As filed with the Securities and Exchange Commission on October 24, 1996
Registration No. 333 - ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------
LIFE CRITICAL CARE CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 7352 52-0980785
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
3333 W. Commercial Blvd., Suite 203
Fort Lauderdale, Florida 33309
(954) 486-0424
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Thomas H. White
Chief Executive Officer
3333 W. Commercial Blvd., Suite 203
Fort Lauderdale, Florida 33309
(954) 486-0424
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
George S. Lawler, Esquire David S. Rosenthal, Esquire
Whiteford, Taylor & Preston L.L.P. Shereff, Friedman, Hoffman & Goodman, LLP
210 West Pennsylvania Avenue 919 Third Avenue
Towson, Maryland 21204-4515 New York, New York 10022
(410) 832-2000 (212) 758-9500
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, check the following box.
CALCULATION OF REGISTRATION FEE
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<CAPTION>
- ---------------------------------------- -------------------- ------------------ ---------------------- ----------------
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount To Be Offering Price Per Aggregate Offering Registration
Securities To Be Registered Registered Share (1) Price (1) Fee
- ---------------------------------------- -------------------- ------------------ ---------------------- ----------------
<S> <C>
Common Stock, $0.01 par value . . . . . 2,300,000 (2) $5.50 $12,650,000.00 $3,834.00
- ---------------------------------------- -------------------- ------------------ ---------------------- ----------------
Underwriter Warrants (3). . . . . . . . 200,000 $.000025 $ 5.00 n.a.
- ---------------------------------------- -------------------- ------------------ ---------------------- ----------------
Common Stock, $0.01 par value(4) . . . 200,000 $6.60 $ 1,320,000.00 $ 400.00
_________
$4,234.00
- ---------------------------------------- -------------------- ------------------ ---------------------- ----------------
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 300,000 shares of Common Stock to be used by the Underwriter to
cover over-allotments, if any.
(3) To be sold to the Underwriter by the Company. No registration fee is
included pursuant to Rule 457(g).
(4) Issuable upon exercise of the Underwriter Warrants. Pursuant to Rule 416,
also includes such presently indeterminable number of additional shares
of Common Stock as may be issuable under certain anti-dilution provisions
of the Underwriter Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS 2,000,000 Shares SUBJECT TO COMPLETION
________________, 1996
LIFE CRITICAL CARE CORPORATION
Common Stock
All of the shares of common stock, par value $.01 per share (the
"Common Stock"), offered hereby (the "Offering") are being issued and sold by
Life Critical Care Corporation (the "Company" or "Life Critical Care").
Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
$5.50 per share. For information relating to the factors considered in
determining the initial public offering price, see "Underwriting." The Company
has applied to have the Common Stock approved for quotation on the Nasdaq
National Market under the trading symbol "LCCC."
See "Risk Factors" beginning on page nine hereof for a discussion of
certain factors that should be considered by prospective purchasers of the
Common Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================================
Underwriting
Price to Public Discounts and Proceeds to
Commissions(1) the Company(2)
<S> <C>
- ---------------------------------------------- -------------------------- ----------------------- --------------------
Per Share................................. $____ $____ $____
- ---------------------------------------------- -------------------------- ----------------------- --------------------
Total(3).................................. $____ $____ $____
======================================================================================================================
</TABLE>
(1) Does not include a 3.0% non-accountable expense allowance payable
to H. J. Meyers & Co., Inc. (the "Underwriter") and warrants to
purchase 200,000 shares of Common Stock issuable to the Underwriter
(the "Underwriter Warrants"). The Company has agreed to indemnify the
Underwriter against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
See "Underwriting."
(2) Before deducting expenses in connection with the Offering, estimated at
$1,010,000 including the non-accountable expense allowance of $330,000, or
$379,500 if the Underwriter's over-allotment option is exercised in full,
payable by the Company.
(3) The Company and certain selling stockholders (the "Selling Stockholders")
have granted to the Underwriter an option, exercisable within 30 days of
the date of this Prospectus, to purchase up to 300,000 additional shares
of Common Stock on the same terms as set forth above, solely to cover
over-allotments. If this option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to the Company
and Proceeds to the Selling Stockholders will be $___________,
$___________, $___________ and $___________, respectively. See
"Underwriting."
The shares of Common Stock offered hereby are being offered by the
Underwriter when, as and if delivered to and accepted by the Underwriter,
subject to prior sale and acceptance by the Underwriter and subject to its right
to withdraw, cancel, modify or reject any order in whole or in part. It is
expected that delivery of the Common Stock will be made at the offices of H. J.
Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620.
H. J. MEYERS & CO., INC.
The date of this Prospectus is ____________, 1996.
<PAGE>
[MAP]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish to its stockholders annual reports containing
consolidated audited financial statements and quarterly reports containing
consolidated unaudited financial information for the first three fiscal quarters
of each fiscal year.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Simultaneously with the closing of the Offering, Life Critical
Care will acquire, in separate transactions (the "Acquisitions") in exchange for
cash and shares of its Common Stock, substantially all of the assets of three
home health care companies (each an "Acquired Company" and collectively the
"Acquired Companies"). The completion of the Acquisitions and the closing of the
Credit Facility (defined below) are conditions to the consummation of the
Offering. Unless otherwise indicated, references to the Company assume
completion of the Acquisitions and include the operations of the Acquired
Companies. Except as otherwise indicated, all information in this Prospectus
assumes no exercise of the Underwriter's over-allotment option and has been
adjusted to reflect the occurrence of the following transactions on or before
the consummation of the Offering: (i) the issuance of 771,875 shares of Common
Stock as part of the consideration for the Acquisitions, (ii) the amendment to
the Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") increasing the number of authorized shares of Common Stock to
10,000,000 and (iii) a 1,110-for-one stock split of the Company's Common Stock.
When used herein, the term "Offering Price" means $5.50 per share of Common
Stock.
THE COMPANY
Life Critical Care is a provider of home health care products and
services in the Northern Midwest region of the United States. Life Critical Care
provides a wide range of home health care products and services, including
respiratory therapy services and home medical equipment sales and rentals. The
Company operates from a total of 21 locations in Michigan and Wisconsin. The
Company believes that the Midwest region offers significant growth opportunities
due to the fragmentation of the home health market in the region. The Company's
objective is to become a leading comprehensive provider of home health care
products and services in the Midwest through acquisitions, internal growth and
the development of provider networks and strategic alliances with other home
health care providers.
Life Critical Care was founded in June 1995. Although it has conducted
no operations to date, Life Critical Care has entered into definitive agreements
to acquire, simultaneously with the closing of the Offering, substantially all
of the assets of the following three home health care companies: (i) Blue Water
Medical Supply, Inc. and Blue Water Industrial Products, Inc. (collectively,
"Blue Water"); (ii) Great Lakes Home Medical, Inc. ("Great Lakes"); and (iii)
ABC Medical Supply, Inc. ("ABC") (collectively, the "Acquired Companies"). The
pro forma consolidated revenues of the Acquired Companies was approximately
$11.5 million and $5.9 million for the year ended December 31, 1995 and the six
months ended June 30, 1996, respectively. The Acquired Companies will be
purchased for a combination of Common Stock and cash provided by the net
proceeds of the Offering to the Company and proceeds from a bank credit facility
(the "Credit Facility").
The home health care industry includes the provision of respiratory and
infusion therapy services in the home, nursing services and the sale or rental
of medical equipment and supplies for use in the home. Home health care is among
the fastest growing segments of the health care industry, with total
expenditures in 1995 estimated to be approximately $27.0 billion. The underlying
growth factors in the home health care industry include the following:
2
<PAGE>
(i) the cost-effective nature of home care compared to hospital care; (ii)
demographic trends toward an aging population; (iii) technological advances that
expand the range of home health procedures; and (iv) patient preference for
treatment in the home.
Historically, the home health care industry has been highly fragmented
and largely characterized by local providers serving discrete geographic areas
and offering a limited range of services. These providers often do not have the
capital necessary to expand their operations or the range of services offered,
which limits their ability to compete for referrals and to realize efficiencies
in their operations. Payors are increasingly seeking home health care providers
that offer a cost-effective, comprehensive range of services, which further
limits the ability of local providers to compete. As a result of these economic
and competitive pressures, and an increasing regulatory burden, the home health
care industry is undergoing rapid consolidation, a trend the Company expects to
continue.
The Company has developed the following strategy in order to achieve
its goal of becoming a leading comprehensive provider of home health care
products and services in the Midwest.
o Expanding through Acquisitions. The Company intends to pursue an
aggressive acquisition strategy. In existing markets, the Company will seek
acquisitions that increase market share and broaden the range of products
and services provided by the Company in those markets. In new geographic
markets, the Company will target established Midwestern home health care
providers that are either leaders in their geographic markets or provide
other strategic advantages to the Company.
o Accelerating Internal Growth. A key component of the Company's strategy is
to accelerate internal growth at each Acquired Company and each
subsequently acquired home health care business by expanding existing
product and service offerings. The Company intends to expand its
respiratory services operations and add infusion therapy and nursing
services at selected locations. The expansion of these products and
services may be accomplished through provider networks or strategic
alliances with other home health care companies. The Company also intends
to enhance its sales and marketing efforts by developing programs targeted
at each of the major referral sources.
o Capitalizing on New Management and Corporate Structure. The Company is
assembling a professional management team with extensive experience in the
home health care industry. The Company's new management team intends to
position the Company to take advantage of the growth opportunities
presented by industry consolidation. In addition, the new corporate
structure will allow the consolidation of administrative functions of the
Acquired Companies such as reimbursement, billing and collection,
purchasing, management information and accounting systems and the
improvement of operating efficiencies through the elimination of redundant
facilities and equipment. The Company also believes that it will have
greater purchasing power in such areas as supplies, inventory, equipment
and insurance and better access to capital than the Acquired Companies had
independently.
3
<PAGE>
THE OFFERING
Common Stock offered by the Company................. 2,000,000 shares(1)
Common Stock to be outstanding after the Offering... 4,000,000 shares(2)
Use of proceeds..................................... To pay a part of the
cash portion of
the purchase price
for the Acquired
Companies and repay
indebtedness. See
"Use of Proceeds."
Proposed NASDAQ Symbol............................. LCCC
- ------------------
(1) Includes 600,000 shares held by founding stockholders and
management that are prohibited from being transfered prior to
December 2004 unless and until the Company satisfies certain
earnings performance criteria. See "Shares Eligible for Future Sale."
(2) Excludes (i) 350,000 shares of Common Stock reserved for issuance upon
the exercise of stock options outstanding under the Company's 1996
Stock and Incentive Plan (the "1996 Plan") , none of which will vest
until December 2004 unless the Company satisfies certain earnings
performance criteria and (ii) 200,000 shares issuable upon exercise of
the Underwriter Warrants. See "Management -- Board of Directors," " --
1996 Plan," "Shares Eligible for Future Sale" and "Underwriting."
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk,
including those discussed under "Risk Factors."
4
<PAGE>
SUMMARY FINANCIAL DATA
Life Critical Care will acquire the Acquired Companies simultaneously
with the closing of the Offering. The following table presents summary
historical financial data for each of the Acquired Companies and Life Critical
Care Corporation, as well as unaudited summary pro forma consolidated financial
data. The historical financial data below are derived from and should be read in
conjunction with the historical financial statements included elsewhere in this
Prospectus. The pro forma consolidated financial data below give effect to the
Acquisitions as if they had occurred as of the beginning of the periods
presented. During the periods presented, the Acquired Companies were not under
common control or common management. Therefore, the unaudited pro forma
consolidated financial data presented may not be indicative of the future
results of operations or financial condition of the Company or the results which
would have occurred had the Acquired Companies been consolidated during the
periods presented. See the Unaudited Condensed Consolidated Pro Forma Financial
Statements included elsewhere in this Prospectus.
Year Ended Six Months
December 31, Ended
1995 June 30, 1996
------------- -------------
Life Critical Care Pro Forma Consolidated
Financial Data(1)
Pro Forma Consolidated Statement of
Operations Data:
Pro forma revenues....................... $11,477,572 $5,888,857
Pro forma income from operations......... 2,625,821 1,307,617
Pro forma net income..................... 1,029,844 523,264
Pro forma net income per share........... $ 0.29 $ 0.13
Pro forma weighted average shares(2)..... 3,592,267 3,921,870
June 30, 1996
Pro Forma
As Adjusted (3)
---------------
Pro Forma Consolidated Balance Sheet Data:
Working capital (deficit)................ $ 2,596,332
Total assets............................. 20,845,913
Total debt, including current portion.... 8,056,037
Stockholders' equity (deficit)........... 12,188,678
5
<PAGE>
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
------------------------- -------------------------
1994 1995 1995 1996
------- -------- -------- ------
<S> <C>
Historical Financial Data
Blue Water:
Revenues............................. $4,773,100 $5,289,682 $2,574,797 $2,841,106
Income from operations............... 517,788 677,905 317,253 558,478
Net income........................... 459,334 623,774 295,442 516,294
Great Lakes:
Revenues............................. $2,672,078 $3,229,062 $1,612,941 $1,569,181
Income from operations............... 440,673 1,196,959 584,704 468,722
Net income........................... 413,576 1,142,258 572,492 438,722
ABC:
Revenues............................. $2,602,203 $2,958,828 $1,460,272 $1,478,570
Income (loss) from operations....... (485) 359,243 174,440 213,838
Net income (loss).................... (11,211) 358,156 173,553 214,822
<CAPTION>
June 19, 1995
(Inception) to Six Months
December 31, 1995 Ended June 30, 1996
----------------- ------------------------
Life Critical Care:
Operating expenses:
General and administrative.. $ 20,049 $ 135,814
Management fee.............. 225,000 90,000
Professional fees........... 10,259 57,409
------------- --------------
Operating loss..................... (255,308) (283,223)
Interest expense................... 12,618 108,193
------------- --------------
Net loss........................... $ (267,926) $ (391,416)
============= ==============
</TABLE>
- -----------------------------------
(1) See Unaudited Condensed Consolidated Pro Forma Financial Statements for a
discussion of the pro forma adjustments.
(2) Excludes shares reserved for issuance pursuant to the Company's stock
option plans.
(3) Gives effect to (i) the Acquisitions using the purchase method of
accounting as if they occurred on June 30, 1996, (ii) the issuance of
771,875 shares of Common Stock to the sellers of the Acquired Companies,
(iii) the incurrence of indebtedness under the September Bridge (as
defined) and (iv) the incurrence of indebtedness under the Credit Facility,
as adjusted for the sale of the 2,000,000 shares of Common Stock offered
hereby at the Offering Price and the application of the net proceeds
therefrom.
6
<PAGE>
THE COMPANY
Although the Company has conducted no operations to date, the Company
has executed definitive agreements to acquire, simultaneously with the
consummation of the Offering, the Acquired Companies. Set forth below is certain
information with respect to each of the Acquired Companies.
Blue Water Medical Supply, Inc. and Blue Water Industrial Products, Inc.
Blue Water, based in New Baltimore, Michigan, provides respiratory
therapy and home medical equipment and supplies to customers in Southeastern
Michigan, including the Detroit metropolitan area. Blue Water also supplies
industrial gases to medical offices and other customers. Blue Water received
accreditation from The Joint Commission on the Accreditation of Healthcare
Organizations ("JCAHO") in 1993 and has been in business for over 30 years. Blue
Water has two locations and 42 employees.
Great Lakes Home Medical, Inc.
Great Lakes, based in Escanaba, Michigan, provides respiratory therapy
and home medical equipment and supplies to customers in the upper peninsula area
of Michigan and Northern Wisconsin. The Company intends to apply for JCAHO
accreditation for Great Lakes following the Offering. Great Lakes has been in
business for over 9 years and has 7 locations and 43 employees serving mostly
non-urban areas.
ABC Medical Supply, Inc.
ABC, based in West Branch, Michigan, provides respiratory therapy and
home medical equipment and supplies to customers in Central and Northern
Michigan. ABC has a total of 12 locations and 38 employees, serving mostly
non-urban areas, and received its JCAHO accreditation in 1994.
-----------------
The consideration to be paid by Life Critical Care to complete the
Acquisitions consists of approximately $14.0 million in cash and 771,875 shares
of Common Stock, subject to certain adjustments. The consideration was
determined by negotiations between Life Critical Care and the sellers of each of
the Acquired Companies, based primarily on the results of operations and
financial condition of each Acquired Company, as well as strategic
considerations.
7
<PAGE>
The following table sets forth the consideration being paid for each
Acquired Company:
<TABLE>
<CAPTION>
Common Stock
------------ Total
Cash Shares(#) Value (1) Consideration
------------ --------- ------------ -------------
<S> <C>
Blue Water(2)..... $ 5,494,500 122,100 $ 671,550 $ 6,166,050
ABC............... 3,700,000 327,275 1,800,000 5,500,000
Great Lakes(3).... 4,837,500 322,500 1,773,750 6,611,250
----------- ------- --------- -----------
Total........ $14,032,000 771,875 $4,245,300 $18,277,300
=========== ======= ========== ===========
</TABLE>
- ----------------------
(1) Represents the cash value of the shares of Common Stock issued as
consideration based upon the Offering Price.
(2) The purchase price for Blue Water is $6,105,000, payable 90% in cash and
10% in Common Stock valued at 90% of the Offering Price. The Company may be
required to issue Common Stock with a value of up to $201,465 in the event
the average closing prices of the Common Stock for the ten business days
ending with the second anniversary of closing decline by at least 15% from
the Offering Price.
(3) The purchase price for Great Lakes is $6,450,000, payable 75% in cash
and 25% in Common Stock valued at 91% of the Offering Price.
______________
The Company was incorporated in Delaware in June 1995. The Company's
executive offices will be located at the headquarters of Blue Water Medical
Supply, 37885 Green Street, New Baltimore, Michigan 48047, following
consummation of the Offering. The Company's executive offices are currently
located at 3333 West Commercial Blvd., Suite 203, Fort Lauderdale, Florida
33309, and its telephone number is 954-486-0424.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
before making an investment in the Common Stock offered hereby.
Lack of Combined Operating History. The Company has no independent
operating history. Although the Acquired Companies each have a substantial
operating history on an individual basis, they have not been operated as a
consolidated entity. Accordingly, the Company's prospects cannot be evaluated
solely based on the history of the Acquired Companies and should be evaluated in
light of the uncertainties and risks related to the Company's ability to
successfully integrate the Acquired Companies, to recognize operational and
administrative efficiencies in delivering products and services and to expand
operations and enhance its ability to compete for referrals. The Company's
management group has been assembled only recently and there can be no assurance
that the management group will be able to effectively manage the consolidated
entity or effectively implement the Company's strategy, including the objective
of becoming a leading provider of comprehensive home health care. There can be
no assurance that the Company will succeed in addressing any or all of these
risks. The failure to do so could have a material adverse effect on the
Company's business, results of operations and financial condition.
Acquisition Strategy. The Company will consummate the Acquisitions
simultaneously with the consummation of the Offering. The Company intends to
expand its business through selective acquisitions of other established home
health care companies. There can be no assurance, however, that the Company will
be able to successfully integrate or retain key personnel of the Acquired
Companies or of future acquisitions. There also can be no assurance that the
Company will not incur disruptions and unexpected expenses or experience reduced
revenues in integrating the Acquired Companies or future acquisitions.
Competition for acquisition candidates exists and may intensify, in which event
there may be fewer acquisition opportunities, as well as higher acquisition
prices. Many of the competitors for such acquisitions have greater financial and
operational resources than Life Critical Care. Furthermore, the process of
identifying, evaluating, negotiating and integrating acquisitions may divert
management time and resources away from current operations. There can be no
assurance that any given acquisition, when consummated, will not materially
adversely affect the Company's business, results of operations or financial
condition.
Acquisition Financing. The Company currently anticipates that a
substantial portion of the consideration for future acquisitions will consist of
cash and that the Company will be required to utilize borrowings, if available,
to pursue its acquisition program. The Company has limited cash resources and
borrowing capacity which may be insufficient to allow the Company to pursue its
acquisition program. In addition, the Credit Facility contains financial
covenants and other terms which may restrict the Company's ability to borrow.
There can be no assurance that the Company will be able to obtain financing for
its acquisition program on terms the Company deems acceptable or at all. See
"--Future Capital Needs; Uncertainty of Additional Financing" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
9
<PAGE>
Dependence on Reimbursement by Third-Party Payors. The Company is
dependent on third-party payors for a majority of its revenues. Medicare,
Medicaid and other payors, such as managed care organizations (including health
maintenance organizations ("HMOs") and preferred provider organizations
("PPOs")), traditional indemnity insurers and third-party administrators
("TPAs") are increasing pressures both to control health care utilization and to
limit reimbursement. Since substantially all of the Company's revenues will be
attributable to payments received from Medicare and a limited number of other
payor categories, the level of revenues and profitability of the Company will be
subject to the effect of possible changes in the mix of the Company's patients
among Medicare, Medicaid and third-party payor categories, increases in case
management and review of services or reductions in coverage or reimbursement
rates by such payors. Such changes could have a material adverse effect on the
Company's business, results of operations or financial condition. See
"Business--Reimbursement, Billing and Collection" and "--Regulation."
Medicare Reimbursement. The Federal government is considering
significant reductions in planned Medicare spending. The Senate and the House of
Representatives have passed budget resolutions calling for reductions of up to
$270 billion in forecasted Medicare expenditures over the next seven years. No
specific measures for achieving such reductions have been adopted, but
Congressional proposals include reductions in oxygen reimbursement rates of up
to 20% and a prohibition on increases in reimbursement rates for a seven year
period. In August 1996, the Health Care Financing Administration ("HCFA"), which
regulates the Medicare and Medicaid programs, issued a notice proposing a 40%
reduction in oxygen reimbursement rates. This proposed reduction must be
approved by the Clinton Administration, which has not taken any action on the
proposal. If approved, the reduction would significantly decrease the Company's
revenues from its respiratory therapy services, which represented approximately
68.0% of the Company's pro forma consolidated revenues during 1995 and the six
months ended June 30, 1996. Another proposal would change Medicare reimbursement
for skilled nursing, rehabilitation services and the first 60 days of home
health care services by "bundling" payments for these services into a single
prospective payment to hospitals to cover "post-acute" care for beneficiaries
who are discharged from a hospital. The adoption of any or all of such proposals
could have a material adverse effect on the Company's business, results of
operations or financial condition. See "Business -- Regulation."
Reimbursement Payment Delays. The Company generally is paid for its
services by government health administration authorities, insurance companies,
or other third party payors, not by the patients themselves. The home health
care industry is generally characterized by long collection cycles for accounts
receivable due to the complex and time consuming requirements for obtaining
reimbursement from private and governmental third party payors. In addition,
reimbursement from government payors is subject to examination and retroactive
adjustment. Such delays or retroactive adjustments could lead to cash shortages,
which may require the Company to borrow funds, issue equity securities or take
other action to meet its ongoing obligations. The Company would be adversely
affected if it were to experience such difficulties and were unable to obtain
funds on acceptable terms to meet possible cash shortages. See "Business --
Reimbursement, Billing and Collection" and "-- Regulation."
10
<PAGE>
Health Care Reform. The health care industry is subject to changing
political, economic and regulatory influences that may affect the procurement
practices and operation of health care industry participants. Changes in the law
or new interpretations of existing laws may have a dramatic effect on the
definition of permissible or impermissible activities, the relative costs
associated with doing business and the amount of payment for medical care by
both governmental and other payors. In addition, numerous health care reform
proposals have been formulated by the current administration, members of
Congress and state legislators. Recent legislation that will become effective on
December 1, 1996 imposes reductions in reimbursement rates and delivery
restrictions for aerosol medications. Government officials can be expected to
continue to review and assess alternative health care delivery systems and
payment methodologies, and public debate of these issues can be expected to
continue in the future. The adoption of reforms or alternative delivery systems
could have a material adverse effect on the Company's business, results of
operations or financial condition. See "Business -- Regulation."
Regulatory Environment. As a provider of services under the Medicare
and Medicaid programs, the Company is subject to strict laws at both the federal
and state levels which provide for civil and criminal penalties, loss of
licensure and exclusion from participation in the Medicare and Medicaid
programs. As a result of the Acquisitions, the Medicare participation agreements
of the Acquired Companies will automatically be assigned to the Company. The
federal government, private insurers and various state enforcement agencies have
increased their scrutiny of provider business practices and claims, particularly
in the area of home health care and durable medical equipment, in an effort to
identify and prosecute fraudulent and abusive practices. While the Company
believes that the Acquired Companies are in material compliance with such laws,
there can be no assurance that the practices of the Company, if reviewed, would
be found to be in full compliance with such laws, as such laws ultimately may be
interpreted. In addition, the federal government and individual states regulate
various aspects of the home health care industry. Such regulations include
federal and state laws covering the dispensing of drugs and the operation of
pharmacies, as well as state laws which impose licensure requirements on home
health care agencies and on certain types of health care practitioners employed
by the Company. The failure to obtain, renew or maintain any of the required
federal, state or local regulatory certifications, approvals or licenses could
have a material adverse affect on the Company. There can be no assurance that
either the Federal government or the states will not impose additional
regulations which would adversely affect the Company's business, results of
operations or financial condition. See "Business -- Regulation."
Dependence on Relationships with Referral Sources. The growth and
profitability of the Company depend on its ability to establish and maintain
close working relationships with referral sources, including payors, hospitals,
physicians and other health care professionals. Hospitals, physicians and
managed care organizations, which are exerting an increasing amount of influence
over the health care industry, have been consolidating to enhance their ability
to impact the delivery of health care services. There can be no assurance that
the Company will be able to successfully maintain existing referral sources or
develop and maintain new referral sources, or that some of its referral sources
will not become competing providers of home health care services. The loss of
any significant number of existing referral sources or the failure to develop
new referral sources could have a material adverse effect on the Company's
business, results of operations or financial condition. The Company's
11
<PAGE>
relationships with existing and potential referral sources also could be
adversely affected by a loss of JCAHO accreditation or by the inability of the
Company to obtain JCAHO accreditation. The Acquired Companies are subject to
periodic resurveys by JCAHO, and there can be no assurance that a renewal of
accreditation will be forthcoming. See "Business -- Operations -- Sales and
Marketing."
Substantial Indebtedness. Upon consummation of the Offering, the
Company's sources of liquidity will consist of cash and cash equivalents and
amounts available under the line of credit portion of the Credit Facility, as
well as funds generated from operations. The Company will have only
approximately $245,000 in cash and cash equivalents and will be required to make
substantial principal and interest payments under the Credit Facility. Payments
of principal and interest will have to be made with respect to such borrowings
regardless of the Company's operating results. Because a substantial portion of
the Company's operating cash flow will be required to be utilized to service the
indebtedness under the Credit Facility, the working capital available to the
Company to capitalize on business opportunities and to pursue all elements of
its growth strategy will be limited. In addition, the credit agreement relating
to the Credit Facility contains customary representations, warranties and
covenants, as well as prohibitions against the incurrence of other indebtedness
without the consent of the lender under certain circumstances. The Company's
obligations under the Credit Facility are secured by a pledge of substantially
all of the assets of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Future Capital Needs; Uncertainty of Additional Financing. The Company
may need to raise additional funds to meet its working capital needs, develop
new or enhanced services, respond to competitive pressures, acquire
complementary businesses or upgrade management information systems. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the existing stockholders of the Company will be
reduced, stockholders may experience additional dilution, or such equity
securities may have rights, preferences or privileges senior to those of the
holders of the Company's Common Stock. There can be no assurance that additional
financing will be available when needed on terms favorable to the Company or at
all. The inability of the Company to obtain additional financing on acceptable
terms could have a material adverse effect on the Company's business, financial
condition or operating results. In addition, the Company has agreed that it will
not sell any securities (except upon the exercise of outstanding options,
warrants or rights) for a period of 12 months from the date of this Prospectus,
without the Underwriter's prior written consent. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Underwriting."
Current Geographic Concentration. Substantially all of the Company's
pro forma consolidated net revenues has been derived from operations in Michigan
and Wisconsin. Unless and until the Company's operations become more diversified
geographically (as a result of acquisitions or internal expansion), adverse
economic, regulatory, or other developments in the foregoing states could have a
material adverse effect on the Company. See "Business -- Regulation."
Expansion into New Geographic Markets. In pursuing its growth strategy,
the Company may expand its presence into new geographic markets. When entering
new geographic
12
<PAGE>
markets, the Company will need to establish relationships with additional
referral sources and will be reliant on local management, who have important
relationships with local referral sources. In addition, the Company will be
required to comply with laws and regulations of states that could differ from
those in which the Company currently operates, and may face competitors with
greater knowledge of such local markets. There can be no assurance that the
Company will be able to maintain existing or establish new referral sources,
develop efficient business operations or otherwise establish a presence in these
new geographic markets. See "Business--Business Strategy."
Dependence on Key Management and Health Care Professionals. The
Company's success will be highly dependent on Thomas H. White, its Chief
Executive Officer, and a number of its other key management and health care
professionals. The loss of one or more of these personnel could have a material
adverse effect on the Company. The Company has entered into an employment
agreement with Mr. White; however, the Company does not have similar
arrangements with its other key management personnel. The Company intends to
obtain a $1 million key man life insurance policy on Mr. White, which will be
assigned to the Bank (as defined) under the Credit Facility. The Company's
success will also depend in part on its ability to attract and retain additional
qualified management and health care professionals. Competition for such
personnel in the health care industry is strong. There can be no assurance that
the Company will be successful in attracting or retaining the personnel it
requires. See "Business--Employees" and "Management."
Competition. The home health care industry is highly competitive and
includes a large number of providers. The Company competes with major national
and regional companies, hospital-based provider programs as well as local
providers. Some current and potential competitors have or may obtain
significantly greater financial and marketing resources than the Company. In
addition, compared to other health care markets, relatively few barriers to
entry exist in the home health care industry. Other companies, including
manufacturers and suppliers of home health care equipment, managed care
organizations, hospitals and other health care providers and provider groups
that currently are not serving the home health care market, may become
competitors. To the extent that these companies enter the home health care
market, the Company may also lose existing and potential referral sources. As a
result, there can be no assurance that the Company will not encounter increased
competition in the future that may limit its ability to maintain or increase its
market share or otherwise materially adversely affect its business, results of
operations or financial condition. See "Business--Competition."
Potential Liability. Participants in the home health care market,
including the Company, are sometimes the subject of lawsuits alleging
negligence, product liability and other legal theories, many of which involve
large claims and significant defense costs. The Company also distributes
industrial gas products, such as acetylene, which have been the subject of
lawsuits arising from industrial and other accidents. Although the Acquired
Companies currently maintain liability insurance, there can be no assurance that
the coverage limits of such insurance policies will be adequate or that such
claims will be covered by insurance. While the Acquired Companies have been able
to obtain liability insurance in the past, such insurance varies in cost, may be
difficult to obtain and may not be available in the future on terms acceptable
to the Company. Claims, regardless of their merit or eventual outcome, may have
a
13
<PAGE>
material adverse effect on the Company's business, results of operations or
financial condition. See "Business--Insurance."
Concentration of Stock Ownership. Upon the completion of the Offering,
the Company's directors, executive officers and founding stockholders will
beneficially own approximately 37.0% of the outstanding Common Stock. As a
result, assuming they act collectively, these stockholders will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such concentration of ownership may also have the effect of
preventing or deterring a change in control of the Company. See "Management --
Executive Officers and Directors" and "Principal Stockholders."
No Prior Public Market; Possible Volatility of Stock Price. Prior to
the Offering, there has been no market for the Company's Common Stock, and there
can be no assurance that an active public market for the Common Stock will
develop or be sustained after the Offering. The initial offering price will be
determined by negotiation between the Company and the Underwriters based upon
several factors. The market price of the Company's Common Stock is likely to be
highly volatile and could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements related to acquisitions
or products or services offered by the Company or its competitors, changes in
financial estimates by securities analysts, or other events or factors, many of
which are beyond the Company's control. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many health care companies
and that often have been unrelated to the operating performance of such
companies. These broad market fluctuations may adversely affect the market price
of the Company's Common Stock.
Possible Illiquidity of Trading Market; Penny Stock. The Company has
filed an application to have the shares of Common Stock included for quotation
on the Nasdaq National Market upon completion of the Offering. However, there
can be no assurance that the Common Stock will qualify for quotation on the
Nasdaq National Market. If the Common Stock is not accepted for quotation on the
Nasdaq National Market, the Company will apply for quotation on the Nasdaq
Small-Cap Market, which is a less liquid market than the Nasdaq National Market.
In addition, if the Company's Common Stock were removed from quotation on either
Nasdaq market, the Common Stock could be subject to so-called "penny stock"
rules that impose additional sales practice and market-making requirements on
broker-dealers who sell and/or make a market in such securities. Consequently,
removal from the Nasdaq market, if it were to occur, could affect the ability or
willingness of broker-dealers to sell and/or make a market in the Company's
Common Stock and the ability of purchasers of the Company's Common Stock to sell
their securities in the secondary market. In addition, if the market price of
the Company's Common Stock is less than $5.00 per share, the Company may become
subject to certain penny stock rules even if still quoted on the Nasdaq National
Market or Nasdaq Small-Cap Market. While such penny stock rules should not
affect the quotation of the Company's Common Stock on either Nasdaq market, such
rules may further limit the market liquidity of the Common Stock and the ability
for purchasers in the Offering to sell such Common Stock in the secondary
market.
Shares Eligible for Future Sale. Sales of substantial numbers of shares
of Common Stock in the public market following the Offering could adversely
affect the market price for the
14
<PAGE>
Common Stock. Upon completion of the Offering, the Company will have outstanding
an aggregate of 4,000,000 shares of Common Stock (4,250,000 shares of Common
Stock if the Underwriter's over-allotment option is exercised in full). Of these
shares, all of the shares sold in the Offering will be freely tradable without
restriction except for shares purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act. The remaining 2,000,000
shares of Common Stock and shares underlying outstanding warrants are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Restricted Shares"). Restricted Shares may only be sold pursuant to a
registration statement under the Securities Act or an applicable exemption from
the registration requirements of the Securities Act, including Rule 144
thereunder. In addition, a total of 600,000 Restricted Shares are subject to a
performance earn-out restricting their sale prior to December 2005 unless and
until the Company meets certain earnings per share thresholds. Subject to
meeting the terms of the performance earn-out, approximately 260,485 shares will
be eligible for sale in the public market (subject to certain volume
limitations) upon expiration of the lock-up agreement 18 months after the date
of this Prospectus and the remainder of the Restricted Shares will be eligible
for sale from time to time thereafter upon expiration of their respective
two-year holding periods. Any shares subject to the lock-up agreements may be
released at any time without notice by the Underwriter. In addition, beneficial
owners of 1,035,875 shares of Common Stock and the Underwriter with respect to
the Underwriter Warrants have registration rights. See "Description of Capital
Stock -- Registration Rights." Moreover, the Company intends to register under
the Securities Act a total of 600,000 shares of Common Stock reserved for
issuance under the 1996 Plan and the Non-Employee Directors Stock Option Plan
(the "Directors Option Plan"). See "Shares Eligible for Future Sale" and
"Underwriting."
Dilutive Effect of the Offering. Purchasers of the Common Stock
in the Offering will experience immediate and significant dilution of
approximately $6.42 in the pro forma consolidated net book value per share of
the Common Stock so purchased, based on the Offering Price. This will result
in the existing stockholders of the Company realizing an immediate accretion in
the net tangible book value of their investment. See "Dilution."
Dividends. The Company intends to retain its earnings to support
the growth and development of its business and has no present intention of
paying any cash dividends on the Common Stock in the foreseeable future.
See "Dividend Policy."
Potential Effect of Anti-Takeover Provisions. The Company's Board of
Directors has the authority to issue shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions of those shares
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue shares of preferred stock. Furthermore, the Company's
Certificate of Incorporation and Amended and Restated Bylaws provide that the
Board of Directors may take certain actions without stockholder approval, such
as establishing a staggered board of directors or limiting stockholder actions
and proposals, which actions may have the effect of discouraging, delaying or
preventing a merger, tender offer or proxy contest.
15
<PAGE>
Such actions could adversely affect the market price of the Common Stock. See
"Management" and "Description of Capital Stock."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares
of Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated Offering expenses, will be approximately
$9.0 million ($10.2 million if the Underwriter's over-allotment option is
exercised in full). The net proceeds of the Offering, together with proceeds of
the Credit Facility, will be used to (i) fund the cash portion of the purchase
price for the Acquired Companies (approximately $14.0 million), (ii) repay $2.0
million in bridge loans (and interest thereon) made to the Company by Morgenthau
Bridge Investment LP ("Bridge LP") and Morgenthau Bridge Loan LLC ("Bridge LLC")
(together, the "Morgenthau Bridge Funds") and by certain investors (the
"September Bridge," together with the loans made by the Morgenthau Bridge Funds,
the "Bridge Financing") (the Morgenthau Bridge Funds and the September Bridge
are sometimes referred to collectively as the "Bridge Funds") and (iii) repay
approximately $390,000 in Acquisition and other expenses not paid out of the
proceeds of the Bridge Financing. The Bridge Financing has been used to fund
deposits to the sellers of the Acquired Companies under the acquisition
agreements and to pay certain expenses in connection with the Acquisitions and
the Offering. A portion of the proceeds from the Bridge Financing were used for
a deposit on a home health care company which is not being acquired by the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Morgenthau Bridge Funds were sponsored by Morgenthau
Bridge Financing Corp. ("MBFC"), and certain principals of MBFC are directors
and beneficial owners of more than 5% of the Common Stock of the Company. The
outstanding principal balance, interest rate and maturity of the financing
provided by the Morgenthau Bridge Funds is $1.5 million, 18.0% and December 31,
1997, respectively. The outstanding principal balance, interest rate and
maturity of the financing provided by the September Bridge is $500,000, 12.0%
and June 30, 1997, respectively. The Morgenthau Bridge Funds also received
warrants to purchase an aggregate of 214,000 shares of Common Stock at $0.10 per
share, which were exercised in September 1996. The exercise price was paid by
foregoing $21,400 in accrued interest. See "Certain Transactions." The investors
in the September Bridge also received 50,000 shares of Common Stock.
Any amounts remaining from the net proceeds of the Offering, including
any proceeds from the exercise of the Underwriter's over-allotment option, will
be used for working capital purposes, including future acquisitions. The Company
currently has no agreements, commitments or understandings with respect to any
such acquisitions. Pending such uses, the Company intends to invest the net
proceeds in short-term, interest bearing investment grade securities.
The Company has obtained a commitment from Manufacturers and Traders
Trust Company (the "Bank") for a $6.0 million term loan, a $4.0 million line of
credit and a $2.0 subordinated note facility. The term portion of the Credit
Facility and the subordinated note facility will be used to pay the remainder of
the cash portion of the purchase price for the Acquisitions, repay the Bridge
Financing and pay certain expenses of the Acquisitions and the Offering. The
remainder of the Credit Facility will be available for working capital and other
general corporate purposes, including future acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
17
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company as of June 30, 1996: (i) on a consolidated pro forma basis giving
effect to the Acquisitions, the September Bridge and the exercise of warrants
issued to the Morgenthau Bridge Funds and (ii) on a consolidated pro forma
basis, as adjusted, to give effect to the Acquisitions, borrowings under the
Credit Facility and the sale by the Company of 2,000,000 shares of Common Stock
at the Offering Price and the application of the net proceeds therefrom as
described under "Use of Proceeds." This table does not include Common Stock
reserved for issuance upon exercise of the Underwriter's Warrants, the warrants
issued in connection with the Bridge Financing or options to be issued under the
Company's 1996 Plan, the Directors Option Plan or individual option grants. See
"Management -- Board of Directors," "-- Stock Option Plan," "Certain
Transactions," "Shares Eligible for Future Sale" and "Underwriting."
<TABLE>
<CAPTION>
June 30, 1996
------------------------------
Pro Forma,
Pro Forma As Adjusted
-------------- ------------
<S> <C>
Short-term debt, including current
portion of long-term debt........................... 41,277 41,277
Long term debt......................................... 2,114,760 8,014,760
Stockholders' equity:
Preferred stock, par value $.01
per share; 500,000 shares
authorized; no shares
issued and outstanding.................... - -
Common stock, par value $.01 per share;
10,000,000 authorized; 2,000,000 shares
issued and outstanding, pro forma; 4,000,000
shares issued and outstanding on a pro forma
basis, as adjusted............................ 10,459 30,459
Additional paid-in-capital.................... 4,355,041 13,335,452
Retained earnings (deficit)................... (720,342) (1,077,213)
-------------- ----------------
Total stockholders' equity............................. 3,645,158 12,288,678
--------- ---------------
Total capitalization.......................... $5,159,918 $20,203,438
============= ===============
</TABLE>
This table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the financial
statements and notes thereto and the Unaudited Condensed Consolidated Pro Forma
Financial Statements included elsewhere in this Prospectus.
18
<PAGE>
DILUTION
The net pro forma tangible book value of the Company as of June 30,
1996 was $(573,983) or $(0.29) per share of outstanding Common Stock. Pro forma
net tangible book value per share is determined by dividing the pro forma
negative net tangible book value (tangible assets less liabilities) of the
Company by the number of shares of Common Stock outstanding on a pro forma
basis.
After giving effect to the Acquisitions, borrowings of $8.0 million
under the Credit Facility and the sale of 2,000,000 shares of Common Stock
offered by the Company hereby at an initial pubic offering price equal to the
Offering Price, the pro forma net tangible book value of the Company as of June
30, 1996 would have been $(3,699,615) or $(0.92) per share of outstanding Common
Stock, representing an immediate dilution of $6.42 per share of Common Stock to
new investors. The following table illustrates this pro forma per share dilution
as of June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Initial public offering price per share (1)................................... $5.50
Pro forma negative net tangible book value per share before the Offering... $ (0.29)
Decrease in pro forma net tangible book value per share of Common Stock
attributable to sale of Common in the Offering(2)........................ $ (0.63)
Pro forma adjusted negative net tangible book value per share after the
Offering and Acquisitions(2)............................................. $ (0.92)
-------------
Dilution per share to new investors........................................... $6.42
</TABLE>
- ---------------------------
(1) Before deduction of underwriting discounts and commissions and estimated
expenses of the Offering payable by the Company.
(2) After deduction of underwriting discounts and commissions and estimated
expenses of the Offering payable by the Company.
The following table sets forth, on a pro forma basis as of June 30,
1996, the number and percentage of total outstanding shares of Common Stock
purchased, the total cash consideration and percentage of total cash
consideration paid, and the average price per share paid by existing
stockholders, the sellers of the Acquired Companies and by purchasers of the
Common Stock offered hereby. The calculations in this table with respect to the
Common Stock to be issued to the Sellers of the Acquired Companies and to be
purchased by new investors in the Offering reflect an initial offering price of
$5.50 per share.
<TABLE>
<CAPTION> Average
Shares Purchased Total Consideration Per Share
Number Percent Amount Percent Price
<S> <C>
Existing stockholders(1).. 2,000,000 50.0% $ 30,310(1) 0.3% $ 0.02
New investors............. 2,000,000 50.0 11,000,000 99.7 5.50
--------- -------- ---------- -----
Total.................. 4,000,000 100.0% $11,030,310 100.0%
========= ======= =========== =====
</TABLE>
- ---------------------
(1) Excludes $4,245,300 of stockholder's equity contributed to the Company by
the Sellers of the Acquired Companies.
19
<PAGE>
DIVIDEND POLICY
The Company currently intends to retain any future earnings to support
the growth and development of its business and has no present intention of
paying any cash dividends on its Common Stock for the foreseeable future. Any
future determination as to the payment of dividends will be at the discretion of
the Company's Board of Directors and will depend on the Company's financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deems relevant. The Company's Credit Facility does not
permit the payment of dividends on the Common Stock.
20
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected historical financial data for
each of the Acquired Companies and Life Critical Care Corporation, as well as
unaudited selected pro forma consolidated financial data. The historical
financial data for each of the periods ended December 31, 1994 and 1995 have
been derived from the historical financial statements which have been audited by
Ernst & Young LLP, independent auditors, included elsewhere in this Prospectus.
The selected financial data set forth below for the respective six month periods
ended June 30, 1995 and 1996 are unaudited and include all adjustments
(consisting only of normal recurring adjustments) that management believes
necessary for a fair presentation of the data for those periods and are not
necessarily indicative of the results to be expected for the year ended December
31, 1996. During the periods presented, the Acquired Companies were not under
common control or common management. Therefore, the unaudited pro forma
consolidated financial data presented may not be indicative of the future
results of operations or financial condition of the Company or the results which
would have occurred had the Acquired Companies been consolidated during the
periods presented. See Unaudited Condensed Consolidated Pro Forma Financial
Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Life Critical Care Pro Forma Consolidated
Financial Data(1)
Pro Forma Consolidated Statement of Operations Year Ended Six Months
Data: December 31, Ended
1995 June 30, 1996
------------ -------------
<S> <C>
Pro forma revenues.......................... $11,477,572 $5,888,857
Pro forma income from operations............ 2,625,821 1,307,617
Pro forma net income........................ 1,029,844 521,788
Pro forma net income per share............ $ 0.29 $ 0.13
Pro forma weighted average shares(2)...... 3,592,267 3,921,870
June 30, 1996
Pro Forma Consolidated Balance Sheet Data: Pro Forma,
As Adjusted (3)
---------------
Working capital (deficit)................... $ 2,596,332
Total assets................................ 20,845,913
Total debt, including current portion....... 8,056,037
Stockholders' equity (deficit).............. 12,188,678
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
Historical Financial Data 1994 1995 1995 1996
------ -------- ------- ------
<S> <C>
Blue Water:
Revenues...................................... $4,773,100 $5,289,682 $2,574,797 $2,841,106
Cost of revenues.............................. 1,632,018 1,752,968 841,981 851,859
Gross profit.................................. 3,141,082 3,536,714 1,732,816 1,989,247
Selling, general and
administrative expenses.................... 2,623,294 2,858,809 1,415,563 1,430,769
Income from operations........................ 517,788 677,905 317,253 558,478
Net income.................................... 459,334 623,774 295,442 516,294
Great Lakes:
Revenues...................................... $2,672,078 $3,229,062 $1,612,941 $1,569,181
Cost of revenues.............................. 677,488 694,637 345,513 334,179
Gross Profit.................................. 1,994,590 2,534,425 1,267,428 1,235,002
Selling, general and
administrative expenses.................... 1,553,917 1,337,466 682,724 766,280
Income from operations........................ 440,673 1,196,959 584,704 468,722
Net income.................................... 413,576 1,142,258 572,492 438,722
ABC:
Revenues...................................... $2,602,203 2,958,828 $1,460,272 $1,478,570
Cost of revenues.............................. 1,170,701 1,308,517 591,811 583,904
Gross profit.................................. 1,431,502 1,650,311 868,461 894,666
Selling, general and
administrative expenses.................... 1,431,987 1,291,068 694,021 680,828
Income (loss) from operations................. (485) 359,243 174,440 213,838
Net income (loss)............................. (11,211) 358,156 173,553 214,822
<CAPTION>
June 19, 1995 Six Months
(Inception) to Ended
December 31, 1995 June 30, 1996
----------------- -------------
Life Critical Care:
Operating expenses:
<S> <C>
General and administrative............. $ 20,049 $ 135,814
Management fee......................... 225,000 90,000
Professional fee....................... 10, 259 57,409
------------- ------------
Operating loss................................ (255,308) (283,223)
Interest expense.............................. 12,618 108,193
------------- ------------
Net Loss...................................... $ (267,926) $(391,416)
============= ============
</TABLE>
- -------------------
(1) See Unaudited Condensed Consolidated Pro Forma Financial Statements for a
discussion of the pro forma adjustments.
(2) Excludes shares reserved for issuance pursuant to the Company's stock option
plans.
(3) Gives effect to (i) the Acquisitions using the purchase method of accounting
as if they occurred on June 30, 1996, (ii) the issuance of 771,875 to the
sellers of the Acquired Companies and (iii) the incurrence of indebtedness
under the September Bridge and (iv) the incurrence of indebtedness under the
Credit Facility, as adjusted for the sale of the 2,000,000 shares of Common
Stock offered hereby and the application of the net proceeds therefrom.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements for the reasons set
forth herein and under "Risk Factors."
General
Prior to the completion of the Offering, the Company's only business
was to identify and evaluate potential acquisition candidates, negotiate the
terms of the Acquisitions and the Offering and to arrange for the financing of
the Acquisitions.
Life Critical Care provides a wide range of home health care products
and services, including respiratory therapy services and home medical equipment
sales and rentals in the Northern Midwest region. The Company operates from a
total of 21 locations in the region, consisting of 18 locations in Michigan and
three locations in Wisconsin. The discussion of the Company's Plan of Operation
and Liquidity and Capital Resources assumes the Company's completion of the
Acquisitions.
The Company derives substantially all of its revenues from Medicare,
Medicaid and private payors, such as traditional indemnity insurers and managed
care organizations, including HMOs and PPOs, and TPAs. The Company anticipates
that Medicare will continue to represent a significant component of its
revenues. Based on available industry and demographic data, the Company believes
that demand for home health care will continue to increase as the ongoing
pressure to contain health care costs accelerates the growth and utilization of
alternate site care, such as home health care, and as the elderly percentage of
the population continues to grow. The Company also believes that regulatory and
industry pressure to significantly reduce health care costs and the growth of
managed care organizations will result in increased pricing pressure.
The Company has preliminarily analyzed the savings that it expects to
be realized by consolidating certain administrative functions (including
reimbursement, billing and collection, purchasing and management information and
accounting systems), and anticipates that it may realize significant savings in
other general and administrative areas. The Company, however, has not and cannot
quantify these savings until completion of the combination of the Acquired
Companies. It is anticipated that these savings will be partially offset by the
costs of being a public company and the costs related to the Company's new
corporate structure. However, these costs, like the savings that they offset,
cannot be quantified accurately. Accordingly, neither the anticipated savings
nor the anticipated costs have been included in the pro forma financial
information. See Unaudited Condensed Consolidated Pro Forma Financial
Statements.
Effective upon the completion of the Offering, the Company will acquire
three home health care companies. The historical results of the Acquired
Companies are discussed below. The Acquired Companies have operated as
closely-held independent private companies and their results of operations
reflect S Corporation tax structures which have influenced, among
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other things, historical levels of owners' compensation. The differential
between the previous compensation and the compensation subsequent to the
Acquisitions is referred to as the "Compensation Differential." In addition, as
a result of the Acquisitions, the Company has acquired intangible assets,
primarily goodwill, of approximately $15.7 million which will be amortized over
a useful life of 40 years. On a pro forma consolidated basis, assuming
completion of the Acquisitions as of the beginning of the respective periods,
the Company would have recognized amortization expense related to goodwill of
approximately $397,100 and $196,400 during 1995 and the six months ended June
30, 1996, respectively. The Compensation Differential, the related and certain
other income tax effects and the amortization expense related to goodwill (as
well as other adjustments) have been included as pro forma adjustments in the
Unaudited Condensed Consolidated Pro Forma Financial Statements.
The variations in the gross margins of the Acquired Companies are
primarily due to internal reporting and product mix differences. For example,
ABC, unlike Blue Water and Great Lakes, records the cost of contract labor
(respiratory therapists) in cost of goods sold resulting in lower gross margins.
In addition, Blue Water sells industrial gases, which typically have a lower
gross margin than other products and services sold by the Company.
Plan of Operation
The Company anticipates that during the next 12 months it will seek to
integrate and expand the operations of the Acquired Companies. In particular,
the Company intends to expand its respiratory services operations and add
infusion therapy and nursing services at selected locations. The expansion of
products and services may occur through provider networks or strategic alliances
with other home health care companies. In addition, management will centralize
certain administrative functions in order to increase efficiency and take
advantage of economies of scale. Management also anticipates that it will seek
to strengthen its regional base through the acquisition of established
Midwestern home health care companies. Management believes that acquisition
opportunities will arise as regulatory and competitive pressures encourage
further consolidation in the industry. See "Business -- Industry Overview,"
and "-- Strategy."
Results of Operations - Blue Water
Six months ended June 30, 1995 and June 30, 1996
Revenues. Revenues increased approximately $266,000, or 10.3%, from
$2.6 million for the six months ended June 30, 1995 (the "1995 Period") to $2.8
million for the six months ended June 30, 1996 (the "1996 Period"). This
increase was due to increased sales of Blue Water's home health care products
and services, while sales of industrial products decreased slightly.
Cost of revenues. Cost of revenues increased approximately $10,000 from
$842,000 for the 1995 Period to $852,000 for the 1996 Period, and cost of
revenues as a percentage of revenues declined from 32.7% to 30.0%. The decrease
in cost of revenues as a percentage of revenues is primarily due to increased
rental revenues, which generally have a higher margin than sales. Gross profit
increased approximately $256,000, or 14.8%, from $1.7 million for the 1995
Period to $2.0 million for the 1996 Period.
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Selling, general and administrative expenses. Selling, general and
administrative expenses were approximately $1.4 million for both periods,
primarily due to a decrease in the profit sharing contribution, partially offset
by higher overhead costs.
Income from operations. Income from operations increased $241,000, or
approximately 76.0%, from $317,000 for the 1995 Period to $558,000 for the 1996
Period as a result of increased revenues and gross profit.
Net Income. Net income, increased 74.8% percent, from $295,000,
or 11.5% of revenues, for the 1995 Period to $516,000, or 18.2% of revenues,
for the 1996 Period.
Years ended December 31, 1994 and 1995
Revenues. Revenues increased approximately $517,000, or 10.8%, from
$4.8 million for 1994 to $5.3 million for 1995. This increase was due to an
increase in both rentals and sales of the Company's products and services.
Cost of revenues. Cost of revenues increased approximately $121,000, or
7.4%, from approximately $1.6 million in 1994 to approximately $1.8 million in
1995, but decreased as a percentage of revenues from 34.2% for 1994 to 33.1% for
1995. Gross profit increased approximately $396,000, or 12.6%, from $3.1 million
in 1994 to $3.5 million in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $236,000, or 9.0%, from $2.6
million for 1994 to $2.9 million for 1995 primarily due to higher overhead costs
including increased professional fees associated with the pending sale of Blue
Water.
Income from operations. Income from operations increased approximately
$160,000, or 30.9%, from $518,000 in 1994 to $678,000 in 1995, primarily due to
increased revenues and gross profits.
Net Income. Net income increased approximately $164,000, or 35.8%,
from $459,000, or 9.6% of revenues, for 1994 to $624,000, or 11.8% of revenues,
for 1995.
Results of Operations - Great Lakes
Six months ended June 30, 1995 and June 30, 1996
Revenues. Revenues decreased approximately $44,000, or 2.7%, from $1.6
million for the 1995 Period to $1.6 million for the 1996 Period primarily due to
a slight decrease in rental revenues.
Cost of revenues. Cost of revenues decreased approximately $11,000 from
$346,000 for the 1995 Period to $334,000 for the 1996 Period. Gross profit
decreased approximately $32,000, or 2.6%, from $1.3 million for the 1995 Period
to $1.2 million for the 1996 Period.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $84,000, or 12.2%, from $683,000
for the 1995 Period to $766,000 for the
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1996 Period, primarily due to higher overhead costs, including annual salary
increases, and the institution of an employee incentive compensation plan.
Income from operations. Income from operations decreased $116,000, or
19.8%, from $585,000 for the 1995 Period to $469,000 for the 1996 Period due
primarily to the increase in overhead costs on lower revenues.
Net income. Net income decreased approximately $134,000, or 23.4%, from
$572,000, or 35.5% of revenues, for the 1995 Period to $439,000, or 28.0% of
revenues, for the 1996 Period.
Years ended December 31, 1994 and 1995
Revenues. Revenues increased approximately $557,000, or 20.8%,
from $2.7 million for 1994 to $3.2 million for 1995 primarily due to an
increase in rental revenues.
Cost of revenues. Cost of revenues increased approximately $17,000, or
2.5%, from $677,000 for 1994 to $695,000 for 1995, but declined as a percentage
of revenues from 25.4% for 1994 to 21.5% for 1995. The decline in cost of
revenues as a percentage of revenues was primarily due to decreased depreciation
expense. Gross profit increased approximately $540,000, or 27.1%, from $2.0
million for 1994 to $2.5 million for 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased approximately $216,000, or 13.9%, from $1.6
million for 1994 to $1.3 million for 1995 primarily due to a non-compete payout
to a former owner which was completed in 1994, a decrease in facilities expense
and a decrease in other administrative expenses.
Income from operations. Income from operations increased approximately
$756,000, or 171.6%, from $441,000 for 1994 to $1.2 million for 1995 due to
higher revenues, increased gross margins and decreased overhead costs.
Net income. Net income increased approximately $729,000, or
176.2%, from $414,000, or 15.5% of revenues, for 1994 to $1.1 million, or
35.4% of revenues, for the same period in 1995.
Results of Operations - ABC
Six months ended June 30, 1995 and June 30, 1996
Revenues. Revenues were approximately $1.5 million for both periods.
Cost of revenues. Cost of revenues decreased approximately $8,000, or
1.3%, from $592,000 for the 1995 Period to $584,000 for the 1996 Period, and
cost of revenues as a percentage of revenues decreased from 40.5% for the 1995
Period to 39.5% for the 1996 Period. Gross profit increased approximately
$26,000, or 3.0%, from $868,000 for the 1995 Period to $895,000 for the 1996
Period.
Selling, general and administrative expenses. Selling, general and
administrative expenses were approximately $700,000 for each of the 1995 Period
and the 1996 Period.
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Income from operations. Income from operations increased approximately
$39,000, or 22.6%, from $174,000 for the 1995 Period to $214,000 for the 1996
Period as a result of lower operating expenses on relatively flat revenues.
Net income. Net income increased approximately $41,000, or 23.8%,
from $174,000, or 11.9% of revenues, for the 1995 Period to $215,000, or 14.5%
of revenues, for the 1996 Period.
Years ended December 31, 1994 and 1995
Revenues. Revenues increased approximately $357,000, or 13.7%, from
$2.6 million for 1994 to $3.0 million for 1995. This increase was primarily due
to increased volume for both rental and sales of the company's products and
services.
Cost of revenues. Cost of revenues increased $138,000, or 11.8%, from
$1.2 million in 1994 to $1.3 million in 1995, but decreased as a percentage of
revenues from 45.0% for 1994 to 44.2% for 1995. The decline in the cost of
revenues as a percentage of revenues was primarily due to a decrease in
depreciation expense and an improved commission structure. Gross profit
increased approximately $219,000, or 15.3%, from $1.4 million in 1994 to $1.7
million in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased approximately $141,000, or 9.8%, from $1.4
million in 1994 to $1.3 million in 1995 primarily due to lower overhead expenses
and lower owners' compensation.
Income from operations. Income from operations increased by
approximately $360,000 to $359,000 in 1995 primarily due to lower operating
expenses on higher revenues and lower owners' compensation.
Net income. Net income increased $369,000 from a loss of $11,000
for 1994 to income of $358,000, or 12.1% of revenues, for 1995.
Liquidity and Capital Resources - Consolidated
Since its inception in June 1995, the Company has incurred expenses in
connection with the Acquisitions, including cash deposits to the sellers of the
Acquired Companies and preparation for the Offering, which have been paid by the
Bridge Financing. The net proceeds of the Offering, together with the term and
subordinated note portions of the Credit Facility, will be used to pay the
remainder of the cash portion of the purchase price for the Acquisitions and to
repay the Bridge Financing. See "Use of Proceeds."
In connection with the Offering, the Company has obtained the Credit
Facility, consisting of a $6.0 million term loan, a $4.0 million line of credit
and a $2.0 million subordinated note facility. The Company incurred a one-time
facility fee of $140,000 and is required to pay a fee on the average unused
portion of the line of credit of 0.375% per annum. Borrowings under the line of
credit and the term portion of the Credit Facility will bear interest at a
floating rate based upon the lower of an index to the Bank's prime rate or
LIBOR. As of October 7, 1996, the applicable interest rate would have been
8.38%. Borrowings under the subordinated note facility amortize over six years,
and will bear interest at a fixed rate of 19.0% per annum. The line of credit
will be available for working capital and acquisition funding
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purposes. Borrowings under the Credit Facility are collateralized by
substantially all of the Company's assets. The Credit Facility also contains
financial covenants applicable to the Company, including minimum debt service
coverage and net worth requirements, and limitations on indebtedness, dividends,
capital expenditures, mergers and the sale or purchase of assets not in the
ordinary course of business.
On a pro forma consolidated basis as of June 30, 1996, assuming the
completion of the Acquisitions and the Offering, the Company expects to have
working capital of approximately $2.6 million, including cash and cash
equivalents of approximately $229,000. The Company anticipates that existing
working capital, together with $4.0 million available to it under the Credit
Facility and cash generated from operations, will be sufficient to fund the
operations of the Company after the consummation of the Acquisitions, and to
fund the planned expansion of services to be offered by the Company during the
next 12 months. However, delays in reimbursement may cause working capital
constraints on the Company's business, results of operations or financial
condition and there can be no assurance that the funds available to the Company
from the Offering and the Credit Facility will be sufficient for the Company's
working capital needs or to fund any further acquisitions. In that event, the
Company may be required to seek additional financing or issue additional shares
of capital stock in order to consummate any such acquisitions. There can be no
assurance that any such additional financing will be available on terms
acceptable to the Company. See "Risk Factors -- Substantial Indebtedness"; and
"-Future Capital Needs; Uncertainty of Additional Financing."
Impact of Inflation
A substantial portion of the Company's revenues is subject to
reimbursement rates which are regulated by the federal and state governments or
through contractual arrangements and do not automatically adjust for inflation.
These reimbursement rates are adjusted periodically based upon certain factors,
including legislation and executive and congressional budget reduction and
control processes, inflation and costs incurred in rendering the services, but
in the past have had little relationship to the actual cost of doing business.
See "Risk Factors --Medicare Reimbursement," "-- Reimbursement Payment
Delays," "-- Health Care Reform" "-- Regulatory Environment" and "Business
- --Regulation."
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BUSINESS
General
Life Critical Care is a provider of home health care products and
services in the Northern Midwest region. Life Critical Care provides a wide
range of home health care products and services, including respiratory therapy
services and home medical equipment sales and rentals. In the region, the
Company operates from a total of 21 locations in Michigan and Wisconsin. The
Company believes that the Midwest region offers significant growth opportunities
due to the fragmentation of the home health market in the region. The Company's
objective is to become a leading comprehensive provider of home health care
products and services in the Midwest through acquisitions, internal growth and
the development of provider networks and strategic alliances with other home
health care providers.
Industry Overview
Total expenditures within the health care industry, which have
increased at twice the rate of inflation in recent years, were approximately
$1.1 trillion in 1995. The ongoing pressure to contain health care costs, while
maintaining high quality care, is accelerating the growth of alternate site
care, such as home health care, that reduces hospital admissions and lengths of
hospital stays. Home health care is among the fastest growing segments of the
health care industry, with total expenditures in 1995 estimated to be
approximately $27.0 billion. The Company believes that the growth in home health
care is influenced by the following factors and trends:
(bullet) Cost Effective Alternative. Health care providers, as well as
Medicare and other payors, are increasingly recognizing that in
many situations home health offers a less costly alternative to
in-patient hospital care.
(bullet) Aging Population. The U.S. Bureau of the Census has estimated
that in 1995 approximately 12.6% of the U.S. population was 65 or
more years of age, with the population of persons over 85 years of
age growing at an annual rate of 3.6%, more than three times
faster than the total population.
(bullet) Technological Advancements. Advancements in medical technology
have allowed the delivery of an increasing amount of health care
products and services in the home and other residential
environments.
(bullet) Patient Preference for Home Care. In general, patients prefer to
recuperate in their homes rather than in a hospital or other
institutional environment.
Historically, the home health care industry has been highly fragmented
and largely characterized by local providers that typically do not offer a
comprehensive range of cost-effective services. These local providers often do
not have the capital necessary to expand their operations or the range of
services offered, which limits their ability to compete for referrals
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and to realize efficiencies in their operations. Payors increasingly are seeking
home health care providers that offer a cost-effective, comprehensive range of
services in each market served, which further inhibits the ability of local
providers to compete effectively. As a result of these economic and competitive
pressures, the home health care industry is undergoing rapid consolidation, a
trend the Company expects will continue.
Strategy
The Company intends to utilize a decentralized operating and service
philosophy in order to assure high quality customer service while capitalizing
on the centralization of certain administrative functions. The strategy also
emphasizes the retention of local management, all of which the Company believes
will allow it to achieve its goal of becoming a leading comprehensive provider
of home health care products and services in the Midwest.
(bullet) Expanding through Acquisitions. The Company intends to pursue an
aggressive acquisition strategy primarily in the Midwest Region, where
the Company believes there are significant growth opportunities due to
fragmentation of the market in the region. In existing markets, the
Company will seek acquisitions that increase market share and broaden
the range of products and services provided by the Company in those
markets. In new geographic markets, the Company will target established
Midwestern home health care service providers that are either leaders
in their markets or provide other strategic advantages for the Company.
(bullet) Accelerating Internal Growth. A key component of the Company's strategy
to become a comprehensive provider to accelerate internal growth at
each Acquired Company and each subsequently acquired home health care
business by standardizing and expanding existing products and services.
The Company intends to expand its respiratory services operations and
add infusion therapy and nursing services at selected locations. The
expansion of these products and services may be accomplished through
provider networks or strategic alliances with other home health care
companies. The Company also intends to enhance its sales and marketing
efforts by developing programs targeted at each of the major referral
sources.
(bullet) Capitalizing on New Management and Corporate Structure. The Company is
assembling a professional management team with extensive experience in
the home health care industry. The Company's new management team
intends to position the Company to take advantage of the growth
opportunities presented by industry consolidation. In addition, the new
corporate structure will allow the consolidation of administrative
functions of the Acquired Companies such as reimbursement, billing and
collection, purchasing, management information and accounting systems
and the improvement of operating efficiencies through the elimination
of redundant facilities and equipment. The Company also believes that
it will have greater purchasing power in such areas as supplies,
inventory, equipment and insurance and better access to capital than
the Acquired Companies had independently.
Products and Services
The Company derives its revenues primarily through the provision of
home respiratory therapy products and services and home medical equipment
("HME") sales and rentals. The
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Company estimates that respiratory therapy products and services, HME sales and
rentals and other products and services (primarily industrial gases) represented
approximately 68.0%, 23.0% and 9.0%, respectively, of pro forma consolidated
revenues during 1995. The Company does not believe that these percentages
changed materially for the six months ended June 30, 1996. The products and
services discussed below are provided by the Company on a consolidated basis,
although not all of the Acquired Companies provide all products and services.
Respiratory Therapy Services. Respiratory therapy patients use
equipment such as oxygen systems, which assist patients with breathing;
nebulizers, which aerosolize medications; and ventilators, which breathe for the
patient. The Company believes that increasing physician acceptance of home
health care, improving clinical techniques which prolong life, the aging
population, and cost effectiveness are resulting in the increasing utilization
of home respiratory therapy services.
In providing respiratory therapy products and services to patients, the
Company's personnel manage the needs of the patient according to the
physician-directed plan of care and educate the patient and care giver regarding
treatment requirements, use of equipment and self-care. Certain equipment, such
as oxygen concentrators, ventilators and apnea monitors, require periodic visits
to the patient's home to assure patient compliance with physician orders and to
monitor the proper functioning of the equipment. The respiratory therapy
services that the Company provides include the following:
Oxygen systems to assist patients with breathing. There are
three types of oxygen systems: (i) oxygen concentrators, which
are stationary units that filter ordinary air in order to
provide continuous flow of oxygen; (ii) liquid oxygen systems,
which are portable, thermally-insulated containers of liquid
oxygen; and (iii) high pressure oxygen cylinders, which are
used for portability with oxygen concentrators. Oxygen systems
are used to treat patients with chronic obstructive pulmonary
disease, cystic fibrosis and neurologically-related
respiratory problems.
Nebulizers to deliver aerosol medication to patients.
Nebulizers are used to treat patients with asthma, chronic
obstructive pulmonary disease, cystic fibrosis and
neurologically-related respiratory problems.
Home ventilators to sustain a patient's respiratory function
mechanically in cases when a patient requires breathing
assistance.
Continuous positive airway pressure therapy ("CPAP") to force
air through respiratory passage-ways during sleep. This
treatment is used primarily on adults with sleep apnea, a
condition in which a patient's normal breathing patterns are
disturbed during sleep.
Apnea monitors to monitor and warn parents of apnea episodes
in newborn infants as a preventive measure against sudden
infant death syndrome.
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Sleep Studies to determine if the patient is suffering from a
sleep disorder and determine the magnitude of such disorders.
Home Medical Equipment Sales and Rentals. The Company's primary product
lines include hospital beds, wheelchairs, bathroom aids, patient aids (such as
walkers, canes and commodes) and diabetic supplies, including meters and strips.
The Company also offers a variety of incontinence, ostomy supplies and orthotic
fittings as well as self-help items such as lift chairs, blood pressure kits and
ice packs. In addition to its sales activities, the Company rents durable
medical equipment, such as beds and wheelchairs, to patients on a short-term and
a long-term basis.
Future Services.
The Company intends to add infusion therapy and nursing services at
selected locations as part of its efforts to become a leading comprehensive
provider of home health care products and services in the Midwest. The expansion
may be the result a combination of internal growth, acquisitions and the
development of provider networks and strategic alliances with other home health
care providers.
Home Infusion Therapy. Home infusion therapy is the administration
outside the hospital setting of nutrients, antibiotics and other medications
intravenously (into the vein), subcutaneously (under the skin), intramuscularly
(into the muscle), intrathecally or epidurally (via spinal routes) or through
tubes into the digestive tract. Typical infusion services include antibiotic and
related therapies (therapies used to treat various infections and diseases);
parenteral nutrition therapy (the intravenous feeding of life sustaining
nutrients to patients with impaired or altered digestive tracts); blood
products; and enteral nutrition therapy (the administration of nutrients through
a feeding tube).
Nursing and Related Care. Nursing services include Registered Nurses,
who provide a broad range of nursing care services, Licensed Practical Nurses,
who perform a variety of technical nursing procedures, specialty therapists,
occupational therapists, speech therapists, social workers and home health aids
and companions.
Operations.
General. The Company's corporate offices will be located at Blue
Water's Medical Supply's office in New Baltimore, Michigan. The Company
maintains offices in the following locations:
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Michigan Manistee
Marquette
Atlanta Menominee
Bay City New Baltimore (2 locations)
Charlevoix Reed City
Cheboygan Sault Ste. Marie
Escanaba West Branch
Gaylord
Gladwin Wisconsin
Ionia
Kalkaska Appleton
Lapeer Manitowoc
Sturgeon Bay
The Company intends to centralize certain administrative functions at
its corporate offices, including reimbursement, billing and collection,
purchasing and management information and accounting systems. The Company
intends to retain local control over most aspects of day to day operations,
especially those functions that are related to patient care.
Sales and rentals at each of the Company's locations are generally
handled by customer service representatives, who take orders, obtain payor
information and dispatch equipment and supplies to the patient's home. The
Company's technicians deliver and install HME and instruct patients in the use
of the equipment. The Company maintains warehouse and repair facilities where
most orders are filled and repairs and maintenance of equipment are performed.
The Company has a periodic routing system to pick up and deliver equipment in
need of repair or maintenance and to provide inventory to individual store
locations.
Sales and Marketing. The Company currently markets its services and
products to referral sources such as physicians, hospital discharge planners and
social service workers, insurance companies and prepaid health plans, as well as
directly to patients. In seeking to attract and retain referral sources, the
Company emphasizes its reputation for quality service and responsiveness to the
requirements of the referral sources. In general, the sales representatives
market the Company's services through direct contact with referral sources in
the form of meetings, telephone calls and solicitations. In addition to these
traditional referral sources, management believes that managed care
organizations and other third party payors will become increasingly important
sources of referrals to home health care providers. As a result, the Company is
developing specific marketing initiatives for managed care organizations.
In addition to its direct marketing efforts, the Company participates
in local trade shows and exhibitions in order to promote its products and
services to potential referral sources and managed care payors. The Company also
provides referral sources with in-service education programs and training
sessions.
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In most of the Company's markets, the Company maintains a retail store
and showroom where patients may purchase or rent supplies and miscellaneous
equipment. The Company believes its retail locations increase community
awareness of its products and services.
Purchasing. The Company purchases or leases medical equipment and
supplies required in connection with the Company's business from many suppliers,
and participates in buying groups that provide the opportunity to receive volume
discounts. The Company has not experienced, and does not anticipate that it will
experience, difficulty in purchasing such materials or leasing such equipment
and supplies. If the Company's current suppliers should cease to supply the
Company, the Company believes that alternative sources can be readily located
that would adequately meet its needs.
Quality Assurance and Accreditation. In order to compete effectively,
management believes that it is essential that the Company provide high quality
products and services with the goal of improving patient outcomes and efficiency
in the delivery of care. Management also believes that all of the Acquired
Companies have reputations in the markets served for providing quality products
and services. In order to promote continued quality, the Company will institute
a rigorous, Company-wide quality assurance program which will emphasize a
corporate philosophy of service excellence and will provide guidance, education
and resources for implementing the quality improvement program.
Blue Water and ABC have been accredited by the JCAHO, a nationally
recognized organization that develops standards for various health care industry
segments and monitors compliance with those standards through voluntary surveys
of participating providers. The Company intends to apply for JCAHO accreditation
for the Great Lakes locations following completion of the Offering. Not all home
health providers have chosen to undergo this accreditation process due to its
expense and time burden. As the home health care industry becomes increasingly
competitive and as managed care organizations increase their penetration in the
markets served by the Company, management believes that JCAHO accreditation will
become an increasingly important factor in procuring business.
The Acquired Companies are subject to periodic resurveys by the JCAHO,
and there can be no assurance that a renewal of accreditation will be
forthcoming. The Company relationship with existing and potential referral
sources could be adversely affected by a loss of JCAHO accreditation at one or
more of the Acquired Companies.
Reimbursement, Billing and Collection. The Company's revenues are
derived primarily from Medicare, Medicaid, private insurance companies, HMOs and
PPOs, workers' compensation programs and directly from patients. The Company
assumes payment for some durable equipment and directly bills Medicare, Medicaid
and private insurance for the collection of these patient claims. This service
allows customers to obtain rental and purchase equipment after they have
received proper documentation from a physician or discharge planner, without
up-front cash payments.
Reimbursement from private insurers, Medicare and Medicaid is largely
dependent on the Company's timely and correct claims form submission in
accordance with varying requirements of different payors. This process is
facilitated by the Company's use of electronic
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billing systems which are in place for certain major payors. The Company intends
to consolidate its billing and collections functions, thus eliminating certain
duplicate overhead costs.
The Company estimates that Medicare, Medicaid, private pay, and private
insurance and other payors represented approximately 52.0%, 13.0%, 6.0%, and
29.0%, respectively, of the Company's pro forma consolidated revenues during
1995, and does not believe that these percentages changed materially for the six
months ended June 30, 1996.
The home health care industry is generally characterized by long
collection cycles for accounts receivable due to the complex and time consuming
requirements for obtaining reimbursement from private and governmental third
party payors. In addition, reimbursement from government payors is subject to
examination and retroactive adjustment. Such delays or retroactive adjustments
could lead to cash shortages, which may require the Company to borrow funds,
issue equity securities or take other action to meet its ongoing obligations.
The Company would be adversely affected if it were to experience such
difficulties and were unable to obtain funds on acceptable terms to meet
possible cash shortages.
Management Information Systems. All of the Acquired Companies have
computerized billing systems, which provide invoicing and statistical data and
electronic billing systems for claims with Medicare and certain other payors.
Following the completion of the Acquisitions, the Company intends to consolidate
the claims processing functions of the Acquired Companies. The consolidation is
expected to take place in stages, with the initial stage being the consolidation
of the Blue Water and ABC billing systems. Further consolidation will depend
upon the Company's assessment of the benefits and costs of consolidation. In
certain markets, providers, payors and managed care organizations are demanding
data on outcomes and utilization and other analytical reports as a measure of
the efficacy and quality of care. In these markets, home health care companies
are required to invest in increasingly sophisticated systems. Management does
not believe that a significant portion of home health care companies in the
markets served by the Acquired Companies are currently utilizing sophisticated
systems, although inroads by managed care organizations could lead to increased
information system requirements. In such event, the Company would need to make
capital investments in such systems, which may require the Company to seek
additional financing.
Competition
The home health care industry is highly competitive. Historically, it
has been highly fragmented and characterized by small, local operators with only
a small number of national providers. The Company competes with a number of home
health care providers including some national companies which seek to offer a
comprehensive range of home health care services as well as regional companies
and locally-owned, limited service home health care providers. In addition,
there are relatively few barriers to entry into the home health care industry.
Other companies, including manufacturers and suppliers of home health care
equipment, managed care organizations, hospitals and other health care providers
and provider groups that currently are not serving the home health care market,
may become competitors. To the extent that these companies enter the home health
care market, the Company may also lose existing and potential referral sources.
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The Company believes that the most important competitive factors are
quality of care and services, reputation with referral sources, payors, patients
and the medical community, reasonable and competitive prices, the range of
services offered and geographic coverage. Management believes the Company is
well positioned to compete effectively with respect to quality of care and
service, reputation and pricing. Management intends to expand the range of
services offered and the geographic coverage of the Company in order to more
effectively compete in the future, particularly as managed care becomes a more
significant source of business for the Company.
In attempting to carry out its acquisition strategy, Life Critical Care
will also compete for acquisition candidates. The Company believes that its
decentralized management and operating strategies will make it an attractive
acquirer to home health care companies. However, other potential home health
care acquirers have greater financial and operational resources than the
Company, and there can be no assurance that the Company will be able to compete
effectively in its chosen markets.
Regulation
The Company's business is subject to extensive federal, state and local
regulation.
Permits and Licensure. Many states require companies providing certain
home health care services to be licensed as home health agencies. In addition,
certain of the Company's operations are subject to federal and other state laws
and regulations governing the packaging and repackaging and dispensing of drugs
(including oxygen). State laws also require licensing of the sale of industrial
and other gases. Federal laws may require registration with the Drug Enforcement
Administration of the United States Department of Justice and the satisfaction
of certain requirements concerning security, record keeping, inventory controls,
prescription, order forms and labeling. In addition, certain health care
practitioners employed by the Company require state licensure and/or
registration and must comply with laws and regulations governing standards of
practice. The failure to obtain, renew or maintain any of the required
regulatory approvals or licenses could adversely affect the Company's business.
There can be no assurance that either the states or the federal government will
not impose additional regulations upon the Company's activities which might
adversely affect its business, results of operations or financial condition.
Certificates of Need. Certain states require companies providing home
health care services to obtain a certificate of need issued by a state health
planning agency. Some states require such certificates of need only for
Medicare-certified home health agencies. Where required by law, the Company has
obtained certificates of need from those states in which it operates. There can
be no assurance that the Company will be able to obtain any certificates of need
which may be required in the future if the Company expands the scope of its
services or if state laws change to impose additional certificate of need
requirements, and any attempt to obtain additional certificates of need will
cause the Company to incur certain expenses.
Fraud and Abuse Laws. The Company is also subject to federal and state
laws prohibiting direct or indirect payments for patient referrals, prohibiting
referrals to an entity in which the referring provider has a financial interest,
and regulating reimbursement procedures and practices under Medicare, Medicaid
and state programs as well as in relation to private payors.
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<PAGE>
The anti-kickback provisions of the federal Medicare and Medicaid
Patient and Program Protection Act of 1987 (the "Anti-kickback Statute")
prohibit the offer, payment, solicitation or receipt of any remuneration in
return for the referral of items or services paid for in whole or in part under
the Medicare or Medicaid programs (or certain other state health care programs).
To date, courts and government agencies have interpreted the Anti-kickback
Statute to apply to a broad range of financial relationships between providers
and referral sources, such as physicians and other practitioners. The United
States Department of Health and Human Services has adopted regulations creating
"safe harbors" from federal criminal and civil penalties under the Anti-kickback
Statute by exempting certain types of ownership interests and other financial
arrangements that do not appear to pose a threat of Medicare and Medicaid
program abuse. Transactions covered by the Anti-kickback Statute that do not
conform to an applicable safe harbor are not necessarily in violation of the
Anti-kickback Statute, but the practice may be subject to increased scrutiny and
possible prosecution. The criminal penalty for conviction under the
Anti-kickback Statute is a fine of up to $25,000 and/or up to five years
imprisonment. In addition, conviction mandates exclusion from participation in
the Medicare and Medicaid programs. Such exclusion can also result based on
conviction under other federal laws which impose civil and criminal penalties
for submitting false claims, such as claims for services not provided as
alleged. Several health care reform proposals have included an expansion of the
Anti-kickback Statute to apply to referrals of any patients regardless of payor
source.
The Federal government has enacted the so-called "Stark Law," which
generally prohibits referrals by physicians to certain entities with which they
have a financial relationship. More recently, the Stark Law was broadly expanded
by the "Amended Stark Law," which provides that where a physician has a
"financial relationship" with a provider of "designated health services"
(including, among other things, the provision of parenteral and enteral
nutrients, equipment and supplies, home health services, ultrasound services and
durable medical equipment, which are products and services provided by the
Company), the physician will be prohibited from making a referral to the health
care provider (and the provider will be prohibited from billing) for the
designated health service for which Medicare or Medicaid payment would otherwise
be made. Certain exceptions are available under the Amended Stark Law, which may
or may not be available to the Company for arrangements in which the Company may
be involved. Submission of a claim that a provider knows or should know is for
services for which payment is prohibited under the Amended Stark Law could
result in refunds of any amounts billed, civil money penalties of not more than
$15,000 for each such service billed and possible exclusion from the Medicare
and Medicaid programs. Furthermore, Medicare regulations contain similar
self-referral restrictions which provide that unless certain conditions are met
a plan of care for home health services generally may not be certified by a
physician who has a significant ownership interest in, or a significant
financial or contractual relation with, that home health agency.
Many states have adopted statutes and regulations which vary from state
to state prohibiting provider referrals to an entity in which the provider has a
financial interest, direct or indirect remuneration or fee-splitting
arrangements between health care providers for patient referrals, and other
types of financial arrangements with health care providers. Sanctions for
violation of these state restrictions may include loss of licensure and civil
and criminal penalties. Certain states also require health care practitioners to
disclose to patients
37
<PAGE>
any financial relationship with a provider and to advise patients of the
availability of alternative providers.
The federal government has increased significantly the financial and
human resources allocated to enforcing the fraud and abuse laws. Private
insurers and various state enforcement agencies also have increased their
scrutiny of health care providers' practices and claims, particularly in the
home health and durable medical equipment areas. Although it is the Company's
policy to monitor compliance with these laws, no assurance can be given that the
practices of the Company, if reviewed, would be found to be in compliance with
such laws or with any future laws, as such laws ultimately may be interpreted.
Reimbursement. In August 1993, Congress passed the Omnibus Budget
Reconciliation Act of 1993 ("OBRA 1993"), which included approximately $56
billion in reimbursement reductions to the Medicare program over five years. In
January 1994, two developments lowered the Company's reimbursement by Medicare
for nebulizers, each of which had a significant impact on net revenues of the
Company attributable to the rental of nebulizers. First, reclassification of
nebulizers to "capped rental equipment" pursuant to OBRA 1993 capped the total
allowable rental payments at the allowable purchase cost of such equipment.
Second, effective January 1, 1994, new fee schedules published by the various
Durable Medical Equipment Regional Carriers ("DMERCs") reduced by approximately
50% the allowable monthly rental fees for nebulizers. Additionally, in December
1994 the DMERCs, which process Medicare and Medicaid claims, issued a composite
draft policy, which, if adopted, would further restrict Medicare coverage of
nebulizers and aerosol medication treatments. Comments on the proposed draft
policy have been submitted by members of the home care industry and currently
are being reviewed by the DMERCs and HCFA. In its continuing effort to contain
health care costs, Congress also is contemplating changes in oxygen
reimbursement.
More generally, government officials are continuing to review and
assess alternative health care delivery systems and payment methodologies
in efforts to curtail costs. Several proposals involving potential changes
in the way home health care services are reimbursed are presently under
consideration. See "-Current Developments."
Current Developments. Political, economic and regulatory influences are
subjecting the health care industry in the United States to fundamental change.
Although Congress has failed to pass comprehensive health care reform
legislation, the Company anticipates that Congress and state legislatures will
continue to review and assess alternative health care delivery and payment
systems and may in the future propose and adopt legislation effecting
fundamental changes in the health care delivery system. Congress currently is
considering proposals to reduce Medicare spending increases by $270 billion over
the next seven years. Legislative debate on health care reform is expected to
continue in the future. While the principal focus of these broad initiatives is
not on costs in the home health care segment of the industry (which in 1995
represented only approximately 3% of total health care costs), it can be
expected that the home health care segment would be affected to some extent by
the passage of any such initiative.
Congress passed the Balanced Budget Act of 1995 (H.R. 2491) (the
"Budget Act") which included provisions that would have converted Medicaid to a
block grant program that would give the states greater freedom to experiment
with innovative benefit packages, provider
38
<PAGE>
payment levels, delivery systems, and eligibility criteria and would have
reduced the rate of spending growth, with projected savings of $182 billion over
the next seven years. On December 7, 1995, President Clinton vetoed the Budget
Act and offered an alternative balanced budget proposal. The Medicaid portion of
President Clinton's proposal calls for a per capita spending cap to limit the
growth of average federal spending for each Medicaid recipient. At this time,
Congress and the President are trying to reach an accord on budget legislation,
which in its final form will likely impact federal spending for Medicaid.
In August 1996, HCFA issued a notice proposing a 40% reduction in
oxygen reimbursement rates, which will not be effective unless and until
approved by the Clinton Administration, which has not taken any action on the
proposal. If approved, the reduction would significantly decrease the Company's
revenues from its respiratory therapy services, which represents a substantial
portion of the Company's pro forma consolidated revenues. Recent legislation
that will become effective on December 1, 1996 imposes reductions on
reimbursement rates and delivery restrictions on aerosol medications.
Congress is also considering establishing a prospective payment system
("PPS") for home health services. The proposal would lower cost limits over the
short-run and implement a per-episode PPS for home health not later than 1999.
Currently, HCFA is running a demonstration project to test per episode
reimbursement for home health services.
The Company is unable to predict whether the proposed Medicare
prospective payment system, the Medicaid block grant program, or the DMERCs
draft policy will be enacted or what final form such legislation might take.
Furthermore, the Company cannot predict what additional government regulations,
if any, affecting its business may be enacted in the future, how existing or
future laws and regulations might be interpreted, or whether the Company will be
able to comply with such laws and regulations in its existing or future markets.
In addition, the level of net revenues and profitability of the Company, like
those of other health care providers, will be affected by the continuing efforts
of payors to contain or reduce the costs of health care by lowering
reimbursement rates, increasing case management review of services, negotiating
reduced contract pricing, and capitalization arrangements.
Employees
As of September 30, 1996, the Company had approximately 102 full-time
and 21 part-time employees. Management believes that the Company's employee
relationships are good. None of the Company's employees are represented by a
labor union.
Properties
The Company has a total of 21 leased facilities in Michigan and
Wisconsin pursuant to leases that expire on various dates through 2001 or
continue on a month-to-month basis. The Company believes that these leases can
be renegotiated as they expire or that alternative properties can be leased on
acceptable terms. The Company also believes that these facilities are adequate
for its current operations and for foreseeable future operations. Certain of the
leases are with the former owners of the Acquired Companies and may be on terms
less favorable to the Company than those currently available to the Company
elsewhere. The Company's corporate headquarters following the consummation of
the Offering will be located
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<PAGE>
at Blue Water's offices in New Baltimore, Michigan in a 15,500 square foot
facility with a lease that expires in November 2000, with one four-year renewal
option.
Insurance
Home health care providers are subject to lawsuits alleging negligence,
product liability or other similar legal theories. The Company also distributes
industrial gas products, such as acetylene, which have been the subject of
lawsuits arising from industrial and other accidents. The Acquired Companies
maintain traditional general liability insurance, professional liability
insurance and excess liability coverage. The Company believes that the policies
are adequate for its operations and is currently evaluating obtaining new
policies on a corporate level. However, there can be no assurance that claims
will be covered by insurance or that the Company will be able to obtain
insurance on terms acceptable to the Company. See "Risk Factors -- Potential
Liability."
Legal Proceedings
Although the Acquired Companies have been engaged in routine litigation
incidental to their businesses, there are no material legal proceedings to which
any of the Acquired Companies or the Company is a party or to which any of their
properties is subject.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
Name Age Position
Thomas H. White.................49 President, Chief Executive Officer
and Director
Richard M. Andzel...............39 Director
Thomas H. White. Mr. White, who has over twenty years of experience
in the home health care industry, has served as President and Chief Executive
Officer of the Company since August 1996 and was appointed as a director in
October 1996. Mr. White have also been appointed Chief Financial Officer to
serve until a permanent Chief Financial Officer has been obtained. From May
1995 to November 1995, Mr. White was a consultant to American HomePatient.
From 1988 through April 1995, when it was acquired by American HomePatient,
Mr. White served as President of Conpharma Home Health Care, Inc., a home
health care provider. At the time of sale, Conpharma had over 450 employees
in 35 branches located in six states and approximately $35 million in annual
sales. From 1983 though 1989, Mr. White worked in various positions,
including Senior Vice President, Vice President and General Manager for
Beverly Home Health, Inc. and subsequently for Primedica, Inc. when it
acquired Beverly in 1987. Mr. White was a private investor and a consultant
to the health care industry from November 1995 to July 1996. Mr. White
received his M.B.A. in 1972 and his B.B.A. in 1970 from Western Michigan
University.
Richard M. Andzel. Mr. Andzel was appointed as a director in
October 1996. Mr. Andzel is currently Vice President of The Morgenthau Group,
Vice President of The Morgenthau Group Investment Corporation and Vice
President of Morgenthau Bridge Financing Corp. From 1992 to early 1995,
Mr. Andzel was engaged in the venture capital business. From 1985 to 1992, Mr.
Andzel was a senior executive with United Group Association, a health and
life small business insurer. When Mr. Andzel resigned in 1992, he was in
charge of seven western states and was responsible for over 350 agents and
managers. Mr. Andzel is a director of Digital Communications, Inc. and
U.S. Digital.
The Company intends to engage a permanent Chief Financial Officer
in November 1996, prior to the consummation of the Offering.
Board of Directors
Following the consummation of the Offering, the Board will consist
of five directors who will serve for a term expiring at the annual meeting of
stockholders in 1997 or until their respective successors are elected and
qualified. At each annual meeting of stockholders, the stockholders will
elect a new Board of Directors for a one year term. Pursuant to the Certificate
of Incorporation of the Company, the Board of Directors have the power to
elect to classify the
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<PAGE>
Board into three classes, with only one-third of the directors coming up
for election each year, although the Board currently has no plans to do so.
See "Description of Capital Stock -- Delaware Law and Certificate of
Incorporation and By-Law Provisions."
Committees and Relationships. The Board of Directors will
establish an Audit Committee and a Compensation Committee. The Audit
Committee will review the Company's accounting practices, internal accounting
controls and financial results and oversees the engagement of the
Company's independent auditors. The Compensation Committee will review and
recommends to the Board of Directors the salaries, bonuses and other forms of
compensation for executive officers of the Company and administers various
compensation and benefit plans. The Board of Directors does not intend to
maintain a nominating committee or a committee performing similar functions.
Directors' Compensation. The Company reimburses its directors for
their expenses in attending Board or committee meetings.
Directors Option Plan. The Company's Non-Employee Directors Stock
Option Plan ("Directors Option Plan") provides for the grant of options
exercisable for up to 50,000 shares of Common Stock. Under the Directors
Option Plan, each non-employee director is entitled to an automatic grant
of an option to purchase up to 7,500 shares of Common Stock on the later of the
date of the consummation of the Offering or the date such director is elected
to the Board at the fair market value on the date of grant. These options
vest as to 25% of the shares on the grant date, with the remaining 75%
vesting ratably over three years commencing one year from the grant date.
In addition, each outside director, and each person who is
subsequently elected as an outside director, will be granted an option at each
annual meeting of stockholders to purchase 2,500 shares at an exercise
price equal to the fair market value on the date of grant. One third of these
options will vest annually commencing one year after the grant date.
Executive Compensation and Employment Agreements
Prior to the completion of the Offering, the Company's only
business was to identify and evaluate potential acquisition candidates,
negotiate the terms of the Acquisitions and the Offering and to arrange for the
financing of the Acquisitions. The Company did not pay any compensation to
any executive officer during 1995. The Company did pay certain management
fees to an affiliate of MBFC for administrative and other services during
1995 and 1996. See "Certain Transactions."
In July 1996, the Company entered into an employment agreement to
employ Mr. White as President and Chief Executive Officer. The agreement
has an initial term through December 31, 1998, and unless the Board of
Directors notifies Mr. White otherwise at least 90 days prior to the end of
the initial or subsequent term, the term of the agreement automatically
renews annually for succeeding one year periods. Mr. White's agreement
provides for an initial annual base salary of $150,000, and he will be
entitled to bonuses calculated in accordance with the Company's incentive
compensation plans and policies. Mr. White's base salary will
automatically increase to $175,000 for 1997 and to $200,000 for 1998. Mr.
White is also entitled to quarterly bonuses of $7,500 per quarter through
December 31, 1997 and may receive
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<PAGE>
performance bonuses as determined by the Compensation Committee. In
conjunction with the Offering, Mr. White will receive a grant of options for
275,000 shares of Common Stock at an exercise price equal to the Offering
Price. See "--1996 Stock and Incentive Plan."
The agreement provides that in the event of the termination of
employment without cause (as defined in the employment agreement), Mr. White
would be paid when and as due, the greater of the total salary payable to him
for the remainder of the term of the agreement or for 12 months. The agreement
also contains provisions for health insurance and other employee benefits
as provided by the Company to its senior executive officers and provides for
a covenant not to compete during the term of the agreement and for 12 months
thereafter.
In connection with his engagement as the Company's President and
Chief Executive Officer, Mr. White purchased a total of 370,000 shares of
Common Stock from the Company's founding stockholders for nominal
consideration. Of these shares, 270,000 shares are subject to the performance
earn-out discussed under "Shares Eligible for Future Sale."
1996 Stock and Incentive Plan
In October 1996, the Board of Directors adopted and the Company's
stockholders approved the Company's 1996 Stock and Incentive Plan (the "1996
Plan"). The primary reason for adopting the 1996 Plan was to ensure that the
Company will be able to provide equity-based compensation to its key employees.
Purposes. The purpose of the 1996 Plan is to attract and retain
outstanding individuals as officers and employees and to motivate such
individuals to achieve the long-term performance goals of the Company by
providing incentives to such individuals in the form of stock ownership or
monetary payments based on the value of the Common Stock. To achieve this
purpose, the 1996 Plan permits grants of incentive stock options ("ISOs"),
options not intended to qualify as ISOs ("nonqualified options"), stock
appreciation rights ("SARs"), restricted and unrestricted stock awards and
performance awards, and combinations of the foregoing (all referred to as
"Awards").
Number of Shares. The 1996 Plan permits Awards to be granted for a
total of 550,000 shares of Common Stock. Shares issuable under Awards that
terminate unexercised, shares issuable under Awards that are payable in stock
or cash but are paid in cash, and shares issued but later forfeited will be
available for future Awards under the 1996 Plan.
Eligible Recipients. All employees of the Company are eligible to
receive Awards under the 1996 Plan.
Administration. The 1996 Plan is administered by the Compensation
Committee, which determines, among other things and subject to certain
conditions, the persons eligible to receive Awards, the persons who actually
receive Awards, the type of each Award, the number of shares of Common Stock
subject to an Award, the date of grant, exercise schedule, vesting schedule
and other terms and conditions of each Award, whether to accelerate the
exercise or vesting schedule or waive any other term or condition of an Award,
whether to amend or cancel an Award, and the form of any instrument used
under the 1996 Plan. The Compensation Committee has the right to adopt rules
for the administration of the 1996 Plan,
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<PAGE>
settle all controversies regarding the 1996 Plan and any Award, and construe
and correct defects and omissions in the 1996 Plan and any Award. The 1996
Plan may be amended, suspended or terminated by the Board of Directors,
subject to certain conditions, provided that stockholder approval will be
required whenever necessary for the 1996 Plan to continue to satisfy
the requirements of certain securities and tax laws, rules and regulations.
The Company has issued options to purchase an aggregate of
275,000 shares of Common Stock (the "Performance Options") to Thomas H.
White. The Performance Options are exercisable at the Offering Price and
vest as follows: (i) 50% of the options become exercisable upon the Company
achieving earnings per share ("EPS") as shown in the Company's financial
statements for the year ended December 31, 1997 of not less than $0.30; and
(ii) the remaining 50% of the options become exercisable upon the Company
achieving EPS for the year ended December 31, 1998 of not less than $0.60.
Also, in any year, 100% of the Performance Options will vest upon the Company
achieving EPS of not less than $1.25 in any year. Notwithstanding, the
options become exercisable on December 31, 2004.
In addition, the Company intends to grant stock options to a new Chief
Financial Officer. These options will be on substantially the same terms as
the Performance Options granted to Mr. White.
Savings Incentive Plan
The Company intends to establish a profit sharing plan qualified
under Section 401(k) of the Internal Revenue Code. All employees of the
Company who have completed one year of service will be eligible to
participate in the plan. Subject to certain limitations on individual
contributions and allocations and Company deductions, the plan will allow
participants to defer up to 15% of their pay on a pre-tax basis. The plan
also may allow the Company to make discretionary matching contributions equal
to a portion of the amount a participant defers, up to 6% of the participant's
pay. All participants will be fully vested in their contributions.
Company contributions will vest 20% per year over five years.
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<PAGE>
CERTAIN TRANSACTIONS
In connection with its formation in June 1995, the Company issued a
total of 743,700 shares of Common Stock to the four founding stockholders of
the Company in a private transaction for nominal consideration. In April
1996, the Company authorized and in September 1996 issued a total of 248,640
shares of Common Stock to the IRA accounts of such persons in a private
transaction for nominal consideration.
In May 1996, the founding stockholders of the Company sold a total of
370,000 shares to Thomas H. White, currently the President and Chief Executive
Officer and a Director of the Company, for nominal consideration.
The Company has entered into loan and securities purchase agreements
(the "Loan Agreements") with the Morgenthau Bridge Funds, whereby the
Morgenthau Bridge Funds have loaned the Company $1.5 million to provide
funding for the deposits and other expenses incurred in connection with
the Acquisitions and the Offering. Advances pursuant to the Loan Agreements
bear interest at the rate of 18% per annum, and will be due in full by December
31, 1997. It is the intention of the Company to repay the loans with a
portion of the proceeds of the Offering. Gregory A. Poloni, Richard M. Andzel
and Anthony R. Morgenthau, each of whom is a founding stockholder of the
Company and a beneficial owner of over five percent of the Company's Common
Stock, are officers and owners of MBFC, the general partner or manager of the
Bridge Funds. Amy E. Parker, another founding stockholder of the Company,
was, until October 1996, affiliated with MBFC and received compensation from
MBFC in such capacity. In connection with the Morgenthau Bridge Funds, Messrs.
Poloni, Andzel and Morgenthau and Ms. Parker have received certain compensation
and other benefits associated with raising the Morgenthau Bridge Funds and
may receive additional compensation dependent on the financial results of
the funds, which are presently unknown. In connection with the September
Bridge, Morgenthau & Associates, Inc., a registered broker-dealer of which
Anthony R. Morgenthau is the President, received placement fees of $48,000.
During the period from June 1995 to October 17, 1996, the Company paid
management fees to MBFC totaling $363,500 for services rendered and $104,400 for
reimbursement of travel and other expenses incurred in connection with the
formation and organization of the Company, investigating and evaluating
potential acquisition candidates and arranging and negotiating the Acquisitions
and the Offering.
In connection with the Loan Agreements, the Company issued warrants
to the Morgenthau Bridge Funds to purchase 214,000 shares of Common Stock at
an exercise price of $0.10 per share. These warrants were exercised in
September 1996. The exercise price of the warrants was paid through the
application of $21,400 in accrued and unpaid interest to the exercise price.
The Company also granted the Bridge Funds certain demand and piggyback
registration rights covering the underlying Common Stock. See "Description
of Capital Stock -- Registration Rights."
The Company intends to enter into a non-exclusive agreement with
The Morgenthau Group Financial Corporation ("MGFC"), pursuant to which MGFC
will assist the Company by identifying and introducing the Company to
potential acquisition candidates. The agreement
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has an initial one-year term and renews automatically on a month-to-month
basis unless terminated by either party. MGFC will be paid a fee equal to one
and three-fourths percent of the total consideration paid in any acquisition
introduced by MGFC upon closing of the acquisition. MGFC will also be
reimbursed for reasonable out-of-pocket expenses incurred. Messrs. Poloni,
Andzel and Morgenthau are associated with MGFC in various capacities.
The Company has adopted a policy that all transactions between the
Company and its executive officers, directors, holders of 5% or more of the
shares of any class of its Common Stock and affiliates thereof, will contain
terms no less favorable to the Company than could have been obtained by it in
arms-length negotiations with unaffiliated persons and will be approved by a
majority of outside directors of the Company not having any interest in the
transaction.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of October 17,
1996, and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, by (i) each person known by the Company to be the beneficial owner of
more than five percent of the Common Stock, (ii) each of the Company's directors
and director nominees, (iii) each of the Company's executive officers and (iv)
all directors and executive officers as a group. In addition, the following
table has been adjusted to reflect the sale of a total of 75,000 shares by the
founding stockholders to a new Chief Financial Officer, which the Company
anticipates will occur in November 1996, prior to the consummation of the
Offering. Except as otherwise indicated below, the beneficial owners of the
Common Stock listed below have sole investment and voting power with respect to
such shares.
<TABLE>
<CAPTION>
Percent Owned
Name and Address of Beneficial Shares
Owner(1)(2) Beneficially Before the After the
Owned (3) Offering Offering
- ----------------------------------------------------- ---------------- -------------- --------------
<S> <C>
Thomas H. White(4)............................. 370,000 18.5 9.3
Richard M. Andzel(5)(6)(7)(8).................. 317,825 15.9 7.9
Anthony R. Morgenthau(5)(6)(7)(8).............. 317,825 15.9 7.9
Gregory A. Poloni(5)(6)(7)(8).................. 329,738 16.5 8.2
Amy E. Parker(8)(9)........................... 155,737 7.8 3.9
Executive Officers and Directors
as a Group (2 persons)....................... 687,825 34.4 17.2
</TABLE>
- ------------------------
* Denotes less than 1.0%
(1) Except as otherwise shown, the address of each person listed above
is c/o of the Company, 3333 West Commercial Blvd., Suite 203, Fort
Lauderdale, Florida 33309.
(2) The following persons (the "Selling Stockholders") have granted the
Underwriter an option to purchase up to 50,000 additional shares of
Common Stock issued to them pursuant to the September Bridge: .
(3) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment
power with respect to the shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days following
October 17, 1996, are deemed outstanding for computing the share
ownership and percentage ownership of the person holding such
securities, but are not deemed outstanding for computing the percentage
of any other person.
(4) Of these shares, 270,000 shares are subject to the performance
earn-out discussed under "Shares Eligible for Future Sale."
(5) Includes 214,000 shares issued to the Morgenthau Bridge Funds.
Each of Messrs. Poloni, Andzel and Morgenthau may be deemed to
have indirect beneficial ownership of such shares as a result of
their positions with MBFC.
(6) The address of Messrs. Poloni, Andzel and Morgenthau is c/o The
Morgenthau Group, Inc., 504 Cathedral Street, Baltimore, Maryland
21201.
(7) Includes 74,370, 49,950 and 49,950 shares held by individual
retirement accounts for Gregory A. Poloni, Richard M. Andzel and
Anthony R. Morgenthau, respectively.
(8) Includes 76,500, 51,000, 51,000 and 76,500 shares beneficially
owned by Messrs. Poloni, Andzel and Morgenthau and Ms. Parker,
respectively, which are subject to the performance earn-out
discussed under "Shares Eligible for Future Sale."
(9) The address of Ms. Parker is 1150 NW 93rd Terrace, Plantation,
Florida 33322. Includes 74,370 shares held by an individual
retirement account for the benefit of Ms. Parker.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company currently consists of
10,500,000 shares, of which 10,000,000 shares have been designated Common Stock,
par value $0.01 per share, and 500,000 shares have been designated Preferred
Stock, par value $0.01 per share. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Company's Certificate of Incorporation and By-Laws, as amended, copies of which
are exhibits to the Registration Statement of which this Prospectus is a part.
Common Stock
As of October 17, 1996, there were 1,228,125 shares of Common Stock
outstanding and held of record by 25 stockholders. Based upon the number of
shares outstanding as of that date and after giving effect to the issuance of
771,875 shares to the Acquired Companies and the issuance of the 2,000,000
shares of Common Stock offered by the Company hereby, there will be 4,000,000
shares of Common Stock outstanding.
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
any outstanding Preferred Stock. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock, as such, have no preemptive, subscription, redemption
or conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in the Offering will be, when issued and paid for, fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue from time to time in the future.
Preferred Stock
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 500,000 shares of Preferred Stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption prices, liquidation preferences and the number of shares constituting
any series. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company.
48
<PAGE>
Delaware Law and Certain Certificate of Incorporation and By-Law Provisions
The Company is subject to the provisions of Section 203 of the General
Corporation Law of the State of Delaware (the "Delaware GCL"). Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
either caused by the interested stockholder or resulting in a financial benefit
to the interested stockholder which is not shared pro rata with the other
stockholders of the Company. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of a corporation's voting stock. The
statute contains provisions enabling a corporation to avoid the statute's
restrictions if stockholders holding a majority of a corporation's voting stock
approve an amendment to the corporation's certificate of incorporation or
by-laws to avoid the restrictions. The Company has not and does not currently
intend to "elect out" of the application of this statute.
The Company's Certificate of Incorporation contains certain provisions
permitted under the Delaware GCL which eliminate the personal liability of
directors for monetary damages for a breach of the director's fiduciary duty,
except for: (i) breach of a director's duty of loyalty; (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) unlawful payments of dividends, stock purchases or stock
redemptions; and (iv) any transaction from which the director derives any
improper personal benefit. The Company's Certificate of Incorporation and
By-Laws also contain provisions indemnifying the Company's directors, officers
and employees to the fullest extent permitted by the Delaware GCL. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors, officers and employees.
The Certificate of Incorporation provides that a director's liability shall be
eliminated or limited to the fullest extent permitted by the Delaware GCL, as
amended from time to time.
The Company's Certificate of Incorporation empowers the Board of
Directors to reclassify the Board into three classes as nearly equal in number
as possible with staggered three-year terms. See "Management -- Executive
Officers and Directors." The classification of the Board of Directors could make
it more difficult for a third party to acquire, or discourage a third party from
attempting to acquire, control of the Company. The Board of Directors currently
has no plans to reclassify the Board.
Registration Rights
Pursuant to the terms of a Loan and Securities Purchase Agreements
among the Company and the Morgenthau Bridge Funds, the funds are entitled to
certain registration rights with respect to the 214,000 shares of Common Stock
issued in connection with the Bridge Financing. Subject to the lock-up agreement
in favor of the Underwriter, at any time after June 30, 1997, the holders of
registration rights may demand, under certain circumstances, that the Company
effect one registration of their shares of Common Stock for resale. The Company
generally is not required to effect more than one such demand registration.
Investors in the September Bridge have the right to have up to 50,000 shares of
Common Stock included in the
49
<PAGE>
shares subject to the over-allotment option. The Morgenthau Bridge Funds and the
investors in the September Bridge also have certain "piggyback" registration
rights with respect to any eligible registration statement the Company proposes
to file with the Securities and Exchange Commission ("SEC") to register any of
its securities, either for its own account or for the account of other
stockholders, subject to certain pro rata reductions in the case of an
underwritten offering to the extent the managing underwriter determines that
inclusion of all or a portion of the shares requested by the holders would
adversely affect the distribution of the securities to be sold by the Company.
The Company must bear all expenses related to the registration of such shares,
except for underwriting discounts and selling commissions.
In connection with the Acquisitions, the Company has granted the
sellers of the Acquired Companies certain piggyback registration rights for the
771,875 shares issued in the Acquisitions with respect to any eligible
registration statement that the Company files with the SEC. The Company also has
granted the Underwriter certain registration rights in connection with the
Underwriter's Warrants. See "Underwriting."
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Continental
Stock Transfer and Trust Company.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect market prices prevailing from time to time. Sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price and
the ability of the Company to raise equity capital in the future.
Upon completion of the Offering, the Company will have a total of
4,000,000 shares of Common Stock outstanding (assuming no exercise of the
Underwriter's over-allotment option). Of these shares, the 2,000,000 shares
offered hereby (assuming no exercise of the Underwriter's over-allotment option)
will be freely tradable without restriction or registration under the Securities
Act by persons other than "affiliates" of the Company as defined in Rule 144
under the Securities Act. The remaining 2,000,000 shares outstanding are
"restricted shares" as defined in Rule 144 under the Securities Act (the
"Restricted Shares").
The Company's officers and directors, and certain other stockholders,
including the sellers of the Acquired Companies, who in the aggregate will hold
approximately 2,000,000 shares upon the completion of the Offering, have agreed
(the "Lock-Up Agreements") that they will not without the written consent of the
Underwriter, sell, offer, hypothecate, make any short sale, pledge, transfer or
otherwise dispose of, directly or indirectly, of any shares of Common Stock or
securities convertible into or exchangeable for shares of Common Stock owned by
them or with respect to which any of them have the power of disposition during a
18 month period following the date of this Prospectus. In addition, a total of
600,000 Restricted Shares owned by the Company's founding stockholders and
members of management are subject to performance earn-outs restricting their
sale as follows: (i) 50% of the shares may be sold upon the Company achieving
EPS for the year ended December 31, 1997 of not less than $0.30 per share; and
the remaining 50% of the shares may be sold upon the Company achieving EPS for
the year ended December 31, 1998 of not less than $0.60 per share. Also, in any
year, subject to Rule 144, all of the shares may be sold upon the Company
achieving EPS of not less than $1.25 in any year. Notwithstanding, all of the
shares may be sold on or after December 31, 2004. Subject to meeting the
performance earn-out, approximately 260,485 shares will be eligible for sale
under Rule 144 upon expiration of the Lock-Up Agreements and the remainder of
the Restricted Shares will become eligible for sale under Rule 144 upon the
expiration of their respective two-year holding periods.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years, including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the number of shares of Common
Stock then outstanding (approximately 40,000 shares upon completion of the
Offering) or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements, and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a
51
<PAGE>
sale, and who has beneficially owned the shares proposed to be sold for at least
three years, will be entitled to sell such shares under Rule 144(k) immediately
after the Offering without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
A total of 600,000 shares of Common Stock are reserved for issuance
upon the exercise of options that may be granted under the 1996 Plan and the
Directors Option Plan. The Company intends to file a registration statement on
Form S-8 to register the Common Stock issued or reserved for issuance under the
plans. Shares of Common Stock issued after the effective date of such
registration statement and the shares of Common Stock outstanding on the date of
such registration statement as a result of option exercises, other than shares
held by affiliates of the Company, will be eligible for resale in the public
market without restriction subject to the agreements described in the preceding
paragraph. See "Management -- Board of Directors -- Directors Option Plan" and
"-- 1996 Stock and Incentive Plan."
52
<PAGE>
UNDERWRITING
The Underwriter has agreed to purchase from the Company, subject to the
terms and conditions of the Underwriting Agreement between the Company and the
Underwriter, the number of shares of Common Stock set forth opposite its name.
The Underwriting Agreement provides that the obligations of the Underwriter are
subject to certain conditions precedent and that the Underwriter shall be
obligated to purchase all of the Shares if any of the Shares are purchased. The
underwriting discount set forth on the cover page of this Prospectus will be
allowed to the Underwriter at the time of delivery to the Underwriter of the
Shares so purchased.
Number of
Shares
to be
Name of Underwriter Purchased
H. J. Myers & Co., Inc...........................
The Underwriter has advised the Company that it proposes to offer the
Shares to the public at an offering price estimated to be $5.50 per Share and
that the Underwriter may allow certain dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") a concession of not in excess
of $0.__ per share. After commencement of the Offering, the public offering
price and concession may be changed.
The Company and the Selling Stockholders have granted to the
Underwriter an option, exercisable during the 30-day period from the date of
this Prospectus, to purchase up to a maximum of 300,000 additional shares on the
same terms set forth above. The Underwriter may exercise such right only to
satisfy over-allotments in the sale of the shares.
The Company has agreed to pay to the Underwriter a non-accountable
expense allowance equal to 3.0% of the total proceeds of the Offering, or
$330,000 ($379,500 if the Underwriter exercises the over-allotment option in
full). In addition to the Underwriter's commission and the Underwriter's
nonaccountable expense allowance, the Company is required to pay the costs of
qualifying the shares of Common Stock, under federal and state securities laws,
together with legal and accounting fees (including $46,315 payable to the
Underwriter's counsel as reimbursement for its fees in connection with the
representation of an underwriter in a proposed offering that was not completed),
printing and other costs in connection with the Offering, estimated to total
approximately $680,000.
At the closing of the Offering, the Company will issue to the
Underwriter for nominal consideration the Underwriter Warrant to purchase for
investment a maximum of 200,000 shares of Common Stock. The Underwriter Warrant
will be exercisable for a four-year period commencing one year from the date of
this Prospectus. The exercise price of the Underwriter Warrant is equal to 120%
of the Offering Price. The Underwriter Warrant will not be transferable prior to
its exercise date except to officers of the Underwriter and members of the
selling group and officers and partners thereof. The Underwriter Warrant will
contain anti-dilution provisions. The Underwriter Warrant does not entitle the
Underwriter to any rights as
53
<PAGE>
a stockholder of the Company until such warrant is exercised and the share of
Common Stock are purchased thereunder. The Underwriter Warrant and the shares of
Common Stock thereunder may not be offered for sale except in compliance with
the applicable provisions of the Securities Act. The Company has agreed that, if
subsequent to the Offering it shall cause to be filed with the SEC either an
amendment to the Registration Statement of which this Prospectus is a part or a
separate registration statement, the Underwriter shall have the right during the
five-year period commencing on the date of this Prospectus to include in such
amendment or Registration Statement the Underwriter Warrant and the shares of
Common Stock issuable upon its exercise at no expense to the Underwriter.
Additionally, the Company has agreed that upon written request by a holder or
holders of 50% or more of the Underwriter Warrant which is made during the
exercise period of the Underwriter Warrant, the Company will on two separate
occasions, register the Underwriter's Warrant and the shares of Common Stock
issuable upon exercise thereof. The initial such registration will be at the
Company's expense and the second such registration will be at the expense of the
holder(s) of the Underwriter Warrant.
For the period during which the Underwriter Warrant is exercisable, the
holder or holders will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other stockholders of the Company. The holder or holders of the
Underwriter Warrant can be expected to exercise it at a time when the Company
would, in all likelihood, be able to obtain any needed capital from an offering
of its unissued Common Stock on terms more favorable to the Company than those
provided for in the Underwriter Warrant. Such facts may materially adversely
affect the terms on which the Company can obtain additional financing. To the
extent that the Underwriter realizes any gain from the resale of the Underwriter
Warrant or the securities issuable thereunder, such gain may be deemed
additional underwriting compensation under the Securities Act.
The Company has agreed to enter into a one-year consulting agreement
with the Underwriter pursuant to which the Underwriter agrees to perform
consulting services related to corporate finance and other financial service
matters, upon the request of the President of the Company, and will make
available qualified personnel for this purpose and devote such business time and
attention to such matters as it shall determine is required. The non-refundable
consulting fee of $72,000 will be payable, in full, on the closing date of the
Offering.
The Company has agreed to engage a public relations firm mutually
acceptable to the Underwriter and the Company. The Company has also agreed to
maintain a relationship with such public relations firm for a minimum period of
24 months and on such other terms as are acceptable to the Underwriter.
The Company has also agreed that, for a period of two years from the
closing of the Offering, if it participates in any merger, consolidation or
other transaction which the Underwriter has brought to the Company (including an
acquisition of assets or stock for which it pays, in whole or in part, with
shares of the Company's Common Stock or other securities), and the transaction
is consummated within 36 months of the closing of the Offering, then it will pay
for the Underwriter's services an amount equal to 5.0% of the first $2,000,000
of value paid or value received in the transaction and 2.0% of any consideration
above $2,000,000. The Company has also agreed that if, during this two-year
period, someone other than the
54
<PAGE>
Underwriter brings such a merger, consolidation or other transaction to the
Company, and if the Company in writing retains the Underwriter for consultation
or other services in connection therewith, then upon consummation of the
transaction, the Company will pay to the Underwriter as a fee the appropriate
amount as set forth above or as otherwise agreed between the Company and the
Underwriter.
Holders of all of the Company's capital stock outstanding prior to the
Offering are expected to be subject to lock-up agreements under which the
holders of such shares will agree not to sell or dispose of any shares owned by
them prior to this Offering, or subsequently acquired under any option, warrant
or convertible security owned prior to this Offering, for a period of 18 months
after the date of this Prospectus without the prior written consent of the
Underwriter.
The Company has agreed that, for a period of 12 months from the date of
this Prospectus, it will not sell any securities, with the exception of the
shares of Common Stock issued upon exercise of currently outstanding options,
warrants or other convertible securities, without the Underwriter's prior
written consent, which consent shall not be unreasonably withheld. In addition,
for a period of 24 months from the date of this Prospectus, the Company will not
sell or issue any securities pursuant to Regulation S under the Securities Act
without the Underwriter's prior written consent.
The Company has agreed that, for a period of three years from the date
of this Prospectus, it will allow a non-voting observer designated by the
Underwriter and acceptable to the Company to receive notice of and be invited to
attend all meetings of the Company's Board of Directors.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriter against certain liabilities in
connection with the Registration Statement, including liabilities under the
Securities Act.
The Underwriter has advised the Company that the Underwriter does not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to the Offering, there has been no public market for the shares
of Common Stock. The initial public offering price has been negotiated among the
Company and the Underwriter. Among the factors considered in determining the
initial public offering price of the Common Stock, are prevailing market
conditions, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed
upon for the Company by Whiteford, Taylor & Preston L.L.P., Baltimore, Maryland.
Certain legal matters will be passed upon for the Underwriters by Shereff,
Friedman, Hoffman & Goodman, LLP, New York, New York.
55
<PAGE>
EXPERTS
The historical financial statements of the Company and the Acquired
Companies as of December 31, 1995 for each of the two years in the period ended
December 31, 1995 included in this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is not currently subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended. The Company has filed with the
SEC a Registration Statement on Form SB-2 (the "Registration Statement") under
the Securities Act of 1933, as amended, with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is made to the Registration Statement
and to the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected by anyone without charge at the SEC's principal office in Washington,
D.C., and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of certain fees prescribed by the SEC.
56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
LIFE CRITICAL CARE CORPORATION:
Report of Independent Auditors.............................................................................................F-3
Financial Statements:
Balance Sheets as of December 31, 1995 and (Unaudited) June 30, 1996......................................................F-4
Statements of Operations for the period from June 19, 1995 (Date of Inception) to December 31, 1995 and
(Unaudited) for the Six Months Ended June 30, 1996...................................................................F-5
Statements of Shareholders' Equity (Deficit) for the period from June 19, 1995 (Date of Inception) to
December 31, 1995 and (Unaudited) for the Six Months Ended June 30, 1996.............................................F-6
Statements of Cash Flows for the period from June 19, 1995 (Date of Inception) to December 31, 1995 and
(Unaudited) for the Six Months Ended June 30, 1996...................................................................F-7
Notes to Financial Statements..............................................................................................F-8
BLUE WATER MEDICAL SUPPLY, INC. AND BLUE WATER INDUSTRIAL PRODUCTS, INC.
Report of Independent Auditors..................................................................................................F-13
Combined Financial Statements:
Combined Balance Sheets as of December 31, 1995 and (Unaudited) June 30, 1996.............................................F-14
Combined Statements of Operations for the Years Ended
December 31, 1994 and 1995 and (Unaudited) for the Six Months Ended June 30, 1995 and 1996..........................F-15
Combined Statements of Shareholders' Equity for the Years Ended December 31, 1994 and 1995 and
(Unaudited) for the Six Months Ended June 30, 1996..................................................................F-16
Combined Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 and (Unaudited) for
the Six Months Ended June 30, 1995 and 1996.........................................................................F-17
Notes to Combined Financial Statements....................................................................................F-18
GREAT LAKES HOME MEDICAL, INC.
Report of Independent Auditors..................................................................................................F-23
Financial Statements:
Balance Sheets as of December 31, 1995 and (Unaudited)
June 30, 1996.......................................................................................................F-24
Statements of Operations for the Years Ended December 31,
1994 and 1995 and (Unaudited) for the Six Months Ended
June 30, 1995 and 1996..............................................................................................F-25
Statements of Shareholders' Equity for the Years Ended
December 31, 1994 and 1995 and (Unaudited) for the
<PAGE>
Six Months Ended June 30, 1996......................................................................................F-26
Statements of Cash Flows for the Years Ended December 31,
1994 and 1995 and (Unaudited) for the Six Months
Ended June 30, 1995 and 1996........................................................................................F-27
Notes to Financial Statements.............................................................................................F-28
ABC MEDICAL SUPPLY, INC.:
Report of Independent Auditors..................................................................................................F-32
Financial Statements:
Balance Sheets as of December 31, 1995 and (Unaudited) June 30, 1996......................................................F-33
Statements of Operations for the Years Ended December 31, 1994 and 1995 and (Unaudited) for the Six Months
Ended June 30, 1995 and 1996........................................................................................F-34
Statements of Shareholders' Equity for the Years Ended December 31, 1994 and 1995 and (Unaudited) for the
Six Months Ended June 30, 1996......................................................................................F-35
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 and (Unaudited) for the Six Months Ended
June 30, 1995 and 1996..............................................................................................F-36
Notes to Financial Statements.............................................................................................F-37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Introduction to Unaudited Pro Forma Condensed Consolidated
Financial Statements................................................................................................F-41
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1996..............................................F-42
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Six Months ended June 30, 1996......................................................................................F-43
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Year Ended December 31, 1995........................................................................................F-44
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements................................................................................................F-45
</TABLE>
F-2
<PAGE>
Report of Independent Auditors
The Board of Directors
Life Critical Care Corporation
We have audited the accompanying balance sheet of Life Critical Care Corporation
as of December 31, 1995, and the related statements of operations, shareholders'
equity (deficit), and cash flows for the period from June 19, 1995 (date of
inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
1995, and the results of its operations and cash flows for the period from June
19, 1995 (date of inception) to December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 23, 1996
F-3
<PAGE>
Life Critical Care Corporation
Balance Sheets
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
-------------------------------------------------
(Unaudited)
<S> <C>
Assets
Current assets:
Cash $ 23,158 $ 188
Deferred costs 245,426 423,563
Deposits 250,000 800,000
-------------------------------------------------
Total current assets 518,584 1,223,751
Organization costs, net of accumulated amortization
of $73 in 1995 and $219 in 1996
1,387 1,241
-------------------------------------------------
Total assets $519,971 $1,224,992
=================================================
Liabilities and shareholders' equity (deficit)
Current liabilities:
Accounts payable $ 59,400 $ 216,193
Accrued interest 12,618 108,941
Loan payable to affiliate 15,000 -
-------------------------------------------------
Total current liabilities 87,018 325,134
Notes payable to affiliates 700,879 1,500,000
Shareholders' equity (deficit):
Preferred stock, $.01 par value, 500,000 shares authorized,
no shares issued and outstanding - -
Common stock, no par value, 10,000,000 shares authorized,
743,700 at December 31, 1995 and 992,340 at June 30, 1996
shares issued and outstanding, net of loans receivable from
shareholders for common stock of $7 and $10, respectively - -
Additional paid-in capital, net of loans receivable from
shareholders for common stock of $663 and $2,900, respectively - 59,200
Accumulated deficit (267,926) (659,342)
-------------------------------------------------
Total shareholders' equity (deficit) (267,926) (600,142)
-------------------------------------------------
Total liabilities and shareholders' equity (deficit) $519,971 $1,224,992
=================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Life Critical Care Corporation
Statements of Operations
For the Period from June 19, 1995 (Date of Inception)
to December 31, 1995 and (Unaudited) for the Six Months
Ended June 30, 1996
<TABLE>
<CAPTION>
1995 1996
------------------------------------------------
(Unaudited)
<S> <C>
Operating expenses:
General and administrative $ 20,049 $ 135,814
Management fee 225,000 90,000
Professional fees 10,259 57,409
------------------------------------------------
Operating loss (255,308) (283,223)
Interest expense 12,618 108,193
------------------------------------------------
Net loss $(267,926) $(391,416)
================================================
Loss per common share $ (.49) $ (.45)
================================================
Weighted-average shares outstanding 546,392 875,995
================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Life Critical Care Corporation
Statements of Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
Additional
Common Paid-in Shareholder Accumulated
Stock Capital Loans Deficit Total
-----------------------------------------------------------------------------
<S> <C>
Balance at June 19, 1995 (Date of
Inception) $7 $ 663 $(670) $ - $ -
Net loss - - - (267,926) (267,926)
-----------------------------------------------------------------------------
Balance at December 31, 1995 7 663 (670) (267,926) (267,926)
Compensation expense on sale of
common stock to management
(Unaudited) - 59,200 - - 59,200
Issuance of stock (Unaudited) 3 2,237 (2,240) - -
Net loss (Unaudited) - - - (391,416) (391,416)
=============================================================================
Balance at June 30, 1996 (Unaudited) $10 $62,100 $(2,910) $(659,342) $(600,142)
=============================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Life Critical Care Corporation
Statements of Cash Flows
For the Period from June 19, 1995 (Date of Inception) to December 31,
1995 and (Unaudited) for the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
1995 1996
---------------------------------------------
(Unaudited)
<S> <C>
Operating activities
Net loss $(267,926) $(391,416)
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 73 146
Stock compensation expense - 59,200
Changes in operating assets and liabilities:
Accounts payable 59,400 156,793
Accrued expenses 12,618 96,323
-------------------------------------------------
Net cash used in operating activities (195,835) (78,954)
Investing activities
Payment of organization and acquisition costs (211,999) (116,979)
Deposits made (250,000) (550,000)
-------------------------------------------------
Net cash used in investing activities (461,999) (666,979)
Financing activities
Proceeds from notes payable to affiliates 700,879 799,121
Payment of deferred offering costs (34,887) (61,158)
Proceeds (payment) of loans payable to affiliates 15,000 (15,000)
-------------------------------------------------
Net cash provided by financing activities 680,992 722,963
-------------------------------------------------
Net increase (decrease) in cash 23,158 (22,970)
Cash at beginning of period - 23,158
-------------------------------------------------
Cash at end of period $ 23,158 $ 188
=================================================
Supplemental information
Cash paid for interest $ - $ 11,870
=================================================
</TABLE>
See accompanying notes.
F-7
<PAGE>
Life Critical Care Corporation
Notes to Financial Statements
(Information with respect to the six-month period
ended June 30, 1996 is unaudited)
1. Description of Business
Life Critical Care Corporation (the Company) was formed on June 19, 1995. The
Company acquires and manages providers of health care products and services,
primarily in the Midwest.
Basis of Presentation
The financial statements of the Company as of June 30, 1996, and for the
six-month period ended June 30, 1996, and all information subsequent to December
31, 1995, are unaudited. All adjustments and accruals (consisting only of normal
recurring adjustments) have been made which, in the opinion of management, are
necessary for a fair presentation of the financial position and operating
results of the Company for the interim period presented.
The interim financial statements are condensed and do not include all the
information and disclosures necessary for a full interim financial statement
presentation.
2. Summary of Significant Accounting Policies
Organization Costs and Deferred Costs
Organization costs are amortized on a straight-line basis over five years.
Deferred costs arise from a planned initial public offering which will be netted
against offering proceeds upon completion of the offering and from the planned
acquisitions (see Note 9) which will be applied to the purchase price.
Income Taxes
The Company uses the liability method of accounting for income taxes, as set
forth in the Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
F-8
<PAGE>
Life Critical Care Corporation
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The Company's financial instruments include accounts payable, accrued expenses,
and loans and notes payable. The fair values of all financial instruments were
not materially different from their carrying values.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Net Loss and Pro Forma Net Loss Per Common Share
Pro forma net loss per common share and historical net loss per common share (as
discussed below) are computed based upon the weighted-average number of common
shares outstanding. Common equivalent shares are not included in the pro forma
and historical per share calculations since the effect of their inclusion would
be antidilutive, except that common equivalent shares issued during the 12-month
period prior to the proposed public offering have been included in the pro forma
calculation as if they were outstanding for all periods presented using the
treasury stock method and an assumed initial public offering price of $5.50 per
share.
3. Related Party Transactions
In August 1995, the Company entered into two promissory notes due December 31,
1997, to affiliates for borrowings up to $750,000 on each note. The notes accrue
interest at 18% per year which is payable quarterly commencing December 31,
1995. Any unpaid interest accrues to the notes. Borrowings on the notes were
$700,879 and $1,500,000 at December 31, 1995 and June 30, 1996, respectively.
In the period ended December 31, 1995, the Company paid a $225,000 management
fee to an affiliate for personnel, office supplies, insurance and other
services provided by the affiliate.
On May 19, 1996, certain shareholders of the Company sold 370,000 shares of
Common Stock to the Chief Executive Officer (CEO) for $.01 per share. The
Company has recorded compensation expense of $88,800 in connection with this
transaction.
F-9
<PAGE>
Life Critical Care Corporation
Notes to Financial Statements (continued)
4. Common Stock Warrants
In connection with the issuance of the promissory notes in August 1995, the
Company issued common stock purchase warrants for 214,000 shares. These warrants
have an exercise price of $.10 per share and are exercisable commencing March
15, 1996, and expire upon the earlier of December 31, 1998, or two years from
the date all sums under the respective notes have been paid. All warrants were
outstanding at December 31, 1995. At December 31, 1995, 214,000 shares of common
stock have been reserved for future issuance in connection with these warrants.
In conjunction with a planned public offering of common stock, warrants to
purchase an aggregate of 200,000 of common stock at an exercise price equal to
120% of the initial public offering price per share will be sold to the managing
underwriter of the initial public offering. The warrants will be exercisable for
a period of four years beginning one year from the effective date of the initial
public offering.
5. Stock Options
On October 16, 1996, the Board of Directors adopted the 1996 Stock and Incentive
Plan (the Plan) for employees. The maximum number of shares issuable under the
Plan is 550,000. The Plan is administered by a committee consisting of two or
more outside directors appointed by the board of directors of the Company.
The Plan provides for granting of Incentive Stock Options (ISOs) and
Non-Qualified Stock Options (NSOs). The exercise price shall be determined by
the committee; however, such exercise price shall not be less than the fair
value of the common stock on the date of grant. The term of the options shall be
determined by the committee, and in the case of ISOs, shall not exceed ten
years.
In addition, the Board of Directors adopted the 1996 Non-employee Directors
Stock Option Plan. (Directors Plan). This plan will be effective upon the
effective date of a planned initial public offering. The Directors Plan provides
for issuance of a maximum number of 50,000 shares. Under the Directors Plan,
each outside director will be automatically granted 7,500 shares on the date of
their initial election to the board of directors. The options vest 50% as of the
date of the first annual meeting following date of grant and 50% as of the date
of the second annual meeting. In addition, on the date of the annual meeting
each outside director will be granted 2,500 shares or a lesser number of shares
prorated for the number of months the director has served on the board of
directors since the most recent annual meeting. These options vest as of the
date of the first annual meeting following the date of grant. All options under
the Directors Plan have a ten-year term.
F-10
<PAGE>
Life Critical Care Corporation
Notes to Financial Statements (continued)
6. Capital Stock
All common share and per share amounts in the financial statements and notes
to financial statements have been restated to reflect a 1,110 for 1 stock
split effective August 29, 1996.
7. Income Taxes
The Company has net operating loss carryforwards for tax purposes of
approximately $270,000 at December 31, 1995, which begin to expire in 2010.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax asset at
December 31, 1995, of $100,000 relates primarily to the net operating loss
carryforward for income tax purposes and has been offset by a valuation
allowance in the same amount.
Based on the Internal Revenue Code and changes in the ownership of the Company,
utilization of the net operating loss carryforward may be subject to annual
limitations.
8. Commitments
The Company has entered into an employment agreement with its CEO which provides
for annual base compensation of $150,000 through December 31, 1996, and
automatic increases to $175,000 in 1997 and $200,000 in 1998. Under the
agreement, the CEO is entitled to quarterly bonuses of $7,500 through December
31, 1997. Additional bonuses of up to 50% of base compensation may be granted at
the discretion of the Board of Directors.
The agreement also provides for the granting of options to purchase 100,000
shares of Common Stock upon the completion of the proposed initial public
offering. These options will vest over five years and will have an exercise
price equal to the initial public offering price.
9. Subsequent Events
In 1996, the Company has entered into a definitive stock purchase agreement and
three asset purchase agreements with home medical equipment suppliers. In
connection with these purchase agreements, deposits totaling $250,000 and
$800,000 at December 31, 1995 and June 30, 1996, respectively, have been paid by
the Company. In September 1996, the Company terminated its stock purchase
agreement, forfeiting a $700,000 deposit.
The transactions proposed by the asset purchase agreements are to close
concurrent with the effective date of the planned initial public offering. The
aggregate purchase price of $18,277,300
F-11
<PAGE>
Life Critical Care Corporation
Notes to Financial Statements (continued)
is to be paid $14,032,000 in cash and $4,245,300 in common stock of the Company
to be issued to the sellers. The cash portion of the purchase price will be
funded through the proceeds of the planned initial public offering and a $6
million term loan, which the Company expects to negotiate with a lender.
These agreements are contingent upon the Company completing the initial public
offering, and one of the asset purchase agreements contains a contingent payment
clause in the event the fair value of the stock of the Company has declined by
greater than 15% by the second anniversary of the closing date of the asset
purchase.
F-12
<PAGE>
Report of Independent Auditors
The Board of Directors
Life Critical Care Corporation
We have audited the accompanying combined balance sheet of Blue Water Medical
Supply, Inc. and Blue Water Industrial Products, Inc. as of December 31, 1995
and the related combined statements of operations, shareholders' equity, and
cash flows for the years ended December 31, 1994 and 1995. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Companies at
December 31, 1995, and the results of their operations and their cash flows for
the years ended December 31, 1994 and 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG, LLP
Chicago, Illinois
June 28, 1996
F-13
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Combined Balance Sheets
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
-------------------------------------------------
(Unaudited)
<S> <C>
Assets
Current assets:
Cash $ 149,940 $ 311,519
Trade accounts receivable, less allowance for doubtful
accounts of $242,493 in 1995 and $290,233 in 1996 797,493 952,459
Advances to shareholders 609,265 700,765
Inventories 374,530 405,417
Prepaid expenses and other assets 45,224 109,742
-------------------------------------------------
Total current assets 1,976,452 2,479,902
Property and equipment, net 903,088 906,034
Other assets 103,306 81,315
-------------------------------------------------
Total assets $2,982,846 $3,467,251
=================================================
Liabilities and shareholders' equity Current liabilities:
Line of credit $ 364,000 $ 810,000
Accounts payable 553,192 329,912
Accrued expenses 74,799 171,518
Current portion of long-term debt and capital lease obligations 240,504 41,277
-------------------------------------------------
Total current liabilities 1,232,495 1,352,707
Long-term debt, less current portion 79,037 14,760
Capital lease, less current portion 87,824 -
Shareholders' equity:
Common stock, $1 and $10 par value:
50,000 and 5,000 shares authorized, 3,000 and 600 issued and
outstanding, Blue Water Industrial Products, Inc. and Blue Water
Medical Supply, Inc., respectively
9,000 9,000
Additional paid-in capital 39,650 39,650
Retained earnings 1,534,840 2,051,134
-------------------------------------------------
Total shareholders' equity 1,583,490 2,099,784
-------------------------------------------------
Total liabilities and shareholders' equity $2,982,846 $3,467,251
=================================================
</TABLE>
See accompanying notes.
F-14
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Combined Statements of Operations
<TABLE>
<CAPTION>
Year Ended Six Months
December 31 Ended June 30
1994 1995 1995 1996
----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Net sales $1,818,952 $2,001,952 $1,022,617 $1,020,724
Rental revenue 2,954,148 3,287,730 1,552,180 1,820,382
----------------------------------------------------------------------------------------------
4,773,100 5,289,682 2,574,797 2,841,106
Cost of revenues 1,632,018 1,752,968 841,981 851,859
----------------------------------------------------------------------------------------------
Gross profit 3,141,082 3,536,714 1,732,816 1,989,247
Selling, general and
administrative expenses
2,623,294 2,858,809 1,415,563 1,430,769
----------------------------------------------------------------------------------------------
Income from operations 517,788 677,905 317,253 558,478
Other (income) expense:
Interest income (14,102) (15,548) (7,130) (8,035)
Interest expense 85,638 82,110 28,675 48,525
Other (income) expense, net (52,334) (60,070) (21,518) (25,881)
----------------------------------------------------------------------------------------------
19,202 6,492 27 14,609
----------------------------------------------------------------------------------------------
Income before income taxes 498,586 671,413 317,226 543,869
Income taxes 39,252 47,639 21,784 27,575
----------------------------------------------------------------------------------------------
Net income $ 459,334 $ 623,774 $ 295,442 $ 516,294
==============================================================================================
Pro forma data (unaudited):
Pro forma net income adjusted
only for income taxes $299,152 $402,848 $190,336 $326,321
========= ======== ========= ========
Pro forma net income adjusted for
compensation differential and
income taxes $472,898 $366,821
======== ========
</TABLE>
See accompanying notes.
F-15
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Combined Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Additional Retained
Stock Paid-In Capital Earnings Total
----------------------------------------------------------------------------------
<S> <C>
Balance at January 1, 1994 $9,000 $39,650 $ 684,908 $ 733,558
Net income - - 459,334 459,334
Shareholder distributions - - (233,176) (233,176)
----------------------------------------------------------------------------------
Balance at December 31, 1994 9,000 39,650 911,066 959,716
Net income - - 623,774 623,774
----------------------------------------------------------------------------------
Balance at December 31, 1995 9,000 39,650 1,534,840 1,583,490
Net income (Unaudited) - - 516,294 516,294
----------------------------------------------------------------------------------
Balance at June 30, 1996 (Unaudited) $9,000 $39,650 $2,051,134 $2,099,784
==================================================================================
</TABLE>
See accompanying notes.
F-16
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 June 30
1994 1995 1995 1996
-----------------------------------------------------------
(Unaudited)
<S> <C>
Operating activities
Net income $459,334 $623,774 $295,442 $516,294
Adjustments to reconcile net income to:
Allowance for doubtful accounts 232,725 5,655 - -
Depreciation and amortization 345,102 428,553 187,689 186,358
(Gain)/loss on sale of fixed assets (1,116) 6,932 952 47,740
Changes in operating assets and liabilities:
Receivables (463,202) (588,564) (500,552) (294,206)
Inventories 207,597 (208,190) (60,278) (30,887)
Prepaid expenses and other assets 16,379 62,038 (115,762) (42,528)
Accounts payable 70,142 286,527 (8,021) (223,279)
Accrued expenses 149,449 (228,237) 209,362 96,719
-----------------------------------------------------------
Net cash provided by operating activities 1,016,410 388,488 8,832 256,211
Investing activities
Proceeds from sale of property and equipment 23,499 2,500 1,500 -
Expenditures for property and equipment (543,929) (366,368) (91,821) (189,304)
-----------------------------------------------------------
Net cash used in investing activities (520,430) (363,868) (90,321) (189,304)
Financing activities
Net increase in line of credit - 131,959 167,959 446,000
Payments on long-term debt, including capital leases (308,758) (275,915) (162,643) (374,966)
Proceeds from long-term debt 216,635 60,827 60,827 23,638
Shareholder distributions (233,176) - - -
-----------------------------------------------------------
Net cash provided by (used in) financing activities (325,299) (83,129) 66,143 94,672
-----------------------------------------------------------
Net increase (decrease) in cash 170,681 (58,509) (15,346) 161,579
Cash at beginning of period 37,768 208,449 208,449 149,940
-----------------------------------------------------------
Cash at end of period $ 208,449 $149,940 $193,103 $311,519
===========================================================
Supplemental cash flow information:
Cash paid for interest $ 86,253 $ 82,110 $ 28,675 $ 48,525
===========================================================
Equipment capitalized under lease agreements $ - $128,735 $ 90,935 $ -
===========================================================
</TABLE>
See accompanying notes.
F-17
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Notes to Combined Financial Statements
(Information with respect to the six-month periods
ended June 30, 1995 and 1996 is unaudited)
1. Description of Business
Blue Water Medical Supply, Inc. provides health care products and services
and rents health care equipment to patients in their homes or in an outpatient
setting primarily in the Midwest. These products and services, which are
typically prescribed by a physician, include respiratory therapy and other
home medical equipment and medical supplies. Blue Water Industrial
Products, Inc. is a retailer of health care products, primarily respiratory
therapy equipment.
Basis of Presentation
Blue Water Medical Supply, Inc. and Blue Water Industrial Products, Inc.
(collectively the Company) are affiliated companies with common ownership. As
such, these financial statements have been prepared on a combined basis.
All intercompany transactions and related balance sheet accounts have been
eliminated.
The financial statements of the Company as of June 30, 1996 and for the
six-month periods ended June 30, 1995 and 1996, and all information subsequent
to December 31, 1995 are unaudited. All adjustments and accruals (consisting
only of normal recurring adjustments) have been made which, in the opinion of
management, are necessary for a fair presentation of the financial position and
operating results of the Company for the interim periods presented.
The interim financial statements are condensed and do not include all the
information and disclosures necessary for a full interim financial statement
presentation.
2. Summary of Significant Accounting Policies
Revenue Recognition
All of the Company's leases are classified as operating leases, and rental
income is reported as revenue ratably over the life of the lease; the lease
terms are primarily month-to-month. Sales revenue is recognized in total upon
the sale of the healthcare equipment and medical supplies.
F-18
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Notes to Combined Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Inventories
Inventories, primarily consisting of medical supplies, are stated at the lower
of cost or market value determined on the first-in, first-out basis.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated utilizing
the straight-line and accelerated methods over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the lesser of the lease term or the estimated useful life of the asset.
Amortization is included with depreciation.
Income Taxes
The shareholders of the Company have elected to be taxed under Subchapter S of
the Internal Revenue Code and, as such, the Company is not subject to federal
and certain state income taxes. Accordingly, the Company's taxable income or
loss is includable in the personal income tax returns of the shareholders.
Fair Value of Financial Instruments
The Company's financial instruments include trade accounts receivable, accounts
payable, accrued expenses and notes payable. The fair values of all financial
instruments were not materially different from their carrying values.
Cash and Cash Equivalents
All highly liquid financial instruments purchased with a maturity of three
months or less are considered to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-19
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Notes to Combined Financial Statements (continued)
3. Property and Equipment
Property and equipment consists of the following at December 31, 1995:
Land $ 31,897
Building 194,932
Land, building and leasehold improvements 45,327
Equipment and furniture 2,140,602
Vehicles 787,747
Computer hardware and software 27,120
--------------------
3,227,625
Accumulated depreciation 2,324,537
--------------------
Net property and equipment $ 903,088
====================
Rental equipment of approximately $1,645,331 with related accumulated
depreciation of $1,196,369 at December 31, 1995 is included with equipment
and furniture.
4. Line of Credit
The Company has a $400,000 bank demand line of credit. Interest at prime plus
1% (8.5% at December 31, 1995) is payable monthly. Available borrowings at
December 31, 1995 were $36,000.
In 1996, the line of credit availability and borrowings were increased to
$810,000.
5. Long-Term Debt
The Company's long-term debt consisted of the following at December 31, 1995:
<TABLE>
<S> <C>
Bank Loans:
Secured computer equipment note, due in monthly installments of $1,493, including interest to September 1996 $ 13,438
Secured installment business loan, payable in monthly installments of $4,333
plus interest at prime plus .75% to October 1997 94,164
-----------
107,602
Various vehicle installment loans payable in monthly installments totaling $9,043, including interest 159,612
-----------
267,214
Less current portion (188,177)
-----------
$ 79,037
===========
</TABLE>
F-20
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Notes to Combined Financial Statements (continued)
5. Long-Term Debt (continued)
The foregoing bank obligations, including the line of credit, are secured by the
Company's assets and are guaranteed by the shareholders.
The aggregate principal maturities of the long-term debt at December 31, 1995
are as follows:
1996 $188,177
1997 68,906
1998 10,131
-----------------------
$267,214
=======================
Except for three vehicle notes totaling $56,037, the above outstanding
installment loans and all capital leases were repaid in 1996 with borrowings on
the line of credit.
6. Leases and Commitments
Operating Leases
The buildings in which the Company conducts operations are leased from a
partnership the partners of which are the shareholders of the Company. Rent
expense was $299,831 and $313,860 for the years ended December 31, 1994 and
1995, respectively.
At December 31, 1995, the aggregate minimum lease commitments under all
noncancelable leases are as follows:
1996 $42,679
1997 15,625
-------------------
$58,304
===================
F-21
<PAGE>
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
Notes to Combined Financial Statements (continued)
6. Leases and Commitments (continued)
Capital Leases
The Company has entered into capital lease agreements for office and computer
equipment. These agreements require monthly minimum lease payments totaling
$4,360 through 1999, and are collaterialized by the equipment. The Company has
recorded $103,000 in equipment at December 31, 1995 related to these leases.
Amortization is included in depreciation expense.
Future minimum payments at December 31, 1995 under the leases, including
interest are as follows:
1996 $52,327
1997 51,417
1998 27,753
1999 8,654
---------------------
140,151
Less current portion (52,327)
---------------------
$87,824
=====================
7. Advances to Shareholders
Advances to shareholders include amounts paid to the shareholders to facilitate
the individual income tax payments. The amounts do not bear interest and are to
be repaid upon the closing of the proposed asset sale (Note 9).
8. Profit Sharing Plan
The Company maintains a defined contribution plan which covers substantially all
employees. Contributions to the plan are at the discretion of the Board of
Directors and totaled $150,866 in 1994. There were no contributions in 1995.
9. Subsequent Event
Subsequent to December 31, 1995, the Company and its shareholders have entered
into a definitive agreement to sell substantially all the assets of the Company.
F-22
<PAGE>
Report of Independent Auditors
The Board of Directors
Life Critical Care Corporation
We have audited the accompanying balance sheet of Great Lakes Home Medical, Inc.
as of December 31, 1995 and the related statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 1994 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great Lakes Home Medical, Inc.
at December 31, 1995, and the results of its operations and its cash flows for
the years ended December 31, 1994 and 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG, LLP
Chicago, Illinois
June 28, 1996
F-23
<PAGE>
Great Lakes Home Medical, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
----------------------------------------
<S> <C> (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 651,200 $ 285,288
Trade accounts receivable, less allowance
for doubtful accounts of $138,887 in 1995 and
$152,952 in 1996 625,909 689,295
Accounts receivable, other 162,578 160,000
Inventories 106,509 106,509
Prepaid expenses and other assets 100 100
----------------- ------------
Total current assets 1,546,296 1,241,192
Furniture and equipment, net 567,116 504,771
----------------- ------------
Total assets $2,113,412 $1,745,963
================= ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 65,001 $ 48,355
Accrued expenses 36,722 127,197
Current portion of noncompete liability 50,000 50,000
----------------- ------------
Total current liabilities 151,723 225,552
Noncompete liability, less current portion 41,667 16,667
Shareholders' equity
Common stock, $1 par value:
50,000 shares authorized, 3,000 issued and
outstanding 3,000 3,000
Retained earnings 1,917,022 1,500,744
----------------- ------------
Total shareholders' equity 1,920,022 1,503,744
----------------- ------------
Total liabilities and shareholders' equity $2,113,412 $1,745,963
================= ============
</TABLE>
See accompanying notes.
F-24
<PAGE>
Great Lakes Home Medical, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Year Ended Six Months
December 31 Ended June 30
1994 1995 1995 1996
-----------------------------------------------------------------------------
<S> <C> (Unaudited)
Net sales $ 488,000 $ 462,044 $ 207,302 $ 215,227
Rental revenue 2,184,078 2,767,018 1,405,639 1,353,954
-----------------------------------------------------------------------------
2,672,078 3,229,062 1,612,941 1,569,181
Cost of revenues 677,488 694,637 345,513 334,179
-----------------------------------------------------------------------------
Gross profit 1,994,590 2,534,425 1,267,428 1,235,002
Selling, general, and
administrative expenses 1,553,917 1,337,466 682,724 766,280
-----------------------------------------------------------------------------
Income from operations 440,673 1,196,959 584,704 468,722
Other (income) expense:
Interest income (9,572) (9,194) (4,315) (6,108)
Interest expense 2,595 5,405 2,571 -
Other (income)
expense, net 15,604 31,452 3,138 15,000
-----------------------------------------------------------------------------
8,627 27,663 1,394 8,892
-----------------------------------------------------------------------------
Income before income taxes 432,046 1,169,296 583,310 459,830
Income taxes 18,470 27,038 10,818 21,108
-----------------------------------------------------------------------------
Net income $413,576 $1,142,258 $ 572,492 $ 438,722
=============================================================================
Pro forma data (unaudited):
Pro forma net income adjusted
only for income taxes $259,228 $701,578 $349,986 $275,898
======== ========= ======== ========
Pro forma net income adjusted for
compensation differential and
income taxes $766,378 $308,298
========= ========
</TABLE>
See accompanying notes.
F-25
<PAGE>
Great Lake Home Medical, Inc.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
-----------------------------------------------------------
<S> <C>
Balance at January 1, 1994 $4,000 $1,850,588 $1,854,588
Net income - 413,576 413,576
Purchase of stock (1,000) (399,000) (400,000)
Shareholder distributions - (551,900) (551,900)
-----------------------------------------------------------
Balance at December 31, 1994 3,000 1,313,264 1,316,264
Net income - 1,142,258 1,142,258
Shareholder distributions - (538,500) (538,500)
-----------------------------------------------------------
Balance at December 31, 1995 3,000 1,917,022 1,920,022
Net income (Unaudited) - 438,722 438,722
Shareholder distributions (Unaudited) - (855,000) (855,000)
-----------------------------------------------------------
Balance at June 30, 1996 (Unaudited) $3,000 $1,500,744 $1,503,744
===========================================================
</TABLE>
See accompanying notes.
F-26
<PAGE>
Great Lakes Home Medical, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 June 30
1994 1995 1995 1996
----------------------------------------------------------------
(Unaudited)
<S> <C>
Operating activities
Net income $413,576 $1,142,258 $572,492 $438,722
Adjustments to reconcile net income to net cash provided
by operating activities:
Noncompete agreement 150,000 - - -
Payments on noncompete agreement (8,333) (50,000) (25,000) (25,000)
Allowance for doubtful accounts 24,489 (22,884) - 14,065
Depreciation and amortization 257,676 242,224 116,432 105,508
Loss on sale of fixed assets 4,490 2,617 2,619 -
Changes in operating assets and
liabilities:
Receivables (177,426) 6,011 47,434 (74,873)
Accounts payable (4,139) 13,959 5,128 (16,646)
Accrued expenses 6,752 (366) 37,047 90,475
----------------------------------------------------------------
Net cash provided by operating activities 667,418 1,333,819 756,152 532,251
Investing activities
Proceeds from assets sold 16,600 1,002 - -
Change in investments 179,596 85,277 (12,295) -
Expenditures for furniture and equipment (259,229) (193,594) (108,698) (43,163)
----------------------------------------------------------------
Net cash used in investing activities (63,033) (107,315) (120,993) (43,163)
Financing activities
Payments on long-term debt (4,211) (145,789) (12,897) --
Purchase of stock (250,000) - - -
Shareholder distributions (551,900) (538,500) (328,521) (855,000)
----------------------------------------------------------------
Net cash used in financing activities (806,111) (684,289) (341,418) (855,000)
----------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (202,059) 542,215 293,741 (365,912)
Cash and cash equivalents at beginning of period 311,044 108,985 108,985 651,200
----------------------------------------------------------------
Cash and cash equivalents at end of period $108,985 $ 651,200 $402,726 $285,288
================================================================
Supplemental information:
Cash paid for interest $ 1,745 $ 6,256 $ 2,646 $ -
================================================================
Note payable issued for stock purchase $150,000 $ - $ - $ -
================================================================
See accompanying notes.
F-27
<PAGE>
Great Lakes Home Medical, Inc.
Notes to Financial Statements
(Information with respect to the six-month periods
ended June 30, 1995 and 1996 is unaudited)
1. Description of Business
Great Lakes Home Medical, Inc. (the Company) provides health care products and
services and rents health care equipment to patients in their homes or in an
outpatient setting primarily in the Midwest. These products and services, which
are typically prescribed by a physician, include respiratory therapy and other
home medical equipment and medical supplies.
Basis of Presentation
The financial statements of the Company as of June 30, 1996 and for the
six-month periods ended June 30, 1995 and 1996, and all information subsequent
to December 31, 1995 are unaudited. All adjustments and accruals (consisting
only of normal recurring adjustments) have been made which, in the opinion of
management, are necessary for a fair presentation of the financial position and
operating results of the Company for the interim periods presented.
The interim financial statements are condensed and do not include all the
information and disclosures necessary for a full interim financial statement
presentation.
2. Summary of Significant Accounting Policies
Revenue Recognition
All of the Company's leases are classified as operating leases, and rental
income is reported as revenue ratably over the life of the lease; the lease
terms are less than one year on substantially all of the leases. Sales revenue
is recognized in total upon the sale of health care equipment and medical
supplies.
Inventories
Inventories, primarily consisting of medical supplies, are stated at the lower
of cost or market value determined on the first in, first out basis.
F-28
<PAGE>
Great Lakes Home Medical, Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Furniture and equipment
Equipment is stated at cost. Depreciation is calculated utilizing the
straight-line and accelerated methods over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the lesser of the lease term or the estimated useful life of the asset.
Amortization is included with depreciation.
Income Taxes
The shareholders of the Company have elected to be taxed under Subchapter S of
the Internal Revenue Code and, as such, the Company is not subject to federal
and certain state income taxes. Accordingly, the Company's taxable income or
loss is includable in the personal income tax returns of the shareholders.
Cash and Cash Equivalents
All highly liquid financial instruments purchased with a maturity of three
months or less are considered to be cash equivalents.
Fair Value of Financial Instruments
The Company's financial instruments include trade accounts receivable, accounts
payable, accrued expenses, and a note payable. The fair values of all financial
instruments were not materially different from their carrying values.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-29
<PAGE>
Great Lakes Home Medical, Inc.
Notes to Financial Statements (continued)
3. Furniture and Equipment
Furniture and quipment consists of the following at December 31, 1995:
Equipment and furniture $1,483,027
Vehicles 196,265
Computer hardware and software 60,410
-------------------
1,739,702
Accumulated depreciation 1,172,586
-------------------
Net equipment $ 567,116
===================
Rental equipment of approximately $1,473,000 with related accumulated
depreciation of $995,100 at December 31, 1995 is included with equipment and
furniture.
4. Related Party Transactions
At December 31, 1994, the Company owed $145,789 to a former shareholder, due in
monthly installments at 7% interest through October 1999. In June 1995, the
Company paid this note in full. Interest expense on this note was $1,738 and
$4,916 for the years ended December 31, 1994 and 1995, respectively.
Great Lakes made payments of $8,333 and $50,000 during the years ended December
31, 1994 and 1995, respectively, to a former shareholder in connection with a
noncompete agreement (Note 7).
5. Common Stock
In October 1994, Great Lakes purchased 1,000 shares of common stock from a
shareholder for $400,000. These shares were subsequently canceled.
F-30
<PAGE>
Great Lakes Home Medical, Inc.
Notes to Financial Statements (continued)
6. Leases
The Company is obligated under various operating leases for its sales offices.
Rent expense was $88,064 and $65,906 for the years ended December 31, 1994 and
1995, respectively.
At December 31, 1995, the aggregate minimum lease commitments under all
noncancelable leases are as follows:
1996 $42,679
1997 15,625
-------
$58,304
=======
7. Noncompete Agreement
In October 1994, the Company entered into a three-year noncompete agreement with
a former shareholder resulting in a $150,000 charge to 1994 selling, general and
administrative expense. The agreement calls for monthly payments of $4,167.
8. Subsequent Event
Subsequent to December 31, 1995, the Company and its shareholders have entered
into a definitive agreement to sell substantially all of the assets of the
Company.
F-31
<PAGE>
Report of Independent Auditors
The Board of Directors
Life Critical Care Corporation
We have audited the accompanying balance sheet of ABC Medical Supply, Inc. as of
December 31, 1995 and the related statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 1994 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ABC Medical Supply, Inc. at
December 31, 1995, and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG, LLP
Chicago, Illinois
June 28, 1996
F-32
<PAGE>
ABC Medical Supply, Inc.
Balance Sheets
</TABLE>
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
-------------------------------------------------
<S> <C> (Unaudited)
Assets
Current assets:
Cash $ 483,096 $ 399,124
Trade accounts receivable, less allowance for doubtful
accounts of $79,200 in 1995 and 1996 754,137 528,707
Inventories 135,609 135,609
Prepaid expenses and other assets 51,380 71,991
----------------------- -------------------------
Total current assets 1,424,222 1,135,431
Furniture and equipment, net 334,494 280,162
Other assets 6,416 6,000
----------------------- -------------------------
Total assets $1,765,132 $1,421,593
======================= =========================
Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 46,845 $ 39,037
Accrued expenses 83,942 85,179
Current portion of long-term debt 21,201 2,641
-------------------------------------------------
Total current liabilities 151,988 126,857
Long-term debt, less current portion 6,098 -
Shareholders' equity
Common stock $1 par value; 50,000 shares authorized,
7,000 shares issued and outstanding 7,000 7,000
Retained earnings 1,600,046 1,287,736
----------------------- -------------------------
Total shareholders' equity 1,607,046 1,294,736
----------------------- -------------------------
Total liabilities and shareholders' equity $1,765,132 $1,421,593
=================================================
</TABLE>
See accompanying notes.
F-33
<PAGE>
ABC Medical Supply, Inc.
Statements of Operations
<TABLE>
<CAPTION> Year Ended Six Months
December 31 Ended June 30
1994 1995 1995 1996
---------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Net sales $ 340,332 $ 390,930 $ 192,660 $ 176,365
Rental revenue 2,261,871 2,567,898 1,267,612 1,302,205
---------------------------------------------------------------------------------
2,602,203 2,958,828 1,460,272 1,478,570
Cost of revenues 1,170,701 1,308,517 591,811 583,904
---------------------------------------------------------------------------------
Gross profit 1,431,502 1,650,311 868,461 894,666
Selling, general, and administrative expenses 1,431,987 1,291,068 694,021 680,828
---------------------------------------------------------------------------------
Income (loss) from operations (485) 359,243 174,440 213,838
Other (income) expense:
Interest income (14,529) (12,743) (5,455) (7,900)
Interest expense 9,443 2,619 1,130 402
Other (income) expense, net (4,626) (4,552) (2,950) 14
---------------------------------------------------------------------------------
(9,712) (14,676) (7,275) (7,484)
---------------------------------------------------------------------------------
Income before income taxes 9,227 373,919 181,715 221,322
Income tax provision 20,438 15,763 8,162 6,500
=================================================================================
Net income (loss) $ (11,211) $ 358,156 $ 173,553 $ 214,822
=================================================================================
Pro forma data (unaudited):
Pro forma net income adjusted
only for income taxes $5,536 $224,351 $109,029 $132,793
====== ======== ======== ========
Pro forma net income adjusted for
compensation differential and
income taxes $483,551 $276,793
======== ========
</TABLE>
See accompanying notes.
F-34
<PAGE>
ABC Medical Supply, Inc.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
----------------------------------------------------------------------
<S> <C>
Balance at January 1, 1994 $7,000 $1,253,101 $1,260,101
Net loss - (11,211) (11,211)
----------------------------------------------------------------------
Balance at December 31, 1994 7,000 1,241,890 1,248,890
Net income - 358,156 358,156
----------------------------------------------------------------------
Balance at December 31, 1995 7,000 1,600,046 1,607,046
Net income (Unaudited) - 214,822 214,822
Shareholder distributions (Unaudited) - (527,132) (527,132)
----------------------------------------------------------------------
Balance at June 30, 1996 (Unaudited) $7,000 $1,287,736 $1,294,736
======================================================================
</TABLE>
See accompanying notes.
F-35
<PAGE>
ABC Medical Supply, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 June 30
1994 1995 1995 1996
----------------------------------------------------------------------
(Unaudited)
<S> <C>
Operating activities
Net income (loss) $ (11,211) $358,156 $173,553 $214,822
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Allowance for doubtful accounts 187,019 - - -
Depreciation and amortization 188,456 168,448 93,159 67,343
Gain on sale of equipment (4,901) (4,552) - -
Changes in operating assets and liabilities:
Receivables (62,071) (238,505) (30,059) 225,430
Inventories 9,012 1,797 - -
Prepaid expenses and other assets 1,314 (49,360) 857 (20,195)
Accounts payable 27,448 (70,857) (91,337) (7,808)
Accrued expenses (23,826) 21,056 (28,117) 1,237
-----------------------------------------------------------------------
Net cash provided by operating activities 311,240 186,183 118,056 480,829
Investing activities
Purchases of furniture and equipment (389,885) (26,582) (11,633) (13,011)
Proceeds from sale of equipment 234,944 32,631 - -
-----------------------------------------------------------------------
Net cash provided by (used in) investing activities (154,941) 6,049 (11,633) (13,011)
Financing activities
Proceeds from long-term debt 49,221 20,000 10,195 -
Payments of long-term debt (188,223) (24,101) (4,367) (24,658)
Shareholder distributions - - - (527,132)
-----------------------------------------------------------------------
Net cash provided by (used in) financing activities (139,002) (4,101) 5,828 (551,790)
-----------------------------------------------------------------------
Net increase (decrease) in cash 17,297 188,131 112,251 (83,972)
Cash at beginning of period 277,668 294,965 294,965 483,096
-----------------------------------------------------------------------
Cash at end of period $294,965 $483,096 $407,216 $399,124
=======================================================================
Supplemental cash flow information:
Cash paid for interest $ 9,443 $ 2,619 $ 1,130 $ 402
=======================================================================
</TABLE>
See accompanying notes.
F-36
<PAGE>
ABC Medical Supply, Inc.
Notes to Financial Statements
(Information with respect to the six-month periods
ended June 30, 1995 and 1996 is unaudited)
1. Business and Organization
ABC Medical Supply, Inc. (the Company) provides health care products and
services and rents health care equipment to patients in their homes or in an
outpatient setting. These products and services, which are typically prescribed
by a physician, include respiratory therapy and other home medical equipment and
medical supplies.
Basis of Presentation
The financial statements for the six-month periods ended June 30, 1995 and 1996
and all information subsequent to December 31, 1995 are unaudited. All
adjustments and accruals (consisting only of normal recurring adjustments) have
been made which, in the opinion of management, are necessary for a fair
presentation of the financial position and operating results of the Company for
the interim periods presented.
The interim financial statements are condensed and do not include all the
information and disclosures necessary for a full interim financial statement
presentation.
2. Summary of Significant Accounting Policies
Revenue Recognition
All of the Company's leases are classified as operating leases, and rental
income is reported as revenue ratably over the life of the lease; the lease
terms are primarily on a month-to-month basis. Sales revenue is recognized in
total upon the shipment of health care equipment and medical supplies.
Inventories
Inventories, primarily consisting of medical supplies, are stated at the lower
of cost or market value determined on the first in, first out basis.
Furniture and Equipment
Furniture and Equipment is stated at cost. Depreciation is calculated utilizing
the straight-line and accelerated methods over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the lesser of the lease term or the estimated useful life of the asset.
Amortization is included with depreciation.
F-37
<PAGE>
ABC Medical Supply, Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Income Taxes
The shareholders of the Company have elected to be taxed under Subchapter S of
the Internal Revenue Code and, as such, the Company is not subject to federal
and certain state income taxes. Accordingly, the Company's taxable income or
loss is includable in the personal income tax returns of the shareholders.
Fair Value of Financial Instruments
The Company's financial instruments include accounts receivable, accounts
payable, accrued liabilities and long-term debt. The fair values of all
financial instruments were not materially different than their carrying values.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Furniture and Equipment
Furniture and equipment consists of the following at December 31, 1995:
Equipment and furniture $1,030,053
Vehicles 167,579
Computer hardware and software 79,234
Leasehold improvements 9,910
------------------
1,286,776
Accumulated depreciation 952,282
------------------
Net furniture and equipment $ 334,494
==================
Rental equipment of approximately $895,000 with related accumulated
depreciation of $685,000 at December 31, 1995 is included with the equipment
and furniture.
F-38
<PAGE>
ABC Medical Supply, Inc.
Notes to Financial Statements (continued)
4. Debt
Debt is comprised of the following at December 31, 1995:
<TABLE>
<S> <C>
Telephone equipment note with monthly payments of $273, including interest,
through March 1998 $ 4,147
Computer software and voice mail loan with monthly payment so $1,206, including
interest, through December 1996 13,688
Vehicle note with monthly payments of $424, including interest through
December 1998 9,464
-------------------------
27,299
Less: Current portion (21,201)
=========================
$ 6,098
=========================
</TABLE>
5. Benefit Plans
The Company sponsors a profit sharing plan that covers substantially all
employees. The Company may make discretionary contributions. The Company
contributed $22,500 to this plan during the year ended December 31, 1994. During
the year ended December 31, 1995, the Company did not contribute to this plan.
6. Leases
The Company is obligated under various operating leases for its sales offices.
Rent expense for all operating leases was $105,979 and $119,749 for the years
ended December 31, 1994 and 1995, respectively. Several of the leases are with a
Company owned by the shareholders. Rent paid to the related party was $36,840
and $59,940 for the years ended December 31, 1994 and 1995, respectively.
At December 31 1995, the aggregate minimum lease commitments under all
noncancelable leases are as follows:
1996 $ 86,014
1997 42,409
1998 10,350
---------
$138,773
=========
F-39
<PAGE>
ABC Medical Supply, Inc.
Notes to Financial Statements (continued)
7. Subsequent Event
Subsequent to December 31, 1995, the Company and its shareholders have entered
into a definitive agreement to sell substantially all the assets of the Company.
F-40
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA
The following unaudited Pro Forma Condensed Consolidated Balance
Sheets as of June 30, 1996 and the Pro Forma Condensed Consolidated Statements
of Operations for the year ended December 31, 1995 and for the six months ended
June 30, 1996 give effect (i) to the Acquisitions and (ii) the Offering and the
other financing transactions described under "Use of Proceeds." The unaudited
Pro Forma Condensed Consolidated Balance Sheet reflects such transactions as if
they had occurred as of June 30, 1996 and the unaudited Pro Forma Condensed
Consolidated Statements of Operations reflect such transactions as if they had
occurred as of January 1, 1995 and January 1, 1996, respectively.
The pro forma financial statements have been prepared by the Company
based on the historical financial statements of the Company and the Acquired
Companies. These pro forma financial statements do not purport to be indicative
of the results that would have been obtained if the transactions had occurred on
the dates indicated or that may be realized in the future. The pro forma
financial statements should be read in conjunction with the Company's historical
financial statements and the notes thereto and the historical financial
statements of the Acquired Companies and the notes thereto included elsewhere in
this Prospectus.
The acquisition prices of the acquired companies are discussed
below.
Blue Water
The purchase price of Blue Water is $6,166,050
comprised of $5,494,500 in cash and $671,550 in Common Stock. The Company will
not assume debt or cash.
ABC
The purchase price of ABC is $5,500,000 comprised of
$3,700,000 in cash and $1,800,000 in Common Stock. The Company will not
assume debt or cash.
Great Lakes
The purchase price of Great Lakes is $6,611,250
comprised of $4,837,500 in cash and $1,773,750 in Common Stock. The Company
will not assume debt or cash.
F-41
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
<TABLE>
<CAPTION> Pro Forma
Life Critical and Offering Consolidated
Care Blue Water ABC Great Lakes Adjustments Pro Forma
<S><C>
ASSETS
Current Assets:
Cash ........................................ $188 $311,519 $399,124 $ 285,288 $(767,141) (1) $ 228,978
Trade accounts receivable, net............... - 952,459 528,707 689,295 - 2,170,461
Accounts receivable other.................... - 700,765 - 160,000 (700,765) (2) 160,000
Inventories.................................. - 405,417 135,609 106,509 - 647,535
Prepaid expenses and other assets............ - 109,742 71,991 100 (150,000) (2) 31,833
Deposits..................................... 800,000 - - - (800,000) (3) -
Deferred costs............................... 423,563 - - - (423,563) (4) -
------- ---------- --------- ---------- ---------- ----------
Total current assets.................... 1,223,751 2,479,902 1,135,431 1,241,192 (2,841,469) 3,238,807
Property and equipment, net...................... - 906,034 280,162 504,771 (80,869) (2) 1,610,098
Other assets..................................... - 81,315 6,000 - (6,000) (2) 81,315
Goodwill, net.................................... - - - - 15,714,452 (5) 15,714,452
Organizational costs............................. 1,241 - - - - 1,241
Capitalized transaction expenses................. - - - - 175,000 (6) 175,000
---------- ---------- ---------- ---------- ------- -------
Total assets................................. $1,224,992 $3,467.251 $1,421,593 $1,745,963 12,986,114 20,845,913
========== ========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $216,193 329,912 $ 39,037 $ 48,355 $ (216,193) (7) $417,304
Accrued expenses............................. 108,941 171,518 85,179 127,197 (308,941) (7) 183,894
Line of credit............................... - 810,000 - - (810,000) (2) -
Current portion of long-term debt and capital
lease obligations - 41,277 2,641 - (2,641) (2) 41,277
Current portion of non-complete liability.... - - - 50,000 (50,000) (2) -
Loan payable to affiliate.................... - - - - - -
---------- ---------- --------- ---------- ------------ -----------
Total current liabilities............... $325,134 $1,352,707 $126,857 $ 225,552 $(1,387,775) 642,475
Long-term debt:
Long-term debt, less current portion......... - 14,760 - - - 14,760
Capital lease, less current portion.......... - - - - - -
Non-compete liability, less current portion.. - - - 16,667 (16,667) (2) -
Senior term loan............................. - - - - 6,000,000 (8) 6,000,000
Subordinated debt............................ - - - - 2,000,000 (8) 2,000,000
Notes payable to affiliate................... 1,500,000 - - - (1,500,000) (7) -
---------- ---------- --------- ---------- ---------- -----------
Total long-term debt.................... 1,500,000 14,760 - 16,667 6,483,333 8,014,760
---------- ---------- --------- ---------- ---------- -----------
Total liabilities....................... 1,825,134 1,367,467 126,857 242,219 5,095,558 8,657,235
Stockholders' equity:
Common stock................................. - 9,000 7,000 3,000 (19,000) (9) -
Common stock, this Offering.................. - - - - 20,600 (10) 20,600
Common stock, sellers........................ - - - - 4,245,300 (11) 4,245,300
Additional paid in capital................... 59,200 39,650 - - 8,979,761 (12) 9,097,871
Retained earnings (deficit).................. 659,342 2,051,134 1,287,736 1,500,744 (5,359,505)(13) (1,177,233)
------- --------- --------- --------- ----------- -----------
Total stockholders' equity.............. (600,142) 2,099,784 1,294,736 1,503,744 7,890,556 12,188,678
--------- --------- --------- --------- --------- ----------
Total Liabilities and Stockholders' Equity....... $1,224,992 $3,467,251 $1,421,593 $1,745,963 $12,986,114 $20,845,913
========== ========== ========== ========== =========== ===========
F-42
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
Pro Forma Consolidated
Life Critical Blue Water ABC Great Lakes Adjustments Pro Forma
<S> <C>
Net sales........................... $ - $1,020,724 $176,365 $215,227 $ - $1,412,316
Rental revenue...................... - 1,820,382 1,302,205 1,353,954 - 4,476,541
------------- --------- --------- --------- ----------- ---------
- 2,841,106 1,478,570 1,569,181 - 5,888,857
------------- --------- --------- --------- ----------- ---------
Cost of revenues.................... - 851,859 583,904 334,179 (95,814)(1) 1,674,128
------------- --------- ------- ------- ---------- ---------
Gross profit........................ - 1,989,247 894,666 1,235,002 95,814 4,214,729
Selling, general and
administrative expenses.......... 283,223 1,430,769 680,826 766,280 (253,988)(2) 2,907,111
------- --------- ------- ------- --------- ---------
Income from operations.............. (283,223) 558,478 213,838 468,722 349,801 1,307,617
Other (income) expense:
Interest income................ - (8,035) (7,900) (6,108) - (22,043)
Interest expense............... 108,193 48,526 402 - 302,879(3) 460,000
Other (income) expense, net.... - (25,881) 14 15,000 10,881(4) 14
------- -------- -------- ------ -------- ---------
108,193 14,609 (7,484) 8,892 313,760 437,971
------- -------- -------- ------ -------- ---------
Income before income taxes.......... (391,416) 543,869 221,322 459,830 36,042 869,647
Income tax provision................ - 27,575 6,500 21,108 292,676(5) 347,859
------- --------- --------- ------ ------- -------
Net income.......................... ($391,416) $516,294 $214,822 $438,722 ($256,634) $522,788
========= ======== ======== ======== ========== ========
Earnings per common share........... $0.13
Weighted average shares
outstanding....................... 3,921,870
</TABLE>
F-43
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Life Pro Forma Consolidated
Critical Care Blue Water ABC Great Lakes Adjustments Pro Forma
<S> <C>
Net sales............................... $ - $2,001,952 $ 390,930 $462,044 $ $2,854,926
Rental revenue.......................... - 3,287,730 2,567,898 2,767,018 - 8,622,646
---------- --------- ---------- --------- ------------- ----------
- 5,289,682 2,958,828 3,229,062 - 11,477,572
---------- --------- ---------- --------- ------------- ----------
Cost of revenues........................ - 1,752,968 1,308,517 694,637 (268,275)(1) 3,487,847
---------- --------- --------- --------- ------------- ----------
Gross profit............................ - 3,536,714 1,650,311 2,534,425 268,275 7,989,725
Selling, general and
administrative expenses.............. 255,308 2,858,809 1,291,068 1,337,466 (378,746)(2) 5,363,904
--------- --------- --------- --------- ------------- ----------
Income from operations.................. (255,308) 677,905 359,243 1,196,959 647,021 2,625,821
Other (income expense:..................
Interest income.................... - (15,548) (12,743) (9,194) - (37,486)
Interest expense................... 12,618 82,110 2,619 5,405 817,248(3) 920,000
Other (income) expense, net........ - (60,070) (4,552) 31,452 60,071(4) 26,901
---------- ---------- ---------- --------- ------------- ----------
12,618 6,492 (14,676) 27,663 877,319 909,415
---------- ---------- ---------- --------- ------------- ----------
Income before income taxes.............. (267,926) 671,413 373,919 1,169,296 (230,298) 1,716,406
Income tax provision.................... - 47,639 15,763 27,038 596,122(5) 686,562
---------- ---------- ---------- ---------- ------------- ----------
Net income.............................. ($267,926) $623,774 $ 358,156 $1,142,258 ($826,419) $1,029,844
========== ========== ========== ========== ============= ==========
Earnings per common share............... $ 0.29
Weighed average shares outstanding...... 3,592,267
</TABLE>
F-44
<PAGE>
LIFE CRITICAL CARE CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Balance Sheet Adjustments
The accompanying unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1996, gives effect to the Offering, borrowings under the
Credit Facility and the simultaneous closing of the Acquisitions all as
described under "Use of Proceeds" as if such transactions had occurred on June
30, 1996.
(1) Adjustments to reduce cash not acquired and record working
capital.
(2) Removes assets and liabilities that are not being acquired or
assumed by the Company.
(3) Removes assets that are allocated to the Acquisitions.
(4) Removes assets that have been either netted against the
Offering proceeds or applied to the purchase price of the
Acquisitions.
(5) Reflects recording of goodwill.
(6) Reflects recording of capitalized expenses associated with the
Credit Facility.
(7) Reflects liabilities that are paid with proceeds from the
Offering and the Credit Facility.
(8) Records the Credit Facility.
(9) Eliminates existing common stock of the Acquired Companies.
(10) Records shares issued in the Offering in the amount of
$20,000, in the September Bridge of $600 and upon the exercise
of warrants issued to the Morgenthau Bridge Funds of $2,140.
(11) Records Common Stock issued to the Sellers and the associated
additional paid-in-capital.
(12) Records additional paid-in-capital associated with shares of
Common Stock issued pursuant to the September Bridge in the
amount of $39,000, eliminates paid-in-capital of the Acquired
Companies in the amount of $39,650, records additional
paid-in-capital associated with the exercise of warrants
issued to the Morgenthau Bridge Funds in the amount of $19,260
and records the net proceeds from the Offering less the par
value in the amount of $8,980,411.
F-45
<PAGE>
(13) Eliminates existing retained earnings of the Acquired
Companies in the amount of $4,839,614, records additional
expenses of the Company in the amount of $456,891, records
value of Common Stock associated with the September Bridge in
the amount of $39,600 and records the value of warrants issued
to the Morgenthau Bridge Funds in the amount of $21,400.
Pro Forma Statements of Operations Adjustments
The accompanying unaudited Pro Forma Condensed Consolidated Statements
of Operations for the year ended December 31, 1995 and for the six months ended
June 30, 1996 give effect to the Offering, borrowings under the Credit Facility
and the simultaneous closing of the Acquisitions all as described under "Use of
Proceeds" as if they occurred on January 1, 1995 and January 1, 1996,
respectively.
(1) Reflects an adjustment in the carrying value of the rental
equipment to fair market value and a change in the estimated
useful lives of the assets from 5 to 7 years to 4 years.
(2) Reflects adjustments to selling, general and administrative
expenses (i) to eliminate Compensation Differential (as
defined elsewhere in this Prospectus) in the amount of
$881,750 for the year ended December 31, 1995 and $451,500 for
the six months ended June 30, 1996, (ii) to record the
amortization of goodwill in connection with the purchase using
the straight-line method over 40 years in the amount of
$395,438 and $196,015, respectively, (iii) to reflect an
adjustment in the carrying value of vehicles, office equipment
and other property to fair market value and a change in the
estimated useful lives of the assets from 5-7 years to 4 years
in the amount of $108,120 and $62,134, respectively, (iv) to
record compensation for executive officers and expense
reimbursement in the amount of $345,000 and $172,500,
respectively, (v) to reduce rent expense of Blue Water to
reflect the contractual future rate in the amounts of $90,000
and $45,000, respectively, (vi) to reflect the elimination of
certain vehicle expenses related to the owners of Blue Water
which will not continue in the amounts of $12,965 and $6,483,
respectively, (vii) to eliminate compensation of certain
terminated and non-replaced employees of Blue Water in the
amount of $29,247 for the year ended December 31, 1995, (viii)
to eliminate other non-recurring expenses of the owners,
including life insurance, in the amount of $37,102 and
$77,386, respectively, (ix) to record the amortization of
capitalized transaction expenses in connection with the Credit
Facility using the straight line method over 5 years in the
amounts of $40,000 and $20,000, respectively.
F-46
<PAGE>
(3) Reflects the elimination of interest expense related to debt
and/or capital leases that will be extinguished or not assumed
and records the interest related to the term portion of the
Credit Facility at an annual rate of 9.0% and the subordinated
debt portion at an annual rate of 19.0%
(4) Removes other income and expense that will not be recurring
because related assets/liabilities are not being assumed.
(5) Incremental adjustment in income tax provision assuming an
estimated effective tax rate of 40.0%.
F-47
<PAGE>
No dealer, salesperson or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or any
Underwriter. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy to any person in any jurisdiction in which such
offer or solicitation would be unlawful, or to any person to whom it is unlawful
to make such an offer or solicitation. Neither the delivery of this Prospectus
nor any offer or sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company or that
the information contained herein is correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary........................................
The Company...............................................
Risk Factors..............................................
Use of Proceeds...........................................
Capitalization............................................
Dilution..................................................
Dividend Policy...........................................
Selected Financial Data...................................
Management's Discussion and Analysis
of Financial Condition and..........................
Results of Operations...............................
Business..................................................
Management................................................
Certain Transactions......................................
Principal and Selling Stockholders........................
Description of Capital Stock..............................
Shares Eligible for Future Sale...........................
Underwriting..............................................
Legal Matters.............................................
Experts...................................................
Additional Information....................................
Index to Financial Statements.............................
Until ___________, 1996 (25 days after the date of this
Prospectus), all dealers effecting transactions in the Common Stock, whether
or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligations of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
__________ Shares
LIFE CRITICAL CARE CORPORATION
COMMON STOCK
PROSPECTUS
____________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware GCL") provides that the Registrant may indemnify any person,
including any officer or director, who was or is a party or who is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Registrant), by reason of the fact that he
is or was a director, officer, employee or agent of the Registrant or is or was
serving at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (collectively, "such Person"), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such Person in connection with such action, suit or proceeding if
such Person acted in good faith and in a manner such Person reasonably believed
to be in or not opposed to the best interests of the Registrant and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. In any threatened, pending or completed action or suit
by or in the right of the Registrant, the Registrant also may indemnify any such
Person against expenses (including attorneys' fees) actually and reasonably
incurred by such Person in connection with that action's or suit's defense or
settlement, if such Person acted in good faith and in a manner such Person
reasonably believed to be in or not opposed to the best interests of the
Registrant, except that no indemnification shall be made with respect to any
claim, issue or matter as to which such Person shall have been adjudged to be
liable to the Registrant, unless and only to the extent that a court shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such Person is fairly and reasonably
entitled to indemnity. Where such Person is successful on the merits or
otherwise in defense of any action or suit referred to above or in defense of
any claim, issue or matter therein, the Registrant shall indemnify such Person
against the expenses (including attorneys' fees) that such Person actually and
reasonably incurred.
The Registrant's Certificate of Incorporation provides that, to the
fullest extent permitted by the laws of the State of Delaware, no director or
officer of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director or
officer. The Registrant's Certificate of Incorporation also provides that to the
fullest extent permitted by the Delaware GCL, as amended or interpreted, the
Registrant shall indemnify all persons whom it may indemnify pursuant thereto.
These provisions in the Certificate of Incorporation do not eliminate the duty
of care. In appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant or its stockholders, for acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under the Delaware GCL. These provisions also do
not affect a director's or officer's responsibilities
II-1
<PAGE>
under any other law, such as the federal or state securities laws or state or
federal environmental laws.
The Underwriting Agreement (a form of which is filed as Exhibit 1.1
hereto) will provide that the Underwriters will indemnify and hold harmless the
Registrant and each director, officer or controlling person of the Registrant
from and against any liability caused by any statement or omission in the
Registration Statement or Prospectus based upon certain information furnished to
the Registrant by the Underwriters for use in the preparation thereof.
II-2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.*
The following table sets forth a statement of all expenses payable by
the Registrant in connection with the registration, issuance and distribution of
the Common Stock offered hereby, other than the underwriting discount.
SEC Registration Fee............................... $ 4,234
Accounting Fees and Expenses....................... **
Legal Fees and Expenses............................ **
Underwriters Expense Allowance..................... 300,000
Printing and Engraving Expenses.................... **
Blue Sky Fees and Expenses......................... **
NASD Filing Fee.................................... 1,897
Nasdaq Quotation Fee............................... 25,000
Registrar and Transfer Agent Fees.................. **
Miscellaneous Fees and Expenses.................... **
---------
Total..................................... $ **
=========
- -------------------
* Except for the SEC registration fee, the NASD filing fee and the Nasdaq
quotation fee, all expenses are estimated.
** To be supplied by amendment.
Item 26. Recent Sales of Unregistered Securities.
The following share amounts and sales prices have been adjusted for a
1,110-for-one stock split of the Company's Common Stock, par value $0.01 per
share, effective on August 29, 1996.
On August 10, 1995, Registrant sold 743,700 shares of Common Stock, par
value $0.01 per share, for $0.01 per share to the four founders of the
Registrant in connection with the formation of the Registrant.
On August 12, 1995, the Registrant sold a $750,000 18%
Subordinated Note due December 31, 1997 for $750,000 to Morgenthau Bridge
Investment Limited Partnership.
On August 12, 1995, the Registrant sold a $750,000 18%
Subordinated Note due December 31, 1997 for $750,000 to Morgenthau Bridge
Loan LLC.
On April 8, 1996, the Registrant authorized the sale of and, on
September 30, 1996, the Registrant sold 248,640 shares of Common Stock, par
value $0.01 per share, for $0.01 per share to IRA accounts for the benefit of
the four founding stockholders of the Registrant.
During September and October 1996, the Registrant sold an aggregate
principal amount of $500,000 of 12% Subordinated Notes due December 31, 1997 and
50,000 shares of Common Stock, par value $0.01 per share, for $0.10 per share to
14 investors.
The foregoing sales were exempt from registration under Section 4(2) of
the Securities Act as they did not involve a public offering. In issuing
securities under the exemption provided by Section 4(2) of the Securities Act,
the Registrant relied upon certain purchasers'
II-3
<PAGE>
status as an officer or director of the Registrant and that each purchaser had
such knowledge and experience in financial and business matters that such
person was capable of evaluating the merits and risks of the investment.
Item 27. Exhibits.
Exhibit
Number Description
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation
3.2 Amended and Restated By-Laws
4.1 Specimen form of Common Stock certificate of the
Company
5.1 Opinion of Whiteford, Taylor & Preston L.L.P.*
10.1 Loan and Securities Purchase Agreement, Stock
Warrant and Subordinated Note each dated August 12,
1995 between Life Critical Care and Morgenthau Bridge
Investment Limited Partnership
10.2 Loan and Securities Purchase Agreement, Stock
Warrant and Subordinated Note each dated August 12,
1995 between Life Critical Care Corporation and
Morgenthau Bridge Loan LLC
10.3 Asset Purchase Agreement dated January 22, 1996
between Life Critical Care and Blue Water Medical
Supply, Inc. and Blue Water Industrial Products, Inc.,
as amended
10.4 Asset Purchase Agreement dated March 1, 1996
among ABC Medical Supply, Inc., Timothy Dillon,
Dennis Phillips and Life Critical Care, as amended
10.5 Asset Purchase Agreement dated March 1, 1996 among
Great Lakes Home Medical, Inc., Michael E. Belleau,
James Bickel, Thomas Mainhardt and Life Critical
Care, as amended
10.6 Form of Lease Agreement between Life Critical Care
and Blue Water Land Development for 37885 Green
Street, New Baltimore, Michigan
II-4
<PAGE>
48047
10.7 Form of Lease Agreement between Life Critical Care
and Blue Water Land Development for 37280 Green
Street, New Baltimore, Michigan 48047
10.8 Form of Loan and Security Agreement between Life
Critical Care and certain investors
10.9 Employment Agreement dated as of July 25, 1996
between Life Critical Care and its Chief Executive
Officer
10.10 Employment Agreement between Life Critical Care and
its Chief Financial Officer*
10.11 1996 Non-Employee Directors Stock Option Plan
10.12 1996 Stock and Incentive Plan
10.13 Form of 401(k) Plan*
10.14 Agreement between Life Critical Care and The
Morgenthau Group Financial Corporation*
10.15 Credit facility agreement between Life Critical Care
and Manufactures and Traders Trust Co.*
10.16 Form of Underwriter's Warrant Agreement*
10.17 Form of Financial Consulting Agreement*
10.18 Form of Merger and Acquisition Agreement*
11.1 Statement Re: Computation of Per Share Earnings
23.1 Consent of Ernst & Young LLP
23.2 Consent of Whiteford, Taylor & Preston L.L.P.
(included in Exhibit 5.1)*
24.1 Power of Attorney (included as part of the
signature page of this Registration Statement)
27.1 Financial Data Schedule
- ----------------
* To be supplied by amendment.
II-5
<PAGE>
Item 28. Undertakings.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fort
Lauderdale, State of Florida, on October 18, 1996.
LIFE CRITICAL CARE CORPORATION
By: /s/ Thomas H. White
--------------------------
Thomas H. White,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director whose signature
appears below constitutes and appoints Thomas H. White, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign for
the undersigned any and all amendments or post-effective amendments to this
Registration Statement on Form SB-2 relating to the issuance of Common Stock of
the Registrant, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission.
We hereby confirm all acts taken by such agent and attorney-in-fact as herein
authorized.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ THOMAS H. WHITE Principal Executive Officer, October 18, 1996
- ---------------------------
THOMAS H. WHITE Principal Financial Officer,
Principal Accounting Officer
and Director
/s/ RICHARD M. ANDZEL Director October 18, 1996
- ---------------------------
RICHARD M. ANDZEL
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation
3.2 Amended and Restated By-Laws
4.1 Specimen form of Common Stock certificate of the Company
5.1 Opinion of Whiteford, Taylor & Preston L.L.P.*
10.1 Loan and Securities Purchase Agreement, Stock Warrant and
Subordinated Note each dated August 12, 1995 between Life
Critical Care and Morgenthau Bridge Investment Limited
Partnership
10.2 Loan and Securities Purchase Agreement, Stock Warrant and
Subordinated Note each dated August 12, 1995 between Life
Critical Care Corporation and Morgenthau Bridge Loan LLC
10.3 Asset Purchase Agreement dated January 22, 1996 between
Life Critical Care and Blue Water Medical Supply, Inc. and Blue
Water Industrial Products, Inc., as amended
10.4 Asset Purchase Agreement dated March 1, 1996 among ABC
Medical Supply, Inc., Timothy Dillon, Dennis Phillips and
Life Critical Care, as amended
10.5 Asset Purchase Agreement dated March 1, 1996 among Great
Lakes Home Medical, Inc., Michael E. Belleau, James Bickel,
Thomas Mainhardt and Life Critical Care, as amended
10.6 Form of Lease Agreement between Life Critical Care and Blue
Water Land Development for 37885 Green Street, New Baltimore,
Michigan 48047
10.7 Form of Lease Agreement between Life Critical Care and Blue
Water Land Development for 37280 Green Street, New Baltimore,
Michigan 48047
II-8
<PAGE>
10.8 Form of Loan and Security Agreement between Life Critical Care
and certain investors
10.9 Employment Agreement dated as of July 25, 1996 between Life
Critical Care and its Chief Executive Officer
10.10 Employment Agreement between Life Critical Care and its Chief
Financial Officer*
10.11 1996 Non-Employee Directors Stock Option Plan
10.12 1996 Stock and Incentive Plan
10.13 Form of 401(k) Plan*
10.14 Agreement between Life Critical Care and The Morgenthau Group
Financial Corporation*
10.15 Credit facility agreement between Life Critical Care and
Manufactures and Traders Trust Co.*
10.16 Form of Underwriter's Warrant Agreement*
10.17 Form of Financial Consulting Agreement*
10.18 Form of Merger and Acquisition Agreement*
11.1 Statement Re: Computation of Per Share Earnings
23.1 Consent of Ernst & Young LLP
23.2 Consent of Whiteford, Taylor & Preston L.L.P. (included in
Exhibit 5.1)*
24.1 Power of Attorney (included as part of the signature page of
this Registration Statement)
27.1 Financial Data Schedule
- ---------------
* To be supplied by amendment.
II-9
Exhibit 3.1
LIFE CRITICAL CARE CORPORATION
RESTATED CERTIFICATE OF INCORPORATION
Life Critical Care Corporation, a Delaware corporation (the
"Corporation"), having its registered office in the County of New Castle, State
of Delaware, and having filed its original certificate of incorporation with the
Secretary of State on June 19, 1995 hereby certifies to the Secretary of State
of the State of Delaware:
FIRST: That the Certificate of Incorporation of the Corporation is
hereby amended and restated by deleting Articles I through VIII therefrom and by
substituting in lieu thereof new Articles FIRST through TENTH as follows:
FIRST: The name of the corporation (the "Corporation") shall
be
Life Critical Care Corporation
SECOND: The address of the Corporation's registered office in
the State of Delaware is 4001 Kennett Pike, Suite 300-A, Wilmington,
Delaware 19807. The name and address of the registered agent are
Corporations & Companies, Inc., 4001 Kennett Pike, Suite 300-A,
Wilmington, Delaware 19807 (New Castle County).
THIRD: The purposes for which the Corporation is formed are:
(a) To engage in and carry on the business of providing
health care products and services and related activities of any nature
whatsoever; and
(b) To carry on the business described above and any other
related or unrelated business and activity in the State of Delaware, in
any other state, territory, district, or dependency of the United
States, or in any foreign country; and
(c) To do anything permitted in Sections 121 and 122 of
the Delaware General Corporation Law, as amended from time to time.
FOURTH: The total number of shares of all classes of stock
which the Corporation has authority to issue is ten million five
hundred thousand (10,500,000) shares, of which ten million (10,000,000)
shares shall be Common Stock, par value $.01 per share, and five
hundred thousand (500,000) shares shall be Preferred Stock, par value
$.01 per share.
<PAGE>
The shares may be issued by the Corporation from time to time
as approved by the Board of Directors of the Corporation without the
approval of the stockholders except as otherwise provided in this
Article FOURTH or the rules of a national securities exchange or
national market system, if applicable. The consideration for the
issuance of the shares shall be paid to or received by the Corporation
in full before their issuance and shall not be less than the par value
per share.
The holders of the Common Stock are entitled at all times to
one vote for each share held and to such dividends as the Board of
Directors may in their discretion from time to time legally declare,
subject, however, to the voting and dividend rights, if any, of the
holders of the Preferred Stock then outstanding. In the event of any
liquidation, dissolution or winding up of the Corporation, the
remaining assets of the Corporation after the payment of all debts and
necessary expenses, subject, however, to the rights of all holders of
the Preferred Stock then outstanding, shall be distributed among the
holders of the Common Stock pro rata in accordance with their
respective holdings. The Common Stock is subject to all of the terms
and provisions of the Preferred Stock as fixed by the Board of
Directors as hereinafter provided.
The Board of Directors shall have the authority to classify
and reclassify any unissued shares of Preferred Stock by authorizing
the issuance of the Preferred Stock from time to time in one or more
series with such distinctive designations as may be established by the
Board of Directors, and any such series: (a) may have such voting
powers, full or limited, or may be without voting powers; (b) may be
subject to redemption at such time or times and at such prices; (c) may
be entitled to receive dividends (which may be cumulative or
noncumulative) at such rate or rates, on such conditions and at such
times and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d)
may have such rights upon the dissolution of, or upon any distribution
of the assets of, the Corporation; (e) may be made convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, at such price or prices or at such rates of exchange, and
with such other adjustments; and (f) shall have such other preferences,
conversion or other rights, voting powers, restrictions, limitations as
to dividends, qualifications, terms or conditions of redemption or
other rights,
-2-
<PAGE>
as shall hereafter be authorized by the Board of Directors in
accordance with the General Corporation Law of the State of Delaware.
FIFTH: The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, which
shall consist of not less than one (1) nor more than ten (10), the
exact number to be determined from time to time by a resolution adopted
by the affirmative vote of a majority of the entire Board of Directors.
Unless the Board of Directors elects to classify the Board as
hereinafter provided:
(a) Any director may be removed from office, with or
without cause, by the affirmative vote of the holders of a majority of
the votes entitled to be cast on the matter, and, to the extent
permitted by law, any director may be removed for cause by the
affirmative vote of the majority of the remaining directors, although
such directors are less than a quorum, or by the sole remaining
director.
(b) Each director shall serve until his successor is
elected and qualified or until his earlier death, retirement,
resignation or removal. Should a vacancy occur or be created, whether
arising through death, resignation or removal of a director or through
an increase in the number of directors, such vacancy shall be filled by
a majority vote of the remaining directors in office, even though such
directors are less than a quorum, or by the sole remaining director. A
director so elected to fill a vacancy shall hold office until the next
annual meeting of stockholders and thereafter until his successor shall
be duly elected and qualified.
The Board of Directors shall have the power pursuant
to the By-Laws of the Corporation to elect to classify the Board of
Directors by dividing the directors into three (3) classes, as
described below. In the event that the Board exercises its power to
classify the Board of Directors, it shall not have the power to
declassify the Board of Directors, except by amendment of the
Corporation's Charter. In the event that the Board of Directors
exercises its power to classify the Board of Directors, then,
notwithstanding anything to the contrary contained herein:
(a) The Board of Directors shall be divided into
three classes, Class A, Class B and Class C. Each class of directors
shall consist of an equal number of directors, or as nearly equal in
number as possible.
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Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director
was elected; provided, however, that each director initially
designated as a Class A director shall hold office until the first
annual meeting of stockholders after such designation; each
director initially designated as Class B shall hold office until the
second annual meeting of stockholders after such designation; and each
director initially designated as Class C shall hold office until the
third annual meeting of stockholders after such designation.
(b) In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a
member until the expiration of his current term, or his prior death,
retirement, resignation or removal, and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall
be apportioned by the Board of Directors among the three classes of
directors so as to maintain such classes as nearly equal as possible
and any vacancies so created shall be filled by a majority vote of the
directors in office of the class in which such vacancy occurs, and a
director so elected to fill a vacancy shall serve for the remainder of
the then present term of office of the class to which he was elected
and until his successor shall be duly elected and qualified.
(c) Any director may be removed from office, with or
without cause, only by the affirmative vote of a majority of the entire
Board of Directors, and any director may be removed from office, only
with cause, by the affirmative vote of the holders of a majority of the
votes entitled to be cast on the matter; a vacancy which results from
the removal of a director as set forth herein, or which arises through
the death or resignation of a director, shall be filled by a majority
vote of the remaining directors in office of the class of such removed
director (or if there are no such directors, by a majority vote of the
entire Board of Directors), and a director so elected to fill a vacancy
shall serve for the remainder of the then present term of office of the
class to which he was elected and until his successor shall be duly
elected and qualified.
SIXTH: Except as otherwise provided in this Certificate of
Incorporation, in furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors
shall have the power, in the manner provided in the By-Laws of the
Corporation, to make, amend, change, add to or repeal the By-Laws of
the Corporation.
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SEVENTH: No Stockholder of the Corporation shall have any
preferential or preemptive right to acquire additional shares of stock
of the Corporation except to the extent that, and on such terms as, the
Board of Directors from time to time may determine.
EIGHTH: In carrying on its business, or for the purpose of
attaining or furthering any of its objects, the Corporation shall have
all of the rights, powers, and privileges granted to corporations by
the laws of the State of Delaware, as well as the power to do any and
all acts and things that a natural person or partnership could do, as
now or hereafter authorized by law, either alone or in partnership or
conjunction with others. In furtherance and not in limitation of the
powers conferred by statute, the powers of the Corporation and of its
Directors and Stockholders shall include the following:
(a) The Corporation reserves the right to adopt from time to
time any amendment to its Certificate of Incorporation, as now or
hereafter authorized by law, including any amendment that alters the
contract rights, as expressly set forth in the Certificate of
Incorporation, of any outstanding stock.
(b) Except as otherwise provided in the Certificate of
Incorporation or By-Laws of the Corporation, as from time to time
amended, the business of the Corporation shall be managed by its Board
of Directors. The Board of Directors shall have and may exercise all of
the rights, powers, and privileges of the Corporation, except only for
those that are by law or by the Certificate of Incorporation or By-Laws
of the Corporation conferred upon or reserved to the Stockholders.
Additionally, the Board of Directors of the Corporation is specifically
authorized and empowered from time to time in its discretion:
(1) To authorize the issuance of shares of the
Corporation's stock of any class, whether now or hereafter authorized,
or securities convertible into shares of its stock, of any class or
classes, whether now or hereafter authorized, for such consideration as
the Board of Directors deems advisable, subject to such restrictions or
limitations, if any, as may be set forth in the By-Laws of the
Corporation;
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(2) By articles supplementary to this Certificate of
Incorporation, to classify or reclassify any unissued shares by fixing
or altering in any one or more aspects, before issuance of those
shares, the preferences, conversion or other rights, voting powers,
restrictions, qualifications, dividends, or terms or conditions of
redemption of those shares, including but not limited to the
reclassification of unissued common shares to preferred shares or
unissued preferred shares to common shares; and
(3) To borrow and raise money, without limit and upon
any terms, for any corporate purposes; and, subject to applicable law,
to authorize the creation, issuance, assumption, or guaranty of bonds,
debentures notes, or other evidences of indebtedness for money so
borrowed, to include therein such provisions as to redeemability,
convertibility, or otherwise, as the Board of Directors, in its sole
discretion, determines, and to secure the payment of principal,
interest, or sinking fund in respect thereof by mortgage upon, or the
pledge of, or the conveyance or assignment in trust of, all or any part
of the properties, assets, and goodwill of the Corporation then owned
or thereafter acquired.
NINTH: The Corporation shall indemnify to the full extent
permitted by, and in the manner permissible under, the laws of the
State of Delaware, any person made or threatened to be made, a party to
an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of the Corporation or served any other enterprise as a director
or officer at the request of the Corporation and such right of
indemnification shall also be applicable to the executors,
administrators and other similar legal representative of any such
director or officer. The foregoing provisions of this Article NINTH
shall be deemed to be a contract between the Corporation and each
director and officer who serves in such capacity at any time while this
Article NINTH is in effect, and any repeal or modification thereof
shall not affect any rights or obligations then existing with respect
to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought based in whole or in
part upon any such state of facts. The foregoing rights of
indemnification shall not be deemed exclusive of any other rights to
which any director or officer or his legal representative may be
entitled apart from the provisions of this Article NINTH.
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TENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize Corporation
action further eliminating or limiting the personal liability of
directors then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this
Article TENTH the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
SECOND: That the foregoing Restated Certificate of Incorporation was
declared advisable and adopted by the Board of Directors of the Corporation at
a meeting duly called for that purpose.
THIRD: That the foregoing Restated Certificate of Incorporation was
approved by the unanimous written consent of the stockholders of the Corporation
in accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware.
FOURTH: That the foregoing Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Section 242 and Section 245 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed by its President and attested to by
its Secretary this 29th day of August, 1996.
ATTEST: LIFE CRITICAL CARE CORPORATION
____________________________________ By: __________________________
Amy E. Parker, Secretary Thomas H. White, President
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Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
LIFE CRITICAL CARE CORPORATION
ARTICLE I
STOCKHOLDERS
1.1. Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the Corporation.
1.2. Annual Meetings. The annual meeting of stockholders shall
be held for the election of directors and for the transaction of any other
proper business at such date and time as may be designated from time to time
by the Board of Directors or the President.
1.3. Special Meetings. Special meetings of stockholders may be
called for any purpose or purposes at any time by the President or by the
Board of Directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
1.4. Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall also state the purpose or purposes for which the
meeting is called. If mailed, notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation.
1.5. Voting List. The officer who has charge of the stock ledger of
the Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be open to examination of any stockholder at the
time and place of such meeting during the whole time of the meeting.
<PAGE>
1.6. Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the holders of a majority of the issued and
outstanding shares of the capital stock of the Corporation entitled to vote at
such meeting either in person or by proxy, shall constitute a quorum for the
transaction of business.
1.7. Adjournments. Any meeting of stockholders may be adjourned,
to any other time and to any other place at which a meeting of
stockholders may be held under these By-laws, by the stockholders present or
represented at such meeting and entitled to vote, although less than a quorum,
or, if no stockholder is present, by any officer entitled to preside at or to
act as secretary of such meeting. It shall not be necessary to notify any
stockholder of any adjournment of less than 30 days if the time and place of the
adjourned meeting are announced at the meeting at which adjournment is taken,
unless a new record date is fixed for the adjourned meeting after the
adjournment. The Corporation may transact any business at the adjourned meeting
which might have been transacted at the original meeting.
1.8. Voting and Proxies. Each stockholder shall have one vote for each
share of stock, entitled to vote, held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise
provided in the Certificate of Incorporation. Each stockholder of record
entitled to vote at a meeting of stockholders, or to express consent or
dissent to corporate action in writing without a meeting, may vote or express
such consent or dissent in person or may authorize another person or persons to
vote or act for him by written proxy executed by the stockholder or his
authorized agent and delivered to the Secretary of the Corporation. No such
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period.
1.9. Action at Meeting. Except as otherwise required by law, the
Certificate of Incorporation or these By-laws, when a quorum is present at
any meeting, the holders of a majority of the stock present or represented
and voting on a matter shall decide any matter to be voted upon by the
stockholders at such meeting. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at such election.
1.10. Consent of Stockholders in Lieu of Meeting. Any action required
or permitted to be taken at any annual or special meeting of stockholders of
the Corporation may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote on such action were present and
voted. Prompt notice of the taking of corporate action without a meeting
shall be given to those stockholders who have not consented in writing.
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ARTICLE II
DIRECTORS
2.1. Powers; Number; Election; and Qualification. The business and
affairs of the Corporation shall be managed by or under the direction of a Board
of Directors, who may exercise all of the powers of the Corporation except
as otherwise provided by law, the Certificate of Incorporation or these
By-laws. The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by resolution of the
stockholders or the Board of Directors. The number of directors may be
increased or decreased at any time and from time to time either by the
stockholders or by a majority of the directors then in office, but may be
decreased only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the Corporation.
2.2. Tenure. Each director shall hold office until the next annual
meeting of stockholders and until his successor is duly elected and
qualified, or until his earlier death, resignation or removal.
2.3. Vacancies. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is duly
elected and qualified, or until his earlier death, resignation or removal.
2.4. Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.5. Regular Meetings. Regular meetings of the Board of Directors may
be held from time to time without notice at such time and place within the
State of Delaware or as otherwise determined by the Board of Directors;
provided, that any director who is absent when such a determination is made
shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of stockholders.
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2.6. Special Meetings. Special meetings of the Board of Directors may
be held at any time and place within or outside the State of Delaware
whenever called by the President, two or more directors, or by one director
in the event that there is only one director in office. Notice of any special
meeting of directors shall be given to each director by the President, the
Secretary or by one of the directors calling the meeting. Notice shall be duly
given to each director: (i) by giving notice to such director in person or by
telephone at least 48 hours in advance of the meeting; (ii) by sending a
telegram, telex, telecopy, or delivering written notice by hand, to his last
known business or home address at least 48 hours in advance of the meeting; or
(iii) by mailing written notice to his last known business or home address at
least 72 hours in advance of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
2.7. Meetings by Telephone Conference Calls. Board of Directors or
any members of any committee designated by the Board may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other. Participation by such means shall constitute
presence in person at such meeting.
2.8. Quorum. A majority of the Board of Directors shall
constitute a quorum at all meetings of the Board of Directors. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice until a quorum shall be present.
2.9. Action at Meeting.At any meeting of the Board of Directors a which
a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-laws.
2.10. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of
the Board of Directors may be taken without a meeting, if all members of
the Board or committee, as the case may be, consent to the action in writing,
and the written consents are filed with the minutes of proceedings of the Board
or committee.
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2.11. Removal. Any one or more or all of the directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that the directors elected
by the holders of a particular class or series of stock may be removed without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series.
2.12. Committees. The Board of Directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors creating such
committee, and subject to the provisions of the General Corporation Law of the
State of Delaware, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each such committee shall keep minutes and make
such reports as the Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the directors or
in such rules, its business shall be conducted as nearly as possible in the same
manner as if provided in these By-laws for the Board of Directors.
2.13. Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
Corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE III
OFFICERS
3.1. Executive Officers. The officers of the Corporation shall
consist of a President, a Secretary, a Treasurer and such other officers
with such other titles as the Board of Directors shall determine, including
one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries. The Board of Directors may appoint such other officers as it may
deem appropriate.
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3.2. Election and Qualification. The President, Treasurer, Secretary
and any other executive officer shall be elected annually by the Board of
Directors at its meeting immediately following the annual meeting of
stockholders. Other officers may be appointed by the Board of Directors at
such meeting or at any other meeting. No officer need by a stockholder.
Any two or more offices may be held by the same person.
3.3. Tenure. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, each officer shall hold office until his
successor is duly elected and qualifies, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.4. Resignation and Removal. Any officer may resign by delivering his
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event. Any officer may be removed at any time, with or without
cause, by vote of a majority of the entire number of directors then in office.
Any removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation.
3.5. Vacancies. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled
for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is duly elected
and qualifies, or until his earlier death, resignation or removal.
3.6. Chairman of the Board of Directors. If a Chairman of the Board of
Directors is elected, he shall preside at all meetings of the Board at which he
is present and shall have such other duties as shall be assigned to him by the
Board of Directors, and, in general, shall perform all duties incident to the
office of Chairman of the Board of Directors.
3.7. President. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
Corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has
designated another officer as Chief Executive Officer, the President shall be
the Chief Executive Officer of the Corporation. The President shall perform such
other duties and shall have such other powers as the Board of Directors may from
time to time prescribe.
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3.8. Vice Presidents. Any Vice President shall perform such duties
and possess such powers as the Board of Directors or the President may from
time to time prescribe. In the event of the absence, inability or refusal
to act of the President, the Vice President (or if there shall be more than
one, the Vice Presidents in the order determined by the Board of Directors)
shall perform the duties of the President and when so performing shall have all
the powers of and be subject to all the restrictions upon the President. The
Board of Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.
3.9. Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
Secretary, including, without limitation, the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors,
to attend all meetings of stockholders and the Board of Directors and keep a
record of the proceedings, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.10. Treasurer and Assistant Treasurers. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer
shall perform such duties and have such powers as are incident to the
office of Treasurer, including, without limitation, the duty and power to
keep and be responsible for all funds and securities of the Corporation,
to deposit funds of the Corporation in depositories selected in
accordance with these By-laws, to disburse such funds as ordered by the Board
of Directors, to make proper accounts of such funds and to render as
required by the Board of Directors statements of all such transactions
and of the financial condition of the Corporation.
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The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurers.
3.11. Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
ARTICLE IV
CAPITAL STOCK
4.1. Certificates of Stock. Every holder of stock of the Corporation
shall be entitled to have a certificate in such form as may be prescribed by
law and by the Board of Directors certifying the number and class of shares
owned by him in the Corporation. Each such certificate shall be signed by or in
the name of the Corporation by the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation. Any or all of the signatures on the certificate
may be a facsimile.
4.2. Transfers. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, the
Certificate of Incorporation or these By-laws, the Corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these By-laws.
4.3. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate of stock in place of any previously issued
certificate alleged to have been lost, stolen or destroyed, upon such
terms and conditions as the Board of Directors may prescribe, including
the presentation of reasonable evidence of such loss, theft or
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destruction and the giving of such indemnity as the Board of Directors may
require for the protection of the Corporation or any transfer agent or
registrar.
4.4. Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders or to express consent (or dissent)
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE V
GENERAL PROVISIONS
5.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
5.2. Corporate Seal. The Corporation may have a seal that shall have
the name of the Corporation inserted thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
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<PAGE>
5.3. Waiver of Notice. Whenever any notice whatsoever is required
to be given by law, the Certificate of Incorporation or these By-laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph,
telecopy, cable or any other available method, whether before, at or after the
time stated in such waiver, or the appearance of such person or persons at such
meeting in person or by proxy, shall be deemed equivalent to a waiver of such
notice.
5.4. Voting of Securities. Except as the Board of Directors may
otherwise designate, the President or Treasurer may waive notice of, and act
as, or appoint any person or persons to act as, proxy or
attorney-in-fact for Corporation (with or without power of substitution) at any
meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by Corporation.
5.5. Transactions with Interested Parties. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, limited liability
company, association or other organization in which one or more of the
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or a committee of the Board of Directors which authorizes
the contract or transaction or solely because his or their votes are counted for
such purpose, if:
(a) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
(b) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of
Directors, a committee of the Board of Directors or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
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<PAGE>
ARTICLE VI
AMENDMENTS
6.1. Amendment of By-laws. These By-laws may be altered or repealed
at any regular or special meeting of the stockholders or of the Board of
Directors.
Exhibit 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
LIFE CRITICAL CARE CORPORATION
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF LIFE CRITICAL CARE CORPORATION
transferable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed.
This Certificate is not valid unless countersigned and registered
by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
SEAL
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ........Custodian.......
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..........................
in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------
- -----------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------- __ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _________________________________________________
---------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- ----------------------------------------------------
THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17 Ad-15.
Exhibit 10.1
LOAN AND SECURITIES PURCHASE AGREEMENT
By and Between
LIFE CRITICAL CARE CORPORATION
and
MORGENTHAU BRIDGE INVESTMENT
LIMITED PARTNERSHIP
August 12, 1995
<PAGE>
LOAN AND SECURITIES PURCHASE AGREEMENT
THIS LOAN AND SECURITIES PURCHASE AGREEMENT (this "Agreement")
is dated as of August 12, 1995 and is made by and between LIFE CRITICAL CARE
CORPORATION, a Delaware corporation (the "Company"), and MORGENTHAU BRIDGE
INVESTMENT LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Purchaser").
RECITALS
WHEREAS, the Company intends to acquire (the "Acquisitions")
certain assets or all of the outstanding capital stock of certain companies in
the home medical equipment business pursuant to the terms of anticipated Asset
Purchase Agreements and Stock Purchase Agreements by and between the Company and
such companies or their stockholders, as applicable;
WHEREAS, the Company desires to borrow from the Purchaser and
the Purchaser desires to lend to the Company up to the aggregate principal
amount of $750,000 pursuant to the terms and limitations set forth in this
Agreement;
WHEREAS, a condition precedent to the Loan, as hereinafter
defined, which the Company acknowledges will provide a direct benefit to it, is
the issuance by the Company to the Purchaser of warrants (the "Warrants") to
purchase 107,000 shares (the "Warrants Shares") of the voting common stock of
the Company (the "Stock") as set forth in EXHIBIT B hereto, which EXHIBIT B is
hereby made a part hereof in consideration of the exercise price (the "Exercise
Price") set forth in EXHIBIT B, with the form of Warrant also being included as
part of such EXHIBIT B;
WHEREAS, the fair market value of the allocation of the
purchase price for the investment units comprised of the Warrants and the Loan
is as follows: the fair market value of the Warrants is $-0- (zero dollars),
subject to the Exercise Price of $0.10 per Warrant Share, and the fair market
value of the Loan is the principal amount advanced by the Purchaser to the
Company hereunder; and
WHEREAS, the Purchaser is hereby irrevocably authorized and
empowered by the Company to pay the Exercise Price to itself to be applied to
the payment of any outstanding amount of principal and interest due and owing
under the Loan (as hereinafter defined) at such time or times and in such order
and manner of application as it may from time to time, in its sole discretion,
determine. The aforementioned payment of the Exercise price shall be deemed to
be full payment thereof to the same extent as if the same monies were directly
received by the Company.
<PAGE>
NOW, THEREFORE, for consideration, the adequacy and
sufficiency of which is hereby acknowledged by the parties hereto, and in
consideration of the premises and the mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
ISSUANCE OF NOTES AND WARRANTS
SECTION 1.01 Issuance of Notes and Warrants.
(a) Subject to the terms and conditions set forth herein and
in the Note, as hereinafter defined, the Company shall borrow from the Purchaser
and the Purchaser shall lend to the Company, on the Closing Date (as hereinafter
defined), the aggregate principal amount (the "Principal Amount") of up to
$750,000 to be evidenced by the issuance by the Company to the Purchaser of a
cash advances subordinated promissory note (a "Note") in the form of EXHIBIT A
hereto (the "Loan"). On the Closing Date and in consideration for the Loan, the
Company shall become obligated to issue to the Purchaser the Warrants, in the
form of EXHIBIT B hereto.
(b) Payments for the Note will be made by the Purchaser by
check or by wire transfers with the amount advanced to be recorded, upon each
such advance, on the Note, up to an amount equal to the Principal Amount. The
Company's obligation to issue to the Purchaser the Warrants shall arise upon
each advance under the Note.
(c) Warrant Exercise Proceeds. The Purchaser is hereby
irrevocably authorized and empowered by the Company to pay the Exercise Price to
itself to be applied to the payment of any outstanding amount of principal and
interest due and owing under the Loan (as hereinafter defined) at such time or
times and in such order and manner of application as it may from time to time,
in its sole discretion, determine. The aforementioned payment of the Exercise
Price shall be deemed to be full payment thereof to the same extent as if the
same monies were directly received by the Company.
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<PAGE>
SECTION 1.02 Closing.
(a) The closing (the "Closing") of the Loan and the issuance
of the Note shall take place at the offices of The Morgenthau Group, Inc., 3333
W. Commercial Boulevard, Ft. Lauderdale, Florida 33309 at 10:00 a.m., Ft.
Lauderdale time, as of the date of this Agreement (such date and time of closing
being herein called the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
SECTION 2.01 Organization, Qualifications and Corporate Power.
The Company is a corporation duly incorporated and organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified as a foreign corporation in each other jurisdiction, if
any, in which the nature of business transacted by it or the character of the
properties owned or leased by it makes such licensing or qualification
necessary, except where the failure to so qualify would not have a material
adverse effect (a "Material Adverse Effect") upon the financial condition or
operations of the Company. The Company has full power and authority (corporate
and other) to own and hold its properties and to conduct its businesses as
currently conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement. The Company has the corporate power
and authority to issue and deliver the Note and the Warrants, and to execute,
deliver and perform any other document required pursuant to this Agreement.
SECTION 2.02 Authorization of Agreement, Etc.
(a) The execution, delivery and performance by the Company of
this Agreement, and the issuance and delivery of the Note and of the Warrants by
the Company, have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the charter or by-laws of the Company, or any provision of any
indenture, agreement or other instrument to which the Company is a party or by
which the Company or any of its properties or assets are bound or affected, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the company other
than as permitted and contemplated by this Agreement.
-3-
<PAGE>
(b) The Note having been duly authorized and, when issued and
delivered in accordance with this Agreement, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. The Warrants and the
Warrant Shares have been duly authorized and the Warrant Shares, upon the
issuance thereof upon the exercise of the Warrants, will be validly issued,
fully paid and nonassessable shares of the Stock of the Company. The execution,
issuance and delivery of the Note, the Warrants and the Warrant Shares are not,
except as disclosed to the Purchaser in writing, subject to any preemptive
rights of shareholders of the Company, or to any right of first refusal or other
similar right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly executed
and delivered by the Company, and (assuming the due authorization, execution and
delivery by the Purchaser) constitutes the legal, valid and binding obligations
of the Company enforceable in accordance with its terms, subject to general
equity principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally. Each other document executed in
connection with this Agreement or the transactions contemplated hereby by the
Company, including, but not limited to, the Note and the Warrants (collectively,
the "Loan Documents") constitute the valid, legally binding obligation of the
Company and are enforceable in accordance with their respective terms, subject
to general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
SECTION 2.04 Governmental Approvals. No registration or filing
with, or consent or approval of, or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance of this Agreement or the issuance, sale and
delivery of the Note or the Warrants.
SECTION 2.05 Offering of Warrants. Neither the Company nor, to
the knowledge of the Company, any person or entity authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Warrants has offered the Warrants for sale to, or solicited any
offers to buy the Warrants from, or otherwise approached or negotiated with
respect thereto with, any person or persons other than the Purchaser and certain
other purchasers of similar notes and warrants under circumstances that have
involved the use of any form of general advertising or solicitation as such
terms are used in Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and neither the Company nor, to the knowledge of
the Company, any person acting on its behalf has
-4-
<PAGE>
taken any action (including, without limitation, any offer, issuance or sale
of any security of the Company, whether to a subsequent investor or otherwise,
under circumstances which might require the integration of such security with
the offering of the Warrants under the Securities Act or the rules and
regulations of the Securities and Exchange Commission [the "Commission"]
thereunder) in a manner which would make the exemptions afforded by the
Securities Act unavailable for the offering, issuance or sale of the Warrants.
SECTION 2.06 Compliance With Law. Except as disclosed to the
Purchaser in writing, the Company is not in default under any order of any
court, governmental authority, arbitration board or tribunal to which it is
subject, or in violation of any laws, ordinances, governmental rules or
regulations, the violation of which would have a Material Adverse Effect.
SECTION 2.07 Litigation. Except as disclosed and described to
the reasonable satisfaction of the Purchaser, there are no proceedings against
the Company, its officers or directors pending or, so far as is known by the
Company, threatened before any court or administrative agency which, if
adversely decided, would have a Material Adverse Effect.
SECTION 2.08 No Conflicting Agreements. There are no
provisions of the Company's charter and by-laws and no provisions of any
existing mortgage, deed of trust, indenture, lease, or other material agreement
binding the Company or affecting its properties which would conflict with or in
any way prevent the execution, delivery, or carrying out of terms of this
Agreement, the Note, the Warrants or the other Loan Documents.
SECTION 2.09 Financial Condition. The Company has delivered to
the Purchaser copies of its most recent unaudited financial statements. Except
as disclosed to the Purchaser in writing, there has been no material adverse
change in the financial condition of the Company or the results of the
operations thereof since the date of such financial statement as stated above.
SECTION 2.10 Information. All information contained in any
financial statement, application, schedule, report, certificate, loan agreement,
equity sharing agreement, or any other document provided by the Company or by
any other officer, director or shareholder in connection with the issuance of
the Note and the Warrants or with any of the Loan Documents is in all respects
true and accurate, and the Company or such other person has not omitted to state
any material fact or any fact necessary to make such information not misleading.
SECTION 2.11 Taxes. All taxes imposed upon the Company and its
properties, operations, and income (including payroll taxes) are paid so as to
be current.
-5-
<PAGE>
SECTION 2.12 Employee Benefit Plans. Each employee benefit
plan, agreement, arrangement or understanding maintained for the benefit of the
Company's current or former employees (a "Plan") is in full force and effect in
accordance with its terms and complies in all material respects with all
applicable laws. The Company is not in default of any of its respective material
obligations under any Plan.
SECTION 2.13 Intellectual Property. The Company owns or has
rights to all patents, trademarks, copyrights, trade secrets or other
intellectual property and technology (the "Intellectual Property"), used or held
for use in connection with its businesses available for such use and in the
possession or subject to the control of the Company and/or necessary to conduct
its businesses as now conducted. The Company has not granted any rights in any
such Intellectual Property to any other person. The present operations of the
Company do not infringe on any Intellectual Property owned by any other party.
SECTION 2.14 Past Activities. During the past ten (10) years,
except as previously disclosed to the Purchaser in writing, none of the
Company's current directors or officers have been arrested or convicted of any
material crime, nor have any of them been the subject of a voluntary or
involuntary bankruptcy proceeding or been an officer or director of a company
which has been the subject of a voluntary or involuntary bankruptcy proceeding.
SECTION 2.15 Brokerage Fee. The Company has not dealt with any
broker, finder, commission agent or other party in connection with the
transactions contemplated by this Agreement, and the Company is under no
obligation to pay any broker's fee or commission in connection with such
transactions to any person.
SECTION 2.16 Leases. Upon the request of the Purchaser, the
Company shall provide to the Purchaser copies of every material lease of real or
personal property to which the Company is a party and which are in effect at the
time of the request.
SECTION 2.17 Subsidiaries and Affiliates. The Company has no
subsidiaries or affiliates which are not a party to this Agreement.
SECTION 2.18 Other Agreements. The Company has not entered
into any written or oral "side agreements" which amend or modify any other
agreement entered into by the Company, and none of the officers and directors of
the Company have agreed to take any action beyond what is required in any other
agreement entered into by the Company which have a value or require the Company
to pay an amount in excess of $25,000.
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<PAGE>
ARTICLE III
COVENANTS
Until the later of payment in full of the Note or the exercise
or expiration of the Warrants:
SECTION 3.01 Financial Statements. The Company shall provide
to the Purchaser within thirty (30) days of the end of each accounting quarter,
quarterly balance sheets, source statements and statements of use of funds,
prepared in accordance with generally accepted accounting principles,
consistently applied.
SECTION 3.02 Certificate of No Default. The Company shall
provide the Purchaser with a quarterly certificate of the President of the
Company stating that no default has occurred during the immediately concluded
calendar quarter under this Agreement or under any of the other Loan documents,
or describing the nature of any default hereunder or thereunder.
SECTION 3.03 Annual Audit. The Company shall provide the
Purchaser with an annual independent certified audit of the Company within
ninety (90) days after the fiscal year end of the Company from an accounting
firm acceptable to the Purchaser, provided that the accounting firm of Ernst &
Young, LLP shall be deemed acceptable.
SECTION 3.04 Governmental Filings. Within thirty (30) days
after filing, at the request of the Purchaser, the Company shall provide the
Purchaser with a copy of all material reports or other documents filed by the
Company with any governmental agencies, including without limitation, the
Internal Revenue Service and the Commission.
SECTION 3.05 Lawsuits. Within thirty (30) days after filing or
receipt, the Company shall provide the Purchaser with copies of all pleadings
filed in connection with any material suits or proceedings filed by or against
the Company in which the amount in controversy exceeds $50,000.
SECTION 3.06 Compliance With Laws. The Company will at all
times comply in all material respects with all applicable federal, state, and
local laws, rules, and regulations, and orders of any court or other
governmental authority having jurisdiction.
SECTION 3.07 Default Notices. Within ten (10) days after
receipt of any notification, the Company shall provide the Purchaser with a copy
of any notification received by the Company relating to any defaults by the
Company on any loans,
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<PAGE>
leases, material contracts or other material agreements to which the Company is
a party.
SECTION 3.08 Insurance. The Company will (a) at all times
maintain with well-rated and responsible insurance companies such insurance as
is required by applicable laws and such other insurance in such amounts, of such
types, and against such risks, hazards, liabilities, casualties, and
contingencies as is customarily maintained by companies similarly situated
(including Federal flood insurance if the businesses of the Company are located
in a Federal Flood Area), (b) list the Purchaser on such policies as a loss
payee, to the extent of the Purchaser's interest in the Company, and (c) file
with the Purchaser annually a detailed list of the insurance then in effect and
stating the names of the insurance companies, the types, the amounts, and rates
of the insurance, dates of the expiration thereof and the properties and risks
covered thereby, and, within thirty (30) days after notice in writing from the
Purchaser, obtain such additional insurance as the Purchaser may reasonably
request, provided that the terms of such additional insurance (including the
premiums) are dictated by sound business judgment.
SECTION 3.09 Financing. Except for an initial public offering
by the Company and any secondary offering, the Company will notify the Purchaser
as to the proposed amount and terms of any third-party equity financing for the
Company at least thirty (30) days prior to offering participation in such
financing to any other entity. During such thirty (30) day period, the Company
will negotiate in good faith with the Purchaser as to the amount of, and the
terms of participation in such financing by the Purchaser. The Purchaser shall
have the first right to participate in all or any portion of such offering with
other similarly situated "purchasers" of notes and warrants.
SECTION 3.10 Maintain Existence. The Company will at all times
maintain in full force and effect its corporate existence, rights, privileges,
and franchises and qualify and remain qualified in all jurisdictions where
qualification is required.
ARTICLE IV
NEGATIVE COVENANTS
Until the later of payment in full of the Note or exercise or
expiration of the Warrants, the Company shall not, without the prior written
consent of the Purchaser:
SECTION 4.01 Dividends. Make any cash or other dividend
distributions to its shareholders except that the Company may pay dividends to
any holders of cumulative preferred stock, if any shall be issued.
-8-
<PAGE>
SECTION 4.02 Sales. Sell or otherwise dispose of any assets of
the Company which have an individual value in excess of $100,000 outside the
regular course of business.
SECTION 4.03 Capital Acquisitions. Other than the
Acquisitions, acquire any asset or other capital item having an individual value
in excess of $350,000.
SECTION 4.04 Related Party Transaction. Transact any business
or enter into any agreement with any member of the board of directors or an
officer of the Company, unless in an "arm's length" transaction negotiated by
each party.
SECTION 4.05 Reorganization. Merge or consolidate with another
corporation or entity or dissolve or otherwise liquidate, except as permitted by
this Agreement.
SECTION 4.06 Corporate Matters. Change the nature of its
business operations, or invest any funds in any concern or entity not strictly
related to its business.
SECTION 4.07 Sale of Stock. Issue or sell any of its stock,
options, convertible debt, or preferred stock, or redeem the same, issue or
grant any stock appreciation rights or other rights in or to stock, or issue or
grant any bonus, profit sharing or other similar arrangements, except as
permitted by this Agreement.
SECTION 4.08 Contracts. Enter into any agreements or leases
not in the normal course of its businesses which require annual payments in
excess of $100,000.
SECTION 4.09 Loans. Enter into any loan agreements or other
borrowing arrangements or increase borrowings under any currently existing
institutional debt which would require annual payments on such new arrangements
in excess of $100,000.
SECTION 4.10 Corporate Structure. Other than in connection
with an IPO, alter its corporate structure so that a change of control occurs,
establish or purchase any new subsidiary or invest more than $100,000 in any one
of its affiliates.
SECTION 4.11 Stock Redemption. Redeem in any one calendar year
shares of their respective stock which, at the time of redemption, would have a
fair market value of greater than $100,000.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01 Authorization. The Purchaser has the power and
authority to execute and deliver this Agreement. All action on the part of the
Purchaser necessary for the authorization, execution, delivery and performance
of all obligations of the Purchaser under this Agreement have been taken. This
Agreement, when executed and delivered by the Purchaser (assuming the due
authorization, execution and delivery by the Company) shall constitute a legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject to general equity principles and to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally.
SECTION 5.02 Investment Representations. The Purchaser
represents and warrants to the Company:
(a) the Warrants (and if applicable, the Warrant Shares)
(collectively, the "Investor Interest") to be acquired by it pursuant to this
Agreement are being acquired for its own account and not with a view toward the
distribution or resale of the Investor Interest or any part thereof in any
transaction which would be in violation of the securities laws of the United
States of America or any State, without prejudice, however, to its rights at all
times to sell or otherwise dispose of all or any part of the Investor Interest
to an affiliate or any person pursuant to a registration statement under the
Securities Act and any comparable State act or under an exemption from such
registration available under the Securities Act and any comparable State act;
provided that such transfers to affiliates, when taken as a whole, will not be
integrated so as to invalidate the exemption from registration under the
Securities Act or any comparable state act pursuant to which the Investor
Interest is being issued by the Company. It has been advised that the Investor
Interest has not been registered under the Securities Act or the securities laws
of any State, on the grounds that no distribution or public offering of the
Investor Interest is presently contemplated by it.
(b)(i) it is an "accredited investor" as defined in Rule
501(a) promulgated under the Securities Act or (ii) by reason of its business
and financial experience, and the business and financial experience of those
persons retained by it to advise it with respect to the Investor Interest, it,
together with such advisors, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment, and it is able to bear the economic
risk of such investment and, at the present time, is able to afford a complete
loss of such investment.
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<PAGE>
(c) prior to making a decision to enter into this Agreement
and acquire the Investor Interest, it has been provided the opportunity to ask
questions of, and receive answers from the executive officers of the Company
concerning the Company, and to obtain from the Company any information requested
from the Company. On the basis of the foregoing, and on the representations of
the Company contained in this Agreement and the representations contained in the
other Loan Documents, it acknowledges that it possesses sufficient information
to understand the merits and risks associated with an investment in the Investor
Interest.
SECTION 5.03 Reliance on Information. The Purchaser
acknowledges that it has relied upon the information provided by the executive
officers of the Company and upon the representations of the Company contained
herein and the representations of such entity contained in the other Loan
Documents.
ARTICLE VI
CONDITIONS TO THE
OBLIGATIONS OF THE PURCHASER TO CLOSE
SECTION 6.01 Obligations of the Purchaser to Close. The
obligation of the Purchaser to purchase and pay the first advance for the Note
on the Closing Date is, at the Purchaser's sole option, subject to the
satisfaction, on or before such date, of the following conditions:
(a) Representations and Warranties to be True and Correct. The
representations and warranties contained herein shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Company shall have certified to such effect to the Purchaser in writing.
(b) Performance. The Company shall have performed and complied
in all material respects with all material agreements and material conditions
contained herein required to be performed or complied with by it prior to or at
the Closing Date.
(c) All Proceedings to be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and the Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
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<PAGE>
(d) Obligation of the Company to Execute and Deliver the
Warrants. The obligation of the Company to execute and deliver to the Purchaser
the Warrants shall become binding at the Closing, with the amount of the
Warrants to be determined by the actual amount of the Principal Amount advanced
under the Note.
(e) Issuance, Sale and Delivery of the Note. The full
issuance and sale by the Company and delivery to the Purchaser of the Note.
SECTION 6.02 Obligation of the Company to Close. The
obligation of the Company to issue, sell and deliver the Note and the Warrants
and to consummate the other transactions contemplated by the Loan Documents on
the Closing Date is, at the Company's option, subject to the satisfaction on or
before such date, of the following conditions:
(a) Payment. The Purchaser shall transfer to the Company an
aggregate amount, at one time or from time to time, up to the Principal Amount
as requested by the Company.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained herein with respect to the Purchaser
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, and the Purchaser shall have certified to such effect to
the Company, in writing.
ARTICLE VII
DEFAULT AND REMEDIES
SECTION 7.01 Events of Default. A default (an "Event of
Default") occurs if:
(a) The Company fails to make any payment of principal,
interest or other amounts required by the Note or any other obligation in any of
the Loan Documents which relate to a monetary payment within sixty (60) days of
when the same becomes due and payable;
(b) The Company fails to comply with or perform in any
material respect any of the covenants or obligations contained in this Agreement
or any other Loan Document, or there occurs a default or Event of Default under
any of the other Loan Documents, or under any other loan documents, and such
failure continues for sixty (60) days after written notice from the Purchaser to
the Company;
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(c) There shall be a declared default under any senior
indebtedness pursuant to its terms, which default extends beyond any applicable
period of grace or cure provided therein with respect thereto;
(d) The Company, pursuant to or within the meaning of any
bankruptcy law: (1) becomes insolvent, (2) fails generally to pay its debts as
they become due, (3) admits in writing its inability to pay debts generally as
they become due, (4) commences a voluntary case or proceeding, (5) consents to
the entry of a judgment, decree or order for relief against it in an involuntary
case or proceeding, (6) consents to the appointment of a custodian for it or for
all or substantially all of its properties, (7) consents to or acquiesces in the
institution of bankruptcy or insolvency against it, (8) applies for, consents to
or acquiesces in the appointment of or taking possession by a custodian of it or
for any part of its properties, (9) makes a general assignment for the benefit
of its creditors, or (10) adopts any board or committee resolution (or
otherwise) that authorizes action to approve any of the foregoing;
(e) The representations and warranties contained in this
Agreement prove to have been false or inaccurate in any material respect when
made and such failure continues for sixty (60) days after written notice from
the Purchaser.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, and will actively resist any attempts by any other
party on their behalf to insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, which would prohibit or forgive the Company from making any payment
on the Note, or which may affect the covenants or the performance of this
Agreement or any agreement contemplated hereby; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefits or advantages
of any such law and covenant that it will not hinder, delay or impede the
execution of any power herein granted to the Purchaser, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 8.2 Survival of Agreements. All covenants and
agreements made herein shall survive the execution and delivery of this
Agreement and the issuance, sale and delivery of the Note and Warrants pursuant
hereto. All statements
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contained in any certificate or other instrument delivered by the Company
hereunder shall be deemed to constitute representations and warranties made by
the Company.
SECTION 8.3 Brokerage. No broker or finder has acted on behalf
of the Company in connection with this Agreement or the transactions
contemplated hereby, and the Purchaser has made no agreement to pay any agent,
finder, broker or any other representative, any fee or commission in the nature
of a finder's or originator's fee arising out of or in connection with the
subject matter of this Agreement. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 8.04 Recitals. The Recitals contained herein are
specifically incorporated herein by reference and made a part hereof.
SECTION 8.05 Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be delivered
personally or mailed by first class registered or certified mail or by Federal
Express or other reliable courier service, postage prepaid, in either case
addressed as follows:
(a) if to the Company at
Life Critical Care Corporation
3333 W. Commercial Boulevard
Suite 203
Ft. Lauderdale, Florida 33309
Attn.: Amy E. Parker, Vice President
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
400 Court Towers
210 West Pennsylvania Avenue
Towson, Maryland 21204-4515
(b) if to the Purchaser at
Morgenthau Bridge Investment Limited Partnership
504 Cathedral Street
Baltimore, Maryland 21202
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or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. Any such communication shall
be deemed given when delivered personally against written receipt or if mailed,
upon the earlier to occur of the date of actual receipt or 48-hours after the
date of mailing to the address indicated.
SECTION 8.06 Change, etc. Neither this Agreement nor any term,
condition, representation, warranty, covenant, or agreement hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing by the party against whom such change, waiver, discharge or termination
is sought.
SECTION 8.07 Terms Binding. All of the terms, conditions,
stipulations, warranties, representations, and covenants of this Agreement shall
apply to and be binding upon, and shall inure to the benefit of, the parties
hereto and each of their respective heirs, personal representatives, successors
and assigns.
SECTION 8.08 Gender, etc. Whenever used herein, the singular
number shall include the plural, the plural the singular, and the use of the
masculine, feminine, or neuter gender shall include all genders.
SECTION 8.09 Headings. The section and subsection headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms hereof.
SECTION 8.10 Governing Law. This Agreement and all
transactions contemplated hereby, including without limitation, the Note and
Warrants, shall be deemed to be made under, and shall be governed by, the
internal laws of the State of Maryland, without regard to the conflicts of law
principles of such State.
SECTION 8.11 Consent to Jurisdiction; Service of Process. Each
party hereto agrees and consents that any action or proceeding arising out of or
brought to enforce the provisions of this Agreement may be brought in any
appropriate court in the State of Maryland or in any other court having
jurisdiction over the subject matter.
SECTION 8.12 Waiver of Jury Trial. The Purchaser and the
Company each waive all right to a trial by jury in any suit, action, or
proceeding under, arising out of, or relating to this Agreement, any of the Loan
Documents or any transactions contemplated thereby.
SECTION 8.13 Further Assurances and Corrective Instruments.
The parties hereto agree that they will, from time to time, execute and deliver,
or cause to be executed and delivered, such supplements hereto and such further
instruments as may
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reasonably be required for carrying out the intention of the parties to, or
facilitating the performance of, this Agreement.
SECTION 8.14 Illegality. If fulfillment of any provision
hereof or any transaction related hereto or to the other Loan Documents at the
time performance of such provisions shall be due shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein contained operates or would prospectively operate to invalidate
this Agreement in whole or in part, then such clause or provision only shall be
void, as though not herein contained, and the remainder of this Agreement shall
remain operative and in full force and effect; provided, however, that, if any
such provision pertains to the repayment of the Company's obligations hereunder,
the occurrence of any such invalidity shall constitute an Event of Default.
SECTION 8.15 Assignment. This Agreement and the other Loan
Documents may not be assigned, in whole or in part, by the Company without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed.
SECTION 8.16 Entire Agreement. This Agreement and the other
Loan Documents constitute the entire agreement of the parties with respect to
the subject matter thereof; the Loan Documents may not be modified or amended
except in writing.
SECTION 8.17 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.1. Demand Registration.
9.1.1. Request for Registration.
9.1.1.1. The Purchaser (herein referred to
as the "Warrantholder") may, by Notice to the Company, make a request for
registration under the Securities Act of all or part of its Registrable
Securities (i.e., capital stock of the Company owned by the Warrantholder) (a
"Demand Registration") at any time after June 30, 1997.
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9.1.1.2. As soon as practicable after
receipt of a request for a Demand Registration of the Company, the Company
will file a registration statement with respect to the Demand Registration.
The Company agrees to use its best efforts to cause the Demand Registration to
be declared effective no later than 120 days after such request and to keep such
Demand Registration continuously effective for sixty (60) days. The Company
further agrees, if necessary, to supplement or make amendments to the Demand
Registration, if required by the registration form used by the Company for such
Demand Registration, by the instructions applicable to each such registration
form by the Securities Act, or by the Warrantholder. The Company agrees to
furnish to the Warrantholder, copies of any such supplement or amendment
prior to its being used and/or filed with the Commission. The Company
will pay all Registration Expenses (as hereinafter defined) in connection
with each Demand Registration, whether or not it becomes effective. The
Company will make available to the Warrantholder, as soon as reasonably
practicable, a statement of operations which shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder.
9.1.1.3. In any registration under this
Section 9.1.1, the Company shall give written notice thereof to the
management stockholders of the Company (the "Management Stockholders") and
upon the written request of any of them given within 15 days after the giving
of such notice by the Company, the Company will notify the Warrantholder as
to the number of the securities requested to be included in such
registration statement, including securities for its own account, except as
set forth below.
9.1.1.4. If any registration pursuant to
this Section 9.1.1 shall be underwritten in whole or in part, the
Company shall allow the securities requested for inclusion by the
Warrantholder and/or the Management Stockholders to be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters, unless the managing underwriter for the
distribution of the securities shall in its good faith judgment be of the
opinion that the sale of such securities would adversely affect either the
price or the marketing of the securities to be sold for the account of the
Company. The Company will effect the registration of only that number of
securities requested for inclusion by the Warrantholder and/or the
Management Stockholders which the managing underwriter believes, in its good
faith judgment, can be included in such registration without such adverse
effect. Any securities allowed to be included in the registration in excess of
those to be sold by the Company shall be apportioned to the Warrantholder and
the Management Stockholders pro rata among them according to the total number of
shares sought to be registered.
9.1.1.5. In the event the Warrantholder, by
Notice to the Company, makes a request for registration pursuant to this
Section 9.1, the Company need not effect a Demand Registration in response to
the Warrantholder's request if the
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Company can find a purchaser, upon terms and conditions acceptable to the
Warrantholder, for all of the Registrable Securities held by the Warrantholder;
provided that, if the purchase and sale of the Registrable Securities is not
completely within sixty (60) days from the date the request for Demand
Registration is received by the Company, the Company shall not be relieved of
its obligation to effect a Demand Registration.
9.1.2. Selection of Underwriters. If the
Warrantholder elects, the offering of Registrable Securities pursuant to
such Demand Registration shall be in the form of an underwritten offering. If
any Demand Registration is in the form of an underwritten offering, the
Company shall be entitled to select the investment banker or investment bankers
and manager or managers to administer the offering.
9.1.3. Payment of Notes. All amounts outstanding
under the Note shall be repaid (whether or not then due) prior to or as a part
of such Demand Registration.
SECTION 9.2. Piggy-Back Registration.
9.2.1. Warrantholder's Option.
9.2.1.1. Following the initial public
offering by the Company of any of its securities, if the Company or the
Management Stockholders propose to file a registration statement under the
Securities Act with respect to an offering by a Company or the Management
Stockholders for its own account of any class of security of the Company then
the Company shall in each case give written notice of such proposed filing to
the Warrantholder at least thirty (30) days before the anticipated filing
date, and such notice shall offer the Warrantholder the opportunity to include
in such registration statement such number of Registrable Securities as the
Warrantholder may request. The Company shall use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten
offering to permit the Warrantholder to include such securities in such offering
on the same terms and conditions as the securities of the Company and the
Management Stockholders included therein.
9.2.1.2. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such proposed underwritten
offering determine in good faith that the total amount of securities which
the Warrantholder, the Company and any other persons or entities intend to
include in such offering is sufficiently large to materially and adversely
affect the success of such offering (including, without limitation, by a
significant and adverse decrease in the proposed offering price) then the
amount of securities to be offered shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter or
underwriters.
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9.2.1.3 In the event the Warrantholder
elects to include Registrable Securities in a registration under this
Section 9.2, the Company or the Management Stockholders (as the case may
be) proposing such registration need not include Registrable Securities in
the registration statement in response to the Warrantholder's request if the
Company or the Management Stockholders can find a purchaser, upon terms and
conditions acceptable to the Warrantholder, for the aggregate principal amount
of the Registrable Securities proposed by the Warrantholder to be
registered; if the purchase and sale of the Registrable Securities proposed
by the Warrantholder to be registered is not completed within sixty (60)
days, the Company and the Management Stockholders shall not be relieved of their
obligations under this Section 9.2.
9.2.2. Payment of Registration Expenses. The
Company will pay all Registration Expenses in connection with any
registration described in this Section 9.2 except for the Warrantholder's pro
rata share of any underwriter's discount for any registration in which the
Warrantholder participates.
9.2.3. Exception from Registration. Notwithstanding
the provisions of this Section 9.2, the Company shall have no obligation to
include any Registrable Securities in any registration filed by the Company if
the registration form to be used by the Company pursuant to the Securities
Act is Form S-8 or another form which cannot be used for the public sale of
Registrable Securities, provided that, at least thirty (30) days before the
filing of any such Form S-8 or other such form, the Company shall notify the
Warrantholder of its intent to so file such a registration form.
SECTION 9.3. Registration Procedures.
9.3.1. Registration. Whenever the Warrantholder
requests that any Registrable Securities be registered pursuant to
Section 9.1 or Section 9.2 of this Agreement, the Company will use its best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request the Company will as
expeditiously as possible:
9.3.1.1. before filing a registration
statement that registers any Registrable Securities or any prospectus
relating thereto or any amendments or supplements relating to such a
registration statement or a prospectus, the Company will (i) furnish to
the Warrantholder's counsel copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel, and (ii)
notify the Warrantholder of any stop order issued or threatened to be issued
by the Commission in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
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9.3.1.2. furnish to the Warrantholder
such number of copies of such registration statement, each amendment and
supplement thereto (including one copy of all exhibits thereto), the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Warrantholder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Warrantholder;
9.3.1.3. use its best efforts to register
or qualify such Registrable Securities under such other securities or blue
sky laws of such jurisdictions in the United States of America as the
Warrantholder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Warrantholder to
consummate the disposition of its Registrable Securities in such
jurisdictions; provided, however, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 9.3.1.3, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
9.3.1.4. use its best efforts to cause the
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Warrantholder to consummate the disposition of such
Registrable Securities;
9.3.1.5. notify the Warrantholder at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
and the Company will prepare a supplement or amendment to such prospectus so
that such prospectus will not contain an 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 not misleading;
9.3.1.6. enter into such customary
agreements (including an underwriting agreement in customary form) and
take all such other actions as the Warrantholder or the underwriters
retained by the Company reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
9.3.1.7. make available for inspection by
the Warrantholder and any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by the Warrantholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent
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corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with such registration statement. Records which the
Company determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Company unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in the registration statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction;
9.3.1.8. use all reasonable efforts to
obtain a cold comfort letter from the Company`s independent certified public
accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Warrantholder or the
underwriters retained by the Company reasonably request;
9.3.1.9. otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and made
available to the Warrantholder, as soon as reasonably practicable, an earnings
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
9.3.1.10. obtain an opinion or opinions
from counsel for the Company in customary form satisfactory to the
Warrantholder; and
9.3.1.11. comply with the requirements for
listing on the exchange selected by agreement of the Company and the
Warrantholder.
9.3.2. Information. For the purposes of effecting
the registration of the Registrable Securities of the Warrantholder
pursuant to Sections 9.1 and 9.2 hereof, and for the purposes of
effectuating a public offering of its securities, the Company may require
the Warrantholder to furnish to the Company such information regarding the
Warrantholder, their officers and directors, the Registrable Securities held
by the Warrantholder and the proposed distribution of such Securities as may
be required to be disclosed in a registration statement by the rules and
regulations under the Securities Act or under any other applicable
securities or blue sky laws, or as may be required to effect the registration
of the Registrable Securities held by the Warrantholder.
SECTION 9.4. Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with blue sky qualifications of the Registrable Securities, rating
agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to
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be registered and fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit, special audit or "cold comfort" letters required by or incident
to such performance), securities acts liability insurance (if the Company
elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained in connection with such registration, fees and
expenses of other Persons retained by the Company, fees and expenses of the
Warrantholder incurred in connection with each registration hereunder
(but not including any underwriting discounts or commissions
attributable to the sale of the Warrantholder's Registrable Securities)
and any out-of-pocket expenses of the Warrantholder, specifically including
the fees of one counsel for all Warrantholders (all such expenses being
herein called "Registration Expenses"), will be borne by the Company.
SECTION 9.5. Indemnification.
9.5.1. Indemnification.
9.5.1.1. The Company agrees to indemnify, to
the fullest extent permitted by law, the Warrantholder, each of their partners
and officers, and each Person who controls the Warrantholder (within the
meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended -- the "Securities Exchange Act") and any investment advisor thereof
or agent therefor against all losses, claims, damages, liabilities and
expenses to which any such Person may become subject under the Securities Act,
the Securities Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions
in respect thereof) arose out of or are based upon any untrue or alleged
untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein no misleading, except insofar as the
same are caused by or contained in any information with respect to the
Warrantholder furnished in writing to the Company by or on behalf of the
Warrantholder expressly for use therein or by the Warrantholder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Warrantholder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify the underwriters thereof, their officers
and directors and each person who controls such underwriters (within the meaning
of the Securities Act or the Securities Exchange Act) to the same extent as
provided above with respect to the indemnification of the Warrantholder.
9.5.1.2. Each Warrantholder agrees to
indemnify, to the fullest extent permitted by law, each Company and each of
its officers and directors who have signed the registration statement, each
Person who controls the Company
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(within the meaning of the Securities Act or the Securities Exchange
Act), the Management Stockholder selling under such registration and any
agent therefor, against all losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arose out of or are based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleges
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading insofar as the same are
caused by or contained in any information with respect to such Warrantholder
furnished to the Company by or on behalf of such Warrantholder failure to
deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto to a prospective purchaser after the
Company has furnished such Warrantholder with a sufficient number of copies of
the same; provided, however, that the obligation of each Warrantholder
hereunder shall be limited to an amount equal to the net proceeds received by
such Warrantholder pursuant to the sale of Registrable Securities as
contemplated herein. In connection with an underwritten offering, each
Warrantholder hereunder shall be limited to an amount equal to the net
proceeds received by such Warrantholder pursuant to the sale of Registrable
Securities as contemplated herein. In connection with an underwritten offering,
each Warrantholder will indemnify the underwriters thereof, their officers and
directors and each person who controls such underwriters (within the meaning of
the Securities Act or the Securities Exchange Act) to the same extent as
provided above with respect to indemnification of the Company.
9.5.2. Conduct of Indemnification Proceedings.
9.5.2.1. In case any action shall be
brought against any Person entitled to indemnification hereunder (an
"Indemnified Person"), the Indemnified Person shall promptly notify the
Person from whom indemnification is sought (the "Indemnifying Person"), in
writing, and the Indemnifying Person shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Person and the payment of all expenses. The Indemnified Person shall have the
right to employ separate counsel in any such action and participate in
the defense thereof, but, the fees and expenses of any such counsel shall
be paid by the Indemnifying Person only if (i) the Indemnifying Person shall
fail to assume the defense of such action as provided herein, (ii) the
Indemnified Person reasonably shall have concluded that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Indemnifying person or other Persons represented by
counsel employed by the Indemnifying Person or (iii) the Indemnified Person
reasonably shall have concluded that a conflict of interest exists between the
Indemnifying Person and the Indemnified Person with respect to the action. The
Indemnifying Person shall not be liable for any settlement of any such action
effected without its consent, but if settled with the consent of the
Indemnifying Person or if there be a final judgment for the plaintiff in any
such action, the
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Indemnifying Person agrees to indemnify and hold harmless the Indemnified
Person from and against any loss or liability by reason of such settlement
or judgment.
9.5.2.2. This Section and all of the
indemnification provisions contained herein shall survive termination of
this Agreement and shall remain operative and in full force and effect
notwithstanding any such termination.
SECTION 9.7. Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act or a registration statement pursuant to the requirements
of the Securities Act, the Company covenants that it will file the reports
required to be filed by it under the Securities Act and Securities Exchange Act
and the rules and regulations adopted by the Commission thereunder. Upon the
request of the Warrantholder, the Company will deliver to the Warrantholder a
written statement as to whether it has complied with such requirements. The
Company will take such further action as the Warrantholder may reasonably
request, all to the extent required from time to time to enable the
Warrantholder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such rule may be amended from time to time or (b)
any similar rule or regulation hereafter adopted by the Commission.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their duly authorized
representatives, as of the day and year first above written.
WITNESS: LIFE CRITICAL CARE CORPORATION
_____________________________ By:__________________________(SEAL)
Amy E. Parker, Vice President
- COMPANY -
WITNESS: MORGENTHAU BRIDGE INVESTMENT
LIMITED PARTNERSHIP
By: Morgenthau Bridge Financing
Corp., General Partner
_____________________________ By:__________________________(SEAL)
its authorized signatory
- PURCHASER -
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EXHIBIT A
No. 2
August 12, 1995 Principal Amount: $ See Loan Schedule
REGISTERED
SUBORDINATED NOTE
LIFE CRITICAL CARE CORPORATION
PAYMENT ON THE PRINCIPAL OF AND INTEREST ON THIS NOTE IS REQUIRED TO BE
MADE DIRECTLY TO THE REGISTERED HOLDER HEREOF WITHOUT NOTATION HEREON. IT CANNOT
BE DETERMINED FROM THE FACE OF THIS NOTE WHETHER ALL OR ANY PART OF THE
PRINCIPAL OF OR INTEREST ON THIS NOTE HAS BEEN PAID.
LIFE CRITICAL CARE CORPORATION (the "Company"), a Delaware corporation,
for value received, promises to pay to the registered holder of this note (the
"Holder") by December 31, 1997 (or earlier as herein referred to), the amounts
specified on the Loan Schedule which is attached to this note and made a part
hereof. The Holder may make additional cash advances (hereinafter referred to as
"loans") to the Company, from time to time, pursuant to the terms and conditions
of that certain Loan and Securities Purchase Agreement of even date herewith,
which shall be covered by this note and recorded on the Loan Schedule.
The interest hereon shall be payable at the annual rate of Eighteen
Percent (18%) per annum (the "Rate") for each day from the date of this note
until the date the principal amount of this note is paid in full. The first
interest payment shall be due on December 31, 1995, and thereafter on the last
day of each of March, June, September and December, or the next succeeding
business day. The accrued interest on the unpaid principal balance evidenced by
the Loan Schedule shall also be covered by this note and shall be recorded on
the Loan Schedule.
The total outstanding principal, together with accrued interest
thereon, shall be payable on December 31, 1997.
Principal of and interest on this note shall be paid to the registered
Holder hereof by check mailed by the Company to the address of the Holder as it
appears on the Note Register and at the end of this note without the necessity
of surrendering or presenting this note, and all such payments shall fully
discharge the obligation of the Company hereunder to the extent made and shall
be recorded on the Loan Schedule. The Company and the Holder hereof may make
provision for the payment of principal and interest by such other method as may
be mutually agreed upon in writing.
<PAGE>
The Company shall pay to the Holder of this note a late charge at the
option of the Holder equal to two percent (2%) of any payment of principal or
interest due if such payment is not received by the registered owner within
fifteen (15) days after such payment is due. Whether or not a late charge is
imposed, interest on principal or interest due but unpaid shall accrue from the
date on which such payment of principal or interest is due at the Rate.
At the option of the Company and upon notice to the Holder at its
address as it appears on the Note Register and at the end of this note, except
as otherwise provided herein, this note may be redeemed by the Company in part
or in whole, less any partial payments previously made by the Company, if any,
at any time or from time to time. In the event the Company redeems only part of
the note, any amount paid to the Holder shall be applied, first, to accrued but
unpaid interest, and second, the then outstanding principal amount. In the event
the Company redeems the entire note, the redemption price shall be equal to the
outstanding principal of the note plus accrued and unpaid interest to the date
of the redemption. Except for a redemption in connection with an initial public
offering by the Company as to which this redemption notice is hereby waived, any
such redemption shall be made upon at least thirty (30) days' but not more than
sixty (60) days' prior notice to the Holder at the address of the Holder as it
appears on the Note Register and at the end of this note. On the date designated
for redemption of the whole note, the note so called for redemption shall become
and be due and payable at the above redemption price, the interest on such notes
shall cease to accrue, and the Holder hereof shall have no rights in respect of
this note except to receive payment of the redemption price hereof. The Company
shall be obligated to redeem this Note simultaneously with its closing on an
initial public offering by the Company of any of its securities.
This note shall be registered by the Company upon the initial delivery
hereof, in the name of the initial purchaser, by endorsement in the space
provided at the end hereof and on the books to be kept for that purpose by the
Company and, thereafter, this note shall be transferable only by successive
endorsements to successive registered holders. Payment of this note and the
interest hereon shall be made only to the registered Holder hereof on the date
such payment is due. The Company may deem and treat the person in whose name
this note is registered as the absolute owner hereof for all purposes and the
Company shall not be affected by any notice to the contrary.
The rights of the Holder to the principal sum or any sum or part
thereof, and the interest due thereon, are and shall remain subject and
subordinate to (a) the prior payment of any and all other indebtedness
(including the principal of and interest on any such indebtedness) constituting
existing or future obligations of the Company for money borrowed from any bank,
trust company, insurance company, or other institutional lender and (b) the
claims of all secured trade and contract creditors of the Company; and upon
dissolution or liquidation of the Company no payment shall be due or payable
-2-
<PAGE>
upon this note until all of the obligations described in this paragraph shall
have been paid in full. The Holder hereby agrees (i) to amend this section of
the note if required to do so by any third-party lender to the Company and (ii)
to execute any and all documents necessary to accomplish such an amendment.
No covenant or agreement contained in this note shall be deemed to be a
covenant or agreement of any past, present or future incorporator, officer,
director or shareholder of the Company or of any predecessor or successor
corporation in his or her individual capacity and no incorporator, officer,
director or shareholder of the Company shall be liable personally on this note
or be subject to any personal liability or accountability by reason of the
issuance of this note, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released.
The Company hereby stipulates and warrants that the loan evidenced
hereby is a commercial loan and that all of the proceeds of such loan will be
used solely to acquire or carry on a business or commercial enterprise.
IN WITNESS WHEREOF, the corporate seal of the Company is hereto affixed
and these presents duly signed by the duly authorized officers of the Company as
of the day and year first above written.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By: ______________________________(SEAL)
Richard M. Andzel, Assistant Secretary Amy E. Parker, Vice President
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE (FEDERAL) SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES ACT OF ANY
STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION
STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.
REGISTERED HOLDER: ADDRESS:
Morgenthau Bridge Investment 504 Cathedral Street
Limited Partnership Baltimore, Maryland 21202
-3-
<PAGE>
LOAN SCHEDULE
The Subordinated Note to which this Loan Schedule is attached evidences
loans made by the Holder to the Company, in the principal amounts and on the
dates set forth below, subject to prepayments of principal set forth below:
=========== ------------ --------- ---------- --------- --------- ============
UNPAID
PRINCIPAL PRINCIPAL INTEREST INTEREST NOTATION
DATE LOAN AMOUNT PAID BALANCE ACCRUED PAID MADE BY
=========== ------------ --------- ---------- --------- --------- ============
08/12/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
09/01/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
10/10/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
10/27/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
11/02/95 $ 45,000
=========== ------------ --------- ---------- --------- --------- ============
11/04/95 $ 5,000
=========== ------------ --------- ---------- --------- --------- ============
11/22/95 $125,000
=========== ------------ --------- ---------- --------- --------- ============
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<PAGE>
EXHIBIT B
WARRANTS
Attached hereto is the form of Warrant to be issued to the Purchaser by
the Company as a condition precedent to the Purchaser's commitment to make the
Loan in the aggregate amount of $750,000 to the Company.
The Company hereby agrees to issue Warrants to the Purchaser to
purchase 107,000 shares of the Company's common stock (the "Warrant Shares").
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH
MAY BE PURCHASED BY EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES ACT OF ANY
STATE. THE WARRANTS ARE BEING OFFERED PURSUANT TO A CLAIM OF EXEMPTION FROM
REGISTRATION CONTAINED IN SECTION 4(2) OF THE SECURITIES ACT AND EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF APPLICABLE STATES, AND MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE REGISTRATIONS UNDER SUCH ACTS OR IN
A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS.
LIFE CRITICAL CARE CORPORATION
A DELAWARE CORPORATION
FORM OF DETACHABLE STOCK WARRANT
TO PURCHASE CAPITAL STOCK OF THE COMPANY
Certificate No.: 2 No. of Warrants: 107,000
FOR VALUE RECEIVED, LIFE CRITICAL CARE CORPORATION, a Delaware
corporation (the "Corporation"), grants the following rights to Morgenthau
Bridge Investment Limited Partnership, its successors and assigns (the
"Holder").
The Warrants represented hereby are part of a duly authorized issue of
160,000 Warrants delivered pursuant to certain loan and securities purchase
agreements between the Corporation and certain others including pursuant to that
certain Loan and Securities Purchase Agreement dated August 12, 1995, by and
between the Corporation and the Holder (the "Securities Purchase Agreement").
Capitalized terms used herein without definition shall have the meaning set
forth in the Securities Purchase Agreement.
The Holder is entitled, in accordance with the terms and conditions of
this Certificate, until the expiration of the Exercise Period, to purchase
voting common Capital Stock of the Corporation, par value $0.01, from the
Corporation at the Exercise Price shown below, upon delivery of this Certificate
to the Corporation with the subscription form attached hereto duly executed and
upon payment of the Exercise Price for the shares purchased.
EXERCISE PRICE: The exercise price per share (the "Exercise Price") shall be Ten
Cents ($0.10), subject to adjustment as provided for in Section 4(d) hereof.
<PAGE>
CONDITION TO EXERCISE: The Warrants hereunder may not be exercised so long as
the Holder shall timely and fully receive all interest, principal and other
amounts, if any, due and payable under the Note.
EXERCISE PERIOD: The Warrants represented hereby shall be exercisable commencing
on March 15, 1996 and shall expire at 5:00 p.m. on the later of December 31,
1998, or two (2) years from the date on which all sums due under the Note are
paid in full (the "Exercise Period").
NUMBER AND CLASS OF SHARES PURCHASABLE: The Holder is entitled to purchase one
(1) share of fully paid and non-assessable voting common Capital Stock of the
Company subject to adjustment from time to time as specified in this Certificate
for each Warrant represented by this Certificate.
SECTION 1. CORPORATION'S COVENANTS AS TO CAPITAL STOCK. Capital Stock
deliverable on the exercise of the Warrants represented hereby shall, at
delivery, be fully paid and non-assessable, free from taxes, liens and charges
with respect to their purchase. The Corporation shall take any necessary steps
(including, but not limited to, amending the Corporation's charter) to assure
that the number and par value of shares authorized by the Corporation's charter
are sufficient to satisfy the conversion and purchase rights of outstanding
convertible securities, options and warrants, and shall at all times reserve and
hold available sufficient shares of Capital Stock to satisfy all conversion and
purchase rights of all outstanding convertible securities, options and warrants.
SECTION 2. CORPORATION'S REPRESENTATIONS AND WARRANTIES AS TO CAPITAL
STOCK. The Corporation represents and warrants to the Holder as of the date
hereof that ___________ shares of the common Capital Stock of the Corporation
are issued and outstanding, and no shares of any other class of stock of the
Corporation or securities convertible at any time into shares of any class of
stock of the Corporation are authorized.
SECTION 3. METHOD OF EXERCISE. The purchase rights represented by these
Warrants are exercisable at the option of the Holder at any time during the
Exercise Period, upon the delivery of this Certificate to the Corporation with
its subscription form duly executed and upon payment of the Exercise Price.
These Warrants shall be deemed to have been exercised, and the Holder shall be
deemed to have become a stockholder of record of the Corporation for the
purposes of receiving dividends and for all other purposes whatsoever, as of the
date of surrender of this Certificate accompanied by payment of the Exercise
Price. If this Certificate is exercised in respect of less than all of the
Warrants represented hereby, the Holder shall be entitled to receive a new
certificate of like tenor and date for the number of Warrants which shall not
have been exercised.
-2-
<PAGE>
SECTION 4. ADJUSTMENT OF SHARES PURCHASABLE. In case prior to the
expiration of these Warrants by exercise or by the terms of this Certificate:
(a) The Corporation shall be recapitalized through the subdivision of
its outstanding shares of Capital Stock into a greater number of shares, or
shall by exchange or substitution of or for its outstanding Capital Stock or
otherwise, reduce the number of such shares, then in each such case the number
of shares deliverable upon the exercise of these Warrants and the Exercise
Price, as provided in Section 4(d), shall be changed in the same proportion as
such increase or decrease of the outstanding shares of such Capital Stock of the
Corporation.
(b) A dividend shall be declared or paid at any time on the Capital
Stock of the Corporation in its Capital Stock or in securities convertible into
Capital Stock of the Corporation, then in each such case, as a condition to such
dividend, the number of shares deliverable upon the exercise thereafter of these
Warrants, shall, without requiring any payment by the Holder in addition to the
payment per Warrant specified on the face hereof, be increased in proportion to
the increase, through such dividend, in the number of outstanding shares of
Capital Stock of the Corporation and such additional shares of Capital Stock
shall be available to enable the Holder to fully exercise its rights to acquire
Capital Stock under these Warrants. In the computation of the increased number
of shares deliverable upon the exercise of these Warrants, any dividend paid or
distributed upon the Capital Stock in securities convertible into shares of
Capital Stock, shall be treated as a dividend paid in Capital Stock to the
extent that shares of stock are issuable upon the conversion thereof. The
obligations of the Corporation and the rights of the Holder shall not be
affected by the exercise of any conversion privileges heretofore granted to the
holders of any of the Capital Stock or securities of the Corporation or of any
other corporation.
(c) The Corporation shall be recapitalized by reclassifying its
outstanding Capital Stock without par value into stock with par value, or
changing Capital Stock of par value to stock without par value, or the
Corporation or a successor corporation shall consolidate or merge with, or
convey all, or substantially all, of its or any successor corporation's property
or assets to, any other corporation or corporations (any such corporation being
included within the meaning "successor corporation" hereinbefore used in the
event of any consolidation or merger of such corporation with, or the sale of,
all or substantially all of the property of such corporation to another
corporation or corporations) then, as a condition to such recapitalization,
consolidation, merger, or conveyance, lawful and adequate provision shall be
made whereby the Holder shall thereafter have the right to purchase, upon the
basis and upon the terms and conditions specified in this Certificate, in lieu
of the shares of Capital Stock of the Corporation theretofore purchasable upon
the
-3-
<PAGE>
exercise of these Warrants, such shares of stock, securities, or assets as may
be issued or payable with respect to, or in exchange for, the number of
shares of Capital Stock of the Corporation theretofore purchasable upon the
exercise of these Warrants had such recapitalization, consolidation, merger, or
conveyance not taken place; and in any such event the rights of the Holder to an
adjustment of the number of shares of Capital Stock purchasable upon the
exercise of these Warrants as herein provided and of the Exercise Price as
provided for in Section 4(d) hereof, shall continue and be preserved in respect
of any stock which the Holder becomes entitled to purchase. It shall be a
condition of such consolidation, merger, or conveyance that each successor
corporation shall assume in manner and form reasonably satisfactory to the
Holder the obligation to deliver to the Holder, upon the exercise of these
Warrants, such shares of Capital Stock, securities, or assets as, in accordance
with the provisions of this Certificate shall have been provided for the
purpose.
(d) In the event the number of shares per Warrant purchasable hereunder
is adjusted pursuant to Section 4(a)-(c), above, the Exercise Price shall be
adjusted so that it is equal to the Exercise Price in effect prior to such
adjustment multiplied by a fraction, the numerator of which is the number of
shares per Warrant purchasable hereunder prior to the adjustment called for
Section 4(a)-(c), and the denominator of which is the number of shares per
Warrant purchasable hereunder after the adjustment called for in Section
4(a)-(c).
Upon each increase of the number of shares of Capital Stock of
the Corporation deliverable upon the exercise of these Warrants, or in the event
of changes in the rights of the Holder by reason of other events hereinbefore
set forth, then in each such case the Corporation shall forthwith deliver to the
Holder a certificate executed by its president or one of its vice presidents,
and attested by its secretary or one of its assistant secretaries, stating the
increased number of shares so deliverable or specifying the other shares of
Capital Stock, securities or assets, and the amount thereof so deliverable and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
Upon each increase of the number of shares of Capital Stock of
the Corporation deliverable upon the exercise of these Warrants, the increased
number of shares so deliverable shall be only a round sum obtained by rounding
up to the nearest integer any fractions resulting from the calculation of the
increased number of shares to be delivered. No fractions of shares shall be
issued upon the exercise of these Warrants.
-4-
<PAGE>
SECTION 5. SPECIAL RIGHTS OF THE HOLDER.
5.1. If any dissolution, liquidation or winding up of the Corporation
shall be proposed, then the Corporation shall cause at least thirty (30) days'
prior written notice to be mailed, by certified or registered mail, return
receipt requested, to the Holder at its address as it appears on the books of
the Corporation. Such notice shall specify the date as of which holders of
record of Capital Stock shall participate in distribution rights upon such
dissolution, liquidation, or winding up, as the case may be, to the end that,
during such period of thirty days, the Holder may exercise these Warrants in
whole or in part, and be entitled in respect of the shares of Capital Stock so
purchased to all the rights of the other holders of Capital Stock of the
Corporation.
5.2. Whenever the Corporation proposes to file a registration statement
for the registration of any of its securities under the Securities Act of 1933,
or any other federal or state securities laws or regulations, at least thirty
(30) days prior to filing such registration statement the Corporation shall give
written notice of such proposed filing to the Holder as set forth in the
Securities Purchase Agreement.
SECTION 6. EXCHANGE FOR OTHER DENOMINATIONS. This Certificate is
exchangeable for new certificates of like tenor and date representing in the
aggregate the right to purchase the number of shares purchasable hereunder in
denominations designated by the Holder at the time of surrender.
SECTION 7. DUE EXECUTION, ISSUANCE AND DELIVERY OF CERTIFICATE AND
CAPITAL STOCK. The Corporation covenants that the issuance of this Certificate
shall constitute full authority to those of its officers who are charged with
the duty of issuing stock certificates to promptly execute, issue and deliver to
the Holder the necessary certificate for shares of Capital Stock or other
securities of the Corporation required by the exercise of the Warrants
represented hereby.
SECTION 8. TRANSFER. These Warrants shall be registered on the books of
the Corporation, which shall be kept by it at its principal office for that
purpose. Subject to the restrictions upon assignment and transfer set forth in
the Securities Purchase Agreement, these Warrants shall be transferable on said
books by the Holder in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. The Corporation agrees that, while these
Warrants shall remain valid and outstanding, its stock transfer books shall not
be closed for any purpose whatsoever except under arrangements which shall
insure to persons exercising warrants or applying for transfer of stock all
rights and privileges which they might have had or received if the stock
transfer books had not been closed and they had exercised their Warrants at any
time during which such transfer book shall have been closed.
-5-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed, ensealed and delivered on its behalf this ____ day of
_____________, 199__.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By:______________________________(SEAL)
____________________, Secretary _______________________, President
-6-
<PAGE>
ASSIGNMENT OF STOCK PURCHASE WARRANT
_______________________, 19___
For value received, the undersigned hereby assigns to
_______________________ all the rights and interests represented by the attached
Certificate and hereby irrevocably constitutes and appoints
_____________________ attorney to transfer the same on the books of Life
Critical Care Corporation with full power of substitution in the premises.
Witness:___________________________ By:___________________________________
Name:_________________________________
Title:________________________________
-7-
<PAGE>
EXERCISE OF OPTION TO PURCHASE
PURSUANT TO ATTACHED STOCK PURCHASE AGREEMENT
______________________, 19__
TO: ____________________________________
The undersigned, the Holder of record of the attached Certificate of
Life Critical Care Corporation, hereby exercises the option granted by the
Warrants evidenced by the attached Certificate to purchase upon the terms set
forth in such Certificate ______ shares of Capital Stock of Life Critical Care
Corporation and hereby makes payment of the Exercise Price set forth on the face
of the Certificate.
Witness:___________________________ By:___________________________________
Name:_________________________________
Title:________________________________
-8-
<PAGE>
No. 2
August 12, 1995 Principal Amount: $ See Loan Schedule
REGISTERED
SUBORDINATED NOTE
LIFE CRITICAL CARE CORPORATION
PAYMENT ON THE PRINCIPAL OF AND INTEREST ON THIS NOTE IS REQUIRED TO BE
MADE DIRECTLY TO THE REGISTERED HOLDER HEREOF WITHOUT NOTATION HEREON. IT CANNOT
BE DETERMINED FROM THE FACE OF THIS NOTE WHETHER ALL OR ANY PART OF THE
PRINCIPAL OF OR INTEREST ON THIS NOTE HAS BEEN PAID.
LIFE CRITICAL CARE CORPORATION (the "Company"), a Delaware corporation,
for value received, promises to pay to the registered holder of this note (the
"Holder") by December 31, 1997 (or earlier as herein referred to), the amounts
specified on the Loan Schedule which is attached to this note and made a part
hereof. The Holder may make additional cash advances (hereinafter referred to as
"loans") to the Company, from time to time, pursuant to the terms and conditions
of that certain Loan and Securities Purchase Agreement of even date herewith,
which shall be covered by this note and recorded on the Loan Schedule.
The interest hereon shall be payable at the annual rate of Eighteen
Percent (18%) per annum (the "Rate") for each day from the date of this note
until the date the principal amount of this note is paid in full. The first
interest payment shall be due on December 31, 1995, and thereafter on the last
day of each of March, June, September and December, or the next succeeding
business day. The accrued interest on the unpaid principal balance evidenced by
the Loan Schedule shall also be covered by this note and shall be recorded on
the Loan Schedule.
The total outstanding principal, together with accrued interest
thereon, shall be payable on December 31, 1997.
Principal of and interest on this note shall be paid to the registered
Holder hereof by check mailed by the Company to the address of the Holder as it
appears on the Note Register and at the end of this note without the necessity
of surrendering or presenting this note, and all such payments shall fully
discharge the obligation of the Company hereunder to the extent made and shall
be recorded on the Loan Schedule. The Company and the Holder hereof may make
provision for the payment of principal and interest by such other method as may
be mutually agreed upon in writing.
<PAGE>
The Company shall pay to the Holder of this note a late charge at the
option of the Holder equal to two percent (2%) of any payment of principal or
interest due if such payment is not received by the registered owner within
fifteen (15) days after such payment is due. Whether or not a late charge is
imposed, interest on principal or interest due but unpaid shall accrue from the
date on which such payment of principal or interest is due at the Rate.
At the option of the Company and upon notice to the Holder at its
address as it appears on the Note Register and at the end of this note, except
as otherwise provided herein, this note may be redeemed by the Company in part
or in whole, less any partial payments previously made by the Company, if any,
at any time or from time to time. In the event the Company redeems only part of
the note, any amount paid to the Holder shall be applied, first, to accrued but
unpaid interest, and second, the then outstanding principal amount. In the event
the Company redeems the entire note, the redemption price shall be equal to the
outstanding principal of the note plus accrued and unpaid interest to the date
of the redemption. Except for a redemption in connection with an initial public
offering by the Company as to which this redemption notice is hereby waived, any
such redemption shall be made upon at least thirty (30) days' but not more than
sixty (60) days' prior notice to the Holder at the address of the Holder as it
appears on the Note Register and at the end of this note. On the date designated
for redemption of the whole note, the note so called for redemption shall become
and be due and payable at the above redemption price, the interest on such notes
shall cease to accrue, and the Holder hereof shall have no rights in respect of
this note except to receive payment of the redemption price hereof. The Company
shall be obligated to redeem this Note simultaneously with its closing on an
initial public offering by the Company of any of its securities.
This note shall be registered by the Company upon the initial delivery
hereof, in the name of the initial purchaser, by endorsement in the space
provided at the end hereof and on the books to be kept for that purpose by the
Company and, thereafter, this note shall be transferable only by successive
endorsements to successive registered holders. Payment of this note and the
interest hereon shall be made only to the registered Holder hereof on the date
such payment is due. The Company may deem and treat the person in whose name
this note is registered as the absolute owner hereof for all purposes and the
Company shall not be affected by any notice to the contrary.
The rights of the Holder to the principal sum or any sum or part
thereof, and the interest due thereon, are and shall remain subject and
subordinate to (a) the prior payment of any and all other indebtedness
(including the principal of and interest on any such indebtedness) constituting
existing or future obligations of the Company for money borrowed from any bank,
trust company, insurance company, or other institutional lender and (b) the
claims of all secured trade and contract creditors of the Company; and upon
dissolution or liquidation of the Company no payment shall be due or payable
-2-
<PAGE>
upon this note until all of the obligations described in this paragraph shall
have been paid in full. The Holder hereby agrees (i) to amend this section of
the note if required to do so by any third-party lender to the Company and (ii)
to execute any and all documents necessary to accomplish such an amendment.
No covenant or agreement contained in this note shall be deemed to be a
covenant or agreement of any past, present or future incorporator, officer,
director or shareholder of the Company or of any predecessor or successor
corporation in his or her individual capacity and no incorporator, officer,
director or shareholder of the Company shall be liable personally on this note
or be subject to any personal liability or accountability by reason of the
issuance of this note, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released.
The Company hereby stipulates and warrants that the loan evidenced
hereby is a commercial loan and that all of the proceeds of such loan will be
used solely to acquire or carry on a business or commercial enterprise.
IN WITNESS WHEREOF, the corporate seal of the Company is hereto affixed
and these presents duly signed by the duly authorized officers of the Company as
of the day and year first above written.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By: ______________________________(SEAL)
Richard M. Andzel, Assistant Secretary Amy E. Parker, Vice President
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE (FEDERAL) SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES ACT OF ANY
STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION
STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.
REGISTERED HOLDER: ADDRESS:
Morgenthau Bridge Investment 504 Cathedral Street
Limited Partnership Baltimore, Maryland 21202
-3-
<PAGE>
LOAN SCHEDULE
The Subordinated Note to which this Loan Schedule is attached evidences
loans made by the Holder to the Company, in the principal amounts and on the
dates set forth below, subject to prepayments of principal set forth below:
=========== ------------ --------- ---------- --------- --------- ============
UNPAID
PRINCIPAL PRINCIPAL INTEREST INTEREST NOTATION
DATE LOAN AMOUNT PAID BALANCE ACCRUED PAID MADE BY
=========== ------------ --------- ---------- --------- --------- ============
08/12/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
09/01/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
10/10/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
10/27/95 $100,000
=========== ------------ --------- ---------- --------- --------- ============
11/02/95 $ 45,000
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11/04/95 $ 5,000
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11/22/95 $125,000
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<PAGE>
No. 1
August 12, 1995 Principal Amount: $ See Loan Schedule
REGISTERED
SUBORDINATED NOTE
LIFE CRITICAL CARE CORPORATION
PAYMENT ON THE PRINCIPAL OF AND INTEREST ON THIS NOTE IS REQUIRED TO BE
MADE DIRECTLY TO THE REGISTERED HOLDER HEREOF WITHOUT NOTATION HEREON. IT CANNOT
BE DETERMINED FROM THE FACE OF THIS NOTE WHETHER ALL OR ANY PART OF THE
PRINCIPAL OF OR INTEREST ON THIS NOTE HAS BEEN PAID.
LIFE CRITICAL CARE CORPORATION (the "Company"), a Delaware corporation,
for value received, promises to pay to the registered holder of this note (the
"Holder") by December 31, 1997 (or earlier as herein referred to), the amounts
specified on the Loan Schedule which is attached to this note and made a part
hereof. The Holder may make additional cash advances (hereinafter referred to as
"loans") to the Company, from time to time, pursuant to the terms and conditions
of that certain Loan and Securities Purchase Agreement of even date herewith,
which shall be covered by this note and recorded on the Loan Schedule.
The interest hereon shall be payable at the annual rate of Eighteen
Percent (18%) per annum (the "Rate") for each day from the date of this note
until the date the principal amount of this note is paid in full. The first
interest payment shall be due on December 31, 1995, and thereafter on the last
day of each of March, June, September and December, or the next succeeding
business day. The accrued interest on the unpaid principal balance evidenced by
the Loan Schedule shall also be covered by this note and shall be recorded on
the Loan Schedule.
The total outstanding principal, together with accrued interest
thereon, shall be payable on December 31, 1997.
Principal of and interest on this note shall be paid to the registered
Holder hereof by check mailed by the Company to the address of the Holder as it
appears on the Note Register and at the end of this note without the necessity
of surrendering or presenting this note, and all such payments shall fully
discharge the obligation of the Company hereunder to the extent made and shall
be recorded on the Loan Schedule. The Company and the Holder hereof may make
provision for the payment of principal and interest by such other method as may
be mutually agreed upon in writing.
<PAGE>
The Company shall pay to the Holder of this note a late charge at the
option of the Holder equal to two percent (2%) of any payment of principal or
interest due if such payment is not received by the registered owner within
fifteen (15) days after such payment is due. Whether or not a late charge is
imposed, interest on principal or interest due but unpaid shall accrue from the
date on which such payment of principal or interest is due at the Rate.
At the option of the Company and upon notice to the Holder at its
address as it appears on the Note Register and at the end of this note, except
as otherwise provided herein, this note may be redeemed by the Company in part
or in whole, less any partial payments previously made by the Company, if any,
at any time or from time to time. In the event the Company redeems only part of
the note, any amount paid to the Holder shall be applied, first, to accrued but
unpaid interest, and second, the then outstanding principal amount. In the event
the Company redeems the entire note, the redemption price shall be equal to the
outstanding principal of the note plus accrued and unpaid interest to the date
of the redemption. Except for a redemption in connection with an initial public
offering by the Company as to which this redemption notice is hereby waived, any
such redemption shall be made upon at least thirty (30) days' but not more than
sixty (60) days' prior notice to the Holder at the address of the Holder as it
appears on the Note Register and at the end of this note. On the date designated
for redemption of the whole note, the note so called for redemption shall become
and be due and payable at the above redemption price, the interest on such notes
shall cease to accrue, and the Holder hereof shall have no rights in respect of
this note except to receive payment of the redemption price hereof. The Company
shall be obligated to redeem this Note simultaneously with its closing on an
initial public offering by the Company of any of its securities.
This note shall be registered by the Company upon the initial delivery
hereof, in the name of the initial purchaser, by endorsement in the space
provided at the end hereof and on the books to be kept for that purpose by the
Company and, thereafter, this note shall be transferable only by successive
endorsements to successive registered holders. Payment of this note and the
interest hereon shall be made only to the registered Holder hereof on the date
such payment is due. The Company may deem and treat the person in whose name
this note is registered as the absolute owner hereof for all purposes and the
Company shall not be affected by any notice to the contrary.
The rights of the Holder to the principal sum or any sum or part
thereof, and the interest due thereon, are and shall remain subject and
subordinate to (a) the prior payment of any and all other indebtedness
(including the principal of and interest on any such indebtedness) constituting
existing or future obligations of the Company for money borrowed from any bank,
trust company, insurance company, or other institutional lender and (b) the
claims of all secured trade and contract creditors of the Company; and upon
dissolution or liquidation of the Company no payment shall be due or payable
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<PAGE>
upon this note until all of the obligations described in this paragraph shall
have been paid in full. The Holder hereby agrees (i) to amend this section of
the note if required to do so by any third-party lender to the Company and (ii)
to execute any and all documents necessary to accomplish such an amendment.
No covenant or agreement contained in this note shall be deemed to be a
covenant or agreement of any past, present or future incorporator, officer,
director or shareholder of the Company or of any predecessor or successor
corporation in his or her individual capacity and no incorporator, officer,
director or shareholder of the Company shall be liable personally on this note
or be subject to any personal liability or accountability by reason of the
issuance of this note, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released.
The Company hereby stipulates and warrants that the loan evidenced
hereby is a commercial loan and that all of the proceeds of such loan will be
used solely to acquire or carry on a business or commercial enterprise.
IN WITNESS WHEREOF, the corporate seal of the Company is hereto affixed
and these presents duly signed by the duly authorized officers of the Company as
of the day and year first above written.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By: ______________________________(SEAL)
Richard M. Andzel, Assistant Secretary Amy E. Parker, Vice President
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE (FEDERAL) SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES ACT OF ANY
STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION
STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.
REGISTERED HOLDER: ADDRESS:
Morgenthau Bridge Loan LLC 504 Cathedral Street
Baltimore, Maryland 21202
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<PAGE>
LOAN SCHEDULE
The Subordinated Note to which this Loan Schedule is attached evidences
loans made by the Holder to the Company, in the principal amounts and on the
dates set forth below, subject to prepayments of principal set forth below:
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UNPAID
PRINCIPAL PRINCIPAL INTEREST INTEREST NOTATION
DATE LOAN AMOUNT PAID BALANCE ACCRUED PAID MADE BY
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12/02/95 $ 15,000
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12/19/95 $ 85,000
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12/27/95 $ 25,000
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01/17/96 $ 50,000
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01/22/96 $100,000
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01/29/96 $ 65,000
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01/31/96 $ 35,000
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02/13/96 $ 50,000
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Exhibit 10.2
LOAN AND SECURITIES PURCHASE AGREEMENT
By and Between
LIFE CRITICAL CARE CORPORATION
and
MORGENTHAU BRIDGE LOAN LLC
August 12, 1995
<PAGE>
LOAN AND SECURITIES PURCHASE AGREEMENT
THIS LOAN AND SECURITIES PURCHASE AGREEMENT (this "Agreement")
is dated as of August 12, 1995 and is made by and between LIFE CRITICAL CARE
CORPORATION, a Delaware corporation (the "Company"), and MORGENTHAU BRIDGE LOAN
LLC, a Maryland limited liability company (the "Purchaser").
RECITALS
WHEREAS, the Company intends to acquire (the "Acquisitions")
certain assets or all of the outstanding capital stock of certain companies in
the home medical equipment business pursuant to the terms of anticipated Asset
Purchase Agreements and Stock Purchase Agreements by and between the Company and
such companies or their stockholders, as applicable;
WHEREAS, the Company desires to borrow from the Purchaser and
the Purchaser desires to lend to the Company up to the aggregate principal
amount of $750,000 pursuant to the terms and limitations set forth in this
Agreement;
WHEREAS, a condition precedent to the Loan, as hereinafter
defined, which the Company acknowledges will provide a direct benefit to it, is
the issuance by the Company to the Purchaser of warrants (the "Warrants") to
purchase 107,000 shares (the "Warrants Shares") of the voting common stock of
the Company (the "Stock") as set forth in Exhibit B hereto, which Exhibit B is
hereby made a part hereof in consideration of the exercise price (the "Exercise
Price") set forth in Exhibit B, with the form of Warrant also being included as
part of such Exhibit B;
WHEREAS, the fair market value of the allocation of the
purchase price for the investment units comprised of the Warrants and the Loan
is as follows: the fair market value of the Warrants is $-0- (zero dollars),
subject to the Exercise Price of $0.10 per Warrant Share, and the fair market
value of the Loan is the principal amount advanced by the Purchaser to the
Company hereunder; and
WHEREAS, the Purchaser is hereby irrevocably authorized and
empowered by the Company to pay the Exercise Price to itself to be applied to
the payment of any outstanding amount of principal and interest due and owing
under the Loan (as hereinafter defined) at such time or times and in such order
and manner of application as it may from time to time, in its sole discretion,
determine. The aforementioned payment of the Exercise price shall be deemed to
be full payment thereof to the same extent as if the same monies were directly
received by the Company.
<PAGE>
NOW, THEREFORE, for consideration, the adequacy and
sufficiency of which is hereby acknowledged by the parties hereto, and in
consideration of the premises and the mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
ISSUANCE OF NOTES AND WARRANTS
SECTION 1.01 Issuance of Notes and Warrants.
(a) Subject to the terms and conditions set forth herein and
in the Note, as hereinafter defined, the Company shall borrow from the Purchaser
and the Purchaser shall lend to the Company, on the Closing Date (as hereinafter
defined), the aggregate principal amount (the "Principal Amount") of up to
$750,000 to be evidenced by the issuance by the Company to the Purchaser of a
cash advances subordinated promissory note (a "Note") in the form of Exhibit A
hereto (the "Loan"). On the Closing Date and in consideration for the Loan, the
Company shall become obligated to issue to the Purchaser the Warrants, in the
form of Exhibit B hereto.
(b) Payments for the Note will be made by the Purchaser by
check or by wire transfers with the amount advanced to be recorded, upon each
such advance, on the Note, up to an amount equal to the Principal Amount. The
Company's obligation to issue to the Purchaser the Warrants shall arise upon
each advance under the Note.
(c) Warrant Exercise Proceeds. The Purchaser is hereby
irrevocably authorized and empowered by the Company to pay the Exercise Price to
itself to be applied to the payment of any outstanding amount of principal and
interest due and owing under the Loan (as hereinafter defined) at such time or
times and in such order and manner of application as it may from time to time,
in its sole discretion, determine. The aforementioned payment of the Exercise
Price shall be deemed to be full payment thereof to the same extent as if the
same monies were directly received by the Company.
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<PAGE>
SECTION 1.02 Closing.
(a) The closing (the "Closing") of the Loan and the issuance
of the Note shall take place at the offices of The Morgenthau Group, Inc., 3333
W. Commercial Boulevard, Ft. Lauderdale, Florida 33309 at 10:00 a.m., Ft.
Lauderdale time, as of the date of this Agreement (such date and time of closing
being herein called the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
SECTION 2.01 Organization, Qualifications and Corporate Power.
The Company is a corporation duly incorporated and organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified as a foreign corporation in each other jurisdiction, if
any, in which the nature of business transacted by it or the character of the
properties owned or leased by it makes such licensing or qualification
necessary, except where the failure to so qualify would not have a material
adverse effect (a "Material Adverse Effect") upon the financial condition or
operations of the Company. The Company has full power and authority (corporate
and other) to own and hold its properties and to conduct its businesses as
currently conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement. The Company has the corporate power
and authority to issue and deliver the Note and the Warrants, and to execute,
deliver and perform any other document required pursuant to this Agreement.
SECTION 2.02 Authorization of Agreement, Etc.
(a) The execution, delivery and performance by the Company of
this Agreement, and the issuance and delivery of the Note and of the Warrants by
the Company, have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the charter or by-laws of the Company, or any provision of any
indenture, agreement or other instrument to which the Company is a party or by
which the Company or any of its properties or assets are bound or affected, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the company other
than as permitted and contemplated by this Agreement.
-3-
<PAGE>
(b) The Note having been duly authorized and, when issued and
delivered in accordance with this Agreement, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. The Warrants and the
Warrant Shares have been duly authorized and the Warrant Shares, upon the
issuance thereof upon the exercise of the Warrants, will be validly issued,
fully paid and nonassessable shares of the Stock of the Company. The execution,
issuance and delivery of the Note, the Warrants and the Warrant Shares are not,
except as disclosed to the Purchaser in writing, subject to any preemptive
rights of shareholders of the Company, or to any right of first refusal or other
similar right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly executed
and delivered by the Company, and (assuming the due authorization, execution and
delivery by the Purchaser) constitutes the legal, valid and binding obligations
of the Company enforceable in accordance with its terms, subject to general
equity principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally. Each other document executed in
connection with this Agreement or the transactions contemplated hereby by the
Company, including, but not limited to, the Note and the Warrants (collectively,
the "Loan Documents") constitute the valid, legally binding obligation of the
Company and are enforceable in accordance with their respective terms, subject
to general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
SECTION 2.04 Governmental Approvals. No registration or filing
with, or consent or approval of, or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance of this Agreement or the issuance, sale and
delivery of the Note or the Warrants.
SECTION 2.05 Offering of Warrants. Neither the Company nor, to
the knowledge of the Company, any person or entity authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Warrants has offered the Warrants for sale to, or solicited any
offers to buy the Warrants from, or otherwise approached or negotiated with
respect thereto with, any person or persons other than the Purchaser and certain
other purchasers of similar notes and warrants under circumstances that have
involved the use of any form of general advertising or solicitation as such
terms are used in Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and neither the Company nor, to the knowledge of
the Company, any person acting on its behalf has
-4-
<PAGE>
taken any action (including, without limitation, any offer, issuance or sale
of any security of the Company, whether to a subsequent investor or otherwise,
under circumstances which might require the integration of such security with
the offering of the Warrants under the Securities Act or the rules and
regulations of the Securities and Exchange Commission [the "Commission"]
thereunder) in a manner which would make the exemptions afforded by the
Securities Act unavailable for the offering, issuance or sale of the Warrants.
SECTION 2.06 Compliance With Law. Except as disclosed to the
Purchaser in writing, the Company is not in default under any order of any
court, governmental authority, arbitration board or tribunal to which it is
subject, or in violation of any laws, ordinances, governmental rules or
regulations, the violation of which would have a Material Adverse Effect.
SECTION 2.07 Litigation. Except as disclosed and described to
the reasonable satisfaction of the Purchaser, there are no proceedings against
the Company, its officers or directors pending or, so far as is known by the
Company, threatened before any court or administrative agency which, if
adversely decided, would have a Material Adverse Effect.
SECTION 2.08 No Conflicting Agreements. There are no
provisions of the Company's charter and by-laws and no provisions of any
existing mortgage, deed of trust, indenture, lease, or other material agreement
binding the Company or affecting its properties which would conflict with or in
any way prevent the execution, delivery, or carrying out of terms of this
Agreement, the Note, the Warrants or the other Loan Documents.
SECTION 2.09 Financial Condition. The Company has delivered to
the Purchaser copies of its most recent unaudited financial statements. Except
as disclosed to the Purchaser in writing, there has been no material adverse
change in the financial condition of the Company or the results of the
operations thereof since the date of such financial statement as stated above.
SECTION 2.10 Information. All information contained in any
financial statement, application, schedule, report, certificate, loan agreement,
equity sharing agreement, or any other document provided by the Company or by
any other officer, director or shareholder in connection with the issuance of
the Note and the Warrants or with any of the Loan Documents is in all respects
true and accurate, and the Company or such other person has not omitted to state
any material fact or any fact necessary to make such information not misleading.
SECTION 2.11 Taxes. All taxes imposed upon the Company and its
properties, operations, and income (including payroll taxes) are paid so as to
be current.
-5-
<PAGE>
SECTION 2.12 Employee Benefit Plans. Each employee benefit
plan, agreement, arrangement or understanding maintained for the benefit of the
Company's current or former employees (a "Plan") is in full force and effect in
accordance with its terms and complies in all material respects with all
applicable laws. The Company is not in default of any of its respective material
obligations under any Plan.
SECTION 2.13 Intellectual Property. The Company owns or has
rights to all patents, trademarks, copyrights, trade secrets or other
intellectual property and technology (the "Intellectual Property"), used or held
for use in connection with its businesses available for such use and in the
possession or subject to the control of the Company and/or necessary to conduct
its businesses as now conducted. The Company has not granted any rights in any
such Intellectual Property to any other person. The present operations of the
Company do not infringe on any Intellectual Property owned by any other party.
SECTION 2.14 Past Activities. During the past ten (10) years,
except as previously disclosed to the Purchaser in writing, none of the
Company's current directors or officers have been arrested or convicted of any
material crime, nor have any of them been the subject of a voluntary or
involuntary bankruptcy proceeding or been an officer or director of a company
which has been the subject of a voluntary or involuntary bankruptcy proceeding.
SECTION 2.15 Brokerage Fee. The Company has not dealt with any
broker, finder, commission agent or other party in connection with the
transactions contemplated by this Agreement, and the Company is under no
obligation to pay any broker's fee or commission in connection with such
transactions to any person.
SECTION 2.16 Leases. Upon the request of the Purchaser, the
Company shall provide to the Purchaser copies of every material lease of real or
personal property to which the Company is a party and which are in effect at the
time of the request.
SECTION 2.17 Subsidiaries and Affiliates. The Company has no
subsidiaries or affiliates which are not a party to this Agreement.
SECTION 2.18 Other Agreements. The Company has not entered
into any written or oral "side agreements" which amend or modify any other
agreement entered into by the Company, and none of the officers and directors of
the Company have agreed to take any action beyond what is required in any other
agreement entered into by the Company which have a value or require the Company
to pay an amount in excess of $25,000.
-6-
<PAGE>
ARTICLE III
COVENANTS
Until the later of payment in full of the Note or the exercise
or expiration of the Warrants:
SECTION 3.01 Financial Statements. The Company shall provide
to the Purchaser within thirty (30) days of the end of each accounting quarter,
quarterly balance sheets, source statements and statements of use of funds,
prepared in accordance with generally accepted accounting principles,
consistently applied.
SECTION 3.02 Certificate of No Default. The Company shall
provide the Purchaser with a quarterly certificate of the President of the
Company stating that no default has occurred during the immediately concluded
calendar quarter under this Agreement or under any of the other Loan documents,
or describing the nature of any default hereunder or thereunder.
SECTION 3.03 Annual Audit. The Company shall provide the
Purchaser with an annual independent certified audit of the Company within
ninety (90) days after the fiscal year end of the Company from an accounting
firm acceptable to the Purchaser, provided that the accounting firm of Ernst &
Young, LLP shall be deemed acceptable.
SECTION 3.04 Governmental Filings. Within thirty (30) days
after filing, at the request of the Purchaser, the Company shall provide the
Purchaser with a copy of all material reports or other documents filed by the
Company with any governmental agencies, including without limitation, the
Internal Revenue Service and the Commission.
SECTION 3.05 Lawsuits. Within thirty (30) days after filing or
receipt, the Company shall provide the Purchaser with copies of all pleadings
filed in connection with any material suits or proceedings filed by or against
the Company in which the amount in controversy exceeds $50,000.
SECTION 3.06 Compliance With Laws. The Company will at all
times comply in all material respects with all applicable federal, state, and
local laws, rules, and regulations, and orders of any court or other
governmental authority having jurisdiction.
SECTION 3.07 Default Notices. Within ten (10) days after
receipt of any notification, the Company shall provide the Purchaser with a copy
of any notification received by the Company relating to any defaults by the
Company on any loans,
-7-
<PAGE>
leases, material contracts or other material agreements to which the Company is
a party.
SECTION 3.08 Insurance. The Company will (a) at all times
maintain with well-rated and responsible insurance companies such insurance as
is required by applicable laws and such other insurance in such amounts, of such
types, and against such risks, hazards, liabilities, casualties, and
contingencies as is customarily maintained by companies similarly situated
(including Federal flood insurance if the businesses of the Company are located
in a Federal Flood Area), (b) list the Purchaser on such policies as a loss
payee, to the extent of the Purchaser's interest in the Company, and (c) file
with the Purchaser annually a detailed list of the insurance then in effect and
stating the names of the insurance companies, the types, the amounts, and rates
of the insurance, dates of the expiration thereof and the properties and risks
covered thereby, and, within thirty (30) days after notice in writing from the
Purchaser, obtain such additional insurance as the Purchaser may reasonably
request, provided that the terms of such additional insurance (including the
premiums) are dictated by sound business judgment.
SECTION 3.09 Financing. Except for an initial public offering
by the Company and any secondary offering, the Company will notify the Purchaser
as to the proposed amount and terms of any third-party equity financing for the
Company at least thirty (30) days prior to offering participation in such
financing to any other entity. During such thirty (30) day period, the Company
will negotiate in good faith with the Purchaser as to the amount of, and the
terms of participation in such financing by the Purchaser. The Purchaser shall
have the first right to participate in all or any portion of such offering with
other similarly situated "purchasers" of notes and warrants.
SECTION 3.10 Maintain Existence. The Company will at all times
maintain in full force and effect its corporate existence, rights, privileges,
and franchises and qualify and remain qualified in all jurisdictions where
qualification is required.
ARTICLE IV
NEGATIVE COVENANTS
Until the later of payment in full of the Note or exercise or
expiration of the Warrants, the Company shall not, without the prior written
consent of the Purchaser:
SECTION 4.01 Dividends. Make any cash or other dividend
distributions to its shareholders except that the Company may pay dividends to
any holders of cumulative preferred stock, if any shall be issued.
-8-
<PAGE>
SECTION 4.02 Sales. Sell or otherwise dispose of any assets of
the Company which have an individual value in excess of $100,000 outside the
regular course of business.
SECTION 4.03 Capital Acquisitions. Other than the
Acquisitions, acquire any asset or other capital item having an individual value
in excess of $350,000.
SECTION 4.04 Related Party Transaction. Transact any business
or enter into any agreement with any member of the board of directors or an
officer of the Company, unless in an "arm's length" transaction negotiated by
each party.
SECTION 4.05 Reorganization. Merge or consolidate with another
corporation or entity or dissolve or otherwise liquidate, except as permitted by
this Agreement.
SECTION 4.06 Corporate Matters. Change the nature of its
business operations, or invest any funds in any concern or entity not strictly
related to its business.
SECTION 4.07 Sale of Stock. Issue or sell any of its stock,
options, convertible debt, or preferred stock, or redeem the same, issue or
grant any stock appreciation rights or other rights in or to stock, or issue or
grant any bonus, profit sharing or other similar arrangements, except as
permitted by this Agreement.
SECTION 4.08 Contracts. Enter into any agreements or leases
not in the normal course of its businesses which require annual payments in
excess of $100,000.
SECTION 4.09 Loans. Enter into any loan agreements or other
borrowing arrangements or increase borrowings under any currently existing
institutional debt which would require annual payments on such new arrangements
in excess of $100,000.
SECTION 4.10 Corporate Structure. Other than in connection
with an IPO, alter its corporate structure so that a change of control occurs,
establish or purchase any new subsidiary or invest more than $100,000 in any one
of its affiliates.
SECTION 4.11 Stock Redemption. Redeem in any one calendar year
shares of their respective stock which, at the time of redemption, would have a
fair market value of greater than $100,000.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01 Authorization. The Purchaser has the power and
authority to execute and deliver this Agreement. All action on the part of the
Purchaser necessary for the authorization, execution, delivery and performance
of all obligations of the Purchaser under this Agreement have been taken. This
Agreement, when executed and delivered by the Purchaser (assuming the due
authorization, execution and delivery by the Company) shall constitute a legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject to general equity principles and to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally.
SECTION 5.02 Investment Representations. The Purchaser
represents and warrants to the Company:
(a) the Warrants (and if applicable, the Warrant Shares)
(collectively, the "Investor Interest") to be acquired by it pursuant to this
Agreement are being acquired for its own account and not with a view toward the
distribution or resale of the Investor Interest or any part thereof in any
transaction which would be in violation of the securities laws of the United
States of America or any State, without prejudice, however, to its rights at all
times to sell or otherwise dispose of all or any part of the Investor Interest
to an affiliate or any person pursuant to a registration statement under the
Securities Act and any comparable State act or under an exemption from such
registration available under the Securities Act and any comparable State act;
provided that such transfers to affiliates, when taken as a whole, will not be
integrated so as to invalidate the exemption from registration under the
Securities Act or any comparable state act pursuant to which the Investor
Interest is being issued by the Company. It has been advised that the Investor
Interest has not been registered under the Securities Act or the securities laws
of any State, on the grounds that no distribution or public offering of the
Investor Interest is presently contemplated by it.
(b)(i) it is an "accredited investor" as defined in Rule
501(a) promulgated under the Securities Act or (ii) by reason of its business
and financial experience, and the business and financial experience of those
persons retained by it to advise it with respect to the Investor Interest, it,
together with such advisors, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment, and it is able to bear the economic
risk of such investment and, at the present time, is able to afford a complete
loss of such investment.
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(c) prior to making a decision to enter into this Agreement
and acquire the Investor Interest, it has been provided the opportunity to ask
questions of, and receive answers from the executive officers of the Company
concerning the Company, and to obtain from the Company any information requested
from the Company. On the basis of the foregoing, and on the representations of
the Company contained in this Agreement and the representations contained in the
other Loan Documents, it acknowledges that it possesses sufficient information
to understand the merits and risks associated with an investment in the Investor
Interest.
SECTION 5.03 Reliance on Information. The Purchaser
acknowledges that it has relied upon the information provided by the executive
officers of the Company and upon the representations of the Company contained
herein and the representations of such entity contained in the other Loan
Documents.
ARTICLE VI
CONDITIONS TO THE
OBLIGATIONS OF THE PURCHASER TO CLOSE
SECTION 6.01 Obligations of the Purchaser to Close. The
obligation of the Purchaser to purchase and pay the first advance for the Note
on the Closing Date is, at the Purchaser's sole option, subject to the
satisfaction, on or before such date, of the following conditions:
(a) Representations and Warranties to be True and Correct. The
representations and warranties contained herein shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Company shall have certified to such effect to the Purchaser in writing.
(b) Performance. The Company shall have performed and complied
in all material respects with all material agreements and material conditions
contained herein required to be performed or complied with by it prior to or at
the Closing Date.
(c) All Proceedings to be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and the Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
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(d) Obligation of the Company to Execute and Deliver the
Warrants. The obligation of the Company to execute and deliver to the Purchaser
the Warrants shall become binding at the Closing, with the amount of the
Warrants to be determined by the actual amount of the Principal Amount advanced
under the Note.
(e) Issuance, Sale and Delivery of the Note. The full
issuance and sale by the Company and delivery to the Purchaser of the Note.
SECTION 6.02 Obligation of the Company to Close. The
obligation of the Company to issue, sell and deliver the Note and the Warrants
and to consummate the other transactions contemplated by the Loan Documents on
the Closing Date is, at the Company's option, subject to the satisfaction on or
before such date, of the following conditions:
(a) Payment. The Purchaser shall transfer to the Company
an aggregate amount, at one time or from time to time, up to the Principal
Amount as requested by the Company.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained herein with respect to the Purchaser
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, and the Purchaser shall have certified to such effect to
the Company, in writing.
ARTICLE VII
DEFAULT AND REMEDIES
SECTION 7.01 Events of Default. A default (an "Event of
Default") occurs if:
(a) The Company fails to make any payment of principal,
interest or other amounts required by the Note or any other obligation in any of
the Loan Documents which relate to a monetary payment within sixty (60) days of
when the same becomes due and payable;
(b) The Company fails to comply with or perform in any
material respect any of the covenants or obligations contained in this Agreement
or any other Loan Document, or there occurs a default or Event of Default under
any of the other Loan Documents, or under any other loan documents, and such
failure continues for sixty (60) days after written notice from the Purchaser to
the Company;
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(c) There shall be a declared default under any senior
indebtedness pursuant to its terms, which default extends beyond any applicable
period of grace or cure provided therein with respect thereto;
(d) The Company, pursuant to or within the meaning of any
bankruptcy law: (1) becomes insolvent, (2) fails generally to pay its debts as
they become due, (3) admits in writing its inability to pay debts generally as
they become due, (4) commences a voluntary case or proceeding, (5) consents to
the entry of a judgment, decree or order for relief against it in an involuntary
case or proceeding, (6) consents to the appointment of a custodian for it or for
all or substantially all of its properties, (7) consents to or acquiesces in the
institution of bankruptcy or insolvency against it, (8) applies for, consents to
or acquiesces in the appointment of or taking possession by a custodian of it or
for any part of its properties, (9) makes a general assignment for the benefit
of its creditors, or (10) adopts any board or committee resolution (or
otherwise) that authorizes action to approve any of the foregoing;
(e) The representations and warranties contained in this
Agreement prove to have been false or inaccurate in any material respect when
made and such failure continues for sixty (60) days after written notice from
the Purchaser.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, and will actively resist any attempts by any other
party on their behalf to insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, which would prohibit or forgive the Company from making any payment
on the Note, or which may affect the covenants or the performance of this
Agreement or any agreement contemplated hereby; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefits or advantages
of any such law and covenant that it will not hinder, delay or impede the
execution of any power herein granted to the Purchaser, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 8.2 Survival of Agreements. All covenants and
agreements made herein shall survive the execution and delivery of this
Agreement and the issuance, sale and delivery of the Note and Warrants pursuant
hereto. All statements
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contained in any certificate or other instrument delivered by the Company
hereunder shall be deemed to constitute representations and warranties made by
the Company.
SECTION 8.3 Brokerage. No broker or finder has acted on behalf
of the Company in connection with this Agreement or the transactions
contemplated hereby, and the Purchaser has made no agreement to pay any agent,
finder, broker or any other representative, any fee or commission in the nature
of a finder's or originator's fee arising out of or in connection with the
subject matter of this Agreement. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 8.04 Recitals. The Recitals contained herein are
specifically incorporated herein by reference and made a part hereof.
SECTION 8.05 Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be delivered
personally or mailed by first class registered or certified mail or by Federal
Express or other reliable courier service, postage prepaid, in either case
addressed as follows:
(a) if to the Company at
Life Critical Care Corporation
3333 W. Commercial Boulevard
Suite 203
Ft. Lauderdale, Florida 33309
Attn.: Amy E. Parker, Vice President
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
400 Court Towers
210 West Pennsylvania Avenue
Towson, Maryland 21204-4515
(b) if to the Purchaser at
Morgenthau Bridge Loan LLC
504 Cathedral Street
Baltimore, Maryland 21202
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or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. Any such communication shall
be deemed given when delivered personally against written receipt or if mailed,
upon the earlier to occur of the date of actual receipt or 48-hours after the
date of mailing to the address indicated.
SECTION 8.06 Change, etc. Neither this Agreement nor any term,
condition, representation, warranty, covenant, or agreement hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing by the party against whom such change, waiver, discharge or termination
is sought.
SECTION 8.07 Terms Binding. All of the terms, conditions,
stipulations, warranties, representations, and covenants of this Agreement shall
apply to and be binding upon, and shall inure to the benefit of, the parties
hereto and each of their respective heirs, personal representatives, successors
and assigns.
SECTION 8.08 Gender, etc. Whenever used herein, the singular
number shall include the plural, the plural the singular, and the use of the
masculine, feminine, or neuter gender shall include all genders.
SECTION 8.09 Headings. The section and subsection headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms hereof.
SECTION 8.10 Governing Law. This Agreement and all
transactions contemplated hereby, including without limitation, the Note and
Warrants, shall be deemed to be made under, and shall be governed by, the
internal laws of the State of Maryland, without regard to the conflicts of law
principles of such State.
SECTION 8.11 Consent to Jurisdiction; Service of Process. Each
party hereto agrees and consents that any action or proceeding arising out of or
brought to enforce the provisions of this Agreement may be brought in any
appropriate court in the State of Maryland or in any other court having
jurisdiction over the subject matter.
SECTION 8.12 Waiver of Jury Trial. The Purchaser and the
Company each waive all right to a trial by jury in any suit, action, or
proceeding under, arising out of, or relating to this Agreement, any of the Loan
Documents or any transactions contemplated thereby.
SECTION 8.13 Further Assurances and Corrective Instruments.
The parties hereto agree that they will, from time to time, execute and deliver,
or cause to be executed and delivered, such supplements hereto and such further
instruments as may
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reasonably be required for carrying out the intention of the parties to, or
facilitating the performance of, this Agreement.
SECTION 8.14 Illegality. If fulfillment of any provision
hereof or any transaction related hereto or to the other Loan Documents at the
time performance of such provisions shall be due shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein contained operates or would prospectively operate to invalidate
this Agreement in whole or in part, then such clause or provision only shall be
void, as though not herein contained, and the remainder of this Agreement shall
remain operative and in full force and effect; provided, however, that, if any
such provision pertains to the repayment of the Company's obligations hereunder,
the occurrence of any such invalidity shall constitute an Event of Default.
SECTION 8.15 Assignment. This Agreement and the other Loan
Documents may not be assigned, in whole or in part, by the Company without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed.
SECTION 8.16 Entire Agreement. This Agreement and the other
Loan Documents constitute the entire agreement of the parties with respect to
the subject matter thereof; the Loan Documents may not be modified or amended
except in writing.
SECTION 8.17 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.1. Demand Registration.
9.1.1. Request for Registration.
9.1.1.1. The Purchaser (herein referred
to as the "Warrantholder") may, by Notice to the Company, make a request for
registration under the Securities Act of all or part of its Registrable
Securities (i.e., capital stock of the Company owned by the Warrantholder) (a
"Demand Registration") at any time after June 30, 1997.
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9.1.1.2. As soon as practicable after
receipt of a request for a Demand Registration of the Company, the Company
will file a registration statement with respect to the Demand Registration.
The Company agrees to use its best efforts to cause the Demand Registration to
be declared effective no later than 120 days after such request and to keep such
Demand Registration continuously effective for sixty (60) days. The Company
further agrees, if necessary, to supplement or make amendments to the Demand
Registration, if required by the registration form used by the Company for such
Demand Registration, by the instructions applicable to each such registration
form by the Securities Act, or by the Warrantholder. The Company agrees to
furnish to the Warrantholder, copies of any such supplement or amendment
prior to its being used and/or filed with the Commission. The Company
will pay all Registration Expenses (as hereinafter defined) in connection
with each Demand Registration, whether or not it becomes effective. The
Company will make available to the Warrantholder, as soon as reasonably
practicable, a statement of operations which shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder.
9.1.1.3. In any registration under this
Section 9.1.1, the Company shall give written notice thereof to the
management stockholders of the Company (the "Management Stockholders") and
upon the written request of any of them given within 15 days after the giving
of such notice by the Company, the Company will notify the Warrantholder as
to the number of the securities requested to be included in such
registration statement, including securities for its own account, except as
set forth below.
9.1.1.4. If any registration pursuant
to this Section 9.1.1 shall be underwritten in whole or in part, the
Company shall allow the securities requested for inclusion by the
Warrantholder and/or the Management Stockholders to be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters, unless the managing underwriter for the
distribution of the securities shall in its good faith judgment be of the
opinion that the sale of such securities would adversely affect either the
price or the marketing of the securities to be sold for the account of the
Company. The Company will effect the registration of only that number of
securities requested for inclusion by the Warrantholder and/or the
Management Stockholders which the managing underwriter believes, in its good
faith judgment, can be included in such registration without such adverse
effect. Any securities allowed to be included in the registration in excess of
those to be sold by the Company shall be apportioned to the Warrantholder and
the Management Stockholders pro rata among them according to the total number of
shares sought to be registered.
9.1.1.5. In the event the Warrantholder,
by Notice to the Company, makes a request for registration pursuant to this
Section 9.1, the Company need not effect a Demand Registration in response to
the Warrantholder's request if the
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Company can find a purchaser, upon terms and conditions acceptable to the
Warrantholder, for all of the Registrable Securities held by the Warrantholder;
provided that, if the purchase and sale of the Registrable Securities is not
completely within sixty (60) days from the date the request for Demand
Registration is received by the Company, the Company shall not be relieved of
its obligation to effect a Demand Registration.
9.1.2. Selection of Underwriters. If the
Warrantholder elects, the offering of Registrable Securities pursuant to
such Demand Registration shall be in the form of an underwritten offering. If
any Demand Registration is in the form of an underwritten offering, the
Company shall be entitled to select the investment banker or investment bankers
and manager or managers to administer the offering.
9.1.3. Payment of Notes. All amounts
outstanding under the Note shall be repaid (whether or not then due) prior to
or as a part of such Demand Registration.
SECTION 9.2. Piggy-Back Registration.
9.2.1. Warrantholder's Option.
9.2.1.1. Following the initial public
offering by the Company of any of its securities, if the Company or the
Management Stockholders propose to file a registration statement under the
Securities Act with respect to an offering by a Company or the Management
Stockholders for its own account of any class of security of the Company then
the Company shall in each case give written notice of such proposed filing to
the Warrantholder at least thirty (30) days before the anticipated filing
date, and such notice shall offer the Warrantholder the opportunity to include
in such registration statement such number of Registrable Securities as the
Warrantholder may request. The Company shall use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten
offering to permit the Warrantholder to include such securities in such offering
on the same terms and conditions as the securities of the Company and the
Management Stockholders included therein.
9.2.1.2. Notwithstanding the foregoing,
if the managing underwriter or underwriters of such proposed underwritten
offering determine in good faith that the total amount of securities which
the Warrantholder, the Company and any other persons or entities intend to
include in such offering is sufficiently large to materially and adversely
affect the success of such offering (including, without limitation, by a
significant and adverse decrease in the proposed offering price) then the
amount of securities to be offered shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter or
underwriters.
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9.2.1.3 In the event the Warrantholder
elects to include Registrable Securities in a registration under this
Section 9.2, the Company or the Management Stockholders (as the case may
be) proposing such registration need not include Registrable Securities in
the registration statement in response to the Warrantholder's request if the
Company or the Management Stockholders can find a purchaser, upon terms and
conditions acceptable to the Warrantholder, for the aggregate principal amount
of the Registrable Securities proposed by the Warrantholder to be
registered; if the purchase and sale of the Registrable Securities proposed
by the Warrantholder to be registered is not completed within sixty (60)
days, the Company and the Management Stockholders shall not be relieved of their
obligations under this Section 9.2.
9.2.2. Payment of Registration Expenses. The
Company will pay all Registration Expenses in connection with any
registration described in this Section 9.2 except for the Warrantholder's pro
rata share of any underwriter's discount for any registration in which the
Warrantholder participates.
9.2.3. Exception from Registration.
Notwithstanding the provisions of this Section 9.2, the Company shall have no
obligation to include any Registrable Securities in any registration filed by
the Company if the registration form to be used by the Company pursuant to the
Securities Act is Form S-8 or another form which cannot be used for the public
sale of Registrable Securities, provided that, at least thirty (30) days
before the filing of any such Form S-8 or other such form, the Company shall
notify the Warrantholder of its intent to so file such a registration form.
SECTION 9.3. Registration Procedures.
9.3.1. Registration. Whenever the Warrantholder
requests that any Registrable Securities be registered pursuant to
Section 9.1 or Section 9.2 of this Agreement, the Company will use its best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request the Company will as
expeditiously as possible:
9.3.1.1. before filing a registration
statement that registers any Registrable Securities or any prospectus
relating thereto or any amendments or supplements relating to such a
registration statement or a prospectus, the Company will (i) furnish to
the Warrantholder's counsel copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel, and (ii)
notify the Warrantholder of any stop order issued or threatened to be issued
by the Commission in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
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9.3.1.2. furnish to the Warrantholder
such number of copies of such registration statement, each amendment and
supplement thereto (including one copy of all exhibits thereto), the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Warrantholder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Warrantholder;
9.3.1.3. use its best efforts to
register or qualify such Registrable Securities under such other securities
or blue sky laws of such jurisdictions in the United States of America as the
Warrantholder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Warrantholder to
consummate the disposition of its Registrable Securities in such
jurisdictions; provided, however, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 9.3.1.3, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
9.3.1.4. use its best efforts to cause the
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Warrantholder to consummate the disposition of such
Registrable Securities;
9.3.1.5. notify the Warrantholder at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
and the Company will prepare a supplement or amendment to such prospectus so
that such prospectus will not contain an 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 not misleading;
9.3.1.6. enter into such customary
agreements (including an underwriting agreement in customary form) and
take all such other actions as the Warrantholder or the underwriters
retained by the Company reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
9.3.1.7. make available for inspection
by the Warrantholder and any underwriter participating in any
disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by the Warrantholder or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
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corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with such registration statement. Records which the
Company determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Company unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in the registration statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction;
9.3.1.8. use all reasonable efforts to
obtain a cold comfort letter from the Company's independent certified public
accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Warrantholder or the
underwriters retained by the Company reasonably request;
9.3.1.9. otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and made
available to the Warrantholder, as soon as reasonably practicable, an earnings
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
9.3.1.10. obtain an opinion or opinions
from counsel for the Company in customary form satisfactory to the
Warrantholder; and
9.3.1.11. comply with the requirements
for listing on the exchange selected by agreement of the Company and the
Warrantholder.
9.3.2. Information. For the purposes of
effecting the registration of the Registrable Securities of the
Warrantholder pursuant to Sections 9.1 and 9.2 hereof, and for the purposes
of effectuating a public offering of its securities, the Company may
require the Warrantholder to furnish to the Company such information regarding
the Warrantholder, their officers and directors, the Registrable Securities
held by the Warrantholder and the proposed distribution of such Securities
as may be required to be disclosed in a registration statement by the
rules and regulations under the Securities Act or under any other
applicable securities or blue sky laws, or as may be required to effect the
registration of the Registrable Securities held by the Warrantholder.
SECTION 9.4. Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with blue sky qualifications of the Registrable Securities, rating
agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to
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be registered and fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit, special audit or "cold comfort" letters required by or incident
to such performance), securities acts liability insurance (if the Company
elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained in connection with such registration, fees and
expenses of other Persons retained by the Company, fees and expenses of the
Warrantholder incurred in connection with each registration hereunder
(but not including any underwriting discounts or commissions
attributable to the sale of the Warrantholder's Registrable Securities)
and any out-of-pocket expenses of the Warrantholder, specifically including
the fees of one counsel for all Warrantholders (all such expenses being
herein called "Registration Expenses"), will be borne by the Company.
SECTION 9.5. Indemnification.
9.5.1. Indemnification.
9.5.1.1. The Company agrees to indemnify,
to the fullest extent permitted by law, the Warrantholder, each of their
partners and officers, and each Person who controls the Warrantholder (within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended -- the "Securities Exchange Act") and any investment advisor thereof
or agent therefor against all losses, claims, damages, liabilities and
expenses to which any such Person may become subject under the Securities Act,
the Securities Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions
in respect thereof) arose out of or are based upon any untrue or alleged
untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein no misleading, except insofar as the
same are caused by or contained in any information with respect to the
Warrantholder furnished in writing to the Company by or on behalf of the
Warrantholder expressly for use therein or by the Warrantholder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Warrantholder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify the underwriters thereof, their officers
and directors and each person who controls such underwriters (within the meaning
of the Securities Act or the Securities Exchange Act) to the same extent as
provided above with respect to the indemnification of the Warrantholder.
9.5.1.2. Each Warrantholder agrees to
indemnify, to the fullest extent permitted by law, each Company and each of
its officers and directors who have signed the registration statement, each
Person who controls the Company
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(within the meaning of the Securities Act or the Securities Exchange
Act), the Management Stockholder selling under such registration and any
agent therefor, against all losses, claims, damages, liabilities and
expenses (or actions in respect thereof) arose out of or are based upon any
untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleges omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading insofar as the same
are caused by or contained in any information with respect to such
Warrantholder furnished to the Company by or on behalf of such Warrantholder
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto to a prospective purchaser after
the Company has furnished such Warrantholder with a sufficient number of copies
of the same; provided, however, that the obligation of each Warrantholder
hereunder shall be limited to an amount equal to the net proceeds received by
such Warrantholder pursuant to the sale of Registrable Securities as
contemplated herein. In connection with an underwritten offering, each
Warrantholder hereunder shall be limited to an amount equal to the net
proceeds received by such Warrantholder pursuant to the sale of Registrable
Securities as contemplated herein. In connection with an underwritten offering,
each Warrantholder will indemnify the underwriters thereof, their officers and
directors and each person who controls such underwriters (within the meaning of
the Securities Act or the Securities Exchange Act) to the same extent as
provided above with respect to indemnification of the Company.
9.5.2. Conduct of Indemnification Proceedings.
9.5.2.1. In case any action shall be brought
against any Person entitled to indemnification hereunder (an "Indemnified
Person"), the Indemnified Person shall promptly notify the Person from
whom indemnification is sought (the "Indemnifying Person"), in writing, and
the Indemnifying Person shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses. The Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but, the fees and expenses of any such counsel shall be
paid by the Indemnifying Person only if (i) the Indemnifying Person shall
fail to assume the defense of such action as provided herein, (ii) the
Indemnified Person reasonably shall have concluded that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Indemnifying person or other Persons represented by
counsel employed by the Indemnifying Person or (iii) the Indemnified Person
reasonably shall have concluded that a conflict of interest exists between the
Indemnifying Person and the Indemnified Person with respect to the action. The
Indemnifying Person shall not be liable for any settlement of any such action
effected without its consent, but if settled with the consent of the
Indemnifying Person or if there be a final judgment for the plaintiff in any
such action, the
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<PAGE>
Indemnifying Person agrees to indemnify and hold harmless the Indemnified
Person from and against any loss or liability by reason of such settlement
or judgment.
9.5.2.2. This Section and all of the
indemnification provisions contained herein shall survive termination of
this Agreement and shall remain operative and in full force and effect
notwithstanding any such termination.
SECTION 9.7. Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act or a registration statement pursuant to the requirements
of the Securities Act, the Company covenants that it will file the reports
required to be filed by it under the Securities Act and Securities Exchange Act
and the rules and regulations adopted by the Commission thereunder. Upon the
request of the Warrantholder, the Company will deliver to the Warrantholder a
written statement as to whether it has complied with such requirements. The
Company will take such further action as the Warrantholder may reasonably
request, all to the extent required from time to time to enable the
Warrantholder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such rule may be amended from time to time or (b)
any similar rule or regulation hereafter adopted by the Commission.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their duly authorized
representatives, as of the day and year first above written.
WITNESS: LIFE CRITICAL CARE CORPORATION
_____________________________ By:__________________________(SEAL)
Amy E. Parker, Vice President
- COMPANY -
WITNESS: MORGENTHAU BRIDGE LOAN LLC
By: Morgenthau Bridge Financing
Corp., Manager
_____________________________ By:__________________________(SEAL)
its authorized signatory
- PURCHASER -
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<PAGE>
EXHIBIT A
No. 1
August 12, 1995 Principal Amount: $ See Loan Schedule
REGISTERED
SUBORDINATED NOTE
LIFE CRITICAL CARE CORPORATION
PAYMENT ON THE PRINCIPAL OF AND INTEREST ON THIS NOTE IS REQUIRED TO BE
MADE DIRECTLY TO THE REGISTERED HOLDER HEREOF WITHOUT NOTATION HEREON. IT CANNOT
BE DETERMINED FROM THE FACE OF THIS NOTE WHETHER ALL OR ANY PART OF THE
PRINCIPAL OF OR INTEREST ON THIS NOTE HAS BEEN PAID.
LIFE CRITICAL CARE CORPORATION (the "Company"), a Delaware corporation,
for value received, promises to pay to the registered holder of this note (the
"Holder") by December 31, 1997 (or earlier as herein referred to), the amounts
specified on the Loan Schedule which is attached to this note and made a part
hereof. The Holder may make additional cash advances (hereinafter referred to as
"loans") to the Company, from time to time, pursuant to the terms and conditions
of that certain Loan and Securities Purchase Agreement of even date herewith,
which shall be covered by this note and recorded on the Loan Schedule.
The interest hereon shall be payable at the annual rate of Eighteen
Percent (18%) per annum (the "Rate") for each day from the date of this note
until the date the principal amount of this note is paid in full. The first
interest payment shall be due on December 31, 1995, and thereafter on the last
day of each of March, June, September and December, or the next succeeding
business day. The accrued interest on the unpaid principal balance evidenced by
the Loan Schedule shall also be covered by this note and shall be recorded on
the Loan Schedule.
The total outstanding principal, together with accrued interest
thereon, shall be payable on December 31, 1997.
Principal of and interest on this note shall be paid to the registered
Holder hereof by check mailed by the Company to the address of the Holder as it
appears on the Note Register and at the end of this note without the necessity
of surrendering or presenting this note, and all such payments shall fully
discharge the obligation of the Company hereunder to the extent made and shall
be recorded on the Loan Schedule. The Company and the Holder hereof may make
provision for the payment of principal and interest by such other method as may
be mutually agreed upon in writing.
<PAGE>
The Company shall pay to the Holder of this note a late charge at the
option of the Holder equal to two percent (2%) of any payment of principal or
interest due if such payment is not received by the registered owner within
fifteen (15) days after such payment is due. Whether or not a late charge is
imposed, interest on principal or interest due but unpaid shall accrue from the
date on which such payment of principal or interest is due at the Rate.
At the option of the Company and upon notice to the Holder at its
address as it appears on the Note Register and at the end of this note, except
as otherwise provided herein, this note may be redeemed by the Company in part
or in whole, less any partial payments previously made by the Company, if any,
at any time or from time to time. In the event the Company redeems only part of
the note, any amount paid to the Holder shall be applied, first, to accrued but
unpaid interest, and second, the then outstanding principal amount. In the event
the Company redeems the entire note, the redemption price shall be equal to the
outstanding principal of the note plus accrued and unpaid interest to the date
of the redemption. Except for a redemption in connection with an initial public
offering by the Company as to which this redemption notice is hereby waived, any
such redemption shall be made upon at least thirty (30) days' but not more than
sixty (60) days' prior notice to the Holder at the address of the Holder as it
appears on the Note Register and at the end of this note. On the date designated
for redemption of the whole note, the note so called for redemption shall become
and be due and payable at the above redemption price, the interest on such notes
shall cease to accrue, and the Holder hereof shall have no rights in respect of
this note except to receive payment of the redemption price hereof. The Company
shall be obligated to redeem this Note simultaneously with its closing on an
initial public offering by the Company of any of its securities.
This note shall be registered by the Company upon the initial delivery
hereof, in the name of the initial purchaser, by endorsement in the space
provided at the end hereof and on the books to be kept for that purpose by the
Company and, thereafter, this note shall be transferable only by successive
endorsements to successive registered holders. Payment of this note and the
interest hereon shall be made only to the registered Holder hereof on the date
such payment is due. The Company may deem and treat the person in whose name
this note is registered as the absolute owner hereof for all purposes and the
Company shall not be affected by any notice to the contrary.
The rights of the Holder to the principal sum or any sum or part
thereof, and the interest due thereon, are and shall remain subject and
subordinate to (a) the prior payment of any and all other indebtedness
(including the principal of and interest on any such indebtedness) constituting
existing or future obligations of the Company for money borrowed from any bank,
trust company, insurance company, or other institutional lender and (b) the
claims of all secured trade and contract creditors of the Company; and upon
dissolution or liquidation of the Company no payment shall be due or payable
-2-
<PAGE>
upon this note until all of the obligations described in this paragraph shall
have been paid in full. The Holder hereby agrees (i) to amend this section of
the note if required to do so by any third-party lender to the Company and (ii)
to execute any and all documents necessary to accomplish such an amendment.
No covenant or agreement contained in this note shall be deemed to be a
covenant or agreement of any past, present or future incorporator, officer,
director or shareholder of the Company or of any predecessor or successor
corporation in his or her individual capacity and no incorporator, officer,
director or shareholder of the Company shall be liable personally on this note
or be subject to any personal liability or accountability by reason of the
issuance of this note, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released.
The Company hereby stipulates and warrants that the loan evidenced
hereby is a commercial loan and that all of the proceeds of such loan will be
used solely to acquire or carry on a business or commercial enterprise.
IN WITNESS WHEREOF, the corporate seal of the Company is hereto affixed
and these presents duly signed by the duly authorized officers of the Company as
of the day and year first above written.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By: ______________________________(SEAL)
Richard M. Andzel, Assistant Secretary Amy E. Parker, Vice President
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE (FEDERAL) SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES ACT OF ANY
STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION
STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.
REGISTERED HOLDER: ADDRESS:
Morgenthau Bridge Loan LLC 504 Cathedral Street
Baltimore, Maryland 21202
-3-
<PAGE>
LOAN SCHEDULE
The Subordinated Note to which this Loan Schedule is attached evidences
loans made by the Holder to the Company, in the principal amounts and on the
dates set forth below, subject to prepayments of principal set forth below:
<TABLE>
<CAPTION>
================== --------------- --------------- ---------------- --------------- --------------- ================
LOAN AMOUNT PRINCIPAL UNPAID INTEREST INTEREST NOTATION
DATE PAID PRINCIPAL ACCRUED PAID MADE BY
BALANCE
================== --------------- --------------- ---------------- --------------- --------------- ================
<S> <C>
12/02/95 $ 15,000
================== --------------- --------------- ---------------- --------------- --------------- ================
12/19/95 $ 85,000
================== --------------- --------------- ---------------- --------------- --------------- ================
12/27/95 $ 25,000
================== --------------- --------------- ---------------- --------------- --------------- ================
01/17/96 $ 50,000
================== --------------- --------------- ---------------- --------------- --------------- ================
01/22/96 $100,000
================== --------------- --------------- ---------------- --------------- --------------- ================
01/29/96 $ 65,000
================== --------------- --------------- ---------------- --------------- --------------- ================
01/31/96 $ 35,000
================== --------------- --------------- ---------------- --------------- --------------- ================
02/13/96 $ 50,000
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== --------------- --------------- ---------------- --------------- --------------- ================
================== =============== =============== ================ =============== =============== ================
================== =============== =============== ================ =============== =============== ================
</TABLE>
-4-
<PAGE>
EXHIBIT B
WARRANTS
Attached hereto is the form of Warrant to be issued to the Purchaser by
the Company as a condition precedent to the Purchaser's commitment to make the
Loan in the aggregate amount of $750,000 to the Company.
The Company hereby agrees to issue Warrants to the Purchaser to
purchase 107,000 shares of the Company's common stock (the "Warrant Shares").
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH
MAY BE PURCHASED BY EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES ACT OF ANY
STATE. THE WARRANTS ARE BEING OFFERED PURSUANT TO A CLAIM OF EXEMPTION FROM
REGISTRATION CONTAINED IN SECTION 4(2) OF THE SECURITIES ACT AND EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF APPLICABLE STATES, AND MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE REGISTRATIONS UNDER SUCH ACTS OR IN
A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS.
LIFE CRITICAL CARE CORPORATION
A DELAWARE CORPORATION
FORM OF DETACHABLE STOCK WARRANT
TO PURCHASE CAPITAL STOCK OF THE COMPANY
Certificate No.: 1 No. of Warrants: 107,000
FOR VALUE RECEIVED, LIFE CRITICAL CARE CORPORATION, a Delaware
corporation (the "Corporation"), grants the following rights to Morgenthau
Bridge Loan LLC, its successors and assigns (the "Holder").
The Warrants represented hereby are part of a duly authorized issue of
214,000 Warrants delivered pursuant to certain loan and securities purchase
agreements between the Corporation and certain others including pursuant to that
certain Loan and Securities Purchase Agreement dated August 12, 1995, by and
between the Corporation and the Holder (the "Securities Purchase Agreement").
Capitalized terms used herein without definition shall have the meaning set
forth in the Securities Purchase Agreement.
The Holder is entitled, in accordance with the terms and conditions of
this Certificate, until the expiration of the Exercise Period, to purchase
voting common Capital Stock of the Corporation, par value $0.01, from the
Corporation at the Exercise Price shown below, upon delivery of this Certificate
to the Corporation with the subscription form attached hereto duly executed and
upon payment of the Exercise Price for the shares purchased.
EXERCISE PRICE: The exercise price per share (the "Exercise Price") shall be Ten
Cents ($0.10), subject to adjustment as provided for in Section 4(d) hereof.
<PAGE>
CONDITION TO EXERCISE: The Warrants hereunder may not be exercised so long as
the Holder shall timely and fully receive all interest, principal and other
amounts, if any, due and payable under the Note.
EXERCISE PERIOD: The Warrants represented hereby shall be exercisable commencing
on March 15, 1996 and shall expire at 5:00 p.m. on the later of December 31,
1998, or two (2) years from the date on which all sums due under the Note are
paid in full (the "Exercise Period").
NUMBER AND CLASS OF SHARES PURCHASABLE: The Holder is entitled to purchase one
(1) share of fully paid and non-assessable voting common Capital Stock of the
Company subject to adjustment from time to time as specified in this Certificate
for each Warrant represented by this Certificate.
SECTION 1. CORPORATION'S COVENANTS AS TO CAPITAL STOCK. Capital Stock
deliverable on the exercise of the Warrants represented hereby shall, at
delivery, be fully paid and non-assessable, free from taxes, liens and charges
with respect to their purchase. The Corporation shall take any necessary steps
(including, but not limited to, amending the Corporation's charter) to assure
that the number and par value of shares authorized by the Corporation's charter
are sufficient to satisfy the conversion and purchase rights of outstanding
convertible securities, options and warrants, and shall at all times reserve and
hold available sufficient shares of Capital Stock to satisfy all conversion and
purchase rights of all outstanding convertible securities, options and warrants.
SECTION 2. CORPORATION'S REPRESENTATIONS AND WARRANTIES AS TO CAPITAL
STOCK. The Corporation represents and warrants to the Holder as of the date
hereof that ___________ shares of the common Capital Stock of the Corporation
are issued and outstanding, and no shares of any other class of stock of the
Corporation or securities convertible at any time into shares of any class of
stock of the Corporation are authorized.
SECTION 3. METHOD OF EXERCISE. The purchase rights represented by these
Warrants are exercisable at the option of the Holder at any time during the
Exercise Period, upon the delivery of this Certificate to the Corporation with
its subscription form duly executed and upon payment of the Exercise Price.
These Warrants shall be deemed to have been exercised, and the Holder shall be
deemed to have become a stockholder of record of the Corporation for the
purposes of receiving dividends and for all other purposes whatsoever, as of the
date of surrender of this Certificate accompanied by payment of the Exercise
Price. If this Certificate is exercised in respect of less than all of the
Warrants represented hereby, the Holder shall be entitled to receive a new
certificate of like tenor and date for the number of Warrants which shall not
have been exercised.
-2-
<PAGE>
SECTION 4. ADJUSTMENT OF SHARES PURCHASABLE. In case prior to
the expiration of these Warrants by exercise or by the terms of this
Certificate:
(a) The Corporation shall be recapitalized through the subdivision of
its outstanding shares of Capital Stock into a greater number of shares, or
shall by exchange or substitution of or for its outstanding Capital Stock or
otherwise, reduce the number of such shares, then in each such case the number
of shares deliverable upon the exercise of these Warrants and the Exercise
Price, as provided in Section 4(d), shall be changed in the same proportion as
such increase or decrease of the outstanding shares of such Capital Stock of the
Corporation.
(b) A dividend shall be declared or paid at any time on the Capital
Stock of the Corporation in its Capital Stock or in securities convertible into
Capital Stock of the Corporation, then in each such case, as a condition to such
dividend, the number of shares deliverable upon the exercise thereafter of these
Warrants, shall, without requiring any payment by the Holder in addition to the
payment per Warrant specified on the face hereof, be increased in proportion to
the increase, through such dividend, in the number of outstanding shares of
Capital Stock of the Corporation and such additional shares of Capital Stock
shall be available to enable the Holder to fully exercise its rights to acquire
Capital Stock under these Warrants. In the computation of the increased number
of shares deliverable upon the exercise of these Warrants, any dividend paid or
distributed upon the Capital Stock in securities convertible into shares of
Capital Stock, shall be treated as a dividend paid in Capital Stock to the
extent that shares of stock are issuable upon the conversion thereof. The
obligations of the Corporation and the rights of the Holder shall not be
affected by the exercise of any conversion privileges heretofore granted to the
holders of any of the Capital Stock or securities of the Corporation or of any
other corporation.
(c) The Corporation shall be recapitalized by reclassifying its
outstanding Capital Stock without par value into stock with par value, or
changing Capital Stock of par value to stock without par value, or the
Corporation or a successor corporation shall consolidate or merge with, or
convey all, or substantially all, of its or any successor corporation's property
or assets to, any other corporation or corporations (any such corporation being
included within the meaning "successor corporation" hereinbefore used in the
event of any consolidation or merger of such corporation with, or the sale of,
all or substantially all of the property of such corporation to another
corporation or corporations) then, as a condition to such recapitalization,
consolidation, merger, or conveyance, lawful and adequate provision shall be
made whereby the Holder shall thereafter have the right to purchase, upon the
basis and upon the terms and conditions specified in this Certificate, in lieu
of the shares of Capital Stock of the Corporation theretofore purchasable upon
the
-3-
<PAGE>
exercise of these Warrants, such shares of stock, securities, or assets as may
be issued or payable with respect to, or in exchange for, the number of
shares of Capital Stock of the Corporation theretofore purchasable upon the
exercise of these Warrants had such recapitalization, consolidation, merger, or
conveyance not taken place; and in any such event the rights of the Holder to an
adjustment of the number of shares of Capital Stock purchasable upon the
exercise of these Warrants as herein provided and of the Exercise Price as
provided for in Section 4(d) hereof, shall continue and be preserved in respect
of any stock which the Holder becomes entitled to purchase. It shall be a
condition of such consolidation, merger, or conveyance that each successor
corporation shall assume in manner and form reasonably satisfactory to the
Holder the obligation to deliver to the Holder, upon the exercise of these
Warrants, such shares of Capital Stock, securities, or assets as, in accordance
with the provisions of this Certificate shall have been provided for the
purpose.
(d) In the event the number of shares per Warrant purchasable hereunder
is adjusted pursuant to Section 4(a)-(c), above, the Exercise Price shall be
adjusted so that it is equal to the Exercise Price in effect prior to such
adjustment multiplied by a fraction, the numerator of which is the number of
shares per Warrant purchasable hereunder prior to the adjustment called for
Section 4(a)-(c), and the denominator of which is the number of shares per
Warrant purchasable hereunder after the adjustment called for in Section
4(a)-(c).
Upon each increase of the number of shares of Capital Stock of
the Corporation deliverable upon the exercise of these Warrants, or in the event
of changes in the rights of the Holder by reason of other events hereinbefore
set forth, then in each such case the Corporation shall forthwith deliver to the
Holder a certificate executed by its president or one of its vice presidents,
and attested by its secretary or one of its assistant secretaries, stating the
increased number of shares so deliverable or specifying the other shares of
Capital Stock, securities or assets, and the amount thereof so deliverable and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
Upon each increase of the number of shares of Capital Stock of
the Corporation deliverable upon the exercise of these Warrants, the increased
number of shares so deliverable shall be only a round sum obtained by rounding
up to the nearest integer any fractions resulting from the calculation of the
increased number of shares to be delivered. No fractions of shares shall be
issued upon the exercise of these Warrants.
-4-
<PAGE>
SECTION 5. SPECIAL RIGHTS OF THE HOLDER.
5.1. If any dissolution, liquidation or winding up of the Corporation
shall be proposed, then the Corporation shall cause at least thirty (30) days'
prior written notice to be mailed, by certified or registered mail, return
receipt requested, to the Holder at its address as it appears on the books of
the Corporation. Such notice shall specify the date as of which holders of
record of Capital Stock shall participate in distribution rights upon such
dissolution, liquidation, or winding up, as the case may be, to the end that,
during such period of thirty days, the Holder may exercise these Warrants in
whole or in part, and be entitled in respect of the shares of Capital Stock so
purchased to all the rights of the other holders of Capital Stock of the
Corporation.
5.2. Whenever the Corporation proposes to file a registration statement
for the registration of any of its securities under the Securities Act of 1933,
or any other federal or state securities laws or regulations, at least thirty
(30) days prior to filing such registration statement the Corporation shall give
written notice of such proposed filing to the Holder as set forth in the
Securities Purchase Agreement.
SECTION 6. EXCHANGE FOR OTHER DENOMINATIONS. This Certificate is
exchangeable for new certificates of like tenor and date representing in the
aggregate the right to purchase the number of shares purchasable hereunder in
denominations designated by the Holder at the time of surrender.
SECTION 7. DUE EXECUTION, ISSUANCE AND DELIVERY OF CERTIFICATE AND
CAPITAL STOCK. The Corporation covenants that the issuance of this Certificate
shall constitute full authority to those of its officers who are charged with
the duty of issuing stock certificates to promptly execute, issue and deliver to
the Holder the necessary certificate for shares of Capital Stock or other
securities of the Corporation required by the exercise of the Warrants
represented hereby.
SECTION 8. TRANSFER. These Warrants shall be registered on the books of
the Corporation, which shall be kept by it at its principal office for that
purpose. Subject to the restrictions upon assignment and transfer set forth in
the Securities Purchase Agreement, these Warrants shall be transferable on said
books by the Holder in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. The Corporation agrees that, while these
Warrants shall remain valid and outstanding, its stock transfer books shall not
be closed for any purpose whatsoever except under arrangements which shall
insure to persons exercising warrants or applying for transfer of stock all
rights and privileges which they might have had or received if the stock
transfer books had not been closed and they had exercised their Warrants at any
time during which such transfer book shall have been closed.
-5-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed, ensealed and delivered on its behalf this ____ day of
_____________, 199__.
ATTEST: LIFE CRITICAL CARE CORPORATION
______________________________ By:______________________________(SEAL)
____________________, Secretary _______________________, President
-6-
<PAGE>
ASSIGNMENT OF STOCK PURCHASE WARRANT
_______________________, 19___
For value received, the undersigned hereby assigns to
_______________ all the rights and interests represented by the attached
Certificate and hereby irrevocably constitutes and appoints
_______________ attorney to transfer the same on the books of Life
Critical Care Corporation with full power of substitution in the premises.
Witness:___________________________ By:________________________________
Name:______________________________
Title:_____________________________
-7-
<PAGE>
EXERCISE OF OPTION TO PURCHASE
PURSUANT TO ATTACHED STOCK PURCHASE AGREEMENT
______________________, 19_____
TO: ____________________________________
The undersigned, the Holder of record of the attached Certificate of
Life Critical Care Corporation, hereby exercises the option granted by the
Warrants evidenced by the attached Certificate to purchase upon the terms set
forth in such Certificate ______ shares of Capital Stock of Life Critical Care
Corporation and hereby makes payment of the Exercise Price set forth on the face
of the Certificate.
Witness:___________________________ By:_______________________________
Name:_____________________________
Title:____________________________
-8-
<PAGE>
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment")
made as of the 15th day of March, 1996, by and among Blue Water Medical Supply,
Inc., Blue Water Industrial Products, Inc. and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
January 22, 1996 (the "Agreement") and desire to amend the Agreement as set
forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.5(x) of the Agreement is hereby amended by adding the
following at the end of the existing Section 1.5(x): "Purchaser shall pay for
the unreimbursed portion of the purchase price of the Equipment by executing and
delivering to Medical Supply Purchaser's promissory note at Closing in an
original principal amount equal to the total unreimbursed payments, with the
note not bearing interest prior to default with the note bearing interest at an
annual rate of interest equal to 12% following any default, and with the
payments under the note being level payments over approximately the average term
of the remaining rental agreements/arrangements on the Equipment."
(b) New Section 1.5 (xi) is hereby added as follows: "(xi) If the
Closing shall not have been completed on or before the scheduled Closing Date,
Purchaser shall be entitled to extend the Closing Date for one (1) thirty
(30)-day extension of the Closing Date upon the payment of Fifty Thousand
Dollars ($50,000), payable on or prior to the original Closing Date (the
'Additional Deposit') in the same manner as the Deposit set forth in Section
1.5(i) hereof, which Additional Deposit shall be applied to the Purchase Price
at Closing or returned to the Purchaser if this Agreement is terminated solely
as a result of Section 7.2.4 or paid over to Seller if this Agreement is
terminated for any other reason. If this extension is exercised by Purchaser,
conforming changes shall automatically be made to any other affected Section of
this Agreement including without
<PAGE>
limitation Section 7.2.5 (by extending the date in the last line thereof to May
30, 1996) and Section 7.3 (by including within the amount of the 'Deposit'
referred to in the last line thereof the amount of the Additional Deposit)."
(c) Section 7.2.5 is hereby amended by correcting a typographical error
therein by deleting the year "1995" as it appears in item (ii) thereof and by
inserting in lieu thereof the year "1996".
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
BLUE WATER MEDICAL SUPPLY, INC.
By: ____________________________
Louis Campbell, President
BLUE WATER INDUSTRIAL PRODUCTS, INC.
By: ___________________________
Louis Campbell, President
LIFE CRITICAL CARE CORPORATION
By: __________________________
Amy E. Parker, Vice President
-2-
<PAGE>
SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this 2nd day of July, 1996 to be made effective as of the 30th day of
May, 1996, by and among Blue Water Medical Supply, Inc., Blue Water Industrial
Products, Inc. and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
January 22, 1996, as previously amended by a First Amendment to Asset Purchase
Agreement dated April 24, 1996 (collectively, the "Agreement") and desire to
amend the Agreement as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"April 30, 1996" as it appears in the fourth line thereof and by inserting in
lieu thereof the date "November 1, 1996."
(b) Section 1.5 (ii) of the Agreement is hereby amended by deleting the
existing Section 1.5(ii) and by inserting the following in lieu thereof:
"(ii) the balance of the Purchase Price shall be paid as
follows:
(a) Ninety Percent (90%) of the Purchase
Price, after being reduced by the Deposit, shall be paid by wire transfer
of immediately available funds to such bank account as shall be designated by
the Seller or by delivery of a cashier's check to the Seller at Closing; and
<PAGE>
(b) Ten Percent (10%) of the Purchase Price (the
"Purchase Price Balance") shall be paid by the issuance by Purchaser to
Seller of that number of shares of the common stock of Purchaser determined
by dividing the amount of the offering price per share of the Common Stock
into the Purchase Price Balance and multiplying the resulting number of
shares by 110% (e.g., if the Purchase Price Balance is $640,000 and the
offering price per share of Common Stock is $20.00 per share, the number of
shares would be 32,000 shares times 110% for a total of 35,200 shares) (the
"Common Stock"), or, if the IPO (as defined in Section 4.1.0 hereof) shall not
have been completed at Closing, in cash in lieu of the Common Stock.
(c) If as of the second anniversary of
Closing the "Fair Market Value" of the Common Stock (i.e., the average
closing prices of the Common Stock for the ten business days ending with the
second anniversary of Closing) has (i) declined by at least 15% but not more
than 45%, then Purchaser shall issue to Seller, and Seller shall be entitled
to, an increase in the number of shares of Common Stock comprising a portion of
the Purchase Price so that the Fair Market Value of the Common Stock and any
additional shares of Purchaser's common stock shall equal at such time 85% of
the fair market value of the Common Stock as of the date of Closing; (ii)
declined by more than 45%, then Purchaser shall issue to Seller, and Seller
shall be entitled to, an increase in the number of shares of Common Stock
comprising a portion of the Purchase Price equal to 30% of the fair market value
of the Common Stock as of the date of Closing; (iii) increased by at least 15%
but not more than 30%, then Seller shall transfer to Purchaser that number of
shares of the Common Stock with a Fair Market Value equal to the amount in
excess of 115% of the fair market value of the Common Stock as of the date of
Closing; and (iv) increased by more than 30%, then Seller shall transfer to
Purchaser that number of shares of the Common Stock with a Fair Market Value
equal to 15% of the fair market value of the Common Stock as of the date of
Closing. In lieu of the issuance or delivery of any shares of Common Stock
pursuant to the previous sentence, Purchaser may pay to Seller, or Seller may
pay to Purchaser, in their respective sole discretion, an amount in cash equal
to the Fair Market Value of the applicable shares of Common Stock, provided such
election is irrevocably made in writing by the payor within two (2) business
days of the second anniversary of the Closing. All payments or deliveries
pursuant to the previous two sentences shall be made within thirty (30) days
after the second anniversary of the Closing. For purposes of this subsection,
the Common Stock shall include all requisite adjustments for stock dividends,
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchange of shares. If any Common Stock issued at Closing is
sold or otherwise transferred by Seller prior to the second anniversary of the
Closing, this subsection shall be read to be adjusted to the revised number of
shares of Common Stock as of the date of Closing as reduced by any such sales or
transfers."
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<PAGE>
(c) New Section 1.5 (xii) is hereby added as follows: "(xii) The
Closing shall have been completed on or before November 1, 1996. In addition,
Purchaser hereby agrees that if, for any reason other than a material
misrepresentation by Seller or a material change in the business of either
Medical Supply or Industrial Products, it does not file with the Securities and
Exchange Commission its registration statement for an initial public offering on
or before August 15, 1996, then Seller shall be entitled to terminate this
Agreement and retain the Deposit (including the original Deposit and the
Additional Deposit). Conforming changes are hereby made to any other affected
Section of this Agreement, including without limitation Section 7.2.5 (by
extending the date in the last line thereof to November 1, 1996).
(d) Section 4.2.1.1 of the Agreement is hereby amended by deleting
existing Section 4.2.1.1 and by inserting in lieu thereof the following:
"4.2.1.1. The wire transfer or delivery of a cashier's
check in the amount of 90% of the Purchase Price, less the
amount of the Deposit, and the delivery of the Common
Stock."
(e) The last sentence of Section 5.2 is hereby deleted and the
following is hereby added at the end of Section 5.2: "Notwithstanding anything
to the contrary otherwise contained in this Agreement, Seller shall be entitled
to maintain their businesses in the ordinary course of business, including
hiring, firing, and giving raises, provided there is no material adverse effect
to either Medical Supply or Industrial Products and, further, provided, that
prompt notice of any such events or actions is provided to Purchaser.
(f) New Section 6.5 is hereby added as follows:
"SECTION 6.5. Lock-Up Agreements. Seller warrants that, if
required by the underwriter(s) for the IPO, it will enter into
any required "lock-up" agreement; provided, however, that
Seller will not be required to a lock-up of the Common Stock
for a period of time in excess of the shortest period of time
agreed to by any other principal stockholder of Purchaser."
(g) New Section 6.6 is hereby added as follows:
"SECTION 6.6. Registration Rights. Purchaser shall, at
closing, enter into a Registration Rights Agreement
pursuant to which Seller shall be granted certain
piggyback registration rights with respect to the Common
Stock."
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<PAGE>
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
BLUE WATER MEDICAL SUPPLY, INC.
By: ____________________________
Louis Campbell, President
BLUE WATER INDUSTRIAL PRODUCTS, INC.
By: ___________________________
Louis Campbell, President
LIFE CRITICAL CARE CORPORATION
By: __________________________
Amy E. Parker, Vice President
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<PAGE>
THIRD AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this ___ day of September, 1996 to be made effective as of the 15th day
of August, 1996, by and among Blue Water Medical Supply, Inc., Blue Water
Industrial Products, Inc. and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
January 22, 1996, as previously amended by a First Amendment to Asset Purchase
Agreement dated April 24, 1996, and as further amended by a Second Amendment to
Asset Purchase Agreement dated July 2, 1996 (collectively, the "Agreement") and
desire to amend the Agreement as set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"November 1, 1996" as it appears in the fourth line thereof and by inserting in
lieu thereof the date "December 31, 1996."
(b) Section 1.1 of the Agreement is hereby further amended by
adding the following at the end of existing Section 1.1:
"Closing will take place simultaneously with the closing
of the IPO (as defined in Section 4.1.0 hereof)."
(c) Section 1.5 (ii) of the Agreement is hereby amended by deleting the
existing Section 1.5(ii) and by inserting the following in lieu thereof:
"(ii) the balance of the Purchase Price shall be paid as
follows:
(a) Subject to the provisions of Section 1.5(ii)(b)
hereof, a portion of the Purchase Price shall be paid by the issuance
by Purchaser to Seller of 67,155 shares of the common stock of
Purchaser (the "Common Stock") which shall be valued at 90.91% of the
offering price per share in Purchaser's IPO (as defined in Section
4.1.0.1 hereof) (e.g., if the offering
<PAGE>
price per share in the IPO is $10.00, then the amount applied
against the Purchase Price shall be $610,500); and
(b) The balance of the Purchase Price, after being
reduced by the Deposit, shall be paid by wire transfer of immediately
available funds to such bank account as shall be designated by the
Seller or by delivery of a cashier's check to the Seller at Closing;
provided, however, that in no event shall the cash portion of the
Purchase Price (prior to being reduced by the Deposit) be less than
$5,494,000 and, if the offering price per share in the IPO is greater
than $10.00, the number of shares to be issued to Seller pursuant to
Section 1.5(ii)(a) hereof shall be reduced to that number of shares
equal to $610,500 divided by the IPO price per share, with the quotient
multiplied by 110% (i.e., if the IPO price per share equals $11.00, the
cash portion of the Purchase Price would be $5,494,000, reduced by the
Deposit, and the number of shares issued pursuant to Section 1.5(ii)(a)
hereof would be 61,050 shares). Any further adjustments to the Purchase
Price shall be post-Closing adjustments.
(d) Section 1.5 (xii) is hereby amended by deleting existing Section
1.5(xii) and by inserting the following in lieu thereof: "(xii) The Closing
shall have been completed on or before December 31, 1996. Conforming changes are
hereby made to any other affected Section of this Agreement, including without
limitation Section 7.2.5 (by extending the date in the last line thereof to
December 31, 1996)."
(e) Section 2.16 of the Agreement is hereby amended by adding the
following at the end of existing Section 2.16:
"Seller has no liabilities or obligations (whether absolute, accrued,
contingent or otherwise), except liabilities, obligations or
contingencies that are accrued or reserved against in the Statements or
that were incurred since the date of the Statements in the ordinary
course of business and would not reasonably likely have a material
adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), prospects or results of operations
of Seller."
(f) Section 4.2.1.1 of the Agreement is hereby amended by deleting
existing Section 4.2.1.1 and by inserting in lieu thereof the following:
"4.2.1.1. The wire transfer or delivery of a cashier's
check in the amount of the cash portion of the Purchase
Price, less the amount of the Deposit, and the delivery of
the Common Stock."
(g) New Section 5.6 is hereby added as follows:
"SECTION 5.6 Cooperation. Seller agrees reasonably to
cooperate with Purchaser in its IPO (as defined in Section
4.1.0 hereof)."
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<PAGE>
(h) Section 7.3 of the Agreement is hereby amended by
adding to the beginning of the second sentence thereof the following:
"Except for vehicle transfer taxes in Michigan which shall be paid by
Purchaser,".
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
BLUE WATER MEDICAL SUPPLY, INC.
By: ____________________________
Louis Campbell, President
BLUE WATER INDUSTRIAL PRODUCTS, INC.
By: ___________________________
Louis Campbell, President
LIFE CRITICAL CARE CORPORATION
By: __________________________
Amy E. Parker, Vice President
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Exhibit 10.3
ASSET PURCHASE AGREEMENT
between
BLUE WATER MEDICAL SUPPLY, INC.
and
BLUE WATER INDUSTRIAL PRODUCTS, INC.
(collectively, "Seller")
and
LIFE CRITICAL CARE CORPORATION
("Purchaser")
January 22, 1996
<PAGE>
TABLE OF CONTENTS
Page
RECITALS........................................................... 1
ARTICLE 1. PURCHASE AND SALE OF ASSETS............................ 1
SECTION 1.1 Closing Date.................................... 1
SECTION 1.2 Purchase and Sale of Assets..................... 1
SECTION 1.3 Excluded Assets................................. 2
SECTION 1.4 Purchase Price.................................. 2
SECTION 1.5 Payment of Purchase Price....................... 2
SECTION 1.6 Liabilities Assumed............................. 6
SECTION 1.7 Allocation of Purchase Price.................... 7
SECTION 1.8 Change and Use of Name.......................... 7
SECTION 1.9 Accounts Receivable............................. 7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER............... 7
SECTION 2.1 Organization and Qualification, Etc............. 7
SECTION 2.2 Authority Relative to Agreement................. 8
SECTION 2.3 No Breach; Consents............................. 8
SECTION 2.4 No Material Adverse Change...................... 8
SECTION 2.5 Title to Purchased Assets....................... 8
SECTION 2.6 Tax Matters..................................... 9
SECTION 2.7 Contracts and Commitments....................... 9
SECTION 2.8 Litigation, Etc................................. 11
SECTION 2.9 Brokerage....................................... 11
SECTION 2.10 Insurance....................................... 11
SECTION 2.11 Compliance with Laws............................ 11
SECTION 2.12 Employees....................................... 11
SECTION 2.13 Licenses and Permits............................ 11
SECTION 2.14 Business Records................................ 12
SECTION 2.15. Environmental Matters........................... 12
SECTION 2.16. Financial Statements............................ 12
SECTION 2.17. Material Misstatements or Omissions............. 12
SECTION 2.18. Effective Date of Warranties, Representations
and Covenants.............................. 13
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<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER............ 13
SECTION 3.1 Organization, Etc............................... 13
SECTION 3.2 Authority Relative to Agreement ................ 13
SECTION 3.3 No Breach; Consents............................. 13
SECTION 3.4 Litigation...................................... 14
SECTION 3.5 Compliance...................................... 14
SECTION 3.6 Brokerage....................................... 14
ARTICLE 4. CLOSING CONDITIONS..................................... 14
SECTION 4.1 Closing Conditions Relating to Purchaser........ 14
SECTION 4.2 Closing Conditions Relating to Seller........... 16
ARTICLE 5. PRE-CLOSING AGREEMENTS................................. 17
SECTION 5.1 Due Diligence................................... 17
SECTION 5.2 Operation of Business........................... 17
SECTION 5.3 Best Efforts.................................... 17
SECTION 5.4 Confidentiality................................. 17
SECTION 5.5 Public Announcements............................ 18
ARTICLE 6. POST-CLOSING AGREEMENTS................................ 18
SECTION 6.1 Indemnification by Seller ...................... 18
SECTION 6.2 Further Assurances.............................. 20
SECTION 6.3 Books and Records............................... 20
SECTION 6.4 Employees ...................................... 21
ARTICLE 7. MISCELLANEOUS.......................................... 21
SECTION 7.1 Survival ....................................... 21
SECTION 7.2 Termination .................................... 21
SECTION 7.3 Expenses ....................................... 22
SECTION 7.4 Amendments, Waivers and Remedies................ 22
SECTION 7.5 Notices ........................................ 23
SECTION 7.6 Assignment ..................................... 24
SECTION 7.7 Severability ................................... 24
SECTION 7.8 Complete Agreement ............................. 24
SECTION 7.9 No Third-Party Beneficiaries ................... 24
SECTION 7.10 Waiver of Bulk Sales Act ....................... 24
SECTION 7.11 Singular and Plural; Gender .................... 24
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<PAGE>
SECTION 7.12 Governing Law .................................. 24
SECTION 7.13 Counterparts ................................... 24
SECTION 7.14 Schedules....................................... 25
SECTION 7.15 Headings........................................ 25
SECTION 7.16 Further Documents............................... 25
SECTION 7.17 Arbitration..................................... 25
SECTION 7.18 Counsel......................................... 26
SECTION 7.19 No Offer........................................ 26
EXHIBITS AND SCHEDULES
Exhibit 1.2.......Bill of Sale and Assignment of Assets/Medical Supply
Exhibit 1.2.A.....Bill of Sale and Assignment of Assets/Industrial Products
Schedule 1.3......Excluded Assets
Schedule 1.6......Liabilities Assumed
Schedule 1.7......Allocation of Purchase Price/Medical Supply
Schedule 1.7.A....Allocation of Purchase Price/Industrial Products
Schedule 2.5.1....Liens
Schedule 2.7......Contracts and Commitments
Schedule 2.8 .....Litigation
Schedule 2.10.....Insurance
Schedule 2.13.....Licenses and Permits
Exhibit 4.1.1.2...Leases
Exhibit 4.1.1.3...Covenant Not to Compete
Exhibit 4.1.1.6...Opinion of Counsel for Seller
Exhibit 4.1.1.7...Articles of Transfer
Exhibit 4.2.1.2...Assignment and Assumption Agreement/Medical Supply
Exhibit 4.2.1.2.A.Assignment and Assumption Agreement/Industrial Products
Exhibit 4.2.1.4...Opinion of Counsel for Purchaser
Exhibit 6.2.......Indemnification Agreement
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 22nd day of January, 1996, by and between BLUE WATER MEDICAL SUPPLY,
INC., a Michigan corporation ("Medical Supply"), and BLUE WATER INDUSTRIAL
PRODUCTS, INC., a Michigan corporation ("Industrial Products") (Medical Supply
and Industrial Products are collectively referred to herein as "Seller"); and
LIFE CRITICAL CARE CORPORATION, a Delaware corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller is engaged in the businesses of providing home medical
equipment at facilities located at 37885 Green Street, New Baltimore, Michigan
48047, and of supplying industrial products at facilities located at 37280 Green
Street, New Baltimore, Michigan 48047 (collectively, the "Business"); and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all of the assets and properties of Seller, including the goodwill
and all assets used in or necessary for the operation of the Business, on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the promises,
agreements, representations and warranties hereinafter set forth, Seller and
Purchaser hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
SECTION 1.1. Closing Date. Subject to the terms and conditions hereof,
the consummation of the transactions described herein (the "Closing") will take
place at 10:00 a.m., within five (5) business days after the initial public
offering by Purchaser as described in Section 4.1.0 hereof, but in no event
later than April 30, 1996, at the offices of Sullivan, Ward, Bone, Tyler &
Asher, P.C., 1000 Maccabees Center, 25800 Northwestern Highway, Southfield,
Michigan 48075-1000, or at such other location as Purchaser may reasonably
determine, or at such other time and date as the parties mutually may determine
(the "Closing Date").
SECTION 1.2. Purchase and Sale of Assets. Subject to Section 1.3, at
the Closing, Seller (as used herein, Seller refers to each of the corporations
comprising Seller, as applicable, and Seller refers to each of such
corporations, jointly and severally, as applicable) will sell, convey, transfer
and deliver to Purchaser, and Purchaser will
<PAGE>
purchase and receive from Seller, all of the assets, rights, and tangible and
intangible property of Seller owned by Seller and used in the Business on the
Closing Date (all of the assets described in this Section 1.2 are
collectively referred to as the "Purchased Assets"). Subject to Section 1.3,
the Purchased Assets shall include all property and assets owned by Seller
and used in the Business, of every kind and description, wherever located,
including all property, tangible or intangible, real, personal or mixed,
inventory, accounts receivable, equipment, improvements, fixtures,
deposits on contractual obligations or otherwise, Seller's right to use
the names "Blue Water Medical Supply" and "Blue Water Industrial Products",
any derivatives or combinations thereof, and all books and records of Seller
relating to the Business, including without limitation trade secret rights in
any information, computer hardware and software, and all trade titles,
marketing materials and direct mail systems developed to promote the
Business, and all customer lists (past, present and prospective), all as the
same shall exist on the Closing Date, including, without limitation, the assets
and property listed or described in the Bills of Sale and Assignments of Assets
(the "Bills of Sale") attached hereto as Exhibit 1.2. and Exhibit 1.2.A.
SECTION 1.3. Excluded Assets. The Purchased Assets shall not
include those assets of Seller, if any, listed or described on Schedule 1.3
attached hereto.
SECTION 1.4. Purchase Price. Subject to the provisions and adjustments
set forth in Section 1.5 hereof, the purchase price (the "Purchase Price") for
the Purchased Assets, and for the benefits and rights conferred upon Purchaser
hereunder, shall be (i) for the Purchased Assets of Medical Supply, an amount
equal to five million five hundred thousand dollars ($5,500,000) and (ii) for
the Purchased Assets of Industrial Products, an amount equal to four (4) times
the Adjusted EBITDA (as defined in Section 1.5(iv) hereof, with "Industrial
Products" replacing "Medical Supply" as such latter term is used in such
definition) of Industrial Products for the twelve-month period ending November
30, 1995.
SECTION 1.5. Payment of Purchase Price. Purchaser shall pay to
Medical Supply, on its own behalf and as agent for Industrial Products, an
amount equal to Seller's Estimate (as defined in this Section 1.5.) as
follows:
i) Fifty Thousand Dollars ($50,000) (the "Deposit")
shall be paid within ten (10) days following the
receipt by Purchaser of the Statements referred
to in Section 2.16 hereof provided that Seller has
furnished all information reasonably requested by
Purchaser on a timely basis and has cooperated
fully with Purchaser to move towards Closing. The
Deposit shall be deposited into a trust account
with Seller's counsel, Sullivan, Ward, Bone,
Tyler & Asher, P.C. The Deposit shall be
credited to the Purchase Price at Closing or
returned to Purchaser if this Agreement is
terminated pursuant to any of Section 7.2.1.,
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<PAGE>
7.2.2., 7.2.3. or 7.2.4. or paid over to Seller if
the Agreement is terminated by Seller solely as a
result of Section 7.2.5 hereof;
ii) The balance of the Seller's Estimate shall be paid
in cash or certified check or wire transfer at the
Seller's option at Closing;
iii) The Purchase Price for the Purchased Assets of
Medical Supply is conditioned upon the book value of
the Purchased Assets of Medical Supply (as
determined by Ernst & Young, LLP using industry
standards applicable to Medical Supply) being at
least equal to nine hundred thirty thousand
dollars ($930,000) as of the Closing Date and in
the event the book value of the Purchased Assets
on Medical Supply's books is less than $930,000 on
the Closing Date then either (a) the Purchase
Price for the Purchased Assets of Medical Supply
shall be adjusted downward by four dollars ($4.00)
for each dollar ($1.00) of the amount of shortfall,
if any, between $930,000 and the actual book value
of the Purchased Assets of Medical Supply on the
Closing Date or (b) Purchaser may elect to terminate
this Agreement;
iv) The Purchase Price for the Purchased Assets of
Medical Supply is further conditioned upon Medical
Supply's earnings before interest, taxes,
depreciation, amortization, profit sharing plan
contribution, compensation to employees who will
not be retained by Purchaser, rental expense over
and above that which would be charged to Purchaser by
Medical Supply's landlords pursuant to the Lease
Agreement included as Schedule 4.1.1.2 hereto,
excess officers' compensation and benefits not
required by replacement personnel, and adjustments
relating to items for periods prior to December 1,
1994, which existed as of December 31, 1994
("Adjusted EBITDA") for the twelve-month period
ending November 30, 1995 being at least equal to
one million dollars ($1,000,000) and in the event
Medical Supply's Adjusted EBITDA for the
twelve-month period ending November 30, 1995 is
less than $1,000,000 then the Purchase Price for
the Purchased Assets of Medical Supply shall be
further adjusted downward by four dollars ($4.00)
for each dollar ($1.00) of the amount of shortfall,
if any, between $1,000,000 and the actual Adjusted
EBITDA of Medical Supply for the twelve-month
period ending November 30, 1995;
v) The Purchase Price shall be decreased by the
amount, if any, of any debt of the Seller assumed
by Purchaser at Closing and set forth in Schedule 1.6
of this Agreement;
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<PAGE>
vi) Seller's Estimate of Purchase Price. No later
than fifteen (15) days prior to the Closing Date,
Seller shall provide Purchaser with an estimate (as
of the Closing Date) of the Purchase Price, as
adjusted pursuant to all of the provisions of
Section 1.4 and this Section 1.5, excluding the
Prorations (as such term is defined in Section
1.5(viii) hereof) ("Seller's Estimate"). Seller's
Estimate shall be accompanied by the certificate of
Seller's chief financial officer stating that
Seller's Estimate has been prepared in good faith
in accordance with the terms of this Agreement,
and by such accounting records, workpapers, and
other back-up material as shall be sufficient to
enable Purchaser to review and verify the
computation of Seller's Estimate. In addition to
Seller's Estimate, Seller shall, no later than
fifteen (15) days prior to the Closing Date, also
provide Purchaser with an estimate (as of the
Closing Date) of the Prorations, which shall be
paid by way of adjustment to the Purchase Price
(it being the intent hereof that the Purchase Price
shall consist of the purchase prices for the assets
of Medical Supply and Industrial Products, as
determined hereunder, as well as the net income
of Medical Supply and Industrial Products, as
determined hereunder as part of the Prorations,
and including income and expense adjustments
including for prepared items as of the Closing
Date). In addition, the parties shall, in mutual
good faith, use their respective best efforts
to further adjust, as necessary, the Purchase
Price at Closing from the Seller's Estimate;
vii) Post-Closing Adjustments. If, at any time during
the one hundred and eighty (180) day period
following the Closing Date, Purchaser or Seller,
respectively, believes that it is entitled to
receive a refund of any portion of the funds paid
at Closing because Seller's Estimate overestimated
any portion of the Purchase Price hereunder or Seller
believes that it is entitled to receive an additional
amount over and above the funds paid at Closing
because Seller's Estimate underestimated any
portion of the Purchase Price hereunder, as
applicable, Purchaser or Seller, as applicable,
shall submit a statement to Seller or Purchaser, as
applicable, that describes the proposed adjustment
to Seller's Estimate and the basis therefor in
reasonable detail. Seller or Purchaser, as
applicable, shall have the right to have its own
accountants review the proposed adjustment and all
underlying books and records. In the event Seller
or Purchaser,
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<PAGE>
as applicable, does not disapprove the proposed
adjustment within ten (10) business days after
receipt thereof, the matter shall be deemed to be
conclusively determined as submitted by Purchaser or
Seller, as applicable. In the event Seller or
Purchaser, as applicable, disapproves the proposed
adjustment in a writing delivered to and received
by Purchaser or Seller, as applicable, within ten
(10) days after receipt thereof, the matter shall
be referred to an independent certified public
accountant or public accounting firm (the "Auditor"),
selected mutually reasonably by Purchaser and
Seller, whose determination of the matter shall be
final and binding on the parties. Seller and
Purchaser shall cooperate fully with the Auditor
and shall use their respective best efforts in good
faith to enable the Auditor to resolve any dispute
within thirty (30) days after submission of the
matter to the Auditor. The fees and expenses of the
Auditor shall be paid solely by Purchaser; provided,
however, that in the event an aggregate adjustment
is made in favor of Purchaser by the Auditor in an
amount equal to at least $25,000, then the fees and
expenses of the Auditor shall be paid solely by
Seller. Any refund of any funds paid to Seller at
Closing and/or any payment due to Seller by
Purchaser as a result of any adjustment, as
applicable, shall be due and payable in full within
fifteen (15) days after the amount of such refund
and/or payment has been determined as set forth
herein;
viii) Apportionment of Income and Expense. Seller
shall be entitled to all income attributable
to, and shall be responsible for all expenses
arising out of, the Business (including both
Medical Supply and Industrial Products) for the
period ---- beginning on December 1, 1995 and
ending at 11:59 p.m. on the Closing Date and
Purchaser shall be entitled to all income
attributable to, and shall be responsible for all
expenses arising out of, the Business after 11:59
p.m. on the Closing Date (collectively, the
"Prorations"). All overlapping items of income and
expense shall be prorated or reimbursed, as the
case may be, as of 11:59 p.m. on the Closing Date
including the following: prepaid expenses;
liabilities customarily accrued; taxes and utility
charges; deposits and unearned prepayments
received by Seller in connection with any contract,
lease or other agreement assumed by Purchaser; and
all other items normally prorated in the sale of the
assets of a business;
ix) General Determination and Payment. Prorations shall
be made, insofar as feasible, at Closing and shall
be paid by way of adjustment to the Purchase
Price. As to Prorations that cannot be made at
Closing, Purchaser shall, within one hundred
twenty (120) days after the Closing Date,
determine all such Prorations and deliver a
statement of its determinations to Seller,
which statement shall set forth in reasonable
detail the basis for such determinations. Within
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ten (10) days thereafter, Purchaser shall pay to
Seller or Seller shall pay to Purchaser, as the
case may be, the net amount due. If Seller does not
concur with Purchaser's determinations, the
provisions of Section 1.5(vii) hereof shall apply
with "Prorations" to be used in place of "Seller's
Estimate" as to the interpretation and application
of such Section 1.5(vii) hereof; and
x) Rental Income. It is contemplated that it will be
necessary for Medical Supply to purchase certain
equipment in order for it to maintain new business
from and after December 1, 1995. This equipment will
include but may not be limited to Apnea Monitors,
Ventilators, and O-2 Concentrators (hereafter
referred to as "Equipment"). The Equipment will be
used in the ordinary course of the business of
Medical Supply and will be producing certain
additional revenue from and after December 1, 1995
(hereafter referred to as "Rental Income").
In the event that Medical Supply acquires Equipment
after December 1, 1995, the Purchaser hereby agrees
to reimburse Medical Supply for the purchase of the
Equipment. Purchaser shall reimburse Medical Supply
that amount which equals the difference between the
purchase price and the Rental Income paid as of the
Closing Date.
For example:
<TABLE>
<S> <C>
Purchase Price of Equipment: $1,500.00
Purchase Date: December 1
Closing Date: February 1
Rental Income: $300.00 x 2 mos. = $600.00
</TABLE>
Purchaser would reimburse Medical Supply at the
Closing Date $900.00 for that individual piece
of equipment.
SECTION 1.6. Liabilities Assumed. Purchaser shall assume all
liabilities relating to the Purchased Assets and the operation of the Business
arising after the Closing Date and shall hold Seller harmless from, and
indemnify Seller against, any liabilities relating to the Purchased Assets and
the operation of the Business arising after the Closing Date. Purchaser shall
assume no debts, obligations, contracts, leases or liabilities of Seller, except
as expressly set forth in Schedule 1.6 of this Agreement, and Seller shall hold
Purchaser harmless from, and indemnify Purchaser against, any debt, obligation,
contract, lease or liability not expressly assumed by Purchaser hereunder.
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SECTION 1.7. Allocation of Purchase Price. After due
negotiation, the parties agree that the consideration described in
Section 1.4 shall be allocated among the Purchased Assets in the manner set
forth in Schedule 1.7. as to Medical Supply and Schedule 1.7.A. as to Industrial
Products.
SECTION 1.8. Change and Use of Name. Concurrently with the Closing,
Seller shall take all actions required to enable Purchaser to use the names Blue
Water Medical Supply and Blue Water Industrial Products and any derivatives or
combinations thereof that it may elect, including assisting Purchaser in
Purchaser's filing of assumed name certificates, and Seller shall make no
further use of such names.
SECTION 1.9. Accounts Receivable. A list of Accounts Receivable (i.e.,
any right to payment for goods sold or leased or for services rendered whether
or not they have been earned by performance) of Seller which shall include the
names and addresses of the customer from whom the Account Receivable is owing
and the age and respective amount of each such Account Receivable shall be
provided by Seller to Purchaser at Closing (the "Accounts Receivable List") and
such Accounts Receivable shall be assigned by Seller to Purchaser at Closing as
part of the Purchased Assets.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLER
As a material inducement to Purchaser to enter into and perform its
obligations under this Agreement, Seller jointly and severally hereby represents
and warrants to Purchaser as follows:
SECTION 2.1. Organization and Qualification, Etc. Each Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Michigan, and has the corporate power to own, lease or
operate all of its properties and assets and to carry on the Business as and
where it is now being conducted. Copies of each of Seller's Articles of
Incorporation and By-Laws, previously delivered to Purchaser and certified by
the Secretary of each Seller, are true, correct and complete copies of such
documents and will not be amended prior to the Closing Date without the prior
written consent of Purchaser.
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SECTION 2.2. Authority Relative to Agreement. Each Seller has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each Seller and the consummation of the transactions
contemplated on its part have been authorized by its Board of Directors and
stockholders. No other corporate proceedings on the part of either Seller are
necessary to authorize the execution and delivery of this Agreement by it or the
consummation by it of the transactions contemplated on its part hereby. This
Agreement has been duly executed and delivered by each Seller and is a valid and
binding agreement of each Seller, enforceable in accordance with its terms,
except as the enforceability may be affected by bankruptcy, insolvency,
reorganization or other similar laws presently or hereafter in effect affecting
the enforcement of creditors' rights generally.
SECTION 2.3. No Breach; Consents. The negotiation, execution, delivery
and performance of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, (a) do not and will not conflict with or
result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of any lien, security interest,
charge, encumbrance or other restriction upon the Purchased Assets under, or
require any authorization, consent, approval, exemption or other action by or
notice to any third party, under the provisions of the Charter or By-Laws of
either Seller or any license, permit, contract, franchise, indenture, mortgage,
lease, loan agreement or other agreement (oral or written) or instrument to
which either Seller is a party or under which its properties are bound, and (b)
do not require any authorization, consent, approval, exemption or other action
by or notice to any court or governmental body under any law, statute, rule,
regulation or decree to which either Seller is subject.
SECTION 2.4. No Material Adverse Change. Since June 30, 1995, there has
been no material adverse change in the financial condition, properties, assets,
business or prospects of Seller, including the Purchased Assets.
SECTION 2.5. Title to Purchased Assets.
2.5.1. Seller owns, or will at Closing own, good and
marketable title, free and clear of all liens and encumbrances, to all of the
Purchased Assets, except as set forth in Schedule 2.5.1, which Purchased Assets
include substantially all of the tangible and intangible personal property owned
by Seller and used or usable in connection with the Business, and on the Closing
Date and upon conveyance, assignment and delivery to Purchaser as provided
herein, Purchaser shall have (subject to compliance with applicable
registration, filing and recording requirements) good and marketable title, or
valid, binding and enforceable rights as contracting party or licensee, as the
case may be, to all the assets purchased by Purchaser hereunder.
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<PAGE>
2.5.2. To the best of its knowledge, Seller is not in
violation of any applicable zoning ordinance or other law, regulation or
requirement relating to the operation of owned or leased properties and Seller
has not received any notice of any such violations within the three years prior
to the date hereof.
2.5.3. Seller leases, licenses or owns all of the properties
and assets used in the Business.
SECTION 2.6. Tax Matters. All tax returns and related information
required to be filed by or on behalf of Seller prior to the date hereof have
been prepared and filed in accordance with applicable law, and all taxes,
interest, penalties, assessments or deficiencies that have become due pursuant
to such returns or any assessments or otherwise have been paid in full. All such
returns are true and correct in all material respects. To the best of Seller's
knowledge, there is no unresolved claim concerning Seller's federal, state and
local tax liabilities.
SECTION 2.7. Contracts and Commitments.
2.7.1. Attached hereto as Schedule 2.7 is a separate
schedule containing an accurate and complete list of:
(i) any contract, agreement, purchase order or other
commitment for the purchase or sale by Seller of goods, property or
services together with all amendments, waivers or other changes
thereto.;
(ii) any pension, profit sharing, stock option, employee stock
purchase or other plan providing for deferred compensation or other
employee benefit plan, or any contract with any labor union;
(iii) any agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of Seller;
(iv) any lease or agreement under which it is lessee of or
holds or operates any property, real or personal, owned by any other
party, except for any lease of personal property under which the
aggregate annual rental payments do not exceed $1,000;
(v) any lease or agreement under which it is lessor of
or permits any third party to hold or operate any property, real or
personal, owned or controlled by it;
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(vi) all agreements providing for the services of an
independent contractor to which Seller is a party or by which it is
bound;
(vii) as of a date no earlier than November 30, 1995 all of
Seller's Accounts Receivables as previously referred to in Section 1.9
together with detailed information as to each such listed receivable
which has been outstanding more than thirty (30) days;
(viii) any and all other or additional contracts, commitments,
agreements, arrangements, writings, guarantees, leases and licenses to
which Seller is a party or by which Seller or any of its property is
bound.
Each of the contracts, agreements, leases, licenses and commitments
required to be listed on Schedule 2.7 (the "Contracts") is valid and binding,
enforceable in accordance with its respective terms, in full force and effect
and, except as otherwise specified in Schedule 2.7, validly assignable to
Purchaser without the consent, approval or act of, or the making of any filing
with, any other person so that, after the assignment thereof to Purchaser
pursuant hereto, Purchaser will be entitled to the full benefits thereof. True
and complete copies of all of the Contracts (together with any and all
amendments thereto) have been delivered to Purchaser and initialed by Seller's
Secretary and identified with a reference to this Section of this Agreement. To
the best of its knowledge, Seller has performed all obligations required to be
performed by it and is not in default under or in breach of or in receipt of any
claim of default or breach under any of the Contracts and no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance under any such Contract; Seller has no
knowledge of any breach or anticipated breach by the other parties to any such
Contract; and, to the best of its knowledge, Seller is not a party to any
Contract for the purchase of goods or services at a rate currently above market
prices.
2.7.2. (i) Seller has performed in all material respects all
obligations required to be performed by it and is not in default under or in
breach of nor in receipt of any claim of default or breach under any agreement
referred to in Section 2.7.1, (ii) no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach or
event of noncompliance under any such agreement, and (iii) Seller does not have
any knowledge of any breach or anticipated breach by any other party to such
agreements.
2.7.3 Purchaser has been heretofore supplied with a true and
correct copy of each of the written contracts which are referred to in Section
2.7.1, together with all amendments, waivers or other changes thereto.
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SECTION 2.8. Litigation, Etc. Other than as set forth in Exhibit 2.8,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of Seller's knowledge, threatened, against Seller, or to
which Seller is a party, at law or in equity, or before or before or by any
court, tribunal, governmental department, commission, board, bureau, agency or
instrumentality, or any arbitration proceedings pending under collective
bargaining agreements or otherwise. To the knowledge of Seller, there is no
proposed law, rule, regulation, ordinance, order, judgment, decree or award that
would be applicable to Seller that would reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), of the
business, assets, liabilities, capitalization, financial position, results of
operations or prospects of Seller.
SECTION 2.9. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement (oral or
written) binding upon Seller or any stockholder of Seller. Purchaser hereby
acknowledges that Seller shall have no obligation for brokerage commissions,
finders' fees or similar compensation in connection with John Elliott's
introduction of the Seller to the Purchaser and that any amounts due to John
Elliott shall be the sole responsibility of Purchaser unless Seller shall have,
in writing, incurred any such obligation on its own behalf in which event Seller
shall be solely responsible for its obligations thereunder.
SECTION 2.10. Insurance. Schedule 2.10 contains an abstract or summary
of each outstanding insurance policy maintained by Seller. Seller has given to
Purchaser a copy of each such insurance policy maintained with respect to
Seller's properties, assets and the Business, and each such policy is in full
force and effect. Purchaser may assume such policies, at its election, at
Closing.
SECTION 2.11. Compliance with Laws. To its best knowledge, Seller has
complied with all laws, rules, regulations, ordinances, orders, judgments, and
decrees applicable to its business or properties, and is not in violation of any
law or any regulation or requirement which might have a material adverse effect
upon its financial condition, operating results or business prospects, and
Seller has not received notice of any such violation.
SECTION 2.12. Employees. To the best knowledge, information and belief
of Seller, Seller has complied with all laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes.
SECTION 2.13. Licenses and Permits. All permits, licenses and
franchises held by Seller, or by its officers, employees or agents, with respect
to the Business are listed on Schedule 2.13. Except as set forth on Schedule
2.13, such licenses, permits and franchises are freely transferable by Seller.
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SECTION 2.14. Business Records. Seller's personnel files, accounting
records, financial statements, operating statements and customer correspondence
files shall be made available to Purchaser promptly upon the execution of this
Agreement and are complete and correct in all material respects, and accurately
reflect Seller's business operations for a period of not less than three (3)
years.
SECTION 2.15. Environmental Matters. To the best of Seller's knowledge,
there is no condition, circumstance, or set of facts (including without
limitation the presence, either past or present, of any underground storage
tanks) that constitutes a significant hazard to health, safety, property, or the
environment relating to the Business or any real property owned or leased by
Seller for which the Business, Seller or the owner or operator of such real
property would be responsible.
SECTION 2.16. Financial Statements. Seller's financial statements and
notes thereto as at and for the fiscal years ended December 31, 1992, 1993 and
1994 and the ten month period ended October 31, 1995, consisting of balance
sheets and statements of income, changes in cash flow and changes in
stockholders' equity, are to be audited by the certified public accounting firm
of Ernst & Young LLP, independent certified public accountants, on or before
February 15, 1995. All such financial statements, copies of which will, upon
completion, be attached hereto as Exhibit 2.16 the "Statements"), will fairly
present the financial condition and results of the operations of Seller as at
the date indicated and for the period indicated, will have been prepared in
accordance with generally accepted accounting principles consistently applied,
will be in accordance with industry standards applicable to Seller, and will be
in accordance with the books and records of Seller, complete and correct in all
material respects. Time is of the essence in completing the audit and both
Seller and Purchaser agree to cooperate fully to expedite the audit process.
Seller shall provide Purchaser with Seller's internally-generated monthly
financial statements for the periods following June 30, 1995, as they become
available. Purchaser shall pay the auditors for the preparation of the
Statements provided that Seller pays its accountants to prepare the books and
records for audit.
SECTION 2.17. Material Misstatements or Omissions. Seller has not
knowingly made any material misstatements of fact or omitted to state any
material fact necessary or desirable to make complete, accurate, and not
misleading every representation, warranty, schedule, and agreement set forth,
described or referred to herein. Seller has disclosed to Purchaser all material
adverse facts relating to the condition or operation, whether past, present or
future, financial or otherwise, of the Purchased Assets and of the Business, and
shall disclose promptly to Purchaser, in writing, any material adverse facts
arising after the date hereof and prior to Closing.
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SECTION 2.18. Effective Date of Warranties, Representations and
Covenants. Each warranty, representation, and covenant set forth in this Article
2 shall be deemed to be made on and as of the date hereof and as of the Closing
Date (except as otherwise specifically provided herein). Prior to the Closing
Date, Seller will notify Purchaser of any change since the date hereof in any
fact, condition or circumstance of which it becomes aware and which would
require a modification of the foregoing representations and warranties
(including any schedule thereto) to make such representation or warranty (or
schedule thereto) complete, accurate and not misleading in all respects. The
representations and warranties contained in this Article 2 shall not be affected
or deemed waived by reason of the fact that Purchaser and/or its representatives
knew or should have known that any such representation or warranty is or might
be inaccurate in any respect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As a material inducement to Seller to enter into and perform its
obligations under this Agreement, Purchaser represents and warrants to Seller as
follows:
SECTION 3.1. Organization, Etc. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware.
SECTION 3.2. Authority Relative to Agreement. Purchaser has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Purchaser. No
other corporate proceedings on its part or the part of the stockholders of
Purchaser are necessary to authorize the execution and delivery of this
Agreement by it or the consummation by it of the transactions contemplated on
its part hereby. This Agreement has been duly executed and delivered by
Purchaser and is the valid and binding agreement of Purchaser except as the
enforceability may be affected by bankruptcy, insolvency, reorganization or
other similar laws presently or hereafter in effect affecting the enforcement of
creditors' rights generally.
SECTION 3.3. No Breach; Consents. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby (a) do not and will not conflict with or result
in any breach of any of the provisions of, constitute a default under, result in
a violation of, result in the creation of any lien, security interest, charge or
encumbrance upon the assets of either of Purchaser under, or
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require any authorization, consent, approval, exemption or other action by or
notice to any third party under the provisions of the Charter or By-Laws of
Purchaser or any license, indenture, mortgage, lease, loan agreement or other
agreement (oral or written) or instrument to which Purchaser is a party, and (b)
do not require any authorization, consent, approval, exemption or other action
by or notice to any court or governmental body under any law, statute, rule,
regulation or decree to which Purchaser is subject.
SECTION 3.4. Litigation. There is no claim, action, suit or proceeding
pending or, to the knowledge of Purchaser, threatened against Purchaser or any
of its properties which seeks to prohibit, restrict or delay consummation of the
transactions contemplated hereby or to limit in any manner the right of
Purchaser to control Seller or any material aspect of the Business of Seller
after the Closing Date, and there is no judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality or arbitrator outstanding against Purchaser having, or which
Purchaser believes may in the future have, any such effect.
SECTION 3.5. Compliance. Purchaser has complied with all laws, rules,
regulations, ordinances, orders, judgments or decrees necessary to effectuate
this transaction.
SECTION 3.6. Brokerage. Subject to the provisions of Section 2.9.
hereof relating to John Elliott, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Purchaser.
ARTICLE 4
CLOSING CONDITIONS
SECTION 4.1. Closing Conditions Relating to Purchaser. The obligation
of Purchaser to consummate the purchase of the Purchased Assets will be subject
to the satisfaction of the following conditions, any of which may be waived by
Purchaser in its sole and absolute discretion:
4.1.0 Contingencies.
4.1.0.1. Purchaser intends to register
certain of its securities under the Securities Act of 1933, as amended (the
"Securities Act") as part of an initial public offering of its securities (the
"IPO"). Accordingly, Purchaser agrees to use its reasonable best efforts to do
as follows:
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(a) Prepare and file with such
amendments and supplements to the registration statement and the prospectus
used in connection therewith as may be necessary to keep said registration
statement effective and to comply with the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act,
with respect to the sale of securities covered by said registration statement
for the period necessary to complete the proposed public offering;
(b) Enter into an underwriting
agreement with customary provisions reasonably required by the underwriter,
if any, of the offering; and
(c) Register its securities covered by
said registration statement under the securities or "blue sky" laws of
appropriate jurisdictions.
It shall be a condition precedent to Purchaser's
obligation to close hereunder that the IPO shall have been completed on
terms and conditions reasonably satisfactory to Purchaser.
4.1.1. Deliveries. At or prior to the Closing, Seller
shall deliver, or cause to be delivered to Purchaser, the following items,
fully executed by all appropriate parties and in form and substance acceptable
to Purchaser:
4.1.1.1. Bills of Sale. Bills of Sale in the forms
of Exhibit 1.2 and Exhibit 1.2.A attached hereto together with any and
all other evidences of conveyance reasonably requested by Purchaser to
obtain clear title to the Purchased Assets.
4.1.1.2. Leases. The Leases in the form of
Exhibit 4.1.1.2 attached hereto executed by Seller.
4.1.1.3. Covenants Not to Compete. Covenants Not
to Compete in the form of Exhibit 4.1.1.3 attached hereto executed by each of
the stockholders of Seller.
4.1.1.4. Corporate Resolutions. Seller shall
deliver to Purchaser certified copies of the resolutions of its Board of
Directors and certified copies of the resolutions of its stockholder(s)
authorizing the transactions contemplated herein.
4.1.1.5. Consents. Seller shall deliver to
Purchaser copies of all necessary third party and governmental consents,
in a form satisfactory to Purchaser, that Seller is required to obtain
in order to consummate the transactions contemplated by this Agreement.
4.1.1.6. Opinion of Counsel for Seller. Purchaser
shall receive an opinion dated the Closing Date of Sullivan, Ward, Bone,
Tyler & Asher, P.C., counsel or the Seller, in the form of Exhibit 4.1.1.6
attached hereto.
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4.1.1.7. Articles of Transfer. Articles of
Transfer in the form of Exhibit 4.1.1.7 attached hereto as to each Seller.
4.1.2. Due Diligence Results. Nothing shall have come to
the attention of Purchaser, in the course of its due diligence investigation
pursuant to Section 5.1 or otherwise, which demonstrates that any of the
representations or warranties of Seller is inaccurate or incomplete in any
material manner.
4.1.3. No Injunction. The consummation of the
transactions contemplated hereby shall not have been enjoined by any court of
competent jurisdiction and no proceeding seeking such an injunction shall be
pending.
SECTION 4.2. Closing Conditions Relating to Seller. The obligation
of Seller to consummate the sale of the Purchased Assets will be subject to
the satisfaction of the following conditions:
4.2.1. Deliveries. At or prior to the Closing, Purchaser
shall deliver, or cause to be delivered to Seller, the following items:
4.2.1.1. The Purchase Price.
4.2.1.2. Assignment and Assumption Agreements. Assignment
and Assumption Agreements in the form of Exhibit 4.2.1.2 and Exhibit 4.2.1.2.A
are attached hereto.
4.2.1.3. Leases. The Leases in the form of Exhibit
4.1.1.2 attached hereto executed by Purchaser.
4.2.1.4. Opinion of Counsel for Purchaser. Seller shall
receive an opinion dated the Closing Date of Whiteford, Taylor & Preston
L.L.P., counsel for Purchaser, in the form of Exhibit 4.2.1.4 attached hereto.
4.2.1.5. Corporate Resolutions. Purchaser shall deliver
to Seller certified copies of the resolutions of its Board of Directors
authorizing the transactions contemplated herein.
4.2.2. No Injunction. The consummation of the transactions
contemplated hereby shall not be enjoined by any court of competent
jurisdiction and no proceeding seeking such an injunction shall be pending.
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ARTICLE 5
PRE-CLOSING AGREEMENTS
SECTION 5.1. Due Diligence. Seller shall grant to Purchaser, and its
employees, counsel, accountants and other representatives, full and complete
access to Seller, its facilities, management, employees and records and its
outside accountants and counsel for purposes of a due diligence investigation in
connection with the transactions contemplated hereby. Purchaser agrees to
exercise its reasonable best efforts in conducting such due diligence in a
manner that will not significantly interfere with or disrupt the normal
operations of Seller or arouse suspicions of Seller's employees, customers or
suppliers that either the capital stock or the assets of Seller are for sale.
Seller will provide Purchaser and its representatives full access to all
relevant financial information, personnel, service and contractual information.
The cost of any such due diligence shall be borne by Purchaser.
SECTION 5.2. Operation of Business. Seller shall continue to operate
the Business in the ordinary course in such manner that each and every warranty
and representation of Seller made herein as of the date hereof will be true,
complete and accurate in all respects as of the date of the Closing hereunder,
without substantial change, and will maintain or cause to be maintained all
existing insurance coverage on the Purchased Assets of Seller until the Closing.
Until the Closing, all risk of loss, damage, or destruction to the Purchased
Assets shall be upon Seller, and in the event of any material loss, damage, or
destruction to the Purchased Assets, Purchaser shall be entitled to terminate
this Agreement within thirty (30) days of learning of the same. Prior to
Closing, Seller shall not increase any current compensation levels of employees
or pay any bonuses or other direct or indirect compensation without the prior
written consent of Purchaser.
SECTION 5.3. Best Efforts. The parties hereto agree to use their
best efforts to cause all conditions to Closing to be satisfied and to cause
the transactions contemplated hereby to be consummated.
SECTION 5.4. Confidentiality. During the due diligence period described
in Section 5.1. hereof, Purchaser and Seller agree that they, and their
respective officers, directors and other representatives, will hold in strict
confidence the negotiations relating to the transactions contemplated by this
Agreement, and all information exchanged pursuant thereto. If, for any reason,
Closing does not occur, all information exchanged by Purchaser and Seller shall
promptly be returned to the other party and each party agrees that it will not
use any such information in any way detrimental to the other party and that all
such information shall continue to be treated confidentially. The parties hereto
acknowledge and understand that Purchaser shall undertake the IPO described in
Section 4.1.0 hereof and shall be entitled to comply with all applicable
regulatory and disclosure requirements incident to such registration of
securities. In addition, Seller will refrain
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<PAGE>
from, and will cause its officers, directors, representatives, agents and
employees to refrain from, directly or indirectly, encouraging, soliciting,
initiating or participating in discussions or negotiations with or providing any
non-public information to any person other than Purchaser concerning the sale
or purchase of the Business (except in the ordinary course of its business),
any merger or consolidation involving Seller or any other transaction in
which Seller's Business would be acquired by a person other than Purchaser.
SECTION 5.5. Public Announcements. Neither Purchaser nor Seller shall
issue any press release or otherwise make any public statement with respect to
this Agreement or the transactions contemplated hereby unless such press release
or public statement is satisfactory to the other party to this Agreement, and
Purchaser and Seller shall consult with each other as to the form and substance
of any public disclosure related thereto; provided, however, that nothing
contained herein shall prohibit any party from making any disclosure which is
required by law.
ARTICLE 6
POST-CLOSING AGREEMENTS
SECTION 6.1. Indemnification by Seller.
6.1.1. Without limitation as to the other rights of Purchaser,
Seller shall indemnify, save and keep Purchaser, its successors and assigns and
its stockholders, directors, officers, affiliates, representatives and employees
and the estates, personal representatives and heirs of such persons, forever
harmless against and from all liability, demands, claims, actions or causes of
action, assessments, losses, penalties costs, damages or expenses, including
reasonable attorneys and expert witness fees (collectively, the "Losses")
sustained or incurred by any of the foregoing persons as a result of or arising
out of or by virtue of (i) any incorrect representation or warranty made by
Seller herein or in any certificate, exhibit or schedule delivered to Purchaser
in connection herewith, or (ii) any debt, liability or obligation of Seller
(whether known or unknown, absolute or contingent) not expressly assumed by
Purchaser hereunder.
6.1.2. Without limitation as to the other rights of Seller,
including without limitation the indemnification provisions of the Assignment
and Assumption Agreements to be executed at Closing in the forms attached hereto
as Exhibit 4.2.1.2 and Exhibit 4.2.1.2.A, Purchaser shall indemnify, save and
keep Seller, its successor and assigns and its stockholders, directors,
officers, affiliates, representatives and employees and the estates, personal
representatives and heirs of such persons forever harmless against and from all
liability, demands, claims, actions, or causes of actions, assessments, losses,
penalties, costs, damages or expenses including reasonable attorneys and expert
witness
-18-
<PAGE>
fees (collectively the "Losses") sustained or incurred by any of the
foregoing persons (i) as a result of or arising out of or by virtue of any
incorrect representation or warranty made by Purchaser herein or in any
certificate, exhibit or schedule delivered by Purchaser to Seller, if any, in
connection herewith, or (ii) relating to the Purchased Assets and the operation
of the Business arising after the Closing Date.
6.1.3. A party required under this Section 6.1 to furnish
indemnity (the "Indemnifying Party") shall satisfy its obligation of
indemnification under this Section 6.1 within forty-five (45) days after written
notice thereof from any party entitled to such indemnity hereunder (the
"Indemnified Party") to the Indemnifying Party; provided, however, that a party
shall not be deemed in breach hereof for so long as it contests in good faith
its liability for indemnification hereunder.
6.1.4. As soon as practicable after obtaining knowledge
thereof, any Indemnified Party shall notify the Indemnifying Party of any claim
or demand which the Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement. A failure to give such
notice shall not negate a right to indemnification hereunder; provided, however,
that the Indemnified Party shall bear any amount of Loss resulting directly from
a failure to give a timely notice. If such claim or demand relates to a claim or
demand asserted by a third party against the Indemnified Party and if the
Indemnifying Party acknowledges in writing its obligations to indemnify and hold
harmless under this Section 6.1, the Indemnifying Party shall have the right to
employ such counsel as is reasonably acceptable to the Indemnified Party to
defend any such claim or demand asserted against the Indemnified Party. The
Indemnified Party shall have the right to participate in the defense of any said
claim or demand at its own cost and expense, provided that unless the
Indemnified Party bears a greater risk of loss than the Indemnifying Party, the
Indemnifying Party shall control the defense of said claim or demand. So long as
the Indemnifying Party is defending in good faith any such claim or demand, (i)
the Indemnified Party shall not settle such claim or demand without the prior
written consent of the Indemnifying Party, and (ii) any settlement of such claim
or demand made without such consent of the Indemnifying Party shall not be
subject to indemnity under this Section 6.1. If the Indemnifying Party fails to
acknowledge in writing its obligation to defend against or settle such claim or
proceeding within twenty (20) days after receiving notice thereof from the
Indemnified Party (or such shorter time specified in the notice as the
circumstances of the matter may dictate), the Indemnified Party shall be free to
dispose of the matter at the expense of the Indemnifying Party, in any way in
which the Indemnified Party deems to be in its best interest. Purchaser, in its
reasonable discretion to protect its financial interest may set off the amount
of any legitimate claim for which it may be entitled to indemnification
hereunder against any payment to be made to Seller hereunder. Legitimate claim
shall be defined as any legal proceeding filed in a court having jurisdiction
over the subject matter which claim is not older than three (3) years from the
date of the Closing.
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<PAGE>
6.1.5. The Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other materials
required for use in contesting any claim or demand asserted by a third party
against any Indemnified Party. Whether or not the Indemnifying Party so elects
to defend any such claim or demand, the Indemnified Party shall not have any
obligation to do so and the Indemnified Party shall not waive any rights it may
have against the Indemnifying Party under this Section 6.1 with respect to any
such claim or demand by electing or failing to elect to defend any such claim,
provided that the Indemnified Party against which a claim or demand is asserted
in the first instance shall file in a timely manner any answer or pleading with
respect to a suit or proceeding in such action as is necessary to avoid default
or other adverse results.
SECTION 6.2. Further Assurances. Seller shall, at any time and from
time to time on and after the Closing Date, upon request by Purchaser and
without further consideration, take such actions or cause others to do so, and
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all transfers, conveyances, powers of attorney and assurances, as may
be required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming to Purchaser, or its respective successors
and assigns, or for aiding and assisting in collecting or reducing to
possession, the Purchased Assets; provided, however, that Seller shall not be
required to assist Purchaser in collecting any accounts receivable of Seller
assigned to Purchaser hereunder or pursuing for collection any third parties. To
provide further assurances to Purchaser of its performance hereunder, Seller
agrees that it shall not during the one year period after the Closing Date seek
protection under any bankruptcy, receivership or other law for the relief of
debtors, and Seller further agrees that it shall not voluntarily dissolve or
terminate either or both of the companies comprising the Seller within one year
following the Closing Date unless it shall have provided to Purchaser an
Indemnification Agreement in the form of Exhibit 6.2 hereto, executed and
delivered by Louis E. Campbell, Jr. and Donald DeWulf, the sole stockholders of
Seller, which shall be executed and delivered to Purchaser prior to, and as an
express condition to, the dissolution or termination of the corporate existence
of either or both of the entities comprising the Seller.
SECTION 6.3. Books and Records. At or immediately following the
Closing, Seller shall deliver to Purchaser all records constituting part of the
Purchased Assets; and all of Seller's correspondence, files, books and records,
necessary for Purchaser's conduct and operation of the Business and the
Purchased Assets; and shall instruct any other party in possession of such
materials to release them to Purchaser (except to the extent that Seller is
prohibited from or restricted in providing such information by other agreements
or applicable law). Seller shall retain the original copies of its tax returns,
and other records which it is required by law to maintain. Purchaser shall
provide Seller with reasonable access to those documents included in the
Purchased Assets which are in the possession of Purchaser from time to time, and
which are necessary for Seller to comply with federal and state securities and
tax laws, which documents shall be stored at
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<PAGE>
Purchaser's facilities in New Baltimore, Michigan, or at such other
reasonable location of Purchaser upon prior notification to Seller.
SECTION 6.4. Employees. Seller shall have and retain responsibility for
all wages, bonuses, commissions and vacation pay, all payroll taxes thereon, all
severance and termination benefits, and all other employment benefits accrued up
to and including the Closing Date relating to Seller's employees in connection
with the Business. Moreover, to the extent that the Worker Adjustment and
Retraining Notification Act of 1988 is applicable, Seller shall also be
responsible for giving such notification or taking whatever actions as may be
required by that statute. However, Purchaser represents that on or before the
Closing Date, it will offer employment to all of Seller's employees other than
management personnel and/or stockholders of Seller, on similar or equivalent
terms and with similar or equivalent employee benefits as are customarily
provided by Seller to its employees. In the event any employee of the Seller
does not accept employment with Purchaser for whatever reason, the Seller shall
be responsible for whatever severance or termination benefits that employee may
be due under Seller's employment policies, and Purchaser shall have no liability
whatsoever for the payment of those benefits. It is expressly understood by the
parties that other than provided for in this Section, Purchaser is not assuming
any obligations of Seller with respect to employees, and Seller shall after the
Closing Date remain responsible for all amounts owed to, and claims of whatever
nature made by, its employees related to services provided by them, or to
actions, omissions or conduct of Seller, in accordance with applicable law and
the contractual obligation of Seller.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Survival. The representations and warranties of Seller
shall survive Closing.
SECTION 7.2. Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned
at any time prior to consummation of the transactions contemplated hereby:
7.2.1. By the mutual consent of Purchaser and Seller.
7.2.2. By Purchaser if all of the conditions to Closing
described in Section 4.1 have not been satisfied by April 30, 1996.
7.2.3. By Purchaser if the transactions shall not have been
consummated by April 30, 1996, or such later date as may be agreed upon by the
parties.
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<PAGE>
7.2.4. By Purchaser if Seller has materially breached any
representation or warranty herein or failed to perform any material obligation
or condition hereof and such breach or failure shall not have been cured in
manner, form and substance reasonably satisfactory to Purchaser; and
7.2.5. By Seller if either (i) Purchaser has materially
breached any representation or warranty herein or failed to perform any material
obligation or condition hereof and such breach or failure has not been cured in
manner, form and substance reasonably satisfactory to Seller or (ii) Purchaser
shall have failed to close its IPO and shall have failed to close hereunder on
or prior to April 30, 1995.
Any termination pursuant to this Section 7.2 shall be without liability on the
part of any party, except as provided in Section 7.3 below.
SECTION 7.3. Expenses. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement. At Closing, Seller shall pay all sales and/or transfer tax which
may be required to be paid in connection with the transactions contemplated
herein including the transfer from Seller to Purchaser of the Purchased Assets.
Seller agrees that the Purchased Assets include unique property that cannot be
readily obtained on the open market and that Purchaser will be irreparably
injured if this Agreement is not specifically enforced. In the event Purchaser
elects to terminate this Agreement as a result of Seller's default instead of
seeking specific performance, Purchaser shall be entitled to recover Purchaser's
actual damages. If Seller terminates this Agreement solely as a result of
Section 7.2.5. hereof, Seller shall be entitled to retain the Deposit as the
sole remedy of Seller hereunder.
SECTION 7.4. Amendments, Waivers and Remedies. The parties hereto, by
mutual agreement in writing, may amend, modify and supplement this Agreement.
The failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach. Pursuit by any party hereto of any remedy shall not preclude
pursuit by it of any other remedy which may be provided by law or equity nor
shall the pursuit of any remedy by a party hereto constitute a forfeiture or
waiver of any amount due such party or of any damage accruing by reason of the
violation of any of the terms, provisions and covenants in this Agreement.
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<PAGE>
SECTION 7.5. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) upon delivery if delivered by hand; (ii) four (4) days subsequent to
mailing if mailed by express, certified or registered mail, with postage
prepaid, in the continental United States; (iii) two (2) days subsequent to pick
up by such courier if sent by a nationally or internationally recognized
overnight courier service that regularly maintains records of items picked up
and delivered; or (iv) when transmitted if sent by telecopier, as follows:
If to Purchaser:
Life Critical Care Corporation
c/o The Morgenthau Group, Inc.
Suite 203
3333 West Commercial Boulevard
Fort Lauderdale, Florida 33309
Attn: Ms. Amy E. Parker
Fax No.: (305) 486-0424
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
210 West Pennsylvania Avenue, Suite 400
Towson, Maryland 21204-4515
Fax No.: (410) 832-2015
If to Seller:
Blue Water Medical Supply, Inc.
52903 Base Street
New Baltimore, Michigan 48047
Attn: Mr. Lou Campbell
with a copy to:
Sullivan, Ward, Bone, Tyler & Asher, P.C.
P.O. Box 222
1000 Maccabees Center, 25800 Northwestern Hwy.
Southfield, Michigan 48075-1000
Attn: A. Stuart Tompkins
Fax No: (810) 746-2760
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<PAGE>
Any party hereto may specify in writing a different address for such purpose to
the other parties at least five (5) days prior to the effective date of such
address change.
SECTION 7.6. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Agreement, and the
rights, interests and obligations hereunder, may not be assigned by either party
without the prior written consent of the other party hereto.
SECTION 7.7. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provision of this Agreement unless the
consummation of the transaction contemplated hereby is adversely affected
thereby.
SECTION 7.8. Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
SECTION 7.9. No Third-Party Beneficiaries. This Agreement shall
be for the benefit only of the parties hereto, and their respective
successors and assigns.
SECTION 7.10. Waiver of Bulk Sales Act. In consideration of, and in
reliance upon, the representations and warranties made by Seller in Article 2,
Purchaser hereby waives compliance with the provisions of any applicable bulk
transfer laws.
SECTION 7.11. Singular and Plural; Gender. The singular shall
include the plural and vice-versa, and the use of one gender shall be deemed
to include all other genders whenever appropriate.
SECTION 7.12. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement will be governed by the laws of the State
of Maryland without reference to any conflict of laws rules.
SECTION 7.13. Counterparts. This Agreement may be executed in two
or more counterparts each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
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<PAGE>
SECTION 7.14. Schedules. The Schedules hereto are an integral part of
this Agreement. Information described in any Schedule of this Agreement shall be
deemed disclosed in all Schedules of this Agreement and the term "Agreement"
shall include all Schedules, exhibits and other deliveries attached or made
pursuant hereto. Except as otherwise specifically provided for herein, any
Schedules which have not been prepared and attached to this Agreement on the
date of execution hereof shall be prepared and delivered by Seller to Purchaser
within ten (10) days from the date of execution of this Agreement.
SECTION 7.15. Headings. The headings and captions set forth herein
are for convenience of reference only and shall not affect the construction or
interpretation hereof.
SECTION 7.16. Further Documents. Seller shall, whenever and as often as
requested to do so by Purchaser, but without expense to Seller, execute,
acknowledge, and deliver all such further conveyances, assignments,
confirmations, satisfactions, releases, instruments of further assurance,
approvals, consents and any and all other further instruments and documents as
may be necessary, expedient, or proper in the reasonable opinion of Purchaser or
its counsel in order to complete the transactions contemplated herein.
SECTION 7.17. Arbitration. Any and all disputes, controversies or
claims that lead up to the execution of this Agreement or that arise out of or
relate to this Agreement or the breach of it, including, without limitation, any
dispute regarding the disposition of the Deposit in the event this Agreement is
terminated and including any claims regarding the validity, scope and
enforceability of this arbitration clause, shall, if not promptly settled by the
parties, be solely and finally resolved by arbitration. The arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association (the "AAA") in effect at the time and shall be conducted
before a single arbitrator. The parties to the arbitration shall attempt to
agree, by mutual consent, to the appointment of the arbitrator. In the absence
of agreement among the parties, any party to the arbitration may apply to AAA
for a list of arbitrators from which list the arbitrator shall be selected in
accordance with the commercial arbitration rules of AAA.
The arbitration shall take place in Southfield, Michigan. Judgment upon
any award rendered by the arbitrator may be entered in any court of competent
jurisdiction in Michigan and each party hereto consents to the jurisdiction of
such courts and waives all claims of improper venue. The arbitrator shall
determine all claims in accordance with the internal law of the State of
Maryland. The internal procedural and substantive laws of Maryland and the
United States Federal Arbitration Act shall govern all questions of arbitral
procedure, arbitral review, scope of arbitral authority, and arbitral
enforcement. The parties further agree that the arbitration proceeding shall
constitute an absolute bar to
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<PAGE>
the institution of any court proceeding, and that the decision and award of the
arbitrator shall be final and binding.
The cost of the arbitration proceeding shall be shared equally by the
parties except that each party shall be responsible for its own attorneys fee,
if any.
SECTION 7.18. Counsel. Each party hereto has been represented by its
own counsel in connection with the negotiation and preparation of this Agreement
and, consequently, each party hereby waives the application of any rule of law
that would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provision of this Agreement shall be interpreted or construed against the party
whose counsel drafted that provision.
SECTION 7.19. No Offer. This Agreement has been provided for
examination only and does not constitute an offer. This Agreement shall become
effective only after execution hereof (or counterparts hereof) by all parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
under seal, on the day and year first above written, intending to be legally
bound hereby.
WITNESS: BLUE WATER MEDICAL SUPPLY, INC.
_____________________________ By:_______________________(SEAL)
, President
WITNESS: BLUE WATER INDUSTRIAL PRODUCTS, INC.
_____________________________ By:_______________________(SEAL)
, President
WITNESS: LIFE CRITICAL CARE CORPORATION
_____________________________ By:_______________________(SEAL)
Amy E. Parker, Vice President
and Chief Financial Officer
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<PAGE>
EXHIBIT 1.2
BILL OF SALE AND ASSIGNMENT OF ASSETS/
MEDICAL SUPPLY
[ATTACHED]
<PAGE>
BILL OF SALE AND ASSIGNMENT OF ASSETS
THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is executed and
delivered effective this _____ day of ______________, 1996 by BLUE WATER
MEDICAL SUPPLY, INC., a Michigan corporation, ("Seller"), to LIFE CRITICAL CARE
CORPORATION, a Delaware corporation, ("Purchaser").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of January 22, 1996 (the "Agreement"), providing for the
purchase by Purchaser of substantially all of the assets of Seller;
NOW, THEREFORE, pursuant to the Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Seller hereby grants, bargains, sells, delivers, transfers, sets over, assigns
and conveys to Purchaser and its successors and assigns, free and clear of any
and all liens, claims or encumbrances of any kind, except for any liabilities of
Seller specifically assumed by Purchaser pursuant to the express terms of the
Agreement, all of the Purchased Assets (as defined in the Agreement) including,
without limitation, those assets and properties listed or described on Schedule
A attached hereto and made a part hereof.
TO HAVE AND TO HOLD the Purchased Assets unto Purchaser and its
successors and assigns, to its and their own use and benefit forever, and
Seller, for itself and its successors and assigns, covenants to and agrees with
Purchaser to warrant and defend the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets unto Purchaser and its successors and assigns,
against all lawful claims and demands.
Seller hereby covenants and agrees with Purchaser that it will duly
execute and deliver all such deeds, bills of sale, endorsements, assignments,
drafts, checks, and other instruments of transfer as may be necessary or helpful
more fully to sell, transfer, assign and convey to and to invest in Purchaser,
all and singular, the Purchased Assets hereby sold, transferred, assigned and
conveyed by this Bill of Sale and Assignment of Assets.
The transfer evidenced by this Bill of Sale and Assignment of Assets is
made subject to and upon all of the terms, covenants, conditions,
representations and warranties set forth in the Agreement, and all of which
terms, covenants, conditions, representations and warranties are incorporated
herein by reference, and shall survive the delivery of this Bill of Sale and
Assignment of Assets.
All of the terms and provisions of this Bill of Sale and Assignment of
Assets shall be binding upon Seller and its respective successors and assigns,
and shall inure to the benefit of the Purchaser and its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused the due execution
of this Bill of Sale and Assignment of Assets, under seal, as of the day and
year first above written.
BLUE WATER MEDICAL SUPPLY, INC.
By:______________________(SEAL)
, President
- Seller -
LIFE CRITICAL CARE CORPORATION
By:______________________(SEAL)
- Purchaser -
-2-
<PAGE>
SCHEDULE A
TO
BILL OF SALE AND ASSIGNMENT OF ASSETS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
<PAGE>
EXHIBIT 1.2.A
BILL OF SALE AND ASSIGNMENT OF ASSETS/
INDUSTRIAL PRODUCTS
[ATTACHED]
<PAGE>
BILL OF SALE AND ASSIGNMENT OF ASSETS
THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is executed and
delivered effective this _____ day of ________________, 1996 by BLUE WATER
INDUSTRIAL PRODUCTS, INC., a Michigan corporation, ("Seller"), to LIFE
CRITICAL CARE CORPORATION, a Delaware corporation, ("Purchaser").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of January 22, 1996 (the "Agreement"), providing for the
purchase by Purchaser of substantially all of the assets of Seller;
NOW, THEREFORE, pursuant to the Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Seller hereby grants, bargains, sells, delivers, transfers, sets over, assigns
and conveys to Purchaser and its successors and assigns, free and clear of any
and all liens, claims or encumbrances of any kind, except for any liabilities of
Seller specifically assumed by Purchaser pursuant to the express terms of the
Agreement, all of the Purchased Assets (as defined in the Agreement) including,
without limitation, those assets and properties listed or described on Schedule
A attached hereto and made a part hereof.
TO HAVE AND TO HOLD the Purchased Assets unto Purchaser and its
successors and assigns, to its and their own use and benefit forever, and
Seller, for itself and its successors and assigns, covenants to and agrees with
Purchaser to warrant and defend the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets unto Purchaser and its successors and assigns,
against all lawful claims and demands.
Seller hereby covenants and agrees with Purchaser that it will duly
execute and deliver all such deeds, bills of sale, endorsements, assignments,
drafts, checks, and other instruments of transfer as may be necessary or helpful
more fully to sell, transfer, assign and convey to and to invest in Purchaser,
all and singular, the Purchased Assets hereby sold, transferred, assigned and
conveyed by this Bill of Sale and Assignment of Assets.
The transfer evidenced by this Bill of Sale and Assignment of Assets is
made subject to and upon all of the terms, covenants, conditions,
representations and warranties set forth in the Agreement, and all of which
terms, covenants, conditions, representations and warranties are incorporated
herein by reference, and shall survive the delivery of this Bill of Sale and
Assignment of Assets.
All of the terms and provisions of this Bill of Sale and Assignment of
Assets shall be binding upon Seller and its respective successors and assigns,
and shall inure to the benefit of the Purchaser and its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused the due execution
of this Bill of Sale and Assignment of Assets, under seal, as of the day and
year first above written.
BLUE WATER INDUSTRIAL
PRODUCTS, INC.
By:_____________________(SEAL)
, President
- Seller -
LIFE CRITICAL CARE CORPORATION
By:_____________________(SEAL)
- Purchaser -
-2-
<PAGE>
SCHEDULE 1.3
EXCLUDED ASSETS
1. Checking accounts of Seller
3. Savings accounts of Seller
4. Life Insurance Policy(ies) of Seller
5. Cash values of any Life Insurance Policy(ies) of Seller
6. Federal and Michigan corporate income tax deposits of Seller
7.
<PAGE>
SCHEDULE 1.6
LIABILITIES ASSUMED
[to be provided by Seller, subject to the reasonable approval of
Purchaser, within 30 days following the execution of
the Asset Purchase Agreement]
1.
2.
3.
<PAGE>
SCHEDULE 1.7
ALLOCATION OF PURCHASE PRICE/MEDICAL SUPPLY*
_______________________ $__________
_______________________ $__________
_______________________ $__________
Furniture, Fixtures, and
Equipment $__________
_______________________ $__________
Goodwill $__________
TOTAL: $__________
* To be determined by Seller and Purchaser prior to the Closing Date.
<PAGE>
SCHEDULE 1.7.A
ALLOCATION OF PURCHASE PRICE/INDUSTRIAL PRODUCTS*
_______________________ $__________
_______________________ $__________
_______________________ $__________
Furniture, Fixtures, and
Equipment $__________
_______________________ $__________
Goodwill $__________
TOTAL: $__________
* To be determined by Seller and Purchaser prior to the Closing Date.
<PAGE>
SCHEDULE 2.5.1
LIENS
[to be provided by Seller, subject to the reasonable approval of
Purchaser, within 30 days following the execution of
the Asset Purchase Agreement]
<PAGE>
SCHEDULE 2.7
CONTRACTS AND COMMITMENTS
[to be provided by Seller within 30 days following
the execution of the Asset Purchase Agreement]
<PAGE>
SCHEDULE 2.8
LITIGATION
[to be provided by Seller within 30 days following
the execution of the Asset Purchase Agreement]
<PAGE>
SCHEDULE 2.10
INSURANCE*
1.
2.
3.
4.
5.
* To be provided by Seller within 30 days following the execution of the
Asset Purchase Agreement.
<PAGE>
SCHEDULE 2.13
LICENSES AND PERMITS*
1.
2.
3.
4.
5.
* To be provided by Seller within 30 days following the execution of the
Asset Purchase Agreement.
<PAGE>
EXHIBIT 4.1.1.2
LEASES
[to be provided by Seller, subject to the reasonable approval of Purchaser,
within 30 days following the execution of the Asset Purchase Agreement --
2 facilities; 4 year lease, 4 year option, purchase option at FMV]
<PAGE>
EXHIBIT 4.1.1.3
COVENANT NOT TO COMPETE
COVENANT NOT TO COMPETE made and entered into this ____ day of ______,
1996, by and between _________________________ ("Covenantor") and LIFE CRITICAL
CARE CORPORATION, a Delaware corporation, and its successors and assigns
("Purchaser").
WITNESSETH:
WHEREAS, BLUE WATER MEDICAL SUPPLY, INC. (hereafter called "Seller") is
selling certain operating assets related to its business (the "Business") to
Purchaser in a transaction contemplated in an Asset Purchase Agreement dated
January 22, 1996 (hereafter called the "Agreement") entered into by Seller and
Purchaser; and
WHEREAS, the Covenantor has been a stockholder of Seller involved in
the operation of the Business and is familiar with the operation of the Business
generally; and
WHEREAS, the Covenantor agreed to enter into this Covenant Not to
Compete as an inducement to Purchaser to enter into the Agreement as a result of
which Agreement the Covenantor will materially benefit.
NOW, THEREFORE, the parties hereto do covenant and agree as follows:
1. COVENANT NOT TO COMPETE PAYMENT. Simultaneously with the
delivery of this Covenant Not to Compete, Purchaser has paid to
Seller the sum of One Dollar ($1.00) in cash, or certified check.
2. RESTRICTIVE COVENANT. In consideration for the entry into the
Agreement by the Purchaser, the Covenantor covenants that he will
not, directly or indirectly for a period of five (5) years from
and after the date hereof, own in whole or in part, manage,
operate, control, or perform services for any health care business
located within the States of Michigan, Illinois, Indiana or Ohio.
3. CONFIDENTIAL INFORMATION. For a period of ten (10) years from
and after the date hereof, the Covenantor shall hold all
Confidential Information (i.e., all trade secrets and
proprietary and confidential information regarding the Business
of whatever nature, in whatever medium, developed, owned or
acquired by the Seller or the Covenantor, including customers
and prospective customers and suppliers but excluding
information which at the time of
<PAGE>
disclosure is in the public domain through no fault of, or
violation of law or breach of agreement by the Covenantor or
which the Covenantor can demonstrate he has lawfully
obtained from a third party under circumstances permitting
its lawful disclosure and use which the Covenantor reasonably
believes has no obligation of confidentiality with respect
thereto) in confidence and not disclose, duplicate, communicate
or transmit the Confidential Information to any person or use or
exploit any Confidential Information for any purpose.
4. REASONABLENESS. The Covenantor hereby expressly agrees that any
competition by him with the Business in violation of the terms of this Covenant
Not to Compete would, among other things, materially impair the Purchaser's
future prospects and that the limitations set forth in Paragraph 2 above are
reasonable, both as to time and geographic area. If, notwithstanding the
foregoing, the scope of any restriction contained in Paragraph 2 is too broad to
permit enforcement thereof to its full extent, such restriction shall be
enforced to the maximum extent permitted by law, and Covenantor hereby agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
5. INJUNCTIVE RELIEF. The Covenantor hereby recognizes that in the
event of his breach of any of the covenants hereunder Purchaser's remedies at
law for money damages would be inadequate, and, therefore, the Covenantor hereby
stipulates that Purchaser shall be entitled to injunctive relief in the event of
any breach of the Covenantor's covenants hereunder.
6. INTERPRETATION. This Covenant Not to Compete and the provisions
hereof shall in all respects be interpreted under and regulated by the laws
of the State of Michigan except for the choice of law rules utilized in that
jurisdiction.
7. AMENDMENT. This Covenant Not to Compete contains all the
understandings of the parties and shall not be altered or amended, except in a
writing signed by each of the parties hereto.
8. ATTORNEYS' FEES. The Covenantor hereby agrees that, in the
event of a breach of the Covenantor's covenants hereunder, Purchaser
shall be entitled to recover such costs, damages and reasonable attorneys'
fees as may be incurred on account of such breach from the Covenantor.
9. BINDING EFFECT. This Covenant Not to Compete shall be binding
upon the parties and their respective successors and assigns.
-2-
<PAGE>
10. COUNTERPARTS. This Covenant Not to Compete may be executed in
two or more counterparts, each of which, when taken together, shall constitute
one and the same original.
IN WITNESS WHEREOF, the parties have caused this Covenant Not to
Compete to be executed under seal on the day and year first above written.
COVENANTOR:
___________________________(SEAL)
[ONE SET TO BE EXECUTED BY EACH STOCKHOLDER
OF BLUE WATER MEDICAL SUPPLY, INC. AND BLUE
WATER INDUSTRIAL PRODUCTS, INC.]
PURCHASER:
LIFE CRITICAL CARE CORPORATION
By:________________________(SEAL)
-3-
<PAGE>
EXHIBIT 4.1.1.6
OPINION OF COUNSEL FOR SELLER
[Letterhead of Sullivan, Ward, Bone, Tyler & Asher, P.C.]
______________, 1996
Life Critical Care Corporation
504 Cathedral Street
Baltimore, MD 21201
Attention: Amy E. Parker, President
Ladies and Gentlemen:
This opinion is delivered pursuant to Section 4.1.1.6 of the Asset
Purchase Agreement, dated January 22, 1996 (the "Agreement"), between Blue Water
Medical Supply, Inc. ("Medical Supply") and Blue Water Industrial Products, Inc.
("Industrial Products") (collectively and individually referred to herein as the
"Company") and Life Critical Care Corporation (the "Purchaser"). We have acted
as counsel to the Company in connection with the Agreement and the transactions
contemplated thereby. Where a term that is defined in the Agreement is used in
this Opinion, the term has the same meaning set forth in the Agreement, unless
differently defined herein.
(1) In rendering the opinions set forth below, we have examined:
(A) The fully executed Agreement; and
(B) The Charter, By-Laws and minutes of the corporate
proceedings of each Company.
(2) In rendering the opinions set forth below, we have assumed:
(A) Each of the parties to the Agreement other than our clients
have the power and authority to: (i) enter into the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
and (ii) perform all of its obligations under the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
<PAGE>
(B) All required corporate actions and authorizations other
than on behalf of our clients have been completed; and
(C) The authenticity of all documents submitted as originals,
the genuineness of all signatures other than signatures on behalf of our clients
and the conformity to the originally executed documents of all documents
submitted to us as drafts or photocopies.
In rendering our opinions, whenever our opinion herein regarding the
existence or absence of facts is indicated to be based on our knowledge or
awareness, our opinion is intended to signify that during the course of our
representation of the Company no information has come to our attention which
would give us actual knowledge of the existence or absence of such facts. We
have not undertaken any independent investigation to determine the existence or
absence of such facts and no inference of further knowledge should be drawn from
our representation of the Company. As to various questions of fact material to
this Opinion, we have relied upon the truth and completeness of the
representations and warranties made by each Company as the "Seller" in the
Agreement and upon certifications executed by the Officers and Directors of each
Company. In addition, we have obtained from public officials and from officers
of each Company such other certificates and assurances, and we have examined
such corporate records, other documents and questions of law, as we have
considered necessary or appropriate for purposes of this Opinion.
Based upon the foregoing, and subject to the limitations and
qualifications set forth herein, it is our opinion that, as of the date of this
letter:
(A) Each Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Michigan, and has
the corporate power to own all of its properties and assets and to carry on its
business as it is now being conducted.
(B) Each Company has validly taken all necessary corporate
action to authorize it to execute and deliver the Agreement and to consummate
the transactions contemplated thereby; and the Agreement has been duly executed
and delivered by each Company and is a valid and binding agreement of each
Company, enforceable in accordance with its terms.
(C) The execution and delivery of the Agreement by each Company
and the consummation by each Company of the transactions contemplated on its
part thereby do not and will not violate any provision of the Charter or By-Laws
of either Company.
-2-
<PAGE>
(D) To our knowledge, all consents, authorizations, orders or
approvals of, and filings and registrations with, any governmental commission,
board or other regulatory body required for or in connection with the execution
and delivery of the Agreement by each Company and the consummation by it of the
transactions contemplated on its part thereby have been obtained or made.
(E) To our knowledge, except as disclosed on any Schedule to the
Agreement, there is no claim, action, suit or legal, administrative or other
proceeding or governmental investigation, pending or threatened against either
Company or any of its properties which might result in any material adverse
change in the business or financial condition of either Company.
(F) To the best of our knowledge, neither the execution and
delivery of the Agreement, nor the consummation of the transactions contemplated
thereby, conflicts with or does or will violate or result (with the giving of
notice and/or the passage of time) in a breach of any of the terms, conditions
or provisions of or constitute a default under, any lease, mortgage, contract or
other agreement binding on either Company or affecting its properties. To the
best of our knowledge, no consent or approval of any public authority is
required as a condition to the validity or enforceability of the Agreement or
any transaction contemplated thereby.
The foregoing Opinion is subject to the following
qualifications:
(A) The Opinion is subject to the operation and effect of
applicable bankruptcy, insolvency, moratorium, reorganization, receivership or
other similar laws, statutes or rules now or hereafter in effect affecting the
rights of creditors generally and the rights of taxing authorities.
(B) The enforceability of the Agreement may require enforcement
by a court of equity, and such enforcement is subject to such principles of
equity as courts having jurisdiction may impose.
(C) In rendering our opinion regarding the good standing of each
Company, we have relied exclusively upon Certificates of Good Standing, dated
_______________, 1996, issued by the Michigan Department of Commerce,
Corporations and Securities Bureau.
(D) Our Opinion is based solely upon the laws of the State of
Michigan, and we are opining herein as to the subject transaction as though the
laws of the United States of America and the State of Michigan were the only
applicable laws. We assume no responsibility as to the applicability thereto or
affect thereon of the laws of any other state or jurisdiction. As to matters
governed or affected by laws of states other than the State of Michigan we have
assumed that insofar as the substantive laws of any other state may be
-3-
<PAGE>
applicable to any opinions herein, such laws are identical to the substance of
laws of the State of Michigan applied by us herein.
This opinion is being furnished to you solely for your benefit and the
benefit of your counsel and may not be relied upon by, nor copies of it
delivered to, any other person or parties without our prior written consent.
SULLIVAN, WARD, BONE,
TYLER & ASHER, P.C.
By: ____________________________
-4-
<PAGE>
EXHIBIT 4.1.1.7
ARTICLES OF TRANSFER
BETWEEN
[BLUE WATER _________________, INC.]
AND
LIFE CRITICAL CARE CORPORATION
THIS IS TO CERTIFY THAT:
FIRST: Blue Water _________________________, Inc. a Michigan
corporation (the "Transferor"), agrees to transfer all or substantially all
of its property and assets to Life Critical Care Corporation, a Delaware
corporation (the "Transferee") pursuant to the terms of an Asset Purchase
Agreement between the Transferor and the Transferee of even date herewith.
SECOND: The Transferor is incorporated under the laws of the
State of Michigan, with a principal office located at 37885 Green Street, New
Baltimore, MI 48047.
THIRD: The Transferee is incorporated under the general laws of
the State of Delaware. The Transferee's address and principal place of business
is 3333 West Commercial Boulevard, Suite 203, Fort Lauderdale, Florida 33309.
FOURTH: The Transferor owns no interest in land, the title
to which could be affected by the recording of an instrument among the land
records.
FIFTH: The terms and conditions of the transaction set forth in
these Articles of Transfer were advised, authorized and approved by the
Transferor in the manner and by the vote required by its Articles of
Incorporation and Michigan law, in the following manner: The Board of Directors
of the Transferor by unanimous written consent adopted a resolution declaring
that the proposed transaction described herein was advisable, and directed that
the proposed transaction be submitted to the stockholders of the Transferor for
consideration and approval. The Shareholders of the Transferor by unanimous
written consent adopted a resolution declaring that the proposed transaction
described herein was approved.
<PAGE>
SIXTH: The terms and conditions of the transaction set forth in
these Articles of Transfer were advised, authorized and approved by the
Transferee in the manner and by the vote required by its Charter and the laws of
the place of its incorporation, in the following manner: The Board of Directors
of the Transferee by unanimous written consent adopted a resolution declaring
that the proposed transaction was approved.
SEVENTH: The nature and amount of the consideration to be paid
by the Transferee to the Transferor for the assets to be transferred by the
Transferor pursuant to the Asset Purchase Agreement is
___________________________________________ Dollars ($_______________).
IN WITNESS WHEREOF, on this day of , 1996, Transferor has caused
these Articles of Transfer to be executed on its behalf by its President and
attested by its Secretary, and Transferee has caused these Articles of Transfer
to be executed on its behalf by its President and attested by its Secretary, and
each individual signing hereby acknowledges, under penalties for perjury, that
these Articles of Transfer are the act of the party on whose behalf such
individual is executing the Articles of Transfer and that, to the best of his or
her knowledge, information and belief, the facts and matters set forth herein
are true in all material respects.
ATTEST: BLUE WATER ______________________, INC.
_______________________________ By:______________________________(SEAL)
, Secretary , President
ATTEST: LIFE CRITICAL CARE CORPORATION
_______________________________ By:______________________________(SEAL)
, Secretary
-2-
<PAGE>
EXHIBIT 4.2.1.2
ASSIGNMENT AND ASSUMPTION AGREEMENT/MEDICAL SUPPLY
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made this _____ day
of _______________, 1996, by and between LIFE CRITICAL CARE CORPORATION, a
Delaware corporation, ("Purchaser"), and BLUE WATER MEDICAL SUPPLY, INC., a
Michigan corporation, ("Seller").
WHEREAS, pursuant to that certain Asset Purchase Agreement,
dated January 22, 1996, between the parties hereto (the "Purchase Agreement"),
Seller has agreed to assign and transfer to Purchaser certain assets, properties
and business of Seller;
NOW, THEREFORE, in consideration of the transfer to Purchaser of
the aforesaid assets, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Assignment. Seller hereby assigns and transfers to Purchaser
the following: All right, title and interest of Seller in, to and under all
contracts, leases, indentures, agreements, commitments and all other legally
binding arrangements, whether oral or written, to which Seller is a party or by
which Seller is bound ("Contracts") that are listed on Schedule A hereto.
2. Assumption. Subject to the further terms of this Agreement,
effective on the date hereof, Purchaser, for itself and its successors and
assigns, hereby covenants and agrees to assume, and hereby does assume, and
agrees to discharge, perform, and observe, and to indemnify, defend, and hold
Seller harmless from and against the obligations of Seller, as and to the extent
arising from and after the date hereof, or pertaining to any period subsequent
to the date hereof, as are listed or described on Schedule B, attached hereto
and made a part hereof (the "Assumed Liabilities").
3. Indemnification. Seller shall defend, indemnify, and hold
Purchaser harmless against and from (a) all liability to any person, firm,
corporation, political subdivision, or other entity for any default by Seller in
connection with the Assumed Liabilities to the extent such default occurs prior
to the date hereof, and (b) any debt, liability, obligation or contract not
expressly assumed by Purchaser hereunder. Purchaser shall defend, indemnify and
hold Seller harmless against and from any and all liability to any person, firm,
corporation, political subdivision, or other entity for any default by Purchaser
in connection with the Assumed Liabilities, to the extent such default occurs on
or after the date hereof. The indemnifications set forth herein are in addition
to any indemnifications set forth in the Purchase Agreement.
4. Representations of Seller. All representations and warranties
of Seller relating to the Assumed Liabilities contained in the Purchase
Agreement are hereby
<PAGE>
incorporated by reference herein. Seller hereby further represents and
warrants to Purchaser that, as of the effective date of this Agreement,
Seller has not received notice of any default by Seller in connection with the
Assumed Liabilities, and to the best of Seller's knowledge, information and
belief, Seller is not in default in connection with the Assumed Liabilities.
5. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Agreement, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Agreement or to any of its provisions.
6. Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
8. Miscellaneous. This Agreement is made and entered into
pursuant to the terms, conditions, and provisions of the Purchase Agreement.
Except as otherwise provided herein or except as otherwise required by the
context herein, all capitalized terms defined in the Purchase Agreement shall
have such defined meanings when used herein.
IN WITNESS WHEREOF, the parties hereto have caused the due
execution of this Assignment and Assumption Agreement, under seal, as of the day
and year first above written.
WITNESS: BLUE WATER MEDICAL SUPPLY, INC.
______________________________ By: _____________________(SEAL)
, President
- SELLER -
WITNESS: LIFE CRITICAL CARE CORPORATION
______________________________ By: _____________________(SEAL)
, President
- PURCHASER -
-2-
<PAGE>
SCHEDULE A
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-3-
<PAGE>
SCHEDULE B
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-4-
<PAGE>
EXHIBIT 4.2.1.2.A
ASSIGNMENT AND ASSUMPTION AGREEMENT/INDUSTRIAL PRODUCTS
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made this _____ day
of _______________, 1996, by and between LIFE CRITICAL CARE CORPORATION, a
Delaware corporation, ("Purchaser"), and BLUE WATER INDUSTRIAL PRODUCTS, INC., a
Michigan corporation, ("Seller").
WHEREAS, pursuant to that certain Asset Purchase Agreement,
dated January 22, 1996, between the parties hereto (the "Purchase Agreement"),
Seller has agreed to assign and transfer to Purchaser certain assets, properties
and business of Seller;
NOW, THEREFORE, in consideration of the transfer to Purchaser of
the aforesaid assets, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Assignment. Seller hereby assigns and transfers to Purchaser
the following: All right, title and interest of Seller in, to and under all
contracts, leases, indentures, agreements, commitments and all other legally
binding arrangements, whether oral or written, to which Seller is a party or by
which Seller is bound ("Contracts") that are listed on Schedule A hereto.
2. Assumption. Subject to the further terms of this Agreement,
effective on the date hereof, Purchaser, for itself and its successors and
assigns, hereby covenants and agrees to assume, and hereby does assume, and
agrees to discharge, perform, and observe, and to indemnify, defend, and hold
Seller harmless from and against the obligations of Seller, as and to the extent
arising from and after the date hereof, or pertaining to any period subsequent
to the date hereof, as are listed or described on Schedule B, attached hereto
and made a part hereof (the "Assumed Liabilities").
3. Indemnification. Seller shall defend, indemnify, and hold
Purchaser harmless against and from (a) all liability to any person, firm,
corporation, political subdivision, or other entity for any default by Seller in
connection with the Assumed Liabilities to the extent such default occurs prior
to the date hereof, and (b) any debt, liability, obligation or contract not
expressly assumed by Purchaser hereunder. Purchaser shall defend, indemnify and
hold Seller harmless against and from any and all liability to any person, firm,
corporation, political subdivision, or other entity for any default by Purchaser
in connection with the Assumed Liabilities, to the extent such default occurs on
or after the date hereof. The indemnifications set forth herein are in addition
to any indemnifications set forth in the Purchase Agreement.
4. Representations of Seller. All representations and warranties
of Seller relating to the Assumed Liabilities contained in the Purchase
Agreement are hereby incorporated by reference herein. Seller hereby further
represents and warrants to Purchaser that, as of the effective date of this
Agreement, Seller has not received notice of
<PAGE>
any default by Seller in connection with the Assumed Liabilities, and to the
best of Seller's knowledge, information and belief, Seller is not in default in
connection with the Assumed Liabilities.
5. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Agreement, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Agreement or to any of its provisions.
6. Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
8. Miscellaneous. This Agreement is made and entered into
pursuant to the terms, conditions, and provisions of the Purchase Agreement.
Except as otherwise provided herein or except as otherwise required by the
context herein, all capitalized terms defined in the Purchase Agreement shall
have such defined meanings when used herein.
IN WITNESS WHEREOF, the parties hereto have caused the due
execution of this Assignment and Assumption Agreement, under seal, as of the day
and year first above written.
WITNESS: BLUE WATER INDUSTRIAL
PRODUCTS, INC.
______________________________ By: ___________________________(SEAL)
, President
- SELLER -
WITNESS: LIFE CRITICAL CARE CORPORATION
______________________________ By: ___________________________(SEAL)
, President
- PURCHASER -
-2-
<PAGE>
SCHEDULE A
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-3-
<PAGE>
SCHEDULE B
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-4-
<PAGE>
EXHIBIT 4.2.1.4
OPINION OF COUNSEL FOR PURCHASER
[Letterhead of Whiteford, Taylor & Preston L.L.P.]
______________, 1996
Blue Water Medical Supply, Inc. and
Blue Water Industrial Products, Inc.
37885 Green Street
New Baltimore, Michigan 48047
Attention: Mr. Lou Campbell
Ladies and Gentlemen:
This opinion is delivered pursuant to Section 4.2.1.4 of the
Asset Purchase Agreement, dated _______________, 1996 (the "Agreement"),
between Blue Water Medical Supply, Inc. ("Medical Supply") and Blue Water
Industrial Products, Inc. ("Industrial Products") (collectively and
individually referred to herein as the "Company") and Life Critical Care
Corporation (the "Purchaser"). We have acted as counsel to the Purchaser in
connection with the Agreement and the transactions contemplated thereby. Where a
term that is defined in the Agreement is used in this Opinion, the term has the
same meaning set forth in the Agreement, unless differently defined herein.
(1) In rendering the opinions set forth below, we have examined:
(A) The fully executed Agreement; and
(B) The Charter, By-Laws and minutes of the corporate
proceedings of the Purchaser.
(2) In rendering the opinions set forth below, we have assumed:
(A) Each of the parties to the Agreement other than our clients
have the power and authority to: (i) enter into the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
and (ii) perform all of its obligations under the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
(B) All required corporate actions and authorizations other
than on behalf of our clients have been completed; and
<PAGE>
(C) The authenticity of all documents submitted as originals,
the genuineness of all signatures other than signatures on behalf of our clients
and the conformity to the originally executed documents of all documents
submitted to us as drafts or photocopies.
In rendering our opinions, whenever our opinion herein regarding the
existence or absence of facts is indicated to be based on our knowledge or
awareness, our opinion is intended to signify that during the course of our
representation of the Purchaser no information has come to our attention which
would give us actual knowledge of the existence or absence of such facts. We
have not undertaken any independent investigation to determine the existence or
absence of such facts and no inference of further knowledge should be drawn from
our representation of the Purchaser. As to various questions of fact material to
this Opinion, we have relied upon the truth and completeness of the
representations and warranties made by the Purchaser as the "Purchaser" in the
Agreement and upon certifications executed by the Officers and Directors of the
Purchaser. In addition, we have obtained from public officials and from officers
of the Purchaser such other certificates and assurances, and we have examined
such corporate records, other documents and questions of law, as we have
considered necessary or appropriate for purposes of this Opinion.
Based upon the foregoing, and subject to the limitations and
qualifications set forth herein, it is our opinion that, as of the date of this
letter:
(A) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power to own all of its properties and assets and to carry on its
business as it is now being conducted.
(B) The Purchaser has validly taken all necessary corporate
action to authorize it to execute and deliver the Agreement and to consummate
the transactions contemplated thereby; and the Agreement has been duly executed
and delivered by the Purchaser and is a valid and binding agreement of the
Purchaser, enforceable in accordance with its terms.
(C) The execution and delivery of the Agreement by the Purchaser
and the consummation by the Purchaser of the transactions contemplated on its
part thereby do not and will not violate any provision of the Charter or By-Laws
of the Purchaser.
(D) To our knowledge, all consents, authorizations, orders or
approvals of, and filings and registrations with, any governmental commission,
board or other regulatory body required for or in connection with the execution
and delivery of the Agreement by the Purchaser and the consummation by it of the
transactions contemplated on its part thereby have been obtained or made.
-2-
<PAGE>
(E) To the best of our knowledge, neither the execution and
delivery of the Agreement, nor the consummation of the transactions contemplated
thereby, conflicts with or does or will violate or result (with the giving of
notice and/or the passage of time) in a breach of any of the terms, conditions
or provisions of or constitute a default under, any lease, mortgage, contract or
other agreement binding on the Purchaser or affecting its properties. To the
best of our knowledge, no consent or approval of any public authority is
required as a condition to the validity or enforceability of the Agreement or
any transaction contemplated thereby.
The foregoing Opinion is subject to the following
qualifications:
(A) The Opinion is subject to the operation and effect of
applicable bankruptcy, insolvency, moratorium, reorganization, receivership or
other similar laws, statutes or rules now or hereafter in effect affecting the
rights of creditors generally and the rights of taxing authorities.
(B) The enforceability of the Agreement may require enforcement
by a court of equity, and such enforcement is subject to such principles of
equity as courts having jurisdiction may impose.
(C) In rendering our opinion regarding the good standing of each
Company, we have relied exclusively upon a Certificate of Good Standing, dated
_______________, 1996, issued by the Maryland State Department of Assessments
and Taxation.
(D) Our Opinion is based solely upon the laws of the State of
Maryland, and we are opining herein as to the subject transaction as though the
laws of the United States of America and the State of Maryland were the only
applicable laws. We assume no responsibility as to the applicability thereto or
affect thereon of the laws of any other state or jurisdiction. As to matters
governed or affected by laws of states other than the State of Maryland we have
assumed that insofar as the substantive laws of any other state may be
applicable to any opinions herein, such laws are identical to the substance of
laws of the State of Maryland applied by us herein.
This opinion is being furnished to you solely for your benefit and the
benefit of your counsel and may not be relied upon by, nor copies of it
delivered to, any other person or parties without our prior written consent.
WHITEFORD, TAYLOR & PRESTON L.L.P.
By: ___________________________________
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<PAGE>
EXHIBIT 6.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made this _____
day of ___________, 1996, by LOUIS E. CAMPBELL, JR. and DONALD DEWULF (jointly
and severally, the "Indemnifying Parties") to and for the benefit of LIFE
CRITICAL CARE CORPORATION ("LCCC") and its successors and assigns (collectively,
with LCCC, the "Indemnified Parties").
RECITALS
Pursuant to an Asset Purchase Agreement dated January 22, 1996 (the
"Purchase Agreement"), LCCC has acquired substantially all of the assets of Blue
Water Medical Supply, Inc. ("Medical Supply") and of Blue Water Industrial
Products, Inc. ("Industrial Products") (Medical Supply and Industrial Products
are referred to herein collectively as the "Seller").
Section 6.2 of the Purchase Agreement requires that, prior to any
dissolution or termination of either or both of the companies comprising the
Seller, the Indemnifying Parties, who were the sole stockholders of each Seller
and who were active in the operations of the businesses of each company
comprising the Seller prior to the closing under the Purchase Agreement, must
execute and deliver to LCCC this Agreement and provide the indemnity herein set
forth with respect to certain provisions of the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Indemnification. The Indemnifying Parties and each of them, jointly
and severally, hereby agree to indemnify, save and keep the Indemnified Parties
forever harmless against and from all liabilities to LCCC by the Seller under
Section 6.1 of the Purchase Agreement and pursuant to the provisions of Section
6.1 of the Purchase Agreement to the same effect as if the Indemnifying Parties
were the "Seller" under the Purchase Agreement; provided, however, that in no
event shall the amount to be paid by the Indemnifying Parties pursuant to this
Agreement exceed the amount of the aggregate Purchase Price actually paid to the
Seller pursuant to the Purchase Agreement and further provided, however, that
the indemnification hereunder shall only apply to claims, etc. that are included
in notices to the Indemnifying Parties within one (1) year from the date of
closing under the Purchase Agreement.
1. Recitals. The foregoing recitals are and the same shall be
included in the terms of this Agreement.
<PAGE>
2. Notice. Any notice provided for herein shall be validly given,
made or served if in writing delivered personally or by certified mail return
receipt requested, postage prepaid, addressed to the party at his last known
address.
3. Termination. This Agreement may only be terminated by the
mutual agreement of the parties hereto, in writing.
4. Entire Agreement. This instrument contains the entire
agreement between the parties with respect to the matters contained
herein. It may not be changed orally but only by agreement in writing and
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
5. Choice of Law. The Agreement shall be construed, interpreted
and enforced under the laws of the State of Maryland, exclusive of the
conflicts of law rules of that State.
6. Severability. In the event that one or more provisions of this
Agreement shall be declared invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
7. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which shall together
constitute one document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the date first above written with the intention that it shall
constitute a document under seal.
WITNESS: LIFE CRITICAL CARE CORPORATION
__________________________ By:___________________________(SEAL)
WITNESS:
__________________________ By:___________________________(SEAL)
Louis E. Campbell, Jr.
WITNESS:
__________________________ By:___________________________(SEAL)
Donald DeWulf
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Exhibit 10.4
ASSET PURCHASE AGREEMENT
between
ABC MEDICAL SUPPLY, INC.
("Seller")
and
TIMOTHY DILLON
and
DENNIS PHILLIPS
and
LIFE CRITICAL CARE CORPORATION
("Purchaser")
March 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
RECITALS.................................................................... 1
ARTICLE 1. PURCHASE AND SALE OF ASSETS...................................... 1
SECTION 1.1 Closing Date..................................... 1
SECTION 1.2 Purchase and Sale of Assets...................... 1
SECTION 1.3 Excluded Assets.................................. 2
SECTION 1.4 Purchase Price................................... 2
SECTION 1.5 Payment of Purchase Price........................ 2
SECTION 1.6 Debts, Liabilities and Other Obligations
Assumed by Purchaser......................... 3
SECTION 1.7 Allocation of Purchase Price..................... 4
SECTION 1.8 Change and Use of Name........................... 4
SECTION 1.9 Accounts Receivable.............................. 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER,
DILLON AND PHILLIPS............................... 4
SECTION 2.1 Organization and Qualification, Etc............... 4
SECTION 2.2 Authority Relative to Agreement................... 4
SECTION 2.3 No Breach; Consents............................... 5
SECTION 2.4 No Material Adverse Change........................ 5
SECTION 2.5 Title to Purchased Assets......................... 5
SECTION 2.6 Tax Matters....................................... 6
SECTION 2.7 Contracts and Commitments......................... 6
SECTION 2.8 Litigation, Etc................................... 7
SECTION 2.9 Brokerage......................................... 8
SECTION 2.10 Insurance......................................... 8
SECTION 2.11 Compliance with Laws.............................. 8
SECTION 2.12 Employees......................................... 8
SECTION 2.13 Licenses and Permits.............................. 8
SECTION 2.14 Business Records.................................. 8
SECTION 2.15 Environmental Matters............................. 9
SECTION 2.16 Financial Statements.............................. 9
SECTION 2.17 Material Misstatements or Omissions............... 9
SECTION 2.18 Effective Date of Warranties, Representations
and Covenants.............................. 9
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER ..................... 10
SECTION 3.1 Organization, Etc................................ 10
SECTION 3.2 Authority Relative to Agreement ................. 10
SECTION 3.3 No Breach; Consents.............................. 10
SECTION 3.4 Litigation....................................... 11
SECTION 3.5 Brokerage........................................ 11
ARTICLE 4. CLOSING CONDITIONS .............................................. 11
SECTION 4.1 Closing Conditions Relating to Purchaser......... 11
SECTION 4.2 Closing Conditions Relating to Seller............ 13
ARTICLE 5. PRE-CLOSING AGREEMENTS .......................................... 13
SECTION 5.1 Due Diligence.................................... 13
SECTION 5.2 Operation of Business............................ 13
SECTION 5.3 Best Efforts..................................... 14
SECTION 5.4 Confidentiality.................................. 14
SECTION 5.5 Public Announcements............................. 14
ARTICLE 6. POST-CLOSING AGREEMENTS ......................................... 15
SECTION 6.1 Indemnification and Limitation of Seller's,
Dillon's and Phillips' Liability................ 15
SECTION 6.2 Further Assurances............................... 17
SECTION 6.3 Books and Records................................ 17
SECTION 6.4 Employees ....................................... 18
ARTICLE 7. MISCELLANEOUS ................................................... 18
SECTION 7.1 Survival ........................................ 18
SECTION 7.2 Termination ..................................... 18
SECTION 7.3 Expenses ........................................ 19
SECTION 7.4 Amendments, Waivers and Remedies................. 19
SECTION 7.5 Notices ......................................... 20
SECTION 7.6 Assignment ...................................... 21
SECTION 7.7 Severability .................................... 21
SECTION 7.8 Complete Agreement .............................. 21
SECTION 7.9 No Third-Party Beneficiaries .................... 21
SECTION 7.10 Waiver of Bulk Sales Act ........................ 21
SECTION 7.11 Singular and Plural; Gender ..................... 21
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SECTION 7.12 Governing Law ................................... 21
SECTION 7.13 Counterparts .................................... 21
SECTION 7.14 Schedules........................................ 22
SECTION 7.15 Headings......................................... 22
SECTION 7.16 Further Documents................................ 22
SECTION 7.17 Arbitration...................................... 22
EXHIBITS AND SCHEDULES
Exhibit 1.2 Bill of Sale and Assignment of Assets
Schedule A to Bill of Sale and Assignment of Assets
Schedule 1.3 Excluded Assets
Schedule 1.6 Liabilities Assumed
Schedule 1.6.1 Liabilities Not Assumed
Schedule 1.7 Allocation of Purchase Price
Schedule 2.7 Contracts and Commitments
Schedule 2.10 Insurance
Schedule 2.13 Licenses and Permits
Exhibit 4.1.1.2 Assignments of Leases
Exhibit 4.1.1.3 Covenant Not to Compete
Exhibit 4.1.1.6 Opinion of Counsel for Seller
Exhibit 4.1.1.7 Articles of Transfer
Exhibit 4.2.1.3 Assignment and Assumption Agreement
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 1st day of March, 1996 by and between ABC MEDICAL SUPPLY, INC., a
Michigan corporation ("Seller"); and LIFE CRITICAL CARE CORPORATION, a Delaware
corporation ("Purchaser"); and TIMOTHY DILLON, a Michigan resident ("Dillon")
and DENNIS PHILLIPS, a Michigan resident ("Phillips").
W I T N E S S E T H
WHEREAS, Seller is engaged in the business of operating a home medical
equipment business at facilities located in West Branch, Michigan and other
locations in Michigan (the "Business");
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all of the assets and properties of Seller, including the goodwill
and all assets used in or necessary for the operation of the Business, but
excluding the assets of Wound K-Air Management ("Wound K-Air") and as otherwise
set forth in Schedule 1.3, on the terms and conditions set forth in this
Agreement; and
WHEREAS, Dillon and Phillips (collectively, the "Stockholders") are the
sole Stockholders of Seller and will materially benefit from the consummation of
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the promises,
agreements, representations and warranties hereinafter set forth, Seller and
Purchaser hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
SECTION 1.1. Closing Date. Subject to the terms and conditions hereof,
the consummation of the transactions described herein (the "Closing") will take
place at 10:00 a.m., on or prior to May 30, 1996, at the offices of Rollert and
MacNeal, 216 Cass Street, Traverse City, Michigan 49685, or at such other
location reasonably selected by Purchaser upon advance notice to Seller, or at
such other time and date as the parties mutually may determine (the "Closing
Date").
SECTION 1.2. Purchase and Sale of Assets. Subject to Section 1.3, at
the Closing, Seller will sell, convey, transfer and deliver to Purchaser, and
Purchaser will purchase and receive from Seller, all of the assets, rights, and
tangible and intangible property of Seller
<PAGE>
owned by Seller and used in the Business on the Closing Date, excluding the
assets of Wound K-Air and the other assets referenced in Schedule 1.3 (all of
the assets described in this Section 1.2 are collectively referred to as the
"Purchased Assets"). Subject to Section 1.3, the Purchased Assets shall
include all property and assets owned by Seller and used in the Business, of
every kind and description, wherever located, including all property,
tangible or intangible, real, personal or mixed, inventory, accounts
receivable, equipment, improvements, fixtures, deposits on contractual
obligations or otherwise, Seller's right to use the name "ABC Medical
Supply" and any derivatives or combinations thereof, and all books and records
of Seller relating to the Business, including without limitation trade secret
rights in any information, computer hardware and software, and all trade
titles, marketing materials and direct mail systems developed to promote the
Business, and all customer lists (past, present and prospective), all as the
same shall exist on the Closing Date, including, without limitation, the assets
and property listed or described in the Bill of Sale and Assignment of Assets
(the "Bill of Sale") attached hereto as Exhibit 1.2.
SECTION 1.3. Excluded Assets. The Purchased Assets shall not include
those assets of Seller, if any, listed or described on Schedule 1.3 attached
hereto.
SECTION 1.4. Purchase Price. Subject to the provisions and adjustments
set forth in Section 1.5 hereof, the purchase price (the "Purchase Price") for
the Purchased Assets, and for the benefits and rights conferred upon Purchaser
hereunder, shall be an amount equal to Four Million Five Hundred Thousand
Dollars ($4,500,000).
SECTION 1.5. Payment of Purchase Price. The Purchase Price
described in Section 1.4 shall be paid as follows:
(i) Fifty Thousand Dollars ($50,000) has previously been paid
to Seller to be held pending Closing or termination of this Agreement in
accordance with the terms of this Agreement (the "Initial Deposit");
(ii) If the Closing shall not have been completed on or before
the scheduled Closing Date, the Purchaser shall be entitled to extend the
Closing Date for one (1) sixty (60)-day extension of the Closing Date upon the
payment of an additional Sixty-Seven Thousand Dollars ($67,000) for such
extension, payable on or prior to the original Closing Date (the "Additional
Deposit") (the Initial Deposit and the Additional Deposit are collectively
referred to herein as the "Deposits"), which Deposits shall be applied to the
Purchase Price at Closing. Subject to the provisions of Article 7 hereof, the
Deposits are nonrefundable, having been paid, or to be paid, as the case may be,
to Seller by Purchaser in consideration of Seller taking Seller off the market
and dealing and negotiating exclusively with Purchaser regarding the sale of
Seller through the earlier of the Closing Date or the termination of this
Agreement, and
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<PAGE>
shall be retained by Seller and shall serve as liquidated damages in the event
the Closing does not occur for reasons other than those set forth in Sections
7.2.3 or 7.2.4 hereof.
(iii) The balance of the Purchase Price shall be paid
in cash by wire transfer of immediately available funds to such bank
account as shall be designated by Seller or, at Seller's option, by delivery
of a cashier's check to Seller at Closing; and
(iv) In addition to the payment of the Purchase Price,
Purchaser shall assume and agree to pay certain debt and trade payables of
Seller at Closing as set forth in Section 1.6 hereof;
(v) The Purchase Price is conditioned upon the book value of
the Purchased Assets being at least equal to $650,000 as of the Closing Date
(the "Target Book Value"). To the extent the book value of the Purchased Assets
on Seller's books is less than the Target Book Value on the Closing Date, the
Purchase Price shall be reduced by One Dollar ($1.00) for each One Dollar
($1.00) that the actual book value is less than the Target Book Value; provided,
however, that the book value shall be estimated in good faith by Seller and
Purchaser on the Closing Date and any adjustments thereto following an audit by
Purchaser's accountants shall be adjusted by payments, within ninety (90) days
after Closing, to Seller by Purchaser or by payments by Purchaser to Seller, as
appropriate; and
(vi) Following the Closing, Purchaser agrees to reimburse to
Seller promptly any amounts of account receivables paid into the Seller's
lock-box (which will be assigned to Purchaser at Closing) on account of
verifiable invoices issued by or on behalf of Wound K-Air.
SECTION 1.6. Debts, Liabilities and Other Obligations Assumed by
Purchaser. Purchaser shall assume all liabilities relating to the Purchased
Assets or the operation of the Business arising on or after the Closing Date.
Purchaser shall also assume all those debts, obligations, contracts, leases or
liabilities of Seller which are, as at Closing, shown or included in SCHEDULE
1.6 attached hereto (with revisions therein to reflect changes in the ordinary
course of business between the effective date of this Agreement and the Closing
Date) and all debt of Seller shown or included in Seller's books and records of
account of the Business as ordinary and customary accounts payable, accrued
payroll taxes not yet due to be paid, and all miscellaneous other debts and
liabilities of the type historically shown on Seller's books, to the extent any
such items are used to compute Target Book Value, except Purchaser shall not
assume those contracts, debts or liabilities of Seller shown on SCHEDULE 1.6.1
of this Agreement. The foregoing debts, liabilities and other obligations,
specifically excluding those which are shown on SCHEDULE 1.6.1, are hereinafter
referred to as the "Assumed Obligations." Seller shall hold Purchaser harmless
from, and indemnify Purchaser against, any debt, obligation, contract, lease or
liability of
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<PAGE>
Seller which is shown on SCHEDULE 1.6.1; and Purchaser shall hold Seller
harmless from, and indemnify and defend Seller against, all the debts,
obligations, contracts, leases or liabilities required to be assumed by
Purchaser pursuant to this Agreement.
SECTION 1.7. Allocation of Purchase Price. After due negotiation, the
parties agree that the consideration described in Section 1.4 shall be allocated
among the Purchased Assets in the manner set forth in SCHEDULE 1.7.
SECTION 1.8. Change and Use of Name. Concurrently with the Closing,
Seller shall take all actions required by the Michigan Corporation and
Securities Bureau to enable Purchaser to receive permission from such
governmental agency to use the name "ABC Medical Supply" in Michigan, and Seller
shall make no further use of such name.
SECTION 1.9. Accounts Receivable. A list of Accounts Receivable (i.e.,
any right to payment for goods sold or leased or for services rendered whether
or not they have been earned by performance) of Seller which shall include the
names and addresses of the customer from whom the Account Receivable is owing
and the age and respective amount of each such Account Receivable shall be
provided by Seller to Purchaser at Closing (the "Accounts Receivable List") and
such Accounts Receivable shall be assigned by Seller to Purchaser at Closing as
part of the Purchased Assets.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLER, DILLON AND PHILLIPS
As a material inducement to Purchaser to enter into and perform its
obligations under this Agreement, Seller, Dillon and Phillips hereby, jointly
and severally, represent and warrant to Purchaser as follows:
SECTION 2.1. Organization and Qualification, Etc. Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Michigan, and has the corporate power to own, lease or
operate all of its properties and assets and to carry on the Business as and
where it is now being conducted. Copies of Seller's Articles of Incorporation
and By-Laws, previously delivered to Purchaser and certified by the Secretary of
Seller, are true, correct and complete copies of such documents and will not be
amended prior to the Closing Date without the prior written consent of
Purchaser.
SECTION 2.2. Authority Relative to Agreement. The Seller has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Seller and the consummation of the transactions
contemplated on its part have been
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<PAGE>
authorized by its Board of Directors and stockholders. No other corporate
proceedings on the part of the Seller are necessary to authorize the
execution and delivery of this Agreement by it or the consummation by it of the
transactions contemplated on its part hereby. This Agreement has been duly
executed and delivered by each of Seller, Dillon and Phillips and is a valid
and binding agreement of Seller, Dillon and Phillips, enforceable in
accordance with its terms, except as the enforceability may be affected by
bankruptcy, insolvency, reorganization or other similar laws presently or
hereafter in effect affecting the enforcement of creditors' rights generally.
SECTION 2.3. No Breach; Consents. The negotiation, execution, delivery
and performance of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, (a) do not and will not conflict with or
result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of any lien, security interest,
charge, encumbrance or other restriction upon the Purchased Assets under, or
except as otherwise disclosed to Purchaser in the schedules and documents
attached hereto, or as otherwise excepted in this Agreement, do not and will not
require any authorization, consent, approval, exemption or other action by or
notice to any third party, under the provisions of the Articles of Incorporation
or By-Laws of Seller or any license, permit, contract, franchise, indenture,
mortgage, lease, loan agreement or other agreement (oral or written) or
instrument to which Seller is a party or under which its properties are bound,
and (b) except as otherwise disclosed to Purchaser as aforesaid, to the best
knowledge of Seller, do not require any authorization, consent, approval,
exemption or other action by or notice to any court or governmental body under
any law, statute, rule, regulation or decree to which Seller is subject.
SECTION 2.4. No Material Adverse Change. Since September 30, 1995,
there has been no material adverse change in the financial condition,
properties, assets, business or prospects of Seller, including the Purchased
Assets, except as may have been disclosed by Seller to Purchaser in writing
prior to Closing.
SECTION 2.5. Title to Purchased Assets.
2.5.1. Seller owns, or will at Closing own, good and
marketable title, free and clear of all liens and encumbrances (except for the
Assumed Obligations) to all of the Purchased Assets, and on the Closing Date and
upon conveyance, assignment and delivery to Purchaser as provided herein,
Purchaser shall have (subject to compliance with applicable registration, filing
and recording requirements) good and marketable title, or valid, binding and
enforceable rights as contracting party or licensee, as the case may be, to all
the Purchased Assets, except software licenses or, without implied limitation,
other agreements or licenses which, by their express terms, are not
transferable.
2.5.2. To the best of Seller's knowledge, Seller is not in
violation of any applicable zoning ordinance or other law, regulation or
requirement relating to the
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<PAGE>
operation of owned or leased properties and Seller has not received any notice
of any such violations within the three years prior to the date hereof.
2.5.3. Seller leases, licenses or owns all of the material
properties and assets used in the Business.
SECTION 2.6. Tax Matters. All tax returns and related information
required to be filed by or on behalf of Seller prior to the date hereof have
been prepared and filed in accordance with applicable law, and all taxes,
interest, penalties, assessments or deficiencies that have become due pursuant
to such returns or any assessments or otherwise have been paid in full. All such
returns are true and correct in all material respects. To the best of Seller's
knowledge, there is no unresolved claim concerning Seller's federal, state and
local tax liabilities.
SECTION 2.7. Contracts and Commitments.
2.7.1. Attached hereto as Schedule 2.7 is a separate
schedule containing an accurate and complete list of:
(i) any contract, agreement, purchase order or other
commitment for the purchase, sale or provision to or by Seller of
goods, property or services having an individual value in excess of
$5,000 or an aggregate value in excess of $50,000;
(ii) any pension, profit sharing, stock option, employee stock
purchase or other plan providing for deferred compensation or other
employee benefit plan, or any contract with any labor union;
(iii) any agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of Seller;
(iv) any lease or agreement under which it is lessee of or
holds or operates any property, real or personal, owned by any other
party, except for any lease of personal property under which the
aggregate annual rental payments do not exceed $1,000;
(v) any lease or agreement under which it is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by it having an individual value in
excess of $1,000;
(vi) all agreements providing for the services of an
independent contractor to which Seller is a party or by which it is
bound;
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<PAGE>
(vii) as of a date no earlier than September 30, 1995, all of
Seller's Accounts Receivables, together with detailed information as to
each such listed receivable which has been outstanding more than thirty
(30) days;
(viii) any and all other or additional contracts, commitments,
agreements, arrangements, writings, guarantees, leases and licenses to
which Seller is a party or by which Seller or any of its property is
bound having an individual value in excess of $5,000 or an aggregate
value in excess of $50,000.
Each of the contracts, agreements, leases, licenses and commitments
required to be listed on SCHEDULE 2.7 (the "Contracts") is valid and binding,
enforceable in accordance with its respective terms, in full force and effect
and, except as otherwise specified in SCHEDULE 2.7, validly assignable to
Purchaser without the consent, approval or act of, or the making of any filing
with, any other person so that, after the assignment thereof to Purchaser
pursuant hereto, Purchaser will be entitled to the full benefits thereof. True
and complete copies of all of the Contracts (together with any and all
amendments thereto) have been delivered to Purchaser and identified with a
reference to this Section of this Agreement. To the best of its knowledge,
Seller has performed all obligations required to be performed by it and is not
in default under or is in breach of or in receipt of any claim of default or
breach under any of the Contracts and no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance under any such Contract; and Seller has no
knowledge of any breach or anticipated breach by the other parties to any such
Contract; and, to the best of its knowledge, Seller is not a party to any
Contract for the purchase of goods or services at a rate currently above market
prices.
2.7.2. (i) Seller has performed in all material respects all
obligations required to be performed by it and is not in default under or in
breach of nor in receipt of any claim of default or breach under any agreement
referred to in Section 2.7.1, (ii) to the best knowledge of Seller, no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance under any such agreement,
and (iii) Seller does not have any knowledge of any breach or anticipated breach
by any other party to such agreements.
2.7.3. Purchaser has been heretofore supplied with a true
and correct copy of each of the written contracts which are referred to in
Section 2.7.1, together with all amendments, waivers or other changes thereto.
SECTION 2.8. Litigation, Etc. Except as shown in SCHEDULE 1.6, there
are no actions, suits, proceedings, orders, investigations or claims pending, or
to the best of Seller's knowledge, threatened, against Seller, or to which
Seller is a party, at law or in
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<PAGE>
equity, before or by any court, tribunal, governmental department,
commission, board, bureau, agency or instrumentality, or any arbitration
proceedings pending under collective bargaining agreements or otherwise. To the
best of Seller's knowledge, except for pending legislation regarding
medicare and medicaid reimbursement that might affect the Business generally,
there is no proposed law, rule, regulation, ordinance, order, judgment,
decree or award that would be applicable to Seller that would reasonably
be expected to have a material adverse effect on the condition (financial
or otherwise), business, assets, liabilities, capitalization, financial
position, results of operations or prospects of Seller.
SECTION 2.9. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement (oral or
written) binding upon Seller or any stockholder of Seller except the business
brokerage agreement between Telesis and Seller, as to which Seller shall
indemnify and save Purchaser harmless.
SECTION 2.10. Insurance. SCHEDULE 2.10 contains an abstract or summary
of each outstanding insurance policy maintained by Seller. Seller has given to
Purchaser a copy of each such insurance policy maintained with respect to
Seller's properties, assets and the Business, and each such policy is in full
force and effect. Purchaser, at its election at Closing and subject to the
consent of the applicable insurance underwriter, which consent, if required,
Seller agrees to use its commercially reasonable efforts to obtain on behalf of
Purchaser, shall be entitled to assume any and all outstanding insurance upon
payment to Seller of a prorated amount of the premium for such insurance for the
remaining term thereof.
SECTION 2.11. Compliance with Laws. To the best of Seller's knowledge,
Seller has complied with all laws, rules, regulations, ordinances, orders,
judgments, and decrees applicable to its business or properties, and to its best
knowledge is not in violation of any law or any regulation or requirement which
might have a material adverse effect upon its financial condition, operating
results or business prospects, and Seller has not received notice of any such
violation.
SECTION 2.12. Employees. To the best of Seller's knowledge, Seller has
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes.
SECTION 2.13. Licenses and Permits. All material permits, licenses and
franchises held by Seller, or by its officers, employees or agents, with respect
to the Business are listed on SCHEDULE 2.13. Except as set forth on SCHEDULE
2.13, to the best of Seller's knowledge, such licenses, permits and franchises
are freely transferable by Seller.
SECTION 2.14. Business Records. Seller's personnel files, accounting
records, financial statements, operating statements and customer correspondence
files shall be made available to Purchaser promptly upon the execution of this
Agreement and are
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substantially complete and correct in all material respects, and reflect
Seller's business operations for a period of not less than three (3) years.
SECTION 2.15. Environmental Matters. To the best of Seller's knowledge,
there is no condition, circumstance, or set of facts (including without
limitation the presence, either past or present, of any underground storage
tanks) that constitutes a significant hazard to health, safety, property, or the
environment relating to the Business or any real property owned or leased by
Seller for which the Business, Seller or the owner or operator of such real
property would be responsible.
SECTION 2.16. Financial Statements. Seller's financial statements and
notes thereto as at and for the fiscal year ended December 31, 1994, and for the
ten months ended October 31, 1995, consisting of balance sheets and statements
of income and cash flow, are to be audited by the certified public accounting
firm of Ernst & Young LLP, independent certified public accountants, on or
before December 31, 1995. All such financial statements, copies of which will,
upon completion, be attached hereto as EXHIBIT 2.16 (the "Statements"), will
fairly present the financial condition and results of the operations of Seller
as at the date indicated and for the period indicated, will have been prepared
in accordance with generally accepted accounting principles consistently
applied, and will be in accordance with the books and records of Seller. Time is
of the essence in completing the audit and both Seller and Purchaser agree to
cooperate fully to expedite the audit process. Seller shall provide Purchaser
with monthly financial statements for the periods following September 30, 1995,
as they become available. Purchaser shall pay the auditors for the preparation
of the Statements provided that Purchaser shall have the right to select the
auditors and further provided that Seller pays its accountants to prepare the
books and records for audit.
SECTION 2.17. Material Misstatements or Omissions. Seller (for purposes
of this Section 2.17 and for purposes of this Article 2 whenever the knowledge
of Seller is used, the knowledge of "Seller" shall mean the actual knowledge
after reasonable diligence of Dillon and Phillips) has not knowingly made any
material misstatements of fact or omitted to state any material fact necessary
or desirable to make complete, accurate, and not misleading every
representation, warranty, schedule, and agreement set forth, described or
referred to herein.
SECTION 2.18. Effective Date of Warranties, Representations and
Covenants. Each warranty, representation, and covenant set forth in this Article
2 shall be deemed to be made on and as of and speak on and as of the date hereof
and as of the Closing Date (except as otherwise specifically provided herein).
Prior to the Closing Date, Seller will notify Purchaser of any change since the
date hereof in any fact, condition or circumstance of which it becomes aware and
which would require a modification of the foregoing representations and
warranties (including any schedule thereto) to make such representation or
warranty (or schedule thereto) complete, accurate and not misleading in all
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respects. The representations and warranties contained in this Article 2 shall
not be affected or deemed waived by reason of the fact that Purchaser and/or its
representatives knew or should have known that any such representation or
warranty is or might be inaccurate in any respect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As a material inducement to Seller to enter into and perform its
obligations under this Agreement, Purchaser represents and warrants to Seller as
follows:
SECTION 3.1. Organization, Etc. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware.
SECTION 3.2. Authority Relative to Agreement. Purchaser has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Purchaser. No
other corporate proceedings on its part or the part of the stockholders of
Purchaser are necessary to authorize the execution and delivery of this
Agreement by it or the consummation by it of the transactions contemplated on
its part hereby. This Agreement has been duly executed and delivered by
Purchaser and is the valid and binding agreement of Purchaser except as the
enforceability may be affected by bankruptcy, insolvency, reorganization or
other similar laws presently or hereafter in effect affecting the enforcement of
creditors' rights generally.
SECTION 3.3. No Breach; Consents. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby (a) do not and will not conflict with or result
in any breach of any of the provisions of, constitute a default under, result in
a violation of, result in the creation of any lien, security interest, charge or
encumbrance upon the assets of either of Purchaser under, or require any
authorization, consent, approval, exemption or other action by or notice to any
third party under the provisions of the Charter or By-Laws of Purchaser or any
license, indenture, mortgage, lease, loan agreement or other agreement (oral or
written) or instrument to which Purchaser is a party, and (b) do not require any
authorization, consent, approval, exemption or other action by or notice to any
court or governmental body under any law, statute, rule, regulation or decree to
which Purchaser is subject.
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SECTION 3.4. Litigation. There is no claim, action, suit or proceeding
pending or, to the best of Purchaser's knowledge, threatened against Purchaser
or any of its properties which seeks to prohibit, restrict or delay consummation
of the transactions contemplated hereby or to limit in any manner the right of
Purchaser to control Seller or any material aspect of the Business of Seller
after the Closing Date, and there is no judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality or arbitrator outstanding against Purchaser having, or which
Purchaser believes may in the future have, any such effect.
SECTION 3.5. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Purchaser.
ARTICLE 4
CLOSING CONDITIONS
SECTION 4.1. Closing Conditions Relating to Purchaser. The obligation
of Purchaser to consummate the purchase of the Purchased Assets will be subject
to the satisfaction of the following conditions, any of which may be waived by
Purchaser in its sole and absolute discretion:
4.1.0 Contingencies.
4.1.0.1. Purchaser intends to register
certain of its securities under the Securities Act of 1933, as amended (the
"Securities Act") as part of an initial public offering of its securities (the
"IPO"). Accordingly, Purchaser agrees to use its reasonable best efforts to do
as follows:
(a) Prepare and file with such amendments and
supplements to the registration statement and the prospectus used in
connection therewith as may be necessary to keep said registration statement
effective and to comply with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Securities Act, with respect to
the sale of securities covered by said registration statement for the period
necessary to complete the proposed public offering;
(b) Enter into an underwriting agreement with
customary provisions reasonably required by the underwriter, if any, of the
offering; and
(c) Register its securities covered by said
registration statement under the securities or "blue sky" laws of appropriate
jurisdictions.
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It shall be a condition precedent to
Purchaser's obligation to close hereunder that the IPO shall have been
completed on terms and conditions reasonably satisfactory to Purchaser;
provided, however, that this condition precedent may be waived by Purchaser
in its sole and absolute discretion in which event it may close and pay the
Purchase Price all in cash.
4.1.1. Deliveries. At or prior to the Closing, Seller
shall deliver, or cause to be delivered to Purchaser, the following items,
fully executed by all appropriate parties and in form and substance acceptable
to Purchaser:
4.1.1.1. Bill of Sale. A Bill of Sale in the form
of EXHIBIT 1.2 attached hereto together with any and all other evidences
of conveyance reasonably requested by Purchaser to obtain clear title to the
Purchased Assets.
4.1.1.2. Assignments of Leases. Assignments of Leases
in the form of EXHIBIT 4.1.1.2.
4.1.1.3. Covenants Not to Compete. Covenants Not
to Compete in the form of EXHIBIT 4.1.1.3 attached hereto executed by each of
the stockholders of Seller.
4.1.1.4. Corporate Resolutions. Seller shall deliver
to Purchaser certified copies of the resolutions of its Board of Directors
and certified copies of the resolutions of its stockholder(s) authorizing
the transactions contemplated herein.
4.1.1.5. Consents. Seller shall deliver to
Purchaser copies of all necessary third party and governmental consents, in
a form satisfactory to Purchaser, that Seller is required to obtain in order to
consummate the transactions contemplated by this Agreement.
4.1.1.6. Opinion of Counsel for Seller. Purchaser
shall receive an opinion dated the Closing Date of Rollert and MacNeal of
Traverse City, Michigan, counsel for the Seller, in the form of EXHIBIT
4.1.1.6 attached hereto.
4.1.1.7. Articles of Transfer. Articles of
Transfer in the form of EXHIBIT 4.1.1.7 attached hereto.
4.1.2. Due Diligence Results. Nothing shall have come to
the attention of Purchaser, in the course of its due diligence investigation
pursuant to Section 5.1 or otherwise, which demonstrates that any of the
representations or warranties of Seller is inaccurate or incomplete in any
material manner.
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4.1.3. No Injunction. The consummation of the
transactions contemplated hereby shall not have been enjoined by any court of
competent jurisdiction and no proceeding seeking such an injunction shall be
pending.
SECTION 4.2. Closing Conditions Relating to Seller. The obligation
of Seller to consummate the sale of the Purchased Assets will be subject to
the satisfaction of the following conditions:
4.2.1. Deliveries. At or prior to the Closing, Purchaser
shall deliver, or cause to be delivered to Seller, the following items:
4.2.1.1. The Purchase Price;
4.2.1.2. Assignments of Leases in the form of EXHIBIT
4.2.1.2.; and
4.2.1.3. An Assignment and Assumption Agreement
in the form of EXHIBIT 4.2.1.3 attached hereto.
4.2.2. No Injunction. The consummation of the transactions
contemplated hereby shall not be enjoined by any court of competent
jurisdiction and no proceeding seeking such an injunction shall be pending.
ARTICLE 5
PRE-CLOSING AGREEMENTS
SECTION 5.1. Due Diligence. Seller shall grant to Purchaser, and its
employees, counsel, accountants and other representatives, full and complete
access to Seller, its facilities, management, employees and records and its
outside accountants and counsel for purposes of a due diligence investigation in
connection with the transactions contemplated hereby. Purchaser agrees to
exercise its reasonable best efforts in conducting such due diligence in a
manner that will not significantly interfere with or disrupt the normal
operations of Seller or arouse suspicions of Seller's employees, customers or
suppliers that either the capital stock or the assets of Seller are for sale.
Seller will provide Purchaser and its representatives full access to all
relevant financial information, personnel, service and contractual information.
The cost of any such due diligence shall be borne by Purchaser.
SECTION 5.2. Operation of Business. Seller shall continue to operate
the Business in the ordinary course in such manner that each and every warranty
and representation of Seller made herein as of the date hereof will be true,
complete and accurate in all respects as of the date of the Closing hereunder,
without substantial change, and will maintain or cause to be maintained all
existing insurance coverage on the Purchased Assets of Seller
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until the Closing. Until the Closing, all risk of loss, damage, or
destruction to the Purchased Assets shall be upon Seller, and in the event of
any substantial and material loss, damage, or destruction to the Purchased
Assets which is not replaced prior to Closing and which is likely to have a
materially adverse effect on the prospects of the Business, taken as a whole,
after Closing, Purchaser shall be entitled to terminate this Agreement within
thirty (30) days of learning of the same. Prior to Closing, Seller shall not
increase any current compensation levels of employees or pay any bonuses or
other direct or indirect compensation without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld or delayed and
provided that if no objection is raised by Purchaser within five (5) business
days after receiving written notice from Seller regarding any such
intention(s), Seller may proceed with the intentions stated in its written
notice. Seller agrees to provide to Purchaser monthly financial statements
for the periods following September 30, 1995, as they become available.
SECTION 5.3. Best Efforts. The parties hereto agree to use their best
efforts to cause all conditions to Closing to be satisfied and to cause the
transactions contemplated hereby to be consummated not later than May 30, 1996.
SECTION 5.4. Confidentiality. Purchaser and Seller agree that they, and
their respective officers, directors and other representatives, will hold in
strict confidence the negotiations relating to the transactions contemplated by
this Agreement, and all information exchanged pursuant thereto. If, for any
reason, Closing does not occur, all information exchanged by Purchaser and
Seller shall promptly be returned to the other party. The parties hereto
acknowledge and understand that Purchaser shall undertake the IPO described in
Section 4.1.0 hereof and shall be entitled to comply with all applicable
regulatory and disclosure requirements incident to such registration of
securities. In addition, Seller will refrain from, and will cause its officers,
directors, representatives, agents and employees to refrain from, directly or
indirectly, encouraging, soliciting, initiating or participating in discussions
or negotiations with or providing any non-public information to any person other
than Purchaser concerning the sale or purchase of the Business (except in the
ordinary course of its business), any merger or consolidation involving Seller
or any other transaction in which Seller's Business would be acquired by a
person other than Purchaser.
SECTION 5.5. Public Announcements. Neither Purchaser nor Seller shall
issue any press release or otherwise make any public statement with respect to
this Agreement or the transactions contemplated hereby unless such press release
or public statement is satisfactory to the other party to this Agreement, and
Purchaser and Seller shall consult with each other as to the form and substance
of any public disclosure related thereto; provided, however, that nothing
contained herein shall prohibit any party from making any disclosure which is
required by law but only after the other party has been given notice of and a
reasonable opportunity to contest any such disclosure allegedly required by law.
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ARTICLE 6
POST-CLOSING AGREEMENTS
SECTION 6.1. Indemnification and Limitation of Seller's, Dillon's and
Phillips' Liability.
6.1.1. Indemnification. Within the limits of liability and the
terms and conditions set forth in Sections 6.1.2 and 6.1.6 below, the Seller
(and Dillon and Phillips, severally one-half as to each) (hereinafter the
"Indemnitors") hereby agree to indemnify, defend, guarantee and hold the
Purchaser, its successors and assigns and its stockholders, directors, officers,
affiliates, representatives and employees and the estates, personal
representatives and heirs of such persons, harmless from and against any and all
loss, liability, demands, claims, actions or causes of action, damages,
deficiency or expenses (including interest, penalties, costs of litigation and
reasonable attorneys' fees) (collectively, the "Losses") arising out of or due
to any incorrect representation or warranty of the Indemnitors contained in
Article 2 of this Agreement (subject to, where applicable, materiality standards
set forth in particular representations and warranties set forth in Article 2 of
this Agreement). The amount of any such loss shall be determined after giving
effect to any tax savings which might be realized by the Purchaser as a result
thereof, and shall be net of any insurance proceeds paid to or for the benefit
of the Purchaser.
6.1.2. Survival of Representations and Warranties; Limitation
on Liability and Time for Bringing Claims Hereunder. The Indemnitors have not
made any representation or warranty not set forth in Article 2 of this Agreement
(including any exhibits or schedules delivered by Seller to Purchaser as
required by the terms of such Article 2). All representations and warranties
shall survive the Closing; provided, however, the Indemnitors' liability
hereunder for the falsity of any such representation or warranty, or for breach
or default in the performance of any agreement or covenant entered into or made
hereunder (where such agreement or covenant is to be performed on or before the
Closing Date), shall be limited to liabilities of which the Indemnitor shall
receive notice in writing from the Purchaser, or its successors or assigns,
within two (2) years from the Closing Date. The Purchaser, its successors and
assigns, shall, as soon as practicable after obtaining knowledge thereof, notify
the Indemnitors of any such liability, asserted liability, breach of warranty,
agreement or covenant, untruth or inaccuracy of representation, or any claim
thereof, and in any event the Purchaser shall take no action or inaction which
would prejudice the defense thereof. If the amount claimed relates to a claim of
a third party and does not exceed the limits, if any, of the Indemnitors'
liability as hereinafter set forth, the Indemnitors or their legal
representatives shall have, at their election, the right to compromise or defend
any such matter through counsel of their own choosing, at the expense of the
Indemnitors, and the Purchaser, at its election, shall have
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the right to fully participate in any decision to compromise or defend any
such matter through counsel of its choosing at the expense of the Purchaser.
If the amount claimed relates to a claim of a third party, and when added to
all other liquidated or unliquidated indemnified claims, exceeds the limits, if
any, of the Indemnitors' liability as hereinafter set forth, the Purchaser or
its legal representatives shall have, at its election, the right to
compromise or defend any such matter through counsel of its own choosing, and
the Indemnitors', at their election, shall have the right to fully
participate in any decision to compromise or defend any such matter through
counsel of their choosing, at the expense of the Indemnitors. Such notice and
opportunity to compromise or defend, if applicable, shall be a condition
precedent to any liability of the Indemnitor. Each party agrees to cooperate
with the other and their counsel in the compromising of or the defending
against any such liabilities. With respect to tax matters, the selection of
the forum shall be by mutual agreement.
6.1.3. A party required under this Section 6.1 to furnish
indemnity (the "Indemnifying Party") shall satisfy its obligation of
indemnification under this Section 6.1 within forty-five (45) days after written
notice thereof from any party entitled to such indemnity hereunder (the
"Indemnified Party") to the Indemnifying Party; provided, however, that a party
shall not be deemed in breach hereof for so long as it contests in good faith
its liability for indemnification hereunder.
6.1.4. So long as the Indemnifying Party is defending in good
faith any such claim or demand, (i) the Indemnified Party shall not settle such
claim or demand without the prior written consent of the Indemnifying Party, and
(ii) any settlement of such claim or demand made without such consent of the
Indemnifying Party shall not be subject to indemnity under this Section 6.1. If
the Indemnifying Party fails to acknowledge in writing its obligation to defend
against or settle such claim or proceeding within twenty (20) days after
receiving notice thereof from the Indemnified Party (or such shorter time
specified in the notice as the circumstances of the matter may dictate), the
Indemnified Party shall be free to dispose of the matter at the expense of the
Indemnifying Party, in any way in which the Indemnified Party deems to be in its
best interest. Purchaser, in its reasonable discretion to protect its financial
interest may set off the amount of any legitimate claim for which it may be
entitled to indemnification hereunder against any payment to be made to Seller
hereunder.
6.1.5. The Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other materials
required for use in contesting any claim or demand asserted by a third party
against any Indemnified Party. Whether or not the Indemnifying Party so elects
to defend any such claim or demand, the Indemnified Party shall not have any
obligation to do so and the Indemnified Party shall not waive any rights it may
have against the Indemnifying Party under this Section 6.1 with respect to any
such claim or demand by electing or failing to elect to defend any such claim,
provided that the Indemnified Party against which a claim or demand is asserted
in
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the first instance shall file in a timely manner any answer or pleading with
respect to a suit or proceeding in such action as is necessary to avoid default
or other adverse results.
6.1.6. The obligations of Section 6.1.1 above shall be
subject to and limited by the following:
6.1.6.1. Purchaser shall not be entitled to
indemnification pursuant to this Agreement until the total for all liquidated
amounts of Losses for which Purchaser is entitled to indemnification hereunder
exceeds $75,000 (the "Threshold Amount"), and, in the event the Losses for
which Purchaser is entitled to indemnification hereunder exceeds the
Threshold Amount, Purchaser shall be entitled to recover all of such Losses
beginning with the first dollar and not merely the amount in excess of the
Threshold Amount.
6.1.6.2. Notwithstanding any provision herein to the
contrary, Purchaser shall not be entitled to indemnification for any amounts
in excess of an amount equal to the Purchase Price.
SECTION 6.2. Further Assurances. Seller shall, at any time and from
time to time on and after the Closing Date, upon request by Purchaser and
without further consideration, take such actions or cause others to do so, and
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all transfers, conveyances, powers of attorney and assurances, as may
be required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming to Purchaser, or its respective successors
and assigns, or for aiding and assisting in collecting or reducing to
possession, the Purchased Assets. To provide further assurances to Purchaser of
its performance hereunder, Seller agrees that it shall not, during the one year
period after the Closing Date, voluntarily dissolve or terminate its corporate
existence, or seek protection under any bankruptcy, receivership or other law
for the relief of debtors.
SECTION 6.3. Books and Records. At or immediately following the
Closing, Seller shall deliver to Purchaser all records constituting part of the
Purchased Assets; and all of Seller's correspondence, files, books and records,
necessary for Purchaser's conduct and operation of the Business and the
Purchased Assets; and shall instruct any other party in possession of such
materials to release them to Purchaser (except to the extent that Seller is
prohibited from or restricted in providing such information by other agreements
or applicable law). Seller shall retain the original copies of its tax returns,
and other records which it is required by law to maintain. Purchaser shall
safely store at its facilities in Gladwin, Michigan, or at such other reasonable
location of Purchaser upon prior notification to Seller, all records delivered
to it from Seller, and shall grant Seller reasonable access thereto for
legitimate business purposes upon Seller's request as may be made from time to
time for at least five (5) years after Closing; provided, however, that in the
event Purchaser intends to move such records out of the State of Michigan, prior
to
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such move Seller shall be permitted to request, and Purchaser shall be
required to provide, copies of such of the records as may reasonably be required
by Seller, subject to customary confidentiality covenants by Seller with respect
thereto.
SECTION 6.4. Employees. Purchaser shall, as part of the Assumed
Obligations, assume and have responsibility for all salaries, accrued bonuses,
commissions, vacation pay, and all other employee welfare plans of Seller, and
all payroll taxes thereon which accrued or earned prior to the time of Closing,
in all events only if and only to the extent the same have been included as part
of the computation of the Target Book Value. Seller shall remain responsible for
employee severance and termination benefits, if any, and all other employment
benefits, claims of wrongful termination, or the like, relating to Seller's
employees. In the event that Seller shall elect to terminate the employment of
its employees contemporaneously with the Closing, Seller shall be responsible
for giving such notification as may be required by the Worker Adjustment and
Retraining Notification Act of 1988, if applicable, and shall indemnify and hold
Purchaser harmless from and against all liabilities arising out of the
notification or other requirements thereof.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Survival. The representations and warranties of Seller
shall survive Closing.
SECTION 7.2. Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at
any time prior to Closing.
7.2.1. By the mutual consent of Purchaser and Seller.
7.2.2. By Purchaser if all of the conditions to Closing
described in Section 4.1 have not been satisfied by May 30, 1996 or within ten
(10) days after the receipt by Purchaser of the Statements referred to in
Section 2.16 hereof.
7.2.3. By Purchaser or Seller if the transactions shall not
have been consummated by May 30, 1996, or such later date, including any
extended Closing Date, as may be agreed upon by the parties, due to the fault,
failure or neglect of the other party to proceed with the Closing.
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7.2.4. By Purchaser if Seller has materially breached any
representation or warranty herein or failed to perform any material obligation
or condition hereof and such breach or failure shall not have been cured in
manner, form and substance reasonably satisfactory to Purchaser; and
7.2.5. By Seller if Purchaser has materially breached any
representation or warranty herein or failed to perform any material obligation
or condition hereof and such breach or failure has not been cured in manner,
form and substance reasonably satisfactory to Seller.
Any termination pursuant to this Section 7.2 shall be without liability on the
part of any party, except as provided in Section 7.3 below.
SECTION 7.3. Expenses. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement. At Closing, Seller shall pay all sales and/or transfer tax which
may be required to be paid in connection with the transactions contemplated
herein including the transfer from Seller to Purchaser of the Purchased Assets
except for the transfer of vehicles in which situation Purchaser shall pay the
first $10,000 of Michigan vehicle transfer tax on all of the vehicles
transferred, in the aggregate, and Seller shall pay any amount in excess of such
amount. Seller agrees that the Purchased Assets include unique property that
cannot be readily obtained on the open market and that Purchaser will be
irreparably injured if this Agreement is not specifically enforced. In the event
Purchaser elects to terminate this Agreement pursuant to Section 7.2.3 or
Section 7.2.4 instead of seeking specific performance, Purchaser shall be
entitled as its sole other remedy to recover Purchaser's actual damages but in
any event not to exceed $200,000. If Seller terminates this Agreement solely as
a result of Section 7.2.3 or Section 7.2.5 hereof, Seller shall be entitled to
retain the Deposits as the sole remedy of Seller hereunder.
SECTION 7.4. Amendments, Waivers and Remedies. The parties hereto, by
mutual agreement in writing, may amend, modify and supplement this Agreement.
The failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach. Pursuit by any party hereto of any remedy shall not preclude
pursuit by it of any other remedy which may be provided by law or equity nor
shall the pursuit of any remedy by a party hereto constitute a forfeiture or
waiver of any amount due such party or of any damage accruing by reason of the
violation of any of the terms, provisions and covenants in this Agreement.
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SECTION 7.5. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) upon delivery if delivered by hand; (ii) four (4) days subsequent to
mailing if mailed by express, certified or registered mail, with postage
prepaid, in the continental United States; (iii) two (2) days subsequent to pick
up by such courier if sent by a nationally or internationally recognized
overnight courier service that regularly maintains records of items picked up
and delivered; or (iv) when transmitted if sent by telecopier, as follows:
If to Purchaser:
Life Critical Care Corporation
c/o The Morgenthau Group, Inc.
504 Cathedral Street
Baltimore, Maryland 21201
Attn: Ms. Amy E. Parker
Fax No.: (410) 727-1427
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
210 West Pennsylvania Avenue, Suite 400
Towson, Maryland 21204-4515
Fax No.: (410) 832-2015
If to Seller:
Mr. Dennis Phillips
10131 Dalzell Road
Traverse City, Michigan 49684
Fax No.: (517) 345-1495
with a copy to:
John A. MacNeal, Esq.
Rollert and MacNeal
216 Cass Street, Box 466
Traverse City, Michigan 49684
Fax No.: (616) 929-4955
Any party hereto may specify in writing a different address for such purpose to
the other parties at least five (5) days prior to the effective date of such
address change.
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SECTION 7.6. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Agreement, and the
rights, interests and obligations hereunder, may not be assigned by either party
without the prior written consent of the other party hereto.
SECTION 7.7. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provision of this Agreement unless the
consummation of the transaction contemplated hereby is adversely affected
thereby.
SECTION 7.8. Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
SECTION 7.9. No Third-Party Beneficiaries. This Agreement shall
be for the benefit only of the parties hereto, and their respective
successors and assigns.
SECTION 7.10. Waiver of Bulk Sales Act. In consideration of, and in
reliance upon, the representations and warranties made by Seller in Article 2,
Purchaser hereby waives compliance with the provisions of any applicable bulk
transfer laws.
SECTION 7.11. Singular and Plural; Gender. The singular shall
include the plural and vice-versa, and the use of one gender shall be deemed
to include all other genders whenever appropriate.
SECTION 7.12. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement will be governed by the laws of the State
of Maryland without reference to any conflict of laws rules.
SECTION 7.13. Counterparts. This Agreement may be executed in two or
more counterparts each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
-21-
<PAGE>
SECTION 7.14. Schedules. The Schedules hereto are an integral part of
this Agreement. Information described in any Schedule of this Agreement shall be
deemed disclosed in all Schedules of this Agreement and the term "Agreement"
shall include all Schedules, exhibits and other deliveries attached or made
pursuant hereto. Except as otherwise specifically provided for herein, any
Schedules which have not been prepared and attached to this Agreement on the
date of execution hereof shall be prepared and delivered by Seller to Purchaser
within ten (10) days from the date of execution of this Agreement.
SECTION 7.15. Headings. The headings and captions set forth herein
are for convenience of reference only and shall not affect the construction or
interpretation hereof.
SECTION 7.16. Further Documents. Each party shall, whenever and as
often as requested to do so by the other, but without expense to the
non-requesting party, execute, acknowledge, and deliver all such further
conveyances, assignments, confirmations, satisfactions, releases, instruments of
further assurance, approvals, consents and any and all other further instruments
and documents as may be necessary, expedient, or proper in the reasonable
opinion of the requesting party or its counsel in order to complete the
transactions contemplated herein.
SECTION 7.17. Arbitration. Any and all disputes, controversies or
claims that lead up to the execution of this Agreement or that arise out of or
relate to this Agreement or the breach of it, including, without limitation, any
dispute regarding the disposition of any deposit in the event this Agreement is
terminated and including any claims regarding the validity, scope and
enforceability of this arbitration clause, shall, if not promptly settled by the
parties, be solely and finally resolved by arbitration. The arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association (the "AAA") in effect at the time and shall be conducted
before a single arbitrator. The parties to the arbitration shall attempt to
agree, by mutual consent, to the appointment of the arbitrator. In the absence
of agreement among the parties, any party to the arbitration may apply to AAA
for a list of arbitrators from which list the arbitrator shall be selected in
accordance with the commercial arbitration rules of AAA.
Any such action or proceeding brought by Purchaser arising out of or
relating to this Agreement shall be brought in Traverse City, Michigan, and in
no other location. Any such action or proceeding brought by Seller arising out
of or relating to this Agreement shall be brought in Baltimore City, Maryland,
and no other location. All cross complaints shall be filed with the same
arbitration panel and in the same location in which the original complaint was
filed. The parties hereby waive the right to object to such location on the
basis of venue or forum nonconveniens. Judgment upon any award rendered by the
arbitrator may be entered in any court of competent jurisdiction in Maryland
and/or Michigan and each party hereto consents to the jurisdiction of such
-22-
<PAGE>
courts and waives all claims of improper venue. The arbitrator shall determine
all claims in accordance with the internal law of the State of Maryland. The
internal procedural and substantive laws of Maryland and the United States
Federal Arbitration Act shall govern all questions of arbitral procedure,
arbitral review, scope of arbitral authority, and arbitral enforcement. The
parties further agree that the arbitration proceeding shall constitute an
absolute bar to the institution of any court proceeding, and that the decision
and award of the arbitrator shall be final and binding.
The cost of the arbitration proceeding shall be borne by the
non-prevailing party, except that each party shall be responsible for its own
attorney fees, if any.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
under seal, on the day and year first above written, intending to be legally
bound hereby.
WITNESS: ABC MEDICAL SUPPLY, INC.
_____________________________ By: ______________________________(SEAL)
Dennis Phillips, President
- Seller -
WITNESS: LIFE CRITICAL CARE CORPORATION
_____________________________ By: ______________________________(SEAL)
, Vice President
- Purchaser -
WITNESS:
______________________________ __________________________________(SEAL)
TIMOTHY DILLON, Individually
______________________________ __________________________________(SEAL)
DENNIS PHILLIPS, Individually
-23-
<PAGE>
EXHIBIT 1.2
BILL OF SALE AND ASSIGNMENT OF ASSETS
THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is executed and
delivered effective this day of , 199__ by ABC
MEDICAL SUPPLY, INC., a Michigan corporation ("Seller"), to LIFE CRITICAL CARE
CORPORATION, a Delaware corporation ("Purchaser").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of March 1, 1996 (the "Agreement"), providing for the
purchase by Purchaser of substantially all of the assets of Seller excluding
assets of Wound K-Air Management;
NOW, THEREFORE, pursuant to the Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Seller hereby grants, bargains, sells, delivers, transfers, sets over, assigns
and conveys to Purchaser and its successors and assigns, free and clear of any
and all liens, claims or encumbrances of any kind except for the Assumed
Obligations (as defined in the Agreement), all of the Purchased Assets (as
defined in the Agreement) including, without limitation, those assets and
properties listed or described on SCHEDULE A attached hereto and made a part
hereof, 'as is' and 'where is' and without any warranty or representation except
as set forth in the Agreement.
The transfer evidenced by this Bill of Sale and Assignment of Assets is
made subject to and upon all of the terms, covenants, conditions,
representations and warranties set forth in the Agreement, and all of which
terms, covenants, conditions, representations and warranties are incorporated
herein by reference, and shall survive the delivery of this Bill of Sale and
Assignment of Assets.
All of the terms and provisions of this Bill of Sale and Assignment of
Assets shall be binding upon Seller and its respective successors and assigns,
and shall inure to the benefit of the Purchaser and its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused the due execution
of this Bill of Sale and Assignment of Assets, under seal, as of the day and
year first above written.
ABC MEDICAL SUPPLY, INC.
By:________________________(SEAL)
, President
- Seller -
LIFE CRITICAL CARE CORPORATION
By:________________________(SEAL)
, Vice President
- Purchaser -
-2-
<PAGE>
SCHEDULE A
TO
BILL OF SALE AND ASSIGNMENT OF ASSETS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
<PAGE>
SCHEDULE 1.3
EXCLUDED ASSETS
1. Life Insurance Policy(ies) of Seller
2. Cash values of any Life Insurance Policy(ies) of Seller
3. Federal and Michigan corporate income tax deposits of Seller
4. Assets of Wound K-Air Management
5. Cash of Seller
6. Marketable Securities of Seller
7. Certificates of Deposit of Seller and other Cash Equivalents
8. Any profit sharing plan of Seller
9. Prorations of prepaid and expensed items to the extent not included as
part of the computation of Target Book Value
10. Corporate minute book of Seller
11. Refunds from insurance policies of Seller, if any, canceled at Closing
<PAGE>
SCHEDULE 1.6
LIABILITIES ASSUMED
1.
2.
3. [Short-term debt of Seller to Phillips and Dillon in the amount of
$__________ as evidenced by a promissory note dated _______________
(the "Note"), which debt has arisen from a loan made to Seller to assist
in keeping Seller's trade payables in reasonable balance with Seller's
receivables, with the proceeds of such loan used by Seller solely to pay
due and payable trade payables in the ordinary course of business;
provided, however, that notification shall be provided to Purchaser of
any and all such payments. At Closing, the Note shall be amended and
restated into a note in an original principal amount equal to the
principal balance of the Note as of the Closing Date, shall bear
interest at the prime rate of interest in effect as of the Closing Date,
and shall be payable in full no later than 180 days after the Closing
Date, with the amended and restated note to be assumed by Purchaser at
Closing and with the Purchaser permitted to prepay such note at any
time, in whole or in part, prior to its maturity.]
<PAGE>
SCHEDULE 1.6.1
LIABILITIES NOT ASSUMED
1. Indebtedness of Seller for any long term debt for borrowed money
(except those long term debt obligations, if any, which were first
incurred subsequent to November 30, 1995 in connection with acquisition
of an asset specifically requested by Purchaser).
2. Seller's obligations under its brokerage contract with Telesis.
3. Any claims against Seller by Seller's employees for wrongful employment
termination, discrimination, or violation of employment, labor or ERISA
laws or regulations except to the extent and within the amounts shown
in and reserved against in the Seller's financial records by the
parties to prepare the Target Book Value.
4.
<PAGE>
SCHEDULE 1.7
ALLOCATION OF PURCHASE PRICE*
Inventory $ 120,000.00
Accounts Receivable $ 625,000.00
Security Deposits $ 2,500.00
Furniture, Fixtures, and
Equipment $ 325,000.00
Covenant Not To Compete $ 1.00
Goodwill $3,427,499.00
TOTAL: $4,500,000.00
* This is a draft Allocation of Purchase Price which must be
confirmed or revised by mutual agreement of Purchaser and
Seller prior to Closing.
<PAGE>
SCHEDULE 2.7
CONTRACTS AND COMMITMENTS
<PAGE>
SCHEDULE 2.10
INSURANCE
1.
2.
3.
4.
5.
<PAGE>
SCHEDULE 2.13
LICENSES AND PERMITS
1.
2.
3.
4.
5.
<PAGE>
EXHIBIT 4.1.1.2
ASSIGNMENTS OF LEASES
[Attached is a draft form of Assignment of Leases supplied by
Seller to Purchaser. Its execution is dependent upon
Purchaser's review and reasonable approval of each of the
lease agreements to be assigned thereunder and Purchaser's
review and reasonable approval of the form of Assignment
itself.]
<PAGE>
EXHIBIT 4.1.1.3
COVENANT NOT TO COMPETE
COVENANT NOT TO COMPETE made and entered into this ____ day of ______,
199__, by and between _____________________________ ("Covenantor") and LIFE
CRITICAL CARE CORPORATION, a Delaware corporation, and its successors and
assigns ("Purchaser").
WITNESSETH:
WHEREAS, ABC Medical Supply, Inc. (hereafter called "Seller") is
selling certain operating assets related to its home medical equipment business
(the "Business") to Purchaser in a transaction contemplated in an Asset Purchase
Agreement dated _____________, 1996 (hereafter called the "Agreement") entered
into by Seller and Purchaser; and
WHEREAS, the Covenantor has been a stockholder of Seller involved in
the operation of the Business and is familiar with the operation of the Business
generally; and
WHEREAS, the Covenantor agreed to enter into this Covenant Not to
Compete as an inducement to Purchaser to enter into the Agreement as a result of
which Agreement the Covenantor will materially benefit.
NOW, THEREFORE, the parties hereto do covenant and agree as follows:
1. COVENANT NOT TO COMPETE PAYMENT. Simultaneously with the
delivery of this Covenant Not to Compete, Purchaser has paid to Seller the
sum of One Dollar ($1.00) in cash, or certified check.
2. RESTRICTIVE COVENANT. In consideration for the entry into the
Agreement by the Purchaser, the Covenantor covenants that he will not, directly
or indirectly for a period of five (5) years from and after the date hereof, own
in whole or in part, manage, operate, control, or perform services for any home
health equipment business located within the States of Michigan, Illinois,
Indiana or Ohio, except that Covenantor shall remain free to own and conduct the
business of Wound K-Air Management.
<PAGE>
3. CONFIDENTIAL INFORMATION. For a period of five (5) years from and
after the date hereof, the Covenantor shall hold all Confidential Information
(i.e., all trade secrets and proprietary and confidential information regarding
the Business of whatever nature, in whatever medium, developed, owned or
acquired by the Seller or the Covenantor, including customers and prospective
customers and suppliers but excluding information which at the time of
disclosure is in the public domain through no fault of, or violation of law or
breach of agreement by the Covenantor or which the Covenantor can demonstrate he
has lawfully obtained from a third party under circumstances permitting its
lawful disclosure and use which the Covenantor reasonably believes has no
obligation of confidentiality with respect thereto) in confidence and not
disclose, duplicate, communicate or transmit the Confidential Information to any
person or use or exploit any Confidential Information for any purpose, except as
may be necessary or desirable to the permitted operation of Wound K-Air
Management, and in a manner reasonably calculated to avoid any material adverse
effect on the Business as conducted by Purchaser.
4. REASONABLENESS. The Covenantor hereby expressly agrees that any
competition by him with the Business in violation of the terms of this Covenant
Not to Compete would, among other things, materially impair the Purchaser's
future prospects and that the limitations set forth in Paragraph 2 above are
reasonable, both as to time and geographic area. If, notwithstanding the
foregoing, the scope of any restriction contained in Paragraph 2 is too broad to
permit enforcement thereof to its full extent, such restriction shall be
enforced to the maximum extent permitted by law, and Covenantor hereby agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
5. INJUNCTIVE RELIEF. The Covenantor hereby recognizes that in the
event of his breach of any of the covenants hereunder Purchaser's remedies at
law for money damages would be inadequate, and, therefore, the Covenantor hereby
stipulates that Purchaser shall be entitled to injunctive relief in the event of
any breach of the Covenantor's covenants hereunder.
6. INTERPRETATION. This Covenant Not to Compete and the provisions
hereof shall in all respects be interpreted under and regulated by the laws
of the State of Michigan except for the choice of law rules utilized in that
jurisdiction.
7. AMENDMENT. This Covenant Not to Compete contains all the
understandings of the parties and shall not be altered or amended, except in a
writing signed by each of the parties hereto.
-2-
<PAGE>
8. ATTORNEYS' FEES. In the event of litigation between the parties,
the prevailing party shall be entitled to reasonable attorneys' fees and costs
of litigation.
9. BINDING EFFECT. This Covenant Not to Compete shall be binding
upon the parties and their respective successors and assigns.
10. COUNTERPARTS. This Covenant Not to Compete may be executed in
two or more counterparts, each of which, when taken together, shall constitute
one and the same original.
IN WITNESS WHEREOF, the parties have caused this Covenant Not to
Compete to be executed under seal on the day and year first above written.
COVENANTOR:
_________________________________(SEAL)
[ONE SET TO BE EXECUTED BY EACH
STOCKHOLDER OF ABC MEDICAL
SUPPLY, INC.]
PURCHASER:
LIFE CRITICAL CARE CORPORATION
By:______________________________(SEAL)
-3-
<PAGE>
EXHIBIT 4.1.1.6
OPINION OF COUNSEL FOR SELLER
[Letterhead of Rollert and MacNeal]
______________, 199__
Life Critical Care Corporation
3333 West Commercial Boulevard
Suite 203
Fort Lauderdale, Florida 33309
Attention: Ms. Amy E. Parker
Ladies and Gentlemen:
This opinion is delivered pursuant to Section 4.1.1.6 of the
Asset Purchase Agreement, dated , 1996 (the "Agreement"),
between ABC Medical Supply, Inc. (the "Company"), Timothy Dillon and Dennis
Phillips and Life Critical Care Corporation (the "Purchaser"). I have acted
as counsel to the Seller in connection with the Agreement and the
transactions contemplated thereby. Where a term that is defined in the Agreement
is used in this Opinion, the term has the same meaning set forth in the
Agreement, unless differently defined herein.
(1) In rendering the opinions set forth below, I have examined:
(A) The fully executed Agreement; and
(B) The Articles of Incorporation, By-Laws and minutes of the
corporate proceedings of the Company.
(2) In rendering the opinions set forth below, I have assumed:
(A) Each of the parties to the Agreement other than my clients
have the power and authority to: (i) enter into the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
and (ii) perform all of its obligations under the Agreement and all other
agreements or documents required to be executed by it pursuant to the Agreement;
<PAGE>
(B) All required corporate actions and authorizations
other than on behalf of my clients have been completed; and
(C) The authenticity of all documents submitted as originals,
the genuineness of all signatures other than signatures on behalf of my clients
and the conformity to the originally executed documents of all documents
submitted to us as drafts or photocopies.
In rendering my opinions, whenever my opinion herein regarding the
existence or absence of facts is indicated to be based on my knowledge or
awareness, my opinion is intended to signify that during the course of my
representation of the Company no information has come to my attention which
would give me actual knowledge of the existence or absence of such facts. I have
not undertaken any independent investigation to determine the existence or
absence of such facts and no inference of further knowledge should be drawn from
my representation of the Company. As to various questions of fact material to
this Opinion, I have relied upon the truth and completeness of the
representations and warranties made by the Company as the "Seller" in the
Agreement and upon certifications executed by the Officers and Directors of the
Company. In addition, I have obtained from public officials and from officers of
the Company such other certificates and assurances, and I have examined such
corporate records, other documents and questions of law, as I have considered
necessary or appropriate for purposes of this Opinion.
Based upon the foregoing, and subject to the limitations and
qualifications set forth herein, it is my opinion that, as of the date of this
letter:
(A) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Michigan, and has
the corporate power to own all of its properties and assets and to carry on its
business as it is now being conducted.
(B) The Company has validly taken all necessary corporate action
to authorize it to execute and deliver the Agreement and to consummate the
transactions contemplated thereby; and the Agreement has been duly executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms.
(C) The execution and delivery of the Agreement by the Company
and the consummation by the Company of the transactions contemplated on its part
thereby do not and will not violate any provision of the Articles of
Incorporation or By-Laws of the Company.
-2-
<PAGE>
(D) To my knowledge, all consents, authorizations, orders or
approvals of, and filings and registrations with, any governmental commission,
board or other regulatory body required for or in connection with the execution
and delivery of the Agreement by the Company and the consummation by it of the
transactions contemplated on its part thereby have been obtained or made.
(E) To my knowledge, except as disclosed on any Schedule to the
Agreement, there is no claim, action, suit or legal, administrative or other
proceeding or governmental investigation, pending or threatened against the
Company or any of its properties which might result in any material adverse
change in the business or financial condition of the Company.
(F) To the best of my knowledge, neither the execution and
delivery of the Agreement, nor the consummation of the transactions contemplated
thereby, conflicts with or does or will violate or result (with the giving of
notice and/or the passage of time) in a breach of any of the terms, conditions
or provisions of or constitute a default under, any lease, mortgage, contract or
other agreement binding on the Company or affecting its properties. To the best
of my knowledge, no consent or approval of any public authority is required as a
condition to the validity or enforceability of the Agreement or any transaction
contemplated thereby.
The foregoing Opinion is subject to the following
qualifications:
(A) The Opinion is subject to the operation and effect of
applicable bankruptcy, insolvency, moratorium, reorganization, receivership or
other similar laws, statutes or rules now or hereafter in effect affecting the
rights of creditors generally and the rights of taxing authorities.
(B) The enforceability of the Agreement may require enforcement
by a court of equity, and such enforcement is subject to such principles of
equity as courts having jurisdiction may impose.
(C) In rendering my opinion regarding the good standing of the
Company, I have relied exclusively upon a Certificate of Good Standing, dated
, 1996, issued by the Michigan Corporation and Securities
Bureau.
(D) My Opinion is based solely upon the laws of the State of
Michigan, and I am opining herein as to the subject transaction as though the
laws of the United States of America and the State of Michigan were the only
applicable laws. I assume no responsibility as to the applicability thereto or
affect thereon of the laws of any other state or jurisdiction. As to matters
governed or affected by laws of states other than the State of Michigan, I have
assumed that insofar as the substantive laws of any other state may be
-3-
<PAGE>
applicable to any opinions herein, such laws are identical to the substance of
laws of the State of Michigan applied by me herein.
This opinion is being furnished to you solely for your benefit and the
benefit of your counsel and may not be relied upon by, nor copies of it
delivered to, any other person or parties without my prior written consent.
Very truly yours,
ROLLERT AND MACNEAL
By: _________________________
John A. MacNeal, Partner
-4-
<PAGE>
EXHIBIT 4.1.1.7
ARTICLES OF TRANSFER
BETWEEN
ABC MEDICAL SUPPLY, INC.
AND
LIFE CRITICAL CARE CORPORATION
THIS IS TO CERTIFY THAT:
FIRST: ABC Medical Supply, Inc., a Michigan corporation (the
"Transferor"), agrees to transfer all or substantially all of its property and
assets to Life Critical Care Corporation, a Delaware corporation (the
"Transferee") pursuant to the terms of an Asset Purchase Agreement between the
Transferor and the Transferee of even date herewith.
SECOND: The Transferor is incorporated under the laws of the
State of Michigan, with a principal office located at
________________________________________.
THIRD: The Transferee is incorporated under the general
laws of the State of Delaware. The Transferee's address and principal place of
business is 504 Cathedral Street, Baltimore, Maryland 21201.
FOURTH: The Transferor owns no interest in land, the title
to which could be affected by the recording of an instrument among the land
records.
FIFTH: The terms and conditions of the transaction set forth in
these Articles of Transfer were advised, authorized and approved by the
Transferor in the manner and by the vote required by its Articles of
Incorporation and Michigan law, in the following manner: The Board of Directors
of the Transferor by unanimous written consent adopted a resolution declaring
that the proposed transaction described herein was advisable, and directed that
the proposed transaction be submitted to the stockholders of the Transferor for
consideration and approval. The Shareholders of the Transferor by unanimous
written consent adopted a resolution declaring that the proposed transaction
described herein was approved.
SIXTH: The terms and conditions of the transaction set forth in
these Articles of Transfer were advised, authorized and approved by the
Transferee in the manner and by the vote required by its Charter and the laws of
the place of its incorporation, in the following manner: The Board of Directors
of the Transferee by unanimous written consent adopted a resolution declaring
that the proposed transaction was approved.
<PAGE>
SEVENTH: The nature and amount of the consideration to be paid
by the Transferee to the Transferor for the assets to be transferred by the
Transferor pursuant to the Asset Purchase Agreement is ____________ Thousand
Dollars ($___________).
IN WITNESS WHEREOF, on this __ day of , 199__,
Transferor has caused these Articles of Transfer to be executed on its behalf
by its President and attested by its Secretary, and Transferee has caused
these Articles of Transfer to be executed on its behalf by its President
and attested by its Secretary, and each individual signing hereby acknowledges,
under penalties for perjury, that these Articles of Transfer are the act
of the party on whose behalf such individual is executing the Articles of
Transfer and that, to the best of his or her knowledge, information and belief,
the facts and matters set forth herein are true in all material respects.
ATTEST: ABC MEDICAL SUPPLY, INC.
__________________________ By:____________________________(SEAL)
, Secretary , President
ATTEST: LIFE CRITICAL CARE CORPORATION
__________________________ By:____________________________(SEAL)
, Secretary , Vice President
-2-
<PAGE>
EXHIBIT 4.2.1.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made this _____ day
of _______________, 199__, by and between LIFE CRITICAL CARE CORPORATION, a
Delaware corporation ("Purchaser"), and ABC MEDICAL SUPPLY, INC., a Michigan
corporation ("Seller").
WHEREAS, pursuant to that certain Asset Purchase Agreement,
dated _____________, 1996, between the parties hereto (the "Purchase
Agreement"), Seller has agreed to assign and transfer to Purchaser certain
assets, properties and business of Seller;
NOW, THEREFORE, in consideration of the transfer to Purchaser of
the aforesaid assets, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Assignment. Seller hereby assigns and transfers to
Purchaser the following: All right, title and interest of Seller in, to and
under all contracts, leases, indentures, agreements, commitments and all
other legally binding arrangements, whether oral or written, to which Seller is
a party or by which Seller is bound ("Contracts") that are listed on Schedule A
hereto.
2. Assumption. Subject to the further terms of this Agreement,
effective on the date hereof, Purchaser, for itself and its successors and
assigns, hereby covenants and agrees to assume, and hereby does assume, and
agrees to discharge, perform, and observe, and to indemnify, defend, and hold
Seller harmless from and against the obligations of Seller, as and to the extent
arising from and after the date hereof, or pertaining to any period subsequent
to the date hereof, as are listed or described on Schedule A, attached hereto
and made a part hereof.
3. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Agreement, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Agreement or to any of its provisions.
4. Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
5. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
<PAGE>
6. Miscellaneous. This Agreement is made and entered
into pursuant to the terms, conditions, and provisions of the Purchase
Agreement, the terms of which are hereby made a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused the due
execution of this Assignment and Assumption Agreement, under seal, as of the day
and year first above written.
WITNESS: ABC MEDICAL SUPPLY, INC.
______________________________ By: ___________________________(SEAL)
, President
- SELLER-
WITNESS: LIFE CRITICAL CARE CORPORATION
______________________________ By: ___________________________(SEAL)
, Secretary , Vice President
- PURCHASER-
-2-
<PAGE>
SCHEDULE A
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-3-
Exhibit 10.5
ASSET PURCHASE AGREEMENT
between
GREAT LAKES HOME MEDICAL, INC.
("Seller")
and
MICHAEL BELLEAU
and
JAMES BICKEL
and
THOMAS MAINHARDT
and
LIFE CRITICAL CARE CORPORATION
("Purchaser")
March 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
RECITALS......................................................... 1
ARTICLE 1. PURCHASE AND SALE OF ASSETS........................... 1
SECTION 1.1 Closing Date.................................... 1
SECTION 1.2 Purchase and Sale of Assets..................... 2
SECTION 1.3 Excluded Assets................................. 2
SECTION 1.4 Purchase Price.................................. 2
SECTION 1.5 Payment of Purchase Price....................... 2
SECTION 1.6 Debts, Liabilities and Other Obligations
Assumed by Purchaser........................ 3
SECTION 1.7 Allocation of Purchase Price.................... 3
SECTION 1.8 Change and Use of Name.......................... 3
SECTION 1.9 Accounts Receivable............................. 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER,
BELLEAU, BICKEL AND MAINHARDT.......... 4
SECTION 2.1 Organization and Qualification, Etc............. 4
SECTION 2.2 Authority Relative to Agreement................. 4
SECTION 2.3 No Breach; Consents............................. 4
SECTION 2.4 No Material Adverse Change...................... 5
SECTION 2.5 Title to Purchased Assets....................... 5
SECTION 2.6 Tax Matters..................................... 5
SECTION 2.7 Contracts and Commitments....................... 6
SECTION 2.8 Litigation, Etc................................. 7
SECTION 2.9 Brokerage....................................... 7
SECTION 2.10 Insurance....................................... 8
SECTION 2.11 Compliance with Laws............................ 8
SECTION 2.12 Employees....................................... 8
SECTION 2.13 Licenses and Permits............................ 8
SECTION 2.14 Business Records................................ 8
SECTION 2.15 Environmental Matters........................... 8
SECTION 2.16 Financial Statements............................ 9
SECTION 2.17 Material Misstatements or Omissions............. 9
SECTION 2.18 Effective Date of Warranties, Representations
and Covenants................................ 9
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER .... 10
SECTION 3.1 Organization, Etc............................... 10
SECTION 3.2 Authority Relative to Agreement ................ 10
SECTION 3.3 No Breach; Consents............................. 10
SECTION 3.4 Litigation...................................... 10
SECTION 3.5 Brokerage....................................... 11
ARTICLE 4. CLOSING CONDITIONS.................................... 11
SECTION 4.1 Closing Conditions Relating to Purchaser........ 11
SECTION 4.2 Closing Conditions Relating to Seller........... 12
ARTICLE 5. PRE-CLOSING AGREEMENTS................................ 13
SECTION 5.1 Due Diligence................................... 13
SECTION 5.2 Operation of Business........................... 13
SECTION 5.3 Best Efforts.................................... 14
SECTION 5.4 Confidentiality................................. 14
SECTION 5.5 Public Announcements............................ 14
ARTICLE 6. POST-CLOSING AGREEMENTS............................... 15
SECTION 6.1 Indemnification by Seller, Belleau,
Bickel and Mainhardt........................... 15
SECTION 6.2 Further Assurances.............................. 16
SECTION 6.3 Books and Records............................... 17
SECTION 6.4 Employees ...................................... 17
ARTICLE 7. MISCELLANEOUS......................................... 18
SECTION 7.1 Survival ....................................... 18
SECTION 7.2 Termination .................................... 18
SECTION 7.3 Expenses ....................................... 18
SECTION 7.4 Amendments, Waivers and Remedies................ 19
SECTION 7.5 Notices ........................................ 19
SECTION 7.6 Assignment ..................................... 20
SECTION 7.7 Severability ................................... 20
SECTION 7.8 Complete Agreement ............................. 20
SECTION 7.9 No Third-Party Beneficiaries ................... 20
SECTION 7.10 Waiver of Bulk Sales Act ....................... 20
SECTION 7.11 Singular and Plural; Gender .................... 21
SECTION 7.12 Governing Law .................................. 21
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SECTION 7.13 Counterparts ................................... 21
SECTION 7.14 Schedules....................................... 21
SECTION 7.15 Headings........................................ 21
SECTION 7.16 Further Documents............................... 21
SECTION 7.17 Arbitration..................................... 21
EXHIBITS AND SCHEDULES
Exhibit 1.2.......Bill of Sale and Assignment of Assets
Schedule 1.3......Excluded Assets
Schedule 1.6......Liabilities Assumed
Schedule 1.7......Allocation of Purchase Price
Schedule 2.7......Contracts and Commitments
Schedule 2.8......Litigation
Schedule 2.10.....Insurance
Schedule 2.13.....Licenses and Permits
Exhibit 4.1.1.2...Assignments of Leases
Exhibit 4.1.1.3...Covenant Not to Compete
Exhibit 4.1.1.6...Opinion of Counsel for Seller
Exhibit 4.1.1.7...Articles of Transfer
Exhibit 4.2.1.3...Assignment and Assumption Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 1st day of March, 1996 by and between GREAT LAKES HOME MEDICAL,
INC., a Michigan corporation ("Seller"); and LIFE CRITICAL CARE
CORPORATION, a Delaware corporation ("Purchaser"); and MICHAEL BELLEAU, a
Michigan resident ("Belleau"), JAMES BICKEL, a Michigan resident ("Bickel")
and THOMAS MAINHARDT, a Florida resident ("Mainhardt").
W I T N E S S E T H
WHEREAS, Seller is engaged in the business of operating a home medical
equipment business at facilities located in Escanaba, Michigan and other
locations in Michigan, Wisconsin and Florida (the "Business");
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all of the assets and properties of Seller, including the
goodwill and all assets used in or necessary for the operation of the
Business on the terms and conditions set forth in this Agreement, but
excluding the assets of Seller used in connection with the Medwest business
conducted in Wisconsin in the discretion of Seller; and
WHEREAS, Belleau, Bickel and Mainhardt (collectively, the
"Stockholders") are the sole Stockholders of Seller and will materially benefit
from the consummation of this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
promises, agreements, representations and warranties hereinafter set forth,
Seller and Purchaser hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
SECTION 1.1. Closing Date. Subject to the terms and conditions
hereof, the consummation of the transactions described herein (the
"Closing") will take place at 10:00 a.m., on or prior to March 31, 1996, at
the offices of Vader & Vader, 623 Ludington Street, Escanaba, Michigan
49829, or at such other location reasonably selected by Purchaser upon
advance notice to Seller, or at such other time and date as the parties
mutually may determine (the "Closing Date").
<PAGE>
SECTION 1.2. Purchase and Sale of Assets. Subject to Section 1.3,
at the Closing, Seller will sell, convey, transfer and deliver to Purchaser,
and Purchaser will purchase and receive from Seller, all of the assets,
rights, and tangible and intangible property of Seller owned by Seller and
used in the Business on the Closing Date (all of the assets described in this
Section 1.2 are collectively referred to as the "Purchased Assets"). Subject
to Section 1.3, the Purchased Assets shall include all property and assets
owned by Seller and used in the Business, of every kind and description,
wherever located, including all property, tangible or intangible, real,
personal or mixed, inventory, accounts receivable, equipment, improvements,
fixtures, deposits on contractual obligations or otherwise, Seller's right
to use the name "Great Lakes Home Medical" and any derivatives or
combinations thereof, and all books and records of Seller relating to the
Business, including without limitation trade secret rights in any information,
computer hardware and software, and all trade titles, marketing materials and
direct mail systems developed to promote the Business, and all customer
lists (past, present and prospective), all as the same shall exist on the
Closing Date, including, without limitation, the assets and property
listed or described in the Bill of Sale and Assignment of Assets (the
"Bill of Sale") attached hereto as Exhibit 1.2.
SECTION 1.3. Excluded Assets. The Purchased Assets shall not
include those assets of Seller, if any, listed or described on Schedule 1.3
attached hereto.
SECTION 1.4. Purchase Price. Subject to the provisions and
adjustments set forth in Section 1.5 hereof, the purchase price (the
"Purchase Price") for the Purchased Assets, and for the benefits and rights
conferred upon Purchaser hereunder, shall be an amount equal to Eight
Million Seven Hundred Ninety Thousand Dollars ($8,790,000); provided,
however, that if, as a result of such adjustments, the Purchase Price is in an
amount less than $6,400,000 then Seller shall be entitled to terminate this
Agreement unless Purchaser agrees to pay a Purchase Price of $6,400,000.
SECTION 1.5. Payment of Purchase Price. The Purchase Price
described in Section 1.4 shall be paid as follows:
(i) The Purchase Price shall be paid in cash by wire
transfer of immediately available funds to such bank account as shall be
designated by Seller or, at Seller's option, by delivery of a cashier's check
to Seller at Closing; and
(ii) In addition to the payment of the Purchase Price,
Purchaser shall assume and agree to pay certain debt and trade payables of
Seller at Closing as set forth in Section 1.6 hereof;
(iii) The Purchase Price is conditioned upon the book value
of the Purchased Assets being at least equal to $570,000 as of the Closing
Date (the "Target Book Value"). To the extent the book value of the
Purchased Assets on Seller's books is less than the Target Book Value on the
Closing Date, the Purchase Price shall be reduced by One Dollar ($1.00)
for each One Dollar ($1.00) that the actual book value is less than the
Target Book Value; provided, however, that the book value shall be
estimated in good faith by Seller and Purchaser on the Closing Date and any
adjustments thereto following
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an audit by Purchaser's accountants shall be adjusted by payments, within
ninety (90) days after Closing, to Seller by Purchaser or by payments by
Purchaser to Seller, as appropriate;
(iv) The Purchase Price is further conditioned upon
Seller's earnings before interest, taxes, depreciation and amortization and
adjusted for extraordinary owners' compensation ("Adjusted EBITDA") for the
twelve-month period ending November 30, 1995 being at least equal to
$1,758,000. In the event Seller's Adjusted EBITDA for the twelve-month
period ending November 30, 1995 is less than $1,758,000 then the Purchase
Price shall be adjusted downward by Five Dollars ($5.00) for each One Dollar
($1.00) of the amount of shortfall, if any, between $1,758,000 and the actual
Adjusted EBITDA of Seller for the twelve-month period ending November 30,
1995; provided, however, any adjustment to the Purchase Price shall be the
greater of the adjustment set forth in Section 1.5(iii) or Section 1.5(iv),
and shall not be adjusted by both Sections; and
(v) If the Closing shall not have been completed on or before
the scheduled Closing Date, Purchaser shall be entitled to extend the
Closing Date for sixty (60) days upon the payment to Seller of a deposit of
$50,000 (the "Deposit") on or before the scheduled Closing Date, which Deposit
shall be applied to the Purchase Price at Closing.
SECTION 1.6. Debts, Liabilities and Other Obligations Assumed by
Purchaser. Purchaser shall assume all liabilities relating to the Purchased
Assets or the operation of the Business arising on or after the Closing Date.
Purchaser shall assume no debts, obligations, contracts, leases or
liabilities of Seller, except as expressly set forth, which are, as at
Closing, shown in Schedule 1.6 attached hereto and Seller shall hold
Purchaser harmless from, and indemnify Purchaser against, any debt, obligation,
contract, lease or liability not expressly assumed by Purchaser hereunder.
SECTION 1.7. Allocation of Purchase Price. After due
negotiation, the parties agree that the consideration described in
Section 1.4 shall be allocated among the Purchased Assets in the manner set
forth in Schedule 1.7.
SECTION 1.8. Change and Use of Name. Concurrently with the
Closing, Seller shall take all actions required by the Michigan Corporation
and Securities Bureau to enable Purchaser to receive permission from such
governmental agency to use the name "Great Lakes Home Medical" in Michigan,
and Seller shall make no further use of such name.
SECTION 1.9. Accounts Receivable. A list of Accounts Receivable
(i.e., any right to payment for goods sold or leased or for services rendered
whether or not they have been earned by performance) of Seller which shall
include the names and addresses of the
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customer from whom the Account Receivable is owing and the age and respective
amount of each such Account Receivable shall be provided by Seller to
Purchaser at Closing (the "Accounts Receivable List") and such Accounts
Receivable shall be assigned by Seller to Purchaser at Closing as part of the
Purchased Assets.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLER, BELLEAU, BICKEL AND MAINHARDT
As a material inducement to Purchaser to enter into and perform its
obligations under this Agreement, Seller, Belleau, Bickel and Mainhardt
hereby, jointly and severally, represent and warrant to Purchaser as
follows:
SECTION 2.1. Organization and Qualification, Etc. Seller is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Michigan, and has the corporate power to own, lease
or operate all of its properties and assets and to carry on the Business as
and where it is now being conducted. Copies of Seller's Articles of
Incorporation and By-Laws, previously delivered to Purchaser and certified by
the Secretary of Seller, are true, correct and complete copies of such
documents and will not be amended prior to the Closing Date without the prior
written consent of Purchaser.
SECTION 2.2. Authority Relative to Agreement. The Seller has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Seller and the consummation of the transactions
contemplated on its part have been authorized by its Board of Directors and
stockholders. No other corporate proceedings on the part of the Seller are
necessary to authorize the execution and delivery of this Agreement by it or the
consummation by it of the transactions contemplated on its part hereby. This
Agreement has been duly executed and delivered by each of Seller, Belleau,
Bickel and Mainhardt and is a valid and binding agreement of Seller,
Belleau, Bickel and Mainhardt, enforceable in accordance with its terms,
except as the enforceability may be affected by bankruptcy, insolvency,
reorganization or other similar laws presently or hereafter in effect
affecting the enforcement of creditors' rights generally.
SECTION 2.3. No Breach; Consents. The negotiation, execution,
delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby, (a) do not and will
not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, result in the creation
of any lien, security interest, charge, encumbrance or other restriction
upon the Purchased Assets under, or require any authorization, consent,
approval, exemption or other action
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by or notice to any third party, under the provisions of the Articles of
Incorporation or By-Laws of Seller or any license, permit, contract,
franchise, indenture, mortgage, lease, loan agreement or other agreement
(oral or written) or instrument to which Seller is a party or under which its
properties are bound, and (b) do not require any authorization, consent,
approval, exemption or other action by or notice to any court or governmental
body under any law, statute, rule, regulation or decree to which Seller is
subject.
SECTION 2.4. No Material Adverse Change. Since September 30, 1995,
there has been no material adverse change in the financial condition,
properties, assets, business or prospects of Seller, including the Purchased
Assets.
SECTION 2.5. Title to Purchased Assets.
2.5.1 Seller owns, or will at Closing own, good and
marketable title, free and clear of all liens and encumbrances to all of the
Purchased Assets, and on the Closing Date and upon conveyance, assignment
and delivery to Purchaser as provided herein, Purchaser shall have
(subject to compliance with applicable registration, filing and recording
requirements) good and marketable title, or valid, binding and enforceable
rights as contracting party or licensee, as the case may be, to all the
Purchased Assets, except software licenses or, without implied limitation,
other agreements or licenses which, by their express terms, are not
transferable.
2.5.2 Seller is not in violation of any applicable
zoning ordinance or other law, regulation or requirement relating to the
operation of owned or leased properties and Seller has not received any notice
of any such violations within the three years prior to the date hereof.
2.5.3 Seller leases, licenses or owns all of the properties
and assets used in the Business.
SECTION 2.6. Tax Matters. All tax returns and related information
required to be filed by or on behalf of Seller prior to the date hereof have
been prepared and filed in accordance with applicable law, and all taxes,
interest, penalties, assessments or deficiencies that have become due pursuant
to such returns or any assessments or otherwise have been paid in full. All
such returns are true and correct in all material respects. There is no
unresolved claim concerning Seller's federal, state and local tax liabilities.
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SECTION 2.7. Contracts and Commitments.
2.7.1. Attached hereto as Schedule 2.7 is a separate
schedule containing an accurate and complete list of:
(i) any contract, agreement, purchase order or other
commitment for the purchase, sale or provision to or by Seller of
goods, property or services;
(ii) any pension, profit sharing, stock option,
employee stock purchase or other plan providing for deferred
compensation or other employee benefit plan, or any contract with
any labor union;
(iii) any agreement or indenture relating to the
borrowing of money or to the mortgaging, pledging or otherwise
placing a lien on any material asset or material group of assets of
Seller;
(iv) any lease or agreement under which it is lessee of
or holds or operates any property, real or personal, owned by any
other party, except for any lease of personal property under which the
aggregate annual rental payments do not exceed $1,000;
(v) any lease or agreement under which it is lessor of
or permits any third party to hold or operate any property, real or
personal, owned or controlled by it;
(vi) all agreements providing for the services of an
independent contractor to which Seller is a party or by which it is
bound;
(vii) as of a date no earlier than December 31, 1995,
all of Seller's Accounts Receivables, together with detailed
information as to each such listed receivable which has been
outstanding more than thirty (30) days;
(viii) any and all other or additional contracts,
commitments, agreements, arrangements, writings, guarantees,
leases and licenses to which Seller is a party or by which Seller or
any of its property is bound.
Each of the contracts, agreements, leases, licenses and commitments
required to be listed on Schedule 2.7 (the "Contracts") is valid and binding,
enforceable in accordance with its respective terms, in full force and effect
and, except as otherwise specified in Schedule 2.7, validly assignable to
Purchaser without the consent, approval or act of, or the making of any filing
with, any other person so that, after the assignment thereof to Purchaser
pursuant hereto, Purchaser will be entitled to the full benefits thereof.
True
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and complete copies of all of the Contracts (together with any and all
amendments thereto) have been delivered to Purchaser and initialed by
Seller's Secretary and identified with a reference to this Section of this
Agreement. Seller has performed all obligations required to be performed
by it and is not in default under or is in breach of or in receipt of any claim
of default or breach under any of the Contracts and no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance under any such Contract; and
Seller has no knowledge of any breach or anticipated breach by the other
parties to any such Contract; and Seller is not a party to any Contract
for the purchase of goods or services at a rate currently above market
prices.
2.7.2. (i) Seller has performed in all material respects
all obligations required to be performed by it and is not in default under
or in breach of nor in receipt of any claim of default or breach under any
agreement referred to in Section 2.7.1, (ii) no event has occurred which
with the passage of time or the giving of notice or both would result in
a default, breach or event of noncompliance under any such agreement,
(iii) Seller does not have any knowledge of any breach or anticipated
breach by any other party to such agreements, and (iv) Seller is not a party
to any material contract or commitment for the purchase of goods or services at
a rate currently above market prices.
2.7.3 Purchaser has been heretofore supplied with a true
and correct copy of each of the written contracts which are referred to in
Section 2.7.1, together with all amendments, waivers or other changes thereto.
SECTION 2.8. Litigation, Etc. Except as set forth on Schedule
2.8, there are no actions, suits, proceedings, orders, investigations or
claims pending, or to the best knowledge of Seller, threatened, against
Seller, or to which Seller is a party, at law or in equity, before or by
any court, tribunal, governmental department, commission, board, bureau,
agency or instrumentality, or any arbitration proceedings pending under
collective bargaining agreements or otherwise. To the knowledge of
Seller, except for pending legislation regarding medicare and medicaid
reimbursement that might affect the Business generally, there is no proposed
law, rule, regulation, ordinance, order, judgment, decree or award that
would be applicable to Seller that would reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
business, assets, liabilities, capitalization, financial position, results of
operations or prospects of Seller.
SECTION 2.9. Brokerage. Except for Telesis, Inc., as to which
Seller shall be solely responsible, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement (oral or written) binding upon Seller or any stockholder of Seller.
Seller will pay, and hold Purchaser harmless against, any liability,
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loss or expenses (including, without limitation, attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
SECTION 2.10. Insurance. Schedule 2.10 contains an abstract or
summary of each outstanding insurance policy maintained by Seller. Seller
has given to Purchaser a copy of each such insurance policy maintained with
respect to Seller's properties, assets and the Business, and each such
policy is in full force and effect. Purchaser, at its election at Closing,
shall be entitled to assume any and all outstanding insurance upon payment to
Seller of a prorated amount of the premium for such insurance for the remaining
term thereof.
SECTION 2.11. Compliance with Laws. To its best knowledge, Seller
has complied with all laws, rules, regulations, ordinances, orders,
judgments, and decrees applicable to its business or properties, and to its best
knowledge is not in violation of any law or any regulation or requirement
which might have a material adverse effect upon its financial condition,
operating results or business prospects, and Seller has not received notice of
any such violation.
SECTION 2.12. Employees. To the best knowledge, information and
belief of Seller, Seller has complied with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes.
SECTION 2.13. Licenses and Permits. All permits, licenses and
franchises held by Seller, or by its officers, employees or agents, with
respect to the Business are listed on Schedule 2.13. Except as set forth on
Schedule 2.13, such licenses, permits and franchises are freely transferable by
Seller.
SECTION 2.14. Business Records. Seller's personnel files,
accounting records, financial statements, operating statements and customer
correspondence files shall be made available to Purchaser promptly upon the
execution of this Agreement and are complete and correct in all material
respects, and accurately reflect Seller's business operations for a period of
not less than three (3) years.
SECTION 2.15. Environmental Matters. There is no condition,
circumstance, or set of facts (including without limitation the presence,
either past or present, of any underground storage tanks) that constitutes a
significant hazard to health, safety, property, or the environment relating
to the Business or any real property owned or leased by Seller for which the
Business, Seller or the owner or operator of such real property would be
responsible.
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SECTION 2.16. Financial Statements. Seller's financial statements
and notes thereto as at and for the fiscal years ended December 31, 1993 and
1994, and for the ten months ended October 31, 1995, consisting of balance
sheets and statements of income and cash flow, are to be audited by the
certified public accounting firm of Ernst & Young LLP, independent
certified public accountants, on or before March 15, 1996. All such financial
statements, copies of which will, upon completion, be attached hereto as
Exhibit 2.16 (the "Statements"), will fairly present the financial
condition and results of the operations of Seller as at the date indicated and
for the period indicated, will have been prepared in accordance with
generally accepted accounting principles consistently applied, and will be
in accordance with the books and records of Seller. Time is of the essence in
completing the audit and both Seller and Purchaser agree to cooperate
fully to expedite the audit process. Seller shall provide Purchaser with
monthly financial statements for the periods following September 30, 1995, as
they become available. Purchaser shall pay the auditors for the preparation
of the Statements provided that Purchaser shall have the right to select the
auditors and further provided that Seller pays its accountants to prepare
the books and records for audit.
SECTION 2.17. Material Misstatements or Omissions. Seller has
not knowingly made any material misstatements of fact or omitted to state
any material fact necessary or desirable to make complete, accurate, and not
misleading every representation, warranty, schedule, and agreement set
forth, described or referred to herein. Seller has disclosed to Purchaser
all material adverse facts relating to the condition or operation, whether
past, present or future, financial or otherwise, of the Purchased Assets and
of the Business, and shall disclose promptly to Purchaser, in writing, any
material adverse facts arising after the date hereof and prior to Closing.
SECTION 2.18. Effective Date of Warranties, Representations
and Covenants. Each warranty, representation, and covenant set forth in
this Article 2 shall be deemed to be made on and as of and speak on and as of
the date hereof and as of the Closing Date (except as otherwise specifically
provided herein). Prior to the Closing Date, Seller will notify Purchaser
of any change since the date hereof in any fact, condition or circumstance
of which it becomes aware and which would require a modification of the
foregoing representations and warranties (including any schedule thereto) to
make such representation or warranty (or schedule thereto) complete,
accurate and not misleading in all respects. The representations and
warranties contained in this Article 2 shall not be affected or deemed waived
by reason of the fact that Purchaser and/or its representatives knew or
should have known that any such representation or warranty is or might be
inaccurate in any respect.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As a material inducement to Seller to enter into and perform its
obligations under this Agreement, Purchaser represents and warrants to Seller
as follows:
SECTION 3.1. Organization, Etc. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware.
SECTION 3.2. Authority Relative to Agreement. Purchaser has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Purchaser. No other corporate proceedings on its part or the part of the
stockholders of Purchaser are necessary to authorize the execution and delivery
of this Agreement by it or the consummation by it of the transactions
contemplated on its part hereby. This Agreement has been duly executed
and delivered by Purchaser and is the valid and binding agreement of
Purchaser except as the enforceability may be affected by bankruptcy,
insolvency, reorganization or other similar laws presently or hereafter in
effect affecting the enforcement of creditors' rights generally.
SECTION 3.3. No Breach; Consents. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby (a) do not and will not conflict with or
result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of any lien, security
interest, charge or encumbrance upon the assets of either of Purchaser under,
or require any authorization, consent, approval, exemption or other action by
or notice to any third party under the provisions of the Charter or By-Laws of
Purchaser or any license, indenture, mortgage, lease, loan agreement or other
agreement (oral or written) or instrument to which Purchaser is a party,
and (b) do not require any authorization, consent, approval, exemption or
other action by or notice to any court or governmental body under any law,
statute, rule, regulation or decree to which Purchaser is subject.
SECTION 3.4. Litigation. There is no claim, action, suit or
proceeding pending or, to the knowledge of Purchaser, threatened against
Purchaser or any of its properties which seeks to prohibit, restrict or delay
consummation of the transactions contemplated hereby or to limit in any
manner the right of Purchaser to control Seller or any material aspect of the
Business of Seller after the Closing Date, and there is no judgment, decree,
injunction, ruling or order of any court, governmental department,
commission, agency
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or instrumentality or arbitrator outstanding against Purchaser having, or
which Purchaser believes may in the future have, any such effect.
SECTION 3.5. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Purchaser.
ARTICLE 4
CLOSING CONDITIONS
SECTION 4.1. Closing Conditions Relating to Purchaser. The
obligation of Purchaser to consummate the purchase of the Purchased Assets
will be subject to the satisfaction of the following conditions, any of
which may be waived by Purchaser in its sole and absolute discretion:
4.1.0 Contingencies.
4.1.0.1. Purchaser intends to register
certain of its securities under the Securities Act of 1933, as amended (the
"Securities Act") as part of an initial public offering of its securities (the
"IPO"). Accordingly, Purchaser agrees to use its reasonable best efforts to do
as follows:
(a) Prepare and file with such
amendments and supplements to the registration statement and the
prospectus used in connection therewith as may be necessary to keep said
registration statement effective and to comply with the provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, with respect to the sale of securities covered by said
registration statement for the period necessary to complete the proposed public
offering;
(b) Enter into an underwriting
agreement with customary provisions reasonably required by the underwriter,
if any, of the offering; and
(c) Register its securities covered by
said registration statement under the securities or "blue sky" laws of
appropriate jurisdictions.
It shall be a condition precedent to Purchaser's
obligation to close hereunder that the IPO shall have been completed on
terms and conditions reasonably satisfactory to Purchaser; provided,
however, that this condition precedent may be waived by Purchaser in its
sole and absolute discretion in which event it may close and pay the Purchase
Price all in cash.
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4.1.1. Deliveries. At or prior to the Closing, Seller
shall deliver, or cause to be delivered to Purchaser, the following items,
fully executed by all appropriate parties and in form and substance acceptable
to Purchaser:
4.1.1.1. Bill of Sale. A Bill of Sale in the form
of Exhibit 1.2 attached hereto together with any and all other evidences
of conveyance reasonably requested by Purchaser to obtain clear title to the
Purchased Assets.
4.1.1.2. Assignments of Leases. Assignments of
Leases in the form of Exhibit 4.1.1.2.
4.1.1.3. Covenants Not to Compete. Covenants Not
to Compete in the form of Exhibit 4.1.1.3 attached hereto executed by each of
the stockholders of Seller.
4.1.1.4. Corporate Resolutions. Seller shall
deliver to Purchaser certified copies of the resolutions of its Board of
Directors and certified copies of the resolutions of its stockholder(s)
authorizing the transactions contemplated herein.
4.1.1.5. Consents. Seller shall deliver to
Purchaser copies of all necessary third party and governmental consents, in
a form satisfactory to Purchaser, that Seller is required to obtain in order to
consummate the transactions contemplated by this Agreement.
4.1.1.6. Opinion of Counsel for Seller. Purchaser
shall receive an opinion dated the Closing Date of Vader & Vader of Escanaba,
Michigan, counsel for the Seller, in the form of Exhibit 4.1.1.6 attached
hereto.
4.1.1.7. Articles of Transfer. Articles of
Transfer in the form of Exhibit 4.1.1.7 attached hereto.
4.1.2. Due Diligence Results. Nothing shall have come to
the attention of Purchaser, in the course of its due diligence investigation
pursuant to Section 5.1 or otherwise, which demonstrates that any of the
representations or warranties of Seller is inaccurate or incomplete in any
material manner.
4.1.3. No Injunction. The consummation of the
transactions contemplated hereby shall not have been enjoined by any court of
competent jurisdiction and no proceeding seeking such an injunction shall be
pending.
SECTION 4.2. Closing Conditions Relating to Seller. The obligation
of Seller to consummate the sale of the Purchased Assets will be subject to
the satisfaction of the following conditions:
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4.2.1. Deliveries. At or prior to the Closing, Purchaser
shall deliver, or cause to be delivered to Seller, the following items:
4.2.1.1. The Purchase Price;
4.2.1.2. Assignments of Leases in the form of Exhibit
4.2.1.2.; and
4.2.1.3. An Assignment and Assumption Agreement
in the form of Exhibit 4.2.1.3 attached hereto.
4.2.2. No Injunction. The consummation of the transactions
contemplated hereby shall not be enjoined by any court of competent
jurisdiction and no proceeding seeking such an injunction shall be pending.
ARTICLE 5
PRE-CLOSING AGREEMENTS
SECTION 5.1. Due Diligence. Seller shall grant to Purchaser, and its
employees, counsel, accountants and other representatives, full and complete
access to Seller, its facilities, management, employees and records and its
outside accountants and counsel for purposes of a due diligence investigation
in connection with the transactions contemplated hereby. Purchaser agrees
to exercise its reasonable best efforts in conducting such due diligence in a
manner that will not significantly interfere with or disrupt the normal
operations of Seller or arouse suspicions of Seller's employees, customers or
suppliers that either the capital stock or the assets of Seller are for sale.
Seller will provide Purchaser and its representatives full access to all
relevant financial information, personnel, service and contractual
information. The cost of any such due diligence shall be borne by Purchaser.
SECTION 5.2. Operation of Business. Seller shall continue to
operate the Business in the ordinary course in such manner that each and every
warranty and representation of Seller made herein as of the date hereof will
be true, complete and accurate in all respects as of the date of the Closing
hereunder, without substantial change, and will maintain or cause to be
maintained all existing insurance coverage on the Purchased Assets of Seller
until the Closing. Until the Closing, all risk of loss, damage, or
destruction to the Purchased Assets shall be upon Seller, and in the event of
any loss, damage, or destruction to the Purchased Assets, Purchaser shall
be entitled to terminate this Agreement within thirty (30) days of learning of
the same. Prior to Closing, Seller shall not increase any current
compensation levels of employees or pay any bonuses or other direct or
indirect compensation without the prior written consent of Purchaser.
Seller
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agrees to provide to Purchaser monthly financial statements for the periods
following September 30, 1995, as they become available.
SECTION 5.3. Best Efforts. The parties hereto agree to use their
best efforts to cause all conditions to Closing to be satisfied and to cause
the transactions contemplated hereby to be consummated not later than April
30, 1996.
SECTION 5.4. Confidentiality. Purchaser and Seller agree that
they, and their respective officers, directors and other representatives,
will hold in strict confidence the negotiations relating to the transactions
contemplated by this Agreement, and all information exchanged pursuant
thereto. If, for any reason, Closing does not occur, all information
exchanged by Purchaser and Seller shall promptly be returned to the other party.
The parties hereto acknowledge and understand that Purchaser shall
undertake the IPO described in Section 4.1.0 hereof and shall be entitled to
comply with all applicable regulatory and disclosure requirements incident
to such registration of securities. In addition, Seller will refrain from,
and will cause its officers, directors, representatives, agents and
employees to refrain from, directly or indirectly, encouraging,
soliciting, initiating or participating in discussions or negotiations with
or providing any non-public information to any person other than Purchaser
concerning the sale or purchase of the Business (except in the ordinary course
of its business), any merger or consolidation involving Seller or any other
transaction in which Seller's Business would be acquired by a person other than
Purchaser.
SECTION 5.5. Public Announcements. Neither Purchaser nor Seller
shall issue any press release or otherwise make any public statement with
respect to this Agreement or the transactions contemplated hereby unless such
press release or public statement is satisfactory to the other party to this
Agreement, and Purchaser and Seller shall consult with each other as to the
form and substance of any public disclosure related thereto; provided,
however, that nothing contained herein shall prohibit any party from making
any disclosure which is required by law but only after the other party has
been given notice of and a reasonable opportunity to contest any such
disclosure allegedly required by law.
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ARTICLE 6
POST-CLOSING AGREEMENTS
SECTION 6.1. Indemnification by Seller, Belleau, Bickel and
Mainhardt.
6.1.1. Indemnification. Without limitation as to the
rights of Purchaser, the Seller, Belleau, Bickel and Mainhardt, jointly
and severally, shall indemnify, save and keep Purchaser, its successors and
assigns and its stockholders, directors, officers, affiliates, representatives
and employees and the estates, personal representatives and heirs of such
persons, forever harmless from and against any and all liability, demands,
claims, actions or causes of action, assessments, losses, penalties,
costs, damages or expenses (including interest, penalties, costs of
litigation, reasonable attorneys fees and expert witness fees)
(collectively, the "Losses") sustained or incurred by any of the foregoing
persons as a result of or arising out of or by virtue of (i) any incorrect
representation or warranty made by Seller herein or in any certificate,
exhibit or schedule delivered by Seller to Purchaser in connection
herewith, or (ii) any debt, liability or obligation of Seller (whether
known or unknown, absolute or contingent) not expressly assumed by
Purchaser hereunder.
6.1.2. Without limitation as to the other rights of Seller,
Purchaser shall indemnify, save and keep Seller, its successor and assigns
and its stockholders, directors, officers, affiliates, representatives and
employees and the estates, personal representatives and heirs of such persons
forever harmless against and from all liability, demands, claims, actions or
causes of actions, assessments, losses, penalties, costs, damages or expenses
(including interest, penalties, costs of litigation, reasonable attorneys
and expert witness fees (collectively the "Losses") sustained or incurred by
any of the foregoing persons as a result of or arising out of or by virtue of
any incorrect representation or warranty made by Purchaser herein or in
any certificate, exhibit or schedule delivered by Purchaser to Seller, if any,
in connection herewith.
6.1.3. A party required under this Section 6.1 to
furnish indemnity (the "Indemnifying Party") shall satisfy its obligation of
indemnification under this Section 6.1 within forty-five (45) days after
written notice thereof from any party entitled to such indemnity hereunder
(the "Indemnified Party") to the Indemnifying Party; provided, however,
that a party shall not be deemed in breach hereof for so long as it
contests in good faith its liability for indemnification hereunder.
6.1.4. As soon as practicable after obtaining knowledge
thereof, any Indemnified Party shall notify the Indemnifying Party of any
claim or demand which the Indemnified Party has determined has given or
could give rise to a right of indemnification under this Agreement. A
failure to give such notice shall not negate a right to indemnification
hereunder; provided, however, that the Indemnified Party shall bear any
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amount of Loss resulting directly from a failure to give a timely notice. If
such claim or demand relates to a claim or demand asserted by a third party
against the Indemnified Party and if the Indemnifying Party acknowledges
in writing its obligations to indemnify and hold harmless under this Section
6.1, the Indemnifying Party shall have the right to employ such counsel as is
reasonably acceptable to the Indemnified Party to defend any such claim or
demand asserted against the Indemnified Party. The Indemnified Party shall
have the right to participate in the defense of any said claim or demand at its
own cost and expense, provided that unless the Indemnified Party bears a
greater risk of loss than the Indemnifying Party, the Indemnifying Party
shall control the defense of said claim or demand. So long as the Indemnifying
Party is defending in good faith any such claim or demand, (i) the Indemnified
Party shall not settle such claim or demand without the prior written consent
of the Indemnifying Party, and (ii) any settlement of such claim or demand
made without such consent of the Indemnifying Party shall not be subject to
indemnity under this Section 6.1. If the Indemnifying Party fails to
acknowledge in writing its obligation to defend against or settle such claim
or proceeding within twenty (20) days after receiving notice thereof from
the Indemnified Party (or such shorter time specified in the notice as the
circumstances of the matter may dictate), the Indemnified Party shall be
free to dispose of the matter at the expense of the Indemnifying Party, in
any way in which the Indemnified Party deems to be in its best interest.
Purchaser, in its reasonable discretion to protect its financial interest
may set off the amount of any legitimate claim for which it may be entitled
to indemnification hereunder against any payment to be made to Seller
hereunder. Legitimate claim shall be defined as any legal proceeding filed in
a court having jurisdiction over the subject matter which claim is not older
than three (3) years from the date of the Closing.
6.1.5. The Indemnified Party shall make available to
the Indemnifying Party or its representatives all records and other
materials required for use in contesting any claim or demand asserted by a
third party against any Indemnified Party. Whether or not the Indemnifying
Party so elects to defend any such claim or demand, the Indemnified Party
shall not have any obligation to do so and the Indemnified Party shall not waive
any rights it may have against the Indemnifying Party under this Section 6.1
with respect to any such claim or demand by electing or failing to elect to
defend any such claim, provided that the Indemnified Party against which a
claim or demand is asserted in the first instance shall file in a timely
manner any answer or pleading with respect to a suit or proceeding in such
action as is necessary to avoid default or other adverse results.
SECTION 6.2. Further Assurances. Seller shall, at any time and
from time to time on and after the Closing Date, upon request by Purchaser
and without further consideration, take such actions or cause others to do
so, and execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, all transfers, conveyances, powers of attorney
and assurances, as may be required or desirable for the better conveying,
transferring, assigning, delivering, assuring and confirming to Purchaser,
or its respective successors and assigns, or for aiding and assisting in
collecting or reducing
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to possession, the Purchased Assets. To provide further assurances to
Purchaser of its performance hereunder, Seller agrees that it shall not,
during the one year period after the Closing Date, voluntarily dissolve or
terminate its corporate existence, or seek protection under any bankruptcy,
receivership or other law for the relief of debtors.
SECTION 6.3. Books and Records. At or immediately following the
Closing, Seller shall deliver to Purchaser all records constituting part of
the Purchased Assets; and all of Seller's correspondence, files, books and
records, necessary for Purchaser's conduct and operation of the Business and
the Purchased Assets; and shall instruct any other party in possession of such
materials to release them to Purchaser (except to the extent that Seller is
prohibited from or restricted in providing such information by other
agreements or applicable law). Seller shall retain the original copies of
its tax returns, and other records which it is required by law to maintain.
Purchaser shall safely store at its facilities in Escanaba, Michigan, or
at such other reasonable location of Purchaser upon prior notification to
Seller, all records delivered to it from Seller, and shall grant Seller
reasonable access thereto for legitimate business purposes upon Seller's
request as may be made from time to time for at least five (5) years after
Closing.
SECTION 6.4. Employees. Seller shall have and retain
responsibility for all salaries, accrued bonuses, commissions, vacation
pay, and all other employee welfare plans of Seller, and all payroll taxes
thereon which accrued or were earned prior to the time of Closing. Seller shall
remain responsible for employee severance and termination benefits, if any, and
all other employment benefits, claims of wrongful termination, or the like,
relating to Seller's employees. In the event that Seller shall elect to
terminate the employment of its employees contemporaneously with the
Closing, Seller shall be responsible for giving such notification as may be
required by the Worker Adjustment and Retraining Notification Act of 1988, if
applicable, and shall indemnify and hold Purchaser harmless from and against
all liabilities arising out of the notification or other requirements
thereof. It is expressly understood by the parties that Purchaser is not
assuming any obligations of Seller with respect to employees, and Seller
shall after the Closing Date remain responsible for all amounts owed to, and
claims made by, its employees relating to services provided by them, or to
actions or omissions of Seller, in accordance with applicable law and
contractual obligations of Seller.
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ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Survival. The representations and warranties of
Seller and Purchaser shall survive Closing.
SECTION 7.2. Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at
any time prior to Closing for any of the following reasons:
7.2.1. By the mutual consent of Purchaser and Seller.
7.2.2. By Purchaser if all of the conditions to Closing
described in Section 4.1 have not been satisfied by March 31, 1996 or within
ten (10) days after the receipt by Purchaser of the Statements referred to in
Section 2.16 hereof.
7.2.3. By Purchaser if the transactions shall not have
been consummated by March 31, 1996, or such later date as may be agreed upon
by the parties.
7.2.4. By Purchaser if Seller has materially breached any
representation or warranty herein or failed to perform any material
obligation or condition hereof and such breach or failure shall not have been
cured in manner, form and substance reasonably satisfactory to Purchaser; and
7.2.5. By Seller if Purchaser has materially breached any
representation or warranty herein or failed to perform any material
obligation or condition hereof and such breach or failure has not been cured in
manner, form and substance reasonably satisfactory to Seller.
Any termination pursuant to this Section 7.2 shall be without liability
on the part of any party, except as provided in Section 7.3 below.
SECTION 7.3. Expenses. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of
its obligations hereunder, and the consummation of the transactions
contemplated by this Agreement. At Closing, Seller shall pay all sales and/or
transfer tax which may be required to be paid in connection with the
transactions contemplated herein including the transfer from Seller to
Purchaser of the Purchased Assets. Seller agrees that the Purchased Assets
include unique property that cannot be readily obtained on the open market
and that Purchaser will be irreparably injured if this Agreement is not
specifically enforced. In the event Purchaser elects to terminate this
Agreement pursuant to Section 7.2.4 instead of seeking specific performance,
Purchaser shall be entitled to recover Purchaser's actual damages. If Seller
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terminates this Agreement solely as a result of Section 7.2.5 hereof, Seller
shall be entitled to retain the Deposit as the sole remedy of Seller hereunder.
SECTION 7.4. Amendments, Waivers and Remedies. The parties hereto,
by mutual agreement in writing, may amend, modify and supplement this
Agreement. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach. Pursuit by any party
hereto of any remedy shall not preclude pursuit by it of any other remedy
which may be provided by law or equity nor shall the pursuit of any remedy by a
party hereto constitute a forfeiture or waiver of any amount due such party
or of any damage accruing by reason of the violation of any of the terms,
provisions and covenants in this Agreement.
SECTION 7.5. Notices. All notices or other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand; (ii) four (4) days
subsequent to mailing if mailed by express, certified or registered
mail, with postage prepaid, in the continental United States; (iii) two
(2) days subsequent to pick up by such courier if sent by a nationally or
internationally recognized overnight courier service that regularly
maintains records of items picked up and delivered; or (iv) when transmitted if
sent by telecopier, as follows:
If to Purchaser:
Life Critical Care Corporation
c/o The Morgenthau Group, Inc.
504 Cathedral Street
Baltimore, Maryland 21201
Attn: Ms. Amy E. Parker
Fax No.: (410) 727-1427
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
210 West Pennsylvania Avenue, Suite 400
Towson, Maryland 21204-4515
Fax No.: (410) 832-2015
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If to Seller:
Great Lakes Home Medical, Inc.
118 North 22nd
Escanaba, Michigan 49829
Attn: Mr. Michael Belleau
with a copy to:
Daniel J. Vader, Esquire
623 Ludington Street, Suite 302
Escanaba, Michigan 49829
Fax No.: (906) 786-8293
Any party hereto may specify in writing a different address for such purpose
to the other parties at least five (5) days prior to the effective date of such
address change.
SECTION 7.6. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This
Agreement, and the rights, interests and obligations hereunder, may not be
assigned by either party without the prior written consent of the other party
hereto.
SECTION 7.7. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provision of
this Agreement unless the consummation of the transaction contemplated hereby is
adversely affected thereby.
SECTION 7.8. Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or
between the parties, written or oral, which may have related to the subject
matter hereof in any way.
SECTION 7.9. No Third-Party Beneficiaries. This Agreement shall
be for the benefit only of the parties hereto, and their respective
successors and assigns.
SECTION 7.10. Waiver of Bulk Sales Act. In consideration
of, and in reliance upon, the representations and warranties made by
Seller in Article 2, Purchaser hereby waives compliance with the
provisions of any applicable bulk transfer laws.
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SECTION 7.11. Singular and Plural; Gender. The singular shall
include the plural and vice-versa, and the use of one gender shall be deemed
to include all other genders whenever appropriate.
SECTION 7.12. Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement will be governed by
the laws of the State of Maryland without reference to any conflict of laws
rules.
SECTION 7.13. Counterparts. This Agreement may be executed in two
or more counterparts each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
SECTION 7.14. Schedules. The Schedules hereto are an integral
part of this Agreement. Information described in any Schedule of this
Agreement shall be deemed disclosed in all Schedules of this Agreement and the
term "Agreement" shall include all Schedules, exhibits and other deliveries
attached or made pursuant hereto. Except as otherwise specifically provided
for herein, any Schedules which have not been prepared and attached to this
Agreement on the date of execution hereof shall be prepared and delivered by
Seller to Purchaser within ten (10) days from the date of execution of this
Agreement.
SECTION 7.15. Headings. The headings and captions set forth herein
are for convenience of reference only and shall not affect the construction or
interpretation hereof.
SECTION 7.16. Further Documents. Each party shall, whenever and as
often as requested to do so by the other, but without expense to the
non-requesting party, execute, acknowledge, and deliver all such further
conveyances, assignments, confirmations, satisfactions, releases,
instruments of further assurance, approvals, consents and any and all other
further instruments and documents as may be necessary, expedient, or proper in
the reasonable opinion of the requesting party or its counsel in order to
complete the transactions contemplated herein.
SECTION 7.17. Arbitration. Any and all disputes, controversies or
claims that lead up to the execution of this Agreement or that arise out of
or relate to this Agreement or the breach of it, including, without
limitation, any dispute regarding the disposition of any deposit in the
event this Agreement is terminated and including any claims regarding the
validity, scope and enforceability of this arbitration clause, shall, if not
promptly settled by the parties, be solely and finally resolved by
arbitration. The arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association (the
"AAA") in effect at the time and shall be conducted before a single
arbitrator. The parties to the arbitration shall attempt to agree, by mutual
consent,
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to the appointment of the arbitrator. In the absence of agreement among the
parties, any party to the arbitration may apply to AAA for a list of
arbitrators from which list the arbitrator shall be selected in accordance with
the commercial arbitration rules of AAA.
Any such action or proceeding brought by Purchaser arising out of or
relating to this Agreement shall be brought in Escanaba, Michigan, and in no
other location. Any such action or proceeding brought by Seller arising out of
or relating to this Agreement shall be brought in Baltimore City, Maryland,
and no other location. All cross complaints shall be filed with the same
arbitration panel and in the same location in which the original complaint
was filed. The parties hereby waive the right to object to such location
on the basis of venue or forum nonconveniens. Judgment upon any award
rendered by the arbitrator may be entered in any court of competent jurisdiction
in Maryland and/or Michigan and each party hereto consents to the
jurisdiction of such courts and waives all claims of improper venue. The
arbitrator shall determine all claims in accordance with the internal law of
the State of Maryland. The internal procedural and substantive laws of
Maryland and the United States Federal Arbitration Act shall govern all
questions of arbitral procedure, arbitral review, scope of arbitral
authority, and arbitral enforcement. The parties further agree that the
arbitration proceeding shall constitute an absolute bar to the institution of
any court proceeding, and that the decision and award of the arbitrator
shall be final and binding.
The cost of the arbitration proceeding shall be borne by the
prevailing party, except that each party shall be responsible for its own
attorney fees, if any.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, under seal, on the day and year first above written, intending to be
legally bound hereby.
WITNESS: GREAT LAKES HOME MEDICAL, INC.
_____________________________ By:_______________________(SEAL)
- Seller -
WITNESS: LIFE CRITICAL CARE CORPORATION
______________________________ By:_______________________(SEAL)
- Purchaser -
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WITNESS:
______________________________ ________________________________(SEAL)
MICHAEL BELLEAU, Individually
WITNESS:
______________________________ ________________________________(SEAL)
JAMES BICKEL, Individually
WITNESS:
_______________________________ ________________________________(SEAL)
THOMAS MAINHARDT, Individually
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EXHIBIT 1.2
BILL OF SALE AND ASSIGNMENT OF ASSETS
THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is executed and
delivered effective this ____ day of ______________, 1996 by GREAT LAKES
HOME MEDICAL, INC., a Michigan corporation ("Seller"), to LIFE CRITICAL
CARE CORPORATION, a Delaware corporation ("Purchaser").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of March 1, 1996 (the "Agreement"), providing for the
purchase by Purchaser of substantially all of the assets of Seller,
excluding the assets of Seller used in the "Medwest" business controlled by
stockholders of Seller;
NOW, THEREFORE, pursuant to the Agreement, and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Seller hereby grants, bargains, sells, delivers, transfers,
sets over, assigns and conveys to Purchaser and its successors and
assigns, free and clear of any and all liens, claims or encumbrances of any
kind, all of the Purchased Assets (as defined in the Agreement) including,
without limitation, those assets and properties listed or described on Schedule
A attached hereto and made a part hereof.
TO HAVE AND TO HOLD the Purchased Assets unto Purchaser and its
successors and assigns, to its and their own use and benefit forever, and
Seller, for itself and its successors and assigns, covenants to and agrees
with Purchaser to warrant and defend the sale, transfer, assignment,
conveyance and delivery of the Purchased Assets unto Purchaser and its
successors and assigns, against all lawful claims and demands.
Seller hereby covenants and agrees with Purchaser that it will duly
execute and deliver all such deeds, bills of sale, endorsements, assignments,
drafts, checks, and other instruments of transfer as may be necessary or
helpful more fully to sell, transfer, assign and convey to and to invest in
Purchaser, all and singular, the Purchased Assets hereby sold, transferred,
assigned and conveyed by this Bill of Sale and Assignment of Assets.
The transfer evidenced by this Bill of Sale and Assignment of Assets
is made subject to and upon all of the terms, covenants, conditions,
representations and warranties set forth in the Agreement, and all of which
terms, covenants, conditions, representations and warranties are
incorporated herein by reference, and shall survive the delivery of this Bill
of Sale and Assignment of Assets.
<PAGE>
All of the terms and provisions of this Bill of Sale and Assignment
of Assets shall be binding upon Seller and its respective successors and
assigns, and shall inure to the benefit of the Purchaser and its successors
and assigns.
IN WITNESS WHEREOF, Seller and Purchaser have caused the due
execution of this Bill of Sale and Assignment of Assets, under seal, as of the
day and year first above written.
GREAT LAKES HOME MEDICAL, INC.
By:______________________(SEAL)
- Seller -
LIFE CRITICAL CARE CORPORATION
By:______________________(SEAL)
- Purchaser -
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SCHEDULE A
TO
BILL OF SALE AND ASSIGNMENT OF ASSETS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
<PAGE>
SCHEDULE 1.3
EXCLUDED ASSETS
1. Life Insurance Policy(ies) of Seller
2. Cash values of any Life Insurance Policy(ies) of Seller
3. Federal and Michigan corporate income tax deposits of Seller
4. Cash of Seller
5. Marketable Securities of Seller
6. Certificates of Deposit of Seller and other Cash Equivalents
7. Those assets owned by Seller which are used in the business operated
in Wisconsin and known as "Medwest" which is controlled by the
stockholders of Seller.
<PAGE>
SCHEDULE 1.6
LIABILITIES ASSUMED
1. Ordinary and customary accounts payable incurred in the ordinary
course of business and miscellaneous other expenses which are not
material to the financial condition of Seller. The nature and
amount of such liabilities will be mutually agreed to by Seller and
Purchaser in good faith at Closing.
<PAGE>
SCHEDULE 1.7
ALLOCATION OF PURCHASE PRICE
_______________________ $__________
_______________________ $__________
_______________________ $__________
Furniture, Fixtures, and
Equipment $__________
_______________________ $__________
Goodwill $__________
TOTAL: $__________
[to be completed by Purchaser and Seller prior to Closing]
<PAGE>
SCHEDULE 2.7
CONTRACTS AND COMMITMENTS
[to be provided by Seller to Purchaser within thirty (30) days
following the execution of the Asset Purchase Agreement]
<PAGE>
SCHEDULE 2.8
LITIGATION
1. Litigation pending in the Circuit Court of Marquette County, Michigan
and now in the Michigan Court of Appeals. Part of the relief requested
is injunctive relief in regards to an employee performing duties for
Seller. Seller is to provide further information regarding this case to
Purchaser.
<PAGE>
SCHEDULE 2.10
INSURANCE
[to be provided by Seller to Purchaser within thirty (30) days
following the execution of the Asset Purchase Agreement]
<PAGE>
SCHEDULE 2.13
LICENSES AND PERMITS
[to be provided by Seller to Purchaser within thirty (30) days
following the execution of the Asset Purchase Agreement]
<PAGE>
EXHIBIT 4.1.1.2
ASSIGNMENTS OF LEASES
[TO BE SUPPLIED BY SELLER]
<PAGE>
EXHIBIT 4.1.1.3
COVENANT NOT TO COMPETE
COVENANT NOT TO COMPETE made and entered into this ____ day
of __________, 1996, by and between _____________________________________
("Covenantor") and LIFE CRITICAL CARE CORPORATION, a Delaware corporation,
and its successors and assigns ("Purchaser").
WITNESSETH:
WHEREAS, Great Lakes Home Medical, Inc. (hereafter called "Seller")
is selling certain operating assets related to its home medical equipment
business (the "Business") to Purchaser in a transaction contemplated in an
Asset Purchase Agreement dated March 1, 1996 (hereafter called the
"Agreement") entered into by Seller and Purchaser; and
WHEREAS, the Covenantor has been a stockholder of Seller involved
in the operation of the Business and is familiar with the operation of the
Business generally; and
WHEREAS, the Covenantor agreed to enter into this Covenant Not to
Compete as an inducement to Purchaser to enter into the Agreement as a result of
which Agreement the Covenantor will materially benefit.
NOW, THEREFORE, the parties hereto do covenant and agree as follows:
1. COVENANT NOT TO COMPETE PAYMENT. Simultaneously with the
delivery of this Covenant Not to Compete, Purchaser has paid to Seller the
sum of One Dollar ($1.00) in cash, or certified check.
2. RESTRICTIVE COVENANT. In consideration for the entry into
the Agreement by the Purchaser, the Covenantor covenants that he will not,
directly or indirectly for a period of five (5) years from and after the date
hereof, own in whole or in part, manage, operate, control, or perform services
for any home health equipment business located within seventy-five (75) miles of
Escanaba, Michigan; provided, however, that Medwest shall be entitled to
continue to conduct business in Marshfield, Wisconsin and Wisconsin Rapids,
Wisconsin.
<PAGE>
3. CONFIDENTIAL INFORMATION. For a period of ten (10) years
from and after the date hereof, the Covenantor shall hold all Confidential
Information (i.e., all trade secrets and proprietary and confidential
information regarding the Business of whatever nature, in whatever medium,
developed, owned or acquired by the Seller or the Covenantor, including
customers and prospective customers and suppliers but excluding information
which at the time of disclosure is in the public domain through no fault of,
or violation of law or breach of agreement by the Covenantor or which the
Covenantor can demonstrate he has lawfully obtained from a third party under
circumstances permitting its lawful disclosure and use which the Covenantor
reasonably believes has no obligation of confidentiality with respect
thereto) in confidence and not disclose, duplicate, communicate or transmit
the Confidential Information to any person or use or exploit any
Confidential Information for any purpose.
4. REASONABLENESS. The Covenantor hereby expressly agrees
that any competition by him with the Business in violation of the terms of this
Covenant Not to Compete would, among other things, materially impair the
Purchaser's future prospects and that the limitations set forth in Paragraph 2
above are reasonable, both as to time and geographic area. If,
notwithstanding the foregoing, the scope of any restriction contained in
Paragraph 2 is too broad to permit enforcement thereof to its full extent,
such restriction shall be enforced to the maximum extent permitted by law, and
Covenantor hereby agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
5. INJUNCTIVE RELIEF. The Covenantor hereby recognizes that
in the event of his breach of any of the covenants hereunder Purchaser's
remedies at law for money damages would be inadequate, and, therefore, the
Covenantor hereby stipulates that Purchaser shall be entitled to injunctive
relief in the event of any breach of the Covenantor's covenants hereunder.
6. INTERPRETATION. This Covenant Not to Compete and the
provisions hereof shall in all respects be interpreted under and regulated
by the laws of the State of Michigan except for the choice of law rules
utilized in that jurisdiction.
7. AMENDMENT. This Covenant Not to Compete contains all the
understandings of the parties and shall not be altered or amended, except in a
writing signed by each of the parties hereto.
8. ATTORNEYS' FEES. The Covenantor hereby agrees that, in
the event of a breach of the Covenantor's covenants hereunder,
Purchaser shall be entitled to recover such costs, damages and reasonable
attorneys' fees as may be incurred on account of such breach from the
Covenantor.
-2-
<PAGE>
9. BINDING EFFECT. This Covenant Not to Compete shall be
binding upon the parties and their respective successors and assigns.
10. COUNTERPARTS. This Covenant Not to Compete may be executed
in two or more counterparts, each of which, when taken together, shall
constitute one and the same original.
IN WITNESS WHEREOF, the parties have caused this Covenant Not to
Compete to be executed under seal on the day and year first above written.
COVENANTOR:
(SEAL)
[ONE SET TO BE EXECUTED BY EACH
STOCKHOLDER OF GREAT LAKES
HOME MEDICAL, INC.]
PURCHASER:
LIFE CRITICAL CARE CORPORATION
By: (SEAL)
-3-
<PAGE>
EXHIBIT 4.1.1.6
OPINION OF COUNSEL FOR SELLER
[Letterhead of Vader & Vader]
______________, 1996
Life Critical Care Corporation
3333 West Commercial Boulevard
Suite 203
Fort Lauderdale, Florida 33309
Attention: Ms. Amy E. Parker
Ladies and Gentlemen:
This opinion is delivered pursuant to Section 4.1.1.6 of the Asset
Purchase Agreement, dated March 1, 1996 (the "Agreement"), between Great
Lakes Home Medical, Inc. (the "Company"), Michael Belleau, James Bickel and
Thomas Mainhardt and Life Critical Care Corporation (the "Purchaser"). I have
acted as counsel to the Seller in connection with the Agreement and the
transactions contemplated thereby. Where a term that is defined in the
Agreement is used in this Opinion, the term has the same meaning set forth in
the Agreement, unless differently defined herein.
(1) In rendering the opinions set forth below, I have examined:
(A) The fully executed Agreement; and
(B) The Articles of Incorporation, By-Laws and minutes of
the corporate proceedings of the Company.
(2) In rendering the opinions set forth below, I have assumed:
(A) Each of the parties to the Agreement other than my
clients have the power and authority to: (i) enter into the Agreement and all
other agreements or documents required to be executed by it pursuant to the
Agreement; and (ii) perform all of its obligations under the Agreement and all
other agreements or documents required to be executed by it pursuant to the
Agreement;
<PAGE>
(B) All required corporate actions and authorizations
other than on behalf of my clients have been completed; and
(C) The authenticity of all documents submitted as
originals, the genuineness of all signatures other than signatures on behalf
of my clients and the conformity to the originally executed documents of all
documents submitted to us as drafts or photocopies.
In rendering my opinions, whenever my opinion herein regarding
the existence or absence of facts is indicated to be based on my knowledge or
awareness, my opinion is intended to signify that during the course of my
representation of the Company no information has come to my attention which
would give me actual knowledge of the existence or absence of such facts. I
have not undertaken any independent investigation to determine the
existence or absence of such facts and no inference of further knowledge
should be drawn from my representation of the Company. As to various
questions of fact material to this Opinion, I have relied upon the truth
and completeness of the representations and warranties made by the Company as
the "Seller" in the Agreement and upon certifications executed by the Officers
and Directors of the Company. In addition, I have obtained from public
officials and from officers of the Company such other certificates and
assurances, and I have examined such corporate records, other documents
and questions of law, as I have considered necessary or appropriate for
purposes of this Opinion.
Based upon the foregoing, and subject to the limitations and
qualifications set forth herein, it is my opinion that, as of the date of this
letter:
(A) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Michigan, and has
the corporate power to own all of its properties and assets and to carry on
its business as it is now being conducted.
(B) The Company has validly taken all necessary corporate
action to authorize it to execute and deliver the Agreement and to consummate
the transactions contemplated thereby; and the Agreement has been duly
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable in accordance with its terms.
(C) The execution and delivery of the Agreement by the
Company and the consummation by the Company of the transactions contemplated
on its part thereby do not and will not violate any provision of the Articles
of Incorporation or By-Laws of the Company.
-2-
<PAGE>
(D) To my knowledge, all consents, authorizations,
orders or approvals of, and filings and registrations with, any governmental
commission, board or other regulatory body required for or in connection with
the execution and delivery of the Agreement by the Company and the
consummation by it of the transactions contemplated on its part thereby have
been obtained or made.
(E) To my knowledge, except as disclosed on any
Schedule to the Agreement, there is no claim, action, suit or legal,
administrative or other proceeding or governmental investigation, pending
or threatened against the Company or any of its properties which might result
in any material adverse change in the business or financial condition of the
Company.
(F) To the best of my knowledge, neither the execution
and delivery of the Agreement, nor the consummation of the transactions
contemplated thereby, conflicts with or does or will violate or result (with
the giving of notice and/or the passage of time) in a breach of any of the
terms, conditions or provisions of or constitute a default under, any lease,
mortgage, contract or other agreement binding on the Company or affecting its
properties. To the best of my knowledge, no consent or approval of any
public authority is required as a condition to the validity or enforceability
of the Agreement or any transaction contemplated thereby.
The foregoing Opinion is subject to the following
qualifications:
(A) The Opinion is subject to the operation and effect of
applicable bankruptcy, insolvency, moratorium, reorganization, receivership
or other similar laws, statutes or rules now or hereafter in effect
affecting the rights of creditors generally and the rights of taxing
authorities.
(B) The enforceability of the Agreement may require
enforcement by a court of equity, and such enforcement is subject to such
principles of equity as courts having jurisdiction may impose.
(C) In rendering my opinion regarding the good
standing of the Company, I have relied exclusively upon a Certificate
of Good Standing, dated __________ , 1996, issued by the Michigan Corporation
and Securities Bureau.
(D) My Opinion is based solely upon the laws of the
State of Michigan, and I am opining herein as to the subject transaction as
though the laws of the United States of America and the State of Michigan were
the only applicable laws. I assume no responsibility as to the applicability
thereto or affect thereon of the laws of any other state or jurisdiction. As
to matters governed or affected by laws of states other than the State of
Michigan, I have assumed that insofar as the substantive laws of any other
state may be
-3-
<PAGE>
applicable to any opinions herein, such laws are identical to the
substance of laws of the State of Michigan applied by me herein.
This opinion is being furnished to you solely for your benefit and the
benefit of your counsel and may not be relied upon by, nor copies of it
delivered to, any other person or parties without my prior written consent.
Very truly yours,
VADER & VADER
By: _________________________
Daniel J. Vader, Partner
-4-
<PAGE>
EXHIBIT 4.1.1.7
ARTICLES OF TRANSFER
BETWEEN
GREAT LAKES HOME MEDICAL, INC.
AND
LIFE CRITICAL CARE CORPORATION
THIS IS TO CERTIFY THAT:
FIRST: Great Lakes Home Medical, Inc., a Michigan
corporation (the "Transferor"), agrees to transfer all or substantially
all of its property and assets to Life Critical Care Corporation, a
Delaware corporation (the "Transferee") pursuant to the terms of an Asset
Purchase Agreement between the Transferor and the Transferee of even date
herewith.
SECOND: The Transferor is incorporated under the laws of the
State of Michigan, with a principal office located at
________________________________________.
THIRD: The Transferee is incorporated under the general
laws of the State of Delaware. The Transferee's address and principal place of
business is 504 Cathedral Street, Baltimore, Maryland 21201.
FOURTH: The Transferor owns no interest in land, the title
to which could be affected by the recording of an instrument among the land
records.
FIFTH: The terms and conditions of the transaction set forth
in these Articles of Transfer were advised, authorized and approved by the
Transferor in the manner and by the vote required by its Articles of
Incorporation and Michigan law, in the following manner: The Board of
Directors of the Transferor by unanimous written consent adopted a resolution
declaring that the proposed transaction described herein was advisable, and
directed that the proposed transaction be submitted to the stockholders of the
Transferor for consideration and approval. The Shareholders of the
Transferor by unanimous written consent adopted a resolution declaring that
the proposed transaction described herein was approved.
SIXTH: The terms and conditions of the transaction set forth
in these Articles of Transfer were advised, authorized and approved by the
Transferee in the manner and by the vote required by its Charter and the laws of
the place of its incorporation, in the following manner: The Board of
Directors of the Transferee by unanimous written consent adopted a resolution
declaring that the proposed transaction was approved.
<PAGE>
SEVENTH: The nature and amount of the consideration to
be paid by the Transferee to the Transferor for the assets to be
transferred by the Transferor pursuant to the Asset Purchase Agreement is
____________ Thousand Dollars ($___________).
IN WITNESS WHEREOF, on this day of __________________, 199__,
Transferor has caused these Articles of Transfer to be executed on its
behalf by its President and attested by its Secretary, and Transferee has
caused these Articles of Transfer to be executed on its behalf by its President
and attested by its Secretary, and each individual signing hereby
acknowledges, under penalties for perjury, that these Articles of Transfer are
the act of the party on whose behalf such individual is executing the
Articles of Transfer and that, to the best of his or her knowledge,
information and belief, the facts and matters set forth herein are true
in all material respects.
ATTEST: GREAT LAKES HOME MEDICAL, INC.
_______________________________ By:____________________________(SEAL)
, Secretary , President
ATTEST: LIFE CRITICAL CARE CORPORATION
_______________________________ By:____________________________(SEAL)
, Secretary , President
-2-
<PAGE>
EXHIBIT 4.2.1.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made this _____ day
of _______________, 1996, by and between LIFE CRITICAL CARE CORPORATION, a
Delaware corporation ("Purchaser"), and GREAT LAKES HOME MEDICAL, INC., a
Michigan corporation ("Seller").
WHEREAS, pursuant to that certain Asset Purchase Agreement,
dated March 1, 1996, between the parties hereto (the "Purchase Agreement"),
Seller has agreed to assign and transfer to Purchaser certain assets,
properties and business of Seller;
NOW, THEREFORE, in consideration of the transfer to Purchaser
of the aforesaid assets, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Assignment. Seller hereby assigns and transfers to
Purchaser the following: All right, title and interest of Seller in, to and
under all contracts, leases, indentures, agreements, commitments and all
other legally binding arrangements, whether oral or written, to which
Seller is a party or by which Seller is bound ("Contracts") that are listed on
Schedule A hereto.
2. Assumption. Subject to the further terms of this
Agreement, effective on the date hereof, Purchaser, for itself and its
successors and assigns, hereby covenants and agrees to assume, and hereby does
assume, and agrees to discharge, perform, and observe, and to indemnify,
defend, and hold Seller harmless from and against the obligations of Seller,
as and to the extent arising from and after the date hereof, or pertaining
to any period subsequent to the date hereof, as are listed or described on
Schedule B, attached hereto and made a part hereof (the "Assumed Liabilities").
3. Indemnification. Seller shall defend, indemnify, and
hold Purchaser harmless against and from (a) all liability to any person,
firm, corporation, political subdivision, or other entity for any default
by Seller in connection with the Assumed Liabilities to the extent such
default occurs prior to the date hereof, and (b) any debt, liability,
obligation or contract not expressly assumed by Purchaser hereunder.
Purchaser shall defend, indemnify and hold Seller harmless against and from
any and all liability to any person, firm, corporation, political
subdivision, or other entity for any default by Purchaser in connection with
the Assumed Liabilities, to the extent such default occurs on or after the
date hereof. The indemnifications set forth herein are in addition to any
indemnifications set forth in the Purchase Agreement.
4. Representations of Seller. All representations and
warranties of Seller relating to the Assumed Liabilities contained in the
Purchase Agreement are hereby incorporated by reference herein. Seller
hereby further represents and warrants to
<PAGE>
Purchaser that, as of the effective date of this Agreement, Seller has not
received notice of any default by Seller in connection with the Assumed
Liabilities, and to the best of Seller's knowledge, information and belief,
Seller is not in default in connection with the Assumed Liabilities.
5. Further Assurances. The parties agree that they
will take whatever action or actions are found to be reasonably necessary
from time to time to effectuate the provisions and intent of this Agreement,
and, to that end, the parties agree that they will execute any further
documents or instruments which may be necessary to give full force and effect
to this Agreement or to any of its provisions.
6. Binding Effect. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
7. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Michigan.
8. Miscellaneous. This Agreement is made and
entered into pursuant to the terms, conditions, and provisions of the
Purchase Agreement. Except as otherwise provided herein or except as otherwise
required by the context herein, all capitalized terms defined in the Purchase
Agreement shall have such defined meanings when used herein.
IN WITNESS WHEREOF, the parties hereto have caused the due
execution of this Assignment and Assumption Agreement, under seal, as of the
day and year first above written.
WITNESS: GREAT LAKES HOME MEDICAL, INC.
______________________________ By: ___________________________(SEAL)
- SELLER-
WITNESS: LIFE CRITICAL CARE CORPORATION
______________________________ By: ___________________________(SEAL)
- PURCHASER-
-2-
<PAGE>
SCHEDULE A
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-3-
<PAGE>
SCHEDULE B
TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
-4-
<PAGE>
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this _____ day of June, 1996 to be made effective as of the 30th day of
May, 1996, by and among ABC Medical Supply, Inc., Timothy Dillon, Dennis
Phillips and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
March 1, 1996 (the "Agreement") and desire to amend the Agreement as set forth
herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"May 30, 1996" as it appears in the third line thereof and by inserting in lieu
thereof the date "November 1, 1996."
(b) Section 1.4 of the Agreement is hereby amended by
deleting the phrase "Four Million Five Hundred Thousand Dollars
($4,500,000)" as it appears in the fourth line thereof and by inserting in lieu
thereof the following: "Five Million Five Hundred Thousand Dollars
($5,500,000)."
(c) Section 1.5 of the Agreement is hereby amended by deleting clauses
(ii) and (iii) and by inserting the following in lieu thereof:
"(ii) the balance of the Purchase Price shall be paid as
follows:
(a) Three Million Seven Hundred Thousand Dollars
($3,700,000) of the Purchase Price, after being reduced by the
Deposit, shall be paid by wire transfer of immediately
available funds to such bank account as shall be designated by
the Seller or by delivery of a cashier's check to the Seller
at Closing; and
<PAGE>
(b) One Million Eight Hundred Thousand ($1,800,000)
of the Purchase Price (the "Purchase Price Balance") shall be
paid by the issuance by Purchaser to Seller of that number of
shares of the common stock of Purchaser determined by dividing
the amount of the offering price per share of the Common Stock
into the Purchase Price Balance (the "Common Stock"), or, if
the IPO (as defined in Section 4.1.0 hereof) shall not have
been completed at Closing, in cash in lieu of the Common
Stock, at the sole discretion of Purchaser and subject to the
provisions of Section 4.1.0 hereof.
(iii) The Closing shall have been completed on or before
November 1, 1996. In addition, Purchaser hereby agrees that
if, for any reason other than a material misrepresentation by
Seller or a material change in the business of Seller, it does
not file with the Securities and Exchange Commission its
registration statement for an initial public offering on or
before August 15, 1996, then Seller shall be entitled to
terminate this Agreement and retain the Deposit. Conforming
changes are hereby made to any other affected Section of this
Agreement, including without limitation Sections 5.3, 7.2.2
and 7.2.3."
(d) Section 1.5(v) of the Agreement is hereby amended by adding the
following to the end of existing Section 1.5(v): "Any adjustments resulting from
this Section 1.5(v) shall be applied to increase or decrease, as applicable, the
Common Stock to be delivered pursuant to Section 1.5(ii)((b) hereof, and only if
a negative adjustment exceeds $1.8 million will such excess be applied to
reductions in the cash portion of the Purchase Price provided for in Section
1.5(ii)(a) hereof."
(e) Section 4.2.1.1 of the Agreement is hereby amended by deleting
existing Section 4.2.1.1 and by inserting in lieu thereof the following:
"4.2.1.1. The wire transfer or delivery of a cashier's
check in the amount of the cash portion of the Purchase
Price, less the amount of the Deposit, and the delivery of
the Common Stock."
(f) New Section 6.5 is hereby added as follows:
"SECTION 6.5. Lock-Up Agreements. Seller warrants that, if
required by the underwriter(s) for the IPO, it will enter into
any required "lock-up" agreement; provided, however, that
Seller will not be required to a lock-up of the Common Stock
for a period of time in excess of the shortest period of time
agreed to by any other principal stockholder of Purchaser."
-2-
<PAGE>
(g) New Section 3.6 is hereby added as follows:
"SECTION 3.6 Material Misstatements or Omissions. Purchaser
(for purposes of this Section 3.6, the knowledge of Purchaser
shall mean the actual knowledge after reasonable diligence of
Amy E. Parker, Vice President of Purchaser) has not knowingly
made any material misstatements of fact or omitted to state
any material fact necessary or desirable to make complete,
accurate , and not misleading every representation, warranty,
schedule, and agreement of Purchaser set forth, described or
referred to herein."
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
ABC MEDICAL SUPPLY, INC.
By: _______________________________
Dennis Phillips, President
-3-
<PAGE>
LIFE CRITICAL CARE CORPORATION
By: _______________________________
Amy E. Parker, Vice President
____________________________________
Timothy Dillon, Individually
____________________________________
Dennis Phillips, Individually
-4-
<PAGE>
SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this 5th day of September, 1996 to be made effective as of the 15th day
of August, 1996, by and among ABC Medical Supply, Inc., Timothy Dillon, Dennis
Phillips and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
March 1, 1996, as amended by a First Amendment to Asset Purchase Agreement dated
June 29, 1996 (as amended, the "Agreement") and desire to amend the Agreement as
set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"November 1, 1996" as it appears in the third line thereof and by inserting in
lieu thereof the date "December 31, 1996."
(b) Section 1.1 of the Agreement is hereby further amended by
adding the following at the end of existing Section 1.1:
"Closing will take place simultaneously with the closing
of the IPO (as defined in Section 4.1.0 hereof)."
(c) Section 1.5 of the Agreement is hereby amended by deleting clauses
(ii) and (iii) and by inserting the following in lieu thereof:
"(ii) the balance of the Purchase Price shall be paid as
follows:
(a) Subject to the provisions of Section 1.5(ii)(b)
hereof, a portion of the Purchase Price shall be paid by the
issuance by Purchaser to Seller of 180,000 shares of the
common stock of Purchaser (the "Common Stock") which shall be
valued at the offering price per share in Purchaser's IPO (as
defined in Section 4.1.0 hereof) (e.g., if the offering price
per share in the IPO is $10.00, then the amount applied
against the Purchase Price shall be $1,800,000); and
<PAGE>
(b) The balance of the Purchase Price, after being
reduced by the Deposit, shall be paid by wire transfer of
immediately available funds to such bank account as shall be
designated by the Seller or by delivery of a cashier's check
to the Seller at Closing; provided, however, that in no event
shall the cash portion of the Purchase Price (prior to being
reduced by the Deposit) be less than $3,700,000 and, if the
offering price per share in the IPO is greater than $10.00,
the number of shares to be issued to Seller pursuant to
Section 1.5(ii)(a) hereof shall be reduced to that number of
shares equal to $1,800,000 divided by the IPO price per share
(i.e., if the IPO price per share equals $11.00, the cash
portion of the Purchase Price would be $3,700,000, reduced by
the Deposit, and the number of shares issued pursuant to
Section 1.5(ii)(a) hereof would be 163,636 shares).
(iii) The Closing shall have been completed on or before
December 31, 1996. In addition, Purchaser hereby agrees that
if, for any reason other than a material misrepresentation by
Seller or a material change in the business of Seller, it does
not file with the Securities and Exchange Commission its
registration statement for an initial public offering on or
before November 1, 1996, then Seller shall be entitled to
terminate this Agreement and retain the Deposit. Any
adjustments to the Purchase Price shall be post-Closing
adjustments. Conforming changes are hereby made to any other
affected Section of this Agreement, including without
limitation Sections 5.3, 7.2.2 and 7.2.3."
(d) Section 1.5(v) of the Agreement is hereby amended by deleting the
following from the end of existing Section 1.5(v): "Any adjustments resulting
from this Section 1.5(v) shall be applied to increase or decrease, as
applicable, the Common Stock to be delivered pursuant to Section 1.5(ii)((b)
hereof, and only if a negative adjustment exceeds $1.8 million will such excess
be applied to reductions in the cash portion of the Purchase Price provided for
in Section 1.5(ii)(a) hereof."
(e) Section 2.4 of the Agreement is hereby amended by deleting the date
"September 30, 1995" from the first line thereof and inserting in lieu thereof
the date "June 30, 1996" and by deleting the following phrase from the existing
Section 2.4: ", except as may have been disclosed by Seller to Purchaser in
writing prior to Closing."
(f) Section 2.16 of the Agreement is hereby amended by adding
the following at the end of existing Section 2.16:
"Seller has no liabilities or obligations (whether absolute,
accrued, contingent or otherwise), except liabilities,
obligations or contingencies that are accrued or reserved
against in the June 30, 1996 audited financial statements of
Seller or that were incurred since the date of such statements
in the ordinary course of business and would not reasonably
likely have a material adverse effect on the business,
operations, properties, assets, condition (financial or
otherwise), prospects or results of operations of Seller."
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<PAGE>
(g) New Section 6.6 is hereby added as follows:
"SECTION 6.6. Registration Rights. Purchaser shall, at
closing, enter into a Registration Rights Agreement
pursuant to which Seller shall be granted certain
piggyback registration rights with respect to the Common
Stock."
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
ABC MEDICAL SUPPLY, INC.
By: ________________________________
Dennis Phillips, President
LIFE CRITICAL CARE CORPORATION
By: ________________________________
Amy E. Parker, Vice President
____________________________________
Timothy Dillon, Individually
____________________________________
Dennis Phillips, Individually
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<PAGE>
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this _____ day of June, 1996 to be made effective as of the 30th day of
May, 1996, by and among Great Lakes Home Medical, Inc., Michael E. Belleau,
James Bickel, Thomas Mainhardt and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
March 1, 1996 (the "Agreement") and desire to amend the Agreement as set forth
herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"May 30, 1996" as it appears in the third line thereof and by inserting in lieu
thereof the date "November 1, 1996."
(b) Section 1.4 of the Agreement is hereby amended by deleting
the phrase "Eight Million Seven Hundred Ninety Thousand Dollars
($8,790,000)" as it appears in the fourth line thereof and by inserting in lieu
thereof the following: "Six Million Four Hundred Fifty-One Thousand Two
Hundred and Fifty-Four Dollars ($6,451,254)."
(c) Section 1.5 of the Agreement is hereby amended by deleting
clause (i) and by inserting the following in lieu thereof:
"(i) The Purchase Price shall be paid as follows:
(a) Seventy-Five Percent (75%) of the Purchase Price,
after being reduced by the Deposit, shall be paid by wire
transfer of immediately available funds to such bank account
as shall be designated by the Seller or by delivery of a
cashier's check to the Seller at Closing; and
<PAGE>
(b) Twenty-Five Percent (25%) of the Purchase Price
(the "Purchase Price Balance") shall be paid by the issuance
by Purchaser to Seller of that number of shares of the common
stock of Purchaser determined by dividing the amount of the
offering price per share of the Common Stock less the
underwriters' discount into the Purchase Price Balance (the
"Common Stock"), or, if the IPO (as defined in Section 4.1.0
hereof) shall not have been completed at Closing, in cash in
lieu of the Common Stock, at the sole discretion of Purchaser
and subject to the provisions of Section 4.1.0 hereof."
(d) Section 1.5(iv) of the Agreement is hereby deleted.
(e) Section 1.5(v) is hereby deleted and the following inserted in
lieu thereof:
"(v) As a result of an extension to this Agreement, Purchaser
has paid to Seller a deposit of $50,000 (the "Deposit") which
shall be applied to the cash portion of the Purchase Price at
Closing."
(f) New Section 1.5(vi) is hereby added to the Agreement as
follows:
"(iii) The Closing shall have been completed on or before
November 1, 1996, subject to any extension(s) thereto solely
as a result of market conditions for an initial public
offering by Purchaser. In addition, Purchaser hereby agrees
that if, for any reason other than a material
misrepresentation by Seller or a material change in the
business of Seller, it does not file with the Securities and
Exchange Commission its registration statement for an initial
public offering on or before August 15, 1996, then Seller
shall be entitled to terminate this Agreement and retain the
Deposit. Conforming changes are hereby made to any other
affected Section of this Agreement, including without
limitation Sections 7.2.2 and 7.2.3."
(g) Section 4.2.1.1 of the Agreement is hereby amended by deleting
existing Section 4.2.1.1 and by inserting in lieu thereof the following:
"4.2.1.1. The wire transfer or delivery of a cashier's
check in the amount of 75% of the Purchase Price, less the
amount of the Deposit, and the delivery of the Common
Stock."
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<PAGE>
(h) New Section 6.5 is hereby added as follows:
"SECTION 6.5. Lock-Up Agreements. Seller warrants that, if
required by the underwriter(s) for the IPO, it will enter into
any required "lock-up" agreement; provided, however, that
Seller will not be required to a lock-up of the Common Stock
for a period of time in excess of the shortest period of time
agreed to by any other principal stockholder of Purchaser and
further provided, however, that the period of any such lock-up
will not exceed the periods provided under Rule 144 and Rule
145 allowing for the resale of restricted stock."
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
GREAT LAKES HOME MEDICAL, INC.
By: _________________________________
Michael E. Belleau, President
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<PAGE>
LIFE CRITICAL CARE CORPORATION
By: _______________________________
Amy E. Parker, Vice President
____________________________________
Michael E. Belleau, Individually
____________________________________
James Bickel, Individually
____________________________________
Thomas Mainhardt, Individually
-4-
<PAGE>
SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
executed this 20th day of September, 1996 to be made effective as of the 15th
day of August, 1996, by and among Great Lakes Home Medical, Inc., Michael E.
Belleau, James Bickel, Thomas Mainhardt and Life Critical Care Corporation.
RECITALS
The parties are parties to an Asset Purchase Agreement among them dated
March 1, 1996, as amended by a First Amendment to Asset Purchase Agreement dated
June 24, 1996 (as amended, the "Agreement") and desire to amend the Agreement as
set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual entry into this
Amendment by the parties hereto, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
Section 1. Amendment of Agreement. The provisions of the Agreement
are hereby amended as follows:
(a) Section 1.1 of the Agreement is hereby amended by deleting the date
"November 1, 1996" as it appears in the third line thereof and by inserting in
lieu thereof the date "December 31, 1996."
(b) Section 1.1 of the Agreement is hereby further amended by
adding the following at the end of existing Section 1.1:
"Closing will take place simultaneously with the closing
of the IPO (as defined in Section 4.1.0 hereof)."
(c) Section 1.5(vi) is hereby amended by deleting existing
Section 1.5(vi) and by inserting the following in lieu thereof:
"(vi) The Closing shall have been completed on or before
December 31, 1996. Purchaser shall file its initial
registration statement to be used in connection with the IPO
no later than November 1, 1996. Conforming changes are hereby
made to any other affected Sections of this Agreement,
including without limitation Sections 7.2.2 and 7.2.3."
<PAGE>
(d) Section 2.16 of the Agreement is hereby amended by adding
the following at the end of existing Section 2.16:
"Seller has no liabilities or obligations (whether absolute,
accrued, contingent or otherwise), except liabilities,
obligations or contingencies that are accrued or reserved
against in the Statements or that were incurred since the date
of the Statements in the ordinary course of business and would
not reasonably likely have a material adverse effect on the
business, operations, properties, assets, condition (financial
or otherwise), prospects or results of operations of Seller."
(e) Section 4.2.1.1 of the Agreement is hereby amended by deleting
existing Section 4.2.1.1 and by inserting in lieu thereof the following:
"4.2.1.1. The wire transfer or delivery of a cashier's
check in the amount of the cash portion of the Purchase
Price, less the amount of the Deposit, and the delivery of
the Common Stock."
(f) New Section 5.6 is hereby added as follows:
"SECTION 5.6 Cooperation. Seller agrees reasonably to
cooperate with Purchaser in its IPO (as defined in Section
4.1.0 hereof)."
(g) New Section 6.6 is hereby added as follows:
"SECTION 6.6. Registration Rights. Purchaser shall, at
closing, enter into a Registration Rights Agreement
pursuant to which Seller shall be granted certain
piggyback registration rights with respect to the Common
Stock."
Section 2. Effect of this Amendment. Except as is hereinabove set
forth, the provisions of the Agreement shall hereafter remain in full force and
effect.
Section 3. This Amendment may be executed in two or more counterparts,
all of which when taken together shall constitute one and the same original.
Section 4. By their execution hereof, the parties hereto hereby agree
that this Amendment is voluntarily accepted for the purpose of making a full and
final compromise adjustment, settlement and waiver of any and all prior defaults
of the Agreement that either has alleged has occurred prior to the execution
hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment the day
and year first above written.
GREAT LAKES HOME MEDICAL, INC.
By: _______________________________
Michael E. Belleau, President
LIFE CRITICAL CARE CORPORATION
By: ______________________________
Amy E. Parker, Vice President
____________________________________
Michael E. Belleau, Individually
____________________________________
James Bickel, Individually
____________________________________
Thomas Mainhardt, Individually
Exhibit 10.6
LEASE AGREEMENT
THIS AGREEMENT, made and entered into this _______ day of ____________,
1996, by and between BLUE WATER LAND DEVELOPMENT, a Michigan co-partnership
("Landlord"), and LIFE CRITICAL CARE CORPORATION, a Delaware corporation
("Tenant").
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. LEASE. The Landlord, upon the terms and subject to
conditions contained herein, does hereby lease to the Tenant, and the
Tenant does hereby lease from the Landlord, the following described
premises situated in the City of New Baltimore, County of Macomb, State of
Michigan, to-wit: 37885 Green Street, New Baltimore, Michigan 48047 (the
"Property").
2. COMMENCEMENT DATE AND TERM. The "Commencement Date" of
the Lease is the date on which the parties execute this Lease Agreement.
The primary term of this Lease Agreement shall be for a period of
forty-eight (48) months beginning on the Commencement Date.
3. PROVISIONS APPLICABLE TO THE REAL ESTATE.
ARTICLE I
USAGE CLAUSE
Section 1. It is understood and agreed between the parties hereto that
during the continuance of this Lease, the Property may be used and occupied for
the purposes of operating a business providing home medical care equipment and
such other business customarily included in said definition and for no other
purpose or purposes without the written consent of the Landlord. Subject to the
respective obligations of Landlord and Tenant contained elsewhere in this
Agreement, Tenant shall promptly comply with all laws, ordinances and lawful
orders and regulations issued by any duly constituted governmental authority and
affecting the Property and the cleanliness, safety, occupation and use of same.
<PAGE>
ARTICLE II
CARE OF PREMISES
Section 1. Tenant shall keep the Property clean and free from rubbish
and dirt at all times, and shall store all trash and garbage at Tenant's
expense. Tenant shall not burn any trash or garbage of any kind in or about the
Property except in facilities provided for such disposal.
Section 2. Tenant shall not use or permit the use of any portion of
the Property for any unlawful purpose or purposes. Tenant shall not make any
structural changes in the Property without the written consent of Landlord,
which approval shall not be unreasonably withheld.
Landlord represents that the Property is in good condition and repair
that all equipment is in good working order, normal wear and tear excepted.
Landlord hereby provides a ninety (90)-day warranty to Tenant that the heating,
ventilation, air conditioning, electrical, and plumbing systems are in good and
operable condition.
ARTICLE III
ENVIRONMENTAL REPRESENTATION
Section 1. Landlord represents and warrants that as of the
Commencement Date there are no materials located on the Property that require
special handling in collection, storage, treatment, or disposal under any
federal, state, or local law, statute, ordinance, or regulation or court or
administrative order or decree, or private agreement pursuant to which material
requires special handling in collection, storage, treatment, or disposal
("Environmental Requirements"). In the event any materials which under any
Environmental Requirements require special handling in collection, storage,
treatment, or disposal are determined to have been located on the Property at or
prior to the date of this Lease Agreement, Landlord shall (a) within thirty (30)
days after written notice thereof, take, or cause to be taken, at its sole
expense, such actions as may be necessary to comply with all Environmental
Requirements and (b) within thirty (30) days after written demand therefor,
reimburse Tenant for any amounts expended by Tenant (i) to comply with any
Environmental Requirements with respect to the Property or (ii) in connection
with any judicial or administrative investigation or proceeding relating
thereto, including, without limitation, reasonable attorney fees, fines, or
other penalty payments.
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<PAGE>
Section 2. Tenant hereby represents that from and after the Commencement Date no
materials will be located on the Property which require special handling in
collection, storage, treatment, or disposal under any federal, state, or local
law, statute, ordinance, or regulation or court or administrative order or
decree, or private agreement pursuant to which material requires special
handling in collection, storage, treatment, or disposal ("Environmental
Requirements"). In the event any materials which under any Environmental
Requirements require special handling in collection, storage, treatment, or
disposal are determined to have been located on the Property after the
Commencement Date, Tenant shall (a) immediately take, or cause to be taken, at
its sole expense, such actions as may be necessary to comply with all
Environmental Requirements and (b) in the event Tenant shall fail to take the
steps as required in subparagraph (a) above, then Landlord shall have the right
to take, or cause to be taken, such action as may be necessary to comply with
all Environmental Requirements after giving Tenant thirty (30) days' written
demand, and Tenant shall thereafter reimburse Landlord for any amounts expended
to: (i) comply with any Environmental Requirements with respect to the Property
or (ii) in connection with any judicial or administrative investigation or
proceeding relating thereto, including, without limitation, reasonable attorney
fees, fines, or other penalty payments.
ARTICLE IV
UTILITY SERVICES
Section 1. Tenant shall timely pay for all public utilities rendered or
furnished to the Property during the term hereof, including but not limited to,
heat, water, gas and electricity. Utility bills covering the period prior to and
after the Commencement Date shall be prorated between Landlord and Tenant.
ARTICLE V
TAXES
Section 1. As part of the consideration for this Lease and in addition
to the rentals hereinbefore provided, Tenant shall pay to the public officers
charged with the collection thereof, before delinquent, all property taxes,
installments of special assessments, and other similar charges to the term of
this Lease. If an assessment levied on the Property is not payable in
installments over the useful life of the improvements financed by the
assessment, Landlord shall be responsible for the assessment and Tenant shall
pay to Landlord, each year during the remaining term hereof, on the date
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<PAGE>
such taxes are otherwise due, an amount equal to the quotient derived by
dividing the total amount of the assessment which is not payable in
installments by the useful life of the improvements financed thereby.
Section 2. In the event Tenant shall become more than sixty (60) days
delinquent in the payment of any assessment or other charge payable by Tenant
pursuant to Section 1 above and such failure remains uncured for a period of
thirty (30) days after written notice thereof is sent to Tenant, Landlord may
elect, at its sole discretion, to require Tenant to escrow tax payments with
Landlord, or its agents, at the monthly rate of one-twelfth (1/12th) of the
previous year's taxes, assessments, and other charges payable by Tenant, in
which event Landlord shall be obligated to use the funds he collects from Tenant
to pay such taxes, assessments and charges as they become due. If the amount of
escrow tax payments with respect to such year, Landlord shall refund the excess
to Tenant within fifteen (15) days after the final payment to the taxing
authority for such year is due, or Tenant shall pay the deficiency to Landlord
within fifteen (15) days after the final payment to the taxing authority for
such year due. The commencement of tax escrow payments pursuant to this Section
2 will not cure the default of Tenant for failing to otherwise pay such taxes,
which only may be cured by Tenant's payment of such taxes.
Section 3. Tenant may, in good faith, and upon reasonable grounds,
dispute the validity or amount of any tax, assessment or other charge, defend
against the same and in good faith conduct any necessary proceedings to prevent
and avoid the same; provided, however, Tenant shall notify Landlord of its
intent to contest and pay all costs and expenses incurred in connection
therewith, and Tenant shall not, in the event of and during the bona fide
prosecution of such litigation, be taken in default in respect to the subject
matter of such litigation.
ARTICLE VI
MAINTENANCE OF THE PROPERTY
Section 1. Tenant shall keep the foundation, the four outer walls and the roof
of the Property in good maintenance and repair, consistent with the condition
thereof on the date this maintenance obligation of Tenant becomes effective.
Tenant shall, at all times, keep the remainder of the Property in good order,
maintenance and repair, and Tenant shall also keep said Property in a clean,
sanitary and safe condition in accordance with the laws of the state of
Michigan, and in accordance with all directions, rules and regulations of the
health officer, fire marshal!, building inspector or other proper officers of
governmental agencies having jurisdiction over the Property, all at the sole
cost and expense of Tenant. Tenant shall comply with all requirements of law and
ordinance otherwise applicable to the Property; provided, however, Landlord
shall be
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<PAGE>
responsible for paying the costs to cure any violations of such laws,
ordinances, directions, rules and regulations which existed as of the
Commencement Date. Tenant shall permit no waste, damage or injury to said
Property, and Tenant shall, at Tenant's own costs and expense, replace any glass
windows and doors in the Property which may be broken. At the expiration of the
tenancy created hereunder, Tenant shall surrender the Property in good condition
and repair, reasonable use, wear and tear thereof, and loss by fire or other
casualty expected.
ARTICLE VII
IMPROVEMENTS, FURNISHINGS,
EQUIPMENT AND PERSONAL PROPERTY
Section 1. All improvements, furnishings, equipment and trade fixtures
presently at the Property together with all fixtures and equipment as may be
installed by Tenant which are so incorporated and affixed to the Property that
their removal would involve structural damage to the building or which have been
installed as replacements to the Landlord's fixtures and equipment shall become
and remain the property of Landlord and shall not be removed from the Property
by Tenant upon the termination of this Lease or otherwise. All tenant
furnishings, equipment and trade fixtures other than those covered in the
foregoing sentence which are paid for and placed on the Property by Tenant will
remain the property of Tenant (the "Tenant's Personalty") and Tenant shall be
required to repair any damage to the Property caused by its removal thereof.
ARTICLE VIII
COVENANT TO HOLD HARMLESS
Section 1. Landlord shall be held harmless by Tenant from any liability
for damages to any person or any property or upon the Property, including the
person and property of Tenant and its employees and all persons in the Property
at its invitation, caused by an event which occurred at the Property during the
term hereof; provided, however, nothing herein shall be construed to require
Tenant to indemnify Landlord against the negligence of Landlord, its employees
or agents, or with respect to an event resulting from the Landlord's breach of
this Agreement.
Section 2. It is understood and agreed that all property kept, stored
or maintained at the Property is at the risk of Tenant. Tenant shall not suffer
or give cause for the filing of any lien against the Property, except for
Tenant's Personalty.
-5-
<PAGE>
Section 3. Tenant shall, during the entire term hereof, keep in full
force and effect a policy of general liability insurance with respect to the
Property and the business operated by Tenant thereon, in which both Landlord and
Tenant shall be named as parties covered thereby, and the limits of liability
shall be no less than $1,000,000.00 per person and $1,000,000.00 per occurrence,
and $1,000,000.00 property damage. Tenant shall furnish Landlord with a
certificate of insurance, or other acceptable evidence that such insurance is in
force.
ARTICLE IX
ACCESS TO PREMISES
Section 1. Landlord shall have the right to enter upon the Property at
all reasonable hours upon reasonable prior notice to Tenant for the purpose of
inspecting same. If Landlord, in the reasonable exercise of its discretion,
deems any repairs necessary which are the obligation of Tenant hereunder,
Landlord may demand that Tenant make the same forthwith, and if Tenant refuses
or neglects to commence such repairs and complete the same with reasonable
dispatch, Landlord may make or cause such repairs to be made only after seven
(7) days' notice has been given to Tenant and said condition shall have
continued, then Landlord may make or cause such repairs to be made, and shall
not be responsible to Tenant for any loss or damage that may accrue to its stock
or business by reason thereof, unless caused by the gross negligence or willful
misconduct of Landlord or its agents; provided, however, Landlord and its agents
shall use reasonable efforts not to interfere with or hinder the operation of
Tenant's business at the Property. If Landlord makes or causes such repairs to
be made, Tenant agrees that it will pay to Landlord the reasonable cost thereof
within ten (10) days of demand. If Tenant fails to timely reimburse Landlord, he
may charge Tenant interest on the unpaid amount computed at a rate of ten
percent (10%) per annum from the date of demand until payment, and Landlord
shall have the remedies provided in Paragraph 8 hereof.
Section 2. For a period commencing six (6) months prior to the
termination of this Lease, Landlord may have reasonable access to the Property
for the purpose of exhibiting same to prospective tenants so long as Landlord
does not interfere with or hinder the operation of Tenant's business at the
Property.
ARTICLE X
EMINENT DOMAIN
Section 1. If the whole of the Property shall be taken by any public
authority under the power of eminent domain, then the terms of this Lease shall
cease as of the
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<PAGE>
date possession shall be taken by such public authority and the rent shall be
paid to that date with a proportionate refund by Landlord of such rent as may
have been paid in advance.
Section 2. If thirty percent (30%) or more of the Property on which the
building is located shall be taken under eminent domain or such lesser portion
of the Property is so taken and Tenant determines that such taking will have a
material adverse effect on its ability to operate its business at the Property,
Tenant shall have the right either to terminate this Lease and declare the same
null and void, or to continue in possession of the remainder of the Property;
and in either event, Tenant shall notify Landlord of Tenant's intention in
writing within sixty (60) days after receiving notice of such taking under the
power of eminent domain. In the event Tenant elects to remain in possession or
the Lease is not otherwise terminated as a result of such taking, all of the
terms herein provided for shall continue in effect except that the fixed rent
hereinabove provided shall be reduced either (i) in proportion to the reduction
in the net useable floor area of the building by reason of such taking or
condemnation in the event of a reduction in the building floor area due to such
taking, or (ii) each year by an amount equal to ten percent (10%) of the
condemnation award granted to Landlord, in the case of a taking which does not
reduce the floor area of the building, and Landlord shall, at Landlord's own
cost and expense, promptly make all necessary repairs or alterations to the
building on the Property so as to constitute the remaining premises a complete
architectural unit consistent with the condition which existed immediately prior
to such taking, said costs to be deducted from the gross condemnation award.
Section 3. All damages awarded for such taking under the power of
eminent domain whether on the whole or a part of the Premises shall belong to
and be the property of Landlord, whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
Property; provided, however, that Tenant shall be entitled to any award made to
Tenant for loss of business, depreciation to, and cost of removal of stock and
fixtures, and moving expenses.
ARTICLE XI
DAMAGES
Section 1. If the Property shall be damaged or destroyed in whole or
in part by fire or any other cause or casualty, Landlord agrees to repair and
restore the same with reasonable dispatch to a good tenantable condition,
similar to the condition of the Property prior to such damage or destruction,
unless this Agreement is terminated pursuant to Section 4 below, and the rent
shall abate entirely in case the entire Property is untenantable and pro-rata
for the portion rendered untenantable in case a part only is untenantable, until
the same shall be restored to a tenantable condition.
-7-
<PAGE>
Section 2. At all times during the term of this Lease, including the
period of construction or reconstruction of any building if Tenant's rent
obligation has not abated, Tenant will, at Tenant's own cost and expense, have
the building or buildings and the contents thereof at any time upon the
Property, insured against loss or damage by fire or other casualty with
responsible insurance companies reasonably satisfactory to Landlord, said
insurance to be in an amount equal to one hundred percent (100%) of actual cash
value of said building or buildings, contents and improvements. All such
insurance policies and all renewals thereof shall be payable to Landlord and
Tenant, as their interests may appear, entitling Landlord to collect all monies
due under said policies payable in the event of any reason of the loss or damage
of the building or buildings situated in the Property and permitting Tenant to
receive all monies payable with respect to the Tenant's Personalty at the
Property. In the event Tenant fails to obtain and continue such insurance in
force at any time, Landlord, at its option and without any obligation on
Landlord's part to do so, may obtain such insurance and Tenant shall forthwith
pay the cost thereof to Landlord, or Landlord may at its option add said cost to
the next rent payment due Landlord from Tenant. Anything to the contrary herein
contained notwithstanding any loss shall first be payable to any first mortgagee
of the Premises to the extent of its interest.
Section 3. So long as Tenant remains open for, and continues to
operate its business at the Property in the same manner as prior to such
casualty, the Property shall not be deemed wholly untenantable. However, the
Property will be treated as wholly untenantable regardless of the extent of the
damage thereto, if Tenant determines, in the exercise of its reasonable business
judgment, that it is unable to operate the Property in the ordinary course of
business or access to the Property is materially hindered.
Section 4. In the event the building or contents of the Property are
damaged or destroyed during the term hereof, and as a result thereof the Tenant
cannot operate its business at the Property until completion of the repair and
restoration, the Tenant shall have the right to terminate this Agreement if (i)
in the reasonable certified opinion of Landlord's architect, the building and
contents cannot be completely repaired and restored such that Tenant will be
able to open for business within one hundred twenty (120) days after the
occurrence of such damage or destruction or (ii) Landlord does not complete such
repair or restoration one hundred twenty (120) days after such damage or
destruction. Tenant shall notify Landlord in writing of its election to
terminate within fifteen (15) days after receipt of the architect's certified or
Landlord's failure to timely complete the repair and restoration, and upon
termination, rent shall be prorated as of the date of such damage or
destruction. During the period of any reconstruction or repair, all rent shall
be abated.
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ARTICLE XII
BANKRUPTCY
Section 1. In the event the estate created hereby shall be taken in
execution or by other process of law, or if Tenant shall be adjudicated
insolvent or bankrupt pursuant to the provisions of any state or federal
insolvency or bankruptcy act, or if any assignment shall be made of Tenant's
Property for the benefit of creditors, then and in any such events, Landlord at
its option may terminate this Lease and all rights of Tenant hereunder, by
giving to Tenant notice in writing of the election of Landlord so to terminate;
provided, however, Tenant shall have sixty (60) days to dismiss any involuntary
proceeding before Landlord may exercise its right of termination so long as
Tenant is not otherwise in default under the terms hereof.
ARTICLE XIII
SUBORDINATION
Section 1. Tenant agrees that this Lease shall be subordinate to any mortgages
that may hereafter be placed upon the Property and to any and all advances to be
made thereunder and to the interest thereon, and all renewals, replacements and
extensions thereof, provided the mortgagees named in said mortgages shall agree
to recognize, not disturb and be bound by the terms and provisions of this
Lease. In the event of any mortgagee electing to have the Lease as a prior lien
to its mortgage, then and in such event, upon such mortgagee notifying the
Tenant to that effect, this Lease shall be deemed prior to lien to the said
mortgage, whether or not this Lease is dated prior to or subsequent to the date
of said mortgage or trust deed.
ARTICLE XIV
CONSTRUCTION
Section 1. Nothing contained herein shall be deemed or construed by the
parties hereto, nor by any third party, as creating the relationship of
principal and agent or of partnership or of joint venture between the parties
hereto, it being understood and agreed that neither any provisions contained
herein, nor any acts of the parties hereto shall create a relationship other
than the relationship of Landlord and Tenant. Whenever herein the singular
number is used, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders.
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ARTICLE XV
NON-LIABILITY
Section 1. Landlord shall not be responsible or liable to Tenant for
any loss or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining Premises or any part of the Premises adjacent to or
connected with the Property or for any loss or damage resulting to Tenant or its
property from burst, stopped or leaking water, gas, sewer or steam pipes not
caused by neglect or breach of covenant or the part of Landlord herein
contained.
ARTICLE XVI
QUIET ENJOYMENT
Section 1. Landlord covenants that Tenant, on payment of the rental at
the time and in the manner aforesaid and performing of all of the foregoing
covenants, shall and may peacefully and quietly have, hold and enjoy the
Property for the term aforesaid, and said quiet and peaceful enjoyment will not
be disturbed or interfered with by Landlord or any person claiming by, through
or under Landlord.
ARTICLE XVII
RENTAL AND LEASE RENEWAL OPTION
Section 1. Rental and Lease Renewal Option. As of the Commencement
Date and for a period of forty-eight (48) months thereafter, Tenant shall pay
Landlord the sum of Seven Thousand Five Hundred Dollars ($7,500.00) per month
due and payable on the _____ day of each month commencing on the day of the
month following the Commencement Date. Rent shall be pro-rated between the
Commencement Date and the day of the next succeeding month.
Section 2. Lease Renewal Option. Upon the expiration of the original
term, Tenant shall have the option to extend this Lease for an extension term of
four (4) years, provided that Tenant gives Landlord at least six (6) months'
prior written notice of its unconditional and irrevocable exercise of such
option and provided further that Tenant has not been in default hereunder. In
the event that Tenant exercises its option to extend the term, all provisions of
this Lease shall apply during the extension term
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hereof, except the rent shall be increased in an amount equal to Eight Thousand
($8,000.00) Dollars per month payable on the first day of each month during the
extension term.
Section 3. Provisions Applicable to Default. If any rental payment
shall be and remain unpaid for more than ten (10) days after it shall become due
and payable, or if Tenant shall violate or default under any of the other
covenants, agreements, stipulations or conditions of this Agreement and such
default shall continue for a period of thirty (30) days after written notice
thereof and Tenant having an opportunity to cure said breach, then it shall be
optional for Landlord to declare this Lease forfeited, the term ended and to
re-enter the Property and take possession of same. In addition thereto, Landlord
shall have such other, further or different rights and remedies as may be
available at law or in equity, including, but not limited to, the right of claim
and delivery, the right of repossession of the Property pursuant to the
applicable statutes for summary proceedings, or such other rights at law or in
equity as may be applicable or available, it being specifically agreed that the
rights herein recited shall be cumulative and not exclusive. A late payment
penalty of five percent (5%) of the amount of the late payment shall be added to
the delinquent payment effective on the 5th day after the due date. In like
manner, any payment which remains due and unpaid thirty (30) days following the
due date shall be subject to a fifteen percent (15%) late payment.
Section 4. Security Deposit. The Landlord hereby acknowledges the
receipt of Seven Thousand Five Hundred ($7,500.00) Dollars, which it is to
retain as security for the faithful performance of all of the covenants,
conditions, and agreements of this Lease, but in no event shall the Landlord be
obliged to apply the same upon rents or other charges in arrears or upon damages
for the Tenant's failure to perform the said covenants, conditions, and
agreements; the Landlord may so apply the security at its option; and the
Landlord's right to the possession of the premises for non-payment of rent or
for any other reason shall not in any event be affected by reason of the fact
that the Landlord holds this security. The said sum if not applied towards the
payment of rent in arrears or towards the payment of damages suffered by
the Landlord by reason of the Tenant's breach of the covenants, conditions,
and agreements of this Lease is to be returned to the Tenant when this Lease
is terminated, according to these terms, and in no event is the said
security to be returned until the Tenant has vacated the premises and delivered
possession to the Landlord.
In the event that the Landlord repossesses itself of the said premises
because of the Tenant's default or because of the Tenant's failure to carry out
the covenants, conditions, and agreements of this Lease, the Landlord may
apply the said security upon all damages suffered to the date of said
repossession and may retain the said security to apply upon such damages as may
be suffered or shall accrue thereafter by reason of the Tenant's default or
breach. The Landlord shall not be obliged to keep the said security as a
separate fund, but may mix the said security with its own funds.
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Upon Tenant satisfying all conditions in this Lease, Landlord
shall deliver the security deposit to Tenant.
ARTICLE XVIII
OPTION TO PURCHASE
Section 1. Tenant, at any time during the term of this Lease, shall
have the option to purchase the Property from Landlord upon thirty (30) days'
written notice to Landlord subject to the following terms and conditions:
(a) The purchase price for the Property during the primary term of the
Lease shall be Eight Hundred Fifty Thousand ($850,000.00) Dollars.
(b) In the event that Tenant shall exercise this option to purchase
the Property during the option period as set forth in Article XVII, Section 2,
the purchase price for the Property shall be Nine Hundred Thirty-Five Thousand
($935,000.00) Dollars.
(c) The purchase price for the Property shall be paid in full at the
time of the closing.
(d) Settlement for the purchase and sale of the Property shall be held
at a place designated by Tenant and at a time designated by Tenant, provided
that settlement shall be held within sixty (60) days after the determination by
the parties of the purchase price of the Property.
(e) The rent hereunder shall cease and shall be adjusted as of the
date of settlement. Water rent, real property taxes, and all other public or
governmental charges or assessments shall be adjusted as of the date of
settlement.
(f) At settlement, Landlord shall execute and deliver to Tenant a
warranty deed that shall convey good and merchantable title to the Property,
subject only to the restrictions, covenants, and encumbrances existing as of the
date hereof, but not including any mortgage currently encumbering the Property.
If there are any mortgages or any subsequently arising restrictions, covenants,
or encumbrances when Tenant exercises the option set forth in this section,
Tenant may purchase the Property subject to the same and deduct the amount
thereof (or the reasonable cost to cure such title defect) from the purchase
price.
(g) All recording and transfer taxes in connection with the settlement
shall be paid by Landlord.
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(h) Insurance premiums, interest, rents, water bills, and current city
and county taxes, if any, shall be prorated and adjusted to the date of closing.
Taxes not previously paid shall not be prorated.
Section 2. Notwithstanding anything contained within this Article
XVIII to the contrary, in the event that Landlord shall receive an offer to
purchase the Property within the primary or option period set forth in this
Lease, then Tenant shall have the right to exercise the option contained within
this Article XVIII provided Tenant gives written notice within thirty (30) days
of notice by Landlord of the aforesaid offer. In the event Tenant shall fail to
exercise its option in this time limitation, then all of Tenant's rights under
this Article XVIII shall terminate.
IN WITNESS WHEREOF, the parties set their hand and seal the day and
year first above written.
WITNESSED BY: LANDLORD:
BLUE WATER LAND DEVELOPMENT, a
Michigan co-partnership
_________________________ By: ________________________________
Its: __________________________
TENANT:
LIFE CRITICAL CARE CORPORATION,
a Delaware corporation
_________________________ By: ________________________________
Its: __________________________
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Exhibit 10.7
LEASE AGREEMENT
THIS AGREEMENT, made and entered into this ____ day of
___________________, by and between BLUE WATER LAND DEVELOPMENT, a
Michigan co-partnership ("Landlord"), and LIFE CRITICAL CARE CORPORATION,
a Delaware corporation ("Tenant").
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. LEASE. The Landlord, upon the terms and subject to conditions
contained herein, does hereby lease to the Tenant, and the Tenant does hereby
lease from the Landlord, the following described premises situated in the City
of New Baltimore, County of Macomb, State of Michigan, to-wit: 37280 Green
Street, New Baltimore, Michigan 48047 (the "Property").
2. COMMENCEMENT DATE AND TERM. The "Commencement Date" of the
Lease is the date on which the parties execute this Lease Agreement. The
primary term of this Lease Agreement shall be for a period of forty-eight
(48) months beginning on the Commencement Date.
3. PROVISIONS APPLICABLE TO THE REAL ESTATE.
ARTICLE I
USAGE CLAUSE
Section 1. It is understood and agreed between the parties hereto that
during the continuance of this Lease, the Property may be used and occupied for
the purposes of operating a business supplying industrial oxygen and ancillary
products and such other business customarily included in said definition and for
no other purpose or purposes without the written consent of the Landlord.
Subject to the respective obligations of Landlord and Tenant contained elsewhere
in this Agreement, Tenant shall promptly comply with all laws, ordinances and
lawful orders and regulations issued by any duly constituted governmental
authority and affecting the Property and the cleanliness, safety, occupation and
use of same.
<PAGE>
ARTICLE II
CARE OF PREMISES
Section 1. Tenant shall keep the Property clean and free from rubbish
and dirt at all times, and shall store all trash and garbage at Tenant's
expense. Tenant shall not burn any trash or garbage of any kind in or about the
Property except in facilities provided for such disposal.
Section 2. Tenant shall not use or permit the use of any portion of the
Property for any unlawful purpose or purposes. Tenant shall not make any
structural changes in the Property without the written consent of LANDLORD,
WHICH APPROVAL SHALL NOT be unreasonably withheld.
Landlord represents that the Property is in good condition and repair
that all equipment is in good working order, normal wear and tear excepted.
Landlord hereby provides a ninety (90)-day warranty to Tenant that the heating,
ventilation, air conditioning, electrical, and plumbing systems are in good and
operable condition.
ARTICLE III
ENVIRONMENTAL REPRESENTATION
Section 1. Landlord represents and warrants that as of the Commencement
Date there are no materials located on the Property that require special
handling in collection, storage, treatment, or disposal under any federal,
state, or local law, statute, ordinance, or regulation or court or
administrative order or decree, or private agreement pursuant to which material
requires special handling in collection, storage, treatment, or disposal
("Environmental Requirements"). In the event any materials which under any
Environmental Requirements require special handling in collection, storage,
treatment, or disposal are determined to have been located on the Property at or
prior to the date of this Lease Agreement, Landlord shall (a) within thirty (30)
days after written notice thereof, take, or cause to be taken, at its sole
expense, such actions as may be necessary to comply with all Environmental
Requirements and (b) within thirty (30) days after written demand therefor,
reimburse Tenant for any amounts expended by Tenant (i) to comply with any
Environmental Requirements with respect to the Property or (ii) in connection
with any
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judicial or administrative investigation or proceeding relating thereto,
including, without limitation, reasonable attorney fees, fines, or other
penalty payments.
Section 2. Tenant hereby represents that from and after the Commencement Date no
materials will be located on the Property which require special handling in
collection, storage, treatment, or disposal under any federal, state, or local
law, statute, ordinance, or regulation or court or administrative order or
decree, or private agreement pursuant to which material requires special
handling in collection, storage, treatment, or disposal ("Environmental
Requirements'). In the event any materials which under any Environmental
Requirements require special handling in collection, storage, treatment, or
disposal are determined to have been located on the Property after the
Commencement Date, Tenant shall immediately (a) take, or cause to be taken, at
its sole expense, such actions as may be necessary to comply with all
Environmental Requirements and (b) in the event Tenant shall fail to take the
steps as required in subparagraph (a) above, then Landlord shall have the right
to take, or cause to be taken, such action as may be necessary to comply with
all Environmental Requirements after giving Tenant thirty (30) days' written
demand, and Tenant shall thereafter reimburse Landlord for any amounts expended
to: (i) comply with any Environmental Requirements with respect to the Property
or (ii) in connection with any judicial or administrative investigation or
proceeding relating thereto, including, without limitation, reasonable attorney
fees, fines, or other penalty payments.
ARTICLE IV
UTILITY SERVICES
Section 1. Tenant shall timely pay for all public utilities rendered or
furnished to the Property during the term hereof, including but not limited to,
heat, water, gas and electricity. Utility bills covering the period prior to and
after the Commencement Date shall be prorated between Landlord and Tenant.
ARTICLE V
TAXES
Section 1. As part of the consideration for this Lease and in addition
to the rentals hereinbefore provided, Tenant shall pay to the public officers
charged with the collection thereof, before delinquent, all property taxes,
installments of special assessments, and
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other similar charges to the term of this Lease. If an assessment levied on
the Property is not payable in installments over the useful life of
the improvements financed by the assessment, Landlord shall be
responsible for the assessment and Tenant shall pay to Landlord, each year
during the remaining term hereof, on the date such taxes are otherwise due, an
amount equal to the quotient derived by dividing the total amount of the
assessment which is not payable in installments by the useful life of the
improvements financed thereby.
Section 2. In the event Tenant shall become more than sixty (60) days delinquent
in the payment of any assessment or other charge payable by Tenant pursuant to
Section 1 above and such failure remains uncured for a period of thirty (30)
days after written notice thereof is sent to Tenant, Landlord may elect, at its
sole discretion, to require Tenant to escrow tax payments with Landlord,-or its
agents, at the monthly rate of one-twelfth (1/12th) of the previous year's
taxes, assessments, and other charges payable by Tenant, in which event Landlord
shall be obligated to use the funds he collects from Tenant to pay such taxes,
assessments and charges as they become due. If the amount of escrow tax payments
with respect to such year, Landlord shall refund the excess to Tenant within
fifteen (15) days after the final payment to the taxing authority for such year
is due, or Tenant shall pay the deficiency to Landlord within fifteen (15) days
after the final payment to the taxing authority for such year due. The
commencement of tax escrow payments pursuant to this Section 2 will not cure the
default of Tenant for failing to otherwise pay such taxes, which only may be
cured by Tenant's payment of such taxes.
Section 3. Tenant may, in good faith, and upon reasonable grounds,
dispute the validity or amount of any tax, assessment or other charge, defend
against the same and in good faith conduct any necessary proceedings to prevent
and avoid the same; provided, however, Tenant shall notify Landlord of its
intent to contest and pay all costs and expenses incurred in connection
therewith, and Tenant shall not, in the event of and during the bona fide
prosecution of such litigation, be taken in default in respect to the subject
matter of such litigation.
ARTICLE VI
MAINTENANCE OF THE PROPERTY
Section 1. Tenant shall keep the foundation, the four outer walls and the roof
of the Property in good maintenance and repair, consistent with the condition
thereof on the date this maintenance obligation of Tenant becomes effective.
Tenant shall, at all times, keep the
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remainder of the Property in good order, maintenance and repair, and Tenant
shall also keep said Property in a clean, sanitary and safe condition in
accordance with the laws of the state of Michigan, and in accordance with
all directions, rules and regulations of the health officer, fire marshal!,
building inspector or other proper officers of governmental agencies having
jurisdiction over the Property, all at the sole cost and expense of Tenant.
Tenant shall comply with all requirements of law and ordinance otherwise
applicable to the Property; provided, however, Landlord shall be responsible
for paying the costs to cure any violations of such laws, ordinances,
directions, rules and regulations which existed as of the Commencement
Date. Tenant shall permit no waste, damage or injury to said Property, and
Tenant shall, at Tenant's own costs and expense, replace any glass windows and
doors in the Property which may be broken. At the expiration of the tenancy
created hereunder, Tenant shall surrender the Property in good condition and
repair, reasonable use, wear and tear thereof, and loss by fire or other
casualty expected.
ARTICLE VII
IMPROVEMENTS, FURNISHINGS,
EQUIPMENT AND PERSONAL PROPERTY
Section 1. All improvements, furnishings, equipment and trade fixtures
presently at the Property together with all fixtures and equipment as may be
installed by Tenant which are so incorporated and affixed to the Property that
their removal would involve structural damage to the building or which have been
installed as replacements to the Landlord's fixtures and equipment shall become
and remain the property of Landlord and shall not be removed from the Property
by Tenant upon the termination of this Lease or otherwise. All tenant
furnishings, equipment and trade fixtures other than those covered in the
foregoing sentence which are paid for and placed on the Property by Tenant will
remain the property of Tenant (the "Tenant's Personalty") and Tenant shall be
required to repair any damage to the Property caused by its removal thereof.
ARTICLE VIII
COVENANT TO HOLD HARMLESS
Section 1. Landlord shall be held harmless by Tenant from any liability
for damages to any person or any property or upon the Property, including the
person and property of Tenant and its employees and all persons in the Property
at its invitation, caused by an event which occurred at the Property during the
term hereof; provided, however, nothing
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herein shall be construed to require Tenant to indemnify Landlord against the
negligence of Landlord, its employees or agents, or with respect to an event
resulting from the Landlord's breach of this Agreement.
Section 2. It is understood and agreed that all property kept, stored
or maintained at the Property is at the risk of Tenant. Tenant shall not suffer
or give cause for the filing of any lien against the Property, except for
Tenant's Personalty.
Section 3. Tenant shall, during the entire term hereof, keep in full
force and effect a policy of general liability insurance with respect to the
Property and the business operated by Tenant thereon, in which both Landlord and
Tenant shall be named as parties covered thereby, and the limits of liability
shall be no less than $1,000,000.00 per person and $1,000,000.00 per occurrence,
and $1,000,000.00 property damage. Tenant shall furnish Landlord with a
certificate of insurance, or other acceptable evidence that such insurance is in
force.
ARTICLE IX
ACCESS TO PREMISES
Section 1. Landlord shall have the right to enter upon the Property at
all reasonable hours upon reasonable prior notice to Tenant for the purpose of
inspecting same. If Landlord, in the reasonable exercise of its discretion,
deems any repairs necessary which are the obligation of Tenant hereunder,
Landlord may demand that Tenant make the same forthwith, and if Tenant refuses
or neglects to commence such repairs and complete the same with reasonable
dispatch, Landlord may make or cause such repairs to be made only after seven
(7) days' notice has been given to Tenant and said condition shall have
continued, then Landlord may make or cause such repairs to be made, and shall
not be responsible to Tenant for any loss or damage that may accrue to its stock
or business by reason thereof, unless caused by the gross negligence or willful
misconduct of Landlord or its agents; provided, however, Landlord and its agents
shall use reasonable efforts not to interfere with or hinder the operation of
Tenant's business at the Property. If Landlord makes or causes such repairs to
be made, Tenant agrees that it will pay to Landlord the reasonable cost thereof
within ten (10) days of demand. If Tenant fails to timely reimburse Landlord, he
may charge Tenant interest on the unpaid amount computed at a rate of ten
percent (10~) per annum from the date of demand until payment, and Landlord
shall have the remedies provided in Paragraph 8 hereof.
Section 2. For a period commencing six (6) months prior to the
termination of this Lease, Landlord may have reasonable access to the Property
for the purpose of exhibiting
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same to prospective tenants so long as Landlord does not interfere with or
hinder the operation of Tenant's business at the Property.
ARTICLE X
EMINENT DOMAIN
Section 1. If the whole of the Property shall be taken by any public
authority under the power of eminent domain, then the terms of this Lease shall
cease as of the date possession shall be taken by such public authority and the
rent shall be paid to that date with a proportionate refund by Landlord of such
rent as may have been paid in advance.
Section 2. If thirty percent (30%) or more of the Property on which the
building is located shall be taken under eminent domain or such lesser portion
of the Property is so taken and Tenant determines that such taking will have a
material adverse effect on its ability to operate its business at the Property,
Tenant shall have the right either to terminate this Lease and declare the same
null and void, or to continue in possession of the remainder of the Property;
and in either event, Tenant shall notify Landlord of Tenant's intention in
writing within sixty (60) days after receiving notice of such taking under the
power of eminent domain. In the event Tenant elects to remain in possession or
the Lease not otherwise terminated as a result of such taking, all of the terms
herein provided for shall continue in effect except that the fixed rent
hereinabove provided shall be reduced either (i) in proportion to the reduction
in the net useable floor area of the building by reason of such taking or
condemnation in the event of a reduction in the building floor area due to such
taking, or (ii) each year by an amount equal to ten percent (10%) of the
condemnation award granted to Landlord, in the case of a taking which does not
reduce the floor area of the building, and Landlord shall, at Landlord's own
cost and expense, promptly make all necessary repairs or alterations to the
building on the Property so as to constitute the remaining premises a complete
architectural unit consistent with the condition which existed immediately prior
to such taking, said costs to be deducted from the gross condemnation award.
Section 3. All damages awarded for such taking under the power of
eminent domain whether on the whole or a part of the Premises shall belong to
and be the property of Landlord, whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
Property; provided, however, that Tenant shall be entitled to any award made to
Tenant for loss of business, depreciation to, and cost of removal of stock and
fixtures, and moving expenses.
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ARTICLE XI
DAMAGES
Section 1. If the Property shall be damaged or destroyed in whole or
in part by fire or any other cause or casualty, Landlord agrees to repair and
restore the same with reasonable dispatch to a good tenantable condition,
similar to the condition of the Property prior to such damage or destruction,
unless this Agreement is terminated pursuant to Section 4 below, and the rent
shall abate entirely in case the entire Property is untenantable and pro-rata
for the portion rendered untenantable in case a part only is untenantable, until
the same shall be restored to a tenantable condition.
Section 2. At all times during the term of this Lease, including the
period of construction or reconstruction of any building if Tenant's rent
obligation has not abated, Tenant will, at Tenant's own cost and expense, have
the building or buildings and the contents thereof at any time upon the
Property, insured against loss or damage by fire or other casualty with
responsible insurance companies reasonably satisfactory to Landlord, said
insurance to be in an amount equal to one hundred percent (100%) of actual cash
value of said building or buildings, contents and improvements. All such
insurance policies and all renewals thereof shall be payable to Landlord and
Tenant, as their interests may appear, entitling Landlord to collect all monies
due under said policies payable in the event of any reason of the loss or damage
of the building or buildings situated in the Property and permitting Tenant to
receive all monies payable with respect to the Tenant's Personalty at the
Property. In the event Tenant fails to obtain and continue such insurance in
force at any time, Landlord, at its option and without any obligation on
Landlord's part to do so, may obtain such insurance and Tenant shall forthwith
pay the cost thereof to Landlord, or Landlord may at its option add said cost to
the next rent payment due Landlord from Tenant. Anything to the contrary herein
contained notwithstanding any loss shall first be payable to any first mortgagee
of the Premises to the extent of its interest.
Section 3. So long as Tenant remains open for, and continues to
operate its business at the Property in the same manner as prior to such
casualty, the Property shall not be
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deemed wholly untenantable. However, the Property will be treated as wholly
untenantable regardless of the extent of the damage thereto, if Tenant
determines, in the exercise of its reasonable business judgment, that it is
unable to operate the Property in the ordinary course of business or access to
the Property is materially hindered.
Section 4. In the event the building or contents of the Property are
damaged or destroyed during the term hereof, and as a result thereof the Tenant
cannot operate its business at the Property until completion of the repair and
restoration, the Tenant shall have the right to terminate this Agreement if (i)
in the reasonable certified opinion of Landlord's architect, the building and
contents cannot be completely repaired and restored such that Tenant will be
able to open for business within one hundred twenty (120) days after the
occurrence of such damage or destruction or (ii) Landlord does not complete such
repair or restoration one hundred twenty (120) days after such damage or
destruction. Tenant shall notify Landlord in writing of its election to
terminate within fifteen (15) days after receipt of the architect's certified or
Landlord's failure to timely complete the repair and restoration, and upon
termination, rent shall be prorated as of the date of such damage or
destruction. During the period of any reconstruction or repair, all rent shall
be abated.
ARTICLE XII
BANKRUPTCY
Section 1. In the event the estate created hereby shall be taken in
execution or by other process of law, or if Tenant shall be adjudicated
insolvent or bankrupt pursuant to the provisions of any state or federal
insolvency or bankruptcy act, or if any assignment shall be made of Tenant's
Property for the benefit of creditors, then and in any such events, Landlord at
its option may terminate this Lease and all rights of Tenant hereunder, by
giving to Tenant notice in writing of the election of Landlord so to terminate;
provided, however, Tenant shall have sixty (60) days to dismiss any involuntary
proceeding before Landlord may exercise its right of termination so long as
Tenant is not otherwise in default under the terms hereof.
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ARTICLE XIII
SUBORDINATION
Section 1. Tenant agrees that this Lease shall be subordinate to any mortgages
that may hereafter be placed upon the Property and to any and all advances to be
made thereunder and to the interest thereon, and all renewals, replacements and
extensions thereof, provided the mortgagees named in said mortgages shall agree
to recognize, not disturb and be bound by the terms and provisions of this
Lease. In the event of any mortgagee electing to have the Lease as a prior lien
to its mortgage, then and in such event, upon such mortgagee notifying the
Tenant to that effect, this Lease shall be deemed prior to lien to the said
mortgage, whether or not this Lease is dated prior to or subsequent to the date
of said mortgage or trust deed.
ARTICLE XIV
CONSTRUCTION
Section 1. Nothing contained herein shall be deemed or construed by the
parties hereto, nor by any third party, as creating the relationship of
principal and agent or of partnership or of joint venture between the parties
hereto, it being understood and agreed that neither any provisions contained
herein, nor any acts of the parties hereto shall create a relationship other
than the relationship of Landlord and Tenant. Whenever herein the singular
number is used, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders.
ARTICLE XV
NON-LIABILITY
Section 1. Landlord shall not be responsible or liable to Tenant for
any loss or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining Premises or any part of the Premises adjacent to or
connected with the Property or for any loss or damage resulting to Tenant or its
property from burst, stopped or
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leaking water, gas, sewer or steam pipes not caused by neglect or breach
of covenant or the part of Landlord herein contained.
ARTICLE XVI
QUIET ENJOYMENT
Section 1. Landlord covenants that Tenant, on payment of the rental at
the time and in the manner aforesaid and performing of all of the foregoing
covenants, shall and may peacefully and quietly have, hold and enjoy the
Property for the term aforesaid, and said quiet and peaceful enjoyment will
not be disturbed or interfered with by Landlord or any person claiming by under
Landlord.
ARTICLE XVII
RENTAL AND LEASE RENEWAL OPTION
Section 1. Rental and Lease Renewal Option. As of the Commencement
Date and for a period of forty-eight (48) months thereafter, Tenant shall pay
Landlord the sum of Two Thousand Five Hundred Dollars ($2,500.00) per month
due and payable on the ____ day of each month commencing on the ____ day of the
month following the Commencement Date. Rent shall be pro-rated between the
Commencement Date and the ____ day of the next succeeding month.
Section 2. Lease Renewal Option. Upon the expiration of the original
term, Tenant shall have the option to extend this Lease for an extension term of
four (4) years, provided that Tenant gives Landlord at least six (6) months'
prior written notice of its unconditional and irrevocable exercise of such
option and provided further that Tenant has not been in default hereunder. In
the event that Tenant exercises its option to extend the term, all provisions of
this Lease shall apply during the extension term hereof, except the rent shall
be increased in an amount equal to Two Thousand Seven Hundred Fifty ($2,750.00)
Dollars per month payable on the first day of each month during the extension
term.
Section 3. Provisions Applicable to Default. If any rental payment
shall be and remain unpaid for more than ten (10) days after it shall become due
and payable, or if Tenant shall violate or default under any of the
other covenants, agreements, stipulations or conditions of this Agreement and
such default shall continue for a period of thirty (30) days after written
notice thereof and Tenant having an opportunity to cure said breach, then it
shall
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be optional for Landlord to declare this Lease forfeited, the term ended and
to re-enter the Property and take possession of same. In addition thereto,
Landlord shall have such other, further or different rights and remedies as may
be available at law or in equity, including, but not limited to, the right of
claim and delivery, the right of repossession of the Property pursuant to the
applicable statutes for summary proceedings, or such other rights at law or
in equity as may be applicable or available, it being specifically agreed
that the rights herein recited shall be cumulative and not exclusive. A late
payment penalty of five percent (5%) of the amount of the late payment shall be
added to the delinquent payment effective on the 5th day after the due date. In
like manner, any payment which remains due and unpaid thirty (30) days
following the due date shall be subject to a fifteen percent (15~) late payment.
Section 4. Security Deposit. The Landlord hereby acknowledges the
receipt of Two Thousand Five Hundred ($2,500.00) Dollars, which it is to retain
as security for the faithful performance of all of the covenants, conditions,
and agreements of this Lease, but in no event shall the Landlord be obliged to
apply the same upon rents or other charges in arrears or upon damages for the
Tenant's failure to perform the said covenants, conditions, and agreements; the
Landlord may so apply the security at its option; and the Landlord's right to
the possession of the premises for non-payment of rent or for any other reason
shall not in any event be affected by reason of the fact that the Landlord holds
this security. The said sum if not applied towards the payment of rent in
arrears or towards the payment of damages suffered by the Landlord by reason of
the Tenant's breach of the covenants, conditions, and agreements of this Lease
is to be returned to the Tenant when this Lease is terminated, according to
these terms, and in no event is the said security to be returned until the
Tenant has vacated the premises and delivered possession to the Landlord.
In the event that the Landlord repossesses itself of the said
premises because of the Tenant's default or because of the Tenant's failure to
carry out the covenants, conditions, and agreements of this Lease, the Landlord
may apply the said security upon all damages suffered to the date of said
repossession and may retain the said security to apply upon such damages as may
be suffered or shall accrue thereafter by reason of the Tenant's default or
breach. The Landlord shall not be obliged to keep the said security as a
separate fund, but may mix the said security with its own funds.
Upon Tenant satisfying all conditions in this Lease, Landlord
shall deliver the security deposit to Tenant.
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ARTICLE XVIII
OPTION TO PURCHASE
Section 1. Tenant, at any time during the term of this Lease, shall
have the option to purchase the Property from Landlord upon thirty (30) days'
written notice to Landlord subject to the following terms and conditions:
(a) The purchase price for the Property during the primary term of the
Lease shall be Three Hundred Thousand ($300,000.00) Dollars.
(b) In the event that Tenant shall exercise this option to purchase
the Property during the option period as set forth in Article XVII, Section 2,
the purchase price for the Property shall be Three Hundred Thirty Thousand
($330,000.00) Dollars.
(c) The purchase price for the Property shall be paid in full at the
time of the closing.
(d) Settlement for the purchase and sale of the Property shall be held
at a place designated by Tenant and at a time designated by Tenant, provided
that settlement shall be held within sixty (60) days after the determination by
the parties of the purchase price of the Property.
(e) The rent hereunder shall cease and shall be adjusted as of the
date of settlement. Water rent, real property taxes, and all other public or
governmental charges or assessments shall be adjusted as of the date of
settlement.
(f) At settlement, Landlord shall execute and deliver to Tenant a
warranty deed that shall convey good and merchantable title to the Property,
subject only to the restrictions, covenants, and encumbrances existing as of the
date hereof, but not including any mortgage currently encumbering the Property.
If there are any mortgages or any subsequently arising restrictions, covenants,
or encumbrances when Tenant exercises the option set forth in this section,
Tenant may purchase the Property subject to the same and deduct the amount
thereof (or the reasonable cost to cure such title defect) from the purchase
price.
(g) All recording and transfer taxes in connection with the settlement
shall be paid by Landlord.
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(h) Insurance premiums, interest, rents, water bills, and current city
and county taxes, if any, shall be prorated and adjusted to the date of closing.
Taxes not previously paid shall not be prorated.
Section 2. Notwithstanding anything contained within this Article
XVIII to the contrary, in the event that Landlord shall receive an offer to
purchase the Property within the primary or option period set forth in this
Lease, then Tenant shall have the right to exercise the option contained within
this Article XVIII provided Tenant gives written notice within thirty (30) days
of notice by Landlord of the aforesaid offer. In the event Tenant shall fail to
exercise its option in this time limitation, then all of Tenant's rights under
this Article XVIII shall terminate.
IN WITNESS WHEREOF, the parties have set their hands and seals the day
and year first above written.
WITNESSED BY: LANDLORD:
BLUE WATER LAND DEVELOPMENT, a
Michigan co-partnership
__________________________________ By:________________________________
Its:_______________________________
TENANT:
LIFE CRITICAL CARE CORPORATION,
a Delaware corporation
__________________________________ By:________________________________
Its:_______________________________
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Exhibit 10.8
LOAN AND SECURITIES PURCHASE AGREEMENT
THIS LOAN AND SECURITIES PURCHASE AGREEMENT (this "Agreement")
is dated as of September __, 1996 and is made by and between LIFE CRITICAL CARE
CORPORATION, a Delaware corporation (the "Company"), and the person whose name
appears on the signature page hereof (the "Purchaser").
RECITALS
WHEREAS, the Company intends simultaneously to close on (i)
the acquisition (the "Acquisitions") of certain assets or all of the outstanding
capital stock of four (4) companies which provide home health care products and
services in the northern Midwest region pursuant to the terms of Asset Purchase
Agreements and Stock Purchase Agreements by and between the Company and such
companies or their stockholders, as applicable, and (ii) an initial public
offering by the Company of certain of its common stock (the "IPO");
WHEREAS, the Company desires to borrow from the Purchaser and
the Purchaser desires to lend to the Company the amount set forth on the
signature page hereof (the "Principal Amount") pursuant to the terms and
limitations set forth in this Agreement;
WHEREAS, a condition precedent to the Loan, as hereinafter
defined, which the Company acknowledges will provide a direct benefit to it, is
the sale by the Company to the Purchaser of that number of shares of the voting
common stock of the Company (the "Stock") set forth on the signature page
hereof; and
WHEREAS, the Principal Amount will be allocated ten cents per
share to the Stock and the balance to the Note.
NOW, THEREFORE, for consideration, the adequacy and
sufficiency of which is hereby acknowledged by the parties hereto, and in
consideration of the premises and the mutual covenants herein contained, the
parties hereby agree as follows:
<PAGE>
ARTICLE I
ISSUANCE OF NOTES AND STOCK
SECTION 1.01 Issuance of Notes and Stock.
(a) Subject to the terms and conditions set forth herein and
in the Note, as hereinafter defined, the Company shall borrow from the Purchaser
and the Purchaser shall lend to the Company, on the Closing Date (as hereinafter
defined), the Principal Amount to be evidenced by the issuance by the Company to
the Purchaser of a subordinated promissory note (a "Note") in the form of
Exhibit A hereto (the "Loan"). On the Closing Date and in consideration for the
Loan, the Company shall become obligated to issue to the Purchaser the Stock.
(b) Payment of the Principal Amount will be made by the
Purchaser by certified or cashier's check or by wire transfer.
SECTION 1.02 Closing. The closing (the "Closing") of the Loan
and the issuance of the Note shall take place at the offices of The Morgenthau
Group, Inc., 3333 W. Commercial Boulevard, Ft. Lauderdale, Florida 33309 at
10:00 a.m., Ft. Lauderdale time, as of the date of this Agreement (such date and
time of closing being herein called the "Closing Date"). The Stock shall be
issued promptly to the Purchaser by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
SECTION 2.01 Organization, Qualifications and Corporate Power.
The Company is a corporation duly incorporated and organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified as a foreign corporation in each other jurisdiction, if
any, in which the nature of business transacted by it or the character of the
properties owned or leased by it makes such licensing or qualification
necessary, except where the failure to so qualify would not have a material
adverse effect (a "Material Adverse Effect") upon the financial condition or
operations of the Company. The Company has full power and authority (corporate
and other) to own and hold its properties and to conduct its businesses as
currently conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement. The Company has the corporate power
and authority to issue and deliver the Note and the Stock, and to execute,
deliver and perform any other document required pursuant to this Agreement.
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SECTION 2.02 Authorization of Agreement, Etc.
(a) The execution, delivery and performance by the Company of
this Agreement, and the issuance and delivery of the Note and of the Stock by
the Company, have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the charter or by-laws of the Company, or any provision of any
indenture, agreement or other instrument to which the Company is a party or by
which the Company or any of its properties or assets are bound or affected, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the company other
than as permitted and contemplated by this Agreement.
(b) The Note having been duly authorized and, when issued and
delivered in accordance with this Agreement, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. The Stock will be
validly issued, fully paid and nonassessable shares of the Stock of the Company.
SECTION 2.03 Validity. This Agreement has been duly executed
and delivered by the Company, and (assuming the due authorization, execution and
delivery by the Purchaser) constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject to general
equity principles and to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect affecting the
enforcement of creditors' rights generally. Each other document executed in
connection with this Agreement or the transactions contemplated hereby by the
Company, including, but not limited to, the Note and the Stock (collectively,
the "Loan Documents") constitute the valid, legal and binding obligation of the
Company and are enforceable in accordance with their respective terms, subject
to general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
SECTION 2.04 Governmental Approvals. No registration or filing
with, or consent or approval of, or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance of this Agreement or the issuance, sale and
delivery of the Note or the Stock.
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SECTION 2.05 Offering of Stock. Neither the Company nor, to
the knowledge of the Company, any person or entity authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Stock has offered the Stock for sale to, or solicited any offers to
buy the Stock from, or otherwise approached or negotiated with respect thereto
with, any person or persons other than the Purchaser and certain other
purchasers of similar notes and stock under circumstances that have involved the
use of any form of general advertising or solicitation as such terms are used in
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and neither the Company nor, to the knowledge of the Company,
any person acting on its behalf has taken any action (including, without
limitation, any offer, issuance or sale of any security of the Company, whether
to a subsequent investor or otherwise, under circumstances which might require
the integration of such security with the offering of the Stock under the
Securities Act or the rules and regulations of the Securities and Exchange
Commission [the "Commission"] thereunder) in a manner which would make the
exemptions afforded by the Securities Act unavailable for the offering, issuance
or sale of the Stock.
SECTION 2.06 Compliance With Law. The Company is not in
default under any order of any court, governmental authority, arbitration board
or tribunal to which it is subject, or in violation of any laws, ordinances,
governmental rules or regulations, the violation of which would have a Material
Adverse Effect.
SECTION 2.07 Litigation. There are no proceedings against the
Company, its officers or directors pending or, so far as is known by the
Company, threatened before any court or administrative agency which, if
adversely decided, would have a Material Adverse Effect.
SECTION 2.08 No Conflicting Agreements. There are no
provisions of the Company's certificate of incorporation and by-laws and no
provisions of any existing mortgage, deed of trust, indenture, lease, or other
material agreement binding the Company or affecting its properties which would
conflict with or in any way prevent the execution, delivery, or carrying out of
terms of this Agreement, the Note or the other Loan Documents.
SECTION 2.09 Financial Condition. The Company has delivered to
the Purchaser copies of its most recent unaudited financial statements. Except
as disclosed to the Purchaser in writing, there has been no material adverse
change in the financial condition of the Company or the results of the
operations thereof since the date of such financial statement as stated above.
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ARTICLE III
COVENANTS
Until the payment in full of the Note:
SECTION 3.01 Certificate of No Default. At the Purchaser's
request, the Company shall provide the Purchaser with a quarterly certificate of
the President of the Company stating that no default has occurred during the
immediately concluded calendar quarter under this Agreement or under any of the
other Loan documents, or describing the nature of any default hereunder or
thereunder.
SECTION 3.02 Commission Filings. Within thirty (30) days after
filing, at the request of the Purchaser, the Company shall provide the Purchaser
with a copy of all material reports or other documents filed by the Company with
the Commission.
SECTION 3.03 Compliance With Laws. The Company will use its
best efforts to at all times comply in all material respects with all applicable
federal, state, and local laws, rules, and regulations, and orders of any court
or other governmental authority having jurisdiction.
SECTION 3.04 Maintain Existence. The Company will at all times
maintain in full force and effect its corporate existence, rights, privileges,
and franchises and qualify and remain qualified in all jurisdictions where
qualification is required.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01 Authorization. The Purchaser has the power and
authority to execute and deliver this Agreement. All action on the part of the
Purchaser necessary for the authorization, execution, delivery and performance
of all obligations of the Purchaser under this Agreement have been taken. This
Agreement, when executed and delivered by the Purchaser (assuming the due
authorization, execution and delivery by the Company) shall constitute a legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject to general equity principles and to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally.
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SECTION 4.02 Investment Representations. The Purchaser
represents and warrants to the Company:
(a) the Note and the Stock (collectively, the "Investor
Interest") to be acquired by it pursuant to this Agreement are being acquired
for its own account and not with a view toward the distribution or resale of the
Investor Interest or any part thereof in any transaction which would be in
violation of the securities laws of the United States of America or any State,
without prejudice, however, to its rights at all times to sell or otherwise
dispose of all or any part of the Investor Interest to an affiliate or any
person pursuant to a registration statement under the Securities Act and any
comparable State act or under an exemption from such registration available
under the Securities Act and any comparable State act; provided that such
transfers to affiliates, when taken as a whole, will not be integrated so as to
invalidate the exemption from registration under the Securities Act or any
comparable state act pursuant to which the Investor Interest is being issued by
the Company. It has been advised that the Investor Interest has not been
registered under the Securities Act or the securities laws of any State, on the
grounds that no distribution or public offering of the Investor Interest is
presently contemplated by it.
(b) it is an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act, and has indicated with an "x" which of the
following categories applies to the Purchaser:
_______ an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed
for the specific purpose of acquiring the Note and
the Stock, with total assets in excess of $5,000,000.
_______ a natural person whose individual net worth, or
joint net worth with that person's spouse, at the
time of purchase, exceeds $1,000,000.
_______ a natural person who had an individual income in
excess of $200,000 in each of the most recent two
years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same
income level in the current year.
_______ a trust with total assets in excess of $5,000,000
not formed for the specific purpose of acquiring
the Note and the Stock, whose purchase is directed
by a sophisticated person.
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_______ an employee benefit plan within the meaning of Title
1 of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan
fiduciary which is a savings and loan association, if
the employee benefit plan has total assets in excess
of $5,000,000 or if the plan is a self-directed plan,
with investment decisions made solely by persons that
are accredited investors.
_______ an entity in which each of the equity owners falls
within one or more of the foregoing categories.
(c) by reason of its business and financial experience, and
the business and financial experience of those persons retained by it to advise
it with respect to the Investor Interest, it, together with such advisors, has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment, and it is able to bear the economic risk of such investment and, at
the present time, is able to afford a complete loss of such investment.
(d) prior to making a decision to enter into this Agreement
and acquire the Investor Interest, it has been provided the opportunity to ask
questions of, and receive answers from the executive officers of the Company
concerning the Company, and to obtain from the Company any information requested
from the Company. On the basis of the foregoing, and on the representations of
the Company contained in this Agreement and the representations contained in the
other Loan Documents, it acknowledges that it possesses sufficient information
to understand the merits and risks associated with an investment in the Investor
Interest.
(e) it is not currently, and has not been within the last
12 months, an NASD member or affiliated with any NASD member.
SECTION 4.03 Acknowledgments. The Purchaser acknowledges and
understands that:
(a) No Federal or state agency has made any finding or
determination as to the fairness of the offering of the Note and Stock for
public or private investment, or any recommendation or endorsement of the Note
or the Stock.
(b) The Note and the Stock have not been registered under the
Securities Act and may not be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser agrees that a legend to the foregoing effect may be placed on any and
all of the Notes and certificates for the Stock.
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(c) The Company is relying upon the accuracy of the
Purchaser's information provided to the Company, including the Purchaser's state
of residence on the signature page hereof.
(d) A commission will be payable by the Company to
Morgenthau & Associates, Inc. in an amount equal to 8% of the Principal
Amount.
(e) There is no assurance that the Company's IPO will occur.
SECTION 4.04 Reliance on Information. The Purchaser
acknowledges that it has relied upon the information provided by the executive
officers of the Company and upon the representations of the Company contained
herein and the representations of such entity contained in the other Loan
Documents.
SECTION 4.05 Lock-Up Agreement. The Purchaser agrees to enter
into a lock-up agreement covering the Stock purchased hereunder not to exceed 12
months from the Effective Date (i.e., the effective date of the Company's
proposed IPO) as required by the Company's underwriter for its proposed IPO.
ARTICLE V
DEFAULT
SECTION 5.01 Events of Default. A default (an "Event of
Default") occurs if:
(a) The Company fails to make any payment of principal,
interest or other amounts required by the Note or any other obligation in any of
the Loan Documents which relate to a monetary payment within sixty (60) days of
when the same becomes due and payable;
(b) The Company fails to comply with or perform in any
material respect any of the covenants or obligations contained in this Agreement
or any other Loan Document, or there occurs a default or Event of Default under
any of the other Loan Documents, or under any other loan documents, and such
failure continues for sixty (60) days after written notice from the Purchaser to
the Company; or
(c) The Company, pursuant to or within the meaning of any
bankruptcy law: (1) becomes insolvent, (2) fails generally to pay its debts as
they become due, (3) admits in writing its inability to pay debts generally as
they become due, (4) commences a voluntary case or proceeding, (5) consents to
the entry of a judgment,
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decree or order for relief against it in an involuntary case or proceeding, (6)
consents to the appointment of a custodian for it or for all or substantially
all of its properties, (7) consents to or acquiesces in the institution of
bankruptcy or insolvency against it, (8) applies for, consents to or acquiesces
in the appointment of or taking possession by a custodian of it or for any part
of its properties, (9) makes a general assignment for the benefit of its
creditors, or (10) adopts any board or committee resolution (or
otherwise) that authorizes action to approve any of the foregoing.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, and will actively resist any attempts by any other
party on their behalf to insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, which would prohibit or forgive the Company from making any payment
on the Note, or which may affect the covenants or the performance of this
Agreement or any agreement contemplated hereby; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefits or advantages
of any such law and covenant that it will not hinder, delay or impede the
execution of any power herein granted to the Purchaser, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 6.02 Survival of Agreements. All covenants and
agreements made herein shall survive the execution and delivery of this
Agreement and the issuance, sale and delivery of the Note and Stock pursuant
hereto. All statements contained in any certificate or other instrument
delivered by the Company hereunder shall be deemed to constitute representations
and warranties made by the Company.
SECTION 6.03 Brokerage. Morgenthau & Associates, Inc. has been
retained by the Company and the Company is solely responsible for any payments
to it. No other broker or finder has acted on behalf of the Company in
connection with this Agreement or the transactions contemplated hereby, and the
Purchaser has made no agreement to pay any agent, finder, broker or any other
representative, any fee or commission in the nature of a finder's or
originator's fee arising out of or in connection with the subject matter of this
Agreement. Each party hereto will indemnify and hold harmless the other against
and in respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby except as set forth
hereinabove, based in any way on agreements, arrangements or understandings made
or claimed to have been made by such party with any third party.
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SECTION 6.04 Recitals. The Recitals contained herein are
specifically incorporated herein by reference and made a part hereof.
SECTION 6.05 Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be delivered
personally or mailed by first class registered or certified mail or by Federal
Express or other reliable courier service, postage prepaid, in either case
addressed as follows:
(a) if to the Company at
Life Critical Care Corporation
3333 W. Commercial Boulevard
Suite 203
Ft. Lauderdale, Florida 33309
Attn.: Thomas H. White, President
with a copy to:
George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
400 Court Towers
210 West Pennsylvania Avenue
Towson, Maryland 21204-4515
(b) if to the Purchaser at the Purchaser's address
on the signature page hereof
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. Any such communication shall
be deemed given when delivered personally against written receipt or if mailed,
upon the earlier to occur of the date of actual receipt or 48 hours after the
date of mailing to the address indicated.
SECTION 6.06 Change, etc. Neither this Agreement nor any term,
condition, representation, warranty, covenant, or agreement hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing by the party against whom such change, waiver, discharge or termination
is sought.
SECTION 6.07 Terms Binding. All of the terms, conditions,
stipulations, warranties, representations, and covenants of this Agreement shall
apply to and be binding upon, and shall inure to the benefit of, the parties
hereto and each of their respective heirs, personal representatives, successors
and assigns.
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SECTION 6.08 Gender, etc. Whenever used herein, the singular
number shall include the plural, the plural the singular, and the use of the
masculine, feminine, or neuter gender shall include all genders.
SECTION 6.09 Headings. The section and subsection headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms hereof.
SECTION 6.10 Governing Law. This Agreement and all
transactions contemplated hereby, including without limitation, the Note and
Stock, shall be deemed to be made under, and shall be governed by, the internal
laws of the State of Maryland, without regard to the conflicts of law principles
of such State.
SECTION 6.11 Consent to Jurisdiction; Service of Process. Each
party hereto agrees and consents that any action or proceeding arising out of or
brought to enforce the provisions of this Agreement may be brought in any
appropriate court in the State of Maryland or in any other court having
jurisdiction over the subject matter.
SECTION 6.12 Waiver of Jury Trial. The Purchaser and the
Company each waive all right to a trial by jury in any suit, action, or
proceeding under, arising out of, or relating to this Agreement, any of the Loan
Documents or any transactions contemplated thereby.
SECTION 6.13 Further Assurances and Corrective Instruments.
The parties hereto agree that they will, from time to time, execute and deliver,
or cause to be executed and delivered, such supplements hereto and such further
instruments as may reasonably be required for carrying out the intention of the
parties to, or facilitating the performance of, this Agreement.
SECTION 6.14 Illegality. If fulfillment of any provision
hereof or any transaction related hereto or to the other Loan Documents at the
time performance of such provisions shall be due shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein contained operates or would prospectively operate to invalidate
this Agreement in whole or in part, then such clause or provision only shall be
void, as though not herein contained, and the remainder of this Agreement shall
remain operative and in full force and effect; provided, however, that, if any
such provision pertains to the repayment of the Company's obligations hereunder,
the occurrence of any such invalidity shall constitute an Event of Default.
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<PAGE>
SECTION 6.15 Entire Agreement. This Agreement and the other
Loan Documents constitute the entire agreement of the parties with respect to
the subject matter thereof; the Loan Documents may not be modified or amended
except in writing.
SECTION 6.16 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 6.17 Indemnification by Purchaser The Purchaser shall
indemnify, hold harmless, and defend the Company and its officers, directors,
affiliates, agents and employees with respect to any and all loss, damage,
expense, claim, action or liability incurred or to which any of the same may be
subject as a result of the breach or untruth of any of the representations and
warranties of the Purchaser contained in this Agreement.
ARTICLE VII
REGISTRATION RIGHTS
SECTION 7.1 Piggy-Back Registration.
7.1.1. Purchaser's Option.
7.1.1.1. Following the initial public
offering by the Company of any of its securities and until the second
anniversary of the date of this Agreement, if the Company proposes to file a
registration statement under the Securities Act with respect to an offering
by the Company for its own account of any class of security of the Company then
the Company shall in each case give written notice of such proposed filing to
the Purchaser at least thirty (30) days before the anticipated filing date,
and such notice shall offer the Purchaser the opportunity to include in
such registration statement such number of Registrable Securities (i.e.,
capital stock of the Company purchased by the Purchaser hereunder and owned
by the Purchaser) as the Purchaser may request. The Company shall use its best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Purchaser to include such securities
in such offering on the same terms and conditions as the securities of the
Company included therein.
7.1.1.2. Notwithstanding the foregoing,
if the managing underwriter or underwriters of such proposed underwritten
offering determine in good faith that the total amount of securities which the
Purchaser, the Company and any other persons or entities intend to include in
such offering is sufficiently large to
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<PAGE>
materially and adversely affect the success of such offering (including, without
limitation, by a significant and adverse decrease in the proposed offering
price) then the amount of securities to be offered shall be reduced pro rata
with other sellers in the offering to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount recommended
by such managing underwriter or underwriters.
7.1.1.3 In the event the Purchaser elects
to include Registrable Securities in a registration under this Section
7.1, the Company need not include Registrable Securities in the
registration statement in response to the Purchaser's request if the
Company can find a purchaser, upon terms and conditions acceptable to the
Purchaser, for the aggregate principal amount of the Registrable Securities
proposed by the Purchaser to be registered; if the purchase and sale of the
Registrable Securities proposed by the Purchaser to be registered is not
completed within sixty (60) days, the Company shall not be relieved of its
obligations under this Section 7.1.
7.1.2. Payment of Registration Expenses. The
Company will pay all Registration Expenses in connection with any
registration described in this Section 7.1 except for the Purchaser's pro
rata share of any underwriter's discount for any registration in which the
Purchaser participates.
7.1.3. Exception from Registration.
Notwithstanding the provisions of this Section 7.1, the Company shall have no
obligation to include any Registrable Securities in any registration filed by
the Company if the registration form to be used by the Company pursuant to the
Securities Act is Form S-8 or another form which cannot be used for the public
sale of Registrable Securities.
7.1.4. Availability of Rule 144. Notwithstanding
anything contained herein to the contrary, the registration rights set
forth in this Section 7.1 shall not be available to any Registrable Securities
that are freely transferable pursuant to Rule 144(k) of the SEC under the
Securities Act.
SECTION 7.2 Registration Procedures.
7.2.1. Registration. Whenever the Purchaser
requests that any Registrable Securities be registered pursuant to Section
7.1 of this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof as quickly as practicable.
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<PAGE>
7.2.2. Information. For the purposes of
effecting the registration of the Registrable Securities of the
Purchaser pursuant to Section 7.1 hereof, and for the purposes of effectuating a
public offering of its securities, the Company may require the Purchaser to
furnish to the Company such information regarding the Purchaser, the
Registrable Securities held by the Purchaser and the proposed distribution of
such Securities as may be required to be disclosed in a registration
statement by the rules and regulations under the Securities Act or under any
other applicable securities or blue sky laws, or as may be required to effect
the registration of the Registrable Securities held by the Purchaser.
SECTION 7.3 Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with blue sky qualifications of the Registrable Securities, rating
agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered and fees and disbursements of counsel for the Company and all
independent certified public accountants (including the expenses of any annual
audit, special audit or "cold comfort" letters required by or incident to such
performance), securities acts liability insurance (if the Company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
retained in connection with such registration, fees and expenses of other
Persons retained by the Company, fees and expenses of the Purchaser incurred in
connection with each registration hereunder (but not including any underwriting
discounts or commissions attributable to the sale of the Purchaser's Registrable
Securities) and any out-of-pocket expenses of the Purchaser, specifically
including the fees of one counsel for all selling stockholders other than the
Company in such registration (all such expenses being herein called
"Registration Expenses"), will be borne by the Company.
SECTION 7.4 Indemnification.
7.4.1. Indemnification.
7.4.1.1. The Company agrees to indemnify,
to the fullest extent permitted by law, the Purchaser, each of their
partners and officers, and each Person who controls the Purchaser (within
the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended -- the "Securities Exchange Act") and any investment advisor
thereof or agent therefor against all losses, claims, damages, liabilities and
expenses to which any such Person may become subject under the Securities Act,
the Securities Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions
in respect thereof) arose out of or are based upon any untrue or alleged
untrue statement
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<PAGE>
of a material fact contained in any registration statement, prospectus or
preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein no misleading, except insofar as the same are caused by or contained in
any information with respect to the Purchaser furnished in writing to the
Company by or on behalf of the Purchaser expressly for use therein or by
the Purchaser's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Company has
furnished the Purchaser with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify the
underwriters thereof, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act or the Securities
Exchange Act) to the same extent as provided above with respect to the
indemnification of the Purchaser.
7.4.1.2. The Purchaser agrees to
indemnify, to the fullest extent permitted by law, the Company and each of its
officers and directors who have signed the registration statement, each Person
who controls the Company (within the meaning of the Securities Act or the
Securities Exchange Act), the other selling stockholders selling under such
registration and any agent therefor, against all losses, claims, damages,
liabilities and expenses (or actions in respect thereof) that arose out
of or are based upon any untrue or alleged untrue statement of a material
fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading insofar as the same are caused by or contained in any information
with respect to such Purchaser furnished to the Company by or on behalf of
such Purchaser expressly for use therein or by the Purchaser's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto to a prospective purchaser after the Company has
furnished such Purchaser with a sufficient number of copies of the same;
provided, however, that the obligation of the Purchaser hereunder shall be
limited to an amount equal to the net proceeds received by the Purchaser
pursuant to the sale of Registrable Securities as contemplated herein. In
connection with an underwritten offering, the Purchaser shall be limited to an
amount equal to the net proceeds received by the Purchaser pursuant to the sale
of Registrable Securities as contemplated herein. In connection with an
underwritten offering, the Purchaser will indemnify the underwriters thereof,
their officers and directors and each person who controls such underwriters
(within the meaning of the Securities Act or the Securities Exchange Act) to the
same extent as provided above with respect to indemnification of the Company.
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<PAGE>
7.4.2. Conduct of Indemnification Proceedings.
7.4.2.1. In case any action shall be brought
against any Person entitled to indemnification hereunder (an "Indemnified
Person"), the Indemnified Person shall promptly notify the Person from
whom indemnification is sought (the "Indemnifying Person"), in writing, and
the Indemnifying Person shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses. The Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but, the fees and expenses of any such counsel shall be
paid by the Indemnifying Person only if (i) the Indemnifying Person shall
fail to assume the defense of such action as provided herein, (ii) the
Indemnified Person reasonably shall have concluded that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Indemnifying person or other Persons represented by
counsel employed by the Indemnifying Person or (iii) the Indemnified Person
reasonably shall have concluded that a conflict of interest exists between the
Indemnifying Person and the Indemnified Person with respect to the action. The
Indemnifying Person shall not be liable for any settlement of any such action
effected without its consent, but if settled with the consent of the
Indemnifying Person or if there be a final judgment for the plaintiff in any
such action, the Indemnifying Person agrees to indemnify and hold harmless the
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment.
7.4.2.2. This Section and all of the
indemnification provisions contained herein shall survive termination of
this Agreement and shall remain operative and in full force and effect
notwithstanding any such termination.
SECTION 7.5 Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act or a registration statement pursuant to the requirements
of the Securities Act, the Company covenants that it will file the reports
required to be filed by it under the Securities Act and Securities Exchange Act
and the rules and regulations adopted by the Commission thereunder. Upon the
request of the Purchaser, the Company will deliver to the Purchaser a written
statement as to whether it has complied with such requirements. The Company will
take such further action as the Purchaser may reasonably request, all to the
extent required from time to time to enable the Purchaser to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
rule may be amended from time to time or (b) any similar rule or regulation
hereafter adopted by the Commission.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their duly authorized
representatives, as of the day and year first above written.
WITNESS: LIFE CRITICAL CARE CORPORATION
_____________________________ By:__________________________(SEAL)
Thomas H. White, President
- COMPANY -
WITNESS:
_____________________________ _____________________________(SEAL)
- PURCHASER -
Purchaser's Address (Section 6.05(b)):
Principal Amount of Note: $_____________ __________________________
Number of Shares of Stock: _____________ shares* __________________________
* i.e., 5,000 shares for each $50,000 Principal Amount of Note.
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<PAGE>
EXHIBIT A
No. ___
August __, 1996 Principal Amount: $__________
REGISTERED
SUBORDINATED NOTE
LIFE CRITICAL CARE CORPORATION
PAYMENT ON THE PRINCIPAL OF AND INTEREST ON THIS NOTE IS REQUIRED TO BE
MADE DIRECTLY TO THE REGISTERED HOLDER HEREOF WITHOUT NOTATION HEREON. IT CANNOT
BE DETERMINED FROM THE FACE OF THIS NOTE WHETHER ALL OR ANY PART OF THE
PRINCIPAL OF OR INTEREST ON THIS NOTE HAS BEEN PAID.
LIFE CRITICAL CARE CORPORATION (the "Company"), a Delaware corporation,
for value received, promises to pay to the registered holder of this note (the
"Holder") by June 30, 1997 (or earlier as herein referred to), the principal
amount of ______________________________ ($_______) and interest as set forth
herein.
The interest hereon shall be payable at the annual rate of Twelve
Percent (12%) per annum (the "Rate") for each day from the date of this note
until the date the principal amount of this note is paid in full.
Interest hereunder shall accrue and shall be due on June 30, 1997.
The total outstanding principal, together with accrued interest
thereon, shall be payable on June 30, 1997.
Principal of and interest on this note shall be paid to the registered
Holder hereof by check mailed by the Company to the address of the Holder as it
appears on the Note Register and at the end of this note without the necessity
of surrendering or presenting this note, and all such payments shall fully
discharge the obligation of the Company hereunder to the extent made. The
Company and the Holder hereof may make provision for the payment of principal
and interest by such other method as may be mutually agreed upon in writing.
At the option of the Company and upon notice to the Holder at its
address as it appears on the Note Register and at the end of this note, except
as otherwise provided herein, this note may be redeemed by the Company in part
or in whole, less any partial payments previously made by the Company, if any,
at any time or from time to time. In the event the Company redeems only part of
the note, any amount paid to the Holder shall be applied, first, to accrued but
unpaid interest, and second, the then outstanding principal amount. In the event
the Company redeems the entire note, the redemption
<PAGE>
price shall be equal to the outstanding principal of the note plus accrued and
unpaid interest to the date of the redemption. Except for a redemption in
connection with an initial public offering by the Company as to which this
redemption notice is hereby waived, any such redemption shall be made upon at
least ten (10) days' but not more than sixty (60) days' prior notice to the
Holder at the address of the Holder as it appears on the Note Register and at
the end of this note. On the date designated for redemption of the whole note,
the note so called for redemption shall become and be due and payable at the
above redemption price, the interest on such notes shall cease to accrue, and
the Holder hereof shall have no rights in respect of this note except to receive
payment of the redemption price hereof. The Company shall be obligated to
redeem this Note within three (3) days after closing on an initial public
offering by the Company of any of its securities.
This note shall be registered by the Company upon the initial delivery
hereof, in the name of the initial purchaser, by endorsement in the space
provided at the end hereof and on the books to be kept for that purpose by the
Company and, thereafter, this note shall be transferable only by successive
endorsements to successive registered holders. Payment of this note and the
interest hereon shall be made only to the registered Holder hereof on the date
such payment is due. The Company may deem and treat the person in whose name
this note is registered as the absolute owner hereof for all purposes and the
Company shall not be affected by any notice to the contrary.
The rights of the Holder to the principal sum or any sum or part
thereof, and the interest due thereon, are and shall remain subject and
subordinate to (a) the prior payment of any and all other indebtedness
(including the principal of and interest on any such indebtedness) constituting
existing or future obligations of the Company for money borrowed from any bank,
trust company, insurance company, or other institutional lender and (b) the
claims of all secured trade and contract creditors of the Company; and upon
dissolution or liquidation of the Company no payment shall be due or payable
upon this note until all of the obligations described in this paragraph shall
have been paid in full. The Holder hereby agrees (i) to amend this section of
the note if required to do so by any third-party lender to the Company and (ii)
to execute any and all documents necessary to accomplish such an amendment.
No covenant or agreement contained in this note shall be deemed to be a
covenant or agreement of any past, present or future incorporator, officer,
director or shareholder of the Company or of any predecessor or successor
corporation in his or her individual capacity and no incorporator, officer,
director or shareholder of the Company shall be liable personally on this note
or be subject to any personal liability or accountability by reason of the
issuance of this note, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released.
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<PAGE>
The Company hereby stipulates and warrants that the loan evidenced
hereby is a commercial loan and that all of the proceeds of such loan will be
used solely to acquire or carry on a business or commercial enterprise.
IN WITNESS WHEREOF, the corporate seal of the Company is hereto affixed
and these presents duly signed by the duly authorized officers of the Company as
of the day and year first above written.
ATTEST: LIFE CRITICAL CARE CORPORATION
________________________________ By: ______________________________(SEAL)
, (Assistant) Secretary Thomas H. White, President
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE (FEDERAL) SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES ACT OF ANY
STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION
STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.
REGISTERED HOLDER: ADDRESS:
_____________________________ __________________________
_____________________________ __________________________
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Exhibit 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN
LIFE CRITICAL CARE CORPORATION
(the "Company")
AND
THOMAS H. WHITE
(the "Executive")
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("this Agreement") is entered into as of the
19th day of May, 1996, to be effective as of the 25th of July, 1996 between Life
Critical Care Corporation, a Delaware corporation (the "Company"), and Thomas H.
White (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive desire to enter into this Agreement to
insure the Company of the services of the Executive and to set forth the rights
and duties of the parties hereto;
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties agree as follows:
1. Employment.
The Company hereby employs the Executive, and the Executive hereby accepts such
employment, on the terms and conditions hereinafter set forth.
During the term of this Agreement, or any renewal hereof (all references herein
to the term of this Agreement shall be deemed to include references to all
periods of renewal hereof, if any), the Executive shall devote his full and
exclusive business time, energies, attention and best efforts to the performance
of his duties hereunder, which may include travel as may reasonably be required
of him.
The Company understands that the Executive serves as an officer of M&M Business
Machines.
2. Term and Position.
The initial term of the Agreement shall be twenty-nine (29) months, commencing
as of July 25, 1996 and continuing through December 31, 1998 (the "Initial
Expiration Date"), unless sooner terminated as herein provided. The term of this
Agreement shall renew automatically for subsequent terms of one (1) year each
(each a "Renewal Term"), unless at least ninety (90) days before the Initial
Expiration Date, or at least ninety (90) days in advance of the expiration of
any subsequent Renewal Term (as the case may be), either party gives the other
party notice in writing of its intent not to renew this Agreement. As used in
this Agreement, the term "Term" shall mean either the Initial Term or any
Renewal Term, as the case may be.
During the term of this Agreement, the Executive shall be employed as the
President and Chief Executive Officer of the Company.
As President, the Executive shall be responsible for interpretation and required
implementation of the policies of the Company as determined and specified from
time to time by the Board of Directors of the Company, and he shall be
responsible for the management and expansion of the business and affairs of the
Company. As President, the Executive shall have the authority to delegate and
assign duties, responsibilities and authorities, and, in the name of the Company
and on its behalf, to negotiate and make any agreements, waivers or commitments
which do not require the express approval of the Board of Directors of the
Company.
The Executive shall immediately notify the Company of (i) his own illness and
consequent absence from work or (ii) any intended significant change in his
plans to work for the Company.
<PAGE>
During the Term of this Agreement, the Executive shall serve in any additional
offices or positions of the Company and its subsidiaries and affiliates
(including as a member of the Company's Board of Directors and any committees
thereof) to which he may be elected or appointed by appropriate action of the
Company. The Executive shall serve in any such additional capacities without
separate compensation for so serving, unless otherwise authorized by the Board
of Directors of the Company or its shareholders.
If the Company materially and adversely changes the Executive's duties and
responsibilities without his consent or if the Company materially changes its
Business Activities without his consent, the Executive shall have the right to
terminate his employment with the Company, but such termination shall not be
considered a voluntary resignation or termination of such employment or of this
Agreement but rather a discharge of the Executive by the Company without cause.
The Executive shall be deemed not to have consented to any written proposal
calling for a material adverse change in his duties and responsibilities unless
he shall give written notice of his consent thereto to the Board of Directors of
the Company within fifteen (15) days after actual receipt of such written
proposal. If the Executive shall not have given such consent, the Company shall
have the opportunity to withdraw such proposed material change by written notice
to the Executive given within ten (10) days after the end of said fifteen (15)
day period.
3. Compensation.
a. Base Salary. As compensation for services rendered under this
Agreement, the Company shall pay the Executive, during the term of this
Agreement, a base salary (the "Base Salary") at the annual rate of
$150,000 through December 31, 1996, which Base Salary shall be
increased to the annual rate of $175,000 effective January 1, 1997
through December 31, 1997, and which Base Salary shall be increased to
the annual rate of $200,000 effective January 1, 1998 through December
31, 1998, payable not less frequently than monthly. On each January 1,
commencing on January 1, 1997, and at any time that there is a change
in the financial condition or character of the business of the Company
during the term of this Agreement, the Compensation Committee of the
Board of Directors of the Company, the majority of which will be
comprised of "outside" Directors (the "Compensation Committee") shall
review the Base Salary to determine whether or not to grant additional
increases in the Base Salary.
b. Bonuses. The Company shall pay to the Executive a sign-on bonus
payable quarterly at a rate of $7,500 per quarter through December 31,
1997. Based upon the Executive's performance during the term of this
Agreement, the Company's operating results, and such other factors as
the Compensation Committee shall determine to be appropriate,
commencing in 1997 the Executive may receive from time to time a
performance bonus of up to 50% of Base Salary, as the Compensation
Committee in its sole discretion shall authorize or agree to pay,
payable on such terms and conditions as it shall determine.
c. Stock Option Plan. The Company has established a stock incentive
plan in the form attached hereto as Exhibit A (the "Stock Incentive
Plan") that becomes effective upon the completion of the initial public
offering (the "IPO") of shares of common stock of the Company (the
"Common Stock") contemplated by the Registration Statement (the
"Effective Date"). The Stock Incentive Plan initially provides, among
other things, for the issuance from time to time to certain officers,
directors and other employees of the Company of up to 360,000 stock
options ("Options"). On the Effective Date, the Company shall grant to
the Executive 100,000 Options (the "Initial Grant") that will vest 20%
on each anniversary of the Effective Date and, to the extent vested and
subject to the further terms hereof, shall be exercisable at 90% of the
initial offering price of the Common Stock. If the Executive leaves his
employment with the Company for any reason set forth in Section 11 or
by his termination of this Agreement with good reason, all his unvested
Options shall automatically and fully vest. If the Executive leaves his
employment with the Company for any reason other than as set forth in
the
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<PAGE>
preceding sentence, all unvested Options shall be forfeited. Upon the
Executive's termination of employment, the Executive (in the case of
his death, the Executive's personal representative or heirs) shall be
entitled to exercise all Options vested as of the date of
termination of employment at any time during the applicable unexpired
exercise period set forth in the Stock Incentive Plan.
4. Health Insurance and Other Benefits.
The Executive shall receive, at the expense of the Company, hospitalization,
major medical, disability, pension plan and such other benefits upon terms and
conditions established by the Company from time to time and consistently applied
for all of its senior executive officers.
a) Vacation. The Executive shall be entitled to annual vacation
at full pay during each twelve (12) month period, such vacation
to be of a duration equal to the greater of (i) four (4) weeks or
(ii) the time period permitted by the Company's vacation and
leave policies in effect from time to time. No more than five (5)
consecutive days may be taken at a time without the prior
notice to and consent of the Board of Directors, which consent
shall not be unreasonably delayed or withheld. In addition to
the foregoing, the Executive may be granted leaves of absence
with or without pay for such reasons as shall be mutually agreed
upon by the Board of Directors of the Company and the
Executive.
b) Employee Benefit Plan. The Executive shall be entitled to
participate in any equity or other employee benefit plan
(including but not limited to paid sick leave and holidays in
accordance with the Company's announced policy for executive
employees, as in effect from time to time, workers' compensation,
pension plans and profit sharing plans) that is generally
available to executive officers of the Company. The Executive's
participation in and benefits under any such plans shall be on the
terms and subject to the conditions specified in any governing
documents of the particular plan.
c) Automobile. The Company shall provide, at its expense, (1) a
car of the Company's choosing or (2) a car allowance of $600
per month toward the Executive's unlimited use of an
automobile to be selected by the Executive, at the Executive's
election.
d) Relocation Reimbursement. The Company shall reimburse the
Executive for Relocation Expenses incurred in connection with
relocation of up to $50,000. The Relocation Expenses shall
include moving expenses (the actual documented costs of the cost
of transporting the household and personal effects of the
Executive, his spouse and his dependent children from his former
residence to his new residence; traveling costs, including
meals and lodging, incurred by the Executive and his spouse
prior to relocation for the purpose of seeking a new residence;
and the cost of temporary quarters in the city of the Executive's
new residence pending occupancy of his new residence, but in no
event more than one hundred eighty (180) days), the
realtor's fee on the sale of the Executive's former residence,
all reasonable and customary closing and settlement costs on the
sale of his former residence, and up to two (2) points as
required by the lender for his new residence to be paid at the
closing on his new residence.
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<PAGE>
5. Reimbursement and Financial Records.
The Company shall promptly reimburse the Executive during the term of this
Agreement or thereafter for preapproved business travel (coach class),
entertainment and other business expenses reasonably and necessarily incurred by
the Executive in the promotion of the Company's business during the term of this
Agreement. The Executive shall furnish such documentation with respect to
reimbursement to be paid under this Section 5 as the Company reasonably shall
require in order to substantiate the Company's right to claim income tax
deductions for such expenses.
6. Indemnification.
For service as a director or officer of the Company or any subsidiary of the
Company, the Executive shall be entitled to the protection of the applicable
indemnification provisions of the charter and bylaws of the Company and any such
subsidiary and to the fullest extent permitted by Delaware law. The Company
shall maintain Directors & Officers liability insurance.
7. Non-Disclosure of Information Concerning Business.
The Executive acknowledges that, in and as a result of his employment hereunder,
he will be making use of, acquiring and/or adding to confidential or proprietary
information developed by the Company and of a special and unique nature and
value to the Company, including, but not limited to, the nature and material
terms of business opportunities and proposals available to the Company, the
Company's methods, systems and research, the names and addresses of its clients,
customers and suppliers, financial records of the Company and of clients,
customers and suppliers, and other information, data, and documents now existing
or later acquired by the Executive or the Company regardless of whether any such
information, data, or documents qualify as "trade secrets" under applicable
Federal or State law (collectively, the "Confidential Information"). As a
material inducement to the Company to enter into this Agreement, and to pay the
Executive the compensation referred to herein, along with other considerations
provided herein, the Executive covenants and agrees that he shall not at any
time during the Term of this Agreement or thereafter, directly or indirectly,
divulge or disclose or use for any purpose whatsoever (except for the sole and
exclusive benefit of the Company, as reasonably required in connection with his
duties to the Company or as otherwise required by law), any Confidential
Information which has been obtained by or disclosed to him as a result of his
employment with the Company.
Notwithstanding the foregoing, Confidential Information shall not include
information:
(a) which was in the public domain at the time of the Company's
disclosure thereof to the Executive;
(b) which entered the public domain through no fault of Executive
subsequent to the time of the Company's disclosure thereof to
Executive;
(c) which was in Executive's possession free of any obligation of
confidentiality at the time of the Company's disclosure thereof to
Executive;
(d) which was disclosed to Executive in good faith by a third party
which has the right to make such disclosure subsequent to the
time of the Company's disclosure thereof to Executive; or
(e) which was disclosed by the Company to a third party free of any
obligation of confidence.
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<PAGE>
8. Non-Competition.
The Executive acknowledges that the Company considers the Executive's services
to be rendered hereunder are of a special and unique character to the success
and continued operation of the Company's business. In recognition of the
aforesaid and the Base Salary and other compensation to be paid to the Executive
hereunder, the Executive agrees that:
During the Term of this Agreement and for the period of 12 months following the
termination of employment with the Company for any reason whatsoever (the
"Restricted Period"), the Executive shall not engage in Business Activity in any
state where the Company or any successor to the Company's business or any of
their affiliates or subsidiaries then conducts business or has conducted
business (the "Restricted Area"), or have any interest, whether as a proprietor,
partner, employee, stockholder, principal, agent, consultant, director, officer,
or in any other capacity or manner whatsoever in any enterprise that
participates in a business that has products or service that are sold or
provided by the Company at the date of such termination or within a 12 month
period prior thereto or any successor to the Company's business, or any of their
affiliates or subsidiaries ("Competitive Business") with the Company in the
Restricted Area without the prior written consent of the Company.
During the Restricted Period, the Executive will not, directly or indirectly,
solicit, induce or influence any of the Company's contacts or clients which have
or have had a business relationship with the Executive at any time during the
term of this Agreement to discontinue or reduce the extent of such relationship
with the Company.
Further, during the Restricted Period the Executive will not, directly or
indirectly, attempt or assist others in any transaction involving any
acquisition identified by the Company or the Executive during the term of this
Agreement.
During the Restricted Period and within the Restricted Area, the Executive will
not, without the prior written approval of the Company, (A) directly or
indirectly recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the Company,
or (B) employ or seek to employ, or cause any Competitive Business to employ or
seek to employ any person who is then (or was at any time within six (6) months
prior to the date the Executive or the Competitive Business employs or seeks to
employ such person) employed by the Company.
During the Restricted Period, the Executive will not intentionally interfere
with or disrupt or attempt to disrupt any past, present or prospective
relationship, contractual or otherwise, between the Company and any customer,
employee, supplier, vendor or agent of the Company.
9. Remedy.
The Executive covenants and agrees that if he shall violate any of his covenants
or agreements provided for pursuant to Sections 7 or 8 hereof, the Company shall
be entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration, and benefits which the Executive, directly or
indirectly, has realized and/or may realize as a result of, growing out of, or
in connection with any such violation; such remedy shall be in addition to and
not in limitation of any injunctive relief or other rights or remedies to which
the Company may be entitled to at law or in equity or under this Agreement.
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<PAGE>
10. Termination by the Company for Cause.
The Company may, at its option, immediately terminate this Agreement for "cause"
by giving written notice of termination to the Executive.
"Cause" shall mean (A) committing or participating in an injurious act of fraud,
gross neglect, material misrepresentation, embezzlement or dishonesty against
the Company or any of its affiliates or subsidiaries; (B) committing or
participating in any other injurious act or omission wantonly, willfully,
recklessly or in a manner which was grossly negligent against the Company or any
of its affiliates or subsidiaries, and which materially harms the Company
including through an act of dishonesty or material conflict of interest which
relates to the performance of the Executive's duties hereunder; (C) engaging in
a criminal enterprise involving moral turpitude; (D) an act or acts constituting
a felony under the laws of the United States or any state thereof; (E)
committing a material breach of any of the provisions of Sections 7 or 8 of this
Agreement; or (F) substantial breach of contract, refusing or willfully failing
to carry out specific directions of the Board of Directors of the Company, or
willfully refusing or willfully failing to perform a material part of his duties
hereunder, provided such specific directions or performance of duties are not in
violation of law.
In the event of termination for any of the reasons set forth in this Section 10,
the Executive shall be entitled to no further compensation or other benefits
under this Agreement, except as to that portion of any unpaid Base Salary and
other benefits accrued and earned by him hereunder up to and including the date
of such termination for "cause."
11. Termination by the Company Without Cause.
If the Company terminates the Executive "without cause", which shall mean for
any reason other than the death or disability of the Executive preventing the
Executive from performing the normal functions of the Executive's job for a
period of sixty (60) days and other than as set forth in Section 10 hereof, the
Executive shall be entitled to receive from the Company a Termination Benefit
equal to the greater of (i) 100% of the Executive's annual Base Salary as in
effect on the date of his termination of employment, payable in monthly
installments on the first day of each month for the twelve (12) months
immediately following the month in which his employment terminates, or (ii) the
Executive's Base Salary, at the rate in effect for the Executive on the date of
termination, for the balance of the employment Term provided by Section 2,
payable in monthly installments for the number of months remaining in the
employment Term, on the first day of each month, immediately following the month
in which his employment terminates.
12. Arbitration.
Any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association then pertaining in Baltimore City,
Maryland, and judgment upon the award rendered by the arbitrator or arbitrators
may be entered in any court having jurisdiction thereof. The arbitrator or
arbitrators shall be deemed to possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration; provided, however, that
nothing in this Section 12 shall be construed so as to deny the Company the
right and power to seek and obtain injunctive relief in a court of equity for
any breach or threatened breach by the Executive of any of his covenants
contained in Sections 7 and 8 hereof.
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<PAGE>
13. Attorneys' Fees.
In the event any litigation, controversy or arbitration arises out of or in
connection with this Agreement between the parties hereto, each party in such
litigation, controversy or arbitration shall bear its respective attorneys'
fees, expenses and suit costs, including those associated with any appellate or
post judgment collection proceedings.
14. Time of Essence.
Time is of the essence of this Agreement and each covenant and condition
contained herein.
15. Notices and Demands.
Any notice or demand which, by any provision of this Agreement or any agreement,
document, or instrument executed pursuant hereto, except as otherwise provided
therein, is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, postage and charges prepaid, to the following address:
if to the Company: Prior to the Company's IPO
Life Critical Care Corporation
3333 W. Commercial Blvd., Suite 203
Fort Lauderdale, Florida 33309
Following the Company's IPO
Life Critical Care Corporation
401 E. North Avenue
Villa Park, Illinois 60181
with a copy to: George S. Lawler, Esquire
Whiteford, Taylor & Preston L.L.P.
210 West Pennsylvania Avenue
Towson, Maryland 21204
or at any other address designated by the Company to the Executive in writing,
and
if to the Executive: 8357 Black Walnut Drive
East Amherst, New York 14051
or at any other address designated by the Executive to the Company in writing.
16. Severability.
If any provision of this Agreement, the deletion of which would not adversely
affect the receipt of any material benefit by any party hereunder or
substantially increase the burden of any party hereto, shall be held to be
invalid or unenforceable to any extent, the same shall not affect in any respect
whatsoever the validity of enforceability of the remainder of this Agreement.
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<PAGE>
17. Waiver of Modification.
No waiver or modification of this Agreement or of any covenant, condition or
limitation herein contained shall be valid unless in writing and duly executed
by the party to be charged therewith.
18. Complete Agreement.
This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter of this Agreement and supersedes any and all
previous agreements between the parties, whether written or oral, with respect
to such matter.
19. Applicable Law, Binding Effect and Venue.
This Agreement shall be construed and regulated under and by the laws of the
State of Maryland, and shall inure to the benefit of and be binding upon the
parties hereto and their heirs, personal representatives, successors and
assigns. Venue for any arbitration or action related to or arising out of this
Agreement shall lie in Baltimore City, Maryland. The Company shall not effect
any merger, consolidation or sale of all or substantially all of its assets
unless prior to or simultaneous with its consummation the successor entity (if
other than the Company) resulting from such transaction, or the entity
purchasing the Company's assets, assumes all the obligation of the Company under
this Agreement.
20. Section Headings.
Section headings used throughout this Agreement are for reference and
convenience and in no way define, limit or describe the scope or intent of this
Agreement or affect its provisions.
21. Multiple Copies or Counterparts of Agreement.
The original and one or more copies of this Agreement may be executed by one or
more of the parties hereto. In such event, all of such executed copies shall
have the same force and effect as the executed original and all of such
counterparts taken together shall have the effect of a fully executed original.
This Agreement shall have no effect unless and until signed in counterparts or
otherwise by all parties set forth in the first paragraph of this Agreement.
22. Opportunity to Employ Counsel.
The Executive acknowledges receipt of a copy of this Agreement prior to his
employment by the Company and also acknowledges that he has had ample time and
opportunity to employ counsel of his choice to provide advice concerning the
terms and conditions of this Agreement and the Executive's prospective
employment with the Company.
23. Definitions.
The term "Business Activity" shall be deemed to include any business activity
relating to home health services and home medical equipment sales and services
and any additional activities which the Company may engage in during the term of
this Agreement.
The term "subsidiary" shall mean any entity deemed to be a subsidiary of the
Company under the rules and regulations of the United States Securities and
Exchange Commission.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Executive Employment
Agreement on the day and year first set forth above.
LIFE CRITICAL CARE CORPORATION,
a Delaware corporation
By: _________________________
its authorized signatory
WITNESS:
_________________________ _________________________ Date: _______________
Thomas H. White
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Exhibit 10.11
LIFE CRITICAL CARE CORPORATION
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Section 1. Purpose
The purpose of the Plan is to retain the services of qualified
persons who are not employees of Life Critical Care Corporation (the "Company")
to serve as members of the Board of Directors and to secure for the Company the
benefits of the incentives inherent in increased Common Stock ownership by
Non-Employee Directors, by granting to such person options to purchase shares of
Common Stock.
Section 2. Definitions
For purposes of the Plan:
(a) "Affiliate" shall mean any entity that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the Company.
(b) "Annual Award" shall mean an award of Options pursuant to
Section 5(b) of the Plan.
(c) "Annual Meeting" shall mean an annual meeting of the
Company's stockholders.
(d) "Board of Directors" shall mean the Board of Directors of
the Company.
(e) "Change in Control" shall mean
(1) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) of the Exchange Act), other than an employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Affiliate of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of [20%] or more of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors or of equity securities having a value equal to [20%] or more of the
total value of all equity securities of the Company; or
(2) individuals who as of the Offering Date constitute the
Board of Directors, and subsequently elected members of the Board of Directors
whose election is approved or recommended by at least a majority of such current
members or their
<PAGE>
successors whose election was so approved or recommended, cease for any reason
to constitute at least a majority of such Board of Directors.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Committee" shall mean the committee designated by the
Board of Directors pursuant to Section 3(c) of the Plan, none of whose members
shall be Non-Employee Directors.
(h) "Common Stock" shall mean the Common Stock of the Company
or such other class or kind of shares or other securities as may be applicable
under Section 12.
(i) "Company" shall mean Life Critical Care Corporation, a
Delaware corporation, or any successor to substantially all its business.
(j) "Disability" shall mean a physical or mental impairment
rendering a Non-Employee Director substantially unable to function as a member
of the Board of Directors for any period of six consecutive months. Any dispute
as to whether a Non-Employee Director is disabled shall be resolved by a
physician mutually acceptable to the Non-Employee Director and the Company,
whose decision shall be final and binding upon the Non-Employee Director and the
Company.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Fair Market Value" shall mean the average of the highest
and lowest quoted selling prices of the Common Stock as reported on the NASDAQ
National Market or such national securities exchange as may be designated by the
Committee or, in the event that the Common Stock is not listed for trading on a
national securities exchange or the NASDAQ National Market, the average of the
highest and lowest quoted bid prices of the Common Stock as reported by the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or, if not listed on NASDAQ, the fair market value of the Common Stock as
determined by the Committee, in any such case for the applicable valuation date.
(m) "Initial Award" shall mean an award of Options pursuant to
Section 5(a) of the Plan.
(n) "Non-Employee Director" shall mean a member of the Board
of Directors who is not an employee of the Company or any of its subsidiaries
and who otherwise satisfies the requirements of Rule 16b-3 promulgated under the
Exchange Act.
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<PAGE>
(o) "Offering Date" shall mean the effective date of the
Company's registration statement no. [333-_____] relating to the initial
public offering of the Common Stock.
(p) "Option" shall mean an option to purchase shares of Common
Stock awarded to a Non-Employee Director pursuant to the Plan.
(q) "Option Shares" shall mean the shares of Common Stock
issuable upon exercise of a Option.
(r) "Plan" shall mean the Life Critical Care Corporation
Non-Employee Directors Stock Option Plan as described herein.
(s) "Retirement" shall mean a Non-Employee Director ceasing to
be a member of the Board of Directors as a result of retirement from the Board
of Directors in accordance with the retirement policy then applicable to members
of the Board of Directors.
(t) "1933 Act" shall mean the Securities Act of 1933, as
amended.
Section 3. Shares Available; Administration
(a) Subject to the provisions of Section 12 of the Plan, the
maximum number of shares of Common Stock which may be issued under the Plan
shall not exceed [50,000] shares. Either authorized and unissued shares of
Common Stock or treasury shares may be delivered upon exercise of Options
awarded pursuant to the Plan.
(b) If Options have been forfeited to the Company as described
in Section 6(d), the Option Shares underlying such Options shall again be
available for issuance in connection with future awards under the Plan.
(c) The Plan will be administered by the Committee. The
Committee may adopt rules and regulations necessary to carry out the Plan's
purposes. The Committee's interpretation and construction of any Plan provision
shall be final and conclusive. Notwithstanding, the selection of Non-Employee
Directors to whom Options are to be granted, the timing of such grants, the
number of shares subject to any Option, the exercise price of Options, the
periods during which Options may be exercised and the term of any Option shall
be as hereinafter provided, and the Committee shall have no discretion as to
such matters.
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<PAGE>
Section 4. Eligibility
Options awarded pursuant to the Plan shall be granted only to
Non-Employee Directors.
Section 5. Awards
(a) Initial Award. On the date of a Non-Employee Director's
initial election or appointment to the Board of Directors (or in the case of a
Non-Employee Director who is a member of the Board of Directors as of the
Offering Date, on the Offering Date), such Non-Employee Director (including any
Non-Employee Director reelected or reappointed after a period of at least 12
calendar months during which he did not serve on the Board of Directors) shall
be granted an Initial Award consisting of an Option to purchase 7,500 shares of
Common Stock. Such Option shall have a per share exercise price equal to the
Fair Market Value of the Common Stock on the date of award and shall be subject
to the vesting schedule provided for in Section 6(a) and the other terms and
conditions provided for herein.
(b) Annual Awards. At each Annual Meeting held subsequent to
the Offering Date, each person who has served as a member of the Board of
Directors during the period elapsed since the immediately preceding Annual
Meeting (or in the case of the first Annual Meeting held subsequent to the
Offering Date, each person who has served as a member of the Board of Directors
since the Offering Date), and who has, during all or a portion of such service,
been a Non-Employee Director for purposes of the Plan, shall be granted as of
the date of such Annual Meeting an Annual Award consisting of an Option to
purchase 2,500 shares of Common Stock (or such lesser number determined by
multiplying 2,500 by a fraction, the numerator of which is the number of full or
partial months since the immediately preceding Annual Meeting (or Offering Date,
if applicable) during which such person served on the Board of Directors in the
capacity of a Non-Employee Director, and the denominator of which is the number
of full or partial months since the immediately preceding Annual Meeting (or
Offering Date, if applicable). Such Option shall have a per share exercise price
equal to the Fair Market Value of the Common Stock on the date of award and
shall be subject to the vesting schedule provided for in Section 6(b) and the
other terms and conditions provided for herein.
Section 6. Vesting
(a) Vesting of Initial Awards. Initial Awards shall
vest and become exercisable as follows:
(i) An Initial Award made other than in connection
with a Non-Employee Director's initial election to the Board of
Directors at an Annual
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<PAGE>
Meeting shall vest and become exercisable as to 25% of the Option
Shares subject to the Option as of the date of award and, as to the
remaining 75% of the Option Shares subject to the Option, in
three installments as of the first, second and third anniversaries
of the date of grant, provided that the Non-Employee Director remains
in service as a member of the Board of Directors until the relevant
vesting date.
(ii) An Initial Award made in connection with a
Non-Employee Director's initial election to the Board of Directors at
an Annual Meeting shall vest and become exercisable as to 25% of the
Option Shares subject to the Option as of the date of award and, as to
the remaining 75% of the Option Shares subject to such Option, in three
installments as of the first, second and third Annual Meetings
following the date of award, provided the Non-Employee Director to whom
such Annual Award was made continues in service as a member of the
Board of Directors until the relevant vesting date (whether or not the
Non-Employee Director is nominated for reelection at the Annual Meeting
held on either vesting date, and whether or not, if nominated, he is
reelected).
(b) Vesting of Annual Awards. Each Annual Award shall vest and
become exercisable in three installments as of the first, second and third
Annual Meetings following the date of award, provided the Non-Employee Director
to whom such Annual Award was made continues in service as a member of the Board
of Directors until the vesting date (whether or not the Non-Employee Director is
nominated for reelection at the Annual Meeting held on such vesting date, and
whether or not, if nominated, he is reelected).
(c) Accelerated Vesting. Notwithstanding anything to the
contrary in Sections 6(a) and 6(b), an Option shall become fully vested and
exercisable upon the first to occur of (i) a Non-Employee ceasing to be a member
of the Board of Directors as a result of death, Disability or Retirement, or
(ii) a Change in Control of the Company.
(d) Forfeiture. In the event of a Non-Employee Director's
termination of service as a member of the Board of Directors for any reason
other than death, Disability or Retirement prior to the satisfaction of any
vesting period requirement hereof, the unvested portion of any Options awarded
to the Non-Employee Director shall be forfeited to the Company as of the date of
termination of service, and the Non-Employee Director shall have no further
right or interest therein.
Section 7. Term of Options
(a) Ten-Year Term. Each Option shall expire ten years from
its date of award, subject to earlier termination as provided herein.
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(b) Exercise Following Certain Terminations of Service. If a
Non-Employee Director's service as a member of the Board of Directors terminates
for any reason other than death, Disability or Retirement, the Non-Employee
Director shall have the right, subject to the terms and conditions hereof, to
exercise the Option, to the extent it has vested as of the date of such
termination of service, at any time within six months after the date of such
termination, subject to the earlier expiration of the Option as provided in
Section 7(a). At the end of such six-month period the Option shall expire.
(c) Exercise Following Termination of Service Due to Death,
Disability or Retirement. If a Non-Employee Director's service as a member of
the Board of Directors terminates by reason of death, Disability or Retirement,
all Options awarded to such Non-Employee Director may be exercised by such
Non-Employee Director, or by his or her estate, personal representative or
beneficiary, as the case may be, at any time within one year after the date of
termination of service, subject to the earlier expiration of the Option as
provided in Section 7(a). At the end of such one-year period the Option shall
expire.
(d) Exercise Following Termination of Service Subject to
Company Policies and Procedures on Insider Trading. Any exercise of an Option
pursuant to Section 7(b) or 7(c) following termination of a Non-Employee
Director's service as a member of the Board of Directors for any reason other
than death shall be subject to, and shall be permitted only to the extent such
exercise complies with, the policies and procedures of the Company concerning
insider trading that were applicable to the Non-Employee Director on the date of
such termination of service (as such policies and procedures may be amended by
the Company during the period provided in Section 7(b) or 7(c), as the case may
be, for exercise of the Option).
Section 8. Time and Manner of Exercise
(a) Notice of Exercise. Subject to the other terms and
conditions hereof, a Non-Employee Director may exercise any Options (to the
extent vested) by giving written notice of exercise to the Company, provided,
however, that no less than 10 Option Shares may be purchased upon any exercise
of the Option unless the number of Option Shares purchased at such time is the
total number of Option Shares in respect of which an Option is then exercisable,
and provided, further, that in no event shall an Option be exercisable for a
fractional share. The date of exercise of an Option shall be the later of (i)
the date on which the Company receives such written notice or (ii) the date on
which the conditions provided in the Section 8(b) are satisfied. Notwithstanding
any other provision of the Plan or of the notice of award relating to an Option
provided for in Section 9, no Option may be exercised, whether in whole or in
part, and no Option Shares will be issued by the Company in respect of any such
attempted exercise, at any time when such exercise is prohibited by Company
policy
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<PAGE>
then in effect concerning transactions by a Non-Employee Director in the
Company's securities. In the event that a Non-Employee Director gives written
notice of exercise to the Company at a time when such exercise is prohibited by
such policy, the Company in its sole discretion may disregard such notice of
exercise or may consider such notice to be delivered as of the first date that
the Non-Employee Director is permitted to exercise such option in accordance
with such Company policy.
(b) Payment. Prior to the issuance of a certificate pursuant
to Section 8(e) hereof evidencing the Option Shares in respect of which all or a
portion of an Option shall have been exercised, a Non-Employee Director shall
have paid to the Company the Option Price for all Option Shares purchased
pursuant to the exercise of such Option. Payment may be made by personal check,
bank draft or postal or express money order (such modes of payment are
collectively referred to as "cash") payable to the order of the Company in U.S.
dollars or in shares of Common Stock already owned by the Non-Employee Director
valued at their Fair Market Value as of the last business day preceding the date
of exercise, or in any combination of cash or such shares as the Committee in
its sole discretion may approve. Payment of the exercise price in shares of
Common Stock shall be made by delivering to the Company the share certificate(s)
representing the required number of shares, with the Non-Employee Director
signing his or her name on the back, or by attaching executed stock powers (the
signature of the Non-Employee Director must be guaranteed in either case).
(c) Stockholder Rights. A Non-Employee Director shall have no
rights as a stockholder with respect to any shares of Common Stock issuable upon
exercise of an Option until a certificate evidencing such shares shall have been
issued to the Non-Employee Director pursuant to Section 8(e), and no adjustment
shall be made for dividends or distributions or other rights in respect of any
share for which the record date is prior to the date upon which the Non-Employee
Director shall become the holder of record thereof.
(d) Limitation on Exercise. No Option shall be exercisable
unless the Common Stock subject thereto has been registered under the Securities
Act and qualified under applicable state "blue sky" laws in connection with the
offer and sale thereof, or the Company has determined that an exemption from
registration under the Securities Act and from qualification under such state
"blue sky" laws is available.
(e) Issuance of Shares. Subject to the foregoing conditions,
as soon as is reasonably practicable after its receipt of a proper notice of
exercise and payment of the Option Price for the number of shares with respect
to which the Option is exercised, the Company shall deliver to the Non-Employee
Director (or following the Non-Employee Director's death, such other person
entitled to exercise the Option), at the principal office of the Company or at
such other location as may be acceptable to the Company and the Non-Employee
Director (or such other person), one or more stock
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<PAGE>
certificates for the appropriate number of shares of Common Stock issued in
connection with such exercise. Such shares shall be fully paid and
nonassessable and shall be issued in the name of the Non-Employee Director (or
such other person).
(f) Tax Withholding. The Company shall have the right, prior
to the delivery of any certificates evidencing shares of Common Stock to be
issued upon full or partial exercise of an Option, to require a Non-Employee
Director to remit to the Company any amount sufficient to satisfy any Federal,
state or local tax withholding requirements. The Company may permit the
Non-Employee Director to satisfy, in whole or in part, such obligation to remit
taxes, by directing the Company to withhold shares of Common Stock that would
otherwise be received by the Non-Employee Director, pursuant to such rules as
the Committee may establish from time to time. The Company shall also have the
right to deduct from all cash payments made pursuant to or in connection with
the Option, any Federal, state or local taxes required to be withheld with
respect to such payments.
(g) Restrictions on Transfer. An Option may not be
transferred, pledged, assigned, or otherwise disposed of, except by will or by
the laws of descent and distribution. The Option shall be exercisable, during
the Non-Employee Director's lifetime, only by the Non-Employee Director. No
assignment or transfer of the Option, or of the rights represented thereby,
whether voluntary or involuntary, by operation of law or otherwise, except by
will or the laws of descent and distribution, shall vest in the assignee or
transferee any interest or right in the Option, but immediately upon any attempt
to assign or transfer the Option, the same shall terminate and be of no force or
effect.
(h) Non-qualified Status of Options. Options awarded under
the Plan are not intended to qualify, and shall not be treated, as an
"incentive stock options" within the meaning of Section 422 of the Code.
Section 9. Notice of Award
The terms and conditions of each award of Options shall be
embodied in a notice of award which shall contain terms and conditions not
inconsistent with the Plan and which shall incorporate the Plan by reference.
Each notice of award shall state the date on which the Options were granted, the
number of shares subject to such Option and the per share exercise price
therefor.
Section 10. Effective Date; Term of the Plan
The effective date of the Plan shall be the Offering Date.
Unless earlier terminated in accordance with Section 11 below, the term of the
Plan shall expire on the tenth anniversary of the Offering Date. After such
date, no further awards of Options
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<PAGE>
may be made hereunder, but previously granted awards shall remain outstanding
subject to the terms hereof.
Section 11. Amendments
The Board of Directors may at any time and from time to time
alter, amend, suspend or terminate the Plan in whole or in part, provided,
however, that any amendment which under the requirements of applicable law or
NASDAQ or stock exchange rules must be approved by the stockholders of the
Company shall not be effective unless and until such stockholder approval has
been obtained in compliance with such law. No termination or amendment of the
Plan may, without the consent of the Non-Employee Director, affect any such
person's rights under the provisions of the Plan with respect to awards of
Options which were made prior to such action.
Section 12. Adjustment of and Changes in Common Stock
In the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, distribution of property, special cash
dividend, or other change in corporate structure affecting the Common Stock, the
Committee shall made such adjustments, if any, as it considers necessary or
appropriate in the number and class of shares subject to Options or authorized
to be awarded hereunder, in order to prevent dilution or enlargement of rights.
Any new or additional Options awarded pursuant to such adjustments shall be
subject to all of the terms and conditions of the Plan.
Section 13. No Right to Reelection
Nothing in the Plan shall be deemed to create any obligation
on the part of the Board of Directors to nominate any of its members for
reelection by the Company's stockholders, nor confer upon any Non-Employee
Director the right to remain a member of the Board of Directors for any period
of time, or at any particular rate of compensation.
Section 14. Governing Law
The Plan and all notices issued or agreements entered into
under the Plan shall be construed in accordance with and governed by the laws of
the State of Delaware.
Section 15. No Restriction on Right of Company to Effect Corporate Changes
The Plan shall not effect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or
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any merger or consolidation of the Company, or any issue of stock or of options,
warrants or rights to purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or exchangeable for Common Stock,
or the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
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Exhibit 10.12
LIFE CRITICAL CARE CORPORATION
1996 STOCK AND INCENTIVE PLAN
Section 1. Purpose
The purpose of the Life Critical Care Corporation 1996 Stock
and Incentive Plan (the "Plan") is to attract and retain outstanding individuals
as Key Employees of Life Critical Care Corporation (the "Company") and its
Affiliates, as hereinafter defined, and to motivate such individuals to achieve
the long-term performance goals of the Company by providing incentives to such
individuals in the form of stock ownership or monetary payments based on the
value of the capital stock of the Company or its financial performance, or both,
on the terms and conditions set forth herein.
Section 2. Definitions
As used in the Plan and unless the context clearly indicates
otherwise, the following terms shall have the respective meanings set forth
below:
(a) "Affiliate" shall mean any entity that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit or Performance Award granted
under the Plan.
(c) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted under the
Plan.
(d) "Beneficiary" shall mean the person designated by the
Participant, on a form provided by the Company, to exercise the Participant's
rights in accordance with Section 7(f) of the Plan in the event of death, or, if
no such person is designated, the estate or personal representatives of such
Participant.
(e) "Board of Directors" shall mean the Board of
Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Commission" shall mean the United States
Securities and Exchange Commission or any successor agency.
<PAGE>
(h) "Committee" shall mean the Compensation Committee of the
Board of Directors. The Committee shall be composed of two or more directors,
all of whom shall be "non-employee directors" within the meaning of Rule 16b-3
and "outside directors" within the meaning of Section 162(m)(4)(C) of the Code
and any regulations issued thereunder.
(i) "Disability" shall mean a total and permanent disability
within the meaning of the Company's long-term disability plan, as amended from
time to time.
(j) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(k) "Fair Market Value" shall mean the average of the highest
and lowest selling prices of the Shares as reported on the NASDAQ National
Market or such national securities exchange as may be designated by the
Committee or, in the event that the Shares are not listed for trading on a
national securities exchange or the NASDAQ National Market, the average of the
highest and lowest quoted bid prices of the Shares as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or, if
not listed on NASDAQ, the fair market value of the Shares as determined in good
faith by the Board of Directors or the Committee, in any such case as of the
valuation date.
(l) "Incentive Stock Option" shall mean a stock option granted
under Section 7(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
(m) "Key Employee" shall mean any officer or other
employee of the Company or any Affiliate who is described in Section 6 of the
Plan.
(n) "Non-Qualified Stock Option" shall mean a stock option
granted under Section 7(a) of the Plan that is not intended to be an Incentive
Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(p) "Participant" shall mean a Key Employee who is
designated to be granted or has received an Award under the Plan.
(q) "Performance Award" shall mean any Award granted
under Section 7(e) of the Plan.
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<PAGE>
(r) "Person" shall mean any individual, corporation,
partnership, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or political subdivision thereof.
(s) "Released Securities" shall mean Restricted Stock with
respect to which all applicable restrictions have expired, lapsed or been
waived.
(t) "Restricted Stock" shall mean any Shares granted
and issued under Section 7(c) of the Plan.
(u) "Restricted Stock Unit" shall mean any Award granted under
Section 7(c) of the Plan that is denominated in Shares.
(v) "Restriction Period" shall mean, with respect to
Restricted Stock or Restricted Stock Units, that period of time determined by
the Committee pursuant to Section 7(c) of the Plan.
(w) "Retirement" shall mean termination of a Participant's
employment with the Company or any Affiliate at his or her "normal retirement
date" as defined in the Company's section 401(k) plan or any successor plan.
(x) "Termination" shall mean any resignation or discharge from
employment with the Company or any Affiliate except in the event of Disability,
Retirement or death.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Commission under the Exchange Act or any successor rule or regulation thereto.
(z) "Shares" shall mean shares of the common stock of the
Company and such other securities or property as may become the subject of
Awards pursuant to an adjustment made under Section 8 of the Plan.
(aa) "Stock Appreciation Right" shall mean any Award
granted under Section 7(b) of the Plan.
Section 3. Effective Date; Stockholder Approval; Termination
(a) Effective Date and Stockholder Approval. Subject
to the approval of the Plan by the stockholders of the Company in accordance
with the provisions of Rule 16b-3, the Plan shall be effective as of October
1, 1996.
(b) Termination. No Award shall be granted under the Plan
after [December 31, 2006]; provided, however, that any Award granted on or
before
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<PAGE>
[December 31, 2006] may extend beyond such date unless expressly provided
otherwise herein or in the applicable Award Agreement; provided further, to the
extent set forth in Section 8 hereof, the authority of the Committee to amend,
alter, adjust, suspend, discontinue or terminate any Award or to waive any
conditions or restrictions with respect to any Award, and the authority of the
Board of Directors to amend the Plan, shall extend beyond such date.
Section 4. Administration
(a) The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by those
members of the Board of Directors who qualify as "non-employee directors" under
Rule 16b-3 and as "outside directors" under Section 162(m)(4)(C) of the Code and
any regulations issued thereunder.
Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority with respect to the Plan,
including, without limitation, the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted
to each Participant under the Plan;
(iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to
be calculated in connection with) Awards;
(iv) determine the terms and conditions of any
Award;
(v) determine whether, to what extent, under
what circumstances and the method by which Awards may be settled or exercised
in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended;
(vi) determine whether, to what extent and under
what circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee;
(vii) interpret and administer the Plan and any
instrument or agreement relating to, and any Award made under, the Plan
(including, without limitation, any Award Agreement);
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(viii) establish, amend, suspend and waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and
(ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan.
Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan, or any Award, shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or Beneficiary of any Award, any stockholder and any employee of the
Company or any Affiliate.
(b) No member of the Committee shall be liable for any action
or determination made in good faith, and the members of the Committee shall be
entitled to indemnification and reimbursement in the manner provided in the
Company's Charter and Bylaws, as amended from time to time.
(c) The Committee may designate persons other than its members
to carry out its responsibilities under such conditions or limitations as it may
set, except that the Committee may not delegate: (i) its authority with regard
to Awards (including decisions concerning the timing, pricing and amount of
Awards) granted to Key Employees who are officers or directors for purposes of
Section 16(b) of the Exchange Act; or (ii) its authority pursuant to Section 8
to amend the Plan.
Section 5. Grants of Awards; Shares Available for Award
(a) The Committee may, from time to time, grant Awards to one
or more Key Employees; provided, however, that:
(i) subject to any adjustment pursuant to
Section 8, the aggregate number of Shares available with respect to which
Awards may be granted under the Plan shall be 550,000;
(ii) to the extent that any Shares covered by an
Award granted under the Plan, or to which any Award relates, are forfeited,
or if an Award otherwise terminates, expires or is canceled prior to the
delivery of all of the Shares or of other consideration issuable or payable
pursuant to such Award, then the number of Shares counted against the
number of Shares available under the Plan in connection with the grant of
such Award, to the extent of any such forfeiture, termination, expiration or
cancellation, shall be available for granting of Awards under the Plan;
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<PAGE>
(iii) Shares which have been issued, or any other
shares of the capital stock of the Company, which a Participant tenders to the
Company in satisfaction of income and payroll tax withholding obligations or in
satisfaction of the exercise price of any Award shall be available for granting
of Awards under the Plan;
(iv) notwithstanding anything herein to the
contrary, the Committee may limit the application of Sections 5(ii) and
5(iii) in any manner that it considers necessary or appropriate to ensure
that the Plan complies with the requirements of Rule 16b-3 under the Exchange
Act or any successor provision; and
(v) notwithstanding anything herein to the
contrary, any Shares ceasing to be subject to an Award due to the
exercise of an Award or expiration of a Restriction Period shall no longer
be available for granting of Awards under the Plan.
(b) For purpose of this Section 5:
(i) if an Award is denominated in Shares, the
number of Shares covered by such Award, or to which such Award relates, shall
be counted on the date of grant of such Award against the number of Shares
available for granting of Awards under the Plan; and
(ii) if an Award is not denominated in Shares,
the number of Shares shall be counted on the date of grant of such Award
against the number of Shares available for granting Awards under the Plan
equal to the quotient of the Fair Market Value (calculated as of the date of
grant) of the maximum amount of cash or other consideration payable pursuant
to such Award, divided by the Fair Market Value of one Share on the date of
grant.
(c) Any Shares delivered by the Company pursuant to an Award
may consist, in whole or in part, of authorized and unissued Shares or of
treasury Shares. In determining the size of any Award, the Committee may take
into account a Participant's responsibility level, performance, potential, cash
compensation level, the Fair Market Value of the Shares at the time of the Award
and such other considerations as it deems appropriate.
Section 6. Eligibility
Any Key Employee, including any executive officer or
employee-director of the Company or any Affiliate, who is not a member of the
Committee and who, in the opinion of the Committee, contributes to the continued
growth, development and financial success of the Company or an Affiliate shall
be eligible to be designated as a Participant.
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<PAGE>
Section 7. Awards
(a) Options. The Committee is hereby authorized to grant
Options to Participants in the form of either Non-Qualified Stock Options or
Incentive Stock Options with the terms and conditions set forth in this Section
7 and with such additional terms and conditions, in either case not inconsistent
with the provisions of the Plan, as the Committee shall determine.
(i) Limitations on Incentive Stock Options.
(A) In the event the Committee grants Incentive
Stock Options, the aggregate Fair Market
Value (determined at the time the Incentive
Stock Options are granted) of the Shares
underlying any such Incentive Stock Options,
together with the shares underlying any
incentive stock options (as defined in
Section 422 of the Code) under any other
plans of the Company or any Affiliate, which
shall be first exercisable by any one
Participant shall not, during any calendar
year, exceed $100,000, or such other
limitation as may be provided in the Code.
(B) The grant of Incentive Stock Options
hereunder shall be subject to guidelines
adopted by the Committee with respect to the
timing and size of Incentive Stock Options.
(C) The terms of any Incentive Stock Option
granted under the Plan shall comply in all
respects with the provisions of Section 422
of the Code, or any successor provision
thereto, and any regulations promulgated
thereunder.
(ii) Exercise Price. The exercise price per
Share purchasable under an Option shall be determined by the Committee;
provided, however, that such exercise price shall not be less than the Fair
Market Value of a Share on the date of grant of the Option (or, if the
Committee so determines, in the case of any Option granted in tandem with
or in substitution for another Award or any outstanding award granted
under any other plan of the Company, on the date of grant of such other Award
or award).
(iii) Option Term. The term of each Option
shall be fixed by the Committee; provided, however, that in no event shall
the term of an Incentive Stock Option exceed a period of ten years from the date
of its grant.
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<PAGE>
(iv) Exercisability and Method of Exercise.
Except for such limitations as may be set forth herein, an Option shall become
exercisable in such manner and within such period or periods and in such
installments as shall be determined by the Committee and set forth in the
Award Agreement evidencing the Option. The Committee also shall determine
the method or methods by which, and the form or forms in which, payment of the
exercise price with respect to any Option may be made or deemed to have been
made.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants. Subject to the
terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to receive,
upon exercise thereof, the difference of (i) the Fair Market Value of one Share
on the date of exercise or, if the Committee shall so determine in the case of
any such right other than one related to any Incentive Stock Option, at any time
during a specified period before or after the date of exercise, less (ii) the
grant price of the right as specified by the Committee, which shall not be less
than the Fair Market Value of one Share on the date of grant of the Stock
Appreciation Right (or, if the Committee so determines, in the case of any Stock
Appreciation Right granted in tandem with or in substitution for another Award
or any outstanding award granted under any other plan of the Company, on the
date of grant of such other Award or award). Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate, including, without limitation, restricting the
time of exercise of the Stock Appreciation Right to specified periods as may be
necessary to satisfy the requirements of Rule 16b-3.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Participants, such Awards, including the total number of Shares to which
they pertain, to be evidenced by an Award Agreement.
(ii) Restrictions. Shares of Restricted Stock
and Restricted Stock Units shall be issued in the name of the Participant
without payment of consideration, and shall be subject to such restrictions
as the Committee may impose (including, without limitation, a Restriction
Period, any limitation on the right to vote a Share of Restricted Stock or the
right to receive any dividend or other right or property), which restrictions
may lapse separately or in combination at such time or times, in such
installments or otherwise, as the Committee may deem appropriate. Different
Restricted Stock or
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Restricted Stock Unit Awards may, among other things, have
different Restriction Periods.
(iii) Registration. Any Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any stock
certificate is issued to evidence Shares of Restricted Stock granted under the
Plan, such certificate shall be registered in the name of the Participant and
shall bear an appropriate legend (as determined by the Committee) referring to
the terms, conditions and restrictions applicable to such Restricted Stock. Upon
completion of the applicable Restriction Period, the related restriction or
restrictions upon the Award shall expire and new certificates representing
the Award shall be issued without the applicable restrictive legend
described herein. Such Shares shall be delivered in accordance with the
terms and conditions of such Participant's Award Agreement.
(d) Other Stock or Stock-Based Awards. An Award other than as
described in (a) through (c) above may be granted pursuant to which Shares are,
or in the future may be acquired, or which is valued or determined in whole or
in part by reference to, or otherwise based upon, Shares.
(e) Code Section 162(m) Requirements. The Committee in its
sole discretion shall determine whether Awards made pursuant to the Plan shall
be designed to meet the requirements of performance-based compensation within
the meaning of Section 162(m) of the Code and any regulations issued thereunder.
(f) Termination of Employment. The Agreement relating to an
Award will set forth provisions governing the disposition of an Award in the
event of the retirement, disability, death or other termination of a
Participant's employment.
(g) Election to Recognize Income. If a Participant makes an
election in a timely manner pursuant to Section 83(b) of the Code to recognize
income for tax purposes when an Award is first made, the Participant shall
notify the Company within 10 days of the making of such election.
(h) General.
(i) Award Agreements. Each Award granted
under the Plan shall be evidenced by an Award Agreement in such form as shall
have been approved by the Committee.
(ii) Awards May Be Granted Separately or
Together. Awards may be granted either alone or in addition to, in tandem
with, or in substitution for any other Award or any award granted under any
other plan of the Company or any Affiliate.
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<PAGE>
Awards granted in addition to or in tandem with other Awards, or in addition to
or in tandem with awards granted under any other plan of the Company or any
Affiliate, may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject
to the terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or any Affiliate upon the grant, exercise
or payment of an Award may be made in such form or forms as the Committee
shall determine, including, without limitation, cash, Shares, other
securities, other Awards or other property, or any combination thereof, and
may be made in a single payment or transfer, in installments or on a deferred
basis, in each case in accordance with the rules and procedures established
by the Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of interest in installments or deferred
payments.
(iv) Limits on Transfer of Awards. No Award
(other than Released Securities), except as otherwise provided by the
Committee in its discretion, and no right under any such Award, shall be
assignable, alienable, saleable or transferable by a Participant otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of ERISA
(or, in the case of an Award of Restricted Stock, to the Company); provided,
however, that, if so determined by the Committee, a Participant may, in the
manner established by the Committee, designate a Beneficiary to exercise
the rights of the Participant, and to receive any property distributable
with respect to any Award upon the death of the Participant. Each
Award, and each right under any Award, shall be exercisable, during the
Participant's lifetime, only by the Participant or, if permissible under
applicable law, by the Participant's guardian or legal representative. No Award
(other than Released Securities), and no right under any such Award, may be
pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Term of Awards. Except as otherwise
provided herein, the term of each Award shall be for such period as may be
determined by the Committee.
(vi) Share Certificates and Representation by
Participants. All certificates for Shares or other securities delivered under
the Plan pursuant to any Award or the exercise thereof shall be subject to
such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other requirements of
the Commission, any stock exchange or other market upon which such Shares
or other securities are then listed or traded, and any applicable federal
or state securities laws, and the Committee may cause a legend or legends to be
inscribed upon any such certificate(s) to make appropriate reference to such
restrictions. The Committee
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<PAGE>
may require each Participant or other Person who acquires Shares or other
securities under the Plan to represent to the Company in writing that such
Participant or other Person is acquiring the Shares or other securities
without a view to the distribution thereof.
Section 8. Amendment and Termination; Adjustments; Corrections
(a) Amendments to the Plan. The Committee may, at any time or
from time to time, amend, alter, suspend, discontinue or terminate the Plan in
whole or in part; provided, however, that no amendment, alteration, suspension,
discontinuation or termination of the Plan shall in any manner (except as
otherwise provided in this Section 8) adversely affect the rights of any
Participant under any Award granted and then outstanding under the Plan, without
the consent of the respective Participant; provided further, however, that any
amendment which under the requirements of applicable law or stock exchange or
NASDAQ rule or policy must be approved by the stockholders of the Company shall
not be effective unless and until such stockholder approval has been obtained in
compliance with such law. No termination or amendment of the Plan may, without
the consent of the Participant to whom an Award has been granted, adversely
affect the rights of such Participant under such Award.
(b) Certain Adjustments of Awards.
(i) In the event the Company or any Affiliate
shall assume outstanding employee awards or the right or obligation to make
future such awards in connection with the acquisition of another business or
business entity, the Committee may make such adjustments in the terms of
Awards, not inconsistent with the terms of the Plan, as it shall deem
appropriate in order to achieve reasonable comparability or other equitable
relationship between the assumed awards and the Awards granted under the
Plan, as so adjusted.
(ii) In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other securities
of the Company, issuance of warrants or other rights to purchase Shares or
other securities of the Company, or other similar corporate transaction,
change in applicable laws, regulations or financial accounting principles or
other event affects the Shares, such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in such manner as it may deem equitable, adjust any or
all of: (A) the number and type of Shares (or other securities or property)
which thereafter may be made the subject of Awards under the Plan; (B) the
number and type of Shares (or other securities or property) subject to
outstanding
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<PAGE>
Awards; and (C) the grant, purchase or exercise price with respect to any
Award, or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award; provided, however, in each case, that with
respect to Awards of Incentive Stock Options, no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code or any successor provision thereto; provided
further, that the number of Shares subject to any Award denominated in Shares
shall always be a whole number. The foregoing adjustments shall be determined by
the Committee in its sole discretion.
(c) Correction of Defects, Omissions and
Inconsistencies. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in any Award or Award Agreement in the manner and
to the extent it shall deem desirable to carry the Plan into effect.
Section 9. General Provisions
(a) No Rights to Awards. No Key Employee, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Key Employees, Participants or
holders or Beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to each Participant.
(b) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of a Participant for federal income
tax purposes with respect to any Award under the Plan, the Participant shall pay
to the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations arising with respect to Awards under the
Plan may be settled with Shares (other than Restricted Stock), including Shares
that are part of, or are received upon exercise of, the Award that gives rise to
the withholding requirement. The obligations of the Company under the Plan shall
be conditioned on such payment or arrangements, and the Company and any
Affiliate shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the Participant. The Committee may
establish such procedures as it deems appropriate for the settling of
withholding obligations with Shares, including, without limitation, the
establishment of such procedures as may be necessary to satisfy the requirements
of Rule 16b-3.
(c) Acceleration. Except as otherwise provided hereunder, the
Committee may, in its discretion, accelerate the time at which an outstanding
Award granted hereunder may be exercised. With respect to Restricted Stock, in
the event of a public tender offer for all or any portion of the Shares of the
Company, or in the event that any proposal to merge or consolidate the Company
with another entity is submitted
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<PAGE>
to the stockholders of the Company for a vote, the Committee, in its sole
discretion, may shorten or eliminate the Restriction Period consistent with the
best interests of the Company.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or any Affiliate may at any time
dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(e) Unfunded Status of the Plan. Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any Participant or
other Person. To the extent any Person holds any right by virtue of the grant of
an Award under the Plan, such right (unless otherwise determined by the
Committee) shall be no greater than the right of an unsecured general creditor
of the Company.
(f) Government and Other Regulations. The obligation of the
Company to make payment of Awards in Shares or otherwise shall be subject to all
applicable laws, rules and regulations, and to such approvals by any government
agencies as may be required. If Shares awarded hereunder may in certain
circumstances be exempt from registration under the Securities Act of 1933, as
amended, the Company may restrict its transfer in such manner as it deems
advisable to ensure such exempt status.
(g) No Restriction on Right of Company to Effect Corporate
Changes. The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Shares or the rights thereof or which are convertible into or
exchangeable for the Shares, or dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
(h) Governing Law. The validity, construction and
effect of the Plan, and any rules and regulations relating to the Plan,
shall be determined in accordance with the laws of the State of Delaware,
exclusive of its conflicts of law provisions, and applicable Federal law.
-13-
<PAGE>
(i) Severability. If any provision of the Plan, any Award
Agreement or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any Person or Award, or would
disqualify the Plan, any Award Agreement or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or, if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan, the Award Agreement or the Award, such provision shall be
stricken as to such jurisdiction, Person or Award, and the remainder of the
Plan, such Award Agreement and such Award shall remain in full force and effect.
(j) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan, any Award Agreement or any Award, and the
Committee shall determine whether cash, other securities or other property shall
be paid or transferred in lieu of any fractional Shares, or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(k) Headings. Headings are given to the sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
-14-
Exhibit 11.1
LIFE CRITICAL CARE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Period from June 19, 1995
(date of inception) Six months ended
to December 31, 1995 June 30, 1996
------------------------- ----------------
<S> <C>
Average number of shares outstanding 546,392 759,650
Net effect of common and common equivalent
shares issued in an initial public offering
SAB 83 - 116,345
-------- --------
Total 546,392 875,995
======== ========
Net loss (267,926) (391,416)
Net loss per share (.49) (.45)
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our reports dated August 23,
1996, for Life Critical Care Corporation, and June 28, 1996 for Blue Water
Medical Supply, Inc. and Blue Water Industrial Products, Inc., Great Lakes
Home Medical, Inc., and ABC Medical Supply, Inc., in the Registration
Statement (Form SB-2) and related Prospectus of Life Critical Care Corporation,
for the registration of 2,000,000 shares of its common stock.
Ernst & Young LLP
/s/ Ernst & Young LLP
Chicago, Illinois
October 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 188 23,158
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,223,751 518,584
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,224,992 519,971
<CURRENT-LIABILITIES> 325,134 87,018
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (659,342) (267,926)
<TOTAL-LIABILITY-AND-EQUITY> 1,224,992 519,971
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> (283,223) (255,308)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 108,193 12,618
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (391,416) (267,926)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
