<PAGE> 1
As filed with the Securities and Exchange Commission on March 28, 1997.
Registration No. 333-21705.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE COMPANY DOCTOR
(Exact name of registrant as specified in its charter)
Delaware 72-1234136
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5215 North O'Connor Boulevard, Suite 1800
Irving, Texas 75039
Telephone: (972) 401-8300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Donald F. Angle, M.D.
5215 North O'Connor Boulevard, Suite 1800
Irving, Texas 75039
Telephone: (972) 401-8300
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
Suite 4700, 1700 Lincoln Street
Denver, Colorado 80203
Telephone: (303) 830-1700
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Approximate date of commencement of proposed sale to public:
As soon as practicable after the 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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
Amount Proposed Proposed maximum Amount of
Title of each class of to be maximum offering aggregate registration
securities to be registered registered price per unit(1) offering price(1) fee
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<S> <C> <C> <C> <C>
Common Stock . . . . . . . . . . . . . . . . . . . 495,561 $6.00 $ 2,973,366 $901.02
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
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.
<PAGE> 2
THE COMPANY DOCTOR
CROSS REFERENCE SHEET BETWEEN ITEMS OF FORM S-3
AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM IN FORM S-3 LOCATION IN PROSPECTUS
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<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover of Prospectus . . . . . . . . . . . . . . Facing Page; Cross Reference Sheet; Outside Front
Cover Page.
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . . . . . . . . . . Inside Front Cover Page; Outside Back Cover Page.
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges . . . . . . . . . . . . . Prospectus Summary; Risk Factors.
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . Prospectus Summary; Use of Proceeds.
5. Determination of Offering Price . . . . . . . . . . . Outside Front Cover Page; Plan of
Distribution.
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . Not Applicable.
7. Selling Security Holders . . . . . . . . . . . . . . . Selling Stockholders.
8. Plan of Distribution . . . . . . . . . . . . . . . . . Plan of Distribution.
9. Description of Securities to be Registered . . . . . . Outside Front Cover Page; Description of Securities.
10. Interests of Named Experts and Counsel . . . . . . . . Legal Matters; Experts.
11. Material Changes . . . . . . . . . . . . . . . . . . . Recent Events.
12. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Information by
Reference.
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . Not Applicable.
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 28, 1997
495,561 SHARES OF COMMON STOCK
THE
COMPANY
DOCTOR
This Prospectus relates to 495,561 shares of Common Stock (the
"Shares") of The Company Doctor (the "Company"), 491,751 Shares of which are
issued or to be issued to certain physicians (the "Physicians") in connection
with the acquisition by an affiliated physician group practice, The Physician
Group, P.A. ("The Physician Group") of occupational and family medicine
practices of such Physicians and the agreement between the Company and The
Physician Group with respect to the management of such practices by the
Company. The remaining 3,810 Shares are issuable by the Company upon exercise
of outstanding options held by a consultant to the Company (the "Consultant").
The Company will receive the $5.25 per share exercise price of the Consultant's
options, but will not receive any of the proceeds from the sale of Shares by
either the Physicians or the Consultant (the Physicians and the Consultant,
collectively, the "Selling Stockholders"). The Company has agreed to pay the
expenses of registering the Shares offered hereby, estimated at $15,000.
The Physicians have agreed not to sell, assign, burden, pledge or
encumber more than 1/12 of their respective Shares during any month following
the date of this Prospectus until February 28, 1998, at which time any Shares
remaining unsold will be released from such restriction. The Consultant's
options become exercisable over a period of time and options relating to only
3,492.5 Shares are currently exercisable. See "Selling Stockholders". Subject
to the foregoing, the Selling Stockholders have advised the Company that they
intend to sell the Shares offered hereby as principals for their own accounts
from time to time in the over-the-counter market or in negotiated transactions
or a combination of such methods of sale. Sales may be made at fixed prices
which may be changed, at market prices prevailing at the time of sale or at
negotiated prices. The Registration Statement of which this Prospectus forms a
part must be current at the time of sale. See "Plan of Distribution."
On March 25, 1997, the closing bid price of the Common Stock was
$6.125 per share. The Company's Common Stock is traded on The Nasdaq SmallCap
Market under the symbol "CDOC" and on the Boston Stock Exchange under the
symbol CDR.
__________________________
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED
WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
__________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________________
THE DATE OF THIS PROSPECTUS IS APRIL ___, 1997.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained from the public reference facility
in Washington, D.C. 20549 at prescribed rates. The Company became an
electronic filer in April 1996. The Commission maintains a Web site that
contains reports, proxy statements and registration statements that have been
filed electronically with the Commission. The address of such site is
http://www.sec.gov. The Company's Common Stock and Warrants are listed on the
Boston Stock Exchange and reports and other information concerning the Company
may be inspected at such exchange.
The Company has filed with the Commission a registration statement
(together with all amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Common Stock offered hereby. This Prospectus, filed as part of the
Registration Statement, omits certain information contained in the Registration
Statement in accordance with the rules and regulations of the Commission. A
complete copy of the Registration Statement may be inspected and copied in the
manner and at the sources described above. Any statements contained herein
concerning the provisions of any document are not necessarily complete and in
each instance, reference is made to the copy of such document as filed with the
Commission and each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-KSB filed on October 16, 1996,
for the fiscal year ended June 30, 1996, the quarterly reports on Form 10-QSB
filed on November 14, 1996 and February 14, 1997, as amended by Form 10-QSB/A-1
filed on March 28, 1997, for the quarters ended September 30, 1996 and December
31, 1996, respectively, and the proxy statement filed October 28, 1996, as
amended on February 11, 1997 are hereby incorporated by reference in this
Prospectus. The description of the Company's capital stock contained in the
Company's Registration Statement on Form 8- A filed December 29, 1995, which
Form 8-A incorporated by reference the description of the Company's capital
stock contained in the Company's Registration Statement on Form SB-2, as amended
(S.E.C. File No. 333-99530-D) (the "IPO Registration Statement") filed with the
Commission on November 16, 1995, is hereby incorporated by reference into this
Prospectus.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold, or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded to the extent that a statement contained herein or in any other
document subsequently filed and incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Any person receiving a copy of this Prospectus may obtain without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, other than exhibits to such documents.
Requests for such copies should be directed to Mr. Shaun Mahoney, The Company
Doctor, 5215 North O'Connor Boulevard, Suite 1800, Irving, Texas 75039,
Telephone: (972) 401-8300.
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<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus and in documents incorporated herein by
reference. See "Risk Factors" for information prospective investors should
consider. Unless the context otherwise requires, the term "Company" refers to
The Company Doctor and its wholly-owned subsidiaries, Emergency Occupational
Physicians Services ("EOPS"), Andicare, Inc. ("Andicare") and Risk Management
Assurance Company ("RMAC").
THE COMPANY
The Company manages the non-medical portions of medical practices
within facilities that provide occupational and industrial medical and related
services exclusively to employees and prospective employees of corporate
customers located in the states of Texas, Louisiana and Arkansas. With recent
additions to its management portfolio, the Company currently manages 11
occupational and industrial medicine facilities servicing over approximately
4,000 employers and clients including local offices of such corporations as
Blockbuster Video, Excel Telecommunications, Fibrebond Corp., Interceramic Tile,
Southwest Airlines, U-Haul Corporation, Levi Strauss, the U.S. Postal Service
and Atlantic Richfield Co. (ARCO). At these facilities prospective employees of
the corporate customer can be pre-screened and work- related injuries and
medical conditions arising from employment can be diagnosed and treated by
physicians affiliated with The Physician Group, P.A., a Texas professional
association of physicians (the "Physicians Group"). The Physician Group is owned
and controlled by the Company's President, Dr. Donald F. Angle.
The laws in the states in which the Company operates limit the practice
of medicine to licensed individuals or professional organizations comprised of
licensed individuals. Accordingly, the Company must depend on licensed
professionals to render the actual medical services provided to employees and
prospective employees of its clients at the Company's facilities. Currently, the
Company's operating revenues are derived primarily through a non-exclusive
Practice Management Agreement with The Physician Group, which is paid for
services either on a fee-for-service basis or on a prepaid "capitated" basis (a
fixed monthly fee for each employee). The Company receives a management fee for
the provision of non-medical services, including marketing, management of the
practice and facilities, and provision of non- medical procedures and programs.
The Company is expanding geographically in areas contiguous to
existing markets in order to increase its market penetration within areas in
which a patient base is currently served. To the extent permitted by applicable
law, the Company and The Physician Group pursue affiliations with physicians,
hospitals or other providers which have established occupational medicine
practices or patient populations that can be served in an occupational medical
setting. Since its public offering, the Company and The Physician Group have
added medicine practices in Lancaster, Texas (a suburb of Dallas), Baytown,
Texas (a suburb of Houston), El Paso, Texas, Carrollton, Texas and Fort Worth,
Texas. The Company and The Physician Group financed these transactions through
the issuance of the Company's Common Stock and options to purchase Common Stock,
payment of cash, and/or delivery of secured promissory notes. In each
transaction, the Company and The Physician Group amended their Practice
Management Agreement to provide that the Company has the sole right to manage
the acquired practice for a minimum of ten years in accordance with the terms
and conditions of the existing Practice Management Agreement. Each of the
Physicians who previously owned the acquired practice entered into a standard
staff physician employment agreement with The Physician Group and into a
standard agreement to serve as Regional Medical Director of the acquired
practice at or about the time of the respective acquisition. The Company has
implemented its cost containment program and other methods of operation at its
facilities, including these newly acquired facilities.
The Company believes its management techniques and cost containment
strategies have in many cases resulted in reductions in loss ratios by workers'
compensation insurers and, thereafter, in reduced insurance premiums charged to
employers. To benefit directly from the cost containment strategies utilized in
its practice management activities, the Company acquired a Texas domiciled,
multi-line insurance company, now known as Risk Management Assurance Corporation
("RMAC"), effective June 30, 1996. Through RMAC, the Company intends to enter
the workers' compensation insurance market by participation in insurance
policies with other workers' compensation insurers that will serve as the
issuing carriers. RMAC expects to market these insurance policies to the
Company's clients at premiums which are comparable to or less than those offered
by other workers' compensation insurers.
The Company's business strategy is based upon The Physician Group or
similar entities providing actual medical services, the Company providing
management of the practices and facilities, while RMAC and/or the issuing
carrier will provide risk management, claims administration and other
insurance-related services.
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<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Selling Stockholders . . . . . . . . . 495,561 Shares of Common Stock
Common Stock outstanding on December 31, 1996 . . . . . . . . . . 4,893,104 shares(1)
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . The Company will not receive any proceeds from
sale of the Shares. See "Use of Proceeds."
Symbols: . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nasdaq SmallCap Market Boston Stock Exchange
---------------------------- ---------------------
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . CDOC CDR
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . CDOCW CDRW
</TABLE>
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(1) Excludes 150,000 shares of Common Stock held in escrow. Such shares will
be cancelled as a result of the Company's failure to satisfy certain
earnings per share requirements in the calendar year ended December 31,
1996. Also excludes (i) 7,179 Shares issuable to one of the Selling
Shareholders in May 1997, (ii) 3,810 Shares issuable to the Consultant,
(iii) Up to 1,040,875 shares of Common Stock reserved for issuance under
the Company's option plan, (iii) 1,839,800 shares of Common Stock
issuable upon the exercise of outstanding Warrants sold in the Company's
initial public offering, and (iv) 320,000 shares of Common Stock issuable
on full exercise of the Unit Purchase Option and underlying Warrants
granted to the representative of the several underwriters in connection
with the Company's initial public offering.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
The following consolidated selected financial data is derived from the
Consolidated Financial Statements and related Notes thereto appearing in the
Company's Form 10-KSB for the year ended June 30, 1996 and the Form 10-QSB for
the six months ended December 31, 1996. The consolidated statements of
operations data for each of the years in the two-year period ended June 30,
1996 and the balance sheet data at June 30, 1996 are derived from the
consolidated financial statements of the Company which have been audited by
Ehrhardt Keefe Steiner & Hottman PC, the Company's independent auditors, as
indicated in their report included herein. The selected consolidated balance
sheet data as of December 31, 1996 and the consolidated statements of
operations data for the six-month periods ended December 31, 1995 and 1996
have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of management, reflect all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the results for these periods and as of that date. The pro
forma unaudited statements of operations for the years ended June 30, 1995 and
1996 were prepared assuming the acquisitions of the Baytown and El Paso clinics
and RMAC had been completed on July 1, 1994. The revenues and expenses
represent the predecessor entities' year ended December 31, 1995 and 1994
revenues and expenses. The operations of Lancaster are not included in the pro
forma statements of operations as their effect is immaterial. The selected
financial data provided below is not necessarily indicative of the future
results of operations or financial performance of the Company.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED) SIX MONTHS
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, ENDED DECEMBER 31,
------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
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<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . $ 4,194 $ 3,006 $ 8,479 $ 6,355 $ 5,444 $1.986
Operating expenses . . . . . . . . . . . 4,267 3,094 7,545 6,964 5,503 1,882
Income (loss) from operations . . . . . . (73) (88) 934 (610) (59) 104
Net income (loss) before tax benefits . . (17) (194) 1,076 (755) 75 55
Income tax benefit . . . . . . . . . . . 100 --- (366) --- 175 --
Net income (loss) . . . . . . . . . . . . $ 83 $ (194) $ 710 $ (755) $ 250 $ 55
Net income (loss) per share . . . . . . . $ .02 $ (.09) $ .16 $ (.30) $ .05 $ .02
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1996
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . $ 4,388 $ 1,366
Current assets . . . . . . . . . . . . . . . 8,780 6,585
Total assets . . . . . . . . . . . . . . . . 13,540 19,330
Total liabilities . . . . . . . . . . . . . . 4,472 6,717
Stockholders' equity . . . . . . . . . . . . 9,068 12,613
</TABLE>
The Company was incorporated in Delaware in June 1992. Its principal
executive offices are located at Suite 1800, 5215 North O'Connor Boulevard,
Irving, Texas 75039, and its telephone number is (972) 401-8300.
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<PAGE> 7
RISK FACTORS
Investment in the Company's securities involves substantial risks,
some of which are summarized below. Prospective investors should carefully
consider the following risk factors, among others, prior to making an
investment.
PRIOR LOSSES AND ACCUMULATED DEFICIT
The Company was incorporated in June 1992 and commenced operations
after acquiring all of the outstanding stock of Andicare and EOPS, which had
been operating since 1987 and 1990, respectively. Accordingly, the Company has
had a limited operating history. In the fiscal years ended June 30, 1995 (the
"1995 Fiscal Year") and June 30, 1996 (the "1996 Fiscal Year"), the Company
incurred losses of approximately $(194,000) and $(17,000), respectively,
although an income tax benefit of $100,000 in the 1996 Fiscal Year resulted in
the Company reporting net income of approximately $83,000. The Company
generated operating loss of approximately $(59,000) in the six months ended
December 31, 1996 and, after taking into account an income tax benefit,
generated net income of approximately $250,000 for the six months. At December
31, 1996, the Company had an accumulated deficit of approximately $(983,000).
The Company experienced severe cash flow difficulties and a corresponding lack
of liquidity during the 1995 Fiscal Year. The lack of liquidity was addressed
through receipt of approximately $398,000 in net proceeds from a private
placement in November 1995 and receipt of approximately $7.9 million in net
proceeds from the Company's initial public offering in February 1996. The
Company has not achieved consistently profitable operations and there is no
assurance that profitability can be achieved or maintained in the future. The
Company's operating expenses are based in part on its estimate of future
revenues and, therefore, the Company may be unable to adjust spending in a
timely manner to compensate for a shortfall in revenues. Furthermore, there can
be no assurance that the expansion of the Company's operations which is now
underway will result in the Company achieving and maintaining consistent
profitability. The Company's operating results have fluctuated in the past and
may continue to fluctuate significantly in the future.
NEED FOR ADDITIONAL FINANCING
The Company has experienced rapid growth as a result of the increase in
the number of practices it manages which are attributable to the acquisitions
conducted by the Physician Group. The Company has also experienced growth in
the number of corporate customers serviced by the occupational medicine clinics
managed by the Company. This growth has placed additional demands on the
Company's working capital, which decreased to approximately $1,366,000 at
December 31, 1996. The Company will require additional financing in order to
continue to implement its growth strategies, the availability of which is not
assured. The Company has accepted financing commitments from an institutional
lender which relate to a proposed $1.5 million term loan and a $5 million
revolving line of credit. Subject to the satisfaction of certain conditions and
requirements, the Company expects to close on such credit arrangements in April,
1997. However, should the Company fail to close on the proposed credit
arrangements or fail in other respects to raise additional capital when
required, the Company's liquidity may be materially adversely affected, with a
corresponding negative impact on results of operations. See "Recent Events."
UNCERTAINTIES RELATED TO CHANGING HEALTHCARE ENVIRONMENT
Legislative and regulatory focus on healthcare, as well as public
concern, has caused insurers, health maintenance organizations ("HMOs") and
other providers in the healthcare industry to reevaluate cost effective means
of delivering healthcare services and has led to substantial changes in the
healthcare industry in recent years, including the introduction of managed
care, capitation programs and other means of cost containment. The
occupational healthcare segment of the healthcare industry has been slower than
other segments to adopt and implement some of these cost containment
strategies. Although the Company believes that capitation programs and other
cost containment strategies, including combined occupational healthcare and
insurance products, will play an increasing role in the delivery of
occupational healthcare, the pace of change and market
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<PAGE> 8
acceptance of new programs in the occupational healthcare segment of the
industry is uncertain. Changes in the occupational healthcare environment may
have significant impact on the success of the Company's proposed insurance
products and the financial results achieved by the Company. There is no
assurance the Company will be successful in the changing healthcare environment
or that the Company's strategy to manage capitation programs and develop
insurance policies addressed to the occupational healthcare industry will
succeed in meeting employers' and workers' occupational healthcare
requirements.
Legislative reforms in some states permit employers to designate
health plans such as HMOs to cover workers' compensation claimants. Because
many health plans have the capacity to manage healthcare for workers'
compensation claimants, such legislation may intensify competition in the
market served by the Company. Within the past few years, several states have
experienced decreases in the number of workers' compensation claims and the
average cost per claim, which has resulted in workers' compensation insurance
premium rates having fallen in those states. The Company believes that
declines in workers' compensation costs in these states are due principally to
intensified efforts by payors to manage and control claim costs, to improved
risk management by employers and to legislative reforms. If declines in
workers' compensation costs occur in many states and persist over the
long-term, they may have an adverse impact on the Company's business and
results of operations.
GOVERNMENT REGULATION OF BUSINESS
General. The Company is subject to various federal and state laws,
including those specified herein with respect to RMAC and those set forth below
with respect to healthcare. Many of the applicable laws are enforced by
regulatory authorities with broad discretion to interpret such laws, promulgate
corresponding regulations and enforce such regulations. Violations of these
laws and regulations may result in substantial penalties. Moreover,
legislative or administrative changes could have a material adverse financial
effect on the Company. The Company believes that its operations are in
material compliance with existing laws and regulations. There can be no
assurance, however, that a court or regulatory authority will not determine
that the Company's operations are not in compliance with applicable laws or
regulations or that any such determination will not have a material adverse
effect on the Company. Moreover, the Company cannot predict what, if any,
legislative changes may occur within such laws or regulations, or the impact of
changes in such laws or regulations, if any, on the Company.
Workers' Compensation Regulation. State and federal workers'
compensation laws and federal Medicare laws control many aspects of providing
occupational healthcare services including, in many cases, the amounts that may
be charged for those services. Management estimates approximately 33% of the
Company's revenues in the 1996 Fiscal Year were subject to state-mandated fee
schedules prescribing maximum reimbursable amounts for designated medical
procedures provided by The Physician Group. In addition, workers' compensation
coverage is mandated in most states. Any change which would require employers
to participate in state-sponsored funds or reduce premiums could have a
material negative impact on the Physician Group's practices and on the
Company's results of operations.
Healthcare Regulation. State laws generally prohibit anyone other
than a licensed physician from engaging in acts that constitute or contribute
to the practice of medicine and also prohibit physicians from "splitting" their
fees with other persons. Many states also limit the practice of medicine to
licensed individuals or professional organizations comprised of licensed
individuals, such as The Physician Group. The Company does not believe that
its arrangements with The Physician Group constitute the corporate practice of
medicine, because (i) they are distinctly divided into The Physician Group
providing all medical services and the Company providing non-medical services;
(ii) the Company has no right to any portion of The Physician Group's profits
derived from its medical practice except for those fees outlined in the
Practice Management Agreement which relate to the provision of non-physician
services and which are calculated to represent the reasonable and historic cost
of the provision of such non-physician services; (iii) the Company has no right
to trade and commercialize on any physician's license; and (iv) the Company has
no right to select medical
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<PAGE> 9
staff in The Physician Group. Any finding to the contrary by a court of law or
a state regulatory authority could have a material adverse impact on the
Company and its operations.
HMO Regulation. A number of states have varying definitions of HMOs
and similar entities and different licensure requirements with respect to them.
The Company believes that its current operations in Texas and Arkansas do not
constitute it as an HMO under applicable state insurance laws or regulations.
It will be necessary for the Company to comply with the laws and regulations of
each state in which it has a facility with respect to HMOs. In the event that
a state in which the Company has established operations should change its laws
and regulations or interpretation of such laws and regulations so as to
constitute the Company as an HMO, or should a state in which it has such
operations assert that the Company is an HMO under existing laws and
regulations, it could result in the inability of the Company to continue
operations in that state unless and until it complies with applicable laws and
regulations, the cost of which could be prohibitive.
A number of the Company's customers now utilize the Preferred Employee
Plan ("PEP"), a capitated plan under which a variety of services are provided
through The Physician Group. At the time the Company entered into contracts
with its existing customers who utilize the PEP, the Company believed that
because it was substantially controlled by Dr. Angle and two former directors
of the Company who are also physicians, the PEP could be provided through the
Company. The Company's healthcare counsel has recommended that the Company
amend its contracts with its PEP customers to clarify that all medical services
will be provided by The Physician Group and that The Physician Group enter into
and market capitated plans in the future. The Company has not yet obtained
signed amendments from its PEP customers. Failure to obtain any amendment
could result in a finding that the Company was offering or arranging for a
capitated plan, which in turn could cause the Company to be classified as an
HMO under Texas law. The Company intends to obtain the necessary addendums to
its PEP contracts and expects it will be successful in so doing. Nonetheless,
should the Company be classified as an HMO under Texas law, it could be subject
to fines, administrative regulation, additional licensing requirements and
substantial additional costs of operation.
EXPANSION INTO INSURANCE BUSINESS
The Company expects to benefit from its management techniques and cost
containment strategies and to expand its business by entering the workers'
compensation insurance market through RMAC. Although the Company is familiar
with workers' compensation insurance as a result of its management of
occupational and industrial healthcare facilities and has employed an
individual who has over 35 years' experience in the insurance industry as
RMAC's President, the Company may be unable to implement effectively its plan
for institution of insurance operations through RMAC. The Company has
initiated several marketing efforts in order to capitalize on its recent
acquisition of RMAC, including a quota share arrangement with Old Republic
General Insurance Group, Inc., a company listed on the New York Stock Exchange
with assets of $6.1 billion, surplus of $1.6 billion and an A+ rating from A.M.
Best Company ("Old Republic Insurance"). See "Dependence on Independent
Insurance Agencies and Insurance Companies." The Company has not written an
individual account (defined as the Company's participation in an individual
quota share policy) under its agreement with Old Republic Insurance. The
Company believes that additional quota share arrangements will be concluded
with issuing carriers in the future, although there can be no assurance the
Company will be successful in this effort. Failure to maintain or conclude
quota sharing arrangements with issuing carriers could require the Company to
identify other means of offering workers' compensation insurance, the
availability of which is not assured, or could effectively prevent RMAC from
entering into the workers' compensation insurance market. Any of the factors
described below could also negatively impact the development of RMAC's business.
Reserve Policy. RMAC is required to establish reserves for estimated
claim and claim settlement expenses after each accounting period, which
reserves are based upon the prior claims paid, the industry in which the
customer operates and the risks associated with that industry. The ability to
estimate reserves accurately depends upon a number of factors, including timely
notification of injuries by customers, the nature
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<PAGE> 10
of the injury, and the length of time a claim remains open. The Company has
placed internal restrictions on cash and investments for payment of the
estimated liability for unpaid losses from workers' compensation claims of
approximately $1,750,000, which represents estimates of the unpaid losses of
RMAC as of June 30, 1996, at which time the Company acquired RMAC. There can
be no assurance the Company's reserves will be adequate to address future
claims. To the extent actual claims exceed estimated reserves, the Company's
operations will be adversely affected.
Lack of Rating. Insurance ratings are based on a comparative analysis
of the financial condition and operating performance of insurance companies.
RMAC was a dormant insurance company when it was acquired and was not rated by
a nationally-recognized insurance rating organization. The Company believes
RMAC will not be eligible to receive a rating until it has been in operation
for a minimum period of five years. Certain insurance carriers that write
umbrella policies will not provide coverage to an employer if any portion of
the employer's underlying insurance policy, such as the workers' compensation
portion, is issued by an unrated carrier. The Company will endeavor to
affiliate with rated insurers, but the inability to obtain a rating may deter
market acceptance of RMAC's products.
Limitation on Distributions. Under Texas law, without obtaining prior
approval of the Commissioner of Insurance, dividends or distributions by RMAC
to the Company are limited to the greater of 10% of RMAC's statutory surplus or
the statutory net income from operations of RMAC for the year ending December
31. Distributions in excess of this limitation are subject to review and
approval of the Commissioner of Insurance of Texas. RMAC may be subject to
similar restrictive limitations on distributions if and when it commences
operations in other states. Accordingly, even if RMAC's operations are
profitable, the Company may have a limited ability to receive distributions
from RMAC for use in other operations.
Regulation. Insurance companies are subject to substantial regulation
in each state in which they provide workers' compensation insurance products.
These regulations are primarily intended to protect covered employees and
policy-holders rather than insurance companies. State regulatory agencies have
broad, often discretionary, administrative powers with respect to all aspects of
operations of insurance companies, including the power to determine licensing
requirements, premium rates, benefit levels, policy forms, dividend payments,
capital adequacy, and the amount and type of investments. In addition, workers'
compensation coverage is mandated in most states and state agencies regulating
such coverage also have broad administrative powers. Both the statutes and
regulations governing insurance companies and workers' compensation coverage are
subject to change. The Company is unable, at this time, to predict the
likelihood that any insurance or workers' compensation legislation will be
enacted which will affect the proposed operations of RMAC.
Competition. RMAC is subject to competition from a variety of
sources, including large insurance companies, managed healthcare companies,
state-sponsored insurance pools and risk management consultants. These
competitors may offer additional insurance products or services to employers
and, as a consequence, may have certain advantages in pricing their workers'
compensation products. The Company is aware of one competitor now offering a
managed care approach to cost containment combined with workers' compensation
insurance. In addition, certain of the Company's competitors in the
occupational healthcare industry may in the future choose to enter the workers'
compensation insurance market. Many of these competitors have greater
financial and operating resources than the Company. The Company believes that
several large insurance companies have recently entered the workers'
compensation market in different states as a result of more favorable
regulatory environments or increases in permissible premium rates. The entry
of large insurance companies into markets in which RMAC conducts business may
have a material adverse effect on RMAC's results of operations.
Dependence on Independent Insurance Agencies and Insurance Companies.
RMAC intends to offer workers' compensation insurance products through
independent insurance agencies and insurance agents
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<PAGE> 11
employed by workers' compensation insurers with which the Company implements
alliances or arrangements. In 1995, the Company implemented an arrangement
with Employers General Insurance Group ("EGIG"), a subsidiary of Old Republic
Insurance, to develop and offer a fully-guaranteed cost product, known as
Comp2000, that included the Company and its affiliate's capitated preventive
healthcare services and insurance underwritten by Old Republic Insurance. The
Company's arrangement with EGIG which was negotiated in 1995 did not allow the
Company to participate in the underwriting risk of workers' compensation
insurance or to share in premium revenues. RMAC, in consultation with EGIG,
has recently redesigned the Comp2000 product in order for RMAC to participate
in premiums and risk with EGIG. RMAC is also negotiating potential
affiliations with various other established issuing carriers of workers'
compensation insurance. The Company currently has no formal agreement with any
independent insurance agency or workers' compensation insurer to promote RMAC's
insurance products, nor is there any assurance that such agreements will be
secured in the future. It is likely that any such agreement will not preclude
agencies and agents from selling competitors' insurance products as well as
those of RMAC. Any such arrangements will also, in all likelihood, be
terminable on short notice at the agent or insurer's discretion. RMAC's
success will depend in part on its ability to offer workers' compensation
insurance products that meet the requirements of insurance companies, agencies
and their customers. Failure to secure affiliations to market RMAC's products
could have a material adverse effect on the Company.
Reinsurance and Quota Sharing. Guaranteed cost workers' compensation
insurance policies may be either (i) policies whereby the employer purchases an
insurance policy written by the insurer and pays a premium based on the
employer's aggregate payroll, and the insurers (including RMAC, to the extent
of its quota share or reinsurance) assume responsibility for all indemnity and
medical costs associated with injuries and manage the employer's entire
workers' compensation program, including all expenses related to workplace
injuries, or (ii) policies with a higher deductible, under which the employer
is responsible for all medical and indemnity expenses up to a specific dollar
amount, while the insurers are responsible for medical and indemnity expenses
over this level. RMAC intends to become a participant in the workers'
compensation risk by reinsuring a layer of losses corresponding to the medical
and indemnity costs of a primary care level of losses. The policy issuing
company will retain losses above the reinsurance assumption by RMAC. The
Company has no reinsurance contract now in effect and there can be no assurance
RMAC will be successful in securing reinsurance at a reasonable cost, if at
all. Even in the event RMAC obtains reinsurance, possible failure of a
reinsurer could subject RMAC to exposure for the payment of all claim and claim
settlement expenses covered by workers' compensation policies that RMAC has
underwritten. Although reinsurance arrangements will protect RMAC against
catastrophic claims that exceed the excess of loss limits, a significant number
of multiple large claims could have a material adverse effect on the reserves
of RMAC and on the Company's results of operations.
The Company anticipates that RMAC will seek to share in the risks and
benefits of the insurance it underwrites on a quota share basis with
established workers' compensation insurers. Under a quota share arrangement,
RMAC will share in a stated percentage of all written premium dollars, as well
as the same percentage of all risks and related costs. The Company has a quota
share arrangement with Old Republic Insurance but has not yet written an
individual account (defined as the Company's participation in an individual
quota share policy) under such agreement.
DEPENDENCE UPON PHYSICIAN GROUP; CONFLICTS OF INTEREST
Pursuant to a Practice Management Agreement between the Company and
The Physician Group, professional medical services are provided by physicians
and licensed professionals employed by The Physician Group at the facilities
managed by the Company. The Physician Group exercises full control over the
medical services rendered at the Company's facilities, while the Company
performs non-medical functions including management and administration. Under
the Practice Management Agreement, The Physician Group retains a portion of
adjusted gross revenues to cover monthly expenses, including amounts payable to
physicians, and for benefits, licenses and certifications. Based upon
calculations from historical data and costs associated with administration and
management of The Physician Group, certain excess adjusted gross revenue is
paid to the
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<PAGE> 12
Company as compensation for services provided under the Practice Management
Agreement, which includes management fees and ancillary revenues from
non-medical services. Based on the Company's own review of The Physician
Group's financial statements and review of all compensation paid by The
Physician Group to physicians affiliated with The Physician Group, the Company
believes the arrangements with The Physician Group are fair and reasonable. Dr.
Angle, the President of the Company, was the founder, and is the sole
stockholder, of The Physician Group. The Company, based upon certain
information available to it, believes that physicians employed by The Physician
Group own a total of approximately 1,670,000 shares, or 34% of the Company's
outstanding Common Stock (without giving effect to the sale of the 471,751
Shares offered hereby). Although no independent third party was retained by the
Company to render an opinion as to the fairness and reasonableness of the terms
of the arrangements between the Company and The Physician Group, such terms were
approved by the disinterested directors of the Company. The Company anticipates
that most, if not all, of its facilities will be provided medical services by
The Physician Group. Because of Dr. Angle's affiliations with the Company and
The Physician Group, there may have existed in the past, and may develop in the
future, conflicts of interest between the Company and The Physician Group. Such
conflicts of interest may include, but are not necessarily limited to, the terms
under which The Physician Group will be compensated, the duties of The Physician
Group and the Company, the amount of ancillary revenues or management fees to
which the Company is entitled, and liability for claims made against the Company
and The Physician Group in excess of liability insurance limits. Although the
disinterested members of the Board of Directors will pass upon any changes in
the terms of the Practice Management Agreement, there can be no assurance that
existing or future conflicts of interest will be resolved to the Company's
benefit. Although the interests of the Company and The Physician Group are
similar in certain respects, the Company's interests are not identical to those
of The Physician Group, which may cause conflicts of interest between the
Company and The Physician Group to arise or increase in the future. Should such
conflicts not be resolved in the Company's favor, then civil or regulatory
action might be taken against the Company, resulting in the potential for
damages or fines being assessed against the Company.
The Company is also dependent upon Dr. Angle and The Physician Group
to recruit and retain physicians with experience in occupational medicine and
the ability to understand and implement the Company's cost containment
management strategies. The Physician Group has encountered significant
competition for experienced doctors and other medical personnel with
backgrounds in occupational healthcare. The inability of The Physician Group
to retain experienced and qualified physicians for any reason could have a
material adverse impact on the Company's operations. While the Company's
agreement with The Physician Group is not exclusive and permits the Company to
enter into practice management agreements with other physicians, there can be
no assurance the Company would be successful in contracting with other
physicians or groups of physicians should it seek to do so.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES BY THE PHYSICIAN GROUP
The Physician Group is involved in the delivery of healthcare services
to the public and, therefore, is exposed to the risk of professional liability
claims. Claims of this nature, if successful, could result in substantial damage
awards which may exceed the limits of any applicable insurance coverage.
Insurance against losses related to claims of this type can be expensive and
varies widely from state to state. The Company is indemnified under its
Practice Management Agreement with The Physician Group for claims against The
Physician Group, maintains liability insurance for itself and negotiates
liability insurance for The Physician Group. Although the Company maintains
insurance providing coverage for certain negligent acts of its employees and The
Physician Group maintains malpractice insurance, there can be no assurance that
the insurance policies carried by the Company or by The Physician Group will be
sufficient so as to offset any claims made. Moreover, costs of insurance may
escalate beyond anticipated levels, or certain types of losses may be
uninsurable or may exceed available coverage. Successful claims could have a
material adverse effect on the Company's financial condition and profitability.
Additionally, the nature of the Company's business necessitates communication
between the Company and The Physician Group, on the one hand, and employers with
respect to health and physical conditions of employees and prospective
employees, on the other. The Company has established procedures to attempt to
ensure (i) no privileged patient/physician information is communicated to the
employer without the prior authorization of the employee, (ii) information
released to an employer relates only to health problems that are significant in
nature and that either could impact or be impacted by the employee's or
prospective employee's job, and (iii) information that is not job related is not
communicated to the employer. The Company also performs drug screen tests for
employers and communicates the results to the employers. There have not been
any claims against the Company due to actions taken or not taken by employers as
a result of these types of communications between the Company and its clients,
nor has any claim been made against it or The Physician Group for unauthorized
disclosure of privileged
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<PAGE> 13
patient/physician information. However, since employers may make employment
job assignment and termination decisions based upon these communications, it is
possible that the Company or The Physician Group could be held liable in
connection with these communications.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent on Donald F.
Angle, M.D., the Company's Chairman of the Board and President and principal of
The Physician Group. The loss of Dr. Angle would have a material adverse
effect on the progress and ultimate likelihood of the Company's success.
Conflicts of interest could develop between the Company and The Physician
Group, which maintain a working relationship pursuant to the Practice
Management Agreement. Moreover, if for any reason Dr. Angle became
unaffiliated with The Physician Group, the new management of The Physician
Group could seek to negotiate changes in the Practice Management Agreement with
the Company or the Company could be required to seek another professional
association to obtain physicians' services. The Company has obtained a key-man
life insurance policy on the life of Dr. Angle in the amount of $2 million and
has entered into an employment agreement for non-physician services with Dr.
Angle.
RMAC's success will be partially dependent on W. Howard Haun, who is a
member of the Board of Directors of the Company and president of RMAC. Mr.
Haun has over 35 years experience in the insurance business and has contributed
significantly in the acquisition of RMAC and the commencement of its
operations. However, there can be no assurance the Company will be successful
in recruiting other individuals with workers' compensation insurance experience
to assist Mr. Haun in managing the day-to-day operations of RMAC or, if
recruited, that such persons will be successful in establishing profitable
operations for RMAC.
COMPETITION
The market for occupational healthcare services is highly competitive.
Some of the Company's current and potential competitors are significantly
larger, have longer operating histories and have greater financial and marketing
resources than the Company. Although the Company believes that the particular
collection of medical services offered by the Physician Group, management
services and insurance has enabled the Company, and will in the future enable
it, to offer corporate clientele certain advantages over managed occupational
healthcare services provided by others, the Company anticipates that healthcare
providers, including hospitals and other occupational medicine groups, as well
as others, may attempt to penetrate the Company's markets by offering comparable
management programs. As managed care evolves, the Company anticipates its
competitors will increasingly consist of specialized provider groups, insurance
companies, HMOs and other significant providers of managed care products. The
Company currently recognizes OccuSystems, Inc., CRA Managed Care, Inc., Atlantic
Health Group, U.S. Healthworks and Meridian, among others, as competitors in its
existing markets. There can be no assurance the Company will be successful in
competing effectively in its existing markets or in markets it may enter in the
future.
CUSTOMER CONCENTRATION
Although none of the Company's existing customers accounts for 5% or
more of the Company's revenues, each of the Company's facilities are dependent
on certain significant customers. The loss of one or more significant
customers at an individual facility may have a material adverse effect on the
ability of the Company to achieve profitability at an individual facility and
could impact the Company's profitability on an overall basis. To the extent
the Company's client base continues to include large corporate customers, the
Company will be subject to an increased risk that the loss of any such customer
will have a material adverse impact on the Company's results of operations.
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EXPANSION INTO ADDITIONAL GEOGRAPHIC AND CUSTOMER MARKETS
Future growth of the Company's operations depends, in part, on its
ability to manage workers' compensation programs for customers in additional
states. In each additional state, the Company must obtain all necessary
regulatory approvals, achieve acceptance of the Company in the local market,
adapt its procedures to that state's workers' compensation system and establish
internal controls that enable it to conduct operations in several locations.
The length of time required and the expense involved will vary from state to
state. In order to reduce the cost and time required to enter new markets, the
Company may seek to enter these markets through joint ventures, as was the case
in Arkansas. There can be no assurance that the Company can obtain approval in
every state it may seek to enter or that it can successfully utilize joint
ventures to reduce the time required for, and costs of, expansion.
The Company has focused its operations on managing workers'
compensation programs for employers in industries that have relatively high
workers' compensation costs and for employers with higher than average claims
experience in their industries. Although the Company intends to continue to
focus on these market segments, it intends to market its services to industries
with lower workers' compensation costs and to employers with lower claims
experience. The Company anticipates greater competition in the future for
employers with lower claims experience. There can be no assurance that
expansion into these additional market segments will be successful.
UNSPECIFIED ACQUISITIONS AND ABSENCE OF STOCKHOLDER APPROVAL
As part of its business strategy, the Company has pursued, and intends
to continue to pursue, growth by adding established physicians' practices to
The Physician Group's practices and to the Company's management portfolio. Any
such transaction involves amendment of the Company's agreement with The
Physician Group to include the new practice and requires expanded client
services and support, increased personnel throughout the Company, expanded
operational and financial systems and the implementation of new control
procedures. Failure to implement financial controls and to address operational
constraints which may arise from time to time could adversely affect the
Company's ability to fulfill customer demands. Such acquisitions could involve a
number of risks, including the diversion of management's attention to the
assimilation of the acquired entities, adverse short-term affects on the
Company's operating results and the amortization of acquired intangible assets.
Acquisitions have in some cases included and may in the future include the
issuance of shares of Common Stock of the Company as a portion of the
consideration paid. Stockholders will in all likelihood be unable to review the
financial statements of the acquisition candidate or vote upon the terms of any
such transaction because the Board of Directors will in almost all cases have
the authority to conclude the transaction.
CONTROL BY EXISTING STOCKHOLDERS
The Company's executive officers, directors and principal stockholders
beneficially own approximately 35% of the Company's outstanding shares of
Common Stock, assuming the exercise of their currently exercisable (or
exercisable within 60 days of the date of this Prospectus) options to purchase
the Company's Common Stock. These stockholders, if acting together, would
likely be able effectively to control most matters requiring approval by the
stockholders of the Company, including the election of a majority of the
directors. The voting power of these stockholders under certain circumstances
could have the effect of delaying or preventing a change in control of the
Company. See "Description of Securities."
PRICE FLUCTUATIONS
The market prices of the Company's securities do not necessarily bear
any relationship to assets, book value, earnings history or other investment
criteria. Factors such as quarterly fluctuations in results of operations,
announcements of new insurance products or occupational healthcare programs by
the Company or its competitors, market conditions in the occupational
healthcare segment of the healthcare industry or
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<PAGE> 15
market conditions in general, may cause the market prices of the Company's
securities to fluctuate, perhaps substantially. Sales of a substantial number
of shares of Common Stock in future periods could adversely affect the market
price of the Common Stock. Holders of 2.3 million restricted shares entered
into lock-up agreements at or prior to the date of the Company's initial public
offering which restrict the sale or disposition of such shares until February
1998. The sale of these shares could have a material adverse effect on the
price of the Company's Common Stock. In addition, in recent years the stock
market has experienced significant price and volume fluctuations. These
fluctuations, which are often unrelated to the operating performance of
specific companies, have had a substantial effect on the market price for many
small capitalization companies. Factors such as those cited above, as well as
other factors which may be unrelated to the operating performance of the
Company, may adversely affect the price of the Company's securities.
RIGHTS OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
up to 5,000,000 shares of Preferred Stock. The Preferred Stock may be issued
in series with the rights and preferences determined by the Board of Directors.
Such rights and preferences could include, among other things, preferential
voting rights, conversion rights, dividend payment requirements, redemption
provisions, and preferences as to dividends and distributions. The issuance of
Preferred Stock with such rights could have the effect of limiting stockholder
participation in certain transactions such as mergers or tender offers or could
discourage or prevent a change in management or control of the Company. As of
the date of this Prospectus, no Preferred Stock is outstanding and the Company
has no present intention to issue any Preferred Stock.
SECURITIES ISSUABLE PURSUANT TO OPTIONS AND WARRANTS
At the date of this Prospectus, the Company has reserved an aggregate
of 2,556,860 shares of Common Stock for issuance on exercise of outstanding
options and warrants. To the extent the market price of the Common Stock
underlying such options and warrants exceeds the exercise price, the holders
can profit from the exercise and sale of the Common Stock, and their exercise
may dilute the ownership interest of existing stockholders. In addition, the
existence of the options and warrants may affect adversely the terms on which
the Company may obtain additional equity financing. Moreover, the holders are
likely to exercise their rights to acquire Common Stock at a time when the
Company would otherwise be able to obtain capital on terms more favorable than
could be obtained through the exercise of such securities. See "Description of
Securities."
LIMITATION OF LIABILITY
The Company's Certificate of Incorporation provides that directors of
the Company shall not be personally liable for monetary damages to the Company
or its stockholders for a breach of fiduciary duty as a director, subject to
limited exceptions. Although such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission, the
presence of these provisions in the Certificate of Incorporation could prevent
the recovery of monetary damages against directors of the Company.
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. The Company intends to retain profits,
if any, to fund growth and expansion.
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The statements contained in this Prospectus or incorporated by
reference herein that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, including statements regarding the
Company's expectations, hopes, intentions or strategies regarding the future.
All forward-looking statements included
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<PAGE> 16
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. Among the
factors that could cause actual results to differ materially are the risk
factors which may be listed from time to time in the Company's reports on Form
10-QSB, 10-KSB and registration statements filed under the Securities Act of
1933, including this Registration Statement. Forward- looking statements
encompass the (i) expectation that the Company will be successful in securing
additional capital, (ii) the operations of RMAC and its ability to enter into
quota sharing arrangements with issuing carriers, (iii) the continued expansion
of the Company's operations through joint ventures and acquisitions, (iv)
success of existing and new marketing initiatives undertaken by the Company,
(v) the retention of physicians, through the Physician Group, and the Company's
success in generating revenue increases through the retention of such
physicians and an increase in their practices, (vi) the Company's success, in
connection with The Physician Group, in concluding acquisitions at prices which
permit the Company to achieve reasonable rates of return on such acquisitions,
(vii) the Company's success in expanding service to regional and national
customers which can be serviced through existing facilities and facilities the
Company may be successful in acquiring, and (viii) success in controlling the
cost of services provided and general administrative expenses as a percentage of
revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's growth
at a reasonable cost, that competitive conditions within the industry would not
change materially or adversely, that demand for the Company's services would
remain strong, that there would be no material adverse change in the Company's
operations or business, and that changes in laws and regulations or court
decisions will not adversely or significantly alter the operations of the
Company. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive, regulatory and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of
the Company. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
information will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
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<PAGE> 17
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
Shares offered hereby. However, upon exercise of the Consultant's options, the
Company will receive proceeds of approximately $20,000. Such proceeds, if
any, will be used as working capital and for general corporate purposes,
including administrative costs and expenses. Any proceeds not immediately
required will be invested principally in U.S. government securities, short-term
certificates of deposit, money market funds or other short-term,
interest-bearing securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been quoted on The Nasdaq SmallCap
Market under the trading symbols CDOC and on the Boston Stock Exchange under
the symbol CDR since the Company's initial public offering in February 1996.
The following table sets forth the range of high and low closing bid prices of
the Company's Common Stock and Warrants, as reported by The Nasdaq Stock
Market, from February 7, 1996 through February 7, 1997. The prices set forth
below reflect interdealer quotations, without retail markups, markdowns or
commissions, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------------ ----------------
FISCAL YEAR 1996: HIGH LOW HIGH LOW
------ ----- ------ -----
<S> <C> <C> <C> <C>
Third Quarter (commencing February 7, 1996) . . . . . . $10.25 $8.50 $3.50 $2.25
Fourth Quarter . . . . . . . . . . . . . . . . . . . . 10.87 9.37 4.25 3.00
FISCAL YEAR 1997:
First Quarter . . . . . . . . . . . . . . . . . . . . . 10.00 8.87 4.00 3.12
Second Quarter . . . . . . . . . . . . . . . . . . . . . 8.87 5.87 3.12 1.50
Third Quarter (Through February 7, 1997) . . . . . . . . 5.87 5.50 1.50 1.25
</TABLE>
The last reported bid price of the Common Stock on March 25, 1997
was $6.12 per share.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock. The
Company anticipates that for the foreseeable future all earnings will be
retained for use in the Company's business and no cash dividends will be paid
to stockholders.
RECENT EVENTS
The Company has engaged in discussions with certain institutional
lenders for the purpose of acquiring one or more credit facilities. On March 27,
1997, the Company accepted two financing commitments from HealthCare Financial
Partners. The first commitment provides for a $5 million revolving line of
credit to be secured by a first lien on all accounts receivable (the "Accounts
Receivable Facility"). The Accounts Receivable Facility would provide for a
two-year term, interest at the rate of prime plus 2%, a .083% monthly collateral
management fee and a $25,000 commitment fee. The second commitment provides for
a $1.5 million term loan to be secured by all of the Company's assets, including
an assignment of the Company's practice management agreement (the "Term Loan").
The Term Loan would provide for a two-year term, interest at the rate of prime
plus 4%, a 2% commitment fee and warrants to purchase 375,000 shares of Common
Stock at an exercise price of $7.00 and on such other terms and conditions as
are contained in the Company's publicly traded warrants. Subject to the
satisfaction of certain conditions and requirements, as to which there can be no
assurance, the Company expects to close on the Accounts Receivable Facility and
the Term Loan in April 1997.
In accordance with their respective registration rights agreements with
the Company, certain Physicians, consisting of Drs. Calderoni, Guerra,
Duchouquette, Riser and Czewski, demanded registration of their Shares on or
before February 28, 1997. When the Registration Statement of which this
prospectus forms a part was not declared effective by the Securities and
Exchange Commission by such date, such Physicians became entitled to sell their
shares back to the Company at a price calculated pursuant to an agreed upon
formula (the "Sale Right"). Drs. Calderoni, Guerra and Duchouquette each
notified the Company of the exercise of their Sale Right. On March 22, 1997,
Drs. Calderoni and Guerra each rescinded the exercise of their Sale Right and
agreed to extend the February 28, 1997 registration deadline to April 30, 1997.
In consideration of such agreements, the Company has issued an additional 6,666
shares of Common Stock to each of Drs. Calderoni and Guerra (the "Additional
Shares"). The Additional Shares are covered by the Registration Statement of
which this Prospectus is a part and are offered hereby. The Company is currently
engaged in discussions with Dr. Duchouquette which are intended to result in his
recession of the exercise of his Sale Right on terms and conditions which may be
similar to those negotiated with Drs. Calderoni and Guerra. However, there can
be no assurance that any such resolution will be achieved.
-15-
<PAGE> 18
SELLING STOCKHOLDERS
The following table sets forth the number of Shares being registered
for the benefit of each of the Selling Stockholders and the number of Shares to
be sold. Drs. Sharp, Riser, Guerra, Calderoni and Czewski are employed by The
Physician Group, each as a staff physician and medical director for the
respective practices which were acquired from them. Dr. Duchouquette is
employed as a staff physician for the practice acquired from him. The Company
has been advised that the Selling Stockholders have sole voting and investment
power with respect to all of the Shares listed opposite their name.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP NUMBER OF SHARES
--------------------------- -------------------
NAME NO. OF SHARES % OF CLASS BEING OFFERED
- ---- ------------- ---------- -------------------
<S> <C> <C> <C>
Doyle Sharp, M.D. . . . . . . . . . . . . . . . 51,846 1.1 51,846
C.A. Riser, M.D.. . . . . . . . . . . . . . . . 88,236 1.8 88,236
Francisco J. Guerra, M.D. . . . . . . . . . . . 120,042 2.5 120,042
Henry H. Calderoni, M.D. . . . . . . . . . . . 120,042 2.5 120,042
J.W. Czewski, D.O.(1) . . . . . . . . . . . . . 48,205 1.0 48,205
Robert G. Duchouquette, M.D., P.A. . . . . . . 63,380 1.3 63,380
Prizm Development, Inc.(2) . . . . . . . . . . 3,810 * 3,810
</TABLE>
___________________________
* Less than 1%
(1) Includes (i) 41,026 Shares issued in September 1996, and (ii) 7,179 Shares
to be issued between May 28, 1997, and June 12, 1997, provided Dr. Czewski
is then employed by The Physician Group under both his Staff Physician and
Regional Medical Director employment agreements.
(2) Includes currently exercisable options to purchase 3,492.5 Shares and
options to purchase the remaining 317.5 Shares which become exercisable
on April 15, 1997.
-16-
<PAGE> 19
PLAN OF DISTRIBUTION
Subject to their respective agreements with the Company described
below, the Selling Stockholders may sell their Shares from time to time in
transactions (which may include block transactions by or for the account of the
Selling Stockholders) in the over-the-counter market or in negotiated
transactions or a combination of such methods of sale. Sales may be made at
fixed prices which may be changed, at market prices prevailing at the time of
sale or at negotiated prices. The Selling Stockholders may effect such
transactions by selling their securities directly to purchasers, through
broker-dealers acting as agents for the Selling Stockholders or to
broker-dealers who may purchase Shares as principals and thereafter sell the
securities from time to time in the over-the-counter market in negotiated
transactions or otherwise. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers for whom such broker-dealers may act as
agents or to whom they may sell as principals or otherwise (which compensation
as to a particular broker-dealer may exceed customary commissions). The
Company will not receive any proceeds from the sale of Shares by the Selling
Stockholders. The Registration Statement of which this Prospectus forms a part
must be current at any time during which the Selling Stockholders sell Shares.
Pursuant to applicable rules and regulations under the Securities
Exchange Act of 1934, any person engaged in the distribution of the Common
Stock may not simultaneously engage in market making activities with respect to
any securities of the Company during the applicable "cooling-off" period (at
least two, and possibly nine, business days) prior to the commencement of such
distribution. Accordingly, in the event a broker-dealer is engaged in a
distribution of the Shares owned by the Selling Stockholders, such firm will
not be able to make a market in the Company's securities during the applicable
restrictive period. The Selling Stockholders and broker-dealers, if any,
acting in connection with such sale might be deemed to be underwriters within
the meaning of Section 2(11) of the Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Act.
Each of the Physicians has agreed that he will not sell, assign,
burden, pledge or encumber more than 1/12 of his Shares during any month
following the date of this Prospectus until February 28, 1998, at which time
any Shares remaining unsold will be released from such restrictions.
Accordingly, no more than an aggregate of approximately 41,000 Shares can be
sold during any month following the date of this Prospectus.
A portion of the Consultant's option becomes exercisable monthly and
will be fully exercisable by April 15, 1997. See "Selling Stockholders."
-17-
<PAGE> 20
DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of Common Stock,
par value $.01 per share, and 5,000,000 shares of Preferred Stock, par value
$.01 per share. As of the date of this Prospectus, 4,893,104 shares of Common
Stock were issued and outstanding and no Preferred Stock was issued or
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. The
Company's Certificate of Incorporation denies cumulative voting rights in the
election of directors. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that are applicable to
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. In the event of a liquidation, dissolution
or winding up of the Company, holders of Common Stock are entitled to share
ratably in the assets remaining after payment of liabilities and the
liquidation preference of outstanding Preferred Stock, if any. Holders of
Common Stock have no preemptive, conversion or redemption rights. All of the
outstanding shares of Common Stock are fully paid and non- assessable.
OUTSTANDING WARRANTS AND REGISTRATION RIGHTS
The Units offered in the Company's public offering each consisted of
one share of Common Stock and one Warrant. The Warrants were immediately
separately transferable from the Common Stock and in March 1996, the Units were
delisted from trading. Each Warrant entitles the holder to purchase one share
of Common Stock at an exercise price of $7.00 until February 6, 1999, subject
to the Company's redemption rights described below. The outstanding 1,839,800
Warrants were issued pursuant to the terms of a Warrant Agreement between the
Company and Continental Stock Transfer & Trust Company (the "Warrant Agent").
The Company, in its discretion, may redeem outstanding Warrants, in
whole but not in part, upon not less than 30 days' notice, at a price of $.05
per Warrant, provided that the closing bid price of the Common Stock equals or
exceeds $10.00 for 20 consecutive trading days ending five days immediately
prior to such notice. The Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. Any Warrant not
exercised by the date fixed for redemption will cease to be exercisable and the
holder thereof will be entitled only to the redemption price.
In addition to the Warrants issued in the initial public offering, the
Company issued to the representative of the several underwriters in such
offering a Unit Purchase Option exercisable through February 5, 2001 to
purchase 320,000 shares of Common Stock on full exercise of the Unit Purchase
Option and underlying Warrants. The Unit Purchase Option and the shares
underlying such Unit Purchase Option were registered on the IPO Registration
Statement.
Pursuant to agreements with one of the Selling Stockholders, the
Company is also obligated to grant to the Selling Stockholder an option on
September 20 of each year for so long as the Selling Stockholder is employed by
The Physician Group as either a Staff Physician or a Regional Medical Director
to purchase that number of shares of Common Stock of the Company which has a
total market value (based on the average closing trading price of the Common
Stock during the five trading days prior to September 20 of each respective
year) of $100,000. Each option will be valid for a period of six years from
its respective September 20 grant date.
As of the date of this Prospectus, a total of 393,250 options of the
1,040,875 options available for issuance under the Company's 1995 Omnibus Stock
Option Plan, as amended (the "Plan"), are outstanding, each with an exercise
price of $5.25 (except in the case of Dr. Angle, the Company's President, whose
exercise
-18-
<PAGE> 21
price is $5.78). All such plan options vest over a period of 18 months
generally commencing two to six months from the date of grant.
PREFERRED STOCK
The Board of Directors has the authority, without further stockholder
approval, to issue up to 5,000,000 shares of Preferred Stock from time to time
in one or more series, to establish the number of shares to be included in each
such series, and to fix the preferences and rights of the shares of each such
series. The issuance of Preferred Stock could delay or prevent a change in
control, decrease the amount of earnings and assets available for distribution
to the holders of Common Stock, if any, adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock, or in certain
circumstances, decrease the market price of the Common Stock.
The Company designated 400,000 shares as Series A Convertible
Preferred Stock and sold such shares in a private offering in November 1995.
The remaining 4,600,000 shares of authorized Preferred Stock have not been
designated by the Company. The Series A Convertible Preferred Stock
automatically converted into shares of Common Stock on a one-for-one basis on
the effective date of the Company's initial public offering and accordingly, no
Preferred Stock is currently outstanding. The Company registered the Common
Stock into which the Series A Convertible Preferred Stock was converted and the
holders of the converted shares may therefore sell or otherwise dispose of
their shares of Common Stock without restriction.
DELAWARE BUSINESS COMBINATION PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of
the Delaware General Corporation Law ("Section 203"), which regulates large
accumulations of shares, including those made by tender offers. Section 203
may have the effect of significantly delaying a purchaser's ability to acquire
the entire interest in the Company if such acquisition is not approved by the
Company's Board of Directors. In general, Section 203 prevents an "Interested
Stockholder" (defined generally as a person with 15% or more of a corporation's
outstanding voting stock) from engaging in a "Business Combination" (defined
below) with a Delaware corporation for three years following the time that such
person became an Interested Stockholder. For purposes of Section 203, the term
"Business Combination" is defined broadly to include mergers and certain other
transactions with or caused by the Interested Stockholder; sales or other
dispositions to the Interested Stockholder (except proportionately with the
corporation's other stockholders) of assets of the corporation or a subsidiary
equal to 10% or more of the aggregate market value of the corporation's
consolidated assets or its outstanding stock; the issuance or transfer by the
corporation or a subsidiary of stock of the corporation or such subsidiary to
the Interested Stockholder (except for transfers in a conversion or exchange or
a pro-rata distribution or certain other transactions, none of which increase
the Interested Stockholder's proportionate ownership of any class or series of
the corporation's or such subsidiary's stock); or receipt by the Interested
Stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on Business Combinations by Section
203 does not apply if: (a) prior to the time that a stockholder becomes an
Interested Stockholder, the Board approves either the Business Combination or
the transaction which resulted in the person becoming an Interested
Stockholder; (b) the Interested Stockholder owns at least 85% of the
corporation's voting stock outstanding upon consummation of the transaction
which made him or her an Interested Stockholder (excluding from the 85%
calculation shares owned by directors who are also officers of the corporation
and shares held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (c) at or
subsequent to such time a person becomes an Interested Stockholder, the Board
approves the Business
-19-
<PAGE> 22
Combination, and it is also approved at a stockholder meeting by 66 2/3% of the
outstanding voting stock not owned by the Interested Stockholder.
Under Section 203, the restrictions described above do not apply if,
among other things, the corporation's original certificate of incorporation or
any amendment to its certificate of incorporation contains a provision
expressly electing not to be governed by Section 203. The Company's
Certificate of Incorporation does not contain such a provision. The
restrictions described above also do not apply to certain Business Combinations
proposed by an Interested Stockholder following the announcement or
notification of one of certain extraordinary transactions involving the
corporation and a person who had not been an Interested Stockholder during the
previous three years or who became an Interested Stockholder with the approval
of a majority of the corporation's directors.
-20-
<PAGE> 23
LEGAL MATTERS
The validity of the Common Stock offered will be passed upon for the
Selling Stockholders by Berliner Zisser Walter & Gallegos, P.C., Denver,
Colorado.
EXPERTS
The financial statements for the fiscal years ended June 30, 1995 and
1996 incorporated in this Prospectus by reference to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995 and 1996, have been so
included in reliance on the report of Ehrhardt Keefe Steiner & Hottman PC,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
With respect to the information contained in the quarterly reports on
Form 10-QSB, Ehrhardt Keefe Steiner & Hottman PC has not audited or reviewed
such information and accordingly, such firm does not express an opinion or any
other form of assurance on that information.
-21-
<PAGE> 24
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
____________________________________
TABLE OF CONTENTS
____________________________________
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . 15
Price Range of Common Stock . . . . . . . . . . . 15
Dividend Policy . . . . . . . . . . . . . . . . . 15
Selling Stockholders . . . . . . . . . . . . . . 16
Plan of Distribution . . . . . . . . . . . . . . 17
Description of Securities . . . . . . . . . . . . 18
Legal Matters . . . . . . . . . . . . . . . . . . 21
Experts . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
495,561 SHARES
THE COMPANY DOCTOR
COMMON STOCK
__________________________
PROSPECTUS
__________________________
APRIL , 1997
================================================================================
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with this offering which will be paid by
The Company Doctor (hereinafter in this Part II, the "Company") are estimated
to be substantially as follows:
<TABLE>
<CAPTION>
AMOUNT PAYABLE
BY THE
ITEM COMPANY
- ---- -------------
<S> <C>
S.E.C. Registration Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 901.02
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000.00*
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000.00*
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,098.98*
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000.00*
============
</TABLE>
- --------------------
* Estimated for the purpose of this filing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of the Delaware General Corporation Law,
the Company has adopted provisions in its Certificate of Incorporation which
provide that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law; (iii) an act related to the unlawful stock repurchase or
payment of a dividend under Section 174 of Delaware General Corporation Law;
and (iv) transactions from which the director derived an improper personal
benefit. Such limitation of liability does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company
to indemnify its officers, directors and other agents, by bylaws, agreements or
otherwise, to the full extent permitted under Delaware law. The Company
intends to enter into separate indemnification agreements with its directors
and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.
II-1
<PAGE> 26
ITEM 16. EXHIBITS.
The following is a complete list of Exhibits filed herewith or which
are incorporated herein by reference thereto.
<TABLE>
<CAPTION>
EXHIBIT NO.
- ----------
<S> <C>
1. Not applicable.
# 2.2 Stock Purchase Agreement by and between Rubus Realty Company and the Company.
## 2.3 Asset Purchase Agreement by and between C.A. Riser, M.D. and the Company.
## 2.4 Asset Purchase Agreement by and between C.A. Riser, M.D. and Donald F. Angle, M.D., P.A.
+ 2.5.1 Stock Purchase Agreement by and among Doctors' Inn, Incorporated, Henry H. Calderoni, Francisco J. Guerra
and the Company.
*** 2.5.2 Amendment to Stock Purchase Agreement by and among Doctors' Inn, Incorporated, Henry H. Calderoni,
Francisco J. Guerra and the Company.
+ 2.6 Stock Purchase Agreement by and among Francisco J. Guerra, M.D., P.A., Francisco J. Guerra, M.D. and
Donald F. Angle, M.D., P.A.
+ 2.7 Stock Purchase Agreement by and between Henry H. Calderoni, M.D., P.A., Henry H. Calderoni, M.D. and
Donald F. Angle, M.D., P.A.
++ 2.8 Asset Purchase Agreement by and among Northside Family Medical Clinic Professional Association, J.W.
Czewski, D.O., and The Company Doctor, including Security Agreement
++ 2.9 Stock Purchase Agreement by and among Northside Family Medical Clinic Professional Association, J.W.
Czewski, D.O., and Donald F. Angle, M.D., P.A., including Secured Promissory Note, Pledge and Security
Agreement and Rescission Agreement
** 2.10 Stock Purchase Agreement by and among Robert G. Duchouquette, M.D., P.A., Robert G. Duchouquette, M.D. and
The Physician Group, P.A., including Note, Pledge Agreement and Security Agreement
** 2.11 Stock Option Agreement by and between Robert G. Duchouquette, M.D. and the Company
** 2.12 Registration Rights Agreement by and between Robert G Duchouquette, M.D. and the Company
* 4.1 Form of specimen certificate for Common Stock of the Company.
* 4.2 Form of specimen certificate for Warrants of the Company.
* 4.4 Form of Unit Purchase Option of the Company.
* 4.5 Form of Warrant Agreement by and among the Company, Continental Stock Transfer & Trust Company and the
Representative.
*** 5. Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding legality of the securities covered by this
Registration Statement.
8. Not applicable.
</TABLE>
II-2
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
15 Not applicable.
*** 23.1 The consent of Berliner Zisser Walter & Gallegos, P.C., to the use of its opinion with respect to the
legality of the securities covered by this Registration Statement and to the references to such firm in
the Prospectus filed as part of this Registration Statement is included in Exhibit 5.
*** 23.2 Consent of Ehrhardt Keefe Steiner & Hottman PC, independent certified public accountants for the Company.
24. Not applicable.
25. Not applicable.
26. Not applicable.
27. Not required.
28. Not applicable.
</TABLE>
- -----------------------------
*** Filed herewith.
* Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 (S.E.C. File No. 33-74876-D) as declared effective on February
6, 1996.
# Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of July 9, 1996.
## Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 15, 1996.
+ Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 21, 1996.
++ Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 28, 1996.
** Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of September 20, 1996.
ITEM 17. UNDERTAKINGS.
(a) Rule 415.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to:
(iii) Include any material additional or changed
information on the plan of distribution.
(2) For determining liability under the Securities Act of
1933 (the "Securities Act"), treat each post-effective amendment as a
new registration statement of securities offered, and the offering of
the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of
the offering.
(e) Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission,
II-3
<PAGE> 28
such indemnification is against public policy as expressed in the Act, and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer
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 Act and will be governed by the final adjudication of such
issue.
(i) Rule 430A.
The undersigned small business issuer hereby undertakes that it will:
(1) For determining any liability under the Securities
Act, treat the information omitted from the form of Prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the small business issuer
under Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part
of this Registration Statement as of the time the Commission declared
it effective.
(2) For determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of
Prospectus as a new registration statement for the securities offered
in the registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
II-4
<PAGE> 29
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on 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 Irving, State of Texas, on March 27, 1997.
THE COMPANY DOCTOR
By: /s/ Donald F. Angle, M.D.
----------------------------------------
Donald F. Angle, M.D.,
Chairman of the Board and President
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald F. Angle, M.D. Chairman of the Board and March 27, 1997
- ------------------------------ President (Principal Executive Officer)
Donald F. Angle, M.D.
/s/ Fred G. Parrish Chief Operating Officer March 27, 1997
- ------------------------------
Fred G. Parrish
/s/ Shaun P. Mahoney Chief Financial Officer (Principal March 27, 1997
- ------------------------------ Financial Officer)
Shaun P. Mahoney
Director
- ------------------------------
Carl S. Luikart
/s/ Thomas J. Edwards Director March 27, 1997
- ------------------------------
Thomas J. Edwards
/s/ John P. Kennedy Director March 27, 1997
- ------------------------------
John P. Kennedy
/s/ Dale W. Willetts Director March 27, 1997
- ------------------------------
Dale W. Willetts
/s/ W. Howard Haun Director March 27, 1997
- ------------------------------
W. Howard Haun
/s/ Stephen W. Cavanaugh Director March 27, 1997
- ------------------------------
Stephen W. Cavanaugh
</TABLE>
II-5
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- ----------
<S> <C>
1. Not applicable.
# 2.2 Stock Purchase Agreement by and between Rubus Realty Company and the Company.
## 2.3 Asset Purchase Agreement by and between C.A. Riser, M.D. and the Company.
## 2.4 Asset Purchase Agreement by and between C.A. Riser, M.D. and Donald F. Angle, M.D., P.A.
+ 2.5.1 Stock Purchase Agreement by and among Doctors' Inn, Incorporated, Henry H. Calderoni, Francisco J. Guerra
and the Company.
** 2.5.2 Amendment to Stock Purchase Agreement by and among Doctors' Inn, Incorporated, Henry H. Calderoni,
Francisco J. Guerra and the Company.
+ 2.6 Stock Purchase Agreement by and among Francisco J. Guerra, M.D., P.A., Francisco J. Guerra, M.D. and
Donald F. Angle, M.D., P.A.
+ 2.7 Stock Purchase Agreement by and between Henry H. Calderoni, M.D., P.A., Henry H. Calderoni, M.D. and
Donald F. Angle, M.D., P.A.
++ 2.8 Asset Purchase Agreement by and among Northside Family Medical Clinic Professional Association, J.W.
Czewski, D.O., and The Company Doctor, including Security Agreement
++ 2.9 Stock Purchase Agreement by and among Northside Family Medical Clinic Professional Association, J.W.
Czewski, D.O., and Donald F. Angle, M.D., P.A., including Secured Promissory Note, Pledge and Security
Agreement and Rescission Agreement
** 2.10 Stock Purchase Agreement by and among Robert G. Duchouquette, M.D., P.A., Robert G. Duchouquette, M.D. and
The Physician Group, P.A., including Note, Pledge Agreement and Security Agreement
** 2.11 Stock Option Agreement by and between Robert G. Duchouquette, M.D. and the Company
** 2.12 Registration Rights Agreement by and between Robert G Duchouquette, M.D. and the Company
* 4.1 Form of specimen certificate for Common Stock of the Company.
* 4.2 Form of specimen certificate for Warrants of the Company.
* 4.4 Form of Unit Purchase Option of the Company.
* 4.5 Form of Warrant Agreement by and among the Company, Continental Stock Transfer & Trust Company and the
Representative.
*** 5. Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding legality of the securities covered by this
Registration Statement.
8. Not applicable.
15 Not applicable.
*** 23.1 The consent of Berliner Zisser Walter & Gallegos, P.C., to the use of its opinion with respect to the
legality of the securities covered by this Registration Statement and to the references to such firm in
the Prospectus filed as part of this Registration Statement is included in Exhibit 5.
*** 23.2 Consent of Ehrhardt Keefe Steiner & Hottman PC, independent certified public accountants for the Company.
24. Not applicable.
25. Not applicable.
26. Not applicable.
27. Not required.
28. Not applicable.
</TABLE>
- -----------------------------
*** Filed herewith.
* Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 (S.E.C. File No. 33-74876-D) as declared effective on February
6, 1996.
# Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of July 9, 1996.
## Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 15, 1996.
+ Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 21, 1996.
++ Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of August 28, 1996.
** Incorporated by reference from the Registrant's Form 8-K, as amended, for
event date of September 20, 1996.
<PAGE> 1
EXHIBIT 2.5.2
March 22, 1997
VIA FACSIMILE 972-401-0839
- --------------------------
The Company Doctor
Las Colinas -- Williams Square
5215 N. O'Connor Blvd.
Suite 1800
Irving, Texas 75039
Attention: Donald D. Angle, M.D.,
Chairman, C.E.O.
Dear Dr. Angle:
This letter is to confirm the agreements we reached in our telephone
conversations last evening regarding (i) the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of the 113,376 shares of The
Company Doctor common stock owned by Henry H. Calderoni, M.D. and the 113,376
shares of The Company Doctor common stock owned by Francisco J. Guerra, M.D.,
(such 226,752 shares being collectively referred to herein as the "TCD
Shares"), and (ii) the withdrawal of our notices of rescission of the transfer
of the TCD Shares pursuant to our letters (herein, collectively, the "Notices
of Rescission"), dated March 5, 1997, to Mr. Robert K. Aiken, Vice President
of The Company Doctor. Those letters exercised our right of rescission pursuant
to Section 3 of the Stock Purchase Agreement (the "Stock Purchase Agreement")
effective July 1, 1996, by and among The Company Doctor, as Purchaser, and
Doctors' Inn Incorporated, Henry H. Calderoni, M.D. and Francisco J. Guerra,
M.D., as Sellers, based upon the Purchaser's failure to register the TCD Shares
on or before February 28, 1997.
You have requested that we amend Section 3 of the Stock Purchase
Agreement to provide that the Purchaser shall use its best efforts to cause to
be effective the registration of the TCD Shares not later than April 30, 1997
(herein, the "Registration"). The amendment is to further provide that if the
Purchaser fails to timely cause the Registration by April 30, 1997, Sellers
shall have the right, exercisable by Sellers giving written notice to Purchaser
subsequent to April 30, 1997, but prior to June 30, 1997, to rescind the
transfer of the TCD Shares, in which event (i) Sellers shall return the TCD
Shares to Purchaser and (ii) Purchaser shall pay to Seller within 15 days after
Purchaser receives Sellers' notice of rescission of the transfer of the TCD
Shares the greater of (i) $1,125,000.00 or (ii) the market value of the TCD
Shares owned by that Seller, which would have been registered pursuant to
Section 3 of the Stock Purchase Agreement, calculated based upon the average of
the closing trading price on NASDAQ of a share of The Company Doctor stock for
the five most recent trading days prior to April 30, 1997. The form of your
proposed amendment, captioned "Amendment to Stock Purchase Agreement" (herein,
the "Amendment"), prepared by you, is attached to this letter.
<PAGE> 2
We agree to withdraw our Notices of Rescission and to execute the
Amendment subject to the following agreements by The Company Doctor,
each of which shall be a condition to the withdrawal of our Notices
of Rescission and our execution of the Amendment:
1. In consideration of our withdrawal of our Notices of Rescission
and our execution of the Amendment, The Company Doctor shall issue to each of
Sellers 6,666 additional shares of The Company Doctor common stock (the
"Additional Shares") within five (5) business days after the effective date of
this agreement.
2. The Stock Purchase Agreement shall be further amended to
provide that the Purchaser shall use its best efforts to cause to be effective
the registration of the Additional Shares not later than April 30, 1997
(herein, the "Additional Share Registration"). The amendment is to further
provide that if the Purchaser fails to timely cause the Additional Share
Registration by April 30, 1997, Sellers shall have the right, exercisable by
Sellers giving written notice to Purchaser subsequent to April 30, 1997, but
prior to June 30, 1997, to rescind the transfer of the Additional Shares, in
the event (i) Sellers shall return the Additional Shares to Purchaser and (ii)
Purchaser shall pay to Seller within 15 days after Purchase receives Sellers'
notice of rescission of the transfer of the Additional Shares the greater of
(i) $40,000.00 or (ii) the market value of the Additional Shares owned by that
Seller, which would have been registered pursuant to Section 3 of the Stock
Purchase Agreement, as amended, calculated based upon the average of the
closing trading price on NASDAQ of a share of The Company Doctor stock for the
five most recent trading days prior to April 30, 1997.
3. We have by letter dated August 22, 1996 requested that you
register the TCD Shares under the Securities Act. To the extent that request
was rescinded by our Notices of Rescission, by this letter Sellers hereby
request, upon your acceptance of the terms of this letter, that your register
under the Securities Act the TCD Shares, and the Additional Shares issued to
each of Sellers pursuant to this agreement, in accordance with Section 3 of the
Stock Purchase Agreement, as amended by the Agreement, that Purchaser shall use
its best efforts to cause to be effective the registration of the TCD Shares
and the Additional Shares not later than April 30, 1997.
4. The Stock Purchase Agreement shall be further amended to
provide that for a period beginning on the earlier of the date of Registration
or April 30, 1997 and ending on February 28, 1998, Sellers shall not sell,
assign, transfer, deliver, burden, pledge or encumber in any one month more
than one-twelfth (1/12th) of the TCD Shares or the Additional Shares.
Commencing March 1, 1998, this restriction shall terminate in its entirety as
to both the TCD Shares and the Additional Shares.
5. The additional amendments to the Stock Purchase Agreement
required by the terms of this agreement must be in form and substance
reasonably acceptable to both Sellers and Purchasers and shall be executed by
the parties within five (5) business days after the effective date of this
agreement.
6. The Company Doctor agrees to reimburse us for all attorney's
fees incurred by us in connection with this matter. We have incurred
approximately $5,800 in fees to date.
<PAGE> 3
There may be additional fees due for work performed by our counsel after this
date. Reimbursement if the final amount of our fees must be made to our account
by wire transfer within five (5) business days after the effective date of this
agreement. We will timely inform you of the final amount after receipt of this
agreement signed by you as provided below.
7. The effective date of this agreement shall be the date when the
undersigned receives a counterpart of this letter agreement signed by The
Company Doctor as provided below. To facilitate this matter we have, at your
request, executed the Amendment attached hereto, however, you understand and
agree that the amendment is subject to and contingent upon your acceptance of
this terms and conditions of this letter. In the event such terms are not
acceptable to The Company Doctor, the Amendment is not effective as to the
undersigned and we request that you return the original executed Amendment to
the undersigned.
8. The Company Doctor further understands and agrees that its failure
to timely perform any of the foregoing terms and conditions shall entitle us,
in addition to any other right or remedy we may have under the Stock Purchase
Agreement, or otherwise, to a rescission of this agreement and the
reinstatement of our original Notices of Rescission. Time is of the essence of
this agreement.
If the foregoing accurately states our agreement please indicate your
acceptance and agreement of these terms by having an authorized officer sign
below.
Thank you,
Very truly yours,
/s/ FRANCISCO J. GUERRA, M.D.
------------------------------------
Francisco J. Guerra, M.D.,
individually and on behalf of
Henry H. Calderoni, M.D.
ACCEPTED AND AGREED:
THE COMPANY DOCTOR,
a Delaware corporation
/s/ Donald F. Angle, M.D.
- ---------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
Date: March __, 1997
<PAGE> 1
EXHIBIT 5
[BERLINER ZISSER WALTER & GALLEGOS, P.C. LETTERHEAD]
March 27, 1997
The Company Doctor
5215 N. O'Connor Boulevard, Suite 1800
Irving, Texas 75039
Re: Registration Statement on Form S-3
(S.E.C. File No. 333-21705) Covering 495,561
Shares of Common Stock of The Company Doctor
Ladies and Gentlemen:
We have acted as counsel to The Company Doctor, a Delaware corporation
(the "Company"), in connection with the proposed offering by certain
shareholders of the Company of 495,561 shares of Common Stock (the "Shares"),
in accordance with the registration provisions of the Securities Act of 1933,
as amended.
In such capacity, we have examined, among other documents, the
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission on February 12, 1997 (as may be amended from time to time,
the "Registration Statement"), covering the offering of the Shares.
Based on the foregoing and on such further examination as we have
deemed relevant and necessary, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware.
2. The Shares of Common Stock have been legally and validly
authorized under the Articles of Incorporation of the Company, and on receipt
of the consideration required by, and when issued in accordance with the
description set forth in, the Registration Statement, the Shares will
constitute duly and validly issued, outstanding, and fully paid and
nonassessable securities of the Company.
We hereby consent to the use of our name and to the references to our
firm in the Prospectus forming a part of the Registration Statement, and to the
filing of a copy of this opinion as Exhibit No. 5 thereto.
Very truly yours,
/s/ BERLINER ZISSER WALTER & GALLEGOS, P.C.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Company Doctor on Form S-3, of our report dated July 26, 1996 (except for
Note 2 as to which the date is August 23, 1996) appearing in the annual report
on Form 10-KSB of The Company Doctor and Subsidiaries for the year ended June
30, 1996 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Ehrhardt Keefe Steiner & Hottman PC
March 27, 1997
Denver, Colorado
