Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to_____________
Commission file number 0-20356
MEDICAL INDUSTRIES OF AMERICA, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0158479
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1903 S. CONGRESS AVENUE, SUITE 400, BOYNTON BEACH, FLORIDA 33426
(Address of principal executive offices)
(561)737-2227
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No __
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,540,652 shares of common
stock, no par value, were outstanding as of May 12,1997.
MEDICAL INDUSTRIES OF AMERICA, INC.
10-QSB- QUARTER ENDED MARCH 31, 1997
INDEX
FORM 10-QSB FORM 10-QSB FORM 10-QSB
PART NO. ITEM NO. DESCRIPTION PAGE NO.
I. FINANCIAL INFORMATION
1. Financial Statements
- Condensed Consolidated Balance
Sheet as of March 31, 1997 3
- Condensed Consolidated Statements of Operations
and Accumulated Deficit for the Three
Months Ended March 31, 1997 and 1996 5
- Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31, 1997
and 1996 6
- Notes to Condensed Consolidated Financial
Statements 8
2. Management's Discussion and Analysis
or Plan of Operations 10
II. OTHER INFORMATION
1. Legal Proceedings 12
5. Other Information 12
6. Exhibits and Reports on Form 8-K 13
Signatures
2
MEDICAL INDUSTRIES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................... 517,032
Trade accounts receivable, net ............................... 877,658
Current portion of notes receivable .......................... 2,510,291
Inventories of medical supplies .............................. 11,310
Net assets held for sale ..................................... 235,548
Prepaid expenses and other current assets .................... 354,953
----------
Total current assets ....................................... 4,506,792
PROPERTY AND EQUIPMENT:
Mobile cardiac catheterization laboratory .................... 1,685,373
and medical equipment
Furniture and office equipment and other assets ............. 242,977
----------
1,928,350
Less: accumulated depreciation and amortization .............. (1,683,653)
----------
Net property and equipment ................................. 244,697
OTHER ASSETS:
Notes receivable, less current maturities .................... 105,206
Goodwill ..................................................... 1,593,958
Investment in Westmark Group Holdings, Inc. .................. 2,233,200
Other assets ................................................. 135,175
----------
Total other assets ......................................... 4,067,539
TOTAL ASSETS
8,819,028
==========
See Notes to Consolidated Financial Statements
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MEDICAL INDUSTRIES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................... 567,503
Accrued liabilities ....................................... 1,198,883
Current portion of note payable ........................... 592,956
Current portion of capital lease obligations
391,075
-----------
Total current liabilities ............................... 2,750,417
LONG TERM LIABILITIES:
Amounts due on purchase of business, net of ............... 1,100,000
current portion
Capital lease obligations, net of current ................. 15,695
-----------
portion
Total long term liabilities .......................... 1,115,695
SHAREHOLDERS' EQUITY:
Preferred shares, authorized 2,500,000 shares:
issued and outstanding:
Series A convertible shares, 22,276 issued Series
B convertible shares, 10,000 issued
$200 stated value, less 4,900 shares minority
interest ................................................... 1,020,000
Series D convertible shares, 112,929 shares
1,752,256 issued and outstanding
Common shares, no par value, authorized 8,000,000:
issued and outstanding 1996, 1,989,742 shares;
including 47,500 escrow .................................... 20,357,743
Preferred shares to be issued ................................ 832,000
Less treasury shares (3,750 shares at stated value) .......... (159,375)
Accumulated deficit .......................................... (18,849,708)
-----------
Total shareholders' equity ................................ 4,952,916
===========
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. 8,819,028
===========
See Notes to Consolidated Financial Statements
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MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Three Months Ended
March 31,
(Unaudited)
1997 1996
----------- -----------
Revenue ........................................ 1,919,926 283,294
Expenses:
Cost of revenues ............................ 907,050 143,827
General and administrative .................. 510,677 648,677
expenses
Depreciation and amortization ............... 82,340 97,944
Interest expense, net ....................... 8,360 35,934
----------- -----------
Total expenses ........................ 1,508,427 926,382
Income (loss) from operations .................. 411,499 (643,088)
Loss from discontinued operations .............. (84,418) (354,605)
----------- -----------
Net income (loss) .............................. 327,081 (997,693)
Accumulated deficit-beginning of
year ........................................ (19,176,789) (11,870,424)
Accumulated deficit-end of 1st
quarter ........................................ (18,849,708) (12,868,117)
=========== ===========
Earnings (loss) per share of common stock:
Primary:
Earnings from operation ..................... .26 (1.34)
Loss from discontinued ...................... (.05) (.74)
----------- -----------
operations Earnings (loss) ..................... .21 (2.08)
=========== ===========
Fully diluted earnings per share ....... .15 -0-
=========== ===========
Weighted average shares
outstanding, excluding
contingently issuable shares
Primary ................................. 1,588,442 480,952
=========== ===========
Fully diluted ........................... 2,716,127 -0-
=========== ===========
See Notes to Consolidated Financial Statements
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MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
March 31,
(Unaudited)
1997 1996
---------- ----------
Operating activities:
Net income (loss) from operations .................. 411,499 (643,088)
Net loss from discontinued operations .............. (84,418) (354,605)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization ................... 82,340 220,075
Equity loss on investments ..................... -0- 134,900
Minority Interest .............................. (3,129) (4,095)
Loss (gain) on disposition of property and
equipment ..................................... 2,544 -0-
Common stock issued for services rendered ..... 426,800 -0-
Reclassification of property and equipment .... 498,450 -0-
held for sale
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable .................. 75,578 187,118
Inventories of medical supplies ............ 3,561 -0-
Net assets held for sale ................... (235,548) -0-
Prepaid expenses and other current assets .. (227,213) (453,707)
Other assets ............................... (6,935) 16,747
Accounts payable ........................... 90,780 (429,297)
Accrued liabilities ........................ 157,354 (32,408)
---------- ----------
Net cash provided (used) by operating
activities ................................. 1,191,663 (1,358,360)
Investing activities
Payment of note payable ............................ -0- (183,369)
Issuance of notes receivable ....................... (697,822) (590,000)
Payment of notes receivable ........................ -0- 78,420
Proceeds from sale of property and equipment ....... -0- -0-
Disbursements for property and equipment ........... (14,234) (15,665)
---------- ----------
Net cash used by operating activities ........... (712,056) (710,614)
Financing activities
Conversion of debt to preferred stock
in Westmark Group Holdings, Inc. ................... -0- (700,000)
Proceeds from the issuance of common stock ......... -0- 1,931,028
Proceeds from the issuance of preferred stock ...... -0- 5,775,000
Payments of capital lease obligations .............. (59,811) (244,168)
Payments of long term debt ......................... (144,225) (955,798)
---------- ----------
Net cash provided (used) by financing activities (204,036) 5,806,062
Net increase (decrease) in cash .................... 275,571 3,737,088
Cash at the beginning of period .................... 241,461 24,431
---------- ----------
Cash at the end of period .......................... 517,032 3,761,519
========== ==========
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Supplemental disclosure of cash flow information:
Interest paid $ 3,825 $ 74,631
========== ==========
Supplemental disclosure of non-cash investing and financing activities:
Non-cash aspects of the acquisition of Florida
Physicians Internet, Inc.:
Fair value of assets acquired 653,048
Accrued payment for acquisition 1,415,000
Preferred shares to be issued in connection 832,000
with acquisition
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MEDICAL INDUSTRIES OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
Medical Industries of America, Inc., f/k/a Heart Labs of America, Inc.,
was incorporated in September 1989 in the State of Florida and has its principal
executive offices at 1903 S. Congress Ave., Suite 400, Boynton Beach, Florida
33426, telephone number (561) 737-2227. Unless the context otherwise requires,
all references to the "Company" include Medical Industries of America, Inc. and
its wholly-owned subsidiaries.
The Company's Consolidated Financial Statements include the Company's
active subsidiaries: Heart Labs of America, Inc. and Florida Physicians
Internet, Inc. The Company's discontinued operations include Essential Care
Medical Centers, Inc. #1 and #5.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements are unaudited. These
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission (the "SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to state fairly the consolidated financial
position and consolidated results of operations as of and for the periods
indicated. These consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and notes thereto for year
ended December 31, 1996, included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission.
Earnings (Loss) Per Common Share
Earnings (loss) per common share is calculated by dividing earnings (loss)
by the weighted average common shares outstanding after giving effect to the 1
for 20 reverse stock split effective November 1, 1996. Fully diluted earnings
per share have been computed based on the assumption that all of the convertible
preferred stock is converted into common shares, and that all stock options have
been exercised. Under this assumption, the weighted average number of common
shares outstanding has been increased accordingly. For 1996, there is no fully
dilutive computation because the effect would be antidilutive.
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Estimates
The preparation of financial statements in conformity with general
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the 1996 financial statements
to conform with the 1997 presentation.
Note 2 - Business Acquired
Effective January 9, 1997 the Company entered into a purchase agreement
with Florida Physicians Internet, Inc. ("FPII"). Florida Physicians
Internet, Inc. is a group medical practice specializing in cardiology,
neurology, pulmonology, pediatrics, and internal medicine. This group
practice is led by Dr. A. Razzak Tai, MD, FACCP, ACCP, MRCP. Consideration
for the purchase included the issuance of the Company's preferred shares in
an amount equal to $832,000, cash payments of $1,415,000 over a three year
period and the issuance of stock options.
Note 3 - Discontinued Operations
In the fourth quarter of 1996, the Company closed seven of its nine
medical centers. It is the Company's intent that the remaining two medical
centers are to be spun off into a separate company that is anticipated to become
a publicly traded company in the third quarter of 1997.
The components of net assets held for sale on the consolidated Balance Sheet are
as follows:
Accounts receivable ...................................... 107,956
Prepaid and other current ................................ 64,304
Property and equipment ................................... 498,450
Deposits ................................................. 2,540
Accounts payable ......................................... (103,106)
Accrued liabilities ...................................... (142,345)
Leases payable ........................................... (19,401)
Notes payable ............................................ (172,850)
--------
235,548
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Note 4 - Accounts receivable
During the 1st quarter of 1997, the Company entered into a an agreement
with a company whereby the Company can sell on an ongoing basis and without
recourse an undivided interest in designated accounts receivables. At March 31,
1997, approximately $354,000 had been received under this agreement.
Note 5 - S-8 Registration Statements
During the 1st quarter of 1997, the Company issued a total of 240,620
shares of common stock to consultants and advisors pursuant to S-8 Registration
Statements. These shares had an aggregate market value of $529,800.
Item 2. Management's Discussion and Analysis or Plan of Operations
General
During 1997 and 1996, the Company principally derived its revenues from
its mobile cardiac catheterization laboratories. In the first quarter of 1997,
the Company also derived revenue from Florida Physicians Internet, Inc., a group
practice acquired in January 1997.
Comparison of the Results of Operations for Three Months Ended March 31, 1997
and March 31, 1996
Total revenues increased to $1,919,926 for the three months ended March
31, 1997 from $283,294 for the three months ended March 31, 1996, principally as
a result of the acquisition of FPII in January 1997 and the revenue from the
sale of equipment. During the 1st quarter of 1997, FPII recorded revenues of
$721,244. Revenues from the Company's mobile cardiac catheterization labs
increased 41% to $398,682 from $283,294 for the three months ended March 31,
1997 and 1996, respectively. This increase is primarily due to the Company
obtaining contacts that fully utilize two of its mobile labs and the addition of
a third mobile lab.
Cost of revenues, which included medical supplies, technical salaries and
benefits and other expenses directly associated with the Company's services
increased to $907,050 from $143,827 for the three months ended March 31, 1997
and 1996, respectively. This increase is primarily due to the acquisition of
FPII, the increased use of the mobile labs and $185,844 from the sale of
equipment. FPII has a higher cost of services due to the cost of the physicians.
As of percentage of revenue, costs of services decreased to 47% of revenue from
operations from 51% of revenue from operations for the periods ended March 31,
1997 and 1996, respectively.
General and Administrative expenses decreased 21% to $510,677 for the
three months ended March 31, 1997 compared to $648,677 for the three months
ended March 31, 1996. This decrease is primarily due to the a reduction in
salaries and consulting fees.
10
Interest expense decreased to $8,360 for the three months ended March 31,
1997 as compared to $35,934 for the three months ended March 31, 1996. This
decrease is attributable to the company carrying lower interest bearing debt in
March 31, 1997.
Net income (loss) from operations increased to $411,499 for the three
months ended March 31, 1997 compared to a net loss of $643,088 for the three
months ended March 31, 1996 resulting from an increase in the results of
operations.
Net income for the three months ended March 31, 1997 was $327,081 compared
to a net loss of $997,693 for the three months ended March 31, 1996. This
increase is primarily attributable to an increase in revenue, a decrease in
expenses, the acquisition of a profitable practice and a reduction in salaries
and consulting fees.
In January 1997, the Company leased its third mobile lab from Comdisco.
The Mobile Lab was financed through a 36 month lease with monthly payments of
$22,000.
On January 9, 1997 the Company effectuated a purchase agreement with
Florida Physicians Internet, Inc. ("FPII"). Consideration for the purchase
included the issuance of the Company's Series E preferred shares in an amount
equal to $832,000, cash payments of $1,415,000 over a three year period and the
issuance of stock options.
In March 1997, the Company entered into an asset purchase agreement
whereby it sold one of its mobile cardiac catheterization labs for $100,000 in
cash and a promissory note in the amount of $700,000 bearing interest at ten
percent to be paid over nine months at $60,000 per month with a balance of
unpaid principal and accrued interest due and payable on December 15, 1997. Upon
execution of the sale of the mobile lab, the Company entered into a service
agreement with the purchaser of the mobile lab whereby the Company will manage
all the affairs of the lab for a fee equal to 14% of the owners revenue plus the
costs incurred in performing its duties under this Agreement.
In April 1997, the Company entered into a settlement agreement with the
plaintiffs of the Tula Business, Inc. et al lawsuit. The terms of this
settlement required the Company to issue 2,063,346 unrestricted common shares,
the plaintiffs to exercise 144,384 warrants into common stock at $1.50 per
share, an aggregate of $216,576 received by the Company and the payment by the
plaintiffs and other claimants of $900,000 to the Company in settlement of its
claims.
The Company had a working capital surplus of $1,756,375 at March 31, 1997
compared to working capital deficiency of $2,837,955 at March 31, 1996. Working
capital in 1996 included $3,761,519 cash that was received from a Regulation S
offering during the quarter.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
In February 1997, a lawsuit was filed in the United States District Court,
Southern District of New York, by Tula Business, Inc. et al alleging the Company
failed to accurately convert preferred shares of stock issued pursuant to a
transaction exempt from the registration requirements of the SEC pursuant to
Regulation S promulgated under the Securities Act of 1933 as amended
("Regulation S") into shares of common stock. Similar charges were made by four
other shareholders of preferred stock who threatened to file a lawsuit similar
to the one brought by Tula Business, Inc. et al. The plaintiffs sought
additional shares. Effective April 7, 1997, the Company entered into a
settlement agreement and mutual releases with the plaintiffs of the Tula
Business, Inc. et al lawsuit and four other shareholders of preferred stock. The
terms of the settlement required the Company to issue 2,063,346 unrestricted
common shares, the exercise of 144,384 warrants into common stock at $1.50 per
share (for an aggregate of $216,576 received by the Company) and the payment by
the Tula Business, Inc. et al plaintiffs and certain of the four other claimants
of $900,000 to the Company in settlement of its claims.
Item 5. Other Information
On April 28, 1997, the Board of Directors of the Company elected Glen
E. Barber and Terry R. Lazar, CPA to its Board of Directors. Mr. Barber
founded New Age Communications, Inc. in 1988 and currently serves as
president. New Age Communications, Inc., of Tallahassee, Florida is a master
distributor of operator services to Oncor, Conquest and LDDS. For the past
four years, Mr. Barber has served as president and director of the Museum of
Art in Tallahassee, Florida. From 1991 through 1993, Mr. Barber served on
the Advisory Board to Oncor Communications, Inc. of Bethesda, Maryland.
Mr. Lazar founded and serves as the senior partner of Lazar, DeThomasis,
Sanders and Company, LLP of Jericho, New York, a full service accounting firm
specializing in real estate, healthcare, manufacturing, insurance hotel industry
and entertainment. In addition, Mr. Lazar serves as partner and director of
finance of the Ambulatory Surgery Center.
On January 9, 1997 the Company effectuated a purchase agreement with
Florida Physicians Internet, Inc. ("FPII"). Florida Physicians Internet,
Inc. is a group medical practice specializing in cardiology, neurology,
pulmonology, pediatrics, and internal medicine. This group practice is led by
Dr. A. Razzak Tai, MD, FACCP, ACCP, MRCP. Consideration for the purchase
included the issuance of the Company's preferred shares in an amount equal to
$832,000, cash payments of $1,415,000 over a three year period and the
issuance of stock options.
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Employment Agreement
In May 1997, the Company effectuated an employment agreement with Paul
Pershes. The term of the agreement is 5 years, with compensation equal to an
annual salary of $150,000, the granting of 775,000 -925,000 stock options to be
vested over a 4 year period and the payment of normal business expenses.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.16 Employment Agreement-Paul Pershes
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDICAL INDUSTRIES OF AMERICA, INC.
(Registrant)
MAY 12, 1997 By: /S/ MICHAEL F. MORRELL
(Date) Michael F. Morrell, Chairman of the Board & Chief
Executive Officer
MAY 12, 1997 By: /S/ PAUL C. PERSHES
(Date) Paul C. Pershes, Director
MAY 12, 1997 By: /S/ LINDA MOORE
Linda Moore, Senior Vice President
MAY 12, 1997 By: /S/ DAWN M. DRELLA
(Date) Dawn M. Drella, Chief Financial Officer
14
Exhibit 10.16
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into as of the 6th
day of January, 1997 by and between Medical Industries of America (formerly
Heart Labs of America, Inc.), a Florida corporation (hereinafter referred to as
"Employer"), and Paul C. Pershes ("Employee").
W I T N E S S E T H:
WHEREAS, Employer and Employee wish to enter into an employment agreement.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, the parties hereto
agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and
Employee hereby accepts employment with Employer upon the terms and
conditions hereinafter set forth.
2. DUTIES. Subject to the power of the Board of Directors of Employer to
elect and remove officers, Employee will serve as President and Chief Operating
Officer and will faithfully and diligently perform the services and functions
relating to such offices or otherwise reasonable incident to such offices,
provided that all such services and functions will be reasonable and within
Employee's area of expertise. Employee will during the term of this Agreement
(or any extension thereof), devote his full business time, attention and skills
and best efforts to the promotion of the business of Employer. The foregoing
will not be construed as preventing Employee from making investments in other
business or enterprises provided that (a) Employee agrees not to become engaged
in any other business activity that interferes with his ability to discharge his
duties and responsibilities to Employer and (b) Employee does not violate any
other provision of this Agreement.
3. TERM. The term of this Agreement will commence as of the date hereof
and will end on that date in the year 2002, unless earlier terminated by either
party pursuant to the terms hereof. The term of this agreement is referred to
herein as the "Term". Assuming all conditions of this Agreement have been
satisfied and there has been no breach of the Agreement during its initial term,
Employer and Employee may mutually extend the term for an additional one (1)
year term at their election ("Extended Term").
4. COMPENSATION. As compensation for the services rendered under
this Agreement, Employee will be entitled to receive the following:
(a) SALARY Commencing upon the date of this Agreement, Employee will
be paid a minimum annual salary of $150,000 per year, payable in accordance with
the then
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current payroll policies of Employer or as otherwise agreed to by the parties
(the "Salary), subject to adjustment in accordance with subparagraph (g) hereof.
At any time the Salary may be increased for the remaining portion of the term if
so determined by the Board of Directors of Employer after a review of Employee's
performance of his duties.
(b) OPTIONS. See Section 20.
(c) EXPENSES. Upon submission of a detailed statement and reasonable
documentation, Employer will reimburse Employee in the same manner as other
executive officers for all reasonable and necessary or appropriate out-of-pocket
travel and other expenses incurred by Employee in rendering services required
under this Agreement.
(d) BENEFITS, INSURANCE.
(i) MEDICAL DENTAL AND VISION BENEFITS. During this Agreement,
Employee and his dependents will be entitled to receive such group medical
dental and vision benefits as Employer may provide to its other employees,
provided such coverage is reasonably available, or be reimbursed if Employee is
carrying or has to carry his own similar insurance.
(ii) BENEFIT PLANS. The Employee will be entitled to
participate in any benefit plan or program of the Employer which may
currently be in place or implemented in the future.
(iii) OTHER BENEFITS. During the Term, Employee will be
entitled to receive, in addition to and not in lieu of base salary, bonus or
other compensation, such as other benefits as Employer may provide for its
officers in the future.
(iv) DISABILITY INSURANCE. Up to $60,000.
(e) VACATION. Employee will be entitled to up to (4) weeks of
paid vacation per year.
(f) AUTOMOBILE. The Employer shall provide an auto and usual
auto expenses not to exceed $1,000 per month..
(g) Salary. Salary to be increased by minimum of CPI plus increases
based on performance, increase in earnings and revenues approved by the
compensation committee.
5. CONFIDENTIALITY. In the course of the performance of Employee's duties
hereunder, Employee recognizes and acknowledges that Employee may have access to
certain confidential and proprietary information of Employer or any of its
affiliates. Without the prior written consent of Employer, Employee shall not
disclose any such confidential or proprietary information to any person or firm,
corporation, association, or other entity for any reason or purpose whatsoever,
and shall not use such information, directly or indirectly, for Employee's
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own behalf or on behalf of any other party. Employee agrees and affirms that
all such information is the sole property of Employer and that at the
termination and/or expiration of this Agreement, at Employer's written
request, Employee shall promptly return to Employer any and all such information
so requested by Employer.
The provisions of this Section 5 shall not, however, prohibit Employee
from disclosing to others or using in any manner information that:
(a) has been published or has become part of the public domain other
than by acts, omissions or fault of Employee;
(b) has been published or has become part of the public domain other
than by acts, omissions or fault of Employee;
(c) was in the possession of Employee prior to obtaining such
information from Employer in connection with the performance of this
Agreement; or
(d) is required to be disclosed by law.
6. INDEMNIFICATION. The Employer shall to the full extent permitted by law
indemnify, defend and hold harmless Employee from and against any and all
claims, demands, liabilities, damages, losses and expenses (including reasonable
attorney's fees, court costs and disbursements) arising out of the performance
by him of his duties hereunder except in the case of his willful misconduct and
will carry directors and officers' insurance of $3,000,000 with $500,000
deductible.
7. TERMINATION. This Agreement and the employment relationship
created hereby will terminate upon the occurrence of any of the following
events:
A. TERMINATION WITHOUT CAUSE BY THE COMPANY. The Company may terminate the
Employee's employment pursuant to the terms of this Agreement without cause by
written notice to the Employee. Such termination will become effective upon the
date specified in such notice, provided that such date is at least 60 days from
the date of such notice. In the event of such termination, the Company shall pay
the Employee all salary due for the remainder of the employment term and all
stock options shall vest immediately at the highest range (Section 20). The
Company shall pay the Employee an amount equal to a minimum of 24 months salary
plus vesting of all stock options Such compensation shall be paid at the same
dates due to be paid as if this agreement were still in effect.
B. DEATH OR DISABILITY. This Agreement and the obligations
hereunder will terminate upon the death or disability of the Employee. For
purposes of this Section 7(C), "Disability" shall mean for a period of six
months in any twelve month period the Employee is incapable of
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substantially fulfilling the duties set forth in Section 2 of this Agreement
because of physical, mental or emotional incapacity resulting from an injury,
sickness or disease. Upon any such termination upon death or disability, the
Employer will pay the Employee or his legal representative, as the case may be,
his annual salary to the end of the agreement, but in no case
less than one year. at such time pursuant to Section 4 through the date of
such termination of employment all vested options become exercised.
C. CONTINUING EFFECT. Notwithstanding, any termination of the
Employee's employment as provided in this Section 7, the provisions of
Section 5 shall remain in full force and effect.
D. CONSIDERATION. The payments (if any) required to be paid by
the Employer to Employee pursuant to Section 7 shall be in full and complete
satisfaction of any and all obligations owing to Employee under this
Agreement.
8. WAIVER OF BREACH. The waiver by any party hereto of a breach of
any provision of this Agreement will not operate or be construed as a waiver
of any subsequent breach by any party.
9. COSTS. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party
will be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he or it may be
entitled.
10. NOTICES. Any notices,demands, requests, approvals and other
communications to be given under this agreement by either party to the other
will be deemed to have been duly given in writing and personally delivered or
within two (2) days if sent by mail, registered or certified, postage prepaid
with return receipt requested as follows:
If to Employer: Medical Industries of America
1903 S. Congress Avenue
Boynton Beach, Florida 33426
If to Employee: Paul C. Pershes
20046 Ocean Key Drive
Boca Raton, FL 33498
Notices delivered personally will be deemed communicated as of actual receipt.
11. MEDICAL BENEFITS for wife and family until age 65.
4
<PAGE>
12. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior agreements and understanding, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
13. GOVERNING LAW. This Agreement and the rights and obligations of
the parties will
be governed by and construed and enforced in accordance with the substantive
laws (but not the rules governing conflicts of laws) of the State of Florida.
14. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
this Agreement, such provision will be fully severable and this Agreement will
be construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof will remain
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there will be added
automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
16. CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
17. GENDER AND NUMBER. When the context requires the gender of
all words used herein will include the masculine, feminine and neuter and the
number of all words will include the singular and plural.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, but only one of which
need be produced.
19. OFFICER'S LIFE INSURANCE FOR BENEFIT OF COMPANY. Life insurance
policy for $1,000,000 with company as beneficiary. The company will also
provide a whole life insurance policy for the individual for his
beneficiaries in the amount of $1,000,000.
20. STOCK OPTIONS
YEAR OF VESTING # OF OPTIONS
--------------- ------------
For 1997 Signing Bonus Options 250,000
For 1997 150,000-200,000
For 1998 175,000-225,000
For 1999 200,000-250,000
For 2000 250,000-250,000
---------------
Total 1997-2000 775,000-925,000
5
<PAGE>
This will be part of Company's Stock Option Plan. The option price as of January
9, 1997 was $.50 per share, market value at date of agreement.
Upon sale of business or change in control all options vest and are exercisable.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EMPLOYER:
MEDICAL INDUSTRIES OF AMERICA, INC.
BY: /S/ MICHAEL F. MORRELL
Michael F. Morrell
Chief Executive Officer
EMPLOYEE:
/S/ PAUL C. PERSHES
Paul C. Pershes
6
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