AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2000
REGISTRATION NO. _________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CYBER CARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-0158479
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1903 SOUTH CONGRESS AVENUE, SUITE 400
BOYNTON BEACH, FLORIDA 33426
(561) 737-2227
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL F. MORRELL With copies to: JOEL D. MAYERSOHN, ESQ.
Cyber-Care, Inc. Atlas, Pearlman, Trop &
1903 South Congress Ave., Borkson, P.A.
Suite 400 350 East Las Olas Blvd.,
Boynton Beach, Florida 33426 Suite 1700
(561) 737-2227 Fort Lauderdale, Florida
Telecopier: (561) 364-8291 33301
(954) 763-1200
Telecopier: (954) 766-7800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TITLE OF EACH
CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------
Common Stock,
$.0025 par value
<S> <C> <C> <C> <C>
per share 18,355,763 (1) $19.3125(2) $354,495,673 $93,587
</TABLE>
(1)Pursuant to Rule 416 under the Securities Act, there are also being
registered such additional number of shares as may be issuable as a result of
the anti-dilution provisions of the securities.
(2)Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended (the
"Securities Act") based on the average of the bid and asked closing price of
the Common Stock, par value $.0025 per share (the "Common Stock") as reported
on the NASDAQ SmallCap Market on February 8, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated February __, 2000
PROSPECTUS
CYBER-CARE, INC.
THE RESALE OF 18,355,763 SHARES OF COMMON STOCK
The selling price for the shares of common stock will be determined by market
factors at the time of their resale.
THE OFFERING
This prospectus relates to the resale by selling shareholders of up to
18,355,763 shares of common stock. The selling shareholders may sell the stock
from time to time in the NASDAQ SmallCap market at the prevailing price or in
negotiated transactions. Of the shares offered:
- up to 4,113,087 shares are issuable upon conversion of convertible
debentures;
- 5,812,615 shares of common stock issuable upon exercise of warrants; and
- 8,430,061 shares of common stock previously issued.
We will receive no proceeds from the sale of the shares by the selling
shareholders. However, we will receive proceeds from the exercise of warrants by
certain selling shareholders.
This investment involves a high degree of risk.
Please refer to Risk Factors beginning on Page 4.
The Securities and Exchange Commission and state securities regulators have not
approved these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense and should be
reported immediately to the Securities and Exchange Commission by calling
1-800-SEC-0330.
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TABLE OF CONTENTS
PAGE
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WHERE YOU CAN FIND MORE INFORMATION.................................. 4
RISK FACTORS......................................................... 5
BUSINESS............................................................. 22
BUSINESS OPERATIONS.................................................. 22
SELLING SHAREHOLDERS................................................. 26
AGREEMENTS........................................................... 31
PLAN OF DISTRIBUTION................................................. 32
DESCRIPTION OF SECURITIES............................................ 33
LEGAL MATTERS........................................................ 34
EXPERTS.............................................................. 35
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on public reference rooms. Our SEC
filings are also available to the public from the SEC's website at
"http://www.sec.gov." The SEC also allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and the
information that we file later with the SEC will automatically update and
supersede this information. We will incorporate by reference the documents
listed below and any future filings we make we will make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
(a) Annual Report on Form 10-KSB and 10-KSB/A for the fiscal year ended
December 31, 1998.
(b) Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999.
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(c) Quarterly Report on Form 10-QSB and 10-QSB/A for the quarter ended June
30, 1999.
(d) Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999.
(e) Current Reports on Forms 8-K and 8-K/A dated April 23, 1999, June 1, 1999,
June 21, 1999 and June 25, 1999, July 20, 1999, July 21, 1999.
You may request a copy of these filings, at no cost by writing or
telephoning our chief financial officer at the following address: Cyber-Care,
Inc., 1903 South Congress Avenue, Suite 400, Boynton Beach, Florida 33426 (561)
737-2227.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS PROSPECTUS UNDER "RISK FACTORS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS OR IN OUR FILINGS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, (THE "EXCHANGE ACT"), ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL FUTURE RESULTS
OR TRENDS TO DIFFER MATERIALLY FROM FUTURE RESULTS OR TRENDS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS,
UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED IN THIS PROSPECTUS UNDER "RISK
FACTORS" AND PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.
UPDATED INFORMATION WILL BE PERIODICALLY PROVIDED BY US AS REQUIRED BY THE
SECURITIES ACT AND THE EXCHANGE ACT. WE, HOWEVER, UNDERTAKE NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS
WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information and representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making offers for the securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
RISK FACTORS
The shares of our common stock being offered for resale by the selling
shareholders are highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose the entire sum
invested in the common shares. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our
business and prospects. If any of the following risk actually occurs, our
business, financial condition or operating results could be materially adversely
affected. In such case, the trading price of our stock could decline, and you
may lose all or part of your investment.
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THE HEALTHCARE INDUSTRY IS SUBJECT TO EXTENSIVE LAWS AND REGULATIONS, WHICH
COULD IMPAIR OUR ABILITY TO CONDUCT BUSINESS.
The healthcare industry in general and the medical ancillary service
business in particular is subject to extensive federal, state and local
regulation relating to licensure, conduct of operations, ownership of
facilities, environment rules, pricing and reimbursement policies. Although we
believe that our current operations comply with applicable regulations, we
believe that the healthcare industry will continue to change, requiring us to
modify our agreements and operations from time to time. While we believe that we
will be able to structure our agreements and operations in accordance with
applicable law, there can be no assurance that the subsequent adoption of laws
or interpretations of existing laws will not regulate, restrict or otherwise
adversely affect our business.
WE HAVE A HISTORY OF LOSSES AND A SUBSTANTIAL ACCUMULATED DEFICIT.
To date we have been unable to generate revenue sufficient to be
profitable on a consistent basis. Consequently, the Company has sustained
substantial losses. Net losses for the years ended December 31, 1997 and 1998
were $1,526,152 and $7,380,953, respectively. As of September 30, 1999, we had a
working capital deficit of $5,987,122, as compared to a working capital surplus
of $2,567,719 as of September 30, 1998. Accumulated deficit for the years ended
December 31, 1997 and 1998 were $21,937,441 and $29,318,394, respectively. There
can be no assurance that we will ever achieve the level of revenues needed to be
profitable in the future or, if profitability is achieved, that it will be
sustained.
WE INTEND TO ACQUIRE VARIOUS COMPANIES, WHICH WILL SUBJECT US TO ALL OF THE
RISKS ASSOCIATED WITH A GROWING COMPANY.
We intend to grow through acquiring 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 our operations.
Competition for suitable acquisition candidates is expected to be intense and
many of our competitors will have greater resources than we have. Our failure to
implement our acquisition strategy could have a material adverse effect on our
financial performance and, moreover, the attendant risks of expansion could also
have a material adverse effect on our business.
One of our recent acquisitions, Cybercare, Inc., is in the research and
development stage, had losses in prior years, will continue to have losses in
1999 and will require a significant amount of capital to bring its products and
services to market. There can be no assurance that this company will be
profitable in the future or that it can be successfully integrated into our
operations. Our growth strategy will result in significant additional demands on
our infrastructure, and will place a significant strain on our management,
administrative, operational, financial and technical resources, and increased
demands on our systems and controls.
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Additional capital may be needed and there can be no assurance that we will be
able to obtain sufficient resources to support Cybercare and future acquisitions
and growth. The inability to continue to upgrade the operating and financial
control systems, the emergence of unexpected expansion difficulties or failure
to manage our proposed expansion properly could have a material adverse effect
on our business, financial condition and results of operations. The laws and
regulations applicable to financial arrangements in the healthcare industry are
complex and may be subject to varying interpretations.
WE MAY NOT BE ABLE TO PROTECT OUR PATENTS AND PROPRIETARY TECHNOLOGY, WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Our ability to compete effectively in the medical e-commerce industry will
depend on our success in developing and marketing our products and services
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 technology companies generally involve complex legal and
factual questions. We currently have an exclusive license for one patent issued
and one pending with regard to our e-commerce technology. We intend to file for
additional patents under our license agreement on products for which we feel the
cost of obtaining a patent is economically reasonable in relation to the
expected protection obtained and has economic benefit. There can be no
assurances that any patent that we apply 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. We may incur
substantial costs in defending any patent or license infringement suits or in
asserting any patent or license rights, including those granted by third
parties, the expenditure of which we might not be able to afford.
Although we have and will continue to enter into confidentiality and
invention agreements with our employees and consultants, there can be no
assurance that such agreements will be honored or that we will be able to
adequately protect our rights to our 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 our trade secrets and know-how. In
addition, we 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 we do not obtain required licenses, we could encounter
delays in product development or find that the development, manufacture, or sale
of products requiring such licenses could be foreclosed. Additionally, we may,
from time to time, support or otherwise collaborate in research conducted by
universities and governmental research organizations. There can be no assurance
that we 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 us or such collaborators.
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WE CANNOT GUARANTEE YOU THAT OUR PRODUCTS WILL BE FULLY DEVELOPED OR ACCEPTED BY
THE MARKETS.
Due to the early-stage development of our e-commerce products and
services, no assurance can be given that these products or services can be
developed into commercial products, manufactured on a large scale or be
economical to market. Nor can there be any assurance that these products or
services will achieve or sustain market acceptance. There is, therefore,
substantial risk that our product and service development and commercialization
efforts will not prove to be successful.
There can be no assurance that physicians, medical providers or the
medical community in general will accept and utilize our products and services.
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 and services, the advantage of these products over existing
technology, third-party reimbursements practices and our manufacturing, quality
control, marketing and sales efforts. There can be no assurance that the medical
community and third-party payors will accept our technology or services. Similar
risks will confront any other products and services we develop in the future.
Failure of our products and services to gain market acceptance would have a
material adverse effect on our business, financial condition, and results of
operations.
OUR LIMITED MARKETING AND SALES RESOURCES COULD PREVENT US FROM EFFECTIVELY
MARKETING OUR PRODUCTS AND SERVICES.
We have limited internal marketing and sales resources and personnel. In
order to market any products and services we may develop, we 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 we will be able to establish sales and distribution
capabilities or that we will be successful in gaining market acceptance for any
products or services we may develop. There can be no assurance that we 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 us, or at all, or that our 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 our business, financial condition, cash flows, and
results of operations. To the extent that we arrange with third parties to
market our products or services, the success of such products and services may
depend on the efforts of such third parties. There can be no assurance that any
of our proposed marketing schedules or plans can or will be met. No material
e-commerce product sales have been made to date.
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THE NATURE OF OUR BUSINESS EXPOSES US TO PROFESSIONAL AND PRODUCT LIABILITY
CLAIMS, WHICH COULD MATERIALLY ADVERSELY IMPACT OUR OPERATIONS.
Our business and e-commerce technology exposes us to potential
professional and product liability risks, which are inherent in such businesses
and products. There can be no assurance that we will not be subjected to future
claims and potential liability. While we plan to maintain insurance against
professional and product liability and defense costs, there can be no assurance
that claims against us arising with respect to our products or services will be
successfully defended or that the insurance to be carried by us will be
sufficient to cover liabilities arising from such claims. A successful claim
against us in excess of our insurance coverage could have a material adverse
effect on us. Furthermore, there can be no assurance that we will be able to
continue to obtain or maintain liability insurance on acceptable terms.
THE LOSS OF CERTAIN MEMBERS OF OUR MANAGEMENT TEAM COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS.
We will be dependent to a significant extent on the continued efforts and
abilities of our Chairman, Michael Morrell, and other key employees.
Notwithstanding our ownership of a one million dollar key-man life insurance
policy on each of Mr. Morrell and our President, Mr. Paul C. Pershes, if we were
to lose the services of either individual or other key employees before a
qualified replacement could be obtained, our business could be materially
adversely affected.
THE HEALTHCARE INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY BE ABLE TO EFFECTIVELY
COMPETE.
The healthcare industry in general and the market for medical services and
equipment in particular, are highly competitive. We compete with companies that
are larger in size and have access to considerably greater financial resources
than we have. We compete by providing more personalized care to the patients
they serve, as well as providing patient transportation and pharmaceutical
delivery.
The primary competitors for products produced by Cybercare 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. We have a patented TCP/IP protocols for the transmission of medical
data in a two-way interactive voice and video session between patients and
caregivers.
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In our 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.
Our air ambulance business 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.
In our rehabilitation business, there are numerous competitors larger in
size than we are and which have access to considerably greater financial
resources than we have.
Our pharmaceutical business competes directly in the sale and delivery of
prescription drugs to individuals living in adult living facilities. There are
numerous competitors larger in size which have access to considerably greater
financial resources. We rely primarily on reputation and service to market our
services. Our inability to compete with our competitors could have a material
adverse effect on our business.
WE HAVE NEVER PAID DIVIDENDS AND WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE
FUTURE.
We have never paid dividends on our common stock and we do not presently
intend to pay any dividends in the foreseeable future. We anticipate that any
funds available for payment of dividends will be re-invested to assist us in
furthering our business strategy.
SUBSTANTIALLY ALL OF OUR SHARES ARE ELIGIBLE FOR RESALE, WHICH MAY HAVE A
DEPRESSIVE EFFECT ON THE MARKET AND DECREASE THE CURRENT MARKET PRICE.
There are currently 47,689,539 shares of our common stock outstanding, of
which substantially all can be sold pursuant to Rule 144 or this registration
statement. Under Rule 144, a person who has held restricted securities for a
period of one year may sell a limited number of shares to the public in ordinary
brokerage transactions. Sales under Rule 144 may have a depressive effect on the
market price of our common stock due to the potential increased number of
publicly held securities. The timing and amount of sales of common stock that
are currently eligible to be resold pursuant to Rule 144 or pursuant to this
registration statement could have a depressive effect on the future market price
of our common stock.
THERE IS ONLY A VOLATILE LIMITED MARKET FOR OUR COMMON STOCK.
Recent history relating to the market prices of public companies indicates
that, from time to time, there may be significant volatility in the market price
of our securities because of factors unrelated, as well as related, to our
operating performance. Factors such as announcements of new services to be
provided by us or our competitors, government regulatory action, and market
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conditions for healthcare company stocks in general could have a significant
impact on the future market price of our common stock.
WE ARE SUBJECT TO A SIGNIFICANT NUMBER OF HEALTHCARE INDUSTRY REGULATIONS AND
RELATED REGULATIONS, WHICH, IF WE FAIL TO COMPLY WITH THEM, COULD MATERIALLY
ADVERSELY AFFECT OUR OPERATIONS.
We are subject to substantial potential liability resulting from a variety
of possible causes, including breach of numerous healthcare laws, malpractice
and product liability. While we currently are not a party to any regulatory
action or material litigation, if any actions or lawsuits in the future are
brought against us, such actions or lawsuits may have a materially adverse
effect on us even if such lawsuits are without merit. Our attempt to minimize
our potential liability through adherence to compliance procedures, effective
case supervision and personnel recruitment procedures. We also carry a variety
of insurance policies including policies insuring against certain negligent
acts. There can be no assurance, however, that such insurance policies will
adequately cover our losses resulting from liability, or that we will continue
to qualify for, or be able to afford or obtain, insurance in the future. We
currently maintain general and professional liability insurance for our
operations in the single limit amount and aggregate annual limit amount of
$60,000,000. There is no assurance that any potential claims will or will not
exceed this limit.
Our air ambulance transport business is subject to significant federal and
international government regulations relating to airline safety, capital
requirements, licensing, maintenance, scheduling, and similar aspects of our
operations. Due to the nature of aircraft operations, applicable regulations and
our policy, we incur substantial expenses associated with the maintenance of our
aircraft fleet. Although we believe that our current operations comply with
applicable regulations, there can be no assurance that the subsequent adoption
of laws or interpretations of existing laws will not regulate, restrict or
otherwise adversely affect our business.
Our physical rehabilitation and sleep therapy business are subject to
extensive federal and state regulations related to fee limitations, quality
control requirements and accounting and cost tracking requirements. These
operations are subject to periodic review and inspection of facilities, patient
records and billing policies which, if the applicable regulatory agency finds
deficiencies, may result in reduction or stoppage of reimbursements and/or fines
and penalties. Additionally, these operations are subject to severe restrictions
relative to referrals from and compensation to physicians as provided by the
Federal Stark rules and Florida Self-Referral rules. Violations of any of these
rules can result in penalties and fines and some cases criminal sanctions. See
discussion relative to Federal Anti-Kickback Laws and Florida and Federal
Self-Referral Laws.
Our pharmacy business is also subject to extensive federal and state
regulations, many of which are specific to pharmacies and the sale of
over-the-counter drugs. Regulations in this area
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often require subjective interpretation, and we cannot be certain that our
attempts to comply with these regulations will be deemed sufficient by the
appropriate regulatory agencies. Violations of any of these regulations could
result in various civil and criminal penalties, including suspension or
revocation of our licenses or registrations, seizure of our inventory, or
monetary fines, which could adversely affect our operations.
We are also subject to laws and regulations regarding homeopathic drugs,
and we may face enforcement actions, lawsuits or claims asserting that we have
not complied with these laws and regulations. As we expand our product and
service offerings, more of our products and services will likely be subject to
regulation by the FDA, which regulates drug advertising and promotion. Complying
with FDA regulations is time consuming, burdensome and expensive, and could
delay our introduction of new products and services.
The Health Insurance Portability and Accountability Act of 1996 mandates
the use of standard transactions, standard identifiers, security and other
provisions by the year 2000. Regulations have been proposed to implement these
requirements, and we are designing our applications to comply with the proposed
regulations. However, until these regulations become final, possible changes in
these regulations could cause us to use additional resources and lead to delays
as we revise our operations.
Management of our Internet business believes that Cybercare's products
will be subject to regulation by the Food and Drug Administration. We have filed
for 510-K approval by the Food and Drug Administration. Since we use vital signs
measuring devices which are already approved by the FDA, we believe that
obtaining this approval for our products will be accomplished in 90-120 days
from the time application was made in January 2000. Complying with FDA
regulations is time consuming, burdensome and expensive, and we could be delayed
or prevented from our introducing of our Internet products and services which
would have a material adverse affect on our business.
WE RECENTLY ACQUIRED CYBERCARE AND ARE SUBJECT TO SUBSTANTIAL RISK RELATING TO
THE INTEGRATION OF CYBERCARE'S BUSINESS AND OPERATIONS WITH OURS.
The continuing successful operation of the businesses acquired in the
Cybercare acquisition is largely dependent upon the retention of the key
management personnel of Cybercare. Because the business acquired represents a
diversification of our 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 businesses and upon the realization of the benefits
anticipated from the Cybercare acquisition.
In determining that the Cybercare acquisition is in our best interests,
the Board of Directors has assumed the continuation of the business of
Cybercare, and that such business can be assimilated into our operations with
relative ease. Under the terms of the employment agreement with Mr. Haines, he
will continue his management of the acquired operations in a
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largely autonomous manner and with minimal direct oversight by our 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, our business, which could have an adverse effect on the revenues
and operating results of the combined companies. There is no assurance that we
will be able to retain all key management and other operating personnel or that
we will realize any of the other anticipated benefits of the Cybercare
acquisition.
WE DEPEND ON REIMBURSEMENT FROM THIRD PARTIES FOR A SUBSTANTIAL PORTION OF OUR
REVENUE.
A substantial amount of our services are purchased by patients, managed
care organizations and medical facilities which provide healthcare services to
their patients. Such organizations, facilities or patients typically bill or
seek reimbursement from various third-party payors such as Medicare, Medicaid,
other governmental programs and private insurance carriers for the charges
associated with the provided healthcare services. We believe that our market
success will largely depend upon obtaining favorable contracts and receiving
timely reimbursement for our products and services from such programs and
carriers.
IF WE DO NOT RECEIVE, AND CONTINUE TO RECEIVE, REFERRALS FROM PHYSICIANS AND
OTHER MEDICAL PROVIDERS, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.
A significant portion of our business depends upon, among other things,
the efforts and success of the physicians, medical providers and others who
refer patients and provide services to our businesses and the strength of our
relationships with such physicians and other individuals and entities. Our
business, financial condition and results of operations could be adversely
affected by the failure of these physicians, medical providers and others to
refer patients, maintain the quality of medical care or otherwise adhere to
required professional guidelines.
Our rehabilitation, sleep and pain businesses are dependent upon revenues
received as a result of referrals made by physicians. We market each of the
services in various methods, including customer and physician referrals,
reputation in the community and third parties. We rely upon community
reputation, customer referral, physician and other medical resource referrals.
In addition, we have in place a three-tier service system that enters local
communities and utilizes a screening program and an in-home lab program. We also
rely upon independent brokers, personal contacts and healthcare provider
referrals to approach new customers. We also staff exhibit booths at major
industry-specific conventions to attract hospital groups, insurance companies,
assistance companies and managed care organizations. We rely heavily on
referrals to perform high-tech procedures. Most of the marketing for our mobile
labs is based on our reputation in the medical community. There can be no
guarantee that any physician will choose to refer patients to us. In addition,
physicians affiliated with us may not, under certain
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circumstances, refer patients. In the event that, for any reason, physicians do
not use the ancillary medical service businesses operated by us, such loss of
patients could have a material adverse effect on our business, financial
condition and results of operation. Furthermore, it is possible that third-party
payors may refuse to approve referrals to ancillary medical care facilities
owned by us, but rather require that such referrals be made to other facilities.
Such a requirement could have a material adverse effect on our business,
financial condition and results of the operations. Further, our physical
rehabilitation companies derive a significant portion of their revenue from
Medicare patients. Recent adjustments to Medicare's allowances with respect to
rehabilitation services have significantly limited the amount of revenues that
we may derive from services rendered to Medicare patients. There is no assurance
that future changes to Medicare's reimbursement policy will not have a
significant adverse effect on revenues derived from these sources.
WE MAY BE SUBJECT TO SUBSTANTIAL PENALTIES WHICH COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS IF WE FAIL TO COMPLY WITH THE FEDERAL ANTI-KICKBACK LAWS
WHICH ARE VERY BROAD AND DIFFICULT TO INTERPRET.
Federal law, 42 USC ss.1320a-7b (the "Anti-Kickback Law"), prohibits
anyone from knowingly and willfully offering, paying, soliciting or receiving
any remuneration in return for the referral of patients or other business that
is paid for in whole or in part by a federal healthcare program including the
Medicare and Medicaid programs, or in return for inducing a person to recommend
purchasing, leasing or ordering items or services that are paid for, in whole or
in part, by a federal healthcare program. The Anti-Kickback Law is very broad in
scope and its provisions are not well defined by existing case law or
regulation. Violations of the Anti-Kickback Law may result in substantial civil,
criminal and/or administrative penalties under Federal and/or state law for
individuals or entities. A violation of the Anti-Kickback Law is a felony
punishable by a fine of up to $25,000 or imprisonment for up to five years, or
both. A violation may also result in civil monetary penalties of up to $10,000
for each violation, plus three times the amount claimed, and exclusion from
participation in the federal healthcare programs, including Medicare and
Medicaid, as well as serve as the basis for a claim under the United States
False Claims Act. Exclusion from participation in the federal healthcare
programs, as well as the other sanctions available under federal and state law,
if applied to us, would result in significant loss of reimbursement and would
have a material adverse effect on us.
The United States Department of Health and Human Services Office of the
Inspector General ("OIG"), the federal agency with primary responsibility for
enforcing the Anti-Kickback Law, has issued regulations that define
relationships that are immune from prosecution under the Anti-Kickback Law (the
"Safe Harbor" regulations). Each Safe Harbor includes a series of standards, all
of which must be satisfied for a business or compensation arrangement to benefit
from the protection offered by a specific Safe Harbor.
Two of the Safe Harbors address investment interests held by parties who
are in a position to refer patients or other business (1) in entities whose
securities are publicly traded that
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have more than $50,000,000 in undepreciated net tangible assets, and (2) in
those entities in which (a) no more than 40% of the value of the investment
interests of each class of investors may be held by investors in a position to
make referrals; (b) the terms of an investment interest offered to a passive
investor in a position to make referrals must be no different than those offered
to other passive investors; (c) the terms of an investment interest offer to an
investor in a position to make referrals or generate business must not be based
on the volume or value generated from the investor to the entity; (d) there is
no requirement that a passive investor make referrals or generate business for
the entity as a condition to remaining as an investor; (e) the entity's services
or items must not be marketed to passive investors differently than
non-investors; (f) no more than 40% of the entity's gross revenue may come from
referrals or business generated by investors; (g) the entity must not loan or
guarantee funds to an investor in a position to make referrals if used to obtain
the investment interest; and (h) the amount of return to the investor must be
directly proportional to the amount of capital investment. We believe an
investment interest in us will currently satisfy the standards of this second
Safe Harbor.
Other Safe Harbors address the structuring of employment and personal
services agreements. The employment safe harbor protects amounts paid by an
employer to an employee who has a bona fide employment relationship with such
employer, for the employment in the provision of items or services covered by a
federal healthcare program. In order to be protected under the personal services
safe harbor, independent contractor relationships, like our medical director
agreements, must satisfy certain standards. These standards include the
requirement that the aggregate compensation over the term of the arrangement
must be consistent with the fair market value of the services being rendered and
not determined in a manner that takes into account the volume or value of
patient referrals or other business between the parties that is paid for, in
whole or in part, by a federal healthcare program. We believe that we currently
meet the requirements of both of these Safe Harbors.
Notwithstanding our belief that it currently satisfies the investment
interest, employee and personal services Safe Harbors to the Anti-Kickback Law,
no assurance can be given that a federal agency charged with enforcement and/or
interpreting the Anti-Kickback Law, or a private party, will not successfully
assert a contrary position, or that future federal statutes, regulations,
administrative interpretations and/or judicial decisions would cause an
investor's referral to be prohibited, or result in the imposition of penalties
on us or investors. Even the assertion of a violation could have a material
adverse effect upon the financial condition and results of our operation.
Further, in addition to complying with the Anti-Kickback Law, physician
investors must also comply with both federal and Florida laws governing
physician self-referrals discussed below.
The OIG has adopted a procedure whereby it will provide guidance (an
"Advisory Opinion") as to whether a party's participation in a particular
business or compensation arrangement would be viewed as violating the
Anti-Kickback Law. An Advisory Opinion is available to the participants in a
business or compensation arrangement who are willing to disclose certain
information to the OIG. An Advisory Opinion may be relied on only by the
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requesting party and is binding on the OIG only with respect to that
transaction; provided, if the OIG later determines the requestor failed to
disclose material information, the OIG will no longer be bound. A prospective
investor should be aware that we do not intend to seek an Advisory Opinion
regarding our compliance with the Anti-Kickback Law from the OIG.
WE MAY ALSO BE SUBJECT TO PENALTIES WHICH COULD MATERIALLY ADVERSELY AFFECT OUR
BUSINESS IF WE FAIL TO COMPLY WITH THE FLORIDA AND FEDERAL SELF-REFERRAL LAWS.
Florida's prohibition on self-referrals prohibits healthcare providers
from referring patients, regardless of payment source (not just Medicare and
Medicaid beneficiaries), for the provision of certain designated health services
("Florida Designated Health Services") to an entity in which the healthcare
provider is an investor or has an investment interest. Under the Self-Referral
Act, Florida Designated Health Services are defined as clinical laboratory,
physical therapy, comprehensive rehabilitative, diagnostic-imaging and radiation
therapy services. We plan to purchase and currently operate facilities that
provide some or all of these Florida Designated Health Services. All healthcare
products and services not considered Florida Designated Health Services are
classified as "other health services." The Self-Referral Act also prohibits the
referral by a physician of a patient for "other health services" to an entity in
which that physician is an investor, unless (1) the physician's investment
interest is in the registered securities of a publicly traded corporation whose
shares are traded on a national exchange or over-the-counter market and which
has net equity at the end of its most recent fiscal quarter in excess of
$50,000,000; or (2) the physician's investment interest is in an entity whereby
(a) no more than 50% of the value of the investment interests in the entity may
be held by investors who are in a position to make referrals to the entity; (b)
the terms under which an investment interest is offered must be the same for
referring investors and non-referring investors; (c) the terms under which an
investment interest is offered may not be related to the investor's volume of
referrals to the entity; and (d) the investor must not be required to make
referrals or be in the position to make referrals to the entity as a condition
for becoming or remaining an investor.
Entities that meet either exception must also (1) not lend, or guarantee a
loan, to an investor who is in a position to make referrals if the investor uses
any part of that loan to obtain the investment interest, and (2) distribute
profits and losses to investors in a manner that is directly proportional to
their capital investment.
The Self-Referral Act excludes from the definition of "referral" certain
services provided by specific healthcare providers such as referrals by a
cardiologist for cardiac catheterization services. We believe that physician
investors that are cardiologists may refer patients to it for cardiac
catheterization services because of this provision. There are, however, no
assurances that the definition of what constitutes a referral will remain in
place.
The definition of referral also excludes services by a healthcare provider
who is a sole provider or member of a group practice that are provided solely
for the referring healthcare provider's or group practice's own patients.
Physician investors cannot refer to us for Florida
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Designated Health Services based upon this exception under the Self-Referral Act
because we do not provide Florida Designated Health Services solely for the
referring physician's or his or her group practice's own patients. So long as
physician investors do not refer to us for Florida Designated Health Services,
we believe we will be in compliance with the Self-Referral Act. Although we will
have mechanisms in place to monitor referrals from physician investors, it is
the responsibility of the physician investors to comply with the Self-Referral
Act and there can be no assurances that physician investors will comply with
such law. Violations thereof could adversely affect us, as well as result in
regulatory action against us.
The Self-Referral Act also imposes certain disclosure obligations on us
and physician investors that are referring physicians. Under the Self-Referral
Act, a physician may not refer a patient to an entity in which he or she is an
investor, even for services that are not Florida Designated Health Services,
unless, before doing so, the patient is given a written statement disclosing,
among other things, the physician's investment interest in the entity to which
the referral is made. The Self-Referral Act also imposes disclosure obligations
on the entities to which physician investors refer patients. Appropriate
disclosures will be required for physician investors. It is the responsibility
of any referring physician investor to comply with such statutes, regulations
and professional standards. However, this law may discourage certain physician
investors from making referrals to us or encourage patients to choose
alternative healthcare providers. In addition, the violation thereof could
adversely affect us, as well as result in regulatory action against us.
The Federal statute relating to self-referrals, 42 USC ss.1395 nn (the
"Stark Law"), restricts the ability of a physician to refer patients for the
furnishing of certain designated health services ("Designated Health Services")
to healthcare entities when the physician (or immediate family member) has a
financial relationship, directly or indirectly, with the entity receiving the
referral. Moreover, the entity may not present or cause to be presented a claim
or bill for the Designated Health Services, either to the Medicare or Medicaid
programs or any other individual or third-party payor. The financial
relationship may be either an investment interest (either equity or debt) or a
compensation arrangement. Designated Health Services for purposes of the Stark
Law include: (1) clinical laboratory services, (2) physical therapy services,
(3) occupational therapy services, (4) radiology services, including magnetic
resonance imaging, computerized axial tomography scans, and ultrasound services,
(5) radiation therapy services and supplies, (6) durable medical equipment and
supplies, (7) parenteral and enteral nutrients, equipment, and supplies, (8)
prosthetics, orthotics, and prosthetic devices and supplies, (9) home health
services, (10) outpatient prescription drugs, and (11) inpatient and outpatient
hospital services.
There are exceptions to the Stark Law that apply (1) to both ownership or
investment interests and compensation arrangements, (2) only to ownership or
investment interests, or (3) only to compensation arrangements. Our current
structure will not meet any of the exceptions to permit a physician investor's
referral for Designated Health Services. Therefore, physician investors cannot
refer to us for Designated Health Services. Although we will have mechanisms in
place to monitor referrals from physician investors, it is the responsibility of
physician
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investors to comply with the Stark Law and no assurance can be given that
physician investors will comply with such law.
Two of the exceptions that protect only compensation arrangements are for
employees and personal services and their requirements are similar to the Safe
Harbor requirements discussed above. However, unlike the Safe Harbors to the
Anti-Kickback Law, the exceptions to the Stark Law must be complied with fully.
We believe we currently meet the requirements of both of these exceptions.
Notwithstanding our belief that we currently are in compliance with the
Stark Laws, no assurance can be given that a federal agency charged with
enforcement and/or interpreting the Stark Law, or a private party, might not
successfully assert a contrary position, or that future federal statutes,
regulations, administrative interpretations and/or judicial decisions would
cause an investor's referral to be prohibited, or result in the imposition of
penalties on us or investors. Even the assertion of a violation could have a
material adverse effect upon our financial condition and results of the
operation.
Violations of the Florida and Federal self-referral laws may result in
substantial civil penalties and administrative sanctions for individuals or
entities, including exclusion from participation in the Medicare and Medicaid
programs, as well as the suspension or revocation of a physician's license to
practice medicine and surgery in Florida. Such sanctions, if applied to us or
any of our physician investors, would result in significant loss of
reimbursement and could have a material adverse effect on us.
An Advisory Opinion procedure similar to that discussed above and the
Declaratory Statement procedure also are available for parties seeking guidance
as to whether a specific transaction violates the Stark Law or the Self-Referral
Act, as the case may be. Potential investors should be aware that we do not
intend to seek the guidance available under either of these procedures.
FAILURE TO PROPERLY SUBMIT CLAIMS FOR REIMBURSEMENT COULD ADVERSELY AFFECT
OUR FINANCIAL CONDITION. We are subject to numerous state and federal laws that
govern the submission of claims for reimbursement to third-party payors,
including state and federal healthcare programs (e.g., Medicare and Medicaid).
These laws generally prohibit an individual or entity from presenting a claim
(or causing a claim to be presented) for payment by Medicare, Medicaid or any
other third-party payor that is false or fraudulent. The penalties available for
violations of these statutes include substantial civil and criminal fines,
imprisonment, exclusion from the federal healthcare programs and licensure
revocation.
One of the most prominent of these laws is the Federal False Claims Act,
which may be enforced by the federal government directly, or by a qui tam
plaintiff on the government's behalf. Under the False Claims Act, both the
government and the private plaintiff, if successful, are permitted to recover
substantial monetary penalties, as well as an amount equal to three times
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actual damages. The State of Florida has a similar statute that governs claims
made to it. In recent cases, some qui tam plaintiffs have taken the position
that violations of the Anti-Kickback Law and the Stark Law should also be
prosecuted as violations of the Federal False Claims Act. We believe that we
have procedures in place to ensure the accurate completion of claim forms and
requests for payment.
NEW LEGISLATIVE DEVELOPMENTS COULD RESULT IN FINANCIAL HARDSHIP. In
addition, proposed legislation regarding healthcare reform has been introduced
before many state legislatures. Any such reforms at the federal or state level
could significantly alter patient-provider relationships. State and federal
agency rule-making addressing these issues is also expected. No predictions can
be made as to whether future healthcare reform legislation, similar legislation
or rule-making will be enacted or, if enacted, its effect on us. Any federal or
state legislation prohibiting investment interests in, or contracting with, us
by physicians or healthcare providers for which there is no statutory exception
or safe harbor would have a material adverse effect on our business, financial
condition and results of operations.
WE MAY BE UNDER MANAGED CARE CONTRACTS. There can be no assurance that we
will be able to obtain managed care contracts. Our future inability to obtain
managed care contracts in our markets could have a material adverse effect on
our business, financial condition or results of operations. In addition, federal
and state legislative proposals have been introduced that could substantially
increase the number of Medicare and Medicaid recipients enrolled in HMOs and
other managed care plans. We will derive a substantial portion of our revenue
from Medicare and Medicaid. If such proposals are adopted, we may be unable to
obtain contracts from HMOs and other managed care plans serving Medicare and
Medicaid enrollees. Failure to obtain such contracts could have a material
adverse effect on our business, financial condition and results of operations.
HEALTHCARE LICENSING REQUIREMENTS MAY BE HIGHLY BURDENSOME. Although our
mobile cardiac catheterization services generally are not subject to healthcare
licensing requirements (we contract directly with hospitals), we must adhere to
the same standards as the hospitals we contract with, including standards for
sanitation, safety and personnel qualifications. We are also required to
register our X-ray equipment and pay annual registration fees to state radiation
control agencies. We believe that our cardiac catheterization operations are in
compliance with applicable registration and hospital license requirements.
We have recently suspended operations of our mobile cardiac
catheterization business as a result of our catheterization labs failing to meet
the guidelines for the licensing of catheterization labs as promulgated by the
Agency for Health Care Administration ("AHCA"). We anticipate that our labs,
which are presently undergoing improvements and changes, will again be
operational by the end of 1999 and that the cost of such improvements and
changes will not exceed $100,000 per lab. Once the improvements and changes are
completed, the labs will be subject to AHCA's inspection before the labs may be
operated. In addition, each provider site must be inspected by AHCA to ascertain
whether or not such site meets the AHCA guidelines.
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All of our customers may not satisfy AHCA's requirements thereby allowing us to
generate revenues. Such loss of revenues over an extended period of time will
have a significant adverse impact on our earnings.
REGULATORY LIMITATION ON FEE-SPLITTING AND THE CORPORATE PRACTICE OF
MEDICINE COULD AFFECT OUR OPERATIONS. The laws of many states prohibit
physicians from splitting fees with non-physicians (or other physicians) and
prohibit non-physician entities from practicing medicine. These laws vary from
state to state and are enforced by the courts and by regulatory authorities with
broad discretion. Our business operations have not been the subject of judicial
or regulatory interpretation; thus, there can be no assurance that review of our
business by courts or regulatory authorities will not result in determinations
that could adversely affect our operations or that the healthcare regulatory
environment will not change so as to restrict our existing operations or their
expansion. In addition, the regulatory framework of certain jurisdictions may
limit our expansion into such jurisdictions if we are unable to modify our
operational structure to conform with such regulatory framework.
A determination in any state that we are engaged in the corporate practice
of medicine or any unlawful fee-splitting arrangement could render any
management agreement between us and a practice located in such state
unenforceable or subject to modification, which could have a material adverse
effect on us. Regulatory authorities or other parties may assert that we are or
a practice is engaged in the corporate practice of medicine in such states or
that the management fees paid to us by the managed practices constitute unlawful
fee-splitting or the corporate practice of medicine. If such a claim were
asserted successfully, we could be subject to civil and criminal penalties,
managed physicians could have restrictions imposed upon their licenses to
practice medicine, and we or the managed practices could be required to
restructure their contractual arrangements. Such results or the inability of us
or the managed practices to restructure our relationships to comply with such
prohibitions could have a material adverse effect on our financial condition and
results of operations.
CHANGES IN PAYMENT FOR MEDICAL SERVICES COULD HARM OUR BUSINESS. We
believe that trends in cost containment in the healthcare industry will continue
to result in a reduction in per-patient revenue for our practices. The federal
government has implemented, through the Medicare program, the RBRVS payment
methodology for physician services. The RBRVS is a fee schedule that, except for
certain geographical and other adjustments, pays similarly situated physicians
the same amount for the same services. The RBRVS is adjusted each year and is
subject to increases or decreases at the discretion of Congress. To date, the
implementation of RBRVS has reduced payment rates for certain procedures
historically performed by our physicians. There can be no assurance that any
reduced operating margins could be recouped by us through cost reductions,
increased volume, introduction of additional procedures or otherwise. Rates paid
by non-governmental insurers, including those that provide Medicare supplemental
insurance, are based on established physician, ambulatory surgery center and
hospital charges, and are generally higher than Medicare payment rates. A change
in the makeup of the patient mix of our practices as well as the medical
practices under our management that results in a decrease
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in patients covered by private insurance or a shift by private payors to RBRVS
or similar payment structures could adversely affect our business, financial
condition or results of operations.
CERTIFICATE OF NEED. Some states, including Florida, require a
"certificate of need" prior to the acquisition of medical equipment or provision
of cardiac catheterization services by hospitals. In Florida, a certificate of
need is required for cardiac catheterization services only if the hospital
wishes to provide such services to in-patients. Typically, obtaining a
certificate of need approval is a costly and lengthy process, and may involve
adversarial proceedings brought by competing facilities. The hospital or
healthcare provider, rather than the Company, must apply for and obtain the
certificate of need, where required. As a result, we are unable to control or
accurately predict whether and how many potential customers will obtain
certificate of needs. Our ability to provide cardiac catheterization services to
hospitals and healthcare providers is dependent upon those entities obtaining a
certificates of need for such services.
PATIENT BROKERING ACT. Florida also has a criminal prohibition regarding
the offering, soliciting, or receiving of remuneration, directly or indirectly,
in cash or in kind, in exchange for the referral of patients (the "Patient
Brokering Act"). One of the exceptions to this prohibition is for business and
compensation arrangements that do not violate the Anti-Kickback Law.
Accordingly, so long as we are in compliance with the Anti-Kickback Law, then we
will be in compliance with the Patient Brokering Act.
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BUSINESS
GENERAL. Cyber-Care, Inc. was incorporated in September 1989 in the State
of Florida. Our name was changed in August 1999 as a result of the acquisition
of Cybercare, Inc. and our entry into the medical e-commerce business. Our
principal executive offices are located at 1903 S. Congress Ave., Suite 400,
Boynton Beach, Florida 33426 and our telephone number is (561) 737-2227.
Our active subsidiaries include: Cybercare, Inc, Pharmacy Care
Specialists, Inc., Your Good Health Network, Inc., Air Response North, Inc. and
our two other air ambulance subsidiaries and Tallahassee Sleep Disorders, Inc.
We are in the business of developing, owning and operating integrated
medical delivery services by providing diversified medical technologies and
operating physical, occupational and speech therapy, sleep apnea, diagnostic and
treatment services, pharmaceutical services and international air ambulance
transport services. We also own and are developing an Internet-based solution
and interactive system that provides products and services to support remote
delivery of care, patient monitoring and education to the U.S. healthcare
market.
BUSINESS OPERATIONS
E-COMMERCE BUSINESS. In August 1999, we acquired CyberCare, Inc., a
privately held Georgia corporation, which is developing an Internet-based
solution and interactive system that provides products and services to support
remote delivery of care, patient monitoring and education to the U.S. healthcare
market. Cybercare's executive offices are located in Atlanta, Georgia as a
wholly owned subsidiary of the Company.
OVERVIEW OF CYBERCARE. Cybercare is a development-stage Internet-based
solution and interactive company that intends to develop, manufacture, operate
and sale Internet-based technology and interactive system for use in assisting
in disease management. This technology support's 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. Management believes that
preventive services for this patient population is an untapped $4 billion market
segment in the United States alone. We believe that our expertise in providing
services to payors and managed care companies combined with CyberCare's Internet
connectivity technology will allow us to link patients directly to healthcare
professionals.
DESCRIPTION OF CYBERCARE. In January 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
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chronically ill patients in their homes. The Willow Group was then incorporated
as Cybercare, Inc. in October of 1997 in the State of Georgia.
As our wholly owned subsidiary, Cybercare will continue to develop, refine
produce and market of its key technologies for monitoring chronically ill
patients in their homes. Cybercare expects to achieve operational efficiencies
through the synergy with the Company and the Company's existing relationships
with insurance companies and other payors.
MATERIAL AGREEMENTS. The technologies which Cybercare uses in its business
are licensed to Cybercare pursuant to an exclusive license agreement with
Georgia Tech Research Corporation and the Medical College of Georgia. This
license agreement gives Cybercare exclusive worldwide rights to the intellectual
property developed by the universities for tele-homecare and also gives rights
to tele-homecare technologies that may be developed by the universities in the
future. 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 also has a joint marketing 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 sign 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. Tentatively scheduled 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
plans
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to 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.
OUR OTHER PRIMARY BUSINESSES.
AIR AMBULANCE TRANSPORT. We are taking advantage of what our management
believes is the growing air ambulance industry through our subsidiaries, Air
Response North, Inc., Global Air Rescue, Inc. and Global Air Charter, Inc.
Through these subsidiaries, we offer national and international fixed-wing air
ambulance transport services to ill, injured or otherwise incapacitated persons
requiring relocation and possible emergency medical care during flight.
Circumstances requiring our transport services 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, our air ambulance transport companies maintain
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. We acquired Your Good
Health Network, Inc. effective October 16, 1998. Your Good Health 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 Your Good Health is to provide physical,
occupational, speech therapy and pain rehabilitation services. Your Good Health
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.
Your Good Health currently owns and operates 49 rehabilitation and therapy
clinics and two physician sites in Boynton Beach and North Palm Beach, Florida.
Your Good Health 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 physical therapy 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.
Your Good Health services include: specialty programs like pain
management, coupled with traditional services such as primary care, orthopedic
and neurological physician services and
24
<PAGE>
comprehensive rehabilitation. These services allow Your Good Health to be a
unique healthcare provider. The physicians' component is focused on specialized
clinical programs that complement the company's rehabilitation services. Your
Good Health 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. Your Good Health is focused to be minimally reliant upon
managed care payors.
CAROLINA REHAB. Effective on August 1, 1999, the Company acquired all
issued and outstanding shares of Carolina Rehab, Inc. and Outreach Programs,
Inc. ("Carolina") in exchange for shares of Cyber-Care, Inc., to be paid in
three installments in accordance with "earn-out" provisions as follows:
The first installment will be paid to the former shareholders of Carolina in
Cyber-Care shares in an amount equal to the pre-tax net profits of Carolina
calculated in accordance with generally accepted accounting principles ("GAAP"),
times three. Fair market value of each share, for purposes of the first
installment payment, shall be $1.25 per share. The second and third installments
will be paid in Cyber-Care shares equal to the incremental increase in profit,
times three. Fair market value of each share, for purposes of the second and
third installments, shall be the ninety day trailing average of the stock prices
as of the last trading day of the second and third periods.
Carolina is a Medicare certified Comprehensive Outpatient Rehabilitation
Facility ("CORF") providing physical, occupational and speech therapy services
in with numerous locations throughout Florida.
SOUTHEAST MEDICAL. Effective on August 1, 1999, the Company, through its
wholly-owned subsidiary, YGHN Acquisition Company I, Inc., acquired all issued
and outstanding shares of Southeast Medical Centers, Inc. ("Southeast") in
exchange for shares of Cyber-Care, Inc., to be paid in three installments in
accordance with "earn-out" provisions as follows:
Three installments will be paid in common stock of Cyber-care in an amount
equal to Southeast's pre-tax net profits calculated in accordance with GAAP, for
each of the three years ending July 31 following the effective date of the
acquisition. Fair market value of each share, for purposes of the first
installment, shall be the ten day trailing average of the stock price as of the
effective date of the acquisition but not to exceed $400,000. Fair market value
of each share, for purposes of the balance of the first installment in excess of
$400,000, if any, and for the second and third installments, will be the ten day
trailing average of the stock price as of the delivery date.
Southeast provides physical therapy and other health care services with
numerous locations in South Florida.
25
<PAGE>
PHARMACEUTICAL SERVICES. We acquired Pharmacy Care Specialists, Inc. in
April 1998. Pharmacy Care Specialists is a closed network pharmacy employing
approximately 50 individuals with its principal place of business in Lakeland,
Florida. Pharmacy Care Specialists provides unit-dosed medications to over 2,500
residents in assisted-living facilities across Florida. Pharmacy Care
Specialists delivers medications to the facilities, provides training workshops
and does third-party billing. The future of the pharmacy industry is in a
transitional phase. We believe the area with potential for growth is in the
adult living facility, 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, Pharmacy Care Specialists has targeted its marketing efforts to
accelerate the adult living facility and mail order business. 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.
HELP INNOVATIONS. We acquired, effective November 15, 1999, patents,
products and key personnel from Help Innovations, Inc. for ($5,000,000) five
million dollars in common stock priced at $3.75 per share. Help Innovations owns
a library of computerized disease management protocols that will assist
CyberCare Technologies delivery of services via the Internet. Help Innovations
is located in Lawrence, Kansas additionally owns patented technology, which will
compliment the CyberCare Technology Line of products.
SLEEP CENTERS. Through our indirect wholly owned subsidiary, Tallahassee
Sleep Disorders, Inc., we offer sleep and disordered breathing diagnostic
programs to physicians and hospitals. We use 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 and snoring. It is estimated
that 40 million people suffer from sleep apnea 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.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
selling shareholders as of January 30, 2000. The selling shareholders are not
currently affiliates of ours, and have not had a material relationship with us
during the past three years. The selling shareholders are not or were affiliated
with registered broker-dealers.
26
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF MAXIMUM NUMBER AMOUNT AND PERCENTAGE
COMMON STOCK OF SHARES OF OF COMMON STOCK
AS OF COMMON STOCK AFTER THE SALE
NAME JANUARY 31, 2000 OFFERED FOR SALE NUMBER %
- -------------------------------- ---------------- ---------------- -------------- ---
<S> <C> <C> <C> <C>
HELP Innovations, Inc. ......... 333,500 333,500 0 --
Trifina Finanz ................. 147,087(1) 147,087(1) 0 --
Roger B. McOmber ............... 150,000(1) 150,000(1) 0 --
Clyde Smith McGregor ........... 300,000(1) 300,000(1) 0 --
Jonathan Old III ............... 150,000(1) 150,000(1) 0 --
David Palaia ................... 75,000(1) 75,000(1) 0 --
Anthony Tang ................... 150,000(1) 150,000(1) 0 --
KAV Associate NV Amsterdam ..... 150,000(1) 150,000(1) 0 --
CDLM - Weiss Associates ........ 150,000(1) 150,000(1) 0 --
Jonathan Old III ............... 390,000(1) 390,000(1) 0 --
Angela C. Sabella .............. 390,000(1) 390,000(1) 0 --
Anthony M. Tang ................ 260,000(1) 260,000(1) 0 --
Fredrik C. Schreuder ........... 260,000(1) 260,000(1) 0 --
James C. Sullivan .............. 75,000(1) 75,000(1) 0 --
Doug Hannink ................... 32,500(1) 32,500(1) 0 --
Paul A. Bornstein .............. 32,500(1) 32,500(1) 0 --
Douglas Moore & Laurie
Moore, JTWROS ................ 65,000(1) 65,000(1) 0 --
David J. Prentiss .............. 32,500(1) 32,500(1) 0 --
Robert J. Rosan ................ 65,000(1) 65,000(1) 0 --
William B. Armitage Trust ...... 65,000(1) 65,000(1) 0 --
Harmonious Lineage
Investments, LLC ............. 65,000(1) 65,000(1) 0 --
Derek Speirs ................... 65,000(1) 65,000(1) 0 --
Denno Family Ltd. Prtshp ....... 65,000(1) 65,000(1) 0 --
Harry S. Scaling ............... 65,000(1) 65,000(1) 0 --
Richard D. Green ............... 97,500(1) 97,500(1) 0 --
Clyde Smith McGregor ........... 65,000(1) 65,000(1) 0 --
Klas & Anette Lifors ........... 32,500(1) 32,500(1) 0 --
Thomas F. Barmann &
Christine C. Barmann JTWROS .. 32,500(1) 32,500(1) 0 --
Charles H. Carmouche ........... 32,500(1) 32,500(1) 0 --
Alan K. DerKazarian ............ 65,000(1) 65,000(1) 0 --
Ruth Moore Trustee of the
Moore bypass Trust
Created 6-15-89............... 32,500(1) 32,500(1) 0 --
William A. Petrick ............. 32,500(1) 32,500(1) 0 --
Thomas Stark III ............... 26,000(1) 26,000(1) 0 --
J. Robert Dille ................ 32,500(1) 32,500(1) 0 --
Pedagogue Trust ................ 32,500(1) 32,500(1) 0 --
Donald W. Breech ............... 32,500(1) 32,500(1) 0 --
Paul S. Lee .................... 65,000(1) 65,000(1) 0 --
Anthony Tang ................... 130,000(1) 130,000(1) 0 --
Arnold Curnyn .................. 97,500(1) 97,500(1) 0 --
James E. Heavner ............... 32,500(1) 32,500(1) 0 --
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nellie Green ................... 32,500(1) 32,500(1) 0 --
Peter A. Massaniso ............. 65,000(1) 65,000(1) 0 --
Ponte Vedra Partners Ltd. ...... 65,000(1) 65,000(1) 0 --
Michael Engdall ................ 32,500(1) 32,500(1) 0 --
Kas Stichting Bewaaerbedrijf1 .. 62,500(1) 162,500(1) 0 --
Barend H. Steenhuis ............ 65,000(1) 65,000(1) 0 --
The Daniel Lee and Lisa Sue
Lee Trust of 1982 (restated) . 65,000(1) 65,000(1) 0 --
Donald Breech MD, PA,
Profit Sharing Plan .......... 32,500(1) 32,500(1) 0 --
ING Baring Private Bank F/B/O
Mandersloot and van Oven
B.V., a corporation .......... 227,500(1) 227,500(1) 0 --
Holloway Playforth Archer
Nighbert Profit Sharing Trust 65,000(1) 65,000(1) 0 --
Mike Daugherty ................. 32,500(1) 32,500(1) 0 --
Edwin J. Nighbert .............. 32,500(1) 32,500(1) 0 --
Alan Chang ..................... 130,000(1) 130,000(1) 0 --
Jeff Spetelnick ................ 32,500(1) 32,500(1) 0 --
BSI Limited .................... 225,000(1) 225,000(1) 0 --
Rosario S. Ilacqua ............. 65,000(1) 65,000(1) 0 --
David M. Palaia ................ 32,500(1) 32,500(1) 0 --
William Kapner ................. 32,500(1) 32,500(1) 0 --
Dr. Eric Spellman .............. 32,500(1) 32,500(1) 0 --
Giovanni Trivella .............. 32,500(1) 32,500(1) 0 --
New Master Investments Limited . 65,000(1) 65,000(1) 0 --
Anthony Tang ................... 195,000(1) 195,000(1) 0 --
ING Baring Private Bank F/B/O
Aufdemstein .................. 65,000(1) 65,000(1) 0 --
ING Baring Private Bank F/B/O
Elizabeth Frazer ............. 32,500(1) 32,500(1) 0 --
ING Baring Private Bank F/B/O
Max Sonderegger .............. 195,000(1) 195,000(1) 0 --
A. Poot ........................ 130,000(1) 130,000(1) 0 --
Fortis Bank Luxumbourg SA ...... 325,000(1) 325,000(1) 0 --
Williams de Broe A/C Fund Invest 162,500(1) 162,500(1) 0 --
F. Steltenpool ................. 32,500(1) 32,500(1) 0 --
Giovanni Trivella .............. 130,000(1) 130,000(1) 0 --
Gail Zimmerman as the Trustee
under the Irrevocable Dee of
Trustee for Gail Zimmerman
and descendants .............. 195,000(1) 195,000(1) 0 --
View Far Management Limited .... 1,040,000(1) 1,040,000(1) 0 --
New Master Investments Limited . 116,667(1) 116,667(1) 0 --
Vernon International Limited ... 466,667(1) 466,667(1) 0 --
Advance Medicare Limited ....... 933,333(1) 933,333(1) 0 --
John E. Haines ................. 210,067 210,067 0 --
Stephen R. Ratzel .............. 1,420,000 1,420,000 0 --
J. David Richey ................ 1,150,000 1,150,000 0 --
Charles P. Garrison, M.D ....... 133,332 133,332 0 --
Fidelity National Bank as
custodian F.B.O. Algle
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Brown, M.D. as SDIRA ......... 133,332 133,332 0 --
A.C. Brown, M.D ................ 219,668 219,668 0 --
Canyon Group, LLC .............. 133,333 133,333 0 --
Raymond James & Assoc. as
custodian F.B.O. James E .....
Cooke, M.D. as SDIRA ......... 66,666 66,666 0 --
Myles S. Jordan, M.D ........... 319,999 319,999 0 --
James A. Mankin, Sr ............ 26,666 26,666 0 --
First National Bank of Griffin
Trustee FBO James A. Mankin,
Jr. U/A dtd 4/29/91 .......... 26,666 26,666 0 --
Leonard E. Borg, Jr ............ 80,000 80,000 0 --
Leonard E. Borg, Jr ............ 133,334 133,334 0 --
Frank Sadler ................... 26,666 26,666 0 --
Dale L. McCord, M.D ............ 133,332 133,332 0 --
Kenneth H. Crandall, Jr ........ 26,668 26,668 0 --
Tony Jatcko .................... 80,000 80,000 0 --
David J. VanderBrook ........... 66,667 66,667 0 --
David J. Wendt ................. 33,334 33,334 0 --
Anna V. Strachura .............. 50,000 50,000 0 --
Anita Sudduth Kiser ............ 15,000 15,000 0 --
Ronald D. Moffitt .............. 30,000 30,000 0 --
Darrell A. Sudduth ............. 75,000 75,000 0 --
Lucille Sudduth ................ 20,000 20,000 0 --
Patrice E. Martin-Perkins ...... 5,000 5,000 0 --
Summers U. Perkins ............. 10,000 10,000 0 --
Barry Sudduth .................. 53,540 53,540 0 --
Robbie Scott ................... 9,000 9,000 0 --
Gregory Matthews ............... 41,838 41,838 0 --
Gerald M. Gordner II ........... 1,000 1,000 0 --
Dale Giloman ................... 15,000 15,000 0 --
Sam Panchal .................... 20,206 20,206 0 --
John Pelfer .................... 55,238 55,238 0 --
Michael F. Burrow .............. 100,240 100,240 0 --
Andrew T. Hopper ............... 13,540 13,540 0 --
William E. Price ............... 13,676 13,676 0 --
Andrew M. Quay ................. 13,676 13,676 0 --
Mary Simmons ................... 1,232 1,232 0 --
James C. Tolar ................. 20,240 20,240 0 --
Ga. Tech Research Corp. ........ 588,238 588,238 0 --
MCG Research Institute ......... 725,000 725,000 0 --
Richard L. Klass ............... 399,832(2) 399,832(2) 0 --
Mid Market Financial Group, LLC 792,222(2) 792,222(2) 0 --
Paul A. Bornstein .............. 4,500(2) 4,500(2) 0 --
Frantz-Lys Cajuste ............. 31,843(2) 31,843(2) 0 --
Michael D. Flinn ............... 10,500(2) 10,500(2) 0 --
John Weldon .................... 101,572(2) 101,572(2) 0 --
Sands Brothers & Co., Ltd. ..... 147,825(2) 147,825(2) 0 --
Derek Speirs ................... 22,928(2) 22,928(2) 0 --
London Court, LTD .............. 4,393(2) 4,393(2) 0 --
ING Baring Private Bank ........ 37,500(2) 37,500(2) 0 --
Southern Territory Group, Ltd. . 141,215(2) 141,215(2) 0 --
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ragner U.G. Jongen ............. 3,643(2) 3,643(2) 0 --
Charles Wang ................... 8,571(2) 8,571(2) 0 --
Euxenite Limited ............... 8,571(2) 8,571(2) 0 --
Swartz Equity .................. 425,000(2) 425,000(2) 0 --
</TABLE>
(1) Represents shares of common stock issuable upon conversion of convertible
debentures and upon the exercise of common stock purchase warrants issued
in connection with the debt-financing.
(2) Includes shares of common stock issuable upon the exercise of common stock
purchase warrants.
30
<PAGE>
AGREEMENTS
ACQUISITION OF YOUR GOOD HEALTH NETWORK, INC.
Effective October 15, 1998, we issued 3,333,333 shares of restricted
common stock valued at $2,500,000 ($.75 a share) for 100% of the outstanding
stock of Your Good Health Network, Inc.
ACQUISITION OF CYBERCARE, INC.
Effective September 1, 1999, we acquired 100% of the outstanding common
stock of CyberCare, Inc. in exchange for 7,399,996 shares of our common stock
valued at $1.12 per share. CyberCare also had outstanding warrants and options
to be converted to Nine Hundred Thirty Five Thousand (935,000) shares of its
common stock. These options and warrants were replaced with like warrants and
options of our securities.
PRIVATE PLACEMENTS
We 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. Each Unit consisted 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. We are 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. We may pay interest in shares of our common
stock. The number of shares paid is determined by dividing the interest payment
by the average closing bid price of our common stock on the twenty days prior to
the interest accrual date.
The debenture and any accrued interest may be initially convertible into
our common stock at 80 percent of the closing bid price of our common stock on
the date we receive the investors' subscription funds but in no event less than
$1.00. If our 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 we have the right to
convert all or any portion of the debentures with any accrued interest into
shares of our common stock at the applicable conversion price.
We may also redeem the debentures with any accrued interest after
providing 30 days notice to the debenture holders. If the average bid price of
our 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 our common stock at the conversion price in effect on
the redemption date.
31
<PAGE>
Each unit includes a warrant which entitles the holder to purchase shares
at 115% of the closing bid price of our common stock on date the we received the
investors subscription funds. We have the right to redeem the warrants if we
give the holder 30 days prior written notice and the average bid price of our
common stock for 22 consecutive trading days exceeds two times the conversion
price.
Pursuant to a second agreement with Connecticut Capital Markets, LLC to
act as a placement agent in a private placement during December 1999 and January
2000, we sold to ten qualified institutional buyers 28.65 units for an aggregate
purchase price of $14,325,000. Each unit consisted of a $500,000 10% convertible
debenture and 250,000 common stock purchase warrants. We issued to our placement
agent warrants to purchase 613,930 shares of common stock, expiring March 2005,
exercisable at $3.50 per share. The debentures mature February 28, 2003 and
interest is payable on the debentures commencing March 1, 2001 and semi-annually
thereafter at the rate of 10% per annum. The warrants expire March 1, 2005 and
are exercisable at $4.20 per share. We are required to register for resale,
prior to May 9, 2000, the shares of common stock issuable upon the conversion of
the debentures, the exercise of the warrants, the shares issuable to the
placement agent and the over-allotment id sold.
PLAN OF DISTRIBUTION
The selling shareholders are free to offer and sell their common shares at
such times, in such manner and at such prices as it may determine. The types of
transactions in which the common shares are sold may include transactions in the
Nasdaq SmallCap market (including block transactions), negotiated transactions,
the settlement of short sales of common shares, or a combination of such methods
of sale. The sales will be at market prices prevailing at the time of sale or at
negotiated prices. Such transactions may or may not involve brokers or dealers.
The selling shareholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities. The selling shareholders
do not have an underwriter or coordinating broker acting in connection with the
proposed sale of the common shares.
The selling shareholders may effect such transactions by selling common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the selling shareholders. They
may also receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Information as to whether underwriters who may be selected by the selling
shareholders, or any other broker-dealer, are acting as principals or agents for
the selling shareholders, the compensation to be received by them, and the
compensation to be received by other broker-
32
<PAGE>
dealers, in the event that compensation is in excess of usual and customary
commissions, will, to the extent required, be set forth in a supplement to this
prospectus. Any dealer or broker participating in any distribution of the shares
may be required to deliver a copy of this prospectus, including a prospectus
supplement, if any, to any person who purchases any of the shares from or
through that dealer or broker.
We have advised the selling shareholders that during such times as they
are engaged in a distribution of the shares, included herein, they are required
to comply with Regulation M promulgated under the Securities and Exchange Act.
With certain exceptions, Regulation M precludes any selling shareholder, and the
affiliated purchasers and any broker, dealer or other person who participates in
such distribution from bidding for or purchasing, or attending to induce any
person to bid for purchasing a security, which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may effect the marketability of the common stock.
The selling shareholders also may resell all or a portion of the common
shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of such rule.
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 200,000,000 shares of common
stock, $.0025 par value, and 20,000,000 shares of Preferred Stock. As of January
30, 2000 there were approximately 47,689,539 shares of common stock issued and
outstanding, and no shares of Preferred Stock are currently outstanding. The
number of shares of common stock outstanding does not include shares of common
stock that could be issued in connection with the potential acquisitions or upon
conversation or exercise of stock options, debentures, and other derivative
securities.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share owned
of record on all matters voted upon by shareholders, and a majority vote is
required for all actions to be taken by shareholders. In the event of our
liquidation, dissolution or winding-up, the holders of the common stock are
entitled to share equally and ratably in our assets, if any, remaining after the
payment of all of our debts and liabilities. The common stock has no preemptive
rights, no cumulative voting rights and no redemption, sinking fund or
conversion provision. Holders of common stock are entitled to receive dividends
if, as and when declared by our Board of Directors out of funds legally
available therefor, subject to any dividend restrictions imposed by our
creditors. No dividend or other distribution (including redemptions or
repurchases of shares
33
<PAGE>
of capital stock) may be made if, after giving effect to such distribution, we
would not be able to pay our debts as they become due in the normal course of
business, or our total assets would be less than the minimum of our total
liabilities. If we realize net profits in the future, our policy is likely to
retain such earnings for the operation and expansion of our business.
PREFERRED STOCK
Our Board of Directors is authorized (without any further action of the
shareholders) to issue preferred stock in one or more series and to fix the
voting rights, liquidation preferences, dividend rates, conversion rights,
redemption rights and terms, including sinking fund provisions, and certain
other rights and preferences. Satisfaction of any dividend preferences of
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends, if any, on the common stock. Also, holders of the
preferred stock would normally be entitled to receive a preference payment in
the event of our liquidation, dissolution or winding-up before any payment is
made to holders of common stock. In addition, under certain circumstances, the
issuance of preferred stock may render more difficult or tend to discourage a
merger, tender offer or proxy contest, the assumption of control by a holder of
a large block of our securities, or the removal of incumbent management. The
Board of Directors, without shareholder approval, may issue preferred stock with
dividend, liquidation, redemption, voting and conversion rights which could
adversely affect the holders of common stock.
OPTIONS AND WARRANTS
As of January 30, 2000, options and warrants to purchase collectively
13,000,239 shares of common stock were outstanding.
CONVERTIBLE DEBENTURES
As of January 30, 2000, $4,970,000 principal amount of debentures
convertible into 4,113,087 shares of common stock were outstanding.
TRANSFER AND WARRANT AGENT AND REGISTRAR
Our transfer agent and registrar for the common stock is Corporate Stock
Transfer, Denver, Colorado.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Atlas, Pearlman, Trop & Borkson, P.A., Fort
Lauderdale, Florida.
34
<PAGE>
EXPERTS
The financial statements included in this Prospectus and in the
Registration Statement have been audited by Grant Thornton, independent
certified public accountants, to the extent and for the periods set forth in
their report appearing elsewhere herein and in the Registration Statement, and
are included herein in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
35
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses payable in connection with the registration and distribution of
the securities being registered hereunder, all of which will be borne by the
Registrant, are as follows:
Registration Fee - Securities and Exchange Commission $ 93,587
Printing and Engraving.............................. 5,000
Legal Fees and Expenses............................. 20,000
Accounting Fees..................................... 10,000
Blue Sky Fees and Expenses.......................... --
Total............................................... $128,587
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to our Articles of Incorporation, and as permitted by the Florida
Business Corporation Act, we may indemnify our directors and officers under
certain circumstances against reasonable expenses (including court costs and
attorney's fees), judgments, penalties, fines, and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a director, officer, employee, or
agent of the Company if it is determined that he acted in accordance with the
applicable standard of conduct set forth in such statutory provisions. Thus, the
indemnification provisions will protect officers and directors from liability
only if the officer or director meets the applicable standard of conduct and the
Company has the financial ability to honor the indemnity.
ITEM 16. EXHIBITS.
The Exhibits to this Registration Statement are listed in the Exhibit
Index commencing at page EX-1 hereof.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement which includes any
material information with respect to
36
<PAGE>
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with any securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing Form S-3 and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boynton Beach, State of Florida, on the date below.
DATED: February 11, 2000 CYBER-CARE, INC.
By: /s/ PAUL C. PERSHES
Paul C. Pershes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ MICHAEL F. MORRELL Chairman, Director, February 11, 2000
Michael F. Morrell Chief Executive Officer
/s/ ARTHUR KOBRIN Senior Vice President February 11, 2000
Arthur Kobrin of Financial Operations
/s/ LINDA MOORE Senior Vice President February 11, 2000
Linda Moore and Secretary
/s/ JOHN HAINES Senior Vice President February 11, 2000
John Haines and Director
/s/ LOUIS R. CAPECE Director February 11, 2000
Louis R. Capece
/s/ GLEN BARBER Director February 11, 2000
Glen Barber
/s/ TED ORLANDO Director February 11, 2000
Ted Orlando
/s/ DANA PUSATERI Director February 11, 2000
Dana Pusateri
/s/ TERRY LAZAR Director February 11, 2000
Terry Lazar
38
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
Registration Statement
Under The Securities Act of 1933
EXHIBITS
CYBER-CARE, INC.
(Exact name of registrant as specified in our charter)
39
<PAGE>
EXHIBIT INDEX
CYBER-CARE, INC.
The following exhibits are included as part of this registration
statement, except those exhibits marked (1), which have previously been filed
with the Securities and Exchange Commission and are incorporated by reference to
another registration statement, report or document. References to the "Company"
in this Exhibit Index mean CYBER-CARE, INC., a Florida corporation.
EXHIBIT
NO. DOCUMENT NO.
- ------ -------------- ---
2.1 Stock Exchange Agreement between Medical Industries of
America, Inc. and CyberCare, Inc. (10)
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amended and Restated Bylaws (1)
3.3 Articles of Amendment to the Articles of Incorporation (11)
4.0 Instruments establishing rights of security holders
4.1 Investment Agreement (9)
4.2 Registration Rights Agreement (9)
4.3 Escrow Agreement and Instructions (9)
4.4 Warrant to Purchase Common Stock of Medical Industries
of America, Inc. ("N" Shares) (9)
4.5 Warrant to Purchase Common Stock of Medical Industries
of America, Inc. ("425,000" Shares) (9)
4.6 Letter to Corporate Stock Transfer (9)
4.7 Agreement (9)
4.8 Acknowledgement (9)
5.0 Opinion re legality
5.1 Legal opinion of Atlas, Pearlman, Attorneys at Law (11)
10.0 Material contracts
10.1 Form of Indemnification Agreement between the Registrant
and each of its directors and certain executive officers (1)
10.2 Form of agreement between the Company and its client
hospitals (1)
10.3 Master Lease Agreement, dated October 16, 1991, between
the Registrant and Comdisco Medical Leasing Group, Inc. (1)
10.4 Agreement between the Registrant and Northwest Broward
Invasive Cardiology Associates (1)
10.5 Promissory Note, dated December 9, 1992, executed by
Joseph S. Zinns, M.D. and Marilyn Zinns in favor of Northern
Trust Bank of Florida, N.A. (the "Bank"), Guaranty, dated
December 9, 1992, executed by and between the Registrant and
the Bank. (2)
10.6 Financial Consulting Agreement (1)
10.7 Escrow Agreement, effective as of September 1, 1992, by and
among the Company, Joseph S. Zinns, M.D., Marilyn Zinns,
Milton Barbarosh and Broad and Cassel (1)
10.8 Technomed, Inc. Share Exchange Agreement (3)
10.9 Westmark Group Holdings, Inc. Agreement (4)
10.10 Greenworld Technologies, Inc. Agreement (4)
10.11 Employment Agreement - Harry Kobrin (4)
10.12 Employment Agreement - Dawn M. Drella (4)
10.13 Essential Care Share Exchange Agreement (4)
40
<PAGE>
10.14 Amendment to Essential Care Share Exchange Agreement (4)
10.15 Employment Agreement - Michael Morrell (5)
10.16 Employment Agreement - Arthur Kobrin (6)
10.17 Employment Agreement - Linda Moore (6)
10.18 Share Exchange Agreement between MIOA Acquisition
Company I, Inc. and Global Air Rescue, Inc. (7)
10.19 Share Exchange Agreement between MIOA Acquisition
Company I, Inc. and Global Air Charter, Inc. (7)
10.20 Share Exchange Agreement between MIOA Acquisition
Company I, Inc. and Clearwater Jet Center, Inc. (7)
10.21 Agreement and Plan of Merger between Medical Industries
of America, Inc., MIOA Acquisition Company V, Inc.,
David S. Klein, M.D., P.C. and David S. Klein, M.D. (8)
10.22 Employment Agreement by and between Medical Industries
of America, Inc. and John E. Haines (10)
10.23 Amendment No. 1 to the Employment Agreement by and between
Medical Industries of America, Inc. and John E. Haines (10)
10.24 Agreement of Purchase and Sale by and between HELP
Innovations, Inc., HELP Innovations Acquisition Corp., Inc.,
Cyber-Care, Inc. and Linda L. Roman and Innovative Health
of Kansas, Inc. (11)
10.25 Agreement and Plan of Merger by and among Medical Industries
of America, Inc., MIOA Acquisition Company IV, Inc., Your
Good Health Network, Inc., and Dr. David Vastola, Dana Pusateri,
Dr. Martin Santia, Juan Cocuy, Irma Espinoza, Randy Davis,
Elaine Callendrillo, Lydia Torregrosa-Greber, Richard Hoffman
and Eric Conn (11)
23.2 Consent of Atlas, Pearlman, Attorneys at Law (included in
Exhibit 5.1) (11)
23.3 Consent of Grant Thornton, Certified Public Accountants (11)
(1) Incorporated by reference from the Exhibit with the same reference
number in the Company's Registration Statement.
(2) Previously filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1992.
(3) Previously filed as an exhibit to the Company's Form 8-K dated
August 23, 1995.
(4) Previously filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995.
(5) Previously filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
(6) Previously filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997.
(7) Previously filed as an exhibit to the Company's Form 8-K dated
January 6, 1998.
(8) Previously filed as an exhibit to the Company's Form 8-K dated
August 6, 1998.
(9) Previously filed as an exhibit to the Company's Registration
Statement on Form SB-2 filed on November 30, 1999.
(10) Previously filed as an exhibit to the Company's Form 8-K dated
July 15, 1999.
(11) Filed herewith.
(12) To be filed.
41
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CYBER-CARE, INC.
------------------------------
PURSUANT TO PROVISIONS OF THE
FLORIDA BUSINESS CORPORATION ACT
------------------------------
CYBER-CARE, INC. (the "Corporation"), a corporation organized and existing
under the Florida Business Corporation Act, does hereby certify that, pursuant
to the applicable section(s) of the Florida Business Corporation Act, the
Shareholders approved the following resolutions of the Board of Directors on
August 26, 1999:
WHEREAS, the Company's Articles of Incorporation currently authorize the
Company to issue up to 100,000,000 shares of $.0025 par value per share common
stock ("Common Stock") and 20,000,000 shares of preferred stock, $1.00 par value
per share ("Preferred Stock"); and
WHEREAS, the Board of Directors deems it to be in the best interests of
the Company to increase the number of authorized shares of capital stock to
220,000,000 shares, consisting of 200,000,000 shares of Common Stock, $.0025 par
value per share, and 20,000,000 shares of Preferred Stock, $1.00 par value per
share.
IT IS, THEREFORE,
RESOLVED, that Article III of the Articles is deleted in its entirety and
in its place the following Article III is hereby adopted and incorporated into
the Articles:
The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is 220,000,000 shares,
consisting of 200,000,000 shares of Common Stock, $.0025 par value per
share, and 20,000,000 shares of Preferred Stock, $1.00 par value per
share.
<PAGE>
RESOLVED, except as set forth herein the Articles of Incorporation of
Cyber-Care, Inc. remain unchanged.
NOW THEREFORE
The foregoing was authorized by the Shareholders by majority approval on
August 26, 1999 and that the number of votes cast by the shareholders was
sufficient for approval.
CYBER-CARE, INC.
By: /s/ PAUL C. PERSHES
Paul C. Pershes,
Director/ President
STATE OF FLORIDA )
)
COUNTY OF PALM BEACH )
On this 16th day of September, 1999, before me, a Notary Public in and for
the State and County aforesaid, personally appeared, Paul C. Pershes, who either
is known to me personally or who supplied______________________ as
identification, acknowledged to the fact that he is a Director and President of
CYBER-CARE, INC., and that he executed as said officer and director the
foregoing Articles of Amendment of said Corporation as his act and deed and as
the act and deed of said Corporation.
WITNESS my hand and seal of office on the date and year first aforesaid.
R. WILLIAMS
------------------------------------
NOTARY PUBLIC
Notary Public Commission expires:
[notarial seal]
EXHIBIT 5.1
[ATLAS, PEARLMAN, TROP & BORKSON, LETTERHEAD]
February 11, 2000
Cyber-Care, Inc.
1903 South Congress Avenue, Suite 400
Boynton Beach, Florida 33426
RE: CYBER-CARE, INC. (THE "COMPANY") - REGISTRATION STATEMENT ON
FORM S-3
Dear Sir/Madam:
We refer to the Registration Statement (the "Registration
Statement") filed by Cyber-Care, Inc., a Florida corporation, with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, in connection with the sale of up to 8,430,061 shares of Common
Stock, $.0025 par value per share, 4,113,087 shares of Common Stock
underlying 10%Convertible Debentures and 5,812,615 shares of Common Stock
underlying warrants (collectively, the "Shares"), as set forth in the
above Registration Statement.
In our capacity as counsel to the Company, we have examined the
original or certified copies of all such records of the Company and all
such agreements, certificates of public officials, certificates of
officers or representatives of the Company and others, and such other
documents as we deem relevant and necessary as a basis for the opinions
hereinafter expressed. In such examination we have assumed the genuineness
of all signatures on original documents and the conformity to original
documents of all copies submitted to us as conformed or photostat copies.
As to various questions of fact material to such opinions, we have relied
upon statements or certificates of officials and representatives of the
Company and others.
Based upon the foregoing, it is our opinion that:
<PAGE>
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Florida.
2. The Shares offered for the account of the Selling Shareholders,
as set forth in the Registration Statement, have been duly and validly
authorized.
3. The Shares have been, or will be upon issuance, duly and validly
issued and are fully paid and non-assessable.
We hereby consent to filing of this opinion as an Exhibit to the
Registration Statement. We also hereby consent to the use of our name
under "Legal Matters" in the Prospectus constituting part of the
Registration Statement.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
EXHIBIT 10.24
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is entered into this
29th day of October, 1999, by and between HELP Innovations, Inc., a Kansas
corporation, (hereinafter referred to as "Seller") HELP Innovations Acquisition
Corp, Inc., a Florida corporation, (hereinafter referred to as "Buyer"),
Cyber-Care Inc., a Florida corporation, (hereinafter referred to as "CYBR") and
Linda L. Roman and Innovative Health of Kansas, Inc. (hereinafter referred to as
"Principal Shareholders").
WITNESSETH:
WHEREAS, Seller is the owner and operator of a technology-assisted disease
management company operating under the trade name "HELP Innovations" (the
Business") with its principle business location at 1311 Wakarusa Drive, Suite
2200, Lawrence, Kansas 66049 (the "Business Location"); and
WHEREAS, Seller is desirous of selling certain assets of the Business and
Buyer is desirous of buying certain assets all on the following terms and
conditions.
In consideration of the mutual promises and covenants herein contained and
the sum of $10.00 and other good and valuable consideration paid by Buyer to
Seller, receipt of which is hereby acknowledged by Seller, it is mutually
covenanted and agreed by the parties hereto as follows:
1. PURCHASE AND SALE OF ASSETS
1.1. ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined), and except as otherwise
stated, Seller shall sell, transfer, convey, assign, and deliver to Buyer or
upon Buyer's request, to Corp, and Buyer shall purchase and accept, unless
otherwise excluded as provided herein, all of the business, rights, claims and
assets (of every kind, nature, character and description, whether real, personal
or mixed, tangible or intangible, accrued, contingent, intellectual or
otherwise, and wherever situated) of Seller, used, held for use or acquired or
developed for use in the Business, or developed in the course of conducting the
Business or by persons employed in the Business (collectively the "Purchased
Assets"). The Purchased Assets shall include, but not be limited to, all the
following assets or rights of the Seller, to the extent so used, held, acquired
or developed:
1.1.(a) LEASED REAL PROPERTY. The lease of real property with
respect to Business Location (the "Real Property Lease") described on
Schedule 1.1.(b).
1.1.(b) PERSONAL PROPERTY. All computers, equipment, automobiles,
trucks, vans, tools, supplies, furniture, fixtures and all other personal
property not included in inventory (other than personal property leased
pursuant to Personal Property Leases as hereinafter defined).
1
<PAGE>
1.1.(c) INVENTORY. All inventories including without limitation, all
rights interest and materials relating to intellectual property, software,
development, design, supplies, merchandise and equipment on the Closing
Date, together with related packaging and delivery materials (collectively
the "Inventory").
1.1.(d) PERSONAL PROPERTY LEASES. All leases of equipment and other
personal property leased by Seller for use in the Business (the "Personal
Property Leases") described in Schedule 1.1.(d).
1.1.(e) TRADE RIGHTS. Seller's interest in any and all Trade Rights
of the Company. As used herein, the term "Trade Rights" shall mean and
include: (i) all trademark rights, business identifiers, trade dress,
service marks, trade names and brand names, all registrations thereof and
applications therefor and all goodwill associated with the foregoing; (ii)
all copyrights, copyright registrations and copyright applications, and
all other rights associated with the foregoing and the underlying works of
authorship; (iii) all intellectual property, all patents and patent
applications, and all international proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title,
license or privilege under the intellectual property rights of any third
party; (v) all inventions, mask works and mask work registrations,
know-how, discoveries, improvements, designs, trade secrets, shop and
royalty rights, employee covenants and agreements respecting intellectual
property and non-competition and all other types of intellectual property;
and (vi) all claims for infringement or breach of any of the foregoing.
1.1.(f) CONTRACTS. All Seller's rights in, to and under all
contracts, agreements, license agreements, purchase orders, and commitment
sales orders (hereinafter "Contracts") of Seller. To the extent that any
Contract for which assignment to Buyer provided herein is not assignable
without the consent of another party, this Agreement shall not constitute
an assignment or an attempted assignment thereof if such assignment or
attempted assignment would constitute a breach thereof. Seller and Buyer
agree to use their reasonable best efforts (without any requirement on the
part of Buyer to pay any money or agree to any change in the terms of any
such Contract) to obtain the consent of such other party to the assignment
of any such Contract to Buyer in all cases in which such consent is or may
be required for such assignment. If any such consent shall not be
obtained, Seller agrees to cooperate with Buyer in any reasonable
arrangement designed to provide for Buyer the benefits intended to be
assigned to Buyer under the relevant Contract, including enforcement at
the cost and for the account of Buyer of any and all rights of Seller
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, Buyer, upon notice to Seller, shall have no
obligation with respect to any such Contract and any such Contract shall
not be deemed to be a Purchased Asset hereunder.
1.1.(g) COMPUTER SOFTWARE. All computer programs and other software,
documentation and related property and information of Seller.
2
<PAGE>
1.1.(h) LITERATURE. All reference materials, sales literature,
promotional literature, catalogs and similar materials.
1.1.(i) RECORDS AND FILES. All records, files, invoices, customer
lists, specifications, designs, drawings, accounting records, business
records, disease management protocols, operating data and other data.
1.1.(j) LICENSES; PERMITS. All licenses, permits and approvals
necessary to operate the Business.
1.1.(k) BUSINESS NAME. The name "HELP Innovations" and all rights to
use or allow others to use such name.
1.1.(l) GENERAL INTANGIBLES. All prepaid items, all causes of action
arising out of occurrences before or after the Effective Date, and other
intangible rights and assets including, without limitation, telephone
numbers, directory listings, and prepaid advertisements.
1.1.(m) INTELLECTUAL PROPERTY. All intellectual property, trade
secrets, patents, patents in process, ideas developed or otherwise,
applications, protocols developed or otherwise which Seller may own or lay
claim.
1.2. EXCLUDED ASSETS. Section 1.1 notwithstanding, Seller shall not sell,
transfer, assign, convey or deliver to Buyer, and Buyer will not purchase or
accept the following assets of Seller:
1.2.(a) CONSIDERATION. The consideration delivered by Buyer to
Seller pursuant to this Agreement.
1.2.(b) OBLIGATIONS OF AFFILIATES. Notes, drafts, accounts
receivable or other obligations for the payment of money, owed to Seller
by any Affiliate of Seller. For purposes of this Agreement, the term
"Affiliate" shall mean and include all shareholders, directors and
officers of Seller; the spouse of any such person; any person who would be
the heir or descendant of any such person if he or she were not living;
and any entity in which any of the foregoing has a direct or indirect
interest.
3
<PAGE>
2. ASSUMPTION OF LIABILITIES
2.1. LIABILITIES NOT TO BE ASSUMED. Buyer is not assuming any Liabilities
of Seller and all such Liabilities shall be and remain the responsibility of
Seller, except for those listed on Schedule 1.1.(e).
2.2. TAXES ARISING FROM TRANSACTION. Buyer shall not assume or be
responsible for any taxes applicable to, imposed upon or arising out of the sale
or transfer of the Purchased Assets to Buyer and the other transactions
contemplated by this Agreement, including but not limited to any income,
transfer, sales, use, gross receipts or documentary stamp taxes.
2.3. INCOME AND FRANCHISE TAXES. Buyer shall not assume or be responsible
for any Liability of Seller for Federal income taxes and any state or local
income, profit or franchise taxes (and any penalties or interest due on account
thereof).
2.4. PRODUCT AND SERVICE LIABILITY. Buyer shall not assume or be
responsible for any Liability of Seller arising out of or in any way relating to
or resulting from any product manufactured, developed, assembled or sold or any
service performed prior to the Effective Date (including any Liability of Seller
for claims made for injury to person, damage to property or other damage,
whether made in product liability, tort, breach of warranty or otherwise).
2.5. LITIGATION MATTERS. Buyer shall not assume or be responsible for any
Liability of Seller with respect to any action, suit, proceeding, arbitration,
investigation or inquiry, whether civil, criminal or administrative
("Litigation") and Seller shall indemnify Buyer for any such costs incurred.
2.6. INFRINGEMENTS. Buyer shall not assume or be responsible for any
Liability of Seller with respect to a third party for infringement of such third
party's Trade Rights.
2.7. TRANSACTION EXPENSES. Buyer shall not assume or be responsible for
any Liabilities incurred by Seller in connection with this Agreement and the
transactions contemplated herein.
2.8. LIABILITY FOR BREACH. Buyer shall not assume or be responsible for
any Liabilities of Seller for any breach or failure to perform any of Seller's
covenants and agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract, whether or not assumed hereunder,
including breach arising from assignment of contracts hereunder without consent
of third parties.
2.9. LIABILITIES TO AFFILIATES. Except as specifically set forth herein,
Buyer shall not assume or be responsible for any Liabilities of Seller to its
present or former Affiliates.
2.10. VIOLATION OF LAWS OR ORDERS. Buyer shall not assume or be
responsible for any Liabilities of Seller for any violation of or failure to
comply with any statute, law, ordinance, rule or regulation (collectively,
"Laws") or any order, writ, injunction, judgment, plan or decree
4
<PAGE>
(collectively, "Orders") of any court, arbitrator, department, commission,
board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, foreign or other (collectively, "Government
Entities").
3. PURCHASE PRICE - PAYMENT
3.1. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Purchased Assets shall be 1,334,000 shares of Buyer's restricted voting common
stock ("Acquisition Shares"); at Closing or as soon thereafter as reasonably
possible, Buyer shall deliver to Seller the Acquisition Shares.
3.2. NO REGISTRATION. The Shareholders acknowledge and agree that:
3.2.(a) Except as otherwise provided herein, the Acquisition Shares
are being granted and issued without registration under applicable federal
and state securities laws in reliance upon certain exemptions from
registration under such securities laws;
3.2.(b) Each certificate representing the Acquisition Shares will
bear a legend restricting its transfer, sale, conveyance or hypothecation,
unless such Acquisition Shares are either registered under applicable
securities laws or as exemption from such registration is applicable;
3.2.(c) The Shareholders shall not transfer all of any of the
Acquisition Shares except in compliance with all applicable securities
laws including Rule 144 of the Securities Act of 1933. Rule 144 presently
allows a sale, within limitations, of the Acquisition Shares after one (1)
year from the date the Acquisition Shares are unconditionally earned
pursuant to this Agreement;
3.2.(d) The Shareholders are acquiring the Acquisition Shares for
their own account, for investment purposes only and not with a view to the
sale or distribution thereof.
3.3. REGISTRATION; CREDITOR SHARES. Twenty-five percent of the Acquisition
Shares are designated solely for use in negotiating the full and complete
satisfaction of all outstanding liabilities of Seller (hereinafter "Creditor
Shares"). Buyer shall use his reasonable best efforts to effect a registration
of Creditor Shares on Form S-3 or other appropriate form (the Registration
Statement) prior to December 31, 1999.
Notwithstanding the foregoing, the Principal Shareholders shall, in any
event, have piggyback registration rights with respect to those Acquisition
Shares they receive for which a registration is not effected by Seller or resale
is not otherwise available pursuant to Rule 144(k) of the Securities Act.
Notwithstanding, if Seller's underwriter or Seller, in good faith, determines
that market factors or underwriting conditions prohibit or otherwise require a
limitation of the number of shares to be underwritten, the underwriter or Seller
may exclude the Acquisition Shares in the
5
<PAGE>
same proportion, as nearly as practicable, as the other selling shareholders of
Seller participating in such registration (proportional to the number of shares
requested to be registered by each) or the underwriter or Seller may limit the
number of Acquisition Shares to be included in the registration and underwriting
to a specified percentage of the total offering to be distributed through the
underwriting in the same proportion, as nearly as practicable, to other selling
shareholders of Seller participating in such registration (proportional to the
number of shares requested to be registered by each).
The Creditor Shares shall be held in escrow from the Closing Date until
the registration of such Creditor Shares becomes effective pursuant to that
certain Stock Pledge and Escrow Agreement executed same even date herewith. Upon
registration the escrow agent shall release 10% of the Creditor Shares each
month to Taylor Stuart Financial on account of the Seller to be held for sale
and used for payment to the satisfaction of the Creditors.
3.4. LICENSE OF ASSET. From the Closing Date until the Creditor Shares are
registered pursuant to Section 3.3 Seller does hereby grant an exclusive license
of all assets of any kind to be acquired hereunder to Buyer for Buyer's sole and
exclusive use, unfettered by any claim. In the event any claim resulting from
activity prior to closing date is asserted Seller will defend, indemnify and
hold harmless Buyer for any cost incurred therein. Furthermore should Buyer
elect to satisfy any claim or cost incurred resulting from a prior claim, Buyer
shall be entitled to be reimbursed therefor on a first priority basis from the
proceeds of the sale of Creditor Shares contemplated by Section 3.3.
3.5. OTHER PAYMENTS AND ADJUSTMENTS. The amount of wages and other
remuneration due in respect of periods prior to the Effective Date to employees
of the Business and the amount of bonuses due to such employees for all such
periods will be paid by Seller directly to such employees.
3.6. ALLOCATION OF PURCHASE PRICE. The aggregate Purchase Price (including
the assumption by Buyer of the Assumed Liabilities) shall be allocated among the
Purchased Assets for tax purposes in accordance with Schedule 3.5. Seller and
Buyer will follow and use such allocation in all tax returns, filings or other
related reports made by them to any governmental agencies. To the extent that
disclosures of this allocation are required to be made by the parties to the
Internal Revenue Service ("IRS") under the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code") or any regulations
thereunder, Buyer and Seller will disclose such reports to the other prior to
filing with the IRS.
3.7 CREDITORS LOAN. From the Closing Date until the Creditor Shares are
registered pursuant to Section 3.3 Buyer does hereby agree to advance funds as
may be necessary to maintain the Seller's plan to satisfy Creditors and
otherwise operate. These advances shall not exceed $20,000 per month provided,
the registration shall have occurred on or before December 31, 1999. These
advances shall in no way operate as a guarantee by the Buyer of any claim
against the Seller. These advances shall be repaid from the proceeds of the sale
of Creditor Shares as available and contemplated by Section 3.3 after the
Seller's monthly payment to satisfy Seller's Creditor Plan as set forth on
Schedule 3.7.
6
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPAL SHAREHOLDERS
Seller and its Principal Shareholders, hereby make the following
representations and warranties to Buyer, each of which is true and correct on
the date this Agreement is executed and shall remain true and correct to and
including the Effective Date, shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer other than as
specifically disclosed in the disclosure schedules delivered to Buyer at the
time of the execution of this Agreement, and shall survive the Closing of the
transactions provided for herein. For the purposes of this Agreement, "Principal
Shareholder" shall be Linda L. Roman and Innovative Health of Kansas, Inc.
4.1. CORPORATE.
4.1.(a) ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Kansas.
4.1.(b) CORPORATE POWER. Seller has all requisite corporate power
and authority to own, operate and lease its properties, to carry on its
business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by Seller pursuant hereto and to carry out the transactions
contemplated hereby and thereby.
4.2. AUTHORITY. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Seller pursuant hereto
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the shareholders and the Board of Directors of Seller.
No other or further corporate act or proceeding on the part of Seller or its
shareholders is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Seller pursuant hereto or the
consummation of the transactions contemplated hereby and thereby. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Seller pursuant hereto will
constitute, valid binding agreements of Seller, enforceable in accordance with
their respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
4.3. NO VIOLATION. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by Seller
pursuant hereto, nor the consummation by Seller of the transactions contemplated
hereby and thereby (a) will violate any applicable Law or Order, (b) will
require any authorization, consent, approval, exemption or other action by or
notice to any Government Entity or (c) will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(as defined in Section 4.9.), upon any of the assets of Seller under, any term
or provision
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of the Articles of Incorporation or By-laws of Seller or of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which Seller is a party or by which Seller or any of its assets or
properties may be bound or affected.
4.4. TAX MATTERS. Except as set forth on Schedule 4.4: (i) all state,
foreign, county, local and other tax returns relating primarily to the Business
or the Purchased Assets, or required to be filed by or on behalf of Seller in
any jurisdiction or any political subdivision thereof, have been timely filed
and the taxes paid or adequately accrued; (ii) Seller has duly withheld and paid
all taxes which it is required to withhold and pay relating to salaries and
other compensation heretofore paid to the employees of the Business; and (iii)
Seller has not received any notice of underpayment of taxes or other deficiency
which has not been paid and there are outstanding agreements or waivers
extending the statutory period of limitations applicable to any tax return or
report relating primarily to the Business or the Purchased Assets, or required
to have been filed by Seller in any jurisdiction or political subdivision
thereof.
4.5. NO LITIGATION. Except as set forth in Schedule 4.6 there is no
Litigation pending or threatened against Seller, or its employees, agents,
officers or directors (in such capacity) that in any way involves the Business,
the Purchased Assets or the Assumed Liabilities, nor does Seller know, or have
grounds to know, of any basis for any Litigation. Except as set forth in
Schedule 4.6, neither Seller, the Purchased Assets nor the Assumed Liabilities
is subject to any order of any Government Entity.
4.6. COMPLIANCE WITH LAWS AND ORDERS.
4.6.(a) COMPLIANCE. Except as set forth in Schedule 4.8(a), the
Business (including each and all of its operations, practices, properties
and assets) is in compliance with all applicable laws and orders,
including, without limitation, those applicable to discrimination in
employment, Medicare, insurance billings, providing of medical services,
sales of medication and durable medical equipment, occupational safety and
health, trade practices, competition and pricing, product warranties,
zoning, building and sanitation, employment, retirement and labor
relations, and product advertising. Except as set forth in Schedule
4.7(a), Seller has not received notice of any violation or alleged
violation of, and is subject to no Liability for past or continuing
violation of, any laws or orders with respect to the operations of the
Business. All reports and returns required to be filed by Seller with any
Government Entity have been filed, and were accurate and complete when
filed. Without limiting the generality of the foregoing:
(i) The operation of the Business as it is now conducted does
not, nor does any condition existing at the Business Location, in
any manner constitute a nuisance or other tortuous interference with
the rights of any person or persons in such a manner as to give rise
to or constitute the grounds for a suit, action, claim or demand by
any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect of the
conduct of the Business or the manner in which it is now conducted.
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(ii) Seller has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments where it is required to maintain such accounts with
respect to the operations of the Business, and each of such accounts
has a positive balance.
4.6.(b) LICENSES AND PERMITS. Seller has all licenses, permits,
approvals, authorizations and consents of all Government Entities and
insurance and all certificates, licenses and permits required for the
conduct of the Business. Except as set forth in Schedule 4.6.(b), the
Business (including its operations, properties and assets) is and has been
in compliance with all such permits and licenses, approvals,
authorizations and consents.
4.7. TITLE TO AND CONDITION OF PROPERTIES.
4.7.(a) MARKETABLE TITLE. Seller upon registration of Creditor
Shares, shall have good and marketable title to all the Purchased Assets,
free and clear of all mortgages, liens (statutory or otherwise), security
interests, claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, covenants, reservations, restrictions,
exceptions, limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except those described in Schedule 4.7.(a). None
of the Purchased Assets are subject to any restrictions with respect to
the transferability thereof. Seller has complete and unrestricted power
and right to sell, assign, convey and deliver the Purchased Assets to
Buyer as contemplated hereby. Upon registration of Creditor Shares, Buyer
will receive good and marketable title to all the Purchased Assets, free
and clear of all Liens of any nature whatsoever except those described in
the appropriate Schedule.
4.7.(b) CONDITION. All tangible assets constituting Purchased Assets
hereunder are in good operating condition and repair, free from any
defects (except such minor defects as do not interfere with the use
thereof in the conduct of the normal operations of Seller), have been
maintained consistent with the standards generally followed in the
industry and are sufficient to carry on the business of Seller as
conducted during the preceding 3 months. All buildings and other
structures owned or otherwise utilized by Seller in operating the Business
are in good condition and repair and have no structural defects or defects
affecting the plumbing, electrical, sewerage, or heating, ventilating or
air conditioning systems.
4.7.(c) NO CONDEMNATION OR EXPROPRIATION. Neither the whole nor any
portion of the Purchased Assets is subject to any order to be sold or is
being condemned, expropriated or otherwise taken by any Government Entity
with or without payment of compensation therefor, nor to the best of
Seller's knowledge has any such condemnation, expropriation or taking been
proposed.
4.8. INSURANCE Set forth in Schedule 4.8 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the Business and the Purchased Assets, true and correct
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copies of which have heretofore been delivered to Buyer. Schedule 4.8 includes,
without limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and the date through which premiums have been paid with respect to
each such policy, and any pending claims in excess of $5,000.00. All such
policies are valid, outstanding and enforceable policies and provide insurance
coverage for the Business and the Purchased Assets, of the kinds, in the amounts
and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Schedule 4.8
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses from the beginning of the most recent fiscal year to
date equal 25% or more of the coverage limit. No notice of cancellation or
termination has been received with respect to any such policy, and neither
Seller or the Principal Shareholders have any information or knowledge of any
act or omission of Seller which could result in cancellation of any such policy
prior to its scheduled expiration date. Seller has not been refused any
insurance with respect to any aspect of the operations of the Business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Seller has duly and timely made all claims it has been entitled to make under
each policy of insurance. There is no claim by Seller pending under any such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and neither Seller or the Principal Shareholders
know of any basis for denial of any claim under any such policy. Seller has not
received any written notice from or on behalf of any insurance carrier issuing
any such policy that insurance rates therefor will hereafter be substantially
increased (except to the extent that insurance rates may be increased for all
similarly situated risks) or that there will hereafter be a cancellation or an
increase in a deductible (or an increase in premiums in order to maintain an
existing deductible) or non-renewal of any such policy. Such policies are
sufficient in all material respects for compliance by Seller with all
requirements of law and with the requirements of all material contracts to which
Seller is a party.
4.9. CONTRACTS AND COMMITMENTS.
4.9.(a) REAL PROPERTY LEASES. Except as set forth in Schedule
1.1.(a) Seller has no leases of real property used or held for use in
connection with the Business or the Purchased Assets.
4.9.(b) PERSONAL PROPERTY LEASES. Except as set forth in Schedule
1.1.(d) Seller has no leases of personal property used or held for use in
connection with the Business or the Purchased Assets.
4.9.(c) PURCHASE COMMITMENTS. Seller has no purchase commitments for
inventory items or supplies in connection with the Business.
4.9.(d) SALES COMMITMENTS. Except as set forth in Schedule 4.10(d)
Seller has no sales contracts or commitments to customers or distributors
in connection with or affecting
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the Business or the Purchased Assets. Seller has no sales contracts or
commitments in connection with or affecting the Business or the Purchased
Assets except those made in the ordinary course of business, at arm's
length, and no such contracts or commitments are for a sales price which
would result in a loss to the Business.
4.9.(e) CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Seller has no
agreement, understanding, contract or commitment (written or oral) in
connection with or affecting the Business or the Purchased Assets with any
Affiliate or any other officer, employee, agent, consultant, distributor,
dealer or franchisee.
4.9.(f) POWERS OF ATTORNEY. The Seller has not given a power of
attorney, which is currently in effect, to any person, firm or corporation
for any purpose whatsoever in connection with or affecting the Business or
the Purchased Assets.
4.9.(g) LOAN AGREEMENTS. Except as set forth in Schedule 4.9(g)
Seller is not obligated under any loan agreement, promissory note, letter
of credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise, which obligation constitutes or gives rise or could by its
terms, through the giving of notice or any other events short of judgment
by a court, give rise to a lien against any Purchased Asset.
4.9.(h) GUARANTEES. Except as set forth in Schedule 4.9(h) Seller
has not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person, in connection with the Business or in any other
way which affects the Business or the Purchased Assets.
4.9.(i) GOVERNMENT CONTRACTS. Except as shown in Schedule 4.9(i)
Seller is not a party to any contract with any governmental body.
4.9.(j) BURDENSOME OR RESTRICTIVE AGREEMENTS. Seller is not a party
to nor is it bound by any agreement, deed, lease or other instrument in
connection with or affecting the Business or the Purchased Assets which is
so burdensome as to materially affect or impair the operation of the
Business. Without limiting the generality of the foregoing, Seller is not
a party to nor is it bound by any such agreement requiring Seller to
assign any interest in any trade secret or proprietary information
constituting Purchased Assets hereunder, or prohibiting or restricting
Seller in its operation of the Business from competing in any business or
geographical area or soliciting customers or otherwise restricting it from
carrying on the Business anywhere in the world.
4.9.(k) NO DEFAULT. Except as shown in Schedule 4.9(j)Seller is not
in default under any lease, license, contract or commitment in its
operation of the Business, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of
Seller's obligations or result in the creation of any Lien on any
Purchased Asset. No third party is in default
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under any such lease, contract or commitment to which Seller is a party,
nor has any event or omission occurred which, through the passage of time
or the giving of notice, or both, would constitute a default thereunder,
or give rise to an automatic termination, or the right of discretionary
termination thereof.
4.10. TRADE RIGHTS. Schedule 4.10. lists all Trade Rights of the type
described in Section 1.1.(d) which are or were used, held for use, or acquired
or developed for use in the Business, or developed in the course of conducting
the Business or by persons employed in the Business, specifying whether such
Trade Rights are owned, controlled, used or held (under license or otherwise) by
Seller, and also indicating which of such Trade Rights are registered. Seller is
not infringing and has not infringed any Trade Rights of another in the
operation of the Business, nor is any other person infringing the Trade Rights
of Seller. Seller has not granted any license or made any assignment of any
Trade Right listed on Schedule 4.10, and no other person has any right to use
any such Trade Right. Seller does not pay any royalties or other consideration
for the right to use any Trade Rights of others. There is no Litigation pending
or threatened to challenge Seller's right, title and interest with respect to
its continued use and right to preclude others from using any Trade Rights of
Seller. All Trade Rights of Seller are valid, enforceable and in good standing,
and there are no equitable defenses to enforcement based on any act or omission
of Seller.
4.11. PRODUCT WARRANTY AND PRODUCT LIABILITY. There are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. There are no defects in design, construction or manufacture of
Products which would adversely affect performance or create an unusual risk of
injury to persons or property. None of the Products has been the subject of any
replacement, field fix, retrofit, modification or recall campaign and, to
Seller's knowledge, no facts or conditions exist which could reasonably be
expected to result in such a recall campaign. As used in this Section 4.11, the
term "Products" means any and all medication and other products currently or at
any time previously manufactured, compounded, mixed, formulated, distributed or
sold by Seller, or by any predecessor of Seller under any brand name or mark
under which products are or have been manufactured, distributed or sold by
Seller, in or through the Business.
4.12. ASSETS NECESSARY TO BUSINESS. The Purchased Assets include all
property and assets (except for the Excluded Assets), tangible and intangible,
and all leases, licenses and other agreements, which are necessary to permit
Buyer to carry on, as currently used or held for use in, the Business as
presently conducted.
4.13. NO BROKERS OR FINDERS. Neither Seller nor any of its directors,
officers, employees, shareholders or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
4.14. FINANCIAL STATEMENTS. Included as Schedule 4.14 are true and
complete copies of the financial statements of the Seller consisting of (i)
balance sheets of the Seller as of December 31, 1998, and 1997, and the related
statements of operations for the years then ended (including the notes contained
therein or annexed thereto), which financial statements are not audited, and
(ii) an unaudited balance sheet of the Seller as of August 31, 1999 (the "RECENT
BALANCE SHEET"), and the
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related unaudited statements of operations for the twelve (12) months then ended
(the "RECENT STATEMENT OF OPERATIONS") and for the corresponding period of the
prior year (including the notes and schedules contained therein or annexed
thereto). All of such financial statements (including the notes and schedules
contained therein or annexed thereto) are true, complete and accurate, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, have been prepared in accordance with the books and records
of the Seller and fairly present, in accordance with generally accepted
accounting principles, the assets with adequate provision made for doubtful
accounts, liabilities and financial position, the results of operations of the
Seller as of the dates and for the years and periods indicated.
4.15. CONDUCT SINCE DATE OF RECENT BALANCE SHEET. Except as set forth in
this Agreement and as disclosed in Schedule 4.15 hereto, none of the following
has occurred since the date of the Recent Balance Sheet:
4.15.(a) NO ADVERSE CHANGE. Any material adverse change in the
financial condition, Purchased Assets, Assumed Liabilities, Business,
prospects or operations of the Seller;
4.15.(b) NO DAMAGE. Any material loss, damage or destruction,
whether covered by insurance or not, affecting the Seller's Business or
the Purchased Assets;
4.15.(c) NO INCREASE IN COMPENSATION. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of the Seller (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued, that exceeds in the aggregate a seven
percent (7%) increase in the total compensation or benefits payable to any
single employee or agent of the Seller;
4.15.(d) NO LABOR DISPUTES. There are no labor dispute or
disturbance, other than routine individual grievances which are not
material to the Business or the Purchased Assets;
4.15.(e) NO COMMITMENTS. Any commitment or transaction by the Seller
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of business consistent with past
practice;
4.15.(f) NO DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any properties or assets of the Seller, except
in the ordinary course of business;
4.15.(g) NO LIENS. Except as set forth in Schedule 4.8(a) any
mortgage, pledge, lien or encumbrance made on any of the Purchased Assets;
4.15.(h) NO AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by the Seller of any Assumed Liability, or any waiver of
material rights thereunder, other than in the ordinary course of business;
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4.15.(i) CREDIT. Any grant of credit to any customer or distributor
on terms or in amounts more favorable than those which have been extended
to such customer or distributor in the past, any other change in the terms
of any credit heretofore extended, or any other change of the Seller's
policies or practices with respect to the granting of credit; or
4.15.(j) NO UNUSUAL EVENTS. Any other event or condition not in the
ordinary course of business of the Seller.
4.16. SUBSIDIARIES. Seller has no subsidiaries or interests in any other
entity nor does the Seller own or control, directly or indirectly, any capital
stock of any corporation or interest in any partnership, trust or unincorporated
association, or any interest or investment in any other corporation, association
or other business entity.
4.17. ACCOUNTS RECEIVABLE. All accounts receivable of the Seller reflected
on the Recent Balance Sheet, and as incurred in the normal course of business
since the date thereof, represent arm's length sales actually made in the
ordinary course of business; are collectible (net of the reserve shown on the
Recent Balance Sheet for doubtful accounts) in the ordinary course of business
without the necessity of commencing legal proceedings; are subject to no
counterclaim or setoff; and are not in dispute. Schedule 4.17 contains an aged
schedule of accounts receivable included in the Recent Balance Sheet.
4.18. ENVIRONMENTAL MATTERS. The applicable Laws relating to pollution or
protection of the environment, including Laws relating to emissions, discharges,
generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("WASTE") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts are herein collectively referred
to as the "ENVIRONMENTAL LAWS". Without limiting the generality of the foregoing
provisions of this Section, Seller is in full compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder. Except as set forth
in Schedule 4.18, there is no Litigation nor any demand, claim, hearing or
notice of violation pending or threatened against the Seller relating in any way
to the Environmental Laws or any Order issued, entered, promulgated or approved
thereunder. Except as set forth in Schedule 4.18, there are no past or present
or future events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans which may interfere with or prevent compliance or
continued compliance with the Environmental Laws or with any Order issued,
entered, promulgated or approved thereunder, or which may give rise to any
liability, including, without limitation, liability under CERCLA or similar
state or local Laws, or otherwise form the basis of any Litigation, hearing,
notice of violation, study or investigation, based
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on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Waste.
4.19. PERSONNEL. Schedule 4.19 attached hereto contains accurate and
complete information as to names and rates of compensation (whether in the form
of salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all personnel of the Seller, together with information as
to any contracts with any such personnel. Seller has no pension, profit-sharing,
bonus, incentive, insurance or other employee benefit plans (including without
limitation any such plans within the meaning of Section 3 (3) of the Employee
Retirement Income Security Act of 1974, as amended) in which any employees of
the Seller participate, except as set forth on the Schedule 4.19.
4.20. DISCLOSURE. No representation or warranty by Seller or the Principal
Shareholders in this Agreement, nor any statement, certificate, schedule or
exhibit hereto furnished or to be furnished by or on behalf of Seller or the
Principal Shareholders pursuant to this Agreement or in connection with
transactions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading. All statements and information
contained in any certificate, instrument, disclosure schedules or document
delivered by or on behalf of Seller or the Principal Shareholders shall be
deemed representations and warranties by Seller and the Principal Shareholders.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to the
Seller and the Principal Shareholders, each of which Buyer represents to be true
and correct on the date hereof, shall remain true and correct to and including
the Effective Date, shall be unaffected by any investigation heretofore or
hereafter made by the Shareholders, or any knowledge of the Shareholders other
than as specifically disclosed in the disclosure schedules delivered to the
Seller.
5.1. SHARES. All of the Acquisition Shares will be validly issued to the
Seller, fully paid and non-assessable. Buyer will deliver, good and marketable
title to the Acquisition Shares, which shares shall be fully paid and
non-assessable and except as otherwise provided in this Agreement shall be free
and clear of all Liens.
5.2. ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and is not required
to be qualified or licensed as a foreign corporation in any other jurisdiction.
Buyer has the full power and authority to own all its assets and to conduct its
business as and where its business is presently conducted. Accurate, current and
complete copies of the Article of Incorporation and Bylaws of the Company are
attached hereto as Schedule 5.2.
5.3. AUTHORITY AND APPROVAL OF AGREEMENT.
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5.3.(a) The execution and delivery of this Agreement by Buyer and
the performance of all Buyer's obligations hereunder have been duly
authorized and approved by all requisite corporate action on the part of
Buyer pursuant to applicable law. Buyer has the power and authority to
execute and deliver this Agreement and to perform all its obligations
hereunder.
5.3.(b) This Agreement and each of the other documents, instruments
and agreements executed by Buyer in connection herewith constitute the
valid and legally binding agreements of Buyer, enforceable against Buyer
in accordance with their terms, except that:
(i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application affecting the enforcement of the rights and remedies of
creditors; and
(ii) the availability of equitable remedies as may be limited
by equitable principles.
5.4. NO VIOLATIONS Neither the execution, delivery nor performance of this
Agreement or any other documents, instruments or agreements executed by the
Buyer in connection herewith, nor the consummation of the transactions
contemplated hereby: (a) constitutes a violation of or default under (either
immediately, upon notice or upon lapse of time) the Articles of Incorporation or
Bylaws of Buyer, any provision of any contract to which Buyer or its assets may
be bound, any judgment to which Buyer is bound or any law applicable to Buyer;
or (b) result in the creation or imposition of any encumbrance upon, or give any
third person any interest in or right to, any or all of the Initial Shares or
any other capital stock of Buyer or any of the assets of Buyer; or (c) result in
the loss or adverse modification of, or the imposition of any fine or penalty
with respect to, any license, permit or franchise granted or issued to, or
otherwise held by or for the use of, Buyer.
5.5. CONSENTS. The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
do not require any consent that has not been received prior to the date hereof.
5.6. BROKERS. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Shareholder or the Company could
become liable or obligated.
5.7. FULL DISCLOSURE. To the best knowledge of Buyer, no representation or
warranty by Buyer in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of Buyer
pursuant to this Agreement or in connection with transactions contemplated
hereby, contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained therein
not materially misleading.
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6. REPRESENTATIONS AND WARRANTIES OF CYBR
CYBR hereby makes the following representations and warranties to Seller
and the Principal Shareholders, each of which CYBR represents to be true and
correct on the date hereof, shall remain true and correct to and including the
Effective Date, shall be unaffected by any investigation heretofore or hereafter
made by the Shareholders, or any knowledge of the Shareholders other than as
specifically disclosed in the disclosure schedules delivered to Seller.
6.1. SHARES. All of the Acquisition Shares will be validly issued to
Seller, fully paid and non-assessable. CYBR will deliver, good and marketable
title to the Acquisition Shares, which shares shall be fully paid and
non-assessable and except as otherwise provided in this Agreement shall be free
and clear of all Liens.
6.2. ORGANIZATION. CYBR is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and is not required
to be qualified or licensed as a foreign corporation in any other jurisdiction.
CYBR has the full power and authority to own all its assets and to conduct its
business as and where its business is presently conducted. Accurate, current and
complete copies of the Article of Incorporation and Bylaws of the Company are
attached hereto as Schedule 5.2.
6.3. AUTHORITY AND APPROVAL OF AGREEMENT.
6.3.(a) The execution and delivery of this Agreement by CYBR and the
performance of all CYBR's obligations hereunder have been duly authorized
and approved by all requisite corporate action on the part of CYBR
pursuant to applicable law. CYBR has the power and authority to execute
and deliver this Agreement and to perform all its obligations hereunder.
6.3.(b) This Agreement and each of the other documents, instruments
and agreements executed by CYBR in connection herewith constitute the
valid and legally binding agreements of CYBR, enforceable against CYBR in
accordance with their terms, except that:
(i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application affecting the enforcement of the rights and remedies of
creditors; and
(ii) the availability of equitable remedies as may be limited
by equitable principles.
6.4. NO ENCUMBRANCES ON SECURITIES. Except as set forth in this Agreement,
the Acquisition Shares being transferred by CYBR to Seller are free and clear of
any liens, claims, encumbrances or restrictions of any kind, and none of those
shares is subject to options, rights, warrants, or other agreements or
commitments other than set forth in this Agreement.
7. OTHER MATTERS
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7.1. NONCOMPETITION; CONFIDENTIALITY. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
Business, Seller and the Principal Shareholders, Linda L. Roman, and subject to
an Employment Agreement of even date, hereby covenant and agree as follows:
7.1.(a) COVENANT NOT TO COMPETE. For a period of three (3) years
from the Effective Date, they will not, directly or indirectly:
(i) engage in, continue in or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business
organization which is so engaged;
(ii) consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Buyer
in any aspect with respect to the Business or Purchased Assets which
Buyer is acquiring hereunder, including, but not limited to,
advertising or otherwise endorsing the products of any such
competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arms' length basis with any
such competitor;
(iii) offer new employment to an employee of the Business,
without the prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade
the provisions of this covenant not to compete or to commit any act
which adversely affects the Business, Purchased Assets or Assumed
Liabilities; provided, however, that the foregoing shall not
prohibit the ownership of securities of corporations which are
listed on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of
the outstanding shares of any such corporation. The parties agree
that the geographic scope of this covenant not to compete shall
extend throughout the state of Florida. The parties agree that Buyer
may sell, assign or otherwise transfer this covenant not to compete,
in whole or in part, to any person, corporation, firm or entity that
purchases all or part of the Business or the Purchased Assets. In
the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as
to duration, geographical scope or activity, it is expressly agreed
that this covenant not to compete shall be construed so that the
remaining provisions shall not be affected, but shall remain in full
force and effect, and any such over broad provisions shall be
deemed, without further action on the part of any person, to be
modified,
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amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
7.1.(b) COVENANT OF CONFIDENTIALITY. Seller shall not at any time
subsequent to the Closing, except as explicitly requested by Buyer, (i)
use for any purpose, (ii) disclose to any person, or (iii) keep or make
copies of documents, tapes, discs or programs containing, any confidential
information concerning the Business, the Purchased Assets or the Assumed
Liabilities. For purposes hereof, "confidential information" shall mean
and include, without limitation, all Trade Rights which are Purchased
Assets, all customer lists and customer information of the Business, and
all other information concerning the processes, apparatus, equipment,
services offered, packaging, products, marketing and distribution methods
of the Business, not previously disclosed to the public directly by
Seller.
7.1.(c) EQUITABLE RELIEF FOR VIOLATIONS. Seller agrees that the
provisions and restrictions contained in this Section are necessary to
protect the legitimate continuing interests of Buyer in acquiring the
Business through the purchase of the Purchased Assets and the assumption
of the Assumed Liabilities, and that any violation or breach of these
provisions will result in irreparable injury to Buyer for which a remedy
at law would be inadequate and that, in addition to any relief at law
which may be available to Buyer for such violation or breach and
regardless of any other provision contained in this Agreement, Buyer shall
be entitled to injunctive and other equitable relief as a court may grant
after considering the intent of this Section.
7.2. USE OF NAME. Following the Effective Date, neither Seller nor any
Affiliate shall, without the prior written consent of Buyer, make any use of the
name "HELP Innovations, Inc." or any other name confusingly similar thereto,
except as may be necessary for Seller to pay its liabilities, prepare tax
returns and other reports, and to otherwise wind up and conclude its business.
7.3 AFTER CLOSING. After the Closing, each party will afford the other
party, its counsel, accountants and other representatives, during normal
business hours, reasonable access to the books, records and other data in such
party's possession relating directly or indirectly to the properties,
liabilities or operations of the Business, with respect to periods prior to the
Closing, and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party for any proper
business purpose. Each party agrees for a period extending three years after the
Closing not to destroy or otherwise dispose of any such records without first
offering in writing to surrender such records to the other party, which party
shall have ten (10) days after such offer to agree in writing to take possession
thereof. All representations and warranties of Seller shall survive the Closing.
8. FURTHER COVENANTS OF SELLER AND PRINCIPAL SHAREHOLDERS
Seller and the Principal Shareholders covenant and agree as follows:
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8.1. CONDUCT OF BUSINESS PENDING THE CLOSING. From the date of this
Agreement until the Effective Date, unless this Agreement is terminated as
provided for herein, and except as otherwise approved in writing by the Buyer:
8.1.(a) ACCESS TO INFORMATION AND RECORDS. Seller shall give Buyer,
its counsel, accountants and other representatives(i)access during normal
business hours to all of the properties, books, records, contracts and
documents of Seller relating to the Business or the Purchased Assets or
Assumed Liabilities for the purpose of such inspection, investigation and
testing as Buyer deems appropriate (and Seller shall furnish or cause to
be furnished to Buyer and its representatives all information with respect
to the Business Buyer may request); (ii) access to employees, agents and
representatives of the Business for the purpose of conducting business,
meetings and communications as Buyer reasonably desires; and (iii) access
to vendors, customers, manufacturers of its medication and equipment, and
others having business dealings with the Business.
8.1.(b) MAINTAIN ORGANIZATION. Seller and the Principal Shareholders
will take such action as may be necessary to maintain, preserve, renew and
keep in favor and effect the existence, rights and franchises of the
Business and will use their best efforts to preserve the Business intact,
to keep available to Buyer the present officers and employees of the
Business, and to preserve for Buyer its present relationships with
suppliers and customers and others having business relationships with the
Business.
8.1.(c) NO BREACH. Seller and the Principal Shareholders will not do
or omit any act, or permit any omission to act, which may cause a breach
of any contract, commitment or obligation material to the Business, or any
breach of any representation, warranty, covenant or agreement made by
Seller or the Principal Shareholders herein, or which would have required
disclosure pursuant to this Agreement.
8.1.(d) NO MATERIAL CONTRACTS. No contract or commitment will be
entered into, and no purchase of medication, equipment, inventory, or
supplies and no sale of goods or services (real, personal, or mixed,
tangible or intangible) will be made, by or on behalf of Seller in
connection with its operation of the Business.
8.1.(e) MAINTENANCE OF INSURANCE. Seller shall maintain all of the
insurance set forth in Schedule 4.10.
8.1.(f) NO NEGOTIATIONS. Seller and the Principal Shareholders will
not directly or indirectly (through a representative or otherwise) solicit
or furnish any information to any prospective buyer, commence, or conduct
presently ongoing, negotiations with any other party or enter into any
agreement with any other party concerning the sale of the Business or the
Purchased Assets or any part thereof (an "acquisition proposal"), and
Seller and the Principal Shareholders shall immediately advise Buyer of
the receipt of any acquisition proposal.
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8.1(g) INTERIM FINANCIALS. The Seller will provide Buyer with
interim monthly financial statements and other management reports as and
when they are available.
8.2. CONSENTS. Seller and the Principal Shareholders will use their best
efforts prior to Closing to obtain all consents necessary for the consummation
of the transactions contemplated hereby.
8.3. OTHER ACTION. Seller and the Principal Shareholders shall use their
best efforts to cause the fulfillment at the earliest practicable date of all of
the conditions to the parties' obligations to consummate the transactions
contemplated in this Agreement.
8.4. DISCLOSURE. Seller and the Principal Shareholders shall have a
continuing obligation to promptly notify Buyer in writing with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth herein or described
in the disclosure schedules, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
8.5. SATISFACTION OF CREDITORS. Seller and its Principal Shareholders
shall obtain informed consent of its primary creditors, including but not
limited to the Internal Revenue Service and First State Bank and Trust, of
Tonganoxie, KS, to this transaction. For the purposes of this paragraph a
"primary creditor" shall be one in which their balance exceeds $10,000.00 except
for Ernst & Young and Lawerence Hurst.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, Buyer's obligations to consummate the
transaction contemplated by this Agreement shall be subject to the satisfaction
of each of the conditions set forth in this Section 8, except to the extent that
such satisfaction is waived by Buyer in writing.
9.1. REPRESENTATIONS AND WARRANTIES TRUE ON THE EFFECTIVE DATE. Each of
the representations and warranties made by Seller in this Agreement, and the
statements contained in the disclosure schedules or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Effective Date as though such
representations and warranties were made or given on and as of the Effective
Date, except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer.
9.2. COMPLIANCE WITH AGREEMENT. Seller shall have in all material respects
performed and complied with all of its agreements and obligations under this
Agreement which are to be performed or complied with by Seller prior to or on
the Effective Date, including the delivery of the closing documents specified in
this Agreement.
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9.3. ABSENCE OF LITIGATION. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Seller or any of the affiliates, officers or directors
of any of them, with respect to the transactions contemplated hereby.
9.4. CONSENTS AND APPROVALS. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
not less than two (2) business days prior to the Effective Date. Notwithstanding
the foregoing, receipt of the consent of any third party to the assignment of a
Contract which is not (and is not required to be) disclosed in the disclosure
schedules shall not be a condition to Buyer's obligation to close, provided that
the aggregate of all such Contracts does not represent a material portion of the
sales or expenditures of the Business. After the Closing, Seller will continue
to use its best effects to obtain any such consents or approvals, and Seller
shall not hereby be relieved of any liability hereunder for failure to perform
any of its covenants or for the inaccuracy of any representation or warranty.
9.5. ESTOPPEL CERTIFICATES. Buyer shall have obtained Buyer on or prior to
the Effective Date an estoppel certificate or status letter from the landlord
under the lease for the Business Location to be assumed pursuant to this
Agreement which estoppel certificate or status letter will certify (i) the lease
is valid and in full force and effect; (ii) the amounts payable by Seller under
the lease and the date to which the same have been paid; (iii) whether there
are, to the knowledge of said landlord, any defaults thereunder, and, if so,
specifying the nature thereof; and (iv) that the transactions contemplated by
this Agreement will not constitute default under the lease and that the landlord
consents to the assignment of the lease to Buyer.
9.6. COMPLETION OF DUE DILIGENCE, SCHEDULES & EXHIBITS. If Buyer does not
complete its due diligence or the disclosure schedules and Exhibits are not
completed and delivered to the appropriate party or if either party is not
reasonably satisfied as to all such matters by October 31, 1999, then this
Agreement and all other collateral documents executed in connection with the
transactions contemplated by this Agreement may be terminated by either Buyer or
Seller. Unless otherwise agreed in writing, if written termination notice to
such effect is not so given on or prior to November 15, 1999, then this
Agreement may not be terminated by reason of this Section 9.6.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, Seller's obligations to consummate the
transaction contemplated by this Agreement shall be subject to the satisfaction
of each of the conditions set forth in this Section 9, except to the extent that
such satisfaction is waived in writing by Seller.
10.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE EFFECTIVE DATE. Each of
the representations and warranties made by Buyer in this Agreement shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the
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Effective Date as though such representations and warranties were made or given
on and as of the Effective Date.
10.2. COMPLIANCE WITH AGREEMENT. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Effective Date, including the delivery of the closing documents specified in
this Agreement.
11. INDEMNIFICATION
11.1. BY SELLER. Seller hereby agrees to indemnify, defend and hold
harmless Buyer, Seller and its directors, officers, employees and controlled and
controlling persons (hereinafter "Buyer's affiliates"), from and against all
Claims asserted against, resulting to, imposed upon, or incurred by Buyer,
Buyer's affiliates, the Business or the Purchased Assets, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy or
breach of any representation or warranty of Seller contained in or made pursuant
to this Agreement (regardless of whether such breach is deemed "material"); (b)
the breach of any covenant of Seller contained in this Agreement (regardless of
whether such breach is deemed "material"); or (c) any Claim of or against
Seller, the Purchased Assets or the Business not specifically assumed by Buyer
pursuant hereto. As used in this Article 11, the term "Claim" shall include (i)
all Liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and expenses); and
(iii) all demands, claims, actions, costs of investigation, causes of action,
proceedings and assessments, whether or not ultimately determined to be valid.
11.2. BY BUYER. Buyer hereby agrees to indemnify, defend and hold harmless
Seller, its directors, officers, employees and controlling persons, from and
against all Claims asserted against, resulting to, imposed upon or incurred by
any such person, directly or indirectly, by reason of or resulting from (a) the
inaccuracy or breach of any representation or warranty of Buyer contained in or
made pursuant to this Agreement (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) all Claims of
or against Seller specifically assumed by Buyer pursuant hereto.
12. CLOSING
12.1 CLOSING DATE. Consummation of the contemplated transaction (the
"CLOSING") shall take place on November 15, 1999 or on such other date or at
such other time or place as may be mutually agreed upon in writing by the
parties hereto (the "CLOSING DATE"). Notwithstanding the foregoing Closing Date,
the parties hereby agree that unless otherwise agreed in writing that the
Closing shall not be effective until the satisfaction or waiver of the
conditions precedent set forth in Sections 9 and 10 of this Agreement (the
"EFFECTIVE DATE"). The Closing shall take place at the
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offices of Buyer in Boynton Beach, Florida, or at such other place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date".
12.2. DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller shall
deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
12.2.(a) BILLS OF SALE. Bills of sale and such other instruments of
assignment, transfer, conveyance and endorsement as will be sufficient in
the opinion of Buyer and its counsel to transfer, assign, convey and
deliver to Buyer the Purchased Assets as contemplated hereby.
12.2.(b) COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of Seller that each of the representations and
warranties made by Seller in this Agreement is true and correct in all
material respects on and as of the Effective Date with the same effect as
though such representations and warranties had been made or given on and
as of the Effective Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Buyer), and that Seller has
performed and complied with all of Seller's obligations under this
Agreement which are to be performed or complied with on or prior to the
Effective Date.
12.2.(c) CERTIFIED RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Seller authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement.
12.2.(d) INCUMBENCY CERTIFICATE. Incumbency certificates relating to
each person executing any document executed and delivered to Buyer
pursuant to the terms hereof.
12.2.(e) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
12.3. DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall
deliver to Seller the following documents, in each case duly executed or
otherwise in proper form:
12.3.(a) PURCHASE PRICE. To Seller the 1,334,000 Shares of voting
common stock required by Section 3.2 hereof.
12.3.(b) ASSUMPTION OF LIABILITIES. Such undertakings and
instruments of assumption as will be reasonably sufficient in the opinion
of Seller and its counsel to evidence the assumption of the Assumed
Liabilities.
12.3.(c) COMPLIANCE CERTIFICATE. A certificate signed by the
President of Buyer that the representations and warranties made by Buyer
in this Agreement are true and correct on and as of the Effective Date
with the same effect as though such representations and
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warranties had been made or given on and as of the Effective Date (except
for any changes permitted by the terms of this Agreement or consented to
in writing by Seller), and that Buyer has performed and complied with all
of Buyer's obligations under this Agreement which are to be performed or
complied with on or prior to the Effective Date.
12.3.(d) CERTIFIED RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement.
12.3.(e) INCUMBENCY CERTIFICATE. Incumbency certificates relating to
each person executing any document executed and delivered to Seller by
Buyer pursuant to the terms hereof.
12.3.(f) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Seller at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Seller may reasonably request.
13. TERMINATION
13.1. RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to the
Effective Date:
13.1.(a) by mutual written agreement of Buyer and Seller, or
13.1.(b) by either Buyer or Seller if any of the conditions set
forth in Sections 9 and 10 hereof are not satisfied at or before October
31, 1999, unless waived in writing.
13.2. TERMINATION FOR BREACH.
13.2.(a) TERMINATION BY BUYER. If (i) there has been a material
violation or breach by Seller of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in
writing by Buyer, or (ii) there has been a failure of satisfaction of a
condition to the obligations of Buyer which has not been so waived, or
(iii) Seller shall have attempted to terminate this Agreement under this
Article 13 or otherwise without grounds to do so, then Buyer may, by
written notice to Seller at any time prior to the Closing that such
violation, breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 13.2.(c)
hereof.
13.2.(b) TERMINATION BY SELLER. If (i) there has been a material
violation or breach by Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in
writing by Seller, or (ii) there has been a failure of satisfaction of a
condition to the obligations of Seller which has not been so waived, or
(iii) Buyer shall have attempted to terminate this Agreement under this
Article 13 or otherwise without
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grounds to do so, then Seller may, by written notice to Buyer at any time
prior to the Effective that such violation, breach, failure or wrongful
termination attempt is continuing, terminate this Agreement with the
effect set forth in Section 13.2.(c) hereof.
13.2.(c) EFFECT OF TERMINATION. Termination of this Agreement
pursuant to this Section 13.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. In addition to
the right of any party under common law to redress for any such breach or
violation, each party whose breach or violation has occurred prior to
termination shall jointly and severally indemnify each other party for
whose benefit such representation, warranty, covenant, agreement or other
provision was made ("indemnified party") from and against all losses,
damages (including, without limitation, consequential damages), costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs, and attorneys
fees and expenses) asserted against, resulting to, imposed upon, or
incurred by the indemnified party, directly or indirectly, by reason of,
arising out of or resulting from such breach or violation.
14. MISCELLANEOUS
14.1. DISCLOSURE SCHEDULES. Information set forth in the Disclosure
schedules specifically refers to the article and section of this Agreement to
which such information is responsive and such information shall not be deemed to
have been disclosed with respect to any other article or section of this
Agreement or for any other purpose. The Disclosure schedules shall not vary,
change or alter the language of the representations and warranties contained in
this Agreement and, to the extent the language in the Disclosure schedules does
not conform in every respect to the language of such representations and
warranties, such language shall be disregarded and be of no force or effect.
14.2. FURTHER ASSURANCE. From time to time, at Buyer's request and without
further consideration, Seller will execute and deliver to Buyer such documents
and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the business and assets being
transferred hereunder.
14.3. ASSIGNMENT; PARTIES IN INTEREST
14.3.(a) ASSIGNMENT. Except as expressly provided herein, the rights
and obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other party.
Notwithstanding the foregoing, Buyer may, without consent of the other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, to Seller hereunder.
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14.3.(b) PARTIES IN INTEREST. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein
shall be deemed to confer upon any other person any right or remedy under
or by reason of this Agreement.
14.4. LAW GOVERNING AGREEMENT. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Florida, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
14.5. AMENDMENT AND MODIFICATION. Buyer and Seller may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
14.6. NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
(a) If to Buyer, to: Cyber-Care, Inc.
1903 S. Congress Ave., Suite 500
Boynton Beach, Florida 33426
Attention: Michael F. Morrell
Facsimile: (561) 364-8291
HELP Innovations Acquisition Corp., Inc.
1903 S. Congress Ave., Suite 500
Boynton Beach, Florida 33426
Attention: John E. Haines
Facsimile: (561) 364-8291
or to such other person or address as Buyer shall furnish to Seller in writing.
(b) If to Seller, to: HELP Innovations, Inc.
1311 Wakarusa Drive, Suite 2200
Lawrence, Kansas 66049
Attention: Linda Roman
Facsimile: (785) 749-4715
or to such other person or address as Seller and Principal Shareholders shall
furnish to Buyer in writing. If personally delivered, such communication shall
be deemed delivered upon actual receipt; if electronically transmitted pursuant
to this paragraph, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
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delivery); if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail
pursuant to this paragraph, such communication shall be deemed delivered as of
the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of the
date of such failure or refusal. Any party to this Agreement may change its
address for the purposes of this Agreement by giving notice thereof in
accordance with this Section.
14.7. EXPENSES. Regardless of whether or not the transactions contemplated
hereby are consummated:
14.7.(a) BROKERAGE. Seller and Buyer each represent and warrant to
each other that there is no broker involved or in any way connected with
the transfer provided for herein. Buyer agrees to hold Seller harmless
from and against all claims for brokerage commissions or finder's fees
incurred through any act of Buyer in connection with the execution of this
Agreement or the transactions provided for herein. Seller agrees to hold
Buyer harmless from and against all claims for brokerage commissions or
finder's fees incurred through any act of Seller in connection with the
execution of this Agreement or the transactions provided for herein.
14.7.(b) EXPENSES TO BE PAID BY SELLER. Seller shall pay, and shall
indemnify, defend and hold Buyer harmless from and against, each of the
following:
(i) TRANSFER TAXES. Any sales, use, excise, transfer or other
similar tax imposed with respect to the transactions provided for in
this Agreement, and any interest or penalties related thereto.
(ii) PROFESSIONAL FEES. All fees and expenses of Seller's
legal, accounting, investment banking and other professional counsel
in connection with the transactions contemplated hereby.
14.7.(c) OTHER. Except as otherwise provided herein, each of the
parties shall bear its own expenses and the expenses of its counsel and
other agents in connection with the transactions contemplated hereby.
14.7.(d) COSTS OF LITIGATION OR ARBITRATION. The parties agree that
the prevailing party in any action brought with respect to or to enforce
any right or remedy under this Agreement shall be entitled to recover from
the other party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such
action, including without limitation attorneys' fees and prejudgment
interest.
14.8. ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
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14.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.10. HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
<TABLE>
<CAPTION>
"SELLER" "CYBR" "BUYER"
<S> <C> <C>
HELP Innovations, Inc. Cyber-Care, Inc. HELP Innovations
Acquisition Corp., Inc.
By: /s/ LINDA L. ROMAN By: /s/ PAUL C. PERSHES By: /s/ JOHN HAINES
Attest: /s/ JAMES A. HIBBARD Attest: /s/ ROBIN WILLIAMS Attest: /s/ ROBIN WILLIAMS
</TABLE>
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AGREEMENT OF PRINCIPAL SHAREHOLDERS
The undersigned principal shareholders of the Seller hereby enters into
and agrees to be individually bound by and a party to the provisions of Sections
4, 7, 8, 11 and 14 of this Agreement.
/s/ LINDA L. ROMAN
Linda L. Roman
Attest: /s/ JAMIE A. HIBBARD
Innovative Health of Kansas, Inc.
By: /s/ LINDA L. ROMAN
Attest: /s/ JAMIE A. HIBBARD
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EXHIBIT 10.25
AGREEMENT AND PLAN OF MERGER
by and among
MEDICAL INDUSTRIES OF AMERICA, INC.,
a Florida corporation,
MIOA ACQUISITION COMPANY IV, INC.,
a Florida corporation
YOUR GOOD HEALTH NETWORK, INC.
a Florida corporation,
and
DR. DAVID VASTOLA
DANA PUSATERI
DR. MARTIN SANTIAGO
JUAN COCUY
IRMA ESPINOZA
RANDY DAVIS
ELAINE CALLENDRILLO
LYDIA TORREGROSA-GREBER
RICHARD HOFFMAN
ERIC CONN
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EXHIBIT INDEX
EXHIBIT A Company Offices and Clinics
EXHIBIT B Articles of Merger
EXHIBIT C Articles of Incorporation
EXHIBIT D Bylaws
EXHIBIT E General Release
EXHIBIT F Employment Agreements and Addendum
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SCHEDULE INDEX
SCHEDULE 2.1 Designation of Shareholders
SCHEDULE 2.1(e)(ii) Pre-Existing Rights
SCHEDULE 3.1 Existing Options, Warrants, Calls & Rights
SCHEDULE 3.2 Articles and Bylaws
SCHEDULE 3.3 List of Security Holders of the Company
SCHEDULE 3.6 Financial Statements of the Company
SCHEDULE 3.7 Conduct Since Recent Balance Sheet
SCHEDULE 3.9 Liabilities
SCHEDULE 3.10(a) Liens
SCHEDULE 3.10(c) Leasehold Interests
SCHEDULE 3.11 Accounts Receivable
SCHEDULE 3.12(b) Personal Property Leases
SCHEDULE 3.12(c) Purchase Commitments
SCHEDULE 3.12(g) Loan Agreements
SCHEDULE 3.12(h) Guarantees
SCHEDULE 3.12(k) Other Material Contracts
SCHEDULE 3.13 Officers and Directors
SCHEDULE 3.14 Labor Matters
SCHEDULE 3.15(a) Compliance
SCHEDULE 3.15(b) Licenses and Permits
SCHEDULE 3.15(c) Environmental Matters
SCHEDULE 3.17(b) Tax Returns
SCHEDULE 3.17(d) Agreements under Section 341(f), etc.
SCHEDULE 3.18 Insurance
SCHEDULE 3.19 Personnel
SCHEDULE 3.20 Litigation
SCHEDULE 3.24 Trade Rights
SCHEDULE 3.25 Bank Accounts
SCHEDULE 3.26 Other Material Matters
SCHEDULE 3.30 Warranties in Respect to Affiliated Companies
SCHEDULE 4.11(a) Compliance With Laws
SCHEDULE 4.11(b) Licenses and Permits
SCHEDULE 4.11(c) Environmental Matters
SCHEDULE 4.12 Litigation
SCHEDULE 11.1 Notices to Shareholders
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is effective as of the
15th day of October, 1998 by and among MEDICAL INDUSTRIES OF AMERICA, INC., a
Florida corporation or its assigns ("MIOA"), MIOA ACQUISITION COMPANY IV, INC.,
a Florida corporation (the "ACQUISITION CORP"), YOUR GOOD HEALTH NETWORK, INC.
and its subsidiaries, Florida corporations (collectively hereinafter called the
"COMPANY") and DR. DAVID VASTOLA, DANA PUSATERI, DR. MARTIN SANTIAGO, JUAN
COCUY, IRMA ESPINOZA, RANDY DAVIS, ELAINE CALLENDRILLO, LYDIA TORREGROSA-GREBER,
RICHARD HOFFMAN AND ERIC CONN (hereinafter individually referred to as
"SHAREHOLDER" and collectively referred to as the "SHAREHOLDERS").
RECITALS:
A. The Company provides pain therapy, physical therapy, occupational therapy,
speech therapy and primary care physician practice services (the
"Business").
B. The principal business location of the Company is 525 S.E. 6th Avenue,
Suite B, Delray Beach, Florida 33483 (the "Principal Business Location").
C. The Company also has offices and clinics at the following addresses shown
in EXHIBIT A annexed hereto.
D. The Shareholders own Eight Hundred Twenty-Nine Thousand Six Hundred
Sixty-eight (829,668) common shares, $.001 par value per share, of the
Company capital stock (the "SHAREHOLDERS' SHARES") which constitutes one
hundred percent (100%) of the total issued and outstanding common stock of
the Company (the "Company Shares").
E. MIOA presently owns and upon consummation of the Merger will own 100% of
all authorized, issued and outstanding stock of Acquisition Corp. The
Shareholders shall receive (subject to dissenters' rights as described in
Section 2.2) in consideration for the merger of the Company into
Acquisition Corp shares of MIOA restricted voting common stock, $.0025 par
value per share (hereinafter referred to as the "MIOA STOCK" or the "MIOA
SHARES") in accordance with the terms and conditions hereof.
F. The Company will, as soon as practicable after the execution of this
Agreement and subject to the satisfaction or waiver of the conditions
precedent set forth in Articles VII and VIII of this Agreement, file
Articles of Merger with the Florida Secretary of State Division of
Corporations thereby statutorily merging the Company into Acquisition
Corp, (such merger being referred to herein as the "Merger"). The Merger
shall be in accordance with this Agreement, the Articles of Merger, the
Florida Business Corporation Act (the "FLORIDA STATUTE").
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ARTICLE I.
THE MERGER
1.1. THE MERGER. As of the Effective Date (as hereinafter defined)
and in accordance with the applicable provisions of the Florida Statute, the
Company shall be merged with and into Acquisition Corp, in accordance with the
terms and conditions of this Agreement and the articles of merger in
substantially the form of EXHIBIT B annexed hereto (hereinafter referred to as
the "ARTICLES OF MERGER"), subject to such changes as to form (but not
substance) as may be required by the Florida Statute. The Acquisition Corp shall
be the surviving corporation of the Merger (the Acquisition Corp, in such
capacity, being hereinafter sometimes referred to as the "SURVIVING CORPORATION"
or "SURVIVING COMPANY"). Thereupon, the separate existence of the Company shall
cease, and the Acquisition Corp, as the Surviving Corporation, shall continue
its corporate existence under the Florida Statute.
1.2. FILING ARTICLES OF MERGER. As soon as practicable after the
execution of this Agreement and subject to the satisfaction or waiver of the
conditions precedent set forth in Articles VII and VIII of this Agreement, the
Acquisition Corp and the Company will execute the Articles of Merger, and shall
file or cause to be filed such Articles of Merger with the Secretary of State of
Florida. Upon the filing of the Articles of Merger, MIOA will irrevocable
instruct its transfer agent to issue and deliver in the manner provided herein
certificates evidencing the MIOA Shares to be issued in the Merger.
1.3. EFFECT OF THE MERGER. Upon the effectiveness of the Merger, (a)
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of the Acquisition Corp and the Company (the
"CONSTITUENT CORPORATIONS"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to Florida Statute without further act or deed,
and (b) the Surviving Corporation shall be liable for all claims, liabilities
and obligations of the Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Florida Statute
without further act or deed.
1.4. SURVIVING CORPORATION. Upon the effectiveness of the Merger,
the Articles of Incorporation and Bylaws of the Surviving Corporation shall be
identical to those attached hereto as EXHIBITS C AND D, respectively. The
directors of the Surviving Corporation initially shall be Dana Pusateri, Paul C.
Pershes, and Arthur Kobrin each of who shall continue to be the directors of the
Surviving Corporation, subject to the Articles of Incorporation and the Bylaws.
1.5. SUBSEQUENT ACTIONS. If at any time after the Effective Date,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurance or any other actions or things are necessary or
desirable to (i) vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights,
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properties or assets of either Acquisition Corp or the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or (ii) otherwise to carry out this Agreement, then the officers and
directors of the Surviving Corporation shall be authorized to (x) execute and
deliver, in the name and on behalf of either the Acquisition Corp or the
Company, as the case may be, all such deeds, bills of sale, assignments and
assurances and (y) to take and do, in the name of and on behalf of each
corporation or otherwise, all such actions and things as may be necessary or
desirable, to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
1.6. STATUS AND CONVERSION OF SHARES. Upon the Effective Date of the
Merger:
(a) Each share certificate representing each outstanding share
of Acquisition Corp shall continue to be a share of issued and outstanding
Common Stock of the Surviving Corporation and shall be retained by MIOA (the
"ACQUISITION CORP STOCK").
(b) The share certificates representing all the Shareholders
Shares shall, by virtue of the Merger and without any action on the part of the
holder thereof, be deemed canceled and extinguished. In exchange for the merger
of the Company into the Acquisition Corp, the Shareholders shall (subject to
Section 2.2 Dissenters' Rights) receive the Merger Consideration set forth and
defined in Section 2.1 below (the "MERGER CONSIDERATION").
1.7. BOOKS AND RECORDS. On the Closing Date (as hereinafter
defined), the Company shall deliver to MIOA all of the stock books, records and
minute books of the Company, all financial and accounting books and records of
the Company, all tax returns and records of the Company, and all supplier,
client, customer, patient (to the extent allowed by law) sales and other
business records of the Company.
1.8 BOARD AND STOCKHOLDER APPROVAL. This Agreement is subject to,
and it is a condition to the consummation of the Merger, that MIOA Board
approval, Acquisition Corp Board approval, Acquisition Corp stockholder
approval, Company Board approval and Company stockholder approval be obtained.
1.9. TAX CONSEQUENCES. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code, and
that this Agreement shall constitute a "plan of reorganization" for purposes of
Section 368 of the Code.
ARTICLE II.
MERGER CONSIDERATION, REGISTRATION RIGHTS, CLOSING
2.1. SHAREHOLDERS' MERGER CONSIDERATION. In exchange for merging the
Company into the Acquisition Corp and canceling and extinguishing the Company
Shares in accordance with this Merger Agreement, the Shareholders, as designated
and in the amounts set forth on SCHEDULE 2.1, shall receive the following Merger
Consideration:
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(a) PURCHASE PRICE. MIOA agrees, subject to the provisions of
this Agreement, to pay to the Shareholders Two Million Five Hundred Thousand
Dollars ($2,500,000.00) (hereinafter the "Purchase Price") as set forth below.
(b) METHOD OF PAYING PURCHASE PRICE. Except as provided in
Section 2.2 below, the Purchase Price shall be paid in MIOA Shares. For purposes
of determining the number of MIOA Shares that a Shareholder will receive, the
portion of the Purchase Price allocated to the Shareholder as set forth in
SCHEDULE 2.1 shall be divided by $0.75; the resulting quotient is the number of
MIOA Shares that shall be delivered to the Shareholders at the Closing. Cash
shall be paid in lieu of fractional shares and any additional MIOA Shares issued
hereunder shall be deemed to have been paid as of the Closing Date for purposes
of Rule 144 of the Securities Act of 1933.
(c) PRICE ADJUSTMENT.
(i) PRICE ADJUSTMENT. Notwithstanding the foregoing, if
during any 20 day trading period beginning on the first anniversary date of the
Effective Date and ending on the last day of the 18th month following the
Effective Date (hereinafter called the "LOOKBACK PERIOD"), the Fair Market Value
of a MIOA Share (defined below) is less than $0.75, then in such event, MIOA
will issue, upon receipt of a "PRICE ADJUSTMENT REQUEST" (as defined below),
"ADDITIONAL CONSIDERATION" to the Shareholders, in proportion to their ownership
interests as designated in SCHEDULE 2.1 [Dissenting Shareholders (as defined
below) and any Company Shareholder who has exercised any buyback rights he may
have shall not be entitled to any Additional Consideration]. Such Additional
Consideration shall mean additional MIOA Shares determined as follows: The
portion of the Purchase Price allocated to a Company Shareholder as set forth in
SCHEDULE 2.1 (excluding Dissenting Shareholders and any Company Shareholder who
has exercised his buyback) shall be divided by the Fair Market Value of an MIOA
Share as established by the parties for the period set forth in the Price
Adjustment Request; from the resulting quotient subtract the number of MIOA
Shares delivered to the Shareholder at Closing; the resulting remainder is the
number of additional MIOA Shares that shall be delivered to the Shareholder.
Cash shall be paid in lieu of fractional shares and such additional MIOA Shares
shall be deemed to have been paid as of the Closing Date for purposes of Rule
144 of the Securities Act of 1933.
ii. PRICE ADJUSTMENT REQUEST. The term "PRICE ADJUSTMENT
REQUEST" shall mean a written notice from Mr. Pusateri or his assigns delivered
to MIOA no later than nineteen (19) months following the Effective Date
designating the Shareholders who are entitled to Additional Consideration and
setting forth with specificity the calculations made in determining such
entitlement. Unless contested, MIOA shall deliver to such Shareholders the
Additional Consideration within thirty (30) days of the receipt of the Price
Adjustment Request. If contested, the parties shall in good faith work toward
resolving their differences. If such differences have not been resolved within
thirty (30) days from the delivery of the Price Adjustment Request, such matters
shall be submitted to binding arbitration with the American
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Arbitration Association serving Palm Beach County, Florida. The non-prevailing
party shall pay all reasonable costs and expenses incurred by the prevailing
party in such arbitration.
(d) FAIR MARKET VALUE OF MIOA SHARES. The term "FAIR MARKET
VALUE" of an MIOA Share shall be calculated as follows: (1) if the principal
market for such stock is a national securities exchange, the 20 day trailing
average of the closing prices per share of such stock as reported by such
exchange or on a composite tape reflecting transactions on such exchange, (2) if
the principal market for such stock is not a national securities exchange and
such stock is quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual
closing price information is available with respect to such stock, the 20 day
trailing average of the closing prices per share of such stock on Nasdaq, or
(ii) if such information is not available, the 20 day trailing average of the
bid prices per share of such stock on Nasdaq, or (3) if the principal market for
such stock is not a national securities exchange and such stock is not quoted on
Nasdaq, the 20 day trailing average of the bid prices per share of such stock as
reported on the OTC Bulletin Board Service or by National Quotation Bureau,
Incorporated or a comparable service; PROVIDED, HOWEVER, that if clauses (1),
(2) and (3) of this Section are all inapplicable, or if no trades have been made
or no quotes are available for such day, the fair market value of such stock
shall be determined as follows: The Shareholders and MIOA shall each appoint an
appraiser and the two appraisers appointed shall have fifteen (15) days to
appoint a third appraiser. Each of such appraisers shall be engaged in the
business of providing appraisals of stock similar to the MIOA stock. The
Shareholders and MIOA shall pay the fee of the appraisers it appoints plus
one-half of the third appraiser's fee. Within thirty (30) days following the
appointment of the third appraiser, the two originally selected appraisers shall
each submit a sealed appraisal to the Shareholders and MIOA. If after the
appraisals have been submitted and the Shareholders and MIOA are unable to agree
upon an acceptable fair market value within fifteen (15) days, the third
appraiser shall select one of the two previously submitted appraisals as the
Fair Market Value of an MIOA Share. The selection by the third appraiser shall
be final and binding upon the parties. Any delay caused by the appraisal
procedures shall cause the closings otherwise contemplated herein to accommodate
such delay.
(e) PUT OPTION.
i. PUT OPTION. If at any time within one (1) year of the
Closing Date, MIOA experiences a "Funding Event" (as defined below), the
Shareholders (excluding the Dissenting Shareholders), in proportion to their
ownership percentage as set forth in SCHEDULE 2.1, shall each have the right by
delivering to MIOA a "PUT REQUEST" (as defined below) to require MIOA to
purchase (the "PUT OPTION" or the "PUT") their proportionate share of an amount
equal to, but not exceeding in the aggregate, Five Hundred Thousand Dollars
($500,000.00) worth of the MIOA Shares delivered to the Shareholders at Closing.
For these purposes, the Put price of an MIOA Share shall be equal to $0.75 (the
"PUT PRICE PER SHARE").
ii. FUNDING EVENT. The term "FUNDING EVENT" shall mean
the sale by MIOA of its assets and/or a debt or equity raise by MIOA whereby the
"NET AVAILABLE PROCEEDS" (as defined below) equal or exceed Three Million
Dollars ($3,000,000.00). The term "NET AVAILABLE PROCEEDS" shall mean the net
proceeds received by MIOA after the payment of
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costs and expenses incurred in connection with such Funding Event and after the
satisfaction of all preexisting rights as set forth in SCHEDULE 2.1(E)II. In
addition, a Funding Event shall be deemed to have occurred in the case of any
consolidation or merger of MIOA with or into another corporation or the
conveyance of all or substantially all of the assets of MIOA to another
corporation. MIOA shall notify the Shareholders in writing within 30 days of the
completion of a Funding Event.
iii. PUT REQUEST. The term "PUT REQUEST" shall mean a
written notice from a Company Shareholder delivered to MIOA together with the
requisite number of MIOA shares free of all encumbrances, claims or liens except
for encumbrances under state or federal securities laws. Such request shall be
submitted within thirty (30) days after receiving notice from MIOA of a Funding
Event and shall state that MIOA has experienced a Funding Event and shall
further state the Put Price that the Company Shareholder is entitled to receive
as a result of this provision. Unless contested, MIOA shall pay the Put Price to
the Shareholder(s) within thirty (30) days of the receipt of the Put Request. If
contested, the parties shall in good faith to resolve their differences. If such
differences have not been resolved within thirty (30) days, such matters shall
be submitted to binding arbitration with the American Arbitration Association
serving Palm Beach County, Florida. The non-prevailing party shall pay all
reasonable costs and expenses incurred by the prevailing party in such
arbitration. Cash shall be paid in lieu of fractional shares and such additional
MIOA Shares shall be deemed to have been paid as of the Closing Date for
purposes of Rule 144 of the Securities Act of 1933. If MIOA shall fail to pay
the Company Shareholder(s) their Put Price within the time periods set forth
herein interest shall accrue on the unpaid amount at the maximum rate allowed by
law. This covenant shall survive the Closing of this transaction.
(f) CAPITAL ADJUSTMENTS AFFECTING MIOA SHARES.
i. The existence of the MIOA Shares or any rights the
Shareholders may otherwise have shall not affect in any way the price
adjustments set forth herein, the right or power of the Surviving Company or
MIOA to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Surviving Company's or MIOA's capital
structure or their business, or to undertake any merger or consolidation of the
Surviving Company or MIOA or to pay dividends, or to subdivided its outstanding
shares into a greater number of shares, combine its outstanding shares into a
smaller number of shares, issue any securities, bonds, debentures, or preferred
or prior preference stock ahead of or affecting the common stock of the
Surviving Company or MIOA, the rights thereof or to effect the dissolution or
liquidation of the Surviving Company or MIOA, or any sale or transfer of all or
part of their assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
ii. In the event of a stock dividend, recapitalization,
or merger in which MIOA is the surviving corporation, split-up, combination or
exchange of shares or the like which results in a change in the number or kind
of shares of common stock which is outstanding immediately prior to such event,
the aggregate number and kind of MIOA Shares owned by the Shareholders and the
rights of the Shareholders to receive additional MIOA Shares
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in respect to the Purchase Price shall be appropriately adjusted in the same
manner as the number and kind of shares of a shareholder of MIOA who owned the
same number and kind of shares immediately prior to such event. Such adjustments
shall be made by the Board of Directors of MIOA, whose determination shall be
conclusive and binding on all parties.
iii. Except as otherwise expressly provided herein, the
issuance of shares of MIOA's capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of MIOA convertible into such shares or
other securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to the number of or price to the MIOA Shares the Shareholders
then owns or his rights in respect to additional MIOA Shares.
iv. In case of any consolidation or merger of MIOA with
or into another corporation or the conveyance of all or substantially all of the
assets of MIOA to another corporation or a share exchange transaction, the MIOA
Shares shall thereafter be convertible into the number of shares of stock,
options or other securities or property to which a holder of the number of
shares of common stock deliverable upon entitlement to the MIOA Shares would
have been entitled upon such consolidation, merger, conveyance or exchange; and,
in any such case, appropriate adjustment shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holders of rights to receive additional MIOA Shares, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock, options or other property
thereafter deliverable upon entitlement to the MIOA Shares.
2.2 DISSENTING SHARES. (a) Notwithstanding the provisions of this Article
2 or any other provision of this Agreement, all outstanding Company Shares held
by the Company Shareholders who have not voted in favor of the Merger as
evidenced by their failure to execute this Agreement and all other required
Transaction Documents and with respect to which dissenter's rights have been
properly exercised and notice given to the Company in accordance with the
Florida Dissenter's Statutes and which dissenter's rights have not been
withdrawn or lost (hereinafter sometimes "DISSENTING SHAREHOLDER(S)" and
sometimes "COMPANY DISSENTING SHARES") shall no longer be entitled to vote or to
exercise any other rights as a Company Shareholder and shall only be entitled to
payment for their Company Dissenting Shares in accordance with the Florida
Dissenter's Statutes (i.e., Sections 607.1301 ET. seq.) (unless such Shareholder
timely withdraws its notice of election to dissent or fails to perfect its right
to dissent in accordance with the Florida Dissenter's Statutes).
2.3. NO REGISTRATION. By executing this Agreement and thereby voting in
favor of this Merger, the Shareholders acknowledge and agree that:
(a) Except as otherwise provided herein, the MIOA Shares are
being granted and issued without registration under applicable federal and state
securities laws in reliance upon certain exemptions from registration under such
securities laws;
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(b) Each certificate representing the MIOA Shares will bear a
legend restricting its transfer, sale, conveyance or hypothecation, unless such
MIOA Shares are either registered under applicable securities laws or an
exemption from such registration is applicable;
(c) The Shareholders shall not transfer all or any of the MIOA
Shares except in compliance with all applicable securities laws including Rule
144 of the Securities Act of 1933. Rule 144 presently allows a sale, within
certain limitations, of the MIOA Shares after one (1) year from the date the
MIOA Shares are unconditionally earned pursuant to this agreement;
(d) The Shareholders are acquiring the MIOA Shares for their
own account, for investment purposes only and not with a view to the sale or
distribution thereof.
2.4. INCIDENTAL REGISTRATION. MIOA agrees that if at any time it shall
propose to file a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") on a form suitable for sales by its shareholders,
it will give written notice to such effect to the Shareholders, at least thirty
(30) days prior to such filing, and, at the written request of the Shareholders,
made within ten (10) days after the receipt of such notice, will include therein
at MIOA's cost and expense (except for the fees and expenses of counsel to the
Shareholders and underwriting discounts, commissions and filing fees
attributable to the MIOA Shares included therein) such of the MIOA Shares held
by a Company Shareholder as he shall request; provided, however, that if the
offering being registered by MIOA is underwritten and if no other outstanding
shares of MIOA's common stock are included therein and if the representative of
the underwriters certifies that the inclusion therein of the MIOA Shares would
materially and adversely effect the sale of the securities to be sold by MIOA
thereunder, the public offering of the MIOA Shares included in such registration
statement either shall be delayed for a period of ninety (90) days after the
commencement of the underwritten public offering, provided that the
representative of the underwriters certifies in writing that such delay would
not materially and adversely effect the sale of the securities to be sold by
MIOA or, if the representative of the underwriters will not so certify, the
Shareholders shall not be permitted to participate in such registration except
to the extent, and then only in proportion thereto, that the other MIOA
officers/directors and other shareholders of MIOA possessing similar
registration rights are entitled to participate.
2.5. CLOSING. Consummation of the contemplated transaction (the "CLOSING")
shall take place on November 13, 1998 or on such other date or at such other
time or place as may be mutually agreed upon in writing by the parties hereto
(the "CLOSING DATE"). Notwithstanding the foregoing Closing Date, the subject
Merger shall become effective as of October 15, 1998 (the "EFFECTIVE DATE").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, make the
following representations and warranties to MIOA, each of which is true and
correct on the date hereof, shall remain true and correct in all material
respects to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by MIOA, or any knowledge of MIOA
other than as specifically disclosed herein or in the disclosure schedules
delivered to MIOA, and shall survive the Closing of the transactions provided
for herein for the period ending on the second anniversary date of the Effective
Date. Notwithstanding anything herein to the contrary, if MIOA, by written
notice prior to the expiration of the survival period, advises of its question,
dispute, debate, variance or contention relative to any specific representation
or warranty of Shareholders such survival period shall be extended until such
time as the matter in question is resolved. For purposes of this section the
term "SHAREHOLDERS' KNOWLEDGE" shall mean "ACTUAL" or "CONSTRUCTIVE" knowledge
of the Shareholders. For these purposes "CONSTRUCTIVE KNOWLEDGE" shall mean that
knowledge or information that a prudent individual could be reasonably expected
to discover or otherwise become aware of in the course of the Company's
Business.
3.1 COMPANY SHARES. The Shareholders are the owners of the Company Shares
free and clear of any direct or indirect claims, liens, security interests,
charges, pledges or encumbrances of any nature whatsoever and will be free of
such claims, liens, security interests, charges, pledges or encumbrances as of
the Closing Date. All of the Company Shares are validly issued to the
Shareholders, fully paid and nonassessable. Except as set forth in SCHEDULE 3.1,
there are no existing options, warrants, calls, rights or commitments of any
character relating to the Company Shares or any Company securities of any kind.
3.2 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and is
validly qualified or licensed in each jurisdiction wherein the character of the
property owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary. Accurate, current and complete copies of
the Articles of Incorporation and Bylaws of the Company are attached hereto as
SCHEDULE 3.2.
3.3 CAPITALIZATION. Except as set forth in SCHEDULE 3.3, the authorized
capital stock of the Company consists of One Million (1,000,000) shares of
common stock, $.001 par value per share (the "Company Stock"), Eight Hundred
Twenty-Nine Thousand Six Hundred Sixty-eight (829,668) common shares of which
are issued and outstanding. No shares of capital stock or other equity
securities of the Company are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and, not subject to preemptive rights.
There are no outstanding bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters
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on which shareholders of the Company may vote. Except as set forth above, there
are no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company is a
party or by which it is bound obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other equity securities of the Company or obligating the Company to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations, commitments, understandings or arrangements of the
Company to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company. A complete list of
security holders of the Company and their addresses is attached hereto as
SCHEDULE 3.3.
3.4 AUTHORITY AND APPROVAL OF AGREEMENT.
(a) The execution and delivery of this Agreement by the Company and
the Shareholders and the performance of all the Company's and the Shareholders'
obligations hereunder have been duly authorized and approved by all requisite
corporate action on the part of the Company and the Shareholders pursuant to
applicable law. The Company and the Shareholders have the power and authority to
execute and deliver this Agreement and to perform all their obligations
hereunder.
(b) This Agreement, the Employment Agreements (hereinafter defined)
and any other documents, instruments and agreements executed by the Company and
the Shareholders in connection herewith (the "TRANSACTION DOCUMENTS") constitute
the valid and legally binding agreements of the Company and the Shareholders,
enforceable against the Company and the Shareholders in accordance with their
terms, except that (i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the enforcement of the rights and remedies of creditors; and (ii) the
availability of equitable remedies may be limited by equitable principles.
3.5 NO VIOLATIONS. Neither the execution, delivery nor performance of this
Agreement or any other Transaction Document executed by the Shareholders and the
Company in connection herewith, nor the consummation of the transactions
contemplated hereby: (a) will violate any statute, law, ordinance, rule or
regulation (collectively, "Laws") or any order, writ, injunction, judgment, plan
or decree (collectively, "Orders") of any court, arbitrator, authority,
instrumentality or other governmental body, whether federal, state, municipal,
foreign or other (collectively, "Government Entities"), (b) will require any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity; (c) subject to obtaining the consents referred to in this
Agreement, will violate or conflict with, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or will result in the termination of, or accelerate the performance required by,
or result in the creation of any Lien (as hereinafter defined) upon any of the
assets of the Company (or the Company Shares) under any term or provision of the
Articles of Incorporation or By-Laws of the Company or of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which the Company or the Shareholders is a party or by which the
Company or the Shareholders or any of its or his assets or properties may be
bound or affected; or (d) will or
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could result in the loss or adverse modification of, or the imposition of any
fine or penalty with respect to, any license, permit or franchise granted or
issued to, or otherwise held by or for the use of, the Company, which in respect
to any one or more of the above would if deemed to be untrue have a material
adverse effect upon the Business, the Company or its assets.
3.6 FINANCIAL STATEMENTS. Included as SCHEDULE 3.6 are true and complete
copies of the financial statements of the Company and its wholly owned
subsidiaries consisting of (i) an audited consolidated balance sheet of the
Company as of December 31, 1997 and unaudited consolidated balance sheets of the
Company as of December 31, 1996, and 1995 and the related audited and unaudited
consolidated statements of operations and cash flows for the years then ended
(including the notes contained therein or annexed thereto), and (ii) an
unaudited consolidated balance sheets of the Company as of September 30, 1998
(the "Recent Balance Sheet"), and the related unaudited consolidated statements
of operations and cash flows for the nine (9) months then ended (the "Recent
Statement of Operations") and for the corresponding period of the prior year
(including the notes and schedules contained therein or annexed thereto). All of
such financial statements (including all notes and schedules contained therein
or annexed thereto) are true, complete and accurate in all material respects,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, have been prepared in accordance with the books
and records of the Company, and fairly present, in accordance with generally
accepted accounting principles, the assets, liabilities and financial position,
the results of operations and cash flows of the Company as of the dates and for
the years and periods indicated.
3.7 CONDUCT SINCE DATE OF RECENT BALANCE SHEET. Except for this Agreement
and as disclosed in SCHEDULE 3.7 hereto, none of the following has occurred
since the date of the Recent Balance Sheet:
(a) NO ADVERSE CHANGE. Any material adverse change in the financial
condition, assets, liabilities, business or operations of the Company;
(b) NO DAMAGE. Any material loss, damage or destruction, whether
covered by insurance or not, affecting the Company's business or properties;
(c) NO INCREASE IN COMPENSATION. Any increase in the compensation,
salaries or wages payable or to become payable to any employee or agent of the
Company (including, without limitation, any increase or change pursuant to any
bonus, pension, profit sharing, retirement or other plan or commitment), or any
bonus or other employee benefit granted, made or accrued;
(d) NO LABOR DISPUTES. Any labor dispute or disturbance, other than
routine individual grievances which are not material to the business, financial
condition or results of operations of the Company.
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(e) NO COMMITMENTS. Any commitment or transaction by the Company
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice;
(f) NO DIVIDENDS. Any declaration, setting aside, or payment of any
dividend or any other distribution in respect of the Company's capital stock;
any redemption, purchase or other acquisition by the Company of any capital
stock of the Company, or any security relating thereto; or any other payment to
any Shareholder of the Company;
(g) NO DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any properties or assets of the Company, except in the ordinary
course of business;
(h) NO INDEBTEDNESS. Any indebtedness for borrowed money incurred,
assumed or guaranteed by the Company;
(i) NO LIENS. Any mortgage, pledge, lien or encumbrance made on any
of the properties or assets of the Company;
(j) NO AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by the Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(k) LOANS AND ADVANCES. Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not limited to, any
Affiliate (for purposes of this Agreement, the term "Affiliate" shall mean and
include all shareholders, directors and officers of the Company; the spouse of
any such person; any person who would be the heir or descendant of any such
person if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest); or
(l) CREDIT. Any grant of credit to any customer or distributor on
terms or in amounts more favorable than those which have been extended to such
customer or distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of the Company's policies or practices
with respect to the granting of credit.
3.8 SUBSIDIARIES. Other than Professional Healthcare Services, Inc.
Physical Therapy and Rehabilitation, Inc., Preferred Medical Management
Solutions, Inc. and Professional Rehab Group, Inc. (collectively the "AFFILIATED
COMPANIES"), the Company has no subsidiaries or interests in any other entity
nor does the Company own or control, directly or indirectly, any capital stock
of any corporation or interest in any partnership, trust or unincorporated
association, or any interest or investment in any other corporation, association
or other business entity. The Shareholders hereby warrant and represent that:
(a) GOOD STANDING. The Affiliated Companies are duly organized,
validly existing and in good standing under the laws of the State of Florida.
The Affiliated Companies
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have all necessary power to own their properties and assets and to carry on
their business as presently conducted.
(b) OWNERSHIP INTEREST. The Company owns, beneficially and of
record, all of the issued and outstanding shares of capital stock of the
Affiliated Companies. All of the shares of The Affiliated Companies are validly
issued to the Company, fully paid and nonassessable.
3.9 LIABILITIES. Except as and to the extent specifically disclosed in the
Recent Balance Sheet, or in SCHEDULE 3.9, the Company does not have any
liabilities, commitments or obligations (secured or unsecured, and whether
accrued, absolute, contingent, direct or indirect), other than commercial
liabilities and obligations incurred since the date of the Recent Balance Sheet
in the ordinary course of business and consistent with past practice and none of
which has or will have a material adverse effect on the business, financial
condition or results of operations of the Company. Except as and to the extent
described in the Recent Balance Sheet or in SCHEDULE 3.9, neither the Company
nor the Shareholders has knowledge of any basis for the assertion against the
Company of any liability and neither has knowledge of any circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which
may give rise to liabilities, except commercial liabilities and obligations
incurred in the ordinary course of the Company's business and consistent with
past practice.
3.10 TITLE TO AND CONDITION OF PROPERTIES.
(a) MARKETABLE TITLE. The Company has good and marketable title to
all of the Company's assets and properties which are integral to the operation
of its Business, including, without limitation, all such properties (tangible
and intangible) reflected in the Recent Balance Sheet, except for items disposed
of in the ordinary course of business since the date of such Recent Balance
Sheet, free and clear of all mortgages, liens, (statutory or otherwise) security
interests, claims, pledges, licenses, equities, options, covenants,
reservations, restrictions, exceptions, limitations, charges or encumbrances of
any nature whatsoever (collectively, "Liens") except those described in SCHEDULE
3.10(A). Except for Permitted Encumbrances and those described in SCHEDULE 3.10,
none of the Company's assets, business or properties are subject to any
restrictions with respect to the transferability thereof; and the Company's
title thereto will not be affected in any way by the transactions contemplated
hereby. "PERMITTED ENCUMBRANCES" means and includes: (i) customary landlord
liens; (ii) unfiled liens and charges incident to construction or maintenance;
(iii) the lien of taxes and assessments which are not delinquent; (iv) minor
defects and irregularities in title, which do not materially impair the values
or use of property; (v) other like purposes which do not materially impair the
value of property or use of property for the purposes for which property is or
may be reasonably expected to be held; (vi) rights reserved to or vested in any
municipality or governmental or other public authority to control, regulate or
use in any manner any portion of a property which, do not materially impair the
value of the property for the purposes for which it is or may reasonably be
expected to be held; (vii) any obligations or duties affecting any portion of
any property to any municipality or governmental or other public authority with
respect to any right, power, franchise, grant, license or permit which do not,
materially impair the value of a property or use of a property for the purpose
for which it is or may reasonably be expected to be held; (viii) present or
future valid
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zoning laws and ordinances consistent with the intended use of a property; (ix)
liens, pledges and encumbrances securing liabilities set forth in the financial
statements furnished to MIOA or set forth in the Schedules or Exhibits; and (z)
liens specifically set forth in the Schedules hereto.
(b) CONDITION. All property and assets owned, leased or otherwise
utilized by the Company are in good operating condition and repair, free from
any defects (except such minor defects as do not interfere with the use thereof
in the conduct of the normal operations of the Company) sufficient to carry on
the Business of the Company as it is presently being conducted.
(c) REAL ESTATE. The Company owns no real estate and has not
committed to purchase any real estate. Except as stated on SCHEDULE 3.10(C), no
officer, director, shareholder or employee of the Company, or any spouse, child
or other relative thereof, owns directly or indirectly, in whole or in part, any
of the leaseholds of the Company. Each of the leases described on SCHEDULE
3.10(C) is a valid and binding obligation of the Company and enforceable in
accordance with its terms and conditions, and to the best knowledge and belief
of the Company and the Shareholders, each of the leases described on SCHEDULE
3.10(C) is a valid and binding obligation of each of the other parties thereto.
Neither the Company nor, to the best knowledge of the Shareholders, any other
party to any such lease is in default with respect to any material term or
condition thereof, nor to the best knowledge of the Company and the
Shareholders, has any event occurred which through the passage of time or the
giving of notice, or both, would constitute a default thereunder, or would cause
the acceleration of any obligation of any party thereto or the creation of a
lien or encumbrance upon any of the assets of the Company. So far as the Company
and Shareholders are aware, the use and operation of the buildings, fixtures and
other improvements described in SCHEDULE 3.10(C) as presently conducted is not
in violation of any applicable building code, zoning ordinance or other law or
regulation.
3.11 ACCOUNTS RECEIVABLE. All accounts receivable of the Company reflected
on the Recent Balance Sheet, and as incurred in the normal course of business
since the date thereof, represent arm's length sales actually made in the
ordinary course of business. The collection of the accounts receivable will not
deviate materially from historical collection percentages without the necessity
of commencing legal proceedings; are to Shareholders' knowledge subject to no
counterclaim or setoff; and are not in dispute. SCHEDULE 3.11 contains an aged
schedule of accounts receivable included in the Recent Balance Sheet.
3.12 CONTRACTS AND COMMITMENTS.
(a) REAL PROPERTY LEASES. Except as set forth in SCHEDULE 3.10(C),
the Company has no leases of real property.
(b) PERSONAL PROPERTY LEASES. Except as set forth in SCHEDULE
3.12(B), the Company has no leases of personal property involving consideration
or other expenditure in excess of $10,000.00 or involving performance over a
period of more than six (6) months.
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(c) PURCHASE COMMITMENTS. Except as set forth in SCHEDULE 3.12(C),
the Company has no purchase commitments for inventory items or supplies in
excess of Fifteen Thousand Dollars ($15,000,00).
(d) SALES COMMITMENTS. The Company has no sales contracts or
commitments to customers which aggregate in excess of $10,000.00 to any one
customer (or group of affiliated customers). The Company has no sales contracts
or commitments except those made in the ordinary course of business, at arm's
length, and no such contracts or commitments are for a sales price which would
result in a loss to the Company.
(e) CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. The Company has no
agreement, understanding, contract or commitment (written or oral) with any
Affiliate or any employee, agent, consultant, distributor or dealer that is not
cancelable by the Company on notice of not longer than 30 days without
liability, penalty or premium of any nature or kind whatsoever.
(f) POWERS OF ATTORNEY. The Company has not given a power of
attorney, which is currently in effect, to any person, firm or corporation for
any purpose whatsoever.
(g) LOAN AGREEMENTS. Except as set forth in SCHEDULE 3.12 (G), the
Company is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
(h) GUARANTEES. Except as disclosed on SCHEDULE 3.12 (H), the
Company has not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or otherwise
agreed to be contingently or secondarily liable for the obligations of any
person.
(i) GOVERNMENT CONTRACTS. The Company is not a party to any contract
with any governmental body.
(j) BURDENSOME OR RESTRICTIVE AGREEMENTS. To the best of the
Shareholders' knowledge, the Company is not a party to nor is it bound by any
agreement, deed, lease or other instrument which is so burdensome as to
materially affect or impair the operation of the Company. Without limiting the
generality of the foregoing, the Company is not a party to nor is it bound by
any agreement requiring the Company to assign any interest in any trade secret
or proprietary information, or prohibiting or restricting the Company from
competing in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on its business anywhere in the world.
(k) OTHER MATERIAL CONTRACTS. The Company has no lease, contract or
commitment of any nature involving consideration or other expenditure in excess
of $10,000.00, or involving performance over a period of more than six (6)
months, or which is otherwise individually material to the operations of the
Company, except as explicitly described in SCHEDULE 3.12(K) or in any other
Schedule.
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(l) NO DEFAULT. The Company is not in default under any lease,
contract or commitment, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a material
default thereunder or cause the acceleration of any of the Company's obligations
or result in the creation of any Lien on any of the assets owned, used or
occupied by the Company except where such default or lien would not have a
material adverse effect on the Company. To the best of the Company's and the
Shareholders' knowledge, no third party is in default under any material lease,
contract or material commitment to which the Company is a party, nor has any
event or omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to an
automatic termination, or the right of discretionary termination, thereof.
3.13 OFFICERS, DIRECTORS, AGENTS, ETC. Set forth on SCHEDULE 3.13 attached
hereto is a complete list of all officers (with office held), directors,
contractors and agents of the Company and the Affiliated Companies, and the
compensation and all vacation and other benefits they are entitled to receive
from the Company.
3.14 LABOR MATTERS. Except as set forth on SCHEDULE 3.14, the Company is
not a party to: (a) any profit sharing, pension, retirement, deferred
compensation, bonus, stock option, stock purchase, retainer, consulting, health,
welfare or incentive plan or agreement or other employee benefit plan, whether
legally binding or not; or other employee benefit plan, whether legally binding
or not; or (b) any plan providing for "fringe benefits" to its employees,
including, but not limited to, vacation, disability, sick leave, medical,
hospitalization and life insurance and other insurance plans, or related
benefits; or (c) any employment agreement. To the best of the Company's and the
Shareholders' knowledge, no former employee of the Company has any claim against
the Company (whether under federal or state law, any employment agreement or
otherwise) on account of or for: (a) overtime pay; (b) wages or salary for any
period; (c) vacation, time-off or pay in lieu of vacation or time-off; or (d)
discrimination, sexual harassment, employment practices or any violation of any
statue, ordinance or regulation relating to minimum wages or maximum hours of
work.
3.15 COMPLIANCE WITH LAWS AND ORDERS.
(a) COMPLIANCE. Except as set forth in SCHEDULE 3.15(A), the Company
(including each and all of its operations, practices, properties, contracts,
agreements and assets) is in compliance with all applicable laws and orders
applicable to discrimination in employment, Medicare, insurance, patient
brokering and referral, advertising, occupational safety and health, trade
practices, competition, pricing and billing, employment, retirement and labor
relations, and product advertising (hereinafter "Laws" and Orders"). Except as
set forth in SCHEDULE 3.15 (A), the Shareholders have not received notice of any
violation or alleged violation of, and to the best of the Company's and the
Shareholders' knowledge, is subject to any Liability for past or continuing
violation of, any Laws or Orders. To the best of Company's and Shareholders'
knowledge, all reports and returns required to be filed by the Company with any
Government Entity have been filed, and to the best of Company's and
Shareholders' knowledge were accurate
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and complete in all material respects when filed. Without limiting the
generality of the foregoing:
i. The Company has made all required payments to its
unemployment compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such accounts, and
each of such accounts has a positive balance.
ii. The Company has timely filed (except where the failure to
file would have no material adverse effect on the Company, its Business or its
assets), in a complete and materially correct manner, all requisite claims and
other reports required to be filed in connection with all state and federal
Medicare and Medicaid programs due on or before the date hereof. There are no
claims, actions, payment reviews, or appeals pending or to the best of the
Company's and the Shareholders' knowledge, threatened before any commission,
board or agency, including, without limitation, any intermediary or carrier, the
Administrator of the Health Care Financing Administration, the Florida
Department of Health and Rehabilitative Services, the Florida Board of Pharmacy
or any other state or federal agency with respect to any Medicare or Medicaid
claims filed by the Company on or before the Closing Date or program compliance
matters, which would materially adversely affect the Business, the Company or
the consummation of the transactions contemplated hereby. No validation review
or program integrity review related to the Company (other than normal, routine
reviews) has been conducted by any commission, board or agency in connection
with the Medicare or Medicaid program, and no such reviews are scheduled,
pending or, to the best of the Company's and the Shareholders' knowledge,
threatened against or affecting the Company or the consummation of the
transactions contemplated hereby.
iii. Neither the Company nor any person or entity
providing services for the Company have engaged in any activities which are
prohibited under 42 U.S.C. (delta)1320a-7a or (delta)1320a-7b, or the
regulations promulgated thereunder, pursuant to such statutes or any other
related state or local statutes and regulations, including but not limited to
the following: (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued right
to any benefit or payment on its, his or her own behalf or on behalf of another,
with intent to fraudulently secure such benefit or payment; and (d) knowingly
and willfully soliciting or receiving any remuneration, kickback, bribe or
rebate, directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration in return for (x) referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid, or (y) purchasing, leasing or ordering, or arranging for or
recommending purchasing, leasing or ordering, any medication, goods, facility,
service or item for which payment may be made in whole or in part by Medicare or
Medicaid. No physician (or his or her immediate family members) having a
"financial relationship" with Company, as that term is defined in 42 U.S.C.
Section 1395nn, is in a position, directly or indirectly, to refer
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patients or services to the Company, or any such referral complies with the
requirements of 42 U.S.C. Section 1395 and the regulations promulgated pursuant
thereto.
iv. The Company has filed when due any and all material
cost reports and other documentation and reports, if any, required to be filed
by third-party payors and governmental agencies in compliance with applicable
contractual provisions and/or laws, regulations and rules.
(b) LICENSES AND PERMITS. Except for those which would have no
material adverse effect on the Company, its Business or its assets, the Company
has all licenses, permits, approvals, authorizations and consents of all
Government Entities and all certification organizations required for the conduct
of the Business and operation of its facilities. All such licenses, permits,
approvals, authorizations and consents are described in SCHEDULE 3.15 (B), are
in full force and effect and will not be affected or made subject to loss,
limitation or any obligation to reapply as a result of the transactions
contemplated hereby. Except as set forth in SCHEDULE 3.15 (B), the Company
(including its Business, operations, properties and assets) is and has been in
compliance with all such permits and licenses, approvals, authorizations and
consents.
(c) ENVIRONMENTAL MATTERS. The applicable Laws relating to pollution
or protection of the environment, including Laws relating to emissions,
discharges, generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts are herein collectively referred
to as the "Environmental Laws". Without limiting the generality of the foregoing
provisions of this Section 3.15, the Company is, to the best of the
Shareholders' knowledge, in material compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder. Except as set forth
in SCHEDULE 3.15(C), there is no Litigation nor, to the best of the Company's
and the Shareholders' knowledge, any demand, claim, hearing or notice of
violation pending or threatened against the Company relating in any way to the
Environmental Laws or any Order issued, entered, promulgated or approved
thereunder.
3.16 BOOKS AND RECORDS. With respect to all material matters occurring
since the inception of the Company, the minute books and other records of the
Company contain complete and accurate records of all such material matters,
meetings and other corporate actions of its shareholders and board of directors.
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3.17 TAX MATTERS.
(a) PROVISION FOR TAXES. The provision made for taxes on the Recent
Balance Sheet is and will be sufficient for the payment of all federal, state,
foreign, county, local and other income, ad valorem, excise, profits, franchise,
occupation, property, payroll, sales, use, gross receipts and other taxes (and
any interest and penalties) and assessments, whether or not disputed, at the
date of the Recent Balance Sheet and for all years and periods prior thereto.
Since the date of the Recent Balance Sheet, the Company has not incurred any
taxes other than taxes incurred in the ordinary course of business consistent in
type and amount with past practices of the Company.
(b) TAX RETURNS FILED. Except as set forth on SCHEDULE 3.17(B), all
federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of the Company have been timely filed and when filed were
true and correct in all material respects, and the taxes shown as due thereon
were paid or adequately accrued. True and complete copies of all tax returns or
reports filed by the Company for each of its three (3) most recent fiscal years
have been delivered to MIOA. The Company has duly withheld and paid all taxes
which it is required to withhold and pay relating to salaries and other
compensation heretofore paid to the employees of the Company.
(c) TAX AUDITS. The Company has not received from the Internal
Revenue Service or from the tax authorities of any state, county, local or other
jurisdiction any notice of underpayment of taxes or other deficiency which has
not been paid nor any objection to any return or report filed by the Company.
There are outstanding no agreements or waivers extending the statutory period of
limitations applicable to any tax return or report.
(d) OTHER. Except as set forth in SCHEDULE 3.17 (D), the Company has
not (i) filed any consent or agreement under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) applied for any tax ruling,
(iii) entered into a closing agreement with any taxing authority, (iv) filed an
election under Section 338(g) or Section 338(h)(10) of the Code (nor has a
deemed election under Section 338(e) of the Code occurred), (v) made any
payments, or been a party to an agreement (including this Agreement) that under
any circumstances could obligate it to make payments that will not be deductible
because of Section 280G of the Code, or (vi) been a party to any tax allocation
or tax sharing agreement. The Company is not a "United States real property
holding company" within the meaning of Section 897 of the Code.
3.18 INSURANCE. Set forth in SCHEDULE 3.18 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the Business and properties of the Company, true and correct copies
of which have heretofore been delivered to MIOA. All such policies are valid and
outstanding and provide insurance coverage for the properties, assets and
operations of the Company. No policy (nor any previous policy) provides for or
is subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date
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hereof. Except as set forth in SCHEDULE 3.18, there have been no claims filed
against such policies. No notice of cancellation or termination has been
received by any of the Shareholders with respect to any such policy, and neither
the Company nor the Shareholders has knowledge of any act or omission of the
Company which could result in cancellation of any such policy prior to its
scheduled expiration date. The Company has not been refused any insurance with
respect to any aspect of the operations of the Business nor has its coverage
been limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last three years. There is no
claim by the Company pending under any such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies, and
neither the Company nor the Shareholders knows of any basis for denial of any
claim under any such policy. To the best knowledge of the Shareholders, the
Company has not received any written notice from or on behalf of any insurance
carrier issuing any such policy that insurance rates therefor will hereafter be
substantially increased (except to the extent that insurance rates may be
increased for all similarly situated risks) or that there will hereafter be a
cancellation or an increase in a deductible (or an increase in premiums in order
to maintain an existing deductible) or nonrenewal of any such policy.
3.19 PERSONNEL. SCHEDULE 3.19 attached hereto contains accurate and
complete information as to names and rates of compensation (whether in the form
of salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all personnel of the Company, together with information as
to any contracts with any such personnel. The Company has no pension,
profit-sharing, bonus, incentive, insurance or other employee benefit plans
(including, without limitation, any such plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended) in
which any employees of the Company participate, except as set forth in SCHEDULE
3.19.
3.20 LITIGATION. Other than as set forth in SCHEDULE 3.20, the Company is
not a party to, the subject of, or threatened with any litigation nor to the
best knowledge of the Company and the Shareholders, is there any basis for any
litigation which would have a material adverse effect on the Company, its
Business or its assets. The Company is not contemplating the institution of any
litigation.
3.21 OTHER LIABILITIES. To the best of the Company's and the Shareholders'
knowledge no claim of breach of contract, tort, product liability or other
claim, contingent or otherwise, has been asserted or threatened against the
Company nor is capable of being asserted by any employee, creditor, claimant or
other person against the Company. To the best of the Company's and the
Shareholders' knowledge, no state of facts exists or has existed, nor has any
event occurred, which could reasonably be expected to give rise to the assertion
of any such claim by any person.
3.22 JUDGMENTS. There are no outstanding judgments against the Company.
There are no open workers compensation claims against the Company, or to the
best of the Company's and the Shareholders' knowledge, any other obligation,
fact or circumstance which would give rise to any right of indemnification on
the part of any current or former shareholder, director, officer,
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employee or agent of the Company, or any heir or personal representative
thereof, against the Company, or any successor to the businesses of the Company.
3.23 BROKERS. Neither the Shareholders nor the Company have any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which MIOA
could become liable or obligated.
3.24 TRADE RIGHTS. SCHEDULE 3.24 lists all Trade Rights (as defined below)
in which the Company now has any interest, specifying whether such Trade Rights
are owned, controlled, used or held (under license or otherwise) by the Company,
and also indicating which of such Trade Rights are registered. All Trade Rights
shown as registered in SCHEDULE 3.24 have been properly registered, all pending
registrations and applications have been properly made and filed and all
annuity, maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct the business of the Company, as
such is currently being conducted or proposed to be conducted, the Company does
not require any Trade Rights that it does not already have. To the best of the
Company's and the Shareholders' knowledge, the Company is not infringing and has
not infringed any Trade Rights of another in the operation of the business of
Company, nor is any other person infringing the Trade Rights of the Company. The
Company has not granted any license or made any assignment of any Trade Right
listed in SCHEDULE 3.24, nor does the Company pay any royalties or other
consideration for the right to use any Trade Rights of others. There is no
Litigation pending or to the best of the Company's and the Shareholders'
knowledge, threatened to challenge the Company's right, title and interest with
respect to its continued use and right to preclude others from using any Trade
Rights of the Company. All Trade Rights of the Company are valid, enforceable
and in good standing, and there are no equitable defenses to enforcement based
on any act or omission of the Company. The consummation of the transactions
contemplated hereby will not alter or impair any Trade Rights owned or used by
the Company. As used herein, the term "Trade Rights" shall mean and include: (i)
all trademark rights, business identifiers, trade dress, service marks, trade
names and brand names, all registrations thereof and applications therefor and
all goodwill associated with the foregoing; (ii) all copyrights, copyright
registrations and copyright applications, and all other rights associated with
the foregoing and the underlying works of authorship; (iii) all patents and
patent applications, and all international proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title, license
or privilege under the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, know-how, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property and non-competition
and all other types of intellectual property; and (vi) all claims for
infringement or breach of any of the foregoing.
3.25 BANK ACCOUNTS. SCHEDULE 3.25 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company maintains a safe deposit box, lock box or
checking, savings, custodial or other account of any nature, the type and number
of each such account and the signatories therefor, a description of any
compensating balance arrangements, and the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto.
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3.26 OTHER MATERIAL MATTERS. Except as set forth in SCHEDULE 3.26, to the
best of the Company's and Shareholders' knowledge, there are no rulings,
legislative enactments, laws, regulations, orders or directives pending,
threatened or enacted or any other changes in the industry that would have a
material adverse impact on the Company's Business as it is now being conducted
or is anticipated to be conducted in the future or which would have, or likely
have, a material adverse effect on the financial condition, assets, business,
prospects, clients or operations of the Company.
3.27 DISCLOSURE. No representation or warranty by the Company and/or the
Shareholders in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of the
Company or Shareholders pursuant to this Agreement or in connection with
transactions contemplated hereby, knowingly contains or shall contain any untrue
statement of material fact or omits or shall knowingly omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in any schedule, exhibit or other
Transaction Document delivered by or on behalf of the Company and/or the
Shareholders shall deemed to be representations and warranties by the Company
and the Shareholders.
3.28 WARRANTIES APPLICABLE TO AFFILIATED COMPANIES. Except as set forth in
SCHEDULE 3.30 hereto, the representations and warranties set forth in Sections
3.4 through 3.29 inclusive, of this Article III relative to the Company shall
also be true relative to the Affiliated Companies, their properties, assets,
liabilities and business.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF MIOA
MIOA hereby makes the following representations and warranties to the
Shareholders, each of which MIOA represents to be true and correct on the date
hereof, shall remain true and correct in all material respects to and including
the Closing Date, shall be unaffected by any investigation heretofore or
hereafter made by the Shareholders, or any knowledge of the Shareholders other
than as specifically disclosed in the disclosure schedules delivered to the
Shareholders, and shall survive the Closing of the transactions provided for
herein for the period ending on the second anniversary date of the Effective
Date. Notwithstanding anything herein to the contrary, if the Shareholders, by
written notice prior to the expiration of said survival period, advises MIOA of
his/her question, dispute, debate, variance or contention relative to any
specific representation or warranty of MIOA such survival period shall be
extended until such time as the matter in question is resolved. For purposes of
this section the term "KNOWLEDGE OF THE MIOA OR ACQUISITION CORP" shall mean
"ACTUAL" or "CONSTRUCTIVE" knowledge of the present officers of MIOA. For these
purposes "CONSTRUCTIVE KNOWLEDGE" shall mean that knowledge or information that
a prudent individual could be reasonably expected to discover or otherwise
become aware of in the course of the Company's Business.
4.1. MIOA SHARES. All of the MIOA Shares shall be validly issued to the
Shareholders, fully paid and non-assessable. MIOA shall deliver, good and
marketable title to the MIOA Shares, which shares shall be fully paid and
non-assessable and except as otherwise
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provided in this Agreement shall be free and clear of all Liens (as defined in
Section 3.10(a) above).
4.2. ORGANIZATION. MIOA and the Acquisition Corp are corporations duly
organized, validly existing and in good standing under the laws of the State of
Florida and are not required to be qualified or licensed as a foreign
corporation in any other jurisdiction. MIOA and the Acquisition Corp have the
full power and authority to own all their assets and to conduct their business
as and where its business is presently conducted.
4.3. AUTHORITY AND APPROVAL OF AGREEMENT.
(a) The execution and delivery of this Agreement by MIOA and the
Acquisition Corp and the performance of their obligations hereunder have been
duly authorized and approved by all requisite corporate action on the part of
MIOA and the Acquisition Corp pursuant to applicable law. MIOA and the
Acquisition Corp have the power and authority to execute and deliver this
Agreement and to perform all their obligations hereunder.
(b) This Agreement and each of the other documents, instruments and
agreements executed by MIOA and the Acquisition Corp in connection herewith
constitute the valid and legally binding agreements of MIOA and the Acquisition
Corp, enforceable against MIOA and the Acquisition Corp in accordance with their
terms, except that: (i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the enforcement of the rights and remedies of creditors; and (ii) the
availability of equitable remedies as may be limited by equitable principles.
4.4. NO VIOLATIONS. Neither the execution, delivery nor performance of
this Agreement or any other documents, instruments or agreements executed by
MIOA and the Acquisition Corp in connection herewith, nor the consummation of
the transactions contemplated hereby: (a) constitutes a violation of or default
under (either immediately, upon notice or upon lapse of time) the Articles of
Incorporation or Bylaws of MIOA or the Acquisition Corp, any provision of any
contract to which MIOA, the Acquisition Corp., or their assets may be bound, any
judgment to which MIOA or the Acquisition Corp is bound or any law applicable to
MIOA or the Acquisition Corp; or (b) result in the creation or imposition of any
encumbrance upon, or give any third person any interest in or right to, any or
all of the MIOA Shares or any other capital stock of MIOA or the Acquisition
Corp or any of the assets of MIOA or the Acquisition Corp; or (c) result in the
loss or adverse modification of, or the imposition of any fine or penalty with
respect to, any license, permit or franchise granted or issued to, or otherwise
held by or for the use of, MIOA or the Acquisition Corp.
4.5. CONSENTS. The execution, delivery and performance by MIOA and the
Acquisition Corp of this Agreement and the consummation by MIOA and Acquisition
Corp. of the transactions contemplated hereby do not require any consent that
has not been received prior to the date hereof.
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4.6. S.E.C. DOCUMENTS. MIOA has delivered or made available to the
Shareholders all required reports, schedules, forms, statements and other
documents filed or to be filed with the Securities and Exchange Commission (the
"SEC") since January 1, 1997 (collectively, the "SEC DOCUMENTS"). To the best of
MIOA's knowledge, MIOA has filed with the SEC all documents required to be filed
under the Securities Act and Exchange Act since January 1, 1997. As of their
respective dates and to the best of MIOA's knowledge, the MIOA SEC documents
complied in all material respects with the requirements of the Securities Act
and Exchange Act and to the best of MIOA's knowledge, none of such documents
contained an untrue statement of a material fact or knowingly omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. To the best of MIOA's knowledge, the financial
statements included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto).
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the SEC
Documents and to the best of MIOA's knowledge, since the date of the most recent
financial statements included in the SEC Documents, MIOA has conducted its
business only in the ordinary course consistent with past practice in light of
its current business circumstances, and there is not and has not been: (a) any
material adverse change with respect to MIOA or its capital stock; (b) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect or give rise to a
material adverse change with respect to MIOA or its capital stock; or (c) any
condition, event or occurrence which could reasonably be expected to prevent,
hinder or materially delay the ability of MIOA to consummate the transactions
contemplated by this Agreement.
4.8. BROKERS. Neither MIOA nor the Acquisition Corp has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Shareholders or the Company could become liable or obligated.
4.9. FULL DISCLOSURE. To the best knowledge of MIOA and the Acquisition
Corp, no representation or warranty by MIOA or Acquisition Corp in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of MIOA or the Acquisition Corp
pursuant to this Agreement or in connection with transactions contemplated
hereby, contains or shall contain any untrue statement of material fact or
knowingly omits a material fact necessary to make the statements contained
therein not materially misleading.
4.10. NO ENCUMBRANCES ON MIOA SHARES. Except as set forth in this
Agreement, the MIOA Shares being issued by MIOA to the Shareholders are validly
issued, fully paid and/or nonassessable and are free and clear of any liens,
claims, encumbrances or restrictions of any kind other than those restrictions
imposed by the various securities laws, and none of those
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securities are subject to options, rights, warrants, or other agreements or
commitments other than as set forth in this Agreement.
4.11 COMPLIANCE WITH LAWS AND ORDERS.
(a) COMPLIANCE. Except as disclosed in the SEC Documents or as set
forth in SCHEDULE 4.11(A), MIOA (including each and all of its operations,
practices, properties, contracts, agreements and assets) is in compliance with
all applicable laws and orders, those applicable to Laws and Orders (as defined
in 3.15(a)). Except as disclosed in the SEC Documents or as set forth in
SCHEDULE 4.11(A), the present officers of MIOA have not received notice of any
violation or alleged violation of, and to the best of the MIOA's knowledge, is
subject to any Liability for past or continuing violation of, any Laws or
Orders. To the best of MIOA's knowledge, all reports and returns required to be
filed by MIOA with any Government Entity have been filed, and were, to the best
of MIOA's knowledge, accurate and complete in all material respects when filed.
Without limiting the generality of the foregoing:
i. MIOA has made all required payments to its
unemployment compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such accounts, and
each of such accounts has a positive balance.
ii. MIOA has timely filed (except where the failure to
file would have no material adverse effect on MIOA), in a complete and
materially correct manner, all requisite claims and other reports required to be
filed in connection with all state and federal Medicare and Medicaid programs
due on or before the date hereof. There are no claims, actions, payment reviews,
or appeals pending or to the best of MIOA's knowledge, threatened before any
commission, board or agency, including, without limitation, any intermediary or
carrier, the Administrator of the Health Care Financing Administration, the
Florida Department of Health and Rehabilitative Services, the Florida Board of
Pharmacy or any other state or federal agency with respect to any Medicare or
Medicaid claims filed by MIOA on or before the Closing Date or program
compliance matters, which would materially adversely affect MIOA or the
consummation of the transactions contemplated hereby. No validation review or
program integrity review related to MIOA (other than normal, routine reviews)
has been conducted by any commission, board or agency in connection with the
Medicare or Medicaid program, and no such reviews are scheduled, pending or, to
the best of MIOA's knowledge, threatened against or affecting the MIOA or the
consummation of the transactions contemplated hereby.
iii. Neither MIOA nor any person or entity providing
services for MIOA has engaged in any activities which are prohibited under 42
U.S.C. (delta)1320a-7a or (delta)1320a-7b, or the regulations promulgated
thereunder, pursuant to such statutes or any other related state or local
statutes and regulations, including but not limited to the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment;
(b) knowingly and willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (c) failing to disclose knowledge by a claimant of the occurrence of
any event affecting the initial or continued right to any benefit or payment on
its, his or her own
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behalf or on behalf of another, with intent to fraudulently secure such benefit
or payment; and (d) knowingly and willfully soliciting or receiving any
remuneration, kickback, bribe or rebate, directly or indirectly, overtly or
covertly, in cash or in kind, or offering to pay or receive such remuneration in
return for (x) referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (y) purchasing, leasing or
ordering, or arranging for or recommending purchasing, leasing or ordering, any
medication, goods, facility, service or item for which payment may be made in
whole or in part by Medicare or Medicaid. No physician (or his or her immediate
family members) having a "financial relationship" with Company, as that term is
defined in 42 U.S.C. Section 1395nn, is in a position, directly or indirectly,
to refer patients or services to the Company, or any such referral complies with
the requirements of 42 U.S.C. Section 1395 and the regulations promulgated
pursuant thereto.
iv. MIOA has filed when due any and all material cost
reports and other documentation and reports, if any, required to be filed by
third-party payors and governmental agencies in compliance with applicable
contractual provisions and/or laws, regulations and rules.
(b) LICENSES AND PERMITS. Except for those which would have no
material adverse effect on MIOA, MIOA has all licenses, permits, approvals,
authorizations and consents of all Government Entities and all certification
organizations required for the conduct of its Business and operation of its
facilities. All such licenses, permits, approvals, authorizations and consents
are in full force and effect and will not be affected or made subject to loss,
limitation or any obligation to reapply as a result of the transactions
contemplated hereby. Except as disclosed in the SEC Documents or as set forth in
SCHEDULE 4.11(B), MIOA is and has been in compliance with all such permits and
licenses, approvals, authorizations and consents.
(c) ENVIRONMENTAL MATTERS. The applicable Laws relating to pollution
or protection of the environment, including Laws relating to emissions,
discharges, generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts are herein collectively referred
to as the "Environmental Laws". Without limiting the generality of the foregoing
provisions of this Section 4.11, MIOA is in material compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulations, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder.
Except as disclosed in the SEC Documents or as set forth in SCHEDULE 4.11(C),
there is no Litigation nor, to the best of MIOA's knowledge, any demand, claim,
hearing
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or notice of violation pending or threatened against MIOA relating in any way to
the Environmental Laws or any Order issued, entered, promulgated or approved
thereunder.
4.12 LITIGATION. Other than as set forth in SCHEDULE 4.12, MIOA is not a
party to, the subject of, or to the best of its knowledge, threatened with any
litigation nor to the best knowledge of MIOA is there any basis for any
litigation which would have a material adverse effect on MIOA. At the present
time, MIOA is not contemplating the institution of any litigation.
ARTICLE V.
INTERPRETATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES; AND INDEMNIFICATION
5.1. INTERPRETATION. Except where indicated otherwise, each warranty and
representation made by a party in this Agreement or pursuant hereto is
independent of all other warranties and representations made by the same party
in this Agreement or pursuant hereto (whether or not covering identical, related
or similar matters) and must be independently and separately satisfied. Except
where indicated otherwise, exceptions or qualifications to any such warranty or
representation shall not be construed as exceptions or qualification to any
other warranty or representation.
5.2. SURVIVAL. All representations and warranties made in this Agreement
or pursuant hereto shall survive the date hereof and the Closing Date through
the second anniversary date of the Effective Date. Notwithstanding anything
herein to the contrary, if an indemnitee under this agreement, by written notice
prior to the expiration of the survival period, advises an indemnitor of its
question, dispute, debate, variance or contention relative to any specific
representation warranty or other matter which is subject to the indemnity
provisions of this Section, such survival period shall be extended only in
respect to such matter until such time as the matter in question is resolved.
5.3. INDEMNIFICATION.
(a) BY SHAREHOLDERS. The Shareholders hereby agree to indemnify,
defend and hold harmless MIOA, its subsidiaries and their directors, officers,
employees and controlled and controlling persons (hereinafter "MIOA'S
AFFILIATES"), from and against all Claims (as hereinafter defined) asserted
against, resulting to, imposed upon, or incurred by MIOA, MIOA's affiliates, the
Company, their businesses or their assets, directly or indirectly, by reason of,
arising out of or resulting from (x) the breach of any representation or
warranty of the Company or such Shareholders contained in or made pursuant to
Article III of this Agreement; (y) the breach of any covenant of the Company or
such Shareholders contained in this Agreement, and (z) any Claim against the
Company, its business or its assets not otherwise disclosed in this Agreement or
the disclosure schedules relating to or arising from matters related to or
arising from the Company, or its businesses prior to the Closing Date. As used
in this section, the term "CLAIM" shall include (i) all liabilities; (ii) all
losses, damages, judgments, awards, settlements, costs and expenses (including,
without limitation, interest including prejudgment interest in any litigated
matter),
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penalties, court costs and reasonable attorneys fees and expenses); and (iii)
all demands, claims, actions, costs of investigation, causes of action,
proceedings and assessments ultimately determined to be valid.
(b) BY MIOA. MIOA hereby agrees to indemnify, defend and hold
harmless the Shareholders from and against all Claims asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (x) the inaccuracy or breach of any
representation or warranty of MIOA contained in or made pursuant to this
Agreement; (y) the breach of any covenant of MIOA contained in this Agreement;
or (z) all Claims of or against the Shareholders specifically assumed by MIOA
pursuant hereto.
(c) MATERIALITY. The parties recognize that many of the
representations, warranties and covenants set forth in this Agreement are
qualified by the term "MATERIAL". For purposes of this Agreement, the parties
hereby agree that a "MATERIAL" event(s) has occurred if the impact of such
event(s) has resulted or is reasonably likely to result in costs, expenses
and/or damages for any event(s) singularly or in the aggregate in excess of
Fifty Thousand Dollars ($50,000.00).
(d) PROCEDURE FOR INDEMNITY. The party indemnified hereunder (the
"Indemnified Party") shall notify in writing the indemnifying party (the
"Indemnifying Party") within thirty (30) days after a Claim is presented to the
Indemnified Party, and the Indemnifying Party shall defend such claim at its
expense. If the Indemnifying Party does not defend or settle such claim, the
Indemnified Party may do so without the Indemnifying Party's participation, in
which case the Indemnifying Party shall pay the reasonable expenses of such
defense, and the Indemnified Party may settle or compromise such claim without
the Indemnifying Party's consent. If the Indemnified Party fails to notify the
Indemnifying Party, and if the Indemnifying Party is thereby materially
prejudiced by such failure of notice in its defense of the claim, the
Indemnifying Party's obligation of indemnity hereunder shall be extinguished
with respect to such claim to the extent that the Indemnifying Party has been
prejudiced by the failure to give such notice. The remedies provided in this
Article V will be the exclusive remedy for Claims for indemnification that are
available to MIOA and the Shareholders.
5.4. LIMITATION.
(a) In respect to all Claims other than Claims related to Medicare
issues, the parties agree that the indemnification provisions set forth in this
Article shall be limited, individually or in the aggregate, to such Claims in
excess of Fifty Thousand Dollars ($50,000.00) (the "Threshold"). Once a Claim or
Claims exceeds the Threshold, if a party is entitled to indemnification under
Section 5.3, such party shall recover all appropriate funds above the Threshold,
as provided in Section 5.3
(b) In respect to all Medicare related Claims for which a party is
entitled to indemnification hereunder (hereinafter "MEDICARE CLAIMS"), the
parties hereby agree that MIOA and the Shareholders will share equally in
respect to the first Two Hundred Thousand Dollars ($200,000.00) of all Medicare
Claims without regard to the Threshold limitations for which a
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party is entitled to indemnification hereunder (the "SHARING AMOUNT"). Once any
one or more Medicare Claim(s) individually, or in the aggregate, exceeds the
Sharing Amount then, in such event, if a party is entitled to indemnification
under Section 5.3, such party shall recover all appropriate funds for all
amounts above the Sharing Amount as provided in Section 5.3.
(c) Notwithstanding the foregoing, the indemnitors shall not be
liable for any liabilities resulting from Claims, including Medicare Claims,
that are covered by any insurance policy or other indemnity or contribution
agreement unless, and only to the extent that, the full limit of such insurance
policy, indemnity or contribution agreement has been exceeded. Further, the
indemnitors shall not be liable for any liabilities resulting from Claims in
excess of $2,500,000.00.
ARTICLE VI.
OTHER COVENANTS
6.1. GENERAL RELEASES. At the Closing, the Shareholders shall deliver
general releases to MIOA, substantially in the form attached hereto as EXHIBIT
E, releasing MIOA, the Company, the Surviving Company and their directors,
officers, agents and employees from all claims through the Closing Date, except
(i) for matters arising out of or from this Agreement or the Transaction
Documents, (ii) as may be described in written contracts disclosed in the
disclosure schedules and expressly described and excepted from such releases,
and (iii) indemnification rights and compensation for current periods expressly
described and excepted from such releases. Such releases shall also contain
waivers of any right of contribution or other recourse against the Surviving
Company with respect to representations, warranties or covenants made herein by
the Company.
6.2. ACCESS TO INFORMATION AND RECORDS. During the period prior to the
Closing Date, the Shareholders shall cause the Company to give MIOA, its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of the
Company and for the purpose of such inspection, investigation and testing as
MIOA deems appropriate (and the Company shall furnish or cause to be furnished
to MIOA and its representatives all information with respect to the business and
affairs of the Company as MIOA may request); (ii) access to employees, agents
and representatives for the purposes of such meetings and communications as MIOA
reasonably desires; and (iii) with the prior consent of the Company in each
instance (which consent shall not be unreasonably withheld), access to vendors,
customers, manufacturers of its machinery and equipment, and others having
business dealings with the Company.
6.3. CONSENTS. MIOA, the Company and the Shareholders will use their
reasonable best efforts prior to the Closing Date to obtain all consents
necessary for the consummation of the transactions contemplated hereby.
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6.4. OTHER ACTION. MIOA, the Company and the Shareholders shall use their
reasonable best efforts to cause the fulfillment at the earliest practicable
date of all of the conditions to the parties' obligations to consummate the
transactions contemplated in this Agreement.
6.5. DISCLOSURE SCHEDULE. MIOA, the Shareholders and the Company shall
have a continuing obligation to promptly notify each other in writing with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the disclosure schedules, but no such disclosure shall cure any
breach of any representation or warranty which is inaccurate.
6.6 RULE 144 REQUIREMENTS. With a view to making available to the
Shareholders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time permit such persons
to sell securities of MIOA to the public without registration, MIOA agrees that,
at all times during which it is subject to the reporting requirements of the
Exchange Act, it will use its commercially reasonable best efforts to file with
the SEC in a timely manner all reports and other documents required of MIOA
under the Securities Act and the Exchange Act.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, the Shareholders' obligation to consummate the
transaction contemplated by this Agreement shall be subject to the satisfaction
of each of the conditions set forth in this Article VII, except to the extent
that such satisfaction is waived in writing by the Shareholders.
7.1. REPRESENTATIONS AND WARRANTIES OF MIOA AND ACQUISITION CORP. All
representations and warranties made by MIOA and the Acquisition Corp in this
Agreement and the Schedules hereto shall be true and correct in all material
respects on the date hereof, and shall be true and correct in all material
respects at the time of the Closing Date as though such representations were
again made, without exception or deviation, at the time of the Closing Date.
7.2. PERFORMANCE OF THIS AGREEMENT. MIOA and the Acquisition Corp shall
have duly performed or complied with all the obligations under this Agreement to
be performed or complied with by MIOA and the Acquisition Corp on or prior to
the Closing Date.
7.3. ABSENCE OF LITIGATION. No litigation shall have been instituted on or
before the time of the Closing Date by any person, the result of which did or
could prevent or make illegal the consummation of the transaction contemplated
by this Agreement, or which had or could have a material adverse effect on MIOA
or the Acquisition Corp.
7.4. SHAREHOLDERS' GUARANTEES. MIOA shall use all reasonable efforts to
have the Shareholders removed from any and all guarantees, agreements,
obligations or debts, as identified in SCHEDULE 7.4, that were entered into by
the Shareholders to facilitate or induce
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another party to engage in any business activity with the Company. If MIOA is
unable to remove the Shareholders from such guarantees, agreements, obligations
or debts then, in such event, MIOA will indemnify the Shareholders for any
damages the Shareholders incur relative to such guarantees, agreements,
obligations or debts.
7.5. EMPLOYMENT AGREEMENTS ADDENDUM AND OPTION PLAN. The Company and
certain principal Shareholders shall have executed the employment agreements and
the addendum to the employment agreement in substantially the same forms as
attached hereto as composite Exhibit F (the "EMPLOYMENT AGREEMENTS AND
ADDENDUM"). It is hereby agreed that MIOA and the Company will enter into a
non-qualified stock option plan whereby MIOA will grant periodically to the
Company options for the purpose of providing additional compensation to the
Company's managers and key employees. The Company and MIOA will mutually agree
as to the number of such options and their exercise prices.
7.6. DELIVERIES AT CLOSING. On or prior to the Closing Date, in addition
to all other deliveries to be made by MIOA, MIOA shall deliver or cause to be
delivered to the Shareholders a certificate signed by an officer of MIOA, dated
the Closing Date, certifying that: (a) all of the terms and conditions of this
Agreement to be satisfied or performed by MIOA and Acquisition Corp. on or
before the time of the Closing Date have been satisfied or performed; and (b) no
litigation has been instituted or, to best of said officer's knowledge
threatened on or before the time of the Closing Date by any person, the result
of which did or could prevent or make illegal the consummation of the
transaction contemplated by this Agreement.
ARTICLE VIII.
CONDITIONS PRECEDENT TO MIOA OBLIGATIONS
Notwithstanding the execution and delivery of this Agreement or the
performance of any part hereof, MIOA's obligations to consummate the transaction
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Article VIII, except to the extent that such
satisfaction is waived by MIOA in writing.
8.1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. All
representations and warranties made by the Company and the Shareholders
contained in this Agreement and the disclosure schedules hereto shall be true
and correct in all material respects on the date hereof, and shall be true and
correct in all material respects at the time of the Closing Date as though such
representations were again made, without exception or deviation, at the time of
the Closing Date.
8.2. PERFORMANCE OF THIS AGREEMENT. The Company and the Shareholders shall
have duly performed or complied with all of the covenants and obligations under
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
8.3. ABSENCE OF LITIGATION. No litigation shall have been instituted on or
before the time of the Closing Date by any person, the result of which did or
could prevent or make illegal
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the consummation of the transaction contemplated by the Agreement, or which had
or could have a material adverse effect on the Company or its Business.
8.4 EXECUTION OF EMPLOYMENT AGREEMENTS. The Company and certain principal
Shareholders shall have executed the Employment Agreements in substantially the
same form as attached hereto as composite Exhibit F.
8.5. DELIVERIES AT CLOSING. On or prior to the Closing Date, in addition
to all other deliveries to be made by the Shareholders hereunder, the
Shareholders shall deliver or cause to be delivered a certificate signed by the
Shareholders, dated as of the Closing Date, certifying that: (a) all of the
terms and conditions of this Agreement to be satisfied or performed by the
Company and the Shareholders on or before the time of the Closing Date have been
satisfied or performed; (b) no litigation has been instituted or, to the best of
their knowledge, threatened on or before the time of the Closing Date by any
person, the result of which did or could prevent or make illegal the
consummation of the transaction contemplated by this Agreement; or which had or
could have a material adverse effect on the Company or its Business; and (c)
there has not been any material adverse change in or affecting the Company or
its Business between the date of this Agreement and the Closing Date.
ARTICLE IX.
OBLIGATIONS ON OR BEFORE THE CLOSING DATE
9.1. OBLIGATIONS OF MIOA TO THE SHAREHOLDERS ON OR BEFORE THE CLOSING
DATE. MIOA hereby covenants and agrees to deliver or cause to be delivered to
the Shareholders on or before the Closing Date or, if agreed, as soon thereafter
as is reasonably possible the following:
(a) The duly issued certificates (legend as provided herein)
representing the Purchase Price, together with any documentary stamps required
in connection with such transfer and such other appropriate documents and
instruments of transfer as the Shareholders may reasonably request;
(b) A certification by an officer of MIOA and the Acquisition Corp
that MIOA and the Acquisition Corp are authorized to execute, deliver and
perform this Agreement and is authorized to consummate the transactions
contemplated hereby; and
(c) All Schedules, Exhibits, leases and employment agreements and
other ancillary documents contemplated by this Agreement and such other
documents and instruments as the Shareholders may reasonably request in order to
effectuate the terms of this Agreement.
9.2. OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS TO MIOA ON OR BEFORE
THE CLOSING DATE. The Company and the Shareholders hereby covenant and agree to
deliver or cause to be delivered to MIOA on or before the Closing Date or, if
agreed, as soon thereafter as is reasonably possible the following:
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(a) Duly executed stock certificates representing the Company
Shares, free and clear of all encumbrances together with any documentary stamps
required in connection with such transfer and such other appropriate documents
and instruments of transfer as MIOA may reasonably request;
(b) A certification by the Company's president that the Company was
authorized to execute, deliver and perform this Agreement and is authorized to
consummate the transactions contemplated hereby;
(c) A Good Standing Certificate for the Company and the Affiliated
Companies from the State of Florida dated no later than ten (10) days prior to
the Closing Date.
(d) Incumbency certificates relating to each person executing (as a
corporate officer or otherwise on behalf of another person) any document
executed and delivered to MIOA pursuant to the terms hereof.
(e) The General Releases referred to in Section 6.1, duly executed
by the persons referred to in such Section.
(f) All Schedules, Exhibits, leases and employment agreements and
other ancillary documents contemplated by this Agreement and such other
documents and instruments as MIOA may reasonably request in order to effectuate
the terms of this Agreement.
(g) An estoppel certificate or status letter from each of the
landlords in respect to the real estate leases of the Company and the Affiliated
Companies which shall certify that (i) the lease is valid and in full force and
effect; (ii) the amounts payable by the Company or the Affiliated Companies
under the lease and the date to which the same have been paid; (iii) whether
there are, to the knowledge of said landlord, any defaults thereunder, and, if
so, specifying the nature thereof; and (iv) that the transactions contemplated
by this Agreement will not constitute default under the lease.
ARTICLE X.
TERMINATION AND RECISSION
10.1. RECISSION POST CLOSING DATE. It is hereby acknowledged that as of
the Closing Date of this Agreement, the parties to this Agreement have not
completed their respective due diligence on MIOA and the Company nor have all
the Schedules and Exhibits to this Agreement been completed and provided as
required herein. Further, it is hereby acknowledged that this transaction is
conditioned upon the approval of MIOA's board of directors and Copelco Financial
Corporation which has not been obtained as of the Closing Date. Accordingly, the
parties obligation to consummate the transactions contemplated by this Agreement
shall be subject to (a) the completion of their due diligence and the completion
and the delivery of the Schedules and Exhibits, all to their reasonable
satisfaction, (b) the unconditional approval of this transaction by Copelco
Financial Corporation and (c) the approval of MIOA's board of directors. If any
one or more of these conditions have not been satisfied by November 20, 1998,
then, in such event,
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MIOA or the Company shall have the right to rescind this transaction by
providing written notice to the parties to this transaction. Such notice must be
given no later than November 23, 1998, unless otherwise agreed. If the
transaction is rescinded in accordance with this provision, MIOA shall return
the stock of the Company Shares to the proper Shareholders in exchange for the
MIOA Shares. Thereafter, all rights, duties and obligations of the parties shall
terminate and this Agreement shall be null and void with no further force or
effect.
ARTICLE XI.
MISCELLANEOUS
11.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered personally or sent by registered or certified
mail, postage prepaid, and addressed as set forth below:
If to the Shareholders: See Schedule 11.1
With a copy to: Joel Mayersohn
Atlas, Pearlman, Trop & Borkson
200 East Las Olas Blvd.
Suite 1900
Fort Lauderdale, Florida 33301
To Company: Your Good Health, Inc.
1903 S. Congress Ave., #400
Boynton Beach, FL 33463
Attn: Paul C. Pershes
If to MIOA: Medical Industries of America, Inc.
1903 S. Congress Ave., #400
Boynton Beach, FL 33463
Attn: Paul C. Pershes, President
Any such notices shall be deemed received upon actual receipt if
personally delivered or the third business day after the post-marked date of
mailing.
11.2. ENTIRE AGREEMENT. This Agreement, including the disclosure schedules
attached hereto and the documents delivered pursuant hereto, sets forth all the
promises, covenants, agreements, conditions and understandings among the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements or conditions, expressed
or implied, oral or written, except as herein contained. No changes of or
modifications or additions to this Agreement shall be valid unless same shall be
in writing and signed by the parties hereto.
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11.3. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon the
parties hereto, their beneficiaries, heirs and administrators. No party may
assign or transfer its interests herein, or delegate its duties hereunder,
without the written consent of the other parties.
11.4. AMENDMENT. The parties hereby irrevocably agree that no attempted
amendment, modification or change (collectively, "AMENDMENT") of this Agreement
shall be valid and effective, unless the parties shall unanimously agree in
writing to such Amendment.
11.5. NO WAIVER. No waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
11.6. GENDER AND USE OF SINGULAR AND PLURAL. All pronouns shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the party or parties or their personal representatives, successors and
assigns may require.
11.7. COUNTERPARTS. This Agreement and any amendments may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
11.8. HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
11.9. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida, and any litigation pertaining or related to
this Agreement shall, to the extent permitted by law, be held in the courts of
Palm Beach County, Florida.
11.10. FURTHER ASSURANCES. The parties hereto shall execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
11.11. LITIGATION. If any party hereto is required to engage in litigation
or arbitration against any other party hereto, either as plaintiff or as
defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party (the "PREVAILING PARTY"), then the party or parties against whom said
final judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so enforcing
or defending its or his rights hereunder, including, but not limited to, all
attorneys' fees, paralegal' fees, court costs and other expenses incurred
throughout all negotiations, trials or appeals undertaken in order to enforce
the Prevailing Party's rights hereunder.
11.12. CONFIDENTIALITY. Except for discussions of the transactions
contemplated by this Agreement among the parties hereto and their
representatives and counsel participating in this
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transaction, and except as may be required of the Corporation pursuant to
federal securities laws, each party hereto shall, unless all other parties
hereto shall otherwise agree, keep confidential and not, directly or indirectly,
disclose to any person the existence of this Agreement, the transaction
contemplated by this Agreement or any of the terms thereof, and each party
hereto shall use its good faith efforts to cause its employees, agents,
officers, directors and representatives to abide by the foregoing restrictions
on disclosure.
11.13. COSTS AND EXPENSES. The parties hereby agree that they each will be
responsible for the payment of their respective costs and expenses including
professional fees incurred in connection with this transaction with the further
understanding that fifty percent (50%) of the costs and expenses incurred by
the Shareholders and the Company shall be the responsibility of the
Shareholders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year set forth above.
WITNESSES: MEDICAL INDUSTRIES OF AMERICA, INC.
______________________________ By: /s/ PAUL C. PERSHES
Print name:___________________ Paul C. Pershes, President
MIOA ACQUISTION COMPANY IV, INC.
______________________________ By: /s/ PAUL C. PERSHES
Print name:___________________ Paul C. Pershes, President
SHAREHOLDERS:
______________________________ /s/ DAVID VASTOLA
Print name:___________________ David Vastola
______________________________ /s/ DANA PUSATERI
Print name:___________________ Dana Pusateri
______________________________ /s/ MARTIN SANTIAGO
Print name:___________________ Martin Santiago
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______________________________ /s/ JUAN COCUY
Print name:___________________ Juan Cocuy
______________________________ /s/ IRMA ESPINOZA
Print name:___________________ Irma Espinoza
______________________________ /s/ RANDY DAVIS
Print name:___________________ Randy Davis
______________________________ /s/ ELAINE CALLENDRILLO
Print name:___________________ Elaine Callendrillo
______________________________ /s/ LYDIA TORREGROSA-GREBER
Print name:___________________ Lydia Torregrosa-Greber
______________________________ /s/ RICHARD HOFFMAN
Print name:___________________ Richard Hoffman
______________________________ /s/ ERIC CONN
Print name:___________________ Eric Conn
YOUR GOOD HEALTH NETWORK, INC.
_______________________________ By: /s/ DANA PUSATERI
Print name:___________________ Dana Pusateri, Chief Executive
Officer
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EXHIBIT A
COMPANY OFFICES AND CLINICS
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EXHIBIT B
ARTICLES OF MERGER
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EXHIBIT C
ARTICLES OF INCORPORATION
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EXHIBIT D
BYLAWS
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EXHIBIT E
GENERAL RELEASE
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EXHIBIT F
EMPLOYMENT AGREEMENTS AND ADDENDUM
43
EXHIBIT 23.3
We have issued our report dated March 26, 1999, accompanying the consolidated
financial statements of Medical Industries of America, Inc. and subsidiaries
included in Form 10-KSB/A for the year ended December 31, 1998 which is
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
report and to the use of our name as it appears under the caption "Experts."
/s/ Grant Thornton, LLP
Fort Lauderdale, Florida
February 11, 2000
