney or other authority, if any, under which it
was signed, or a notarized certified copy thereof, with the Company's transfer
agent, North American Transfer, 147 West Merrick Road, Freeport, New York 11520,
at least 48 hours (excluding Saturdays, Sundays and statutory holidays) before
the time of the Annual Meeting or adjournment thereof or with the chairman of
the Annual Meeting prior to the commencement thereof. Unregistered stockholders
who received the Proxy through an intermediary must deliver the Proxy in
accordance with the instructions given by such intermediary.
BY ORDER OF THE BOARD OF DIRECTORS
Dawn M. Drella, Secretary
September 9, 1996
THE PROXY STATEMENT WHICH ACCOMPANIES THIS NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS CONTAINS MATERIAL INFORMATION CONCERNING THE MATTERS TO BE
CONSIDERED AT THE MEETING, AND SHOULD BE READ IN CONJUNCTION WITH THIS NOTICE.
<PAGE>
PRELIMINARY
HEART LABS OF AMERICA, INC.
1903 S. CONGRESS AVENUE, SUITE 400
BOYNTON BEACH, FLORIDA 33426
(PRINCIPAL EXECUTIVE OFFICES)
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
--------------------
This Proxy Statement is being furnished to stockholders in connection
with the solicitation of proxies by the Board of Directors of Heart Labs of
America, Inc., a Florida corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at the Sheraton Inn
Lakeside, 7769 W. Irlo Bronson Memorial Highway, Kissimmee, Florida 34747, at
9:00 a.m., eastern daylight time, on Tuesday, September 24, 1996, and at any
adjournments thereof for the purpose of considering and voting upon the matters
set forth in the accompanying Notice of Annual Meeting of Stockholders (the
"Notice"). This Proxy Statement and the accompanying form of proxy are first
being mailed to stockholders on or about September 9, 1996. All costs of
soliciting proxies will be borne by the Company.
The close of business on August 21, 1996 has been fixed as the record
date ("Record Date") for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof. As of the record
date, there were 20,199,511 shares of Common Stock, no par value, issued and
outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock on the Record Date is necessary to constitute a quorum at
the Annual Meeting. Abstentions and broker non-votes will be counted towards a
quorum. If a quorum is not present or represented by proxy at the Annual
Meeting, the stockholders present or represented by proxy at the Annual Meeting
have the power to adjourn the Annual Meeting from time to time, without notice
other than an announcement at the Annual Meeting, until a quorum is present or
represented by proxy. At any such adjourned Annual Meeting at which a quorum is
present or represented by proxy, any business may be transacted that might have
been transacted at the original Annual Meeting.
With respect to the election of directors, votes may be cast in favor or
withheld. Directors are elected by a plurality of the votes cast at the Annual
Meeting, and votes that are withheld will be excluded entirely from the vote and
will have no effect. Stockholders may not cumulate their votes in the election
of directors. The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at the Annual Meeting is
required for approval of Items 2, 3, 4, 5 and 6. Abstentions will have the same
effect as a vote against a proposal.
Brokers who hold shares in street name for customers are required to
vote those shares in accordance with instructions received from the beneficial
owners. In addition, brokers are entitled to vote on certain items, such as the
election of directors, the ratification of auditors and other "discretionary
items," even when they have not received instructions from beneficial owners.
Brokers are not permitted to vote for "non-discretionary" items without specific
instructions from the beneficial owners. Under applicable Florida law, broker
non-votes will have no effect on any of the proposals.
All shares represented by properly executed proxies, unless such proxies
have been previously revoked, will be voted at the Annual Meeting in accordance
with the directions set forth on such proxies. If no direction is indicated, the
shares will be voted (i) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, (ii) FOR
THE APPROVAL OF THE INDEPENDENT PUBLIC ACCOUNTANTS, (iii) FOR AN AMENDMENT TO
THE
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PRELIMINARY
COMPANY'S ARTICLES OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES
OF CAPITAL STOCK, (iv) FOR AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION CHANGING THE NAME OF THE COMPANY TO "MEDICAL INDUSTRIES OF
AMERICA, INC," (v) FOR APPROVAL OF THE 1996 STOCK OPTION PLAN FOR OFFICERS AND
DIRECTORS, AND (vi) FOR APPROVAL OF THE 1996 EMPLOYEE STOCK OPTION PLAN.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by (a) the execution and submission of
a revised proxy, (b) written notice to the Secretary of the Company or (c)
voting in person at the Annual Meeting.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995 is being mailed with this Proxy Statement. The Annual
Report does not form any part of the material for solicitation of proxies.
The Company will provide, without charge, a copy of the exhibits to its
Annual Report on Form 10-KSB, upon written request to Dawn M. Drella, Secretary
of the Company, at 1903 S. Congress Avenue, Suite 400, Boynton Beach, Florida
33426; fax number (561) 737-5008.
ITEM 1
ELECTION OF DIRECTORS
DIRECTOR NOMINEES
The directors are elected annually by the stockholders of the Company.
The Bylaws of the Company provide that the number of directors will be
determined by the Board of Directors. The stockholders will elect three
directors for the coming year. All of the nominees presently serve as directors
of the Company.
Although the Board of Directors of the Company does not contemplate that
any of the nominees will be unable to serve, if such a situation arises prior to
the Annual Meeting, the persons named in the enclosed Proxy will vote for the
election of such person(s) as may be nominated by the Board of Directors. The
Company's directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified.
HARRY KOBRIN (AGE 60). Mr. Kobrin has served as a director of the
Company since November 1995, and as president and chief operating officer since
August 1996. Mr. Kobrin also served as the Company's executive vice president
from January 1996 through August 1996. In June 1992, Mr. Kobrin founded
Essential Care Medical Centers, Inc. and operated that company until it was
acquired by the Company in October 1995. From March 1989 until June 1992, Mr.
Kobrin owned and operated Donna Properties, a real estate agency located in
Lauderhill, Florida.
MICHAEL MORRELL (AGE 54). Mr. Morrell has served as a director of the
Company and as chairman of the board and chief executive officer since August
1996. From March 1994 through November 1995, Mr. Morrell served as president and
as a director of Westmark Group Holdings, Inc. ("Westmark"). From March 1994 to
January 1995, Mr. Morrell served as president of Churchill Technology. From
March 1990 to March 1994, Mr. Morrell served as president of Nexus Leasing Corp.
and Nexus Realty which he founded in March 1990. Mr. Morrell serves on the
Company's Audit and Compensation Committees.
PAUL PERSHES (AGE 53). Mr. Pershes has served as a director of the
Company since August 1996. Mr. Pershes has been a director of Weinberg, Pershes
and Company, P.A. since August 1995. From January 1993 to August 1995, Mr.
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PRELIMINARY
Pershes was a director of Pershes & Company, P.A. and its predecessor companies.
From December 1990 to December 1992, Mr. Pershes served as president of Temco
Service Industries, Inc. From 1973 to 1990, Mr. Pershes was a partner of
Laventhol & Horwath, a public accounting firm which subsequently filed a
petition under the U.S. Bankruptcy Code. Mr. Pershes is a certified public
accountant licensed in the states of New York and Florida. Mr. Pershes serves on
the Company's Audit and Compensation Committees.
COMMITTEES AND MEETINGS
The Board of Directors held 15 meetings in 1995, and each director of
the Company attended at least 75% of all Board meetings. In August 1996, the
Board established an Audit Committee and a Compensation Committee. The Audit
Committee reviews and reports to the Board on the financial results of the
Company's operations and the results of the audit services provided by the
Company's independent accountants, including the fees and costs for such
services. The Compensation Committee reviews compensation paid to management and
recommends to the Board appropriate executive compensation. Messrs. Morrell and
Pershes serve on both committees.
DIRECTORS' FEES
Directors will receive an annual fee of $7,500 and are entitled to
reimbursement for reasonable travel expenses incurred in attending board
meetings. Pursuant to the Company's Director Stock Option Plan, the Company's
outside directors (directors who are not employees of the Company) receive an
automatic grant of options to purchase 5,000 shares of the Company's Common
Stock upon election as director and an automatic grant of options to purchase an
additional 1,000 shares of Common Stock for each year of service thereafter, in
both instances at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant. In August 1996, the company granted
options to purchase 1,000,000 shares each to Messrs. Kobrin and Morrell and
options to purchase 500,000 shares to Mr. Pershes. These options are vested 50%
immediately, with the remaining 50% to vest at such time as determined by the
Compensation Committee. These options are exercisable at $.30 per share and
expire in August 1998.
REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership, and to furnish
the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with during 1995, except that Harry Kobrin failed to timely file a
Form 3.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTORS FOR ELECTION
BY THE SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH
OF THE NOMINEES LISTED ABOVE. THE ELECTION OF THESE DIRECTORS REQUIRES A
PLURALITY OF THE VOTES CAST BY THE HOLDERS OF SHARES OF COMMON STOCK PRESENT OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE IN THE ELECTION
OF DIRECTORS.
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PRELIMINARY
ITEM 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors wishes to obtain from the stockholders a
ratification of the Board's action in appointing Grant-Schwartz Associates,
CPA's as independent public accountants of the Company for the fiscal year
ending December 31, 1996. The engagement of Grant-Schwartz Associates, CPA's for
audit services has been approved by the Board of Directors. Representatives from
Grant-Schwartz Associates, CPA's are not expected to be present at the
Annual Meeting; and, therefore, will not have an opportunity to make any
statements or be available to respond to appropriate questions.
In the event the appointment of Grant-Schwartz Associates, CPA's as the
Company's independent public accountants for fiscal year 1996 is not ratified by
the stockholders, the adverse vote will be considered as a direction to the
Board of Directors to select other auditors for the following year. However,
because of the difficulty in making any substitution of auditors so long after
the beginning of the current year, it is contemplated that the appointment for
fiscal 1996 will be permitted to stand unless the Board finds other good reason
for making a change.
THE BOARD OF DIRECTORS HAS APPROVED THE APPOINTMENT OF GRANT-SCHWARTZ
ASSOCIATES, CPA'S AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 1996 AND UNANIMOUSLY
RECOMMENDS A VOTE FOR RATIFICATION OF SUCH APPOINTMENT. SUCH RATIFICATION
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF COMMON
STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
ITEM 3
INCREASE IN AUTHORIZED CAPITAL STOCK
The Company's Articles of Incorporation currently authorize the Company
to issue up to 20,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, no par value per share ("Preferred Stock"). Of the 5,000,000
shares of Preferred Stock authorized, 668,280 shares are designated as Series A,
200,000 shares are designated as Series B, and 1,500,000 shares are designated
as Series C. As of the Record Date, the Company had 20,199,511 shares of Common
Stock issued and outstanding. There are no shares of Series A, 200,000 shares of
Series B and 74,000 shares of Series C Preferred Stock issued and outstanding.
The Board of Directors deems it to be in the best interests of the
Company to increase the number of authorized shares of capital stock to
210,000,000 shares, consisting of 160,000,000 shares of Common Stock, no par
value per share, and 50,000,000 shares of Preferred Stock, no par value per
share. This increase is necessary in order to accommodate recent stock issuances
and to provide that there are a sufficient number of shares of Common Stock
available for issuance upon conversion of outstanding shares of the Company's
Preferred Stock and upon exercise of outstanding stock options and warrants. See
Articles of Amendment attached hereto as EXHIBIT A .
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK, AND
UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS AMENDMENT. SUCH APPROVAL
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF COMMON
STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
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PRELIMINARY
ITEM 4
CHANGE OF COMPANY NAME
The Board of Directors deems it to be in the best interest of the
Company to change the name of the Company from "Heart Labs of America, Inc." to
"Medical Industries of America, Inc." The Board of Directors believes that this
name better describes the business presently being conducted by the Company. To
effect this change in the Company's name, the Company's Articles of
Incorporation will be amended accordingly. See Articles of Amendment attached
hereto as EXHIBIT A.
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION CHANGING THE NAME OF THE COMPANY TO "MEDICAL INDUSTRIES OF
AMERICA,
INC." AND UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS AMENDMENT. SUCH
APPROVAL REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF
COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
ITEM 5
APPROVAL OF 1996 STOCK OPTION
PLAN FOR OFFICERS AND DIRECTORS
The Board of Directors has adopted, subject to shareholder approval, the
1996 Stock Option Plan for Officers and Directors ("1996 Officer and Director
Plan") to provide for the granting of incentive and non-qualified stock options
to officers and directors of the Company. The purpose of the 1996 Officer and
Director Plan is to foster and promote the financial success of the Company and
increase stockholder value by strengthening the Company's ability to attract and
retain qualified officers and directors in the employ of the Company by
furnishing suitable recognition of their efforts which contributed to the
success of the Company and to align their interests to the long-term interests
of the Company's stockholders.
GENERAL
The following is a summary description of the 1996 Officer and Director
Plan and is qualified in its entirety by reference to the full text of the 1996
Officer and Director Plan, which is attached to this proxy statement as EXHIBIT
B.
The 1996 Officer and Director Plan was adopted by the Board of Directors
on August 27, 1996. The 1996 Officer and Director Plan is to be administered by
a committee of at least two Board members which meets the plan administration
requirements of Rule 16b-3(c)(2) promulgated under the Securities Exchange Act
of 1934, as amended. Such requirements provide generally that plan
administrators shall not, during one year prior to service as an administrator
of a plan, or during the term of such service, be granted or awarded equity
securities under such plan or any other plan of the company or any of its
affiliates. The Compensation Committee, currently composed of Messrs. Morrell
and Pershes, is responsible for administration of the 1996 Officer and Director
Plan. The Compensation Committee has the authority to determine persons to whom
awards shall be granted, make awards in such form and amounts as it shall
determine, impose such limitations and conditions upon such awards as it shall
deem appropriate, interpret the 1996 Officer and Director Plan and prescribe,
amend and rescind rules and regulations relating to it, determine the terms and
provisions of the respective participants' agreements and make such other
determinations as it deems necessary or advisable for the administration of the
1996 Officer and Director Plan.
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PRELIMINARY
SHARES SUBJECT TO 1996 OFFICER AND DIRECTOR PLAN
Five million shares of Company Common Stock, no par value, are
authorized for issuance under the 1996 Officer and Director Plan.
PARTICIPANTS
Officers and directors of the Company are eligible to receive options
under the 1996 Officer and Director Plan.
TERMS AND CONDITIONS OF OPTIONS
The 1996 Officer and Director Plan provides for the grant of incentive
stock options (pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended) and non-qualified stock options. The exercise price of incentive stock
options shall be no less than 100% of the fair market value of a share of Common
Stock on the date of grant; provided, however, that incentive stock options
granted to any holder of 10% or more of the Company's Common Stock shall be no
less than 110% of the fair market value. The exercise price of non-qualified
stock options shall be no less than 85% of the fair market value. As of August
21, 1996, the last sale price of a share of the Company's Common Stock as
reported by Nasdaq was $.41.
The exercise price shall be paid in cash or, subject to the approval of
the Compensation Committee, in shares of Common Stock valued at their fair
market value on the date of exercise. The Compensation Committee has the
authority to determine the terms and provisions of each option granted,
including the term of each option and the time or period of time in which the
option will vest. The 1996 Officer and Director Plan provides, however, that no
option shall be exercisable after the expiration of 10 years from the date of
grant and no incentive stock option granted to a 10% shareholder shall be
exercisable after the expiration of five years from the date of grant.
CHANGE IN CONTROL
Upon a change in control of the Company, all options become immediately
exercisable. The 1996 Officer and Director Plan defines change in control to
mean (i) the acquisition by any person, after the effective date of the 1996
Officer and Director Plan, of 30% or more of the shares of voting securities of
the Company, unless the Board of Directors determines in its sole and absolute
discretion that no change in control has occurred, (ii) certain changes in the
composition of the Board of Directors as a result of a contested election for
positions on the Board of Directors, or (iii) any other event which the Board of
Directors determines constitutes a change in control of the Company.
TERMINATION
Except in the event of the death or permanent and total disability (as
defined) of a Participant or the termination of the employment of a participant
for cause (as defined), options are exercisable only while a participant is
employed or otherwise engaged by the Company or within three months after such
employment or engagement has terminated to the extent that such options were
exercisable on the last day of employment and had not expired by their terms. In
the event of the death or permanent and total disability of a participant,
options are exercisable within one year after such death or disability to the
extent that such options were exercisable on the last day of employment and had
not expired by their terms. In the event of the termination of the employment of
a participant for cause, all options held by such Participant terminate
immediately. Options are not transferrable other than by will, by the laws of
descent and distribution, or pursuant to certain domestic relations orders.
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PRELIMINARY
AMENDMENTS
The Board of Directors may at any time amend the 1996 Officer and
Director Plan in any respect; provided, however, that without the approval of
the Company's stockholders, no amendment may (i) increase the number of shares
of Common Stock that may be issued under the 1996 Officer and Director Plan,
(ii) materially increase the benefits accruing to Participants under the 1996
Officer and Director Plan, or (iii) materially modify the requirements as to
eligibility for participation in the 1996 Officer and Director Plan.
ADJUSTMENTS
The 1996 Officer and Director Plan provides for an adjustment in the
number of shares of Common Stock available under the 1996 Officer and Director
Plan, the number of shares subject to options, and the exercise prices of
options upon a change in the capitalization of the Company, a stock dividend or
split, a merger or combination of shares and certain other similar events.
TAX ASPECTS
A participant will not recognize any income for federal tax purposes at
the time a non-qualified stock option is granted, nor will the Company be
entitled to a deduction at that time. However, when any part of a non-qualified
stock option is exercised, the participant will recognize ordinary income in an
amount equal to the difference between the fair market value of the shares
received and the exercise price of the non-qualified stock option, and the
Company will generally recognize a tax deduction in the same amount.
A participant will not recognize any income at the time an incentive
stock option is granted, nor on a qualified exercise of an incentive stock
option. If a participant does not dispose of the shares acquired by exercise of
an incentive stock option within two years after the grant of the incentive
stock option and one year after the exercise of the incentive stock option, the
exercise is qualified and the gain or loss (if any) on a subsequent sale will be
a long-term capital gain or loss. Such gain or loss equals the difference
between the sum of sales proceeds and the exercise price for the stock sold. The
Company is not entitled to a tax deduction as a result of the grant or qualified
exercise of an incentive stock option. However, if shares acquired upon the
exercise of an incentive stock option are disposed of prior to the expiration of
the one-year and two-year holding periods, the exercise is not qualified and
special rules apply that require the Participant to recognize ordinary income
(at least in part) at the time of exercise equal to the excess (if any) of the
fair market value of the shares on the date of exercise over the exercise price.
The Company is generally entitled to a deduction at the same time and in the
same amount as the ordinary income recognized by the participant from such
disposition.
Although the qualified exercise of an incentive stock option will not
produce ordinary taxable income to the participant, it will produce an increase
in the participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.
BENEFITS UNDER THE 1996 OFFICER AND DIRECTOR PLAN
In August 1996, options to purchase an aggregate of 2,500,000 shares
were granted under the 1996 Officer and Director Plan. These options are
exercisable at a price of $.30 per share and expire in August 1998. The
Compensation Committee has not made any determination with respect to the
granting of any additional options under the 1996 Officer and Director Plan.
THE BOARD OF DIRECTORS HAS APPROVED THE 1996 STOCK OPTION PLAN FOR OFFICERS AND
DIRECTORS AND RECOMMENDS A VOTE FOR THE
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PRELIMINARY
APPROVAL AND RATIFICATION OF SUCH PLAN. SUCH APPROVAL AND RATIFICATION REQUIRES
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF COMMON STOCK
ENTITLED TO VOTE AND REPRESENTED IN PERSON OR BY PROXY AT THE MEETING.
ITEM 6
APPROVAL OF 1996 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
1996 Employee Stock Option Plan ("1996 Employee Plan") to provide for the
granting of incentive and non-qualified stock options to employees of the
Company and others. The purpose of the 1996 Employee Plan is to foster and
promote the financial success of the Company and increase stockholder value by
strengthening the Company's ability to attract and retain qualified Employees of
the Company by furnishing suitable recognition of their efforts which
contributed to the success of the Company and to align their interests to the
long-term interests of the Company's stockholders.
GENERAL
The following is a summary description of the 1996 Employee Plan and is
qualified in its entirety by reference to the full text of the 1996 Employee
Plan, which is attached to this proxy statement as EXHIBIT C.
The 1996 Employee Plan was adopted by the Board of Directors on August
27, 1996. The 1996 Employee Plan is to be administered by a committee of at
least two Board members which meets the plan administration requirements of Rule
16b-3(c)(2) promulgated under the Securities Exchange Act of 1934, as amended.
Such requirements provide generally that plan administrators shall not, during
one year prior to service as an administrator of a plan, or during the term of
such service, be granted or awarded equity securities under such plan or any
other plan of the company or any of its affiliates. The Compensation Committee,
currently composed of Messrs. Morrell and Pershes, is responsible for
administration of the 1996 Employee Plan. The Compensation Committee has the
authority to determine persons to whom awards shall be granted, make awards in
such form and amounts as it shall determine, impose such limitations and
conditions upon such awards as it shall deem appropriate, interpret the 1996
Employee Plan and prescribe, amend and rescind rules and regulations relating to
it, determine the terms and provisions of the respective participants'
agreements and make such other determinations as it deems necessary or advisable
for the administration of the 1996 Employee Plan.
SHARES SUBJECT TO 1996 EMPLOYEE PLAN
One million shares of Company Common Stock, no par value, are authorized
for issuance under the 1996 Employee Plan.
PARTICIPANTS
Employees and consultants are eligible to receive options under the 1996
Employee Plan.
TERMS AND CONDITIONS OF OPTIONS
The 1996 Employee Plan provides for the grant of incentive stock options
(pursuant to Section 422 of the Internal Revenue Code of 1986, as amended) and
non-qualified stock options. The exercise price of incentive stock options shall
be no less than 100% of the fair market value of a share of Common Stock on the
date of grant; provided, however, that incentive stock options granted to any
holder of 10% or more of the Company's Common Stock shall be no less than 110%
of the fair market value. The exercise price of non-qualified stock options
shall be no less than
8
PRELIMINARY
85% of the fair market value. As of August 21, 1996, the last sale price of a
share of the Company's Common Stock as reported by Nasdaq was $.41.
The exercise price shall be paid in cash or, subject to the approval of
the Compensation Committee, in shares of Common Stock valued at their fair
market value on the date of exercise. The Compensation Committee has the
authority to determine the terms and provisions of each option granted,
including the term of each option and the time or period of time in which the
option will vest. The 1996 Employee Plan provides, however, that no option shall
be exercisable after the expiration of 10 years from the date of grant and no
incentive stock option granted to a 10% shareholder shall be exercisable after
the expiration of five years from the date of grant.
CHANGE IN CONTROL
Upon a change in control of the Company, all options become immediately
exercisable. The 1996 Employee Plan defines change in control to mean (i) the
acquisition by any person, after the effective date of the 1996 Employee Plan,
of 30% or more of the shares of voting securities of the Company, unless the
Board of Directors determines in its sole and absolute discretion that no change
in control has occurred, (ii) certain changes in the composition of the Board of
Directors as a result of a contested election for positions on the Board of
Directors, or (iii) any other event which the Board of Directors determines
constitutes a change in control of the Company.
TERMINATION
Except in the event of the death or permanent and total disability (as
defined) of a Participant or the termination of the employment of a participant
for cause (as defined), options are exercisable only while a participant is
employed or otherwise engaged by the Company or within three months after such
employment or engagement has terminated to the extent that such options were
exercisable on the last day of employment and had not expired by their terms. In
the event of the death or permanent and total disability of a participant,
options are exercisable within one year after such death or disability to the
extent that such options were exercisable on the last day of employment and had
not expired by their terms. In the event of the termination of the employment of
a participant for cause, all options held by such Participant terminate
immediately. Options are not transferrable other than by will, by the laws of
descent and distribution, or pursuant to certain domestic relations orders.
AMENDMENTS
The Board of Directors may at any time amend the 1996 Employee Plan in
any respect; provided, however, that without the approval of the Company's
stockholders, no amendment may (i) increase the number of shares of Common Stock
that may be issued under the 1996 Employee Plan, (ii) materially increase the
benefits accruing to participants under the 1996 Employee Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
1996 Employee Plan.
ADJUSTMENTS
The 1996 Employee Plan provides for an adjustment in the number of
shares of Common Stock available under the 1996 Employee Plan, the number of
shares subject to options, and the exercise prices of options upon a change in
the capitalization of the Company, a stock dividend or split, a merger or
combination of shares and certain other similar events.
9
PRELIMINARY
TAX ASPECTS
A participant will not recognize any income for federal tax purposes at
the time a non-qualified stock option is granted, nor will the Company be
entitled to a deduction at that time. However, when any part of a non-qualified
stock option is exercised, the participant will recognize ordinary income in an
amount equal to the difference between the fair market value of the shares
received and the exercise price of the non-qualified stock option, and the
Company will generally recognize a tax deduction in the same amount.
A participant will not recognize any income at the time an incentive
stock option is granted, nor on a qualified exercise of an incentive stock
option. If a participant does not dispose of the shares acquired by exercise of
an incentive stock option within two years after the grant of the incentive
stock option and one year after the exercise of the incentive stock option, the
exercise is qualified and the gain or loss (if any) on a subsequent sale will be
a long-term capital gain or loss. Such gain or loss equals the difference
between the sum of sales proceeds and the exercise price for the stock sold. The
Company is not entitled to a tax deduction as a result of the grant or qualified
exercise of an incentive stock option. However, if shares acquired upon the
exercise of an incentive stock option are disposed of prior to the expiration of
the one-year and two-year holding periods, the exercise is not qualified and
special rules apply that require the Participant to recognize ordinary income
(at least in part) at the time of exercise equal to the excess (if any) of the
fair market value of the shares on the date of exercise over the exercise price.
The Company is generally entitled to a deduction at the same time and in the
same amount as the ordinary income recognized by the participant from such
disposition.
Although the qualified exercise of an incentive stock option will not
produce ordinary taxable income to the participant, it will produce an increase
in the participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.
BENEFITS UNDER THE 1996 EMPLOYEE PLAN
As of the date hereof, no options have been granted under the 1996
Employee Plan. Additionally, the Compensation Committee has not made any
determination with respect to the granting of any options under the 1996
Employee Plan.
THE BOARD OF DIRECTORS HAS APPROVED THE 1996 EMPLOYEE STOCK OPTION PLAN AND
RECOMMENDS A VOTE FOR THE APPROVAL AND RATIFICATION OF SUCH PLAN. SUCH APPROVAL
AND RATIFICATION REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
SHARES OF COMMON STOCK ENTITLED TO VOTE AND REPRESENTED IN PERSON OR BY PROXY AT
THE MEETING.
10
PRELIMINARY
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION
Michael Morrell (1) 54 Chairman of the Board and Chief
Executive Officer
Harry Kobrin(1) 60 President and Chief Operating Officer
Dawn M. Drella 29 Chief Financial Officer and Secretary
- -----------------------
(1) Biographical information with respect to these officers was previously
described in Item 1.
DAWN M. DRELLA has been chief financial officer of the Company since
April 1995. She also served as the controller of the Company from June 1993
until April 1995. From February 1996 to June 1996, Ms. Drella served as chief
financial officer of Westmark. Ms. Drella served as a staff accountant at Jones
& Hall, PA from 1992 to 1993. From 1991 through 1992, Ms. Drella served as
controller of RCC Associates, Inc., a general contracting firm that specialized
in high end retail stores. Ms. Drella is a certified public accountant.
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board. There is no family relationship
between or among any executive officers, directors and director nominees.
11
PRELIMINARY
STOCK OWNERSHIP
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's Common Stock as of the Record
Date by (i) each person known by the Company to beneficially own more than 5% of
the Company's Common Stock, (ii) each of the Company's directors and director
nominees, (iii) each named executive officer, and (iv) all directors and
officers of the Company as a group.
SHARES OF PERCENTAGE
NAME AND ADDRESS COMMON STOCK OF CLASS
Harry Kobrin................................ 1,182,829(1) 5.6%
1903 S. Congress Avenue, Ste. 400
Boynton Beach, FL 33426
Michael Morrell............................. 500,000(2) 2.4%
1903 S. Congress Avenue, Ste. 400
Boynton Beach, FL 33426
Paul C. Pershes............................. 250,000(3) 1.2%
1903 S. Congress Avenue, Ste. 400
Boynton Beach, FL 33426
Dawn Drella................................. 20,000(4) *
1903 S. Congress Avenue, Ste. 400
Boynton Beach, FL 33426
All Directors and Executive
Officers as a Group......................... 1,952,829(1)(2)(3)(4) 9.0%
- -------------------------------
*less than 1%
(1) Includes currently exercisable options to purchase (i) 5,000 shares of
Common Stock at $2.875 per share; (ii) 264,000 shares at $.375 per
share; and (iii) 500,000 shares at $.30 per share.
(2) Includes currently exercisable options to purchase 500,000 shares of
Common Stock at $.30 per share.
(3) Includes currently exercisable options to purchase 250,000 shares of
Common Stock at $.30 per share.
(4) Includes currently exercisable options to purchase 10,000 shares of
Common Stock at $3.25 per share and 10,000 shares at $1.00 per share.
12
PRELIMINARY
EXECUTIVE COMPENSATION
The following table sets forth the information with respect to each
person who served in the capacity of chief executive officer during 1995, and
other officers of the Company whose total annual salary and bonus for the fiscal
year ended December 31, 1995 exceeded $100,000 (collectively, the "Named
Executive Officers"). These Named Executive Officers receive perquisites and
other personal benefits in amounts less than 10% of their total annual salary
and bonus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------ ------- ------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cornelius F. Wit, 1995 $83,043 -- -- 120,000 --
Chief Executive 1994 -- -- -- -- --
Officer (1) 1993 -- -- -- -- --
Edwin F. Russo, 1995 $17,308(3) -- -- 5,000 $159,375(4)
Chief Executive 1994 -- -- -- -- --
Officer (2) 1993 -- -- -- -- --
Norman J. Birmingham 1995 $21,461(6) -- -- 5,000 $ 53,125(7)
Chief Executive 1994 -- -- -- -- --
Officer(5) 1993 -- -- -- -- --
</TABLE>
- ------------------------
(1) Mr. Wit served as chief executive officer from February 1995 to August
1995.
(2) Mr. Russo served as chief executive officer from August 1995 to November
1995.
(3) Does not include the use of an automobile valued at $150 per month.
(4) In October 1995, Mr. Russo received 75,000 shares of Common Stock valued
at $159,375 for services rendered.
(5) Mr. Birmingham served as chief executive officer from November 1995
through June 1996.
(6) Does not include (i) approximately $6,195 in airfare to and from Mr.
Birmingham's home in Michigan; (ii) use of an automobile provided by
Westmark at a cost of approximately $1,200 per month; (iii) annual
compensation from Westmark of $87,500 and (iv) $13,000 in compensation
from Greenworld Technologies, Inc, a former subsidiary of the Company.
(7) In October 1995, an affiliate of Mr. Birmingham received 25,000 shares
of Common Stock valued at $53,125 for services rendered.
EMPLOYMENT AGREEMENTS
In April 1996, the Company entered into three-year employment agreements
with Harry Kobrin and Dawn Drella pursuant to which they will be entitled to
receive base salaries of $120,000 and $60,000, respectively. In addition, the
Company provides Mr. Kobrin and Ms. Drella with automobiles at a cost to the
Company of $550 and $1,300 per month, respectively. Mr. Kobrin's agreement was
amended in August 1996 to provide for the grant of an option to purchase
1,000,000 shares of Common Stock at an exercise price of $.30 per share, which
option will expire in August 1998. These options are vested 50% immediately,
with the remaining 50% to vest as determined by the Compensation Committee.
13
PRELIMINARY
In August 1996, the Company entered into a five-year employment
agreement with Michael Morrell, pursuant to which he will be entitled to receive
an annual salary of $150,000, as well as options to purchase 1,000,000 shares of
Common Stock at an exercise price of $.30 per share which expire in August 1998.
These options are vested 50% immediately, with the remaining 50% to vest at such
time and on such terms as determined by the Compensation Committee.
The following tables show, as to the Named Executive Officers, certain
information concerning stock options.
1995 STOCK OPTION GRANTS
OPTIONS PERCENT OF EXERCISE
GRANTED TOTAL OPTIONS PRICE EXPIRATION
NAME (SHARES) GRANTED (PER SHARE) DATE
- -------------------- ------- ------- ----------- ---------------
Cornelius F. Wit 20,000 12% $ 1.50 March 2000
100,000 59% $ 1.125 April 2000
Edwin F. Russo 5,000 3% $ 1.312 November 1996
Norman J. Birmingham 5,000 3% $ 2.875 November 1996
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED
ACQUIRED VALUE UNEXERCISED IN-THE-MONEY
NAME ON EXERCISE REALIZED(1) OPTIONS OPTIONS(1)
- -------------------- ---------- ---------- ---------- ----------
Cornelius F. Wit 20,000 $ 7,400 -- --
15,000 $ 13,050 85,000 $ 73,950(2)
Edwin F. russo -- -- 5,000 $ 3,440
Norman J. Birmingham -- -- 5,000 (3)
- --------------------
(1) Values are determined based on the difference between the exercise price
and the fair market value per share as of the exercise date or December
31, 1995, as the case may be.
(2) These options subsequently terminated unexercised upon Mr. Wit's
resignation from the company.
(3) These options were not in the money as of December 31, 1995.
LONG-TERM EMPLOYEE PLANS
The Company does not have any long-term incentive plans.
EMPLOYEE STOCK OPTION PLAN
In May 1992, the Company adopted a Stock Option Plan (the "Plan") under
which 200,000 shares of Common Stock are reserved for issuance upon exercise of
options. The Plan is designed to serve as an incentive for retaining qualified
and competent employees. The Company's Board of Directors or a Committee thereof
(the "Committee")
14
PRELIMINARY
administers and interprets the Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers and
directors.
The Plan provides for the granting of both incentive stock options and
non-qualified stock options. Options are granted under the Plan on such terms
and at such price as determined by the Committee, except that the per share
exercise price of incentive stock options cannot be less than the fair market
value of the Common Stock on the date of grant and the per share price of
non-qualified stock options will not be less than 85% of the fair market value
on the date of grant. Options granted under the Plan are not transferable other
than by will or intestate distribution and no option can be exercised until six
months after the date of grant or after the expiration of 10 years from the date
of grant. To date, 20,000 options are outstanding under the Plan.
DIRECTOR STOCK OPTION PLAN
In May 1992, the Company adopted a Director Stock Option Plan (the
"Director Plan") under which 20,000 shares of common stock are reserved for
issuance upon exercise of options. In July 1995, the Director Plan was amended
to increase the number of shares available thereunder to 60,000. The Director
Plan is designed to serve as an incentive for attracting and retaining qualified
and competent Directors.
Pursuant to the Director Plan, each eligible Director is granted 5,000
shares when he is elected or appointed to the Board and on each Annual Meeting
date thereafter, provided that on the annual grant date he is still a director
of the Company. The exercise price per share of the options is the fair market
value of the shares underlying the options on the date of grant. Options granted
under the Director Plan are not transferable, other than by will or intestate
distribution and no option can be exercised until six months after the date of
grant or after 5 years from the date of grant. In the event that the grantee
ceases to be a Director due to (i) cause, the options immediately expire; (ii)
death, the option expires one year for the Director's death; and (iii) any other
reason, the option expires three months from the date the grantee ceases to act
as a Director. To date, 20,000 options are outstanding under the Director Plan.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company maintains a $3,000,000 Director and Officer and Company
Reimbursement Insurance Policy (the "Policy"). The Policy will pay the
judgments, damages, settlement and defense costs ("loss") of each director or
officer of the Company and reimburse the Company for any loss due to any alleged
breach of duty, neglect, error misstatement, misleading statement, omissions or
act by the directors or officers of the Company except losses arising out of or
in connection with, among other things (i) gaining personal profit or advantage;
(ii) criminal or deliberate fraudulent acts; (iii) self dealing; (iv) violations
of Sections 16(b) of the Securities Exchange Act of 1934 and amendments thereto
or similar state laws; (vi) certain corporate takeover transactions; (vii)
failure to maintain insurance; (viii) pending or prior litigation or actions
derived from the same facts as the pending or prior litigation (ix) violations
of the Environmental Protection Act or similar laws and, (x) violations of the
Employee Retirement Income Security Act of 1974 or amendments thereto or any
similar state or common law.
CERTAIN TRANSACTIONS
COMPENSATION OF DIRECTORS
During October 1995, the Company issued shares of the Company's common
stock to the following directors and former directors for services rendered as
advisors and consultants: Edwin F. Russo - 75,000 shares; Frank Dolney - 75,000
shares; Budget Services (of which Norman Birmingham is the sole shareholder) -
25,000 shares; and Medical Industries Consulting, Inc. (of which Jean Johnstone
is a majority shareholder) - 75,000 shares. These shares were valued at
$159,375, $159,375, $53,125 and $159,375, respectively. Mr. Birmingham was not
an officer or director
15
PRELIMINARY
of the Company at the time that the Budget Services shares were issued. These
shares were issued for services rendered to Technomed, Inc., a subsidiary of the
Company. Subsequent to year end, Mr. Dolney returned his shares to the Company.
WESTMARK GROUP HOLDINGS, INC.
In November 1995, the Company signed a Share Exchange Agreement with
Westmark pursuant to which the Company received a 49% interest or 1,298,388
shares of Westmark common stock in exchange for $1,210,000 in cash and cash
equivalents, a note payable in the amount of $315,000 and 200,000 shares of the
Company's Series B preferred stock, with a stated value of $10. The Share
Exchange Agreement provides that the Company's 49% interest will be maintained
and that Westmark is obligated to issue additional shares to maintain such
ownership position.
The then officers of Westmark, Michael Morrell and Linda Moore resigned
as officers and Mr. Morrell resigned as a director. The Company issued Mr.
Morrell a promissory note in the principal amount of $415,000, bearing interest
at a rate of 12% per annum, to repay a $415,000 advance previously made to
Westmark. This note was paid down to $215,000 by the Company. Mr. Morrell has
the right to convert all or a portion of this note into shares of the Company's
Common Stock at a rate equal to 50% of the closing bid price on the day
preceding such conversion. The Company granted certain registration rights in
connection therewith. The Company also issued Ms. Moore a promissory note in the
principal amount of $60,000, bearing interest at the rate of 12% per annum, to
repay a $60,000 advance previously made to Westmark. Ms. Moore's note has been
repaid. Ms. Moore presently acts as a consultant to the Company and Mr. Morrell
is a director.
In the first and second quarter of 1996, the Company advanced to
Westmark additional financing of $2,428,593 to be used for Westmark's operations
and financing activities. This financing was in the form of short term advances
which the Company may, at its option, convert to equity. As of the date of this
Proxy Statement, $700,000 has been converted to 10% convertible preferred stock
of Westmark.
In addition, Norman J. Birmingham devoted time to the Company, served as
Westmark's president and operated Budget Service, Inc. Mr. Birmingham's annual
compensation from the Company was $100,000, $87,000 from Westmark and $13,000
from Greenworld Technologies, Inc, a former subsidiary of the Company.
Dawn M. Drella, the Company's Chief Financial Officer also devoted time
and served as Westmark's chief financial officer until June 1996 when she
resigned from that position.
ESCROW AGREEMENT
In September 1992, certain shareholders ("Escrow Holders") entered into
an Escrow Agreement whereby an aggregate of 950,000 shares of Common Stock
(903,450 of which are owned by Marilyn Zinns, 722,690 are owned by the Acquiring
Persons (as defined below) and 46,550 are owned by Milton H. Barbarosh) are
being held in escrow until the date all such shares are released to the Escrow
Holders or transferred to the Company in accordance with the provisions
described below (which provisions were amended pursuant to shareholder approval
in August 1994). The following number of shares will be released to the Escrow
Holders based on the level of the Company's pre-tax earnings (without giving
effect to any changes in earnings resulting from the release of the shares)
during 1996:
16
PRELIMINARY
IF PRE-TAX CUMULATIVE
EARNINGS EXCEED NO. OF SHARES RELEASED
$2,900,000 118,750
$3,200,000 237,500
$3,500,000 475,000
Alternatively, if the bid price at any time during 1996 exceeds $12.50 for a
minimum of 30 days, 475,000 shares will be released. Since the Company's 1994
and 1995 pre-tax earnings and the Company's common stock bid prices did not
reach the criteria levels necessary for return to the Escrow Holders, 475,000
shares are being returned to the Company as treasury stock.
CHANGE IN CONTROL OF REGISTRANT
In May 1995, Edwin F. Russo, Bradley T. Ray (the son of Jean Johnstone,
the former chairman of the Company) Edwin F. Russo, II and Frank Dolney (the
"Acquiring Persons") acquired an aggregate of 998,550 shares of Common Stock
from Marilyn Zinns. The Acquiring Persons reported the transaction on Form 13D.
The 13D also indicated that they acquired from Ms. Zinns the right to receive,
on a pro-rata basis, up to 722,690 of the escrowed shares (see Escrow Agreement
above). Mr. Edwin F. Russo was then elected to the Company's Board of Directors.
Mr. Dolney and Ms. Johnstone were later elected to the Company's Board of
Directors in July 1995.
In May 1996, the Acquiring Persons amended the Form 13D deleting the
previously asserted right to acquire the 722,690 additional shares and stating
that the proxy had been determined to be invalid. Therefore, this transaction
did not result in a change of control.
TECHNOMED ACQUISITION
In August 1995, the Company completed a Share Exchange Agreement with
the shareholders of Technomed, Inc. to acquire 100% ownership (7,422,500 shares
of common stock) of Technomed, Inc. for 2,739,003 unregistered shares of the
Company's Common Stock.
Three of the Company's directors at the time of the transaction, Edwin
F. Russo, Jean Johnstone and Frank Dolney directly or indirectly had an interest
in Technomed. Mr. Russo held 50,000 shares (.6%), Ms. Johnstone, personally and
through Medical Industries Consulting, Inc. and family members held 1,950,000
shares (26%) and Frank Dolney's wife, D. Ann Jassen, held 750,000 shares (10.1%)
of Technomed common stock. The transaction was approved by a majority of
unaffiliated directors of the Company.
JEAN JOHNSTONE AGREEMENT
In June 1996, the Company entered into an Agreement with Jean Johnstone,
a former chairman and director of the Company, whereby, among other things, the
Company would facilitate, through a third party, the purchase of 400,000 shares
of Ms. Johnstone's stock at the closing bid price per share of the Company's
common stock as reported by Nasdaq on the day prior to purchase. If the
aggregate purchase price is not at least $284,000.71, the Company will issue Ms.
Johnstone a convertible debenture in an amount equal to the shortfall. The
Company has agreed to register the shares underlying the debenture. If a third
party purchase cannot be facilitated in 120 days, the Company will repurchase
the shares at the price set forth above by issuance of a Senior Promissory Note
bearing interest at the rate of 8% per annum, paying interest only, quarterly in
arrears, with a balloon payment due June 7, 1997. In addition,
17
PRELIMINARY
the Company purchased 21,000 shares from Ms. Johnstone at the purchase price of
$.87 per share for a total purchase price of $18,270.
The Company also granted Ms. Johnstone a five-year option to purchase
200,000 shares of the Company's common stock at $1.00 per share. The parties
executed mutual general releases and Ms. Johnstone resigned as chairman and
director of the Company on June 7, 1996.
In April 1996, the Company issued a check to Ms. Johnstone in the amount
of $400,000. This sum was for the following: (i) partial payment for the
repurchase of stock, $13,851; (ii) AR Mediquest accrued salary, $33,603; and
(iii) repayment of her loan to C.J. Holding/AR/Mediquest, $352,546.
BRADLEY RAY AGREEMENT
In June 1996, the Company entered into an Agreement with Bradley Ray, as
consultant to the Company and the son of Ms. Johnstone, whereby, among other
things, the Company would facilitate, through a third party, the purchase of
300,000 shares of Mr. Ray's stock at the closing bid price per share of the
Company's common stock as reported by Nasdaq on the day prior to purchase. If
the aggregate purchase price is not at least $214,285.71, the Company will issue
a one-year convertible debenture in the amount of the shortfall. The Company has
agreed to register the shares underlying the debenture. If a third party
purchase cannot be facilitated in 120 days, the Company will repurchase the
shares at the price set forth above by the issuance of a Senior Promissory Note,
bearing interest at the rate of 8% per annum, paying interest only, quarterly in
arrears, with a balloon payment due June 7, 1997.
In addition, the Company also granted one-year options to purchase
600,000 and 200,000 shares of the Company's common stock at $.34 per share and
$.40 per share, respectively. The Company agreed to register the shares
underlying these options.
The Company also issued Mr. Ray a one-year promissory note in the amount
of $700,000 for payment of commissions Mr. Ray earned as a consultant. The note
will be reduced by the difference between the exercise price of the options and
the bid price as reported by Nasdaq on the day of exercise.
The parties also executed mutual general releases.
CONSULTING AGREEMENTS
In June 1996, the Company entered into a 50-month consulting agreement
with Mr. Ray for a monthly consulting fee of $5,713 per month. In August 1996,
the Company prepaid a portion of Mr. Ray's consulting fees through the issuance
of 450,000 shares of Common Stock valued at $306,000.
During 1995 and 1996, Mr. Pershes and his affiliates provided financial
and accounting services to the Company and its affiliates. The Company paid
$2,040 in consulting fees to Mr. Pershes in 1995, and $36,352 in 1996. An
additional $15,473 is owed.
ESSENTIAL CARE ACQUISITION
In October 1995, the Company acquired Essential Care Medical Centers,
Inc., including the real property located at 2601 N.E. 2nd Avenue in Miami,
Florida, from Mr. Kobrin for consideration consisting of 827,658 shares of
Common Stock. The mortgage on the real property was not assigned to the Company;
therefore, Mr. Kobrin remains liable on the mortgage covering this property.
18
PRELIMINARY
COST OF SOLICITATION
The Company will bear the cost of the solicitation of proxies from its
stockholders. In addition to the use of mail, proxies may be solicited by
directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and employees
of the Company will not be compensated additionally for the solicitation, but
may be reimbursed for out-of-pocket expenses in connection with this
solicitation. Arrangements are also being made with brokerage houses and any
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of the Company, and the Company will reimburse
such brokers, custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses.
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the meeting. However, if any other matter is properly presented, it is the
intention of the persons named in the enclosed proxy to vote in accordance with
their best judgment on such matters.
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the 1997 Annual Meeting must be received by
the Company no later than May 9, 1997 in order to have them included in the
proxy statement and form of proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Dawn M. Drella, Secretary
September 9, 1996
Boynton Beach, Florida
19
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
HEART LABS OF AMERICA, INC
On September 24,1 996, the shareholders of Heart Labs of America, Inc.
adopted the following two (2) amendments to the Articles of Incorporation
pursuant to the relevant provisions of Chapter 607 of the Florida Statutes.
1. Article I is hereby amended to read in full as follows:
The name of the corporation is "MEDICAL INDUSTRIES OF AMERICA, INC."
(Hereinafter the "Corporation")
2. The first paragraph of Article III is hereby amended to read in full as
follows:
The aggregate number of shares of all classes of capital stock that this
Corporation shall have the authority to issue is two hundred ten million
(210,000,000), consisting of (i) one hundred sixty million (160,000,000) shares
of common stock, no par value (the "Common Stock") and, (ii) fifty million
(50,000,000) shares of preferred stock, no par value (the "Preferred Stock").
3. Except as amended by the said shareholders, the Article of Incorporation
shall remain unchanged.
4. The two (2) amendments to the Articles of Incorporation were duly
adopted on September 24, 1996 by the holders of the Corporation's common stock,
no par value, the only class of capital stock of the Corporation outstanding and
entitled to vote thereon, and approved by a sufficient number of votes pursuant
to the Florida Statutes.
HEART LABS OF AMERICA, INC.
By: ____________________________________
Name: Dawn Drella
Title: Secretary
<PAGE>
EXHIBIT B
HEART LABS OF AMERICA, INC.
1996 STOCK OPTION PLAN FOR OFFICERS AND DIRECTORS
<PAGE>
HEART LABS OF AMERICA, INC.
1996 STOCK OPTION PLAN FOR OFFICERS AND DIRECTORS
1. ADOPTION AND PURPOSE
Heart Labs of America, Inc., a Florida corporation (the "Company"),
adopted its 1996 Stock Option Plan for Officers and Directors ("Plan")
effective August 27, 1996, subject to stockholder approval. The purpose
of the Plan is to foster and promote the financial success of the
Company and increase stockholder value by strengthening the Company's
ability to attract and retain officers and directors in the employ of
the Company by furnishing suitable recognition of their efforts which
contributed to the success of the Company and to align their interests
to the long-term interests of the Company's stockholders. The Plan is
intended to provide "incentive stock options" within the meaning of that
term under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), as well as non-qualified stock options. Any proceeds of
cash or property received by the Company for the sale of Heart Labs of
America, Inc. common stock, no par value (the "Common Stock") pursuant
to Options granted under this Plan will be used for general corporate
purposes.
2. ADMINISTRATION
2.1 The Plan shall be administered by a committee (the "Compensation
Committee") appointed by the Board of Directors of the Company
(the "Board") and composed of at least two Board members. The
Compensation Committee shall meet the plan administration
requirements described under Rule 16b-3(c)(2) promulgated under
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
or any similar rule which may subsequently be in effect. Any
vacancy on the Compensation Committee shall be filled by the
Board.
2.2 Subject to the express provisions of the Plan, the Compensation
Committee shall have the sole and complete authority to (i)
determine the officers and directors to whom awards hereunder
shall be granted, (ii) make awards in such form and amounts as it
shall determine, (iii) impose such limitations and conditions
upon such awards as it shall deem appropriate, (iv) interpret the
Plan, prescribe, amend and rescind rules and regulations relating
to it, (v) determine the terms and provisions of the respective
participants' agreements (which need not be identical), and (vi)
make such other determinations as it deems necessary or advisable
for the administration of the Plan. The decisions of the
Compensation Committee on matters within their jurisdiction under
the Plan shall be conclusive and binding on the Company and all
other persons. No members of the Board or the Compensation
Committee shall be liable for any action taken or determination
made in good faith.
2.3 All expenses associated with the Plan shall be paid by the
Company or its Subsidiaries.
3. DEFINITIONS
3.1 "CAUSE" when used in connection with the termination of a
Participant's relationship with the Company, shall mean the
termination of the Participant's relationship by the Company by
reason of (i) the conviction of the Participant of a crime
involving moral turpitude by a court of competent jurisdiction as
to which no further appeal can be taken; (ii) the proven
commission by the Participant of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any
funds or property of the Company by the Participant; (iv) the
willful, continued and unreasonable failure by the Participant to
perform duties assigned to him and agreed to by him; (v) the
knowing engagement by the Participant in any direct, material
conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect;
(vi) the knowing engagement by the Participant, without the
written approval of the Board of Directors of the Company, in any
activity which competes with the business of the Company or which
would result in a material injury to the Company; or (vii) the
knowing engagement in any activity which would constitute a
material
- 1 -
violation of the provisions of the Company's insider trading
policy or business ethics policy, if any, then in effect.
3.2 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(i) any Person becomes, after the effective date of this Plan,
the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 30%
or more of the combined voting power of the Company's then
outstanding securities, unless the Board (as constituted
immediately prior to such Change in Control) determines in
its sole absolute discretion that no Change in Control has
occurred;
(ii) individuals who constitute the Board on the effective date
of the Plan cease, for any reason, to constitute at least
a majority of the Board of Directors; PROVIDED, HOWEVER,
that any person becoming a director subsequent to the
effective date of the Plan who was nominated for election
by at least 662/3% of the Board as constituted on the
effective date of the Plan (other than the nomination of
an individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the Board of Directors, as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes
of this Plan, considered a member of the Board as
constituted on the effective date of the Plan; or
(iii) the Board of Directors determines in its sole and absolute
discretion that there has been a Change in Control of the
Company.
3.3 "EMPLOYEE" shall mean any person employed on an hourly or
salaried basis by the Company or any parent or Subsidiary of the
Company that now exists or hereafter is organized or acquires the
Company.
3.4 The "FAIR MARKET VALUE" of a share of Common Stock on any date
shall be (i) the closing sales price on the immediately preceding
business day of a share of Common Stock as reported on the
principal securities exchange on which shares of Common Stock are
then listed or admitted to trading, or (ii) if not so reported,
the average of the closing bid and asked prices for a share of
Common Stock on the immediately preceding business day as quoted
on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), or (iii) if not quoted on Nasdaq,
the average of the closing bid and asked prices for a share of
Common Stock as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC
Bulletin Board System. If the price of a share of Common Stock
shall not be so reported, the Fair Market Value of a share of
Common Stock shall be determined by the Compensation Committee in
its absolute discretion. In no event shall the Fair Market Value
of any share of Common Stock be less than its par value.
3.5 "INCENTIVE STOCK OPTION" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the
Code and which is identified as an Incentive Stock Option in the
agreement by which it is evidenced.
3.6 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified
Stock Option in the agreement by which it is evidenced.
3.7 "OPTION" shall mean an Option to purchase shares of Common Stock
of the Company granted pursuant to this Plan. Each Option shall
be identified either as an Incentive Stock Option or a Non-
Qualified Stock Option in the agreement by which it is evidenced.
- 2 -
3.8 "SUBSIDIARY" shall mean a corporation (other than the Company) in
which the Company directly or indirectly controls 50% or more of
the combined voting power of all stock of that corporation.
4. ELIGIBILITY
The Compensation Committee may grant Options to purchase Common Stock
under this Plan to officers and directors of the Company or its
Subsidiaries. Officers and directors of the Company who are granted
Options pursuant to this Plan shall be referred to as "Participants."
The Compensation Committee shall determine, within the provisions of the
Plan, those persons to whom, and the times at which, Options shall be
granted. In making such determinations, the Compensation Committee may
take into account the nature of the services rendered by such person,
his or her present and potential contributions to the Company's success,
and such other factors as the Compensation Committee in its discretion
shall deem relevant. Grants may be made to the same individual on more
than one occasion.
5. GRANTING OF OPTIONS
5.1 POWERS OF THE COMPENSATION COMMITTEE. The Compensation Committee
shall determine, in accordance with the provisions of the Plan,
the duration of each Option, the exercise price of each Option,
the time or times within which (during the term of the Option)
all or portions of each Option may be exercised, and whether
cash, Common Stock, or other property may be accepted in full or
partial payment upon exercise of an Option.
5.2 NUMBER OF OPTIONS. As soon as practicable after the date an
individual is determined to be eligible under Section 4 hereof,
the Compensation Committee may, in its discretion, grant to such
person a number of Options determined by the Compensation
Committee.
6. COMMON STOCK
Each Option granted under the Plan shall be convertible into one share
of Common Stock, unless adjusted in accordance with the provisions of
Section 8 hereof. Options may be granted for a number of shares not to
exceed, in the aggregate, 5,000,000 shares of Common Stock, subject to
adjustment pursuant to Section 8 hereof. For purposes of calculating the
maximum number of shares of Common Stock that may be issued under the
Plan, (i) all the shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when cash is used as
full payment for shares issued upon the exercise of an Option, and (ii)
shares tendered by a Participant as payment for shares issued upon
exercise of an Option shall be available for issuance under the Plan.
Upon the exercise of an Option, the Company may deliver either
authorized but unissued shares, treasury shares, or any combination
thereof. In the event that any Option granted under the Plan expires
unexercised, or is surrendered by a Participant for cancellation, or is
terminated or ceases to be exercisable for any other reason without
having been fully exercised, the Common Stock subject to such Option
shall again become available for new Options to be granted under the
Plan to any eligible person (including the holder of such former Option)
at an exercise price determined in accordance with Section 7.2 hereof,
which price may then be greater or less than the exercise price of such
former Option. No fractional shares of Common Stock shall be issued, and
the Compensation Committee shall determine the manner in which
fractional share value shall be treated.
7. REQUIRED TERMS AND CONDITIONS OF OPTIONS
7.1 AWARD OF OPTIONS. The Compensation Committee may, from time to
time and subject to the provisions of the Plan and such other
terms and conditions as the Compensation Committee may prescribe,
grant to any Participant in the Plan one or more Incentive Stock
Options or Non-Qualified Stock Options to purchase for cash or
shares the number of shares of Common Stock allotted by the
- 3 -
Compensation Committee. However, subject to the provisions of
Sections 7.4 and 7.5, Incentive Stock Options may be granted only
to these officers and directors who are also Employees. The date
an Option is granted shall mean the date selected by the
Compensation Committee as of which the Compensation Committee
allots a specific number of shares to a Participant pursuant to
the Plan.
7.2 EXERCISE PRICE. The exercise price of any Non-Qualified Stock
Option granted under the Plan shall be such price as the
Compensation Committee shall determine on the date on which such
Non- Qualified Stock Option is granted; provided, however, that
such price may not be less than 85% of the Fair Market Value of a
share of Common Stock on the date the Option is granted. Except
as provided in Section 7.4 hereof, the exercise price of any
Incentive Stock Option granted under the Plan shall be not less
than 100% of the Fair Market Value of a share of Common Stock on
the date on which such Incentive Stock Option is granted.
7.3 TERM AND EXERCISE. Each Option shall be exercisable on such date
or dates, during such period and for such number of shares of
Common Stock as shall be determined by the Compensation Committee
on the day on which such Option is granted and as set forth in
the agreement evidencing the Option; PROVIDED, HOWEVER, that (A)
no Option shall be exercisable after the expiration of 10 years
from the date such Option was granted, and (B) no Incentive Stock
Option granted to a 10% shareholder as set forth in Section 7.4
hereof shall be exercisable after the expiration of five years
from the date such Incentive Stock Option was granted; and,
PROVIDED, FURTHER, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan.
Each Option shall be exercisable in whole or in part with respect
to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof. On the partial
exercise of an Option, the agreement evidencing such Option shall
be returned to the Participant exercising such Option together
with the delivery of the certificates described in Section 7.7
hereof.
7.4 TEN PERCENT SHAREHOLDER. Notwithstanding anything to the contrary
in this Plan, Incentive Stock Options may not be granted to any
owner of 10% or more of the total combined voting power of the
Company and its Subsidiaries unless (i) the exercise price is at
least 110% of the Fair Market Value of a share of Common Stock on
the date the Option is granted, and (ii) the Option by its terms
is not exercisable after the expiration of five years from the
date such Incentive Stock Option is granted.
7.5 MAXIMUM AMOUNT OF OPTION GRANT. To the extent that the aggregate
Fair Market Value (determined on the date the Option is granted)
of Common Stock subject to Incentive Stock Options exercisable
for the first time by a Participant during any calendar year
exceeds $100,000, such Options shall be treated as Non-Qualified
Stock Options.
7.6 METHOD OF EXERCISE. An Option shall be exercised by delivering
notice to the Company's principal office, to the attention of its
Secretary, no fewer than five business days in advance of the
effective date of the proposed exercise. Such notice shall be
accompanied by the agreement evidencing the Option, shall specify
the number of shares of Common Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise, and shall be signed by the Participant. The Participant
may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective
date of the proposed exercise, in which case such agreement shall
be returned to the Participant. Payment for shares of Common
Stock purchased upon the exercise of an Option shall be made on
the effective date of such exercise either (i) in cash, by
certified check, bank cashier's check or wire transfer or (ii)
subject to the approval of the Compensation Committee, in shares
of Common Stock owned by the Participant and valued at their Fair
Market Value on the effective date of such exercise, or partly in
shares of Common Stock with the balance in cash, by certified
check, bank cashier's check or wire transfer. Any payment in
shares of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company,
- 4 -
duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and
evidences as the Secretary of the Company shall require from time
to time.
7.7 DELIVERY OF STOCK CERTIFICATES. Certificates for shares of Common
Stock purchased on the exercise of an Option shall be issued in
the name of the Participant and delivered to the Participant as
soon as practicable following the effective date on which the
Option is exercised; PROVIDED, HOWEVER, that such delivery shall
be effected for all purposes when the stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Participant.
8. ADJUSTMENTS
8.1 The aggregate number or type of shares of Common Stock with
respect to which Options may be granted hereunder, the number or
type of shares of Common Stock subject to each outstanding
Option, and the exercise price per share for each such Option may
all be appropriately adjusted, as the Compensation Committee may
determine, for any increase or decrease in the number of shares
of issued Common Stock resulting from a subdivision or
consolidation of shares whether through reorganization,
recapitalization, consolidation, payment of a share dividend, or
other similar increase or decrease.
8.2 Subject to any required action by the stockholders, if the
Company shall be a party to a transaction involving a sale of
substantially all its assets, a merger, or a consolidation, any
Option granted hereunder shall pertain to and apply to the
securities to which a holder of Common Stock would be entitled to
receive as a result of such transaction; PROVIDED, HOWEVER, that
all unexercised Options under the Plan may be cancelled by the
Company as of the effective date of any such transaction by
giving notice to the holders of such Options of its intention to
do so, and by permitting the exercise of such Options during the
30-day period immediately after the date such notice is given.
8.3 In the case of dissolution of the Company, every Option
outstanding hereunder shall terminate; PROVIDED, HOWEVER, that
each Option holder shall have 30 days' prior written notice of
such event, during which time he shall have a right to exercise
his partly or wholly unexercised Options.
8.4 On the basis of information known to the Company, the
Compensation Committee shall make all determinations under this
Section 8, including whether a transaction involves a sale of
substantially all the Company's assets; and all such
determinations shall be conclusive and binding on the Company and
all other persons.
8.5 Upon the occurrence of a Change in Control, the Compensation
Committee (as constituted immediately prior to the Change in
Control) shall determine, in its absolute discretion, whether
each Option granted under the Plan and outstanding at such time
shall become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan or whether each such Option
shall continue to vest according to its terms.
9. OPTION AGREEMENTS
Each award of Options shall be evidenced by a written agreement,
executed by the Participant and the Company, which shall contain such
restrictions, terms and conditions as the Compensation Committee may
require in accordance with the provisions of this Plan. Option
agreements need not be identical. The certificates evidencing the shares
of Common Stock acquired upon exercise of an Option may bear a legend
referring to the terms and conditions contained in the respective Option
agreement and the Plan, and the Company may place a stop transfer order
with its transfer agent against the transfer of such shares. If
requested to do so by the Compensation Committee at the time of exercise
of an Option, each Participant shall
- 5 -
execute a certificate indicating that he is purchasing the Common Stock
under such Option for investment and not with any present intention to
sell the same.
10. LEGAL AND OTHER REQUIREMENTS
10.1 The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933, as amended,
of any shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to
cause to be issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan unless and until the
Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded.
The Compensation Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Common
Stock pursuant to the terms hereof, that the recipient of such
shares make such covenants, agreements and representations, and
that such certificates bear such legends, as the Compensation
Committee, in its sole discretion, deems necessary or desirable.
The exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common
Stock pursuant to such exercise is in compliance with all
applicable laws, regulations of governmental authorities and the
requirements of any securities exchange on which shares of Common
Stock are traded. The Company may, in its sole discretion, defer
the effectiveness of any exercise of an Option granted hereunder
in order to allow the issuance of shares of Common Stock pursuant
thereto to be made pursuant to registration or an exemption from
registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the
Participant in writing of its decision to defer the effectiveness
of the exercise of an Option granted hereunder. During the period
that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
10.2 With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provisions of the Plan or action by the
Compensation Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed
advisable by the Compensation Committee. Moreover, in the event
the Plan does not include a provision required by Rule 16b-3 to
be stated therein, such provision (other than one relating to
eligibility requirements, or the price and amount of Options)
shall be deemed automatically to be incorporated by reference
into the Plan insofar as Participants subject to Section 16 are
concerned. The Compensation Committee may at any time impose any
limitations upon the exercise, delivery and payment of any Option
which, in the Compensation Committee's discretion, are necessary
in order to comply with Section 16(b) and the rules and
regulations thereunder.
10.3 A Participant shall have no rights as a stockholder with respect
to any shares covered by an Option, or exercised by him, until
the date of delivery of a stock certificate to him for such
shares. No adjustment, other than pursuant to Section 8 hereof,
shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is delivered.
11. NON-TRANSFERABILITY
During the lifetime of a Participant, any Option granted to him shall be
exercisable only by him or by his guardian or legal representative. No
Option shall be assignable or transferable, except by will, by the laws
- 6 -
of descent and distribution, or pursuant to certain domestic relations
orders. The granting of an Option shall impose no obligation upon the
holder thereof to exercise such Option or right.
12. NO CONTRACT OF EMPLOYMENT
The adoption of this Plan or the grant of any Option shall not be
construed as giving a Participant the right to continued employment with
the Company or any Subsidiary of the Company. Furthermore, the Company
or any Subsidiary of the Company may at any time dismiss a Participant
from employment, free from any liability or claim under the Plan, unless
otherwise expressly provided in the Plan or any Option agreement.
13. EFFECT OF TERMINATION OF RELATIONSHIP
13.1 If the relationship of a Participant with the Company shall
terminate for any reason other than Cause, "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code)
or the death of the Participant (a) Options granted to such
Participant, to the extent that they were exercisable at the time
of such termination, shall remain exercisable until the
expiration of three months after such termination, on which date
they shall expire, and (b) Options granted to such Participant,
to the extent that they were not exercisable at the time of such
termination, shall expire at the close of business on the date of
such termination; PROVIDED, HOWEVER, that no Option shall be
exercisable after the expiration of its term.
13.2 If the relationship of a Participant with the Company shall
terminate on account of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) or the death
of the Participant (a) Options granted to such Participant, to
the extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of one
year after such termination, on which date they shall expire, and
(b) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination;
PROVIDED, HOWEVER, that no Option shall be exercisable after the
expiration of its term.
13.3 In the event of the termination of a Participant's relationship
with the Company for Cause, all outstanding Options granted to
such Participant shall expire at the commencement of business on
the date of such termination.
14. INDEMNIFICATION OF COMPENSATION COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board or the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal therein), to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted
hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as
to which it shall be adjudged in such action, suit or proceeding that
such Compensation Committee member is liable for gross negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding a
Compensation Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
- 7 -
15. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue or transfer such shares of
Common Stock net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares
of Common Stock shall be valued on the date the withholding obligation
is incurred.
16. NEWLY ELIGIBLE PARTICIPANTS
Except as otherwise provided herein, the Compensation Committee shall be
entitled to make such rules, regulations, determinations and awards as
it deems appropriate in respect of any person who becomes eligible to
participate in the Plan.
17. TERMINATION AND AMENDMENT OF PLAN
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, PROVIDED, HOWEVER, that
without approval of the holders of a majority of the outstanding shares
of Common Stock present in person or by proxy at an annual or special
meeting of stockholders, no revision or amendments shall (i) increase
the number of shares of Common Stock that may be issued under the Plan,
except as provided in Section 8 hereof, (ii) materially increase the
benefits accruing to Participants under the Plan or (iii) materially
modify the requirements as to eligibility for participation in the Plan.
18. GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender and vice
versa, and the singular shall include the plural and the plural shall
include the singular.
19. GOVERNING LAW
The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Florida.
20. EFFECTIVE DATE OF PLAN
The effective date of the Plan is August 27, 1996. The Plan, each
amendment to the Plan, and each Option granted under the Plan is
conditioned on and shall be of no force or effect until approval of the
Plan and each amendment of the Plan by the holders of a majority of the
shares of Common Stock of the Company.
- 8 -
<PAGE>
EXHIBIT C
HEART LABS OF AMERICA, INC.
1996 EMPLOYEE STOCK OPTION PLAN
<PAGE>
HEART LABS OF AMERICA, INC.
1996 EMPLOYEE STOCK OPTION PLAN
1. ADOPTION AND PURPOSE
Heart Labs of America, Inc., a Florida corporation (the "Company"),
adopted its 1996 Employee Stock Option Plan ("Plan") effective August
27, 1996, subject to stockholder approval. The purpose of the Plan is to
foster and promote the financial success of the Company and increase
stockholder value by strengthening the Company's ability to attract and
retain qualified Employees and Consultants by furnishing suitable
recognition of their efforts which contributed to the success of the
Company and to align their interests to the long-term interests of the
Company's stockholders. The Plan is intended to provide "incentive stock
options" within the meaning of that term under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as
non-qualified stock options. Any proceeds of cash or property received
by the Company for the sale of Heart Labs of America, Inc. common stock,
no par value (the "Common Stock") pursuant to Options granted under this
Plan will be used for general corporate purposes.
2. ADMINISTRATION
2.1 The Plan shall be administered by a committee (the "Compensation
Committee") appointed by the Board of Directors of the Company
(the "Board") and composed of at least two Board members. The
Compensation Committee shall meet the plan administration
requirements described under Rule 16b-3(c)(2) promulgated under
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
or any similar rule which may subsequently be in effect. Any
vacancy on the Compensation Committee shall be filled by the
Board.
2.2 Subject to the express provisions of the Plan, the Compensation
Committee shall have the sole and complete authority to (i)
determine key employees and others to whom awards hereunder shall
be granted, (ii) make awards in such form and amounts as it shall
determine, (iii) impose such limitations and conditions upon such
awards as it shall deem appropriate, (iv) interpret the Plan,
prescribe, amend and rescind rules and regulations relating to
it, (v) determine the terms and provisions of the respective
participants' agreements (which need not be identical), and (vi)
make such other determinations as it deems necessary or advisable
for the administration of the Plan. The decisions of the
Compensation Committee on matters within their jurisdiction under
the Plan shall be conclusive and binding on the Company and all
other persons. No members of the Board or the Compensation
Committee shall be liable for any action taken or determination
made in good faith.
2.3 All expenses associated with the Plan shall be paid by the
Company or its Subsidiaries.
3. DEFINITIONS
3.1 "CAUSE" when used in connection with the termination of a
Participant's employment with the Company, shall mean the
termination of the Participant's employment by the Company by
reason of (i) the conviction of the Participant of a crime
involving moral turpitude by a court of competent jurisdiction as
to which no further appeal can be taken; (ii) the proven
commission by the Participant of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any
funds or property of the Company by the Participant; (iv) the
willful, continued and unreasonable failure by the Participant to
perform duties assigned to him and agreed to by him; (v) the
knowing engagement by the Participant in any direct, material
conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect;
(vi) the knowing engagement by the Participant, without the
written approval of the Board of Directors of the Company, in any
activity which competes with the business of the Company or which
would result in a material injury to the Company; or (vii) the
knowing engagement in any activity which would constitute a
material
- 1 -
violation of the provisions of the Company's insider trading
policy or business ethics policy, if any, then in effect.
3.2 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(i) any Person becomes, after the effective date of this Plan,
the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 30%
or more of the combined voting power of the Company's then
outstanding securities, unless the Board (as constituted
immediately prior to such Change in Control) determines in
its sole absolute discretion that no Change in Control has
occurred;
(ii) individuals who constitute the Board on the effective date
of the Plan cease, for any reason, to constitute at least
a majority of the Board of Directors; PROVIDED, HOWEVER,
that any person becoming a director subsequent to the
effective date of the Plan who was nominated for election
by at least 662/3% of the Board as constituted on the
effective date of the Plan (other than the nomination of
an individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the Board of Directors, as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes
of this Plan, considered a member of the Board as
constituted on the effective date of the Plan; or
(iii) the Board of Directors determines in its sole and absolute
discretion that there has been a Change in Control of the
Company.
3.3 "CONSULTANT" shall mean any person who is engaged by the Company
or any parent or Subsidiary of the Company to render consulting
services and is compensated for such consulting services.
3.4 "EMPLOYEE" shall mean any person employed on an hourly or
salaried basis by the Company or any parent or Subsidiary of the
Company that now exists or hereafter is organized or acquires the
Company.
3.5 The "FAIR MARKET VALUE" of a share of Common Stock on any date
shall be (i) the closing sales price on the immediately preceding
business day of a share of Common Stock as reported on the
principal securities exchange on which shares of Common Stock are
then listed or admitted to trading, or (ii) if not so reported,
the average of the closing bid and asked prices for a share of
Common Stock on the immediately preceding business day as quoted
on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), or (iii) if not quoted on Nasdaq,
the average of the closing bid and asked prices for a share of
Common Stock as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC
Bulletin Board System. If the price of a share of Common Stock
shall not be so reported, the Fair Market Value of a share of
Common Stock shall be determined by the Compensation Committee in
its absolute discretion. In no event shall the Fair Market Value
of any share of Common Stock be less than its par value.
3.6 "INCENTIVE STOCK OPTION" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the
Code and which is identified as an Incentive Stock Option in the
agreement by which it is evidenced.
3.7 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified
Stock Option in the agreement by which it is evidenced.
- 2 -
3.8 "OPTION" shall mean an Option to purchase shares of Common Stock
of the Company granted pursuant to this Plan. Each Option shall
be identified either as an Incentive Stock Option or a Non-
Qualified Stock Option in the agreement by which it is evidenced.
3.9 "SUBSIDIARY" shall mean a corporation (other than the Company) in
which the Company directly or indirectly controls 50% or more of
the combined voting power of all stock of that corporation.
4. ELIGIBILITY
The Compensation Committee may grant Options to purchase Common Stock
under this Plan to Employees of the Company or its Subsidiaries, as well
as to Consultants. Employees of the Company, as well as Consultants who
are granted Options pursuant to this Plan shall be referred to as
"Participants." The Compensation Committee shall determine, within the
provisions of the Plan, those persons to whom, and the times at which,
Options shall be granted. In making such determinations, the
Compensation Committee may take into account the nature of the services
rendered by such person, his or her present and potential contributions
to the Company's success, and such other factors as the Compensation
Committee in its discretion shall deem relevant. Grants may be made to
the same individual on more than one occasion.
5. GRANTING OF OPTIONS
5.1 POWERS OF THE COMPENSATION COMMITTEE. The Compensation Committee
shall determine, in accordance with the provisions of the Plan,
the duration of each Option, the exercise price of each Option,
the time or times within which (during the term of the Option)
all or portions of each Option may be exercised, and whether
cash, Common Stock, or other property may be accepted in full or
partial payment upon exercise of an Option.
5.2 NUMBER OF OPTIONS. As soon as practicable after the date an
individual is determined to be eligible under Section 4 hereof,
the Compensation Committee may, in its discretion, grant to such
person a number of Options determined by the Compensation
Committee.
6. COMMON STOCK
Each Option granted under the Plan shall be convertible into one share
of Common Stock, unless adjusted in accordance with the provisions of
Section 8 hereof. Options may be granted for a number of shares not to
exceed, in the aggregate, 1,000,000 shares of Common Stock, subject to
adjustment pursuant to Section 8 hereof. For purposes of calculating the
maximum number of shares of Common Stock that may be issued under the
Plan, (i) all the shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when cash is used as
full payment for shares issued upon the exercise of an Option, and (ii)
shares tendered by a Participant as payment for shares issued upon
exercise of an Option shall be available for issuance under the Plan.
Upon the exercise of an Option, the Company may deliver either
authorized but unissued shares, treasury shares, or any combination
thereof. In the event that any Option granted under the Plan expires
unexercised, or is surrendered by a Participant for cancellation, or is
terminated or ceases to be exercisable for any other reason without
having been fully exercised, the Common Stock subject to such Option
shall again become available for new Options to be granted under the
Plan to any eligible person (including the holder of such former Option)
at an exercise price determined in accordance with Section 7.2 hereof,
which price may then be greater or less than the exercise price of such
former Option. No fractional shares of Common Stock shall be issued, and
the Compensation Committee shall determine the manner in which
fractional share value shall be treated.
- 3 -
7. REQUIRED TERMS AND CONDITIONS OF OPTIONS
7.1 AWARD OF OPTIONS. The Compensation Committee may, from time to
time and subject to the provisions of the Plan and such other
terms and conditions as the Compensation Committee may prescribe,
grant to any Participant in the Plan one or more Incentive Stock
Options or Non-Qualified Stock Options to purchase for cash or
shares the number of shares of Common Stock allotted by the
Compensation Committee. However, subject to the provisions of
Sections 7.4 and 7.5, Incentive Stock Options may be granted only
to Employees. The date an Option is granted shall mean the date
selected by the Compensation Committee as of which the
Compensation Committee allots a specific number of shares to a
Participant pursuant to the Plan.
7.2 EXERCISE PRICE. The exercise price of any Non-Qualified Stock
Option granted under the Plan shall be such price as the
Compensation Committee shall determine on the date on which such
Non- Qualified Stock Option is granted; provided, however, that
such price may not be less than 85% of the Fair Market Value of a
share of Common Stock on the date the Option is granted. Except
as provided in Section 7.4 hereof, the exercise price of any
Incentive Stock Option granted under the Plan shall be not less
than 100% of the Fair Market Value of a share of Common Stock on
the date on which such Incentive Stock Option is granted.
7.3 TERM AND EXERCISE. Each Option shall be exercisable on such date
or dates, during such period and for such number of shares of
Common Stock as shall be determined by the Compensation Committee
on the day on which such Option is granted and as set forth in
the agreement evidencing the Option; PROVIDED, HOWEVER, that (A)
no Option shall be exercisable after the expiration of 10 years
from the date such Option was granted; and (B) no Incentive Stock
Option granted to a 10% shareholder as set forth in Section 7.4
hereof shall be exercisable after the expiration of five years
from the date such Incentive Stock Option was granted; and,
PROVIDED, FURTHER, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan.
Each Option shall be exercisable in whole or in part with respect
to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof. On the partial
exercise of an Option, the agreement evidencing such Option shall
be returned to the Participant exercising such Option together
with the delivery of the certificates described in Section 7.7
hereof.
7.4 TEN PERCENT SHAREHOLDER. Notwithstanding anything to the contrary
in this Plan, Incentive Stock Options may not be granted to any
owner of 10% or more of the total combined voting power of the
Company and its Subsidiaries unless (i) the exercise price is at
least 110% of the Fair Market Value of a share of Common Stock on
the date the Option is granted, and (ii) the Option by its terms
is not exercisable after the expiration of five years from the
date such Incentive Stock Option is granted.
7.5 MAXIMUM AMOUNT OF OPTION GRANT. To the extent that the aggregate
Fair Market Value (determined on the date the Option is granted)
of Common Stock subject to Incentive Stock Options exercisable
for the first time by a Participant during any calendar year
exceeds $100,000, such Options shall be treated as Non-Qualified
Stock Options.
7.6 METHOD OF EXERCISE. An Option shall be exercised by delivering
notice to the Company's principal office, to the attention of its
Secretary, no fewer than five business days in advance of the
effective date of the proposed exercise. Such notice shall be
accompanied by the agreement evidencing the Option, shall specify
the number of shares of Common Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise, and shall be signed by the Participant. The Participant
may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective
date of the proposed exercise, in which case such agreement
- 4 -
shall be returned to the Participant. Payment for shares of
Common Stock purchased upon the exercise of an Option shall be
made on the effective date of such exercise either (i) in cash,
by certified check, bank cashier's check or wire transfer or (ii)
subject to the approval of the Compensation Committee, in shares
of Common Stock owned by the Participant and valued at their Fair
Market Value on the effective date of such exercise, or partly in
shares of Common Stock with the balance in cash, by certified
check, bank cashier's check or wire transfer. Any payment in
shares of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with
any other documents and evidences as the Secretary of the Company
shall require from time to time.
7.7 DELIVERY OF STOCK CERTIFICATES. Certificates for shares of Common
Stock purchased on the exercise of an Option shall be issued in
the name of the Participant and delivered to the Participant as
soon as practicable following the effective date on which the
Option is exercised; PROVIDED, HOWEVER, that such delivery shall
be effected for all purposes when the stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Participant.
8. ADJUSTMENTS
8.1 The aggregate number or type of shares of Common Stock with
respect to which Options may be granted hereunder, the number or
type of shares of Common Stock subject to each outstanding
Option, and the exercise price per share for each such Option may
all be appropriately adjusted, as the Compensation Committee may
determine, for any increase or decrease in the number of shares
of issued Common Stock resulting from a subdivision or
consolidation of shares whether through reorganization,
recapitalization, consolidation, payment of a share dividend, or
other similar increase or decrease.
8.2 Subject to any required action by the stockholders, if the
Company shall be a party to a transaction involving a sale of
substantially all its assets, a merger, or a consolidation, any
Option granted hereunder shall pertain to and apply to the
securities to which a holder of Common Stock would be entitled to
receive as a result of such transaction; PROVIDED, HOWEVER, that
all unexercised Options under the Plan may be cancelled by the
Company as of the effective date of any such transaction by
giving notice to the holders of such Options of its intention to
do so, and by permitting the exercise of such Options during the
30-day period immediately after the date such notice is given.
8.3 In the case of dissolution of the Company, every Option
outstanding hereunder shall terminate; PROVIDED, HOWEVER, that
each Option holder shall have 30 days' prior written notice of
such event, during which time he shall have a right to exercise
his partly or wholly unexercised Options.
8.4 On the basis of information known to the Company, the
Compensation Committee shall make all determinations under this
Section 8, including whether a transaction involves a sale of
substantially all the Company's assets; and all such
determinations shall be conclusive and binding on the Company and
all other persons.
8.5 Upon the occurrence of a Change in Control, the Compensation
Committee (as constituted immediately prior to the Change in
Control) shall determine, in its absolute discretion, whether
each Option granted under the Plan and outstanding at such time
shall become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan or whether each such Option
shall continue to vest according to its terms.
- 5 -
9. OPTION AGREEMENTS
Each award of Options shall be evidenced by a written agreement,
executed by the Participant and the Company, which shall contain such
restrictions, terms and conditions as the Compensation Committee may
require in accordance with the provisions of this Plan. Option
agreements need not be identical. The certificates evidencing the shares
of Common Stock acquired upon exercise of an Option may bear a legend
referring to the terms and conditions contained in the respective Option
agreement and the Plan, and the Company may place a stop transfer order
with its transfer agent against the transfer of such shares. If
requested to do so by the Compensation Committee at the time of exercise
of an Option, each Participant shall execute a certificate indicating
that he is purchasing the Common Stock under such Option for investment
and not with any present intention to sell the same.
10. LEGAL AND OTHER REQUIREMENTS
10.1 The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933, as amended,
of any shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to
cause to be issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan unless and until the
Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded.
The Compensation Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Common
Stock pursuant to the terms hereof, that the recipient of such
shares make such covenants, agreements and representations, and
that such certificates bear such legends, as the Compensation
Committee, in its sole discretion, deems necessary or desirable.
The exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common
Stock pursuant to such exercise is in compliance with all
applicable laws, regulations of governmental authorities and the
requirements of any securities exchange on which shares of Common
Stock are traded. The Company may, in its sole discretion, defer
the effectiveness of any exercise of an Option granted hereunder
in order to allow the issuance of shares of Common Stock pursuant
thereto to be made pursuant to registration or an exemption from
registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the
Participant in writing of its decision to defer the effectiveness
of the exercise of an Option granted hereunder. During the period
that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
10.2 With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provisions of the Plan or action by the
Compensation Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed
advisable by the Compensation Committee. Moreover, in the event
the Plan does not include a provision required by Rule 16b-3 to
be stated therein, such provision (other than one relating to
eligibility requirements, or the price and amount of Options)
shall be deemed automatically to be incorporated by reference
into the Plan insofar as Participants subject to Section 16 are
concerned. The Compensation Committee may at any time impose any
limitations upon the exercise, delivery and payment of any Option
which, in the Compensation Committee's discretion, are necessary
in order to comply with Section 16(b) and the rules and
regulations thereunder.
- 6 -
10.3 A Participant shall have no rights as a stockholder with respect
to any shares covered by an Option, or exercised by him, until
the date of delivery of a stock certificate to him for such
shares. No adjustment, other than pursuant to Section 8 hereof,
shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is delivered.
11. NON-TRANSFERABILITY
During the lifetime of a Participant, any Option granted to him shall be
exercisable only by him or by his guardian or legal representative. No
Option shall be assignable or transferable, except by will, by the laws
of descent and distribution, or pursuant to certain domestic relations
orders. The granting of an Option shall impose no obligation upon the
holder thereof to exercise such Option or right.
12. NO CONTRACT OF EMPLOYMENT
The adoption of this Plan or the grant of any Option shall not be
construed as giving a Participant the right to continued employment with
the Company or any Subsidiary of the Company. Furthermore, the Company
or any Subsidiary of the Company may at any time dismiss a Participant
from employment, free from any liability or claim under the Plan, unless
otherwise expressly provided in the Plan or any Option agreement.
13. EFFECT OF TERMINATION OF EMPLOYMENT
13.1 If the employment or consulting, service or similar relationship
of a Participant with the Company shall terminate for any reason
other than Cause, "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) or the death of the
Participant (a) Options granted to such Participant, to the
extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of
three months after such termination, on which date they shall
expire, and (b) Options granted to such Participant, to the
extent that they were not exercisable at the time of such
termination, shall expire at the close of business on the date of
such termination; PROVIDED, HOWEVER, that no Option shall be
exercisable after the expiration of its term.
13.2 If the employment or consulting, service or similar relationship
of a Participant with the Company shall terminate on account of
the "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) or the death of the Participant (a)
Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain
exercisable until the expiration of one year after such
termination, on which date they shall expire, and (b) Options
granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the
close of business on the date of such termination; PROVIDED,
HOWEVER, that no Option shall be exercisable after the expiration
of its term.
13.3 In the event of the termination of a Participant's employment or
other relationship with the Company for Cause, all outstanding
Options granted to such Participant shall expire at the
commencement of business on the date of such termination.
14. INDEMNIFICATION OF COMPENSATION COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board or the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal therein), to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted
hereunder, and against all amounts paid by them in settlement thereof
- 7 -
(provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as
to which it shall be adjudged in such action, suit or proceeding that
such Compensation Committee member is liable for gross negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding a
Compensation Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
15. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue or transfer such shares of
Common Stock net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares
of Common Stock shall be valued on the date the withholding obligation
is incurred.
16. NEWLY ELIGIBLE PARTICIPANTS
Except as otherwise provided herein, the Compensation Committee shall be
entitled to make such rules, regulations, determinations and awards as
it deems appropriate in respect of any person who becomes eligible to
participate in the Plan.
17. TERMINATION AND AMENDMENT OF PLAN
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, PROVIDED, HOWEVER, that
without approval of the holders of a majority of the outstanding shares
of Common Stock present in person or by proxy at an annual or special
meeting of stockholders, no revision or amendments shall (i) increase
the number of shares of Common Stock that may be issued under the Plan,
except as provided in Section 8 hereof, (ii) materially increase the
benefits accruing to Participants under the Plan, or (iii) materially
modify the requirements as to eligibility for participation in the Plan.
18. GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender and vice
versa, and the singular shall include the plural and the plural shall
include the singular.
19. GOVERNING LAW
The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Florida.
20. EFFECTIVE DATE OF PLAN
The effective date of the Plan is August 27, 1996. The Plan, each
amendment to the Plan, and each Option granted under the Plan is
conditioned on and shall be of no force or effect until approval of the
Plan and each amendment of the Plan by the holders of a majority of the
shares of Common Stock of the Company.
- 8 -
<PAGE>
PRELIMINARY
PROXY
HEART LABS OF AMERICA, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 24, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HEART LABS OF
AMERICA, INC. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE CHOICES SPECIFIED BELOW.
The undersigned stockholder of Heart Labs of America, Inc. (the "Company")
hereby appoints Harry Kobrin and Dawn Drella, the true and lawful attorneys,
agents and proxies of the undersigned with full power of substitution for and in
the name of the undersigned, to vote all the shares of Common Stock of the
Company which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Sheraton Inn Lakeside, 7769 W.
Irlo Bronson Memorial Highway, Kissimmee, Florida 34747 on Tuesday, September
24, 1996 at 9:00 a.m., and any and all adjournments thereof, with all of the
powers which the undersigned would possess if personally present, for the
following purposes:
1. To elect three Directors.
FOR WITHHOLD
Harry Kobrin [ ] [ ]
Michael Morrell [ ] [ ]
Paul Pershes [ ] [ ]
2. To ratify the selection of Grant-Schwartz Associates, CPA's as independent
public accountants of the Company for the fiscal year ending December 31,
1996.
3. To amend the Company's Articles of Incorporation to increase the
number of authorized shares of capital stock.
4. To amend the Company's Articles of Incorporation to change the
name of the Company.
5. To approve the 1996 Stock Option Plan for Officers and Directors.
6. To approve the 1996 Employee Stock Option Plan.
7. The proxies are authorized to vote as they determine in their discretion
upon such other matters as may properly come before the meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
THIS PROXY WILL BE VOTED FOR THE CHOICES SPECIFIED. IF NO CHOICE IS SPECIFIED
FOR ITEMS 1, 2, 3, 4, 5 AND 6, THIS PROXY WILL BE VOTED FOR THESE ITEMS.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated September 9, 1996.
PRELIMINARY
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
DATED:__________________________ _________________________________________
[Signature]
----------------------------------------------------
[Signature if jointly held]
----------------------------------------------------
[Printed Name]
Please sign exactly as name appears
on stock certificate(s). Joint
owners should each sign. Trustees
and others acting in a
representative capacity should
indicate the capacity in which they
sign.
