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:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11 (c) or
Sec. 240.14a-12
MEDICAL INDUSTRIES OF AMERICA, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person (s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $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:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by the
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 of Schedule and the date
of its filing.
(1) Amount previously paid:
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(2) Form, Schedule of Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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MEDICAL INDUSTRIES OF AMERICA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 26, 1999
To the Stockholders of Medical Industries of America, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Medical
Industries of America, Inc., a Florida corporation (the "Company"), will be held
at the Holiday Inn, 1601 N. Congress Avenue, Boynton Beach, Florida, at 2:00
p.m., local time on August 26, 1999, for the following purposes:
1. To elect eight directors to each serve until the next annual meeting of
Stockholders of the Company and until their successors have been duly
elected and qualified.
(i) John Haines' appointment is subject to the approval of the acquisition
of CyberCare, Inc. as more fully disclosed herein as Proposal 2.
2. To consider and act upon a proposal to approve the issuance of additional
common shares of the Company for the purpose of acquiring all the capital
stock of CyberCare, Inc. under the terms of that certain Stock Exchange
Agreement by and between the Company and CyberCare, Inc. dated July 5,
1999.
3. To consider and act upon a proposal to approve an amendment to the
Company's Articles of Incorporation to change the name of the Company from
Medical Industries of America, Inc. to Cyber-Care, Inc.
4. To consider and act upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the number of authorized
shares of common stock from 100 million to 200 million.
5. To consider and act upon a proposal to approve the Company's proposed 1999
Incentive Stock Option Plan.
6. To consider and act upon a proposal to approve the Company's proposed 1999
Officers and Directors Stock Option Plan.
7. To consider and act upon a proposal to approve the Company's proposed 1999
Employee Stock Purchase Plan.
8. To ratify the appointment of Ernst & Young, LLP.
9. To consider and act upon a proposal to approve an amendment to the Plan of
Merger with Air Response, Inc. whereby the Company will issue a series of
debentures convertible into its common stock in replacement of promissory
notes.
10. To consider and act upon a proposal to approve the sale to investors of
debentures and warrants pursuant to a private offering with Connecticut
Capital Markets, LLC, the placement agent, where the issuance of the
Company's common shares upon the conversion or exercise of the debentures
or warrants could result in the Company issuing shares of its common stock
to the investors in amounts of 20% or more of the Company's issued and
outstanding common stock as of the Record Date.
11. To consider and act upon a proposal to approve the sale, pursuant to a
three year $25 million equity line funding commitment with Swartz Capital
& Partners, LLC, of the Company's common stock and warrants which, if
converted, could result in the Company issuing shares of its common stock
to the investors in amounts of 20% or more of the Company's issued and
outstanding common stock as of the Record Date.
12. 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 July 16, 1999, are
entitled to notice of and to vote at the meeting, or any adjournment thereof
subject to the following exception: with respect to Proposal 9, the amendment to
the Merger Agreement with Air Response, Inc. the former stockholders of Air
Response, Inc. or their successors in interest who hold shares of the Company's
common stock may not vote. A complete list of such stockholders will be
available for examination at the offices of the Company in Boynton Beach,
Florida, for ten business days prior to the meeting.
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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, Corporate Stock Transfer, 370 17th Street, Denver, Colorado 80202, 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
Boynton Beach, Florida /s/ Linda Moore
July 30, 1999
Linda Moore, Secretary
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>
TABLE OF CONTENTS
PROXY
MEDICAL INDUSTRIES OF AMERICAN, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 10, 1999
PROXY STATEMENT FOR 1999 ANNUAL MEETING OF STOCKHOLDERS 1
Annual Meeting 1
Record Dates 1
Quorum 1
Voting Requirements 1
Abstentions and Broker Non-Votes 2
Default Voting
ANNUAL REPORT 2
AVAILABLE INFORMATION 2
FORWARD-LOOKING INFORMATION 3
PROPOSAL 1 - ELECTION OF DIRECTORS 3
Director Nominees 3
Committees and Meetings 4
Directors' Fees 5
Reports 5
PROPOSAL 2 - CYBERCARE STOCK EXCHANGE AGREEMENT 5
General 5
Reasons for the Proposal 5
Pro Forma Book Value and Earnings Per Share 6
Comparative Per Share Information 6
Unaudited Pro Forma Combined Financial Information 7
SUMMARY OF CYBERCARE ACQUISITION 12
The Parties to the Transaction 12
The Company 12
CyberCare 12
CyberCare Stockholder Who Will Become Director 12
CyberCare Stockholder Who Will Become More than 5% Stockholder 12
Lack of Opinions, Appraisals and Reports 12
Regulatory Requirements 12
Federal Income Tax Consequences of the CyberCare Acquisition 12
Accounting Treatment of the Transaction 12
Resales of Common Stock 13
Absence of Dissenters' Rights 13
Nasdaq Requirement for Stockholder Approval 13
Market and Market Price for Common Stock 13
Risk Factors Applicable to the CyberCare Acquisition 14
Dependence Upon Acquired Management 14
Integration of Operations; Management of Growth 15
Dilution; Voting Control 15
Pro Forma Effect on Book Value and Earnings Per Share 15
Resales of Common Stock and Market Volatility 15
Risks With Respect to Computer Technologies and
Year 2000 Compliance 16
Substantial Competition 16
Risk of Product Liability 16
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Future Capital Needs; Potential Need for Additional Financing 16
Acquisition of Businesses; Risks of Growth and Expansion 17
Uncertain Ability To Protect Patents and Proprietary
Technology and Information 17
Early Stage Product Development 18
Dependence on Market Acceptance 18
Limited Marketing and Sales Capability 18
THE CYBERCARE ACQUISITION 18
Background 18
Reasons for the CyberCare Acquisition 18
Potentially Negative Factors of the CyberCare Acquisition 19
Resales of Common Stock 19
Registration Rights Agreement 20
Lock-Up of Common Stock 20
Interest of Certain Persons in the CyberCare Acquisition 20
The Exchange Agreement 20
General 20
Employment and Non-Compete Agreement 21
Representations and Warranties of the Parties 21
Additional Covenants of the Parties 21
THE COMPANY 21
General 21
Business Operations 22
Air Ambulance Transport Service 22
Physical, Occupational and Speech Therapy Centers 22
Pharmaceutical Services 22
Sleep Centers 23
Cardiology Ancillary Services 23
Pending Acquisition 23
Professional Liability Insurance 23
Competition 24
Marketing 24
Employees 24
Description of Properties 25
Legal Proceedings 25
MEDICAL INDUSTRIES OF AMERICA, INC.
SELECTED CONSOLIDATED FINANCIAL DATA 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY 27
Overview 27
Material Changes 28
Comparison of the Results of Operations For the
Three Months Ended March 31, 1999 and March 31, 1998 28
Comparison of the Results of Operations For the Twelve
Months Ended December 31, 1998 and December 31, 1997 29
Comparison of the Results of Operations For the Twelve
Months Ended December 31, 1997 and December 31, 1996 30
Liquidity and Capital Resources 30
CYBERCARE - SELECTED CONSOLIDATED FINANCIAL DATA 31
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CYBERCARE 32
Overview 32
Results of Operations 32
Description of the Business of CyberCare 32
Description of the Business For the Last Five Years 32
Conduct of Business of CyberCare 32
Material Agreements 32
Description of Material Products 33
Status of Patents and/or Copyrights 33
Competition 33
Marketing 33
Description of Properties 34
Employees 34
Government Regulations 34
Legal Proceedings 34
PROPOSAL 3 - AMENDMENT TO ARTICLES OF INCORPORATION NAME CHANGE 34
General 34
Reason For the Proposal 34
Vote Necessary to Approval Proposal 35
PROPOSAL 4 - INCREASE IN AUTHORIZED CAPITAL STOCK 35
General 35
Purpose and Effect of the Proposed Amendment 36
Vote Necessary to Approve Proposal 36
PROPOSAL 5 - MEDICAL INDUSTRIES OF AMERICA, INC. 1999
INCENTIVE STOCK OPTION PLAN 36
PROPOSAL 6 - MEDICAL INDUSTRIES OF AMERICA, INC. 1999
OFFICERS AND DIRECTORS STOCK OPTION PLAN 37
Eligibility 37
Number of Stock Options 37
Exercise Price 37
Non-Transferability and Restrictions on Exercises 37
Term of the Options 37
Tax Consequences 38
Anti-Dilution Provisions 38
Reload Options 38
PROPOSAL 7 - MEDICAL INDUSTRIES OF AMERICA, INC. 1999
EMPLOYEE STOCK PURCHASE PLAN 38
Tax Consequences 39
PROPOSAL 8 - CHANGE IN ACCOUNTING FIRMS, APPOINTMENT OF
ERNST & YOUNG, LLP AS OUR AUDITORS 39
PROPOSAL 9 - AMENDMENT TO AIR RESPONSE MERGER AGREEMENT 40
General 40
Terms of Transaction 40
Purpose and Effect of Proposal 40
PROPOSAL 10 - CONNECTICUT CAPITAL MARKETS, LLC
$5,000,000 PRIVATE PLACEMENT 41
General 41
Purpose and Effect of Proposal 42
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PROPOSAL 11 - SWARTZ EQUITY LINE 43
General 43
Purpose and Effect of Proposal 44
PROPOSAL 12 - OTHER MATTERS 45
STOCK OWNERSHIP 45
EXECUTIVE COMPENSATION 46
Compensation of the Company Officers 47
Summary of Compensation Table 47
Employment Agreements 47
Option Grants During 1998 and Aggregated Fiscal
Year-end Option Value 48
Aggregated Options Exercised in 1998 and 1998 Option Values 48
Long-Term Employee Plans 49
COST OF SOLICITATION 49
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS 49
OTHER MATTERS 49
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 50
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MEDICAL INDUSTRIES OF AMERICA, INC
1903 S. CONGRESS AVENUE, SUITE 400
BOYNTON BEACH, FLORIDA 33426
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PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
-------------------
ANNUAL MEETING. This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Medical Industries of
America, Inc., a Florida corporation (the "Company") for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at the Holiday Inn,
Boynton Beach, Florida, at 2:00 p.m., local time, on August 26, 1999, 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 of the Company (the "Stockholders") on or about
August 4, 1999. All costs of soliciting proxies will be borne by the Company.
RECORD DATES. With respect to all proposals, other than Proposal 9, the
close of business on July 16, 1999 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 29,260,885 shares of common stock, $.0025 par value, issued and
outstanding. With respect to Proposal 9, the former stockholders of Air
Response, Inc. or their successors in interest who own shares of the Company's
common stock may not vote on this proposal. As of the Record Date, the former
stockholders of Air Response, Inc. owned 3,866,667 shares of the Company's
common stock.
QUORUM. 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.
VOTING REQUIREMENTS. With respect to the election of directors, votes may
be cast in favor of 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. Any other matter that may be
submitted to a vote of the Stockholders will be approved if the number of shares
of common stock voted in favor of the matter exceeds the number of shares voted
against the matter, unless the matter is one for which a greater vote is
required by law or the Company's Articles of Incorporation or Bylaws.
ABSTENTIONS AND BROKER NON-VOTES. Abstentions will be considered as shares
present and entitled to vote at the Annual Meeting and will be counted as votes
cast at the Annual Meeting, but will not be counted as votes cast for or against
any given matter. Shares referred to as "broker or nominee non-votes" (shares
held by brokers or nominees as to which instructions have not been received from
the beneficial owners or persons entitled to vote and the broker or nominee does
not have discretionary voting power on a particular matter) will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. For purposes of determining the outcome of any matter as
to which the proxies reflect broker or nominee non-votes, shares represented by
such proxies will be treated as not present and not entitled to vote on that
subject matter and therefore will not be considered when counting votes cast on
the matter (even though those shares are considered
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entitled to vote for quorum purposes and may be entitled to vote on other
matters). Accordingly, abstentions and broker or nominee non-votes will not have
the same effect as a vote against the election of any director.
DEFAULT VOTING. 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 AS DIRECTORS, (ii) FOR THE APPROVAL OF THE ISSUANCE OF
ADDITIONAL COMMON SHARES OF THE COMPANY FOR THE PURPOSE OF ACQUIRING ALL THE
CAPITAL STOCK OF CYBERCARE, INC., (iii) FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION CHANGING THE NAME FROM MEDICAL INDUSTRIES OF
AMERICA, INC. TO CYBER-CARE, INC., (iv) FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK, (v) FOR THE APPROVAL OF THE 1999 INCENTIVE STOCK OPTION PLAN,
(vi) FOR THE APPROVAL OF THE 1999 OFFICERS AND DIRECTORS STOCK OPTION PLAN,
(vii) FOR THE APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN, (viii) FOR
RATIFICATION OF ERNST & YOUNG, LLP. AS THE COMPANY'S ACCOUNTANTS, (ix) FOR THE
APPROVAL OF THE AMENDMENT TO THE PLAN OF MERGER WITH AIR RESPONSE, INC. (x) FOR
THE APPROVAL OF THE SALE OF AN AMOUNT OF DEBENTURES AND WARRANTS PURSUANT TO A
PRIVATE PLACEMENT MEMORANDUM WHICH, IF CONVERTED, COULD RESULT IN THE COMPANY
ISSUING SHARES OF ITS COMMON STOCK IN AMOUNTS OF 20% OR MORE OF THE COMPANY'S
ISSUED AND OUTSTANDING STOCK ON THE RECORD DATE, (xi) FOR THE APPROVAL OF THE
SALE, PURSUANT TO A THREE YEAR $25 MILLION EQUITY LINE FUNDING COMMITMENT, OF
THE COMPANY'S COMMON STOCK AND WARRANTS WHICH, IF CONVERTED, COULD RESULT IN THE
COMPANY ISSUING SHARES OF ITS COMMON STOCK IN AMOUNTS OF 20% OR MORE OF THE
COMPANY'S ISSUED AND OUTSTANDING STOCK ON THE RECORD DATE. IF ANY OTHER BUSINESS
COMES BEFORE THE STOCKHOLDERS FOR A VOTE AT THE MEETING, THE SHARES WILL BE
VOTED IN ACCORDANCE WITH THE DISCRETION OF THE HOLDERS OF THE PROXY.
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/A for the fiscal year
ended December 31, 1998 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/A, upon written request to Linda Moore, Secretary
of the Company, at 1903 S. Congress Avenue, Suite 400, Boynton Beach, Florida
33426; fax number (561) 737-5008.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the SEC relating to its businesses, financial statements and other matters.
Reports, proxy statements and other information, may be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N. W., Judiciary Plaza, Washington, D.C. 20549 and at the public
reference facilities maintained by the SEC at its regional offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. Copies
of such material can be obtained at prescribed rates by writing to the SEC,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
SEC also maintains a web site that contains reports, proxy and
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information statements and other information regarding the Company. The address
of that web site is HTTP://WWW.SEC.GOV. The common stock is listed on the Nasdaq
Small Cap Market and information with respect to the Company is available for
inspection at 1903 S. Congress Ave, Suite #400, Boynton Beach, FL 33426.
FORWARD-LOOKING INFORMATION
Statements relating to the Company contained in this Proxy that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In addition, the Company,
through its senior management, from time to time makes forward-looking public
statements concerning expected future operations and performance and other
developments. Such forward-looking statements are necessarily estimates
reflecting the Company's best judgment based upon current information and
involve a number of significant risks and uncertainties, and there can be no
assurance that other factors will not affect the accuracy of such
forward-looking statements. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by the Company, include, but are not limited to, changes in the
regulation of the healthcare industry at either or both of the federal and state
levels, changes in reimbursement for services by government or private payors,
competitive pressures in the healthcare industry and the Company's response
thereto, the Company's ability to obtain and retain favorable arrangements with
third-party payors, unanticipated delays in implementation of its healthcare
e-commerce business, the ability of the Company to raise sufficient capital in a
timely manner to fully implement its business plan and to provide adequate
working capital, general conditions in the economy and capital markets, and
other factors which may be identified from time to time in the Company's SEC
filings and in other public announcements of the Company.
PROPOSAL 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 Board of Directors will determine the
number of directors. The Stockholders will elect eight directors for the coming
year. All of the nominees, except for Mr. John Haines, presently serve as
directors of the Company. Should any nominee become unable or unwilling to
accept nomination or election, the Board of Directors will either select a
substitute nominee or will reduce the size of the Board. If you have submitted a
proxy and a substitute nominee is selected, the holders of the proxy will vote
your shares FOR the election of the substitute nominee. The Board of Directors
has no reason to believe that any nominee will be unable or unwilling to serve
if elected.
Except for Messrs. Pusateri, Capece and Haines, the individuals listed
below as nominees for the Board of Directors were directors of the Company
during 1998.
The name and age of each nominee, his principal occupation, and the period
during which such person has served as a director is set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE SERVICE AS DIRECTOR POSITION
- --------------- ----- ------------------- --------
<S> <C> <C>
Michael F. Morrell 57 since 1996 Chairman of the Board Chief Executive Officer
Paul C. Pershes (1)(2) 56 since 1996 President and Director
Theodore J. Orlando (2) 59 since 1997 Director
Terry Lazar (1)(2) 56 since 1997 Director
Glen Barber (1) 49 since 1997 Director
Dana J. Pusateri (2) 47 since 1999 Director
Louis R. Capece 51 since 1999 Director
John E. Haines (3) 52 n/a
</TABLE>
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(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) The approval of Mr. Haines is conditioned upon the Stockholders' approval
of Proposal 2 and the consummation of the transactions contemplated by the
Stock Exchange Agreement between the Company and CyberCare, Inc.
MICHAEL F. MORRELL has served as Chairman and CEO since August 1996. From
November 1995 to August 1996, Mr. Morrell was an independent consultant in the
field of corporate finance. From March 1994 to November 1995 Mr. Morrell served
as President and a director of Westmark Group Holdings, Inc.
PAUL C. PERSHES has served as a director since August 1996 and as
President and Chief Operating Officer since May 1997. Prior to joining the
Company, Mr. Pershes was a founding stockholder of a local accounting firm from
July 1995 to May 1997. From November 1990 to June 1973, Mr. Pershes was a senior
partner of the international accounting firm, Laventhol and Horvath.
THEODORE J. ORLANDO has served as an outside director of the Company since
March 1997. In April 1994, Mr. Orlando founded and is currently President of
Barkus Capital Resources, Ltd., a real estate and securities investment company.
In March 1984, Mr. Orlando founded TJ Systems Corporation, a computer leasing
company, and served as its Chairman and Chief Executive Officer from its
inception until June 1995.
GLEN BARBER has served as an outside director of the Company since April
1997. In June 1988, Mr. Barber founded New Age Communications, Inc. and served
is its President until February 1977. Mr. Barber has served as President and
Chief Executive Officer of Financial Services Group since 1997.
TERRY LAZAR has served as an outside director of the Company since April
1997. In September 1977, Mr. Lazar founded and has served as a senior partner of
Lazar, Sanders, LLP, a full service accounting firm. From May 1993 to present,
Mr. Lazar has served as a partner and Director of Finance of the Ambulatory
Surgery Center of Brooklyn.
DANA PUSATERI has served as a director of the Company since January 1999.
Mr. Pusateri co-founded IntegraCare, Inc. in March 1988 and served as its
Chairman, Chief Executive Officer and President from March 1988 to August 1995.
In December 1995, Mr. Pusateri left IntegraCare, Inc. and was an independent
consultant until May of 1997. In May of 1997, Mr. Pusateri co-founded Your Good
Health Network, Inc., a wholly owned subsidiary of the Company, and currently
serves as its Chief Executive Officer and President.
LOUIS "RUSTY" CAPECE, JR. has served as a director of the Company since
March 1999. In March of 1999, Mr. Capece was elected and continues to serve as
Chief Executive Officer and President of Air Response North, Inc., a wholly
owned subsidiary of the Company. Mr. Capece served as President of Air Response,
Inc. since its inception in June 1986 until March 1999 when it merged with Air
Response North, Inc., a wholly owned subsidiary of the Company. From June 1982
to June 1997, Mr. Capece was President of Response Medical, Inc.
JOHN E. HAINES has served as Chairman, Chief Executive Officer and
President of CyberCare, Inc. since its inception in October 1997. Mr. Haines
founded C-Med Corporation, a telemedicine technology company in Atlanta,
Georgia, in January 1994, and served as its Chief Executive Officer from its
inception until March 1995, when he became Chief Executive Officer of Video Lan
Technologies, Inc. Mr. Haines remained Chief Executive Officer of Video Lan
Technologies, Inc. until December 1995, when he left to form another
telemedicine technology firm known as the Willow Group. The Willow Group was
formally incorporated in October 1997 as CyberCare, Inc.
COMMITTEES AND MEETINGS. The Board of Directors held fourteen (14)
meetings in 1998 and each director of the Company attended at least 85% of all
the Board meetings. In April 1997, 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. Lazar and Pershes
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serve on both committees. Messrs. Orlando and Pusateri serve on the Compensation
Committee. Mr. Barber serves on the Audit Committee.
DIRECTORS' FEES. Outside directors will receive an annual fee of up to
$5,000 and are entitled to reimbursement for reasonable travel expenses incurred
in attending board meetings. Each of the outside directors is granted stock
options in the Company as awarded in the discretion of the Compensation
Committee. Each outside director was granted 75,000 options in February 1998
exercisable over three years.
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 ownerships 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 and directors were complied with during the year ended December 31,
1998.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTORS FOR ELECTION
BY THE STOCKHOLDERS 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 THE SHARES OF COMMON STOCK PRESENT
OR REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE IN THE
ELECTION OF DIRECTORS.
PROPOSAL 2
CYBERCARE STOCK EXCHANGE AGREEMENT
GENERAL. The Board of Directors has approved, and recommends that the
Stockholders approve, the issuance of 7,250,000 shares of Company's common stock
in order to consummate the acquisition (the "CyberCare Acquisition") by the
Company of all of the capital stock of CyberCare, Inc. ("CyberCare") under the
terms of the Stock Exchange Agreement dated as of July 5, 1999 (the "Exchange
Agreement") between the Company and CyberCare.
Stockholders of the Company should read the information concerning the
CyberCare Acquisition which is included in this Proxy Statement following the
statement of the recommendation of the Board of Directors before deciding how to
vote on the CyberCare Acquisition proposal.
REASONS FOR THE PROPOSAL. The Board of Directors is committed to further
diversify the business activities of the Company in the health care industry in
the belief that such diversification can provide increased revenues and
profitability and reduce the Company's dependence on revenues generated solely
from its present core businesses. The Board has further determined that any such
diversification is a logical expansion into a larger market that is
distinguishable from, but compatible with its existing health care business.
After its review of the business and prospects of CyberCare during the initial
negotiations, and subsequently during the Company's due diligence investigation,
the Board unanimously approved the CyberCare Acquisition. The Board believes
that the CyberCare Acquisition will result in a major expansion of the Company's
customer base, increase the Company's revenues and profits, diversify the
business of the Company and provide a basis for further related growth which
will be in the best interests of the Company and its Stockholders.
THE BOARD OF DIRECTORS HAS APPROVED ISSUANCE OF ADDITIONAL SHARES OF THE
COMPANY'S COMMON STOCK FOR THE PURPOSE OF CONSUMMATING THE STOCK EXCHANGE
AGREEMENT WITH CYBERCARE, INC. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE APPROVAL OF THIS PROPOSAL. 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.
5
<PAGE>
PRO FORMA BOOK VALUE AND EARNINGS PER SHARE.
COMPARATIVE PER SHARE INFORMATION. The following summary presents selected
comparative per share information (i) for CyberCare on a historical basis, in
comparison with pro forma equivalent information after giving effect to the
CyberCare Acquisition on a "purchase" basis, and (ii) for the Company on a
historical basis, in comparison with pro forma equivalent information after
giving effect to the CyberCare Acquisition on a "purchase" basis. This financial
information should be read in conjunction with the historical consolidated
financial statements of CyberCare and the Company and the related notes thereto
and the pro forma financial information contained elsewhere herein.
Neither CyberCare nor the Company has paid cash dividends since inception.
It is anticipated that the Company will retain all earnings for use in the
expansion of the business and therefore management of the Company does not
anticipate to pay any cash dividends in the foreseeable future. The payment of
future dividends will be at the discretion of the Board of Directors and will
depend, among other things, upon future earnings, capital requirements,
financial condition and debt covenants.
The following information is not necessarily indicative of the combined
results of operations or combined financial position that would have resulted
had the CyberCare Acquisition been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the combined results of
operations in future periods or future combined financial position.
HISTORICAL PRO FORMA
---------- ---------
For the year ended
December 31, 1998
-------------------------
Company Common Stock per share:
--- Cash dividends - -
--- Loss per share from continuing operations (.39) (.29)
CyberCare stock per share:
--- Cash dividends - -
--- Loss per share (.18) (.18)
For the three months
Ended March 31, 1999
-------------------------
Company Common Stock per share:
--- Cash dividends - -
--- Income (loss) per share from continuing
operations - -
CyberCare stock per share:
--- Cash dividends - -
--- Loss per share (.02) (.02)
At March 31, 1999
-------------------------
Company Common Stock per share:
--- Book value $.55 $.41
CyberCare stock per share:
--- Book value (.11) (.11)
(1) The pro forma combined financial information has been prepared based on
the purchase method of accounting assuming that one share of the Company's
common stock is issued for each outstanding share of CyberCare common
stock and that no holder of CyberCare common stock exercises appraisal
rights in the CyberCare Acquisition.
6
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION. The following
unaudited pro forma condensed combined financial information combines (i) the
historical consolidated statements of income of the Company and CyberCare, Inc.
after giving effect to the completion of the transactions contemplated by the
Exchange Agreement, as if the CyberCare Acquisition had occurred on January 1,
1998, and (ii) the historical balance sheet of the Company and CyberCare, Inc.
as if the CyberCare Acquisition had occurred on March 31, 1999, in each case
using the purchase method. There can be no assurances that the CyberCare
Acquisition will be consummated. The information shown below should be read in
conjunction with the historical financial statements of the Company and
CyberCare, Inc. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS BY
REFERENCE" and the Company and Subsidiaries Index to Consolidated Financial
Statements. The "Company" includes Medical Industries of America, Inc., its
wholly owned subsidiaries and its majority-owned subsidiary.
The pro forma amounts below are presented for informational purposes only
and are not necessarily indicative of the results of operations of the combined
company that would have actually occurred had the CyberCare Acquisition been
consummated as of January 1, 1998 or of the financial condition of the combined
company had the CyberCare Acquisition been consummated as of March 31, 1999 or
of the future results of operations or financial condition of the combined
company. The pro forma information does not reflect any synergies anticipated as
a result of the CyberCare Acquisition. The pro forma income statement and
balance sheet information does not reflect costs associated with the combining
of the companies, which costs the Company and CyberCare, Inc. cannot presently
estimate.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
7
<PAGE>
MEDICAL INDUSTRIES OF AMERICA, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
MEDICAL
INDUSTRIES OF PRO FORMA PRO FORMA
AMERICA, INC. CYBERCARE, INC. ADJUSTMENTS COMBINED
------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Assets
Cash .............................................................. $ 531,640 $ 3,618 $ -- $ 535,258
Accounts receivable, net .......................................... 5,915,310 -- -- 5,915,310
Current maturities of mortgages and notes
receivables ..................................................... 71,802 -- -- 71,802
Inventories ....................................................... 167,306 -- -- 167,306
Medical equipment held for sale ................................... 92,540 -- -- 92,540
Prepaid expenses and other current assets ......................... 779,617 1,000 -- 780,617
----------- ----------- --------------- -----------
Total current assets .......................................... 7,558,215 4,618 -- 7,562,833
Property and equipment, net ....................................... 20,472,486 19,227 -- 20,491,713
Notes and mortgages receivables, less current
maturity ........................................................ 308,844 -- -- 308,844
Goodwill .......................................................... 8,938,630 -- (a) 10,418,750 18,707,380
(b)(650,000)
Investment in equity securities ................................... 2,924,578 -- -- 2,924,578
Other assets ...................................................... 1,769,184 -- -- 1,769,184
----------- ----------- --------------- -----------
Total assets .................................................. $41,971,937 $ 23,845 $ 9,768,750 $51,764,532
=========== =========== =============== ===========
Liabilities and Stockholders' Equity
Line of credit .................................................... $ 2,253,053 $ -- $ -- $ 2,253,053
Current maturities of notes payable & long-term
debt ............................................................ 3,354,030 -- -- 3,354,030
Current maturities of capital lease obligations ................... 162,171 -- -- 162,171
Current maturities of convertible subordinated
debentures ...................................................... 75,000 -- -- 75,000
Accounts payable .................................................. 3,723,083 41,132 -- 3,764,215
Accrued liabilities ............................................... 1,959,762 63,473 -- 2,023,235
Licensing fees payable ............................................ -- 487,912 -- 487,912
----------- ----------- --------------- -----------
Total current liabilities ..................................... 11,527,099 592,517 -- 12,119,616
----------- ----------- --------------- -----------
Notes payable & long-term debt, less current
maturities ...................................................... 11,824,156 -- -- 11,824,156
Convertible subordinated debentures ............................... 3,837,543 -- -- 3,837,543
Capital lease obligations, less current
maturities ...................................................... 641,047 -- -- 641,047
Payable to officers ............................................... 151,169 -- -- 151,169
----------- ----------- --------------- -----------
Total long-term liabilities ................................. 16,453,915 -- -- 16,453,915
----------- ----------- --------------- -----------
(b) (650,000)
Stockholders' equity ........................................ 13,990,923 (568,672) (a) 10,418,750 23,191,001
----------- ----------- --------------- -----------
Total liabilities and stockholders' equity .................. $41,971,937 $ 23,845 $ 9,768,750 $51,764,532
=========== =========== =============== ===========
</TABLE>
8
<PAGE>
MEDICAL INDUSTRIES OF AMERICA, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
MEDICAL AIR
INDUSTRIES OF RESPONSE PRO FORMA PRO FORMA
AMERICA, INC. NORTH, INC. CYBERCARE, INC. ADJUSTMENTS COMBINED
------------- ----------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Cash ................................................... $ 698,574 $ 149,947 $ 30,854 $ -- $ 879,375
Accounts Receivable .................................... 3,409,025 993,577 -- (b) (128,640) 4,273,962
Current portion of notes and mortgages
receivables .......................................... 79,119 -- -- -- 79,119
Inventories ............................................ 125,525 -- -- -- 125,525
Medical equipment held for sale ........................ 92,540 -- -- -- 92,540
802,731
Prepaid expenses and other current assets .............. 549,896 251,835 1,000 --
------------- ----------- --------------- -------------- -----------
Total current assets ............................... 4,954,679 1,395,359 31,854 (128,640) 6,253,252
Property and equipment, net ............................ 10,468,420 7,988,429 20,508 (a)2,233,368 20,610,725
(c)(100,000)
Notes and mortgages receivables, less
current maturity ..................................... 97,580 -- -- 97,580
Intangible assets ...................................... 8,338,972 -- (a)845,490 19,049,212
(c)(34,000)
(d)10,418,750
(e)(520,000)
Investment in equity securities ........................ 2,863,840 -- -- 2,863,840
Other assets ........................................... 1,609,219 62,533 -- 1,671,752
------------- ----------- -------------- -----------
Total assets ....................................... $ 28,332,710 $ 9,446,321 $ 52,362 $ 12,714,968 $50,546,361
============= =========== =============== ============== ===========
Liabilities and Stockholders' Equity
Line of credit ......................................... $ 1,789,827 $ -- $ -- $ -- $ 1,789,827
Current maturities of notes payable &
long-term debt ....................................... 1,827,835 1,531,195 -- -- 3,359,030
Current maturities of capital lease
obligations .......................................... 163,595 -- -- -- 163,595
Current maturities of convertible
subordinated debentures .............................. 125,000 -- -- -- 125,000
Accounts payable ....................................... 2,117,079 1,915,728 20,381 (b)(128,640) 3,924,548
Accrued liabilities .................................... 1,009,564 83,000 20,013 -- 1,112,577
Licensing fees payable ................................. -- -- 487,912 -- 487,912
Net liabilities of discontinued operations ............. 418,243 -- -- -- 418,243
------------- ----------- --------------- -------------- -----------
Total current liabilities .......................... 7,451,143 3,529,923 528,306 (128,640) 11,380,732
------------- ----------- --------------- -------------- -----------
Notes payable & long-term debt, net of
current maturities ................................... 6,184,737 5,965,256 -- -- 12,149,993
Convertible subordinated debentures .................... 3,367,500 -- -- -- 3,367,500
Capital lease obligations, net of current
maturities ........................................... 681,335 -- -- -- 681,335
Other liabilities ...................................... -- 130,000 -- -- 130,000
Payable to officers .................................... 151,169 -- -- -- 151,169
------------- ----------- --------------- -------------- -----------
Total long-term liabilities ...................... 10,384,741 6,095,256 -- -- 16,479,997
------------- ----------- --------------- -------------- -----------
(c)(134,000)
Stockholders' equity (deficit) ................... 10,496,826 (178,858) (475,944) (a)3,078,858 22,685,632
------------- ----------- --------------- -----------
(d)10,418,750
(e)(520,000)
--------------
Total liabilities and stockholders' equity ............. $ 28,332,710 $ 9,446,321 $ 52,362 $ 12,714,968 $50,546,361
============= =========== =============== ============== ===========
</TABLE>
9
<PAGE>
MEDICAL INDUSTRIES OF AMERICA, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
MEDICAL INDUSTRIES PRO-FORMA PRO FORMA
OF AMERICA, INC. CYBERCARE, INC. ADJUSTMENTS COMBINED
------------------ -------------- ----------- ------------
<S> <C> <C> <C>
Revenue
Revenue ..................................................... $ 7,910,994 $ -- $ -- $ 7,910,994
------------------ ------------ ----------- ------------
Expenses
Technology licensing fees ................................... -- 2,500 -- 2,500
Cost of revenues ............................................ 3,667,584 -- -- 3,667,584
General and administrative expenses ......................... 3,005,246 101,447 -- 3,106,693
Depreciation and amortization ............................... 555,630 1,281 (b) 130,000 686,911
Interest expense ............................................ 559,271 -- -- 559,271
Interest-beneficial conversion feature ...................... 236,468 -- -- 236,468
Other ....................................................... (60,738) -- -- (60,738)
------------------ ------------ ----------- ------------
Total expenses .......................................... 7,963,461 105,228 130,000 8,198,689
------------------ ------------ ----------- ------------
Net loss ....................................................... $ (52,467) $ (105,228) $ (130,000) $ (287,695)
================== ============ =========== ============
Loss per share ................................................. $ (--) $ (.02) $ -- $ (.01)
================== ============ =========== ============
Weighted average common shares outstanding ..................... 24,906,947 5,099,997 2,150,003 32,156,947
================== ============ =========== ============
</TABLE>
(a) The following pro forma adjustments are made to reflect estimated
fair value adjustments at December 31, 1998 between Medical
Industries of America, Inc. and CyberCare, Inc.
Fair value adjustments:
Intangible assets $ 10,418,750
==============
(b) Pro forma adjustments to reflect additional amortization based on
fair market value adjustment.
10
<PAGE>
MEDICAL INDUSTRIES OF AMERICA, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MEDICAL
INDUSTRIES AIR RESPONSE PRO-FORMA PRO FORMA
OF AMERICA, INC. NORTH, INC. CYBERCARE, INC. ADJUSTMENTS COMBINED
---------------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Revenue from operations ....................... $ 14,448,523 $ 12,779,135 $ -- $(a)(488,838) $ 26,738,820
Interest income ............................... 282,803 -- -- -- 282,803
---------------- ------------ --------------- ------------ ------------
Total revenue ............................. 14,731,326 12,779,135 -- (488,838) 27,021,623
---------------- ------------ --------------- ------------ ------------
Expenses
Cost of services .............................. 6,915,503 9,407,694 -- (a) (488,838) 15,834,359
General and administrative expenses ........... 8,425,420 1,840,005 325,405 -- 10,590,830
Technology licensing fee ...................... -- -- 601,662 -- 601,662
Depreciation and amortization ................. 1,458,595 562,465 5,127 (b) 654,000 2,680,187
Interest expense .............................. 1,120,106 653,769 -- -- 1,773,875
Interest - beneficial conversion feature ...... 1,109,163 1,109,163
Other ......................................... 300,951 -- -- -- 300,951
---------------- ------------ --------------- ------------ ------------
Total expenses ............................ 19,329,738 12,463,933 932,194 165,162 32,891,027
---------------- ------------ --------------- ------------ ------------
Non-operating income ............................. -- 226,913 -- -- 226,913
---------------- ------------ --------------- ------------ ------------
Income (Loss) from continuing
operations .................................... (4,598,412) 542,115 (932,194) (654,000) (5,642,491)
Loss from discontinued operations ................ (2,952,107) -- -- -- (2,952,107)
---------------- ------------ --------------- ------------ ------------
Income (loss) before extraordinary
item and income taxes ......................... (7,550,519) 542,115 (932,194) (654,000) (8,594,598)
Extraordinary item ............................... 169,566 -- -- -- 169,566
---------------- ------------ --------------- ------------ ------------
Income (loss) before income taxes ................ (7,380,953) 542,115 (932,194) (654,000) (8,425,032)
Income taxes ..................................... -- (214,000) -- -- 214,000
---------------- ------------ --------------- ------------ ------------
Net income (loss) ................................ $ (7,380,953) $ 328,115 $ (932,194) $ (654,000) $ (8,639,032)
================ ============ =============== ============ ============
(Loss) Income per share .......................... $ (.39) $ 3,281 $ (.18) -- $ (.29)
================ ============ =============== ============ ============
Weighted average common shares
outstanding ................................... 18,873,992 100 5,086,663 6,029,900 29,990,655
================ ============ =============== ============ ============
</TABLE>
(a) The following pro forma adjustments reflect Inter-company adjustments
between Medical Industries and Air Response, Inc.
Revenue ...................................... $488,838
========
Cost of Revenue .............................. $488,838
========
(b) Pro forma adjustments to reflect additional depreciation and amortization
based on fair market value adjustment.
11
<PAGE>
SUMMARY OF THE CYBERCARE ACQUISITION
THE PARTIES TO THE TRANSACTION.
THE COMPANY. The Company will be the purchaser of the CyberCare capital
stock under the terms of the Exchange Agreement. The Company is a Florida
corporation, engaged in the business of developing integrated medical delivery
services by providing diversified medical technologies and operating physical,
occupational and speech therapy, sleep apnea, diagnostic and treatment centers,
providing pharmaceutical services and international air ambulance transport
service.
Through its acquisition of the CyberCare capital stock, the Company will
acquire CyberCare as a wholly owned subsidiary. After the CyberCare Acquisition,
CyberCare will be operated as a wholly owned subsidiary of the Company.
The principal executive offices of the Company are located at 1903
S. Congress Ave., Suite 400, Boynton Beach, Florida 33426, telephone number
(561) 737-2227.
CYBERCARE. CyberCare, a privately held Georgia corporation, is an
Internet-based solution and interactive system that provides product and
services to support remote delivery of care, patient monitoring and education to
the U.S. Healthcare market. The principal executive offices of CyberCare are
located at 430 10th Street NW, Suite S-004, Atlanta, Georgia 30318, and its
telephone number is (404) 872-5894.
CYBERCARE STOCKHOLDER WHO WILL BECOME DIRECTOR. As set forth in Proposal
1, Mr. John Haines will become a director of the Company following the closing
under the terms of the Exchange Agreement.
CYBERCARE STOCKHOLDER WHO WILL BECOME MORE THAN A 5% STOCKHOLDER. As
consideration for the CyberCare Acquisition, the Company will issue an aggregate
of 7,250,000 shares of common stock, 2,250,000 shares of which will be
distributed to Mr. John E. Haines. As a result of the issuance of the 7,250,000
shares for the CyberCare Acquisition, and assuming that the otherwise
outstanding shares of common stock of the Company as of that date was the same
as the 29,260,885 shares which were outstanding on the record date, Mr. Haines
would then become a holder of more than 5% of the then outstanding common stock
of the Company. Mr. Haines would hold 2,250,000 shares, which together with the
9,436,669 shares beneficially owned by the current officers and directors of the
Company would aggregate 11,686,669 shares, or approximately 32% of the total
then outstanding shares of the Company.
LACK OF OPINIONS, APPRAISAL AND REPORTS. No unaffiliated representative
has been retained to act solely on behalf of the Company or CyberCare for the
purposes of negotiating the terms of the acquisition or preparing a report
concerning its fairness. The Company has not solicited or obtained any
appraisal, report, or opinion by any outside party regarding the acquisition.
The Board of Directors chose not to retain the services of an investment
advisor, because it believed the cost of such services would be excessive
relative to the size of the transaction.
REGULATORY REQUIREMENTS. There are no federal or state regulatory
requirements that must be complied with or approval obtained in connection with
the acquisition of CyberCare.
FEDERAL INCOME TAX CONSEQUENCES OF THE CYBERCARE ACQUISITION. The
transaction is structured as a tax-free exchange of securities pursuant to
Section 368 of the Internal Revenue Code of 1986, as amended. If the exchange so
qualifies no gain or loss will be recognized by the CyberCare stockholders.
ACCOUNTING TREATMENT OF THE TRANSACTION. The CyberCare Acquisition will be
accounted for using the purchase method under generally accepted accounting
principles for accounting and financial reporting purposes. The value of the
common stock issued in connection with the CyberCare Acquisition will be based
on a separate valuation of the shares taking into consideration the effect of
price fluctuations, quantities of shares traded and issuance costs. Goodwill
will be amortized over a fifteen-year period.
12
<PAGE>
RESALES OF COMMON STOCK. All of the shares of common stock to be issued in
the CyberCare Acquisition will be considered "restricted securities" under
federal securities laws and a majority of such shares will be subject to the
"lock-up" provision of the Exchange Agreement. Consequently, the transferability
of such shares by their holders will be limited following the closing.
ABSENCE OF DISSENTERS' RIGHTS. Pursuant to Sections 14-2-1301 through
14-2-1332, inclusive, of the Georgia Business Corporation Code ("GBCC"), a
dissenting CyberCare stockholder (the "Dissenting Stockholder") who desires to
receive the fair value of his or her CyberCare stock in cash rather than to
receive the Company's common stock pursuant to the Exchange Agreement may do so
if he or she complies with the provisions of the GBCC pertaining to the exercise
of dissenters' rights. The following is a summary of such provisions of the
GBCC.
The GBCC provides that any Dissenting Stockholder desiring to object to
the share exchange and receive payment in cash for his CyberCare stock must
deliver, prior to the vote of the CyberCare stockholders, written notice of his
intent to demand payment of the fair value of his shares of CyberCare stock if
the Exchange Agreement is effectuated. Further, the Dissenting Stockholder must
not vote his shares in favor of the Exchange Agreement.
If the Exchange Agreement and the transactions contemplated thereby are
approved by the CyberCare stockholders, CyberCare is required to send written
notice (the "Dissenters' Notice") to each of the Dissenting Stockholders who
filed a written notice of his intent to dissent. The Dissenters' Notice shall
(i) state where the Dissenting Stockholders' First Payment Demand (as defined
below) must be sent and where and when the Dissenting Stockholders must deposit
their CyberCare stock certificates, (ii) state the date by which CyberCare must
receive the First Payment Demand, which date shall be fixed by CyberCare and
shall not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is delivered and (iii) contain a copy of Article 13 of the GBCC relating
to dissenters' rights. Any Dissenting Stockholder who voted for or consented in
writing to the Share Exchange shall not be entitled to Dissenters' Notice from
CyberCare or to receive payment of the fair value of his or her shares of
CyberCare stock. CyberCare shall send the Dissenters' Notice to each of the
Dissenting Stockholders no later than ten days after the date on which the
CyberCare stockholders vote to authorize the Share Exchange and the transactions
contemplated thereby. The Dissenters' Notice is to be sent to each Dissenting
Stockholder at his or her address as it appears in the stock transfer books of
CyberCare or at such address as the Dissenting Stockholder supplies by notice to
CyberCare.
Each Dissenting Stockholder to whom CyberCare sends a Dissenter's Notice
must demand payment for his or her shares by notice to CyberCare (the "First
Payment Demand") in accordance with the terms of the Dissenters' Notice. In
addition, the Dissenting Stockholder must deposit his or her CyberCare
Certificate(s) with CyberCare in accordance with the terms of the Dissenters'
Notice. Any Dissenting Stockholder who does not submit a First Payment Demand or
deposit his or her CyberCare stock certificate(s) at CyberCare, each as set
forth in the Dissenters' Notice, shall lose his or her rights to dissent and
shall not be entitled to payment for his or her shares.
Except for one abstention (which did not provide written notice of his
intent to demand payment of the fair value of his shares of CyberCare stock) all
the stockholders of CyberCare have voted for the closing of the CyberCare
Acquisition. Accordingly, there are no dissenter's rights.
NASDAQ REQUIREMENT FOR STOCKHOLDER APPROVAL. Nasdaq regulations require
that the Company obtain the approval of its Stockholders in connection with a
transaction, other than a public offering, involving the sale or issuance by the
Company of common stock (or securities convertible into, or exercisable for,
common stock) equal to 20% or more of the common stock, or 20% or more of the
voting power of the Company's securities, which were outstanding before the
issuance of the common stock in the CyberCare Acquisition. As a result, even
though the CyberCare Acquisition is not required to be approved by the
Stockholders of the Company under the terms of the Florida Business Corporations
Act, such Stockholder approval is required under the terms of the regulations of
Nasdaq to which the Company is subject.
MARKET AND MARKET PRICE FOR COMMON STOCK. The Company's common stock is
listed under the symbol "MIOA" on the Nasdaq SmallCap Market. Set forth below
are the high and low reported sales prices per
13
<PAGE>
share of the Company's common stock on the Nasdaq SmallCap Market, on (i) April
8, 1999, the last business date preceding the announcement of the Letter of
Intent entered into with respect to the CyberCare Acquisition, and (ii) July 13,
1999, the most recent practicable date such information could be obtained.
PER SHARE OF
COMMON STOCK
-----------------------------
DATE HIGH LOW
- ------- ---------- ---------
April 8, 1999 $ 31/32 $ 11/16
July 13, 1999 $1 19/32 $ 1 5/16
The following table sets forth certain information as to the high and low
reported sales prices per share of the Company's common stock for the periods
indicated. The prices for the Company's common stock are as reported on the
Nasdaq SmallCap Market. The Company has never paid dividends on its capital
stock. The Company's credit agreements include provisions which restrict the
payment of dividends.
PER SHARE OF
COMMON STOCK
------------------------------
DATE HIGH LOW
- ------- --------- ---------
1997
First Quarter $ 4 3/16 $ 1/4
Second Quarter 3 1/16 1 13/16
Third Quarter 2 9/32 1 5/8
Fourth Quarter 2 17/32 1 5/8
1998
First Quarter $ 2 1/8 $ 1 1/4
Second Quarter 2 3/16 1 3/8
Third Quarter 1 7/8 13/32
Fourth Quarter 1 9/32
1999
First Quarter $ 1 11/16 $ 5/8
Second Quarter 2 3/8 11/16
Third Quarter
As of July 16, 1999, there were approximately 150 record holders of the
Company's common stock, excluding those shares held by depository companies for
certain beneficial owners. Management estimates that there are approximately
3,450 beneficial owners of common stock, who hold their shares through
depository companies and other nominees.
HOLDERS OF CYBERCARE CAPITAL STOCK AND THE COMPANY'S CAPITAL STOCK ARE
ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR COMMON STOCK. No assurance can
be given as to the market price of the Company's common stock at closing or at
any other time.
RISK FACTORS APPLICABLE TO THE CYBERCARE ACQUISITION.
Each Stockholder of the Company should carefully consider and evaluate the
following factors, among others, before voting on the CyberCare Acquisition
proposal.
DEPENDENCE UPON ACQUIRED MANAGEMENT. The continuing successful operation
of the businesses to be acquired in the CyberCare Acquisition is largely
dependent upon the retention of the key management personnel of CyberCare as
employees of CyberCare following the closing. Because the business being
acquired represents a
14
<PAGE>
diversification of the Company's business functionally and geographically, the
loss of any of the key management personnel from CyberCare could have an adverse
effect on one or both of the acquired businesses and upon the realization of the
benefits anticipated from the CyberCare Acquisition.
INTEGRATION OF OPERATIONS; MANAGEMENT OF GROWTH. In determining that the
CyberCare Acquisition is in the best interests of the Company, the Company's
Board of Directors has assumed the continuation of the business of CyberCare,
after it becomes a subsidiary of the Company, and that such business can be
assimilated into the operations of the Company with relative ease. Under the
terms of the employment agreement to be entered into at the closing, the Company
will employ Mr. Haines to continue his management of the acquired operations in
a largely autonomous manner and with minimal direct oversight by the Company's
Board of Directors and executive officers. The employment agreement is intended
to provide consistent management of the acquired operations, however, the
difficulties of assimilation may be increased by the necessity of coordinating
geographically separated organizations, integrating personnel with disparate
business backgrounds and combining different corporate cultures. The process of
combining the acquired businesses may cause an interruption of, or a loss of
momentum in, the Company's business, which could have an adverse effect on the
revenues and operating results of the combined Company. There is no assurance
that the combined entity will be able to retain all of its key management and
other operating personnel or that the combined entity will realize any of the
other anticipated benefits of the CyberCare Acquisition.
DILUTION; VOTING CONTROL. The Company will issue an aggregate of 7,250,000
shares of common stock as consideration for the CyberCare Acquisition which
would represent approximately 25% of the number of shares of common stock
outstanding as of July 16, 1999. Accordingly, the CyberCare Acquisition will
have the effect of substantially reducing the percentage voting interest in the
Company prior to the CyberCare Acquisition. The substantial ownership of common
stock by the CyberCare stockholders, as a group, after the CyberCare Acquisition
will provide them with the ability to exercise substantial influence in the
election of directors and other matters submitted for approval by the Company's
stockholders. Following the CyberCare Acquisition, the ownership of common stock
by the CyberCare stockholder who will become a director together with the
present officers and directors of the Company and their affiliates will then
represent approximately 32% of the outstanding shares of the Company. Such
concentrations of ownership of the common stock may make it difficult or
impossible for other stockholders of the Company to successfully advocate or
oppose matters which may be submitted for stockholder action. Such ownership may
also have the effect of delaying, deterring or preventing a change in control of
the Company without the consent of such major stockholders. In addition, sales
of common stock by such major stockholders could result in a change in control
of the Company.
PRO FORMA EFFECT ON BOOK VALUE AND EARNINGS PER SHARE. On a pro forma
basis, the CyberCare Acquisition will have a dilutive effect on book value per
share of the Company as of June 30,1999 and will reduce earnings per share. The
extent of dilution or enhancement to the Company's Stockholders with respect to
future book value and earnings per share will depend on the actual results
achieved by the Company following the CyberCare Acquisition as compared with the
results that could have been achieved by the Company on a stand-alone basis over
the same period in the absence of the CyberCare Acquisition transaction. There
is no assurance as to such future results, and, accordingly, as to whether the
CyberCare Acquisition will ultimately be dilutive or accretive to the Company's
future book value per share or earnings per share.
RESALES OF COMMON STOCK AND MARKET VOLATILITY. The Company will issue and
deliver an aggregate of 7,250,000 shares of common stock as consideration for
the CyberCare Acquisition. Such additional shares would represent, in the
aggregate, approximately 25% of the number of shares outstanding as of July 16,
1999. The shares to be issued in the CyberCare Acquisition will be considered
"restricted securities" under applicable securities laws, thereby limiting the
resale of such shares into the public market. All of such shares will, however,
become eligible for sale in the public market in accordance with SEC Rule 144
one year following the closing with certain volume and manner of sale
limitations continuing for only one year thereafter (except as to shares held by
persons deemed to be affiliates of the Company). In addition, the Company has
agreed to file a registration statement to register the shares with the SEC
within five months after the closing. Four million five hundred twenty thousand
shares are also restricted by the lock-up provisions of the Exchange Agreement,
it is not anticipated that a majority of such shares would be offered for sale
until at least 18 months after the closing. As of July 16, 1999, approximately
19,800,000
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shares, or 68% of the outstanding shares of common stock, is held by
nonaffiliates of the Company. There can be no assurance that a more active
trading market for the common stock will develop or be sustained. The market
price of the common stock has been vulnerable to significant fluctuations. The
market price of the common stock will remain subject to significant fluctuations
in response to such factors as well as in response to operating results and
other factors affecting the stock market generally. The stock market in recent
years has experienced price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of the issuers. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price of the common stock in the future.
RISKS WITH RESPECT TO COMPUTER TECHNOLOGIES AND YEAR 2000 COMPLIANCE. The
Company is aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. Many existing computer programs
use only two digits to identify a year in the date field. The issue is whether
such code exists in mission-critical applications and if that code will produce
accurate information with relation to date-sensitive calculations after the turn
of the century. While the Company believes that its computer systems are, for
the most part, Year 2000 compliant, there can be no assurance that the Company
will be completely successful in its efforts to address the Year 2000 issues. In
addition, the Company has determined that the computer systems in its mobile
cath labs are not Year 2000 compliant. Accordingly, the Company may incur
substantial costs in order to bring these systems into compliance.
The Company is also dependent on third parties such as customers,
patients, suppliers, service and equipment providers, payors (including
Medicare) and other business partners. If these parties fail to adequately
address Year 2000 issues, the Company could experience a negative impact on its
business operations or financial statements. For example, the failure of certain
of the Company's principal payors such as Medicare to have Year 2000 compliant
internal systems could impact reimbursements to the Company and therefore
severely impact the Company's cash flow. Because of the many uncertainties
associated with the Year 2000 compliance issues, and because the Company's
assessments are necessarily based on information from third-party vendors,
payors and suppliers, there can be no assurance that the Company's assessment is
correct as to either the materiality or the effect of such compliance, including
compliance by third party payors.
SUBSTANTIAL COMPETITION. The healthcare industry in general, and the
market for medical and e-commerce products and services in particular, are
highly competitive. The Company competes with companies that are larger in size
than the Company and have access to considerably greater financial resources
than the Company. The Company has competed in the past by providing more
personalized care to the patients they serve as well as providing patient
transportation and pharmaceutical delivery. With respect to the Company's mobile
cardiac catheterization services, the Company competes not only directly with
other contract providers, but also with healthcare providers that have their own
equipment and with equipment manufacturers and leasing companies that sell or
lease equipment to healthcare providers for full-time utilization. Some of the
Company's direct competitors which provide contracted medical services may have
access to considerably greater financial resources than the Company. The Company
competes against other contract providers on the basis of quality of services
and equipment, price and reliability. In the State of Florida, competition with
respect to healthcare providers is highly competitive. The Company will rely
principally on its reputation and service to market its services.
RISK OF PRODUCT LIABILITY. The Company's business and proposed e-commerce
technology exposes it to potential product liability risks, which are inherent
in such businesses and products. There can be no assurance that the Company will
not be subjected to future claims and potential liability. While the Company
plans to maintain insurance against product and professional liability and
defense costs, there can be no assurance that claims against the Company arising
with respect to its products will be successfully defended or that the insurance
to be carried by the Company will be sufficient to cover liabilities arising
from such claims. A successful claim against the Company in excess of the
Company's insurance coverage could have a material adverse effect on the
Company. Furthermore, there can be no assurance that the Company will be able to
continue to obtain or maintain liability insurance on acceptable terms.
FUTURE CAPITAL NEEDS; POTENTIAL NEED FOR ADDITIONAL FINANCING. The Company
believes that the funds to be raised with respect to its offerings (assuming
receipt of proceeds from the sale of substantially all of the
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offering), together with the revenues of the Company will be sufficient to
provide the Company with capital sufficient to fund the capital requirements of
the CyberCare Acquisition and provide a portion of its immediate anticipated
working capital needs. The Company may be required to raise additional
financing. There can be no assurance that such funds will, in fact, be available
or if available will be sufficient in the near term or that conditions and
circumstances described herein may not result in subsequent cash requirements by
the Company or that future funds will be sufficient to sustain operations and to
meet growth. In the event of such developments, attaining financing under such
conditions may not be possible, or even if additional capital may be otherwise
available, the terms on which such capital may be available may not be
commercially feasible or advantageous to investors participating in this
Offering.
ACQUISITION OF BUSINESSES; RISKS OF GROWTH AND EXPANSION. The Company will
use a portion of the net proceeds from future financings to acquire healthcare
and e-commerce businesses. There can be no assurance that suitable acquisitions
will be available or that acquisitions can be negotiated on acceptable terms, or
that the operations of acquired businesses can be integrated effectively into
the operations of the Company. Competition for suitable acquisition candidates
is expected to be intense and many of the Company's competitors will have
greater resources than the Company. The failure of the Company to implement its
acquisition strategy could have a material adverse effect on the Company's
financial performance and, moreover, the attendant risks of expansion could also
have a material adverse effect on the Company's business.
There can be no assurance that the CyberCare Acquisitions and other
pending acquisitions will be completed or if completed, that these businesses
will be profitable in the future or that these acquisitions can be successfully
integrated into the Company's operations. The Company's growth strategy will
result in significant additional demands on its infrastructure, and will place a
significant strain on the Company's management, administrative, operational,
financial and technical resources, and increased demands on its systems and
controls. There can be no assurance that the Company will be able to obtain
sufficient resources to support future operations and growth. The inability to
continue to upgrade the operating and financial control systems, the emergence
of unexpected expansion difficulties or failure to manage the Company's proposed
expansion properly could have a material adverse effect on the Company's
business, financial condition and results of operations. The laws and
regulations applicable to financial arrangements in the health care industry are
complex and may be subject to varying interpretations.
UNCERTAIN ABILITY TO PROTECT PATENTS AND PROPRIETARY TECHNOLOGY AND
INFORMATION. The Company's ability to compete effectively in the medical
e-commerce industry will depend on its success in consummating the CyberCare
Acquisition and/or acquiring other suitable medical e-commerce businesses and
protecting their proprietary technology, both in the United States and abroad.
The patent positions of medical products companies generally involve complex
legal and factual questions. CyberCare currently has two patents pending with
regard to its e-commerce technology and intends to file for additional patents
on products for which it feels the cost of obtaining a patent is economically
reasonable in relation to the expected protection obtained. Neither the Company
or CyberCare presently holds any patents. There can be no assurances that any
patent that the Company or CyberCare applies for will be issued, or that any
patents issued will not be challenged, invalidated, or circumvented, or that the
rights granted thereunder will provide any competitive advantage. The Company
may incur substantial costs in defending any patent infringement suits or in
asserting any patent rights, including those granted by third parties, the
expenditure of which the Company might not be able to afford.
Although the Company has entered into and will continue to enter into
confidentiality and invention agreements with its employees and consultants,
there can be no assurance that such agreements will be honored or that the
Company will be able to adequately protect its rights to its non-patented trade
secrets and know-how. Moreover, there can be no assurance that other individuals
or entities will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets and know-how. In addition, the Company may be required to obtain
licenses to patents or other proprietary rights from third parties. There can be
no assurance that any licenses required under any patents or proprietary rights
would be made available on acceptable terms, if at all. If the Company does not
obtain required licenses, it could encounter delays in product development or
find that the development, manufacture, or sale of products requiring such
licenses could be foreclosed. Additionally, the Company may, from time to time,
support or otherwise collaborate in
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research conducted by universities and governmental research organizations.
There can be no assurance that the Company will have or be able to acquire
exclusive rights to the inventions or technical information derived from such
collaborations or that disputes will not arise with respect to rights in
derivative or related research programs conducted by the Company or such
collaborators.
EARLY STAGE PRODUCT DEVELOPMENT. Due to the early stage development of
CyberCare's proposed products and services, no assurance can be given that these
products can be developed into commercial products, manufactured on a large
scale or be economical to market. Nor can there be any assurance that these
proposed products will achieve or sustain market acceptance. There is,
therefore, substantial risk that the Company's proposed product development and
commercialization efforts will not prove to be successful.
DEPENDENCE ON MARKET ACCEPTANCE. There can be no assurance that
physicians, medical providers or the medical community in general will accept
and utilize the products developed by the Company. The extent that, and rate of
which, these products achieve market acceptance and penetration will depend on
many variables including, but not limited to, a timely penetration of the
market, the establishment and demonstration in the medical community of the
clinical safety, efficacy and cost-effectiveness of these products, the
advantage of these products over existing technology, third-party reimbursement
practices and the Company's manufacturing, quality control, marketing and sales
efforts. There can be no assurance that the medical community and third-party
payors will accept the Company's technology. Similar risks will confront any
other products developed by the Company in the future. Failure of the Company's
products to gain market acceptance would have a material adverse effect on the
Company's business, financial condition, and results of operations.
LIMITED MARKETING AND SALES CAPABILITY. The Company and CyberCare have
limited internal marketing and sales resources and personnel. In order to market
any products it may develop, the Company will have to develop a marketing and
sales force with technical expertise and distribution capability (or outsource
such duties to independent contractors). There can be no assurance that the
Company will be able to establish sales and distribution capabilities or that
the Company will be successful in gaining market acceptance for any products it
may develop. There can be no assurance that the Company will be able to recruit
and retain skilled sales, marketing, service or support personnel, that
agreements with distributors will be available on terms commercially reasonable
to the Company, or at all, or that the Company's marketing and sales efforts
will be successful. Failure to successfully establish a marketing and sales
organization, whether directly or through third parties, would have a material
adverse effect on the Company's business, financial condition, cash flows, and
results of operations. To the extent that the Company arranges with third
parties to market its products, the success of such products may depend on the
efforts of such third parties. There can be no assurance that any of the
Company's proposed marketing schedules or plans can or will be met. No
e-commerce product sales have been made to date.
THE CYBERCARE ACQUISITION
BACKGROUND. The Board of Directors determined to pursue, as a long-range
goal, further expansion and diversification of the Company's business in the
healthcare industry. The Board concluded that such diversification would most
likely be achieved through the Company's acquisition of one or more established
businesses. Any such businesses should be engaged in activities which would be
distinguishable from, but compatible with, the existing business of the Company
and should represent a logical expansion of the Company's business. It was also
the intention of the Board that a significant portion of the acquisition price
for any such acquisition should consist of Common Stock and that incentives be
provided to retain the proven management personnel of any such business.
REASONS FOR THE CYBERCARE ACQUISITION. The Board of Directors and
executive officers of the Company believe that the terms of the CyberCare
Acquisition are fair to, and in the best interests of, the Company and the
Stockholders of the Company.
In reaching its determination to approve the CyberCare Acquisition, the
Board identified and analyzed the following factors and potential benefits,
among others, relating to the CyberCare Acquisition:
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o alternatives for growth in the healthcare industry, including internal
development, which the Board viewed as less advantageous due to the
current full commitment of the Company's management to current business
activities, concentration of the Company's management experience in the
Company's current business activities, the Company's limited development
resources and the uncertainty of the success of such development efforts,
none of which appeared to present the opportunity that the acquisition of
CyberCare presented;
o the strategic value of diversifying the business activities of the Company
by adding the remote interactive healthcare delivery business of
CyberCare;
o the expectation that the businesses of CyberCare will be compatible with,
and complementary to, the Company's healthcare-related business and that
the CyberCare Acquisition may be viewed favorably by investors as a
logical expansion and diversification of the Company's business;
o information concerning the Company's and CyberCare's respective prospects,
financial performance, financial condition, assets and operations; and
o the financial terms of the CyberCare Acquisition and its possible effect
on future earnings.
Following its deliberations concerning such factors, the Company's Board
concluded that the CyberCare Acquisition may increase the long-term prospects of
the Company for continued growth, may increase Stockholder value, and is in the
best interests of the Company and its Stockholders financially and
strategically.
POTENTIALLY NEGATIVE FACTORS OF THE CYBERCARE ACQUISITION. The Company's
Board also considered a variety of potentially negative factors in its
deliberations concerning the CyberCare Acquisition, including:
o the possible dilutive effect of the issuance of the common stock in the
CyberCare Acquisition;
o the transaction costs and costs of integrating the businesses to be
acquired in the CyberCare Acquisition;
o the risk that, despite the obtaining of the employment agreement, key
personnel of CyberCare may not be retained by the Company causing an
adverse effect on the continuing business operation acquired in the
CyberCare Acquisition;
o the risk that key business contracts or relationships of CyberCare may not
be transferred to the Company in connection with the CyberCare Acquisition
reducing the realization of the value sought to be obtained by the
CyberCare Acquisition; and
o the risk that other benefits sought to be obtained by the CyberCare
Acquisition might not be obtained.
Given the variety of factors, both positive and negative, considered by
the Company's Board, the Board did not quantify or otherwise assign relative
weights to the specific factors considered. In addition, individual members of
the Company's Board may have given different weights to the various factors
considered. The Board of Directors was unanimous in its approval of the
CyberCare Acquisition under the terms of the CyberCare Exchange Agreement.
RESALES OF COMMON STOCK.
All of the shares of common stock to be issued in connection with the
CyberCare Acquisition will be deemed to be "restricted securities" as that term
is defined in Rule 144. As a consequence, such shares may not be sold, pledged
or otherwise transferred by the holders thereof except in transactions permitted
by the resale provisions of Rule 144 or as otherwise permitted under the
Securities Act of 1933, as amended (the "1933 Act"). Resales of common stock
will also be restricted by the further restrictions on transferability included
in the "lock-up" provision of the Exchange Agreement referred to in the
following section of this Proxy Statement.
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In general, under Rule 144, during the first year following the closing of
the CyberCare Acquisition, any person receiving shares of common stock in the
CyberCare Acquisition would be able to sell or otherwise transfer such shares
only pursuant to an effective registration statement under the 1933 Act or in
compliance with an exemption from the registration requirements of the 1933 Act.
During the second year following the receipt of such shares, such person would
be entitled to sell such shares only through unsolicited "brokers' transactions"
or in transactions directly with a "market maker" as such terms are defined in
Rule 144. Additionally, the number of shares to be sold by such person (together
with certain related persons) within any three-month period for the purposes of
Rule 144 could not exceed the greater of one percent of the outstanding shares
of common stock or the average weekly trading volume of such stock during the
four calendar weeks preceding such sale. Rule 144 will remain available,
however, if the Company remains current with its informational filings with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"). Two
years after the closing of the CyberCare Acquisition, a person who received
common stock in the CyberCare Acquisition would be able to sell such common
stock without such manner of sale or volume limitations, provided that the
Company was then current with its 1934 Act informational filings and such person
had not been an "affiliate" as defined in Rule 144, for at least three months
prior to such sale. Persons who may be deemed to be affiliates of the Company
generally include individuals or entities that control, are controlled by, or
under common control with, the Company, and may include certain officers and
directors of the Company as well as principal stockholders of the Company.
In order to help assure compliance with Rule 144 and the 1933 Act, a
provision of the Exchange Agreement, to which each of the persons who will
receive shares of Common Stock in the CyberCare Acquisition is a party, includes
the agreement of such persons to be bound by the transfer restrictions which are
applicable to the shares as restricted securities, to also be bound by the
lock-up, and to accept share certificates representing such shares bearing
transfer restriction legends providing notice of such transfer restrictions.
REGISTRATION RIGHTS AGREEMENT. Pursuant to a registration rights agreement
executed in connection with the acquisition, the Company has granted the
CyberCare stockholders piggyback registration rights to register the Common
Stock issued for the CyberCare Acquisition, with respect to a registration
statement (other than form S-4 or S-8) filed within five months of the Closing.
If no such registration statement is filed, the Company shall within 30 days of
demand by CyberCare stockholders owning more than 3,700,000 shares file a
registration statement registering the 7,250,000 shares of Company Common Stock
held be the CyberCare stockholders.
LOCK-UP OF COMMON STOCK. Under the terms of the Exchange Agreement,
4,520,000 shares of Common Stock which are issued in the CyberCare Acquisition
may be sold, transferred, hypothecated and pledged by the holders only in a
limited number for a period of twelve months following the effectiveness of the
registration statement registering such shares unless such "lock-up" period is
terminated by reason of co-sale rights or otherwise agreed to by the Company.
INTEREST OF CERTAIN PERSONS IN THE CYBERCARE ACQUISITION. Upon the closing
of the CyberCare Acquisition and subject to Stockholder approval, Mr.
Haines will be elected a director of the Company.
THE EXCHANGE AGREEMENT.
GENERAL. The Exchange Agreement (which includes, as exhibits, the
employment agreements, registration rights agreement and stock restriction
agreement) is the legal document that governs the CyberCare Acquisition. The
Exchange Agreement provides for the acquisition by the Company of the capital
stock of CyberCare and delivery to the Company of the employment agreements,
registration rights agreement and stock restriction agreement, all in exchange
for the issuance delivered by the Company of an aggregate of 7,250,000 shares of
Common Stock, options and warrants to purchase 934,997 shares of Company's
common stock and the undertaking by the Company of the obligations in the
Exchange Agreement and to enter into the employment agreement with Mr. Haines.
If the CyberCare Acquisition proposal is approved by the Stockholders of
the Company, the closing of CyberCare Acquisition is expected to be consummated
within five days of the approval hereof, but the parties may mutually agree to
extend the closing date.
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EMPLOYMENT AND NON-COMPETE AGREEMENT. At the Closing, Mr. Haines will
enter into an employment agreement with the Company for the position of Senior
Vice President of the Company in charge of the Company's technology markets,
divisions and subsidiaries, and as president of CyberCare. The term of the
employment agreement is three years from the closing of the CyberCare
Acquisition. Mr. Haines' base salary shall be $175,000 per annum. Mr. Haines
will also be entitled to receive incentive compensation as determined by the
Board of Directors and options to purchase 200,000 shares of Company's common
stock at an exercise price of $1.75 per share which vest ratably over the term
of the employment agreement. The employment agreement also includes a covenant
not to compete during the term of the agreement and for a two-year period
thereafter in the United States. In an action to seek enforcement, a court
having jurisdiction over the matter may determine not to enforce, or to only
partially enforce, the non-compete provision in accordance with its terms.
REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The Exchange Agreement
contains certain customary comprehensive representations and warranties of
CyberCare and its stockholders. Such representations and warranties include
representations and warranties with respect to the corporate status, financial
condition, business, operations, and assets of CyberCare and certain other
matters with respect to its employees, employee benefit plans and employee
relations. The stockholders of CyberCare have agreed to indemnify and hold
harmless the Company for breaches of representations and warranties given by
them but is limited to the value of the consideration received.
The Acquisition Agreement also contains certain customary purchaser
representations and warranties of the Company with respect to the corporate
status, capitalization, financial condition, business, operation and assets of
the Company, liability of the Company to the stockholders of CyberCare for
damages resulting from breaches of representations, warranties and agreements
for the Company contained in the Acquisition Agreement but is limited to the
value of the consideration paid.
ADDITIONAL COVENANTS OF THE PARTIES. The Exchange Agreement, in addition
to the covenants and agreements contained in the representations and warranties
given by the parties referred to in the preceding sections of this Proxy
Statement, also includes covenants of CyberCare and the stockholders of
CyberCare to grant the Company access to the books and records, personnel and
properties of CyberCare and to cooperate with the Company in the preparation of
financial statements, proxy materials and any required regulatory filings which
are necessary to implement the Acquisition. These covenants also include a
covenant to conduct the business of CyberCare only in the ordinary and usual
course, to use best efforts to preserve each such entity's business
organization, staff and goodwill, to assure the continued accuracy of the
representations and warranties given, and to refrain from negotiating with any
party other than the Company for the possible acquisition of such entity during
the period of time from the signing of the Exchange Agreement until the closing.
During the same period, the Company also covenants to grant to CyberCare and the
CyberCare stockholders access to the books, records and property of the Company,
to use its best efforts to assure that its representations and warranties
continue to be true.
THE COMPANY
GENERAL. The Company 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.
The Company's active subsidiaries include: Air Response North, Inc.,
Global Air Charter, Inc., Global Air Rescue, Inc., Tallahassee Sleep Disorders,
Inc., Pharmacy Care Specialists, Inc., Heart Labs of America, Inc., and Your
Good Health Network, Inc.
The Company is in the business of developing integrated medical delivery
services by providing diversified medical technologies and operates physical,
occupational and speech therapy, sleep apnea, diagnostic and treatment services,
pharmaceutical services and international air ambulance transport service.
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BUSINESS OPERATIONS.
AIR AMBULANCE TRANSPORT SERVICE. The Company is taking advantage of the
growing air ambulance industry through its subsidiaries, Air Response North,
Inc., Global Air Rescue, Inc. and Global Air Charter, Inc. (collectively "Air
Response"), by offering national and international fixed-wing air ambulance
transport service to ill, injured or otherwise incapacitated persons requiring
relocation and possible emergency medical care during flight. Circumstances
requiring Air Response's transport service include the relocation of patients
requiring specialized medical procedures such as organ transplants, cancer
treatment, specialized cardiac surgery, burn care, stroke care and advanced
brain and spinal cord surgery, as well as transportation to hospitals and
medical facilities recognized nationally for excellence in their respective
fields.
Based in Denver, Colorado, Air Response employs approximately 95 full and
part-time employees and maintains an aircraft fleet which includes 15 owned and
two leased aircraft. Air Response has the competitive advantage generated by the
long-range capabilities of its Model 36 Learjets offering worldwide,
intercontinental response capabilities. It also has the added advantage of an
in-house maintenance team, providing expedient flight readiness equipped with
state-of-the-art medical equipment including the lifeport stretcher system,
oxygen, suction pumps, compressed air and a 1500 watt AC inverter.
PHYSICAL, OCCUPATIONAL AND SPEECH THERAPY CENTERS. Your Good Health
Network, Inc. ("YGHN") was acquired by the Company effective October 16, 1998.
YGHN was founded in April 1997 by four individuals, three of whom founded and
managed a similar company which went public and was subsequently acquired by a
much larger NYSE company. The business objective of YGHN is to provide pain
rehabilitation and occupational, speech and physical therapy services. YGHN
intends to develop business operations within specific geographic locations
which can create synergies and operating efficiencies and satisfy the cost
containment requirements of significant payor sources.
YGHN currently owns and operates 27 rehabilitation and therapy clinics and
two physician sites in Boynton Beach and North Palm Beach, Florida. YGHN
currently has a total of approximately 100 people, including nine employees in
its corporate office providing management and administrative services through a
staff leasing company. Each rehabilitation clinic typically has three staff,
including two fully licensed therapists and an administrative
secretary/rehabilitation aide. Physician offices typically have a staff of four,
including a medical assistant, nurse, technician and clerical aide.
YGHN services include: specialty programs like hyperbaric medicine, pain
management and HIV primary care, coupled with traditional services such as
primary care, orthopedic and neurological physician services and comprehensive
rehabilitation. These services allow YGHN to be a unique health care provider.
The physicians' component is focused on specialized clinical programs that
complement the company's rehabilitation services. YGHN's strategy is to provide
services which are less reliant upon governmental reimbursement and to diversify
its payor sources to more of a fee-for-service basis. YGHN is focused to be
minimally reliant upon managed care payors.
PHARMACEUTICAL SERVICES. The Company acquired Pharmacy Care Specialists,
Inc. ("PCS") in April 1998. PCS is a closed network pharmacy employing
approximately 40 individuals with its principal place of business in Lakeland,
Florida. PCS provides unit-dosed medications to over 2,500 residents in
assisted-living facilities across Florida. PCS delivers medications to the
facilities, provides training workshops and does third-party billing. The future
of the pharmacy industry is in a transitional phase. The Company believes the
area with potential for growth is in mail order and internet pharmacy services.
The insurance industry has, in recent years, expanded its involvement with mail
order pharmacies. In essence, many insurance companies are requiring their
policyholders to order, by mail, their medications from an approved, contracted
pharmacy. This allows them to control expenses by stipulating the amount each
medication will be sold for, thus allowing them to increase their profit margin.
Realizing this, PCS has targeted its marketing efforts in this direction. As the
population ages and expands and many of these older individuals relocate to
Florida, the market for pharmaceuticals to assisted-living facilities and
nursing homes increases as does the direct-mail pharmacy market.
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SLEEP CENTERS. Through its indirect wholly owned subsidiary, Tallahassee
Sleep Disorders, Inc. ("TSD"), the Company offers sleep and disordered breathing
diagnostic programs to physicians and hospitals. TSD uses the latest diagnostic
equipment along with the proprietary DataSmart screening program, involving
screening, home testing and testing in a complex lab. The majority of patients
suffering from sleep disorders have obstructive sleep apnea ("OSA") and snoring.
It is estimated that 40 million people suffer from OSA and that 95% of these
cases go undiagnosed and untreated. In the past several years, sleep center
studies have been increasing by approximately 25% per year as technology and
testing programs are improved. Most of the studies to date have been performed
by hospitals and smaller, independent companies.
CARDIOLOGY ANCILLARY SERVICES. The Company, through its wholly owned
subsidiary Heart Labs of America, Inc. ("HLOA"), currently operates three mobile
cardiac catheterization laboratories which perform outpatient cardiology
procedures and diagnostic tests. HLOA typically contracts with smaller,
non-urban hospitals which may not have in-house cardiac catheterization
capabilities, or larger hospitals which use the mobile labs for when they exceed
their existing capacity. HLOA is accredited by the Joint Commission on
Accreditation of Healthcare Organizations.
PENDING ACQUISITION.
The Company and American Enterprise Solutions, Inc. ("AESI") have entered
into a Stock Exchange Agreement, whereupon the completion of satisfactory due
diligence and obtaining unqualified audited financial statements and stockholder
approval, AESI will become a wholly owned subsidiary of the Company. As a result
of the Nasdaq rules and regulations requiring stockholder approval when more
than 20% of the Company's outstanding shares are issued in an acquisition
transaction, the Company will submit this matter to its Stockholders for
approval pursuant to a separate proxy statement at a special meeting of its
Stockholders.
AESI is a Florida corporation that designs, develops, implements and is in
the process of operating internet multi-media healthcare networks called
"Community Health Information Utilities" ("CHIUs"). These internet-based
utilities will allow for the electronic connecting of all healthcare-trading
partners. The healthcare-trading partners include doctors, hospitals, consumers,
patients, employers, governments, managed-care companies, insurance companies
and all other providers and organizations. AESI also develops, manages and owns
community healthcare delivery systems, called "Community Health Enterprises"
("CHEs"). The CHEs are healthcare enterprises that create a single-source
delivery system by incorporating and integrating all healthcare delivery
services into a single-source delivery system. At the core of each enterprise is
a CHIU.
The CHIU is designed to provide, over the internet, clinical pathways and
quality assurance applications and systems to maximize the flow of patient data
and increase the ability of the physician, hospital, ancillary service and
diagnostic center to service the patient. It is believed that the integration of
the entire healthcare delivery system, through the use of these technologies,
will create substantial reductions in healthcare costs and provide improved
profits over existing healthcare models.
Management believes, although no assurance can be given, the acquisition
of AESI will assist in catapulting the Company into the healthcare internet
business allowing the Company to utilize the benefits of advanced internet
technologies to improve the quality of healthcare services while increasing
profitability. It is anticipated that the internet will provide the Company and
its clients the opportunity to reduce costs and provide additional profit
centers. The Company's strategic plan in respect to the use of the internet
along with its new proprietary technologies is to re-empower patients and
doctors in the management of their healthcare.
The closing of the contemplated transaction is conditioned upon completion
of satisfactory due diligence and unqualified audits and SEC and Stockholder
approval. Accordingly, no assurance can be given that the acquisition will be
completed or, if completed, that the combined companies will be successful.
23
<PAGE>
PROFESSIONAL LIABILITY INSURANCE.
The Company currently maintains general and professional liability
insurance for its operations in the single limit amount and aggregate annual
limit amount of $5,000,000. There is no assurance that any potential claims will
or will not exceed this limit. While the Company's Mobile Labs are at a
customer's facility, they operate only under the direction of licensed
physicians on the customer's staff who direct the procedures, supervise the
Company's nurses and technologists, and interpret the results of the
examinations. The Company requires the users of the Mobile Labs to carry medical
malpractice insurance to cover the physicians using the Company's Mobile Labs.
COMPETITION.
The healthcare industry in general, and the market for medical ancillary
services is highly competitive.
The Company competes with companies that are larger in size than the
Company and have access to considerably greater financial resources than the
Company. The Company competes by providing more personalized care to the
patients they serve as well as providing patient transportation and
pharmaceutical delivery.
In the physical, occupational and speech therapy business segment, there
are numerous competitors larger in size than the Company and which have access
to greater financial resources.
In the sleep lab business segment, there are no clear market leaders or
major competition. Most of the independents are either labs in hospitals or
physicians interested in sleep that have started labs as an adjunct to their
local practice.
The air ambulance transport business segment has numerous smaller
competitors with short-range aircraft, but has limited competitors with aircraft
capability of performing international and, in particular, trans-Atlantic
flights. Medjet in Alabama, Kalitta in Detroit, and Sky Service in Toronto are
the biggest competitors in the international market.
The Company's pharmaceutical business competes directly in the sale and
delivery of prescription drugs to individuals living in adult living facilities
("ALFs"). There are numerous competitors larger in size than the Company which
have internet capabilities and access to considerably greater financial
resources. The Company relies on reputation and service to market its services.
MARKETING.
The Company markets each of the services in various methods, including
customer and physician referrals, reputation in the community and third parties.
YGHN relies upon community reputation, customer referral, physician and
other medical resource referrals.
The sleep centers rely upon physician referrals for their customer base.
In addition, the Company has in place a three-tier service system that enters
local communities and utilizes a screening program and an in-home lab program.
Air Response relies upon print media, independent brokers, personal
contacts and physician referrals to attract new customers. The Company also
staffs exhibit booths at major industry-specific conventions to attract hospital
groups, insurance companies, assistance companies and managed care
organizations.
HLOA relies heavily on referrals to perform high-tech procedures. Most of
the marketing for its mobile labs is based on the Company's reputation in the
medical community.
24
<PAGE>
EMPLOYEES.
As of July 16, 1999, the Company employed approximately 300 persons, of
which approximately 195 are full time. The Company's ability to provide its
services is dependent upon the Company recruiting, hiring and retaining
qualified technical personnel. To date, the Company has been able to recruit and
retain sufficient qualified personnel. None of the Company's employees is
represented by a labor union. The Company has not experienced any work stoppages
and considers its relations with its employees to be good.
DESCRIPTION OF PROPERTIES.
The Company leases approximately 7,900 square feet of office space in
Boynton Beach, Florida for its corporate offices at an average monthly net
rental of $8,000 over the term of the lease. The lease expires in April 2003.
YGHN leases approximately 41,000 sq. ft of space for its 27 rehabilitation
centers and two physician offices located throughout South Florida for a total
monthly net rental of $47,950. The lease expires through August 31, 2003.
Tallahassee Sleep Disorder Center leases approximately 2,600 sq. ft. of
space for its sleep disorder center in Tallahassee, Florida for a total net
monthly rental of $3,007. The lease expires March 31, 2001.
Air Response leases office and hangar space in Clearwater, Florida for at
an average monthly net rental of $4,350 on a month-to-month basis and leases
approximately 37,000 sq. ft. of office and hangar space in Denver, Colorado;
Schenectady, New York; and Paducah, Kentucky for a total current net monthly
rental of $16,218. The leases expire through June 30, 2002.
Pharmacy Care Specialists leases approximately 15,000 sq. ft. of office
and warehouse space in Lakeland, Florida at a monthly rental of $4,200 and
the lease expires in June 2004.
LEGAL PROCEEDINGS.
The Company is presently not a party to any material litigation outside
the ordinary course of business.
25
<PAGE>
MEDICAL INDUSTRIES OF AMERICA, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following table sets forth selected consolidated financial data of the
Company. The selected consolidated financial data for the years ended December
31, 1994, 1995, 1996, 1997 and 1998 is derived from the audited consolidated
financial statements of the Company. The selected consolidated financial data
for the three months ended March 31, 1998 and 1999 is derived from the unaudited
financial statements of the Company. This information should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the Notes thereto included elsewhere in the Proxy.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER ENDED
31, 1994 31, 1995 31, 1996 31, 1997 31, 1998 MARCH 31,
---------- ---------- ---------- ---------- ---------- -------------------
1998 1999
-------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net revenues ................................ $ 1,722 $ 1,251 $ 1,312 $ 2,558 $ 14,731 $ 2,298 $ 7,911
---------- ---------- ---------- ---------- ---------- -------- --------
Operating expenses:
Cost of services ......................... 753 562 669 1,546 6,916 1,318 3,668
General and administrative ............... 976 2,865 3,084 1,400 8,425 730 3,005
Depreciation and amortization ............ 537 576 354 232 1,459 115 555
Interest expense, net .................... 83 114 141 88 1,120 111 559
Interest - beneficial conversion
feature ............................... -- -- -- -- 1,109 -- 237
Equity in net loss of investee ........... -- 62 666 373 (81) (26) (61)
Other .................................... -- 1 18 -- 382 -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Total operating expenses ................. 2,349 4,180 4,932 3,639 19,330 2,248 7,963
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations ............................... (627) (2,929) (3,620) (1,081) (4,599) 50 (52)
Loss from discontinued operations ........... (2,994) (4,011) (1,624) (445) (1,442) 90 --
Loss from disposal of discontinued
operations ............................... -- (1,905) (3,296) -- (1,510) -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before extraordinary
items and income taxes .................. (3,621) (8,845) (8,540) (1,526) (7,551) 140 (52)
Extraordinary item - gain from
retirement of debt ...................... -- -- -- -- 170 -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before income taxes ........... (3,621) (8,845) (8,540) (1,526) (7,381) 140 --
Income tax expense (benefit) ................ 59 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss) ........................... $ (3,562) $ (8,845) $ (8,540) $ (1,526) $ (7,381) $ 140 $ (52)
========== ========== ========== ========== ========== ======== ========
Net income (loss) per share ................. $ (33.40) $ (41.75) $ (10.33) $ (.28) $ (.39) $ .01 $ --
========== ========== ========== ========== ========== ======== ========
Weighted average shares outstanding ......... 107 212 826 5,476 18,874 15,982 24,907
========== ========== ========== ========== ========== ======== ========
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------------- ---------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $ (1,180) $ (3,076) $ (1,456) $ (1,017) $ (2,496) $ (3,969)
Total assets ............. 3,672 6,337 5,744 22,278 28,333 41,972
Long-term debt ........... 105 350 147 4,648 9,552 12,465
Total Stockholders' equity 1,437 1,668 1,634 12,771 10,497 13,991
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE COMPANY
The following should be read in conjunction with the Financial Statements
and Notes thereto contained herein.
OVERVIEW. The complete management team of the Company has been in place
now for less than two years. We decided that it was in the best interest of the
Company and Stockholders to re-evaluate the Company's direction, and,
accordingly, discontinue certain operations in 1998 and focus our attention on
the subsidiaries we felt could grow with profitable margins. These included:
pharmaceutical services; physical, occupational and speech rehabilitation
services; the sleep centers; and, the air ambulance transport service.
During 1998, it became very clear to us that, in order for the Company to
obtain significant profit levels, utilization of technology and the internet was
necessary. A significant amount of administrative and duplicative costs are
incurred in each and every aspect of healthcare activities. There are over 30
billion transactions annually in the healthcare industry and only 10% are
electronic. As a result, we identified and entered into definitive agreements to
acquire American Enterprise Solutions, Inc. and CyberCare, Inc. These
acquisitions will significantly expand our ability to address the healthcare
issues facing society. We believe that by bringing these companies together, the
Company will have a significant advantage in healthcare e-commerce and increase
stockholder value, profitability, and position us to expand our operations in
future years.
We intend to change our name to more closely reflect our refocused
strategy in which each of the business segments will support the further
development and implementation of our digital information technology. This
technology will make each of our business segments more efficient. Digital
technology will have a profound effect on the healthcare industry. We are
embarking upon an entirely new, but overdue, approach to the delivery of quality
healthcare in this country. We expect to emerge as an innovator, meeting the
global trend toward fully digitized, fully integrated medical services.
During the last twelve months, we made two strategic acquisitions. They
were Your Good Health Network, Inc. (effective October 15, 1998) and Air
Response, Inc. (effective March 1, 1999). We believe that these acquisitions
will allow us to expand our growth potential with acceptable profitability.
We made some significant strides during 1998 but incurred significant
losses. The loss from continuing operations in the amount of $4,598,412 is a
result of significant costs incurred to grow the Company and reposition us for
the year 2000, as well as losses from the mobile catheterization lab operations.
We also discontinued and disposed of certain operations to allow us to focus on
our new direction.
The Company settled the dispute with Westmark Group Holdings, Inc.
("Westmark") which resulted in an investment which represents over 20% of
Westmark's outstanding common stock. Westmark is currently profitable and is
projecting to substantially increase its profitability in 1999. The current
approximate market value of our 683,457 shares of Westmark is $1,537,778 ($2.25
a share) at July 16, 1999.
Nasdaq requires that a common stock traded on its exchange be equal to or
exceed $1 for at least ten days. The Company's stock has traded below $1. The
Company's common stock has been selling in excess of $1 for
27
<PAGE>
several months and management believes it will continue to do so and be in
compliance with Nasdaq. However, there is no assurance that the Company's common
stock will continue to trade in excess of $1.00.
MATERIAL CHANGES. There have been no material changes in the Company's
business since the filing of the Company's 10-QSB/A for the period ending March
31, 1999.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
---------------------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------- ----------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues ............................ 100% 100% 100% 100% 100%
------ ------ ------ ------ ------
Operating expenses:
Cost of services ...................... 51 60 47 57 46
General and administrative ............ 235 55 57 32 38
Depreciation and amortization ......... 27 9 10 5 7
Interest expense, net ................. 11 3 15 5 10
Equity in net loss of investee ........ 51 15 (1) (1) (1)
Other ................................. 1 -- 3 -- --
------ ------ ------ ------ ------
Total operating expenses ........... 376 142 131 98 100
------ ------ ------ ------ ------
Income (loss) from continuing operations 276% (42)% (31)% 2% --
====== ====== ====== ====== ======
</TABLE>
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND MARCH 31, 1998. Total revenues from operations increased to
$7,910,994 for the three months ended March 31, 1999 as compared to $2,297,932
for the three months ended March 31, 1998, principally due to the revenue of the
acquisitions, Ivanhoe Medical Systems, Inc. ($102,621), Valley Pain Centers,
Inc. ($780,230), Your Good Health Network, Inc. ($1,397,486) and Air Response,
Inc. ($1,843,958). Revenue for 1999, excluding acquisitions, in comparison to
1998 has increased due to an increase in utilization of the aircrafts but which
was partially offset by a reduction in utilization of the mobile cath labs and
other lab revenue.
Cost of revenues, which included medical supplies, technical salaries and
benefits and other expenses directly associated with the Company's services,
increased to $3,667,584 from $1,317,709 for the three months ended March 31,
1999 and 1998, respectively. This increase is primarily due to the cost of
revenue of the acquisitions, Ivanhoe Medical Systems, Inc. ($4,371), Valley Pain
Centers, Inc. ($29,602), Your Good Health Network, Inc. ($550,826) and Air
Response, Inc. ($899,434). Cost of revenue for 1999, excluding acquisitions, in
comparison to 1998 increased due to the costs associated with the air ambulance
company which increased in direct proportion to the increase in revenue and was
offset by the reduction in mobile cath lab costs, which declined in direct
proportion to the reduction in utilization.
General and administrative expenses increased to $3,005,246 for the three
months ended March 31, 1999 compared to $729,994 for the three months ended
March 31, 1998. This increase is primarily due to the acquisitions.
Interest expense increased to $559,271 for the three months ended March
31, 1999 as compared to $110,722 for the three months ended March 31, 1998. This
increase is primarily attributable to interest on the airplane loans assumed as
part of the acquisition of Air Response, Inc., issuance of subordinated
debentures and related penalties and discounts.
In accordance with EITF D-60, the Company is required to amortize as
additional interest expense the difference between the fair market value of the
Company's common stock and the conversion rate of the subordinated debentures at
the commitment date. The term of the amortization is for the period from the
date of closing through the date the debenture can be first converted.
28
<PAGE>
EITF D-60 requires the Company to record a beneficial conversion feature
("BCF") when the Company issues convertible debt. The Company is required to
record a BCF on the issuance of subordinated debentures totaling $699,830, of
which $231,830 has been recorded in the first quarter of 1999 and $468,000 will
be recorded in the second quarter of 1999. In addition, as part of the private
placement, the Company issued detachable warrants to purchase up to 2,000,000
shares of the Company's common stock at an exercise price of $.50. In accordance
with FAS 123, the fair market value of the warrants was determined to be
$571,950 and is required to be amortized over the life of the debentures in
accordance with APB 14, paragraph 16. The Company amortized $4,638 during the
first quarter as additional interest expense relative to the fair market value
of the warrants.
As a result of the above, the Company had a net loss of $52,467 for the
three months ended March 31, 1999 compared to a net income of $140,138 for the
three months ended March 31, 1998.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1998 AND DECEMBER 31, 1997. Total revenues for all subsidiaries
were $14,448,523 for the year ended December 31, 1998, as compared with
$2,375,309 for the year ended December 31, 1997. This 508% increase is primarily
due to the revenues generated from the companies acquired during 1998. Global
had revenues of $7,146,457 in 1998 which was the first complete year of
operations since acquisition. YGHN had revenues of $1,143,625 from October 16,
1998 to December 31, 1998. Pharmacy Care Specialists had $2,565,887 from April
1, 1998 to December 31, 1998. Ivanhoe had revenues of $824,198 from April 1,
1998 to December 31, 1998. Valley Pain had revenues of $993,944 from September
1, 1998 to December 31, 1998.
Cost of services, which include salaries and benefits and other expenses
directly associated with the Company's services, increased 347% to $6,915,503 in
1998, as compared with $1,545,710 in 1997. The increase is due to the cost of
services relating to the acquisitions of the companies during 1998 and Global
which was acquired on December 31, 1997. There were increased cost of services
from Heart Labs due to increased operating costs and fixed costs and lower
revenue.
General administrative expenses increased 502% to $8,425,420 in 1998, from
$1,400,102. This increase was due primarily to the acquisitions made during 1998
and Global.
Depreciation and amortization increased 528% to $1,458,595 in 1998, from
$232,235 in 1997, primarily as a result of the acquired companies.
Interest expense increased 1,173% to $1,120,106 in 1998 from $87,992 in
1997 primarily due to the increase in long-term debt on the airplanes and other
debt associated with the acquired companies in 1998.
On July 31, 1998, the Company issued $3,000,000 of 6% convertible A
debentures, calling for semi-annual interest with a maturity date of July 29,
2001. The holders of the 6% convertible A debentures received options to
purchase 300,000 shares of the Company's common stock at an exercise price of
$2.50. The underwriter received options to purchase 60,000 shares of the
Company's common stock at an exercise price of $2.00. The convertible A
debentures were issued through J.W. Genesis Financial Services Capital Markets
and were issued to accredited investors. The total offering price was $3,000,000
and the underwriter's commission was $180,000.
The debentures are convertible into the Company's common stock based on
the lower of $2.00 per share or 82.5% of the twenty-two (22) day average closing
bid price of the Company's common stock just prior to conversion with a minimum
conversion price of $1.00.
The estimated fair value of the beneficial conversion feature of these
debentures amounted to $1,109,163. In accordance with EITF D-60, this amount has
been amortized as additional interest expense over a five-month period ending
December 31, 1998. The estimated fair market value of the debenture conversion
feature was calculated as the difference between the fair market value of the
Company's common stock at the date of commitment and the conversion price
multiplied by the number of shares to be issued upon conversion.
29
<PAGE>
Equity in net income (loss) of investee increased to a profit of $80,685
in 1998 as compared with a loss of $373,458 in 1997 due to the profitability of
Westmark Group Holdings, Inc.
Merger costs of $117,748 in 1998 resulted from the termination of the
merger with Physician Health Corporation.
The loss on sale of subsidiary of $29,026 in 1998 was a result of the sale
of Care America, Inc. The loss from discontinued operations of $1,441,799 and
loss from disposal of discontinued operations of $1,510,308 resulted from the
sale of Care America, Inc., PRN of North Carolina, Inc., and Florida Physicians
Internet Inc. during 1998.
The gain from retirement of debt in 1998 was a result of the settlement of
a note payable for less than carrying amount.
Interest income increased to $282,803 in 1998 from $182,757 in 1997 due to
interest earned on mortgage and notes receivable, and cash equivalents.
Total revenues from operations for 1998 existing in 1997 were $1,017,554,
as compared with $2,375,309 for the same operations in 1997. Cost and expenses
for these operations were $1,683,171 in 1998, as compared with $1,727,503 in
1997.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996. Revenues from the mobile cardiac
catheterization subsidiary for the year ended December 31, 1997 was $2,375,310
compared to $1,276,904 for the year ended December 31, 1996. This increase is
due to the Company increased utilization through additional contracts with
hospitals, and the sale of a mobile lab. In 1997, the Company had six contracts
with hospitals compared to four for 1996.
Cost of services, which includes medical supplies, technical and sales
personnel salaries and benefits, and other expenses directly associated with the
Company's services, increased 130% to $1,545,710 compared to $669,484 in 1996.
Heart Labs had an increase in cost of services due to increased operating costs
and an increase in cost of personnel.
General and administrative expenses decreased 54.6% from $3,084,025 to
$1,400,102. The decrease was due to the Company implementing a cost reduction
program.
Depreciation and amortization decreased 34% to $232,235 from $353,785 in
1996. This decrease is due to one of the Company's mobile lab leases being
renewed in July 1997 and recorded as an operating lease versus a capitalized
lease, as in previous years.
Interest expense decreased 37% to $87,992 in 1997 from $140,674 in 1996.
This decrease is due to one of the Company's mobile lab leases being renewed in
July 1997 and recorded as an operating lease versus a capitalized lease, as in
previous years.
As a result of the foregoing factors, the Company had net loss of
$1,526,152 in 1997 compared to $8,540,864 in 1996.
LIQUIDITY AND CAPITAL RESOURCES. In 1998 and 1997, the Company financed
operating activities through a combination of cash flow from operations, private
placements, and proceeds from litigation settlements. Cash used in operating
activities was $3,862,280 in 1998 as compared with cash provided by operating
activities of $362,339 in 1997. Cash used in investing activities was $1,120,748
in 1998 as compared with cash used in investing activities of $297,231 in 1997.
At December 31, 1998, the Company had a working capital deficiency of
$2,496,464 as compared with a working capital deficiency of $1,016,557 in 1997.
Current portion of long-term maturities aggregating $465,804
30
<PAGE>
represents payments due on the outstanding airplane debt. The Company in March
1999 commenced negotiations to refinance the long-term debt on the airplanes and
is negotiating to expand its accounts receivable line of credit. In addition,
the Company is in negotiations to raise at least $25 million through equity
offerings with investment bankers.
In 1999, the Company, pursuant to a private placement, sold $2,000,000 of
12% convertible debentures plus 2,000,000 three-year detachable warrants. The
debentures were sold in increments of $10,000 amounts and up. The debentures are
convertible at any time into common stock at $.50 per share, which was the
approximate value of the Company's common stock at the time the transaction was
priced. The warrants are exercisable immediately by the warrant holder at $.50
per share.
The Company will continue to raise working capital from proceeds from
private placement, long-term debt operations and warrants and believes we will
refinance our long-term debt. We believe that, if the Company's working capital
is insufficient to fund its operations, we will have to explore additional
sources of financing as discussed above. No assurances, however, can be given
that future financing will be available or, if available, could be obtained at
terms satisfactory to the Company.
CYBERCARE
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following table sets forth selected financial data of CyberCare. The
selected financial data for the year ended December 31, 1998 is derived from the
audited financial statements of CyberCare. The selected financial data for the
three months ended March 31, 1999 and 1998 is derived from the unaudited
financial statements of CyberCare. This information should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the Notes thereto included elsewhere in the Proxy.
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
----------------- -----------------
Statements of Operations
Data:
Net revenues ........................... $ -- $ --
----------------- -----------------
Operating expenses:
Technology licensing fees ............ 602 3
General and administrative ........... 325 101
Depreciation and
amortization ........................ 5 1
Total operating expenses ............. 932 105
----------------- -----------------
Net (loss) ............................. (932) (105)
================= =================
Net (loss) per share ................... $ (.18) $ (.02)
================= =================
Weighted average shares
outstanding .......................... 5,087 5,100
================= =================
DECEMBER 31, 1998 MARCH 31, 1999
----------------- -----------------
BALANCE SHEET DATA:
Working capital ........................ $ (496) $ (588)
Total assets ........................... 52 24
Long-term debt ......................... -- --
Total stockholders' equity ............. (476) (569)
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF CYBERCARE
The following should be read in conjunction with the Financial Statements
and Notes thereto contained herein.
OVERVIEW. CyberCare is a development stage company internet-based solution
and interactive company that provides products and support services to support
remote delivery of care, patient monitoring and education to the U. S.
healthcare market. CyberCare's initial product system has been targeted
specifically for the high cost, chronically ill patient population. Preventive
services for this patient population is an untapped market segment estimated to
be greater than Four Billion Dollars ($4 billion) in the United States alone.
The Company believes that its expertise in providing services to payors and
managed care companies combined with CyberCare's internet connectivity
technology will allow the Company to link patients directly to healthcare
professionals.
RESULTS OF OPERATIONS.
DESCRIPTION OF THE BUSINESS OF CYBERCARE
CyberCare, Inc. is a development stage company that has no material
expenditures in 1997. In 1998, CyberCare incurred $325,405 in general and
administrative expenses, primarily salaries and $601,662 in technology licensing
fees to Georgia Tech Research Institute and the Medical College of Georgia,
representing the initial research and development expenses. Cybercare will
continue to increase its research and development costs during 1999.
In 1998, CyberCare's financial operating activities through the sale of
common stock aggregated $365,000. Cash used in operating activities was $308,511
in 1998.
DESCRIPTION OF THE BUSINESS FOR THE LAST FIVE YEARS. In January of 1996,
the Willow Group was formed by John Haines for the purpose of developing and
marketing telemedicine solutions and technologies. In September of 1997, the
Willow Group acquired rights to technologies which had been developed by The
Georgia Institute of Technology and The Medical College of Georgia for
monitoring chronically ill patients in their homes. The Willow Group was then
incorporated as CyberCare, Inc. in October of 1997 in the State of Georgia.
CyberCare's mission since that time has been the refinement of that technology
to meet the specific needs of the marketplace and to develop key strategic
relationships in preparation for bringing the product to market.
CONDUCT OF BUSINESS OF CYBERCARE. CyberCare intends to continue conducting
its business in accordance with its previous business plan. Under this plan,
CyberCare will continue development, production and marketing of its key
technologies for monitoring chronically ill patients in their homes. The
principal place of business will continue to be located in the Atlanta, Georgia
area for engineering, sales and marketing purposes. CyberCare anticipates hiring
additional staff in the Atlanta area and in other markets around the country, as
necessary. CyberCare expects to achieve operational efficiencies through the
synergy with the Company and the Company's existing relationships with insurance
companies and other payors. CyberCare anticipates that these relationships will
enable CyberCare to penetrate its key markets faster and will provide CyberCare
with access to the additional capital anticipated under its business plan.
MATERIAL AGREEMENTS. CyberCare has a license agreement with The Georgia
Tech Research Corporation and The Medical College of Georgia through which
technologies have been provided. This license agreement gives CyberCare
exclusive worldwide rights to the intellectual property developed by the
universities for tele-homecare and also gives rights for future tele-homecare
technologies that may be developed by the universities. This license agreement
further provides for certain royalty payments to the universities and
establishes a granting of stock as compensation for the license agreement. In
addition, this license agreement provides for ongoing research and development
support by the universities for CyberCare activities. CyberCare has in place a
joint marketing
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agreement with Nortel Networks, Inc., which provides for Nortel sales personnel
to bring sales leads to CyberCare and to work jointly to close CyberCare
business with Nortel prospects. CyberCare has a distribution agreement in place
with Healthlink Group, LLC, which provides for CyberCare equipment and services
to be marketed by Healthlink Group for use in assisted-living facilities in
designated markets and subject to Healthlink Group attaining certain performance
objectives. CyberCare also has a letter agreement in place with The Mayo Clinic
of Jacksonville, Florida for provision of CyberCare services in support of
tele-medicine projects in Florida.
DESCRIPTION OF MATERIAL PRODUCTS. CyberCare's initial product is the care
management system, which has two major components: the patient module and the
caregiver module. The patient module consists of a multimedia personal computer
with video conferencing capability in a very simple touch-screen user interface.
The patient module also includes interface drivers and medical devices which are
used by the patient to automatically collect vital diagnostic information,
including weight, temperature, blood pressure, ECG, heart and lung sounds
(electronic stethoscope), blood oxygen level, pulse rate, blood sugar levels,
etc. Vital signs information collected by the patient module is automatically
recorded in an electronic patient record maintained by the system within the
network. The caregiver module is also a personal computer-based application with
specialized software to permit a doctor or nurse to monitor a patient's vital
signs information and communicate directly with those patients. Both modules
function together so that measurement devices may be controlled from either end
and results are automatically collected, charted, and maintained for permanent
records. For delivery in late 1999, the patient module is being repackaged into
a small, portable unit called the personal care management system which a nurse
can hand carry into a patient's home for connection to standard telephone lines
or other network interfaces. In addition, CyberCare will provide network
services to link these patients together into a common environment, where
resources can be made available 24 hours a day seven days a week whenever the
patient needs assistance.
STATUS OF PATENTS AND/OR COPYRIGHTS. Two patent applications have been
filed to protect the technology licenses granted CyberCare and several
additional claims are being prepared for patent applications in the future.
CyberCare has exclusive rights to those patents under its license agreements
with The Georgia Tech Research Corporation and The Medical College of Georgia
Research Institute. Based on recent communications between the Company's
attorneys and the U.S. patent office, the Company believes that it is likely,
although no assurance can be given, that the patent office will approve the
majority of the claims which have been filed for CyberCare's key technologies,
and that patents will be subsequently awarded.
COMPETITION.
The primary competitors for CyberCare's products are small, privately
held companies and none has established a major market position as of this time.
Key differentiators between CyberCare and its competitors lie primarily in the
network architecture CyberCare has built to serve this market. Unlike our known
competitors, CyberCare is unique in the automatic collection, transmission, and
logging of vital signs measurements to a central database where the information
can be viewed by a caregiver on a real-time basis or whenever necessary. Known
competitive systems require the manual entry of information. CyberCare believes
it is unique in using TCP/IP protocols for the transmission of medical data in a
two-way interactive voice and video session between patients and caregivers.
MARKETING.
Studies now show that 1% of the U.S. population is responsible for 30% of
all healthcare costs and that 1/3 to 1/2 of those costs are preventable through
monitoring and intervention. CyberCare has created an internet-based healthcare
delivery system for these high-cost chronically ill patients which would
dramatically improve patient health while significantly reducing per-patient
costs. CyberCare's customers are expected to be payers (insurance companies and
health management organizations) who currently spend upwards of $70,000 per year
for the care of each of these patients. CyberCare believes these prospects are
highly motivated to reduce costs and will be strong candidates to purchase
CyberCare equipment and services in the future. CyberCare intends to reach these
prospects through two separate channels. The first channel is an indirect
channel where CyberCare hopes to form partnerships with other companies who have
relationships with customers CyberCare has targeted. The second channel will use
CyberCare's direct sales force to contact the largest of these prospects.
CyberCare believes that state Medicaid
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organizations, the military, Veterans' Administration, and major health
management organizations will be among the prospects for its direct sales force.
DESCRIPTION OF PROPERTIES.
CyberCare operates today in leased space at the Advanced Technology
Development Center which is located on the campus of The Georgia Institute of
Technology in Atlanta, Georgia. CyberCare also has a research and development
contract with Georgia Tech for continued development of hardware and software
capabilities for its products. The engineers at Georgia Tech who are providing
those services for CyberCare are located at the Georgia Center for Advanced
Telecommunications Technology where CyberCare also maintains a demonstration
facility.
EMPLOYEES.
On July 16, 1999, CyberCare employed approximately 15 persons, 4 of which
are full time. To date, CyberCare has been able to recruit and retain qualified
technical personnel and has good relations with its employees.
GOVERNMENT REGULATIONS. CyberCare believes that its products will be
subject to regulation by the Food and Drug Administration. CyberCare expects to
file for 510-K approval by the Food and Drug Administration later in 1999. Since
CyberCare uses vital signs measuring devices which are already approved by the
FDA, CyberCare believes that obtaining this approval for its products will be
accomplished in 90-120 days from the time application is made.
LEGAL PROCEEDINGS.
CyberCare is presently not a party to any material litigation outside the
ordinary course of business.
ACCOUNTANT'S ATTENDANCE AT STOCKHOLDERS' MEETING. The Company does not
anticipate that either its former accountants or its newly appointed accountants
will be present at the Stockholders meeting.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE EXCHANGE AGREEMENT AND
THE ISSUANCE OF 7,250,000 SHARES OF COMMON STOCK CONTEMPLATED THEREBY, BY THE
UNANIMOUS WRITTEN CONSENT OF ALL OF THE DIRECTORS, AND HAS DETERMINED THAT THE
TERMS OF THE EXCHANGE AGREEMENT ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE OF
7,250,000 SHARES OF COMPANY COMMON STOCK IN ORDER TO CONSUMMATE THE CYBERCARE
ACQUISITION. YOUR PROXY WILL BE VOTED FOR APPROVAL UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL 3
AMENDMENT TO ARTICLES OF INCORPORATION
NAME CHANGE
GENERAL. The Board of Directors has approved, and recommends to the
Stockholders for approval, an amendment to the Company's Articles of
Incorporation which would change the corporate name of the Company from Medical
Industries of America, Inc. to Cyber-Care, Inc.
REASON FOR THE PROPOSAL. Consistent with the long-range plans of the Board
of Directors to further diversify the business activities of the Company in the
medical e-commerce business and related medical internet industry, the Board has
recommended a change in the name of the Company from Medical Industries of
America, Inc. to Cyber-Care, Inc. in order to present a corporate identity which
is not limited solely to the Company's present
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core business. Currently, the Company's core business consists of developing
integrated medical delivery services by: providing diversified medical
technologies; operating physical, occupational and speech therapy clinics;
providing sleep apnea, diagnostic and treatment services; providing
pharmaceutical services; and, providing international air ambulance transport
service. The Board plans to diversify the Company's business activities through
expansion or acquisition. Fox example, if the CyberCare acquisition proposal
which is to be acted upon at the Annual Meeting is approved and implemented, the
Company will expand its activities by acquisition to include design,
development, modification and marketing of an interactive internet system that
provides products and services to support the remote delivery of care, patient
monitoring and education to the U.S. healthcare market and related operations.
The proposal for the name change is not contingent upon approval of the
CyberCare acquisition proposal. It is the intention of the Board to pursue the
diversification of the Company's business through acquisition or expansion
whether or not the present proposal is approved.
The Board has selected and recommends to the Stockholders approval of the
proposed name, Cyber-Care, Inc., based upon the Board's judgment that
Cyber-Care, Inc. will present an identity which retains the Company's
established reputation for quality and performance it its current core business
while, at the same time, not limiting its corporate identity to its present
business. The trading symbols for the Company's securities, "MIOA", for the
Common stock will be changed to "CYBR" and the currently outstanding share
certificates bearing the name Medical Industries of America, Inc. would continue
to represent shares of the Company following the change in its name to
Cyber-Care, Inc. If the proposal to change the name of the Company is approved
by the Stockholders, the name change will be implemented by filing a name change
amendment to the Company's Articles of Incorporation within thirty days after
the Annual Meeting.
VOTE NECESSARY TO APPROVE PROPOSAL. The affirmative vote of a majority of
the shares of common stock represented at the Annual Meeting and entitled to
vote thereon is required to approve the amendment to the Company's Articles of
Incorporation to change the name of the Company from Medical Industries of
America, Inc. to Cyber-Care, Inc. Shares of common stock that are designated to
"abstain" and shares which are subject to broker non-votes with respect to
approval of the name change will not be considered as votes cast with respect to
approval of the name change.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL TO CHANGE THE COMPANY'S NAME TO
CYBER-CARE, INC. AND UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS
AMENDMENT. SUCH APPROVAL REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE SHARES OF COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING.
PROPOSAL 4
INCREASE IN AUTHORIZED CAPITAL STOCK
GENERAL. The Company's Articles of Incorporation currently authorize the
Company to issue up to 100,000,000 shares of common stock and 50,000,000 shares
of "blank check" Preferred Stock with such designations, rights, and preferences
as may be determined from time to time by the Board of Directors. The Board of
Directors is empowered, without Stockholder approval, to designate and issue
additional series of Preferred Stock with dividend, liquidation, conversion,
voting or other rights, including the right to issue convertible securities with
no limitations on conversion. As of the Record Date, the Company had 29,260,885
shares of common stock issued and outstanding. Of the 50,000,000 shares of
Preferred Stock authorized, only 272,500 shares are issued and outstanding and
have been designated as Series B Preferred Stock.
The Board of Directors is proposing an amendment to its Articles of
Incorporation to increase the number of authorized common shares to 200,000,000
shares, $.0025 par value per share. If the proposal to increase the number of
authorized common shares to 200,000,000 shares, $.0025 par value per share, is
approved by the Stockholders, the increase in authorized common shares will be
implemented by filing an amendment to the Company's Articles of Incorporation
within thirty days after the Annual Meeting.
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PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT. All authorized but unissued
shares of common stock will be available for issuance from time to time for any
proper purpose approved by the Board of Directors (including issuances in
connection with stock-based employee benefit plans, future stock splits or
dividends and issuances to raise capital or effect acquisitions). There are
currently no binding arrangements, agreements or understandings for the issuance
or use of the additional shares of authorized common stock (other than issuances
with respect to Proposals 3, 5, 6, 7, 9, 10 and 11, and as permitted or required
under the Company's stock-based employee benefit plans or awards made pursuant
to those plans). Other than as set forth in this Proxy, the Board of Directors
does not presently intend to seek further Stockholder approval of any particular
issuance of shares unless such approval is required by law or the rules of the
Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of common stock that may be issued in the
future, and therefore, future issuances of common stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing Stockholders.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if the Company were the subject of a hostile takeover
attempt, it could try to impede the takeover by issuing shares of common stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost of the takeover. The availability of this defensive strategy
to the Company could discourage unsolicited takeover attempts, thereby limiting
the opportunity for the Company's Stockholders to realize a higher price for
their shares than is generally available in the public markets. The Board of
Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented with the intent
that it be utilized as a type of anti-takeover device.
VOTE NECESSARY TO APPROVE PROPOSAL. The affirmative vote of the holders of
a majority of the outstanding shares of common stock entitled to vote at the
meeting is necessary for approval of Proposal 3. Therefore, abstentions and
broker non-votes effectively count as votes against the proposal.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL TO AMEND 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 THE SHARES OF
COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
PROPOSAL 5
MEDICAL INDUSTRIES OF AMERICA, INC.
1999 INCENTIVE STOCK OPTION PLAN
The Company believes it to be in its best interest to adopt the Medical
Industries of America, Inc. 1999 Incentive Stock Option Plan to grant up to
2,000,000 stock options. The purpose of this plan is to foster and promote
financial success of the Company and increase stockholder value by strengthening
the Company's capability to develop and maintain an outstanding management team
and to encourage the performance of that team by the offering of financial
incentives by way of an ownership interest in the Company. The plan will further
allow the Company to attract and retain outstanding executive talent and to
enable key employees to participate in the long-term growth and financial
success of the Company.
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 Compensation Committee will be empowered to grant options to key
employees of the Company and its subsidiaries by considering the nature of the
services rendered by the employee, present and potential contributions to the
Company's success and other such factors as the Committee shall in its
discretion deem
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relevant. The option price per share of common stock deliverable upon the
exercise of an option under this plan shall be 100% of the fair market value of
a share of common stock on the date the option is granted.
The option shall be fully exercisable no sooner than six (6) months of the
date of the grant; however, in no event shall an option be exercised later than
ten (10) years from the date of the grant. The aggregate fair market value as of
the date the option is granted shall not exceed $100,000 in any calendar year.
Any proceeds of cash or property received by the Company from the sale of common
stock pursuant to the options granted under this plan will be used for general
corporate purposes.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE MEDICAL
INDUSTRIES OF AMERICA, INC. 1999 INCENTIVE STOCK OPTION PLAN AND RECOMMENDS A
VOTE FOR THE ADOPTION OF THIS PROPOSAL. 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.
PROPOSAL 6
MEDICAL INDUSTRIES OF AMERICA, INC.
1999 OFFICERS AND DIRECTORS STOCK OPTION PLAN
The purpose of this plan is to foster and promote financial success of the
Company and increase stockholder value by strengthening the Company's capability
to develop and maintain an outstanding management team and to encourage the
performance of that team by the offering of financial incentives by way of an
ownership interest in the Company. Further, the plan will allow the Company to
attract and retain outstanding individuals willing to serve on the Board of
Directors of the Company and to participate in the long-term growth and
financial success of the Company.
ELIGIBILITY. All members of the Company's Board of Directors and the
Company's executive officers are eligible to receive grants of options.
NUMBER OF STOCK OPTIONS. The plan allows the Company to grant up to
4,000,000 stock options to its Board of Directors and executive officers.
EXERCISE PRICE. The exercise price of each option is equal to the fair
market value of the Company's common stock underlying the option at the time of
grant. The exercise price may be paid (i) in cash or by cashier's check, or (ii)
by delivery of shares of common stock already owned by the Eligible Director or
Executive Officer, which have a fair market value, at the time of exercise,
equal to the aggregate exercise price.
NON-TRANSFERABILITY AND RESTRICTIONS ON EXERCISES. No option granted under
the Officers and Directors Plan is transferable by the Eligible Director or
Executive Officer otherwise than by will or the laws of descent and
distribution. An option is only exercisable during the Eligible Director or
Executive Officer's lifetime by the Eligible Director or Executive Officer. In
the event of the Eligible Director or Executive Officer's death, the personal
representative or the person who acquires the right to exercise the option by
bequest or inheritance may exercise the options at any time during the lesser of
(i) the remaining term of the option, or (ii) one year from the date of the
Eligible Director or Executive Officer's death. All options granted under the
Officers and Director's Plan are not exercisable for a period of six (6) months
after the date of grant, except in the case of an Eligible Director or Executive
Officer's death or permanent disability, upon which event an option becomes
immediately exercisable for a period equal to one year thereafter.
TERM OF THE OPTIONS. All options granted under the Officers and Directors
Plan expire, if not previously exercised, ten (10) years from the date of grant.
If the Eligible Director or Executive Officer's membership on the Board or
employment terminates for any reason, any options held on such date terminate
upon the lesser of (i) one year from the date of termination, or (ii) the
remaining term of the option.
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TAX CONSEQUENCES. Under present tax law, the federal income tax treatment
of options granted under the Officers and Directors Plan is as generally
described below. Local and state tax authorities may also tax compensation
awarded under the Officers and Directors Plan.
All options granted under the Officers and Directors Plan are
non-qualified stock options. Non-qualified stock options are all options which
do not qualify for incentive stock option treatment under Section 422 of the
Code. If a non-qualified stock option has a readily ascertainable fair market
value at the time of grant, the optionee realizes ordinary income either (a)
when his rights in the option become transferable; or (b) when the right to an
option is not subject to a substantial risk of forfeiture. Ordinary income will
be equal to the fair market value of the option less any amount paid by the
optionee. If the option does not have an ascertainable fair market value at the
time of grant, income is realized at the time the option is exercised. Such
income would be the positive difference between the fair market value of the
common stock received at the time of exercise and the exercise price paid. Upon
the sale of the common stock received upon exercise, the difference between the
sale price and the fair market value on the date of exercise will be treated as
capital gain or loss.
The Company will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as an optionee is required to
recognize ordinary income as described above. To the extent an optionee realizes
capital gains as described above, the Company will not be entitled to any
deduction for Federal income tax purposes.
The foregoing discussion does not purport to be a complete summary of the
effects of Federal income taxation upon holders of options or upon the Company.
It also does not reflect provisions of the income tax laws of any municipality,
state or foreign country in which an optionee may reside.
ANTI-DILUTION PROVISIONS. In the event of a change, such as a stock split
or stock dividend, in the Company's capitalization, which results in a change in
the number of outstanding shares of common stock, without receipt of
consideration, an appropriate adjustment will be made in the exercise price of,
and the number of shares subject to, all outstanding options. An appropriate
adjustment will also be made in the total number of shares authorized for
issuance under the Officers and Directors Plan.
RELOAD OPTIONS. The Officers and Directors Plan provides for the grant of
reload options to an optionee who would pay all, or part of, an option exercise
price by the delivery of shares of common stock already owned by such optionee,
at the discretion of the Compensation Committee. Reload options would be granted
for each share so tendered. The exercise price of such reload options is the
fair market value of the common stock on the date the original option is
exercised. All other terms of the reload options are identical to the terms of
the original option.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE MEDICAL
INDUSTRIES OF AMERICA, INC. 1999 OFFICERS AND DIRECTORS STOCK OPTION PLAN AND
RECOMMENDS A VOTE FOR THE ADOPTION OF THIS PROPOSAL. 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.
PROPOSAL 7
MEDICAL INDUSTRIES OF AMERICA, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the plan is to provide employees of the Company and
designated subsidiaries with the opportunity to purchase common stock of the
Company. This plan will foster and promote the financial success of the Company
and increase stockholder value by strengthening the Company's capability to
develop and maintain an outstanding pool of employees and to encourage the
performance of that pool of employees by offering the financial benefits of
ownership interest in the Company. It is the intention of the Company to have
the plan qualified as an Employee Stock Purchase Plan under section 423 of
Internal Revenue Code of 1986, as amended (the "1986 Code").
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Generally, the plan will allow eligible employees to become participants
by purchasing stock in the plan by way of payroll deduction. The employee may
elect to purchase not less than one percent (1%) and not more than fifteen
percent (15%) of their compensation on each payday. The employees will be
allowed to purchase the stock at eighty-five percent (85%) of the fair market
value of the share of Company stock on the particularly defined dates. The
employees are allowed to withdraw their participation in the plan in certain
circumstances. All contributions received or held by the Company under the plan
may be used by the Company for any corporate purpose.
TAX CONSEQUENCES. The plan is intended to comply with the requirements
governing employee stock purchase plans set forth in the 1986 Code. Certain
favorable tax consequences are afforded to purchasers of stock pursuant to an
employee stock purchase plan meeting those requirements. If a participant
acquires stock under such a plan and holds it for a period of more than two
years from the date the option is granted and more than one year from the date
the option is exercised, he would not realize any ordinary income on exercise
but would realize ordinary income upon disposition of such stock to the extent
of the excess of the fair market value of such stock at the time the option was
granted over its option price (which in the plan would be the amount of the 15%
reduction in price), and he would report any additional gain as capital gain. If
such stock is disposed of when its fair market value is less than its fair
market value at the time the option was granted, the amount of ordinary income
is limited to the excess of the fair market value at the time of disposition
over the option price. Neither the grant of an option under an employee stock
purchase plan meeting the requirements in the 1986 Code nor the exercise of such
an option has tax consequences to the Company. If a participant disposes of
stock acquired pursuant to such an option within two years from the date the
option is granted or one year from the date the option is exercised, he must
report as ordinary income the difference between the option price and the fair
market value of the stock at the time the option was exercised, and the Company
may take an income tax deduction in that amount.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE MEDICAL
INDUSTRIES OF AMERICA, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN AND RECOMMENDS A
VOTE FOR THE APPROVAL OF THIS PROPOSAL. 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.
PROPOSAL 8
CHANGE IN ACCOUNTING FIRMS
APPOINTMENT OF ERNST & YOUNG, LLP AS OUR AUDITORS
Ernst and Young, LLP was engaged on June 1, 1999 as the Company's
independent certified public accountants. Grant Thornton LLP has declined to
stand for re-election as the Company's independent certified public accountants,
effective May 10, 1999.
There were no reportable events and no disagreements between the Company
and Grant Thornton on any matter of accounting principle or practice, financial
statement disclosure, auditing scope, procedure or otherwise. The decision to
change accounting firms was approved by the Company's Board of Directors.
In the event the appointment of Ernst and Young, LLP as the Company's
independent public accountants for the fiscal year ended 1999 is not ratified by
the Stockholders, the adverse vote will not be considered as a direction to the
Board of Directors to select other auditors for the following year as this
proposal is merely a ratification of the Board's previous action.
The Company does not anticipate that either its former accountants or its
newly appointed accountants will be present at the Stockholders meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CHANGE IN ACCOUNTING FIRMS
AND RECOMMENDS A VOTE FOR THE APPROVAL OF THIS PROPOSAL. SUCH APPROVAL REQUIRES
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
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SHARES OF COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT
THE ANNUAL MEETING.
PROPOSAL 9
AMENDMENT TO AIR RESPONSE MERGER AGREEMENT
GENERAL. Effective February 28, 1999, the Company through one of its
wholly owned subsidiaries completed a merger with Air Response, Inc. ("Air
Response") and its stockholders. Air Response is in the air ambulance and
charter business. Air Response's principal executive officers are located at
7211 South Peoria Street, Suite 200, Englewood, Colorado 80112. The Company
filed Form 8-K/A with the Securities and Exchange Commission with respect to
this transaction on June 21, 1999. The Company consummated the Air Response
transaction for the purpose of expanding its air ambulance business, capturing a
significant portion of the air ambulance retail market and benefiting from the
economies of scale associated with the consolidation of its other air ambulance
operations.
TERMS OF TRANSACTION. Pursuant to merger agreement, the former
stockholders of Air Response received, at closing, 3,866,667 shares of the
Company's common stock, par value $.0025, and are entitled to earn additional
monies in the event the Company's air ambulance subsidiaries, on a consolidated
basis, meet certain earning targets. The additional monies earned, if any, are
payable to the former stockholders of Air Response in the form of a series of
promissory notes accruing interest at 9.5% annually. These earn-out notes are
secured by the issued and outstanding capital stock of Air Response North, Inc.,
the surviving company. Interest on the earn-out notes is paid on a quarterly
basis, in arrears, commencing at the end of the second calendar quarter
following the closing date and is subject to adjustment at the end of each
earnings period. Two Hundred Thousand Dollars of the principal face value (or if
such earn-out note is less than $200,000.00 the entire principal amount) plus
all accrued but unpaid interest on the earn-out note for the first earnings
period will be paid on May 30, 2001. The remaining unpaid principal, if any, on
the earn-out notes for the first earnings period together with the principal
face value of earn-out notes for the second and third earnings period together
with all accrued but unpaid interest on the earn-out notes will be due and
payable on the August 31, 2002. The earn-out notes may be prepaid by the Company
at any time without penalty or additional interest. This transaction was
approved by the Board of Directors of the Company.
PURPOSE AND EFFECT OF PROPOSAL. The Air Response transaction was
consummated subject to the condition that the Company present to its
Stockholders, for approval, a proposal that the earn-out notes which may be
earned by the former stockholders of Air Response be replaced by convertible
notes (the "debentures"). The debentures would contain identical terms and
conditions as the earn-out notes, except for a conversion feature. The
debentures, if earned and as proposed, would be convertible, at the option of
the holder, into shares of restricted common stock of the Company at a price of
$1.00 per share, which was 33% higher than the market price per share at the
time the transaction was negotiated. The maximum amount of shares which may be
issued by way of these conversion rights would be limited to Two Million Nine
Hundred Thousand (2,900,000) shares of restricted common stock of the Company.
Nasdaq Rule 4460(i)(1)(D), of the Nasdaq Stock Market, Inc. Nasdaq
Marketplace Rules (the "Nasdaq 20% Rule") requires certain companies (such as
the Company) to seek approval of its stockholders if a transaction, in the
aggregate, potentially results in the issuance of shares of its common stock
which represents 20% or more of its outstanding stock immediately prior to such
transaction. According to the records of the Company's Stock Transfer Agent, on
February 28, 1999 (the effective date of merger with Air Response), the Company
had 22,818,202 shares of common stock outstanding. As a result of the merger
with Air Response, the Company issued 3,866,667 Shares of restricted common
stock to the stockholders of Air Response. The earn-out provisions of the merger
agreement may potentially result, if the debentures are fully earned and
converted, in the issuance of an additional 2,900,000 shares of restricted
common stock or 2,203,027 shares of stock in excess of the Nasdaq 20% Rule.
The purpose of the issuance of the debentures in replacement of the
earn-out notes is to provide the former stockholders of Air Response with the
opportunity to earn additional shares of the Company's common stock which the
Company believes will foster and promote the financial success of the Company
and its air ambulance
40
<PAGE>
operations and further encourage the performance of the former stockholders of
Air Response, who are now executives of the Company and its air ambulance
subsidiaries, by offering additional financial incentives.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT OF THE MERGER
AGREEMENT TO ALLOW THE COMPANY TO ISSUE THE DEBENTURES TO THE FORMER
STOCKHOLDERS OF AIR RESPONSE IN REPLACEMENT OF THE EARN-OUT NOTES WHICH WOULD
OTHERWISE BE ISSUED PURSUANT TO THE EARN-OUT PROVISION OF THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR THE APPROVAL OF THIS PROPOSAL. 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.
PROPOSAL 10
CONNECTICUT CAPITAL MARKETS, LLC
$5,000,000 PRIVATE PLACEMENT
GENERAL. The Company has entered into an agreement with Connecticut
Capital Markets, LLC to act as placement agent offering to accredited investors
up to 50 Units at a purchase price of $100,000 per Unit on a best efforts basis.
In the event the placement agent obtains the $5,000,000 investment, it may offer
up an additional 20 Units at $100,000 per Unit for a total investment of
$7,000,000. Each Unit consists of a convertible debenture in the principal
amount of $100,000 accruing interest at 10 percent and a warrant to purchase
50,000 shares of the Company's common stock. The Company is required to make its
first interest payment on September 30, 2000 and semi-annually thereafter at a
rate of 10 percent with the debentures maturing on September 30, 2002. The
Company, at its option, may pay interest in shares of the Company's common
stock. The number of shares paid is determined by dividing the interest payment
by the average closing bid price of the Company's stock on the twenty days prior
to the interest accrual date.
The debenture and any accrued interest may be initially convertible into
the Company's common stock at 80 percent of the closing bid price of the
Company's stock on the date the Company receives the investors' subscription
funds but in no event less than $1.00 (the "Conversion Price").
If the Company's common stock is listed on a national market and is
trading at two times the then applicable Conversion Price for the 22 consecutive
trading days during the 30-day period prior to conversion, then the Company has
the right to convert all or any portion of the debentures with any accrued
interest into shares of the Company's common stock at the applicable Conversion
Price.
The Company may also redeem the debentures with any accrued interest after
providing 30 days' notice to the debenture holders. If the average bid price of
the Company's common stock during any 22 consecutive trading days during the
30-day period prior to the redemption is less than two times the applicable
Conversion Price, then, as a protective incentive, the holders of the debenture
will be entitled for a period of six months after such redemption to purchase
additional nonregistered shares of the Company's common stock at the Conversion
Price in effect on the Redemption Date. For example, if the Conversion Price is
at $1.20 and a holder's Unit ($100,000) plus accrued interest of $10,000 is
redeemed by the Company and the Company's common stock during any 22 consecutive
trading days during the 30-day period prior to the date of redemption is less
than $2.40 then, in such event, the holder of the Debenture will be entitled
during the six-month period to purchase 91,667 of the Company's common stock at
$1.20 per share.
The debentures will not be subordinated to any other debt obligations of
the Company except secured debt obligations, existing and replacement revolving
debt and non-convertible loans from lending institutions with over $500,000,000
in assets. The Company will be considered in default of its obligations under
the debentures if it files for bankruptcy protection under the federal
bankruptcy laws, enters into an agreement to sell all, or substantially all of
its assets, defaults under the terms of the placement agency agreement, fails to
use its reasonable best efforts to register with the Commission the shares of
the Company's common stock issuable upon the exercise or conversion of the
debentures or warrants within 90 days of the final closing of this offering (or
fails to register such shares for
41
<PAGE>
any reason within one year of the final closing of this offering), fails to pay
interest due on the debentures for 30 days or commits any other material
default. If an event of default occurs, among other things, the interest rate on
the debentures will increase to 14% until such default is cured.
If the Company implements a reverse stock split of 1:5, or multiple splits
which aggregate more than 1:5, prior to the conversion of any of the debentures,
then the owners of the debentures and warrants shall be protected so that any
debenture or warrant that is outstanding as of the effective date of the reverse
stock split will be not greater than 1:5. If the Company issues common stock, or
securities convertible into its common stock (other than pursuant to obligations
existing on July 1, 1999, acquisitions or mergers, options to officers or
directors or pursuant to Proposal 11), at a lower price than the Conversion
Price then in effect, the debenture and warrant owners are protected by way of a
price reset mechanism so that they may convert their debentures and exercise
their warrants at the lower price. A holder of a debenture may not engage in
short sales of the Company's common stock.
Each Unit includes a warrant which entitles the holder to purchase shares
at 115% of the closing bid price of the Company's common stock on date the
Company receives the investor's subscription funds. The Company has the right to
redeem the warrants if the Company gives the holder 30 days' prior written
notice and the average bid price of the Company's stock for 22 consecutive
trading days exceeds two times the Conversion Price.
The Company is required to use its reasonable best efforts to register
resale within 90 days after the closing of the offering any shares which may be
issued upon the conversion of the debentures, warrants or otherwise under this
offering.
As compensation for its services under this best efforts agreement, the
placement agent will receive a sales commission of 8% of the aggregate purchase
price of all Units sold by the placement agent and in addition, will receive a
fee for its administrative and due diligence services provided in connection
with the offering equal to 3% of the purchase price paid for all the Units sold.
Additionally, the placement agent will receive a warrant to purchase 15,000
shares of common stock for each Unit or pro rata portion thereof sold in the
offering. In the event the placement agent sells 30 Units, the agent will
receive a $3,000 per month consulting fee for financial services rendered to the
Company. The Company will indemnify the placement agent against any liability
incurred with regard to misrepresentations made by the Company in connection
with the offering.
The offering will terminate on September 30, 1999 unless earlier
terminated or extended to November 1999 as may be agreed by placement agent and
the Company. The Company has the right to suspend or terminate the offering to
accommodate the filing of a registration statement. If the Company terminates
the agreement with the placement agent due to the placement agent's inability to
complete the offering by September 30, 1999, the Company agrees not to solicit
financing from any party introduced by the placement agent for a period of 3
years without the placement agent's consent.
The discount relative to the beneficial conversion feature of the
debentures and warrants will be charged to interest expense in the Company's
income statement as additional cost of the financing. This interest expense is
deductible for income tax purposes.
PURPOSE AND EFFECT OF PROPOSAL. The net proceeds received by the Company
from this offering are expected to be used primarily for financing the research
and development of CyberCare, if that transaction is approved, or if not, other
acquisitions of the Company and working capital.
Rule 4460(i)(1)(D) of the Nasdaq Stock Market, Inc. Nasdaq Marketplace
Rules requires certain companies whose securities are traded on the Nasdaq
SmallCap Market (such as the Company) to obtain stockholder approval prior to
issuing common stock (or securities convertible into common stock) in a
transaction other than a public offering at a price less than the market value
of the common stock when the amount of common stock to be issued (or issuable
upon conversion) is or will be greater than 20% of the common stock or voting
power of the company outstanding prior to issuance. The initial sales of the
debentures and warrants do not require stockholder approval pursuant to Rule
4460(i)(1)(D) because upon conversion of the debentures and warrants such shares
would not breach the Company's obligation under the rules or regulations of the
Nasdaq Stock Market, being
42
<PAGE>
a maximum of 19.99% of the then currently issued and outstanding common stock.
The Company, however, must obtain Stockholder approval of this Proposal prior to
the sale of such securities which, if converted, would exceed the 19.99%
limitation.
Assuming approval of this Proposal, the ultimate number of shares of
common stock into which the debentures and warrants are convertible is unknown
at this time. However, based upon (i) a closing bid price of $1.375 per share
(the closing price of the Company's common stock on July 16, 1999), (ii) a
conversion on July 16, 1999, and (iii) assuming the conversion of all debentures
and warrants (i.e., 50 Units) at the applicable Conversion Price, the Company
would issue an additional 7,045,455 shares of common stock. Such 7,045,455
shares of common stock would represent approximately 22.7 % of the currently
issued and outstanding common stock, or approximately 18.5% of the Company's
issued and outstanding common stock, giving pro forma effect to such issuance.
The amount of shares and percentage of common stock ultimately issuable upon
conversion of all debentures and warrants may increase or decrease
substantially.
In the event that this offering potentially results in the issuance of
common stock in excess of the maximum number of shares the Company can issue
without prior Stockholder approval, the offering will be terminated. The Company
is seeking the approval of the Stockholders prior to the closing of this
offering to allow the issuance of the additional number of shares of common
stock so as to remain in compliance with Nasdaq Rules.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ISSUANCE OF THE DEBENTURES
AND WARRANTS WITH RESPECT TO THIS OFFERING AND RECOMMENDS A VOTE FOR THE
APPROVAL OF THIS PROPOSAL. 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.
PROPOSAL 11
SWARTZ EQUITY LINE
GENERAL. The Company has entered into an irrevocable subscription
agreement with Swartz Private Equity, LLC for the purpose of selling, at the
Company's option, common shares in the Company up to an aggregate amount of
$25,000,000 over a three-year period. This equity line may be expanded up to
$50,000,000 by subsequent agreement of the parties.
Pursuant to an effective registration statement, which the Company will
file with the Commission with respect to this transaction, the Company will have
the right to sell common stock to Swartz at a price equal to the lesser of the
lowest day trading price of the Company's common stock for the 10 days preceding
the purchase date less $.10, or 91% of the low day trading price of the common
stock of the Company for the six days immediately preceding the date of
purchase. The Company has the right to establish a floor price under which it
will not sell shares to Swartz; however, the floor price may not be greater than
85% of the closing bid price for the Company's common stock as of a specific
date. Each transaction under this agreement may total up to $5,000,000 subject
to certain volume limitations in the agreement and other limitations currently
in effect by Nasdaq or any other exchange for which the Company shares may
trade.
For each purchase of the Company's shares by Swartz, Swartz shall receive
warrants equal to 10% of the number of shares purchased at an exercise price of
115% of the closing bid price of the Company's stock on that date. These
warrants shall have piggyback registration rights and reset provisions.
As compensation for entering into this agreement with the Company, Swartz
received warrants convertible into 425,000 shares of the Company's common stock
with an exercise price equal to 115% of the average closing bid price on the
date prior to the execution of the preliminary agreement documents. The warrants
have a five-year term, piggyback registration rights and reset provisions. In
addition, Swartz may receive additional warrants in the event the Company issues
additional shares in conjunction with acquisitions consummated on or after May
13, 1999.
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<PAGE>
If the Company conducts a reverse stock split during the first year of the
agreement, then the warrants issued to Swartz in connection with entering into
the agreement shall be protected. In the event a reverse stock split results in
the number of common shares outstanding being greater than 8,000,000 shares,
then the minimum amount of shares exercisable under the warrants issued to
Swartz shall be 300,000. If the number of shares of common stock outstanding
pursuant to reverse stock split is equal to or less than 8,000,000 shares, then
the minimum amount of shares exercisable under the warrants to Swartz will be
250,000. If a registration statement registering the shares sold in this
offering has not been declared effective within six months of the original
filing of the registration statement, then 40% of the warrants will be returned
to the Company and the agreement with Swartz shall be cancelled.
The Company agrees to sell to Swartz at least $1,000,000 of its common
stock during each six-month period after the effective date of the registration
statement or the Company will pay Swartz a fee equal to $100,000 less 10% of the
actual dollar amount of the shares sold to Swartz during such period. This
non-usage fee may be paid with registered common stock of the Company. The
Company will be entitled to six periodic suspensions of this offering which do
not aggregate more than nine months to effect a secondary underwriting. The
non-usage fee shall not be due during these suspensions. The non-usage fee will
be cancelled in the event the Company is acquired by a third party. The Company
may cancel its agreement with Swartz at any time by paying a fee of $200,000
less 10% of the aggregate dollar amount of shares sold to Swartz under the
agreement prior to the cancellation.
PURPOSE AND EFFECT OF PROPOSAL. The net proceeds received by the Company
from this offering are expected to be used primarily for financing the
development of the Company's e-commerce business and for acquisitions and
working capital.
Rule 4460(i)(1)(D) of the Nasdaq Stock Market, Inc. Nasdaq Marketplace
Rules requires certain companies whose securities are traded on the Nasdaq
SmallCap Market (such as the Company) to obtain stockholder approval prior to
issuing common stock (or securities convertible into common stock) in a
transaction other than a public offering at a price less than the market value
of the common stock when the amount of common stock to be issued (or issuable
upon conversion) is or will be greater than 20% of the common stock or voting
power of the company outstanding prior to issuance. The initial sales of the
Company's common stock and warrants do not require stockholder approval pursuant
to Rule 4460(i)(1)(D) because the sale of such shares and the conversion of the
warrants would not breach the Company's obligation under the rules or
regulations of the Nasdaq Stock Market, being a maximum of 19.99% of the then
currently issued and outstanding common stock. The Company, however, must obtain
Stockholder approval of this Proposal prior to the sale of such securities which
would exceed the 19.99% limitation.
If this offering potentially results in the issuance of common stock in
excess of the maximum number of shares the Company can offer without prior
stockholder approval, the offering will be terminated. The Company is seeking
the approval of the Stockholders prior to the closing of the subscription to
allow the issuance of the additional number of shares of common stock so as to
remain in compliance with Nasdaq Rules.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ISSUANCE OF THE SHARES AND
WARRANTS WITH RESPECT TO THIS OFFERING AND RECOMMENDS A VOTE FOR THE APPROVAL OF
THIS PROPOSAL. 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.
44
<PAGE>
PROPOSAL 12
OTHER MATTERS
The Board of Directors is aware of no other matters that are to be
presented to Stockholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
STOCK OWNERSHIP
The following table and notes thereto set forth, as of July 16, 1999,
certain information regarding beneficial ownership of the Company's common stock
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 COMMON STOCK(1) OF CLASS(1)
- ---- --------------- ------------
Michael F. Morrell (1)(2) .............. 1,825,000 5.9%
Paul C. Pershes (1)(3) ................. 1,700,000 5.5%
Linda Moore (1)(4) ..................... 227,000 *
Arthur Kobrin (1)(5) ................... 225,000 *
E. Nicholas Davis III (1)(6) ........... 300,000 1%
Theodore J. Orlando (1)(7) ............. 158,334 *
Terry Lazar (1)(8) ..................... 158,334 *
Glen Barber (1)(9) ..................... 158,334 *
Dana Pusateri (1)(10) .................. 841,333 2.6%
Louis R. Capece, Jr. (1) ............... 3,093,334 9.9%
All Directors and Officers as a
group (10 persons) ..................... 9,436,669 30.25%
*less than 1%
A person is deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from June 1, 1999 upon the exercise of options,
and that person's options are assumed to have been exercised in determining such
person's percentage ownership.
(1) The business address of each of the beneficial owners is: 1903 S.
Congress Ave., Suite 400, Boynton Beach, Florida 33426
(2) Includes 825,000 shares of common stock that are issuable upon
exercise of vested options. Does not include 300,000 unvested options, 160,000
shares of common stock that are issuable upon exercise of debentures and 79,992
shares of common stock that are issuable upon exercise of warrants. On February
11, 1998
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<PAGE>
Mr. Morrell exercised options to acquire 1,000,000 shares of common stock at a
collective exercise price of $500,000, issuing the Company a promissory note in
payment for the shares, which note contained the following terms: (i) repayment
of principal with interest at the prime lending rate, (ii) pledge of the shares
as collateral security for repayment of the loan, and (iii) repayment of the
principal and interest upon the earlier to occur of the sale of the shares or
February 11, 2002.
(3) Includes 700,000 shares of common stock that are issuable upon
exercise of vested options. Does not include 250,000 unvested options, 50,000
shares of common stock that are issuable upon exercise of debentures, and 25,000
shares of common stock that are issuable upon exercise of warrants. On February
11, 1998 Mr. Pershes exercised options to acquire 1,000,000 shares of common
stock at a collective exercise price of $500,000, issuing the Company a
promissory note in payment for the shares, which note contained the following
terms: (i) repayment of principal with interest at the prime lending rate, (ii)
pledge of the shares as collateral security for repayment of the loan, and (iii)
repayment of the principal and interest upon the earlier to occur of the sale of
the shares or February 11, 2002.
(4) Ms. Moore is Senior Vice President and Secretary of the Company.
Includes 127,000 shares of common stock that are issuable upon exercise of
vested options. Does not include 25,000 unvested options, 20,000 shares of
common stock that are issuable upon exercise of debentures and 10,008 shares of
common stock that are issuable upon exercise of warrants.
(5) Mr. Kobrin is Senior Vice President of Financial Operations of the
Company. Includes 150,000 shares of common stock that are issuable upon exercise
of vested options. Does not include 50,000 unvested options, 20,000 shares of
common stock that are issuable upon exercise of debentures, and 10,000 shares of
common stock that are issuable upon exercise of warrants.
(6) Mr. Davis is Senior Vice President of Legal Affairs of the Company.
Includes 200,000 shares of common stock that are issuable upon exercise of
vested options.
(7) Includes 158,334 shares of common stock that are issuable upon
exercise of vested options. Does not include 66,666 unvested options, 20,000
shares of common stock that are issuable upon exercise of debentures, and 10,000
shares of common stock that are issuable upon exercise of warrants.
(8) Includes 158,334 shares of common stock that are issuable upon
exercise of vested options. Does not include 66,666 unvested options, 120,000
shares of common stock that are issuable upon exercise of debentures, and 60,000
shares of common stock that are issuable upon exercise of warrants.
(9) Includes 158,334 shares of common stock that are issuable upon
exercise of vested options. Does not include 66,666 unvested options.
(10) Does not includes 100,000 shares of common stock that are issuable
upon exercise of unvested options, 100,000 shares of common stock that are
issuable upon exercise of debentures, and 50,000 shares of common stock that are
issuable upon exercise of warrants.
EXECUTIVE COMPENSATION
The following table sets forth the information with respect to each person
who served in the capacity of chief executive officer during l998, and other
officers of the Company whose total annual salary and bonus for the fiscal year
ended December 31, 1998 exceeded $100,000 (collectively, the "Named Executive
Officers"). These Named Executive Officers receive other personal benefits in
amounts less than 10% of their total annual salary and bonus.
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<PAGE>
COMPENSATION OF THE COMPANY OFFICERS.
The following table sets forth the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and other executive officers for
services rendered to the Company during 1998 and 1997. No other person, who,
during 1998 and 1997 served as an executive officer of the Company, had a total
annual salary and bonus in excess of $100,000.
SUMMARY OF COMPENSATION TABLE.
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Name & Principal Other Annual LTIP
Position Year Salary ($) Bonus($) Compensation Options Payouts ($)
- ----------------------------------- ----------- ------------- ------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C>
Michael F. Morrell (1) 1998 $160,000 600,000
1997 $173,461 1,500.000
Paul C. Pershes (2) 1998 $153,462 500,000
1997 $104,808 1,437,000
E. Nicholas Davis, III (3) 1998 $111,631 200,000
A. Razzak Tai (4) 1997 $348,354 50,000
</TABLE>
(1) Chief Executive Officer from August 1996 to present.
(2) President and Chief Operating Officer from April 1997 to present.
(3) Senior Vice President of Legal Affairs from June 1998 to present.
(4) Director and Director of Medicine of Florida Physicians Internet, Inc.
from June 1997 and January 1997. Resigned in September 1998. President
from April 1997 to present.
EMPLOYMENT AGREEMENTS.
In January 1997, the Company signed an employment agreement with Michael
Morrell. The term of the agreement is for four years and provides for annual
salary of $150,000, the granting of 1,175,000 stock options at $.50 per share
which have vested (1,000,000 of which were exercised in February 1998) and the
payment of normal business expenses. On November 1, 1997, the Board of Directors
approved an increase in salary to $200,000 per year and granted 300,000 stock
options at $1.25 a share. In February 1998, 600,000 stock options were granted
at $1.25 a share. The agreement was extended for one additional year. Mr.
Morrell agreed to a 20% reduction in salary effective November 1, 1998, until
such time as the Company achieves sufficient profitability or cash flow.
In January 1997, the Company signed an employment agreement with Paul C.
Pershes. The term of the agreement is for four years and provides for annual
salary of $150,000, the granting of 1,175,000 stock options at $.50 per share
which have vested (1,000,000 of which were received in February 1998) and the
payment of normal business expenses. On November 1, 1997, the Board of Directors
approved an increase in salary to $175,000 per year and granted 250,000 stock
options at $1.25 a share. In February 1998, 500,000 stock options were granted
at $1.25 a share. The agreement was extended for one additional year. Mr.
Pershes agreed to a 20% reduction in salary effective November 1, 1998, until
such time as the Company achieves sufficient profitability or cash flow.
On June 16, 1997, the Company signed an employment agreement with Arthur
Kobrin. The term of the agreement is for four years and provides for annual
salary of $78,000, the granting of 100,000 stock options at $1.48 a share to be
vested over a three-year period, and the payment of normal business expenses.
Effective February 8, 1998 the annual salary was increased to $100,000 and he
received 150,000 stock options at $1.25 a share (75,000 options were exercised
in February 1998). Effective November 1, 1998, Mr. Kobrin agreed to a 15%
reduction in salary, until such time as the Company achieves sufficient
profitability or cash flow.
On November 6, 1996, the Company signed an employment agreement with Linda
Moore. The term of the agreement is for five years and provides for annual
salary of $80,000, the granting of 100,000 stock options at $.50 per share to be
vested immediately (these options were exercised in February 1998), and the
payment of normal
47
<PAGE>
business expenses. Effective February 8, 1998 the annual salary was increased to
$100,000 and she received 150,000 stock options at $1.25 a share (25,000 options
were exercised in February 1998). Effective November 1, 1998, Ms. Moore agreed
to a 15% reduction in salary, until such time as the Company achieves sufficient
profitability or cash flow.
On March 15, 1998, the Company signed an employment agreement with E.
Nicholas Davis, III. The initial term of the agreement was for three years and
provides for annual salary of $125,000, the granting of 200,000 stock options at
$1.25 per share all of which have vested, and the payment of normal business
expenses. Beginning November 1, 1998 and ending in May, 1999 Mr. Davis also took
a 20% reduction in salary. This unpaid salary will be repaid upon the Company
achieving sufficient profitability or having sufficient cash available. On
February 5, 1999, the term of Mr. Davis' contract was extended to December 31,
2003.
Effective October 15, 1998, YGHN signed an employment agreement with Dana
Pusateri. The term of the agreement is for four years and provides for annual
salary of $120,000, and the granting of up to 100,000 Company stock options at
$.75 per share based on performance.
The compensation of the officers and directors of the Company is
reflected in Form 10KSB and Form 10QSB. Officers' and directors' compensation
and options to acquire the Company's stock are subject to increase at the
discretion of the Company's Compensation Committee and the Chief Executive
Officer.
The following tables show, as to the Named Executive Officers, certain
information concerning stock options:
OPTION GRANTS DURING 1998 AND AGGREGATED FISCAL YEAR-END OPTION VALUE.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME OPTIONS IN FISCAL YEAR PRICE ($/SH) DATE
---- ------------ ------------------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Michael F. Morrell 600,000 27.3 1.25 2/10/08
Paul C. Pershes 500,000 22.7 1.25 2/10/08
E. Nicholas Davis III 200,000 9.1 1.25 2/10/08
</TABLE>
AGGREGATED OPTIONS EXERCISED IN 1998 AND 1998 OPTION VALUES.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN THE
UNEXERCISED OPTIONS AT 12/31/98 MONEY OPTIONS AT 12/31/98
SHARES ACQUIRED VALUE -------------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Morrell 1,000,000 0 925,000 200,000 32,000 -0-
Paul C. Pershes 1,000,000 0 783,333 32,000 -0-
E. Nicholas Davis III 0 0 -0- 200,000 -0- -0-
</TABLE>
48
<PAGE>
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
CASH COMPENSATION SECURITY GRANTS
------------------------------------------------- -------------------------------------
CONSULTING NUMBER OF
ANNUAL RETAINER MEETING FEE / OTHER NUMBER OF SECURITIES UNDERLYING
NAME FEE ($) FEES ($) FEES ($) SHARES (#) OPTIONS/SARS (#)
---- ---------------- -------- ----------- ---------- ---------------------
<S> <C> <C> <C> <C>
Terry Lazar - 2,000 (1) - 50,000 50,000
Glen Barber - 1,000 (1) - 50,000 50,000
Theodore J. Orlando - 2,000 (1) - 50,000 50,000
</TABLE>
(1) The Directors had fourteen meetings during 1998, of which twelve were
telephonic meetings. The Directors receive $1,000 for each meeting they
attend, up to a maximum of $5,000. The Directors are also awarded stock
options for other meetings and work performed.
LONG-TERM EMPLOYEE PLANS
The Company does not have any long-term incentive plans.
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.
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals of Stockholders of the Company which are intended to be
presented by such Stockholders at the 2000 Annual Meeting must be received by
the Company no later than 5:00 p.m., Friday, August 20, 1999 in order to have
them included in the proxy statement and form of proxy relating to that meeting.
The Company's bylaws require a Stockholder to give advance notice of any
business, including the nomination of candidates for the Board of Directors,
that the Stockholder wishes to bring before a meeting of the Stockholders of the
Company. In general, for business to be brought before an annual meeting by a
Stockholder, written notice of the Stockholder's proposal or nomination must be
received by the secretary of the Company not less than 90 days nor more than 120
days before the meeting, or if the Company gives less than 40 days' notice of
the meeting date, written notice of the stockholder proposal or nomination must
be received within ten days after the meeting date is announced. With respect to
Stockholder proposals, the Stockholder's notice to the secretary must contain a
brief description of the business to be brought before the meeting and the
reasons for conducting such business at the meeting, as well as such other
information set forth in the Company's bylaws or required by law. With respect
to the nomination of a candidate for the Board of Directors by a stockholder,
the stockholder's notice to the secretary of the Company must contain certain
information set forth in the Company's bylaws about both the nominee and the
Stockholder making the nominations.
If a Stockholder desires to have a proposal included in the Company's
proxy materials for the 2000 Annual Meeting of Stockholders and desires to have
such proposal brought before the same Annual Meeting, the Stockholder must
comply with both sets of procedures described in the two immediately preceding
paragraphs. Any required notices should be sent to Medical Industries of
America, Inc., 1903 S. Congress Avenue, Suite 400, Boynton Beach, Florida 33426,
Attention Secretary.
49
<PAGE>
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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998, as amended on Form 10-KSB/A dated June 30, 1998;
2. The Company's Current Report on Form 8-K filed April 23, 1999, as
amended June 21, 1999;
3. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, as amended June 30, 1999;
4. The Company's Current Report on Form 8-K filed June 1, 1999, as
amended June 25, 1999;
5. The Company's Form S-3 Registration Statement, effective June 30,
1999;
6. The Company's Current Report on Form 8-K filed July 19, 1999; and
7. All documents subsequently filed hereto by the Company pursuant to
sections 13(a), 13(c), 14 or 15(d) prior to the Meeting Date.
The Company will provide, without charge upon oral or written request, to
each person to whom this Proxy Statement is delivered, a copy of any or all of
the documents incorporated by reference, other than exhibits to such documents
not specifically incorporated by reference above. Requests for such documents
should be directed to the Company, Medical Industries of America, Inc., 1903 S.
Congress Avenue, Suite 400, Boynton Beach, Florida 33426, Attention Secretary.
In addition, the Commission maintains a Web site on the Internet that contains
reports, proxy and information statements and other information regarding
issuers filed electronically with the Commission. The address of the site is
http://www.sec.gov. Visitors to the site may access the documents incorporated
by reference herein by searching the EDGAR database on the site.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Linda Moore
Linda Moore, Secretary
July 30, 1999
Boynton Beach, Florida
<PAGE>
EXHIBIT A
MEDICAL INDUSTRIES OF AMERICA, INC.
DIRECTORS' AND EXECUTIVE OFFICERS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Medical Industries of America, Inc. Directors' and
Executive Officers' Stock Option Plan (the "Plan") is to secure for Medical
Industries of America, Inc. and its stockholders the benefits arising from stock
ownership by its Directors and Executive Officers. The Plan will provide a means
whereby eligible Directors and Executive Officers may purchase shares of the
common stock, $.0025 par value, of Medical Industries of America, Inc. pursuant
to options granted in accordance with the Plan.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the
respective meanings set forth in this Article:
2.1 "Board" shall mean the Board of Directors of Medical Industries of
America, Inc.
2.2 "Change of Control" shall mean the occurrence of any of the
following acts:
(a) The acquisition by any person, entity or "group" within the
meaning of SS 13(d) or 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty (30%) percent or more of either
the then outstanding shares of the Company's Common Stock or the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally in the election of directors; provided, however, the purchase by
underwriters in a firm commitment public offering of the Company's securities
shall not constitute a Change of Control; or
(b) If the individuals who serve on the Company's Board as of
____, 1999 (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, any person who becomes a Director
subsequent to ____, 1999, whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
Directors then compiling the Incumbent Board, shall for purposes of this
Agreement be considered as if such person was a member of the Incumbent Board;
or
(c) Approval by the Company's stockholders of: (i) a merger,
reorganization or consolidation whereby the Company's stockholders immediately
prior to such approval do not, immediately after consummation of such
reorganization, merger or consolidation own more than 50% of the combined voting
power entitled to vote generally in the election of directors of the surviving
entity's then outstanding voting securities; or (ii) liquidation or dissolution
of the Company; or (iii) the sale of all or substantially all of the assets of
the Company.
2.3 "Common Stock" shall mean the common stock, $.0025 par value of
the Company.
2.4 "Company" shall mean Medical Industries of America, Inc. and any
of its subsidiaries.
2.5 "Director" shall mean any person who is a member of the Board of
the Company.
2.6 "Eligible Director" shall be any Director who is a member of the
Board of the Company.
2.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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2.8 "Exercise Price" shall mean the price per share at which an Option
may be exercised.
2.9 "Eligible Executive Officer" shall mean those persons in a
position of control within the Company, including but not limited to President,
Vice President, Secretary and Treasurer.
2.10 "Fair Market Value" shall mean the closing price of a share of
Common Stock on the principal securities exchange on which such Common Stock is
traded on the last preceding business day prior to the date as to which Fair
Market Value is being determined, or on the next preceding business day on which
such Common Stock is traded, if no shares of Common Stock were traded on such
date. If the Common Stock is not traded on a securities exchange, Fair Market
Value shall be the closing sales price of the Common Stock as reported on the
Nasdaq National Market System for the last preceding business day prior to the
date on which Fair Market Value is to be determined or on the next preceding
business day if the Common Stock was not traded on such date. If the Common
Stock is not quoted on the Nasdaq National Market System, Fair Market Value
shall be the average of the high bid and low asked prices of the Common Stock in
the over-the-counter market on the last preceding business day prior to the day
as of which Fair Market Value is being determined, or on the next preceding day
on which such high bid and low asked prices were recorded. If the Common Stock
is not publicly traded, Fair Market Value shall be determined by the Board, in
good faith, but only during any period in which no equity security of the
Company's is registered pursuant to SS 12 of the Exchange Act. In no case shall
Fair Market Value be less than the par value per share of the Common Stock. Fair
market value shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
2.11 "Option" shall mean an Option, including a Reload Option, to
purchase shares granted pursuant to the Plan.
2.12 "Option Agreement" shall mean the written agreement described in
Article VI herein.
2.13 "Permanent Disability" shall mean the condition of an Eligible
Director who is unable to participate as a member of the Board by reason of any
medically determined physical or mental impairment which can be expected to
result in death or which can be expected to last for a continuous period of not
less than twelve (12) months.
2.14 "Purchase Price" shall be the Exercise Price multiplied by the
number of whole shares of Common Stock with respect to which an Option may be
exercised.
2.15 "Plan" shall mean this Medical Industries of America, Inc.
Directors? Stock Option Plan.
2.16 "Reload Option" means an option granted to an Eligible Director
or Executive Officer equal to the number of shares of Common Stock delivered by
the Eligible Director or Executive Officer to pay for the exercise of an Option
as more fully described in Article XII - RELOAD OPTIONS.
ARTICLE III
ADMINISTRATION
3.1 GENERAL. This Plan shall be administered by the Board in
accordance with the express provisions of this Plan, subject to the restrictions
contained in SS 16 of the Exchange Act.
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<PAGE>
3.2 POWERS OF THE BOARD. The Board shall have full and complete
authority to adopt such rules and regulations and to make all such other
determinations not inconsistent with the Plan or SS 16 of the Exchange Act (once
the Common Stock is registered pursuant to SS 12 of the Exchange Act), as may be
necessary for the administration of the Plan.
3.3 SECTION 16 COMPLIANCE. It is the intention of the Company that the
Plan, and the administration of the Plan (once the Company's Common Stock is
registered pursuant to SS 12 of the Exchange Act) comply in all respects with
SS 16 of the Exchange Act and the rules and regulations promulgated thereunder.
If any Plan provision, or any aspect of the administration of the Plan, is found
not to be in compliance with SS 16 of the Exchange Act, the provision or
administration shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3 promulgated
under the Exchange Act.
ARTICLE IV
SHARES SUBJECT TO PLAN
Subject to adjustment in accordance with Articles VIII and XI an
aggregate of 4,000,000 shares of Common Stock are reserved for issuance under
the Plan. Shares of Common Stock reserved under this Plan may be either
authorized, but unissued shares of Common Stock or reacquired shares of Common
Stock. If an Option, or any portion thereof, shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of Common
Stock covered by such Option shall be available for future grants of Options.
ARTICLE V
TERMS OF OPTION
Each Option shall be evidenced by a written Option Agreement executed
by the Company and the Eligible Director or Eligible Executive Officer which
shall specify the grant date, the number of shares of Common Stock subject to
the Option, the Exercise Price and shall also include or incorporate by
reference the substance of all of the following provisions and such other
provisions consistent with this Plan as the Board may determine:
5.1 TERM. The term of the Option shall be five (5) years from the
grant date of each Option, subject to earlier termination in accordance with
Articles V and IX of the Plan.
5.2 RESTRICTION ON EXERCISE. No Option shall be exercisable until six
(6) months after the grant date, except in the case of the Eligible Director's
or Eligible Executive Officer's death or permanent disability, upon which
events the Option will become immediately exercisable. Thereafter, an Option, or
any portion thereof, may be exercised until the earlier of the expiration of the
option's term or termination of the Option in accordance with this Article V.
5.3 EXERCISE PRICE. The Exercise Price for each share of Common Stock
subject to an Option shall be the Fair Market Value of the Common Stock as
determined in Section 2.10 herein.
5.4 MANNER OF EXERCISE. An Option shall be exercised in accordance
with its terms, by delivery of a written notice of exercise to the Company and
payment of the full Purchase Price of the shares of Common Stock being
purchased. An Eligible Director or Executive Officer may exercise an Option with
respect to all or less than all of the shares of Common Stock for which the
Option may then be exercised, but an Eligible Director or Executive Officer must
exercise the Option in full shares of Common Stock.
5.5 PAYMENT. The Purchase Price pursuant to an Option or portion
thereof, may be paid:
(a) in United States dollars, in cash or by check, bank draft or
money order payable to the Company; or
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<PAGE>
(b) by delivery of shares of Common Stock owned by an Eligible
Director or Executive Officer which has an aggregate Fair Market Value on the
date of exercise equal to the Purchase Price, subject to the provisions of
SS 16(b) of the Exchange Act; or
(c) to the extent authorized by the Board, or if specified in
the Option being exercised, by a promissory note from optionee to the Company,
upon such terms and conditions determined by the Board and secured by the Common
Stock issuable upon exercise of the Option; or
(d) by any combination of the above methods of payment.
5.6 TRANSFERABILITY. No Option shall be transferable otherwise than by
will or the laws of descent and distribution, and an Option shall be exercisable
during the Eligible Director's or Eligible Executive Officer's lifetime only by
the Eligible Director or Executive Officer, his guardian or legal
representative.
5.7 TERMINATION OF MEMBERSHIP ON THE BOARD. If an Eligible Director's
or Eligible Executive Officer's employment or membership on the Board terminates
for any reason, an Option held on the date of termination may be exercised in
whole or in part at any time within one (1) year after the date of such
termination (but in no event after the actual expiration of the term of the
Option) and shall thereafter terminate.
ARTICLE VI
GOVERNMENT AND OTHER REGULATIONS
6.1 DELIVERY OF COMMON STOCK. The obligation of the Company to issue
or transfer and deliver shares of Common Stock for exercised Options under the
Plan shall be subject to all applicable laws, regulations, rules, orders and
approvals which shall then be in effect.
6.2 HOLDING OF STOCK AFTER EXERCISE OF OPTION. The Option Agreement
shall provide that the Eligible Director or Executive Officer, by accepting such
option, represents and agrees, for the Eligible Director or Executive Officer
and his permitted transferees, that none of the shares of Common Stock purchased
upon exercise of the Option shall be acquired with a view to any sale, transfer
or distribution of the shares in violation of the Securities Act of 1933, as
amended (the "Act") and the person exercising an Option shall furnish evidence
satisfactory to that Company to that effect, including an indemnification of the
Company in the event of any violation of the Act by such person.
ARTICLE VII
WITHHOLDING TAX
The Company may, in its discretion, require an Eligible Director or
Executive Officer to pay to the Company, at the time of exercise of an Option an
amount that the Company deems necessary to satisfy its obligations, if any, to
withhold federal, state or local income or other taxes (which for purposes of
this Article VII includes an Eligible Director's or Eligible Executive Officer's
FICA obligation) incurred by reason of such exercise. When the exercise of an
Option does not give rise to the obligation to withhold federal income taxes on
the date of exercise, the Company may, in its discretion, require an Eligible
Director or Executive Officer to place shares of Common Stock received upon
exercise of the Option in escrow for the benefit of the Company until such time
as federal income tax withholding is required on amounts included in the
Eligible Director's or Executive Officer's gross income as a result of the
exercise of an Option. At such time, the Company, in its discretion, may require
an Eligible Director or Executive Officer to pay to the Company an amount that
the Company deems necessary to satisfy its obligation to withhold federal, state
or local taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow upon such payment by an
Eligible Director or Executive Officer.
A-4
<PAGE>
ARTICLE VIII
ADJUSTMENTS
8.1 PROPORTIONATE ADJUSTMENTS. If the outstanding shares of Common
Stock are increased, decreased, changed into or exchanged into a different
number or kind of shares of Common Stock or securities of the Company through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, an appropriate and
proportionate adjustment shall be made to the maximum number and kind of shares
of Common Stock as to which Options may be granted under this Plan. A
corresponding adjustment changing the number or kind of shares of Common Stock
allocated to unexercised Options or portions thereof, which shall have been
granted prior to any such change, shall likewise be made. Any such adjustment in
the outstanding Options shall be made without change in the Purchase Price
applicable to the unexercised portion of the Option with a corresponding
adjustment in the Exercise Price of the shares of Common Stock covered by the
Option. Notwithstanding the foregoing, there shall be no adjustment for the
issuance of shares of Common Stock on conversion of notes, preferred stock or
exercise of warrants or shares of Common Stock issued by the Board for such
consideration as the Board deems appropriate.
8.2 DISSOLUTION OR LIQUIDATION. Upon the dissolution or liquidation of
the Company, or upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the property or
more than 80% of the then outstanding shares of Common Stock of the Company to
another corporation, the Company shall give to each Eligible Director or
Executive Officer at the time of adoption of the plan for liquidation,
dissolution, merger or sale either (1) a reasonable time thereafter within which
to exercise the Option prior to the effective date of such liquidation or
dissolution, merger or sale, or (2) the right to exercise the Option as to an
equivalent number of shares of Common Stock of the corporation succeeding the
Company or acquiring its business by reason of such liquidation, dissolution,
merger, consolidation or reorganization.
ARTICLE IX
AMENDMENT OR TERMINATION OF PLAN
9.1 AMENDMENTS. The Board may at any time amend or revise the terms of
the Plan, provided no such amendment or revision shall, unless appropriate
stockholder approval of such amendment or revision is obtained:
(a) materially increase the maximum number of shares of Common
Stock which may be sold pursuant to Options granted under the Plan;
(b) materially increase the benefits accruing to participants
under the Plan;
(c) materially modify the requirements as to eligibility for
participants in the Plan.
9.2 TERMINATION. The Board may suspend or terminate this Plan at any
time. This Plan, unless sooner terminated, shall terminate on the tenth (10th)
anniversary of its adoption by the Board. No Option may be granted under this
Plan, while this Plan is suspended or after it is terminated.
9.3 HOLDER OF CONSENT. No amendment, suspension or termination of the
Plan shall, without the consent of the holder of Options, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 PRIVILEGE OF STOCK OWNERSHIP. No Eligible Director or Executive
Officer entitled to exercise any Option granted under the Plan shall have any of
the rights or privileges of a stockholder of the Company with respect to any
shares of Common Stock issuable upon exercise of an Option until certificates
representing the shares of Common Stock shall have been issued and delivered.
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<PAGE>
10.2 PLAN EXPENSES. Any expenses incurred in the administration
of the Plan shall be borne by the Company.
10.3 USE OF PROCEEDS. Payments received from an Eligible Director or
Executive Officer upon the exercise of Options shall be used for general
corporate purposes of the Company.
10.4 GOVERNING LAW. The Plan has been adopted under the laws of the
State of Florida. The Plan and all Options which may be granted hereunder and
all matters related thereto, shall be governed by and construed and enforceable
in accordance with the laws of the State of Florida as it then exists.
10.5 GENDER AND NUMBER. Except as otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.
10.6 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
ARTICLE XI
STOCKHOLDER APPROVAL AND EFFECTIVE DATE
The Plan shall be submitted for approval by the holders of the
outstanding voting stock of the Company within twelve (12) months from the date
the Plan is adopted by the Board; provided, however, that if such vote was not
solicited substantially in accordance with the rules and regulations, if any, in
effect under SS 14(a) of the Exchange Act, at the time of such vote, the Company
will furnish in writing to the holders of record of the securities entitled to
vote for the Plan, substantially the same information concerning the Plan which
would be required by the rules and regulations in effect under SS 14(a) of the
Exchange Act, as if proxies to be voted with respect to the approval or
disapproval of the Plan were then being solicited, on or prior to the date of
the first annual meeting of security holders held subsequent to the later of (i)
the first registration of an equity security under SS 12 of the Exchange Act; or
(ii) the acquisition of an equity security for which an exemption is claimed.
The Plan shall be deemed approved by the holders of the outstanding voting stock
of the Company by the affirmative vote of the holders of a majority of the
voting shares of the Company represented and voting at a duly held meeting at
which a quorum is present. Any Options granted under the Plan prior to obtaining
such stockholder approval shall be granted under the conditions that the Options
so granted (i) shall not be exercisable prior to such approval, and (ii) shall
become null and void if such stockholder approval is not obtained.
ARTICLE XII
RELOAD OPTIONS
12.1 RELOAD OPTION. Whenever the optionee holding any Option
outstanding under the Plan (including Reload Options granted under this Article
XII) exercises the Option and makes payment of the Exercise Price pursuant to
Section 6.5(b) by tendering Common Stock previously held by the optionee, then
the Company shall grant at the sole discretion of the compensation committee of
the Board, a Reload Option for the number of shares of Common Stock that is
equal to the number of shares tendered by the optionee on payment of the
Exercise Price of the Option being exercised.
12.2 RELOAD OPTION EXERCISE PRICE. The Reload Option Exercise Price
per share shall be an amount equal to the Fair Market Value per share of the
Company's Common Stock determined as of the date of receipt by the Company of
the notice by optionee to exercise the Option.
12.3 TERM OF RELOAD OPTION. The exercise period of the Reload Option
shall expire, and the Reload Option shall no longer be exercisable, on the later
of (i) expiration date of the original surrendered Option, or (ii) one year from
the date of grant.
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12.4 RESTRICTION ON EXERCISE. Any Reload Option granted under this
Article XII shall vest immediately, but shall not be exercisable until the end
of six months after the date of its issuance, except in the case of the death or
permanent disability of the optionee, upon which event the Reload Option will
become immediately exercisable.
12.5 OTHER TERMS OF RELOAD OPTIONS. All other terms of the Reload
Options granted hereunder shall be identical to the terms and conditions of the
original Option, the exercise of which gives rise to the grant of the Reload
Option.
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EXHIBIT B
MEDICAL INDUSTRIES OF AMERICA, INC.
1999 INCENTIVE STOCK OPTION PLAN
1. ADOPTION AND PURPOSE
Medical Industries of America, Inc., a Florida corporation (the "Company"),
hereby adopts this Medical Industries of America, Inc. 1999 Incentive Stock
Option Plan, as hereinafter set forth (the "Plan"), subject to stockholder
approval. The purpose of the Plan is to foster and promote the financial
success of the Company and materially increase stockholder value by (a)
strengthening the Company's capability to develop and maintain an
outstanding management team, (b) motivating superior performance by the
management team, (c) encouraging and providing for obtaining an ownership
interest in the Company, (d) attracting and retaining outstanding executive
talent by providing incentive compensation opportunities competitive with
other companies, and (e) enabling key employees to participate in the
long-term growth and financial success of the Company. 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").
Any proceeds of cash or property received by the Company for the sale of
Medical Industries of America, Inc. common stock, $.0025 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 or the Board of
Directors. If the Plan is administered by the Compensation Committee,
it shall meet the plan administration requirements described under
Rule 16b-3(c)(2) promulgated under the Securities Exchange Act of 1934
[see 17 CFR Section 240.16b-3(c)(2)] or any similar rule which may
subsequently be in effect. Any vacancy on the Compensation Committee
shall be filled by the Board.
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<PAGE>
2.2 Subject to the express provisions of the Plan, the Compensation
Committee shall have the sole and complete authority to (a) determine
key employees to whom awards hereunder shall be granted, (b) make
awards in such form and amounts as it shall determine, (c) impose such
limitations and conditions upon such awards as it shall deem
appropriate, (d) interpret the Plan, prescribe, amend and rescind
rules and regulations relating to it, (e) determine the terms and
provisions of the respective participants' agreements (which need not
be identical), and (f) 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.
2.4 As used in this Section and wherever used in this Plan, the term
"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.
3. ELIGIBILITY
The Compensation Committee may grant options to purchase Common Stock under
this Plan (referred to as "Options") only to key employees of the Company or
its Subsidiaries. The Compensation Committee shall determine, within the
provisions of the Plan, those key employees 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 the
employee, 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. An employee of the Company who is granted Options
pursuant to this Plan shall be referred to as a "Participant."
4. GRANTING OF OPTIONS
4.1 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 (i.e. Option price) under 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.
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4.2 NUMBER OF OPTIONS. As soon as practicable after the date an employee is
determined to be eligible under Section 3 hereof, the Compensation
Committee may, in its discretion, grant to such eligible employee a
number of Options determined by the Compensation Committee.
5. COMMON STOCK
Each Option granted under the Plan shall be convertible into one (1) share(s) of
Common Stock, unless adjusted in accordance with the provisions of Section 7
hereof. Options may be granted for a number of shares not to exceed, in the
aggregate, 2,000,000 shares of Common Stock, subject to adjustment pursuant to
Section 7 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
theretofore subject to such Option shall again become available for new Options
to be granted under the Plan to any eligible employee (including the holder of
such former Option) at an Option price determined in accordance with Section 6.2
hereof, which price may then be greater or less than the Option 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.
6. REQUIRED TERMS AND CONDITIONS OF OPTIONS
6.1 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" (intended
to qualify as such under the provisions of Section 422 of the Code) to
purchase for cash or shares the number of shares of Common Stock
allotted by the Compensation Committee. 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. Except as otherwise provided in
Section 6.4, Options shall not be granted to any owner of 10% or more of
the total combined voting power of the Company and its Subsidiaries.
6.2 OPTION PRICE. Except as otherwise provided in Section 6.4, the option
price per share of Common Stock deliverable upon the exercise of an
Option shall be 100% of the "Fair Market Value" of a share of Common
Stock on the date the Option is
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granted. For purposes of this Plan, Fair Market Value shall mean as of
any date and in respect of any share of Common Stock, the closing price
on such date or on the next business day, if such date is not a business
day, of a share of Common Stock last reported on the principal national
securities exchange on which the Common Stock is listed or admitted to
trade, provided that, if shares of Common Stock shall not have been
traded on such securities exchange for more than 10 days immediately
preceding such date or if deemed appropriate by the Compensation
Committee for any other reason, the Fair Market Value of shares of
Common Stock shall be as determined by the Compensation Committee in
such other manner as it may deem appropriate. In no event shall the Fair
Market Value of any share of Common Stock be less than its par value.
6.3 TERM AND EXERCISE. Each Option shall be fully exercisable six months
from the date of its grant except in the event of the Participant's
death or "disability" (within the meaning of Section 22(e)(3) of the
Code) or unless a shorter period is provided by the Compensation
Committee or another Section of this Plan. Except as otherwise provided
in Section 6.4, each Option may be exercised during a period of 10 years
from the date of grant thereof.
6.4 TEN PERCENT SHAREHOLDER. Notwithstanding anything to the contrary in
this Plan, Options may be granted to any owner of 10% or more of the
total combined voting power of the Company and its Subsidiaries (i) if
the Option 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 Option is granted.
6.5 MAXIMUM AMOUNT OF OPTION GRANT. The aggregate Fair Market Value
(determined on the date the Option is granted) of Common Stock subject
to an Option granted to a Participant by the Compensation Committee in
any calendar year shall not exceed $100,000.
6.6 METHOD OF EXERCISE. Options may be exercised by giving written notice to
the President of the Company, stating the number of shares of Common
Stock with respect to which the Option is being exercised and tendering
payment thereof. In lieu of part or all of a cash payment, the
Compensation Committee may permit payment in Common Stock, valued at
fair market value (as determined by the Compensation Committee) on the
date of exercise. Payment for Common Stock, whether in cash or in other
shares of Common Stock, shall be made in full at the time that an
Option, or any part thereof, is exercised.
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7. ADJUSTMENTS
7.1 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 Option 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.
7.2 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 canceled 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.
7.3 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.
7.4 On the basis of information known to the Company, the Compensation
Committee shall make all determinations under this Section 7, 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.
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8. OPTION AGREEMENTS
Each award of Options shall be evidenced by a written agreement, executed by
the employee 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.
9. LEGAL AND OTHER REQUIREMENTS
The obligation of the Company to sell and deliver Common Stock under Options
shall be subject to all applicable laws, regulations, rules and approvals,
including, but not by way of limitation, the effectiveness of a registration
statement under the Securities Act of 1933, if deemed necessary or
appropriate by the Board, of the Common Stock reserved for issuance upon
exercise of Options. In the case of officers or other persons subject to
Section 16(b) of the Securities Exchange Act of 1934, 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. 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 7 hereof shall be made for
dividends or other rights for which the record date is prior to the date
such stock certificate is delivered.
10. NON-TRANSFERABILITY
During the lifetime of an optionee, 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 divorce decrees. The
granting of an Option shall impose no obligation upon the optionee to
exercise such Option or right.
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11. NO CONTRACT OF EMPLOYMENT
Neither the adoption of this Plan nor the grant of any Option shall be
deemed to obligate the Company or any subsidiary of the Company to continue
the employment of any employee for any particular period, nor shall the
granting of an Option constitute a request or consent to postpone the
retirement date of any employee.
12. 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.
13. 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
grantee 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.
14. LEAVES OF ABSENCE
The Compensation Committee shall be entitled to make such rules, regulations
and determinations as it deems appropriate under the Plan in respect of any
leave of absence taken by the recipient of any Option. Without limiting the
generality of the foregoing, the Compensation Committee shall be entitled to
determine (i) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii) the
impact, if any, of any such leave of absence on Options under the Plan
theretofore made to any recipient who takes such leave of absence.
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15. NEWLY ELIGIBLE EMPLOYEES
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 employee who becomes eligible to
participate in the Plan.
16. RELOAD OPTION
16.1 RELOAD OPTION. Whenever the optionee holding any Option outstanding
under the Plan (including Reload Options granted under this Section 16)
exercises the Option and makes payment of the Exercise Price pursuant
to Section 6.2 by tendering Common Stock previously held by the
optionee, then the Company shall grant, at the sole discretion of the
Compensation Committee, a Reload Option for the number of shares of
Common Stock that is equal to the number of shares tendered by the
optionee on payment of the Exercise Price of the Option being
exercised.
16.2 RELOAD OPTION EXERCISE PRICE. The Reload Option Exercise Price per
share shall be an amount equal to the Fair Market Value per share of
the Company's Common Stock determined as of the date of receipt by the
Company of the notice by optionee to exercise the Option.
16.3 TERM OF RELOAD OPTION. The exercise period of the Reload Option shall
expire, and the Reload Option shall no longer be exercisable, on the
later of (i) expiration date of the original surrendered Option, or
(ii) one year from the date of grant.
16.4 RESTRICTION ON EXERCISE. Any Reload Option granted under this Section
16 shall vest immediately, but shall not be exercisable until the end
of six months after the date of its issuance, except in the case of the
death or permanent disability of the optionee, upon which event the
Reload Option will become immediately exercisable.
16.5 OTHER TERMS OF RELOAD OPTIONS. All other terms of the Reload Options
granted hereunder shall be identical to the terms and conditions of the
original Option, the exercise of which gives rise to the grant of the
Reload Option.
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17. TERMINATION AND AMENDMENT OF PLAN
The Board, acting by a majority of its members (exclusive of Board members
who are not eligible to be appointed to the Compensation Committee as
described in Section 2.1) without further action on the part of the
stockholders, may from time to time alter, amend or suspend the Plan or any
Option granted hereunder or may at any time terminate the Plan; provided,
however, that the Board may not:
(a) change the total number of shares of Common Stock available for Options
under the Plan (except as provided in Section 7 hereof);
(b) extend the duration of the Option;
(c) increase the maximum term of Options;
(d) decrease the Option price or otherwise materially increase the benefits
accruing to Participants under the Plan; or
(e) materially modify the eligibility requirements of the Plan;
and provided further that no such action shall materially and adversely
affect any outstanding Options without the consent of the respective
optionees.
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 Plan shall become effective upon adoption by the Board.
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EXHIBIT C
MEDICAL INDUSTRIES OF AMERICA, INC.
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of Medical Industries of America, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the
Internal Revenue Code of 1986, as amended. The provisions of the Plan
shall, accordingly, be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the Code.
2. DEFINITIONS.
1) "BOARD" shall mean the Board of Directors of the Company.
2) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
3) "COMMON STOCK" shall mean the Common Stock of the Company.
4) "COMPANY" shall mean Medical Industries of America, Inc., a Florida
corporation.
5) "COMPENSATION" shall mean all regular straight time gross earnings
and commissions, and shall not include payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and
other compensation.
6) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the
case of a leave of absence agreed to in writing by the Company,
provided that such leave is for a period of not more than 90 days or
re-employment upon the expiration of such leave is guaranteed by
contract or statute.
7) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
8) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
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9) "EMPLOYEE" shall mean any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and
more than five (5) months in a calendar year by the Company or one
of its Designated Subsidiaries.
10) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
amended.
11) "EXERCISE DATE" shall mean the last day of each offering period of
the Plan.
12) "PURCHASE DATE" shall mean the last day of each Purchase Period of
the Plan.
13) "OFFERING DATE" shall mean the first business day of each Offering
Period of the Plan.
14) "OFFERING PERIOD" shall mean an initial period of five (5) months
commencing July 1, 1999, and thereafter a period of six (6) months
commencing on January 1 and July 1 of each year except as otherwise
indicated by the Company.
15) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
16) "PLAN" shall mean this Employee Stock Purchase Plan.
17) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary
3. ELIGIBILITY.
1) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering
Period under the Plan, subject to the requirements of Section 5(a)
and the limitations imposed by Section 423(b) of the Code.
2) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i), if,
immediately after the grant, such Employee (or any other person
whose stock would be attributed to such an Employee pursuant to
Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of
the total combined working power or value of all classes of stock of
the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all
employee stock purchase plans (described in Section 423 of the Code)
of the Company and its Subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value
of such stock (determined at the
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time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. OFFERING PERIODS.
1) The Plan shall be implemented by a series of Offering Periods of six
(6) months duration, with new Offering Periods commencing on or
about January 1 and June 1 of each year (or at such other time or
times as may be determined by the Board of Directors). The Plan
shall continue until terminated on accordance with Section 19
hereof. The Board of directors of the Company shall have the power
to change the duration and/or the frequency of Offering Period with
respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the
scheduled beginning of the first Offering Period to be affected.
Eligible employees may not participate in more than one Offering at
a time.
5. PARTICIPATION.
1) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the
Company and filing it with the Company's payroll office prior to the
applicable Offering Date, unless a later time for filing the
subscription agreement is set by the Board for all eligible
Employees with respect to a given offering. The subscription
agreement shall set forth the whole number percentage of the
participant's Compensation (which shall be not less than 1% and not
more than 15%) to be paid as Contributions pursuant to the Plan.
2) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid prior to the
Exercise Date of the Offering Period to which the subscription
agreement is applicable, that unless sooner terminated by the
participant as provided in Section 10, provided however, that any
payroll paid within five (5) business days preceding the Exercise
Date will be included in the subsequent Offering Period.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
1) The participants shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one
percent (1%) and not more than fifteen percent (15%) (in whole
number increments) of such participant's Compensation on each such
payday. All payroll deductions made to a participant shall be
credited to his or her account under the Plan. A participant may not
make any additional payments into such account.
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2) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the
Offering Period, may decrease the rate of his or her Contributions
during the Offering Period by completing and filing with the Company
a new subscription agreement. The change in rate shall be effective
as of the beginning of the next calendar month following the date of
filing of the new subscription agreement, if the agreement is filed
at least ten (10) business days prior to such care and, if not, as
of the beginning of the next succeeding calendar month.
7. GRANT OF OPTION.
1) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to
purchase on the Exercise Date a number of shares of the Company's
Common Stock determined by dividing such Employee's Contribution
accumulated prior to such Purchase Date and retained in the
participant's account as of the Purchase Date by the lower of (i)
eighty-five (85%) of the fair market value of a share of the
Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of the Company's Common Stock
on the Purchase Date; provided however, that the maximum number of
shares an Employee may purchase during each Offering Period shall be
5,000 shares, and provided further that such purchase shall be
subject to the limitations set forth in Section 3(b) and 13. The
fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
2) The option price per share of the shares offered in a given Offering
Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or
(ii) 85% of the fair market value of a share of the Common Stock of
the Company on the Exercise Date. The fair market value of the
Company's Common Stock on a given date shall be determined by the
Board in its discretion based on the closing price of the Common
Stock for such date (or, in the event that the common Stock is not
traded on such date, on the immediately proceeding trading date on
which there was a closing price), as reported by the National
Association of Securities Dealers Automated Quotation (Nasdaq)
National Market or, if such price is not reported, the mean of the
bid and asked prices per share of the Common Stock as reported by
Nasdaq or, in the event the Common Stock is listed on a stock
exchange, the fair market value per share shall be the closing price
or such exchange on such date (or, in the event that the Common
Stock is not traded on such date, on the immediately preceding
trading date), as reported in the Wall Street Journal.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date of the Offering Period,
and the maximum number of full shares subject to the option
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will be purchased at the applicable option price with the accumulated
Contributions in his or her account. The shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to
the participant on the Exercise Date. During his or her lifetime, a
participant's option to purchase shares hereunder is exercisable only
by him or her.
9. DELIVERY. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, including but not limited to, direct deposit
into a book entry account or brokerage account, the shares purchased upon
exercise of his or her option. Any cash remaining to the credit of a
participant's account under the Plan after a purchase by him or her of
shares on the Exercise Date, other than amounts representing fractional
shares, will be returned to him or her as soon as practicable. Amounts
representing fractional shares will be carried forward for use in
subsequent purchases.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
1) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any
time prior to two (2) business days prior to the Exercise Date of
the Offering Period by completing a Company approved notification.
All of the participant's Contributions credited to his or her
account will be paid to him or her as soon as practicable after
receipt of his or her notice of withdrawal and his or her option for
the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the
Offering Period.
2) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of an Offering Period for any
reason, including retirement or death, the Contributions credited to
his or her account will be returned to him or her or in the case of
his or her death, to the person or persons entitled thereto under
Section 14, and his or her option will be automatically terminated.
3) In the event an Employee fails to remain in Continuous Status as an
Employee of the Company for at least twenty (20) hours per week
during the Offering Period in which the employee is participant, he
or she will be deemed to have elected to withdraw from the Plan and
the Contributions credited to his or her account will be returned to
him or her and his or her option terminated.
4) A participant's withdrawal from an offering will not have any effect
upon his or her eligibility to participate in a succeeding offering
or in any similar plan which may hereafter be adopted by the
Company.
11. INTEREST. No interest shall accrue on the Contributions of a participant
in the Plan.
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12. STOCK.
1) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 2,000,000
shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18. If the total number of shares
which would otherwise be subject to options granted pursuant to
Section 7(a) on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of
all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the
shares remaining available for option grant in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each
Employee affected thereby and shall similarly reduce the rate of
Contributions, if necessary.
2) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
3) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the "Street Name" of
a Company approved broker.
13. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt,
amend and rescind any rules deemed desirable and appropriate for the
administration of the Plan and not inconsistent with the Plan, to construe
and interpret the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The composition of the
committed shall be in accordance with the requirements to obtain or retain
any available exemption from the operation of Section 16(b) of the
Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
14. DESIGNATION OF BENEFICIARY.
a) A participant may file a written designation of a beneficiary who is
to receive shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent
to the end of an Offering Period but prior to delivery to him or her
of such shares and cash. In addition a participant may file a
written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such
participant's death prior to the Exercise Date of an Offering
Period. If a participant is married and the designated beneficiary
is not the spouse, spousal consent shall be required for such
designation to be effective.
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2) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. Int
he event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents of relatives of the participant, or if no
spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. TRANSFERABILITY. Neither Contributions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 13) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as election to
withdraw funds in accordance with Section 10.
16. USE OF FUNDS. All Contributions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
1) ADJUSTMENTS. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for
issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the price per share of
Common Stock covered by each option under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration."
Such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except
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as expressly provided herein, no issue by the Company of shares of
stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number of price of shares of
Common Stock subject to an option.
2) CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. In the event of a proposed
sale of all or substantially all of the assets of the Company, or
the merger of Company with or into another corporation, each option
under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary
of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board
shortens the Offering Period then in progress in lieu of assumption
or substitution in the event of the merger of sale of assets, the
Board shall notify each participant in writing, at least ten (10)
days prior to the New Exercise Date, that the Exercise Date for his
or her option has been changed to the New Exercise Date and that his
or her option will be exercised automatically on the New Exercise
Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be
assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock
subject to the option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities
or property) received in the sale of assets or merger by holders of
Common stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice
of consideration, the type of consideration chosen by the holders of
a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets
or merger was not solely common stock of the successor corporation
or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock and the sale
of assets of merger.
19. AMENDMENT OR TERMINATION.
1) The Board of Directors of the Company may at any time terminate or
amend the Plan. Except as provided in Section 19, no such
termination may affect options previously granted, nor may an
amendment make any change in any option theretofore granted which
adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Exchange Act,
or under Section 423
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of the Code (or any successor rule or provision or any applicable
law or regulation), the Company shall obtain shareholder approval in
such a manner and to such a degree as so required.
2) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely
affected, the Board (or its committee) shall be entitled to change
the Offering Periods and purchase periods, limit the frequency
and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld
in currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust
for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for
each participant properly correspond with amounts withheld form the
participant's compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location or by the person, designated by the Company for the receipt
thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES.
1) Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities
Act 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to
such compliance.
2) As a consideration to the exercise of an option, the Company may
require the person exercising such option to represent and warrant
at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the
Company, such a representation is required by any of the
aforementioned applicable provisions of law.
3) Each participant agrees, by entering the Plan, to promptly give the
Company notice of any disposition of shares purchased under the Plan
where such disposition occurs
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within two (2) years after the date of grant of the option pursuant
to which such shares were purchased.
22. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 20.
23. ADDITIONAL RESTRICTION OF RULE 16B-3. The terms and conditions of options
grated hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions
of Rule 16b-3. This Plan shall be deemed to contain, and such options
shall contain, and the shares issued upon exercise thereof shall be
subject to, such additional conditions and restrictions as may be required
by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
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PROXY
PRELIMINARY PROXY
MEDICAL INDUSTRIES OF AMERICA, INC.
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MEDICAL
INDUSTRIES OF AMERICA, INC. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
IN ACCORDANCE WITH THE CHOICES SPECIFIED BELOW.
The undersigned stockholder of Medical Industries of America, Inc. (the
"Company") hereby appoints E. Nicholas Davis, III and Linda Moore, 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 at the Annual Meeting of Stockholders of the Company
to be held at the Holiday Inn, 1601 N. Congress Avenue, Boynton Beach, Florida,
on August 26, 1999 at 2:00 p.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 eight Directors.
For Withhold
Michael F. Morrell [ ] [ ]
Paul C. Pershes [ ] [ ]
Theodore J. Orlando [ ] [ ]
Glen Barber [ ] [ ]
Terry Lazar [ ] [ ]
Dana J. Pusateri [ ] [ ]
Louis R. Capece [ ] [ ]
John E. Haines(i) [ ] [ ]
(i) John E. Haines' appointment is subject to the approval of the
acquisition of CyberCare, Inc. as more fully disclosed herein as
Proposal 2.
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For Against Abstain
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2. To consider and act upon a proposal to approve the issuance of additional
common shares of the Company for the purpose of acquiring all the capital
stock of CyberCare, Inc. under the terms of that certain Stock Exchange
Agreement by and between the Company and CyberCare, Inc. dated July 5,
1999. [ ] [ ] [ ]
3. To consider and act upon a proposal to approve an amendment to the
Company's Articles of Incorporation to change the name of the Company from
Medical Industries of America, Inc. to Cyber-Care, Inc. [ ] [ ] [ ]
4. To consider and act upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the number of authorized
shares of common stock from 100 million to 200 million. [ ] [ ] [ ]
5. To consider and act upon a proposal to approve the Company's proposed 1999
Incentive Stock Option Plan. [ ] [ ] [ ]
6. To consider and act upon a proposal to approve the Company's proposed 1999
Officers and Directors Stock Option Plan. [ ] [ ] [ ]
7. To consider and act upon a proposal to approve the Company's proposed 1999
Employee Stock Purchase Plan. [ ] [ ] [ ]
8. To ratify the appointment of Ernst & Young, LLP. [ ] [ ] [ ]
9. To consider and act upon a proposal to approve an amendment to the Plan of
Merger with Air Response, Inc. whereby the Company will issue a series of
debentures convertible into its common stock in replacement of promissory
notes. [ ] [ ] [ ]
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10. To consider and act upon a proposal to approve the sale of debentures and
warrants to investors pursuant to a private offering with Connecticut
Capital Markets, LLC, the placement agent, where the issuance of the
Company's common shares upon the conversion or exercise of the debentures
or warrants could result in the Company issuing shares of its common stock
to the investors in amounts of 20% or more of the Company's issued and
outstanding common stock as of the Record Date. [ ] [ ] [ ]
11. To consider and act upon a proposal to approve the sale, pursuant to a
three year $25 million equity line funding commitment with Swartz Capital &
Partners, LLC, of the Company's common stock and warrants which, if
converted, could result in the Company issuing shares of its common stock
to the investors in amounts of 20% or more of the Company's issued and
outstanding common stock as of the Record Date. [ ] [ ] [ ]
12. To transact such other business as may properly come before the meeting or
any Adjournment thereof. [ ] [ ] [ ]
</TABLE>
This Proxy will be voted for the choices specified. If no choice is
specified for Items 1 through 11, this Proxy will be voted FOR those items.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement dated _________________, 1999.
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.
