ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of the 9th day
of July, 1999, is entered into by and among the corporation(s) or limited
liability company listed under the caption "Seller" on the signature page(s) of
this Agreement (collectively the "Seller"); the persons executing this Agreement
under the caption "Stockholders" on the signature page(s) of this Agreement
(collectively the "Stockholders" and individually a "Stockholder"); Oak Tree
Medical Systems, Inc., a Delaware corporation ("Oak Tree"); and Oak Tree Medical
Systems Practice Management, Inc., a New York corporation (the "Purchaser").
Certain other capitalized terms used herein and not otherwise defined shall have
the meanings as set forth in Article 12 hereof.
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the business of providing
administrative and management services to physician practices (the "Business")
and currently manages the physician practice(s) set forth on Schedule A (the
"Practices"), which Schedule A also includes the addresses of the Practices;
WHEREAS, the Practices employ or contract with the physicians set forth
on Schedule B (the "Physicians"), which Schedule B also identifies which
Practice such Physician is affiliated with;
WHEREAS, the Stockholders own all of the issued and outstanding capital
stock of the Seller, or are all of the members of the Seller, and are entering
into this Agreement as an inducement to Oak Tree and the Purchaser;
WHEREAS, the Purchaser desires to purchase from the Seller, and the
Seller desires to sell, convey, transfer, assign and deliver to the Purchaser,
the assets, properties and operations of the Seller, on the terms and subject to
the conditions hereinafter set forth;
WHEREAS, each of the Practices and Purchaser shall enter into an
Amended and Restated Practice Management Agreement (the "Amended and Restated
Practice Management Agreement") in substantially the form attached hereto as
Exhibit A, to become effective as of the Closing Date, which shall supersede all
current agreements between the Seller and such Practices relating to the
provision of physician management services to the Practices; and
WHEREAS, Purchaser or its affiliated designee has entered into or
intends to enter into other purchase agreements (the "Other Agreements") with
other physician practice management companies and/or the stockholders of such
companies (together with the Seller, the "Target Companies").
NOW, THEREFORE in consideration of the premises and the respective
mutual agreements, covenants, representations and warranties contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
agree as follows:
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PURCHASE AND SALE OF ASSETS
1. 1 Purchase and Sale of Assets. Subject to the terms and conditions
of this Agreement, at the Closing, the Seller shall sell, transfer, convey,
assign and deliver to the Purchaser, and the Purchaser shall purchase, accept
and receive, all of Seller's right, title and interest to the following, as the
same shall exist on the Closing Date:
(a) subject to the provisions of Section 1.2, the supplies,
furniture, fixtures, equipment, medicines, inventories, computer hardware and
software and all other assets listed on Schedule 1.1(a), owned by the Seller or
used by the Seller in connection with its operations or the operations of any of
the Practices managed by the Seller, whether in transit or on order and not yet
delivered;
(b) the Seller's right, title and interest in the utility,
security and other deposits and prepaid expenses of the Seller and held legally
or beneficially by the Seller as of the Closing Date (other than such items
relating to premises or property which is subleased to Purchaser);
(c) all of Seller's rights, benefits and privileges under
those leases (real or personal), contracts and agreements listed on Schedule
1.1(c), including, without limitation, all those agreements pursuant to which
the Seller provides physician practice management services of any type;
(d) all right, title and interest in Seller's accounts, notes,
contracts and other receivables and work in progress arising from the provision
of services or other transactions in the ordinary course of business of the
Seller through and including the Closing Date (collectively the "Receivables")
as set forth on Schedule 1.1(d), which Schedule 1.1(d) sets forth a true and
complete list, including aging, of the Receivables as of the date hereof, and
shall be updated as of the Closing Date and sixty days thereafter;
(e) all books, files, papers, and records owned by the Seller
and used in the operation of the Seller (including, without limitation, all
customer lists, data or other information, billing information and marketing,
distribution or other reports prepared by or for the Seller);
(f) all right, title and interest in and to the going concern
of the Seller, the goodwill thereof, the name and any trademarks, service marks
or logos used or owned by Seller, and further including, without limitation, any
such right purchased or acquired by Seller in connection with its management of
the Practices;
(g) all permits, licenses, certificates and governmental
authorizations, approvals, license applications or related certification in
connection with the operation of its business to the extent transferable by
applicable Legal Requirements;
(h) rights, if any, to reserve returns from health plans or
third-party payors for services provided prior to the Closing;
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(i) all of Seller's warranty rights and claims, if any, in
respect of the foregoing items; and
(j) all other assets, properties, and rights of or arising
from the operations of the business of the Seller.
It is specifically understood and agreed by the parties hereto that the
Purchaser is acquiring, and the Seller is selling, all of the tangible and
intangible assets other than the Excluded Assets owned by the Seller or in which
the Seller has an interest and which are used by the Seller, including without
limitation those assets and properties set forth above. The assets and
properties to be transferred to the Purchaser hereunder and as described in this
Section 1.1 are hereinafter collectively referred to as the "Assets."
1. 2 Excluded Assets. Notwithstanding anything to the contrary set
forth in this Agreement, the assets and properties to be transferred by the
Seller to the Purchaser hereunder shall not include: (i) any right, title or
interest of Seller in furniture, fixtures, equipment and real property owned by
Seller; and (ii) minute books, stock books, tax returns and any other books and
records which the Seller may be required by applicable law to retain
(collectively, the "Excluded Assets").
1. 3 Method of Conveyance. The sale of Assets shall be effected as of
the Closing Date by the Seller's execution and delivery of warranty bills of
sale, endorsements, assignments, drafts and other instruments of conveyance and
transfer (hereinafter collectively referred to as the "Instruments of
Conveyance") reasonably necessary to effectively vest in the Purchaser all of
Seller's right, title and interest in the Assets. At the Closing, Seller shall
sell, transfer, convey, assign and deliver good title to the Assets pursuant to
the Instruments of Conveyance, free of all liens, encumbrances, claims, and any
other restrictions whatsoever. With respect to any real property used by Seller
in the operation of the Business and the conduct of the Practices, at Seller's
option, Seller will cause the owner of the real property to enter into leases or
subleases of such real property with Purchaser or Seller will sublease or assign
its lease to Purchaser.
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ASSUMED OBLIGATIONS
2. 1 Assumed Liabilities and Obligations. Subject to the terms and
conditions of this Agreement, on the Closing Date, the Purchaser will acquire
the Assets subject only to Seller's executory obligations under the leases,
contracts, agreements and obligations listed on Schedule 2.1 hereto accruing
after the Closing Date (the items set forth in the foregoing clause being
collectively referred to herein as the "Assumed Liabilities") pursuant to an
instrument of assumption (the "Assumption Agreement") substantially in the form
attached hereto as Exhibit D. Notwithstanding the foregoing, to the extent that
the Purchaser obtains the benefit of any contract or agreement not listed on
Schedule 2.1 hereto following the Closing Date, the Purchaser shall,
nevertheless, be deemed to have assumed the Seller's obligations thereunder.
2. 2 Excluded Liabilities. Except as expressly set forth in Section 2.1
above, Purchaser shall not assume, undertake, or accept and shall not be liable
or responsible for any debt, obligation, or liability of the Seller, the
Stockholders or the Practices, or for any claim against
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any of the foregoing, of any kind, whether known or unknown, contingent,
absolute, or otherwise (collectively the "Excluded Liabilities"), including,
without limitation, the following:
(a) any foreign, federal, state and local taxes or
liabilities, including any interest or penalties thereon;
(b) any Medicare or Medicaid liabilities or obligations
(including without limitation repayment or overpayment liabilities in respect of
previously paid or denied claims);
(c) any liabilities or obligations arising out of any breach,
default, event of default or violation, at any time on or prior to the Closing
Date, of any contract, lease, agreement, commitment or law;
(d) any liabilities, obligations, leases, contracts, and
agreements not shown or referred to on Schedule 2.1 or in Section 2.1 hereof;
(e) any liabilities or obligations incurred or arising or
accruing after the Closing Date, except to the extent the same arise under
leases, contracts, agreements or purchase orders expressly assumed by Purchaser
under Section 2.1 hereof;
(f) any liabilities or obligations of the Seller or the
Stockholders arising from its indemnity obligation under Article 9 of this
Agreement;
(g) any expenses paid or incurred by the Seller or the
Stockholders incident to the preparation of or entering into and carrying into
effect of this Agreement and the transactions contemplated hereby, except as
otherwise agreed to in writing by the parties; and
(h) any other liability or obligation of or claim not
expressly assumed pursuant to this Agreement.
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PURCHASE PRICE AND PAYMENT
3. 1 Purchase Price. (a) In payment for the Assets, Purchaser shall,
and Oak Tree shall cause Purchaser to, pay to Seller the sum (the "Purchase
Price") of (A) an amount (the "Purchase Price for EBITDA") equal to the product
of (x) 5 times (y) Adjusted EBITDA for 1998, plus (B) an amount equal to the
amount of the Receivables actually collected and remitted to Purchaser from time
to time (the "Purchase Price for Receivables").
(b) The Purchase Price for EBITDA shall be payable and subject
to adjustment as follows:
(i) 60% of the Purchase Price for EBITDA shall be
payable by the Purchaser to the Seller at Closing by wire transfer of
immediately available funds to a deposit account with a bank designated by
Seller giving notice thereof to Purchaser and Oak Tree at least one business day
prior to the Closing Date (the "Cash Purchase Price").
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(ii) The remaining portion of the Purchase Price for
EBITDA (net of the Cash Purchase Price determined and paid in accordance with
above item (i)) shall be payable in shares of Oak Tree Common Stock (the "Stock
Purchase Price") equal to the remainder, if any, of (A) the product of (x) 5
times (y) Average EBITDA, minus (B) the Cash Purchase Price. Within 15 days of
final determination of Average EBITDA, Oak Tree shall direct its transfer agent
to deliver to Seller a number of shares (the "Stock Purchase Price Shares") of
Oak Tree Common Stock, rounded up to the nearest whole share and bearing the
appropriate "restricted stock legend" equal to (x) the Stock Purchase Price,
divided by (y) the lesser of the average of the Closing Prices of the Oak Tree
Common Stock on each of the five trading days prior to the day on which the
obligation to deliver the Stock Purchase Price Shares occurs or the Specified
Adjusted Price (as further adjusted for stock splits, stock dividends and
similar recapitalizations after the date of this Agreement affecting all of the
outstanding shares of Oak Tree Common Stock). In the event the calculation set
forth in the first sentence of this Section 3.1(b)(ii) results in a negative
number (the "Negative Result"), then (a) the Seller shall not be entitled to
receive any Stock Purchase Price Shares, and (b) the Negative Result shall be
setoff against the principal amount of the Receivables Note.
(iii) The Stock Purchase Price shall be determined
by the Purchaser by a date no later than 60 days after the end of the Earnout
Period. Upon determination of such amount, Purchaser shall provide Seller with a
written report setting forth the Stock Purchase Price and the calculations of
such amount (the "Report"). Seller shall have 15 days after receipt of the
Report to challenge the Report by issuing a written objection to Purchaser (the
"Dispute Report"). If no Dispute Report is provided within such 15-day period,
the Report shall become final and shall not be subject to further review by the
parties. If a Dispute Report is submitted within such 15-day period, and the
Purchaser and Seller are unable to resolve the Seller's objection within 30 days
of the receipt of the Dispute Report, the dispute shall be submitted to a
recognized firm of independent certified public accountants experienced in
auditing health care companies (other than accountants for Purchaser and Seller)
selected jointly by the Purchaser and Seller or, if the Purchaser and Seller
cannot agree on an accountant, such accountant as selected by the accountants of
the Purchaser and Seller (the "Settlement Accountants"). Within five (5)
business days after selection of the Settlement Accountants, the parties shall
submit documents supporting their respective positions to the Settlement
Accountants and the Settlement Accountants shall issue a final report resolving
the dispute within 30 days thereafter, which final report shall be final and
binding on the Seller, Oak Tree and the Purchaser. The costs and expenses of the
services of the Settlement Accountants shall be paid by the party whose
calculation of the Stock Purchase Price when compared to the Settlement
Accountants' calculation of such amount results in the greatest difference.
(c) The Purchase Price for Receivables shall be payable by
delivery to Seller at the Closing of a promissory note executed by Oak Tree and
Purchaser in the form attached hereto as Exhibit F (the "Receivables Note"),
which Receivables Note shall be secured by a first priority security interest
and lien on the Receivables and the accounts receivable of the Purchaser arising
or created after the Closing, and the proceeds thereof, pursuant to a Security
Agreement in the form attached hereto as Exhibit G. The principal amount of the
Receivables Note shall be equal to the total amount of Receivables actually
collected by Purchaser from time to time, which principal amount, together with
accrued interest thereon at the annual rate of 7%, shall be payable in annual
installments commencing on the second-year anniversary of the Closing Date (or
on the first-year anniversary date, at the option of Oak Tree) until the
principal amount of the
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Receivables Note, with interest, is fully paid, which principal amount (and the
respective payment due under the Receivables Note) shall be subject to
adjustment by the amount of the Negative Result. On each anniversary date that a
payment is due under the Receivables Note, the principal amount of Receivables
actually collected by Purchaser since the date of the last annual payment, with
accrued interest, shall, at the election of the Purchaser, be payable by
Purchaser in cash or by issuance by Oak Tree to the holder of the Receivables
Note of Oak Tree's 7.00% Series A Convertible Payment-in-Kind Preferred Stock
(the "Series A Preferred Stock"). The principal amount of the Receivables Note
shall be reduced by the amount of the Negative Result, if any, and principal
payments due under the Receivables Note shall be reduced, in the aggregate, by
the amount of the Negative Result. The number of shares of Series A Preferred
Stock issuable in lieu of a cash payment of principal and accrued interest on
the Receivables Note, rounded up to the nearest whole share, shall be equal to
the quotient of (a) the amount of the cash payment required to be made, and (b)
the average of the Closing Prices of the Oak Tree Common Stock on each of the
five trading days prior to the date on which the obligation to deliver the
shares under the Receivables Note occurs (the "Receivables Shares Price"). The
Series A Preferred Stock, which will bear the appropriate "restricted stock
legend," shall be convertible into shares of Oak Tree Common Stock on a
one-for-one basis and, upon such conversion, are hereinafter referred to as the
"Receivables Shares." The Series A Preferred Stock shall have the rights,
preferences and limitations set forth in the certificate of designation attached
to the Receivables Note and forming a part thereof, until the full principal
amount and accrued interest on the Receivables Note has been fully paid. Such
certificate of designation shall be filed by Oak Tree with the Secretary of
State of Delaware and become effective simultaneously with the Closing.
3. 2 Filing with Internal Revenue Service. The Purchase Price shall be
allocated among the Assets in accordance with the manner set forth on Schedule
3.2. The Purchaser shall prepare, in a manner consistent with the allocation set
forth on Schedule 3.2, the Internal Revenue Service Form 8594 ("Form 8594") on
behalf of itself and the Seller for the applicable fiscal year, and for any
future year in which such form may be required to be filed. The Purchaser and
Seller agree to use, without amendment or change of any kind, the Form 8594
prepared by the Purchaser in filing their respective corporate tax returns.
3. 3 Lock-up and Price Protection Provisions. The Stock Purchase Price
Shares and the Receivables Shares shall be subject to the following lock-up and
price protection provisions.
(a) Lock-up for Stock Purchase Price Shares and Receivables
Shares. During the respective period(s) ending the first six months after the
later of (x) the date of receipt by Seller or its designees of the Stock
Purchase Price Shares or Receivables Shares, as the case may be, and (y) the
date such Seller or its designees may dispose of such shares in open market,
routine broker transactions under applicable securities laws, the Seller or its
designees shall not, other than pursuant to a Permitted Exception, be allowed to
dispose of more than one-sixth of the number of Stock Purchase Price Shares or
Receivables Shares, as the case may be, during any 30-day period within such
relevant six-month period. All sales of the Stock Purchase Price Shares or
Receivables Shares during the applicable six-month periods shall be made only in
open market, routine broker transactions.
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(b) Price Protection for Stock Purchase Price Shares.
(i) If, during the six-month period after receipt of
the Stock Purchase Price Shares ("Disposal Period One"), either the Seller or
its designees shall have sold Stock Purchase Price Shares, not in violation of
the lock-up provisions set forth herein, for a sales price (excluding
commissions, discounts and other costs of sale) less than the Specified Adjusted
Price, then, at the end of Disposal Period One, Oak Tree shall issue to Seller
or its designees, at no additional cost to the Seller or such designees, a
number of shares ("Price Protection Shares One") of Oak Tree Common Stock equal
to the quotient of (I) the remainder ("Shortfall Amount One") of (A) the product
of (x) the number of such Stock Purchase Price Shares sold during the Disposal
Period One at less than the Specified Adjusted Price ("Disposal Shares One"),
times (y) the Specified Adjusted Price, minus (B) the aggregate sales price
(excluding commissions, discounts and other costs of sale) for the Stock
Purchase Price Shares sold during the Disposal Period One at less than the
Specified Adjusted Price, divided by (II) the average of the Closing Prices of
the Oak Tree Common Stock on each of the five trading days prior to the last
trading day of Disposal Period One (the "Protected Price"). The Price Protection
Shares One shall bear the appropriate "restricted stock legend." In lieu of
issuing Price Protection Shares One, the Purchaser, at its option, may deliver
cash payments to Seller or its designees equal to the relevant Shortfall Amount
One.
(ii) In the event the Seller (or its designees) is
issued any Price Protection Shares One, then during the six month period after
the later of (x) the end of the Disposal Period One and (y) the date the Seller
or its designees may dispose of such Shares in open market, routine broker
transactions under applicable securities laws ("Disposal Period Two"), the
Seller and its designees shall not, other than pursuant to a Permitted
Exception, be allowed to dispose of more than one-sixth of the number of Price
Protection Shares One during any 30-day period within Disposal Period Two. All
sales of Stock Purchase Price Shares or Price Protection Shares One, as the case
may be, during Disposal Period Two shall be made only in open market, routine
broker transactions.
(iii) If, during Disposal Period Two, the Seller or
its designees shall have sold Price Protection Shares One, not in violation of
the lock-up provisions set forth herein, for a sales price (excluding
commissions, discounts and other costs of sale) less than the Protected Price,
then, at the end of Disposal Period Two, Oak Tree shall issue to Seller or its
designees, at no additional cost to the Seller or such designees, a number of
shares ("Price Protection Shares Two") of Oak Tree Common Stock equal to the
quotient of (I) the remainder ("Shortfall Amount Two"), if any, of (A) the
product of (x) the number of such Price Protection Shares One sold during
Disposal Period Two at less than the Protected Price (the "Disposal Shares
Two"), times (y) the Protected Price, minus (B) the aggregate sales price
(excluding commissions, discounts and other costs of sale) for the Price
Protection Shares One sold during the relevant Disposal Period Two at less than
the Protected Price, divided by (II) the average of the Closing Prices of the
Oak Tree Common Stock on each of the five trading days prior to the last trading
day of the respective Disposal Period Two. The Price Protection Shares Two shall
bear the appropriate "restricted stock legend." In lieu of issuing Price
Protection Shares Two, the Purchaser, at its option, may deliver cash payments
to Seller or its designees equal to Shortfall Amount Two.
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(iv) If, during Disposal Period Two, the Seller or
its designees shall have sold Price Protection Shares Two for a sales price
(exclusive of commissions, discounts and other costs of sale) greater than the
Protected Price for such shares, then Seller or its designees shall return to
Oak Tree for cancellation stock certificates representing the number of shares
(the "Excess Shares") equal to the quotient of (I) the remainder of (A) the
product of (x) the number of Price Protection Shares One sold during Disposal
Period Two at greater than the Protected Price (the "Premium Shares"), times (y)
the sales price of such Premium Shares, minus (B) the product of (x) the number
of Premium Shares, times (y) the Protected Price for such Premium Shares,
divided by the Specified Adjusted Price. Such certificates shall be delivered to
Oak Tree free and clear of all liens, claims and encumbrances.
(v) The intent of the protection provisions set
forth in this Section 3.3(b) is to assure that, in the event the Seller desires
to dispose of the Stock Purchase Price Shares or Price Protection Shares One
during the respective six month period(s) referenced above, that the Seller will
realize at least the Specified Adjusted Price or Protected Price, as applicable,
per share (exclusive of commissions and other costs of sale), upon a sale in the
open market.
(c) Price Protection for Receivables Shares.
(i) If, during a six-month period after the later of
(x) the receipt of the Receivables Shares and (y) the date the Seller or its
designees may dispose of such shares in open market, routine broker transactions
under applicable securities laws (each a "Receivable Shares Disposal Period"),
the Seller or its designees shall have sold some or all of such Receivables
Shares, not in violation of the lock-up provisions set forth herein, for sales
prices (excluding commissions, discounts, and other costs of sale) of less than
the Receivables Shares Price, then, at the end of each Receivables Shares
Disposal Period, Oak Tree shall issue to Seller or its designees, at no
additional cost to the Seller or its designees, a number of shares ("Price
Protection Shares Three") of Oak Tree Common Stock equal to the quotient of (I)
the remainder ("Receivables Shortfall Amount") of (A) the product of (x) the
number of such Receivables Shares sold during such Receivables Shares Disposal
Period at sales prices (exclusive of commissions and other costs of sale) of
less than the Receivables Shares Price (the "Receivables Disposed Shares") times
(y) the Receivables Shares Price, minus (B) the product of (x) the number of
relevant Receivables Disposed Shares times (y) the sales price of such
Receivables Disposed Shares divided by (II) the average of the Closing Prices of
the Oak Tree Common Stock for each of the five trading days prior to the last
trading day of such Receivables Shares Disposal Period (the "Receivables
Protected Price"). The Price Protection Shares Three shall bear the appropriate
"restricted stock legend." In lieu of issuing Price Protection Shares Three, the
Purchaser, at its option, may deliver cash payments to Seller or its designees
equal to the relevant Receivables Shortfall Amount.
(ii) If, subsequent to the receipt of Price
Protection Shares Three or Additional Price Protection Shares and prior to the
first thirty-day period, after the later of (x) the date of receipt of such
shares and (y) the date the Seller or its designees may dispose of such shares
in open market, routine broker transactions under applicable securities laws, in
which the average of the Closing Prices of the Oak Tree Common Stock is equal to
or greater than the Receivables Protected Price or the Additional Shares Price
for such shares as applicable, the Seller or its designee shall sell some or all
of its Price Protection Shares Three or Additional Price Protection Shares for
sales prices (excluding commissions, discounts and other costs of
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sale) of less than the Receivables Protected Price or the Additional Shares
Price for such shares, as applicable, then, Oak Tree shall issue to Seller or
its designees, at no additional cost to Seller or its designee, a number of
shares ("Additional Price Protection Shares") of Oak Tree Common Stock equal to
the quotient of (I) the remainder ("Price Protection Shortfall Amount") of (A)
the product of (x) the number of such Price Protection Shares Three or
Additional Price Protection shares sold at sales prices (exclusive of
commissions and other costs of sale) of less than the Receivables Protected
Price or the Additional Shares Price for such shares, as applicable, times (y)
the Receivables Protected Price or the Additional Shares Price for such shares,
as applicable, minus (B) the product of (x) the number of Price Protection
Shares Three or additional Price Protection Shares sold at sales prices
(exclusive of commissions and other costs of sale) of less than the Receivables
Protected Price or the Additional Shares Price for such shares, as applicable,
times (y) the sales price of such Price Protection Three Shares or Additional
Price Protection Shares, divided by (II) the average of the Closing Prices of
the Oak Tree Common Stock on each of the five trading days prior to the day on
which the obligation to deliver the Additional Price Protection Shares occurs
(the "Additional Shares Price"). The Additional Price Protection Shares shall
bear the appropriate "restricted stock legend." In lieu of issuing Additional
Price Protection Shares, the Purchaser, at its option, may deliver cash payments
to Seller or its designees equal to the relevant Price Protection Shortfall
Amount.
(iii) The intent of the protection provisions set
forth in this Section 3.3(c) is to assure that, in the event the Seller or its
designees desires to dispose of Receivables Shares during the respective
six-month period(s) referenced above, or Price Protection Shares Three or
Additional Price Protection Shares before the average Closing Price of Oak Tree
Common Stock has been equal to or greater than the Receivables Protected Price
or the Additional Shares Price for such shares for the first thirty-day period
after the later of (x) the receipt of such shares and (y) the date the Seller or
its designees may dispose of such shares in open market, routine broker
transactions under applicable securities laws, that the Seller or its designee
will realize at least the applicable Receivables Shares Price, Receivables
Protected Price or Additional Shares Price, as applicable, per share (exclusive
of commissions and other costs of sale), upon a sale in the open market.
(d) Procedures Relating to Issuance of Shares. In
the event Oak Tree is obligated to issue any shares pursuant to this Section
3.3, within ten days of receipt of the appropriate documentation from the Seller
or its designees concerning its sale of any shares for which it seeks any price
protection provided herein, Oak Tree shall (i) provide such Seller or its
designees with its calculations of the number of such shares to be issued to
such Seller or its designees and (ii) instruct its transfer agent to deliver
certificates for such additional shares to the Seller or its designees.
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CLOSING
4. 1 The Closing. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place simultaneous with the
consummation of the Other Agreements, unless otherwise agreed to by the Seller
Representative and Oak Tree, but in no event later than the Termination Date.
Except as otherwise agreed in writing by the parties
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hereto, such date shall be referred to herein as the "Closing Date", and the
transactions contemplated hereby shall be effective as of 12:01 a.m. on the
Closing Date.
4. 2 Obligations of the Seller at Closing. At the Closing, the Seller
shall:
(a) deliver or cause to be delivered to the Purchaser the
Instruments of Conveyance, including without limitation, a Xxxx of Sale (the
"Xxxx of Sale"), in the form attached as Exhibit B hereto, and an Assignment of
Contracts and Leases (the "Assignment of Contracts and Leases"), in the form
attached as Exhibit C hereto;
(b) deliver or cause to be delivered to Purchaser a
certificate of an executive officer or member of Seller to the effect that the
conditions set forth in Article 7 have been satisfied and that the
representations and warranties contained in Article 5 are true and correct at
and as of the Closing Date except: (i) for changes specifically permitted by or
disclosed pursuant to this Agreement; and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date;
(c) deliver or cause to be delivered to Purchaser copies of
resolutions duly adopted by the Board of Directors or members and the
Stockholders of Seller authorizing and approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
certified by an executive officer or member of Seller;
(d) execute and deliver or cause to be delivered to Purchaser
either (i) an assignment of all real property leases relating to all tangible
assets used by the Seller or by the Practices pursuant to the Assignment of
Contracts and Leases, or (ii) leases or subleases to the Purchaser for such real
property and, in each case, if applicable, including the consents of the
landlord or the lessor relating thereto (the "Lessor Consents"), in each case
with respect to assets that are material to the Business;
(e) deliver to Purchaser or cause to be delivered to Purchaser
all other documents and instruments, duly executed where required or
appropriate, as the Purchaser may reasonably request in connection with the
transactions contemplated by this Agreement;
(f) deliver or cause to be delivered to Purchaser a
certificate of incumbency of Seller, executed by an executive officer or member
of Seller, which lists the officers or members of Seller authorized to execute
this Agreement and closing documents on behalf of Seller and their specimen
signatures;
(g) deliver to Purchaser or cause to be delivered to Purchaser
an opinion letter of counsel to the Seller with respect to the matters set forth
in (I) the first sentence of Section 5.1, (II) the matters set forth in
subsections (i) and (ii) of the second sentence of Section 5.1, and (III) the
matters set forth in Section 5.2; and
(h) execute and deliver to Purchaser a lease for all
furniture, fixtures and equipment owned by Seller, in the form attached as
Exhibit M (the "Personal Property Lease").
4. 3 Obligations of Purchaser and Oak Tree at Closing. At Closing the
Purchaser and/or Oak Tree, as the case may be, shall:
10
(a) deliver to Seller the Cash Purchase Price as provided in
Section 3.1 of this Agreement;
(b) execute and deliver to the Seller the Assumption
Agreement, in the form attached as Exhibit D hereto;
(c) deliver or cause to be delivered to Seller certificates of
an executive officer of Purchaser and Oak Tree to the effect that the conditions
set forth in Article 8 have been satisfied, and that the representations and
warranties contained in Article 6 are true and correct at and as of the Closing
Date, except: (i) for changes specifically permitted by or disclosed pursuant to
this Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date;
(d) deliver to Seller copies of resolutions duly adopted by
Oak Tree and Purchaser authorizing and approving the execution and delivery of
this Agreement, and the consummation of the transactions contemplated hereby,
certified by an executive officer;
(e) execute and deliver to the Seller the Receivables Note;
(f) execute and deliver to Seller the Security Agreement;
(g) execute and deliver to Seller the Guaranty in the form
attached hereto as Exhibit E and the Corporate Governance Agreement in the form
attached hereto as Exhibit H (the "Governance Agreement");
(h) execute and deliver to (i) Xxxxxx Xxxxxx the Employment
Agreement in the form attached hereto as Exhibit I (the "Xxxxxx Employment
Agreement") and (ii) Xxx Xxxx the Employment Agreement in the form attached
hereto as Exhibit J (the "Xxxx Employment Agreement");
(i) deliver or cause to be delivered to Seller a certificate
of incumbency of Purchaser and Oak Tree, executed by an executive officer, which
lists the officers of Purchaser and Oak Tree authorized to execute this
Agreement and closing documents on behalf of Purchaser and Oak Tree and their
specimen signatures;
(j) deliver to Seller or cause to be delivered to Seller an
opinion letter of counsel to the Purchaser and Oak Tree with respect to the
matters set forth in (I) the first sentence of Section 6.1, (II) the matters set
forth in subsections (i) and (ii) of the second sentence of Section 6.1, and
(III) the matters set forth in Section 6.2; and
(k) execute and deliver to Seller the Personal Property Lease.
4. 4 Consents of Third Parties. Notwithstanding anything herein to the
contrary, this Agreement and any of the Instruments of Conveyance, shall not
constitute an assignment of any agreement, claim, contract, license, lease,
purchase order or other commitment included in the Assets if the attempted
assignment is lacking a necessary consent of a party or governmental agency such
that the attempted assignment would be ineffective, constitute a breach or
violation or result in the Purchaser not receiving all of the rights and
benefits of the Seller pursuant to the assignment (all such claims, contracts,
licenses, leases, purchase orders or other commitments are hereinafter
collectively referred to as the "Commitments"). If by the Closing Date any such
11
consent has not been obtained, and Seller desires to have Purchaser's assistance
in obtaining such consent, the Purchaser shall use its best efforts to assist
the Seller in obtaining such consent.
4. 5 Delivery of Exhibits and Disclosure Schedules. The parties hereby
agree that they are executing this Agreement without the Exhibits and Schedules
hereto, and that the parties shall deliver such Exhibits and Schedules in form
and substance satisfactory to Oak Tree and the Seller Representative the other
party by no later than the date on which the Seller Financials as described in
Section 5.9 are delivered hereunder.
5
REPRESENTATIONS AND WARRANTIES OF THE
SELLER AND THE STOCKHOLDERS
In order to induce the Purchaser and Oak Tree to enter into this
Agreement and to consummate the transactions contemplated by this Agreement,
each of the Seller and the Stockholders, jointly and severally with respect to
the representations and warranties of Seller, and severally by each Stockholder
only with respect to the representations concerning such Stockholder, hereby
represents and warrants to the Purchaser and Oak Tree as follows:
5. 1 Organization, Authority, Qualification. The Seller is a
corporation or limited liability company duly incorporated or formed, validly
existing and in good standing under the laws of the state of its incorporation
or formation. The Seller: (i) has full power and authority to own and operate
its properties and assets and to conduct and carry on its business as it is now
being conducted; (ii) is duly licensed or qualified to transact or conduct
business and is in good standing, in each jurisdiction in which the ownership or
lease of real property or the conduct of its business requires it to be so
licensed, authorized or qualified and where its failure to be so qualified would
have a Material Adverse Effect; and (iii) has all material governmental
licenses, certifications, permits, approvals and other authorizations necessary
to own or lease its properties and assets and carry on its business as it is now
being conducted. All of the issued and outstanding stock or equity interests of
Seller is owned by the Stockholders, free and clear of all options, powers,
claims and rights of others, in the amounts and the percentages set forth on
Schedule 5.1 hereto.
5. 2 Authorization. Each of the Seller and the Stockholders has full
power, ability and authority to execute and deliver this Agreement and the
Related Agreements to which it is a party, to perform its obligations under, and
to consummate the transactions contemplated by, this Agreement and the Related
Agreements to which it is a party. This Agreement has been duly and validly
executed and delivered by each of Seller and the Stockholders, and constitutes,
and the Related Documents when executed shall constitute, its legal, valid and
binding obligations, enforceable against each of them in accordance with its
terms, except as the same shall be limited by the effect of bankruptcy,
insolvency, fraudulent transfer and similar laws affecting creditor's rights in
general or by the effect of general principles of equity (whether applied in a
proceeding at law or in equity) and the discretion of the court in which such
proceeding is brought. The Board of Directors or the members of the Seller has
approved the execution, delivery and performance of this Agreement and the
Related Agreements to which the Seller is a party, and the consummation of the
transactions contemplated thereby.
12
5. 3 No Violation. The execution, delivery and performance of this
Agreement by each of Seller and the Stockholders does not, and the consummation
by each of Seller and the Stockholders of the transactions contemplated hereby
will not, and the compliance by each of Seller and the Stockholders with the
provisions of this Agreement will not, (i) with respect to the Seller, conflict
with or violate any provision of its articles of organization, certificate of
incorporation, bylaws or operating agreement, (ii) with or without notice or the
passage of time or both, constitute, give rise or result in the breach, default
or event of default under, or violation of any obligation under, or in the
termination or acceleration of or entitle any party to terminate or accelerate,
or result in the imposition of any lien upon or the creation of a security
interest or encumbrance in or upon any of Seller's assets, business or
properties pursuant to, any note, bond, mortgage, indenture, deed, license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which Seller or Stockholder is a party or by which Seller or
Stockholders or any of Seller's assets are bound or subject, and will not
violate or conflict with any other material restriction of any kind or character
to which Seller or Stockholders, or any of their properties or assets, are
subject, (iii) violate any order, writ, injunction, decree, judgment or ruling
of any court or governmental authority applicable to Seller or Stockholders, or
(iv) violate any statute, law, rule or regulation applicable to Seller or
Stockholders.
5. 4 [Intentionally Omitted]
5. 5 [Intentionally Omitted]
5. 6 [Intentionally Omitted]
5. 7 Capitalization. The authorized capital stock or equity interest of
Seller consists of (a) _____ shares of Common Stock, par value $_________ per
share, of which _____ shares are issued and outstanding and owned by the
Stockholders, _____ shares are issued but not outstanding, and _____ shares are
authorized and unissued, or (b) the members listed on Schedule 5.7. All issued
shares of Seller's capital stock have been duly and validly issued and are fully
paid and non-assessable (except as provided in New York Business Corporation Law
ss. 630). Except as may be disclosed on Schedule 5.7 and as provided for in this
Agreement, there are no outstanding options, warrants, rights, puts, calls,
commitments, conversion rights, plans or other agreements of any character to
which Seller or Stockholder is a party or otherwise bound which provide for the
acquisition, disposition or issuance of any issued but not outstanding,
outstanding, or authorized and unissued shares of capital stock of Seller. There
is no personal liability, and there are no preemptive or similar rights,
attached to Seller's capital stock (except as may be provided by New York
Business Corporation Law ss. 622).
5. 8 Interests in Other Entities. Except as may be disclosed on
Schedule 5.8 hereto, Seller does not (A) own, directly or indirectly, of record
or beneficially, any shares of voting stock or other equity securities of any
other corporation or limited liability company, (B) have any ownership interest,
direct or indirect, of record or beneficially, in any unincorporated entity, or
(C) have any obligation, direct or indirect, present or contingent, (1) to
purchase or subscribe for any interest in, advance or loan monies to, or in any
way make investments in, any person or entity, or (2) to share any profits or
capital investments or both.
5. 9 Financial Statements. The Seller has furnished (or will furnish
prior to the Closing Date) to the Purchaser audited balance sheets as of
December 31, 1998 and 1997 and the
13
unaudited balance sheet for the six-month period ended June 30, 1999, and the
related statements of operations, changes in stockholders' equity and cash flow,
together with the notes thereto (all such financial statements of the Seller, or
such affiliated group, are hereinafter referred to as the "Seller Financials").
Such financial statements were (or will be) prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied, and
present fairly, in material respects, the financial position of Seller as at the
dates thereof and the results of operations and cash flows for the periods
indicated, except that the aforementioned unaudited financial statements are (or
will be) subject to normal recurring adjustments which might be required as a
result of year end audit. The books and records of Seller are in all material
respects complete and correct, have been maintained in accordance with good
business practices, and accurately reflect the basis for the financial condition
of Seller as set forth in the aforementioned financial statements.
5. 10 Absence of Undisclosed Liabilities. Seller has no liabilities or
obligations of any nature whatsoever, whether accrued, absolute, contingent or
otherwise, which have not been (i) in the case of liabilities and obligations of
a type customarily reflected on a corporate balance sheet prepared in accordance
with GAAP, set forth on their respective balance sheet as of June 30, 1999 (the
"Balance Sheet" and such date is hereinafter called the "Seller Balance Sheet
Date") or (ii) in the case of other types of liabilities and obligations,
described in any of the Schedules delivered by Seller pursuant hereto or omitted
from such Schedules in accordance with the terms of this Agreement, or (iii)
incurred, consistent with past practice, in the ordinary course of business
since the Seller Balance Sheet Date (in the case of liabilities and obligations
of the type referred to in clause (i) above).
5. 11 Properties. Seller owns or has the right to use all assets listed
on the Seller's Balance Sheet or acquired since the Seller Balance Sheet Date,
free and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except for those which are described in the notes to such
Balance Sheet and Schedule 5.11 hereto, excluding any assets disposed of in the
ordinary course of business since the Seller Balance Sheet Date. All plants,
structures, machinery and equipment which are material to the business,
operations or condition (financial or otherwise) of Seller are in substantially
operating condition, and are suitable for the purposes for which they are used;
and none of such plants, structures, machinery or equipment are in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
which are not substantial in nature or cost.
5. 12 [Intentionally Omitted]
5. 13 Absence of Changes. Since the Seller Balance Sheet Date, there
has not been (i) any Material Adverse Change in the condition (financial or
otherwise), assets, liabilities, business or results of operations of Seller
(including, without limitation, any such Material Adverse Change resulting from
damage, destruction or other casualty loss, whether or not covered by
insurance), (ii) any waiver by Seller of any right, or cancellation of any debt
or claim, of substantial value, (iii) any declaration, setting aside or payment
of any dividend or other distribution or payment in respect of the capital stock
of Seller, (iv) any change in any of the arrangements which are referred to in
Section 5.17 hereof or any transactions of the type which is referred to in
clause (f) of Section 5.18 hereof, or (v) any change in the accounting
principles or methods which are utilized by Seller.
14
5. 14 Litigation. Other than as set forth in Schedule 5.14 hereto,
there are no suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending or, to the knowledge of
Seller or Stockholders, threatened, against or relating to Seller (or the
Stockholders with respect to the Business) or their respective business and
assets. There are no judgments, orders, stipulations, injunctions, decrees or
awards in effect which relate to Seller and/or the Stockholders with respect to
the Business, the effect of which is to limit, restrict, regulate, enjoin or
prohibit any business practice in any area, or the acquisition of any
properties, assets or businesses, or otherwise materially adverse to their
respective businesses assets.
5. 15 No Violation of Law. Seller is not engaging in any activity or
omitting to take any action as a result of which (a) it is in violation in any
material respect of any law, rule, regulation, zoning or other ordinance,
statute, order, injunction or decree, or any other requirement of any court or
other governmental authority, applicable to it (individually or on a
consolidated basis), its Business or assets, including, but not limited to,
those relating to: healthcare (including Medicare and Medicaid); occupational
safety and health; environmental and ecological protection (e.g., the use,
storage, handling, transport or disposal of pollutants, contaminants or
hazardous or toxic materials or wastes, and the exposure of persons thereto);
business practices and operations (including federal and state anti-kickback
laws and regulations), labor practices; employee benefits; and zoning and other
land use, and (b) which would have a Material Adverse Effect on Seller.
5. 16 Tax Matters. Seller has filed with the appropriate governmental
agencies all tax returns and reports required to be filed by it, and has paid in
full or made adequate provision for the payment of, all material taxes,
interest, penalties, assessments and deficiencies shown to be due or claimed to
be due on such tax returns and reports. The provisions for taxes which are set
forth on the Balance Sheet are adequate for all accrued and unpaid taxes of
Seller as of the Seller Balance Sheet Date arising out of transactions entered
into, or any state of facts existing, on or prior to that date. The provisions
for taxes which are set forth on the respective books of account of Seller are
adequate for all taxes which accrued after the Seller Balance Sheet Date.
Neither Seller nor the Stockholders on behalf of Seller has executed or filed
with any taxing authority any agreement extending the period for the assessment
or collection of any taxes, and is not a party to any pending or, to the best of
the knowledge of Seller and Stockholders, overtly threatened in writing, action
or proceeding by any governmental authority for the assessment or collection of
income or other taxes. The United States federal income tax returns of Seller
and the Stockholders with respect to Seller have not been examined by the
Internal Revenue Service.
5. 17 Employee Arrangements. Schedule 5.17 hereto contains a complete
and correct list and summary description of all (i) union, collective
bargaining, employment, management, termination and consulting agreements to
which Seller is a party or otherwise bound, and (ii) compensation plans and
arrangements; bonus and incentive plans and arrangements; deferred compensation
plans and arrangements; pension and retirement plans and arrangements;
profit-sharing and thrift plans and arrangements; stock purchase and stock
option plans and arrangements; hospitalization and other life, health or
disability insurance or reimbursement programs; holiday, sick leave, severance,
vacation, tuition reimbursement, personal loan and product purchase discount
policies and arrangements; and other plans or arrangements providing for
benefits for employees of Seller. Such Schedule also lists the names and
compensation of all employees of Seller whose earnings during the last fiscal
year was $50,000 or more (including
15
bonuses and other incentive compensation), and all employees who are expected to
receive at least said amount in respect of the present year.
5. 18 ERISA.
(a) Schedule 5.18 hereto lists each "employee pension benefit
plan" (collectively called "Seller Pension Plans" and severally called "Seller
Pension Plan"), as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and each "employee
welfare benefit plan" (collectively called "Seller Welfare Plans" and severally
called "Seller Welfare Plan") as such term is defined in Section 3(1) of ERISA,
which is maintained by Seller to which it contributes or is obligated or
required to contribute. The Seller Pension Plans and Seller Welfare Plans are
hereinafter sometimes collectively referred to as the "Seller Plans" and
severally referred to as an "Seller Plan".
(b) Each Seller Pension Plan and the trust (if any) forming a
part thereof has been determined by the IRS to be qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and is exempt
from taxation under Section 501(a) of the Code, and nothing has occurred since
the date of such determination which would adversely affect such qualification.
(c) Seller will deliver to Oak Tree and the Purchaser
complete and correct copies of (i) the Seller Plans, and all related trust
agreements, (ii) all written interpretations and summary plan descriptions
relating thereto, (iii) the two most recent annual reports (Form 5500 Series)
and accompanying schedules, which were prepared in connection with each Seller
Plan, (iii) all IRS determination letters relating to the Seller Plans, and (iv)
the two most recent actuarial evaluation reports which were prepared in
connection with any of the Seller Plans.
(d) None of Seller, any Seller Plans, any trust created
thereunder, or any trustee or administrator thereof has engaged in a transaction
which would subject Seller or any of the Seller Plans to the tax on prohibited
transactions imposed by Section 4975 of the Code or to a civil penalty assessed
pursuant to Section 502(i) of ERISA.
(e) None of the Seller Pension Plans has incurred any
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived.
(f) Seller has not incurred, or is not expected to incur,
directly or indirectly, any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to any Seller Pension Plan. The PBGC has
not instituted proceedings to terminate any Seller Pension Plan, nor has it
notified Seller or the Stockholders, either formally or informally, of its
intention to institute any such proceedings.
(g) There have not been, with respect to any of the Seller
Plans, any "reportable events", as such term is defined in Section 4043(b) of
ERISA.
(h) Seller has not maintained or contributed to, or been
obligated or required to contribute to, a "multiemployer plan", as such term is
defined in Section 3(37) of ERISA.
16
(i) Seller has paid in full all amounts which were required
to have been paid by it on or prior to the date hereof as contributions to any
of the Seller Pension Plans. The current value of all accrued benefits under
each of the Seller Pension Plans did not, as of the latest valuation date
thereof, exceed the then current value of the assets of such Seller Pension Plan
allocable to such accrued benefits, based upon the actuarial assumptions then
being utilized with respect thereto.
(j) There is not pending, and to the knowledge of Seller and
the Stockholders there is not overtly threatened in writing, any claims against
any of the Seller Plans or any fiduciary thereof (other than claims for benefits
made in the ordinary course).
5. 19 Certain Business Matters. Except as disclosed in Schedule 5.19
hereto, (a) neither Seller nor the Stockholders with respect to the Business is
a party to or bound by any distributorship, dealership, sales agency, franchise
or similar agreement which relates to the sale or distribution of any of the
products and services of the business of Seller; (b) Seller has no sole-source
supplier of significant goods or services (other than utilities) with respect to
which practical alternative sources are not available on comparable terms and
conditions; (c) there are no pending, or to the knowledge of Seller or the
Stockholders, overtly threatened in writing, labor negotiations, work stoppages
or work slowdowns involving or affecting the business of Seller, and, to the
knowledge of Seller and the Stockholders, no union representation questions
exist, and there are no organizing activities, in respect of any of the
employees of Seller, (d) the product and service assurances, warranties or
guarantees, if any, given by Seller or by which Seller is bound (complete and
correct copies or descriptions of which have heretofore been delivered by Seller
to Oak Tree and the Purchaser) entail no greater obligations than are customary
in the business of Seller; (e) neither Seller (nor the Stockholders with respect
to the Business) is a party to, or bound by, any agreement which limits its
freedom to compete in any line of business or with any person, or which is
otherwise materially burdensome to it; and (f) to the knowledge of Seller and
the Stockholders, Seller is not a party to, or bound by, any agreement in which
any officer, principle or key employee, agent, consultant, director or
stockholder of Seller or the Stockholders (or any affiliate of any such person)
has, or had when made, a direct or indirect material interest.
5. 20 Certain Contracts. Schedule 5.20 hereto contains a complete and
correct list of all contracts, commitments, obligations and understandings which
are not set forth in any other Schedule to this Agreement and to which Seller is
a party or otherwise bound, except for each of those which (a) was made in the
ordinary course of business, and (b) either (1) is terminable by Seller without
liability, expense or other obligation on 30 days' notice or less, or (2) may be
anticipated to involve aggregate payments to or by Seller of $25,000 (or the
equivalent) or less calculated over the full term thereof, and (c) is not
otherwise material to the business of Seller. Complete and correct copies of all
contracts, commitments, obligations and undertakings set forth on any of the
Schedules delivered pursuant to this Agreement have been furnished by Seller and
the Stockholders to the Purchaser and Oak Tree, and except as expressly stated
on the Schedule on which they are set forth, (a) each of them is in full force
and effect, no person or entity which is a party thereto or otherwise bound
thereby is in default thereunder, and, to the knowledge of Seller and the
Stockholders, no event, occurrence, condition or act exists which does (or which
with the giving of notice or the lapse of time or both would) give rise to a
default or right of cancellation, acceleration or loss of contractual benefits
thereunder; (b) there has been
17
no threatened cancellations thereof, and there are no outstanding disputes
thereunder; and (c) none of them is materially burdensome to Seller.
5. 21 Approvals. Schedule 5.21 hereto, which contains a complete and
correct list of all governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises which are
necessary for the operation of Seller, all of which have been duly obtained and
are in full force and effect.
5. 22 Customers and Suppliers. Schedule 5.22 hereto contains a complete
and correct list setting forth, with respect to the fiscal year ended December
31, 1998: (a) if applicable the 10 largest customers or clients of the business
of Seller and the amount for which each such customer was invoiced, and (b) the
10 largest suppliers to Seller and the amount of goods and services purchased
from each such supplier during Seller's last fiscal year. To the knowledge of
Seller and the Stockholders, (i) there has been no material adverse change in
the business relationship between Seller and any such customer or supplier, and
(ii) such suppliers and customers will continue their respective relationships
with Seller after the Closing Date on substantially the same basis as now
exists.
5. 23 Business Practices and Commitments. Schedule 5.23 hereto sets
forth a complete and accurate summary description of (a) the following practices
and obligations of Seller: rebate and volume discount practices and obligations,
(b) allowance and customer return practices and obligations, and (c) warranty
practices and obligations.
5. 24 Brokers. No agent, broker, person, or firm acting on behalf of
Seller or the Stockholders, or under its authority, is or will be entitled to a
financial advisory fee, brokerage commission or other like payment in connection
the execution and delivery of this Agreement or any of the transactions
contemplated hereby.
5. 25 Information as to Seller and the Stockholders. None of the
representations, warranties or statements made by Seller or the Stockholders in
this Agreement, any Schedule hereto or in any other agreement or instrument
executed and delivered by or on behalf of either of them pursuant hereto
contains or will contain an untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements therein
contained in light of the circumstances under which they were made not
misleading.
5. 26 Insurance. To Seller's Knowledge, the Seller has in full force
and effect policies of insurance of the type and in amounts providing protection
for the Seller consistent with the Seller's belief of sound business practices
and prudent risk management applicable to businesses of the size and nature of
the Seller. Schedule 5.26 will constitute a true and complete description of (i)
all of the policies in force and effect in respect of the Seller (the "Seller
Policies"); (ii) the coverage and limits on the Seller Policies; and (iii) all
known current claims under any of the Seller Policies. To Seller's Knowledge,
all of the Seller Policies are in full force and effect and the Seller has not
received any notice of cancellation in respect of such insurance coverage under
the Seller Policies. To Seller's Knowledge, all premiums due and payable in
respect of the Seller Policies have been paid or payment thereof has been duly
provided for. There are no pending or, to Seller's Knowledge, threatened
terminations or premium increases with respect to any of the Seller Policies
and, to Seller's Knowledge, the Seller is in compliance, in all material
respects with all conditions contained therein. Also set forth in Schedule 5.26
are, to Seller's Knowledge, all current claims pending against the Physicians or
the Practices.
18
6
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND OAK TREE
In order to induce the Seller and Stockholders to enter into this
Agreement and to consummate the transactions contemplated by this Agreement,
each of the Purchaser and Oak Tree hereby represents and warrants to the Seller
and the Stockholders as follows:
6. 1 Organization, Authority, Qualification. Each of Oak Tree and the
Purchaser is a corporation duly incorporated validly existing and in good
standing under the laws of the state of its incorporation. Each of Oak Tree and
the Purchaser: (i) has full power and authority to own and operate its
properties and assets and to conduct and carry on its business as it is now
being conducted; (ii) is duly licensed or qualified to transact or conduct
business and is in good standing, in each jurisdiction in which the ownership or
lease of real property or the conduct of its business requires it to be so
licensed, authorized or qualified and where its failure to be so qualified would
not have a Material Adverse Effect; and (iii) has all material governmental
licenses, certifications, permits, approvals and other authorizations necessary
to own or lease its properties and assets and carry on its business as it is now
being conducted. The Purchaser is a wholly owned direct subsidiary of Oak Tree.
6. 2 Authorization. Each of Oak Tree and the Purchaser has full
corporate power, ability and authority to execute and deliver this Agreement and
the Related Agreements to which it is a party, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Related Agreements to which it is a party. This Agreement has been duly and
validly executed and delivered by each of Oak Tree and the Purchaser, and
constitutes, and the Related Agreements when executed shall constitute, its
legal, valid and binding obligations, enforceable against each of them in
accordance with its terms except as the same shall be limited by the effect of
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditor's rights in general or by the effect of general principles of equity
(whether applied in a proceeding at law or in equity) and the discretion of the
court in which such proceeding is brought. The Board of Directors of each of the
Purchaser and Oak Tree have approved the execution, delivery and performance of
this Agreement and the Related Agreements to which Purchaser or Oak Tree is a
party, and the consummation of the transactions contemplated by each of them.
6. 3 No Violation. The execution, delivery and performance of this
Agreement by each of Oak Tree and the Purchaser does not, and the consummation
by each of Oak Tree and the Purchaser of the transactions contemplated hereby
will not, and the compliance by each of Oak Tree and the Purchaser with the
provisions of this Agreement will not, (i) conflict with or violate any
provision of its certificate of incorporation or bylaws, (ii) with or without
notice or the passage of time or both, constitute, give rise or result in the
breach, default or event of default under, or violation of any obligation under,
or in the termination or acceleration of or entitle any party to terminate or
accelerate, or result in the imposition of any lien upon or the creation of a
security interest or encumbrance in or upon any of its assets, business or
properties pursuant to, any note, bond, mortgage, indenture, deed, license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which it is a party or by which it or any of its assets are bound
or subject, and will not violate or conflict with any other material restriction
of any kind or character to which the Purchaser or Oak Tree, or any of its
properties or assets, are
19
subject, (iii) violate any order, writ, injunction, decree, judgment or ruling
of any court or governmental authority applicable to it, or (iv) violate any
statute, law, rule or regulation applicable to it.
6. 4 [Intentionally Omitted]
6. 5 The Stock Purchase Price Shares, the Series A Preferred Stock,
Receivables Shares and Price Protection Shares. The Shares of Oak Tree, when
issued, will be duly validly issued and outstanding, fully paid and
non-assessable, free and clear of adverse claims, liens and other encumbrances
created by Oak Tree.
6. 6 [Intentionally Omitted]
6. 7 Capitalization. The authorized capital stock of Oak Tree consists
of _____ shares of Preferred Stock, par value $_____ per share, of which _____
are issued and outstanding, _____ shares are issued but not outstanding, and
_____ shares are authorized and unissued and _____ shares of Common Stock, par
value $_________ per share, of which _____ shares are issued and outstanding,
_____ shares are issued but not outstanding, and _____ shares are authorized and
unissued. All issued shares of Oak Tree's and Purchaser's capital stock have
been duly and validly issued and are fully paid and non-assessable. Except as
may be disclosed on Schedule 6.7 and as provided for in this Agreement, there
are no outstanding options, warrants, rights, puts, calls, commitments,
conversion rights, plans or other agreements of any character to which Oak Tree
or Purchaser is a party or otherwise bound which provide for the acquisition,
disposition or issuance of any issued but not outstanding, outstanding, or
authorized and unissued shares of capital stock of Oak Tree or Purchaser. There
is no personal liability, and there are no preemptive or similar rights,
attached to Oak Tree's or Purchaser's capital stock, other than as contemplated
by this Agreement.
6. 8 Interests in Other Entities. Except as may be disclosed on
Schedule 6.8 hereto, Oak Tree does not (A) own, directly or indirectly, of
record or beneficially, any shares of voting stock or other equity securities of
any other corporation other than the Purchaser, (B) have any ownership interest,
direct or indirect, of record or beneficially, in any unincorporated entity, or
(C) have any obligation, direct or indirect, present or contingent, (1) to
purchase or subscribe for any interest in, advance or loan monies to, or in any
way make investments in, any person or entity, or (2) to share any profits or
capital investments or both. Except as may be disclosed on Schedule 6.8 hereto,
Purchaser does not (A) own, directly or indirectly, of record or beneficially,
any shares of voting stock or other equity securities of any other corporation,
(B) have any ownership interest, direct or indirect, of record or beneficially,
in any unincorporated entity, or (C) have any obligation, direct or indirect,
present or contingent, (1) to purchase or subscribe for any interest in, advance
or loan monies to, or in any way make investments in, any person or entity, or
(2) to share any profits or capital investments or both.
6. 9 Financial Statements. Oak Tree has heretofore made available to
the Seller and the Stockholders true and complete copies of its annual report on
Form 10-KSB for its most recently completed fiscal year as filed with the United
States Securities and Exchange Commission ("SEC"), all reports on Forms 10-QSB
and 8-K filed with the SEC since the date such annual report was filed with the
SEC and the most recent registration statement under the Securities Act of 1933
filed by Oak Tree with the SEC, all of which reports contain in all material
respects the information required to be included therein under the rules and
regulations
20
of the SEC. Such financial statements were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied, and present
fairly, in all material respects, the consolidated financial position of Oak
Tree and its subsidiaries as at the dates thereof and the consolidated results
of operations and cash flows for the periods indicated, except that the
aforementioned unaudited financial statements are subject to normal recurring
adjustments which might be required as a result of year-end audit. The books and
records of Oak Tree and its subsidiaries, including the Purchaser are in all
material respects complete and correct, have been maintained in accordance with
good business practices, and accurately reflect the basis for the consolidated
and consolidating financial condition of Oak Tree and its subsidiaries as set
forth in the aforementioned financial statements.
6. 10 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.10, neither Oak Tree nor the Purchaser has any liabilities or
obligations of any nature whatsoever, whether accrued, absolute, contingent or
otherwise, which have not been (i) in the case of liabilities and obligations of
a type customarily reflected on a corporate balance sheet prepared in accordance
with GAAP, set forth on their respective balance sheets as of February 28, 1999
(the "Balance Sheets" and such date is hereinafter called the "Oak Tree Balance
Sheet Date") or (ii) in the case of other types of liabilities and obligations,
described in any of the Schedules delivered by Oak Tree and/or Purchaser
pursuant hereto or omitted from such Schedules in accordance with the terms of
this Agreement, or (iii) incurred, consistent with past practice, in the
ordinary course of business since the Oak Tree Balance Sheet Date (in the case
of liabilities and obligations of the type referred to in clause (i) above).
6. 11 Properties. Each of Oak Tree and the Purchaser own or have the
right to use all listed on their respective Balance Sheets or acquired since the
Oak Tree Balance Sheet Date, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever, except for those which are
described in the notes to such Balance Sheets and Schedule 6.11 hereto,
excluding any assets disposed of in the ordinary course of business since the
Balance Sheet Date. All plants, structures, machinery and equipment which are
material to the business, operations or condition (financial or otherwise) of
Oak Tree, on a consolidated basis, and the Purchaser are in substantially
operating condition, and are suitable for the purposes for which they are used;
and none of such plants, structures, machinery or equipment are in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
which are not substantial in nature or cost.
6. 12 [Intentionally Omitted]
6. 13 Absence of Changes. Since the Oak Tree Balance Sheet Date, there
has not been (i) any Material Adverse Change in the condition (financial or
otherwise), assets, liabilities, business or results of operations of Oak Tree
or the Purchaser (including, without limitation, any such Material Adverse
Change resulting from damage, destruction or other casualty loss, whether or not
covered by insurance), (ii) any waiver by Oak Tree or the Purchaser of any
right, or cancellation of any debt or claim, of substantial value, (iii) any
declaration, setting aside or payment of any dividend or other distribution or
payment in respect of the capital stock of Oak Tree or the Purchaser, (iv) any
change in any of the arrangements which are referred to in Section 6.17 hereof
or any transactions of the type which is referred to in clause (f) of Section
6.18 hereof, or (v) any change in the accounting principles or methods which are
utilized by Oak Tree or the Purchaser.
21
6. 14 Litigation. Other than as set forth in Schedule 6.14 hereto,
there are no suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending or, to the knowledge of Oak
Tree and the Purchaser, threatened, against or relating to Oak Tree or the
Purchaser or their respective business and assets. There are no judgments,
orders, stipulations, injunctions, decrees or awards in effect which relate to
Oak Tree (individually or on a consolidated basis) and/or the Purchaser or their
respective businesses, the effect of which is to limit, restrict, regulate,
enjoin or prohibit any business practice in any area, or the acquisition of any
properties, assets or businesses, or otherwise materially adverse to their
respective businesses assets.
6. 15 No Violation of Law. Neither Oak Tree nor the Purchaser is
engaging in any activity or omitting to take any action as a result of which (a)
it is in violation in any material respect of any law, rule, regulation, zoning
or other ordinance, statute, order, injunction or decree, or any other
requirement of any court or other governmental authority, applicable to it
(individually or on a consolidated basis), its Business or assets, including,
but not limited to, those relating to: healthcare (including Medicare and
Medicaid); occupational safety and health; environmental and ecological
protection (e.g., the use, storage, handling, transport or disposal of
pollutants, contaminants or hazardous or toxic materials or wastes, and the
exposure of persons thereto); business practices and operations (including
federal and state anti-kickback laws and regulations), labor practices; employee
benefits; and zoning and other land use, and (b) which would have a Material
Adverse Effect.
6. 16 Tax Matters. Except as disclosed on Schedule 6.16, each of Oak
Tree and the Purchaser has filed with the appropriate governmental agencies all
tax returns and reports required to be filed by it, and has paid in full or made
adequate provision for the payment of, all material taxes, interest, penalties,
assessments and deficiencies shown to be due or claimed to be due on such tax
returns and reports. The respective provisions for taxes which are set forth on
the Balance Sheets are adequate for all accrued and unpaid taxes of Oak Tree
(individually and on a consolidated basis) and the Purchaser as of the Oak Tree
Balance Sheet Date, whether (A) incurred in respect of or measured by income of
Oak Tree or the Purchaser for any prior periods, or (B) arising out of
transactions entered into, or any state of facts existing, on or prior to that
date. The provisions for taxes which are set forth on the respective books of
account of Oak Tree and the Purchaser are adequate for all taxes which accrued
after the Oak Tree Balance Sheet Date. Neither Oak Tree nor the Purchaser has
executed or filed with any taxing authority any agreement extending the period
for the assessment or collection of any taxes, and is not a party to any pending
or, to the best of the knowledge of Oak Tree and the Purchaser, overtly
threatened in writing, action or proceeding by any governmental authority for
the assessment or collection of income or other taxes. The United States federal
income tax returns of Oak Tree and the Purchaser have not been examined by the
Internal Revenue Service.
6. 17 Employee Arrangements. Schedule 6.17 hereto contains a complete
and correct list and summary description of all (i) union, collective
bargaining, employment, management, termination and consulting agreements to
which Oak Tree or the Purchaser is a party or otherwise bound, and (ii)
compensation plans and arrangements; bonus and incentive plans and arrangements;
deferred compensation plans and arrangements; pension and retirement plans and
arrangements; profit-sharing and thrift plans and arrangements; stock purchase
and stock option plans and arrangements; hospitalization and other life, health
or disability insurance or reimbursement programs; holiday, sick leave,
severance, vacation, tuition reimbursement,
22
personal loan and product purchase discount policies and arrangements; and other
plans or arrangements providing for benefits for employees of Oak Tree, Oak Tree
and its subsidiaries and the Purchaser. Such Schedule also lists the names and
compensation of all employees of Oak Tree or the Purchaser whose earnings during
the last fiscal year was $50,000 or more (including bonuses and other incentive
compensation), and all employees who are expected to receive at least said
amount in respect of the present year.
6. 18 ERISA.
(a) Schedule 6.18 hereto lists each "employee pension benefit
plan" (collectively called "Oak Tree Pension Plans" and severally called "Oak
Tree Pension Plan"), as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and each "employee
welfare benefit plan" (collectively called "Oak Tree Welfare Plans" and
severally called "Oak Tree Welfare Plan") as such term is defined in Section
3(1) of ERISA, which is maintained by Oak Tree or the Purchaser to which it
contributes or is obligated or required to contribute. The Oak Tree Pension
Plans and Oak Tree Welfare Plans are hereinafter sometimes collectively referred
to as the "Oak Tree Plans" and severally referred to as an "Oak Tree Plan".
(b) Each Oak Tree Pension Plan and the trust (if any) forming
a part thereof has been determined by the IRS to be qualified under Section
401(a) of the Code, and is exempt from taxation under Section 501(a) of the
Code, and nothing has occurred since the date of such determination which would
adversely affect such qualification.
(c) Oak Tree and the Purchaser will deliver to the Seller and
the Stockholders complete and correct copies of (i) the Oak Tree Plans, and all
related trust agreements, (ii) all written interpretations and summary plan
descriptions relating thereto, (iii) the two most recent annual reports (Form
5500 Series) and accompanying schedules, which were prepared in connection with
each Oak Tree Plan, (iii) all IRS determination letters relating to the Oak Tree
Plans, and (iv) the two most recent actuarial evaluation reports which were
prepared in connection with any of the Oak Tree Plans.
(d) None of Oak Tree, the Purchaser, any of the Oak Tree
Plans, any trust created thereunder, or any trustee or administrator thereof has
engaged in a transaction which would subject Oak Tree, the Purchaser or any of
the Oak Tree Plans to the tax on prohibited transactions imposed by Section 4975
of the Code or to a civil penalty assessed pursuant to Section 502(i) of ERISA.
(e) None of the Oak Tree Pension Plans has incurred any
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived.
(f) Neither Oak Tree nor the Purchaser has incurred, or is
expected to incur, directly or indirectly, any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") with respect to any Oak Tree Pension Plan. The
PBGC has not instituted proceedings to
23
terminate any Oak Tree Pension Plan, nor has it notified Oak Tree or the
Purchaser, either formally or informally, of its intention to institute any such
proceedings.
(g) There have not been, with respect to any of the Oak Tree
Plans, any "reportable events", as such term is defined in Section 4043(b) of
ERISA.
(h) Neither Oak Tree nor the Purchaser has ever maintained or
contributed to, or been obligated or required to contribute to, a "multiemployer
plan", as such term is defined in Section 3(37) of ERISA.
(i) Each of Oak Tree and the Purchaser has paid in full all
amounts which were required to have been paid by it on or prior to the date
hereof as contributions to any of the Oak Tree Pension Plans. The current value
of all accrued benefits under each of the Oak Tree Pension Plans did not, as of
the latest valuation date thereof, exceed the then current value of the assets
of such Oak Tree Pension Plan allocable to such accrued benefits, based upon the
actuarial assumptions then being utilized with respect thereto.
(j) There is not pending, and to the knowledge of Oak Tree and
the Purchaser there is not overtly threatened in writing, any claims against any
of the Oak Tree Plans or any fiduciary thereof (other than claims for benefits
made in the ordinary course).
6. 19 Certain Business Matters. Except as disclosed in Schedule 6.19
hereto, (a) neither Oak Tree nor the Purchaser is a party to or bound by any
distributorship, dealership, sales agency, franchise or similar agreement which
relates to the sale or distribution of any of the products and services of the
business of Oak Tree and its subsidiaries (on a consolidated basis) or the
Purchaser; (b) neither Oak Tree nor the Purchaser has a sole-source supplier of
significant goods or services (other than utilities) with respect to which
practical alternative sources are not available on comparable terms and
conditions; (c) there are no pending, or to the knowledge of Oak Tree or the
Purchaser, overtly threatened in writing, labor negotiations, work stoppages or
work slowdowns involving or affecting the business of Oak Tree and its
subsidiaries (on a consolidated basis) or the Purchaser, and, to the knowledge
of Oak Tree and the Purchaser, no union representation questions exist, and
there are no organizing activities, in respect of any of the employees of Oak
Tree and its subsidiaries (on a consolidated basis) or the Purchaser, (d) the
product and service assurances, warranties or guarantees, if any, given by Oak
Tree or the Purchaser or by which each is bound (complete and correct copies or
descriptions of which have heretofore been or shall be delivered by Oak Tree and
the Purchaser to Seller and the Stockholders) entail no greater obligations than
are customary in the business of Oak Tree or the Purchaser; (e) neither Oak Tree
nor the Purchaser is a party to, or bound by, any agreement which limits its
freedom to compete in any line of business or with any person, or which is
otherwise materially burdensome to it; and (f) to the knowledge of Oak Tree and
the Purchaser, neither Oak Tree nor the Purchaser is a party to, or bound by,
any agreement in which any officer, principle or key employee, agent,
consultant, director or stockholder of Oak Tree (individually or on a
consolidated basis) or the Purchaser (or any affiliate of any such person) has,
or had when made, a direct or indirect material interest.
6. 20 Certain Contracts. Schedule 6.20 hereto contains a complete and
correct list of all contracts, commitments, obligations and understandings which
are not set forth in any other Schedule to this Agreement and to which Oak Tree
(individually or on a consolidated basis) or the Purchaser is a party or
otherwise bound, except for each of those which (a) was made in the
24
ordinary course of business, and (b) either (1) is terminable by Oak Tree or the
Purchaser without liability, expense or other obligation on 30 days' notice or
less, or (2) may be anticipated to involve aggregate payments to or by Oak Tree
or the Purchaser of $25,000 (or the equivalent) or less calculated over the full
term thereof, and (c) is not otherwise material to the business of Oak Tree
(individually or on a consolidated basis), or the Purchaser. Complete and
correct copies of all contracts, commitments, obligations and undertakings set
forth on any of the Schedules delivered pursuant to this Agreement have been or
will be furnished by Oak Tree and the Purchaser to the Seller and the
Stockholders, and except as expressly stated on the Schedule on which they are
set forth, (a) each of them is in full force and effect, no person or entity
which is a party thereto or otherwise bound thereby is in default thereunder,
and, to the knowledge of Oak Tree and the Purchaser, no event, occurrence,
condition or act exists which does (or which with the giving of notice or the
lapse of time or both would) give rise to a default or right of cancellation,
acceleration or loss of contractual benefits thereunder; (b) there has been no
threatened cancellations thereof, and there are no outstanding disputes
thereunder; and (c) none of them is materially burdensome to Oak Tree
(individually or on a consolidated basis) or the Purchaser.
6. 21 Approvals. Schedule 6.21 hereto, which contains a complete and
correct list of all governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises which are
necessary for the operation of the Oak Tree (individually and on a consolidated
basis with its subsidiaries) or Purchaser, all of which have been duly obtained
and are in full force and effect.
6. 22 Customers and Suppliers. Schedule 6.22 hereto contains a complete
and correct list setting forth, with respect to the fiscal year ended May 30,
1998 and the eleven month period ended February 28, 1999: (a) if applicable the
10 largest customers or clients of the business of Oak Tree (individually and on
a consolidated basis with its subsidiaries) or the Purchaser and the amount for
which each such customer was invoiced, and (b) the 10 largest suppliers to Oak
Tree (individually and on a consolidated basis with its subsidiaries) or the
Purchaser and the amount of goods and services purchased from each such supplier
during Oak Tree's last fiscal year. To the knowledge of Oak Tree and the
Purchaser, (i) there has been no material adverse change in the business
relationship between Oak Tree and the Purchaser and any such customer or
supplier, and (ii) such suppliers and customers will continue their respective
relationships with Oak Tree (individually and on a consolidated basis with its
subsidiaries) or the Purchaser after the Closing Date on substantially the same
basis as now exists.
6. 23 Business Practices and Commitments. Schedule 6.23 hereto sets
forth a complete and accurate summary description of (a) the following practices
and obligations of Oak Tree (individually and on a consolidated basis with its
subsidiaries) and of the Purchaser: rebate and volume discount practices and
obligations, (b) allowance and customer return practices and obligations, and
(c) warranty practices and obligations.
6. 24 Brokers. No agent, broker, person, or firm acting on behalf of
Oak Tree or the Purchaser, or under its authority, is or will be entitled to a
financial advisory fee, brokerage commission or other like payment in connection
the execution and delivery of this Agreement or any of the transactions
contemplated hereby.
6. 25 Information as to Oak Tree and the Purchaser. None of the
representations, warranties or statements made by Oak Tree or the Purchaser in
this Agreement, any Schedule
25
hereto or in any other agreement or instrument executed and delivered by or on
behalf of either of them pursuant hereto contains or will contain an untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make the statements therein contained in light of the circumstances
under which they were made not misleading.
6. 26 Issuance of Securities. Oak Tree and the Purchaser, to the extent
applicable, have the requisite corporate power and authority to issue the
Receivables Note, the guaranty of Oak Tree in respect of the Receivables Note
(the "Guaranty") and the Shares of Oak Tree. The Receivables Note, the Security
Agreement, the Guaranty and the certificate of designation with respect to the
Series A Preferred Stock have been duly authorized by all requisite corporate
action on the part of Oak Tree and the Purchaser, to the extent applicable. When
issued, the Receivables Note and Security Agreement will be a valid binding
obligation of the Purchaser, and the Guaranty will be a valid binding obligation
of Oak Tree, each enforceable in accordance with its term, except as
enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws affecting creditors' rights in general and the application of
general equitable principles, whether applied in an action at law or a
proceeding in equity. The certificate of designation relating to the Series A
Preferred Stock has been, or will on or prior to the Closing be, duly filed with
the Secretary of State of Delaware, and when so filed, upon the issuance of the
Series A Preferred Stock to the Seller or its designees, the holders of such
Series A Preferred Stock will be entitled to the benefits of the certificate of
designation and be entitled to enforce their rights thereunder in accordance
with the provisions of Oak Tree's certificate of incorporation, as amended to
date and as further amended or supplemented by such certificate of designation.
The Receivables Note and Shares of Oak Tree have been duly authorized for
issuance and all necessary corporate action has been taken by Oak Tree in
accordance with the terms of this Agreement and the Receivables Note. The Shares
of Oak Tree, when issued (in the case of the Receivables Shares, upon due
conversion of the Series A Preferred Stock, and in the case of the Price
Protection Shares, upon due exercise by the Seller and its designees of their
rights under Article 3 of this Agreement) will be validly issued, fully paid and
non-assessable. Upon issuance of the Series A Preferred Stock in accordance with
the respective terms of this Agreement, the Receivables Note and the applicable
certificate of designation, such securities will be convertible at the option of
the holders thereof into Receivables Shares on a one-for-one basis for each
share of Preferred Stock so converted. No holder of any Shares of Oak Tree will
be subject to personal liability by reason of being such a holder, and the
issuance of such shares upon conversion, purchase or other issuance will not be
subject to preemptive or other similar rights of any security holder of Oak Tree
created by Oak Tree or Purchaser and will be duly authorized, validly issued and
outstanding, fully paid and non-assessable. During the past six years, all
Common Stock issued by Oak Tree has been issued in compliance in all material
respects with the federal securities laws applicable to it.
6. 27 Insurance. To Purchaser's Knowledge, each of the Purchaser and
Oak Tree has in full force and effect policies of insurance of the type and in
amounts providing protection for the Purchaser and Oak Tree consistent with the
Purchaser's and Oak Tree's belief of sound business practices and prudent risk
management applicable to businesses of the size and nature of the Purchaser and
Oak Tree. Schedule 6.27 will constitute a true and complete description of (i)
all of the policies in force and effect in respect of the Purchaser and Oak Tree
(the "Purchaser Policies"); (ii) the coverage and limits on the Purchaser
Policies; and (iii) all known current claims under any of the Purchaser
Policies. To Purchaser's Knowledge, all of the Purchaser Policies are in full
force and effect and neither Purchaser or Oak Tree has received any notice of
26
cancellation in respect of such insurance coverage under the Purchaser Policies.
To Purchaser's Knowledge, all premiums due and payable in respect of the
Purchaser Policies have been paid or payment thereof has been duly provided for.
There are no pending or, to Purchaser's Knowledge, threatened terminations or
premium increases with respect to any of the Purchaser Policies and, to
Purchaser's Knowledge, the Purchaser and Oak Tree is in compliance, in all
material respects with all conditions contained therein.
7
CONDITIONS TO OBLIGATIONS OF PURCHASER AND OAK TREE
The obligations of Purchaser and Oak Tree under this Agreement are
subject to satisfaction of the following conditions at or prior to Closing, any
of which may be waived by Purchaser in writing:
7. 1 Correctness of Representations and Warranties. All representations
and warranties of the Seller and the Stockholders contained in this Agreement
shall be true and complete in all material respects on the Closing Date, and a
certificate to that effect shall be delivered by the Seller to Purchaser.
7. 2 Instruments of Conveyance. Seller shall have delivered to
Purchaser the Assignment of Contracts and Leases, the Xxxx of Sale, and such
other Instruments of Conveyance and consents and waivers by others, necessary or
appropriate to transfer to and effectively vest in Purchaser all right, title
and interest of Seller in and to the Assets as contemplated by this Agreement in
proper statutory form for recording if such recording is necessary or
appropriate, and certified copies of all corporate actions taken by Seller, in
respect of this Agreement and the transactions contemplated by this Agreement.
7. 3 Delivery of Documents. In addition to the Instruments of
Conveyance described above, all of the documents to be executed and delivered to
Purchaser at or prior to the Closing pursuant hereto as provided in Section 4
shall be so delivered.
7. 4 Performance of Covenants. Each of the Seller and the Stockholders
shall have performed all of the covenants and agreements to be performed by
Seller and the Stockholders hereunder at or prior to the Closing, and a
certificate to that effect shall have been delivered by Seller and Stockholders
to Purchaser and Oak Tree.
7. 5 Consents and Approvals; Licenses and Permits. All consents and
approvals of governmental agencies and authorities legally required for the
consummation of the transactions contemplated hereby, and, to the extent
material to the operation of the Business by Purchaser after the Closing, all
consents of third parties required for the assignment of leases (or subleases
thereunder), contracts and agreements to be assigned hereunder, shall have been
obtained. In addition, all licenses, permits and approvals legally required for
the consummation of the transactions contemplated hereby and for the operation
of the businesses of the Seller and the Practices managed by the Seller
subsequent to the Closing, shall have been obtained.
7. 6 Transactions Satisfactory. All transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to Purchaser
and its counsel, as determined by
27
Purchaser in its sole and absolute discretion, and shall be in compliance with
applicable rules, laws and regulations.
7. 7 Investor Questionnaire. The Seller and the Stockholders shall have
completed, executed and delivered, or shall cause to be completed, executed and
delivered by the appropriate persons or entities, executed and delivered to the
Purchaser Investor Questionnaires (each an "Investor Questionnaire" and
collectively the "Investor Questionnaires") in the form attached as Exhibit K
hereto, and such completed Investor Questionnaires shall be acceptable to the
Purchaser in its sole discretion, and such completed Investor Questionnaires
shall be true and correct in all material respects at and as of the Closing
Date.
7. 8 Effectiveness of Amended and Restated Practice Management
Agreement. The Amended and Restated Practice Management Agreement between each
Practice and Purchaser shall be in full force and effect at Closing. All
conditions to be satisfied by each Practice under the terms of the Amended and
Restated Practice Management Agreement shall have been satisfied by such
Practice. All of the representations and warranties of each Practice contained
in the Amended and Restated Practice Management Agreement shall be true and
correct in all material respects as of Closing Date. There shall not have
occurred any breach or default by the Seller or any Practice of their respective
material obligations under the Amended and Restated Practice Management
Agreement which, if not cured, would have a Material Adverse Effect.
7. 9 Employment/Independent Contractor Agreements. Purchaser shall have
been provided copies of fully executed Employment Agreements or Independent
Contractor Agreements, as the case may be (the "Employment/Independent
Contractor Agreements") between the Physicians and each Practice listed on
Schedule B hereto.
7. 10 No Material Adverse Change. There shall have been no Material
Adverse Change with respect to Seller since December 31, 1998.
7. 11 No Threatened or Pending Litigation. No suit, action or other
proceeding shall be pending or threatened in writing before any governmental
authority seeking to restrain the Purchaser or Oak Tree or prohibit the Closing
or seeking damages against the Purchaser, or Oak Tree, as a result of the
consummation of this Agreement.
7. 12 Financial Statements. Purchaser shall have been provided with the
Seller Financials referenced in Section 5.9 hereof and any supplementary
unaudited financial statements contemplated by Section 10.11 hereof.
7. 13 Note Offering. Purchaser or Oak Tree shall have received the
proceeds from the Note Offering.
7. 14 Rule 14-f. Oak Tree shall have taken all action necessary to
comply with Rule 14f-1 under the securities laws.
28
8
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to
satisfaction of the following conditions at or prior to the Closing, any of
which may be waived by the Seller in writing:
8. 1 Payment of Purchase Price. Purchaser or Oak Tree shall have
delivered to Seller the Cash Purchase Price and the documents required to be
delivered at Closing under Article 3 hereof.
8. 2 Correctness of Representations and Warranties. All the
representations and warranties of Purchaser and Oak Tree contained in this
Agreement shall be true and complete in all material respects on the Closing
Date and a certificate to that effect shall have been delivered by Oak Tree and
Purchaser to Seller.
8. 3 Delivery of Documents. All of the documents to be executed and
delivered to Seller at or prior to the Closing pursuant hereto as provided in
Section 4 shall be so delivered.
8. 4 Performance of Covenants. Purchaser and Oak Tree shall have
performed all of the covenants and agreements to be performed by Purchaser and
Oak Tree hereunder at or prior to the Closing and a certificate to that effect
shall have been delivered by Oak Tree and Purchaser to Seller.
8. 5 Consents and Approvals; Licenses and Permits. All consents and
approvals of governmental agencies and authorities legally required for the
consummation of the transactions contemplated hereby, and, to the extent
material to Purchaser's operation of the Business, all consents of third parties
required for the assignment of leases (or subleases thereunder), contracts and
agreements to be assigned hereunder or leasing or subleasing, shall have been
obtained. In addition, all licenses, permits and approvals legally required for
the consummation of the transactions contemplated hereby and for the operation
of the businesses of the Seller and the Practices managed by the Seller
subsequent to the Closing, shall have been obtained.
8. 6 No Material Adverse Change. There shall have been no Material
Adverse Change with respect to Oak Tree since December 31, 1998.
8. 7 Transactions Satisfactory. All transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to Seller and
its counsel, as determined by Seller in its sole and absolute discretion, and
shall be in compliance with applicable rules, laws and regulations.
9
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9. 1 Survival. All representations and warranties of the parties
included or provided for in this Agreement, including without limitation the
Schedules and Exhibits hereto, shall survive the Closing, irrespective of any
investigation at any time made by or on behalf of any
29
other party, for a period of 24 months following the Closing Date, except that
any claim for breach of representations and warranties contained in Section 5.16
(taxes) or fraud shall survive until the applicable statute of limitations
expires.
9. 2 Indemnification by Seller and the Stockholders.
(a) General. Each of the Seller and the Stockholders, jointly
and severally, shall, with respect to their Proportionate Share, indemnify,
defend and hold harmless Purchaser and Oak Tree (including their officers,
directors, employees, agents, representatives and affiliates) from and against
any and all claims, losses, damages, liabilities, demands, assessments,
judgments, costs and expenses (including, without limitation, settlement costs
and any reasonable legal or other expenses for investigating, bringing or
defending any actions or threatened actions) incurred by Purchaser in connection
with each and all of the following:
(i) any misrepresentation or breach of any warranty
made by Seller (or any of its officers or directors) or any Stockholder in this
Agreement or any Schedule, Exhibit, certificate or other instrument attached
hereto or delivered to Purchaser pursuant hereto;
(ii) the breach of any covenant, agreement or
obligation of Seller or any Stockholder contained in this Agreement, any
Schedule or any certificate or agreement or instrument delivered to the
Purchaser or Oak Tree by the Seller or Stockholders pursuant hereto;
(iii) any misrepresentation contained in any written
statement or certificate furnished by any officer of Seller or any Stockholder,
in each case pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement;
(iv) any liability or obligation of, or claim
against, Seller or any Stockholder of any kind or nature which arises out of or
relates to operations by Seller at any time on or prior to the Closing Date and
which is not expressly assumed by Purchaser pursuant to this Agreement;
(v) any liability or obligation of any kind or
nature, to the extent not expressly assumed by Purchaser pursuant to this
Agreement, which arises out of, or relates to, any pension, retirement, profit
sharing, deferred compensation, bonus or other incentive plan, or any collective
bargaining agreement or other labor agreement, including single or
multi-employer plans or agreements, to which Seller is a party or by which it is
bound; and
(vi) any federal, foreign, state or local tax
liability, obligation or claim (including any such liability, obligation or
claim arising as a result of or with respect to the consummation of the
transactions contemplated by this Agreement) for periods ending on or before the
Closing Date.
(b) Claims for Indemnification. Whenever any claim shall
arise for indemnification under this Section 9.2, Purchaser or Oak Tree shall
promptly notify in writing the Seller and the Stockholders of the claim and,
when known, the facts constituting the basis for such claim. In the event of any
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceeding by a person who is not a party to this Agreement
("Third Party Claim"), such notice shall also specify, if known, the amount or
an estimate of the amount of the liability arising therefrom. Neither Oak Tree
nor Purchaser shall incur any
30
expenses, or settle or compromise or enter into any binding agreement to settle
or compromise, or consent to entry of any judgment arising from, any such claim
or proceeding except in accordance with this Section 9.2. Purchaser will give
Seller and the Stockholders prompt written notice of any such claim and, with
respect to any Third Party Claim, Seller and the Stockholders will undertake the
defense thereof by representatives of their own choosing reasonably satisfactory
to Purchaser. Purchaser shall have the right to participate in any such defense
of a Third Party Claim with advisory counsel of its own choosing at its own
expense. In the event Seller or the Stockholders, within a reasonable time after
notice of any such Third Party Claim, fails to defend, Purchaser or any parent,
subsidiary or affiliate of Purchaser will have the right to undertake the
defense, compromise or settlement of such Third Party Claim on behalf of, and
for the account of, Seller and the Stockholders, at the expense and risk of
Seller and the Stockholders. Seller and the Stockholders shall not, without
Purchaser's written consent, settle or compromise any such Third Party Claim or
consent to entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to Purchaser and/or
Purchaser's parent, subsidiary or subsidiaries, or affiliate or affiliates, as
the case may be, an unconditional release from all liability in respect of such
Third Party Claim. The Purchaser and Oak Tree will cooperate with Seller and
Stockholders in connection with the defense or settlement of such Third Party
Claim. Notwithstanding the foregoing, Seller and the Stockholders shall have the
right to dispute the issue of whether it is obligated hereunder to indemnify
Purchaser with respect to any particular Third Party Claim.
(c) Limitations on Indemnification. Notwithstanding anything
to the contrary set forth in this Agreement, the Purchaser's right to
indemnification under this Section 9.2 shall be limited as follows: (i) any
claim for indemnification must be asserted by written notice by a date which is
not later than 24 months following the Closing Date, except that, any claim
based upon a breach of the representations and warranties contained in Section
5.14 (Taxes) or based upon fraud may be asserted until the applicable statute of
limitations has expired, (ii) the Purchaser's right to pursue any claim for
indemnification shall be limited solely to its rights of setoff set forth in
Section 13.1 hereof, and the Stockholders shall have no personal obligations
with respect to such claims of indemnification by the Purchaser, except with
respect to the setoff provisions described in Section 13.1 hereof, and (iii) in
no event shall any Stockholder be liable to Oak Tree and/or the Purchaser for
more than the actual amount of cash received by such Stockholder from the
Purchaser and Oak Tree pursuant to this Agreement.
(d) Sole Remedy. Indemnification and set off shall be sole
and exclusive remedies of Oak Tree and the Purchaser for redressing the breach
by the Seller and/or the Stockholders of any misrepresentation or the breach of
any warrants, covenant, condition or agreement of the Seller or the Stockholders
set forth herein in this Agreement or in any agreement, instrument or document
executed and delivered by the Seller or the Stockholders herewith.
9. 3 Indemnification by Purchaser and Oak Tree.
(a) General. Purchaser and Oak Tree, jointly and severally,
shall indemnify, defend and hold harmless Seller (including its officers,
directors, employees, agents, representatives and affiliates) and the
Stockholders from and against any and all claims, losses, damages, liabilities,
demands, assessments, judgments, costs, and expenses (including, without
limitation, settlement costs and any legal or other expenses for investigating,
bringing or
31
defending any actions or threatened actions) incurred by Seller or any
Stockholder in connection with each and all of the following:
(i) any misrepresentation or breach of any warranty
made by Purchaser or Oak Tree or any of their officers or executive directors in
this Agreement or any Schedule, Exhibit, certificate or other instrument
attached hereto or delivered to Seller or any Stockholder pursuant hereto;
(ii) the breach of any covenant, agreement or
obligation of Purchaser or Oak Tree contained in this Agreement, any Schedule or
any certificate or agreement or instrument delivered to the Seller or the
Stockholders pursuant hereto;
(iii) any misrepresentation contained in any
statement or certificate furnished by Purchaser or Oak Tree or any officer of
Purchaser or Oak Tree pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement; and
(iv) the Assumed Liabilities, any other liability or
obligation of, or any claim for damages of any kind or nature which arises out
of or relates to the operation of the Purchaser or Oak Tree at any time after
the Closing Date, including, without limitation, any federal, foreign, state or
local tax liability, obligation or claim of or against Purchaser or Oak Tree
(except to the extent a portion of the amount thereof is to be prorated to
Seller under the terms of this Agreement) (including any such liability,
obligation or claim arising as a result of or with respect to the consummation
of the transactions contemplated by this Agreement) for periods ending after the
Closing Date.
(b) Claims for Indemnification. Whenever any claim shall
arise for indemnification under this Section 9.3, Seller or a Stockholder shall
promptly notify in writing the Purchaser and Oak Tree of the claim and, when
known, the facts constituting the basis for such claim. In the event of any
Third Party Claim, such notice shall also specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. Neither Seller nor
the Stockholders shall incur any expenses, or settle or compromise or enter into
any binding agreement to settle or compromise, or consent to entry of any
judgment arising from, any such claim or proceeding except in accordance with
this Section 9.3. Seller and the Stockholders will give Purchaser and Oak Tree
prompt written notice of any such claim and, with respect to any Third Party
Claim, Purchaser or Oak Tree will undertake the defense thereof by
representatives of its own choosing reasonably satisfactory to Seller and the
Stockholders. Seller and the Stockholders shall have the right to participate in
any such defense of a Third Party Claim with advisory counsel of its own
choosing at its own expense. In the event Purchaser or Oak Tree, within a
reasonable time after notice of any such Third Party Claim, fails to defend,
Seller and the Stockholders will have the right to undertake the defense,
compromise or settlement of such Third Party Claim on behalf of, and for the
account of, Purchaser and Oak Tree, at the expense and risk of Purchaser and Oak
Tree. Purchaser and Oak Tree shall not, without the written consent of Seller
and the Stockholders, settle or compromise any such Third Party Claim or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to Seller and the Stockholders, an
unconditional release from all liability in respect of such Third Party Claim.
The Seller and the Stockholders will cooperate with Oak Tree and the Purchaser
in connection with the defense of settlement of such Third Party Claim.
Notwithstanding the foregoing, Purchaser and Oak Tree shall have the right
32
to dispute the issue of whether it is obligated hereunder to indemnify Seller
and the Stockholders with respect to any particular Third Party Claim.
(c) Limitations on Indemnification. Notwithstanding anything
to the contrary set forth in this Agreement, the Seller's and any Stockholder's
right to indemnification under this Section 9.3 shall be limited as follows: (i)
any claim for indemnification must be asserted by written notice by a date which
is not later than 24 months following the Closing Date, except that, any claim
based upon a breach of the representations and warranties contained in Section
6.14 (Taxes) or based upon fraud may be asserted until the applicable statute of
limitations has expired, (ii) in no event shall Purchaser or Oak Tree be liable
to Seller and/or the Stockholders for more than the actual amount of cash paid
by Oak Tree and/or the Purchaser to the Seller or the Stockholders pursuant to
this Agreement, and (iii) any claim relating to undisclosed liabilities of Oak
Tree or Purchaser shall be satisfied by the issuance of Additional Shares as set
forth in Section 10.14 hereof.
(d) Sole Remedy. Indemnification shall be sole and exclusive
remedies of Seller and/or the Stockholders for redressing the breach by the
Seller and/or the Stockholders of any misrepresentation or the breach of any
warrants, covenant, condition or agreement of the Seller or the Stockholders set
forth herein in this Agreement or in any agreement, instrument or document
executed and delivered by the Seller or the Stockholders herewith.
10
COVENANTS OF PARTIES
The parties hereto hereby covenant and agree as follows:
10. 1 Transfer Taxes. Each party hereto shall pay all such sales,
transfer, use, gross receipts, registration and similar taxes arising out of or
in connection with the transactions contemplated by this Agreement as are
payable by such party under applicable law.
10. 2 Consents. Each of the parties hereto will use its commercially
reasonable efforts to obtain consents of all third parties and governmental
instrumentalities, agencies and authorities necessary to the consummation of the
transactions contemplated by this Agreement.
10. 3 Public Announcements. The Seller and the Stockholders will
consult with the Purchaser before issuing any press releases or otherwise making
any public statements with respect to this Agreement and/or the transactions
contemplated herein and shall not issue any such press release or make any such
public statement without the prior written approval of the Purchaser, which
approval shall not be unreasonably withheld. The obligations of the Seller and
the Stockholders under this Section 10.3 shall survive the termination of this
Agreement.
10. 4 Transactions Affecting Organization and Good Standing. Between
the date hereof and the Closing Date, neither the Seller, the Purchaser nor Oak
Tree will amend or otherwise change its articles of incorporation or bylaws, or
other organizational documents, except Oak Tree shall file the certificate of
designation relating to the Series A Preferred Stock, in form and substance
approved in writing by the Seller and its legal counsel, and the Seller, the
Purchaser and Oak Tree, as the case may be, will take all necessary actions to
keep in full force and effect its legal existence.
33
10. 5 Conduct of Business Before the Closing. Between the date hereof
and the Closing Date, each of the Seller, the Stockholders (with respect to the
Seller), Purchaser and Oak Tree shall:
(a) (i) conduct its business diligently in the ordinary
course of business, (ii) retain in its employ all of its key employees and an
adequate employee work force in numbers and skills substantially as in effect on
the date hereof, and (iii) preserve its goodwill and relationships with
physicians, employees, third party payors, suppliers and patients and others
having business relations;
(b) except upon the prior written consent of Oak Tree or
Seller, as the case may be, which consent shall not be unreasonably withheld,
not: (i) except in the ordinary course of business, sell, assign, lease or
otherwise transfer or dispose of any of its properties or assets, (ii) except in
the ordinary course of business, forgive or compromise any obligations of others
or claims against others, (iii) mortgage, pledge or subject any of the
properties or assets to a lien, charge or encumbrance of any kind, or (iv) in
case of the Seller or the Purchaser, permit a change in its ownership or control
or, in the case of Oak Tree, permit any change in control or, in the case of
Seller, Purchaser or Oak Tree, grant any options, powers, warrants or rights
which could result in such a change of control or ownership.
(c) except upon the prior written consent of Oak Tree or
Seller, as the case may be, which consent shall not be unreasonably withheld:
(i) not amend, renew or terminate any contract or agreement to which it is a
party (including, without limitation, any contract or agreement with any of the
Practices managed by Seller) or enter into or become a party to any contract or
agreement under which the value of services to be performed by or for it or the
cost of goods and services to be sold to or by it under any one such contract or
agreement may exceed $50,000, (ii) not enter into or become a party to any loan,
letter of credit or other debt agreement (other than extensions of credit in
relation to purchases of inventory in the ordinary course of business consistent
with prior practices), or incur, assume or guaranty any obligation for borrowed
money, (iii) not compromise or settle any pending or threatened litigation or
claims against it for an amount in excess of $50,000, (iv) not enter into any
contracts or agreements to do anything prohibited under this Section 10.5 and
(v) perform all obligations under all contracts and agreements to which the
Seller is a party.
(d) continue in full force and effect its existing insurance
coverages.
(e) except upon the prior written consent of Oak Tree or
Seller, as the case may be, not alter or amend, in any material respect, any
employment, consulting, non-competition or similar agreement, or increase the
compensation or rate of compensation or benefits payable or to become payable to
any of its directors, officers, stockholders, employees or agents over the rate
being paid to them at the date hereof, except for increases required pursuant to
a contract in existence at the date hereof and listed on a schedule to this
Agreement, and except for promotions to fill vacancies arising after the date
hereof in positions existing on the date hereof.
(f) except upon the prior written consent of Oak Tree or
Seller, as the case may be, enter into any contract, agreement or course of
action which may reasonably be expected materially to increase its aggregate
amount of liabilities.
34
(g) except upon the prior written consent of Oak Tree or
Seller, as the case may be, not make any alteration in the manner of keeping its
books, accounts or records or in the accounting practices therein reflected.
(h) except upon the prior written consent of Oak Tree or
Seller, as the case may be, not make any material change in its business, or
enter into any material transaction, which is not in the ordinary course of
business.
10. 6 Access and Information Prior to Closing. Each party shall have
the right to conduct due diligence following the execution hereof. Each party
and their respective directors, officers, employees and agents shall cooperate
fully with each other and their respective directors, officers, employees and
agents to ensure the prompt and complete availability of all records and
information of such party, of any nature whatsoever, that such party may
request. Each party shall, upon the request of the other party, provide written
authorizations to all parties having information regarding such party,
authorizing them to release such information to such party for review and/or
copying, and directing them to cooperate fully with such party. In addition,
such party and its agents shall have access to the facilities and properties of
such party for the purposes of inspection and survey.
10. 7 Current Information. Each party will advise the other party in
writing, as soon as practicable but in no event later than the Closing, of: (i)
the occurrence of any event which renders any of the representations or
warranties of such party set forth herein inaccurate; and (ii) the failure of
such party to perform any of its covenants or agreements set forth herein. The
Seller will also provide to Purchaser promptly upon their becoming available
copies of all financial reports prepared by or for the conduct of the business
of Seller prior to the Closing Date.
10. 8 Preservation of the Assets. From the date hereof until the
Closing Date, each party will maintain the tangible assets in no worse
condition, repair and working order and all other Assets in substantially the
same condition as such Assets exist on the date hereof. With respect to all
contract rights to be assigned to Purchaser hereunder, Purchaser shall preserve
the enforceability and validity of each material contract with third parties,
including specifically any and all management agreements with the Practices.
10. 9 Contracts/Compliance With Laws. With regard to any contracts or
other business arrangements to which Seller is a party, the benefits of which
are to be transferred to Purchaser hereunder, and which may be, in the opinion
of qualified legal counsel selected by Purchaser, in violation of any state or
federal laws or regulations, the Seller shall promptly take such actions as are
necessary, in the reasonable mutual judgment of the parties hereto, to amend
such contracts or business arrangements so as to eliminate any such violation
and preserve the benefit of such contract or agreement for Purchaser.
10. 10 Exclusivity. Each of the Seller and the Stockholders will not,
and will cause their respective directors, officers, employees, financial
advisors, legal counsel, accountants and other agents and representatives (for
purpose of this Section 10.10 only, being referred to as "affiliates") not to
initiate, solicit or encourage, directly or indirectly, or take any other action
to facilitate any inquiries or the making of any proposal with respect to,
engage or participate in negotiations concerning, provide any nonpublic
information or data to or have any discussions with any person other than
Purchaser or Oak Tree relating to, any acquisition, exchange offer,
35
merger, consolidation, acquisition of beneficial ownership of or the right to
vote securities of the Seller, dissolution, business combination, purchase of
all or any significant portion of the assets or any division of, or any equity
interest in, the Seller, or similar transaction, other than the transactions
contemplated under this Agreement (such proposals, disclosures, negotiations, or
transactions being referred to as "Acquisition Proposals"). Each of the Seller
and the Stockholders will notify Purchaser within 24 hours orally and within 48
hours in writing if any such Acquisition Proposal (including the terms thereof
and identity of the persons making such proposals) is received and furnish to
Purchaser a copy of any written proposal. The provisions of this Section 10.6
shall remain in effect until the earlier of (x) the date this Agreement is
terminated pursuant to Article 11, and (y) the Closing.
10. 11 Supplementary Financial Information. Within 25 days after the
end of each calendar month between the date of this Agreement and Closing, the
Seller shall provide to Purchaser unaudited financial statements (including at
the minimum income statement and balance sheet) for such month then ended that
shall present fairly the consolidated results of its operations at such date and
for the period covered thereby, all in accordance with the books and records of
the Seller and on a basis consistent with prior periods, in each case, certified
as true and correct in all material respects by its chief financial officer.
10. 12 Filings; Other Actions. (a) The Purchaser and Oak Tree shall
cooperate to promptly prepare (and the Seller and the Stockholders shall
cooperate in such preparation) an Offering Memorandum (the "Offering
Memorandum") with respect to the Note Offering. Oak Tree shall use commercially
reasonable efforts to consummate the Note Offering at the earliest possible time
after preparation of the Seller Financials.
(b) The Seller and the Stockholders represent and warrant
that none of the information or documents supplied or to be supplied by it
specifically for inclusion in the Offering Memorandum, by exhibit or otherwise,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Seller and Stockholders shall be entitled to review the Offering
Memorandum prior to the time it becomes final with respect to the information
contained therein relating to the Seller.
(c) Oak Tree and the Purchaser agree that none of the
information contained in Offering Memorandum (other than information concerning
the Seller and the Stockholders expressly provided by the Seller and the
Stockholders at the request of Oak Tree for inclusion therein) will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(d) The Seller and Stockholders shall furnish Oak Tree with
all information concerning themselves, their subsidiaries, if any, directors,
officers and stockholders and such other matters as may be reasonably requested
by Oak Tree in connection with the preparation of the Offering Memorandum, or
any other statement, filing, notice or application made by or on behalf of each
such party or any of its subsidiaries to any governmental entity in connection
with the transactions contemplated by the Other Agreements or this Agreement.
36
10. 13 Restrictions. In consideration of the payment of the purchase
price referenced in Article 3 hereof, and in order to induce Purchaser to enter
into this Agreement and to consummate the transactions contemplated hereby, each
of the Seller and the Stockholders hereby covenants and agrees as follows:
(a) Each of the Seller and the Stockholders agrees that,
during the Non-Compete Period, no Seller or Stockholder (including any affiliate
thereof) will, directly or indirectly, for itself or for any other Person,
engage in or compete in, or acquire or own in any manner any interest in any
Person which is engaged in or which competes in, the business conducted by the
Seller within the Territory. For a period of five years from the Closing Date,
the Seller and the Stockholders agree that, without the prior written consent of
Purchaser, the Seller, the Stockholders and their affiliates shall not hire,
solicit or offer employment to any of its former employees who become employees
of any affiliated entity of the Purchaser. These non-competition and
non-solicitation provisions shall be in addition to any similar provisions under
any separate agreements between any Seller or Stockholder and Purchaser or its
affiliates. As used herein, Non-Compete Period shall mean the lesser of (x) five
years from the Closing Date, and (y) the date which is 10 days from the date Oak
Tree has received written notice from Seller that the Stock Purchase Price
Shares have not been delivered to Seller as required under this Agreement,
provided, that, any dispute regarding the delivery of the Stock Purchase Price
Shares shall be resolved in accordance with the following procedures. In the
event of any dispute, controversy or claim arising out of or in connection with
the delivery of the Stock Purchase Price Shares, which cannot be amicably
resolved between the parties within thirty (30) days following the receipt of a
notice of dispute by either party, shall be submitted before an arbitration
tribunal designated in accordance with the rules of the American Arbitration
Association (the "Rules") by three (3) arbitrators appointed in accordance with
the Rules then in force and effect. Any such arbitration shall be held in New
York, New York and shall be held pursuant to the laws of the State of New York.
The decision of any such arbitration tribunal shall be final regarding any
matters presented to the arbitrators. The costs of arbitration shall be equally
between the Seller and the Purchaser. The arbitrators shall not be empowered to
award punitive, exemplary and/or consequential damages to any party.
(b) From and after Closing, no Seller or Stockholder shall
disclose, to any Person or entity, or make use of, without the authorization of
Purchaser, any non-public pricing strategies or records of the Seller, any
proprietary data or trade secrets owned by the Seller and included in the Assets
or any financial or other information about the Seller; provided that the
foregoing restrictions shall not apply to any information which: (i) is or
becomes publicly known through no negligent or wrongful act or omission on the
part of the Seller or any Stockholder; (ii) is approved for release by
Purchaser; (iii) is required to be disclosed in accordance with applicable law,
(iv) is disclosed to such party's accountants and lawyers who shall keep such
information confidential, or (v) in connection with the performance of duties by
the Stockholders on behalf of Purchaser after the Closing.
(c) It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by the Seller or the Stockholders or their
affiliates of any or all of the covenants and agreements contained in this
Section 10.3 may cause irreparable harm and damage to Purchaser in a monetary
amount which may be virtually impossible to ascertain. As a result, each of the
Seller and the Stockholders recognizes and hereby acknowledges that Purchaser
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining
37
any breach or violation of any or all of the covenants and agreements contained
in this Agreement by the Seller or the Stockholders and/or their respective
associates, affiliates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other rights or remedies Purchaser may possess hereunder, at law or in equity.
10. 14 Trading Restrictions. Each of the Seller and the Stockholders
acknowledge that he, she or it is aware that the United States securities laws
prohibit persons who are in possession of material, non-public information
concerning an issuer (such as Oak Tree) from purchasing or selling securities of
such issuer and from communicating such information to any other person under
circumstance under which it is reasonably foreseeable that such person is likely
to purchase or sell such securities, and each of the Seller and the Stockholders
agrees to fully comply with such laws. This Section 10.14 shall survive the
termination of this Agreement.
10. 15 Additional Shares. The Seller shall be entitled to be issued
additional shares of Oak Tree Common Stock (the "Additional Shares"), rounded up
to the nearest whole share and bearing the appropriate "restricted stock legend"
equal to the quotient of (x) Net Undisclosed Liabilities, divided by (y) the
lesser of (a) the average of the Closing Prices of the Oak Tree Common Stock
during each of the trading days in the five trading days prior to the date of
the issuance of such Additional Shares, and (b) the Specified Adjusted Price,
which shares shall be issued thirty months after the Closing Date. Within 15
days of the end of such thirty month period Oak Tree shall (a) deliver to Seller
a copy of its computation of the amount of Additional Shares, and (b) direct its
transfer agent to deliver the Additional shares to the Seller.
10. 16 Actions Necessary to Issue Shares. Subsequent to the Closing,
Oak Tree will take, and cause to be taken, all action, corporate or other, which
may be necessary or expedient to assure that (a) it has a sufficient number of
authorized and/or issued but not outstanding shares of Series A Preferred Stock
and Oak Tree Common Stock to issue such shares of capital stock at the times and
under the circumstances set forth in this Agreement, the Receivables Note and
the related certificate of designation pertaining as the same may be amended,
modified, supplemented, amended and restated, renewed and extended from time;
(b) it has duly reserved for issuance a sufficient number of shares of capital
stock (Series A Preferred Stock and Oak Tree Common Stock) at the times and
under the circumstances set forth in this Agreement, the Receivables Note and
the related certificate of designation; and (c) any shares of Oak Tree Common
Stock issued pursuant to this Agreement or upon conversion of the Series A
Preferred Stock shall be duly listed on or admitted for trading or quotation,
subject to due notice of issuance, on the exchange or market where shares of Oak
Tree Common Stock is at the time traded or quoted. Such action shall include,
but shall not be limited to, calling a special meeting of the stockholders of
Oak Tree to vote upon or submitting to its stockholders at an annual meeting
thereof (whichever is more expedient), a proposal to amend its certificate of
incorporation to increase the number of authorized shares of Oak Tree Common
Stock, prepare, file with the SEC and circulate to stockholders a proxy
statement, proxy cards and other proxy solicitation materials on behalf of the
management of Oak Tree to seek to obtain the requisite number of votes to assure
adoption of such proposal and convening all requisite meetings of the board of
directors of Oak Tree (or obtaining the necessary written consent of directors)
to take the necessary corporate action, authorize and direct the taking of all
actions and the expenditure of the necessary funds to permit the performance by
Oak Tree of its obligations under this covenant.
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10. 17 Amendment to Certificate of Incorporation. Oak Tree shall, not
less than 30 days prior to the Closing Date, take all action necessary to amend
its Certificate of Incorporation, in substantially the form of the amendment
attached hereto as Exhibit L, to provide for a staggered Board of Directors,
such directors to serve for staggered three (3) year terms. Effective on the
Closing Date, the Board of Directors of Oak Tree shall increase the size of the
Board and fill the vacancies created by such increase, with the appointees of
Seller Representative and as directed by Seller Representative, the effect of
which shall result in the control of the Board of Oak Tree by the appointees of
Seller Representative.
10. 18 Reimbursement of Out-of-Pocket Expenses. At or prior to the
Closing, Oak Tree shall have reimbursed Xxxxxx Xxxxxx and Xxx Xxxx for all of
the Out-of-Pocket Expenses to be reimbursed by Oak Tree pursuant to the
Indemnification and Reimbursement Agreement of even date by and among Xxx Xxxx,
Xxxxxx Xxxxxx, Oak Tree and Nevada Minerals Corp.
11
TERMINATION
11. 1 Termination. This Agreement may be terminated:
(a) By mutual written consent of Seller and Purchaser.
(b) By the Seller or the Purchaser if the Closing shall not
have been consummated by the Termination Date, or such other date mutually
agreed to in writing by the Seller and Purchaser.
(c) By Purchaser if Seller fails to deliver to Purchaser the
Schedules hereto in form and substance satisfactory to Purchaser prior to the
date on which the Seller Financials as described in Section 5.9 are delivered
hereunder.
(d) By Seller if Purchaser fails to deliver to Seller the
Schedules hereto in form and substance satisfactory to Seller prior to the date
on which the Seller Financials as described in Section 5.9 are delivered
hereunder.
11. 2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
effect and, except for a termination resulting from a breach by a party of any
of its material obligations under this Agreement, there shall be no liability or
obligation on the part of the Seller, the Stockholders or the Purchaser or their
respective officers or directors (except as set forth in Sections 10.3, 10.14,
13.11, 13.12 and 13.13 hereof, which shall survive the termination). Nothing
contained in this Section 11.2 shall relieve any party from liability for
willful breach of this Agreement that results in termination of this Agreement.
Upon request therefor, each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing same.
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12
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Acquisition Proposals" shall have the meaning set forth in Section
10.10 of this Agreement.
"Additional Shares" shall have the meaning set forth in Section 10.15
of this Agreement.
"Adjusted EBITDA for 1998" shall mean the EBITDA, as determined from
the audited financial statements of the Seller prepared by a national accounting
firm acceptable to the Purchaser, for the 12 month period ending December 31,
1998, except that the amounts comprising "Owners' Compensation" as reflected on
such audited financial statements shall be added back to the extent deducted
from the EBITDA.
"Amended and Restated Practice Management Agreement" shall have the
meaning set forth in the recitals of this Agreement.
"Assets" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Assignment of Contracts and Leases" shall have the meaning set forth
in Section 4.2(a) of this Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 2.1
of this Agreement.
"Assumption Agreement" shall have the meaning set forth in Section 2.1
of this Agreement.
"Average EBITDA" shall mean the quotient of (a) EBITDA for the Earnout
Period, divided by (b) two.
"Balance Sheet Date" shall mean December 31, 1998.
"Balance Sheets" shall have the meaning set forth in Sections 5.10 and
6.10 of this Agreement.
"Xxxx of Sale" shall have the meaning set forth in Section 4.2(a) of
this Agreement.
"Cash Purchase Price" shall have the meaning set forth in Section
3.1(b)(i) of this Agreement.
"Closing" shall have the meaning set forth in Section 4.1 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 4.1 of this
Agreement.
"Closing Price" shall mean the closing price of the Common Stock of Oak
Tree on the applicable trading day or, if the Common Stock is not traded on such
day, the closing price on the last preceding day that the Common Stock was
traded.
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"Code" shall have the meaning set forth in Section 5.18(b) of this
Agreement.
"Commitments" shall have the meaning set forth in Section 4.4 of this
Agreement.
"Disposal Period One" shall have the meaning set forth in Section
3.3(b)(i) of this Agreement.
"Disposal Period Two" shall have the meaning set forth in Section
3.3(b)(ii) of this Agreement.
"Disposed Shares One" shall have the meaning set forth in Section
3.3(b)(i) of this Agreement.
"Disposed Shares Two" shall have the meaning set forth in Section
3.3(b)(iii) of this Agreement.
"Disposal Share Three" shall have the meaning set forth in Section
3.3(c) of this Agreement.
"Dispute Report" shall have the meaning set forth in Section
3.1(b)(iii) of this Agreement.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization for the operations of the Seller.
"Earnout Period" shall mean the first full 24 months after the Closing
Date.
"Employment/Independent Contractor Agreements" shall have the meaning
set forth in Section 7.10 of this Agreement.
"Environment" shall mean soil, surface waters, groundwater, land, steam
sediments, surface or subsurface strata and ambient air.
"ERISA" shall have the meaning set forth in Section 5.18(a) of this
Agreement.
"Excess Shares" shall have the meaning set forth in Section 3.3(b)(iii)
hereof.
"Excluded Assets" shall have the meaning set forth in Section 1.2 of
this Agreement.
"Excluded Liabilities" shall have the meaning set forth in Section 2.2
of this Agreement.
"Form 8594" shall have the meaning set forth in Section 3.2 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America from time to time.
"Guaranty" shall have the meaning set forth in Section 6.26 of this
Agreement.
"Instruments of Conveyance" shall have the meaning set forth in Section
1.3 of this Agreement.
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"Investor Questionnaire" and "Investor Questionnaires" shall have the
meaning set forth in Section 7.8 of this Agreement.
"Legal Requirements" means, when described as being applicable to any
Person, any and all laws (statutory, judicial or otherwise) ordinances,
regulations, judgments, orders, directives, injunctions, writs, decrees or
awards of, and any contracts, agreements or undertakings with, any Governmental
Authority, in each case as and to the extent applicable to such Person or such
Person's business, operations or properties.
"Lessor Consents" shall have the meaning set forth in Section 4.2(e) of
this Agreement.
"Material Adverse Change" or "Material Adverse Effect" means a material
adverse change in, or the occurrence of any event which could have a material
adverse change in the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of (i)
the Seller, if such representation or statement is made with respect to the
Seller, or (ii) Oak Tree taken as a whole, if such representation or statement
is made with respect to Purchaser or Oak Tree.
"Negative Result" shall have the meaning set forth in Section
3.1(b)(ii) of this Agreement.
"Net Undisclosed Liabilities" shall mean Undisclosed Liabilities net of
the tax benefit realized by Oak Tree prior to the expiration of the thirty-month
period after the Closing Date as a result of its net operating loss attributable
to periods prior to the Closing Date.
"Note Offering" shall mean the 144A underwritten note offering or
similar financing (whether in the form of equity or debt) of approximately $100
million to be consummated simultaneous with the closing of this Agreement and
the Other Agreements.
"Oak Tree" means Oak Tree Medical Systems, Inc., a Delaware corporation
and the parent of the Purchaser.
"Oak Tree Balance Sheet Date" shall mean February 28, 1999.
"Oak Tree Common Stock" shall mean the common stock, $.01 par value, of
Oak Tree.
"Oak Tree Pension Plan" shall have the meaning set forth in Section
6.18(a) of this Agreement.
"Oak Tree Plans" shall have the meaning set forth in Section 6.18(a) of
this Agreement.
"Oak Tree Welfare Plan" shall have the meaning set forth in Section
6.18(a) of this Agreement.
"Offering Memorandum" shall have the meaning set forth in Section 10.8
of this Agreement.
"Other Agreements" shall have the meaning set forth in the recitals of
this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
42
"Permitted Exceptions" shall mean (1) Seller shall be permitted to
transfer any shares of capital stock of Oak Tree Common Stock to be issued to
the Seller (or its designees) under this Agreement in the event of a partial or
complete liquidation of the Seller following the Closing and (2) the
Stockholders shall be permitted to transfer the shares of capital stock of Oak
Tree Common Stock to be issued to the Seller (or its designees) under this
Agreement to family members or to a partnership, corporation or limited
liability company of which such Stockholder controls the equity interests have
voting or management power in such entity or to a trust in which such
Stockholder has sole or shared voting power over such shares so held; provided,
that, such transferee executes a written agreement to be bound by the terms of
this Agreement.
"Person" means an individual, association, business, entity,
corporation, partnership, joint venture, limited liability company, trust or
unincorporated organization or a government or agency or political subdivision
thereof, or other entity of whatever nature.
"Physicians" shall have the meaning set forth in the recitals of this
Agreement.
"Practices" shall have the meaning set forth in the recitals of this
Agreement.
"Price Protection Shares" shall have the meaning set forth in Section
6.26 of this Agreement.
"Price Protection Shares One" shall have the meaning set forth in
Section 3.3(b)(i) of this Agreement.
"Price Protection Shares Two" shall have the meaning set forth in
Section 3.3(b)(iii) of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 3.1(a) of
this Agreement.
"Purchase Price for EBITDA" shall have the meaning set forth in Section
3.1(a) of this Agreement.
"Purchase Price for Receivables" shall have the meaning set forth in
Section 3.1(a) of this Agreement.
"Purchaser" shall have the meaning set forth in the recitals of this
Agreement.
"Purchaser's Knowledge" means the actual knowledge of Purchaser or Oak
Tree or the officers or directors of Oak Tree or Purchaser engaged in the active
management of the business of Oak Tree or Purchaser.
"Receivables" shall have the meaning set forth in Section 1.1(d) of
this Agreement.
"Receivables Note" shall have the meaning set forth in Section 3.1(c)
of this Agreement.
"Receivables Shares" shall have the meaning set forth in Section 3.1(c)
of this Agreement.
"Receivables Shares Price" shall have the meaning set forth in Section
3.1 of this Agreement.
43
"Related Agreements" means the exhibits attached hereto to which such
Person is a party.
"Report" shall have the meaning set forth in Section 3.1(b)(iii) of
this Agreement.
"Sales Price One" shall have the meaning set forth in Section 3.3(b)(i)
of this Agreement.
"SEC" shall mean the United States Securities and Exchange Commission.
"Seller" shall have the meaning set forth in the recitals of this
Agreement.
"Seller Balance Sheet Date" shall mean June 30, 1999.
"Seller Plans" shall have the meaning set forth in Section 5.18 of this
Agreement.
"Seller Representative" shall mean Xxxxxx Xxxxxx, M.D.
"Seller Welfare Plan" shall have the meaning set forth in Section 5.18
of this Agreement.
"Seller's Knowledge" means the actual knowledge of Seller or the
Stockholders engaged in active management of the Business.
"Series A Preferred Stock" shall have the meaning set forth in Section
3.1(c) of this Agreement.
"Settlement Accountants" shall have the meaning set forth in Section
3.1(b)(iii) of this Agreement.
"Shares of Oak Tree" shall mean the shares of Oak Tree Common Stock
required to be issued to Seller or its designee pursuant to this Agreement.
"Shortfall Amount One" shall have the meaning set forth in Section
3.3(b)(i) hereof.
"Shortfall Amount Two" shall have the meaning set forth in Section
3.3(b)(iii) hereof.
"Specified Adjusted Price" means $3; provided that, in the event Oak
Tree issues shares of Oak Tree Common Stock after the date hereof and prior to
Closing Date that are not accretive to Oak Tree, the Specified Adjusted Price
shall be reduced, for each such issuance, by an amount equal to the product of
(A) a fraction, the numerator of which is the number of such shares issued by
Oak Tree and the denominator of which is the number of shares of Oak Tree Common
Stock outstanding on the date hereof, calculated on a fully diluted basis, times
(B) $3.
"Stock Purchase Price" shall have the meaning set forth in Section
3.1(b)(ii) of this Agreement.
"Stock Purchase Price Shares" shall have the meaning set forth in
Section 3.1(b)(ii) of this Agreement.
"Stockholders" shall have the meaning set forth in the recitals of this
Agreement.
"Target Companies" shall have the meaning set forth in the recitals of
this Agreement.
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"Territory" means within a five mile radius of any Practice set forth
on Schedule A or required to be set forth on Schedule A and any state in which
any such Practice is located.
"Termination Date" means March 1, 2000, provided that (i) in the event
that the Seller shall fail to cooperate with the accounting firm retained by Oak
Tree to prepare audited financial statements of the Seller for such periods as
Seller Representative and Oak Tree agree shall be required and shall not cure
such failure to cooperate within thirty days of receipt by Seller of written
notice of such failure, the Termination Date shall be extended by the number of
days after the receipt of such notice during which Seller may continue to fail
to cooperate as specified in such notice, and, (ii) in the event the financing
source for the Note Offering advises the Purchaser that such date needs to be
extended due to market conditions, the Seller and Stockholders agree to work in
good faith with the Purchaser to extend the Termination Date until market
conditions become more favorable to consummate the transactions contemplated
hereby, but in no event by more than four months.
"Third Party Claim" shall have the meaning set forth in Section 9.2(b)
of this Agreement.
"Undisclosed Liabilities" shall mean any liability or obligation of Oak
Tree or Purchaser existing on the Closing Date and not incurred in the ordinary
course of business prior to the Closing Date. For purposes of this definition,
all costs, expenses and fees relating to the transactions contemplated by this
Agreement and the Other Agreements, including but not limited to professional
and printing fees and expenses, shall not be deemed to be ordinary course of
business liabilities or obligations.
13
MISCELLANEOUS PROVISIONS
13. 1 Right of Offset. Subject to the limitations with respect to each
Stockholder's Proportionate Share, Purchaser is entitled to offset from any
payments (including without limitation the Stock Purchase Price, the Stock
Purchase Price Shares, the Net Realizable Amount, the Series A Preferred Stock,
the Receivables Shares and the Price Protection Shares One and Two), or reduce
the amount of compensation, due from Purchaser to Seller or any Stockholder the
amount of any damages, claims or costs (including the loss of revenues) incurred
by Purchaser or its affiliates resulting from the Seller's or any Stockholder's
misrepresentations or breach of warranties under this Agreement or the Seller's
or any Stockholder's breach of another agreement executed in connection herewith
(including, but not limited to, the Other Agreements to which the Seller or any
Stockholder is a party), which damages, claims or costs remain uncured for a
period of thirty (30) days following Purchaser's written notice to Seller
setting forth in reasonable detail the nature of the breach or
misrepresentation.
13. 2 Prorations. Personal property ad valorem taxes, assessments,
property insurance, utility charges, maintenance contract fees for those
maintenance contracts approved and assumed by the Purchaser, and other ordinary
and customary operating expenses incurred in the usual course of business, based
upon the actual days involved, shall be prorated as of the Closing Date. Seller
shall be responsible for all taxes and assessments, including but not limited
to, ad valorem taxes for any period prior to the Closing. All charges or amounts
payable pursuant to any contract of Seller assumed by Purchaser and utility
charges shall be determined and paid through
45
the Closing Date by Seller. To the extent that the actual amounts of such
charges, expense and income referred to in this Section are unavailable at the
Closing Date, the closing statement shall be based upon estimated amounts, and a
readjustment shall be made within twenty (20) days from the Closing Date. The
proration of both real and personal property ad valorem taxes and any
assessments shall be based upon such amounts assessed for the preceding year
with allowance made for the maximum allowable discount for early payment. If
such taxes and/or assessments for the year of Closing increase over those of the
preceding year, Seller shall pay to Purchaser a pro rata portion of such
increase, computed to the Closing Date and, conversely, if such taxes and/or
assessments for the year of Closing decrease from those of the preceding year,
Purchaser shall pay to Seller a pro rata portion of such decrease, computed to
the Closing Date. Any such payment shall be made within twenty (20) days after
notification by either party that such adjustment is necessary.
13. 3 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the Purchaser, the Seller and Stockholders with respect to any of the terms
contained herein.
13. 4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which is deemed an original and all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
13. 5 Governing Law; Jurisdiction; Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to the choice or conflict of law principles thereof, as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies. Except as otherwise expressly provided in this
Agreement, the parties to this Agreement agree that any legal action or
proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby shall be brought in any court of the State of
New York located in New York County or the United States District Court for the
Southern District of New York, and, by execution and delivery of this Agreement,
the parties hereby submit to and accept with regard to any such action or
proceeding, each for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts and waive any
objection which such party now or hereafter have to any such court as the venue
for any such proceeding on the ground that it may constitute any forum non
conveniens.
13. 6 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other would be irreparably harmed and damaged in the event any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, each of the parties
hereto agrees that the other shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court specified in Section 13.5 hereof (except as otherwise
expressly provided for in this Agreement), in addition to any other remedy to
which such party may be entitled, at law or in equity.
13. 7 Severability. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other provision
hereof.
46
13. 8 Notices. All notices and other communications hereunder shall be
given by personal delivery, by telecopy or by registered or certified mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, provided that notices of a change of address shall be effective only
upon receipt thereof):
(a) If to Purchaser, to:
c/o Oak Tree Medical Systems, Inc.
0000 Xxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: President
(b) If to the Seller, the address set forth below the
Seller's name on the signature page attached hereto, with a copy to Seller's
attorney at the address set forth on the signature pages attached hereto.
All such notices and other communications shall be deemed given or
delivered when received or when delivery thereof is refused.
13. 9 Successors and Assigns. Neither party may assign this Agreement
without the prior written consent of the other party hereto; provided, however,
Purchaser may assign this Agreement without the Seller's consent: (i) to a
parent, subsidiary or affiliate of the Purchaser, (ii) to any entity that the
Purchaser merges with or consolidates into; or (iii) to any entity to which the
Purchaser sells all or substantially all of its assets. This Agreement shall be
binding on and shall inure to the benefit of the parties to this Agreement, and
their successors and permitted assigns. Subject to the foregoing sentence, no
person or entity not a party to this Agreement shall have any right under or by
virtue of this Agreement.
13. 10 Entire Agreement. This Agreement, including without limitation
the Schedules and Exhibits hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and there are no agreements,
covenants, understandings, representations or warranties among the parties with
respect to the subject matter hereof other than those set forth or referred to
in these agreements.
13. 11 Confidentiality. The Seller and the Stockholders recognize and
acknowledge that they had in the past, currently have and in the future may
possibly have access to certain confidential information of the Purchaser that
is valuable, special and a unique asset of the Purchaser's businesses. The
Seller and the Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes available
to or known by the public generally through no fault of the Seller and the
Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided that prior to disclosing any
information pursuant to this clause (ii) the Seller and the Stockholders shall,
if possible, give prior written notice thereof to the other parties hereto and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) the Seller and the Stockholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) the Seller and the Stockholders are the sole and
exclusive owners of such confidential information as a result of the
transactions contemplated hereunder or
47
otherwise. In the event of a breach or threatened breach by the Seller and the
Stockholders of the provisions of this Section 13.11, the Purchaser shall be
entitled to an injunction restraining the Seller and the Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Purchaser from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages. The obligations of the parties under this Section 13.11 shall survive
the termination of this Agreement. The Purchaser agrees to be subject to the
same covenants and restrictions with respect to the confidential information of
the Seller through the Closing Date.
13. 12 Expenses. Each of the parties to this Agreement shall bear its
own expenses incurred in connection with the negotiation, preparation, execution
and closing of this Agreement and the transactions contemplated hereby, unless
otherwise agreed to in writing by the parties.
This Section 13.12 shall survive the termination of this Agreement.
13. 13 Attorneys' Fees. In the event that a suit for the collection of
any damages resulting from, or for the injunction of any action constituting, a
breach of any of the terms or provisions of this Agreement, then the
non-prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the prevailing party. This Section 13.13 shall
survive the termination of this Agreement.
13. 14 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference and convenience purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or the schedules. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Time shall be of the essence in this Agreement.
13. 15 Arm's Length Negotiations. Each party herein expressly
represents and warrants to all other parties hereto that: (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
48
